AFSCME Maryland Council 3 v. State of Maryland, 61 F.4th 143

Maryland established a State Employee and Retiree Health and Welfare Benefits Program in 1993 providing a retirement subsidy but not specifying benefit details.
Congress enacted Medicare Part D (2003) with a Part D coverage gap; Maryland enacted SPP § 2-509.1 (2004) directing the State to continue a prescription drug benefit for retirees notwithstanding Medicare Part D.
In 2011 Maryland amended § 2-509.1 to discontinue prescription drug benefits for Medicare-eligible retirees in FY2020; timing was later adjusted when Congress closed the Part D “doughnut hole” earlier than expected.
Retirees (the Fitch Plaintiffs) obtained a preliminary injunction in federal court ordering the State to continue providing prescription drug benefits; AFSCME (Appellant) intervened to represent active employees who began service on or before June 30, 2011 and sued asserting the statutes created a contract to provide prescription drug benefits upon retirement.
The district court held the statutes created a unilateral contract enforceable by retirees but not by active employees because benefits vest only after meeting retirement conditions, and it dismissed AFSCME’s complaint (certified under Rule 54(b)).
The Fourth Circuit affirmed dismissal but on different grounds: it held SPP §§ 2-508 and 2-509.1 did not unmistakably create a contractual obligation binding the State.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether SPP §§ 2-508 and 2-509.1 created an enforceable contract to provide prescription drug benefits to retirees	Statutes “entitle” retirees to a subsidy and § 2-509.1 specifically requires prescription drug coverage, so the legislature created a contractual right	Statutes are policy statements lacking unmistakable contract language or definite benefit terms; presumption against creating vested contractual rights	No — statutes do not unmistakably create a contract binding the State
Whether active (non-retired) employees have a vested contractual right to future prescription drug benefits	Active employees (through AFSCME) claim the statutory scheme creates enforceable rights that cannot be withdrawn once accepted	Even if a contract existed, it would be unilateral and benefits vest only upon meeting retirement conditions (so actives have no present right)	Not reached on the merits because no contract exists; thus actives have no enforceable contractual right
Scope of appellate review under the district court’s Rule 54(b) certification	Review limited to district court’s unilateral-contract/vesting holding	Certification encompassed the entire dismissal order; appellate court can review the whole judgment de novo	Fourth Circuit reviewed the dismissal de novo and was not bound by the district court’s contractual-findings

Indiana ex rel. Anderson v. Brand, Trustee, 303 U.S. 95 (1938) (legislative enactments can become contracts enforceable against the State in Contracts Clause analysis)
Nat’l R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451 (1985) (statutory language must unmistakably show legislative intent to bind the State to create contractual rights)
United States v. Winstar Corp., 518 U.S. 839 (1996) (unmistakability doctrine requires clear language to defeat the presumption of legislative power to modify prior enactments)
Dodge v. Bd. of Educ. of Chi., 302 U.S. 74 (1937) (presumption that legislation declares policy rather than creates private contractual rights unless clear intent appears)
Cherry v. Mayor of Baltimore City, 257 A.3d 1087 (Md. 2021) (contrasting ordinance language that expressly created a binding contractual relationship with more equivocal statutory language)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard for facial plausibility on a motion to dismiss)