Donohue v. the State of New York ( 2022 )

18-3193-cv
Donohue v. The State of New York
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 2021
Last Submission: March 30, 2022 Decided: April 27, 2022
Docket No. 18-3193-cv
DANNY DONOHUE, AS PRESIDENT OF THE CIVIL SERVICE EMPLOYEES ASSOCIATION,
INC., LOCAL 1000, AFSCME, AFL-CIO, CIVIL SERVICE EMPLOYEES ASSOCIATION,
INC., LOCAL 1000, AFSCME, AFL-CIO, MILO BARLOW, ON BEHALF OF HIMSELF, ON
BEHALF OF RETIREES OF THE STATE OF NEW YORK FORMERLY IN THE CSEA
BARGAINING UNITS, THOMAS JEFFERSON, ON BEHALF OF HIMSELF, ON BEHALF OF
RETIREES OF THE STATE OF NEW YORK FORMERLY IN THE CSEA BARGAINING UNITS,
CORNELIUS KENNEDY, ON BEHALF OF HIMSELF, ON BEHALF OF RETIREES OF THE STATE
OF NEW YORK FORMERLY IN THE CSEA BARGAINING UNITS, JUDY RICHARDS, ON
BEHALF OF HERSELF, ON BEHALF OF RETIREES OF THE STATE OF NEW YORK FORMERLY
IN THE CSEA BARGAINING UNITS, HENRY WAGONER, ON BEHALF OF HIMSELF, ON
BEHALF OF RETIREES OF THE STATE OF NEW YORK FORMERLY IN THE CSEA
BARGAINING UNITS,
Plaintiffs-Appellants,
— v. —
KATHLEEN C. HOCHUL, IN HER OFFICIAL CAPACITY AS GOVERNOR OF THE STATE OF
NEW YORK, PATRICIA A. HITE, INDIVIDUALLY, REBECCA A. CORSO, IN HER OFFICIAL
CAPACITY AS ACTING COMMISSIONER, NEW YORK STATE CIVIL SERVICE
DEPARTMENT, CAROLINE W. AHL, IN HER OFFICIAL CAPACITY AS COMMISSIONER OF
THE NEW YORK STATE CIVIL SERVICE COMMISSION, LANI V. JONES, IN HER OFFICIAL
CAPACITY AS COMMISSIONER OF THE NEW YORK STATE CIVIL SERVICE COMMISSION,
ROBERT L. MEGNA, INDIVIDUALLY, ROBERT F. MUJICA, JR., IN HIS OFFICIAL CAPACITY
AS DIRECTOR OF THE NEW YORK STATE DIVISION OF THE BUDGET, THOMAS P.
DINAPOLI, IN HIS OFFICIAL CAPACITY AS COMPTROLLER OF THE STATE OF NEW YORK,
JANET M. DIFIORE, IN HER OFFICIAL CAPACITY AS CHIEF JUDGE OF THE NEW YORK
STATE UNIFIED COURT SYSTEM,
Defendants-Appellees,
THE STATE OF NEW YORK, NEW YORK STATE CIVIL SERVICE DEPARTMENT, NEW
YORK STATE AND LOCAL RETIREMENT SYSTEM, NEW YORK STATE UNIFIED COURT
SYSTEM,
Defendants.
B e f o r e:
NEWMAN and LYNCH, Circuit Judges.*
Plaintiffs-Appellants the Civil Service Employees Association (“CSEA”)
and officers and retired former members of CSEA (collectively, “the CSEA
Plaintiffs”) challenge the State of New York’s 2011 reduction, through the
amendment of a state statute and regulation, of its contributions to retired former
State employees’ health insurance premiums. The CSEA Plaintiffs contend that
the reduced contributions contravene the State’s contractual obligation, under
CSEA’s collective-bargaining agreements (“CBAs”) with the State, to pay a fixed
percentage of retirees’ health insurance premiums throughout their retirements.
They bring claims for breach of contract under New York law and for impairing
*
Judge Peter W. Hall, originally a member of the panel, died on March 11, 2021. The two
remaining members of the panel, who are in agreement, have decided this case. See 28 U.S.C.
