Hon. Fields v. Elected Officials Retirement ( 2014 )

IN THE
SUPREME COURT OF THE STATE OF ARIZONA
THE HONORABLE KENNETH FIELDS (RET.), A RETIRED STATE COURT JUDGE;
AND THE HONORABLE JEFFERSON LANKFORD (RET.), A RETIRED STATE COURT
JUDGE, ON BEHALF OF THEMSELVES AND OTHERS SIMILARLY SITUATED,
Plaintiffs/Appellees,
v.
THE ELECTED OFFICIALS’ RETIREMENT PLAN; BRIAN TOBIN;
RICHARD PETRENKA; GREGORY FERGUSON; LAUREN KINGRY;
JEFF MCHENRY; AND RANDIE STEIN, ARE ALL NAMED IN THEIR OFFICIAL
CAPACITIES AS MEMBERS OF THE BOARD OF TRUSTEES OF THE ELECTED
OFFICIALS RETIREMENT PLAN OF THE STATE OF ARIZONA;
AND THE STATE OF ARIZONA,
Defendants/Appellants.
No. CV-13-0005-T-AP
Filed February 20, 2014
Appeal from the Superior Court in Maricopa County
The Honorable Robert H. Oberbillig, Judge
No. CV2011-017443
AFFIRMED
COUNSEL:
Colin F. Campbell, Sharad H. Desai, Thomas L. Hudson (argued), Osborn
Maledon PA, Phoenix, for Kenneth Fields and Jefferson Lankford
Bennett Evan Cooper, Shannon E. Trebbe, Steptoe & Johnson, LLP,
Phoenix, for Elected Officials Retirement Plan, Brian Tobin, Richard
Petrenka, Gregory Ferguson, Lauren Kingry, Jeff McHenry, and Randie
Stein
HON. FIELDS et al v. ELECTED OFFICIALS RETIREMENT PLAN
Opinion of the Court
Thomas C. Horne, Arizona Attorney General, Charles A. Grube, Assistant
Attorney General (argued), Arizona Attorney General’s Office, Phoenix,
for State of Arizona
Gregrey G. Jernigan, Office of the President, Arizona State Senate,
Phoenix, for Amicus Curiae Andy Biggs
Peter A. Gentala, Pele K. Peacock, Office of the Speaker, Arizona House of
Representatives, Phoenix, for Amicus Curiae Andrew M. Tobin
William F. Bock, General Counsel, League of Arizona Cities and Towns,
Phoenix, for Amicus Curiae League of Arizona Cities and Towns
Joseph Sciarrotta, Jr., General Counsel, Office of Governor Janice K.
Brewer, Phoenix, for Amicus Curiae Governor Janice K. Brewer
Robert D. Klausner, Adam P. Levinson, Klausner, Kaufman, Jensen &
Levinson, Plantation, FL, and Ron L. Kilgard, Keller Rohrback PLC,
Phoenix, for Amicus Curiae National Conference on Public Employee
Retirement Systems
JUSTICE BRUTINEL authored the opinion of the Court, in which CHIEF
JUSTICE BERCH, VICE CHIEF JUSTICE BALES, JUSTICE PELANDER,
and JUSTICE TIMMER joined.
JUSTICE BRUTINEL, opinion of the Court:
¶1 Arizona Revised Statutes Section 38-818 establishes a
formula for calculating pension benefit increases for retired members of
the Elected Officials’ Retirement Plan (“Plan”). In 2011, the legislature
modified that formula by enacting Senate Bill (“S.B.”) 1609. Because that
statute diminishes and impairs the retired members’ benefits, we hold that
it violates the Pension Clause of Article 29, § 1(C) of the Arizona
Constitution.
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Opinion of the Court
I.
¶2 In 1985, the Arizona Legislature established the Elected
Officials’ Retirement Plan to provide pension benefits for elected officials,
including judges. A.R.S. §§ 38-801(15), 38-802, 38-804. The Plan is funded
by employer and employee contributions, court fees, and investment
proceeds. Id. § 38-810.
¶3 Upon retirement, Plan members receive monthly benefits
based on 4% of their salary for each year worked, up to a maximum of
80% of their average yearly salary.1 Id. § 38-808(B)(1). Plan members are
also eligible for additional financial benefits such as medical subsidies, id.
