Appendix — Pineman v. Fallon
Supreme Court brief1988
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No. ae
In The ba
Supreme Court Of Che United States
OCTOBER TERM, 1988
KAREN PINEMAN, ALPHONSE MAROTTA,
DANIEL CLIFFORD, JUDITH NARUS, |
ROSE SCHEWE and ALFRED K. TYLL,
Petitioners,
V.
WILLIAM J. FALLON, Chairman of the
State Employees Retirement Commission,
HENRY E. PARKER, Treasurer of the
State of Connecticut, and
J. EDWARD CALDWELL, Comptroller of the
State of Connecticut,
Respondents.
APPENDIX TO
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
PAUL W. ORTH
SHIPMAN & GOODWIN
799 Main Street
Hartford, CT 06103
(203) 549-4770
Printed by
Brescia’s Printing Services, Inc.
66 Connecticut Boulevard
East Hartford, CT 06108
528-4254
APPENDIX TABLE OF CONTENTS
STATUTES IN ISSUE: Page
ye ee A 4. SS. eS Al
Conn. Gen. Stat. §5-156(a)
(1971 Enactment and 1975
SD Pa ee eee ee ee ee Al4
Conn. Gen. Stat. §5-162(c)(1)
(1958 Revision and 1975
a Al9
Conn. Gen. Stat. §5-162(d)(1)
(1958 Revision and 1975
Ee aie acy ee We eae ee Oe A21
Conn. Gen. Stat. §5-162(d)(3)
(1958 Revision and 1975
I eae a a Gob wie eee « A23
Conn. Gen. Stat. §5-163(c)
(1958 Revision and 1975
Sa EO GED ae ar ee a A26
Conn. Gen. Stat. §5-166(a)
(1958 Revision, 1971 Amendment
ana i975 Amendment) ....ccccccce A28
PRIOR DECISIONS:
Pineman I-
Pineman v. Oechslin, 494 F.Supp.
Bee. Sw COMR. LOGO} cc ccc wcccwene A30
Pineman II-
Pineman v. Oechslin, 637 F.2d
Oe ee eS sD eee A175
Pineman III
Pineman v. Oechslin, 195 Conn.
405, 486 A.2d 603 (1965)... A198
APPENDIX TABLE OF CONTENTS
(Continued )
Pineman V-
Pineman v. Fallon, 662 F.Supp.
1311 (D.Conn. 1987)..----+++-+--
Pineman VI-
Pineman v. Fallon,
F.2d (24 Cir. 1968) ..««+-
Judgment - Pineman v. Fallon,
(2a Cir. March 10, 1988)....-.--
Substitute House Bill No. 5176
PUBLIC ACT No. 75-531
AN ACT CONCERNING ELIGIBILITY FOR STATE
RETIREMENT.
Section 1. Subsection (c) of
section 5-162 of the general statutes
is repealed and the following is
substituted in lieu thereof:
(c) Schedule 1--Twenty-five or
more years of state service.
(1) EXCEPT AS PROVIDED IN SECTION
5 OF THIS ACT, [Each] EACH member who
has completed twenty-five or more years
of state service shall be retired, on
his own application or on the
application of the executive head of
the agency employing him, on the first
day of the month named in the
application, and on or after the
member's fifty-fifth birthday [, if a
ae
man, or fiftieth birthday, if a woman. ]
(2) Each member who has completed
twenty-five or more years of state
service and has reached his seventieth
birthday and who is in an appointive
position shall continue in service and
shall be retired on the first day of
the month on or after his seventieth
birthday, upon notice from the
retirement commission to the member, to
the executive head of his agency and
the comptroller.
(3) Each member referred to in
subdivisions (1) and (2) of this
subsection shall receive a monthly
retirement income beginning on his
retirement date equal to one-twelfth of
(A) plus (B)}: (A) Twenty-five per cent
of his social security earnings, plus
fifty percent of his excess earnings;
(B) the number of years, if any, taken
to completed months, of his state
- A2 -
service in eucesa of twenty-five years
multiplied by one percent of his social
security earnings, plus the number of
such years multiplied by two per cent
of his excess earnings.
Sec. 2. Subsection (d) of section
5-162 of the general statutes is
repealed and the following is
substituted in lieu thereof:
(d) Schedule 2--Less than
twenty-five years of state service.
(1) EXCEPT AS PROVIDED IN SECTION
5 OF THIS ACT, [Each] EACH member who
has completed less than twenty-five
years of state service shall be retired
on his own application, the first day
of the month following his application,
if [he then meets any one of the
following conditions: (A) The member is
a woman who has completed five years of
state service and reached her
sixty-fifth birthday; (B) the member is
as
a woman who has completed ten years of
state service and reached her
fifty-fifth birthday; (C)] the member
[is a man who] has completed ten years
of state service and reached his
sixtieth birthday.
(2) Each such member in an
appointive position who has reached his
seventieth birthday shall continue in
service and shall be retired on the
first day of the month on or after his
seventieth birthday, upon notice from
the retirement commission to the
member, the executive head of his
agency and the comptroller.
(3) Each member referred to in
subdivisions (1) and (2) of this
subsection shall receive a monthly
retirement income beginning on his
retirement date equal to one-twelfth of
(A) plus (B): (A) The number of years
of his state service, taken to
» At =
completed months, multiplied by the
applicable percentage of his social
security earnings determined from the
table below for the appropriate age and
years of state service; (B) the number
of such years multiplied by the
applicable percentage of his excess
earnings determined from the table
below for such age and years of service.
Percentage
[Age of Member Years of _ of Social
on His Retire- State Ser- Security Excess
ment Date vice Earnings Earnings
Man Woman
70 and 65 and 5
over over and over* 1.25% 2.50%
65 to 70 60 to 65 10 1.00 2.00
64 59 10 94 1.88
63 58 10 .88 1.76
62 57 10 82 1.64
61 56 10 .76 1.52
60 55 10 .70 1.40
59 54 10 65 1.30
58 53 10 .60 1.20
57 52 10 56 1.12
56 51 10 53 1.06
55 50 10 50 1.00
“Not more than 20 years may be counted
for this age and percentage group. }
PERCENTAGE
AGE OF MEMBER yEars OF OF SOCIAL
ON HIS RETIRE- sTATE SECURITY EXCESS
MENT DATE SERVICE EARNINGS EARNINGS
70 AND OVER 4 AND OVER* 1.25% 2.50%
65 - 20 10 1.00
64 10 24 1.88
63 10 88 1.76
62 10 82 1.64
61 10 26 L52
60 10 20 1.40
39 10 ‘65 30
58 10 60 1.20
37 10 56 Ll
26 10 53 1.06
a2 10 50 1.00
*NOT MORE THAN 20 YEARS MAY BE COUNTED FOR
THIS AGE AND PERCENTAGE GROUP.
For each full year of service
beyond ten, the percentage of social
security earnings shall be increased by
one-fifteenth of the difference between
one and the percentage shown in the
above table opposite the age of the
retiring employee, and the percentage
of excess earnings shall be increased
by one-fifteenth of the difference
between two and the percentage shown in
the above table opposite the age of the
retiring employee.
» AS =
Sec. 3. Subsection (c) of section
5-163 of the general statutes is
repealed and the following is
substituted in lieu thereof:
(c) EXCEPT AS PROVIDED IN SECTION
5 OF THIS ACT, [A] A member whose state
service is terminated because of
economy lack of work or abolition of
his position, or who, being an army or
air national guard technician in the
military department, is dismissed by
reason of separation from the national
guard because of age, after he has
completed twenty-five years of state
service but before he has reached his
fifty-fifth birthday, [if aman, or her
fiftieth birthday, if a woman,] shall
be entitled to a retirement income.
The amount of each monthly payment
shall be determined from subsection (c)
of section 5-162, if the member elects
the first day of the month on or after
» BF a
_————
such birthday as his retirement date;
and shall be the actuarial equivalent
of such amount, as determined by the
retirement commission, if the member
elects the first day of the month on or
after his termination date as his
retirement date.
Sec. 4. Subsection (a) of Section
5-166 of the general statutes is
repealed and the following is
substituted in lieu thereof:
(a) EXCEPT AS PROVIDED IN SECTION
5 OF THIS ACT, [A] A member who leaves
state service before he is eligible for
retirement but after completing at
least ten years of state service, of
which at least five years shall have
immediately preceded the date of his
leaving state service, shall continue
to be a member, and shall be eligible
for a retirement income as provided in
section 5-162, but on a reduced
“a ee
actuarial basis, as determined by the
retirement commission [provided, if
such member is a woman she shall be
eligible upon reaching her fiftieth
birthday and if a man, he shall be
eligible] upon reaching his fifty-fifth
birthday. Such vested retirement
income shall not be subject to
divestiture by subsequent employment
unless the member withdraws his
retirement contribution.
Sec. 5 (NEW) (a) Any member who has
completed twenty-five years of state
service and has reached the age of
fifty prior to June 30, 1980, may elect
to be retired on the first day of the
month following such application and
receive retirement benefits in
accordance with the provisions of
subdivision (3) of subsection (c) of
section 5-162 of the general statutes,
- Ad--
provided such member so elects prior to
June 30, 1980.
(b) Any member who has completed
at least ten but less than twenty-five
years of state service and reached the
age of fifty-five prior to June 30,
1980, may elect to be retired on the
first day of the month following his
application and receive retirement
benefits in accordance with subsection
(d) of this section, provided such
member so elects prior to June 30, 1980.
(c) Any member who has completed
at least five but less than ten years
of state service and has reached the
age of sixty-five prior to June 30,
1980, may elect to be retired on the
first day of the month following such
application and receive retirement
benefits in accordance with the
provisions of subsection (d) of this
- AlO -
section, provided such member so elects
prior to June 30, 1980.
(d) Each member referred to in
subsections (b) and (c) of this section
shall receive a monthly retirement
income beginning on his retirement date
equal to one twelfth of (A) plus (B):
(A) The number of years of state
service taken to completed months,
multiplied by the applicable percentage
of his social security earnings
determined from the table below for the
appropriate age and years of state
service; (B) the number of years
multiplied by the applicable percentage
of his excess earnings determined from
the table below for such age and years
of service.
- All -
Percentage
Age of Member __ Years of Of Social
on his Retire- State Security Excess
ment Date Service Earnings Earnings
65 and over 5 and over* 1.25% 2.50%
60 to 65 10 1.00 2.00
59 10 .94 1.88
58 10 .88 1.76
57 10 .82 1.64
56 10 .76 1.52
55 10 .70 1.40
54 10 .65 1.30
53 10 .60 1.20
52 10 .56 1.12
51 10 53 1.06
50 10 .50 1.00
*Not more than 20 years may be counted
for this age and percentage group.
For each full year of service beyond
ten, the percentage of social security
earnings shall be increased by
one-fifteenth of the difference between
one and the percentage shown in the
above table opposite the age of the
retiring employee, and the percentage
of excess earnings shall be increased
by one-fifteenth of the difference
between two and the percentage shown in
the above table opposite the age of the
retiring employee.
- Al2 -
Sec. 6. This act shall take
effect from its passage.
Approved June 30, 1975
8471H
- Al3 -
Conn.Gen.Stat. §5-156a
1971 Public Act 666§4
Funding of retirement system on
actuarial reserve basis
(a) The state employees’
retirement system shall be funded on an
actuarial reserve basis. The
retirement commission shall, on or
before December first, annually certify
to the general assembly the amount
necessary on the basis of an actuarial
determination to gradually establish
and subsequently maintain the
retirement fund on such determined
actuarial reserve basis, and make such
other recommendations with regard to
such fund and its administration as the
commission deems appropriate. The
retirement commission shall, at least
once every three years, prepare a
valuation of the assets and liabilities
- Al4 -
0 tte
of the system. On the basis of each
such valuation, it shall redetermine
the normal rate of contribution and,
until it is amortized, the unfunded
past service liability. The general
assembly shall review the commission's
recommendations and certification and
shall appropriate to the retirement
fund the amount certified by the
retirement commission as necessary
provided said certification is in
compliance with this section.
(b) The retirement commission
shall determine on an actuarial basis
(1) a normal rate of contribution which
the state shall be required to make
into the retirement fund in order to
meet the actuarial cost of current
service and (2) the unfunded past
service liability. For the first
fifteen years, the funding program for
- Al5S -
the actuarial reserve basis shall
consist of the following percentages of
the sum of normal cost and the amount
required for a forty-year amortization
of unfunded liabilities:
Percentage to be
paid of normal cost
plus full 40-year
amortization
Fiscal year from the beginning
Beginning of such fiscal year
7-1-71 30
7-1-72 35
7-1-73 40
7-1-74 45
7-1-75 45
7-1-76 50
7-1-77 55
7-1-78 60
7-1-79 65
7-1-80 70
7-1-81 75
7-1-82 80
7-1-83 85
7-1-84 90
7-1-85 95
- Al6 -
Bain.
provided said state payments shall not
be less than seventy-five per cent of
total retirement income payments for
each fiscal year commencing July l,
1973; and for each of the fiscal years
ending June 30, 1972, and June 30,
1973, respectively, shall be seventy
per cent of the total retirement income
payments.
(c) Transfer of appropriated
amounts from the general fund to the
retirement fund shall be made in equal
monthly payments during the fiscal year.
(d) No act liberalizing the
benefits of the plan shall be enacted
by the general assembly until the
assembly has requested and received
from the retirement commission a
certification of the cost of such
change under the actuarial funding
basis adopted by this act using full
normal cost plus forty year
amortization.
- Al7 -
1975 Amendment
1975, P.A. 75-581, §4, amending
subsec. (b), substituted “sixteen” for
“fifteen years in the second sentence,
increased the percentage for each
fiscal year beginning 7-1-75 by 5%, and
provided for fiscal year beginning
7-1-86.
- Alg -
Conn.Gen.Stat. §5-162(c)(1)
1958 Revision
Retirement date and retirement income
(c) Schedule 1-Twenty-five or more
years of state service.
(1) Each member who has completed
twenty-five or more years of state
service shall be retired, on his own
application or on the application of
the executive head of the agency
employing him, on the first day of the
month named in the application, and on
Or after the member's fifty-fifth
birthday, if€ aman, or fiftieth
birthday, if a woman.
- Ald -
1975 Amendment
1975, P.A. 75-531, §1, amended
subsec. (c)(1l) by inserting “Except as
provided in section 5 of this act “, at
the beginning and by deleting”, if a
man, or fiftieth birthday, if a woman”
from the end.
- A20 -
Conn.Gen.Stat. §5-162(d)(1)
1958 Revision
Retirement date and retirement income
(d) Schedule 2-Less than
twenty-five years of state service.
(1) Each member who has completed
less than twenty-five years of state
service shall be retired on his own
application, on the first day of the
month following his application, if he
then meets any one of the following
conditions: (A) The member is a woman
who has completed five years of state
service and reached her sixty-fifth
birthday; (B) the member is a woman who
has completed ten years of state
service and reached her fifty-fifth
birthday; (C) the member is a man who
has completed ten years of state
service and reached his sixtieth
birthday.
- A2l -
1975 Amendment
1975, P.A. 75-531, §2, amended
subsec. (d)(1l) by inserting “Except as
provided in section 5 of this act,", by
deleting “he then meets any one of the
following conditions: (A) The member
is a woman who has completed five years
of state service and reached her
sixty-fifth birthday; (B) the member is
a woman who has completed ten years of
state service and reached her
fifty-fifth birthday; (c)" following
“following his application, if", and by
deleting “is a man who" following “the
member";
- A22 -
Conn.Gen.Stat. §5-162(d) (3)
1958 Revision
Retirement date and retirement income
(d) Schedule 2-Less than 25 years
of state service.
(3) Each member referred to in
subdivisions (l) and (2) of this
subsection shall receive a monthly
retirement income beginning on his
retirement date equal to one-twelfth of
(A) plus (B): (A) The number of years
of his state service, taken to
completed months, multiplied by the
applicable percentage of his social
security earnings determined from the
table below for the appropriate age and
years of state service; (B) the number
of such years multiplied by the
applicable percentage of his excess
earnings determined from the table
below for such age and years of service.
- A23 -
Percentage
of Social
Age of Member on Years of Security Excess
His Retirement Date State Service Earnings Earnings
ney Man . Woman
70 andover 65andover 5 and over* 1.25% 2.50%
65 to 70 60 to 65 10 1.00 2.00
64 59 10 94 1.88
63 58 : 10 .88 1.76
62 57 10 82 1.64
61 56 10 -76 1.52
60 55 10 .70 1.40
59 54 10 65 1.30
58 53 10 .60 1.20
57 52 10 56 1.12
56 51 10 53 1.06
55 50 10 .50 1.00
* Not more than 20 years may be counted for
this age and percentage group
For each full year of service beyond
ten, the percentage of social security
earnings shall be increased by
one-fifteenth of the difference between
one and the percentage shown in the
above table opposite the age of the
retiring employee, and the percentage
of excess earnings shall be increased
by one-fifteenth of the difference
between two and the percentage shown in
the above table opposite the age of the
retiring employee.
- A24 -
ical
1975 Amendment
1975, P.A. 75-531, §2, amended
subsec. (d)(3), by substituting the
table for former table which had
included separate columns for men and
women for age at retirement.
Age of Member on Years of State Percentage of Social Excess
His Retirement Date Service ** Security Earnings Earnings
70 and over 5 and over * 1.25% 2.50%
65 to 70 10 1.00 2.00
64 10 94 1.88
63 10 88 1.76
62 10 82 1.64
61 10 .76 1.52
60 10 .70 1.40
59 10 .65 1.30
58 10 .60 1.20
57 10 56 1.12
56 10 53 1.06
55 10 .50 1.00
“Not more than 20 years may be counted for this age
and percentage group.
** Between the ages of fifty-five and sixty, the minimum
service requirement is ten years of actual state service.
