UNITED STATES DISTRICT COURT EASTERN DISTRICT OF TENNESSEE CHATTANOOGA DIVISION JOHNNY H. FRAZIER, et al.,
) ) ) Plaintiffs, ) ) v. ) No. 1:14-cv-00128-CLC-WBC ) CITY OF CHATTANOOGA, TENNESSEE and ) THE CHATTANOOGA FIRE AND POLICE ) PENSION FUND, ) ) ) Defendants. ) ______________________________________________________________________________ DEFENDANT CHATTANOOGA FIRE AND POLICE PENSION FUND’S RESPONSE TO PLAINTIFFS’ MOTION FOR A PRELIMINARY INJUNCTION ______________________________________________________________________________ Defendant Chattanooga Fire and Police Pension Fund (“Defendant” or “the Fund”) files its Response to Plaintiffs’ Motion for a Preliminary Injunction (Doc. 14) and contends the Motion should be DENIED. I.
FACTUAL AND PROCEDURAL BACKGROUND Plaintiffs are a small group of retired firefighters and police officers who worked in those
capacities for the City of Chattanooga (“the City”). They receive certain retirement benefits through their participation in the Fund and in accord with the terms of the legislation governing the Fund (“the Plan”). Frustrated with the validity of one particular change included among comprehensive measures recently passed by the Chattanooga City Council (“City Council”) to help ensure the continued financial integrity of the Fund, they filed suit to enjoin the change. Plaintiffs now move for a preliminary injunction to halt the commencement of this change as applied to the larger group of retirees.
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A brief history of the Fund will provide some context for the issues before the Court. The Fund believes the Plaintiffs do not dispute the below facts, which are found in various Chattanooga City Codes and Ordinances and other publicly available sources, including Fund documents. The Plan started in 1949, and the Fund is now governed by a Board of eight members: three active police officers elected by the active and retired police officers; three active firefighters elected by the active and retired firefighters; one member appointed by the Mayor of the City; and one member appointed by the City Council (See Affidavit of Frank Hamilton, hereinafter “Hamilton Aff.” and attached as Exhibit 1, at ¶¶ 3, 6). The police officer and firefighter members serve staggered three-year terms on the Board such that two members (one police officer and one firefighter) are up for election each year (Hamilton Aff. ¶ 3). In order to maintain the financial integrity of the Fund, the Board, along with the City and the City Council, have implemented many changes to the Plan throughout the years (Hamilton Aff. ¶¶ 6-7).
In the past, changes to the Plan were submitted to public vote through a
referendum; in 2000, however, the Board established a new system so that changes can be made by the City Council upon recommendation of the Board, with advice of the Mayor (Hamilton Aff. ¶ 8). If the City Council desires to make changes without the Board’s recommendation, such change must be submitted to public vote through a referendum (Hamilton Aff. ¶ 9). The Board, under the terms of the Plan, has the authority to interpret the provisions of the Plan (See City Code, Section 2-408). The Plan is an organic document; it has been revised frequently to address various needs and economic circumstances. Below is a list of the changes that have occurred over the last 40 plus years:
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1946/1949: Members retired with 50% of pay; death benefit $250 1971: Surviving spouse benefit added at $100/month 1972: Death benefit increased to $4,000 1981: A cost of living adjustment (“COLA”) implemented;; the adjustment was based on the CPI, not to exceed 3% 1985: Surviving spouse benefit increased to $200/month 1985: Death benefit increased to $10,000 for all active or retired members 1985: “Maximum pension” increased to $330 1985: Joint & Survivor payment election implemented at 100% or 50% 1987: Maximum pension increased to $375 1988: Enhancement for years of service 25-30 added (1.69% per year for a maximum benefit of 69.45%) 1988: COLA restricted to age 55 1990: Surviving spouse benefit increased to $300/month 1990: Maximum pension increased to $450 1993: Enhancement for years of service 25-30 increased to 2% for years of service over 25 with a maximum of 70% at 30 years 1993: Final Average Salary (“FAS”) changed to be calculated based on the three highest paid years of a “topped-out” Sergeant 1993: 60% of a “topped-out” Sergeant's FAS applicable