§ 46(d); 2d Cir. IOP E(b); United States v. Desimone, 140 F.3d 457, 458-59 (2d Cir. 1998).
2
contractual obligations in violation of the Contract Clause of the United States
Constitution. The United States District Court for the Northern District of New
York granted summary judgment to Defendants-Appellees on both claims. On
appeal, we certified two questions to the New York Court of Appeals, including
whether the CBA provisions that the CSEA Plaintiffs cite, though silent on the
question of lifetime vesting, give rise to an inference of such vesting, or are at
least ambiguous concerning that issue. The New York Court of Appeals
answered the first part of that question in the negative and declined to resolve
the second. With the benefit of the answer to our certified questions, we now
conclude that the State’s adjustment of contribution rates for retirees neither
breached any of the contractual provisions that the CSEA Plaintiffs identify nor
impaired any constitutionally protected contractual obligations. We therefore
AFFIRM the judgment of the district court.
ERIC E. WILKE, Civil Service Employees Association, Inc.,
Albany, NY (Daren J. Rylewicz, Jennifer C. Zegarelli, on
the brief), for Plaintiffs-Appellants.
FREDERICK A. BRODIE, Assistant Solicitor General, Albany, NY
(Letitia James, Attorney General, State of New York,
Barbara D. Underwood, Solicitor General, Andrea Oser,
Deputy Solicitor General, on the brief), for Defendants-
Appellees.
Robert T. O’Reilly, New York State United Teachers, New
York, NY, for Amicus Curiae United University Professions.
GERARD E. LYNCH, Circuit Judge:
Plaintiffs-Appellants the Civil Service Employees Association (“CSEA”)
and certain of its officers and retired former members (collectively, “the CSEA
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Plaintiffs”) brought this action against various New York State officials
(collectively, “the State”), asserting claims for breach of contract and
unconstitutional impairment of contractual obligations, based on the State’s 2011
decision to reduce its contributions to certain retired former employees’ health
insurance premiums. Although the relevant collective bargaining agreements
(“CBAs”) did not expressly provide for a vested lifetime right to a particular
contribution rate, the CSEA Plaintiffs argued that various provisions of the CBAs
gave rise to such a right by inference. The United States District Court for the
Northern District of New York (Mae A. D’Agostino, J.) granted summary
judgment to the State on the contract and constitutional claims. See Donohue v.
New York (“Donohue I”), 347 F. Supp. 3d 110 (N.D.N.Y. 2018).
On appeal, we determined that both claims “depend on aspects of New
York law on which the State’s courts have not conclusively ruled and that meet
our other criteria for certification.” Donohue v. Cuomo (“Donohue II”), 980 F.3d 53,
59 (2d Cir. 2020). Accordingly, we certified two questions to the New York Court
of Appeals: (1) whether, under New York law, the CBA provisions that the CSEA
Plaintiffs cite grant retirees a vested lifetime right to fixed contribution rates, or at
4
least are ambiguous on that issue; and (2) if such a vested right exists, whether
New York law affords the CSEA Plaintiffs a remedy in contract. Id. at 87.