Conn.Gen.Stat. §5-163(c)
1958 Revision
Early retirement
(c) A member whose state service
is terminated because of economy, lack
of work or abolition of his position,
or who, being an army or air national
guard technician in the military
department, is dismissed by reason of
separation from the national guard
because of age, after he has completed
twenty-five years of state service but
before he has reached his fifty-fifth
birthday, if aman, or her fiftieth
birthday, if a woman, shall be entitled
to a retirement income. The amount of
each monthly payment shall be
determined from subsection (c) of
section 5-162, if the member elects the
first day of the month on or after such
- A26 -
ill
birthday as his retirement date; and
shall be the actuarial equivalent of
such amount, as determined by the
retirement commission, if the member
elects the first day of the month on or
after his termination date as his
retirement date.
1975 Amendment
1975, P.A. 75-531, §3, amended the
first sentence of subsec. (c) by
inserting “Except as provided in
section 5 of this act," at the
beginning and by deleting "if aman, or
her fiftieth birthday, if a woman,”
following “his fifty-fifth birthday,".
- A27 -
Conn.Gen.Stat. §5-166(a)
1958 Revision
Leaving state service before becoming
eligible for retirement
(a) A member who leaves state
service before he is eligible for
retirement but after completing at
least ten years of state service, of
which at least five years shall have
immediately preceded the date of his
leaving state service, shall continue
to be a member, and shall be eligible
for a retirement income as provided in
section 5-162, but on a reduced
actuarial basis, as determined by the
retirement commission, provided, if
such member is a woman she shall be
eligible upon reaching her fiftieth
birthday and if aman, he shall be
eligible upon reaching his fifty-fifth
birthday.
- A28 -
—T
1971 Amendment
1973, P.A. 73-171 added, to
subsec.(a), the second sentence.
1975 Amendment
1975, P.A. 75-531, §4, amended the
first sentence of subsec. (a) by
inserting "Except as provided in
section 5 of this act," at the
beginning, and by deleting “, provided,
if such member is a woman she shall be
eligible upon reaching her fiftieth
birthday and if aman, he shall be
eligible” following “as determined by
the retirement commission".
9145H
Karen PINEMAN, Alphonse Marotta,
Daniel Clifford, Judith Narus, Rose
Schewe and Alfred K. Tyll
William G. OECHSLIN, Chairman of
the State Employees Retirement
Commission, Henry E. Parker, Treasurer
of the State of Connecticut, and J.
Edward Caldwell, Comptroller of the
State of Connecticut.
Civ. No. H 77-164.
United States District Court,
District of Connecticut.
April 16, 1980.
State employees brought action
challenging legislation which
established for all employees
retirement ages which were identical to
- A30 -
the high retirement ages previously
applicable only to male employees. The
District Court, José A. Cabranes, J.,
held that statutory amendments which
established for all state employees
retirement ages that were identical to
the high retirement ages previously
applicable only to male employees of
the state was in violation of the
contract clause of the United States
Constitution, as that legislation was
applied to state employees who had not
reached normal retirement age prior to
June 30, 1980, and who were such
employees on June 30, 1975, since the
legislation impaired obligations of
contract entered into between state and
its employees requiring state to permit
those male and female employees to
retire on terms of State Employees
Retirement Act, and since the
impairment could not be justified as
- A3l -
either necessary to serve important
public purpose or as being reasonable
in light of the surrounding
circumstances
Plaintiffs‘ motion for summary
judgment granted.
Paul W. Orth, Hoppin, Carey &
Powell, Hartford, Conn., for plaintiffs.
J. Sarah Posner, Asst. Attorney
General, State of Connecticut, Carl R.
Ajello, Attorney General, Hartford,
Conn., for defendants.
- A32 -
MEMORANDUM OF DECISION ON PLAINTIFFS’
MOTION FOR SUMMARY JUDGMENT
JOSE A. CABRANES, District Judge.
Contents
a eee et ee ee 527
Ba ee EE i'd s 6-0 o 0-6 6 6 ee 6 ke ee 529
II. THE FACTUAL BACKGROUND.......... 530
A. The Fitzpatrick
AN ae ee ee 530
B. The Plaintiffs’
Reliance on Pre-1975
GC. FRO 2975 ASlevocccccessess 533
D. The Legislative History
OF CRO 2975 ASE. cccccseces 535
III. THE PLAINTIFFS* CLAIMS.......... 536
IV. THE CONTRACT CALUSE OF THE
UNITED STATES CONSTITUTION...... 537
- A33 -
Ent rOGuUCtiON..ccccscccsecsece
Connecticut’s Contractual
Obligations to the
Plainti€Es. .ccccccccsacscccses
1. Contractual Obliga-
tions in Pensin Plans
Under Connecticut
2. Mere “Gratuities” or
Contractual Rights?....
3. The Content of the
Plaintiffs‘ Contrac-
tual and Connecti-
cut’s Obligations......
Connecticut's Impairment
of Its Contractual
ODLIGSCLONS.ccccccscccsssece
The Unconstitutionality
of Connecticut's Impair-
ment of Its Contractual
- A34 -
541
.
;
V.
GCOLRGSCEORS sc ccs cccssdcacers TrTreuy 547
l. The “Reserved Powers”
DER eis 6 bc ecek cekbsseébece 547
2. Judicial Scrutiny Under
the United States Trust Company
, ear ear aan er 548
et ere a ee 549
(b) Reasonableness......... 552
Cs a eb web aoe 6 080 bree week 553
- A35 -
Introduction
This action is a sequel to this
court's decision in Fitzpatrick v.
Bitzer’. In that case, decided in
1974, Chief Judge Clarie held invalid
the provisions of the Connecticut State
Employees Retirement Act,
Conn.Gen.Stat. Section 5-152 et seq.,
which required male employees of the
State to work five years longer to earn
pension benefits than similarly
Situated female employees. Judge
Clarie ruled that these provisions
discriminated against men on account of
their sex, in violation of Title VII of
the Civil Rights Act of 1964, as
amended ("Title VII").* The decision
in Fitzpatrick was not appealed by the
state,* and Connecticut began to
administer its retirement statute in a
- A36 -
~ acieiiioéiis i
manner consistent with the court's
ruling, permitting both men and women
to retire with full pension benefits at
the lower ages formerly applicable only
to women. *
At the next legislative session,
the General Assembly passed Public Act
75-531 ("the 1975 Act"), which amended
the portions of the State Employees
Retirement Act which this court found
to be discriminatory in Fitzpatrick.
The 1975 Act established for all
employees retirement ages which were
identical to the higher retirement ages
applicable only to male employees prior
to Fitzpatrick.
In this class action, certain male
and female employees of the State of
Connecticut challenge the constitution-
- A37 -
ality of the 1975 Act. The state
concedes that the effect of the 1975
Act was to require the plaintiffs, who
had become state employees and remained
in the state's service in reliance upon
the terms of pre-1975 law (as modified
by Judge Clarie‘s order), to work up to
five years longer than that law had
required in order to qualify for
retirement with full pension benefits.
The plaintiffs claim that the 1975 Act
therefore impaired the state's
pre-existing contractual obligations to
them, in violation of the contract
clause of the United States
Constitution. °®
The defendants, who are the
Connecticut officials ultimately
responsible for administering the State
Employees Retirement Act, deny that
- A38 -
pre-1975 law gave rise to any
contractual obligations. They assert
that “a pension is not a matter of
contract,” but “a gratuity ‘springing
from the appreciation and graciousness
of the sovereign.‘”°®
Accordingly,
they argue, the plaintiffs have no
rights which fall within scope of the
contract clause, even though (as they
admit) the state required the
plaintiffs to become members of the
State Employees Retirement System and
to contribute substantially to the fund
out of which benefits are paid, and the
plaintiffs joined and remained in the
state’s employ in reliance upon the
terms of pre-1975 law.
With due respect, the court
declines to follow the defendants'
reasoning. Rather, on the basis of the
- A39 -
uncontested facts before the court on
the plaintiffs' motion for summary
judgment, the court finds that the
state entered into a contractual
relationship with the plaintiffs,
pursuant to which the state bound
itself to permit the members of the
plaintiff class to retire from state
- service on the terms provided by the
law which was in effect immediately
prior to the adoption of the 1975 Act.
The court further finds that the 1975
Act severely impaired the state's
contractual obligations to this class
of its employees, and that this
impairment is unconstitutional under
the criteria set forth by the Supreme
Court, for the state has not argued,
much less established, that the
abrogation of its contractual
Obligations was either necessary for
« KAO
the achievement of the state's purposes
Or reasonable in light of the
circumstances.
Because the 1975 Act, as applied to
the plaintiffs, violates the contract
rrr of the United States
Constitution, the plaintiffs' motion
for summary judgment is granted. An
injunction shall be issued against the
enforcement of the 1975 Act with
respect to those state employees who
were in state service on June 30, 1975
(the effective date of the 1975 Act),
are still in the state's service, and
will not be eligible to retire with
full pension benefits prior to June 30,
1980.’
Among the plaintiffs to whom the
court grants relief from the chailenged
- A4l -
statutory provisions are female state
employees who entered state service
prior to the enactment of the 1975
Act. The state has admitted that all
of these class members relied on the
promise of pension benefits set forth
in the pre-1975 version of the State
Employees Retirement Act, both before
and after it was modified by the
decision in Fitzpatrick. The court
also grants similar relief to male
employees who entered state service
prior to the adoption of the 1975 Act.
It may be suggested that this decision
grants a “windfall” to those male class
members who entered state service
before this court's decision in
Fitzpatrick by permitting them to
retire on terms more favorable than the
ones upon which they relied under prior
law. However, the court is bound by
- A42 -
the state's admission that these class
members either expected to become
eligible for pension benefits on terms
as favorable as those extended to
temale employees under pre-Fitzpatrick
law, Or remained in state service after
the Fitzpatrick decision in reliance
upon the promise of benefits identical
to those of female employees which was
held out to them by the state following
that decision. Moreover, even apart
from the question of the expectations
of this group of class members, all
males who were in the state's employ at
the time of the Fitzpatrick decision
became entitled, under the terms of
Judge Clarie'’s order, to retire on the
terms applicable to similariy situated
female employees under the former law.
The court cannot deny any males in the
plaintiff class the right to retire on
- A43 -
the terms to which similarly situated
female class members are entitled
without in effect undoing Judge
Clarie's decision in Fitzpatrick.
Nothing in this ruling affects the
application of the 1975 Act, on a
prospective basis, to employees who
were not in the state's service on June
30, 1975, and who therefore had no
contractual rights to retire on the
more advantageous terms afforded by
prior law. The court holds only that
the retroactive application of the more
stringent requirements for pension
eligibility contained in the 1975 Act
to the discrete class of state
employees who brought this action is
unconstitutional.
The rules on retirement ages
enforced by this decision are those
- A44 -
embodied in contractual arrangements
between the state and its employees
prior to June 30, 1975. In holding the
1975 Act unconstitutional to the extent
that it changed those rules
retroactively as applied to the
plaintiffs, the court makes no judgment
concerning the wisdom of the pension
policies which the state enforced prior
to the enactment of the 1975 Act, or,
indeed, concerning the policies
embodied in the 1975 Act. Any harm to
the state treasury which may be caused
by the court's enforcement of the
state's contractual obligations-and the
state has neither shown nor suggested
the existence of such harm-is the
direct result of obligations assumed by
the state itself and of prior judicial
determinations, binding on the state,
which required that Connecticut's male
- A45 -
employees be accorded the same rights
as female employees under the state's
retirement system.
I. THE PARTIES
The plaintiff class, as certified
in this court's order of February 20,
1979, consists of “all existing
employees of the State of Connecticut
who will not reach normal retirement
age prior to June 30, 1980 and who were
such employees on June 30, 1975."°
It includes both male and female
employees. The phrase “normal
retirement age” refers to the age at
which employees are permitted to retire
with pension benefits, under the State
Employees Retirement Act, without
regard to special provisions for early
retirement.’
- A46 -
The defendants are William G.
Oechslin, chairman of the State
Employees Retirement Commission, Henry
G. Parker, Treasurer of the State of
Connecticut,'° and J. Edward
Caldwell, Comptroller of the State of
Connecticut and Secretary of the State
Employees Retirement Commission' '
The State Employees Retirement
Commission is responsible for
administering the State Employees
Retirement System and all other
retirement systems of the State of
Connecticut except the Teachers’
Retirement Fund. Conn.Gen.Stat.
§5-155(d). Nearly all of Connecticut's
employees are required by law to belong
to the State Employees Retirement
12
System.
- A4d7 -
The members of the State Employees
Retirement System must choose one of
two benefit plans. The first of these
plans is independent of the federal
Social Security program; the other is
coordinated with it. See
Conn.Gen.Stat. §§ 5-157, 5-158a-g.
Under either plan, the employees are
required to make contributions to the
State Employees Retirement Fund, out of
which the members’ retirement benefits
are paid. Indeed, employees have been
required to contribute to the
retirement fund since 1939, when the
retirement system was established. '’
An employee not covered by Social
Security must contribute 5% of his or
her salary to the fund, Conn.Gen.Stat.
§5-161(b), while an employee who has
Social Security coverage must
- A48
contribute to the fund an amount equal
to 2% of that part of his or her salary
on which the state makes Social
Security contributions plus 5% of the
remainder of his or her salary,
Conn.Gen.Stat. §5-161l(a). Actuarial
studies by the state demonstrate that,
depending upon the plan selected, the
age of retirement and the sex of the
employee, between 12% and 25% of an
employee's benefits is attributable to
his or her contributions, including the
interest accrued on those
contributions.'* The balance of the
benefits paid out of the State
Employees Retirement Fund is
attributable to appropriations by the
State. See Conn.Gen.Stat. §5-156a.
- A49 -
II. THE FACTUAL BACKGROUND
The facts relevant to the pending
motion are rather complex. However,
they are not in dispute.'’ Much of
the factual background is a matter of
public record, particularly the record
of the Fitzpatrick litigation. The
other relevant facts were admitted by
the defendants or stipulated by the
parties.
A. The Fitzpatrick Litigation
A brief recapitulation of the
history of the Fitzpatrick litigation
is the logical starting point for the
narrative of the facts relevant here.
The Fitzpatrick plaintiffs were members
of the class of male state employees
and former employees who belonged to
- A5O -
the State Employees Retirement System.
Fitzpatrick v. Bitzer, supra, 390
F.Supp. at 279. They challenged the
following statutory provisions then in
effect:
(1) Former Conn.Gen.Stat.
§5-162(c)(1), which allowed an employee
with 25 years of state service to
retire with pension benefits “or or
after the member's fifty-fifth
birthday, if aman, or fiftieth
birthday, if a woman";
(2) Former Conn.Gen.Stat.
§5-162(d)(1), which allowed any female
employee with at least 10, but less
than 25, years of state service to
retire with pension benefits at age 60,
but only permitted a male employee who
had served for that period of time to
- ASl -
retire with pension benefits at age
65;'°
(3) Former Conn.Gen.Stat.
§5-162(d)(3), which provided that the
calculation of retirement benefits be
made according to a table based on age
and sex, which ensured that a female
retiree would receive retirement
benefits equal to those received by a
male retiree five agai her senior;
(4) Former Conn.Gen.Stat.
§5-163(c), which permitted an employee
whose state service was terminated
under one of certain enumerated
conditions to retire with pension
benefits after the completion of 25
years of state service “before he has
reached his fifty-fifth birthday, if a
man, or her fiftieth birthday, if a
woman. .. ."*; and
- AS2 -
(5) Former Conn.Gen.Stat.
§5-166(a), which provided that, in
certain circumstances, an employee who
left state employment before reaching
the normal age of eligibility would be
eligible for retirement income, on a
reduced actuarial basis, at age 55 if
male, or age 50 if female.
See Fitzpatrick v. Bitzer, supra, 390
F.Supp. at 281.
In Fitzpatrick, Judge Clarie held
that these statutory provisions
violated Title VII of the Civil Rights
Act of 1964, as amended in 1972.'’
Fitzpatrick v. Bitzer, supra, 390
F.Supp. at 288. The court granted the
plaintiffs' request for injunctive
relief, prohibiting the defendants from
administering the State Employees
- AS3 -
Retirement Act in a discriminatory
manner in the future. Id. at 290.
The court's order stated:
"The defendants are accordingly
ordered to administer the State
Employees' Retirement Act without
unreasonable sex classifications
unfavorable to men as they relate
to retirement age and benefit
computations; so that men will be
eligible to retire at age 50 and
receive the same treatment as
Similarly situated women. Nothing
herein shall be construed to
interfere with the State
Legislature performing its
constitutional function of freely
determining public policy, as it
pertains to deciding upon a uniform
retirement age for all men and
women employees of the State of
Connecticut in the future, provided
the same is carried out without
discrimination as to age or
benefits on the basis of sex."
390 F.Supp. at 290 (emphasis added).
As a result of this order, from
which, as noted, the state did not
® the State of Connecticut
appeal,’
enforced the existing provisions of the
State Employees Retirement Act so that
men were treated precisely as women
- AS54 -
previously had been treated. Men with
25 years of continuous service were
thus permitted to retire at age 50
after Judge Clarie's order; other men
in state service were likewise
permitted to retire upon the terms
applicable to similarly situated
females.'?
B. The Plaintiffs' Reliance on
Pre-1975 Law
Through admissions and exhibits
obtained from the defendants, the
plaintiffs have established the
following facts relevant to the
question of the plaintiffs* reliance on
the law as it stood prior to the 1975
Act.**
At least since 1971, employees and
prospective employees of the State of
- ASS -
Connecticut have been made aware of the
retirement benefits available to them
under state law, at or before the time
they were hired. Moreover, prospective
employees have frequently inquired,
before entering the state’s employ,
about Connecticut's retirement benefit
laws, the State Employees Retirement
System and the benefits to which they
would be entitled if they became state
employees. The booklet which the state
distributes to new employees to
describe the State Employees Retirement
System declares: “You may retire--and
receive immediate retirement
benefits--at any time after you reach
the minimum permissible retirement
age.” Nowhere in that booklet does the
state expressly reserve the right to
change the minimum permissible
retirement ages, and the defendants
have not argued that the state ever
conveyed to the plaintiffs any
intention to reserve such rights.