to members hired after 7/1/93 who reached age 55 and had at least 25 years of service 1993: COLA restricted to take effect after a one year waiting period after retirement 1993: COLA added for surviving spouses 1993: Joint & Survivor 75% payment election implemented and modified to allow automatic 50% 1994: Actuarial assumption rate reduced to 8.25% (from 9%) 1997: Joint & Survivor payment election modified 2000: Surviving spouse benefit increased to $500/month 2000: Maximum pension increased to $750 2000: Retirement benefit changed to be based on FAS, which became the highest salary a three year average of each individual 2000: COLA restriction of age 55 removed; COLA changed to 3% and no longer tied to CPI 2002: Permanent & Total Disability (“PTD”) implemented with a sunset of 12/31/2007 3 Case 1:14-cv-00128-CLC-WBC Document 22 Filed 11/14/14 Page 3 of 19 PageID #: 480
2003: Actuarial assumption rate reduced to 8% 2008: PTD sunset extended to 12/31/2008 2010: Actuarial assumption rate reduced to 7.75% 2013: Joint & Survivor payment election automatic 50% benefit eliminated 2013: Plan language brought into compliance with Heroes Earning Assistance and Relief Act (HEART) 2013: FAS calculated using the average of the highest 36 months of consecutive salary 2014: PTD re-implemented with no sunset 2014: COLA changed to be tied to CPI 2014: Active contribution rate changed 2014: Retirement benefits restricted to age 55 (See City Code, Sections 2-400 through 2-429, for applicable years; see also Fund website at http://cfppf.org/historical-pension-booklets/ for historical pension booklets from 1949, 1972, 1987, 1992, and 2003 (last visited November 14, 2014)). The extensive list of changes demonstrates that, as the economy evolves and the Plan’s funding level increases or decreases, it is necessary and appropriate to make adjustments to the Plan to help preserve the financial integrity of the Fund (Hamilton Aff. ¶ 6). The Plan is not, and never has been, a static, unchanging set of legislation.
As noted above, a cost of living
adjustment (“COLA”) was first added to the Plan in 1981 and was initially calculated based on the CPI, not to exceed 3% (Hamilton Aff. ¶¶ 6-7, 10). In 1988, the Plan was revised to restrict that COLA to retirees age 55 and above (Hamilton Aff. ¶¶ 6-7, 10). Another change, in 1993, implemented a one-year waiting period prior to receiving a COLA, but provided the COLA to those who retired prior to 1981 (Hamilton Aff. ¶¶ 6-7, 10). In 2000, the COLA was changed again -- this time to remove the age restriction and make it an annual 3% increase that was not
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tied to the CPI (Hamilton Aff. ¶¶ 6-7, 10, 12).1 The 2000 change2 also provided an immediate 3% COLA to retirees who had not yet received an adjustment (Hamilton Aff. ¶¶ 6-7, 10, 12, 14). The most recent set of changes to the Plan are documented in Ordinance No. 12813, passed by the City in March 2014 (Hamilton Aff. ¶ 14; see also Affidavit of Phillip E. McClain, hereinafter “McClain Aff.” and attached as Exhibit 2, at ¶ 19).
The changes reflected in
Ordinance No. 12813 occurred after a lengthy and involved process in which the Board, the Board’s actuary, the City, the City Council, a consultant hired by the City and a special Task Force appointed by the Mayor participated (McClain Aff. ¶¶ 4-11). This Ordinance includes several changes not applicable to this lawsuit (but nonetheless worthy of noting) -- an increased contribution rate for actives that will continue to increase yearly through 2016; an increased retirement age that does not consider a set number of years of active service; and a change in the interest rate applied to the deferred retirement option provision (“DROP”) benefits, which are received as a lump sum (See Ordinance No. 12813, attached as Exhibit 3). Most of the changes implemented became effective July 1, 2014 (See Exhibit 3, Ordinance No. 12813).3 Despite multiple changes to the Plan, the sole change Plaintiffs contest is modifying the existing COLA to return it to a variable COLA. Plaintiffs’ challenge, though, overlooks some key points about a variable COLA.
First, having a variable COLA is an economically
responsible modification to the Plan. Second, the process of how the variable COLA is going to be applied is the result of a well-reasoned consideration of multiple factors affecting the Plan. It
1
A COLA is typically intended to protect earnings from being eroded by inflation. (Hamilton Aff. ¶ 16).
