Danny Donohue v. Andrew M. Cuomo

18-3193-cv
Danny Donohue, et al. v. Andrew M. Cuomo, et al.
1 UNITED STATES COURT OF APPEALS
2 FOR THE SECOND CIRCUIT
3
4
5 August Term, 2019
6
7 Argued: June 22, 2020 Decided: November 6, 2020
8
9 Docket No. 18-3193-cv
10
11
12 DANNY DONOHUE, AS PRESIDENT OF THE CIVIL SERVICE EMPLOYEES ASSOCIATION,
13 INC., LOCAL 1000, AFSCME, AFL-CIO, CIVIL SERVICE EMPLOYEES ASSOCIATION,
14 INC., LOCAL 1000, AFSCME, AFL-CIO, MILO BARLOW , ON BEHALF OF HIMSELF, ON
15 BEHALF OF RETIREES OF THE STATE OF NEW YORK FORMERLY IN THE CSEA
16 BARGAINING UNITS, THOMAS JEFFERSON, ON BEHALF OF HIMSELF, ON BEHALF OF
17 RETIREES OF THE STATE OF NEW YORK FORMERLY IN THE CSEA BARGAINING UNITS,
18 CORNELIUS KENNEDY, ON BEHALF OF HIMSELF, ON BEHALF OF RETIREES OF THE STATE
19 OF NEW YORK FORMERLY IN THE CSEA BARGAINING UNITS, JUDY RICHARDS, ON
20 BEHALF OF HERSELF, ON BEHALF OF RETIREES OF THE STATE OF NEW YORK FORMERLY
21 IN THE CSEA BARGAINING UNITS, HENRY WAGONER , ON BEHALF OF HIMSELF, ON
22 BEHALF OF RETIREES OF THE STATE OF NEW YORK FORMERLY IN THE CSEA
23 BARGAINING UNITS,
24
25 Plaintiffs-Appellants,
26 — v. —
27
28 ANDREW M. CUOMO, IN HIS OFFICIAL CAPACITY AS GOVERNOR OF THE STATE OF NEW
29 YORK, PATRICIA A. HITE, INDIVIDUALLY AND IN HER OFFICIAL CAPACITY AS ACTING
30 COMMISSIONER, NEW YORK STATE CIVIL SERVICE DEPARTMENT, CAROLINE W. AHL,
31 IN HER OFFICIAL CAPACITY AS COMMISSIONER OF THE NEW YORK STATE CIVIL
32 SERVICE COMMISSION, J. DENNIS HANRAHAN, IN HIS OFFICIAL CAPACITY AS
33 COMMISSIONER OF THE NEW YORK STATE CIVIL SERVICE COMMISSION, ROBERT L.
1 MEGNA, INDIVIDUALLY AND IN HIS OFFICIAL CAPACITY AS DIRECTOR OF THE NEW
2 YORK STATE DIVISION OF THE BUDGET, THOMAS P. DINAPOLI, IN HIS OFFICIAL
3 CAPACITY AS COMPTROLLER OF THE STATE OF NEW YORK , JONATHAN LIPPMAN , IN
4 HIS OFFICIAL CAPACITY AS CHIEF JUDGE OF THE NEW YORK STATE UNIFIED COURT
5 SYSTEM ,
6
7 Defendants-Appellees,
8
9 THE STATE OF NEW YORK, NEW YORK STATE CIVIL SERVICE DEPARTMENT, NEW
10 YORK STATE AND LOCAL RETIREMENT SYSTEM , NEW YORK STATE UNIFIED COURT
11 SYSTEM ,
12
13 Defendants.
14
15
16
17 B e f o r e:
18
19 NEWMAN, HALL, and LYNCH, Circuit Judges.
20
21 Plaintiffs-Appellants the Civil Service Employees Association (“CSEA”)
22 and officers and retired former members of CSEA challenge the State of New
23 York’s 2011 reduction, through the amendment of a state statute and regulation,
24 of its contribution rates to retired former state employees’ health insurance
25 premiums. Plaintiffs-Appellants contend that the reduced contribution rates
26 contravene the State’s contractual obligation, under CSEA’s collective-bargaining
27 agreements with the State, to pay a fixed percentage of retirees’ health insurance
28 premiums throughout their retirements. They bring claims for breach of contract
29 under New York law and for impairing the obligations of contract in violation of
30 the Contract Clause of the U.S. Constitution. We conclude that both of Plaintiffs’
31 claims raise unresolved issues of state law that are appropriate for certification.
32 We therefore reserve decision and certify two questions to the New York Court of
33 Appeals.
2
1
2
3 ERIC E. WILKE, Of Counsel, Civil Service Employees
4 Association, Inc., Albany, NY (Daren J. Rylewicz,
5 Jennifer C. Zegarelli, on the brief), for Plaintiffs-Appellants.
6 FREDERICK A. BRODIE, Assistant Solicitor General of Counsel,
7 Albany, NY (Letitia James, Attorney General, State of
8 New York, Barbara D. Underwood, Solicitor General,
9 Andrea Oser, Deputy Solicitor General on the brief), for
10 Defendants-Appellees.
11
12
13 GERARD E. LYNCH, Circuit Judge:
14 This case arises from the State of New York’s 2011 reduction, through the
15 amendment of a state statute and regulation, of its rate of contribution to certain
16 retired former employees’ health insurance premiums for the first time in almost
17 twenty-nine years, from 90% to 88% for individual coverage and from 75% to
18 73% for dependent coverage. The Civil Service Employees Association (“CSEA”),
19 the union representing the largest bargaining unit of employees of New York
20 State (“the State”), joined by certain officers and retired former members of
21 CSEA, brought suit on behalf of themselves and retired former members of that
22 bargaining unit. They contend that the State’s reduction of its contribution rate
23 contravenes its contractual obligations, under CSEA’s past collective-bargaining
3
1 agreements (“CBAs”) with the State, to pay a fixed percentage of retirees’ health
2 insurance premiums throughout their retirements. They seek relief for breach of
3 contract under New York State law and for impairment of the obligations of
4 contract in violation of the Contract Clause of the United States Constitution.
5 In order to prevail on either claim, Plaintiffs must establish that the
6 relevant CBAs provide for a vested right to health-insurance coverage at fixed
7 contribution rates for the life of the retiree. It is beyond dispute that the CBAs do
8 not expressly provide for a vested right to coverage at fixed contribution rates. As
9 a result, Plaintiffs’ suggested interpretation of the CBAs is tenable only if a vested
10 right – or, at minimum, ambiguity with respect to such a right, as is necessary for
11 the consideration of extrinsic evidence of the meaning of the CBAs – may be
12 inferred under the circumstances. Moreover, even if Plaintiffs can establish that
13 the State’s reduction of its contribution rates to retiree health-insurance
14 premiums breached a contractual obligation, the resolution of both of their claims
15 depends on whether the State, in reducing its contribution rates, merely breached
16 its contract, permitting a remedy for breach under state law, or completely
17 negated any such obligation so as to preclude plaintiffs from recovering damages
18 under state law. Both of these issues depend on aspects of New York law on
4
1 which the State’s courts have not conclusively ruled and that meet our other
2 criteria for certification. We therefore reserve decision and certify two questions
3 to the New York Court of Appeals.
4 BACKGROUND
5 In 1956, the State established the New York State Health Insurance Plan
6 (“NYSHIP”), an optional health-benefit plan for active and retired State
7 employees. Since the inception of NYSHIP, the State has contributed to both
8 active employees’ and retirees’ NYSHIP premium costs. Prior to 1983, the State,
9 pursuant to a State statute, paid 100% of both employees’ and retirees’ costs for
10 individual coverage and 75% of their costs for dependent coverage. In 1982, the
11 State and the unions representing State employees negotiated a reduction of the
12 State’s contribution rate for individual coverage from 100% to 90%, effective
13 January 1, 1983. Among the unions with which the State negotiated was CSEA,
14 which represents the largest bargaining unit of State employees. Members of that
15 bargaining unit include employees of the Administrative Services Unit,
16 Operational Services Unit, Institutional Services Unit, Division of Military &
17 Naval Affairs Unit, and some employees of the Unified Court System.
5
1 CSEA’s and the State’s memorandum of understanding, which they
2 entered into in November 1982, provided that the State would pay 90% of the
3 cost of premium charges “for the coverage of State employees” and 75% of the
4 cost of premium charges “for the coverage of dependents of such State
5 employees.” J. App’x 1450. It did not expressly address the State’s contribution
6 rates for retirees or define the term “employee[].” The State legislature thereafter
7 amended New York Civil Service Law § 167 to codify the negotiated contribution
8 rates. As amended in 1983, Civil Service Law § 167(1) provided, in part, that:
9 The full cost of premium or subscription charges for the
10 coverage of retired state employees who are enrolled in
11 the basic, statewide health insurance plan established
12 pursuant to this article and who retired prior to
13 [January 1, 1983] shall be paid by the state. Nine-tenths
14 of the cost of premium or subscription charges for the
15 coverage of state employees and retired state employees
16 retiring on or after [January 1, 1983] who are enrolled in
17 such basic, statewide health insurance plan shall be paid
18 by the state. . . . [T]hree-quarters of the cost of premium
19 or subscription charges for the coverage of dependents
20 of such state employees and retired state employees
21 shall be paid by the state.
22 N.Y. Civ. Serv. Law § 167(1), eff. 1983. The substance of this portion of the statute
23 has remained largely unchanged to this day. See id. § 167(1). Between 1982 and
24 2011, CSEA and the State entered into eight successive collective-bargaining
6
1 agreements. Beginning in 1985, each of these agreements provided, in identical or
2 substantially similar language, that “[t]he State agrees to pay 90 percent of the
3 cost of individual coverage and 75 percent of the cost of dependent coverage”
4 under NYSHIP. J. App’x 918; see also id. at 943, 966, 993-94, 1013-14, 1034, 1051.1
5 These provisions did not specify the duration of the State’s agreement to
6 contribute at these rates. Each of the eight agreements also provided, in identical
7 or substantially similar language, that “[e]mployees covered by [NYSHIP] have
8 the right to retain health insurance after retirement upon completion of ten years
9 of service.” Id. at 923; see also id. at 946, 972, 997, 1018, 1038, 1055, 1069. Each of
10 the eight CBAs contained a duration clause, specifying the term of the CBA itself
11 to be either three or four years, depending on the CBA. See J. App’x 931, 949, 980,
12 1004, 1026, 1044, 1061, 1074.
13 Between January 1, 1983 and September 30, 2011, the State contributed to
14 the NYSHIP premium costs of eligible retired former State employees who had
15 retired on or after January 1, 1983 at the rates of 90% (for individual coverage)
1
1 The parties’ 1982-1985 CBA, which was in effect when the parties negotiated the
2 reduction of the State’s contribution rate to individual coverage from 100% to
3 90%, provided that the State would continue to pay 100% of individual coverage
4 and 75 % of dependent coverage subject to negotiated rate changes. See J. App’x
5 1066-67, 1070.
7
1 and 75% (for dependent coverage).
2 Beginning in December 2007, the United States economy (as well as other
3 economies around the world) was plagued by a severe financial crisis that has
4 become known as the “Great Recession.” In the wake of that crisis, the State faced
5 significant budget deficits for fiscal years 2009-2010, 2010-2011, and 2011-2012. In
6 2011, the State attempted to close its $10 billion budget gap for fiscal year 2011-
7 2012 through a variety of cost-reducing measures, including a $1.5 billion cut to
8 state agency operations. The State budgeted for $450 million of that operational
9 reduction to come from workforce-related reductions and asked all state agencies
10 to submit proposals for such reductions. The Department of Civil Service
11 proposed, among other contemplated reductions, a reduction to the State’s
12 contribution rates to NYSHIP premiums.
13 In June 2011, CSEA and the State agreed to the terms of a five-year CBA,
14 covering 2011-2016. Under the negotiated agreement, the State reduced its rates
15 of contribution to the NYSHIP premium costs of employees represented by
16 CSEA, with two sets of rates based on employees’ salary grades. According to the
17 CBA, “[e]ffective October 1, 2011 for employees in a title Salary Grade 9 or below
18 or an employee equated to a position title Salary Grade 9 or below . . . the State
8
1 agrees to pay 88 percent of the cost of individual coverage and 73 percent of the
2 cost of dependent coverage,” and “for employees in a title Grade Salary 10 or
3 above . . . the State agrees to pay 84 percent of the cost of individual coverage and
4 69 percent of the cost of dependent coverage.” Id. at 865.