State employees rely upon the
information which the state conveys to
them about its retirement laws, systems
and benefits, without regard to
subsequent changes adverse to them.
Indeed, some of the plaintiffs accepted
state employment, leaving otherwise
more lucrative positions, because of
Superior retirement benefits available
to them as state employees.
After joining state service,
Connecticut's employees frequently
inquire about retirement benefits,
including the options available to them
under state law and the ages at which
State law entitles them to retire with
benefits. The information which state
employees learn from such inquiries is
- AS7 -
a material and substantial factor in
their personal retirement plans.
Accordingly, the terms of the State
Employees Retirement Act are
substantial inducements for prospectiv:
employees to enter state service and
for those already in the state's emplo;
to remain in state service.
| The law upon which female members
| of the plaintiff class relied was the
State Employees Retirement Act, as it
read prior to its amendment in 1975.
The provisions of that law which
governed the retirement ages and
benefits of women were in no way
affected by the decision of the court
in Fitzpatrick.
Prior to that decision, which was
filed on September 16, 1974, the law
upon which most male employees relied
- AS58 -
contained the discriminatory
provisions--requiring men to work
longer than women to become eligible
for equivalent benefits--which were
held unlawful in Fitzpatrick. It is
admitted, however, that even before the
Fitzpatrick decision was announced, “an
indeterminate number of male state
employees believed that they would
obtain, through legislative or judicial
action, equal treatment with women
under the state's retirement laws,
l.e., that the retirement ages and
benefits applicable to women would be
made available to them through a change
in the laws.” In any event, the
‘itzpatrick decision changed the law to
enable men to retire on the terms
formerly applicable only to women, and
between September 1974 and June 1975
both prospective employees and men
already in state service learned,
- ASI -
either from pension benefit information
disseminated by the state or from other
sources, that the retirement ages and
benefits applicable to men had, by
virtue of the court's order, become
identical to those applicable to
women. The law upon which male members
of the plaintiff class were relying
just before the adoption of the 1975
Act was therefore the rule articulated
by Judge Clarie in Fitzpatrick: men
already in state service had the right
to retire at the same ages and with the
same levels of benefits as female state
employees. See Fitzpatrick v. Bitzer,
supra, 390 F.Supp. at 290.
C. The 1975 Act
The 1975 Act amended the State
Employees Retirement Act in a number of
ways. As the plaintiffs contend, and
- A60 -
the defendants concede,’' the thrust
of the amendments was to require
certain employees, both male and
female, to work as many as five years
longer than they were required to work
by prior law (i.e., the State Employees
Retirement Act, as modified by this
court's decision in Fitzpatrick) in
order to obtain the same level of
pension benefits. The 1975 Act did not
have this effect on all employees, for
it contained a “grandfather clause"’?
which exempted from the more stringent
age requirements for eligibility those
employees who would reach, before June
30, 1980, the lower age threshold
imposed by prior law; as a result of
this provision, the 1975 Act affected
only the plaintiffs and those who
entered state service after June 30,
1975.
- A6l -
The specific statutory provisions
which the plaintiffs challenge are the
following:
(1) Amended Conn.Gen.Stat.
§5-162(c) and 5-162(d), which require
an employee to reach the age of 55, if
he or she has completed 25 years of
state service, or the age of 60, if he
or she has completed at least 10 but
less than 25 years of state service,
before retiring with benefits.
Immediately prior to the enactment of
these amended provisions, such
employees could retire with benefits at
ages 50 and 55, respectively. These
subsections also establish benefit
schedules which reduce the levels of
retirement benefits that some members
of the plaintiff class can expect.
- A62Z -
(2) Amended Conn.Gen.Stat.
§5-163(c), which provides that an
employee whose state service is
terminated under certain conditions’?
is entitled to retirement benefits if
he or she has completed 25 years of
state service, but has not yet reached
his or her 55th birthday. The
applicable age for such an employee had
been 50 under the law which had been
enforced by the state immediately prior
to the adoption of the 1975 Act.
(3) Amended Conn.Gen.Stat.
§5-166(a), which provides that an
employee who leaves state service under
certain conditions before becoming
eligible for retirement with pension
benefits under other provisions of the
statute’* shall nonetheless be
eligible for a pension on a reduced
actuarial basis upon attaining the age
- A63 -
of 55. Under the law as applied
immediately prior to the enactment of
the 1975 Act, such an employee was
eligible for these benefits at age 50.
(4) Conn.Gen.Stat. §5-163a, which
permits any employee reaching either
(a) the age of 50 and his or her 25th
year of state service, or (b) the age
of 55 and nis or her 10th year of state
service, prior to June 30, 1980 to
retire with a pension at full benefit
levels before that date. This
provision protected these classes of
state employees from the more stringent
age qualifications embodied in other
provisions of the 1975 Act, but left
the members of the plaintiff class
exposed to the more restrictive
standards of the new law.
- A64 -
The effects of these provisions of
the 1975 Act on the named individuals
who represent the plaintiff class
illustrate the types of injuries which
the 1975 Act inflicts upon the
plaintiffs' expectations.*’ For
example, plaintiff Karen Pineman, who
is now 44 years old, has been in
continuous state service since January
16, 1956. Under former Conn.Gen.Stat.
§5-162(c)(1), which, as applied to
female employees, was unaffected by
Judge Clarie's 1974 order, she could
have expected to retire with pension
benefits at age 50--i.e., in 1986. The
1975 Act requires her to work an
additional five years--until 1991l--to
receive benefits at the same levels.
Plaintiff Alphonse S. Marotta is in
an analagous position. He is 45 years
old and has been in continuous state
- A65 -
service since June 20, 1955. Former
Conn.Gen.Stat. §5-162(c)(1) would have
required him, solely as a consequence
of his sex, to work until his 55th
birthday in order to obtain the
benefits due him as a 25 year veteran
of continuous state service. However,
the order of this court in Fitzpatrick,
which required the state to administer
its retirement statute “so that men
will be eligible to retire at age 50,"
changed the expectations of men in Mr.
Marotta's position. After the court's
order in Fitzpatrick, but before June
30, 1975 (the effective date of the
1975 Act), such male employees were
permitted to retire with pension
benefits at age 50. Indeed, the 1975
Act continued to allow retirement with
full benefits at age 50 for employees
who had served the state for 25 years
and reached age 50 before June 30,
1980. Conn.Gen.Stat. §5-163a.
However, because Mr. Marotta will not
reach age 50 until after June 30, 1980,
under the 1975 Act he will have to wait
until his 55th birthday, in 1990
(rather than his 50th birthday, in
1985), to retire with pension benefits.
Plaintiff Alfred K. Tyll is ina
Similar situation. He is 48 years old
and will have completed 25 years of
continuous state service by June 30,
1980. The 1975 Act requires him to
work until age 55-i.e., 1987--before he
may retire with pension benefits; the
law in effect after Fitzpatrick but
before the 1975 Act would have
permitted his retirement with full
benefits in 1982, when he turns 50.
Under the 1975 Act, Mr. Tyll is
eligible for full retirement benefits
Only after working five years longer
- A67 -
than he would have been required to
work under prior law.
The 1975 Act forces some employees
to choose between working longer than
previous law would have required in
order to receive retirement benefits at
the levels they expected and retiring
prematurely with retirement income
calculated at lower benefit levels.
For example, plaintiff Daniel Clifford,
who is 47 years old and began state
service on September 15, 1959, would
have been entitled to a full pension in
1984 (after 25 years of service) but
for the 1975 Act. However, its
provisions require him either to work
until 1988, when he reaches the age of
55 and thereby qualifies for retirement
with full pension benefits, or to
retire before that time with vested
retirement income on a reduced
- A68 -
actuarial basis, pursuant to amended
Conn.Gen.Stat. §5-166(a). If he
chooses the latter option, Mr. Clifford
will receive something less than the
full pension benefits at age 50 which
he would have obtained had the 1975
Act's retroactive provisions not become
law. Plaintiff Judith Narus is put to
the same choice by the 1975 Act; she
may either work longer than prior law
required to receive benefits at the
usual full pension levels, or retire
before reaching her 55th birthday and
accept benefits calculated at a lower
level.
Finally, the practical effect of
the 1975 Act is to reduce the benefits
of some plaintiffs who have served the
state for less than 25 years, pursuant
to the benefit schedule set forth in
amended section 5-162(d). For example,
- A69 -
under prior law, plaintiff Rose Schewe,
who will have completed fifteen years
of state service on September 10, 1980,
would have received monthly benefits
including 2.5% of her earnings in
excess of the amount on which the state
made Social Security contributions,
multiplied by her years of service.
However, under the 1975 Act, this
component of her benefits will be
calculated on the basis of a 2.0%
multiplier for “excess earnings" if she
retires after reaching age 65, but
before her 70th birthday. Only if she
continues to work until she reaches age
70 will Ms. Schewe become eligible,
under the 1975 Act, to receive benefits
calculated at the 2.5% rate to which
she would formerly have been entitled
at age 65.
- A70O -
D. The Legislative History of the 1975
Act
The 1975 Act had its origins in
House Bill 5176, which was introduced
on the floor of the Connecticut House
of Representatives on June 3, 1975.
See General Assembly Proceedings 1975:
House of Representatives 6342-43. The
Original version of this bill would
have raised the retirement age only for
those who would become state employees
after June 30, 1975. It did not
purport to have any retroactive
effect. The bill was, however, amended
on the floor to provide that one grvup
of employees already in state
service--the members of the plaintiff
Class--would, along with future
generations of state employees, be
Subject to the more stringent age
qualifications for pension
- A7?l -
eligibility. In the words of the
amendment’*s sponsor, “({t]his amendment
restores males who are under age 45 to
the [age] 55 retirement that was in
effect before the recent Court
decision, and it establishe[s] age 55
for females who are presently under age
45." Id. at 6346 (remarks of Rep.
Wright).
After brief debate, the House
passed the bill, as amended. Id. at
6362. The next day, the Senate passed
the bill in the same form. General
Assembly Proceedings 1975: Senate
3590. Neither the House of
Representatives nor the Senate held
public hearings on the legislation
which became the 1975 Act. See id. at
3582 (remarks of Sen. Rome).
- A72 -
A
Although there are no formal
reports explaining the legislature's
purpose in passing the 1975 Act, it is
clear from the debates in both houses
that the General Assembly was reacting
to the decision in Fitzpatrick with a
view toward achieving two related
objectives: (1) putting an end to
Connecticut's policy of permitting
certain state employees to retire with
pension benefits at age 50, which many
legislators believed to be an unduly
early retirement age, and (2) saving
money by reducing the expenses which
the state incurs to fund its share of
the State Employees Retirement System.
On the House floor, the amended
bill's sponsor, Representative Wright,
brought these two aims of the
legislation into sharp focus.
Condemning past Connecticut policy
- A73 -
which allowed some state employees to
retire at age 50, he said: “I don’t
think there is any other state or
probably any municipality that has a
retirement age that allows employees to
retire at age 50 and receive 50% of
their pay. This is far more liberal
than is provided in [sic] any public
employer, and one that I think if we
don't correct it can bankrupt the State
of Connecticut.” General Assembly
Proceedings 1975: House of
Representatives 6346. Citing a report
which estimated that the amended bill
would save between $3,000,000 and
$5,000,000 in 1975-76, Representative
Wright added, “I‘m sure the House will
be able to find a place to use that
three to five million dollars, should
this amendment pass.“ Id. Another
proponent of the amended bill,
- A74 -
)
)
;
Representative Dice, stated:
“(T)]here are very few, if any,
retirement plans where you can
retire at age 50. The only one
that I know is the military
service, and I hope our state
employees are not equivalent to
being in the military service,
where they would have to go
overseas to that extent.”
Id. at 6347-48. Representative Dice
added that Connecticut faced the risk
of bankruptcy if it did not reduce its
pension obligations, comparing the
Situation to that of New York City.
Id. at 6348. Representative Mannix
offered a similar assessment of the
Situation:
“Most, if not all, of the taxpayers
who have a retirement plan in the
State of Connecticut can normally
retire at age 60. They're being
asked by us and the government of
the State to underwrite a
retirement plan at age 50. To me,
this is inexcusable. Something's
got to be done. If we continue on
this way, as has been pointed out,
we're going to end up in
bankruptcy.”
Id. at 6348.
- A7S -
The day after the amended bill
cleared the House, the Senate took up
the measure. The remarks made by the
bill‘s supporters in the upper chamber
paralleled those made by its advocates
in the House. Senator Hennessey
expressed the view that “we're just
trying to straighten out a Court
decision.” General Assembly
Proceedings 1975: Senate 3579. The
thrust of the position of the bill's
supporters was that “50 years of age is
an unreasonable age for retirement,”
id. at 3578 (remarks of Sen. Amenta);
see also id. at 3582 (remarks of Sen.
Fauliso); id. at 3588 (remarks of Sen.
Ciarlone), and that the biil would save
Connecticut $3,600,000 in the next
fiscal year alone, see id. at 3575
(remarks of Sen. Baker); id. at 3586-87
(remarks of Sen. Houley). A study
prepared by the actuary of the pension
- A76 -
a
fund was reported to have established
that, in fiscal year 1975-76, the state
would save $800,000 by prospectively
caising the retirement age for new
employees, and another $2,800,000 by
extending that provision to those
persons already in the state's employ
who would not be eligible to retire
with pension benefits under after June
30, 1980-i.e., the plaintiffs in this
action. Id. at 3587 (remarks of
Senator Houley). As Senator Houley
noted, enacting the amended bill would
permit the state to start realizing
Savings on its appropriations for the
State Employees Retirement Fund in the
very fiscal year for which the
legislature had just passed a budget.
Id.
- A77 -
III. THE PLAINTIFFS‘ CLAIMS
The plaintiffs' principal
contention is that the 1975 Act
operates to impair the state's
contractual obligations to them, in
violation of the contract clause of the
United States Constitution.’°® They
seek a declaratory judgment
establishing that the 1975 Act, as
applied to the plaintiff class, is
unconstitutional, as well as injunctive
relief requiring the defendants to
administer the State Employees
Retirement Act, insofar as it applies
to the plaintiffs, without regard to
the provisions of the 1975 Act. They
do not chalienge the constitutionality
of the prospective application of the
1$75 Act to those who became state
employees after June 30, 1975.
- AMS >
The plaintiffs would require the
state to permit them to retire with
fuli pension rights (a) upon completion
of 25 years of continuous state
service, at age 50; and (b) upon
completion of at least 10, but less
than 25, years of continuous state
service, at age 55. In addition, the
terms of retirement and the benefit
levels for which the plaintiffs would
be eligible would be those which were
applied to all state employees retiring
in the period after this court's
Fitzpatrick decision, but prior to the
1975 Act. These are the same terms and
benefits which the state--consistently
with Title VII--afforded all employees,
regardless of sex, immediately after
the Fitzpatrick decision, and which
were preserved by the 1975 Act for
those employees covered by its
“grandfather clause," Conn.Gen.Stat.
§5-163a.
IV. THE CONTRACT CLAUSE OF
THE UNITED STATES CONSTITUTION
A. Introduction
{1] The constitutional provision
invoked by the plaintiffsS reads
Simply: “No State shall .. . pass any
Law impairing the Obligation of
Contracts ... U.S. Conet. art. I,
§10, cl. 1. However, the analysis of a
contract clause challenge to state
legislation is anything but simple.
While the language of the Constitution
is, on its face, absolute, a
substantial body of Supreme Court cases
demonstrates that the contract clause
does not prohibit every impairment by a
state of contractual obligations. See,
e.g., El Paso v. Simmons, 379 U.S. 497,
85 S.Ct. 577, 13 L.Ed.2d 446 (1965);
Home Building & Loan Association v.
- A80 -
aug. 4 te GD
Bae.eoe.s, 290 U.6. 398, 54 &.Ct. 231,
78 L.Ed. 413 (1934).*’ Nonetheless,
the Supreme Court has recently reminded
us that the contract clause “is not a
dead letter,” Allied Structural Steel
Co. ¥. Spannaus, 438 U.S. 234, 241, 98
Beuee 2Phey “274k, 37 L.EG.24 727
(1978), and that it requires
particularly careful examination of
state legislation which impairs a
contract to which the state itself is a
Barty, 20. at 244 n.15, 98 S.Ct. at
2722 n.15; United States Trust Co. v.
New Jersey, 431 U.S. 1, 22-23, 25-26,
7? Bates 2900, £952 7=1516, 1519, S52
L.Ed.2d 92 (1977).
In United States Trust Co., the
Court, in an opinion by Justice
Blackmun, reaffirmed the continuing
vitality of the contract clause in
modern constitutional law:
- A8l -
431
"Both [Home Building & Loan
Association v. Blaisdell and El
Paso v. Simmons, supra] eschewed a
rigid application of the Contract
Clause to invalidate state
legislation. Yet neither indicated
that the Contract Clause was
without meaning in modern
constitutional jurisprudence, or
that its limitation on state power
was illusory. Whether or not the
protection of contract rights
comports with current views of wise
public policy, the Contract Clause
remains a part of our written
Constitution."
U.8. -€& 264. 97 SCO. @€ 2528.
In United States Trust Co., as
here, the question was whether a state
law violated the contract clause by
impairing a state's own contractual
obligations to private parties. At
issue there was the constitutionality
of a 1974 New Jersey statute which,
together with an identically worded New
York statute, repealed a 1962 covenant
(itself embodied in legislation enacted
by both states) limiting the ability of
the bi-state Port Authority of New York
- A82 -
and New Jersey to use its revenues and
reserves to subsidize unprofitable rail
passenger transportation between the
two states. The plaintiff, a New York
bank, was a substantial holder of Port
Authority bonds subject to the covenant
and was a trustee for two series of
such bonds.
The Court in United States Trust
Co. held that the retroactive appeal of
the 1962 covenant was an unjustifiable
impairment of the state's contractual
obligations to the plaintiff, in
violation of the contract clause.
Citing such venerable authority as
Fletcher v. Peck, 10 U.S. (6 Cranch)
87, 137-39, 3 L.Ed. 162 (1810) and
Trustees of Dartmouth College v.