2
Negotiations for these changes started in 1999, but were not complete until 2000. The public vote was held in August 2000 (Hamilton Aff. ¶¶ 12-13). 3
The new COLA did not become effective in July 2014 because any adjustment made as a result of the COLA accrues on a calendar year basis; therefore, it will become effective in January 2015 (Hamilton Aff. ¶ 15).
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is a flexible approach designed to strengthen the Plan while recognizing some change over time may be appropriate. The new, variable COLA will be based on a formula providing for an average increase of 1.5%, with retirees who receive the largest benefits check receiving no less than 1% and no one receiving more than 2% (See Exhibit 3, Ordinance No. 12813). For the next three years, the COLA will not compound (i.e., it will simply be added to the base benefit as of December 31, 2014 and will not increase the base benefit upon which subsequent COLAs are calculated), and those who retire after July 1, 2014 will have a three-year waiting period before receiving their first COLA until the Plan is 70% funded (See Exhibit 3, Ordinance No. 12813). Afterwards, every retiree will be subject to a one-year waiting period before the COLA becomes effective (See Exhibit 3, Ordinance No. 12813). Finally, once the Plan is 80% funded, the COLA will be based on the Consumer Price Index (“CPI”) each year but will not exceed 3% (See Exhibit 3, Ordinance No. 12813). Soon after Ordinance No. 12813 passed and the changes were implemented, Plaintiffs filed suit in Hamilton County Chancery Court in April 2014 to enjoin changes to the COLA. Plaintiffs assert they were guaranteed this benefit by virtue of various provisions of the U.S. Constitution and the Tennessee Constitution. The City of Chattanooga and the Fund removed the Complaint to this Court shortly thereafter. The Fund adopts and incorporates by reference its Motion for Summary Judgment and accompanying materials, which were filed contemporaneously with this Response. II.
STANDARD OF REVIEW Although Plaintiffs reference the Tennessee Rules of Civil Procedure in their brief
supporting the motion, Federal Rule of Civil Procedure 65 applies to this motion. Fed. R. Civ. P.
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65 provides the Court may issue a preliminary injunction on notice to the adverse party and contains other general procedural guidelines. Beyond the rule, the Court must examine four factors to determine whether Plaintiffs are entitled to a preliminary injunction: “(1) whether the movant has shown a strong likelihood of success on the merits; (2) whether the movant will suffer irreparable harm if the injunction is not issued; (3) whether the issuance of the injunction would cause substantial harm to others; and (4) whether the public interest would be served by issuing the injunction.” Overstreet v. Lexington-Fayette Urban Cnty. Gov’t, 305 F.3d 566, 573 (6th Cir. 2002). The United States Court of Appeals for the Sixth Circuit has observed that “[t]hese factors are to be balanced against one another and should not be considered prerequisites to the grant of a preliminary injunction.” Leary v. Daeschner, 228 F.3d 729, 736 (6th Cir. 2000). III.
ARGUMENT As a threshold issue, Fed. R. Civ. P. 65(c) (emphasis added) states the Court may issue a
preliminary injunction “only if the movant gives security in an amount that the court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained.” Plaintiffs have not indicated in their motion or supporting exhibits that they have provided such security. Thus, the Court should deny Plaintiffs’ motion. As a secondary point, the Court should take note of several problems with the affidavit of Plaintiff William Melhorn and its attachments (Docs. 14-3 through 14-6). Melhorn first attaches a print-out from a website that is titled “Explanation of changes” and appears to have been information posted on the Fund website (Doc. 14-4, hereinafter referred to as “Exhibit 1 to Melhorn Affidavit”). Melhorn attaches Exhibit 1 to Melhorn Affidavit to support the false proposition that “[t]he fact that the annual three-percent (3%) cost of living adjustment (COLA) would be guaranteed to all retirees and their beneficiaries, regardless of age, was disseminated in
