“[W]e note that the issue of whether a contract right exists is governed by state law, while federal law governs a determination that a contract has been impaired ....”
How later courts described this case
- “[W]e note that the issue of whether a contract right exists is governed by state law, while federal law governs a determination that a contract has been impaired ....”
- construing North Carolina law
- no contract rights prior to retirement
Written by the judges who cited it.
The opinion
K.K. HALL, Circuit Judge,
dissenting:
On August 16, 1979, Kestler celebrated his fifth anniversary on the police force, and the *805 retirement plan did not include an earnings cap. The cap was added in 1980, and he retired on disability in 1986. The majority and I agree that events subsequent to “vesting” could not decrease Kestler’s level of benefits; the only issue before us is whether, under North Carolina law, Kestler’s benefits “vested” in 1979 or 1986. The majority relies solely on Griffin, whose facts parallel those in Kestler’s case, in holding that the vesting occurred on retirement. Griffin, however, is in direct conflict with Simpson, and it is the latter case that dictates a ruling in Kestler’s favor in this appeal. I respectfully dissent.
There simply is no way to reconcile the holdings in Griffin 1 and Simpson. 2 Although noting that “[wjhile the principles involved in Griffin and Simpson are similar, they are not the same ...ante at 804, the majority fails to identify any differences beyond those in the factual settings. The principles involved are precisely the same, and the holdings are diametrically opposite. Griffin holds that a retiree receives the level of pension benefits calculated in accordance with the statute in existence at the time he actually begins to receive the benefits, ie. at retirement, while Simpson holds that it is the computation method in effect when the employee has met the service requirements for future benefits, ie. before retirement, that determines what level of benefits he will receive. Each panel designated the pivotal moment as the point of “vesting.” The resolution of the appeal before us depends on the answer to a single question: Which case do we follow?
The opinions in Griffin and Simpson were written by different three-member panels 3 of North Carolina’s intermediate appellate court. The majority cites Cole for the proposition that North Carolina requires a “clear and impelling inference” that an earlier case directly involving the same principle is being implicitly overruled. 4 While the opinion in Simpson may not have provided a sufficiently clear inference, its core ruling, and not Griffin’s, was upheld when the same principle arose again in the same court five years later.
In Faulkenbury v. Teachers’ and State Employees’ Retirement System of N.C., 108 N.C.App. 357 , 424 S.E.2d 420, 426 (1993), the Court of Appeals cited Simpson for the proposition that “a statute that diminishes the calculated benefit of an employee impairs that employee’s contractual rights.” As was the case in Simpson and Griffin, and is the case in this appeal, the statutory diminution of benefits occurred after the Faulkenbury plaintiffs had met the service requirements for “vesting” but before they had actually retired. The court held that the “plaintiffs had stated a valid claim for impairment of obligation of contract” under the first two prongs of the test set forth in United States Trust Co. of N.Y. v. State of New Jersey, 431 U.S. 1, 17-26 , 97 S.Ct. 1505, 1515-20 , 52 L.Ed.2d 92 (1977). 5 424 S.E.2d at 427 . Faulkenbury , as the latest and clearest version of the Court of Appeals’ view on the issue of vesting in the state employees retirement plan, states the rule in North Carolina with regard to the impairment issue in Kest-ler’s case. Griffin, which reigned as precedent for eight months and was never heard of again except for a mention (while its holding was ignored) in the later Simpson opinion, is too slender a reed to support the majority’s ruling. Faulkenbury is the law. *806 I would, therefore, affirm the judgment of the district court.
. Griffin v. Law Enf. Officers Ben. & Ret. Fund, 84 N.C.App. 443 , 352 S.E.2d 882 , appeal dismissed and disc. rev. denied, 319 N.C. 672 , 356 S.E.2d 776 (1987).
. Simpson v. Government Emp. Ret. Sys., 88 N.C.App. 218 , 363 S.E.2d 90 (1987), aff'd mem., 323 N.C. 362 , 372 S.E.2d 559 (1988).
. Judge Cozort sat on both panels but did not write either opinion.
. Cole was decided well before there was an intermediate appellate court in North Carolina. The Court of Appeals was created in 1967. 1967 Sess. Laws c. 108, s. 1 (codified at N.C. Gen.Stat. § 7A-16 (1969)).
.Under the U.S. Trust test, the court must ask the following questions: (1) Did the statute create a contractual obligation?; (2) Did the state legislature impair that obligation?; (3) Was the impairment “necessary and reasonable”? In Faulkenbury , the Court of Appeals held that the statutory change in benefits computation satisfied the first two prongs. The court did not, however, reach the “necessary and reasonable” issue.