John J. Mascio v. Public Employees Retirement System of Ohio Richard E. Schumacher

160 F.3d 310

• Court: Court of Appeals for the Sixth Circuit
• Decided: January 11, 1999
• Docket: 97-3314
• Status: Published

Opinions

DAVID A. NELSON, J„ delivered the opinion of the court, in which RYAN, J., joined. ROSEN, D.J. (pp. 315-326), delivered a separate dissenting opinion.

OPINION

DAVID A. NELSON, Circuit Judge.

This is an appeal from a preliminary injunction in which the district court barred the Public Employees Retirement System of Ohio and its Executive Director from enforcing a newly enacted Ohio statute that mandates forfeiture of certain vested pension rights. Finding no abuse of discretion, we shall affirm the injunction.

I

The plaintiff, Jefferson County Common Pleas Judge John Maseio, retired from the bench in September of 1996. On October 1, 1996, Ohio’s Public Employees Retirement System (PERS) began paying him the retirement benefits to which he was entitled by law. Notwithstanding his retirement, Maseio stood as a candidate for election to the seat he had just vacated. Elected without opposition in November of 1996, he began receiving a salary upon his return to the bench in January of 1997.

Had it not been for what came to be perceived as a statutory loophole, this kind of “double-dipping” would have been impossible under Ohio law. At the time of Judge Mas-cio’s retirement, the Ohio Revised Code contained a provision that read as follows:

“No person holding office in this state ... who is re-elected to that office shall retire under Chapter 145. of the Revised Code with a date for the commencement of his retirement allowance that is during the period beginning on the thirty-first day before the date of his re-election and extending through the thirty-first day after the date on which his new term of office begins.” Ohio Rev.Code § 3.16(A) (repealed 12/6/96).

The consequence of retirement in violation of § 3.16(A) was forfeiture of the elected office. Ohio Rev.Code § 3.16(B).

Judge Mascio was able to plan his retirement and subsequent election in such a way as to avoid the application of § 3.16. Filing for re-election without making his retirement plans public, he secured a place on the ballot without attracting an opponent. His re-eleetion assured, he retired with a date for commencement of his retirement allowance that was more than thirty-one days prior to the election.

After the election, in an eleventh-hour effort to prevent Judge Mascio from double-dipping, the Ohio legislature passed Senate Bill 82. The new act became effective on December 6, 1996 — about a month before Judge Mascio was to resume his judicial duties, but more than two months after he had begun collecting his retirement benefits.

As codified at Ohio Rev.Code § 145.38(C)(4), the new legislation provides in part as follows:

“A PERS retirant shall elect division (C)(1)(b) of this section if both of the following apply:

(a) The retirant held elective office in this state, or in any municipal corporation, county, or other subdivision of this state at the time of retirement under Chapter 145. of the Revised Code;

(b) The retirant was elected or appointed to the same office for the remainder of the term or the term immediately following the term during which the retirement occurred.”

Division (C)(1)(b) provides that the retirant will “receive compensation for the employment and forfeit the pension portion of the retirement allowance.” The retirant is precluded from electing division (C)(1)(a), under which certain persons can receive “both compensation for the employment and a retirement allowance.”

In light of the new statute, the Retirement System notified Judge Mascio that his retirement allowance would be suspended effective January 1, 1997. Mascio then brought the present declaratory judgment/injunction suit, claiming a violation of his rights under the Contract Clause (Art. I, § 10) and Bill of Attainder Clause (Art. I, § 9) of the United States Constitution. Concluding that Mascio had demonstrated a substantial likelihood of success on the merits of these claims, the district court granted a preliminary injunction blocking suspension of the retirement allowance. This appeal followed.

II

The granting of a preliminary injunction is subject to appellate review under an “abuse of discretion” standard. The injunction will seldom be disturbed unless the district court relied upon clearly erroneous findings of fact, improperly applied the governing law, or used an erroneous legal standard. See Blue Cross & Blue Shield Mut. of Ohio v. Blue Cross and Blue Shield Ass’n, 110 F.3d 318, 322 (6th Cir.1997).

