1. law, govt and politics

Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 1 of 21 PageID 6241
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
FORT WORTH DIVISION
RICHARD VAN HOUTEN JR., et al.
VS.
CITY OF FORT WORTH
§
§
§
§
§
CIVIL ACTION NO. 4:12-CV-826-Y
ORDER GRANTING MOTION FOR SUMMARY JUDGMENT
Before the Court is Defendant’s Amended Motion for Summary
Judgment (doc. 76). After review, the Court GRANTS the motion.
I.
BACKGROUND
Defendant City of Fort Worth (“the City”) offers its general
employees and police officers a defined-benefit pension plan known
as the Employees’ Retirement Fund of the City of Fort Worth (“the
Fund”). In 2012, the City adopted amendments to its retirement
ordinance, which would impact the Fund’s benefit calculation and
cost-of-living adjustments. The City then filed a declaratoryjudgment action in state court, seeking an adjudication that the
amendments complied with Article XVI, Section 66(d) of the Texas
Constitution, which protects benefits accrued by members of a nonstatewide retirement system against reduction or impairment.
Shortly thereafter, the Fund removed the state-court action,
and two police officers participating in the Fund, plaintiffs
Richard Van Houten Jr. and Stephen Hall, filed the instant federal
lawsuit claiming that the ordinance violated various provisions of
the United States and Texas Constitutions. In particular, Van
Houten and Hall allege unconstitutional impairment of contract,
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 2 of 21 PageID 6242
due-process violations, unlawful taking of property, and violation
of Article XVI, Section (d) of the Texas Constitution. The City
filed a motion to stay the federal action in favor of the statecourt suit, which this Court granted.
Upon receiving the City’s motion for summary judgment in the
state-court action, the Fund filed a plea to the state court’s
jurisdiction, contending that it was the “wrong party” and did not
intend to challenge the constitutionality of the ordinance. Van
Houten and Hall then moved this Court to reconsider its order
staying
the
federal
case.
The
Court
granted
the
motion
for
reconsideration. In lifting the stay, the Court determined that
“[a]fter reviewing the matter, it is apparent to the Court that Van
Houten and Hall’s legal positions are not aligned with those of the
[Fund] as the Court had originally perceived.” As the Court
explained in the order:
Van Houten and Hall have introduced newly discovered and
uncontroverted evidence that the Fund does not intend to
challenge the constitutionality of the ordinance at issue
in this case (“the ordinance”). This means that none of
the litigants in the state-court suit is vigorously
protecting Van Houten and Hall’s alleged rights.
On August 9, 2013, the state district court issued an order
denying the Fund’s plea to jurisdiction and granting the City’s
motion for summary judgment. The state court declared:
(1) the prospective benefit reductions for future service
of current police officers and current general employees
adopted by the City Council on October 23, 2012 comply
with
Article
XVI,
Section
66(d)
of
the
Texas
Constitution; (2) the prospective benefit reductions for
2
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 3 of 21 PageID 6243
future police officers and future general employees
adopted by the City Council on October 23, 2012 comply
with
Article
XVI,
Section
66(d)
of
the
Texas
Constitution; and (3) the COLA amendments adopted by the
City Council on October 23, 2012 comply with Article XVI,
Section 66(d) of the Texas Constitution.
(Def.’s App. at 639-40.) The state court later entered a final
judgment, which contained the same declarations. As the City notes,
these
declarations
construction
of
represent
Article
the
XVI,
first
Section
and
66(d)
only
of
judicial
the
Texas
Constitution.
On September 13, 2013, the City moved for summary judgment,
asking this Court to either apply the doctrine of collateral
estoppel based on the state-court judgment or hold as a matter of
law that the prospective benefit reductions and cost-of-living
amendments adopted by the city council comply with Article XVI,
Section 66(d) of the Texas Constitution. The City also filed a
motion to stay discovery pending the resolution of its motion for
summary judgment, arguing that the dispositive issues could be
determined as a matter of law and no evidentiary development was
necessary for the Court to rule on the summary-judgment motion. Van
Houten and Hall responded that discovery was necessary and would
reveal the absence of privity, an essential element for collateral
estoppel. The Court denied the motion to stay and granted limited
discovery on the issue of privity.