Woodward, 17 U.S. (4 Wheat.) 518, 4
L.Ed. 629 (1819), the Court observed
that “[Li]lt long has been established
- A83 -
that the Contract Clause limits the
power of the States to modify their own
contracts as well as to regulate those
between private parties." United
States Trust Co. v. New Jersey, supra,
431 U.S. at 17, $7 &.Ct. OO feees ee
the same time, the Court noted, “the
Contract Clause does not prohibit the
States from repealing or amending
statutes generally, or from enacting
legislation with retroactive effects."
Id. (footnote omitted).
[2] Where, as here, it is claimed
that the contract clause prohibits a
state's statutory modification of its
own obligations, the court must
determine whether contractual
obligations within the purview of the
contract clause exist; if so, whether
the state legislation under attack
impaired those obligations; and if
—
- A84 -
there is an impairment of contract,
whether it is forbidden by the
Constitution. See generally United
States Trust Co. v. New Jersey, supra,
S35 U.5. at 21-32, 97 S.Ct. at
1517-1522.
B. Connecticut's Contractual
Obligations to the Plaintiffs
[3,4] A statute gives rise to a
contractual obligation which is subject
to the contract clause “when the
language and circumstances evince a
legislative intent to create private
rights of a contractual nature
enforceable against the State." United
States Trust Co. v. New Jersey, supra,
ee ss ee. 2S, 6 6SFlU SCE. @t 1515
n. 14. In its inquiry into the
existence of a contract within the
meaning of the contract clause, a
- A85 -
—E—— CC —t~S
federal court must “accord respectful
consideration and great weight" to
relevant state law, Indiana ex rel.
Anderson v. Brand, 303 U.S. 95, 100, 58
S.Ct. 443, 446, 82 L.Ed. 685 (1938),
although it is not bound by the state's
law of contracts. Irving Trust Co. v.
Day, 314 U.S. 556, 561, 62 S.Ct. 398,
401, 86 L.Ed. 452 (1942). See
generally Hale, The Supreme Court and
the Contract Clause: o> Cae ¥,
Harv.L.Rev. 852, 852-72 (1944).
Accordingly, the appropriate starting
point for this court's examination of
the question whether Connecticut's
State Employees Retirement Act created
contractual obligations to state
employees is the common law of the
State of Connecticut.
- A86 -
enamel
Contractual Obligation in
Pension Plans Under
Connecticut Law
[5] In the leading case of Bird v.
Connecticut Power Co., 144 Conn. 456,
133 A.2d 894 (1957), the Connecticut
Supreme Court of Errors held that a
non-contributory pension plan in which
employees were not required to
participate created contractual rights
enforceable against a private
employer. In Bird, the court rejected,
in no uncertain terms, the employer's
argument that, as a matter of law, it
had complete discretion to modify its
employees’ expectations of pension
benefits:
“A board of directors cannot
legally strip an employee of the
benefits of a pension plan where
the employee has complied with the
terms of the offer of a pension,
Since the purposes of the plan
could be readily frustrated at the
- A87 -
whim of the directors. ... Even
where an employer declares the plan
is within the absolute discretion
of the directors, the court will
interpret the plan as a whole so as
to give effect to its general
purpose in securing the loyalty and
continued service of the employees,
and the employer may not defeat the
employees’ reasonable expectations
of recovering the promised reward.
Bird v. Connecticut Power Co., supra,
144 Conn. at 463, 133 A.2d at 897
(citations omitted).
In Wyper v. Providence Washington
Insurance Co., 533 F.2d 57 (2d Cir.
1976), the court affirmed a decision by
Judge Blumenfeld of this court,
following Bird and holding that under
Connecticut law, “a pension plan
creates contractual rights and
court review may not be defeated
through reservation of discretionary
powers in the pension board.” Id. at
63 (footnote omitted). In Wyper,
- ABB -
which, like Bird, involved a private
employer's pension plan, Judge Gurfein
reiterated the contractual nature of
pension rights under Connecticut law:
“Later Connecticut opinions citing
Bird treat it only as establishing
that informal pension plans give
rise to contractual rights which
cannot be defeated by assertion of
discretionary power, and we agree.
See Bordon v. Skinner Chuck Co., 21
Conn.Supp. 184, 150 A.2d 607, 610
({Super.Ct.Hartford Cty.] 1958);
Ellis v. Emhart Mfg. Co., 150 Conn.
501, 191 A.2d 546, 549 (1963).”
533 F.2d at 63 n.9.
If an “informal” pension plan in
which employees are not required to
participate and to which they
contribute nothing of pecuniary value
creates a binding contract, it would
seem to follow, a fortiori, that a
highly structured and formal pension
plan--like the State Employees
Retirement System--in which the
employees must participate and into
which they must make monetary
- AB9 -
—— <<
contributions gives rise to obligations
and rights which are contractual in
nature. Further examination of
relevant Connecticut cases confirms
this impression and strongly suggests
that the rationale of Bird, Wyper and
the cases cited therein applies with
equal force to the facts of this case.
In Bird, the court emphasized that
the employee “gave up other
opportunities for employment because of
the security he felt the pension
benefits of the defendants afforded
him." Bird v. Connecticut Power Co.,
Supra, 144 Conn. at 462, 133 A.2d at
897. Indeed, the very purpose of the
defendants’ offer of a pension was to
induce the plaintiff to act as he did;
“securing the loyalty and continued
service of the employees” was the
employer's goal in offering pension
- A90 -
4 i
benefits. Id., 144 Conn. at 463, 133
A.2d at 897°"° Similarly, in Bordon
v. Skinner Chuck Co., supra, the
Superior Court, following Bird,
stressed that the offer of a
pension-like “bonus” may act not only
as an inducement for a prospective
employee to accept the offered
position, but also as an incentive for
one already in the employer's service
to remain in his or her job. If the
effect of such a promise is “to induce
the employee to refrain from quitting,
and in reliance thereon he does
refrain, then there is sufficient
consideration to support an enforceable
contract.” Bordon v. Skinner Chuck
Co., supra, 21 Conn. Supp. at 190, 150
A.2d at 610.’’
In Bird and its progeny, the
Connecticut courts held that an
- A9l -
_—
employee who relies upon an offer of
deferred benefits to his or her
detriment, and to the benefit of the
employer who gains the employee's
valuable services and loyalty as a
consequence thereof, has expectations
which are protected by the law of
contracts. The facts in the case at
bar demonstrate the existence of
precisely this type of reliance. The
state has admitted that the plaintiff
class consists entirely of persons who
either accepted state employment,
eschewing otherwise more lucrative job
Opportunities to work for Connecticut,
in reliance upon the promises of
pensions contained in pre-1975 law, or
who remained in state service,
foregoing other employment
opportunities, in reliance upon the law
as modified by Judge Clarie's decision
in Fitzpatrick. Under the logic of
- A92 -
Bird and similar cases decided under
Connecticut law, the plaintiffs’
relationships with the state with
respect to their expected pensions are
contractual in nature.
This conclusion is confirmed by the
application of basic and long-standing
principles of contract law to the
admitted facts of the instant case.
The common law of contracts clearly
protects, in various contexts, the type
of reliance interest which, the
defendants concede, the plaintiffs
possessed prior to the enactment of the
1975 Act. See, e.g., Fisk v. Policy
Jury of Jefferson, 116 U.S. 131,
133-34, 6 S.Ct. 329, 330, 29 L.Ed. 587
(1885) (implied contract theory
protects reliance interest of public
officer who performs services on the
basis of a promise of a salary level
- A93 -
embodied in legislation); Restatement
(Second) of Contracts §§ 90 (Tent.
Draft No. 2, 1965), 45 (Tent. Draft No.
1, 1964).°° See generally 1A Corbin
on Contracts §§ 193-207 (1963 ed.);
Fuller & Perdue, The Reliance Interest
in Contract Damages, 46 Yale L.J. 52,
337 (1936-37).
Indeed, the courts of Connecticut
have been in the forefront of this
common law development, conferring the
protection of the law of contracts on
the reliance interests of promisees in
positions like those of the plaintiffs
here even before the first Restatement
of Contracts was published. In State
ex rel. March v. Lum, 95 Conn. 199, 111
A. 190 (1920), the Supreme Court of
Errors held that teachers who were
promised a salary increase by a school
board, and who relied in silence upon
- A94 -
RE LN
that promise, forbearing from
exercising their options to leave their
jobs, had a contractual right to the
increase in pay. In the court's words,
the teachers “gave up something that
was legally theirs, and the town has
received the benefit of their
Surrender.” State ex rel. March v.
Lum, supra, 95 Conn. at 204, lll A. at
192. This, the court held, brought the
teachers’ case within the rule of Rice
v. Almy, 32 Conn. 297, 304 (1864):
“([I]£ aman by a promise induces
the promisee. . . to do some act or
part with some chattel, title,
interest, privilege, or right,
which the law regards as of some
value, there is sufficient
consideration for the promise."
State ex rel. Marsh v. Lum, supra, 95
Coen. o0 206, iki A. @t 192. See also
Tilbert v. Eagle Lock Co., 116 Conn.
337, 361-62, 165 A. 205, 207 (1933).
As in Marsh, the plaintiffs’
forbearance, which in this case was
- A95 -
induced by the state's offer of pension
benefits on the terms in effect prior
to the 1975 Act, constitutes
consideration--even apart from the
plaintiffs’ contributions to the State
Employees Retirement Fund--for the
state's promise.
The contributions which the
plaintiffs have made to the State
Employees Retirement Fund since
becoming state employees’ further
support the conclusion that their
relationships with the state are
contractual in nature. Standing alone,
these payments, which are required as a
condition of entering the remaining in
‘state service, constitute consideration
under Connecticut law. See e.g.,
Osborne v. Locke Steel Chain Co., 153
Conn. 527, 331, 218 A.2d@ 526, 529
(1966) (defining consideration as “a
- A96 -
set
benefit to the party promising, or a
loss or detriment to the party to whom
the promise is made"); Finlay v.
Swirsky, 103 Conn. 624, 631, 131 A.
420, 423 (1925) (same). This
conclusion is in no way affected by the
fact that the contributions of
employees comprise but a
fraction--albeit a substantial
one’'--of the benefits paid out of
the retirement fund, for the size of
the benefit or detriment which
constitutes consideration is irrelevant
under Connecticut law. See Osborne v.
Locke Steel Chain Co., supra, 153 Conn.
at 332, 216 A.2G at 330; Ciaecez ¥,
Sigourney, 17 Conn. 51ll, 517 (1846);
see generally 1 Corbin on Contracts
§127 (1963 ed.). Indeed, courts in
other jurisdictions have held that the
fact that a public employee must make
contributions to a pension fund compels
- A97T -
a finding that his or her expectations
are enforceable contract rights, not
mere gratuities. See, e.g., Campbell
v. Judges' Retirement Board, 378 Mich.
169, 179-80, 143 N.W.2d. 755, FS? (1366)
(state court judges’ pensions); Hickey
v. Pension Board, 378 Pa. 300, 305-07,
106 A.2d 233, 235-36 (1954) (city
employees’ pensions).
oe Mere “Gratuities” or
Contractual Rights?
Not surprisingly, the defendants do
not question the plaintiffs’ strong
reliance interest or the existence of
consideration sufficient to support a
contract. Nor do they dispute that
under Connecticut law the plaintiffs
would possess enforceable contractual
rights if this case arose in the
context of a private employer's pension
- A98 -
plan. Rather, the defendants’
principal argument is that because the
state is their employer, the plaintiffs
possess mere “gratuities” offered them
by a sovereign, rather than rights
conferred by contract law.’* This
proposition is, however, supported
neither by Connecticut precedent nor
logic.
No Connecticut court has been
called upon to consider whether a
public employee's expectation of
pension benefits, like that of the
private employee in Bird is contractual
in nature. The only indication that it
is possible that the Bird rule might
not apply to the case at bar is to be
found in ambiguous dicta in an opinion
of the Supreme Court of Errors written
fifteen years prior to Bird. In State
ex rel. Kirby v. Board of Fire
- ASD -
Commissioners, 129 Conn. 419, 29 A.2d
452 (1942), the court affirmed a
judgment for a retired Hartford fireman
who sought a pension which was provided
for by the city charter, but which the
board administering the pension plan
deciined to award him. In rejecting
one of the board's arguments, the court
wrote:
"The defendants further contend
that the plaintiff had no vested
right to retirement but that his
retirement lay in the discretion of
the board. It may be true that
under retirement acts generally
even where the person eligible for
retirement has contributed by way
of dues or assessments to make up
the retirement fund he has no
vested right to retirement. That
does not mean, however, that a
charter provision granting
retirement rights may be
overridden by a municipal board so
as to deprive an employee of his
right to retirement as fixed by the
Cmercer, «2
State ex rel. Kirby v. Board of Fire
Commissioners, supra, 129 Conn. at 426,
29 A.2d at 455-56 (emphasis added)
(citation omitted).
- AlOO -
—_
Insofar as it might be relevant
here, this language is inconclusive.
On the one hand, the court suggested
that “it may be true," as a general
propcsition, that no contractual rights
arise from statutory employee pension
plans. On the other hnand, the court
found that the city charter granted the
plaintiff “his right to retirement”
with the benefits promised by the city;
this implies that, at least in some
unspecified circumstances, public
employees may have contractual rights
to pensions provided by law.
To the limited extent that the
ambiguous Kirby dicta do appear to
Support the defendants’ argument that a
state pension is merely a “gratuity”,
such language is of highly uncertain
precedential value after Bird v.
Connecticut Power Co., supra. The
- Alodl -
contention of the defendants in Kirby
that a pension board has complete
discretion to deprive an employee of
the pension which he expected under the
terms of the board's earlier offer was
not squarely addressed by the court in
that case. However, this notion was
expressly rejected, at least as applied
to the private sector, in Bird, where
the court gave no indication that its
holding should be limited to cases
involving private employers’ pension
offers. See Bird v. Connecticut Power
Co., supra, 144 Conn. at 463, 133 A.2d
at 897.
In the absence of Connecticut
precedent which is directly on point,
the defendants urge that the Bird rule
should not be applied to this case, and
instead refer the court to a line of
cases from other jurisdictions which
- AlQ2 -
hold that public employees’ pensions
* However, the
are “gratuities.”
court finds the logic of these cases to
be anything but compelling. To follow
these authorities would require the
court to hold that a pension is a
“gratuity” if offered by the state,
even though the same pension would
undoubtedly give rise to contractual
rights under Connecticut law if it were
offered by a private employer under
like circumstances. In support of this
distinction, the defendants rely
entirely on the fact that the state,
unlike a private employer, possesses
attributes of sovereignty.
While Connecticut's sovereignty is
undeniable, so is its ability to enter
into binding contracts to procure the
services which it requires to function
on a daily basis. See United States
- AlO3 -
<<
aaa,
Trust Co. v. New Jersey, supra, 431
U.S. at 24, 97 S.Ct. at 1519 (a state’s
“power to enter into effective
financial contracts cannot be
questioned”). The fact that in our
constitutional system, the state
possesses a measure of sovereignty in
no way supports the conclusion that its
offer of pension benefits to its
employees is gratuitous rather than
contractual. See Cohn, Public Employee
Retirement Plans--The Nature of the
Employees’ Rights, 1968 U. of
I111.L.Forum 32, 37.
Another difficulty with the notion
that the pensions offered by
Connecticut are “gratuities” is to be
found in the state’s own constitution.
Article 1l1l, section 2 of the
Connecticut Constitution provides:
§2. Extra compensation to public
officers prohibited
Neither the general assembly
nor any county, city, borough, town
or school district shall have power
to pay or grant any extra
compensation of any public officer
employee, agent or servant or
increase the compensation of any
public officer or employee, to take
effect during the continuance in
office of any person whose salary
might be increased thereby, or
increase the pay or compensation of
any public contractor above the
amount specified in the contract.
This provision, which dates to the
nineteenth century,’* prohibits the
legislature from bestowing “extra
compensation” or gratuities on the
State’s employees. “(T]he purpose of
the article [is] to take from the
public bodies therein mentioned
the power to make gratuitous
compensation to public officers and
employees in addition to that which is
established by law or contract ....”
Conn. 660, 665, 71 A. 906, 907 (1909)
- AlO5 -
(ordinance increasing police officers’
salaries did not confer an
unconstitutional gratuity). See also
State ex rel. Marsh v. Lum, supra, 95
Conn. at 205-206, 1ll A. at 192 (school
board's grant of a pay increase to
teachers was a contract, not a gratuity
barred by the state constitution);
McGovern v. Mitchell, 78 Conn. 536,
569, 63 A. 433, 446 (1906).
Through Article 1l, section 2, the
sovereign people of Connecticut
expressly denied the legislature the
power to make gratuitous payments to
state employees--the very power which
the defendants now misguidedly argue
the legislature exercised when it
passed the State Employees Retirement
Act. The court declines to find that
the General Assembly exceeded its
constitutional authority when, in 1939,
- Al0Q6 -
ical: iii
it enacted the state's comprehensive
public employee retirement laws.’’
Rather, the court concludes that the
State Employees Retirement Act was in
fact designed to achieve the proper
legislative purpose of providing a form
of deferred compensation to qualified
state employees as an incentive for
them to enter into, and remain in,
state service. See Alcorn ex rel. Hyde
v. Dowe, 10 Conn.Supp. 346, 350
(Super.Ct. Hartford Cty.), rev'd on
other ground sub nom. State ex rel.
Hyde v. Dowe, 129 Conn. 266, 28 A.2d 12
(1942) (“the fundamental theory of the
Act is that those who have rendered
long and faithful service to the State
shall be compensated after they
retire").