§ 38-817, disability benefits, id. § 38-806, survivor benefits, id. § 38-807, and
benefit increases after retirement, id. § 38-818.
¶4 The benefit increase formula in § 38-818 is similar to a cost-
of-living adjustment. But unlike a cost-of-living adjustment, which is
generally tied to the inflation rate, see Strunk v. Pub. Emps. Ret. Bd., 108
P.3d 1058, 1070 (Or. 2005), the benefit increase in § 38-818 is not tied to
inflation, but instead is tied to the Plan’s return on investment. A benefit
increase is determined by multiplying the amount by which the yearly
total investment return exceeds 9% times the actuarial present value of
pensions in payment status, subject to a statutory cap of 4%. A.R.S. § 38-
818(B)–(C), (F). Any return in excess of the amount necessary to pay for
the benefit increase in any given year is placed in a reserve fund to be
used for future benefit increases, including years in which the return itself
is not sufficient to provide an increase. Id. § 38-818(E).
¶5 When the Plan was created, no statutory mechanism for
awarding post-retirement benefit increases existed; instead, the legislature
passed ad hoc increases. See A.R.S. § 38, Ch. 5, Art. 3, Elected Officials’
Retirement Plan (Historical and Statutory Notes). In 1990, the legislature
enacted A.R.S. § 38-818, creating the first statutory mechanism for
1 In 2011, the legislature modified this formula for those who become
Plan members after January 1, 2012. Those members receive monthly
benefits based on 3% of their salary per year up to a maximum of 75% of
their average yearly salary. A.R.S. § 38-808(C)(1).
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Opinion of the Court
calculating increases. This statute provided that retired members are
“entitled to receive a permanent increase in the base benefit” each year as
determined by the statutory formula, but was effective only through 1994.
Id. § 38-818(A) (1990). There was no benefit increase mechanism for 1995.
¶6 In 1996, the legislature removed the 1994 sunset provision,
extending the permanent benefit increases indefinitely. Id. § 38-818 (1996).
The legislature also reduced the annual benefit increase to the lesser of
one-half of the percentage change in the consumer price index or 3%. Id.
§ 38-818(F). In 1998, the legislature amended § 38-818 to reinstate the 4%
benefit increase cap. Id. § 38-818(F) (1998).
¶7 Later that year, Proposition 100 was referred to and passed
by the voters, becoming Article 29 of the Arizona Constitution. It
provides:
A. Public retirement systems shall be funded with
contributions and investment earnings using actuarial
methods and assumptions that are consistent with
generally accepted actuarial standards.
B. The assets of public retirement systems,
including investment earnings and contributions, are
separate and independent trust funds and shall be
invested, administered and distributed as determined
by law solely in the interests of the members and
beneficiaries of the public retirement systems.
C. Membership in a public retirement system is a
contractual relationship that is subject to article II, §
25, and public retirement system benefits shall not be
diminished or impaired.
Ariz. Const. art. 29, § 1.
¶8 Beginning in 2000, the ratio of the Plan’s assets to its
liabilities (“funding ratio”), began to steadily decline.2 Staff of PSPRS,
2 The funding ratio measures a pension plan’s assets as a percentage
of its future obligations. See generally Richard A. Ippolito, Reversion Taxes,
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Opinion of the Court
Comprehensive Annual Financial Report/Elected Officials’ Retirement Plan FY
2010 at 7, available at http://azmemory.azlibrary.gov/cdm/singleitem/
collection/statepubs/id/12803/rec/1. Between 2000 and 2010, the Plan’s
funding ratio decreased from 141.7% to 66.7%. Id. Nevertheless, the
reserve fund allowed retired members to receive a 4% benefit increase
each year until 2011.
¶9 In 2011, the legislature enacted S.B. 1609, the provision at
issue here. S.B. 1609 amended § 38-818 by prohibiting the transfer of any
investment earnings that exceed the 9% rate of return to the reserve fund,
and instead provided that such earnings would fund the basic retirement
plan.3 2011 Ariz. Sess. Laws ch. 357, § 62(A), (D). As a result, retired Plan
members received only a 2.47% benefit increase in July 2011 (rather than
the anticipated 4% increase) and did not receive any benefit increases in
2012 or 2013.