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writing to the participants” (Doc. 14-3 at p. 2). The date of this information, found at the lower right-hand corner of the pages (and somewhat obscured by the Court’s footer), is June 19, 2000. But the vote on the proposed changes to the Plan listed in this document did not occur until August 2000 (Hamilton Aff. ¶¶ 12-13). Exhibit 1 to Melhorn Affidavit was intended only to provide participants information about proposed changes (Hamilton Aff. ¶ 13). It would be unreasonable for Plaintiffs and other retirees to rely upon a purely informational document outlining proposed changes. In fact, some of the changes in Exhibit 1 to Melhorn Affidavit were not included on the ballot, and Plaintiffs could have no valid argument that they are now entitled to receive benefits listed on this document that did not materialize. Melhorn’s representation that Exhibit 1 to Melhorn Affidavit, dated before the vote on the proposed Plan changes, “clearly stated and represented to the participants in the pension fund that the new COLA benefit is guaranteed” is an inaccurate statement. Melhorn’s affidavit also attaches a dubious spreadsheet showing his alleged financial injury over the next 18 years (Doc. 14-6). While this spreadsheet reveals the driving force behind the litigation -- Plaintiffs’ personal income -- but this spreadsheet should be disregarded for multiple reasons. First, the Court has no way to determine the veracity of the initial numbers upon which the entire spreadsheet is based, and Plaintiffs have provided no documentation to substantiate Melhorn’s current pension benefit. Second, the spreadsheet assumes Melhorn will live to be at least 80 years old, which the Court could not know to any degree of certainty. Third, the spreadsheet assumes a flat 1.5% COLA, which is not accurate. 4
Fourth, the
4
The new COLA will be an average of 1.5% until the Fund reaches a certain funded status. At that time, it could be as high as 3% depending on the CPI (See Exhibit 3, Ordinance No. 12813). To the extent Plaintiff Melhorn claims 1.5% is an accurate gauge because he may receive a smaller increase starting in 2015 (i.e., if he receives a larger benefit, he may only receive a 1% COLA) and it could average out if he receives a larger increase in the future, this difference serves to further demonstrate his inability to be similarly situated with all retirees (See Hamilton Aff. ¶ 22).
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spreadsheet fails to account for any payment of taxes, listing instead the difference in Melhorn’s “monthly gross” benefit without regard for any net benefit. Fifth, the spreadsheet does not consider other income that could affect Melhorn’s tax rate.
All of these factors lead to
inaccurate, unverifiable data showing a dramatic amount of personal financial harm. As for “other income,” this is an issue. Plaintiffs’ Motion states that they “and other similarly situated retirees are on a fixed income and the pension benefits that they receive from the City of Chattanooga is their only source of income. They do not receive Social Security benefits, and it is important to them that their pension benefit payments keep up with the increased costs of living” (Doc. 14-1 at p. 8). This blanket statement is incorrect. At least two of the Plaintiffs, including Melhorn, receive other sources of income - either because they now work another job, or because they receive another pension from separate employment, or because they receive Social Security benefits (Hamilton Aff. ¶¶ 18-20). Upon information and belief, other retirees similarly receive income from other sources, including Social Security benefits (Hamilton Aff. ¶ 21). The Court should review these attached documents in light of the inaccuracies contained in the exhibits and in Plaintiffs’ Motion. Finally, turning to the merits of Plaintiffs’ Motion and the four factors at issue, Plaintiffs cannot prevail on the motion because none of the applicable factors apply in Plaintiffs’ favor. The Fund discusses each factor in turn below. 1. Likelihood of Success on the Merits The likelihood Plaintiffs will succeed on the merits is low. Plaintiffs assert claims under the Contracts Clause, the Due Process Clause, and the Takings Clause of the United States Constitution, and the Law of the Land provision of the Tennessee Constitution. Contrary to the assertions made in the instant motion, it is unlikely Plaintiffs will prevail on any of those claims.