In exercising its discretion with respect to a motion for a preliminary injunction, a district court must give consideration to four factors: “(1) whether the movant has a strong likelihood of success on the merits; (2) whether the movant would suffer irreparable injury without the injunction; (3) whether issuance of the injunction would cause substantial harm to others; and (4) whether the public interest would be served by issuance of the injunction.” Rock & Roll Hall of Fame & Museum, Inc. v. Gentile Prods., 134 F.3d 749, 753 (6th Cir.1998).

In this circuit, “the four considerations applicable to preliminary injunction decisions are factors to be balanced, not prerequisites that must be met.” In re DeLorean Motor Co., 755 F.2d 1223, 1229 (6th Cir.1985). This court “will reverse a district court’s weighing and balancing of the equities only in the rarest of circumstances.” Moltan Co. v. Eagle-Picher Indus., Inc., 55 F.3d 1171, 1175 (6th Cir.1995).

In its balancing of the four factors in the case at bar, the district court placed great weight on the circumstance that, as the court saw it, Judge Mascio had shown a strong likelihood of success on the merits of both his Bill of Attainder and Contract Clause claims. We find it unnecessary to address the Bill of Attainder Clause question, because it seems to us that the district court was clearly correct in its assessment of the likelihood that Judge Mascio would prevail on the Contract Clause issue.

The Contract Clause provides that “[n]o state shall ... pass any ... Law impairing the Obligation of Contracts.” U.S. Const, art. I, § 10, cl.l. To prove a violation of this provision, a plaintiff must demonstrate that a “change in state law has ‘operated as a substantial impairment of a contractual relationship.’” General Motors Corp. v. Romein, 503 U.S. 181, 186, 112 S.Ct. 1105, 117 L.Ed.2d 328 (1992) (quoting Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244, 98 S.Ct. 2716, 57 L.Ed.2d 727 (1978)). In deciding whether such a demonstration has been made, the court must ask whether “(1) a contract exists, (2) a change in law impairs that contract, and (3) the impairment is substantial.” Linton v. Comm’r of Health & Environment, 65 F.3d 508, 518 (6th Cir.1995), cert. denied, 517 U.S. 1155, 116 S.Ct. 1542, 134 L.Ed.2d 646 (1996). If a contractual obligation is substantially impaired by the change in law, the court must further inquire whether the adjustment of the rights of the parties to the contractual relationship was reasonable and appropriate in the service of a legitimate and important public purpose. See Allied Structural Steel, 438 U.S. at 242-44, 98 S.Ct. 2716.

The retirement benefits of Ohio public employees vest, by statute, at the time when the retirement allowance or pension is granted by the public employees retirement board. Ohio Rev.Code § 145.561. The effect of this vested rights statute is “to make the engagement of public authorities to pay a pension, upon conditions fulfilled, a contractual obligation founded upon a valid consideration, giving to the pensioner a vested right in his pension which cannot afterwards be impaired or revoked.” State ex rel. Cunat v. Trustees of Cleveland Police Relief & Pension Fund, 149 Ohio St. 477, 482, 79 N.E.2d 316 (1948), supplemented, 150 Ohio St. 377, 82 N.E.2d 743 (1948).

Judge Mascio’s pension was fully vested as of October 1, 1996, the date on which he began receiving benefits. As of that date, in other words, Mascio had a contractual right to continued receipt of the benefits. Forfeiture of the benefits would obviously constitute a substantial impairment of this vested contract right.¹

The defendants argue that no impairment could occur unless, as of December 6, 1996, Mascio had a present right to receive both his pension and his judge’s salary. We disagree. The newly enacted statute effected a forfeiture of pension benefits, not a forfeiture of salary. Although it is conceivable that under the new law Mascio could have continued to receive his pension benefits by resigning from the office to which he had been reelected, his contractual right to the pension benefits was not conditioned on his giving up his judicial salary.

In reliance on a line of eases that includes Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 103 S.Ct. 697, 74 L.Ed.2d 569 (1983), the defendants attempt to justify the new statute as a “regulation” that has “a significant and legitimate public purpose.” See id. at 411, 103 S.Ct. 697. Substantial impairment of Judge Mas-cio’s vested contract rights is justified, according to the defendants, “by the state’s significant and legitimate public purpose in passing S.B. 82: protecting the viability of the PERS retirement fund, maintaining public confidence in the fund, ending double-dipping schemes like these by elected officials, and protecting public confidence in the judiciary in general and in lawyers in particular.”