The New York Court of Appeals accepted certification, 36 N.Y.3d 935(2020), and answered the first part of our first certified question, holding that
“New York’s contract law does not recognize . . . inferences” of vested lifetime
rights to retiree benefits from silence and that “[a]bsent such inferences, none of
the CBA provisions identified [in our first certified question] establish a vested
right to lifetime fixed premium contributions, either singly or in combination,”
Donohue v. Cuomo (“Donohue III”), 38 N.Y.3d 1, 19 (2022). The Court of Appeals
declined, however, “to determine whether the CBA’s text is ambiguous.” Id.With the benefit of the New York Court of Appeals’s guidance, we now
conclude that the district court did not err in granting summary judgment to the
State on both claims. The New York Court of Appeals held as a matter of state
law that the CBA provisions at issue cannot unambiguously establish a vested
lifetime right to fixed premium contributions, so the breach of contract claim
cannot succeed without the consideration of extrinsic evidence. Looking to the
certification opinion and applying established principles of New York law, we
hold that those provisions are not ambiguous regarding the establishment of
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such a vested right, and therefore consideration of extrinsic evidence is not
permissible. To the extent that our Contract Clause analysis requires us to make
an independent determination of whether constitutionally protected contractual
obligations were impaired, we hold that no such obligations are at stake. We
therefore AFFIRM the judgment of the district court.1
BACKGROUND
This appeal grows out of a dispute over the State’s decision in 2011 to
reduce its premium contributions under the New York State Health Insurance
Plan (“NHYSHIP”), an optional health-benefit plan for active and retired State
employees. From the program’s inception in 1956 until 1983, the State, pursuant
to a state statute, paid 100% of active and retired participants’ NYSHIP premiums
and 75% of their dependents’ premiums. In 1982, the State negotiated with CSEA
and other public-sector unions a reduction of the State’s individual-coverage
1
This Opinion disposes only of the above-captioned appeal. We reserve decision
in the ten related cases – Nos. 18-3049-cv, 18-3066-cv, 18-3122-cv, 18-3140-cv, 18-
3142-cv, 18-3151-cv, 18-3172-cv, 18-3183-cv, 18-3220-cv, and 18-3221-cv – because
those cases involve different CBAs which may include materially different
language. We will afford the parties in those cases an opportunity for further
briefing focused on any relevant differences in those CBAs or other
circumstances that may distinguish them from this case in light of the principles
applied in Donohue II, Donohue III, and this Opinion.
6
contribution rate from 100% to 90%, effective January 1, 1983. The 90% and 75%
rates remained in effect from 1983 to 2011, during which period CSEA and the
State negotiated seven more CBAs.
In 2011, in an effort to address budget shortfalls due to the Great Recession,
the State negotiated with CSEA and other public-sector unions to reduce the
State’s contribution rates to 88% for individual coverage and 73% for dependent
coverage for certain grades of employees, and 84% for individual coverage and
69% for dependent coverage for others. Thereafter, the State legislature amended
N.Y. Civ. Serv. Law § 167 to provide that, “[n]otwithstanding any inconsistent
provision of law, where and to the extent that a [CBA] so provides, the state cost
of premium or subscription for eligible employees covered by such agreement
may be modified pursuant to the terms of such agreement,” and to authorize the
President of the Civil Service Commission, “with the approval of the director of
the budget, [to] extend the modified state cost of premium or subscription
charges for employees or retirees not subject to [a CBA] and [to] promulgate the
necessary rules or regulations to implement this provision.” Id. § 167(8). Pursuant
to that authorization, the Acting Commissioner of the State Civil Service
Department – who is also the President of the Civil Service Commission –
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received the necessary approval and promulgated a regulation extending the 88%
and 73% contribution rates negotiated for current employees to retirees. See N.Y.
Comp. Code R. & Regs. tit. 4, § 73.3(b).
Various groups of retired former State employees, unions representing
them, and those unions’ officers then filed eleven separate actions challenging the
contribution reductions in United States District Court. The CSEA Plaintiffs filed
this action on December 28, 2011, and the district court designated it as the lead
case. The State moved for summary judgment in all eleven cases, and the CSEA
Plaintiffs cross-moved for summary judgment in this case. The district court
granted the State’s summary judgment motions in all eleven cases and denied the
CSEA Plaintiffs’ cross-motion, concluding, inter alia, that the CBA provisions at
issue unambiguously did not provide any vested right to a continuing
contribution rate for retirees. See Donohue I, 347 F. Supp. 3d at 129-31. All eleven
sets of plaintiffs timely appealed. Like the district court, we designated the
present case as the lead case, and we ordered that the various sets of plaintiffs
coordinate their argument.
In Donohue II, we determined that this case turned on unresolved questions
of New York law. We were unable to confidently predict whether the New York
8
Court of Appeals would adopt the Supreme Court’s holding in M & G Polymers
USA, LLC v. Tackett, 574 U.S. 427 (2015), that courts interpreting CBAs governed
by federal law may not infer lifetime vesting of retiree benefits from silence as to
the duration of such benefits, and the Supreme Court’s holding in CNH Indus.
N.V. v. Reese, 138 S. Ct. 761 (2018), that such silence does not create ambiguity
concerning that issue.2 Donohue II, 980 F.3d at 68-72.