5 Leaders of both the State and CSEA acknowledged in public statements
6 that the parties’ agreement had allowed the State to reduce its labor costs without
7 the need for widespread layoffs. Governor Andrew M. Cuomo called the CBA “a
8 win-win for CSEA members and the State of New York” that, “if adopted by the
9 other bargaining units, means layoffs needed to achieve needed workforce
10 savings would be avoided.” Id. at 854. CSEA President Danny Donohue referred
11 to the agreement as a product of “shared sacrifice” that was responsive to
12 “CSEA’s concerns about job security.” Id. The State and unions representing
13 other bargaining units subsequently agreed to terms for successor CBAs that
14 reflected the same reductions in the State’s contribution rates to employees’
15 NYSHIP premiums.
16 On August 17, 2011 the State legislature amended Civil Service Law
17 § 167(8), which had previously provided that the State’s contribution rates to
18 eligible employees’ NYSHIP coverage costs could be “increased” subject to the
9
1 terms of a CBA, without any mention of modifications other than increases. See
2 Sp. App’x 6. As amended, § 167(8) provided that, “[n]otwithstanding any
3 inconsistent provision of law, where and to the extent that an agreement between
4 the state and an employee organization . . . so provides, the state cost of premium
5 or subscription charges for eligible employees covered by such agreement may be
6 modified pursuant to the terms of such agreement.” N.Y. Civ. Serv. Law § 167(8)
7 (emphasis added). The amended statute further provided that the President of
8 the Civil Service Commission, with approval from the Director of the Budget,
9 “may extend the modified state cost of premium or subscription charges for
10 employees or retirees not subject to an agreement referenced above and shall
11 promulgate the necessary rules or regulations to implement this provision.” Id.2
12 Thereafter, pursuant to the terms of § 167(8), the Acting Commissioner of
13 the Department of Civil Service sought and received approval from the State’s
14 Budget Director to extend the modified contribution rates, as defined in the
15 State’s CBAs with CSEA and other bargaining units, to retirees. The Department
2
1 The State legislature did not amend § 167(1), which continues to provide that
2 90% of individual coverage costs and 75% of dependent coverage costs “of state
3 employees and retired state employees retiring on or after” January 1, 1983 “shall
4 be paid by the state.” N.Y. Civ. Serv. Law § 167(1).
10
1 of Civil Service implemented that extension of the modified rates by amending
2 its regulations. As amended, Title 4, § 73.3(b) of the New York Code of Rules and
3 Regulations provided that “for retirees who retired on or after January 1, 1983,
4 and employees retiring prior to January 1, 2012, New York State shall contribute
5 88 percent of the charge on account of individual coverage and 73 percent of the
6 charge on account of dependent coverage.” N.Y. Comp. Codes R. & Regs. tit. 4, §
7 73.3(b).3
8 The State estimates that the reduction of its rates of contribution to retirees’
9 NYSHIP coverage costs saved the State approximately $30 million annually and
10 that the premiums for retirees who retired between January 1, 1983 and
11 December 31, 2011 would increase by approximately $10.50 per month for
12 individual coverage and $28.50 per month for dependent coverage.
13 Following the State’s reduction of its contribution rates for retirees’
14 NYSHIP coverage costs, retired former State employees, the unions that had
3
1 The amended regulation also provided that the State would contribute to the
2 coverage costs of retirees who retired on or after January 1, 2012 at the same rates
3 at which it contributed to their coverage prior to retirement, based on salary
4 grade: 88% (individual coverage) and 73% (dependent coverage) for retirees
5 whose title had been Salary Grade 9 or below, and 84% (individual coverage) and
6 69% (dependent coverage) for retirees whose title had been Salary Grade 10 or
7 above. See N.Y. Comp. Codes R. & Regs. tit. 4, § 73.3(b).
11
1 represented them, and those unions’ officers brought suit in federal court, in
2 eleven separate actions. The CSEA plaintiffs filed the instant action on December
3 28, 2011. The United States District Court for the Northern District of New York
4 (Mae A. D’Agostino, J.) designated CSEA’s action as the lead case. Following
5 discovery, Defendants moved for summary judgment in all eleven actions. The
6 CSEA plaintiffs moved for summary judgment in this action. The district court
7 granted Defendants’ motions in all eleven actions, concluding, inter alia, that the
8 CBAs unambiguously did not provide for the vesting of the State’s agreement to
9 pay 90% of retirees’ individual coverage costs and 75% of their dependent
10 coverage costs under NYSHIP. The district court denied Plaintiffs’ cross-motion
11 for summary judgment.
12 This appeal – along with ten others, by plaintiffs in the related cases –
13 followed.
14 DISCUSSION
15 Plaintiffs contend that each of the eight successive CBAs between CSEA
16 and the State in effect between 1982 and 2011 gave retiring employees a vested
17 right to retain NYSHIP coverage with the State contributing 90% of the cost of
18 individual coverage and 75% of the cost of dependent coverage. If, as plaintiffs
12
1 allege, such an obligation exists under the agreements, the State plainly violated
2 that obligation by reducing its contribution rates for retirees’ coverage. The State
3 does not dispute that it unilaterally reduced its contribution rates for CSEA
4 members who retired between 1983 and 2011; rather, it maintains that it acted
5 within its legal rights by doing so.
6 Plaintiffs bring two claims arising from their theory that the CBAs provide
7 for a vested right to coverage at a fixed contribution rate. First, they argue that
8 the State breached the CBAs in violation of New York contract law.4 Second, they
9 argue that the State impaired its contractual obligation, in violation of the
10 Contract Clause of the U.S. Constitution.
11 As explained below, we find that resolving Plaintiffs’ claims requires that
12 we apply New York law at two junctures in our analysis of both the state
13 contract-law and federal constitutional claims. First, Plaintiffs cannot prevail on
14 either claim unless we interpret the CBAs to provide for a vested right to
4
1 The parties place primary emphasis on Plaintiffs’ federal constitutional claim,
2 perhaps because it is that claim that gives the federal courts jurisdiction over this
3 action and allows for the exercise of supplemental jurisdiction over Plaintiffs’
4 state-law claim. See 28 U.S.C. §§ 1331, 1367(a). However, because (as discussed
5 below) the issues raised by Plaintiffs’ state-law claim are logically prior to those
6 raised by their federal constitutional claim, we address their state-law claim first.
13
1 NYSHIP coverage at fixed contribution rates for retirees – either because they
2 unambiguously so provide, or because they are ambiguous as to such a right and
3 extrinsic evidence resolves that ambiguity in Plaintiffs’ favor.5 In order to reach
4 such a conclusion, we would need to infer the existence of a vested right, or
5 ambiguity with respect to the existence of such a right, notwithstanding that the
6 CBAs do not provide for such vesting in explicit terms. That analysis begins –
7 and, in the case of Plaintiffs’ state-law breach-of-contract claim, ends – with the
8 application of state-law principles of contractual interpretation.
9 Second, if we conclude that the CBAs do provide for a vested right to
10 NYSHIP coverage at fixed contribution rates, we must consider what remedy is
11 available to Plaintiffs in light of the State’s failure to comply with its alleged
12 contractual obligation. Plaintiffs can prevail on their breach-of-contract claim
13 only if a state-law remedy is available to them, meaning that the State’s reduction
14 of its contribution levels to retirees’ premiums breached but did not invalidate its
5
1 Plaintiffs seek to establish the asserted contractual obligation solely on the
2 theory that each now-expired CBA in effect between 1983 and 2011 conferred on
3 employees who retired during the term of that CBA a vested right to continued
4 NYSHIP coverage at the existing contribution rates throughout their retirements.
5 As they clarified at oral argument, Plaintiffs do not contend that the 2011-2016
6 CBA provided any rights to specific contribution rates to already-retired former
7 members of the bargaining unit.
14
1 contractual obligation. Conversely, Plaintiffs’ federal constitutional claim for
2 contractual impairment is tenable only if the State has impaired, rather than
3 merely breached, its obligation by negating any remedy under state law. See TM
4 Park Ave. Assocs. v. Pataki, 214 F.3d 344, 349 (2d Cir. 2000). The task of
5 determining the existence of a state-law remedy for breach of contract requires
6 that we consider and apply state law.
7 At both of these junctures, New York law does not provide settled
8 principles that we may apply in order to conclusively resolve the issues in this
9 case. The New York Court of Appeals has previously declined to either adopt or
10 reject an inference that retirees’ health benefits vest under CBAs in the absence of
11 express vesting language, but it has suggested that CBAs may be ambiguous
12 with respect to the vesting of such benefits under certain circumstances. See Kolbe
13 v. Tibbetts, 22 N.Y.3d 344, 354-55 (2013). In addition, the question whether the
14 New York legislature, by amending Civil Service Law § 167(8) to permit the
15 extension of modified contribution rates (as negotiated by the State and unions
16 representing State employees) to retirees, and the New York Civil Service
17 Commission, by promulgating amended regulations that reduced the State’s
18 contribution rates to retirees’ NYSHIP coverage, thereby invalidated any contrary
15
1 contractual obligations under the State’s CBAs (as opposed to merely breaching
2 those obligations) is one that, in our view, is both novel and uniquely suited to
3 the judgment of the State’s judiciary. Therefore, and for the reasons explained
4 below, we certify two questions to the New York Court of Appeals and reserve
5 decision on this case.6
6 I. Standard of Review
7 “We review a district court’s decision granting summary judgment de novo,
6
1 We also reserve decision in the other ten cases on appeal, which were brought
2 by other unions and their retired former members, and which were briefed and
3 argued in tandem with this appeal: Kreh v. Cuomo (18-3220-cv); Spence v. Cuomo
4 (18-3140-cv); New York State Law Enforcement Officers Union Council 82 v. Hite (18-
5 3142-cv); New York State Correctional Officers and Police Benevolent Association v.
6 Cuomo (18-3151-cv); New York State Police Investigators Association v. Cuomo (18-
7 3066-cv); Police Benevolent Association of New York State v. Cuomo (18-3183-cv);
8 Police Benevolent Association of New York State Troopers v. Cuomo (18-3049-cv);
9 Roberts v. State of New York (18-3172-cv); New York State Court Officers Association
10 v. Hite (18-3221-cv); and Brown v. Cuomo (18-3122-cv; 18-3166-cv; 18-3345-cv).
11 Although each of these cases raises different issues turning in part on the
12 different terms of CBAs entered by different groups of State employees, the
13 instant case – as suggested by the fact that it has been treated throughout this
14 litigation as the lead case – presents questions the resolution of which will
15 significantly advance, if not control, the dispositions of the other cases. We
16 therefore think it prudent to certify questions to the New York Court of Appeals
17 in this case, rather than to burden that Court with a host of variations on the most
18 significant theme common to all of the cases. We expect that once those questions
19 are resolved, the principles of state law determined in this case will enable us to
20 resolve the issues in the remaining cases without further resort to certification.
16
1 and will affirm only if the record, viewed in the light most favorable to the non-
2 movant, shows no genuine dispute of material fact and demonstrates the
3 movant’s entitlement to judgment as a matter of law.” FIH, LLC v. Found. Capital
4 Partners LLC, 920 F.3d 134, 140 (2d Cir. 2019) (internal quotation marks omitted).
5 We also review issues of contractual interpretation de novo. Id.
6 II. Determination of Applicable Law
7 The relationship between Plaintiffs’ state-law and federal constitutional
8 claims, and between the roles of state and federal law in resolving those claims, is
9 somewhat complicated. We therefore begin our analysis by clarifying that
10 relationship and identifying the legal authorities that we apply to each of these
11 claims.
12 Both Plaintiffs’ claim for contractual impairment, in violation of the
13 Contract Clause, and their claim for breach of contract, in violation of New York
14 law, rest initially on a single, disputed premise: that CSEA’s CBAs with the State
15 between 1982 and 2011 guaranteed to employees upon their retirement a vested
16 right to retain health-insurance coverage at the specific contribution rates set
17 forth in those agreements. Thus, our first task in resolving both claims is one of
18 contractual interpretation.
17
1 Under both federal law and New York law, “[w]e interpret collective-
2 bargaining agreements . . . according to ordinary principles of contract law.” M &
3 G Polymers USA, LLC v. Tackett, 574 U.S. 427, 435 (2015); see Kolbe, 22 N.Y.3d at 353
4 (“[W]e must look to well established principles of contract interpretation to
5 determine whether the parties intended that the contract give rise to a vested
6 right.”). The National Labor Relations Act (“NLRA”) guarantees to employees
7 “the right to self-organization, to form, join, or assist labor organizations, [and] to
8 bargain collectively” and prohibits employers from refusing to bargain
9 collectively with its employees’ representatives. 29 U.S.C. §§ 157, 158(a)(5). The
10 Labor Management Relations Act (“LMRA”) “grants federal courts jurisdiction to
11 resolve disputes between employers and labor unions about collective-
12 bargaining agreements,” Tackett, 574 U.S. at 434. See 29 U.S.C. § 185(c). It also
13 “ensures that federal law will be the basis for interpreting collective-bargaining
14 agreements.” Hawaiian Airlines, Inc. v. Norris, 512 U.S . 246, 262 (1994) (internal
15 quotation marks omitted). But the protections of the NLRA are available to
16 private-sector workers, not to state employees. See 29 U.S.C. § 152(2). New York
17 State employees’ right to bargain collectively is provided for solely by New York
18 law. See N.Y. Civ. Serv. Law § 203. The CBAs between CSEA and the State are
18
1 therefore contracts created under and governed by New York law.
