USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
____________________
Nos. 96-2225
96-2226
96-2227
96-2228
RICHARD M. PARKER, ET AL.,
Plaintiffs, Appellees, Cross-Appellants,
v.
DAVID S. WAKELIN, ET AL.,
Defendants, Appellants, Cross-Appellees.
____________________
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Gene Carter, U.S. District Judge]
____________________
Before
Torruella, Chief Judge,
Boudin and Lynch, Circuit Judges.
_____________________
Cabanne Howard, Assistant Attorney General, with whom Andrew
Ketterer, Attorney General, and
Thomas D. Warren
, State Solicitor,
were on brief for appellants.
Donald F. Fontaine, with whom Kaighn Smith, Jr. and Fontaine
& Beal, P.A. were on brief for appellees.
____________________
August 11, 1997
____________________
TORRUELLA, Chief Judge. The question presented by this
appeal is whether certain legislative amendments to the Maine State
Retirement System ("MSRS") violate the Contract Clause of the
United States Constitution as applied to plaintiffs, a class
comprised of current Maine public school teachers all of whom are
members of the MSRS. Following a bench trial, the district court
held that certain amendments violated the Contract Clause as
applied to those public employees who had satisfied the service
requirements under the MSRS and whose pension rights had thereby
"vested." Finding no unmistakable intent on the part of the Maine
legislature to create private contractual rights against the
reduction of pension benefits prior to the point at which pension
benefits may actually be received, we hold that the Maine
amendments do not violate the Contract Clause with regard to any of
the plaintiffs. Accordingly, we reverse the district court's
holding that the amendments violate the Contract Clause as applied
to "vested" members of the MSRS.
BACKGROUND
None of the relevant facts recited below are in dispute.
I. The Maine State Retirement System (MSRS)
The MSRS operates as a public pension trust pursuant to
Maine's public employee retirement benefit statute.
See 5 M.R.S.A.
SS 17001-18663 (1989 & Supp. 1996). The MSRS was created in 1942
to encourage "qualified persons to seek public employment and to
continue in public employment in their productive years." 5
M.R.S.A. S 17050 (1989). For all Maine state employees, including
-2-
the public school teachers comprising the plaintiff class in the
instant case, membership in the MSRS is mandatory. 5 M.R.S.A.
SS 17001(14), 17651 (1989). All MSRS members make mandatory
contributions into a pension fund. The State of Maine also
contributes annually to maintain the fund's actuarial soundness
with regard to future benefit obligations. 5 M.R.S.A. SS 17701-A,
17701-B, 17153(1-A)(B)(Supp. 1996). The MSRS can be classified as
a "defined benefit system," in that the retirement benefits
provided for teachers are defined upon employment and financed in
part by their fixed contributions into the system.
The teachers, as members of the system, qualify to
receive retirement benefits upon (1) reaching the statutory
retirement age,
and (2) satisfying
either of the following service
requirements: (a) at least ten years of creditable service; or (b)
at least one year of creditable service prior to reaching the
statutory retirement age while in public service. 5 M.R.S.A.
S 17851 (1989 & Supp. 1996). Alternatively, a member may be
entitled to receive retirement benefits when he or she retires
after performing at least 25 years of creditable service. Id. In
the district court's decision, the term "vesting" was used to
describe the satisfaction of the service requirements. See
Parker
v.
Wakelin, 937 F. Supp. 46, 49 n.1 (D. Me. 1996). However, as the
district court in fact noted, the term "vesting" does not figure in
the statutory scheme itself, which simply indicates the age and
service requirements that must be met. See 5 M.R.S.A. S 17851
-3-
(1989 & Supp. 1996). Members who terminate their public service
prior to satisfying the pension eligibility requirements are
entitled to a return of their contributions, with interest. 5
M.R.S.A. S 17705(2).
An eligible retiree earns a pension in the amount of two
percent of his or her "average final compensation" multiplied by
the number of years of total creditable public service (up to 25
years). 5 M.R.S.A. S 17852 (1989). The legislative amendments at
issue on this appeal affect, among other things, the process by
which one computes an employee's "average final compensation" in
such a manner as to reduce the expected pension benefits of many
members.