Prior to Tackett and Reese, some federal courts had drawn such inferences
in interpreting CBAs governed by federal law, following the Sixth Circuit’s lead
in the now-abrogated case of International Union, United Auto., Aerospace, & Agric.
Implement Workers of America (UAW) v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir.
1983). In Kolbe v. Tibbetts, 22 N.Y.3d 344 (2013), the New York Court of Appeals
held that a CBA that granted retirees a vested right to the “same coverage” until
age 70 was ambiguous as to the “scope” of that coverage, but it declined “to rule
on whether New York applies an inference of vesting for retiree health insurance
rights,” id. at 354, leaving an open question of state contract law that was critical
2
Because state employees are not covered by the National Labor Relations Act,
see 29 U.S.C. § 152(2), their collective bargaining rights, if any, derive from state
law, and when states create such rights (as New York has, see N.Y. Civ. Serv. Law
§ 203), the interpretation of any resulting CBAs is governed by state law.
9
to this case. Furthermore, we were unable to predict whether, assuming that the
CSEA Plaintiffs had a constitutionally protected contractual right to fixed
contribution rates, the New York Court of Appeals would hold that they could
obtain relief under state law for breach of contract. The answer to that question is
critical to determining whether, if such vested rights were provided by the CBA,
New York’s failure to comply with the contracts was a mere breach, remediable
under state law, or an unconstitutional impairment of contractual obligations.
Donohue II, 980 F.3d at 80-81. Accordingly, after determining that both issues met
our criteria for certification, see id. at 84, we certified the following questions to
the New York Court of Appeals:
Question 1:
Under New York state law, and in light of Kolbe v.
Tibbetts, 22 N.Y.3d 344, 980 N.Y.S.2d 903, 3 N.E.3d 1151(2013), M & G Polymers USA, LLC v. Tackett, 574 U.S. 427,
135 S.Ct. 926, 190 L.Ed.2d 809 (2015), and CNH Indus.
N.V. v. Reese, ––– U.S. ––––, 138 S. Ct. 761, 200 L.Ed.2d 1(2018), do §§ 9.13 (setting forth contribution rates of 90%
and 75%), 9.23(a) (concerning contribution rates for
surviving dependents of deceased retirees), 9.24(a)
(specifying that retirees may retain NYSHIP coverage in
retirement), 9.24(b) (permitting retirees to use sick-leave
credit to defray premium costs), and 9.25 (allowing for
the indefinite delay or suspension of coverage or
sick-leave credits) of the 2007-2011 collective bargaining
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agreement between the Civil Service Employees
Association, Inc. and the Executive Branch of the State
of New York (“the CBA”), singly or in combination, (1)
create a vested right in retired employees to have the
State’s rates of contribution to health-insurance
premiums remain unchanged during their lifetimes,
notwithstanding the duration of the CBA, or (2) if they
do not, create sufficient ambiguity on that issue to
permit the consideration of extrinsic evidence as to
whether they create such a vested right?
Question 2
If the CBA, on its face, or as interpreted at trial upon
consideration of extrinsic evidence, creates a vested
right in retired employees to have the State's rates of
contribution to health-insurance premiums remain
unchanged during their lives, notwithstanding the
duration of the CBA, does New York's statutory and
regulatory reduction of its contribution rates for retirees’
premiums negate such a vested right so as to preclude a
remedy under state law for breach of contract?
Donohue II, 980 F.3d at 87-88.
In Donohue III, the New York Court of Appeals answered our first certified
question in part. “Settling the question left open in Kolbe,” the court “decline[d] to
adopt any Yard-Man-type inferences, either in favor of vested rights or in favor of
determining that ambiguity exists concerning that issue.” 38 N.Y.3d at 17-18.
Accordingly, the court held that “none of the CBA provisions identified by the
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Second Circuit in the first certified question establish a vested right to lifetime
fixed premium contributions, either singly or in combination.” Id. at 19. It
declined, however, to answer the second part of our first certified question,
finding “no occasion to determine whether the CBA’s text is ambiguous.” Id.
Following the answer of the New York Court of Appeals to our certified
questions, we ordered the parties to file supplemental letter-briefs addressing the
effect of that answer on the proper disposition of this appeal. We also granted the
request of the United University Professions (“UUP”), a plaintiff in one of the
related cases, to file a supplemental letter-brief as amicus curiae.
