Professional Fire Fighters of New Hampshire & a. v. State of New Hampshire & a. , 167 N.H. 188 ( 2014 )

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THE SUPREME COURT OF NEW HAMPSHIRE
___________________________
Merrimack
No. 2013-669
PROFESSIONAL FIRE FIGHTERS OF NEW HAMPSHIRE & a.
v.
STATE OF NEW HAMPSHIRE & a.
Argued: May 15, 2014
Opinion Issued: December 10, 2014
Bernstein, Shur, Sawyer & Nelson, P.A., of Manchester (Andru H.
Volinsky, Christopher G. Aslin, and Talesha L. Caynon on the brief, and Mr.
Volinsky orally), Molan, Milner & Krupski, PLLC, of Concord (Glenn R. Milner
on the brief), Stember Feinstein Doyle Payne & Kravec, LLC, of Pittsburgh,
Pennsylvania (William T. Payne and Stephen M. Pincus on the brief), and
Gottesman & Hollis, PA, of Nashua (David M. Gottesman on the brief), for the
plaintiffs and intervenors.
Joseph A. Foster, attorney general (Richard W. Head, associate attorney
general, on the brief and orally), for the State.
Getman, Schulthess & Steere, PA, of Manchester (Andrew R. Schulman
on the brief), for New Hampshire Retirement System, as amicus curiae.
Cordell A. Johnston, of Concord, for New Hampshire Municipal
Association, Betsy B. Miller, of Concord, for New Hampshire Association of
Counties, and Barrett M. Christina, of Concord, for New Hampshire School
Boards Association, by brief, as amici curiae.
DALIANIS, C.J. The State appeals the Superior Court’s (McNamara, J.)
ruling that legislative changes increasing the contribution rates paid by
members of the New Hampshire Retirement System violate the Contract
Clauses of the New Hampshire and United States Constitutions. The plaintiffs
and the intervenors cross-appeal the court’s ruling that members’ rights to
retirement benefits do not vest until they accrue ten years of creditable service.
For reasons set forth below, we reverse the court’s contract clause ruling and
remand. Accordingly, we need not address the issue raised in the cross-
appeal.
The following undisputed facts are supported by the record. In 2011, the
legislature amended RSA 100-A:16, I(a) by increasing the following contribution
rates for New Hampshire Retirement System (NHRS) members: for Group I
members the rate increased from 5 percent to 7 percent; for Group II
permanent fire fighter members the rate increased from 9.3 percent to 11.80
percent; and for Group II permanent police members the rate increased from
9.3 percent to 11.55 percent. Laws 2011, 224:172; see RSA 100-A:16, I(a)
(Supp. 2010) (amended 2011). In June 2011, the Professional Fire Fighters of
New Hampshire, the New Hampshire Police Association, the National Education
Association – New Hampshire, and the State Employees Association of New
Hampshire – SEIU Local 1984 filed a petition for declaratory and injunctive
relief challenging the constitutionality of the changes to the statute. The
petition was twice amended to add six individual plaintiffs. In addition to
claims against the State, the petition included a claim against the
Commissioner of the New Hampshire Department of Administrative Services.
However, the plaintiffs subsequently filed a voluntary nonsuit without
prejudice with respect to such claim. Accordingly, the only defendant in this
appeal is the State.
The petition alleged, among other things, that “[m]embers become vested
in their NHRS benefits upon commencement of permanent employee status”
and that “upon vesting, their contribution rates may not be increased without a
commensurate benefit.” (Quotation omitted.) The plaintiffs argued that the
legislative change to RSA 100-A:16, I(a) “substantially impairs the members’
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rights” and that “[t]he substantial impairment is neither reasonable nor
necessary to serve an important public interest,” thereby violating the Contract
Clauses of the New Hampshire and Federal Constitutions. See N.H. CONST.
pt. I, art. 23; U.S. CONST. art. 1, § 10. The State moved to dismiss, arguing
that: there is no contract clause violation because RSA chapter 100-A does not
constitute a contract between the parties; even if RSA chapter 100-A includes
sections that give rise to a contract, there is no contract right to a permanent,
fixed employee contribution rate; and even if the statute includes sections that
give rise to a contract, the contract is not formed until the employee “vests,” as
defined in RSA 100-A:10 (2013).