After engaging in more than two months of discovery on the
issue of privity, the City filed a motion to compel, seeking
3
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
certain
documents
withheld
on
the
Page 4 of 21 PageID 6244
basis
of
attorney-client
privilege and attorney work product. Van Houten and Hall later
agreed to submit for in camera inspection by the Court the withheld
documents,
which
consisted
of
written
communications
between
Klausner, Kaufman, Jenson, & Levinson (“KKJL”) and Strasburger &
Price, LLP (“S&P”). KKJL (the law firm representing Van Houten and
Hall) and S&P (the law firm representing the Fund in the statecourt action), filed a joint brief arguing that because KKJL
engaged S&P as its local counsel, written communications between
the two law firms were protected by the attorney-client privilege.
Alternatively,
they
argued
that
the
withheld
documents
were
protected as attorney work product.
After considering the parties’ briefing and reviewing the in
camera documents, the Court issued an order denying the City’s
motion to compel. The Court concluded that no attorney-client
relationship existed between KKJL and its local counsel, S&P. But
the Court held that the written communications between the two law
firms contained opinion work product and the City had not shown “a
compelling
need
and
no
alternative
means
of
obtaining
the
information.” The Court noted as an example that the City had not
availed itself of other means of obtaining the information, such as
taking depositions. The Court invited the City to file an amended
motion for summary judgment within 30 days.
4
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 5 of 21 PageID 6245
The City filed an emergency motion for an extension of time to
file its amended motion for summary judgment. The City requested a
30-day extension so that it could depose attorneys with KKJL and
S&P
regarding
the
nature
and
extent
of
their
communications
concerning the state-court action and the Van Houten/Hall action
for the purpose of establishing privity. The Court granted the
extension and the City conducted its depositions. The City then
filed its amended motion for summary judgement, which is now ripe
for adjudication.
II.
LEGAL STANDARD
When the record establishes “that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as
a matter of law,” summary judgment is appropriate. Fed. R. Civ. P.
56(a). A dispute is “genuine” if it is “real and substantial, as
opposed to merely formal, pretended, or a sham.” Bazan v. Hidalgo
Cnty., 246 F.3d 481, 489 (5th Cir. 2001) (citation omitted). A fact
is “material” if it “might affect the outcome of the suit under
governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986).
To demonstrate that a particular fact cannot be genuinely in
dispute, a defendant movant must cite to particular parts of
materials in the record (e.g., affidavits), or show either that (1)
the materials cited by the plaintiff do not establish the presence
of a genuine dispute as to that fact, or (2) the plaintiff cannot
5
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 6 of 21 PageID 6246
produce admissible evidence to support that particular fact. Fed.
R. Civ. P. 56(c)(1). Although the Court “need consider only the
cited materials, . . . it may consider other materials in the
record.” Fed. R. Civ. P. 56(c)(3).
In evaluating whether summary judgment is appropriate, the
Court “views the evidence in the light most favorable to the
nonmovant, drawing all reasonable inferences in the nonmovant’s
favor.” Sanders-Burns v. City of Plano, 594 F.3d 366, 380 (5th Cir.
2010) (citation and internal quotation marks omitted). “[I]f no
reasonable juror could find for the non-movant,” summary judgment
should be granted. Byers v. Dallas Morning News, Inc., 209 F.3d
419, 424 (5th Cir. 2000) (citing Celotex Corp. v. Catrett, 477 U.S.
317, 322 (1986)).
III. ANALYSIS
The City has moved for summary judgment against Van Houten and
Hall based on two legal grounds. First, the City argues, based on
collateral-estoppel principles, that the final judgment in the
state-court declaratory-judgment action, which declared that the
amendments did not violate Article XVI, Section 66(d) of the Texas
Constitution, should be given preclusive effect in this action.
Second, the City argues that based on principles of statutory
construction, the City’s amendments to its retirement ordinance do
not violate Article XVI, Section 66(d).