Because Connecticut's sovereignty
does not compel a finding that the
| - Al07 -
nature of the plaintiffs' expectations
differs from those of similarly
Situated employees in the private
sector in any legally significant way,
the court finds the Bird rationale
applicable to the case at bar. This
result is supported by the trend of
cases in other states holding that, at
least where employees contribute to the
pension fund (as Connecticut's
employees are required to do), a public
pension plan is not a gratuity, but
rather gives rise to binding
contractual rights and
6
obligations.’ See, e.g., In re
State Employees' Pension Plan, 364 A.2d
1228 (Del. 1976); Miles v. Tennessee
Consolidated Retirement System, 548
S.W.2d 299 (Tenn. 1976); Pyle v. Webb,
253 Ark. 940, 489 S.W.2d 796 (1973);
Sylvestre v. State, 298 Minn. 142, 214
N.W.2d 658 (1973); Smith v. City of
- Al0& -
Dothan, 279 Ala. 571, 188 So.2d 532
(1966); Yeazell v. Copins, 98 Ariz.
109, 402 P.2d 541 (1965); Police
Pension & Relief Board v. Bills, 148
Colo. 383, 366 P.2d 581 (1961); State
Teachers’ Retirement Board v. Giesel,
12 Wis.2d 5, 106 N.W.2d 301 (1960);
Eisenbacher v. City of Tacoma, 53
Wash.2d 280, 333 P.2d 642 (1958);
Wright v. Retirement Board, 390 Pa. 75,
134 A.2d 231 (1957); Wallace v. City of
Fresno, 42 Cal,2d 180, 265 P.2d 884
(1954); Tait v. Freeman, 74 S.D. 620,
57 N.W.2d 520 (1953): Payne v. Board of
Trustees, 76 N.D. 278, 35 N.W.2d 553
(1948).
The numerous courts which have
rejected the archaic notion that public
employees’ pensions are merely
gratuities which may be revoked or
8488H
- AlO9 -
Significantly modified at the whim of
the legislature have recognized that
one who is offered a pension by the
state as an inducement to join and
remain in the state's employ is in
precisely the same position as one,
such as the plaintiff in Bird, who is
offered a similar pension for the same
reasons by a private employer. In both
instances, the offered pension is a
form of deferred compensation upon
which the employee makes his or her
decision to accept and continue in a
job. See Wright v. Retirement Board,
supra, 390 Pa. at 79, 134 A.2d at 233.
In both cases, the employer and
employee each give up something of
value: the employer makes a promise to
pay compensation in the future, and the
employee forbears from accepting other
employment. In both cases, each
obtains something of value: the
employee gains an expectation of
- AllO -
deferred compensation upon retirement,
while the employer receives valuable
services and, perhaps, a measure of
loyalty from the employee. See Yeazell
v. Copins, supra, 98 Ariz. at 114-15,
402 P.2d at 543.
The contractual nature of modern
contributory public employee pension
plans, and their similarity to private
pension plans, was placed in historical
perspective by the Supreme Court of
Delaware in holding that the “gratuity"
doctrine no longer comports with modern
realities:
"Originally a pension was a
gratuity usually offered to a retiring
officer or executive of a company to
show the company's appreciation for
past services rendered. Those first
pension systems were non-contributory
and, although a person might have
expected to receive a pension, the
recipient usually did not accept
employment or continue therein in
reliance upon the expectation of a
pension. As time and the nature of
employment relationships passed,
employers--even governments--found it
necessary as a matter of competition to
- Alll -
offer a pension plan benefit as an
inducement for the hire or retention of
employees. Indeed, in today's economy,
the terms and conditions of an
employer's pension plan play an
important role in inducing a man to
enter or continue in the service of
that employer. In other words, it is a
part of the consideration for the
contract of hire."
Dorsey v. State ex rel. Mulrine, 301
A.2d 516, 518 (Dei. 1972) (emphasis
added). See also Hickey v. Pension
Board, 378 Pa. 300, 304-05, 106 A.2d
233, 235-36 (1954).
As noted at greater length
previously, the facts of this case
demonstrate the contractual nature of
the relationship between the state and
the plaintiffs. Following the trend of
better-reasoned modern cases from other
jurisdictions, and consistently with
Connecticut contract law and the
rationale of the opinion of the
Connecticut Supreme Court of Errors in
- All2 -
Bird, the court holds that the
enactment of the State Employees
Retirement Act gave rise to contractual
rights and obligations which are
cognizable under the contract clause of
the United States Constitution. In so
holding, the court does not denigrate
the sovereignty of the State of
Connecticut. While the state's
sovereignty is irrelevant to the
existence of a contract, it is an
important factor in determining whether
any contractual obligation of the state
has been unconstitutionally impaired.
The court duly considers questions of
state sovereignty in determining the
constitutionality of the claimed
impairment of Connecticut's contractual
obligations.’’
- All3 -
2. The Content of the Plaintiffs'
Contractual Rights and
Connecticut's Obligations
[6] The content of the plaintiffs’
contractual rights and Connecticut's
obligations, to the extent that they
are affected by the 1975 Act, merits
some consideration. The state is not,
of course, contractually obligated to
pay any employee pension benefits until
he or she meets all the qualifications
established by law, including
completion of the requisite period of
service and attainment of the requisite
age. Therefore, members of the
plaintiff class lack, as of this date,
vested rights to receive pension
benefits. This does not mean, however,
that they are without rights protected
by the law of contracts and the
contract clause of the United States
- All4 -
Constitution. Because of their
reliance interest and the consideration
which they have given for the state's
offer of pension benefits, the
plaintiffs have a contractual right to
continued membership in the State
Employees Retirement System under the
terms for retirement ages and benefits
prevailing immediately prior to the
adoption of the 1975 Act. See Wright
v. Retirement Board, supra, 390 Pa. at
79, 134 A.2d at 233; Police Pension &
Relief Board v. Bills, supra, 148 Colo.
at 390, 366 P.2d at 583 (although
pension rights are only vested at the
time of retirement, a “limited vesting"
occurs upon commencement of employment,
so that the pension plan, as it relates
to those in state service, cannot be
abolished or adversely affected in any
Substantial manner). Cf. Restatement
(Second) of Contracts §45 &
- Al15 -
Illustration 8 (Tent. Draft No. 2,
1965) (when unilateral option contact
is offered, the offeree possesses a
contractual right from the time he
begins performance in reliance upon the
offer).
[7] The substance of the state's
contractual obligations, and of the
plaintiffs’ corresponding rights, is
not to be found in the bare words of
the State Employees Retirement Act as
it read prior to its 1975 amendment.
Rather, this court must look to the
statute as it was modified by the
decision in Fitzpatrick v. Bitzer.
Viewing the matter otherwise would in
effect undo this court's holding in
Fitzpatrick, as applied to the male
plaintiffs, by restoring the
effectiveness of the very
discriminatory provisions of state law
- All6 -
which violated Title VII.’* As this
court held in Fitzpatrick, Title VII
requires that if the state obligates
itself to grant women retirement rights
at age 50 under certain conditions, it
must grant men the same rights under
the same conditions. See Fitzpatrick
v. Bitzer, supra, 390 F.Supp. at 290.
Because women in the plaintiff class
could expect, under pre-1975 law, to
retire with pensions at age 50 after 25
years of continuous state service, the
court is constrained by Title VII and
Fitzpatrick to hold that similarly
Situated males in the class had the
Same contractual expectations at the
time the 1975 Act was adopted.
While this conclusion might at
first seem to grant male plaintiffs
greater rights than they had reason to
expect, it is in fact consistent with
the scope of their admitted reliance
interest. After this court's decision
in Fitzpatrick, in which the state
acquiesced, Connecticut enforced the
law in accordance with Judge Clarie's
decision, permitting men to retire on
the terms which previously had applied
only to women. As the defendants
admit, males in the plaintiff class
relied upon this application of the law
after September 1974 in forbearing from
seeking and accepting alternative
employment.** Since the male
plaintiffs’ contractual rights
immediately prior to the 1975 Act were
defined by their reliance interest,
their rights were in fact, as they must
be under Title VII, identical to those
of the female members of the plaintiff
class.
- All8 -
C. Connecticut's Impairment o
f Its
Contractual Obligations
The contract clause prohibits
certain impairments by states of
contractual obligations. Recent
Supreme Court cases have been concerned
with whether such impairments are
merely “technical” in nature, United
States Trust Co. v. New Jersey, Supra,
633 U.S. @6 2as 97 BS-GCO. Ot. 9487. “The
severity of the impairment measures the
height of the hurdle the state
legislation must clear." Allied
Structural Steel Co. v. Spanneaus,
Supra, 438 U.S. at 245, 98 S.Ct. at
2723. The defendants have conceded
that if prior law created contractual
Obligations on the part of the state,
the 1975 Act represents an impairment
of Connecticut's obligations to the
40
plaintiffs. The court finds,
- All9 -
moreover, that the acknowledged
impairment here is not a “technical”
one.
The 1975 Act requires the
plaintiffs to work up to five
additional years in order to obtain the
benefits which the state promised them
under the contract created by prior
law. It reduces, as a practical
matter, the retirement income which
members of the plaintiff class can
expect to receive, and in some
instances will prevent class members
from receiving pension benefits
altogether. Because the 1975 Act thus
Operates to reduce substantially the
value of the plaintiffs’ contractual
expectations without providing them
with any compensatory benefits, it
constitutes a significant impairment of
the state's contractual obligations to
ae oe): ae
the plaintiffs. See e.g., In re State
Employees’ Pension Plan, supra, 364
A.2d at 1234-36 (Delaware statute
permitting invasion of pension fund
into which beneficiaries made
contributions for the payment of
benefits to non-contributing employees
violated the contract clause of the
federal Constitution); Sylvestre v.
State, supra, 298 Minn. at 155, 214
N.W.2d at 666 (Minnesota statute
depriving retired judges of the
benefits of an “escalator” provision
which tied their pensions to the
Salaries of active judges violated the
contract clause of the United States
Constitution and an analagous provision
in the Minnesota Constitution); Opinion
of the Justices, 364 Mass. 847, 864,
303 N.E.2d 320, 329 (1973) (proposed
statute materially increasing the
required contributions of state
Pay ty &. 3% Co
employees to pension fund without
increasing the benefits they ultimately
could expect was “presumptively
unconstitutional” under the contract
clause). Cf. United States v.
Larionoff, 431 U.S. 864, 879-82, 97
S.Ct. 2150, 2159-60, 53 L.Ed.2d 48
(1977) (statute repealing provision for
reenlistment bonuses for members of
Navy who agree to extend their terms of
service held to apply only
prospectively; retroactive application
would interfere with “contractual
entitlements" and create “serious
constitutional questions"); Caola v.
United States, 404 F.Supp. 1101,
1106-07 (D.Conn. 1975) (Blumenfeld, J.).
Because the facts of this case
demonstrate an undeniable “[s]Jevere
impairment" of contract, the court must
undertake “a careful examination of the
- Al22 -
nature and purpose of the state
legislation.” Allied Structural Steel
Co. v. Spannaus, supra, 438 U.S. at
4243, 938 S.Ct. at 2723.
D. The Unconstitutionality of
Connecticut's Impairment of Its
Contractual Obligations
a% The “Reserved Powers" Doctrine
[8] This examination must begin
with an inquiry into the issue of
whether the “reserved powers" doctrine
shields the state from the contract
clause challenge. As the Supreme Court
has stated, a court “must attempt to
reconcile the strictures of the
Contract Clause with the ‘essential
attributes of sovereign power,’ [Home
Building & Loan Association v.
Blaisdell, supra, 290 U.S.] at 435, [54
S.Ct. at 239,] necessarily reserved by
the States to safeguard the welfare of
their citizens. Id., at 434-440, [54
S.Ct. at 238-240.]" United States
Trust Co. v. New Jersey, supra, 431
U.S. at 21, 97 B.C. && 3537.
[9] Where, as in the case at bar, a
state is found to have impaired the
obligation of its own contract, the
"reserved powers" doctrine imposes on a
court the obligation to undertake the
inquiry described in United States
Trust Co. v. New Jersey, supra:
"The initial inquiry concerns the
ability of the State to enter into
an agreement that limits its power
to act in the future. As early as
Fletcher v. Peck, the Court
considered the argument that ‘one
legislature cannot abridge the
powers of a succeeding
legislature.' 6 Cranch, at 135.
It is often stated that ‘the
legislature cannot bargain away the
police power of a State.' Stone v.
Missission:, 101 U.S. 814, 817, {25
L.Ed. 1079] (1880). This doctrine
requires a determination of the
State's power to create irrevocable
- Al24 -
contract rights in the first place,
rather than an inquiry into the
purpose or reasonableness of the
subsequent impairment. In short,
the Contract Clause does not
require a State to adhere to a
contract that surrenders an
essential attribute of its
sovereignty."
SS. 43,0 Ot. gas Sr SCE. St 2518
(footnote omitted).
As the Court observed in United
States Trust Co., earlier Supreme Court
decisions divided the powers of the
states into those which could not be
“contracted away" (such as the police
power and the power of eminent domain)
and those which a state could exercise
in a manner which would bind it in the
future; chief among the latter were the
taxing and spending powers. United
States Trust Co. v. New Jersey, supra,
$31 U.S. at 23<24 & nn... 20-21, 397 §.Ct.
at 1518 & nn. 206-21. Of this historic
dichotomy, Justice Blackmun wrote for
the Court:
"Such formalistic distinctions
perhaps cannot be dispositive, but
they contain an important element
of truth. Whatever the propriety
of a State's binding itself to a
future course of conduct in other
contexts, the power to enter into
effective financial contracts
cannot be questioned.”
431 U.S. at 24, S? S.Ct. st 2508
(emphasis added).
[10] A purely financial
obligation--such as the promise in
United States Trust Co. not to deplete
the revenues and reserves securing the
bonds of the Port Authority, or the
promise here to pay state employees
retirement benefits established by
state law--"“may not be said
automatically to fall within the
reserved powers that cannot be
contracted away." United States Trust
Co. v. New Jersey, supra, 431 U.S. at
24-25, 97 S.Ct. at 1519. Accordingly,
the 1975 Act cannot escape further
judicial scrutiny under the contract
- Al26 -
clause on the ground that the “reserved
powers” doctrine prohibited Connecticut
from entering into a binding contract
to provide pension benefits for its
employees.
* Judicial Scrutiny Under the
“United States Trust Co."
Tests
{11] An exercise of the spending
power which creates a contract whose
enforcement is not barred by the
“reserved powers" doctrine may
nonetheless be modified by the state
legislature in certain circumstances.
While the 1975 Act enjoys no immunity
from a challenge under the contract
clause merely because its predecessor
statutes were passed in the exercise of
the legislature's power to expend money
from the public treasury, it may yet
- Al27 -
pass constitutional muster if it is
“both reasonable and necessary” to
“serve an important public purpose.”
United States Trust Co. v. New Jersey,
431 U.S. et 29, 37 €.Ct. at ES2k3 ie.
at 25, 97 S.Ct. at 1519 (emphasis
added). However, as Justice Blackmun
has noted, the application of the tests
of necessity and reasonableness
requires a much greater degree of
judicial scrutiny in cases, such as
this one, invoiving legislation which
purports to abrogate a state's own
financial obligation than in cases
involving an impairment by the state of
purely private contracts.*'
"“{C]omplete deference to a
legislative assessment of
reasonableness and necessity is not
appropriate because the State's
self-interest is at stake. A
governmental entity can always find
a use for extra money, especially
when taxes do not have to be
raised. If a State could reduce
its financial obligations whenever
it wanted to spend the money for
- Al28 -
what it regarded as an important
public purpose, the Contract Clause
would provide no protection at all."
United States Trust Co. v. New Jersey,
supra, 431 U.S. at 26, 97 S.Ct. at 1519
(footnote omitted). *’
[12] As the legislative history of
the 1975 Act demonstrates, the twin
purposes of the legislation were the
correction of what the legislature
deemed an imprudent policy of allowing
some state employees to retire with
pension benefits at age 50 and the
reduction of state spending. The
state's decision to establish or change
a policy of permitting its employees to
retire with pension benefits at
whatever age the legislature
chooses--whether 50, 55, or a higher
age--is one which the court does not
question, for the wisdom of such a
policy is not a proper concern of this
- Al29 -
court. The desirability of reducing
the state's financial burdens is beyond
doubt. Without questioning that the
state's objectives here are “important
public purpose[s]"“ within the meaning
of the test established by the Supreme
Court in United States Trust Co., the
court must nonetheless examine the 1975
Act to determine whether it was both
“necessary” to the achievement of these
policy goals and “reasonable in light
;
of the surrounding circumstances. "**
See United States Trust Co. v. New
Jersey, supra, 431 U.S. at 31, 97 §.Ct.
at 1522. If the 1975 Act fails either
of these tests, it must be held
unconstitutional. The court finds that
it faile Both.
- Al30 -
(a) Necessity
The inquiry into the “necessity”
component of the United States Trust
Co. standard “can be considered on two
levels": first, whether “a less
drastic modification" of contractual
obligations would have been sufficient
to accomplish the state‘s purposes, and
second, whether, without modifying its
obligations at all, the state “could
have adopted alternative means of
achieving [its] goals ... ." United
States Trust Co. v. New Jersey, supra,
431 U.S. at 29-30, 97 S.Ct. at
1521-1522. It is no answer that
“choosing among these alternatives is a
matter for legislative discretion,”
Since
"a State is not completely free to
consider impairing the obligations
of its own contracts on a par with
other policy alternatives.
Similarly, a State is not free to
- Al3l -
impose a drastic impairment when an
evident and more moderate course
would serve its purposes equally
well.”
United States Trust Co. v. New Jersey,
supra, 431 U.S. at 30-31, 97 S.Ct. at
1522.
The General Assembly clearly could
have accomplished the first goal of the
1975 Act--correcting what it believed
to be an unsound policy of permitting
some state employees to retire with
pensions as early as their 50th
birthdays--without impairing any of the
state's contractual obligations. *“
Having originally determined that
retirement with pension benefits at age
50 is, in some circumstances,
appropriate, the legislature is
certainly entitled to reconsider its
judgment and raise the retirement age
to 55 or any other age it deems
- Al32 -
> However, the state
appropriate. *
could have attained this goal without
affecting the contractual rights of the
plaintiffs; indeed, to the extent that
the 1975 Act applies
prospectively--i.e., to those who were
not in state service as of its
effective date--the legislature has
accomplished this purpose without
injuring contractual rights. The
“evident and more moderate course,”
United States Trust Co. v. New Jersey,
supra, 431 U.S. at 3l, 97 S.Ct. at
1522, of a purely prospective change in
the retirement ages serves
Connecticut's unquestioned interest in
establishing what its legislature
considers a more reasonable scheme of
retirement ages equally well and
without impairing the obligations of
its contracts.