The trial court dismissed the four non-individual plaintiffs for lack of
standing, but allowed them to proceed as intervenors. The State does not
challenge this ruling on appeal. Thus, we assume, without deciding, that the
non-individual plaintiffs have standing to be intervenors. See G2003B, LLC v.
Town of Weare, 153 N.H. 725, 727 (2006). The trial court denied the motion to
dismiss as to the individual plaintiffs, finding that, pursuant to RSA 100-A:10,
I, “the legislature intended that public employees’ pension rights . . . vest after
ten years of creditable service, and that after vesting the State is contractually
bound to honor its obligation to provide a pension without any modification or
decrease in benefits.” The court also found that the increase in members’
contribution rates constitutes a substantial impairment “because it requires
employees, who have already met the requisite service and age requirements, to
pay additional amounts . . . without receiving additional benefit.” Accordingly,
the court concluded that “RSA 100-A creates a contract between vested
employees and the State, and the . . . modification in the employee contribution
rate is a substantial modification of that contract, in violation of both the
United States and New Hampshire Constitutions with respect to employees
who have met the service requirements of RSA 100-A:10.”
The parties thereafter filed cross-motions for summary judgment. The
State argued that “[g]iven the historical changes to the employee contribution
rates, combined with the absence of any language reflecting constitutional
contractual rights associated with employee contribution rates,” the legislature
had not “evinced a clear intent to create contractual rights binding on
successive legislatures against modification of [such] rates.” The State asserted
that “[e]ven if RSA 100-A creates a contractual interest upon vesting, its
contractual obligation is to provide a pension as it exists . . . on a certain day,
but does not prohibit changes to the system going forward,” and that “[t]he
legislature should not . . . be prohibited from changing that retirement system
going forward, while at the same time guaranteeing as unchanged the pension
benefit that has accrued up until that point.” The plaintiffs and intervenors
(collectively, the plaintiffs) argued that, based upon Cloutier v. State, 163 N.H.
445 (2012), the trial court should “revisit its decision as to when vesting occurs
. . ., and find that vesting occurs when an NHRS member obtains permanent
employment status.”
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The trial court denied the plaintiffs’ cross-motion, affirming its earlier
ruling that benefits vest after ten years of creditable service. The court rejected
the plaintiffs’ reliance upon Cloutier, noting that Cloutier was “based on an
interpretation of a wholly different statute – RSA chapter 100-C – and
specifically, other pertinent language,” including that the judges subject to that
statute were entitled to retirement benefits as “additional compensation for
services rendered and to be rendered.” (Quotation omitted.) The trial court
also denied the State’s cross-motion, rejecting its argument that the legislature
had not demonstrated an unmistakable intent to bind future legislatures to
particular contribution rates. Because only three of the six individual plaintiffs
had served their ten years of creditable service prior to the effective date of the
2011 statutory changes, the trial court granted summary judgment for the
three “vested” plaintiffs and denied summary judgment for the other individual
plaintiffs.
On appeal, the State argues, among other things, that the trial court
erred by ruling that NHRS members have a contractual right to a fixed
contribution rate. We agree.
In reviewing the trial court’s grant of summary judgment, we consider all
evidence presented in the record, and all inferences properly drawn therefrom,
in the light most favorable to the nonmoving party. See City of Concord v.
State of N.H., 164 N.H. 130, 133 (2012). We will affirm the grant of summary
judgment only if our review of that evidence discloses no genuine issue of
material fact, and the moving party is entitled to judgment as a matter of law.
Antosz v. Allain, 163 N.H. 298, 299 (2012). We review the trial court’s
application of the law to the facts de novo. Id.
Whether or not a statute is constitutional is a question of law, which we
review de novo. Tuttle v. N.H. Med. Malpractice Joint Underwriting Assoc., 159
N.H. 627, 640 (2010).
