Schulz v. City of Longmont, Colorado, 04-1418.

• Decision Date: 26 September 2006
• Docket Number: No. 04-1418.,04-1418.
• Citation: 465 F.3d 433
• Parties: Stephen SCHULZ, Darren Bloom, William Clark, Steven Deal, Sean Harper, Timothy Lambert, Craig Mortenson, Sara Pierce, Rachael Sloan, Brian Smith, Michael Stogsdill, Jennifer Anderson, Denise Arneson, Kevin Blumenshine, Travis Chapman, Casey Cloud, Shayne Dombrowski, Michele Goldman, Luke Jasso, Todd Landin, Michael Major, Jonathon Michael, Scott Opie, Anthony Priola, Arturo Ramirez, Troy Reed, Susan Hogg, Amy Hennion, Plaintiffs-Appellants, v. CITY OF LONGMONT, COLORADO, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

465 F.3d 433

Stephen SCHULZ, Darren Bloom, William Clark, Steven Deal, Sean Harper, Timothy Lambert, Craig Mortenson, Sara Pierce, Rachael Sloan, Brian Smith, Michael Stogsdill, Jennifer

Anderson, Denise Arneson, Kevin Blumenshine, Travis Chapman, Casey Cloud, Shayne Dombrowski, Michele Goldman, Luke Jasso, Todd Landin, Michael Major, Jonathon Michael, Scott Opie, Anthony Priola, Arturo Ramirez, Troy Reed, Susan Hogg, Amy Hennion, Plaintiffs-Appellants, v. CITY OF LONGMONT, COLORADO, Defendant-Appellee.

No. 04-1418.

United States Court of Appeals, Tenth Circuit.

September 26, 2006.

Darold W. Killmer (Mari Newman, with him on the briefs), Killmer, Lane & Newman LLP, Denver, CO, for Plaintiffs-Appellants.

Andrew D. Ringel (Thomas J. Lyons, with him on the brief), Hall & Evans, L.L.C., Denver, CO, for Defendant-Appellee.

Before BRISCOE, McKAY, and EBEL, Circuit Judges.

EBEL, Circuit Judge.

Due to declining revenues, the City of Longmont, Colorado ("the City") imposed a salary freeze on its employees for the year 2003. Plaintiffs-Appellants ("the Officers"), members of Longmont's fire and police departments, sued the City, alleging that when the City hired them, it had promised each of them annual pay increases for approximately the first three years of their employment. The Officers, who were eligible for such an annual pay increase in 2003, claimed that the City, by imposing the 2003 salary freeze, 1) breached its employment contract with these Officers; 2) in the alternative, was bound by promissory estoppel principles to give the Officers a pay increase for that year; and 3) had deprived the Officers of a property interest without due process. We conclude that, because under Colorado law any promises made to the Officers at the time the City hired them could not bind future City Councils, the district court properly granted the City summary judgment on all of these claims.

I. BACKGROUND

The City pays its police officers and firefighters on a step-pay system. There are four pay steps.¹ The City always hires firefighters at pay step one, while police officers reach step one after completing a probationary period.² The City also hires police officers, but not firefighters, as lateral transfers from police departments in other cities and, as such, the City gives those Officers credit for their prior experience with those other cities.

A City ordinance required the City to move an Officer up to the next pay step after the Officer had completed one year at a particular pay step, so long as the Officer had performed satisfactorily.³ That meant that after approximately three years of satisfactory performance, an Officer would reach the highest pay level, level four. The Officers assert that the City was able to recruit and hire new officers at lower salaries than other comparable cities because the City's compensation plan allowed the Officers to reach the highest pay level more quickly than officers in other cities.

In 2002, the City was facing a decline in revenues. In light of that, the City manager, along with other City administrators, proposed to the Longmont City Council ("Council") a 2003 budget⁴ that froze the wages of all city employees. The proposed budget did include a "one time payment of $500 per regular employee in appreciation of their hard work and dedication to the organization during this difficult financial period."⁵ After several weeks of study and public comment and discussion, the City Council approved the proposed budget. In adopting this budget and its wage freeze,⁶ the Council also suspended the ordinance requiring the City to give annual step increases.

The City's revenue shortfall for 2003 was not as dire as predicted. As a result, the City Council approved a 2004 budget that included step increases for all Officers eligible for them and reinstated the ordinance requiring the City to give eligible Officers an annual increase.