The State of Maine concedes that the sole purpose for
enacting the changes in the terms and conditions of retirement
benefits ("the 1993 Amendments") was to save money by lowering
budget allocations by the state to the trust funds of the MSRS;
their enactment coincided with other responses to a state fiscal
crisis. The 1993 Amendments may be sorted into two groups: three
changes apply to the pensions of
all current teacher-members of the
MSRS, while three others apply only to those who had not satisfied
the service requirements under the MSRS as of the effective date of
Other non-pension benefits under the retirement system, such as
life insurance and disability retirement benefits, may be received
without having satisfied any minimum service requirement.
A slightly different method applies to those retirees whose
eligibility is based on having completed 25 or more years of
creditable service.
-4-
the amendments. None of the amendments affected retirees earning
pensions as of the effective date. The amendments that affected
all of the plaintiffs were: (1) an increase in the rate of required
member contributions from 6.5 percent of their salary to 7.65
percent; (2) a cap on the salary increase that may be included in
the course of calculating the level of teachers' retirement
benefits; and (3) a six-month delay in the first cost-of-living
adjustment of retirement benefits. See P.L. 1993, ch. 410, pt. L,
SS 28, 13, 31. The district court held that these three
modifications were unconstitutional as applied to those plaintiffs
who had satisfied the service requirements. The other 1993
amendments, which only applied to those who had not served 10 years
as of the effective date of the amendments, were: (1) an increase
in the regular retirement age from 60 to 62; (2) an increase in the
early retirement penalty from 2.25 percent to 6 percent of the
teachers' retirement benefit for each year preceding age 62; and
(3) the elimination of an inclusion of per diem payment of up to
thirty days of unused sick or vacation pay in the course of
calculating teachers' retirement benefits.
See P.L. 1993, ch. 410,
pt. L, SS 33, 35, 37, 12. It is not disputed that the 1993
Amendments operate to the disadvantage of MSRS members without
providing substantive offsetting benefits.
These provisions are codified as amended at 5 M.R.S.A. SS 17001-
B, 17701(13)(C), 17806(3).
These provisions are codified as amended at 5 M.R.S.A. SS 17851
(1-A) & (2-A), 17852(3-A), 17001(13)(B).
-5-
When the MSRS was first adopted in 1942, the legislature
made no express statement as to its ability to amend or alter the
pension benefit structure. In 1975, the Maine legislature enacted
the following provision:
No amendment to this chapter shall cause
any reduction in the amount of benefits
which would be due to the member based on
creditable service, compensation, employee
contributions and the provisions of this
chapter on the date immediately preceding
the effective date of such amendment.
P.L. 1975, ch. 622, S 6, codified at 5 M.R.S.A. S 17801 (1989),
under the title "Amendment not to cause reduction in benefit."
II. The Proceedings Below
Plaintiffs, the Maine Education Association and a class
representing public school teachers throughout the State of Maine,
challenged the constitutionality of the 1993 Amendments under the
Contract Clause, the Due Process Clause, and the Takings Clause,
seeking declaratory and injunctive relief to block implementation.
The district court held that: (1) the 1993 Amendments violated the
Contract Clause only as applied to MSRS members whose benefits had
"vested" under the system; and (2) the 1993 Amendments did not
The current version has a few minor changes in language:
No amendment to this Part may cause any
reduction in the amount of benefits that would
be due to a member based on creditable
service, earnable compensation, employee
contributions, pick-up contributions and the
provisions of this Part on the date
immediately preceding the effective date of
the amendment.
5 M.R.S.A. S 17801 (1989).
-6-
violate any other provision of the constitution. By using the term
"vested" the district court referred to those MSRS members who had
satisfied the service requirements under the system -- a service
requirement is a necessary (but not a sufficient) condition to
being entitled to actually receive a pension. See Parker v.
Wakelin, 937 F. Supp. at 49 n.1.
On appeal, the state defendants ask that we hold that the
1993 Amendments do not violate the Contract Clause as applied to
any of the plaintiffs. In their cross-appeal, the plaintiffs argue
that the 1993 Amendments violate the Contract Clause as applied to
all teacher members of the MSRS prior to the effective date of the
amendments, and that the 1993 Amendments also violate substantive
due process.