6
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 7 of 21 PageID 6247
A. Application of Collateral Estoppel
Within the doctrine of res judicata, there are two principle
categories: “(1) claim preclusion (also known as res judicata) and
(2) issue preclusion (also known as collateral estoppel).” Barr v.
Resolution Trust Corp. ex rel. Sunbelt Fed. Sav., 837 S.W.2d 627,
628 (Tex. 1992). Collateral estoppel precludes the relitigation of
essential issues of law that were litigated and determined in a
prior action, regardless of whether the second suit is based on the
same cause of action. Getty Oil Co. v. Ins. Co. of N. Am., 845
S.W.2d 794, 802 (Tex. 1992). “The doctrine of collateral estoppel
. . . is designed to promote judicial efficiency, protect parties
from multiple lawsuits, and prevent inconsistent judgments by
precluding the relitigation of issues.” Sysco Food Servs., Inc. v.
Trapnell, 890 S.W.2d 796, 801 (Tex. 1994) (citations omitted).
Collateral estoppel bars relitigation of an issue if: (1) the
issue sought to be litigated in the first action was fully and
fairly litigated in the prior action; (2) the issue was essential
to the judgment in the prior action; (3) the party against whom
collateral estoppel is being asserted was a party or in privity
with a party in the prior litigation. Eagle Props., Ltd. v.
Scharbauer, 807 S.W.2d 714, 721 (Tex. 1990).
Van Houten and Hall argue that they were not adequately
represented in the state-declaratory-judgment case and, thus,
privity does not exist in this case. They point out that in the
7
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 8 of 21 PageID 6248
state-court action, the Fund clearly set out that it had no legal
stake in the outcome of the ordinance’s constitutionality. The Fund
observed that “no City employee was made a party to [the statecourt action] despite the fact that these employees’ retirement
benefits are directly affected by the Ordinance.” (Pls.’ App. at
396-97.) And as described by the Fund’s former executive director,
Ruth Ryerson, “[t]he Fund itself does not have any vested rights or
legal interests in any of the retirements benefits of the current
and former employees it oversees and distributes.” (Id. at 323.)
In a subsequent affidavit, Ryerson further explained that the
Fund’s board of trustees “adopted a resolution affirming its
commitment to comply with, fully effectuate, and not challenge
Ordinance No. 20471-10-2012,” which authorized the amendments at
issue in this case.1 (Id. at 326.) The Fund’s resolution stated
that at no point in the future “while Ordinance No. 20471-10-2012
remains effective, will the Fund or the Board of Trustees initiate
any action in a court of law, or affirmatively seek to join any
action, challenging the pension benefits imposed by the Ordinance.”
(Id. at 328.)
A
non-party
will
only
be
considered
“in
privity,
or
sufficiently close to a party in the prior suit so as to justify
1
In state court, the City objected to Ryerson’s subsequent
affidavit as untimely. The state court sustained the City’s
objection to the affidavit and denied the Fund’s motion for leave
to file the affidavit as additional evidence in support of its plea
to jurisdiction.
8
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 9 of 21 PageID 6249
preclusion,” when the party to the first suit “is so clearly
aligned with the nonparty’s interests as to be his ‘virtual
representative.’” Royal Ins. Co. of Am. v. Quinn-L Capital Corp.,
960 F.2d 1286, 1297 (5th Cir. 1992) (quoting
Benson & Ford, Inc.
v. Wanda Petroleum Co., 833 F.2d 1172, 1174–75 (5th Cir. 1987)).
Based on the above facts, the Court cannot say that the Fund
virtually represented Van Houten and Hall’s interests in the statecourt lawsuit such that they were in privity with the Fund.
The City also claims that Van Houten and Hall are in privity
with the Fund based on communication and coordination between the
Fund’s counsel (“S&P”) and Van Houten and Hall’s counsel (KKJL)
with regard to the state-court action and the case filed in this
Court. While a nonparty may be bound by the result of a prior
action
based
on
closely
aligned
interests,
close
alignment
“requires more than a showing of parallel interest or, even, a use
of the same attorney in both suits.” Benson, 833 F.2d at 1174. KKJL
and S&P acknowledge that they worked together in an attempt to
remove the state-court action to federal court so that it could be
consolidated with the federal-court action brought by Van Houten
and Hall, but they deny that their joint efforts establish privity.