- Al33 -
The second purpose of the 1975
Act--saving money--could likewise have
been accomplished without affecting the
contractual rights and obligations
created by the State Employees
Retirement Act, as modified by
Fitzpatrick and as in force at the time
the legislature passed the 1975 Act.
The Generai Assembly is of course free
to choose among legislative options
which would have the laudatory effect
of reducing the burdens borne by
Connecticut's taxpayers. However,
nothing in the record indicates that it
was impossible for the legislature to
reduce state spending without
abrogating the state's contract with
the plaintiffs. Indeed, common sense
suggests the existence of other
options; the legislature must have had
available to it myriad alternative ways
of exercising fiscal restraint without
- Al34 -
affecting constitutionally protected
rights.
This is not a case where the
legislature found itself confronted by
a dire fiscal emergency which impaled
the state on the horns of the dilemma
of either repudiating its contractual
obligations or ceasing to perform such
basic governmental functions as
protecting its citizens’ health, safety
and welfare. This case is thus readily
distinguishable from Ropico, Inc. v.
City of New York, 425 F.Supp. 970
(S.D.N.Y. 1976) and Subway-Surface
Supervisors Association v. New York
City Transit Authority, 44 N.Y.2d. 101,
404 8. 7.6.20):323,.$ 373. 8.2.20 364
(1978), two important New York cases
which recently upheld state legislation
Challenged under the contract clause.
- Al35 -
In Ropico, which was decided before
the Supreme Court's decision in United
States Trust Co., the court upheld
against a contract clause challenge
state legislation which suspended for a
three-year period repayment of the
principal on certain short-term notes
issued by the City of New York, but
which permitted the affected
noteholders either to exchange their
notes for the longer-term obligations
of a special state agency (the
Municipal Assistance Corporation) or to
obtain interest on their notes until
the principal was repaid.*® In
Subway-Surface Supervisors Association,
the court held that the contract clause
did not prohibit a temporary freeze on
the wages of New York City employees as
part of another statute designed to
alleviate the city’s fiscal emergency.
- Al36 -
The statutes under challenge in
Ropico and Subway-Surface Supervisors
Association were both passed by the New
York Legislature, in extraordinary
sessions, on the basis of detailed
legislative findings of fact which
spelled out the conditions that
constituted a grave emergency,
threatening the city’s very existence
7
as a viable governmental entity. °*
In both Ropico and Subway-Surface
Supervisors Association, the
legislation under attack was necessary
to prevent an unparalleled financial
Crisis from, in the words of the
Legislature, “almost permanently
destroy[ing] the fiber of the
048
city. Connecticut was not backed
into any such corner in 1975;*’ the
General Assembly which passed the
legislation under attack in this action
was not forced to choose between
abrogating its contractual commitments
Or permitting the state to become
insolvent, and thereby unable to
continue to function as a viable
governmental entity.
Accordingly, the court finds that
the retroactive application of the 1975
Act to the plaintiffs cannot be
justified, under the United States
Trust Co. test, aS an impairment of
contractual obligations which was 7
necessary to achieve the state's
concededly legitimate and important
purposes.
(b) Reasonableness
As applied to the plaintiff class,
the 1975 Act is not “reasonable in
light of the surrounding
circumstances,” as required by United
- Al38 -
States Trust Co. v. New Jersey, Supra,
42% US. GE 9a St BE. ok 582. *
The Court there rejected New Jersey's
argument that unforeseen changes
occurring after the adoption of a 1962
bondholders' covenant justified as
"reasonable" 1974 legislation which
repealed the 1962 covenant and impaired
the contractual obligations established
by that covenant. In doing so, the
Court indicated that unforeseen
subsequent circumstances might, in an
appropriate case, be sufficient to
demonstrate that a law impairing
pre-existing contractual obligations
was “reasonable in ight of the
Surrounding circumstances.” Referring
to El Paso v. Simmons, supra, the Court
wrote:
"There a 19th century statute had
effects that were unforeseen and
unintended by the legislature when
Originally adopted. As a result
speculators were placed in a
position to obtain windfall
benefits. The Court held that
adoption of a statute of limitation
[for the reinstatement rights of
purchasers of state land who had
defaulted on their interest
obligations] was a reasonable means
to ‘restrict a party to those gains
reasonably to be expected from the
contract’ when it was adopted. 379
U.S., at 315, 65 @3.Ce. 86-2072
United States Trust Co. v. New Jersey,
supra, 431 U.S. at 31, 97 O.06. 65 4502
(footnote omitted).
The application to this case of the
concept of unforeseen circumstances
giving rise to unintended “windfalls”
(as in El Paso), on the basis of this
court's decision in Fitzpatrick, is
troublesome. The pension benefits
granted to female employees after
Fitzpatrick cannot be deemed
unforeseeable “windfalls," because
Judge Clarie's decision did not change
the terms of their entitlement to such
benefits. However, it is arguable’'
- A140 -
that this characterization is
applicable to the benefits which the
sstate was required to pay male
employees as a result of Fitzpatrick.
Thus, the defendants might have
attempted to justify the 1975 Act as a
“reasonable” attempt to “'‘'restrict
[male members of the plaintiff class]
to those gains reasonably to be
expected from the contract’ when it was
adopted,” United States Trust Co.,
Suerea, 431 U.S. at 31, 97 S.Ct. at
1522, quoting El Paso v. Simmons,
Supre, 279 U.S. at 515, 85 S.Ct. at
587, and to prevent male plaintiffs
from reaping “windfalls." However,
such a construction would require the
court to uphold the 1975 Act in its
effect on males in the plaintiff class
(including men who were also members of
the plaintiff class in Fitzpatrick v.
Bitzer) but invalidate it as it applies
to female plaintiffs. A holding that
the contract clause permits the
impairment of Connecticut's obligations
to men, but not women, in the plaintiff
class would, of course, permit the
state to treat male plaintiffs in the
discriminatory manner which Judge
Clarie found unlawfui under Title VII.
Such disparate treatment of men and
women, explicitly forbidden by this
court's enforcement of Title VII in
Fitzpatrick, could not possibly be
regarded as “reasonable in light of the
Surrounding circumstances.”
Moreover, factors other than
"unforeseen circumstances” which have
been deemed relevant to the
"reasonableness" inquiry militate
against a finding that the 1975 Act was
reasonable as applied to the
plaintiffs. The effect of the 1975 Act
- Al42 -
on the plaintiffs would not be “simply
a temporary alteration of the
contractual relationships"™ in question,
Allied Structural Steel Co. v.
Spannaus, supra, 438 U.S. at 250, 98
S.Ct. at 2726. Rather, it would work
"a severe, permanent, and immediate
change in those
relationships--irrevocably and
retroactively." Id. Nor does the
scope of the 1975 Act, as it applies to
persons in the state's employ as of its
effective date, appear reasonable. The
statute does not apply equally to all
who were then in state service;
instead, it singles out those who would
not reach the-age for normal retirement
within the next five years. The
defendants have offered no
justification or explanation for the
decision to “grandfather in" some state
employees, while leaving the plaintiffs
subject to the new eligibility
requirements for pension benefits. C
Ph
Allied Structural Steel Co. v.
Spannaus, supra, 438 U.S. at 250, 98
S.Ct. at 2725.
Accordingly, the court cannot
conclude that the 1975 Act, as applied
to the plaintiffs, was a reasonable
method of furthering the state's
interests.
V. CONCLUSION
On the basis of the admitted and
stipulated facts, the court finds that
Connecticut and the members of the
plaintiff class were parties to a valid
and binding contract. Immediately
prior to the time the 1975 Act became
law, this contract required the state
to permit both male and female members
- Al44 -
of that class to retire on the terms of
the State Employees Retirement Act
which, before this court's decision in
Fitzpatrick, had applied only to female
employees. The court finds that the
1975 Act severely impairs the
obligations of this contract. Indeed,
although they have claimed that the
plaintiffs have no contractual rights,
the defendants have conceded that if
any such rights existed, the 1975 Act
impaired the state's contractual
obligations to the plaintiffs. That
impairment cannot be justified, under
the tests set forth by the Supreme
Court in United States Trust Co., as
either “necessary” to “serve an
important public purpose” or
“reasonable in light of the surrounding
Circumstances." The 1975 Act, as
applied to the plaintiffs, thus
unconstitutionally impaired the state's
contractual obligations.
This conclusion in no way affects
the constitutionality of the 1975 Act
insofar as it applies to employees who
entered state service after June 30,
1975. Nor does it prevent the members
of the legislature, as the duly elected
representatives of the people of
Connecticut, from enacting in the
future any legislation on the subject
of state employees’ pensions which
comports with their considered judgment
and wisdom on matters of public policy
and does not interfere with rights
protected by the Constitution or laws
»9€ the United States. In his opinion
in Fitzpatrick, Judge Clarie expressly
stated:
"Nothing herein shal
to interfere with t
Legislature performing its
constitutional function of freely
determining public policy, as it
pertains to deciding upon a uniform
retirement age for all men and
women employees of the State of
Connecticut in the future,
provid[ing] the same is carried out
without discrimination as to age or
benefits on the basis of sex."
Fitzpatrick v. Bitzer, supra, 390
F.Supp. at 290 (emphasis added). To
those words this court today only adds
the proviso, which inheres in our
constitutional system, that such
legislation as the state may enact on
this subject may not transgress the
limitations on state power, such as the
-ontract clause, which are embodied in
the United States Constitution
¢ 1intiff - t r cor >u airy
inted , permanent
t : e, requiring the
id ter the State
ement Act in a manner
tne pla Leeed &
contractual rights. The parties shall
settle within ten days an order
consistent with this memorandum of
decision, ensuring that the State
Employees Retirement Act is
administered in a way which protects
the contractual rights of every member
of the plaintiff class, and curing each
of the various types of injury which
the 1975 Act works upon their
constitutionally protected
expectations. The order shall further
provide for notice of this decision to
be sent to all members of the plaintiff
class and shall include a proposed form
of notice to the class.
It is so ordered.
- Al4d8 -
FOOTNOTES
390 F.Supp. 278 (D.Conn. 1974),
aff'd in part and rev'd in part on
grounds not relevant here, 519
F.2d 559 (2d Cir. 1975), aff'd in
not relevant here, 427 U.S. 445,
96 S.Ct. 2666, 49 L.Ed.2d 614
(1976).
42 U.S.C. Section 2000e et seq.
The appeal in Fitzpatrick (see n.l
Supra) was taken by the plaintiffs
and involved only the question
whether the Eleventh Amendment to
the United States Constitution
barred recovery by them of
monetary damages and attorney's
fees. The Supreme Court
ultimately held that Connecticut's
immunity under the Eleventh
Amendment was no obstacle to
either form of relief. There was
no appeal from Judge Clarie's
holding in Fitzpatrick that the
Connecticut statute violated the
rights of male employees under the
Title VII, or from the injunction
which he issued against the state
officials named as defendants in
Fitzpatrick. See Fitzpatrick v.
Bitzer, supra, 427 U.S. at 450n.7,
96 &.Ct. at 2666 n.7.
Stipulation Concerning Facts,
Filed March 26, 1980 §2.
u.m. Consett. eft 1, 636, <i. 1.
Brief in Opposition to Plaintiffs'
Motion for Summary Judgment, P. 4.
quoting Beford v. White, 106 Colo,
439, 444, 106 P.2d 469, 472
(1940). The quoted language has
long since been repudiated by the
Supreme Court of Colorado. See
Pension & Relief Board v. Bills,
148 Colo. 383, 388-89, 366 P.2d
581, 583-84 (1961); note 33, infra.
See p. 529, infra.
The class members were duly
notified of the pendency of this
action and of their rights with
respect to the litigation by means
of notices distributed with
payroll checks to state employees
on April 20, 1979. Affidavit of
Sidney D. Giber, Assistant
Attorney General of the State of
Connecticut, filed October 29,
1979.
Under the law in force immediately
prior to the effective date of the
1975 Act, the normal retirement
ages were 50 for employees with 25
years of continuous state service
and 55 for employees with at least
10, but less than 25, years of
continuous state service. The
1975 Act raised the normal
retirement ages to 55 and 60,
respectively, Conn.Gen.Stat.
§§5-162(c), 5-162(d), except for
employees who would reach, prior
to June 30, 1980, the normal
retirement ages previously in
force. Conn.Gen.Stat. §5-163a.
The Treasurer's duties include the
receipt and disbursement of public
monies, Conn. Const. art. 4, §22,
including monies in the State
Employees Retirement Fund,
Conn.Gen.Stat. §5-156.
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”
4
The Comptroller is responsible for
the adjustment and settlement of
public accounts, Conn. Const. art.
4, §24, including accounts for the
State’s pension systems, see
Conn.Gen.Stat.§§5-156(b), 5-159.
Excepted are elected officials and
their appointees (who may
nonetheless choose to join the
System), Conn.Gen.Stat.§5-160(b),
judges (who may, in the special
circumstances enumerated in
Conn.Gen.Stat.§5-166a, choose to
join the system, rather than a
special retirement system for the
judiciary),
Conn.Gen.Stat.§5-160(c), and
teachers in state service,
Conn.Gen.Stat.§5-160(g). The
latter must join either the State
Employees Retirement System or a
separate retirement system for
teachers. Id.;
Conn.Gen.Stat.§5-158f.
Memorandum from JoAnn S. Mogensen,
Chief of the Retirement Division
of the Office of the Comptroller,
State of Connecticut, to Sidney D.
Giber, Assistant Attorney General
of the State of Connecticut, March
10, 1980, p. 1 (hereafter referred
to as the "“Mogensen Memorandum"),
annexed as an exhibit to the
Stipulation Concerning Facts,
filed March 26, 1980.
Mogensen Memorandum, p. 2. If the
accrued interest were not credited
to employees’ contributions, the
range would be from 6.9% to 12.8%
of benefits. Id.
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The absence of a genuine issue of
material fact is, of course, a
prerequisite to the availability
of summary judgment under Rule 56,
Fed.R.Civ.P. Although the parties
admitted and stipulated to a
fairly complicated set of facts,
the court would have been greatly
assisted had the parties prepared
and filed the statements required
by Rule 9(d) of the Local Rules
Governing Civil Procedure in this
District. That rule requires the
party moving for summary judgment
to include in his moving papers “a
separate, short and concise
statement of the material facts as
to which the moving party contends
there is no genuine issue to be
tried," and requires the opposing
party to file “a separate, short
and concise statement of the
material facts as to which it is
contended that there exists a
genuine issue to be tried." *
Because Rule 9(d) statements
facilitate the determination
whether summary judgment is an
appropriate remedy, compliance
with the rule is mandatory.
This provision also permitted
female employees with at least
five but less than ten years of
state service to retire with
pension benefits at age 65; no
male employee could retire with
less than ten years of state
service under this provision,
regardless of his age. See former
Conn.Gen.Stat.§5-162(d)(1)(A).
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The 1972 amendment, Pub.L. No.
92-261, §2, brought, state
employees within the protection of
Title VII's prohibition of sex
discrimination in employment.
Fitzpatrick v. Bitzer, supra, 427
U.8. @t 4469 .2, 96 3.Ct. at. 2668
n.2. In view of his decision
under the federal statute, it was
unnecessary for Judge Clarie to
consider the plaintiffs' claim
that the Connecticut statute also
violated the equal protection
Clause of the Fourteenth Amendment
to United States Constitution.
Fitzpatrick v. Bitzer, supra, 390
r. Supp. at 290; id. 427 U.S. at
449 8.3, 38 3.48 .. St 2668 4.3.
See n.3, supra. The Supreme
Court's decision in Fitzpatrick
held that the retired members of
the plaintiff class were entitled
to “an award of retroactive
retirement benefits as
compensation for losses caused by
the State's discrimination,"
Fitzpatrick v. Bitzer, supra, 427
U.S. at 449-56, 96 S.Ct. at 2667,
as well as reasonable attorney's
fees, id. at 456-57, 96 S.Ct. at
2671. As a result of this
holding, the retired plaintiffs in
Fitzpatrick received compensatory
payments for the period commencing
March 24, 1972 (the effective date
of the 1972 amendments to Title
VII), which left them with
benefits identical to what they
would have received had they been
permitted to retire at the ages
formerly applicable only to
women. Mogensen Memorandum, p. l.
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Stipulation Concerning Facts,
filed March 26, 1980, ¥f2.
The facts recounted in this
section of the court's opinion
were established by the
dGefendants' failure to respond to
the plaintiffs’ Request for
Admissions, filed July 13, 1979.
Under Rule 36(a), Fed.R.Civ.P.,
the failure of a party served with
such a request to respond within
thirty days of service constitutes
an admission of the matters
requested. According to Rule
36(b), Fed.R.Civ.P., “[La]ny matter
admitted under this rule is
conclusively established unless
the court on motion permits
withdrawal or amendment of the
admission." Counsel for the
defendants has not moved to
withdraw or amend the admissions.
Nor have the defendants attempted
to file a response, however
untimely, to the plaintiffs'
Request for Admissions.
Accordingly, the court deems these
facts admitted and conclusively
established for the purposes of
this litigation.
See Answer 4, admitting relevant
portions of Amended Complaint ¥14.
Conn.Gen.Stat.§5-163a.
Section 5-163(c), which is headed
"(eJarly retirement," provides
that an employee, not covered by
Conn.Gen.Stat.§5-163a, “whose
state service is terminated
because of economy, lack of work
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Or abolition of his position, or
who, being an army or air national
guard technician ‘in the military
department, is dismissed by reason
of separation from the national
guard because of age, after he has
completed twenty-five years of
State service, but before he has
reached his fifty-fifth birthday,
Shall be entitled to a retirement
income."