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The Fund respectfully directs the Court’s attention to its Memorandum in Support of its Motion for Summary Judgment, incorporated herein by reference, for a more detailed discussion on Plaintiffs’ arguments. Briefly, however, Plaintiffs’ legal position is not supportable. To respond directly to assertions made in Plaintiffs’ Motion, Plaintiffs essentially cite only two cases in support of the likelihood that they will succeed on the merits.5 The first case, Arena v. City of Providence, 919 A.2d 379 (R.I. 2007), is characterized by Plaintiffs as addressing “claims very similar to those at issue in this cause” (Doc. 14-1 at p. 11). In fact, any similarity stops after acknowledging that both cases involved a COLA modification. Arena cannot be read in a vacuum, as it was one of multiple cases filed in state and federal court to contest various issues stemming from expired collective bargaining agreements (“CBAs”) not ratified by that municipality’s City Council. The overarching dispute spanned over years and involved a complicated history of multiple CBAs negotiated with individual fire and police unions and complicated jurisdictional issues. Id. at 383-84. In the midst of these multiple issues, it is unclear from Arena what claims the plaintiffs made regarding COLAs, and the Arena court appears to have taken a middle approach to contractual rights in pension plans which was informed by language in the ordinance at issue that explicitly imposed the benefits in effect at the date of retirement. Id. at 393-94. In addition, later versions of the same ordinance included language that called the COLA a voluntary gratuity,
5
Plaintiffs also cite to Blackwell v. Quarterly Cnty. Court of Shelby Cnty., 622 S.W.2d 535 (Tenn. 1981) and Roberts v. Tennessee Consol. Ret. Sys., 622 S.W.2d 544 (Tenn. 1981), in support of their general arguments. The Fund has discussed the applicability of Blackwell in its summary judgment memorandum. Roberts is a very short opinion with limited applicability, and it addressed a statute that expressly distinguished between “prior class members” and “superseded systems” and listed a date certain. 622 S.W.2d at 545 fn.1 (citing to the applicable statute). It did not address a COLA modification and, like Blackwell, has little factual similarity to this case. Plaintiffs also cite to -- and attach -- an unsigned 2005 opinion of the Tennessee Attorney General providing guidance on the application of Blackwell and Roberts to a particular statutory scheme not relevant to this case (Doc. 14-2). This AG opinion is not binding on the Court and offers no further support for Plaintiffs’ position.
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while the challenged ordinance did not. Id. The Arena court found this difference instructive and gave credence to the fact that the COLA was negotiated as part of a CBA. Id. at 394. The Arena case is not analogous to the situation here and, as more fully demonstrated in the Fund’s summary judgment materials, it is clear that Arena’s holding is by no means universally shared across the state and federal courts that have addressed this issue. The second case Plaintiffs cite, Shaw v. Int’l Ass’n of Machinists & Aerospace Workers Pension Plan, 750 F.2d 1458 (9th Cir. 1985) (which is cited in Arena), also does not support Plaintiffs’ claims. Simply, the court’s holding in Shaw rested on a provision in the Employee Retirement Income Security Act (“ERISA”) that was applicable to the ERISA-governed plan. Id. at 1463-65. The Fund is not governed by ERISA or its provisions, and the same provision that applied in Shaw simply has no applicability here. See Section 4(b)(1) of the Employee Retirement Income Security Act of 19874, as amended, 29 U.S.C. § 1003(b)(1) (“The provisions of this subchapter shall not apply to any employee benefit plan if . . . such plan is a governmental plan . . .”). Plaintiffs’ case turns on the threshold issue of whether they have a contractual right to the COLA in place at the time they retired, and all Plaintiffs’ claims fail for the following reasons: (1) they do not, and cannot, establish the existence of a contractual right to a permanent 3% COLA; (2) Blackwell does not support the existence of any contractual right to a COLA; and (3) courts across the country have concluded that participants in pension plans have no contractual right to a particular COLA. As explained in more detail in the Fund’s Motion for Summary Judgment and accompanying materials, Plaintiffs have no contractual right because no such right was explicitly afforded by the provision that established the 3% COLA.