DISCUSSION
The CSEA Plaintiffs contend that each of the CBAs between CSEA and the
State in effect between 1982 and 2011 gave retirees a lifetime vested right to retain
NYSHIP coverage with the State contributing 90% of the cost of individual
coverage and 75% of the cost of dependent coverage, and that the State either
breached or unconstitutionally impaired the CBAs by unilaterally reducing those
rates to 88% and 73%, respectively. They assert that five CBA provisions, read
together, establish such a right, or at least create an ambiguity about its
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existence.3
As we held in Donohue II, the CSEA Plaintiffs “cannot prevail” on either the
breach of contract or Contract Clause claim “unless we interpret the CBAs to
provide for a vested right to NYSHIP coverage at fixed contribution rates for
retirees – either because they unambiguously so provide, or because they are
ambiguous as to such a right and extrinsic evidence resolves that ambiguity in
Plaintiffs’ favor.” Donohue II, 980 F.3d at 63. The New York Court of Appeals has
now held as a matter of state law that the CBAs do not unambiguously provide
such a right. Accordingly, the CSEA Plaintiffs now may prevail on their breach of
contract claim only if the CBA provisions are ambiguous and extrinsic evidence
resolves that ambiguity in their favor; and if not, they may prevail on their
contract impairment claim only if, notwithstanding New York law’s failure to
recognize the right that they assert, that right is protected by the Contract Clause
as a matter of federal constitutional law. We conclude that the CBA provisions
unambiguously do not provide a vested lifetime right to continuous contribution
rates for retirees under New York or federal law, and that the district court thus
3
The five provisions in question are summarized in Certified Question 1 above.
The full texts of all five provisions are set out in Donohue II, 980 F.3d at 72-73.
13
did not err in granting summary judgment to the State on both claims.
I. Standard of Review
“We review a district court’s decision granting summary judgment de novo,
and will affirm only if the record, viewed in the light most favorable to the non-
movant, shows no genuine dispute of material fact and demonstrates the
movant’s entitlement to judgment as a matter of law.” FIH, LLC v. Found. Capital
Partners LLC, 920 F.3d 134, 140 (2d Cir. 2019) (internal quotation marks omitted).
We also review issues of contractual interpretation de novo. Id.II. Breach of Contract
In order to prevail on their New York breach of contract claim, the CSEA
Plaintiffs must establish “(1) an agreement, (2) adequate performance [on their
part], (3) breach by [the State], and (4) damages.” Fisher & Mandell, LLP v.
Citibank, N.A., 632 F.3d 793, 799 (2d Cir. 2011). The first two elements are not in
dispute. Our analysis thus begins with whether the State breached the CBAs by
reducing the State’s contribution rates. It ends there as well because, guided by
the answers to our certified questions provided by the New York Court of
Appeals, we conclude as a matter of New York law that the CBA provisions that
the CSEA Plaintiffs cite unambiguously do not provide a vested lifetime right to
14
fixed contribution rates for retirees, and thus the reduction in contribution rates
could not have breached the CBAs.
In response to our first certified question, the New York Court of Appeals
held that “none of the CBA provisions [that the CSEA Plaintiffs cite] . . . establish
a vested right to lifetime fixed premium contributions, either singly or in
combination,” Donohue III, 38 N.Y.3d at 19. It is clear from that holding that the
provisions at issue do not unambiguously establish the vested right that the CSEA
Plaintiffs assert. With the benefit of the answer to our first certification question,
we now conclude that the CBA provisions at issue are not ambiguous as to
lifetime vesting.
“Absent law from a state’s highest court, a federal court sitting in
diversity” or exercising supplemental jurisdiction over state-law claims “has to
predict how the state court would resolve an ambiguity in state law.” Michalski v.
