Rhode Island Council 94, AFSCME, AFL-CIO v. Carcieri

• Decision Date: 13 September 2011
• Docket Number: C.A. PC 10-2859
• Parties: RHODE ISLAND COUNCIL 94, AFSCME, AFL-CIO; NATIONAL EDUCATION ASSOCIATION RHODE ISLAND; RHODE ISLAND FEDERATION OF TEACHERS AND HEALTH PROFESSIONALS; RHODE ISLAND BROTHERHOOD OF CORRECTIONAL OFFICER INTERNATIONAL FEDERATION OF PROFESSIONAL AND TECHNICAL ENGINEERS LOCAL 400; NATIONAL ASSOCIATION OF GOVERNMENT EMPLOYEES, LOCAL 79; RHODE ISLAND EMPLOYMENT SECURITY ALLIANCE, LOCAL 401; and RHODE ISLAND ALLIANCE OF SOCIAL SERVICE EMPLOYEES, LOCAL 580 v. DONALD L. CARCIERI, in his capacity as Governor of the State of Rhode Island; FRANK T. CAPRIO, in his capacity as General Treasurer of the State of Rhode Island; and THE EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF RHODE ISLAND, by and through the RHODE ISLAND RETIREMENT BOARD, by and through Frank T. Caprio, in his capacity as Chairman of the Retirement Board, and Frank J. Karpinski, in his capacity as Secretary of the Retirement Board
• Court: Rhode Island Superior Court

RHODE ISLAND COUNCIL 94, AFSCME, AFL-CIO; NATIONAL EDUCATION ASSOCIATION RHODE ISLAND; RHODE ISLAND FEDERATION OF TEACHERS AND HEALTH PROFESSIONALS; RHODE ISLAND BROTHERHOOD OF CORRECTIONAL OFFICER INTERNATIONAL FEDERATION OF PROFESSIONAL AND TECHNICAL ENGINEERS LOCAL 400; NATIONAL ASSOCIATION OF GOVERNMENT EMPLOYEES, LOCAL 79; RHODE ISLAND EMPLOYMENT SECURITY ALLIANCE, LOCAL 401; and RHODE ISLAND ALLIANCE OF SOCIAL SERVICE EMPLOYEES, LOCAL 580 v. DONALD L. CARCIERI, in his capacity as Governor of the State of Rhode Island; FRANK T. CAPRIO, in his capacity as General Treasurer of the State of Rhode Island; and THE EMPLOYEES' RETIREMENT SYSTEM OF THE STATE OF RHODE ISLAND, by and through the RHODE ISLAND RETIREMENT BOARD, by and through Frank T. Caprio, in his capacity as Chairman of the Retirement Board, and Frank J. Karpinski, in his capacity as Secretary of the Retirement Board

C.A. No. PC 10-2859

Superior Court of Rhode Island

September 13, 2011

DECISION

TAFT-CARTER, J.

Plaintiff labor unions^1[] ("Plaintiffs") filed the underlying action against the Governor and General Treasurer of the State of Rhode Island, the Employees' Retirement System of the State of Rhode Island ("ERSRI"), by and through the Rhode Island Retirement Board ("Retirement Board"), and the Chairman and Secretary of the Retirement Board (collectively "Defendants"), alleging that two recent legislative changes to the ERSRI violate the Contract Clause art. I §12, and the Takings Clause art. I, §16, of the Rhode Island Constitution. Before the Court is Defendants' Motion for Summary Judgment pursuant to Super. R. Civ. P. 56, seeking a determination as to whether the ERSRI—a statutorily-created pension system for most state and some municipal employees—establishes a contractual relationship between the State of Rhode Island and participating employees. For the reasons stated herein the Court denies Defendants' Motion for Summary Judgment and finds that the ERSRI does give rise to an implied contract and the rights and obligations incident thereto.

I Facts and Travel

In 1936, the Rhode Island General Assembly statutorily created a retirement system, now known as the ERSRI, for the benefit of state employees, school teachers, and employees of participating municipalities. See P.L. 1936, ch 2334, codified as G.L. 1956 §§ 36-8-1 to 36-10.1-4; see also Nat'l Educ. Ass'n- R.I. v. Ret. Bd. of R.I. Emps.' Ret. Sys. ("NEA II"), 172 F.3d 22, 24 (1st Cir. 1999) (providing history of ERSRI); Kass v. Ret. Bd. of Emps.' Ret. Sys. of State of R.I. 567 A.2d 358, 362 (R.I. 1989) (same). Pursuant to the enabling legislation, the ERSRI was to be administered by the Retirement Board. See P.L. 1936, ch. 2334, codified as §§ 36-8-3, 36-8-4.

From its inception, the ERSRI has been a mandatory, contributory, defined benefit pension system. Under this system, the ERSRI deducts a statutorily-set percentage of participants' annual salaries from each of their paychecks.^2[] In return, participants receive a fixed retirement allowance calculated based upon years of service and salary level achieved. See § 36-10-10 (allowance schedule for state employees); G.L. 1956 § 16-16-13 (allowance schedule for school teachers). The retirement allowance becomes due and payable to participants in equal monthly installments after retirement. See § 36-10-9 (retirement eligibility for state employees); § 16-16-12 (retirement eligibility for school teachers); § 36-10-9.2 (retirement eligibility for state correctional officers); § 36-10-9.3 (retirement eligibility for state registered nurses). Eligibility for retirement and collection of retirement allowance is based upon credited years of service and/or reaching certain statutorily-prescribed retirement ages. See, e.g., §§ 36-10-9, 36-10-9.2, 36-10-9.3; § 16-16-12.