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The Supreme Court of the United States has acknowledged that, “absent 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.’” Nat’l R.R. Passenger Corp. v. Atchison Topeka & Santa Fe Ry. Co., 470 U.S. 451, 465-66 (1985). Plaintiffs make no argument that the provision establishing the 3% COLA clearly created a contractual right, and the section, entitled “Cost of Living Adjustments to Pension Benefits,” states only: The benefits payable to retired members or any of their Survivors or beneficiaries shall be increased each January 1, following the first twelve (12) months of benefit, by three percent (3%). City Code, Section 2-417. The provision frames the 3% COLA as an increase to the base benefit, not part of the base benefit. And without explicit language evincing an intent to promise the COLA indefinitely (or for a more specific period, such as the life of the retiree), the provision simply does not support the existence of a contractual right to a permanent 3% COLA. Rather, and as Plaintiffs acknowledge, the COLA is an increase or adjustment to the base benefit. Plaintiffs’ primary argument with respect to contractual rights -- that “vesting” pursuant to the terms of the Plan afforded them contractual rights in all the benefits available at the time of retirement -- is fundamentally flawed and provides no support for their claims. The Fund will not belabor the points made more fully in its summary judgment materials, but Plaintiffs present an unworkable system that questions their capacity to claim the entire class of retirees is “similarly situated” and entitled to a 3% COLA. Plaintiffs’ reliance on Blackwell similarly provides no basis for finding a contractual right in a 3% COLA and, in fact, the weight of available case law addressing similar positions supports the Fund and the City’s arguments. Several courts have determined that participants in
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a pension plan do not have a contractual right to a COLA under similar facts. One recent decision, Justus v. State, 2014 WL 5393539, ___ P.3d ___, at *1 (Colo. Oct. 20, 2014), addresses the Contract Clause inquiry fully in a very analogous situation with analogous claims and similar COLA modifications. The Justus court is one of several to determine that Contract Clause claims fail with respect to COLA modifications. Plaintiffs fail to establish any entitlement to a particular COLA. Without a contractual right, Plaintiffs cannot succeed on a Contract Clause claim. Moreover, Plaintiffs cannot succeed on Due Process Clause or Takings Clause claims because they have no property interest or right in a COLA and thus, no legitimate basis for asserting a deprivation of that property. For these reasons, the likelihood of success on the merits of all Plaintiffs’ claims is low and this factor should weigh against Plaintiffs. 2. Irreparable Harm The second factor for the Court to consider is the existence (or lack thereof) of irreparable harm to the moving party. Alone, this factor could be a threshold prerequisite preventing the grant of a preliminary injunction; when considered alongside the other factors, it provides another compelling reason to deny Plaintiffs’ motion. Here, Plaintiffs cannot establish irreparable harm of the sort that typically leads to extraordinary injunctive relief. See Overstreet, 305 F.3d at 573 (“A preliminary injunction is an extraordinary remedy which should be granted only if the movant carries his or her burden of proving that the circumstances clearly demand it.”) (citation omitted). Plaintiffs complain of purely monetary harm that will begin in January 2015. In their Motion, Plaintiffs reference an alleged “immediate financial detriment” and “immediate financial loss” to be suffered by the Plaintiffs and other retirees (Doc. 14-1 at p. 14). Preliminary
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injunctions are intended to protect against irreparable harm. If Plaintiffs’ alleged injury can be made whole with a monetary award, it is, by definition, not irreparable. “A plaintiff's harm from the denial of a preliminary injunction is irreparable if it is not fully compensable by monetary damages.” Overstreet, 305 F.3d at 578. “[T]his court has never held that a preliminary injunction may be granted without any showing that the plaintiff would suffer irreparable injury without such relief. Despite the overall flexibility of the test for preliminary injunctive relief, and the discretion vested in the district court, equity has traditionally required such irreparable harm before an interlocutory injunction may be issued.” Friendship Materials, Inc. v. Michigan Brick, Inc., 679 F.2d 100, 102-03 (6th Cir. 1982). “[A] plaintiff's harm is not irreparable if it is fully compensable by money damages. However, an injury is not fully compensable by money damages if the nature of the plaintiff's loss would make damages difficult to calculate.” Basicomputer Corp. v. Scott, 973 F.2d 507, 511 (6th Cir. 1992). Although Plaintiffs equate a delay in continuing to receive a 3% COLA with irreparable harm (i.e., in the event the Court does not issue a ruling on Plaintiffs’ motion before the new COLA takes effect), this is not irreparable harm. It bears repeating that Plaintiffs will receive a COLA in January 2015 -- it will merely be lower than 3%. In the event Plaintiffs ultimately prevail and the Court orders a 3% COLA rather than the new variable formula, it would be simple to calculate the additional amount due to Plaintiffs with any applicable interest and provide the funds to Plaintiffs retroactively. 6 “The fact that an individual may lose his income for some extended period of time does not result in irreparable harm, as income wrongly 6
Plaintiffs also appear to make the point that irreparable harm could occur because some Plaintiffs or retirees could die before the case concludes (Doc. 14-1 at p. 14). This possibility does not change the fact that the injury is monetary and is fully compensable with the payment of benefits retroactively. In the event a Plaintiff or retiree died before a favorable decision, presumably the funds payable until his or her death could be paid to the estate. To the extent Plaintiffs are attempting to equate the loss of use of funds prior to death as irreparable injury, the Fund respectfully contends that it is unlikely the amount of benefits at issue would be significant enough to cause irreparable harm.