On November 19, 2012, Van Houten and Hall filed their federal
lawsuit. The same day, the Fund filed its notice of removal of the
state-court action. Then, on December 6, the Fund filed a motion to
transfer the case, which had been assigned to the Honorable John
9
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
McBryde,
to
the
docket
of
the
Page 10 of 21 PageID 6250
undersigned
for
possible
consolidation with the first-filed federal case (i.e., the Van
Houten/Hall case). The City filed a motion to remand, which Judge
McBryde granted. Judge McBryde reasoned that because the statecourt action only sought a declaration that the amendments to the
retirement ordinance complied with the Texas Constitution, there
was no question of federal law.
Van Houten and Hall contend that any and all coordination
between their lawyers and the Fund’s lawyers related to efforts to
remove and consolidate the cases. Even if it went beyond that, dual
representation by the same lawyer is not enough to establish
privity where the nonparty does not have actual control over the
litigation. See Benson, 833 F.2d at 1174. “To have control of
litigation requires that a person have effective choice as to the
legal theories and proofs to be advanced on behalf of the party to
the action. He must also have control over the opportunity to
obtain review.” Id. (quoting Hardy v. Johns-Manville Sales Corp.,
681 F.2d 334, 339 (5th Cir. 1982)).
Here, the City has presented evidence that Van Houten and
Hall’s
attorneys
communicated
with
the
Fund’s
attorneys
with
respect to removal and consolidation efforts. And a KKJL attorney
admitted that he contacted an S&P attorney about whether the Fund
planned to appeal the state-court judgment. But “[e]ven a nonparty
who was ‘heavily involved’ [in prior litigation] may remain free
10
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 11 of 21 PageID 6251
from preclusion” where the nonparty did not have actual control
over the litigation. Id. (citation omitted). In this Court’s
judgment, the City simply has not shown that Van Houten and Hall
controlled the state-court litigation or the subsequent decision to
forgo appellate review of the final judgment in that case.2
Based on the above, the Court concludes that Van Houten and
Hall were not actually or adequately represented by the Fund.
Because the City has not shown the essential element of privity,
the Court need not consider the remaining elements, and collateral
estoppel does not apply.
B.
Constitutionality of the Amendments
Having determined that the doctrine of collateral estoppel
does not apply, the Court must consider whether under principles of
statutory construction, the City’s amendments to the retirement
ordinance
violate
Constitution,
which
Article
XVI,
protects
Section
against
66(d)
of
the
Texas
reduction
or
impairment
benefits accrued by members of a non-statewide retirement system.
The City contends that because the amendments affect only future
benefits--not accrued benefits--the amendments do not violate the
Texas Constitution. The Court agrees.
Federal courts apply Texas law in construing Texas statutes
and constitutional provisions. See e.g., Marketic v. U.S. Bank
2
The Fund agreed not to appeal the final judgment in exchange
for the City’s agreement to withdraw its claim for attorney’s fees.
11
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Nat’l
Ass’n,
436
F.
Supp.
2d
842,
Page 12 of 21 PageID 6252
848-53
(N.D.
Tex.
2006)
(Buchmeyer, J.). In construing the Texas Constitution, courts are
directed to rely heavily on its literal text, giving effect to its
plain language. Doody v. Ameriquest Mortg. Co., 49 S.W.3d 342, 344
(Tex. 2001). Constitutional provisions should be given “the effect
their makers and adopters intended.” Id. (citations omitted). And
courts should “avoid a construction that renders any provision
meaningless or inoperative.” Id. (citations omitted).
