Boyd v. Rockwood Area Sch

Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
7-22-2004
Boyd v. Rockwood Area Sch
Precedential or Non-Precedential: Non-Precedential
Docket No. 03-4124
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 03-4124
CLAUDIA L. BOYD; EDGAR W. GNAGEY;
CORDELLA B. GREEN; WILLIAM S. HAJEL;
DONNA L. JOHNSON; SANDRA KUSCH;
LARRY LAVIGNE; JOYCE D. STERN;
WILLIAM H. WELSH,
Appellants
v.
ROCKWOOD AREA SCHOOL DISTRICT;
ANDREAS DEMIDONT; CLAIR E. LEWIS
On Appeal from the United States District Court
for the Western District of Pennsylvania
(No. 02-cv-00233)
District Judge: Hon. Joy F. Conti
Argued May 11, 2004
BEFORE: NYGAARD, M cKEE and WEIS, Circuit Judges.
(Filed July 22, 2004)
Kathryn L. Simpson, Esq. (Argued)
P. Daniel Altland, Esq.
Ronald L. Finck, Esq.
Ambrose W. Heinz, Esq.
Mette, Evans & Woodside
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110
Counsel for Appellant
Daniel W. Rullo, Esq. (Argued)
Barbera, Clapper, Beener, Rullo & Melvin
146 West Main Street
P.O. Box 775
Somerset, PA 15501
Counsel for Appellees Rockwood Area School District and Andreas Demidont
William K. Eckel, Esq. (Argued)
Central Park Law Building
Suite 210
132 Gazebo Park
Johnstown, PA 15901
Counsel for Appellee Clair E. Lewis
OPINION
McKEE, Circuit Judge.
Retired employees of the Rockwood Area School District sued the Rockwood
School District, the District Superintendent and the President of the district teachers’
union after the school district changed plaintiffs’ health care coverage pursuant to a new
collective bargaining agreement it had negotiated with the union. The plaintiffs sought
recovery under 42 U.S.C. § 1983 arguing that the change violated their Fifth Amendment
right to procedural due process. They also asserted several causes of action under state
2
law. The district court dismissed the § 1983 claim pursuant to Fed. R. Civ. P. 12(b)(6)
and declined to exercise supplemental jurisdiction over the state law claims pursuant to
28 U.S.C. § 1367(c)(3). We will affirm. I. BACKGROUND
When reviewing a district court’s Rule 12(b)(6) dismissal, we must “accept all
factual allegations in the complaint and all reasonable inferences to be drawn therefrom in
the light most favorable to the plaintiffs.” Lorenz v. CSX Corp., 1 F.3d 1406, 1411 (3d
Cir. 1993). We will therefore set forth the facts and relevant inferences as derived from
plaintiffs’ complaint.
When plaintiffs retired they were covered by a collective bargaining agreement
between the Rockwood Area School District (“RASD”) and the Rockwood Educators’
Association (“REA”), the district teachers’ union.1 Article V, paragraph F of this
agreement stated:
In the event an employee after 30 years of service in teaching
permanently retires from teaching after date of this contract
and prior to such retiring employee’s attaining the age of
eligibility for M edicare, the Employer agrees to continue to
pay the premiums for such employees’ Blue Cross, Blue
Shield and major medical or equivalent insurance coverage
benefits under paragraph “A” of this Article V above until
such employee attains the age of eligibility for Medicare.
Complaint ¶ 19.
1
Seven of the plaintiffs were teachers and members of the REA. The remaining two
plaintiffs were employed as an administrator and a secretary and allege that they were
entitled to the same benefits as the teachers pursuant to their contracts with the school
district.
3
Article V, paragraph A provided that RASD would “provide and pay the premium
in full for Plan ‘U’ Blue Cross, Blue Shield and Major Medical . . . or [] equivalent
insurance coverage with some other responsible insurance carrier, for each individual
employee and the dependent members of his family.” Complaint ¶ 18. Defendants
Andreas Demidont, the superintendent of RASD, and Clair E. Lewis, the president of the
REA, were able to encourage plaintiffs to take early retirement largely because of
RASD’s obligation to maintain plaintiffs’ level of health care insurance coverage.
Plaintiffs’ desire to maintain their then current level of coverage was pivotal in their
decision to take early retirement.
However, a collective bargaining agreement that the REA negotiated with RASD
following plaintiffs’ retirement changed the employees’ health insurance from Plan U
Blue Cross to Select Blue Plan Option 1. That change also applied to the plaintiff
retirees’ coverage, and plaintiffs protested arguing that changing their health insurance to
Select Blue Option 1 violated the agreement to maintain the level of benefits they enjoyed
under Plan U Blue Cross.
RASD held a hearing in response to plaintiffs’ complaints about the change in
coverage but concluded that the shift did not violate any agreement with the plaintiffs.