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withheld may be recovered through monetary damages.” Overstreet, 305 F.3d at 579. Plaintiffs will not suffer any irreparable harm if no preliminary injunction issues. 3. Substantial Harm to Others Another factor for the Court to consider is whether the granting of injunctive relief will cause substantial harm to others. In this case, the act of granting of a preliminary injunction may not cause immediate harm to others, but proceeding down the path could have severe consequences and cause substantial harm to a variety of individuals and entities. Plaintiffs frame their case very narrowly, claiming to represent the larger group of retirees and seeking only to maintain a 3% COLA -- the only change that affects the retirees. To the extent that Plaintiffs can sufficiently represent all retirees, 7 this focus ignores the other participants in the Plan and the extensive process that resulted in all of the necessary changes to the Plan. Should Plaintiffs ultimately prevail such that they continue receiving a 3% COLA, the lengthy process that resulted in these changes to the Plan would have to start over completely, and many individuals would suffer as a result. Although Plaintiffs inexplicably contend in the Motion -- without any support for the assertion -- that the impact to the City would be “minimal” if it is required to pay Plaintiffs and retirees a 3% COLA, there is nothing minimal about the impact to the City and others should Plaintiffs prevail (Doc. 14-1 at p. 15). The active firefighters and police officers, who already have to contribute a larger portion of their salary to the Fund with the recently implemented changes,8 would likely face a
7
Plaintiffs’ Motion casts doubt on this claim, as further discussed in the Fund’s Motion for Summary Judgment. See also Hamilton Aff. ¶ 22 and its attached exhibit, which begs the question as to whether Plaintiffs have the interest in and capacity to represent all retirees. The exhibit further begs the question as to whether Melhorn can allege irreparable harm when he is personally unconcerned with the COLA modification. 8
Plaintiffs state in their Motion that they contributed 8% of their base salary to the Fund (Doc. 14-1 at p. 2). Active police officers and firefighters now contribute 9% or 10%, and these percentages will increase by 1% in both 2015 and 2016 (See Exhibit 3, Ordinance No. 12813).
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significantly higher contribution, be subject to a higher retirement age or be required to accrue more years of service before retirement, receive a reduced base benefit and reduced ancillary benefits upon retirement, or some combination of the above. The City would likely have to make a higher contribution to the Fund for active employees, potentially resulting in a heightened burden on taxpayers due to a need for higher taxes to compensate for the increased contribution.
In the event Plaintiffs ultimately prevail, it is also possible that even by
implementing multiple of these changes to compensate for the continued payment of a 3% COLA, the Fund may not reach the anticipated level of funding. If that occurs, it is more likely that additional, even less favorable changes will be required in the future -- all so that this group of retirees can maintain one additional benefit adjustment to which they believe they are entitled. Due to the nature of a defined benefit plan such as the one at issue here, significant financial impacts have long-term consequences that may not be realized for some time. Though these risks may be speculative now, they are very real risks that will occur should Plaintiffs prevail. Thus, while the act of granting a preliminary injunction may not cause immediate substantial harm, the granting of the Motion would suggest Plaintiffs have showed some likelihood of success on the merits -- and if Plaintiffs prevail, there is a great risk of future, substantial harm to others. The section below that addresses the “public interest” factor also discusses issues relevant to why there likely would be harm to others if a preliminary injunction is granted. The Court should not discount the value of the process that lead to the various changes reflected in the work of the Task Force and others. There is no “line item veto” of just the new variable COLA. If the variable COLA issue is rejected, the entire set of modifications fails, and the issue of the Fund’s future economic stability and viability must again be addressed.