Courts use the same rules of construction when considering
municipal ordinances. City of San Antonio v. Headwaters Coal.,
Inc., 381 S.W.3d 543, 551 (Tex. App.—San Antonio 2012, pet.
denied). “When the construction of municipal ordinances is involved
. . . [a court’s] primary duty is to carry out the intentions of
the municipality’s legislative body.” Id. To ascertain intent,
courts look first to the ordinance’s plain language and give words
their ordinary meaning. See id. Courts may also consider, among
other
matters,
the:
“(1)
object
sought
to
be
attained;
(2)
circumstances under which the statute was enacted; (3) legislative
history; (4) common law or former statutory provisions, including
laws on the same or similar subjects; (5) consequences of a
particular construction; (6) administrative construction of the
statute;
and
(7)
title
(caption),
preamble,
provision.” Tex. Gov’t Code Ann. § 311.023.
12
and
emergency
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 13 of 21 PageID 6253
In 2003, the Texas Legislature proposed a constitutional
amendment to ensure that accrued retirement benefits of vested
municipal employees could not be reduced or impaired by subsequent,
unilateral
legislative
action.
The
Legislature
later
adopted
Article XVI, Section 66, which provides:
On or after the effective date of this section, a change
in service or disability retirement benefits or death
benefits of a retirement system may not reduce or
otherwise impair benefits accrued by a person if the
person:
(1) could have terminated employment or has
terminated employment before the effective
date of the change; and
(2) would have been eligible for those
benefits, without accumulating additional
service under the retirement system, on any
date on or after the effective date of the
change had the change not occurred.
Tex. Const. art. XVI, § 66(d). Simply put, Article XVI, Section 66
prohibits the reduction or impairment of accrued benefits (i.e.,
benefits that an employee would be eligible to receive at the time
of the reduction without accumulating additional service).
The City’s amendments to its retirement ordinance affect
employee
benefits
through
changes
to
the
defined-benefit
calculation and the cost-of-living adjustment. The Court first
considers the constitutionality of the changes to the benefit
calculation.
Going forward, a bifurcated calculation will be used to
determine an employee’s defined benefit upon retirement. The City
offers an example to explain the bifurcated calculation. A general
13
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 14 of 21 PageID 6254
employee who was hired in 2003 (ten years before the benefit
reductions) and retired in 2023 (ten years after the benefit
reductions) would receive benefits according to the following
calculation:
Pre-2013 Years of Service: 10
Compensation Base: High 3
Multiplier (Normal): 3%
(10)*(High 3)*3% = X
Post-2013 Years of Service: 10
Compensation Base: High 5
Multiplier (Normal): 2.5%
(10)*(High 5)*(2.5%)= Y
Annual Pension Benefits = X + Y
An employee’s highest three years and highest five years of
earnings would be determined by looking at the employee’s entire
career. In other words, both compensation bases--for years of
service before and after the amendments--would be based on an
average of the employees’ actual highest grossing years of service,
regardless of whether the employees’ highest grossing years occur
before or after the effective date of the amendments.
The City explains that the bifurcated calculation will protect
accrued benefits by (1) dividing the periods before and after the
effective
determining
date
the
of
the
amendments
compensation
bases
(except
as
just
for
purposes
explained),
of
(2)
calculating an employee’s accrued benefits based on pre-amendment
factors, (3) calculating the employee’s future benefits based on
the post-amendment factors, and (4) adding together the accrued
benefits and future benefits to determine the employee’s ultimate
pension.
14
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 15 of 21 PageID 6255
Van Houten and Hall challenge the bifurcated calculation based
on a 2008 Texas Attorney General Opinion, which held that Article
XVI, Section 66(d) “prohibits a change in the method of determining
the compensation base of vested employees if such action reduces or
impairs retirement benefits that the employee would have been
eligible to receive on or before the effective date of the change.”
Op. Tex. Att’y Gen. No. GA-0615, at *8 (2008). In that case, the
attorney general was asked to review an amendment adopted by the
City in 2007 that altered the method of calculating an employee’s
compensation based by imposing a 12% cap on any increases in the
annual earnings of an employee’s highest three years--the years
that make up the compensation base. Id. at *2. The cap was to apply
prospectively, meaning that salaries earned prior to the effective
date of change would not be subject to the cap. Id.