Thereafter, plaintiffs filed the instant 1983 action arguing that the change in health care
benefits in violation of their understanding at retirement improperly deprived them of a
protected property interest, and that RASD’s post-deprivation hearing did not cure the
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constitutional deprivation.. 2
The defendants moved to dismiss the 1983 claim pursuant to Fed. R. Civ. P.
12(b)(6), and they moved to dismiss the state law claims under Fed. R. Civ. P. 12(b)(1)
for lack of subject matter jurisdiction.3 The district court concluded that plaintiffs failed
to state a cause of action under § 1983. Accordingly, the court dismissed that claim
pursuant to Rule 12(b)(6), and declined to exercise supplemental jurisdiction over the
remaining state law claims. This appeal followed.
II. DISCUSSION
We review the district court’s dismissal under Rule 12(b)(6) to determine if any
relief could be granted under the facts plaintiffs alleged. Lorenz v. CSX Corp., 1 F.3d
1406, 1411 (3d Cir. 1993). In order to prevail on their Fifth Amendment procedural due
process claim, plaintiffs have to allege that they were deprived of a constitutionally
protected interest without due process of law. Zinermon v. Burch, 494 U.S. 113, 125
(1990); Reich v. Beharry, 883 F.2d 239, 242 (3d Cir. 1989).
The plaintiffs argue that they were involuntarily deprived of their protected
2
As noted above, plaintiffs also asserted pendent state law claims for breach of
contract and equitable estoppel against RASD, and claims of intentional interference with
contract, fraudulent misrepresentation and civil conspiracy against defendants Lewis and
Demidont.
3
Defendants Demidont and RASD also argued that the claims against them should be
dismissed under Fed. R. Civ. P. 12(b)(7) for failure to join an indispensable party, the
REA. The district court did not reach this argument because it based its decision to
dismiss the claims before it on other grounds, and we need not address this argument
because we affirm its dismissal on those grounds.
5
property right to continue employment with RASD because RASD made material
misrepresentations regarding future health care coverage and plaintiffs relied upon those
representations in deciding to take early retirement. Alternatively, plaintiffs argue that
they were deprived of their property right to continued health care benefits that arose
from the collective bargaining agreement in effect when they took early retirement and
their employer’s commitment to continue those benefits.
The district court held that plaintiffs did not allege a property interest protected by
the Due Process Clause, and that any interest plaintiffs may have had was adequately
protected by the hearing the district held after the change in coverage.
A. The Claimed Property Interest.
Constitutionally protected property interests arise only from independent sources
such as state law. However, “federal constitutional law determines whether [an interest
under state law] rises to the level of a legitimate claim of entitlement protected by the Due
Process Clause.” Memphis Light Gas & Water Div. v. Craft, 436 U.S. 1, 9 (1978)
(internal quotation marks and citation omitted). The plaintiffs’ purported property
interest arises from two different sources: (1) their interest in continued employment, and
(2) their agreement with RASD to retire early in return for a continuing level of health
care coverage.
The Supreme Court has held that state law can create a property interest in tenured
school teachers, administrators, or nonprofessional school employees. 24 P.S. §§ 5-514 et
6
seq., 11-1101 et seq.; cf. Bd. of Regents v. Roth, 408 U.S. 564, 566 (1972) (noting that
Wisconsin law created a protected property interest in tenured teaching positions).
Plaintiffs argue that their interest in continued employment with RASD rises to the level
of a protected property interest because their agreement to take early retirement was
contingent on their health benefits remaining the same or increasing. They maintain that
the subsequent collective bargaining agreement changed their coverage in violation of
that agreement and that the resulting deprivation is sufficiently severe to rise to the level
of a protected property interest.
We have previously stated that retirement decisions are presumed to be voluntary.
Leheny v. City of Pittsburgh, 183 F.3d 220, 227 (3d Cir. 1999). Accordingly, we assume
that the plaintiffs’ decision to take early retirement was voluntary. However, that
presumption can be overcome by evidence of coercion or misrepresentation of facts
material to the retirees’ decision.. Id. at 228. The plaintiffs argue that their retirement was
involuntarily because RASD misrepresented a material fact to them.
We apply an objective test to determine if a retirement decision is voluntary.
Covington v. Dep’t of Health and Human Services, 750 F.2d 937, 942 (Fed. Cir. 1984);
see also, Scharf v. Dep’t of the Air Force, 710 F.2d 1572, 1574-75 (Fed. Cir. 1983).
Under that test, we do not inquire into the subjective perceptions of the employee or the
subjective intentions of the employer. Covington, 750 F.2d at 942. Rather, the plaintiff
need only prove that a reasonable person would have been misled by the agency’s
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statements. Id. (quoting Scharf, 710 F.2d at 1575).
The plaintiffs’ constitutional challenge rests upon provisions in a collective
bargaining agreement, and the only reasonable conclusion here is that plaintiffs should
have known that their health care benefits as retirees were subject to change pursuant to
subsequent collective bargaining agreements between RASD and the REA. The
agreement they rely upon for the source of a protected property interest in continued
inclusion in Plan U specifically stated that different health care insurance could be
substituted as long as it was equivalent to the Plan U Blue Cross Blue Shield coverage.
