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Rhode Island Public Employees' Retiree Coalition v. Chafee

Superior Court of Rhode Island

April 16, 2014

RHODE ISLAND PUBLIC EMPLOYEES' RETIREE COALITION, AFSCME, COUNCIL 94 RETIREE CHAPTER, NEARI-RETIRED, RI AFT/R LOCAL 8037, RHODE ISLAND RETIRED TEACHERS ASSOCIATION, RHODE ISLAND ASSOCIATION OF RETIRED PRINCIPALS, RHODE ISLAND LABORERS' RETIREE COUNCIL, DAVID FLORIO, JAMES GILLIS, CAROL KEISER, MARK KURTZMAN, MARY ANN PARKER, ANTHONY PICCIRILLI
v.
LINCOLN D. CHAFEE, in his capacity as Governor of the State of Rhode Island, GINA RAIMONDO, in her capacity as General Treasurer of the State of Rhode Island, and the EMPLOYEES' RETIREMENT SYSTEM OF RHODE ISLAND, by and through The RETIREMENT BOARD, by and through Gina Raimondo, in her capacity as Chairperson of the Retirement Board, and Frank J. Karpinski, in his capacity as Secretary of the Retirement Board

Rhode Island Public Employees' Retiree Coalition, et al Carly Beauvais Iafrate, Esq. Jay E. Sushelsky, Esq. Bristol/Warren Regional School Employees, Local 581, et al, Thomas R. Landry, Esq. R.I. Council 94, AFSCME, AFL-CIO Locals: Boys & Girls Training School Local Lynette Labinger, Esq. Cranston Police Officers, IBPO, Local 301, et al, Gary T. Gentile, Esq., Christopher Lambert, Esq., Paul V. Sullivan, Esq. Plaintiff Firefighters, et al., Joseph F. Penza, Jr., Esq., Douglas L. Steele, Esq., Kurt T. Rumsfeld, Esq., Megan K. Mechak, Esq., Cranston Fire Fighters, Local 1363, AFL-CIO Mark B. Gursky, Esq.

Defendants Lincoln D. Chafee and Gina Raimondo James Lee. Esq. Rebecca T. Partington, Esq., Employees' Retirement System of Rhode Island, John A. Tarantino, Esq., Patricia K. Rocha, Esq., Employees' Retirement System of Rhode Island, Nicole J. Benjamin, Esq., Michael J. Tarantino, Esq., Julia Hamilton, Esq., David Boies, Esq.

DECISION

TAFT-CARTER, J.

Plaintiffs[1] filed the underlying action against the Governor and General Treasurer of the State of Rhode Island, the Employees' Retirement System of the State of Rhode Island, by and through the Retirement Board and the Chairman and Secretary of the Retirement Board (collectively, the Defendants), challenging the constitutionality of the Rhode Island Retirement Security Act (RIRSA) of 2011. Before the Court is the Defendants' Motion to Dismiss the Plaintiffs' Complaint pursuant to Super. R. Civ. P. 12(b)(6) and the Plaintiffs' objection. For the reasons stated herein, the Court denies the Defendants' Motion to Dismiss the Complaint.

I. Facts and Travel

The State Retirement System was created by legislation and has been in existence since 1936. The retirement system was placed under the management of the Retirement Board (Board). The Board is chaired by the General Treasurer of the State. See G.L. 1956 § 36-8-4. The purpose of the retirement system is to provide retirement allowances to employees of the State of Rhode Island. It is known as the Employees' Retirement System of Rhode Island (ERSRI). Sec. 36-8-2. Among the retirement plans administered by the Board are the Employees' Retirement System (ERS) and the Municipal Employees' Retirement System (MERS). Sec. 36-10-1 and G.L. 1956 §§ 45-21-1 et seq. Over the years, amendments have been made to the pension legislation. See P.L. 2005, ch. 117, art. 7; P.L. 2009, ch. 68, art. 7; P.L. 2010, ch. 23, art. 16; P.L. 2011, ch. 406; P.L. 2011, ch. 408; and P.L. 2011, ch. 409.

The General Assembly, in November 2011, enacted the RIRSA, which overhauled the public pension system. Specifically, the legislation reduced the pension benefits, including the COLA, for retired employees.[2] The RIRSA suspended the annual COLAs for all retirees effective January 2013. It also provides that no annual COLAs will be paid to retired teachers and state employees until the retirement system is eighty percent funded, which is not estimated to occur for about sixteen years. Even if the system becomes eighty percent funded—and thus, an annual COLA resumes—the RIRSA reduces the amount of the COLA by establishing a new formula for the COLA percentage and applying the COLA only to the first $25, 000 of a beneficiary's retirement allowance. Finally, the reduced COLAs will be paid every five years after the system is eighty percent funded.

