Nonnenmacher v. City of Warwick, No. 97-528-Appeal

• Decision Date: 25 January 1999
• Docket Number: No. 97-529-Appeal., No. 97-528-Appeal
• Citation: 722 A.2d 1199
• Parties: Harold J. NONNENMACHER v. The CITY OF WARWICK, et al. Donald E. Sjogren v. The City of Warwick, et al.
• Court: Rhode Island Supreme Court

722 A.2d 1199

Harold J. NONNENMACHER v. The CITY OF WARWICK, et al.

Donald E. Sjogren v. The City of Warwick, et al.

Nos. 97-528-Appeal, 97-529-Appeal.

Supreme Court of Rhode Island.

January 25, 1999.

Kelly M. Fracassa, Westerly, for plaintiff.

Kimberly Ann O'Connell, Providence, for defendant.

Present WEISBERGER, C.J., and LEDERBERG, BOURCIER, FLANDERS, and GOLDBERG, JJ.

OPINION

LEDERBERG, Justice.

The plaintiffs, Harold J. Nonnenmacher and Donald E. Sjogren, filed suit under 42 U.S.C. §§ 1983 and 1988, claiming that § 7-75.2(b) of the Warwick Code of Ordinances (1993), violates Article 1, section 10, of the Contract Clause of the United States Constitution¹ because its setoff provision required a reduction in disability pension benefits paid to retired firefighters whose earned income during retirement exceeded certain limits. The plaintiffs and the defendants—the City of Warwick, the members of the Warwick Board of Public Safety, individually and in their official capacities, and the Warwick City Treasurer, individually and in his official capacity—filed motions for summary judgment. The trial justice denied the plaintiffs' motions for summary judgment and granted the defendants' cross-motions for summary judgment. We affirm the trial justice's finding that the ordinance does not violate the Contract Clause because it advances legitimate governmental interests. We reject, however, the findings that the plaintiffs' disability pensions vested prior to their disabilities and that the ordinance "substantially impaired" their right to a disability pension. A summary of the facts of this case follows.

Facts and Procedural History

The Warwick Board of Public Safety (board) is responsible for administering the firefighters' pension system of the city of Warwick (city). At the time these suits were filed, the members of the board were Robert Donohue, Marshall Martin, and Dianna Pearson, and the city treasurer was John E. Martin, all of whom were named as defendants in this case. Until 1977, whenever a firefighter retired because of a disability, the board granted a pension varying in amount from 50 percent to 75 percent of the firefighter's then current salary. The ordinance in effect at that time granted the board wide discretion in providing disability pensions but set a floor of "an annual sum not less than 50% of *** highest salary ." Warwick, R.I., Ord. No. 0-61-101, § 5-47 (May 18, 1961). On March 9, 1977, the board adopted a rule establishing 66 2/3 percent of the salary as the fixed rate that would apply to all pending and future cases in which firefighters retired because of service-related injuries. Thereafter, in January 1980, the Warwick City Council (council) adopted an amendment to the Code of Ordinances which provided that all permanent firefighters placed on the pension list as a result of a service-related injury "shall receive a sum of sixty-six and two thirds (66 2/3%) per cent [sic] of his highest salary," subject, however, to a potential limitation when such firefighters received earned income from other employment. Specifically, § 7-75.2(b)² of the Warwick Code of Ordinances (1993) provides, in pertinent part:

"The officer or member's pension amount for the following six (6) months after the filing of the report of earned income shall be reduced dollar for dollar by any amount that the actual earned income exceeded the salary paid to an officer or permanent member with the retired member's highest rank and seniority on active duty at the time such reports are filed. However, in no event shall any officer or member on pension receive an annual sum less than fifty (50) percent of his highest salary as a fireman." (Emphases added.)

The plaintiffs became permanent members of the Warwick Fire Department (department) in 1967. During their employment and continuing to their retirement, sums were deducted from their salaries and placed into a pension fund as required under the Warwick Code. The board retired plaintiffs due to service-related disabilities after the enactment of § 7-75.2(b).³ At the time of their retirements, both plaintiffs held the rank of lieutenant. In addition to being permanent members of the department, plaintiffs were employed privately prior to the 1980 enactment of what is now § 7-75.2(b), and they continued in private employment after retiring from the department. During plaintiffs' retirements, the board sought "refunds" of pension benefits from plaintiffs because their earned income exceeded that which lieutenants in the department then were receiving.⁴ The plaintiffs then filed separate complaints under 42 U.S.C. §§ 1983 and 1988, contesting the constitutionality of § 7-75.2(b) as applied to their pensions. Because the cases contained similar facts and legal issues, the Superior Court heard and decided the cases together.