DISCUSSION
The essential facts being undisputed, this appeal turns
on questions of law over which we exercise de
novo review. See
Villafane-Neriz v. FDIC, 75 F.3d 727, 730 (1st Cir. 1996). This
appeal raises a legal issue of considerable importance, one we
specifically left unresolved in
McGrath v.
Rhode Island Retirement
Board, 88 F.3d 12, 19 (1st Cir. 1996). When stated broadly, the
issue is whether a legislative amendment to a state employee
retirement pension plan that is detrimental to employees triggers
further scrutiny under the Contract Clause as applied to state
employees whose pension rights under the plan have "vested" prior
to such amendment. In McGrath, we did not need to resolve this
issue, because the plaintiff's pension rights had not vested prior
-7-
to the legislative amendment at issue, and because the legislature
specifically reserved the power to amend or terminate the plan as
to nonvested members. 88 F.3d at 19-20. We now conclude that a
blanket answer to the issue of Contract Clause protection for
vested employees is not possible, because, as we explain below, a
detailed examination of the particular provisions of a state
pension program will be required prior to determining the nature
and scope of the unmistakable contractual rights, if any, that are
created by a given state legislature.
I. General Contract Clause Principles
Although the wording of the Contract Clause appears
uncompromising -- "No state shall . . . pass any . . . Law
impairing the Obligation of Contracts . . . "
-- the Supreme Court
does not interpret it as an absolute bar on the impairment of
either governmental or private contractual obligations.
See
United
States
Trust
Co. v. New
Jersey, 431 U.S. 1, 21 (1977) ("'[T]he
prohibition is not an absolute one and is not to be read with
literal exactness like a mathematical formula.'" (quoting Home
Bldg.
&
Loan
Ass'n v. Blaisdell, 290 U.S. 398, 428 (1934))).
Rather, the Supreme Court has elaborated an analysis under which a
court must first ascertain whether a change in state law has
resulted in "'the substantial impairment of a contractual
relationship.'" General Motors Corp. v. Romein, 503 U.S. 181, 186
(1992) (quoting Allied Structural Steel Co. v. Spannaus, 438 U.S.
U.S. Const. art. I, S 10, cl. 1.
-8-
234, 244 (1978)). Next, the reviewing court must determine whether
the impairment is nevertheless justified as "reasonable and
necessary to serve an important public purpose." United
States
Trust
Co., 431 U.S. at 25-26. Where the contract allegedly
impaired is one created, or entered into, by the state itself, less
deference to a legislative determination of reasonableness and
necessity is required, because "the State's self-interest is at
stake." Id. at 25;
see also
McGrath, 88 F.3d at 16 (when the state
itself is a party, it "must do more than mouth the vocabulary of
the public weal in order to reach safe harbor.").
The first step described above can be further broken down
into "three components: whether there is a contractual
relationship, whether a change in law impairs that contractual
relationship, and whether the impairment is substantial." Romein,
503 U.S. at 186. In the instant case, we need not reach the issue
of impairment or substantiality, because the plaintiffs fail to
demonstrate the existence of a contractual relationship protected
by the Contract Clause. At the same time that less deference is
given to state legislatures when it is the state that wishes to
relieve itself of contractual obligations, a clear showing must be
made that a state law has created a contractual obligation on the
part of the state in the first place. See
Hoffman v.
Warwick, 909
F.2d 608, 614 (1st Cir. 1990) ("The Contract Clause is applicable
to contracts into which the state enters, but normally state
statutory enactments do not of their own force create a contract
with those whom the statute benefits.").
-9-
II. The Unmistakability Doctrine
In order to deem a state legislative enactment a contract
for the purposes of the Contract Clause, there must be a clear
indication that the legislature intends to bind itself in a
contractual manner. See
National R.R. Passenger Corp.
v.
