AP&S Defends State of Rhode Island in High-Stakes Pension Litigation
The Challenge:
Since 2010, AP&S has represented Rhode Island’s Governor, General Treasurer and Employees’ Retirement System in defense of constitutional challenges to the state’s pension statutes in both state and federal court. Through nine cases in state court, a class action lawsuit, and a separate case in federal court, various unions, associations and retirees challenged the constitutionality of pension changes made by the Rhode Island General Assembly in 2009, 2010 and 2011, which had reduced retirement benefits for employees of the state – Rhode Island’s largest employer – and employees of various cities and towns.
The Solution:
After a year-long effort to resolve the state court cases through mediation, the parties engaged in extensive motion practice on complex legal issues. AP&S successfully argued that because the litigation impacted numerous municipal entities that participated in the Municipal Employees Retirement System (“MERS”), including Rhode Island’s 39 cities and towns, those entities should be made parties to the litigation. AP&S also successfully argued that the nine state court cases should be consolidated and tried to a jury. Finally, in ruling on motions in limine filed by both the plaintiffs and the state defendants, the Superior Court issued a decision addressing the parties’ respective burdens of proof and persuasion, holding that the plaintiffs – not AP&S’s clients – bore the burden of proving the unconstitutionality of the statutes at issue beyond a reasonable doubt, the highest-burden available in a civil case. As to the primary claim in the case, for alleged violation of the Contract Clause of Rhode Island’s Constitution, the Court ruled that the plaintiffs bore the burden of proving, beyond a reasonable doubt, that the legislation constitutes a substantial impairment of a contract. The Court further ruled that if the state defendants made a sufficient showing of reasonableness and necessity of the changes, plaintiffs must then prove, beyond a reasonable doubt, that the legislation was not reasonable and necessary.
As the parties prepared for trial of the state court cases, AP&S’s team coordinated an extensive and multifaceted effort to collect and produce more than 4 million pages of electronically stored documents, utilizing computer-assisted search and review technology. AP&S’s team also noticed and took numerous depositions and briefed and argued a number of discovery-related motions.
The Result:
In the months before trial of the state court cases was scheduled to commence, the parties filed motions for summary judgment. While plaintiffs filed three separate motions for summary judgment, AP&S filed six separate motions for summary judgment, which, if successful, would dispose of the nine cases in their entirety. The Superior Court ruled on only one of those motions and granted summary judgment in favor of AP&S’ clients on one claim brought by a number of retirees. Before decisions were issued on the remaining motions, but after the Superior Court had issued the decision on the burden of proof, renewed settlement efforts resulted in a proposed settlement between the state defendants and the parties to most of the lawsuits, which retained approximately 92 percent of the pension savings the state had obtained in the challenged legislation. The Superior Court held a five-day-long class action fairness hearing on the proposed settlement and issued a written decision concluding that the proposed settlement was fair, reasonable and adequate.
In addition to handling these matters before the judiciary, the proposed settlement required the passage of legislation by the Rhode Island General Assembly to be effective. Accordingly, AP&S attorneys appeared before the Rhode Island Senate and the Rhode Island House finance committees and testified concerning the terms of proposed legislation and the corresponding cost to the state.
Thereafter, appeals were filed in the Rhode Island Supreme Court from the state court’s decision. After briefing and argument by AP&S, the Rhode Island Supreme Court affirmed the Superior Court’s decision, concluding that the hearing justice did not overlook any of the concerns raised by the various objectors to the settlement and that she had conducted an exhaustive review of the factors necessary to determine whether the settlement was fair, reasonable and adequate. The Supreme Court’s decision, available here, also concluded that the hearing justice properly balanced the benefits and drawbacks of the settlement.
While the settlement resolved six of the state court lawsuits, the Superior Court dismissed the three remaining cases on the ground that the claims advanced in those cases had been rendered moot by the passage of the legislation. Two of the unions in those cases later commenced a new lawsuit in the United States District Court for the District of Rhode Island. AP&S filed a motion to dismiss the federal court lawsuit, which was granted. The unions appealed the dismissal of their claims to the United States Court of Appeals for the First Circuit. On appeal, AP&S represented the Governor, the Treasurer, the Employees’ Retirement System and the City of Cranston. After briefing and argument, the First Circuit affirmed the district court’s dismissal in all respects.
The First Circuit’s decision, available here, relied on the unmistakability doctrine to conclude that the pension statute at issue did not give the unions the contractual rights they claimed. In so concluding, the First Circuit cautioned that “[a] claim that a state statute creates a contract that binds future legislatures confronts a tropical-force headwind in the form of the unmistakability doctrine.” The First Circuit’s decision not only was a victory for the defendants in that case but it also established favorable precedent for the state and municipalities in future challenges in which a party claims a contractual right to benefits set forth by statute.
Finally, AP&S continues to represent the Employees’ Retirement System in one remaining case brought by the Rhode Island State Troopers Association.