Twenty-eight Officers who were due to receive step increases in 2003, but who did not receive them because of the wage freeze, filed suit against the City, alleging: 1) breach of contract; 2) promissory estoppel; and 3) deprivation of a property right without due process. The Officers asserted their first two claims under Colorado law and their due process claim under 42 U.S.C. § 1983. The Officers expressly based their claims, not on the City's ordinance requiring the City to pay annual step increases, but only on representations the Officers say the City made when it hired them promising annual pay increases. The district court granted the City summary judgment on all three claims. The Officers now appeal from that decision. Having jurisdiction to consider this appeal under 28 U.S.C. § 1291, we AFFIRM.

II. STANDARD OF REVIEW

This court reviews the district court's summary judgment decision de novo, viewing the evidence in the light most favorable to the non-moving party. See Roberts v. Printup, 422 F.3d 1211, 1214 (10th Cir. 2005). Summary judgment is appropriate only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

III. DISCUSSION

A. Claims asserted under Colorado law for breach of contract and promissory estoppel.

The Officers allege that the promises⁷ the City made to pay annual step increases resulted in a contractual obligation or, in the alternative, could be enforced against the City under a theory of promissory estoppel.⁸ Under Colorado law, however, a municipality's authority to enter into contractual obligations is circumscribed by statute and ordinance. See Colo. Springs Fire Fighters Ass'n v. City of Colo. Springs, 784 P.2d 766, 773-74 (Colo.1989); see also Shaw v. Sargent Sch. Dist. No. RE-33-J ex rel. Bd. of Educ., 21 P.3d 446, 449-50 (Colo.Ct.App.2001). These restrictions are incorporated into any contract the municipality makes. See Keeling v. City of Grand Junction, 689 P.2d 679, 680 (Colo.Ct.App.1984); see also Colo. Invs. Servs., Inc. v. City of Westminster, 636 P.2d 1316, 1318 (Colo.Ct.App. 1981). And anyone that contracts with a municipality is charged with constructive knowledge of those restrictions and, therefore, cannot claim any justifiable reliance on representations made beyond the municipality's contractual authority. Colo. Springs Fire Fighters Ass'n, 784 P.2d at 774 (holding that "[p]ersons dealing with the City are on constructive notice of the scope of authority possessed by the municipal officials with whom they are dealing;" further holding that "[t]his constructive notice includes the knowledge that the city council acted pursuant to the authority granted it by the city charter and subject to the limitations provided therein"); Keeling, 689 P.2d at 680 (holding that "[o]ne who contracts with a municipality is charged with knowledge of its limitations and restrictions in making contracts"); Colo. Invs. Servs., Inc., 636 P.2d at 1318 (same).⁹

Applying these principles, Colorado courts have specifically determined that municipalities retain the ability to change the compensation and benefits they provide to their employees. For example, in Keeling, 689 P.2d 679, the Colorado Court of Appeals addressed the manner in which the City of Grand Junction compensated its police officers and firefighters. See id. at 680. Grand Junction had "initiated an educational incentive pay program," which increased an officer's base pay "when a participant earned a specified number of college credits and accumulated a specified number of years of law enforcement [or fire fighting] experience." Id. Grand Junction decided to terminate that program and instead "equalize[] the salaries of all police officers and fire[fighters] having similar rank and time in grade within each department without regard to individual educational levels." Id. Several police officers and firefighters challenged the change in the manner in which they were to be compensated, suing Grand Junction for breach of contract and, in the alternative, recovery under promissory estoppel principles. See id.

The Colorado Court of Appeals in Keeling noted that, like Longmont's City Council, the Grand Junction City Council was "vested with all the legislative power of the City." Id. The court held that

[a] city council, in the exercise of its legislative power, cannot enter into a contract which will bind succeeding city councils and thereby deprive them of the unrestricted exercise of their legislative power. Among the legislative powers of a city council is the fixing of salaries of city employees. Therefore, the Grand Junction City Council, being vested with all the legislative power of the City, had the power to adopt a new pay plan setting forth rates of pay for all city employees and terminating the prior program.

Id. (citations omitted). The Colorado Court of Appeals, therefore, rejected the arguments of the officers and firefighters in Keeling that they were entitled to recover for breach of contract or, in the alternative, under a theory of promissory estoppel:

One who contracts with a municipality is charged with knowledge of its limitations and restrictions in making contracts. The existing law at the time and place of the making of the contract, including the city charter, becomes a part of the contract.

Charged with knowledge that succeeding city councils are not bound by the legislative acts of their predecessors in setting salaries for city employees, plaintiffs cannot prevail on the basis of contract. Because the fixing of salaries is subject to change and the receipt of a salary is contingent upon continued employment with the City, plaintiffs do not have a vested contractual right in the continuance of a particular rate or method of compensation.

For the same reasons, plaintiffs could not have reasonably relied upon...