Section 5-166 applies to employees
who leave state service before
they become eligible for
retirement, “but after completing
at least ten years of state
service, of which at least five
years shall have immediately
preceded the date of .. . leaving
State service," unless they are
covered by Conn.Gen.Stat.§5-163a.
Conn.Gen.Stat.§5-166(a).
The facts relating to the named
plaintiffs are drawn from 4415-21
of the plaintiffs’ Amended
Complaint, which are admitted in
%3 of the defendants' Answer.
The plaintiffs also allege that
the 1975 Act violates their rights
under the due process and equal
protection clauses of the
Fourteenth Amendment. However,
these points were neither
emphasized in the parties' briefs
nor stressed at oral arqument.
See Transcript of Oral Argument on
Plaintiffs’ Motion for Summary
Judgment, Feb. 7, 1980, p. 4. In
view of the court's conclusion
that the plaintiffs' rights under
the contract clause were violated
by the 1975 Act, it is unnecessary
to consider the merits of the
Fourteenth Amendment claims which
the plaintiffs have not pressed.
In El Paso, the Court upheld a
Texas statute which limited the
reinstatement rights of those who
had purchased land from the state
and had defaulted on their
interest payments by requiring
that such persons make application
for reinstatement within five
years of default; prior law
included no such statute of
limitations. Rejecting the
argument that the contract clause
forbade such legislation, the
Court held that “it is not every
modification of a contractual
promise that impairs the
obligation of contract under
CGGUCSE LON -. a. ss a”. Bk. Pee. ¥.
Simmons, supra, 379 U.S. at
906-07, 85 S.Ct. at 582.
In Blaisdell, the Supreme Court
upheld against a contract clause
Challenge a’temporary mortgage
moratorium enacted by the
Minnesota legislature in the
depths of the Great Depression.
The Court gave effect to the
“principle of harmonizing the
constitutional prohibition with
the necessary residuum of state
power,” 290 U.S. at 435, $4 §.Ct.
at 239, to deal with a grave
economic crisis by holding that,
in the circumstances presented,
the limited impairment of
contractual obligations caused by
the mortgage moratorium was
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constitutionally permissible.
ash In another context, the Supreme
Court of the United States
recently made a similar
observation:
"A pension plan assures
employees that by devoting a
large portion of their working
years to a single employer,
they will achieve some
financial security in their
years of retirement. By
rewarding lengthy service, a
plan may reduce employee
turnover and training costs
and help an employer secure
the benefits of a stable work
force."
Alabama Power Co. v. Davis, 431
U.S. 381i, 594, S97 St.ct. 2002,
2009, 52 L. Ed.2d 595 (1977)
(holding that the Military
Selective Service Act of 1967
required an employer to grant a
veteran returning from military
service credit toward his pension
for time spent in the military).
As the court noted in Borden v.
Skinner Chuck Co., supra, 21 Conn.
Supp. at i190, 150 A.2d at 610,
this principle was applied in
Connecticut as early as Tilbert v.
Eagle Lock Co., 116 Conn. 357,
361-62, 165 A. 205, 207 (1933), a
case involving employee death
benefits. In Tilbert, a widow
brought an action to recover
benefits under a “certificate of
benefit" issued to her late
husband by his employer. The
Supreme Court of Errors held that
the plaintiff stated a good cause
of action under Connecticut's law
of contracts, even though the
employer, in a contemporaneous
document explaining its offer of
the “certificate of benefit,”
expressly stated that “(t)]his
benefit plan being voluntary on
the part of Eagle Lock Co., it is
understood that it constituted no
contract with any Employee or any
beneficiary, and confers no legal
rights on him or them,” 116 Conn.
at 360, 165 A. at 207. The court
found that there was consideration
for the supposedly gratuitous
offer of a death benefit,
explaining:
“(A] prime purpose of the
granting of the benefits was
to secure the good will,
loyalty, and efficiency of the
defendant's employees and
especially, through the
progressive premium placed on
long-continued service, to
minimize labor turn-over and
obtain the advantages of
experienced operatives. The
attainment of these purposes
constituted a benefit or
advantage received by the
defendant, who must be assumed
to have requested it because
it desired it and regarded it
as beneficial to its
interests. Tilbert remained
in the employ of the defendant
more than seven years after
receiving the certificate. By
so doing he manifested his
acceptance of the promise,
forbore his right to terminate
his employment and engage
elsewhere, and conterred he
benefit which the defen lant
sougnt. .. -« The essential f a
consideration are satisfiec. .
116 Conn. at 361-62, 165 A. at
(citations omitted).
Section 90 of the Sec nd
Rest yztement DI Vi le P Lr pe rtine t
part:
.
Z
Inducing Actio! [ rebea é
A promise which the pl!
should reasonably expect ¢
induce oe 2 n r f Hhearar}r ‘
and whicn 1O€ naouce ]
—wction I rpeatral
b ndi - rs ’ ‘ P .
a» + » ti » & s .
ivoided nly by the
ent rce eT > f - Mis
seg., somehow negat
existence f any tract
state ene y 5 pr t t
. 1975, ts effe > ; >
Brief in O; sit ee E t
Motion for Su ary igmer
l-3 While the ect t
bargaining law ¢f le f t
f contract between tne tate
its employees, it does . a [
t act retroact ely and ¢t
1f the state'‘s ntracts wit!
employees, reviously made, int
something less thar ntracts
The court ther )
connection between the collective
bargaining legislation of 19
the issue of whether previous
legislation gave rise to
contractual obligations.
See Brief in Opposition to
Plaintiffs‘ Motion for Summary
Judgment, pp. 3-5. Cf. Pennie v
Reis, 132 U.S. 464, 471, 10 S.Ct.
149, 151, 33 L.Ed. 426 (1889)
(interest of police officer in
employee benefit fund was “a mere
expectancy, created by the law,
and [is] liable to be revoked or
destroyed by the same authority”
until the happening of the
conditions established by law).
Among the cases upon which the
defendants rely for the
proposition that public employees’
pensions are mere gratuities,
conferring no contractual rights,
is Board of Trustees v. People ex
rel. Behrman, 119 Colo. 301, 203
P.2d. 490, (1949). Behrman, was,
however, expressly overruled on
this point in Police Pension &
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=
In Yeazell v. Copins, 98 Ariz.
169, 242, 402-7220 238i. 343
(1965), the court held that
Arizona's statutory provisions
for public employees’ pensions
were contractual in nature.
The court rejected the
argument that the pension
benefits were gratuities, in
part because the Arizona
legislature, like
Connecticut's, was
constitutionally /forbidden
from conferring gratuities on
state employees.
As long ago as 1956, a
commentator who surveyed this
field of law observed that
"the tendency today is to
consider a pension plan a
contract," and to reject “the
gratuity theory of pensions."
Note, Contractual Aspects of
Pension Plan Modification, 56
Colum. L.R@v. 251, 235 €21996) .
In addition to the states
whose courts have rejected the
“gratuity” concept, several
states, of which New York was
the first, have adopted
constitutional provisions
declaring public employees'
pensions benefits to be
contractual in nature. See
a.%. Const. act. ¥, S7,
("membership in any pension or
retirement system of the state
or a Civil division thereof
shall be a contractual
relationship, the benefits of
which shall not be diminished
Or impaired"); Alaska Const.
art XII, §7; Hawaii Const.
act... Bats Sai iis Ceoaee. Ort. 13,
SS; Bien. Conét. ast. 1%; 324. $j$in
Massachusetts, a statute
establishes as contractual the
relationship between the state and
members of its public employees'
retirement system. Mass. Gen.L.
cn. 32,. S25¢3)... Tae tact that, in
other jurisdictions, prior case
law based on the “gratuity" theory
has been overruled by
constitutional amendments or
statutes is no impediment to this
court's determination that
Connecticut's common law of
contracts requires a rejection of
the "gratuity" theory. The
inherent but unexercised power of
a legislature or constitutional
convention to discard an outmoded
judge-made doctrine is no obstacle
to a judicial decision that
overrules such a doctrine, see
generally B. Cardozo, The Nature
of the Judicial Process 127-28,
134-38, 149-58 (1921), much less a
bar to a decision--such as this
one--which restates and
interprets, rather than revises,
the state's common law.
See pp. 547-548, infra.
In view of the clear holding in
Fitzpatrick that the provisions of
state law applicable to men
violated Title VII, those
provisions must, under the
Supremacy clause of the United
States Constitution, yield to the
requirements of the federal
statute. See Stryker v. Register
Publishing Co., 423 F.Supp. 476,
479 (D. Conn. 1976) (Newman, J.).
- Al63 -
See pp. 532-533 & N. 20, Supra.
At oral argument on the pending
motion, the court asked
defendants' counsel whether,
assuming arguendo the existence of
a contractual obligation, the 1975
Act impaired the state's
obligation to its employees.
Counsel responded:
"Yes, I think I would have to
concede that asking a
particular state employee to
work five years more would be
an impairment of the contract.”
Transcript of Oral Argument on
Plaintiffs‘ Motion for Summary
Judgment, Feb. 7, 1980, p. 37.
The dual standard of judicial
scrutiny employed by the Court was
suggested in Note, The
Constitutionality of the New York
Municipal Wage Freeze and Debt
Moratorium: Resurrection of the
Contract Clause, 125 U.Pa.L.Rev.
167, 184-91 (1976); see United
States Trust Co. v. New Jersey,
supra, 431 U.S. at 26 n.25, 97
S.ct. at 1519 n.25. Several
commentators have expressed the
view that this dual standard
breathes new life into the
contract clause, at least in cases
involving contracts to which
states or their subdivisions are
parties. See, e.g., Note, The
Contract Clause: Is There Life
After Death?, 30 Baylor L.Rev. 191
(1978); Comment, Constitutional
Law: Contract Clause Protection
of Municipal Bond Obligations, 29
U.Fla.L.Rev. 1000, 1010 (1977).
While, as a general proposition,
- Al64 -
this may be accurate, the point
should not be overstated. Even in
the immediate aftermath of Home
Building & Loan Association v.
Blaisdell, supra--the case which
is often considered to have
Signaled the demise of the
contract clause--the Supreme Court
voided state laws which
unreasonably and unnecessarily
impaired contractual obligations.
See, e.g., W.B. Worthen Co. v.
Kavanaugh, 295 U.S. 56, 60-63, 55
ns ey eee, 296-5598, 79 L.Ed.
1298 (1935); W.B. Worthen Co. v.
Thomas, 292 U.S. 426, 432-34, 54
Saues eaes oeeeo.9o, 76 L.Ed. 1344
(1934). See generally B. Wright,
The Contract Clause of the
Constitution 111-19 (1938).
Justice Blackmun's observation
that “({a] governmental entity can
always find a use for extra money,
especially when taxes do not have
co me geneecq, 431 U.S. at 26, 97
S.Ct. at 1519, is strikingly
reminiscent of the remarks of the
sponsor of the amended bill which
became the 1975 Act: "I'm sure
this House will be able to find a
place to use [the] three to five
million dollars [to be saved]
should this amendment pass."
General Assembly Proceedings
1975: House of Representatives
6346 (remarks of Rep. Wright).
The Supreme Court's own
straightforward explanation of the
need for closer scrutiny where the
state has impaired its own
contractual obligations is thus
Orne out by the record before the
court in this case. Clearly, the
- Al65 -
A
4
rationale for careful examination
of the legislature's action in a
case such as this has nothing to
do with the existence or
intimation of “legislative
venality or corruption," as one
commentator has suggested. See
The Supreme Court, 1976 Term, 91
Harv.L.Rev. 70, 89 (1977).
Because this court does not review
the merits or wisdom of the
state's decisions on matters of
public policy in determining the
constitutionality of the statute,
it cannot fairly be said that the
application of the United States
Trust Co. tests revives “the
heyday of economic due process
associated with Lochner v. New
Yock, i198 U.8. 39, tas Btu. 239,
49 L.Ed. 937] (1905), and similar
cases long since discarded,"
United States Trust Co. v. New
Jersey, supra, 431 U.S. at 60-61,
$7 &.Ct. at iS37 (Srennan, d.,
dissenting). Lochner and similar
decisions were based on the
premise, no longer tenable in
modern constitutional
jurisprudence, that the
Constitution forbids the enactment
of any legislation designed to
achieve certain goals. For
example, in Lochner, the Court
held that it was not within a
state's power to regulate the
hours a baker might be required to
work, on the ground that the due
process clause made this an
impermissible purpose of state
legislation. See generally L.
Tribe, American Constitutional Law
- Al66 -
§8-4 (1978). However, the
contract clause analysis
undertaken here does not prohibit
the state from exercising its
sovereignty to achieve any
particular goal. The inquiry
which the court undertakes is only
an examination of the necessity
and reasonableness of the means
chosen to achieve concededly
proper, and indeed important,
legislative ends. The court does
not in any way second-guess the
legality or desirability of the
purposes which the General
Assembly sought, as a matter of
public policy, to advance in
adopting the 1975 Act.
In fact, some of the provisions of
the 1975 Act have no effect on the
former policy of permitting
retirement with benefits at age
50. See, e.g.,
Conn.Gen.Stat.§5-162(d)(1)
(raising age from 55 to 60 for
certain employees). The
impairment of contractual
obligations which result from the
application of those provisions to
members of the plaintiff class is
wholly unrelated to the goal of
putting an end to retirements at
age 50. Such sections of the
statute can be upheld, if at all,
only on the theory that they were
necessary and reasonable means of
achieving the state’s goal of
Saving money.
Clearly, no provision of the
United States Constitution or of
federal law requires Connecticut
to allow its employees to retire
~« WI6T.<
with pension benefits at age 50
or, for that matter, any other
age. This court's decision in
Fitzpatrick v. Bitzer held only
that the state, having already
granted certain females in its
employ the right to retire with
benefits at age 50, was required
by Title VII to give similarly
Situated males the identical
right. Nothing in Fitzpatrick,
see 390 F.Supp. at 290, and indeed
nothing in this opinion, limits
the legislature's discretion to
change retirement age on a
prospective and non-discriminatory
basis in accordance with its
policy judgments. Because it was
Connecticut's own legislative
decision that permitted retirement
at age 50, and conferred
contractual rights to retire at
that age upon some employees, the
state cannot complain that it is
Onerous to be held to that
contract or its consequences. Any
resulting injury is self-inflicted.
In Flushing National Bank v.
Municipal Assistance Corp., 40
N.¥.20 73k, 320 Betumeee 2a, Soe
N.E.2d 848 (1976) (Breitel, C.J.),
the New York Court of Appeals held
that the debt moratorium statute
which was also the subject of the
Ropico litigation violated article
VIII, section 2 of the New York
Constitution, which prohibits any
city in the state from contracting
any indebtedness without pledging
its “full faith and credit" for
repaying the debt. Although the
lower courts in Flushing National
- Al68 -
Bank had held that the statute
violated neither the state
constitution nor the contract
clause of the United States
Constitution, the Court of
Appeals, New York's highest
tribunal, found it unnecessary to
reach the federal constitutional
question in light of its holding
under the New York Constitution.
Flushing National Bank v.
Municipal Assistance Corp., supra,
40 8.%.42G@ @¢t 739, 390 W.Y¥.S.2d at
26, 3090 8.8.46 &t 854.
the preamble to the New York State
Financial Emergency Act for the
City of New York, 1975 N.Y. Laws,
ch. 868, §1, enacted in September
1975 and challenged in
Subway-Surface Supervisors
Association, provides in part:
“It is hereby found and
declared that a financial
emergency and an emergency
period exists in the City of
New York. The city is unable
to obtain the funds needed by
the city to continue to
provide essential services to
its inhabitants or to meet its
obligations to the holders of
outstanding securities.
Unless such funds are obtained
the city will soon (i) fail to
pay salaries and wages to
employees and amounts owed
vendors and suppliers to the
city, (ii) fail to pay amounts
due to persons receiving
assistance from the city and
(iii) default on the interest
and principal payments due the
- Al69 -
holders of outstanding obligations
of the city.
If such failures and
defaults were to occur, the
effect on the city and its
inhabitants would be
devastating: (1) unpaid
employees might refuse to
work; (2) unpaid vendors and
suppliers might refuse to sell
their goods and render
services to the city; (3)
unpaid recipients of public
assistance would be unable to
provide themselves with the
basic necessities of life; and
(4) unpaid holders of city
Obligations would seek
judicial enforcement of their
legal rights as to city
revenues. These events would
effectively force the city to
stop operating as a viable
governmental entity and create
a clear and present danger to
the health, safety and welfare
of its inhabitants.
The difficulties of
finding solutions to such
events would be compounded by
the likelihood that the city,
as well as the municipal
assistance corporation for the
city of New York, would be
foreclosed from seeking funds
in the public markets. The
elimination of the public
markets as a source of funds
would leave the city with no
foreseeable way to refund its
outstanding short-term
indebtedness. Thus the city
- Al70O -
might be unable for an extended
period to cure default on its
outstanding obligations and that
event could almost permanently
destroy the fiber of the city.
x x x
This situation is a
disaster and creates a state
of emergency. To end this
disaster, to bring the
emergency under control and to
respond to the overriding
state concern described above,
the state must undertake an
extraordinary exercise of its
police and emergency powers
under the state constitution,
and exercise controls and
supervision over the financial
affairs of the city of New
York, but in a manner intended
to preserve the ability of
city officials to determine
programs and expenditure
priorities within available
financial resources."
x x .
(emphasis added).
In November 1975, the New York
Legislature, at another
extraordinary session, adopted the
legislation that was attacked in
Ropico, the New York State
Emergency Moratorium Act for the
City of New York. This statute
included a preamble, 1975 N.Y.
Laws, ch. 874, §1l, expressing a
legislative finding that the
city’s fiscal emergency had
seriously deteriorated since the
previous special legislative
session:
- Al7l -
“It is hereby found and declared
that the grave public emergency
found and declared to exist by the
legislature in adopting the New
York State Financial Emergency Act
for the City of New York has
dramatically worsened in the last
two months. Today, not only is
the City of New York threatened
with default on its outstanding
obligations, but financially sound
agencies of the state itself are
similarly threatened becatse of
public fears about the effects of
default by the city.”