¶10 Effective July 1, 2013, S.B. 1609 also changed the formula
used to calculate permanent benefit increases. A.R.S. § 38-818.01(B). This
new formula increased the rate of return necessary to trigger a benefit
increase from 9% to 10.5%. Id. § 38-818.01(D). The new formula also tied
the availability of benefit increases to the Plan’s overall funding ratio. Id.
§ 38-818.01(C). If the funding ratio is 60% or less, the Plan will not fund a
benefit increase; if the funding ratio is between 60% and 65%, the Plan will
fund a 2% benefit increase; and for each 5% increase in the funding ratio
over 65%, the Plan will increase the amount of the benefit increase by 0.5%
up to a maximum of 4%. Id. Beginning December 31, 2015, S.B. 1609
allows the legislature to provide ad hoc benefit increases in addition to the
permanent benefit increases that may be awarded each year. Id. § 38-
818.02.
¶11 In September 2011, retired judges Fields and Lankford, on
Contingent Benefits, and the Decline in Pension Funding, 44 J. Law & Econ.
199, 202 (2001).
3 Although S.B. 1609 became effective on July 20, 2011, the legislature
made it retroactive to May 31, 2011, in order to reverse the July 1, 2011
transfer of excess investment earnings to the reserve fund.
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Opinion of the Court
behalf of themselves and as representatives of a class of retired Plan
members and beneficiaries (collectively “Fields”), sued the Elected
Officials’ Retirement Plan and its board members (“EORP”), alleging that
S.B. 1609 violates Article 29, § 1, as well as Article 2, § 25 of the Arizona
Constitution, and Article 1, § 10 of the United States Constitution, both of
which prohibit the enactment of laws impairing contract obligations. The
State intervened to defend S.B. 1609. Fields moved to preliminarily enjoin
implementation of S.B. 1609, and the trial court consolidated the hearing
on the preliminary injunction with a trial on the merits. Following the
trial, the court found that S.B. 1609 violates Article 29, § 1(C)’s command
that “public retirement system benefits shall not be diminished or
impaired.” The court reasoned that § 38-818’s required benefit increase
was a vested financial benefit that was directly and adversely affected by
S.B. 1609. The court did not address Fields’ contentions that S.B. 1609
violated the Contract Clauses of the state and federal constitutions. The
court also awarded Fields attorneys’ fees.
¶12 After EORP filed a timely notice of appeal, we granted
EORP’s petition to transfer the case to this Court under Arizona Rule of
Civil Appellate Procedure 19(a). The funding of public pensions raises
issues of statewide importance, and we have jurisdiction pursuant to
Article 6, § 5(3) of the Arizona Constitution.
II.
¶13 Before we begin our analysis of the legal question presented,
we note that the Justices of this Court are not members of the class of
retired judges who are appellees in this case. We are, however, members
of the Plan, as are most Arizona state judges, and we will be eligible for
benefit increases pursuant to A.R.S. § 38-818 upon our retirement.4 No
4 New enrollment in the Plan ended after 2013. Beginning January 1,
2014, all new Arizona elected officials, including judges, are members of
the newly created Elected Official’s Defined Contribution Retirement
System plan. A.R.S. § 38-831(4). They are not eligible for benefit increases
pursuant to A.R.S. § 38-818. Elected officials and judges who were
members of the Plan on December 31, 2013, are eligible to remain in the
Plan. A.R.S. § 38-804(B).
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party has asked for our recusal, and, in any event, the rule of necessity
applies.
¶14 The rule of necessity establishes that a judge is not
disqualified because of a personal interest if no other judge is available to
decide the case. United States v. Will, 449 U.S. 200, 213–16 (1980); see also
Scheehle v. Justices of the Sup. Ct., 211 Ariz. 282, 295, 120 P.3d 1092, 1105
(2005). Because our disqualification would “result in a denial of a
litigant’s constitutional right to have a question, properly presented to
such court, adjudicated,” Will, 449 U.S. at 214 (quotation omitted), the rule
of necessity applies, and we must decide the matter, Wisconsin Judicial
Com’n v. Prosser, 817 N.W.2d 830, 833 (Wis. 2012).
III.
¶15 We review the constitutionality of S.B. 1609 de novo. State v.
Glassel, 211 Ariz. 33, 51 ¶ 65, 116 P.3d 1193, 1211 (2005). We presume that
the statute is constitutional, and a “party asserting its unconstitutionality
bears the burden of overcoming the presumption.” Eastin v. Broomfield,
116 Ariz. 576, 580, 570 P.2d 744, 748 (1977).
IV.