Although the cap only applied to future years of service, the
amendment affected the benefits calculation for the employee’s
entire
career
by
potentially
limiting
the
employee’s
future
compensation base. Because the proposed cap changed the method for
determining the compensation base, the attorney general concluded
that the 2007 amendment may constitute an impermissible impairment
or reduction of accrued benefits. Id. at *8. In light of the
attorney general’s opinion, the City never implemented the 12%
earnings cap.
15
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 16 of 21 PageID 6256
The amendments at issue here do not implicate the same
concerns. The bifurcated calculation ensures that benefit changes
related to future service of current general employees and police
officers will have no impact on the benefits they have already
accrued. Unlike the single calculation from the proposed 2007
amendment, the bifurcated calculation uses the current (High 5) and
past (High 3) compensation bases to ensure that an employee’s
already-accrued benefits are protected. And as the City points out,
the attorney general explicitly limited its 2008 opinion to the
particular amendment at issue in that case:
It is the City’s particular chosen method for addressing
the unfunded liability of its retirement system that we
conclude may violate Texas Constitution Article XVI,
section 66(d). The City could have addressed the unfunded
liability through other means that would not violate the
constitutional provision.
Id. at *8 n.15.
Van Houten and Hall also argue that, as vested members of the
Fund, they have a contractual right to continue receiving benefits
under the same formula in place when they “vested.” As they see it,
the attorney general’s opinion concluded that once an employee
“vests” in the retirement system (i.e., completes five years of
service) he cannot have his benefits reduced even prospectively.
But that definition of “vested” is not what the attorney general
pronounced. Instead, the attorney general explained as follows:
We note that your question implicates only Article XVI,
16
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 17 of 21 PageID 6257
section 66(d) . . . . You ask only about “vested”
employees. See Request Letter, supra note 1, at 1-2.
While you do not explain the term “vested,” we understand
that term, in the context of the Request Letter as a
whole, to describe persons meeting the constitutional
criteria under subsections d(1) and (2) [of section 66].
Id. at 3. Those subsections protect only benefits actually accrued
by an employee who would have been eligible to receive those
benefits without accumulating additional service at the time of any
change in benefits. And the word “vested” does not appear in
Article XVI, Section 66(d) of the Texas Constitution. Furthermore,
as the City points out, no employee--vested or unvested--has an
expectancy right to benefits not yet accrued.
Because the City’s change to the defined-benefit calculation
affects only the future service of the City’s police and general
employees, it does not contravene Article XVI, Section 66(d) of the
Texas Constitution, which even the attorney general recognizes “was
intended
to
permit
prospective
changes
to
retirement
system
benefits.” Id. at 6.
In 1999, the City adopted an ordinance giving all members of
the Fund a guaranteed 2% cost-of-living adjustment (“COLA”), on top
of their defined-benefit payment. In 2001, the City adopted an
alternative to the 2% simple COLA--a compound ad hoc COLA that
would be given based on the amortization period required to pay off
the unfunded liability of the Fund, as determined annually by the
Fund’s actuary. Depending on how the Fund performed in a given
17
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 18 of 21 PageID 6258
year, an employee who selected the ad hoc COLA would receive an
additional payment of between 0% and 4% of his annual pension.3
The City argues that the COLA amendments do not violate
Article XVI, Section 66(d) because they mandate change only with
respect
to
future
employees
and
future
service
of
current
employees. Under the amendments, future general employees and
police officers will receive no COLA; current general employees and
police officers will receive a 2% simple COLA for future service;
and current general employees and police officers who elected to
receive the ad hoc COLA will be given the option to revert to a 2%
simple COLA for their past service.
The Court concludes that the COLA amendments do not impair
accrued benefits. Article XVI, Section 66(d) was intended to allow
prospective changes to retirement-plan benefits. Thus, eliminating
the COLA for future employees and mandating the 2% simple COLA for
the future service of current employees does not violate the Texas
Constitution. With respect to the current general employees and
police officers who previously selected the ad hoc COLA, they now
3
The City explains that it adopted the ad hoc COLA in an
effort to protect the Fund against receding markets and to allow
members of the Fund to share in the risks and rewards of investment
performance. Unfortunately, the ad hoc COLA did not work as
intended because any time that the Fund was more than 80% funded,
the amortization period was shortened, and the Fund was healthy
enough to trigger ad hoc COLA payments. In other words, efforts by
the City to improve the funded status of its retirement plan, such
as increasing the City’s contributions, would trigger an ad hoc
COLA and drain money out of the Fund.