2 “Contract law is a general area of law[] traditionally regulated by the
3 states.” Geweke Ford v. St. Joseph’s Omni Preferred Care Inc., 130 F.3d 1355, 1359 (9th
4 Cir. 1997); see also Roadway Package Sys., Inc. v. Kayser, 257 F.3d 287, 293 (3d Cir.
5 2001), abrogated on other grounds by Hall Street Assocs., L.L.C. v. Mattel, Inc., 552
6 U.S. 576, 584 n.5 (2008) (“Contract law is mostly state law, and it varies from state
7 to state.”) While principles of contractual interpretation are often consistent
8 between states (and, when a contract is governed by federal law, between state
9 and federal law), state courts and legislatures retain the authority to diverge from
10 traditional contract-law principles. Federal courts, when applying state law, are
11 bound to apply the law as established by the state’s highest court. “State
12 autonomy and the relationship between state and federal authority would be
13 impaired were the federal courts to set state policy independently and follow
14 their own instincts as to state contract law.” Pineman v. Oechslin, 637 F.2d 601, 606
15 (2d Cir. 1981).
16 In analyzing Plaintiffs’ breach-of-contract claim, which alleges that
17 Defendants violated state contract law by breaching the terms of CBAs executed
18 under New York law, we are therefore obligated to apply New York law. The
19
1 parties discuss two recent decisions of the Supreme Court of the United States
2 interpreting private-sector CBAs under federal law with respect to the vesting of
3 retiree health benefits, M & G Polymers USA, LLC v. Tackett, 574 U.S. 427 (2015)
4 and CNH Industrial N.V. v. Reese, 138 S. Ct. 761 (2018). But those decisions are not
5 controlling insofar as we apply New York law to interpreting the CBAs here.
6 However much respect we, and the New York courts, accord to pronouncements
7 of the United States Supreme Court as highly persuasive authority, its
8 interpretations of CBAs created under the authority of the NLRA are neither
9 based on New York law nor binding on New York courts, when such courts
10 interpret CBAs created under the authority of New York statutes in accordance
11 with New York’s understanding of contract law principles. In applying New
12 York law to Plaintiffs’ breach-of-contract claim, we are similarly obliged to regard
13 the Supreme Court’s decisions in Tackett and Reese as persuasive rather than
14 binding authority.
15 In evaluating Plaintiffs’ federal constitutional claim for contractual
16 impairment, “the existence of the contract and the nature and extent of its
17 obligation become federal questions for the purposes of determining whether
18 they are within the scope and meaning of the Federal Constitution, and for such
20
1 purposes finality cannot be accorded to the views of a state court.” Irving Trust
2 Co. v. Day, 314 U.S. 556, 561 (1942). Because the Contract Clause protects only
3 those contractual obligations recognized as such by the federal Constitution, “in
4 order that the constitutional mandate may not become a dead letter, we are
5 bound to decide for ourselves whether a contract was made [and] what are its
6 terms and conditions.” State of Indiana ex rel. Anderson v. Brand, 303 U.S. 95, 100
7 (1938). In this way, states may not “evade the restraint of the [Contract] Clause by
8 determining, through legislation or adjudication, that an arrangement previously
9 regarded as a contract was no longer enforceable.” Pineman, 637 F.2d at 604. Nor
10 may they generate federal constitutional protections for purported or actual
11 obligations by conferring contractual status on arrangements that are “not, in any
12 sense, a contract within the meaning of the Constitution of the United States.”
13 Hawkeye Commodity Promotions, Inc. v. Vilsack, 486 F.3d 430, 437 (8th Cir. 2007)
14 (internal quotation marks omitted).
15 The Contract Clause does not, however, constitutionalize all questions of
16 contract law or prohibit states from developing the law of contracts according to
17 their own lights. In analyzing a claim brought under the Contract Clause, “we
18 accord respectful consideration and great weight to the views of the state’s
21
1 highest court,” and our inquiry necessarily “involves an appraisal of the statutes
2 of the State and the decisions of its courts.” Brand, 303 U.S. at 100. When the
3 “construction and effect” of a contract “is a state question,” the federal courts
4 “must determine it from the law of the state” but “give our own judgment
5 derived from” state law. Appleby v. City of New York, 271 U.S. 364, 380 (1926). This
6 Court has therefore noted that the question of whether an alleged contractual
7 obligation exists “is an issue of both state and federal law” and that “[i]nitially it
8 is a question of state law, for only those arrangements enforceable as contractual
9 obligations under state law are protected by the Contract Clause against
10 impairment.” Pineman, 637 F.2d at 604.
11 Thus, our initial inquiry into the meaning of the CBAs for the purpose of
12 evaluating Plaintiffs’ impairment claim is for the most part coextensive with our
13 interpretation of the CBAs for the purpose of evaluating Plaintiffs’ state-law
14 breach claim. In both cases, we begin by applying state law to determine whether
15 the CBAs contain the alleged contractual obligation. Even in the event that state
16 law endorses interpretive principles that are distinct from those under federal
17 law, we may nonetheless apply those state-law principles in evaluating Plaintiffs’
18 Contract Clause claim, so long as we independently determine the contract’s
22
1 meaning and do not accord finality to state law, and so long as state law neither
2 recognizes nor denies contractual status in a manner precluded by the
3 Constitution.
4 If we interpret the CBAs to give rise to the alleged obligation, however, our
5 analysis of Plaintiffs’ two claims then necessarily diverges. Impairing a contract is
6 not the same thing as breaching it; in fact, liability for impairment and liability for
7 breach are mutually exclusive. “A contract creates alternative obligations. Either
8 perform the contract or pay damages.” TM Park Ave., 214 F.3d at 349. The
9 distinction between a contractual breach and a contractual impairment “depends
10 on the availability of a remedy in damages.” E & E Hauling, Inc. v. Forest Preserve
11 Dist. of Du Page Cty., Ill., 613 F.2d 675, 679 (7th Cir. 1980). If a state, by legislative
12 action, breaches a contract’s terms, it may nevertheless fulfill its contractual
13 obligation by paying damages; in such cases, it has not impaired the obligations
14 of contract within the meaning of the Constitution. If, however, the state’s
15 legislative action not only breaches the contract but also purports to invalidate the
16 obligation, so as to preclude a damages remedy at state law, the state’s action
17 constitutes an impairment (which may or may not violate the Contract Clause,
18 based on considerations discussed below).
23
1 “[T]he federal Circuit Courts, as well as the Supreme Court, have
2 consistently viewed this distinction – between breach and the removal of any
3 remedy for a breach – as a line delineating whether a Contracts Clause claim may
4 lie.” Sullivan v. Nassau Cty. Interim Fin. Auth., 959 F.3d 54, 63 (2d Cir. 2020). Under
5 the circumstances of this case, it is also a line delineating whether a state-law
6 claim for breach of contract may lie. In order to prevail on their state-law claim,
7 then, Plaintiffs must establish the existence of a fact (the availability of a state
8 remedy for breach) that precludes them from prevailing on their federal
9 constitutional claim, and vice versa. Thus, these two grounds for relief may exist
10 only in the alternative.
11 Whether or not Plaintiffs may recover damages on their breach-of-contract
12 claim is fundamentally a question of state law; the related question, essential to
13 the Contract Clause analysis, of “whether the State has, by later legislation,
14 impaired its obligation” is ultimately a federal question that “we are bound to
15 decide for ourselves.” Brand, 303 U.S. at 100. But here, as with our analysis of the
16 CBAs’ meaning, New York law – in this case, pertaining to the effect of state
17 legislative action on the State’s obligation to pay damages arising from
18 contractual obligations violated by such action – will be a critical factor in our
24
1 resolution of the impairment issue.
2 “It is axiomatic that the federal courts should, where possible, avoid
3 reaching constitutional questions,” including by “render[ing] decisions on federal
4 constitutional questions unnecessary by resolving cases on the basis of state law.”
5 Allstate Ins. Co. v. Serio, 261 F.3d 143, 149-50 (2d Cir. 2001). Because our resolution
6 of Plaintiffs’ breach-of-contract claim may foreclose Plaintiffs’ ability to prevail
7 on their Contract Clause claim, we address the state-law claim first.
8 III. Breach of Contract
9 Under New York law, an action for breach of contract requires that a
10 plaintiff establish “(1) an agreement, (2) adequate performance by the plaintiff,
11 (3) breach by the defendant, and (4) damages.” Fischer & Mandell, LLP v. Citibank,
12 N.A., 632 F.3d 793, 799 (2d Cir. 2011). The first two elements are not at issue here.
13 Defendants do not dispute that CSEA’s CBAs with the State, under which the
14 alleged obligation to pay fixed contribution rates arose, were valid and
15 enforceable agreements. Nor do they suggest that Plaintiffs’ state-law claim fails
16 due to inadequate performance by CSEA or its members. We therefore limit our
17 analysis to the remaining two elements: breach and damages.
18 A. Breach of Contractual Obligation
25
1 The crux of Defendants’ argument is that Plaintiffs “cannot establish the
2 violation of any contractual right.” Appellee’s Br. at 37. Because the parties agree
3 that the State reduced its contribution rates to the relevant retirees’ NYSHIP
4 costs, from 90% to 88% for individual coverage and 75% to 73% for dependent
5 coverage, the issue of breach hinges on whether that reduction violated any
6 contrary obligation under the CBAs. Thus, Plaintiffs’ ability to establish breach
7 requires that they prove that the CBAs gave retirees7 a vested right to NYSHIP
8 coverage to which the State contributed at fixed rates of 90% and 75%.
9 Because the task of determining whether the CBAs provide a vested right
10 to coverage at fixed contribution rates requires us to apply New York law, we
11 begin our analysis with an overview of the relevant precedents regarding
12 whether and when it is appropriate to infer that retirees’ health benefits vest
13 under a CBA.
14 1. Legal Background
15 “As a general rule, contractual rights and obligations do not survive
16 beyond the termination of a collective bargaining agreement. . . . However,
7
1 Here and throughout the remainder of this opinion, the term “retirees” refers
2 specifically to former state employees who retired between January 1, 1983 and
3 December 31, 2011.
26
1 ‘rights which accrued or vested under the agreement will, as a general rule,
2 survive termination of the agreement[,]’ . . . and we must look to well established
3 principles of contract interpretation to determine whether the parties intended
4 that the contract give rise to a vested right.” Kolbe, 22 N.Y.3d at 353 (citing and
5 quoting Litton Fin. Printing Div., Litton Bus. Sys., Inc. v. NLRB, 501 U.S. 190, 207
6 (1991)).
7 In Kolbe, the New York Court of Appeals considered whether retired
8 former members of CSEA had a vested right, pursuant to CSEA’s CBAs with the
9 Newfane Central School District, to receive the same health insurance coverage
10 until age 70 as was provided to them at the time of their retirement, and, if so,
11 whether such a vested right encompassed a right to fixed prescription drug co-
12 pays. See 22 N.Y.3d at 348-49. The CBAs stated that “[r]etired employees shall be
13 eligible to continue group health insurance upon payment of [the] premium.” Id.
14 at 350 (internal quotation marks omitted). In a separate provision, the CBAs
15 provided that retirees “shall be entitled to receive credit toward group health
16 insurance premiums . . . for accumulated sick leave,” to be paid by the school
17 district “until the employee reaches age 70.” Id. (internal quotation marks
18 omitted). The same provision indicated that “[t]he coverage provided shall be the
27
1 coverage which is in effect for the unit at such time as the employee retires.” Id.
2 (internal quotation marks omitted).
3 The New York Court of Appeals concluded that “the plain meaning of this
4 provision unambiguously establishes that plaintiffs have a vested right to the
5 coverage which was in effect for the unit at such time as they retired, until they
6 reach age 70,” notwithstanding that no provision of the CBAs explicitly stated
7 that coverage would continue beyond their dates of expiration. Id. at 353 (internal
8 quotation marks and alterations omitted). It found that the placement of the
9 sentence stating that “[t]he coverage provided shall be the coverage which is in
10 effect for the unit at such time as the employee retires” within the same provision
11 that set forth retirees’ right to use accumulated sick-leave credit to reduce
12 premiums “until the employee reaches age 70” permitted a “clear inference . . .
13 that the parties intended the right to continued coverage to operate for the same
14 period as the section as a whole, i.e., until the employee reaches 70,” and that its
15 “close proximity to this durational language is also evidence of an intent that it
16 should vest upon retirement rather than terminate with the expiration of the
17 CBA.” Id.
18 Because the New York Court of Appeals found that the CBAs
28
1 unambiguously established a vested right to continued coverage until age 70, it
2 declined “to rule on whether New York applies an inference of vesting for retiree
3 health insurance rights.” Id. at 354. It then considered whether the unambiguous
4 vested right encompassed a right to fixed prescription drug co-pays. The CBAs
5 set forth co-pay amounts that ranged from $0 to $5, without specific durational
6 language regarding those costs. See id. at 349. The defendants argued that a
7 vested right to the “same coverage” in retirement referred merely to “equivalent
8 coverage” that “d[id] not substantially alter the overall package” of health
9 insurance, and did not entitle retirees to fixed costs. Id. at 355 (emphasis omitted).