Atchison,
Topeka & Santa Fe Ry. Co., 470 U.S. 451, 465-66 (1985) ("[A]bsent
some clear indication that the legislature intends to bind itself
contractually, the presumption is that 'a law is not intended to
create private contractual or vested rights but merely declares a
policy to be pursued until the legislature shall ordain
otherwise.'" (quoting Dodge v. Board
of
Educ., 302 U.S. 74, 79
(1937))); United States Trust Co., 431 U.S. at 17 n.14 (a statute
may be treated as a binding contract "when the language and the
circumstances evince a legislative intent to create private rights
of a contractual nature enforceable against the state.").
This threshold requirement for the recognition of public
contracts has been referred to as the "unmistakability doctrine."
See McGrath, 88 F.3d at 19 (citing United
States v. Winstar, 116
S. Ct. 2432 (1996)). In United
States v. Winstar, the Supreme
Court traced the history of the unmistakability doctrine from
Justice Marshall's opinion in
Fletcher v.
Peck, 10 U.S. (6 Cranch)
87 (1810), and explained its purpose. Because legislatures should
not bind future legislatures from employing their sovereign powers
in the absence of the clearest of intent to create vested rights
protected under the Contract Clause, courts developed canons of
construction disfavoring implied governmental contractual
-10-
obligations. Thus, "'neither the right of taxation, nor any other
power of sovereignty, will be held . . . to have been surrendered,
unless such surrender has been expressed in terms too plain to be
mistaken.'" Winstar, 116 S. Ct. at 2455 (quoting
Jefferson Branch
Bank v. Skelly, 68 U.S. (1 Black) 436, 446 (1862)). The
requirement that "the government's obligation unmistakably appear
thus served the dual purposes of limiting contractual incursions on
a State's sovereign powers and of avoiding difficult constitutional
questions about the extent of State authority to limit the
subsequent exercise of legislative power." Winstar, 116 S. Ct. at
2455.
In its most recent Contract Clause case holding a state
to its obligations under a public contract, the Supreme Court found
ample evidence that a promise on the part of the state had been
made in a contractual setting, in return for a specific bargained-
for benefit, and found that the statutory scheme clearly employed
the language of contract. See
United States Trust Co.
, 431 U.S. at
17-18 (involving a legislative covenant between New York and New
Jersey and future bondholders where the very "purpose of the
covenant was to invoke the constitutional protection of the
Contract Clause as security against repeal"). In the instant case,
we must determine whether the MSRS also evinces a clear intent on
the part of the Maine legislature to create contractual rights
against the modification of pension benefits.
III. Pension Plans as Contractual Obligations
-11-
The law governing the rights of members of public
employee retirement plans varies greatly from state to state, and
has not been the subject of federal regulation or harmonization.
There is no modern Supreme Court case that provides guidance as to
the rights public employees have to their pensions. Pennie v.
Reis, 132 U.S. 464 (1889), stands for the proposition that public
employee pension programs do not create vested rights against
legislative modifications, and thus are gratuities that a state may
freely revoke. See Pennie, 132 U.S. at 470-71 (holding
California's adjustment of a pension benefit plan for police
officers did not constitute deprivation of property without due
process). Although this "gratuity" approach has been rejected by
most state courts,
Pennie has never been explicitly overruled.
See
generally 60A Am. Jur. 2d, Pensions and Retirement Funds, SS 1620-
29 (discussing the shift away from the gratuity approach toward the
contract approach). Pennie has, however, been ignored as a
precedent, perhaps because its dicta regarding public pension
benefits arose in the context of a Due Process claim.
Although only two other circuits have addressed this
question, state courts have generally viewed a public pension plan
as creating implied-in-fact unilateral contracts. See
McGrath, 88
F.3d at 17 (collecting cases). The Ninth Circuit in State
of
Nevada Employees Ass'n v. Keating, 903 F.2d 1223 (9th Cir. 1990),
agreed with the Nevada Supreme Court that the "'better reasoned
view' recognizes that non-vested employees have contractual rights
in pension plans 'subject to reasonable modification in order to
-12-
keep the system flexible to meet changing conditions, and to
maintain the actuarial soundness of the system.'" 903 F.2d at 1227
(quoting
Public Employees' Retirement Board
v.