The party challenging a statute’s constitutionality bears the
burden of proof. The constitutionality of an act passed by the
coordinate branch of the government is to be presumed. It will not
be declared to be invalid except upon inescapable grounds; and the
operation under it of another department of the state government
will not be interfered with until the matter has received full and
deliberate consideration.
Id. (quotations, citations and brackets omitted). “When doubts exist as to the
constitutionality of a statute, those doubts must be resolved in favor of its
constitutionality.” Bd. of Trustees, N.H. Judicial Ret. Plan v. Sec’y of State,
161 N.H. 49, 53 (2010).
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The contract clause of the United States Constitution provides: “No state
shall . . . pass any . . . law impairing the obligation of contracts . . . .” U.S.
CONST. art. I, § 10. Part I, Article 23 of the New Hampshire Constitution
provides: “Retrospective laws are highly injurious, oppressive, and unjust. No
such laws, therefore, should be made, either for the decision of civil causes, or
the punishment of offenses.” N.H. CONST. pt. I, art. 23. Although Part I,
Article 23 “does not expressly reference existing contracts . . ., we have held
that its proscription duplicates the protections found in the contract clause of
the United States Constitution.” State v. Fournier, 158 N.H. 214, 221 (2009)
(quotation omitted). “We . . . understand article I, section 10 [of the Federal
Constitution] and part I, article 23 [of the State Constitution] to offer equivalent
protections where a law impairs a contract, or where a law abrogates an earlier
statute that is itself a contract.” Opinion of the Justices (Furlough), 135 N.H.
625, 630 (1992). Thus, “every statute which takes away or impairs vested
rights, acquired under existing laws, or creates a new obligation, imposes a
new duty, or attaches a new disability, in respect to transactions or
considerations already past, must be deemed retrospective” within the meaning
of Part I, Article 23. Tuttle, 159 N.H. at 641 (quotation omitted).
When evaluating a contract clause claim, a court must first determine
“whether a change in state law has resulted in the substantial impairment of a
contractual relationship.” Parker v. Wakelin, 123 F.3d 1, 4-5 (1st Cir. 1997)
(quotations omitted). This inquiry, in turn, has “three components: whether
there is a contractual relationship, whether a change in law impairs that
contractual relationship, and whether the impairment is substantial.” Id. at 5
(quotation omitted). To survive a contract clause challenge, a legislative
enactment that constitutes a substantial impairment of a contractual
relationship “must have a significant and legitimate public purpose.” Energy
Reserves Group v. Kansas Power & Light, 459 U.S. 400, 411 (1983).
“A party alleging that contractual rights arose from a statutory
enactment faces a heavy burden.” Maine Ass’n of Retirees v. Board of Trustees,
758 F.3d 23, 29 (1st Cir. 2014). “[W]here a public contract allegedly arises out
of statutory language, the hurdle under the first component of the first part of
the test – proving that a contractual relationship exists – is necessarily higher,
since normally state statutory enactments do not of their own force create a
contract with those whom the statute benefits.” Parella v. R.I. Employees’
Retirement System, 173 F.3d 46, 60 (1st Cir. 1999) (quotation omitted). As the
United States Supreme Court has explained:
[T]he principal function of a legislature is not to make contracts,
but to make laws that establish the policy of the state. Policies,
unlike contracts, are inherently subject to revision and repeal, and
to construe laws as contracts when the obligation is not clearly
and unequivocally expressed would be to limit drastically the
essential powers of a legislative body.
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National R. Passenger Corp. v. A. T. & S. F. R. Co., 470 U.S. 451, 466 (1985)
(citation omitted). Thus, “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.” Id. at 465-66
(quotation omitted).
“This threshold requirement for the recognition of public contracts has
been referred to as the ‘unmistakability doctrine.’” Parker, 123 F.3d at 5. The
doctrine “serve[s] the dual purposes of limiting contractual incursions on a
State’s sovereign powers and of avoiding difficult constitutional questions
about the extent of state authority to limit the subsequent exercise of legislative
power.” United States v. Winstar Corp., 518 U.S. 839, 875 (1996) (plurality
opinion). Because we have consistently held that the proscription contained in
Part I, Article 23 “duplicates the protections found in the contract clause of the
United States Constitution,” Opinion of the Justices (Furlough), 135 N.H. at
630, we here adopt the unmistakability doctrine. See Tuttle, 159 N.H. at 641
(Federal and State Contract Clauses offer “equivalent protections” (quotation
omitted)). We first address the State’s argument under the State Constitution
and rely upon federal law only to aid our analysis. See State v. Ball, 124 N.H.