10 The plaintiffs argued that they were entitled to fixed benefits and costs, because
11 “once employees retire, they are no longer represented by the union in collective
12 bargaining negotiations, . . . and, as a result, it is logical to assume that the
13 bargaining unit intended to insulate retirees from losing important insurance
14 rights during subsequent negotiations by using language in each and every
15 contract which fixed their rights to coverage as of the time they retired.” Id. at
16 354-55 (internal citation and quotation marks omitted). The New York Court of
17 Appeals concluded that both parties “advanced . . . plausible interpretations of
18 the operative provision,” with respect to the scope of the vested right to coverage,
29
1 thereby “making it appropriate for the Court to consider extrinsic evidence” as to
2 whether the parties intended co-pay amounts to vest. Id. at 355. It therefore
3 remanded the case for further factual development of the parties’ intent. Id. at
4 355-56.
5 In defining the inference that it declined either to adopt or reject, the Court
6 referenced the Sixth Circuit’s decision in International Union, United Auto.,
7 Aerospace, & Agric. Implement Workers of Am. [UAW] v. Yard-Man, Inc., 716 F.2d
8 1476 (6th Cir. 1983). See id. at 354. In that case, the Sixth Circuit – applying the
9 federal common law that governs the interpretation of CBAs negotiated under
10 the NLRA and enforced under LMRA, see Textile Workers Union of America v.
11 Lincoln Mills of Alabama, 353 U.S. 448, 456-58 (1957) – held that courts should infer
12 that CBAs providing health insurance benefits for retirees established vested
13 rights. The Sixth Circuit reasoned that because “[b]enefits for retirees are only
14 permissive not mandatory subjects of collective bargaining[,] . . . it is unlikely
15 that such benefits, which are typically understood as a form of delayed
16 compensation or reward for past services, would be left to the contingencies of
17 future negotiations.” Yard-Man, 716 F.2d at 1482. The so-called “Yard-Man
18 inference” was repeatedly applied in federal cases, especially by the Sixth Circuit,
30
1 over the following three decades.8
2 In 2015, however, just over one year after the New York Court of Appeals
3 decided Kolbe, the United States Supreme Court unanimously rejected the pro-
4 vesting inferences articulated in Sixth Circuit precedents such as Yard-Man. In M
5 & G Polymers USA, LLC v. Tackett, the Court considered claims brought under the
6 LMRA and the Employee Retirement Income Security Act (“ERISA”), arising
7 from a private employer’s alleged promise of vested health insurance benefits to
8 retirees under its CBAs. 574 U.S. at 431-32. The Court held that “when a contract
9 is silent as to the duration of retiree benefits, a court may not infer that the parties
10 intended those benefits to vest for life.” Id. at 442. It found that inferences in favor
11 of vested retirement benefits, where a CBA does not “provide in explicit terms
12 that certain benefits continue after the agreement’s expiration,” were
13 “inconsistent with ordinary principles of contract law,” such as “the traditional
14 principle that courts should not construe ambiguous writings to create lifetime
15 promises” and “the traditional principle that contractual obligations will cease, in
8
1 See, e.g., Cole v. ArvinMeritor, Inc., 549 F.3d 1064, 1074 (6th Cir. 2008); Noe v.
2 PolyOne Corp., 520 F.3d 548, 555 (6th Cir. 2008); Armistead v. Vernitron Corp., 944
3 F.2d 1287, 1297 (6th Cir. 1991); Policy v. Powell Pressed Steel Co., 770 F.2d 609, 615
4 (6th Cir. 1985).
31
1 the ordinary course, upon termination of the bargaining agreement.” Id. at 441-42
2 (internal quotation marks and alteration omitted).
3 Three years later, in CNH Industrial N.V. v. Reese, the Supreme Court
4 clarified and extended its holding in Tackett. In Reese, the Court rejected the
5 premise that, in light of Tackett, “the same Yard-Man inferences [the Sixth Circuit]
6 once used to presume lifetime vesting can now be used to render a collective-
7 bargaining agreement ambiguous as a matter of law, thus allowing courts to
8 consult extrinsic evidence about lifetime vesting.” 138 S. Ct. at 763. Rather, the
9 Court suggested, “[w]hen a collective-bargaining agreement is merely silent on
10 the question of vesting,” courts should “conclude that it does not vest benefits for
11 life.” Id. at 766. “Similarly, when an agreement does not specify a duration for
12 health care benefits in particular,” courts should “simply apply the general
13 durational clause.” Id. The Court clarified that it had rejected the Yard-Man
14 inferences in Tackett “not because of the consequences . . . attached to them –
15 presuming vesting versus finding ambiguity – but because they are not a valid
16 way to read a contract.” Id. Those inferences, it explained, “cannot be used to
17 create a reasonable interpretation any more than they can be used to create a
18 presumptive one.” Id.
32
1 The New York Court of Appeals has not had occasion to address the effect
2 of Tackett and Reese, if any, on the circumstances in which New York law
3 recognizes vested retiree health benefits under New York public-sector CBAs.
4 Kolbe, the most relevant decision from the New York Court of Appeals on this
5 subject, both predates and is at least arguably in tension with those Supreme
6 Court precedents.9 In Kolbe, the court inferred the existence of a vested right to
7 retirement health benefits, despite the absence of express durational language to
9
1 The State suggested at oral argument that New York law is fundamentally
2 consistent with Tackett and Reese, citing both Kolbe and Matter of Aeneas McDonald
3 Police Benevolent Association v. City of Geneva, 92 N.Y.2d 326 (1998). In Aeneas
4 McDonald, the New York Court of Appeals declined to find that a contractual
5 right vested on the basis of past practice, reasoning that extrinsic evidence is
6 “merely an interpretive tool” to be employed when a contract is ambiguous, and
7 that it “cannot be used to create a contractual right independent of some express
8 source in the underlying agreement.” 92 N.Y.2d at 333. While Aeneas McDonald
9 stands for the proposition that contractual rights – including vested rights – must
10 have a textual basis, it does not speak to what kinds of inferences may and may
11 not be applied in locating contractual rights in a contract’s text. The New York
12 Court of Appeals in Kolbe presumably did not understand Aeneas McDonald to
13 foreclose the possibility that New York law might apply inferences of vesting to
14 retiree health benefits, given its indication that the status of such inferences under
15 New York law was an open question. 22 N.Y.3d at 354. Thus, Aeneas McDonald
16 does not command the conclusion that the holdings of Tackett and Reese reflect
17 established principles of New York law. Nor does the fact that both the Supreme
18 Court and the New York Court of Appeals have held that CBAs should be
19 interpreted according to traditional contract principles dictate that the New York
20 courts will follow Tackett and Reese. As noted above, different jurisdictions may
21 and sometimes do interpret those principles differently.
33
1 that effect, based largely on the “close proximity” between the CBA’s description
2 of retiree coverage and durational language regarding the use of sick-leave
3 credits. 22 N.Y.3d at 353. It also credited as “plausible” the plaintiffs’ argument
4 that the scope of the vested right included fixed co-pays based on an inference
5 drawn from the collective-bargaining context, and found the CBAs ambiguous as
6 to scope on that basis. Id. at 355-56. These two inferences, while not necessarily
7 irreconcilable with Tackett and Reese, suggest some willingness to find that
8 benefits vest even absent express durational language specific to those benefits.
9 And, as discussed below, Plaintiffs here make arguments based on the particular
10 language of the CBAs at issue in this case that bears at least a superficial
11 resemblance to the language the New York Court of Appeals relied on to find
12 vesting and ambiguity in Kolbe.
13 More recently, two state appellate divisions have taken divergent
14 approaches to applying the Supreme Court’s holdings in Tackett and Reese. In
15 Village of Old Brookville v. Village of Muttontown, the Second Department
16 considered whether the Village of Muttontown was obligated, under a CBA, to
17 contribute to retired police officers’ health benefit costs after the CBA’s
18 expiration. 117 N.Y.S.3d 264, 267 (2d Dep’t 2020). Citing Tackett for the principle
34
1 that “when a contract is silent as to the duration of retiree benefits, a court may
2 not infer that the parties intended those benefits to vest for life,” id. (citing Tackett,
3 574 U.S. at 442), the court concluded that “the health care benefits at issue do not
4 survive beyond the expiration of the [relevant] CBA,” id. at 268. It distinguished
5 Kolbe on the ground that, unlike in that case, the relevant CBA contained “no
6 comparable language guaranteeing the same level of benefits beyond [its]
7 expiration.” Id.
8 In Evans v. Deposit Central School District, the Third Department considered
9 whether the defendant school district had a vested obligation to pay the full cost
10 of retired teachers’ health insurance coverage, notwithstanding that the relevant
11 CBA “d[id] not specify the duration that retired employees will receive benefits.”
12 123 N.Y.S.3d 285, 289 (3d Dep’t 2020). The court quoted from Tackett the
13 proposition that “when a contract is silent as to the duration of retiree benefits, a
14 court may not infer” lifetime vesting.10 Id. at 288 (internal quotation marks
10
1 However, the Third Department cited only Old Brookville as the source of this
2 language, and used an “internal . . . citation omitted” parenthetical rather than
3 citing Tackett (the omitted internal citation) by name. See 123 N.Y.S.3d at 288
4 (quoting Old Brookville, 117 N.Y.S.3d at 267); see also Tackett, 574 U.S. at 442.
5 Neither did the court cite Reese, or indeed any federal cases, in its analysis of New
6 York law applicable to New York public-sector CBAs.
35
1 omitted). But unlike the Second Department in Old Brookville, the Third
2 Department concluded that, in the absence of specific durational language
3 addressed to the particular provision, the CBA was ambiguous as to whether
4 retirees’ health benefits survived the CBA’s termination. Id. at 289. It therefore
5 considered the extrinsic evidence and found that evidence sufficiently strong to
6 affirm a summary judgment resolving the textual ambiguity in favor of a vested
7 right. Id. at 289-90.
8 While the courts in both Old Brookville and Evans purported to apply the
9 central holding of Tackett, the Second Department in Old Brookville did so in a
10 manner that was also consistent with Reese, whereas the Third Department in
11 Evans did not. See Reese, 138 S. Ct. at 766 (holding that the inferences rejected in
12 Tackett “cannot be used to create a reasonable interpretation any more than they
13 can be used to create a presumptive one”). In light of these divergent approaches
14 by New York appellate courts, we are not able to confidently predict, as
15 Defendants ask us to do, that the New York Court of Appeals would necessarily
16 adopt the holdings of Tackett and Reese under the circumstances of this case.
36
1 2. CBAs Between CSEA and the State
2 The provisions of the CBAs between CSEA and the State that set forth the
3 State’s contribution rates toward employees’ NYSHIP coverage do not expressly
4 specify the duration of that obligation. In the 2007-2011 agreement,11 § 9.13(a)
5 provides: “The State agrees to pay 90 percent of the cost of individual coverage
6 and 75 percent of the cost of dependent coverage toward the
7 hospital/medical/mental health and substance abuse components provided under
8 the Empire Plan.” J. App’x 918. Section 9.13(b) provides that the State agrees to
9 pay the same rates toward employees’ “alternative Health Maintenance
10 Organization (HMO) coverage.” Id.
11 While § 9.13 does not specify the duration of the State’s agreement to pay
12 90% of individual coverage costs and 75% of dependent coverage costs, Plaintiffs
13 argue that a court could plausibly infer from the text of the 2007-2011 CBA that
14 the parties intended that obligation to vest by reading that provision in
15 combination with four others:
11
1 For purposes of simplicity, we focus our discussion on the text of the parties’
2 2007-2011 CBA. The seven CBAs that directly preceded the 2007-2011 agreement,
3 dating back to 1982, contain provisions that are identical or substantially similar
4 to the provisions from the 2007-2011 CBA discussed herein, though the relevant
5 provisions are not numbered consistently throughout the CBAs.
37
1 • § 9.23(a) of the 2007-2011 CBA, which provides that “[t]he
2 unremarried spouse and otherwise eligible dependent children of an
3 employee, who retires after April 1, 1979, with ten or more years of
4 active State service and subsequently dies, shall be permitted to
5 continue coverage in the health insurance program with payment at
6 the same contribution rates as required of active employees for the
7 same coverage.” Id. at 923.
8
9 • § 9.24(a) of the 2007-2011 CBA, which provides that “[e]mployees
10 covered by the State Health Insurance Plan have the right to retain
11 health insurance after retirement upon completion of ten years of
12 service.” Id.
13
14 • § 9.24(b) of the 2007-2011 CBA, which provides that “[a]n employee
15 who is eligible to continue health insurance coverage upon
16 retirement is entitled to a sick leave credit to be used to defray any
17 employee contribution toward the cost of the premium” and allows
18 employees to apply specified percentages “of the calculated basic
19 monthly value of the credit towards defraying the required
20 contribution to the monthly premium during their own lifetime.” Id.
21 at 923-24.
22
23 • § 9.25 of the 2007-2011 CBA, which provides that “[a]n employee
24 retiring from State service may delay commencement or suspend
25 his/her retiree health coverage and the use of the employee’s sick
26 leave conversion credits indefinitely.” Id. at 924.