Washoe, 96 Nev. 718
(1980)). Thus the Ninth Circuit in
Keating concluded that a Nevada
law penalizing the withdrawal of pension contributions and thereby
altering the previous law that contained no such penalty, violated
the Contract Clause because it did not represent a reasonable
modification of the pension plan. The court in Keating noted,
however, that the state did not dispute that Nevada's statutes
providing pensions for public employees created contractual
obligations. See
Keating, 903 F.2d at 1225-26. The Fourth Circuit
also ignored the gratuity approach in the course of holding that
legislative amendments to a North Carolina public employee
disability benefit plan did not violate the Contract Clause
because, under relevant state law interpretations of the statute,
rights to benefits under the plan did not vest until retirement.
See Kestler v. Board of Trustees of North Carolina Local
Governmental Employees' Retirement Sys.
, 48 F.3d 800, 804 (4th Cir.
1995) (no Contract Clause violation where plaintiff was not vested
at the time of the effective date of the amendment).
These cases reflect the modern trend among state supreme
courts, which is to protect pension rights on the theory that a
state's promise of pension benefits represents an offer that can be
accepted through the employee's performance -- thus, a unilateral,
implied-in-fact contract is created that is binding on the state.
See generally
Andrew Mackenzie, "
Spiller v.
State: Determining the
-13-
Nature of Public Employees' Rights to Their Pensions," 46 Me. L.
Rev. 355, 357-59 (1994); Note, John J. Dwyer, "'Til Death Do Us
Part: Pennsylvania's 'Contract' With Public Employees For Pension
Benefits," 59 Temp. L.Q. 553 (1986). There is much disagreement on
the details, however, under this unilateral contract approach. One
widely held view is that at some point, public employees'
contractual rights to pension benefits vest; after vesting, the
state is contractually bound to honor its obligation to provide a
pension without any further modifications or decreases in overall
benefit levels. See, e.g., Petras v. State
Bd.
of
Pension
Trustees, 464 A.2d 894, 896 (Del. 1983) (rights vest upon
completion of minimum service requirement); Baker v. Oklahoma
Firefighters
Pension
&
Ret.
Sys., 718 P.2d 348, 353 (Okla. 1986)
(same);
Leonard v.
City of Seattle
, 503 P.2d 741, 746 (Wash. 1972)
(en banc) (same);
Sylvestre v.
State, 214 N.W.2d 658, 666-67 (Minn.
1973) (rights vest at start of employment);
Yeazell v.
Copins, 402
P.2d 541 (Ariz. 1965) (en banc) (same as Sylvestre). Several
states have provisions in their constitutions declaring that
vesting occurs at the moment of public employment and barring any
legislative modifications that retroactively reduce the accrued
benefits of public employees. See, e.g., Alaska Const. art. XII,
S 7; Haw. Const. art. XVI, S 2; Ill. Const. art. XIII, S 5; Mich.
Const. art. IX, S 24; N.Y. Const. art. V, S 7. Several states
follow a modified contract approach, which permits some unilateral
legislative modifications of pension plans as long as the
legislature offsets any new disadvantage with comparable new
-14-
advantages, as seen from the point of view of the public employee.
See,
e.g.,
Singer v.
City of Topeka
, 607 P.2d 467, 475 (Kan. 1980);
Betts v.
Board of Admin. of the Pub. Employees' Ret. Sys.
, 582 P.2d
614, 617 (Cal. 1978) (en banc);
Opinion of the Justices
, 303 N.E.2d
320, 328 (Mass. 1973). At least two state supreme courts,
including Maine's, have declined to use the language of "vesting"
in the course of upholding modifications to pension benefits at any
time during the employment relationship.
See
Spiller v.
State, 627
A.2d 513, 516 (Me. 1996);
Pineman v.
Oechslin, 488 A.2d 803 (Conn.