Home Depot, Inc., 225 F.3d 113, 116 (2d Cir. 2000). Mindful of that role, we noted
in Donohue II that the New York Court of Appeals had never taken a position on
the Supreme Court’s holdings in Tackett or Reese and that “two state appellate
divisions ha[d] taken divergent approaches to applying” those holdings. 980 F.3d
at 71. Specifically, the Second Department declined to draw an inference of
15
lifetime vesting from silence and also found no ambiguity in that silence, see
Village of Old Brookville v. Village of Muttontown, 179 A.D.3d 972 (2d Dep’t 2020),
while the Third Department declined to draw an inference of lifetime vesting but
found ambiguity in a contract’s silence on that issue, see Evans v. Deposit Cent.
Sch. Dist., 183 A.D.3d 1081 (3d Dep’t 2020). “While the courts in both Old
Brookville and Evans purported to apply the central holding of Tackett, the Second
Department in Old Brookville did so in a manner that was also consistent with
Reese, whereas the Third Department in Evans did not.” Donohue II, 980 F.3d at 72.
In light of this divergent precedent, we could not predict whether, assuming that
the New York Court of Appeals adopted Tackett, it would also adopt Reese.
In its answer to our certified questions, the New York Court of Appeals
declined to consider whether the CBA provisions at issue were ambiguous,
because it “believe[d] that [its] analysis answers the pivotal question that
prompted [our] certification, and settles New York law that governs the first
certified question.” Donohue III, 38 N.Y.3d at 19. Since our first certified question
included the sub-question of whether the CBA provisions were ambiguous,
which would “permit the consideration of extrinsic evidence as to whether they
create such a vested right,” Donohue II, 980 F.3d at 87-88, it follows that the New
16
York Court of Appeals believed we would find the answer to that sub-question in
its analysis.
We believe that the New York Court of Appeals effectively settled the issue
when it “decline[d] to adopt any Yard-Man-type inferences, either in favor of
vested rights or in favor of determining that ambiguity exists concerning that
issue.” Donohue III, 38 N.Y.3d at 17-18. The portion of that statement concerning
ambiguity appears to endorse the Supreme Court’s holding in Reese that courts
should not read contractual language that is silent on the issue of lifetime vesting
of insurance benefits for retirees to create ambiguity as to that issue – precisely
what the CSEA Plaintiffs ask us to do here. Moreover, in the course of its
analysis, the New York Court of Appeals recited an established principle of New
York contract law that counsels against inferring ambiguity from silence:
A contract’s silence on an issue does not “create an
ambiguity which opens the door to the admissibility of
extrinsic evidence to determine the intent of the
parties.” More to the point, “an ambiguity never arises
out of what was not written at all, but only out of what
was written so blindly and imperfectly that its meaning
is doubtful.”
Id. at 13, quoting Greenfield v. Philles Records, Inc., 98 N.Y.2d 562, 570, 573 (2002)
(internal citations omitted). Here, the CBAs are silent as to lifetime vesting, and
17
the CSEA Plaintiffs ask us to infer ambiguity from what the CBAs do not say
rather than anything they do say. For these reasons, we can now predict with
confidence that the New York Court of Appeals would adopt not only Tackett but
Reese, following the Second Department’s approach in Old Brookville rather than
the Third Department’s approach in Evans.
To the extent that the CSEA Plaintiffs make an argument about ambiguity
that they see as consistent with Reese, that argument is unavailing. They attempt
to distinguish this case from Reese, and to liken it to Kolbe, by pointing out that
the district court determined that the CBAs unambiguously created a vested
lifetime right for retirees to continue receiving NYSHIP coverage, and arguing that
“the scope of [that] benefit[], specifically the price term, is not clear from the
language and is therefore ambiguous.” Appellants’ Supp. Letter-Br. at 3
(emphasis added). But here, unlike in Kolbe, there is no CBA provision granting
retirees a lifetime vested right to the “same coverage” that they had in active
service. Kolbe, 22 N.Y.3d at 355. Rather, the 2007-2011 CBA provides, inter alia,
that “[e]mployees covered by the State Health Insurance Plan have the right to
retain health insurance after retirement upon completion of ten years of service.” J.
App’x 923 (emphasis added). The CBAs are wholly silent as to whether that
18
health insurance must resemble the insurance that current retirees had while in
active service. This case is thus more similar to Reese than to Kolbe, and as noted
above, we are now confident that New York law tracks Reese and forecloses the
sort of inference of ambiguity that the CSEA Plaintiffs ask us to draw.