27
28 Section 9.24(a), which gives retirees a “right to retain” coverage, can
29 plausibly be read as providing for either a non-vested right to retain NYSHIP
30 coverage after retirement until the expiration of the CBA or a vested right to
31 retain NYSHIP coverage throughout the retiree’s lifetime. Under federal common
38
1 law as explicated in Tackett and Reese, the absence of any express indication that
2 the right to retain coverage after retirement extends beyond the term of the CBA
3 would seem to foreclose the possibility of vesting. The New York Court of
4 Appeals, reviewing the divergent decisions in the Appellate Divisions, might
5 look to Tackett and Reese for non-binding guidance, find Kolbe to be
6 distinguishable on the basis of differences in the relevant CBA language, and
7 decline – as the Second Department did in Old Brookville – to infer the existence of
8 vested rights absent clear durational language. See Old Brookville, 117 N.Y.S.3d at
9 267.
10 Alternatively, a court following in Kolbe’s analytical footsteps might
11 conclude that, in the context of surrounding provisions that seem to contemplate
12 retirees’ and their dependents’ long-term retention of NYSHIP coverage, a “right
13 to retain coverage after retirement” is properly understood as a vested right. In
14 that case, Kolbe suggests that it is “plausible” that the scope of a vested right to
15 coverage would encompass a right to fixed costs such as co-pays or, perhaps,
16 contribution rates. 22 N.Y.3d at 355. Thus, a court applying Kolbe might find that
17 the 2007-2011 CBA is ambiguous as to whether the scope of the theoretically
18 vested “right to retain coverage after retirement” in § 9.24(a) includes a vested
39
1 right to the fixed contribution rates set forth in § 9.13.12
2 Section 9.23(a), which addresses the coverage of deceased retirees’
3 surviving dependents, signals the parties’ intent to negotiate post-retirement
4 contribution rates for, at a minimum, a specific subset of retirees’ dependents.
5 The clause guarantees nothing to living retirees or their dependents, but it does
6 seem to contemplate that such persons have NYSHIP coverage prior to retirees’
7 deaths by bestowing on surviving dependents a right to “continue” coverage. J.
12
1 The State does not dispute, for purposes of this litigation, that the CBAs may
2 provide for a vested right to coverage, see Appellees’ Br. 13, and so the question
3 whether it does is not before us. Nevertheless, the question whether the CBAs
4 provide for a vested right to coverage at all is closely related to the question at
5 issue here: whether such a vested right encompasses fixed contribution rates. A
6 necessary premise for Plaintiffs’ interpretation is that at least the promise of
7 continued coverage is a vested right. Notwithstanding the State’s limited
8 concession to this premise, if the CBAs, when properly interpreted under New
9 York law, do not provide for any vested right to coverage, irrespective of the
10 scope of such right, Plaintiffs cannot prevail on their claim. By contrast, if the
11 CBAs are properly interpreted to provide for vested coverage rights, Kolbe
12 suggests, under arguably analogous circumstances, that the textual bases for
13 implying a vested right of coverage may also create an ambiguity with respect to
14 the scope of such rights, including such matters as co-pays and premium
15 contributions. Plaintiffs in this case (and/or plaintiffs in parallel cases) rely on the
16 provisions of the CBAs under discussion as part of their argument that aspects of
17 the text of the CBAs imply, or at least create an ambiguity, with respect to the
18 vesting of the contribution rates. We therefore address their arguments
19 concerning whether the CBAs’ provisions suggest a vested right to coverage in
20 service of our inquiry into whether they provide for a vested right to coverage at
21 fixed rates of contribution.
40
1 App’x 923. Moreover, by guaranteeing that surviving dependents will pay
2 contribution rates equal to those paid by active employees, the provision either
3 seems to assume that living retirees and their dependents also have a contractual
4 right to specific contribution rates, or else it confers on surviving dependents a
5 contractual right not extended to living retirees and their dependents. (In the
6 latter scenario, it is possible under the CBA that a deceased retiree’s surviving
7 spouse could pay a lower percentage of his NYSHIP costs than a living retiree
8 pays of hers.) It would be odd, though not impossible, for CSEA to negotiate a
9 fixed contribution rate for deceased retirees’ surviving dependents but not for
10 living retirees. Therefore, this provision arguably lends indirect support to the
11 inference that the parties intended to fix contribution rates for retirees’
12 coverage.13
13
1 To be sure, § 9.23 does not expressly give deceased retirees’ surviving
2 dependents a vested right to continued coverage at the same contribution rates as
3 active employees. It might therefore be read to apply only to surviving
4 dependents of those retirees who retired (and subsequently died) during the term
5 of the CBA, and to guarantee coverage to surviving dependents only until the
6 CBA’s expiration. But this interpretation is arguably undercut by the language of
7 the provision, which states that it applies to the eligible surviving dependents of
8 “an employee, who retires after April 1, 1979, with ten or more years of active
9 State service and subsequently dies,” not to surviving dependents only of those
10 employees who both retire and die during the term of the agreement. See J. App’x
11 923.
41
1 Sections 9.24(b) and 9.25, concerning retirees’ use of sick-leave credits to
2 defray NYSHIP coverage costs, appear to contemplate that retirees may make
3 contributions to NYSHIP coverage “during their own lifetime,” and permit them
4 to delay the application of such credits “indefinitely.” Id. at 924. This durational
5 language suggests that retirees may apply sick-leave credit toward their NYSHIP
6 coverage costs beyond the expiration of the CBA, and therefore seems to assume
7 that retirees will retain coverage beyond the CBA’s term. As in Kolbe, the CBA’s
8 sick-leave-credit language appears to contemplate a duration for that benefit that
9 is different from the term of the CBA. And, as in Kolbe, the CBA’s promise of a
10 right to post-retirement coverage appears within the same provision as the
11 description of the sick-leave-credit benefit. See 22 N.Y.3d at 353. A court applying
12 Kolbe might therefore impute the durational language accompanying the sick-
13 leave-credit clause to the right to retain coverage after retirement, as the New
14 York Court of Appeals did in light of the clauses’ “close proximity” to one
15 another. Id.
16 Taken together, these provisions promise NYSHIP coverage to retirees,
17 allow retirees to use their accumulated sick leave to defray coverage costs
18 “during their own lifetime” (or to postpone the use of such credits
42
1 “indefinitely”), and guarantee a fixed contribution rate to deceased retirees’
2 surviving dependents. A court applying New York law might reasonably
3 conclude, as in Kolbe, that these provisions suggest that retirees have a right to
4 NYSHIP coverage not only until the expiration of the CBA, but for the rest of
5 their lives. If a court reached such a conclusion, it might further conclude, as in
6 Kolbe, that one “plausible interpretation[]” of a CBA that provides retirees with a
7 vested right to health-insurance coverage is that the parties, mindful of the fact
8 that employees lose their collective-bargaining rights upon retirement, intended
9 the scope of the vested coverage right to include fixed or controlled costs. Id. at
10 355. We therefore think it is plausible that a court applying New York law might
11 interpret the 2007-2011 CBA to be ambiguous on the question of whether the
12 State’s fixed contribution rates to NYSHIP coverage vest.
13 While we regard the Plaintiffs’ textual arguments as plausible in light of
14 the willingness of the New York Court of Appeals to infer vesting from the
15 context of related CBA provisions, we do not regard those arguments as
16 sufficiently compelling to predict that the New York Court of Appeals would
17 endorse them. It might reasonably find that the various contractual provisions on
18 which Plaintiffs rely do not indicate an intention sub silentio to vest a lifetime
43
1 right not just to participate in NYSHIP but to particular rates of State
2 contributions to the cost of such participation.14 It might therefore conclude that
3 because § 9.13 of the 2007-2011 CBA is silent as to the duration of the State’s
4 agreement to pay 90% of individual coverage costs and 75% of dependent
5 coverage costs, that agreement merely established a non-vested right that
6 terminated upon the CBA’s expiration.
7 In our view, the 2007-2011 CBA, as well as the seven CBAs that directly
8 preceded it, is amenable to either of these interpretations, depending on whether
9 New York law adopts the holdings of both Tackett and Reese (as in Old Brookville),
10 adopts that of Tackett but not Reese (as in Evans), rejects both Supreme Court
11 holdings and adopts the Yard-Man inference, or distinguishes the Supreme
12 Court’s holdings by finding adequate indications in the text of the CBAs to grant
13 vested rights to contribution rates in light of the New York Court of Appeals’
14
1 We note, in this regard, that the Kolbe Court distinguished the intention to vest
2 a lifetime right in retirees to retain health insurance benefits, which it found the
3 CBAs there unambiguously (if inexplicitly) granted, from the intention to vest a
4 particular financial benefit of such insurance, in the form of co-pays, on which it
5 found the CBAs ambiguous and remanded for consideration of extrinsic
6 evidence. The issue in this case concerns the latter sort of question; reasonable
7 courts might differ over whether the level of employer contributions to premium
8 costs is more or less difficult to establish inferentially than the level of co-pays at
9 issue in Kolbe.
44
1 prior decision in Kolbe. For that reason, we cannot say with certainty whether
2 Plaintiffs can establish that the State breached the CBAs by proving the existence
3 of the State’s alleged contractual obligation to pay 90% of retirees’ individual
4 coverage costs and 75% of retirees’ dependent coverage costs throughout retirees’
5 lifetimes.
6 B. Availability of Damages
7 Assuming, without deciding, that Plaintiffs can successfully establish that
8 the CBAs provide for a vested right to fixed contribution rates, thereby allowing
9 them to establish the element of breach (or at least that the terms of the CBAs are
10 sufficiently ambiguous to defeat Defendants’ motion for summary judgment and
11 require a trial to consider extrinsic evidence of the contract’s meaning), to prevail
12 on a breach-of-contract claim Plaintiffs must also establish that they are entitled
13 to recover damages. See Fischer & Mandell, 632 F.3d at 799. “It is well settled that
14 in breach of contract actions the nonbreaching party may recover general
15 damages which are the natural and probable consequence of the breach.” Bi-
16 Economy Mkt., Inc. v. Harleysville Ins. Co. of New York, 10 N.Y.3d 187, 192 (2008)
17 (internal quotation marks and citation omitted). However, this case presents an
18 unusual potential obstacle to Plaintiffs’ ability to recover damages: the
45
1 possibility, as contemplated by Plaintiffs’ constitutional impairment claim, that in
2 reducing its contribution levels to retirees’ NYSHIP premiums by statute and
3 regulation, the State not only breached but also invalidated its obligation under
4 the CBAs, thereby precluding a remedy for damages.
5 “An individual breach of contract does not reach constitutional dimensions
6 and create a cause of action based on the [C]ontracts [C]lause. The state, like any
7 private party, must be able to breach contracts without turning every breach into
8 a violation of the federal Constitution. Thus, it is necessary to distinguish
9 between legislative action that merely breaches the contract and legislative action
10 that impairs it.” TM Park Ave., 214 F.3d at 348-49 (internal quotation marks,
11 citations, and alterations omitted). As noted above, the distinction between a
12 contractual breach and a contractual impairment “depends on the availability of
13 a remedy in damages in response to the state’s” legislative action. E & E Hauling,
14 613 F.2d at 679.
15 If a state “passes a law and through enforcement of it prevents a[] party
16 from fulfilling its obligation under the contract because the use of the ordinance
17 precludes a damage remedy, the non-breaching party cannot be made whole.
18 Instead, the law has impaired the obligation of the contract.” Id. A state’s “[u]se
46
1 of law normally will preclude a remedy of damages because the law will be a
2 defense to a suit seeking damages unless it is clear the law is not to have that
3 effect.” Id.
4 Thus, in E & E Hauling the Seventh Circuit found that the defendant
5 district “used its legislative authority to prevent the plaintiff from fulfilling its
6 contract,” and thereby precluded a damages remedy, when it not only enacted an
7 ordinance that interfered with the plaintiff’s contractual right to operate a
8 landfill, but also “enforced the ordinance by placing armed guards at the landfill
9 site.” Id. at 680. This Court has found that a state defendant’s legislative
10 enactment of a wage freeze “not only . . . breach[ed] a previously made
11 employment contract to which a state entity is a party, but . . . use[d] the state’s
12 powers to invalidate portions of those contracts, thereby negating any state law
13 breach of contract remedy.” Nassau Cty., 959 F.3d at 63 (emphasis in original). On
14 the other hand, courts have found that when a state defendant has made “no
15 attempt . . . to use the law, federal or state, to repudiate a contractual obligation,”
16 the defendants remain “open to a suit for breach of contract.” Jackson Sawmill Co.,
17 Inc. v. United States, 580 F.2d 302, 312 (8th Cir. 1978).
18 Plaintiffs can prevail on their breach-of-contract claim only if we conclude
47
1 that neither the New York legislature, in amending Civil Service Law § 167(8),
2 nor the Civil Service Commission, in amending § 73.3(b) of the New York Code
3 of Rules and Regulations, invalidated any contractual obligation of the State to
4 pay 90% of retirees’ individual NYSHIP coverage and 75% of retirees’ dependent
5 NYSHIP coverage throughout their retirements. Neither the statute nor the
6 regulation, as amended, expressly repudiates all contrary contractual obligations;
7 nor do they expressly preclude the State from paying damages or retirees from
8 recovering them in the event that the reduced contribution rates violate the
9 State’s obligations under its CBAs. Thus, it is possible that the State believed that
10 it was entitled under the terms of the CBAs to implement the reduction and did
11 not contemplate the possibility that it was breaching any of its contractual
12 obligations by doing so. If the State’s breach arises from a good-faith
13 misunderstanding of its CBAs’ terms, rather than from a deliberate effort to
14 impair its own obligation, state law might permit a remedy for its breach.
