JOE TAYLOR, JEFF MAYBEN, LECIL HARRELSON, JEFF MORRIS, JOHN ALAN CALVERT, DAVID PUTMAN, DERRECK SHERRILL, on behalf of themselves and all others similarly situated, Plaintiffs - Appellants,
CITY OF GADSDEN, an Alabama Municipal corporation, SHERMAN GUYTON, in his official capacity as Mayor of the City of Gadsden, Defendants - Appellees
Appeal from the United States District Court for the Northern District of Alabama. D.C. Docket No. 4:11-cv-03336-VEH.
For Joe Taylor, Jeff Mayben, Lecil Harrelson, Jeff Morris, John Alan Calvert, David Putman, DERRECK SHERRILL, on behalf of themselves and all others similarly situated, Plaintiffs - Appellants: Raymond Fitzpatrick, Law Office of Raymond P. Fitzpatrick, Jr., Birmingham, AL.
For CITY OF GADSDEN, AL, an Alabama Municipal corporation, SHERMAN GUYTON, in his official capacity as Mayor of the City of Gadsden, Defendants - Appellees: Howard Edgar Howard, Ford Howard & Cornett, PC, Gadsden, AL.
Before TJOFLAT, Circuit Judge, MOORE,[*] Chief District Judge, and SCHLESINGER,[*] District Judge.
TJOFLAT, Circuit Judge
This case presents a problem common to most cities in the United States. Their pension funds have been operating at a substantial loss, and the cities' long-term liabilities are becoming unfunded at an exponentially increasing rate. That is, the contributions employees and cities are making to pension funds--as a percentage of the employees' salaries--are being used to pay the pensions earned by retirees instead of being set aside and invested for employees' retirements.
The trend is all too familiar to Gadsden, Alabama. In 2011, its pension program--administered by the State of Alabama but comprised of local funds--had an unfunded liability of $50.9 million. In fact, Gadsden anticipated having to pay 24.54% of its employees' total compensation out of public funds during the following year to prevent default. This projected expense contributed to a $1.5 million shortage in Gadsden's proposed budget.
With its back against the wall--and in an effort to resuscitate its flailing pension program--Gadsden raised its employees' pension contributions by 2.5% of their total compensation. It did so pursuant to an Act passed by the Alabama legislature mandating such an increase for state employees and permitting, but not requiring, localities to do the same. In response, a class of Gadsden firefighters--whose contribution rate was raised from 6% to 8.5%--brought this lawsuit. They alleged that the City's actions impaired the terms of their employment contracts, in violation of both the United States Constitution
and the Alabama Constitution. After extensive record development, and on cross-motions for summary judgment, the District Court dismissed the complaint for failing to demonstrate that any contractual right had been impaired. We affirm.
Since 1939, Gadsden has provided its firefighters with a pension program as part of their compensation. Firefighters initially belonged to a local program, the Policemen's and Firemen's Retirement Fund of the City of Gadsden (the " PFRF" ). In 2002, concerns about the PFRF's solvency led Gadsden to negotiate a new arrangement with these employees: the City, it was agreed, would terminate the local fund and move all of its assets, liabilities, and members into the Employee Retirement System of Alabama (the " ERS" )--a state-administered ...