A.
¶16 We first address the argument that because Article 29, § 1(C)
references the Contract Clause of Article 2, § 25 of the Arizona
Constitution, we should resolve this case by using a Contract Clause
analysis similar to that employed by the Supreme Court in Energy Reserves
Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400 (1983), which held that
although the federal Contract Clause is facially absolute, it allows the
impairment of contracts under certain conditions. Section 1(C) not only
references the Contract Clause, but also uses similar language. Compare
Ariz. Const. art. 29, § 1(C) (“Membership in a public retirement system is a
contractual relationship that is subject to article II, § 25, and public
retirement system benefits shall not be diminished or impaired.”), with
Ariz. Const. art. 2, § 25 (“No . . . law impairing the obligation of a contract,
shall ever be enacted.”). But accepting this argument would render
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HON. FIELDS et al v. ELECTED OFFICIALS RETIREMENT PLAN
Opinion of the Court
superfluous the latter portion of § 1(C), the Pension Clause, which
prohibits diminishing or impairing public retirement benefits. Because
the legislature generally avoids redundancy, we reject this argument.
Williams v. Thude, 188 Ariz. 257, 259, 934 P.2d 1349, 1351 (1997) (noting
court construes statutes to avoid rendering portions superfluous); Vega v.
Morris, 184 Ariz. 461, 463, 910 P.2d 6, 8 (1996) (rejecting an interpretation
that would render the statute in question “essentially meaningless”).
¶17 We similarly reject EORP’s argument that reading the two
clauses of § 1(C) independently renders the reference to the Contract
Clause redundant. The Contract Clause applies to the general contract
provisions of a public retirement plan, while the Pension Clause applies
only to public retirement benefits. Therefore, the Pension Clause confers
additional, independent protection for public retirement benefits separate
and distinct from the protection afforded by the Contract Clause. See
Ariz. Op. Att’y Gen. No. I09-009 (concluding that the Pension Clause
“provides additional, substantive protection” to that offered by the
Contract Clause).
B.
¶18 We next consider whether use of the formula established by
A.R.S. § 38-818 to calculate future benefit increases is itself a “benefit”
protected by the Pension Clause. Fields argues that the term “benefit”
includes the benefit-increase formula. The State and EORP, on the other
hand, argue that the term “benefit” only includes the right to receive
payments in the amount determined by the most recent calculation. All
parties agree that once a benefit increase has occurred, the Pension Clause
protects it from later reduction.
¶19 In interpreting a constitutional amendment, our primary
purpose is to “effectuate the intent . . . of the electorate that adopted it.”
Jett v. City of Tucson, 180 Ariz. 115, 119, 882 P.2d 426, 430 (1994); see also
McElhaney Cattle Co. v. Smith, 132 Ariz. 286, 289, 645 P.2d 801, 804 (1982).
Neither the Arizona Constitution nor Arizona case law defines “benefit.”
We therefore consider how this term “is generally understood and used
by the people.” McElhaney Cattle Co., 132 Ariz. at 290, 645 P.2d at 805; see
also State v. Jones, 188 Ariz. 388, 392, 937 P.2d 310, 314 (1997) (when a term
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Opinion of the Court
is not defined within a statute, “the court first looks to the statute’s
language”). We first examine the provision by assigning each word its
“natural, obvious, and ordinary meaning.” State ex rel. Morrison v.
Nabours, 79 Ariz. 240, 245, 286 P.2d 752, 755 (1955).
¶20 To determine the ordinary meaning of a term, we commonly
refer to established and widely used dictionaries. State v. Wise, 137 Ariz.
468, 470 n.3, 671 P.2d 909, 911 n.3 (1983). In the retirement-system context,
a “benefit” has been defined as “a payment or service provided for under
an annuity, pension plan, or insurance policy.” Merriam-Webster’s
Collegiate Dictionary 114 (11th ed. 2003); see also The American Heritage
Dictionary 168 (5th ed. 2011) (defining “benefit” as “a form of
compensation, such as . . . a pension, provided to employees in addition to
wages or salary as part of an employment arrangement”).
¶21 We think the dictionary definitions do not determine the
meaning of “benefit” as used in the Pension Clause. The parties’ differing
interpretations each are reasonable, and the dictionary definitions do not
provide sufficient guidance as to whether a “benefit” constitutes only the
base benefit or includes the promise of future benefit increase payments
using a specified formula.