15 But the absence of language in the operative statute or regulation expressly
16 repudiating the State’s contractual obligations does not, in our view, conclusively
17 establish that the State’s actions lack any such repudiatory effect. Indeed, the
18 amended statute provides that the reduction of contribution rates toward
48
1 NYSHIP coverage paid by the State may be applied “[n]otwithstanding any
2 inconsistent provision of law.” N.Y. Civ. Serv. Law § 167(8). That language most
3 obviously contemplates the contrary specification of contribution rates in
4 § 167(1), but it could plausibly be read to also refer to “any inconsistent” CBA
5 provisions. Arguably the State has, by reducing its contribution rates to retirees’
6 NYSHIP costs to the levels specified in § 73.3(b) of the regulations, “enforced” the
7 regulation and “used its legislative authority to prevent the plaintiff[s] from
8 fulfilling” the CBA’s alleged terms. E & E Hauling, 613 F.2d at 680.
9 We are not aware of any decisions by New York courts that address
10 whether, under circumstances like these, the State owes damages on its
11 contractual obligations notwithstanding that such obligations were breached by a
12 state legislative enactment. It is therefore not clear to us, from the face of the
13 statute and regulation, whether under state law the reduction of the State’s
14 contribution rates to retirees’ premiums constitutes a remediable breach or an
15 irremediable repudiation of contrary obligations provided for in the State’s
16 CBAs.
17 * * * * *
18 The task of resolving Plaintiffs’ state-law claim for breach of contract, a
49
1 claim that is governed by New York law, is made difficult in this case by the
2 uncertain status of New York law on two critical issues: (1) the applicable
3 interpretive principles for determining whether a CBA provides for vested health
4 benefits for retirees and, if so, defining the scope of such benefits; and (2) the
5 effect of state legislative action that violates terms of the State’s own CBAs on the
6 availability of state-law damages. For the reasons explained below, we therefore
7 reserve decision on Plaintiffs’ breach-of-contract claim pending certification of
8 these issues to the New York Court of Appeals.15
15
1 It could be argued that Plaintiffs’ state-law claim for breach of contract should
2 be dismissed on the basis of the Eleventh Amendment. “Although the
3 Amendment, by its terms, bars only federal suits against state governments by
4 citizens of another state or foreign country, it has been interpreted also to bar
5 federal suits against state governments by a state’s own citizens.” Woods v.
6 Rondout Valley Centr. Sch. Dist. Bd. of Educ., 466 F.3d 232, 236 (2d Cir. 2006). As the
7 Supreme Court has taught, “federal courts may hear claims for prospective
8 injunctive relief [against state officials], but retroactive claims seeking monetary
9 damages from the state treasury are barred by the Eleventh Amendment because,
10 even if state officials are the nominal defendants, the state is the real party in
11 interest.” Tsirelman v. Daines, 794 F.3d 310, 314 (2d Cir. 2015) (citing Edelman v.
12 Jordan, 415 U.S. 651, 663, 677 (1974)).
13 Plaintiffs’ breach-of-contract claim appears to seek monetary damages
14 from state officials, who acted in their official capacities when they reduced the
15 State’s contribution rates to retirees’ NYSHIP premiums. In the district court,
16 Defendants sought the dismissal of Plaintiffs’ action on Eleventh Amendment
17 grounds, and the district court partially granted Defendants’ motion, including
18 “[t]o the extent plaintiffs seek monetary relief against defendants acting in their
19 official capacity as agents of the State.” J. App’x 505-06. Nonetheless, for reasons
50
1 IV. Contractual Impairment
2 Article I, § 10 of the U.S. Constitution provides, in part, that “[n]o State
3 shall . . . pass any . . . Law impairing the Obligation of Contracts.” Plaintiffs argue
4 that the State’s reduction of its contribution rates to retirees’ NYSHIP coverage
5 costs, from 90% to 88% for individual coverage and from 75% to 73% for
6 dependent coverage, impaired the State’s alleged contractual obligation to
1 that are not entirely clear from the record before us, Plaintiffs’ breach-of-contract
2 claim survived the motion to dismiss and was later dismissed by the district
3 court, on the merits, at the summary-judgment stage. On appeal, Defendants
4 argue only that the claim was properly dismissed on the merits, without
5 reference to the Eleventh Amendment.
6 The Eleventh Amendment “does not automatically destroy original
7 jurisdiction,” but rather “grants the State a legal power to assert a sovereign
8 immunity defense should it choose to do so. The State can waive the defense”
9 and a court need not “raise the defect on its own.” Wisconsin Dep’t of Corr. v.
10 Schacht, 524 U.S. 381, 389 (1998) (citations omitted). “Unless the State raises the
11 matter, a court can ignore it.” Id. (citation omitted). Moreover, this Court has
12 previously declined to address Eleventh Amendment issues, even where the
13 issue was raised by a state defendant, so as to avoid unnecessarily taking up a
14 difficult constitutional issue. See, e.g., Nat’l R.R. Passenger Corp. v. McDonald, 779
15 F.3d 97, 100 (2d Cir. 2015); Ret. Sys. of Ala. v. J.P. Morgan Chase & Co., 386 F.3d 419,
16 431 (2d Cir. 2004); Tyler v. Douglas, 280 F.3d 116, 121 (2d Cir. 2001). Here, by
17 certifying to the New York Court of Appeals two questions that are critical to the
18 resolution of Plaintiffs’ state-law claim (as well as to their federal constitutional
19 claim), we may avoid the unnecessary adjudication of a constitutional issue not
20 raised by the Defendants on appeal. Accordingly, we decline to consider whether
21 the Eleventh Amendment bars Plaintiffs’ breach-of-contract claim.
22
23
51
1 contribute to the retirees’ health insurance costs at fixed rates of 90% and 75%
2 perpetually, in violation of that constitutional provision. Defendants contend that
3 no such contractual obligation exists under the CBAs and that, even if it does
4 exist, the State’s reduction of its contribution rates did not amount to an
5 unconstitutional impairment of its obligation.
6 In evaluating claims for contractual impairment, “we first ask whether the
7 change in state law has operated as a substantial impairment of a contractual
8 relationship.” General Motors Corp. v. Romein, 503 U.S. 181, 186 (1992) (citations
9 and internal quotation marks omitted). “This inquiry has three components:
10 whether there is a contractual relationship, whether a change in law impairs that
11 contractual relationship, and whether the impairment is substantial.” Id. But
12 “state laws that impair an obligation under a contract do not necessarily give rise
13 to a viable Contracts Clause claim.” Buffalo Teachers Fed. v. Tobe, 464 F.3d 362, 368
14 (2d Cir. 2006) (citation omitted). “[T]he interdiction of statutes impairing the
15 obligations of contracts does not prevent the State from exercising such powers as
16 are vested in it for the promotion of the common weal, or are necessary for the
17 general good of the public.” Allied Structural Steel Co. v. Spannaus, 438 U.S. 234,
18 241 (1978) (internal quotation marks and citation omitted). Even when a state law
52
1 substantially impairs a contractual obligation, it does not “trench[] impermissibly
2 on contract rights” if it serves a “legitimate public purpose” through means that
3 are “reasonable and necessary.” Buffalo Teachers, 464 F.3d at 368.
4 Thus, to establish a violation of the Contract Clause, Plaintiffs must
5 establish: (1) the existence of the alleged contractual obligation; (2) the State’s
6 impairment of that obligation; (3) the substantiality of that impairment; and (4)
7 that the impairment was not a reasonable and necessary means of effectuating a
8 legitimate public purpose. Although these elements are distinct from those of the
9 state-law breach-of-contract claim, the validity of the federal constitutional claim
10 in this case hinges in substantial part on the same undecided state-law questions
11 that control the state-law claim.
12 A. Contractual Obligation
13 As explained above, when a federal court “is asked to invalidate a state
14 statute upon the ground that it impairs the obligation of a contract, the existence
15 of the contract and the nature and extent of its obligation become federal
16 questions for the purposes of determining whether they are within the scope and
17 meaning of the Federal Constitution.” Irving Trust Co., 314 U.S. at 561. While “we
18 accord respectful consideration and great weight to the views of the state’s
53
1 highest court . . . we are bound to decide for ourselves whether a contract was
2 made, [and] what are its terms and conditions.” Brand, 303 U.S. at 100. Where, as
3 here, the “construction and effect” of a contract “is a state question,” we “must
4 determine it from the law of the state” but “give our own judgment derived
5 from” state authority, “and not accept the present conclusion of the state court
6 without inquiry.” Appleby, 271 U.S. at 380.
7 In Pineman, we found that because existing state law did not resolve the
8 issue at hand, “abstention [wa]s appropriate to afford the state courts an
9 opportunity to adjudicate the contract law aspect of [the] claim, even though the
10 federal courts, thereafter resolving the constitutional issue, will not be obliged to
11 give the state court ruling the conclusive deference that abstention normally
12 entails.” Pineman, 637 F.2d at 605. Similarly, the Eighth Circuit affirmed a district
13 court’s decision to certify the question of whether a contractual obligation existed
14 to the appropriate state court, because in doing so the district court “gave proper
15 consideration to the state court’s views but independently determined that the
16 right to payment under the [statute] is not contractual within the meaning of the
17 Contract Clause.” Honeywell, Inc. v. Minnesota Life & Health Ins. Guar. Ass’n, 110
18 F.3d 547, 552 (8th Cir. 1997).
54
1 We find, as discussed above, that New York law does not conclusively
2 address the question of whether – and if so, when – a court should infer that a
3 CBA that is silent as to the duration of retirees’ health-insurance benefits
4 nonetheless provides, either unambiguously or ambiguously, for a vested right to
5 such benefits. The New York Court of Appeals in Kolbe expressly declined to
6 “rule on whether New York applies an inference of vesting for retiree health
7 insurance rights,” 22 N.Y.3d at 354, while also finding that the relevant CBA
8 language unambiguously established a vested right to coverage and was
9 ambiguous as to whether the scope of such coverage included fixed co-pays, id. at
10 353, 355. More recently, the Second Department concluded that retiree health-
11 insurance benefits unambiguously did not vest, absent express durational
12 language relating to those benefits, Old Brookville, 117 N.Y.S.3d at 267, while the
13 Third Department concluded that a CBA that was “silent as to the duration of
14 retiree benefits” was nonetheless ambiguous as to whether such benefits vested,
15 Evans, 123 N.Y.S.3d at 289 (quoting Old Brookville, 117 N.Y.S.3d at 267). Thus, the
16 present state of New York law on this question is not entirely clear.
17 Moreover, in addressing the federal question of whether the alleged
18 contractual obligation exists, we do not anticipate that we will reach a different
55
1 conclusion than the one compelled by state law. If, under New York law, the
2 CBAs are properly interpreted so as to provide only for non-vested contribution
3 rates, we see no basis to conclude that the State is seeking to “evade the restraint”
4 of the Contract Clause by rendering a valid arrangement unenforceable. Pineman,
5 637 F.2d at 604.16 Nor, if under New York law the CBAs do provide for vested
6 contribution rates, is such an obligation ineligible for constitutional protection: a
7 state’s bargained-for promise to provide vested health benefits to retirees does
8 not offend the Constitution in any respect.
9 Tackett and Reese do not command otherwise, even in the event that New
10 York law applies an inference in favor of vesting or ambiguity that differs from
11 the holdings in those cases. Those cases “arose in a different context than the
12 claims presented here” because they were “brought under ERISA, which governs
13 the relationship and agreements between private employers and their employees
14 but excludes public employers and employees, like plaintiffs here. See 29 U.S.C.
15 § 1003(b)(1).” Serafino v. City of Hamtramck, 707 F. App’x 345, 352 (6th Cir. 2017).
16
1 Indeed, if the New York Court of Appeals were to interpret the CBAs in this
2 manner, its interpretation would be consistent with the Supreme Court’s
3 interpretation of similar CBAs subject to federal law. See Tackett, 574 U.S. at 442;
4 Reese, 138 S. Ct. at 766.
56
1 See Tackett, 574 U.S. at 434; Reese, 138 S. Ct. at 764. Our obligation to analyze
2 Contract Clause claims under the federal constitution does not require us to
3 apply, in determining the contract that is alleged to have been impaired by state
4 legislative action, every interpretive convention recognized by federal law in the
5 interpretation of federal contracts. Therefore, while the proper interpretation of
6 the CBAs under New York law will not control our resolution of the issue for
7 purposes of Plaintiffs’ Contract Clause claim, we see no basis to anticipate that
8 we will reach a contrary conclusion in exercising our independent
9 responsibilities.