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4. Public Interest Contrary to Plaintiffs’ assertions, a preliminary injunction would not advance the public interest. It is highly unlikely any public interest would be immediately advanced by the granting of a preliminary injunction -- instead, a preliminary injunction would only advance Plaintiffs’ narrow and largely self-serving interests. Much like the substantial harm factor, most public interests would only be implicated upon the ultimate resolution of this case, and the Fund contends that public interests will not be advanced if Plaintiffs ultimately prevail. The public interest was undoubtedly served by virtue of the lengthy process that resulted in the changes of which Plaintiffs now complain. Generally, any member of the public may request to be placed on the agenda at any Board meeting with two days advance notice and can appear to speak before the Board (Hamilton Aff. ¶ 5). The meetings are held twice monthly (Hamilton Aff. ¶ 5). The public also had the opportunity to be involved at multiple steps of the process that extended from summer 2013 until March 2014 when the Plan changes passed. Members of the community were appointed to be members of the Task Force, along with other active and retired police officers and firefighters and representatives of the respective police and fire unions (McClain Aff. ¶ 5). The Task Force meetings were open to the public and held at convenient times (McClain Aff. ¶ 12). The Task Force meetings were well attended, and audience members had an opportunity to ask questions or make statements at the end of each meeting (McClain Aff. ¶ 13). Audience members were encouraged to talk with Task Force members and the City’s consultant, Vijay Kapoor, in between meetings (McClain Aff. ¶ 13). The public interest thus would be affected detrimentally in the event Plaintiffs prevailed and this lengthy, involved process had to start over again.
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Plaintiffs also claim only that “the public has an interest in not having retired policemen and firefighters have vested financial benefits taken away” (Doc. 14-1 at p. 14). Certainly, Plaintiffs served the public as police officers and firefighters for a number of years, and “there is a strong public interest in a stable and reliable public safety force.” Howe v. City of Akron, No. 5:06 CV 2779, 2011 WL 2931548, at *12 (N.D. Ohio July 18, 2011). This interest, however, cuts both ways. The public has an interest in providing police officers and firefighters with benefits fitting the position, and this is accomplished by the provision of a base monthly benefit for retired police officers and firefighters. But the retirees no longer serve the public in these capacities, and the public also has a significant interest in maintaining an active force that will adequately ensure public safety. If Plaintiffs ultimately prevail, the Fund could be compelled to implement some or all of the changes to the Plan described above. A natural consequence of such severe changes is simple: the more restrictive and less beneficial the Plan becomes, the more and more difficult it will be for the City to recruit and retain qualified, experienced police officers and firefighters. It is expensive for the City to train police officers and firefighters, and it is crucial the City fills these positions. But as the pension benefits available to actives and potential hires are reduced, the more probable it is that potential employees will decline positions or current employees will leave their existing position for greener pastures. This likelihood -- at the expense of providing the retirees with the same COLA they receive now -- would certainly not advance the public interest. And as outlined above, the attempt by Plaintiffs to halt a change that occurred after extensive time and resources were expended to reach an adequate compromise is decidedly not in the public interest.
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IV.
CONCLUSION For the reasons outlined above, the Fund maintains that Plaintiffs cannot meet their
burden of establishing the factors to be considered by the Court. Thus, Plaintiffs cannot prevail on their Motion for Preliminary Injunction and the Motion should be DENIED.
Respectfully submitted, BAKER, DONELSON, BEARMAN, CALDWELL & BERKOWITZ, PC By: s/Melanie A. Prince William E. Robinson, TN BPR No. 007238 Cameron S. Hill, TN BPR No. 017408 Melanie A. Prince, TN BPR No. 028346 1800 Republic Centre 633 Chestnut Street Chattanooga, TN 37450-1800 Telephone: (423) 209-4160 Email:
[email protected] [email protected] [email protected] Attorneys for Defendant Chattanooga Fire and Police Pension Fund
CERTIFICATE OF SERVICE I hereby certify that I have on November 14, 2014, caused a copy of the foregoing Response to Plaintiffs’ Motion for a Preliminary Injunction to be filed electronically. Notice of this filing will be sent by operation of the Court’s electronic filing system to all parties indicated on the electronic filing receipt. All other parties will be served by regular U.S. mail. Parties may access this filing through the Court’s electronic filing system.
BAKER, DONELSON, BEARMAN, CALDWELL & BERKOWITZ, P.C. By:
s/Melanie A. Prince
19 Case 1:14-cv-00128-CLC-WBC Document 22 Filed 11/14/14 Page 19 of 19 PageID #: 496