¶22 When terms are unclear or susceptible to more than one
reasonable interpretation, we consider extrinsic evidence of the
electorate’s intent, including “the history behind the provision, the
purpose sought to be accomplished by its enactment, and the evil sought
to be remedied.” McElhaney Cattle Co., 132 Ariz. at 290, 645 P.2d at 805.
¶23 The history of the Pension Clause suggests that the term
“benefit” includes benefit increases. In 1990, eight years before the voters
approved the Pension Clause, the legislature enacted A.R.S. § 38-818,
which provides that eligible retired members are “entitled to receive [a]
permanent benefit increase in their base benefit.” (Emphasis added).
After this version of § 38-818 sunsetted in 1994, the legislature removed
the sunset provision in 1996 — unqualifiedly extending benefit increases
in perpetuity. A.R.S. § 38-818 (1996). Just two years later, the legislature
reinstated the 4% benefit increase cap, and the voters approved Article 29,
of which the Pension Clause is a part, giving public retirement benefits
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Opinion of the Court
constitutional protection.
¶24 The Pension Clause neither altered the concept of “benefit”
reflected in § 38-818’s “entitled to receive a permanent benefit increase”
language, nor amended the formula for the calculation of pensions.
Inasmuch as formula-based future benefit increases were part of the
statutorily identified benefits existing in 1998, it seems reasonable to
conclude that they also were embraced by the term “benefits” in the
Pension Clause.
¶25 We disagree with the State’s and EORP’s argument that
because § 38-818 prescribes only a formula for benefit increases rather
than a liquidated amount, that formula is not protected by the Pension
Clause. The monthly payments to which a retired Plan member is entitled
are determined by a statutory formula. See A.R.S. § 38-808(B), (C) (2011);
A.R.S. § 38-818(A) (1996). Although the State seeks to limit the definition
of “benefit” to the “liquidated amount” of payments as currently
calculated, the legislature has never promised to pay a specific dollar
amount; rather, it has provided a formula by which the promised amount
is calculated. See id.
¶26 Adopting this reasoning would place § 38-808’s base benefit
— the main component of retirement benefits — outside the scope of
Pension Clause protection because the base benefit is a direct product of §
38-808’s formula. As the legislature demonstrated when it passed S.B.
1609, changing the amount of the promised benefit requires changing the
formula. Therefore, the “benefit” provided under § 38-808, and protected
by the Pension Clause, necessarily includes the right to use the statutory
formula.
¶27 Our interpretation of the Pension Clause is consistent with
prior cases. In Yeazell v. Copins, this Court held that an employee was
entitled to have his retirement benefits calculated based upon the formula
existing when he began employment, rather than a less-favorable formula
subsequently adopted during his employment. 98 Ariz. 109, 115, 402 P.2d
541, 545 (1965). The Court explained that the employee “had the right to
rely on the terms of the legislative enactment of the Police Pension Act of
1937 as it existed at the time he entered the service of the City of Tucson
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Opinion of the Court
and that the subsequent legislation may not be arbitrarily applied
retroactively to impair the contract.” Id. at 117, 402 P.2d at 549. As in
Yeazell, Fields has a right in the existing formula by which his benefits are
calculated as of the time he began employment and any beneficial
modifications made during the course of his employment. Thurston v.
Judges’ Ret. Plan, 179 Ariz. 49, 51, 876 P.2d 545, 574 (1994) (recognizing that
“when the amendment [to retirement benefits] is beneficial to the
employee or survivors, it automatically becomes part of the contract by
reason of the presumption of acceptance”).
¶28 This definition of “benefit” also comports with the use of the
term in other states that have similar constitutional provisions protecting
public pension benefits. For example, construing a similar definition of
“benefit,” New York and Illinois have also determined that benefit
calculation formulas are entitled to constitutional protection.5 See
Kleinfeldt v. New York City Emps.’ Ret. Sys., 324 N.E.2d 865, 868–69 (N.Y.