10 The question whether, as a matter of state law, the CBAs in question
11 provide for the vesting of the State’s rates of contribution to the cost of retirees’
12 health insurance may therefore be dispositive of both the federal constitutional
13 claim and the state-law claim. If the CBAs do not provide for vesting, neither
14 claim is viable. For this reason, as well as others explained below, we conclude
15 that it is appropriate “to afford the state courts an opportunity to adjudicate the
16 contract law aspect of appellees’ claim, even though the federal courts, thereafter
17 resolving the constitutional issue, will not be obliged to give the state court ruling
18 the conclusive deference that [certification] normally entails.” Pineman, 637 F.2d
57
 1 at 605.
2 B. Impairment
3 Assuming, without deciding, that Plaintiffs can successfully establish that
4 the CBAs provide for a vested right to coverage at fixed contribution rates,
5 Plaintiffs must next establish that the State impaired its contractual obligation to
6 pay such rates.17 As explained above, the distinction between a contractual breach
7 and a contractual impairment “depends on the availability of a remedy in
8 damages in response to the state’s . . . action.” E & E Hauling, 613 F.2d at 679.
9 “[T]he federal Circuit Courts, as well as the Supreme Court, have consistently
10 viewed this
11 distinction – between breach and the removal of any remedy for breach – as a line
12 delineating whether a Contracts Clause claim might lie.” Nassau Cty., 959 F.3d at
17
1 Curiously, Plaintiffs (as well as all plaintiffs in the tandem cases) and
2 Defendants both neglect to address this element of Plaintiffs’ Contract Clause
3 claim in their briefs, and the district court’s decision granting summary judgment
4 to Defendants similarly omits any discussion of whether Plaintiffs can establish
5 an impairment of the alleged obligation. In all cases, the argumentation skips
6 directly from a discussion of whether the alleged contractual obligation exists to a
7 discussion of whether, if it does exist, any impairment of it was substantial. We
8 therefore emphasize that in order to prevail on a federal constitutional claim of
9 contractual impairment, a plaintiff must affirmatively establish, inter alia, that the
10 defendant State impaired its contractual obligation.
58
1 63.
2 Even if a state’s action interferes with a party’s performance of its
3 contractual obligation, unless it also “preclude[s] a damage remedy the contract
4 has been breached and the non-breaching party can be made whole. If this
5 happens, there has been no law impairing the obligation of the contract.” E & E
6 Hauling, 613 F.2d at 679. This Court has therefore determined that a plaintiff’s
7 Contract Clause claim “will be mooted” if the plaintiff recovers damages in a
8 concurrent state-law action for breach of contract, because its recovery of
9 damages “will demonstrate that there has been no impairment, but only a
10 breach.” TM Park Ave., 214 F.3d at 349. By contrast, when a state “passes a law
11 and through enforcement of it prevents a[] party from fulfilling its obligation
12 under the contract,” the law may act “as a defense to a suit” for breach of contract
13 and preclude a damages remedy, “unless it is clear the law is not to have that
14 effect.” E & E Hauling, 613 F.2d at 679.
15 As with the task of determining, for purposes of a Contract Clause
16 analysis, whether a contract exists and sets forth the alleged obligation, “we
17 accord respectful consideration and great weight to the views of the state’s
18 highest court but . . . are bound to decide for ourselves whether . . . the State has,
59
1 by later legislation, impaired its obligation.” Brand, 303 U.S. at 100. But while the
2 issue of impairment remains within federal courts’ ultimate discretion, we are
3 guided for all practical purposes by the necessarily state-law inquiry into the
4 availability of damages for breach.
5 As explained above, New York law does not conclusively establish
6 whether either the state legislature’s amendment of Civil Service Law § 167(8) or
7 the Civil Service Commission’s amendment of § 73.3(b) of the regulations
8 operated so as to repudiate contrary contractual obligations and thereby negated
9 Plaintiffs’ access to damages for breach under New York law. While neither the
10 statute nor regulation, on its face, provides for such an effect, the legislature and
11 Civil Service Commission arguably “prevent[ed] [the State] from fulfilling its
12 obligation under the contract” by both passing and enforcing a law that
13 unilaterally reduced the State’s contribution rates to retirees’ NYSHIP costs. E &
14 E Hauling, 613 F.2d at 679. Whether this “use of law” prevents the State from
15 fulfilling both its performance obligation and its alternative obligation to pay
16 damages, or instead merely gives rise to the latter obligation by breaching the
17 former one, is a question appropriate for certification to the New York Court of
18 Appeals.
60
1 C. Constitutionality
2 “Not all impairments of contractual obligations are unconstitutional.” Id. at
3 681. “To determine if a law trenches impermissibly on contract rights, we pose
4 three questions to be answered in succession: (1) is the contractual impairment
5 substantial and, if so, (2) does the law serve a legitimate public purpose such as
6 remedying a general social or economic problem and, if such purpose is
7 demonstrated, (3) are the means chosen to accomplish this purpose reasonable
8 and necessary.” Buffalo Teachers, 464 F.3d at 368. “If the impairment is
9 insubstantial, or the law is a reasonable and necessary means to remedy a
10 legitimate public purpose, the Contracts Clause is not violated.” Nassau Cty., 959
11 F.3d at 64. Thus, even if, arguendo, Plaintiffs establish both the existence and the
12 impairment of the alleged contractual obligation, they may prevail on their
13 Contract Clause claim only if they further establish that the impairment was
14 unconstitutional, meaning that it was substantial and was not reasonable and
15 necessary to a legitimate public purpose.
16 “The substantiality of an impairment depends upon the extent to which
17 reasonable expectations under the contract have been disrupted. And the
18 reasonableness of expectations depends, in part, on whether legislative action
61
1 was foreseeable.” Nassau Cty., 959 F.3d at 64 (internal quotation marks omitted).
2 “Impairment is greatest where the challenged government legislation was wholly
3 unexpected.” Sanitation & Recycling Indus., Inc. v. City of New York, 107 F.3d 985,
4 993 (2d Cir. 1997). In evaluating “the degree of impairment” we also consider
5 “the extent to which the challenged provision provides for gradual applicability
6 or grace periods.” Id. (internal quotation marks omitted).
7 “Minimal alteration of contractual obligations may end the inquiry” at the
8 stage of evaluating an impairment’s substantiality, whereas “[s]evere impairment
9 . . . will push the inquiry to a careful examination of the nature and purpose of
10 the state legislation.” Spannaus, 438 U.S. at 245. If we conclude that the
11 impairment was substantial, “the state must show a significant and legitimate
12 public purpose behind the law.” Buffalo Teachers, 464 F.3d at 368. Such a purpose
13 is one “aimed at remedying an important general or social economic problem
14 rather than providing a benefit to special interests.” Sanitation & Recycling Indus.,
15 107 F.3d at 993 (internal quotation marks omitted). Courts, including this one,
16 “have often held that the legislative interest in addressing a fiscal emergency is a
17 legitimate public interest.” Buffalo Teachers, 464 F.3d at 369; see id. at 368-69;
18 Nassau Cty., 959 F.3d at 65; Barr v. City of White Plains, 779 F. App’x 765, 767-68
62
1 (2d Cir. 2019); see also Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398, 444-45
2 (1934).
3 “That a contract-impairing law has a legitimate public purpose does not
4 mean there is no Contracts Clause violation. The impairment must also be one
5 where the means chosen are reasonable and necessary to meet the stated
6 legitimate public purpose.” Buffalo Teachers, 464 F.3d at 369. If the state is not
7 “itself [] a party to the contract, courts usually defer to a legislature’s
8 determination as to whether a particular law was reasonable and necessary.” Id.
9 If the state is a party, the degree of deference depends on whether there are
10 “some indicia that the state impaired the contract out of its own self-interest.”
11 Nassau Cty., 959 F.3d at 65 (internal quotation marks and citation omitted). The
12 plaintiffs bear the burden of showing “sufficient evidence” of “indicia of self-
13 serving, privately motivated, action” by the state, in order to establish that a less
14 deferential review of “the reasonableness and necessity of the government’s
15 actions” is warranted. Id. at 66. “Ultimately, for an impairment to be reasonable
16 and necessary under less deference scrutiny, it must be shown that the state did not
17 (1) consider impairing the contracts on par with other policy alternatives or (2)
18 impose a drastic impairment when an evident or more moderate course would
63
1 serve its purpose equally well, nor (3) act unreasonably in light of the
2 surrounding circumstances.” Buffalo Teachers, 464 F.3d at 371 (internal quotation
3 marks, citation, and alterations omitted).
4 In our view, Plaintiffs can likely establish that the alleged impairment was
5 substantial. Assuming (without deciding) that the alleged contractual obligation
6 was a negotiated term of the CBAs, Plaintiffs reasonably expected the State to
7 honor that term and could not have foreseen its reduction of its contribution rates
8 to retirees’ NYSHIP coverage costs. The contribution rates Plaintiffs argue they
9 are entitled to under the CBAs had been constant for nearly thirty years and were
10 codified in a state statute. See N.Y. Civ. Serv. Law § 167(1). Contrary to
11 Defendants’ argument, the State’s repeated efforts to renegotiate its contribution
12 rates through the collective-bargaining process did not put Plaintiffs on notice
13 that the State might bypass that process and implement its desired changes
14 unilaterally.18 We are therefore inclined to find that the alleged impairment of the
18
1 To the contrary, those efforts are part of the alleged extrinsic evidence cited by
2 the Plaintiffs as suggesting that the State believed that the existing rates were
3 vested aspects of prior CBAs that could only be altered by collective bargaining.
4 We express no view as to the persuasiveness of this argument. Rather, we
5 observe only that an effort to negotiate a consensual change in putatively
6 contractual terms does not put State employees or retirees on notice that the State
7 might adopt the same changes without consent.
64
1 alleged contractual obligation was “wholly unexpected” and therefore
2 substantial. See Sanitation & Recycling Indus., 107 F.3d at 993. The changes were
3 also “substantial” in the more ordinary meaning of the term: while the additional
4 premium payment required of the average retiree – $10.50 per month for
5 individual coverage and $28.50 per month for dependent coverage NYSCOA J.
6 App’x. 94] – is not a dramatic number, the cumulative additional cost, over years
7 or even decades of retirement, cannot be seen as trivial in the context of the
8 budgets of retired employees on fixed incomes.
9 We are also inclined to conclude that the State acted with a legitimate
10 public purpose. Defendants credibly argue that, as a result of the severe financial
11 crisis that began in 2007, the State in 2011 faced a very significant budget deficit,
12 which it addressed through a wide-ranging array of spending cuts that included
13 the reduction of its contribution rates to retirees’ NYSHIP costs. Prior decisions of
14 this Court make clear that where, as here, a state seeks to address financial
15 problems arising from a “severe fiscal crisis,” it acts with a legitimate public
16 purpose. Buffalo Teachers, 464 F.3d at 368. Plaintiffs have “presented no evidence
17 to undermine” Defendants’ claim that the State faced a serious fiscal crisis, which
18 it also sought to solve through “other draconian measures.” Nassau Cty., 959 F.3d
65
 1 at 65. Although Plaintiffs argue that the State, in collective-bargaining
2 negotiations, regularly claimed that the State was facing a fiscal crisis, there is no
3 serious question that the period following the “Great Recession” was one of
4 austerity and constraint across the entire economy. The fact that the State may
5 have previously cried wolf at the bargaining table does not undermine the
6 substantial evidence that on this occasion it was dealing with a genuine wolf.
7 We find the reasonableness and necessity of the State’s action to be a closer
8 question – and one that we decline to answer at this time. The Supreme Court has
9 “urged the federal courts of appeals to use certification in order to avoid deciding
10 constitutional questions unnecessarily or prematurely.” Tunick v. Safir, 209 F.3d
11 67, 72 (2d Cir. 2000) (citing Arizonans for Official English v. Arizona, 520 U.S. 43
12 (1997)). “Warnings against premature adjudication of constitutional questions
13 bear heightened attention when a federal court is asked to invalidate a State’s
14 law,” as Plaintiffs ask that we do here. Arizonans, 520 U.S. at 79. An inquiry –
15 even a deferential one – into whether a state legislature’s potential impairment of
16 its own contracts violated the U.S. Constitution is a delicate matter for a federal
17 court to undertake and risks second-guessing, with the security of hindsight,
18 difficult choices made by the legislature under demanding circumstances. The
66
1 New York Court of Appeals’ answers to our certified questions may allow us to
2 resolve this case without determining the constitutionality of the alleged
3 impairment, should the Court conclude either that there was no vested
4 contractual right in the first place or, alternatively, that Plaintiffs may recover
5 state-law damages for breach of any such right, thus precluding Plaintiffs from
6 establishing impairment. It would therefore be premature and potentially
7 unnecessary for us to decide at this time whether the State’s reduction of its
8 contribution rates to retirees’ NYSHIP costs, if it was an impairment of a
9 contractual obligation, was nonetheless a reasonable and necessary response to
10 the fiscal crisis or whether, alternatively, it offended the Contract Clause of the
11 federal constitution.