Thus, they were clearly aware of the possibility of different, though equivalent, health
care coverage in the future. Given that knowledge, their decision to take early retirement
is hardly rendered involuntary because a subsequent collective bargaining agreement
afforded different coverage.4
Not every contract results in a protected property interest. Reich v. Beharry, 883
F.2d 239, 242 (3d Cir. 1989). Rather, a contract creates a protected property interest
4
The plaintiffs cite to both Leheny and Hargray v. City of Hallandale, 57 F.3d 1560
(11th Cir. 1995), to establish that reasonable reliance on a misrepresentation could
amount to an involuntary deprivation of their property interest in continued employment.
However, neither case furthers our inquiry. In Leheny, we affirmed the district court’s
finding that plaintiffs were not forced to retire as a matter of law because the plaintiffs
had decided to retire four months before the alleged misrepresentation occurred. 183 F.3d
at 228. In Hargray, the plaintiff alleged that his decision to retire was rendered
involuntary by his employer’s fraudulent threat to bring charges against him. However,
the court held that the employing municipality had probable cause to bring criminal
charges against him. Thus, there was no fraud and the city’s actions did not make the
plaintiff’s decision to retire involuntary. 57 F.3d at 1569-71.
8
subject to the limitations of the Due Process Clause only if it confers a status of
permanence or extreme dependence, or if it provides that the contract can only be
terminated for cause. Unger v. Nat’l Residents Matching Program, 928 F.2d 1392, 1399
(3d Cir. 1991). The collective bargaining agreement here does neither. The situation
here is not analogous to the circumstances in Goldberg v. Kelly, 397 U.S. 254, 261-62
(1970). The welfare benefits conferred there resulted in the recipient’s “extreme
dependence” for day-to-day survival. In fact, as defendants note, “[t]here is no claim . . .
that any [plaintiffs] have paid money out of pocket for medical care or been denied
insurance coverage for medical treatment as a result of not having Plan ‘U’ health
insurance.” Appellees’ Br. at 23. Moreover, as appellees also note without contradiction,
“[p]laintiffs can still obtain Plan ‘U’ health insurance through the School District health
benefit plan by paying the cost differential for such insurance.” Id. Although we do not
minimize the actual and psychological importance of health care benefits and related
costs to retirees, we can not help but note that plaintiffs here are not alleging that their
day-to-day survival has been threatened by the “reduction” in coverage under the new
collective bargaining agreement. See S&D M aintenance Co., Inc. v. Goldin, 844 f.2d 962,
966 (2d Cir. 1988 (the claimed property interest must be “characterized by a quality of
either extreme dependence” or “permanence . . . or sometimes both [to rise to the level of
a constitutionally protected interest.”). 5
5
The plaintiffs also argue that “Congress recognized the importance of sound
retirement plans with it enacted the Employee Retirement Income Security Act [29 U.S.C.
9
B. The process due given the property interest involved
Plaintiffs’ challenge to the adequacy of the post-deprivation hearing RASD held is
contingent on the significance of the property right involved. We have already explained
that plaintiffs have not alleged a constitutionally protected property interest. Accordingly,
the district court correctly held that plaintiffs were not entitled to procedural due process
under the Fifth Amendment before their health plan was changed.6 There may be an issue
of whether the substituted benefits were “equivalent” to the benefits plaintiffs received
under Plan U. However, absent more indicia of extreme dependence of permanence than
exists here, the post deprivation hearing plaintiffs were afforded was more than adequate
to protect plaintiffs’ interests. See Mathews v. Elridge, 424 U.S. 319 335 (1976). As the
district court correctly recognized, the question of whether the subsequent plan was
“equivalent” to Plan U is a contract dispute that turns on issues of state contract law that
do not implicate the Constitution.
The plaintiffs can pursue their state law claims, but not in federal court. Since the
§§ 1001 et seq.]” Br. at 21. The passage of ERISA certainly indicates that Congress
thought that employees’ receipt of retirement benefits was important enough to be
federally regulated, but it does not necessarily follow that Congress intended to indicate
that retirement benefits rose to the level of being a constitutionally protected property
interest.
6
In his individual brief on appeal, Lewis argues that he did not have the authority as
either a RASD teacher or the president of the REA to provide the plaintiffs with a pre-
deprivation hearing and can not be held liable for any due process violations that may
have occurred as a result. We need not address this argument because we find that the
plaintiffs did not have a due process right to a pre-deprivation hearing.
10
district court correctly dismissed the section 1983 claim, it was within its authority to
remand the state law claims. 28 U.S.C. § 1367(c)(3).
III. Conclusion.
For all of the above reasons, we will affirm the district court’s order dismissing all
claims against the defendants.
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