1985). The Connecticut Supreme Court in fact rejected the contract
model altogether and indicated that public employees have a
property interest in pension benefits that may not be arbitrarily
confiscated by the state, under the Due Process Clause. Pineman,
488 A.2d at 809-810.
Although we have recognized the diversity of contract
theories adopted by state courts -- in particular the divergence of
approaches with regard to when exactly binding rights to a certain
level of retirement benefits "vest" -- we have never chosen to
adopt a particular approach to
public pension rights. See
McGrath,
88 F.3d at 16-18.
In
McGrath, we noted that, as a general matter, pensions
are viewed as "a species of unilateral contracts," although there
is considerable disagreement as to when rights in public pension
plans vest, if at all. Id. at 17. But in the course of analyzing
a Contract Clause challenge to certain amendments to the Rhode
Island public employee retirement system, we eschewed participating
-15-
in abstract contract theory in favor of performing a close analysis
of the statutory provision at issue. Such an approach is wise,
because the unmistakability doctrine mandates that we determine
whether the challenged legislative enactment evinces the clear
intent of the state to be bound to particular contractual
obligations. It may well be that the variety of approaches adopted
by state supreme courts reflect, in part, differences in the
structure of the various state pension programs, and of the
intention of the different state legislatures that created them.
There is a danger, however, in adopting a theory of pension rights
and subsequently forcing a given program to fit under it. Any
given theoretical approach will make assumptions regarding the
intent of legislatures to be bound, as well as the time at which
vesting should occur, which may be contradicted by particular
statutory provisions such as, for example, an express reservation
of the right to revoke pension benefits. When reviewing a
particular enactment, therefore, we must suspend judgment and
"proceed cautiously both in identifying a contract within the
language of a regulatory statute and in defining the contours of
any contractual obligation." Atchison, Topeka & Santa Fe Ry. Co.
,
470 U.S. at 466. The district court's decision protects Maine
public employees from benefit reduction once employees' rights are
"vested." Unfortunately, the line it drew between teachers who had
In McGrath, we specifically reserved judgment on the question of
whether such express reservations are valid after the point at
which pension rights are "vested." 88 F.3d at 19.
-16-
and had not completed a minimum service requirement, cannot be
justified on the basis of the Maine statute, which nowhere speaks
of "vesting" as understood by the district court.
-17-
IV. Contractual Rights Under the MSRS
Turning to the MSRS, we ask whether the Maine Legislature
has unmistakably evinced the intention to create binding
contractual rights. See Hoffman, 909 F.2d at 614 (determining
whether "language and circumstances" of Rhode Island benefits
statute reveal "a legislative intent to create private contractual
rights"). Specifically, in light of the plaintiffs' claims, we
must ask whether Maine has bound itself not to modify or alter, at
any time before the employee's retirement, the level of pension
benefits an employee would expect to receive. The statutory
language is the primary focus of the inquiry. Atchison, Topeka &
Santa Fe Ry. Co., 470 U.S. at 466.
Under the terms of the MSRS, public employees who have
met certain service and age requirements are entitled to receive
pensions. At the heart of this case is 5 M.R.S.A. S 17801, which
reflects the state's intent to reserve the power to amend the
amount of pension benefits, as well as, arguably, the state's
intent to create private contractual rights. That is, the State's
self-imposed limitations on its legislative power through section
17801 may reasonably serve as an indication of its intent to
guarantee pension benefits once they are "due," as well as an
obvious reservation of amendment powers with regard to the amount
of benefits that are not "due." The parties disagree as to the
unmistakable intentions section 17801 represents.
Section 17801 states that "no amendment . . . may cause
any reduction in the amount of benefits which would be due a member
-18-
. . . on the date immediately preceding the effective date of the
amendment." Much turns on the meaning of "due." The plaintiff
public school teachers argue that benefits are "due" from the
moment of employment, and that this section merely confirms the
applicability of a strict implied-in-fact, unilateral contract
approach. The State contends that section 17801 is a reservation
of the power to alter benefits until the retirement benefits are
literally due to be received. The third alternative, not the basic
position of either party, is that benefits are "due" if a teacher
has completed the statute's initial service requirements, although
pension benefits are not yet currently payable.
The Maine Supreme Judicial Court's Spiller decision,
which deserves our "'respectful consideration and great weight,'"
Romein, 503 U.S. at 187 (quoting
Indiana ex rel. Anderson
v.