12 IV. Certification
13 “Although the parties did not request certification, we are empowered to
14 seek certification nostra sponte.” CIT Bank N.A. v. Schiffman, 948 F.3d 529, 537 (2d
15 Cir. 2020). “We have long recognized the appropriateness of according to state
16 courts the opportunity to decide significant issues of state law through the
17 certification process.” Corsair Special Situations Fund, L.P. v. Pesiri, 863 F.3d 176,
18 183 (2d Cir. 2017). The rules of the New York Court of Appeals provide that
67
1 “[w]henever it appears to . . . any United States Court of Appeals . . . that
2 determinative questions of New York law are involved in a case pending before
3 that court for which no controlling precedent of the [New York] Court of Appeals
4 exists, the court may certify the dispositive questions of law to the [New York]
5 Court of Appeals.” 22 N.Y.C.R.R. § 500.27(a); see also 2d Cir. R. 27.2(a) (“If state
6 law permits, the court may certify a question of state law to that state’s highest
7 court.”).
8 We have explained our standard for exercising our discretion as follows:
9 Our decision to certify questions to the Court of
10 Appeals is discretionary, and when exercising that
11 discretion we consider whether: (1) the New York
12 Courts of Appeals has not squarely addressed an issue
13 and other decisions by New York courts are insufficient
14 to predict how the Court of Appeals would resolve it;
15 (2) the statute’s [or, in this case, CBA’s] plain language
16 does not indicate the answer; (3) a decision on the
17 merits requires value judgments and important public
18 policy choices that the New York Court of Appeals is
19 better situated than we to make; and (4) the questions
20 certified will control the outcome of the case.
21
22 CIT Bank N.A., 948 F.3d at 537 (internal quotation marks omitted).
23 All four of these factors weigh in favor of certifying two questions in this
24 case: (1) a question concerning under what circumstances, if any, New York law
25 permits an inference of vested post-retirement benefits under a state-law CBA,
68
1 notwithstanding the absence of any express specification that those benefits
2 extend beyond the term of the CBA, and (2) a question concerning whether,
3 assuming that the CBAs at issue did grant a vested contractual right to such
4 benefits, New York’s statutory reduction of its contribution rates for retirees’
5 health-insurance coverage costs negated any contrary contractual obligations, so
6 as to preclude the possibility of a remedy for breach. We address the reasons for
7 certifying each of these questions in turn.
8 A. Inference of Vested Benefits for Retirees
9 First, the New York Court of Appeals “has not squarely addressed” this
10 issue, and “other decisions by New York courts are insufficient to predict how
11 the Court of Appeals would resolve it.” Id. (internal quotation marks omitted). As
12 explained above, the New York Court of Appeals in Kolbe expressly left open the
13 question of “whether New York applies an inference of vesting for retiree health
14 insurance rights,” 22 N.Y.3d at 354, and applied interpretive principles that are
15 arguably in tension with those subsequently endorsed by the Supreme Court of
16 the United States in Tackett, 574 U.S. at 442, and Reese, 138 S. Ct. at 766. See Kolbe,
17 22 NY.3d at 353-55. The Court of Appeals has not revisited the issue of inferences
18 of vesting for retiree health insurance benefits since Kolbe; nor has it had occasion
69
1 to consider Tackett and Reese. Decisions by intermediate New York appellate
2 courts on the issue have not taken consistent positions on whether Tackett and
3 Reese reflect New York law. Compare Old Brookville, 117 N.Y.S.3d at 267 with
4 Evans, 123 N.Y.S.3d at 289-90. We are therefore unable to predict how the New
5 York Court of Appeals would address the issue of vesting in this case.
6 Second, the CBAs’ “plain language does not indicate the answer.” CIT Bank
7 N.A., 948 F.3d at 537 (internal quotation marks omitted). The 2007-2011 CBA sets
8 forth the State’s rates of contributions in § 9.13, a provision that is silent as to the
9 duration of the specified rates or their applicability to retirees. Depending on the
10 interpretive principles embraced by New York law, that silence may foreclose
11 any possibility of vesting; alternatively, various provisions of the relevant CBAs
12 arguably contemplate a vested right to coverage, the scope of which could
13 plausibly be interpreted to encompass fixed contribution rates. Thus, the plain
14 language of the CBAs is susceptible to more than one plausible interpretation,
15 depending on the interpretive principles that the Court of Appeals adopts.
16 Third, deciding this issue necessarily entails “value judgments and
17 important public policy choices” that the New York Court of Appeals is best
18 suited to make. Id. (internal quotation marks omitted). New York law alone gives
70
1 employees of the State, who are not covered under the NLRA, a right to bargain
2 collectively. See N.Y. Civ. Serv. Law § 203; 29 U.S.C. § 152(2) (excepting “any
3 State or political subdivision thereof” from definition of “employer” as used in
4 NLRA). Thus, the CBAs between CSEA and the State are created under and
5 governed by New York law. A judicial decision interpreting the CBAs is
6 guaranteed to have a substantial financial impact on both retired State employees
7 and the State: Plaintiffs represent a group of approximately 71,000 retirees and
8 their dependents, and the relevant CBA provisions are similar to those in ten
9 other actions brought by other public-sector unions and their retired members.
10 The State estimates that the reduction of its contribution rates toward the
11 NYSHIP costs of retirees who retired since January 1, 1983 has saved it
12 approximately $30 million annually.
13 Moreover, even beyond the scope of the present dispute, the interpretive
14 principles applied to determine whether retirees’ benefits vest under CBAs with
15 the State may affect other rights under existing contracts and will surely
16 influence the way in which the State and unions negotiate future contracts. The
17 interpretation of this state-law agreement is therefore likely to have a broad and
18 substantial impact on both existing and future contracts between the State and
71
1 public-sector unions representing State employees. Under these circumstances, it
2 seems clear that the New York Court of Appeals is better situated than we to
3 weigh the policy considerations and make the value judgments that necessarily
4 accompany the resolution of this issue.
5 Fourth, the resolution of this issue may well be dispositive of the case. If
6 the New York Court of Appeals determines that New York law does not
7 recognize an inference of vesting for retiree health benefits, Plaintiffs cannot
8 prevail on their state-law cause of action, and almost certainly would not be able
9 to establish a contractual obligation protected by the federal Constitution’s
10 Contract Clause. If the Court of Appeals instead finds that the CBA is ambiguous
11 with respect to the vesting of fixed contribution rates, its subsequent decision on
12 the question of remedy, as discussed below, will effectively foreclose one of
13 Plaintiffs’ two asserted bases for relief.
14 We therefore conclude that this issue is appropriate for certification for the
15 New York Court of Appeals.
16 B. Effect of State’s Action on Contrary Contractual Obligations
17 We also find that it is appropriate in this case to certify a second question
18 to the New York Court of Appeals, which that Court need only address if it
72
1 concludes, in answering the first question that we certify, that the relevant CBAs
2 are best interpreted under New York law as providing for vested contribution
3 rates (or at least are ambiguous with respect to vesting such that the district
4 court’s grant of summary judgment for Defendants on this issue must be
5 vacated). If the Court of Appeals so determines, we respectfully ask that it further
6 determine whether the State’s unilateral statutory and regulatory reduction of its
7 contribution rates to retirees’ NYSHIP costs invalidated any contrary contractual
8 obligations and thereby precluded a damages remedy under state law.
9 First, this too is an issue which the Court of Appeals has not addressed,
10 and which cannot be conclusively resolved by reference to decisions of the State’s
11 other courts. As far as we are aware, New York courts have not previously
12 considered the question of whether state legislative or administrative action that
13 contravenes a performance obligation of the State under its CBAs also precludes
14 the courts, as a matter of state law, from providing a remedy for breach of that
15 obligation.
16 Second, neither New York Civil Service Law § 167(8) nor § 73.3(b) of the
17 New York Code of Rules and Regulations indicates, by its plain language, what
18 effect the State’s reduction of its contribution rates to retirees’ NYSHIP coverage
73
1 costs has on any contrary contractual obligations held by the State.
2 Third, resolving the question of whether the actions of the State’s
3 legislature and Civil Service Commission invalidated obligations undertaken by
4 the State’s executive branch in a potentially unconstitutional manner requires the
5 balancing of sensitive and important policy considerations. Addressing this
6 question entails careful weighing of the relationships between the State’s
7 branches and the interrelated effects of their exercises of sovereign power. In
8 light of those considerations, the New York Court of Appeals is much better
9 situated than we to undertake such an analysis.
10 Fourth, and finally, the answer to this question will, for all practical
11 purposes, be determinative of at least one and possibly both of Plaintiffs’ claims.
12 If the Court of Appeals determines that the reduction of the State’s contribution
13 rates precludes a state-law remedy for breach of contract, Plaintiffs cannot prevail
14 on their state-law breach-of-contract claim, but we would consequently conclude
15 that the State substantially impaired its obligation, thereby allowing Plaintiffs to
16 proceed to the analysis of whether such impairment was constitutional. If, on the
17 other hand, the Court of Appeals determines that Plaintiffs may recover damages
18 for breach of the CBAs, Plaintiff may be able to prevail on their state-law claim,
74
1 so long as the alleged contractual obligation is found to exist,19 but we would
2 consequently conclude that they are unable to prevail on their Contract Clause
3 claim. Thus, the manner in which the Court of Appeals resolves this question will
4 effectively resolve either the breach-of-contract claim or the federal constitutional
5 claim and will substantially inform the resolution of the other claim.
6 We therefore conclude that certification of this issue to the New York Court
7 of Appeals is appropriate.
8 CONCLUSION
9 For the reasons stated above, we reserve decision20 and certify the
19
1 It is possible that the New York Court of Appeals could conclude, in resolving
2 the first certified question, that the CBA is ambiguous as to whether the alleged
3 obligation exists, thereby giving rise to a remand of this case to the district court
4 for consideration of the extrinsic evidence in order to resolve that ambiguity.
5 Under those circumstances, if the district court were to conclude on remand that
6 the extrinsic evidence does not support the existence of the alleged vested right to
7 fixed contribution rates, Plaintiffs would not be able to prevail on their state-law
8 cause of action even if the New York Court of Appeals were to conclude, in
9 resolving the second certified question, that damages are available for breach of
10 contract. Thus, the resolution of the second certified question is only necessarily
11 determinative of one of Plaintiffs’ two causes of action – whichever of the two it
12 effectively forecloses.
20
1 In addition to reserving decision on Plaintiffs’ claims for contractual
2 impairment and breach of contract, we also reserve decision on their additional
3 challenges to the district court’s admission of declarations by witnesses whose
4 identities were allegedly not disclosed to Plaintiffs, as required by Rule
5 26(a)(2)(A) of the Federal Rules of Civil Procedure. Those issues are not case-
75
1 following two questions to the New York Court of Appeals.
2 Question 1:
3 Under New York state law, and in light of Kolbe v. Tibbetts, 22 N.Y.3d 344
4 (2013), M & G Polymers USA, LLC v. Tackett, 574 U.S. 427 (2015), and CNH Indus.
5 N.V. v. Reese, 138 S. Ct. 761 (2018), do §§ 9.13 (setting forth contribution rates of
6 90% and 75%), 9.23(a) (concerning contribution rates for surviving dependents of
7 deceased retirees), 9.24(a) (specifying that retirees may retain NYSHIP coverage
8 in retirement), 9.24(b) (permitting retirees to use sick-leave credit to defray
9 premium costs), and 9.25 (allowing for the indefinite delay or suspension of
10 coverage or sick-leave credits) of the 2007-2011 collective bargaining agreement
11 between the Civil Service Employees Association, Inc. and the Executive Branch
12 of the State of New York (“the CBA”), singly or in combination, (1) create a
13 vested right in retired employees to have the State’s rates of contribution to
14 health-insurance premiums remain unchanged during their lifetimes,
15 notwithstanding the duration of the CBA, or (2) if they do not, create sufficient
16 ambiguity on that issue to permit the consideration of extrinsic evidence as to
17 whether they create such a vested right?
1 dispositive, and the resolution of the certified questions may render them moot.
76
1
2 Question 2
3 If the CBA, on its face, or as interpreted at trial upon consideration of
4 extrinsic evidence, creates a vested right in retired employees to have the State’s
5 rates of contribution to health-insurance premiums remain unchanged during
6 their lives, notwithstanding the duration of the CBA, does New York’s statutory
7 and regulatory reduction of its contribution rates for retirees’ premiums negate
8 such a vested right so as to preclude a remedy under state law for breach of
9 contract?
10 “As is our practice, we do not intend to limit the scope of the Court of
11 Appeals’ analysis through the formulation of our question[s], and we invite the
12 Court of Appeals to expand upon or alter th[ese] question[s] as it should deem
13 appropriate.” 10 Ellicott Square Court Corp. v. Mountain Valley Indem. Co., 634 F.3d
14 112, 126 (2d Cir. 2011).
15 It is hereby ORDERED that the Clerk of this Court transmit to the Clerk of
16 the New York Court of Appeals this opinion as our certificate, together with a
17 complete set of briefs, appendices, and the record filed in this case by the parties.
18 This panel retains jurisdiction for purposes of resolving this appeal after the
19 disposition of the certification by the New York Court of Appeals.
77
1 CERTIFICATE
2 The foregoing is hereby certified to the New York Court of Appeals
3 pursuant to 22 N.Y.C.R.R. § 500.27(a) and 2d Cir. R. 27.2(a), as ordered by the
4 United States Court of Appeals for the Second Circuit.
78