On June 22, 2012, Plaintiffs filed suit on behalf of individual retired state and municipal employees and retired public school teachers who were current beneficiaries of the ERSRI at the time the RIRSA became effective. The suit challenges various provisions of RIRSA as being unconstitutional under the Contract Clause, the Due Process Clause, and the Takings Clause of the Rhode Island Constitution. Defendants filed a Motion to Dismiss the Plaintiffs' Complaint pursuant to Super. R. Civ. P. 12(b)(6). The Court heard oral argument and now issues its Decision.

II. Standard of Review

"A motion under Rule 12(b)(6) challenges the sufficiency of the complaint about whether it fails to state a claim upon which relief can be granted." Boyer v. Bedrosian, 57 A.3d 259, 270 (R.I. 2012). "The standard for granting a motion to dismiss is a difficult one for the movant to meet." Id. (quoting Pellegrino v. Rhode Island Ethics Comm'n, 788 A.2d 1119, 1123 (R.I. 2002)). "Rule 12(b)(6) does not deal with the likelihood of success on the merits, but rather with the viability of a plaintiff's bare-bones allegations and claims as they are set forth in the complaint." Hyatt v. Vill. House Convalescent Home, Inc., 880 A.2d 821, 823 (R.I. 2005). When ruling on Rule 12(b)(6) motion, a court's review is confined to the four corners of the pleadings. See Palazzo v. Alves, 944 A.2d 144, 149 (R.I. 2008). A court must "assume that the allegations contained in the complaint are true, and examine the facts in the light most favorable to the nonmoving party." Boyer, 57 A.3d at 270 (quoting Pellegrino, 788 A.2d at 1123); see also Palazzo, 944 A.2d at 149; Multi-State Restoration, Inc. v. DWS Properties, LLC., 2013 WL 116789 (R.I. 2013). Thus, "[i]f it 'appears beyond a reasonable doubt that a plaintiff would not be entitled to relief under any conceivable set of facts, ' the motion may be granted." Boyer, 57 A.3d at 270 (quoting Estate of Sherman v. Almeida, 747 A.2d 470, 473 (R.I. 2000).

Further, to the extent that the United States Supreme Court has articulated a heightened pleading standard in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 556 U.S. 662 (2009), this standard does not yet apply in Rhode Island. Our Supreme Court has not adopted the heightened pleading standard and still adheres to the notice pleading standard. See Barrette v. Yakavonis, 966 A.2d 1231 (R.I. 2009) (stating that "a pleading need not include 'the ultimate facts that must be proven in order to succeed on the complaint . . . or . . . set out the precise legal theory upon which [the plaintiffs'] claim is based.") (quoting Gardner v. Baird, 871 A.2d 949, 953 (R.I. 2005)); see also William Chhun et al. v. Mortgage Electronic Registration Systems, Inc., et al., No. 12-298, slip op. at 3-4 (R.I. Feb. 3, 2014) (addressing the differences between the Federal and Rhode Island Rule 12(b)(6) standards, but "[leaving] the Twombly and Iqbal conundrum for another day").

III Analysis

The gravamen of the Defendants' argument is that at the time the RIRSA was enacted, no contractual relationship existed between the Plaintiffs and the State. The Defendants maintain that the pension legislation does not create a contractual relationship, and therefore, Plaintiffs' claims must fail as a matter of law. Defendants cite the federal doctrine of unmistakability in support of their argument that the Plaintiffs do not have contractual rights arising from the pension statute. Plaintiffs argue that the Complaint states implied-in-fact contract claims sufficient for relief.

When the unmistakability doctrine argument is made, it is the plaintiffs who bear a heavy burden to overcome the presumption that one legislature cannot bind another as legislative enactments declare policy "'to be pursued until the legislature shall ordain otherwise.'" Brennan v. Kirby, 529 A.2d 633, 638 (R.I. 1989) (quoting Dodge v. Bd. of Educ. of Chicago, 302 U.S. 74, 79 (1937)). Plaintiffs urge the Court to follow its analysis in Pension I, wherein this Court found that vested employees possessed implied-in-fact contract rights to their pension benefits. Pension I, although parallel in argument, involved plaintiffs of a different status. In Pension I, the plaintiffs were not retirees; they were employees who had completed a minimum ten years ...


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