The trial court found that plaintiffs had vested contract rights to their disability pensions prior to the enactment of § 7-75.2(b) and that § 7-75.2(b) worked a "substantial impairment of their aforementioned vested contractual rights as it could potentially cost the Plaintiffs a significant amount of money in compulsory reimbursements." The court concluded, however, that the ordinance did not violate the Contract Clause because the enactment was a "reasonable and necessary means of advancing the government's legitimate interest in flexibility" and "further[ed] the public interest in fiscal responsibility." Accordingly, the trial justice issued final judgments in both cases, denying plaintiffs' motions for summary judgment and granting defendants' cross-motions for summary judgment. The plaintiffs' appeals of the entries of summary judgment for defendants were consolidated by this Court for briefing and oral argument.

Standard of Review

It is well settled that this Court conducts a de novo review of the granting of a summary judgment. Woodland Manor III Associates v. Keeney, 713 A.2d 806, 810 (R.I. 1998). Accordingly, if after reviewing the admissible evidence in the light most favorable to the nonmoving party, we conclude that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law, then we shall affirm the grant of summary judgment. Id. In addition, the determination of whether a contract exists is a question of law that this Court reviews de novo.

Contract Clause

The Contract Clause of the United States Constitution bars states from enacting "any *** law impairing the obligation of contracts." U.S. Const., Art. 1, sec. 10. "Though the Framers apparently had in mind only purely private contracts (particularly debt obligations) *** the Clause routinely has been applied to contracts between states and private parties. See, e.g., Fletcher v. Peck, 10 U.S. (6 Cranch) 87, 137-39, 3 L.Ed. 162 (1810)

." McGrath v. Rhode Island Retirement Board, Etc., 88 F.3d 12, 16 (1st Cir.1996). The Clause speaks only of the impairment of a contract by a state, but it has been interpreted to apply to municipalities as well. Northern Pacific Railway Co. v. Minnesota ex rel. Duluth, 208 U.S. 583, 590, 28 S.Ct. 341, 343, 52 L.Ed. 630, 633 (1908).

The United States Supreme Court has developed a three-part analysis for determining whether a modification of a state or municipal statute results in a violation of the Contract Clause. General Motors Corp. v. Romein, 503 U.S. 181, 186, 112 S.Ct. 1105, 1109, 117 L.Ed.2d 328, 337 (1992). A court first must determine whether a contract exists. McGrath, 88 F.3d at 16. If a contract exists, the court then must determine whether the modification results in an impairment of that contract and, if so, whether this impairment can be characterized as substantial. Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 411-12, 103 S.Ct. 697, 704-05, 74 L.Ed.2d 569, 580-81 (1983). Finally, if it is determined that the impairment is substantial, the court then must inquire whether the impairment, nonetheless, is reasonable and necessary to fulfill an important public purpose. Id. This three-part analysis has been applied by this Court in Rhode Island Depositors Economic Protection Corp. v. Brown, 659 A.2d 95 (R.I. 1995), where we sustained a statute that eliminated the right of nonsettling parties to seek contribution from settling parties in the credit union crisis, and in Retired Adjunct Professors v. Almond, 690 A.2d 1342 (R.I. 1997), where we held that the retroactive application of statutory amendments did not substantially impair an alleged contractual right to employment after retirement.

A Contract Clause analysis also must interface with the consideration that statutory enactments do not create contractual relationships unless such legislation evinces a clear intent to do so. The United States Supreme Court has explained that "absent some clear indication that the legislature intends to bind itself contractually, the presumption is that `a law is not intended to create private contractual or vested rights but merely declares a policy to be pursued until the legislature shall ordain otherwise.'" National Railroad Passenger Corp. v. Atchison, Topeka & Santa Fe Railway Co., 470 U.S. 451, 465-66, 105 S.Ct. 1441, 1451, 84 L.Ed.2d 432, 446 (1985). Moreover, the party asserting the existence of a contract bears the burden of overcoming this presumption. Id. at 466, 105 S.Ct. at 1451, 84 L.Ed.2d at

446. See also Retired Adjunct Professors, 690 A.2d at 1345

("there is a strong presumption against construing a statute to create such contractual obligations, and individuals alleging its creation bear the heavy burden of overcoming this presumption"). In order to overcome the presumption, the party must prove that "the language and circumstances evince a legislative intent to create private rights of a contractual nature enforceable against the State." United States Trust Co. of New York, Trustee v. New Jersey, 431 U.S. 1, 17 n. 14, 97 S.Ct. 1505, 1515 n. 14...