The CSEA Plaintiffs give us no other reason, apart from the CBAs’ silence
on lifetime vesting, to infer that the CBAs are ambiguous on that issue. Because
the CSEA Plaintiffs’ breach of contract claim cannot succeed unless we read the
CBA provisions that they cite as at least ambiguous, it cannot succeed as a matter
of New York law.
Nor can we accept UUP’s argument as amicus curiae that the CBAs’
reference to the “State Health Insurance Plan,” read against the background of
the law in effect at the time, creates ambiguity as to lifetime vesting. For the
proposition that we must look to existing law to interpret the CBAs, UUP cites
Association of Surrogates and Supreme Court Reporters Within the City of New York v.
State of New York, 940 F.2d 766 (2d Cir. 1991). The CBAs in that case provided that
employees’ “bi-weekly salaries” would be calculated based on 10 days of work,
and the State began to lag those employees’ payment by two weeks. Id. at 770.
We held that the delayed payment impaired the CBAs because it had “the effect
19
of withholding ten percent of each employee’s expected wages over a period of
twenty weeks and postponing their payment indefinitely.” Id. at 772. In the
context of addressing the possible mootness of a request for declaratory and
injunctive relief, we looked to a statute in effect at the time of the CBAs’ adoption
providing that salaries were due on a biweekly basis, and concluded that the
“continued” lagging of paychecks thus “expressly impaired this obligation of
immediate payment contained in the [CBAs].” Id. at 774.
That approach made sense in Surrogates, because the CBAs expressly
referenced “bi-weekly salaries,” and the statute’s express provision filled in the
essential detail of when those salaries became payable. But in the present case,
§ 167, like the CBAs, was totally silent on the question of lifetime vesting at the
time that the CBAs were adopted. In effect, UUP asks us to draw from statutory
silence the sort of inference that New York law does not allow us to draw from
contractual silence. The fact that statutory provisions “generally do not have
durational terms” unless otherwise specified, UUP Amicus Letter Br. 6, does not
help to give that silence meaning, because statutes are subject to repeal and
amendment, and legislatures frequently do repeal or amend them. Indeed, the
State has repeatedly amended § 167 itself in response to changes in CBAs. It
20
cannot be, as UUP’s position suggests, that the State exposes itself to liability
every time it amends a statute to change the details of a benefit program
referenced in a contract absent an express durational limit in the statute.4
For these reasons, we can confidently predict that if the New York Court of
Appeals were to consider whether the CBA provisions at issue in this case are
ambiguous as to the vesting of a lifetime right to a continuous contribution rate
for retirees, it would answer that question in the negative. The district court was
therefore correct to grant summary judgment to the State on the breach of
contract claim without considering extrinsic evidence of the parties’ intent.
III. Contractual Impairment
The CSEA Plaintiffs also contend that the State’s amendment of the
contribution rates impaired the CBAs in violation of the Contract Clause of the
United States Constitution, which provides that “[n]o State shall . . . pass any . . .
4
Indeed, the Third Department has held that § 167 did not itself create a vested
right to continue receiving coverage with the contribution rates that it set out, for
the statute “is more reasonably read as a policy determination regarding the
state’s contribution rate towards retiree health insurance premiums that is subject
to later change at the will of the Legislature.” Matter of Retired Pub. Empls. Ass’n,
Inc. v. Cuomo, 123 A.D.3d 92, 97 (3d Dep’t 2014); see also New York State Court
Officers Ass’n v. Hite, 851 F. Supp. 2d 575, 582 (S.D.N.Y. 2012) (denying
preliminary injunction for similar reasons), affirmed, 475 Fed. App’x 803 (2d Cir.
2012).
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Law impairing the Obligation of Contracts.” U.S. Const. art. I, § 10. In Donohue II,
we noted that “the validity of the federal constitutional claim in this case hinges
in substantial part on the same undecided state-law questions that control the
state-law claim.” 980 F.3d at 79. With the benefit of the answer of the New York
Court of Appeals to our certified questions, we now hold that the State’s
adjustment of retirees’ contribution rates did not violate the Contract Clause
because the CSEA Plaintiffs lacked any contractual right to a vested lifetime
contribution rate.