1975) (including the formula utilized in calculating an annual retirement
allowance under the Pension Clause); Miller v. Ret. Bd. of Policemen’s
Annuity, 771 N.E.2d 431, 444 (Ill. App. 2001) (holding benefit increases to
be constitutionally protected). Additionally, unlike narrower protections
found in other states’ constitutions, the protection afforded by the Arizona
Pension Clause extends broadly and unqualifiedly to “public retirement
system benefits,” not merely benefits that have “accrued” or been
“earned” or “paid.” See, e.g., Alaska Const. art. 7, § 7; Haw. Const. art. 16,
§ 2; Mich. Const. art. 9, § 24.
¶29 Accordingly, we conclude that § 38-818’s benefit increase
formula is a “benefit” for purposes of Article 29, § 1(C).
5 New York’s Pension Clause provides: “[M]embership in any
pension or retirement system of the state or of a civil division thereof shall
be a contractual relationship, the benefits of which shall not be diminished
or impaired.” N.Y. Const. art. 5, § 7. Illinois’ Pension Clause provides:
“Membership in any pension or retirement system of the State, any unit of
local government or school district, or any agency or instrumentality
thereof, shall be an enforceable contractual relationship, the benefits of
which shall not be diminished or impaired.” Ill. Const. art. 13, § 5.
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C.
¶30 The State and EORP argue that retired judges do not have a
vested right in the formula because it is contingent upon future events —
for example, a rate of return sufficient to trigger the benefit increase.
“[Benefits] are contingent when they are only to come into existence on an
event or condition which may not happen or be performed until such
other event may prevent their vesting.” Thurston, 179 Ariz. at 50, 876 P.2d
at 548 (quoting Hall v. A.N.R. Freight System, Inc., 149 Ariz. 130, 140, 717
P.2d 434, 444 (1986)).
¶31 In Yeazell, this Court held that because Article 9, § 7 of the
Arizona Constitution forbids the legislature from providing gratuities, the
right to receive a pension necessarily arose as a condition of the
employee’s contract of employment. 98 Ariz. at 114, 402 P.2d at 544.
Although the right to receive a pension is subject to conditions precedent,
such as completing the term of employment, “the right to a pension
becomes vested upon acceptance of employment.” Id. at 115, 402 P.2d at
545; see also Fund Manager v. City of Phoenix Police Dept., 151 Ariz. 487, 489,
728 P.2d 1237, 1239 (App. 1986) (stating that “a public employee’s interest
in a retirement benefit or pension is so significant that it should become a
right or entitlement at the outset of employment”). After such vesting,
“[the pension] contract cannot be unilaterally modified nor can one party
to a contract alter its terms without the assent of the other party.” Yeazell,
98 Ariz. at 115, 402 P.2d at 545. This contractual underpinning of public
retirement systems was codified by Article 29, §1(C). Because future
increases under § 38-818 fall within the meaning of “benefit” under Article
29, they are part of the contract of employment and are not contingent.
¶32 EORP relies on Smith v. City of Phoenix, 175 Ariz. 509, 858
P.2d 654 (App. 1992), to argue that Fields had only a contingent right. In
Smith, a city ordinance set the salaries of city judges at 95% of the salaries
of superior court judges. Before a statutory increase in superior court
salaries took effect, the city revised its ordinance to preserve the salaries
for city judges at the then-existing amount. Id. at 514, 858 P.2d at 659.
The court of appeals held that Smith had no vested contractual right to
continued salary increases under the city ordinance, observing that his
“contract of employment” did not express “that the method of calculating
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his salary would remain fixed throughout his term,” and “[i]ndeed, the
fact that both parties knew his salary was established by a city ordinance,
which was naturally subject to change by the city council, suggests just the
opposite.” Id.¶33 Smith is inapposite. Assuming the case was correctly
decided, we note that it reflects the general principle that statutory
provisions do not create contractual rights. See Proksa v. Ariz. State Sch. for
the Deaf & the Blind, 205 Ariz. 627, 629 ¶¶11–12, 74 P.3d 939, 941 (2003).
But statutorily established retirement benefits are an exception to this rule.
Id. at 631 ¶21, 74 P.3d at 943. Under Yeazell, the right to a public pension
on the terms promised vests upon acceptance of employment, 98 Ariz. at
115, 402 P.2d at 545, and “the State may not impair or abrogate that
contract without offering consideration and obtaining consent of the
employee,” Proksa, 205 Ariz. at 630 ¶ 16, 74 P.3d at 942; cf. Thurston, 179
Ariz. at 52, 876 P.2d at 575 (recognizing that a detrimental modification to
retirement benefits “may not be applied absent the employee’s express
acceptance of the modification because it interferes with the employee’s
contractual rights”).