In 2005, the General Assembly amended the ERSRI pension provisions affecting those employees with less than ten years of credited service as of July 1, 2005. See P.L. 2005, ch. 117, art. 7, §§ 1, 2 (amending § 36-10-10, § 16-16-13). Specifically, the 2005 amendments increased the years of service requirements and decreased the affected employees' benefits by redefining the formula for calculating retirement allowances. See id. Until 2009, the General Assembly had passed no legislation aimed at decreasing the benefits afforded under the ERSRI to those employees with ten years or more of credited service.^3[] Unaffected by the 2005 amendments, those ten-year veterans continued to receive a fixed retirement allowance based on an unchanged formula of years of service—up to a maximum of eighty percent for thirty-five years of service—and salary level achieved—based on the average of the employee's three highest earning years. See id.

In 2009, the General Assembly passed P.L. 2009, ch. 68, art. 7 (the "2009 Act"). The 2009 Act altered, in a number of ways, the benefits available to those who already had accrued at least ten years of contributory service. First, the 2009 Act amended the provisions pertaining to retirement eligibility, in part by increasing the minimum age for retirement for those with ten years of service. See P.L. 2009, ch. 68, art. 7 (amending §§ 36-10-9, 36-10-9.2, 36-10-9.3; § 16-16-12). The relevant language, which is substantially similar in Titles 36 and 16 of the General Laws, provides as follows as to those employees with ten years of contributory service accrued on or before July 1, 2005:

"For members who become eligible to retire on or after October 1, 2009, benefits are available to members who have attained the age of sixty-two (62) and completed at least ten (10) years of contributory service. For members in service as of October 1, 2009 who were not eligible to retire as of September 30, 2009, the minimum retirement age of sixty-two (62) will be adjusted downward in proportion to the amount of service the member has earned as of September 30, 2009. The proportional formula shall work as follows:

(1) The formula shall determine the first age of retirement eligibility under the laws in effect on September 30, 2009 which shall then be subtracted from the minimum retirement age of sixty-two (62).

(2) The formula shall then take the member's total service credit as of September 30, 2009 as the numerator and the years of service credit determined under (1) as the denominator. (3) The fraction determined in (2) shall then be multiplied by the age difference determined in (1) to apply a reduction in years from age sixty-two (62)." Sec. 36-10-9(1)(a)(ii).

Prior to the 2009 Act, a state employee or school teacher with ten years of service accrued on or before July 1, 2005 was eligible to retire and collect a pension at the age of sixty or upon completing twenty-eight years of total service. See § 36-10-9(1)(a)(i); § 16-16-12(a)(1)(i).

As to those employees who had not accrued ten years of contributory service on or before July 1, 2005, the 2009 Act provides:

"For members who become eligible to retire on or after October 1, 2009, benefits are available to members who have attained the age of sixty-two (62) and completed at least twenty-nine (29) years of total service or have attained the age of sixty-five (65) and completed at least ten (10) years of contributory service. For members in service as of October 1, 2009 who were not eligible to retire as of September 30, 2009, who have a minimum retirement age of sixty-two (62), the retirement age will be adjusted downward in proportion to the amount of service the member has earned as of September 30, 2009. The proportional formula shall work as follows:

(1) The formula shall determine the first age of retirement eligibility under the laws in effect on September 30, 2009 which shall then be subtracted from the minimum retirement age of sixty-two (62).

(2) The formula shall then take the member's total service credit as of September 30, 2009 as the numerator and the years of service credit determined under (1) as the denominator.

(3) The fraction determined in (2) above shall then be multiplied by the age difference determined in (1) to apply a reduction in years from age sixty-two (62)." Sec. 36-10-9(1)(b)(ii).

Again, Title 16 includes comparable provisions for municipal school teachers. See §§ 16-16-12(a)(1)(ii), 16-16-12(b)(ii). Prior to the 2009 Act, a state employee or school teacher without at least ten years of contributory service as of July 1, 2005 was eligible to retire upon completing twenty-nine years of service and attaining the age of fifty-nine or upon completing ten years of contributory service and attaining the age of sixty-five. See § 36-10-9(1)(b)(i); § 16-16-12(b)(i). An employee could also retire upon completing twenty years of service and attaining the age of fifty-five, but would receive a retirement allowance that was reduced actuarially for each month the employee was less than sixty-five years of age. See id.

Specifically with regard to correctional officers and registered nurses employed by the State, §§ 36-10-9.2 and 36-10-9.3 provide that for members in service but ineligible to retire as of September 30, 2009, retirement allowances are available upon completing twenty-five years of service and attaining the age of fifty-five, adjusted downward in proportion to the amount of service earned. See §§ 36-10-9.2(b)(ii), 36-10-9.3(b)(ii). Before the 2009 Act, these state employees were eligible to retire upon twenty-five years of service and attaining the age of 50. See §§ 36-10-9.2(b)(i), 36-10-9.3(b)(i).

In addition to amending the provisions pertaining to retirement eligibility, for those employees who had completed ten years of contributory service before July 1, 2005, the 2009 Act reduced the percentage allowances for any service completed on or after October 1, 2009. See P.L. 2009, ch. 68 art. 7 (am...