New York State Financial Emergency
Act for the City of New York, 1975
N.Y. Laws, ch. 868, §1.
In the course of the brief debates
which preceded the adoption of the
1975 Act by the General Assembly,
several legislators alluded to New
York City’s fiscal crises, arguing
that unless Connecticut began to
exercise fiscal restraint in
administering its pension system,
it might subsequently find itself
in the dire straits into which New
York City had already fallen.
See, e.g., General Assembly
Proceedings 1975: House of
Representatives 6348 (remarks of
Rep. Dice); id. at 6351 (remarks
of Rep. Nevas). Such occasional
invocations of New York City’s
grave difficulties were apparently
designed to sound an alarm for the
future, rather than to describe
the financial condition of
Connecticut in 1975. Nothing in
the record of the General Assembly
- Al72 -
proceedings relating to the 1975
Act suggests that the financial
problems of this state were in any
sense comparable to the New York
City fiscal crisis, or that the
legislation enacted by the General
Assembly was part of a
comprehensive program to remedy or
prevent any such crisis in
Connecticut. It is noteworthy in
this regard that the 1975 Act was
not accompanied by legislative
findings of imminent financial
catastrophe, such as those
reproduced in note 47, supra. See
also Home Building & Loan
Association v. Blaisdell, 290 U.S.
398, 420-21, 421 n.3, 444-45, 54
S.C&. 231, 233 a.3, 242, 76 L.84.
413 (1934) (crediting, and relying
upon. express findings of
legislature concerning economic
emergency). Significant, too, is
the fact that the defendants have
not argued that the present
condition of Connecticut's
finances militates against a
judgment for the plaintiffs.
Indeed, the defendant state
officials have not called to the
court's attention any facts
concerning the impact on the
state's finances of a decision
upholding the plaintiffs’
challenge to the application of
the 1975 Act to them.
The “reasonableness” test may well
be, as one critic of United States
Trust Co. has written, “redundant”
in light of the apparently more
searching inquiry, also
contemplated by United States
- Al73 -
Trust Co., into the necessity of
the impairment of contractual
obligations. See The Supreme
Court, 1976 Term, 91 Harv.L.Rev.
70, 87 (1977); see also United
States Trust Co. v. New Jersey,
Supra, 431 U.S. at 55 n.17, 97
S.Ct. at 1534 n.17 (Brennan, J.,
dissenting). The court, however,
declines to ignore this test,
recently set forth by the Supreme
Court, even though its
determination that the 1975 Act
does not meet the stringent
“necessity” test may technically
relieve the court of the need to
examine the reasonableness of the
legislation.
Neither in their briefs nor at the
hearing on this motion did the
defendants offer any arguments in
support of the necessity or
reasonableness of the 1975 Act, as
applied to the plaintiffs.
Indeed, the only question
presented by the instant motion
which defendants’ counsel
addressed was the preliminary
inquiry into whether a contract
existed.
9000H
- Al74 -
Karen PINEMAN et al.,
Plaintiffs-Appellees,
V .
William G. OECHSLIN et al.,
Defendants-Appellants
No. 376, Docket 80-7562.
United States Court of Appeals,
Second Circuit.
Argued Nov. 17, 1980.
Decided March 16, 1981.
Plaintiffs brought suit challenging
constitutionality of state of
Connecticut's revision of its State
Employees Retirement Act to conform to
requirements of federal civil rights
law. The United States District Court
for the District of Connecticut, Jose A.
Cabranes, J., 494 F. Supp. 525, declared
revision of Act impaired state's
contractual obligations in violation of
contract clause of the United States
Constitution, and defendants appealed.
Al75 -
The Court of Appeals, Newman, Circuit
Judge, held that abstention was
appropriate in suit so that state
courts could be given opportunity to
adjudicate contract law aspect of
plaintiffs’ claim, even though federal
courts, thereafter resolving the
constitutional issue, would not be
obliged to give state court ruling the
conclusive deference that abstention
normally entails.
Vacated and remanded.
Peter W. Gillies, Deputy Atty,
Gen., Hartford, Conn. (Carl R. Ajello,
Atty. Gen., Bernard F. McGovern, Jr.,
Asst. Atty. Gen., and J. Sarah Posner,
Asst. Atty. Gen., Hartford, Conn., on
brief), for defendants-appellants.
Paul W. Orth, Hartford, Conn.
(Austin Carey, Jr., Harry Franklin,
Robert Krzys, Eleanor K. May and
Hoppin, Carey & Powell, Hartford,
» £16.
Conn., on brief), for
plaintiffs-—appellees.
Robert F. McWeeny and Fleischman,
Sherbacow, McWeeny & Cohn, Hartford,
Conn., submitted a brief for
Connecticut State Federation of
Teachers, AFT, AFL-CIO, as amicus
curiae.
Before LUMBARD, NEWMAN, and KEARSE,
Circuit Judges.
NEWMAN, Circuit Judge:
This appeal concerns the
constitutionality of the State of
Connecticut's revision of its State
Employees Retirement Act, Conn. Gen.
Stat. §5-152 et seq., to conform to the
requirements of the federal civil
rights laws. The District Court for
the District of Connecticut (Jose A.
Cabranes, Judge) struck down the
revisions for impairing contractual
obligations in violation of the
«< RETT +
Contract Clause of the United States
Constitution.?+ Pineman v. Oechslin,
494 F. Supp. 525 (D.Conn.1980). We
vacate and remand to allow the state
courts an initial opportunity to decide
the important question of state law at
issue in this lawsuit.
Until 1974 a Connecticut state
employee's eligibility for pension
benefits varied according to gender;
women with 25 years of service were
eligible for retirement with full
benefits at age 50, while men with the
same length of service became eligible
at age 55, Conn.Gen.Stat. §5-162(c) (1)
(amended 1975); for employees with 10
to 25 years of service, the eligibility
age for retirement with full benefits
was 55 for women and 60 for men,
Conn.Gen.Stat. §5-162(d)(1) (amended
1975). Similar five-year eligibility
differences, based on gender, existed
tk oe
for reduced pension benefits, which
were available under certain
circumstances, Conn.Gen.Stat.
§§5-163(c) and 5-166(a) (amended 1975),
and the tables by which benefits were
calculated ensured that a female
retiree received benefits equal to
those received by a male retiree five
years her senior, Conn.Gen.Stat.
§5-162(d)(3) (amended 1975).
In 1974 these five-year retirement
age differentials were found to
discriminate against men in violation
of Title VII of the Civil Rights Act of
1964, 42 U.S.C. §2000e et seq. (1976).
Fitzpatrick v. Bitzer, 390 F. Supp. 278
(D.Conn.1974). In order to remedy that
discrimination, the State legislature
amended the retirement statute in 1975
tc equalize the terms and benefits of
the retirement system by raising the
retirement eligibility ages for female
= Ri?9- —
employees so that they equaled the ages
required for male employees. P.A. No.
75-531 (1975) ("the 1975 Act"). The
1975 Act established one retirement
eligibility age for each category of
eligible employee regardless of
gender.”
Plaintiffs-appellees, who represent
various classes of state employees,
challenged the constitutionality of the
1975 Act under the Contract Clause for
impairing the State's alleged
contractual obligation to provide them
with benefits at the retirement ages
previously established. ° By raising
the ages, the State effectively reduced
benefits for female employees. This
reduction occurs either because the
length of time benefits are received is
shorter or the annual amount received
is less. Ail women who wish to retire
at the earliest possible age, set
- Al8s0 -
according to their length of service,
will find that this minimum eligibility
age is now increased by five years.
Most women who retire at the same age
at which they would have retired under
the prior system will find that their
annual benefit level is reduced.“
The District Court, on appellees'
motion for summary judgment, held that
the 1975 Act, as applied to appellees,
violated the Contract Clause. The
Court also noted that the Act's
prospective application to employees
who were not employed by the State on
the Act's effective date (June 30,
1975) was not challenged and, in any
event, would be constitutional.
In a thorough and carefully
considered opinion, the District Court
pursued traditional Contract Clause
analysis, first considering whether a
contractual obligation existed and, if
- Al18l -
so, whether the new statute was an
unconstitutional impairment of that
obligation. Allied Structural Steel Co
v. Spannaus, 438 U.S. 234, 98 S.Ct.
2716, 57 L.Ed.2d 727 (1978); United
States Trust Co. v. New Jersey, 431
U.S. 1, 97 §.Ct. 1503, 32 ameeeo oe
(1977); see Note, A Process-Oriented
Approach to the Contract Clause, 89
Yale L.J. 1623 (1980). Although no
Connecticut court had ever ruled on the
issue of when, or to what extent, the
pension rights of the state employees
vest, the District Court found, from a
combination of factors, that the
Retirement Act, as it existed prior to
the 1975 revision, created a
contractual obligation. The Court
emphasized state court decisions
concerning the contractual nature of
private-employer pension plans, Bird v.
Connecticut Power Co., 144 Conn. 456,
- Al82 -
133 A.2d 894 (1959); Borden v. Skinner
Chuck Co., 21 Conn.Sup. 184, 150 A.2d
607 (Super.Ct. 1958), and Wyper v.
Providence Washington Insurance Co.,
533 F.2d 57 (2d Cir. 1976) (construing
Connecticut law); the statutory
requirement that state employees
participate in, and contribute to, one
of the state retirement plans,
Conn.Gen.Stat. §§5-157, 5-160 and
5-161 (1975); and the reliance
interest of female employees who had
entered state service before the
enactment of the 1975 Act, expecting to
retire at the lower ages and receive
the established benefit levels. Having
found an enforceable state law
obligation, the District Court then
concluded that the 1975 revision
violated the Contract Clause because it
was neither necessary nor reasonable.
- A183 -
{1] In reviewing the District
Court's conclusions, > we focus our
attention on the initial question
whether the pre-1975 Retirement Act
created a contractual obligation
obliging Connecticut to maintain the
pre-1975 retirement ages for female
state employees who had not yet begun
receiving retirement benefits when the
Act was revised. This is an issue of
both state and federal law. Initially
it is a question of state law, for only
those arrangements enforceable as
contractual obligations under state law
are protected by the Contract Clause
against impairment. At the same time,
there is a federal law component to the
inquiry. Federal courts must have the
ultimate authority to determine, as a
matter of constitutional law, whether a
particular arrangement, of the sort
normally enforceable as a contract
under state law, is a contract
protected by the Contract Clause;
otherwise, states could always evade
the restraint of the Clause by
determining, through legislation or
adjudication, that an arrangement
previously regarded as a contract was
no longer enforceable. For this reason
the Supreme Court has frequently
instructed that federal courts must
independently determine the existence
of a contract and the nature and extent
of its obligations in order to decide
whether it enjoys the protection of the
Contract Clause. E.g., Irving Trust
Co, v. Day, 314 U.S. 566, 561, 62 S.Ct.
398, 401, 86 L.Ed. 452 (1942). This
federal law aspect of a Contract Clause
case is often the dominant inquiry,
because, at least in modern cases, the
state law status of a contract is
rarely in dispute. See Allied
- Alg5s -
Structural Steel Co. v. Spannaus,
supra; United States Trust Co. v. New
Jersey, supra; Veix v. Sixth Ward
Building & Loan Association, 310 U.S.
32, 60 S.Ct. 792, 84 L.Ed 1061 (1940);
Blaisdell, 290 U.S. 398, 54 S.Ct. 231,
78 L.Ed 413 (1934). In this case,
however, there is considerable
uncertainty as to the state law nature
of contingent pension benefits for
public employees.
No Connecticut court has yet ruled
on the precise question whether state
employees have vested pension rights
prior to becoming eligible to receive
benefits. The states that have
considered the question have adopted a
variety of approaches. Some states
hold that there are no rights under a
pension plan until the state employee
satisfies all the eligibility
requirements, including age and years
of service, for receiving benefits.
See, e.g., Etherton v. Wyatt, 155
Ind.App. 440, 293 N.E. 2d 43
(Ct.App.1973); McFeely v. Pension
Comm'n 8 N.J. Super., 575, 73 A.2d 757
(Law Div.1950); Creps v. Board of
Firemen’'s Relief & Retirement Fund
Trustees, 456, S.W. 2nd 434
(Tex.Civ.App.1970). Others hold that
pension rights vest unconditionally
upon employment. See, e.g., Yeazell v.
Copins, 98 Ariz., 109, 402 P.2d 541
(1965); N.Y. Const. art. V, §7. Still
others apply a liimited vesting concept,
holding that pension right vest upon
employment subject to “reasonable”
modification by the public employer.
See, e.g., Stork v. State, 62 Cal.App.3
465, 133 Cal. Rptr. 207 (1976); Police
Pension Relief Bd. v. Bills, 148 Colo.
383, 366 P.2d 581 (1961); City of
- Al87 -
>
Frederick v. Quinn, 35 Md.App. 626, 371
A.2d 724 (Ct.Spec.App.1977). And some
determine vesting rights according to
the nature of the employee's
contributions: voluntary plans vest
upon employment, but mandatory plans do
not vest. See, e.g., State ex rel.
Q'Donald v. City of Jacksonville Beach,
142 So.2d 349 (Fla.Dist.Ct.App.1962),
aff'd, 151 So.2d 430 (1963). Cf. United
States Railroad Retirement Bd. v.
Fritz,—vU.S.—, 101 S.Ct 453, 66
L.Ed.2d 368 (1980) (railroad retirement
benefits, established by federal law,
are not contractual); Flemming v.
Nestor, 363 U.S. 603, 610-11, 80 S.Ct.
1367, 1372, 4 L.Ed.2d 1435 (1960)
(social security benefits are not
contractual; Congress's reservation of
right to alter, amend, or repeal the
system simply makes express what is
implicit in the institutional needs of
the program).
- Al88 -
{2] In the absence of any
authoritative ruling by the courts of
Connecticut on the vesting of state
employee pension rights, both sides in
_\this case have relied on a small number
of Connecticut decisions on somewhat
related questions of pension law. Bird
v. Connecticut Power Co., supra; Borden
v. Skinner Chuck Co., supra; Fraser v.
City of Norwich, 137 Conn. 43, 75 A.2d
60 (1950); State ex rel. Herbert v.
Ryan, 16 Conn.Sup. 319
(Super.Ct.1949). The District Court,
analogizing from a decision in the
field of private pensions, Bird v.
Connecticut Power Co., supra, predicted
that Connecticut courts would recognize
contractual rights to public pensions
arising immediately upon entry into
state employment. We are not prepared
either to accept or to reject that
prediction. In our view abstention is
- Al89 -
appropriate to afford the state courts
an opportunity to adjudicate the
contract law aspect of appellees'
claim, even though the federal courts,
thereafter resolving the constitutional
issue, will not be obliged to give the
state court ruling the conclusive
deference that abstention normally
entails. See Atlantic Coast Line
Railroad. Co. v, Priliins, 332 U.S.
168, i70, 67 &.C. 131564, 1565, 91 L.Ed.
1977 (1947); Irving Trust Co. v. Day,
supra, 314 U.S. at 561, 62 S.Ct st 401;
Higginbotham v. City of Baton Rouge,
306 U.S. 535, 5336-39, 59 &.Ct 7OS, 706,
83 L.Ed. 968 (1939).
Despite the lack of the usual
conclusiveness of a state court
determination of state law, abstention
principles are fully applicable in this
case. The issues in this lawsuit
combine significant aspects of both the
- A190 -
Pullman® and Burford’ branches of
the abstention doctrine. The state
common law rule® governing the
vesting of public employee pension
rights is highly uncertain. The
subject matter, the fixing of
compensation benefits to state
employees, is of vital importance to
the State and its governmental
functioning. See National League of
Cities v. Usery, 426 U.S. 833, 96 S.Ct.
2465, 49 L.Ed.2d 245 (1976). State
autonomy and the relationship between
state and federal authority would be
impaired were the federal courts to set
state policy independently and follow
their own instincts as to state
contract law. Considerations of comity
that underlie our federal system of
government make abstention
appropriate. see Burford v. Sun Oil
C., 229 U.B. 315, 334, 334, GF S.CU.
- A191 -
1098, 1106, 1107, 87 L.Ed 1424 (1943);
Railroad Commission v. Pullman, 312
U.S. 496, 498, 501, 61 S.Ct 643, 645,
85 L.Ed. 971 (1941).
The District Court's judgment with
respect to the invalidity of the 1975
Act, as applied to persons employed
before June 30, 1975, is vacated and
remanded for further proceedings in
accordance with this opinion.” No
costs.
20731
- Al92 -
FOOTNOTES
1 The Clause provides: "No State
shall ... pass any ... Law impairing
the Obligation of Contracts ...." U.S.
Comee. Bee. £, SIC, cl. 1.
2 The 1975 Act adopted the
retirement ages formerly applicable
only to male employees, as the new,
uniform eligibility ages.
Conn.Gen.Stat. §§5-162(c), 5-162(d),
and 5-163(c) (1975). However, all
employees, both male and female, who
would reach the ages at which female
employees were eligible to retire under
the pre-1975 Act, within five years of
the effective date of the 1975 Act,
i.e., by June 30, 1980, were eligible
to retire at those lower ages.
Conn.Gen.Stat. §5-163a (1975).
3 Appellees also challenged the
1975 amendments to the State Employees
Retirement Act under the Due Process
and Equal Protection Clauses of the
Fourteenth Amendment. They alleged
that the amendments constituted a
taking of property-their contract
rights to pension benefits-without just
compensation, and an arbitrary and
irrational classification of
employees-one according to
birthdate-because employees who would
reach the former, lower retirement age
within five years of the enactment of
the amendments, by June 30, 1980, were
exempted from the higher retirement
eligibility ages established by the
amendments. Because the District Court
found that the 1975 amendments violated
the Contract Clause, it did not reach
the merits of these claims. Pineman v.
- A193 -
Oechslin, 494 F.Supp. 525, 536 n.26
(D.Conn.1980).
4 Benefits under the plan for
those retiring with less than 25 years
of service are dete
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