D.
¶34 This leaves the question of whether S.B. 1609’s changes to §
38-818’s formula diminish or impair retirement system benefits. We
conclude that S.B. 1609 diminishes retired members’ retirement benefits in
two ways.
¶35 First, because S.B. 1609 retroactively prevented the transfer
of approximately $31 million to the reserve, 2011 Ariz. Sess. Laws, Ch. 357,
§ 62(A), (D), the Plan could fund only a 2.47% benefit increase in 2011,
rather than the expected 4% increase. Likewise, because S.B. 1609
prevented any transfer for 2012 or 2013 and the reserve did not have
sufficient funds, retired members did not receive a benefit increase in
those years. Compare id. § 62(A) (eliminating any transfer of excess
investment earnings from and after May 31, 2011), with A.R.S. § 38-
818.01(A) (establishing a new benefit increase formula effective July 1,
2013). If S.B. 1609 had not been enacted, Fields would have received a 4%
benefit increase in 2011, 2012 and 2013.
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¶36 Second, S.B. 1609 makes it more difficult for retired members
to receive future benefits by increasing the rate of return required to fund
an increase from 9% to 10.5%. S.B. 1609 also makes it less likely that
retired members will receive the maximum 4% increase in benefits by
tying increases to the Plan’s funding ratio. Because S.B. 1609 diminishes
and impairs the benefits to which retired members are entitled, the statute
violates Article 29, § 1(C).
E.
¶37 We likewise reject the State’s and EORP’s argument that
Section 1(C)’s pension protection is subject to Section 1(A)’s requirement
that the plan be funded “using actuarial methods and assumptions that
are consistent with generally accepted actuarial standards.” Ariz. Const.
art. 29 § 1(A). Section 1(C) explicitly states that “retirement system
benefits shall not be diminished or impaired.” No language in Section
1(C) indicates that its mandate is qualified by any other provision,
including Section 1(A).
V.
¶38 Fields has requested an award of attorneys’ fees under the
common fund doctrine or A.R.S. § 12-2030, which permits fees to
prevailing parties in mandamus actions.
¶39 A mandamus action “seeks to compel a public official to
perform a non-discretionary duty imposed by law,” and a party that
prevails in such an action is entitled to attorneys’ fees and other expenses
under § 12-2030. Stagecoach Trails MHC, L.L.C. v. City of Benson, 231 Ariz.
366, 370 ¶¶ 18–19, 295 P.3d 943, 947 (2013).
¶40 Fields sought to compel EORP to calculate benefit increases
according to § 38-818’s formula rather than that of S.B. 1609. Although
Fields characterized the action as one for mandamus, the complaint
alleges that the Board did not use the correct formula to calculate the
benefit increases, not that it refused to calculate the benefit at all.
Therefore, Fields did not seek mandamus relief. See Stagecoach Trails, 231
Ariz. at 370 ¶ 21, 295 P.3d at 947 (holding that an action contending that
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HON. FIELDS et al v. ELECTED OFFICIALS RETIREMENT PLAN
Opinion of the Court
an officer “either misapplied or misinterpreted the regulations” did not
seek relief in the nature of mandamus). We thus deny Fields’ request for
attorneys’ fees pursuant to § 12-2030.
¶41 Fields also argues that the common fund doctrine supports
an award of attorneys’ fees. “Under the common fund doctrine a court
may award attorneys’ fees to counsel for the prevailing side whose efforts
in litigation create or preserve a common fund from which others who
have undertaken no risk or cost will nevertheless benefit.” Kerr v. Killian,
197 Ariz. 213, 217–18 ¶ 19, 3 P.3d 1133, 1137–38 (App. 2000). Because
“application of [the common fund doctrine] is capable of great abuse, it is
exercised only in exceptional circumstances and for dominating reasons of
justice.” Id. at 219–20 ¶ 27, 3 P.3d at 1139–40 (quoting Rossi, Attorneys
Fees, Second Edition (Lawyers Cooperative Publishing Co. 1995)). Even
assuming that the doctrine may apply in a case such as this (an issue we
need not decide), we decline to award attorneys’ fees in an exercise of our
discretion.
VI.
¶42 We affirm the decision of the trial court.
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