226, 231-33 (1983).
“[T]he unmistakability doctrine mandates that we determine whether the
challenged legislative enactment evinces the clear intent of the state to be
bound to particular contractual obligations.” Parker, 123 F.3d at 7. “When
reviewing a particular enactment, therefore, we must suspend judgment and
proceed cautiously both in identifying a contract within the language of a
regulatory statute and in defining the contours of any contractual obligation.”
Id. at 7-8 (quotation omitted). The first step is to examine the statutory
language itself. National, 470 U.S. at 466.
Prior to the 2011 amendments, RSA 100-A:16, I(a) provided:
The member annuity savings fund shall be a fund in which shall
be accumulated the contributions deducted from the compensation
of members to provide for their member annuities together with
any amounts transferred thereto from a similar fund under one or
more of the predecessor systems. Such contribution shall be, for
each member, dependent upon the member’s employment
classification at the rate determined in accordance with the
following table:
Employees of employers other than the state 5.00
Employees of the state hired on or before June 30, 2009 5.00
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Employees of the state hired after June 30, 2009 7.00
Teachers 5.00
Permanent Policemen 9.30
Permanent Firemen 9.30
RSA 100-A:16, I(a).
The trial court determined that pursuant to RSA 100-A:10, I, “the
legislature intended that public employees’ pension rights . . . vest after ten
years of creditable service,” and, therefore, that the legislature’s “modification
in the employee contribution rate is a substantial modification of that
contract.” However, the statutory amendment at issue – RSA 100-A:16, I(a) –
does not retroactively affect NHRS member contribution rates. The narrow
question before us is whether, by enacting RSA 100-A:16, I(a), the legislature
unmistakably intended to establish NHRS member contribution rates as a
contractual right that cannot be modified. We hold that it did not.
As the State points out, courts in other jurisdictions have concluded that
a legislature is not constitutionally prohibited from increasing member
contributions to a state retirement system. For example, the Michigan
Supreme Court concluded that “an employee contribution rate increase of 5%
without a corresponding increase in benefits” would not violate that state’s
constitution. In re Enrolled Senate Bill 1269, 209 N.W.2d 200, 201-02 (Mich.
1973). The court stated that although “the legislature cannot diminish or
impair accrued financial benefits, . . . we think it may properly attach new
conditions for earning financial benefits which have not yet accrued.” Id. at
202-03.
Similarly, the Florida Supreme Court, recognizing that the legislature has
authority “to amend a retirement plan prospectively, so long as any benefits
tied to service performed prior to the amendment date are not lost or impaired,”
held that legislative amendments to the Florida Retirement System increasing
employee contributions from zero to three percent “have not impaired any
statutorily created contract rights.” Scott v. Williams, 107 So. 3d 379, 389
(Fla. 2013); see also Taylor v. City of Gadsden, 958 F. Supp. 2d 1287, 1325
(N.D. Ala. 2013) (“there is no indication that the legislature . . . unmistakably
has bound itself to never changing the contribution rate”), aff’d, 767 F.3d 1124
(11th Cir. 2014).
We hold that there is no indication that in enacting RSA 100-A:16 the
legislature unmistakably intended to bind itself from prospectively changing
the rate of NHRS member contributions to the retirement system. Because the
Federal Constitution affords the plaintiffs no greater protection than does the
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State Constitution in these circumstances, we reach the same conclusion
under the Federal Constitution as we do under the State Constitution. See
Maine Ass’n of Retirees, 758 F.3d at 29. Accordingly, we reverse the trial
court’s ruling that the 2011 amendment to RSA 100-A:16, I(a) violated the
Contract Clauses of the State and Federal Constitutions.
Reversed and remanded.
HICKS, CONBOY, LYNN, and BASSETT, JJ., concurred.
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