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American Federation of Teachers v. State

Supreme Court of New Hampshire

January 16, 2015

American Federation of Teachers -- New Hampshire & a.
v.
State of New Hampshire & a.

Argued November 13, 2014

Page 64

[Copyrighted Material Omitted]

Page 65

Merrimack.

Bernstein, Shur, Sawyer & Nelson, P.A., of Manchester ( Andru H. Volinsky, Christopher G. Aslin, and Talesha L. Caynon on the brief, and Mr. Volinsky orally), Molan, Milner & Krupski, PLLC, of Concord ( Glenn R. Milner on the brief), Stember Feinstein Doyle Payne & Kravec, LLC, of Pittsburgh, Pennsylvania ( William T. Payne and Stephen M. Pincus on the brief), and Gottesman & Hollis, PA, of Nashua ( David M. Gottesman on the brief), for the plaintiffs and intervenors.

Joseph A. Foster, attorney general ( Richard W. Head, associate attorney general, on the brief and orally), for the State.

Getman, Schulthess & Steere, PA, of Manchester ( Andrew R. Schulman on the brief), and McLane, Graf, Raulerson & Middleton, PA, of Manchester ( Michael A. Delaney orally), for New Hampshire Retirement System.

DALIANIS, C.J. HICKS, CONBOY, LYNN, and BASSETT, JJ., concurred.

OPINION

Page 66

Dalianis, C.J.

The State appeals the Superior Court's ( McNamara, J.) ruling that legislative changes to the definition of " earnable compensation" applicable to members of the New Hampshire Retirement System violate the Contract Clauses of the New Hampshire and United States Constitutions. The plaintiffs and the intervenors cross-appeal the court's rulings that members' rights to retirement benefits do not vest until they accrue ten years of creditable service, and that members do not have vested rights to cost-of-living adjustments to their pensions. The New Hampshire Retirement System takes no position on the legal issues raised in the appeal, but objects to the remedy sought by the plaintiffs and the intervenors. For the reasons set forth below, we reverse the trial court's ruling on " earnable compensation," and affirm its ruling on cost-of-living adjustments.

The following undisputed facts are supported by the record. The New Hampshire Retirement System (NHRS), as set forth in RSA chapter 100-A, is a contributory, public employee, defined-benefit pension plan, qualified under section 401(a) of the Internal Revenue Code and funded through a trust. See RSA 100-A:2 (2013). NHRS is funded by member contributions, employer contributions, and investment gains. The percentage of " earnable compensation" that is contributed by members is set by the legislature. RSA 100-A:16, I (Supp. 2014). NHRS members receive retirement benefits in proportion to the member's " average final compensation." See RSA 100-A:5 (2013), :6 (Supp. 2014). Average final compensation is defined as the average of a member's three highest years of " earnable compensation." See RSA 100-A:1, XVIII(a) (2013); see also RSA 100-A:1, XVIII(b) (2013) (establishing five year period to determine average final compensation for members who have not attained vested status prior to January 1, 2012).

Page 67

In 2007 and 2008, the legislature amended RSA chapter 100-A, including changing the definition of " earnable compensation" in RSA 100-A:1, XVII, by largely excluding from it " other compensation," and altering the method of funding cost-of-living adjustments (COLAs) in RSA 100-A:41-a. See Laws 2007, 268:8; Laws 2008, 300:1, :8, :19.

In August 2009, the plaintiffs filed a petition for declaratory and injunctive relief challenging the constitutionality of the changes to the statute. The plaintiffs included: the American Federation of Teachers -- New Hampshire, the National Education Association -- New Hampshire, the New England Police Benevolent Association IUPA Local 9000, AFL-CIO, the New Hampshire Association of Fire Chiefs, the New Hampshire Police Association, the New Hampshire Retired Educators Association, the New Hampshire School Administrators Association, the Professional Fire Fighters of New Hampshire, the State Employees Association of New Hampshire, SEIU Local 1984, and several individuals. The petition was amended in May 2010. In addition to claims against the State, the amended petition included claims pursuant to 42 U.S.C. § 1983 against the Chair of the New Hampshire Retirement System and the Governor, and sought restitution against NHRS. However, the parties subsequently jointly tolled the Section 1983 claims pending resolution of the constitutional issues. The petition was amended again in February 2013 to, among other things, include additional individual plaintiffs.

In November 2010, the parties filed cross-motions for summary judgment. The plaintiffs claimed that the amendments violated the Contract Clauses of the State and Federal Constitutions, arguing that RSA chapter 100-A constitutes a contract, that " [t]he statute providing for the formula to calculate pension benefits, which included consideration of 'other compensation' in determining the retiree's average salary, created vested rights," and that eliminating " other compensation" from the formula constituted a substantial impairment of their vested rights. The plaintiffs also argued that " [t]he statute that promised a ... COLA to NHRS members ... created vested rights," and that the statutory amendments constituted a substantial impairment of those rights. The State argued that RSA chapter 100-A does not create a contract with respect to the definition of " earnable compensation," because the statute did not evince a clear intent by the legislature to be bound by the statute and not permitted to change it, and that, even if the statute did create a contract, the plaintiffs failed to show that the amendments " impair the contract to a substantial degree," or that they are retroactive. The State further argued that the plaintiffs did not have vested rights in COLAs because receipt of a COLA is based ...


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