Brand,
303 U.S. 95, 100 (1938)), clearly rejects the alternative pressed
by the teachers. The court was "unpersuaded by the reasoning of
those jurisdictions that have discerned in the statutory language
the creation at the time of employment of binding contractual
rights." Spiller, 627 A.2d at 516. It held that, as to the
Spiller plaintiffs, none of whom had satisfied the statute's
service requirements at the time of the statutory amendment
challenged in Spiller, "[n]one of the benefits at issue here were
due . . . on the effective date of [the] legislation." Id.
The question remains, however, whether section 17801
should be read to protect a teacher -- and possibly to create
contract rights -- whenever a teacher satisfies the service
-19-
requirements even though the teacher is still in active service and
no pension is currently payable. Section 17801 does not clearly
compel such a reading, since "due" could easily be read to mean
currently payable. And such a reading would also arguably conflict
with some of the language in
Spiller (although not its holding) and
with the dissent's reading of the majority. See
Spiller, 627 A.2d
at 516 ("By implication, the [statutory] language reserves to
future legislatures the power to modify prospective service
retirement benefits for employees to whom benefits are not then
due"); id. at 519 ("Although the Court does not reach the issue
today, its interpretation of section 17801 also undermines the
pension benefits of those employees who have met the eligibility
conditions for pension benefits but [have not yet retired].")
(Wathen, C.J., dissenting).
Even if we treat the statute as unclear and conclude that
Spiller leaves the issue open, we think that the principle of
unmistakability would defeat the teachers' claim that the contract
rights are created when service requirements are satisfied. We
need not decide whether the statute ever gives rise to a
contractual relationship; it is enough to say that it does not
clearly do so before a teacher retires, and thus gains an immediate
right to the payment of pension benefits. Because there is no
attempt here to take away retirees' benefits, there can be no
plausible contract clause claim in this case.
The district court reasoned that "due" should be
construed as referring to the point at which a member qualifies for
-20-
retirement benefits. But even if this is a possible reading, we do
not think this language could be said to reflect the unmistakable
intent of the Maine Legislature, particularly when the legislature
could very well have indicated as much. In fact, the MSRS makes no
reference to "vesting." As the district court points out, and as
the plaintiffs have vigorously argued, there is some evidence
indicating that certain legislators wanted to protect vested
rights; and that the Maine Legislature, in enacting section 17801,
responded to a report that recommended the protection of employees'
accrued retirement benefits from retroactive reductions. But the
language of section 17801 remains at best ambiguous, and we cannot
find that the legislature as a whole unmistakably intended to
create contract rights at the time that service requirements were
satisfied -- especially where, as here, it would have been easy to
make any such intention crystal clear.
We do not decide today whether, in order to satisfy the
unmistakability doctrine, a public pension statute must explicitly
employ the language of contract. Nor need we decide whether
Contract Clause principles would apply if Maine sought to reduce
pension benefits already "due" to present retirees, a step that
would in any case appear to require revision of the present section
17801. To resolve this appeal, we need only conclude that there is
no unmistakable intent by the Maine Legislature to create an
enforceable private contract right against the modification of the
plaintiffs' retirement benefits until they are actually receivable.
-21-
As we indicated in McGrath, public employment contracts
operate in a "special employment environment" requiring recognition
of "the states' flexibility vis-a-vis the retirement benefits that
it offers public employees." 88 F.3d at 19. Whether the
amendments here are wise or justified as a matter of political
philosophy is not our concern. As Contract Clause challenges
arise, we must look to the language of the pension statutes to
determine, as a threshold matter, whether the unmistakability
doctrine is satisfied. Here, as it relates to Maine's purported
obligation not to alter the benefits of its public teacher
employees, it is not. Thus, no violation of the Contract Clause
may be found.
With regard to the teacher-plaintiffs' due process claim
on cross-appeal, we affirm the decision of the district court,
finding no due process violation, for the reasons given in its
opinion, extending that reasoning to all plaintiffs. See 937 F.
Supp. at 58.
CONCLUSION
For the reasons stated in this opinion, the decision of
the district court, to the extent that it found the Maine
legislative amendments violative of the Contract Clause, is
reversed in part, and to the extent that it found no constitutional
violations, is affirmed in part.
-22-