Judge Mascio responds that these purposes will be served by the prospective application of the statute to all public employees whose pensions vest after enactment. It was unnecessary and unreasonable, Mascio submits, to pass the statute as an emergency measure targeted at him alone. (It appears that Mascio was the only Ohio official who took advantage of the statutory loophole in 1996.)

Where the State is a party to the contractual obligation in question, “complete deference to a legislative assessment of reasonableness and necessity is not appropriate because the State’s self-interest is at stake.” United States Trust Co. of New York v. New Jersey, 431 U.S. 1, 26, 97 S.Ct. 1505, 52 L.Ed.2d 92 (1977). Moreover, “a state is not completely free to consider impairing the obligations of its own contracts on a par with other policy alternatives.” Id. at 30-31, 97 S.Ct. 1505. We do not question the legitimacy of the purposes put forward by the defendants, but this does not mean that it was reasonable or necessary to bring Mascio within the ambit of a statute that was not enacted until after his pension had vested. The district court determined that impairment was “not necessary to advance an important public purpose” here. The defendants have pointed to nothing that persuades us otherwise.²

Given the near certainty of Mascio’s success on the merits of his Contract Clause claim, we find no abuse of discretion in the district court’s issuance of the preliminary injunction. The order granting the injunction is AFFIRMED.

DISSENT

1 . Our assessment of the substantiality of the impairment does not turn on our assessment of Judge Mascio's personal rectitude, of course. The dissent accuses Mascio of practicing "deliberate concealment and deceit” in order "to manipulate the retirement system to gain a windfall.” If Judge Mascio held a vested contractual right to a pension, however, the abrogation of that right — either for a six year term or for life— constituted a substantial impairment of the contract whether or not our sensibilities happen to cringe at Mascio's cupidity and duplicity.

The dissent acknowledges that "as of October 1, 1996, the date on which his pension commenced, Judge Mascio possessed a vested right to the continued receipt of retirement benefits.” But because he took pains to conceal his plans, realizing that he might not win the election if his intent were to become known before the filing deadline, Mascio is said to have had no "legitimate” expectation of being able to continue receiving his retirement benefits if he won the upcoming election.

As a legal matter, it seems to us, the legitimacy of the expectation turns on the wording of the existing statutes and not on the moral legitimacy of Mascio’s gamesmanship. The fact that we may find the gamesmanship repugnant surely gives us no warrant to rewrite the Ohio Revised Code — and neither can it warrant our gaming the Constitution itself by labeling as “insubstantial” an impairment of contract that is plainly not insubstantial.

2 . From the State’s point of view, as the dissent suggests, the political aspect of the forfeiture of Judge Mascio’s pension has far more significance than the financial aspect. But what is small change to the State is not necessarily small change to the pensioner — and if any deference be due the State’s decision to renege on its contract with Judge Mascio, we are not persuaded that the degree of deference should be increased because of the huge disparity between the wealth of the State and the wealth of the individual pensioner.

Neither are we persuaded that Energy Reserves — a decision harking back to Home Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. 413 (1934) — can legitimize the forfeiture of Judge Mascio’s vested pension rights. Energy Reserves dealt with price controls imposed by the State of Kansas on the intrastate marketing of natural gas. The Slate was not a party to the contracts in question, and its interest was one of "controlling the serious economic dislocations that [a] sudden increase in gas prices would cause...." Energy Reserves, 459 U.S. at 409, 103 S.Ct. 697. Like the depression era mortgage moratorium that was upheld in Blaisdell, the Kansas statute addressed a "broad and general” socioeconomic problem. See Energy Reserves, 459 U.S. at 412, 103 S.Ct. 697.

No such “broad and general” problem was addressed by the application of Senate Bill 82 to Judge Mascio. In this respect the Ohio statute resembles the Minnesota pension statute held unconstitutional in Allied Structural Steel. As the Energy Reserves Court said of the Minnesota statute, it had “a very narrow focus: it was aimed at specific employers” and "it even may have been directed at one particular employer....’’ Energy Reserves, 459 U.S. at 412 n. 13, 103 S.Ct. 697. The Ohio statute, similarly, may well have been directed at one particular Ohio employee — and Ohio's impairment of its own contract with Judge Mascio is even more clearly unconstitutional, as we see it, than was Minnesota’s impairment of the private pension contracts in Allied Structural Steel.