18
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 19 of 21 PageID 6259
have the option to revert to a 2%, fixed-rate COLA for their past
service. As the City point out, by allowing current general
employees and police officers to exercise this option with regard
to their past service, the City has provided those employees with
an opportunity to receive more than they might otherwise have
received given that in some years the ad hoc COLA paid out 0%.
Each member will have the option to decide whether to change
his COLA election, and any effects will be the result of the
employee’s choice, not unilateral legislative action by the City.
And the voluntary exercise of this option does not, in this Court’s
view, violate Article XVI, Section 66(d).4 See Nussbaum v. N.Y.
City Emp. Ret. Sys., 425 N.E.2d 869, 869 (N.Y. 1981) (“[P]laintiff
was
not
unconstitutionally
denied
vested
pension
rights
by
legislation which created an additional, optional pension plan.
Plaintiff could have remained in the existing plan without any of
his rights being impaired. It was his decision not to do so that
caused the alleged change in his rights”).
The
City
does
not
dispute
4
that
the
amendments
to
its
Van Houten and Hall complain that under the prior ordinance,
employees were given the opportunity to make a “one-time
irrevocable election” of either the 2% COLA or the ad hoc COLA, and
employees were never told by the City or the Fund that the
irrevocable election could be reopened at the City’s option. As the
City points out though, the election was made irrevocable so that
employees could not change their election from year to year based
on the annual actuarial projections of the Fund. It was not
irrevocable in the sense that it precluded the City’s ability to
amend the ordinance in the future.
19
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 20 of 21 PageID 6260
retirement ordinance will reduce Van Houten and Hall’s future
defined benefits. But Article XVI, Section 66(d) protects only
those benefits actually accrued by an employee who would have been
eligible to receive those benefits without accumulating additional
service at the time of any change in benefits. In other words, it
was intended to permit prospective changes to retirement benefits.
Because the amendments to the City’s retirement ordinance affect
only future benefits, not accrued benefits, the City’s amendments
to its retirement ordinance do not violate Article XVI, 66(d) of
the Texas Constitution.
This Court’s construction of Article XVI, Section 66(d) is
consistent with the plain language of the constitutional provision.
Moreover,
it
is
consistent
with
the
state
district
court’s
construction, which is currently the only Texas court to render
judgment on the construction of the phrase “benefits accrued” in
Article XVI, Section 66(d). And as the Fifth Circuit has stated,
“it is fundamental that state courts be left free and unfettered by
the federal courts in interpreting their state constitutions.”
Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 367 (5th
Cir. 1995) (quoting Minnesota v. Nat’l Tea Co., 309 U.S. 551, 555
(1940)).
Van Houten and Hall have alleged numerous claims under state
and federal law with respect to the City’s amendments to its
retirement ordinance. In particular, they claim that the benefit
20
Case 4:12-cv-00826-Y Document 88 Filed 04/07/15
Page 21 of 21 PageID 6261
reductions and COLA amendments violate the contract clause, dueprocess
clause,
and
takings
clause
of
the
United
States
Constitution; 42 U.S.C. § 1983; and the contract clause, dueprocess clause, and takings clause of the Texas Constitution. But
as this Court has observed in previous orders, all of these claims
rise and fall on this Court’s construction of Article XVI, Section
66(d). Because the Court has concluded that the City’s amendments
to its retirement ordinance do not violate Article XVI, Section
66(d),
Van
Houten
and
Hall
cannot
establish
unconstitutional
impairment of contract, violation of their due-process rights, or
impermissible taking as a matter of law.
IV.
CONCLUSION
Based on the forgoing, the City’s amended motion for summary
judgment is GRANTED and Van Houten and Hall’s claims are dismissed
with prejudice.
SIGNED April 7, 2015.
____________________________
TERRY R. MEANS
UNITED STATES DISTRICT JUDGE
TRM/lj
21