“[T]o establish a violation of the Contract Clause, Plaintiffs must establish:
(1) the existence of the alleged contractual obligation; (2) the State’s impairment
of that obligation; (3) the substantiality of that impairment; and (4) that the
impairment was not a reasonable and necessary means of effectuating a
legitimate public purpose.” Id. at 78. To resolve this case, we need not look
beyond the first element.
Our conclusion that the CBAs do not create a vested lifetime right to
continuous contribution rates for retirees as a matter of New York contract law is
not completely dispositive of the Contract Clause claim, for “when a federal court
‘is asked to invalidate a state statute upon the ground that it impairs the
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obligation of a contract, the existence of the contract and the nature and extent of
its obligation become federal questions for the purposes of determining whether
they are within the scope and meaning of the Federal Constitution.” Id. at 79,
quoting Irving Trust Co. v. Day, 314 U.S. 556, 561 (1942). In certain exceptional
cases, the state- and federal-law determinations of contractual rights may not
align. “We ‘accord respectful consideration and great weight to the views of the
State’s highest court,’” General Motors Corp. v. Romein, 503 U.S. 181, 187 (1992),
quoting Indiana ex rel. Anderson v. Brand, 303 U.S. 95, 100 (1938), but we must
determine for ourselves, “as a matter of constitutional law, whether a particular
arrangement, of the sort normally enforceable as a contract under state law, is a
contract protected by the Contract Clause; otherwise, states could always evade
the restraint of the Clause by determining, through legislation or adjudication,
that an arrangement previously regarded as a contract was no longer
enforceable.” Pineman v. Oechslin, 637 F.2d 601, 604 (2d Cir. 1981).
In the present case, we have no trouble concluding as a matter of federal
law that the State’s decision to increase retirees’ contribution rates did not impair
any constitutionally protected contractual obligations. As we noted in Donohue II,
“[i]f, under New York law, the CBAs are properly interpreted so as to provide
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only for non-vested contribution rates, we see no basis to conclude that the State
is seeking to ‘evade the restraint’ of the Contract Clause by rendering a valid
arrangement unenforceable,” 980 F.3d at 79-80, quoting Pineman, 637 F.2d at 604,
because “if the New York Court of Appeals were to interpret the CBAs in this
manner, its interpretation would be consistent with the Supreme Court’s
interpretation of similar CBAs subject to federal law,” id. at 80 n.16, citing Tackett,
574 U.S. at 442, and Reese, 138 S. Ct. at 766. Now that the New York Court of
Appeals has interpreted the CBAs in line with the Supreme Court’s federal-law
decisions in Tackett and Reese, we see no reason to conclude that the State’s
alteration of contribution rates affected any cognizable contractual obligations as
a matter of federal law. The Supreme Court rested its holding in both cases on
“ordinary principles of contract law.” Tackett, 574 U.S. at 438; Reese, 138 S. Ct. at
766. New York’s refusal to recognize inferences of lifetime vesting (or ambiguity
concerning that issue) from silence is therefore also rooted in ordinary contract-
law principles. Moreover, New York’s Court of Appeals is not the first state high
court to expressly adopt Tackett or Reese. See Kendzierski v. Macomb County, 931
N.W.2d 604, 609-10 (Mich. 2019) (adopting Tackett and Reese); Matthews v. Chicago
Transit Authority, 51 N.E.3d 753, 768-69 (Ill. 2016) (adopting Tackett). Accordingly,
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we see no attempt to “evade the restraint of the [Contract] Clause . . . through
legislation or adjudication,” Pineman, 637 F.2d at 604, in New York’s adoption of
principles that leave the CSEA Plaintiffs with no contractual right to lifetime
vesting – and thus no contractual entitlement that could be impaired.
Since no constitutionally protected obligation is at stake, we have no
occasion to consider whether the State’s alteration of the contribution rates
impaired such an obligation, the substantiality of such impairment, or its
reasonableness and necessity as a means of effectuating a legitimate public
purpose. The district court therefore did not err in granting summary judgment
to the State on the CSEA Plaintiffs’ Contract Clause claim.
CONCLUSION
For the foregoing reasons, we AFFIRM the judgment of the district court.
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