Hall v. Elected Officials' Retirement Plan, 383 P.3d 1107

Background

In 2011 the Arizona Legislature enacted S.B. 1609, amending the Elected Officials’ Retirement Plan (EORP) to (a) change the statutory formula for permanent benefit increases (PBI) and (b) raise employee contribution rates (retroactive to June 30, 2011).
Retired members successfully challenged the PBI change in Fields v. Elected Officials’ Ret. Plan; the Court held the PBI formula is a protected “benefit” under the Pension Clause and the amendment diminished retirees’ benefits.
A class of employed EORP members (judges) sued, arguing the Bill (1) violated the Pension Clause by diminishing benefits and (2) violated Yeazell (pension terms are part of the employment contract and cannot be unilaterally altered once vested).
The trial court granted summary judgment to employed members, but denied attorneys’ fees, prejudgment interest, and running judgment against the State; EORP and the State appealed and the members cross‑appealed.
The Arizona Supreme Court affirmed invalidation of both the PBI-formula and contribution-rate changes as applied to employed members, held Yeazell protects the members’ contractual pension terms, and reversed the trial court’s denials of attorneys’ fees, prejudgment interest, and relief against the State.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the changed PBI formula is protected by the Pension Clause	The PBI formula is a pension "benefit"; raising the return threshold and cutting transfers diminishes current and future benefits	Changes are permissible because rights hadn’t vested or are subject to later legislative modification	PBI formula is a protected benefit; the amendment diminished/ impaired benefits—unconstitutional under the Pension Clause (Fields controls)
Whether increasing employee contribution rates violated Yeazell / Pension Clause	The fixed 7% statutory rate was part of the employment contract; unilateral increases retroactively alter vested contract terms	The 2000 vesting statute and legislative authority allow prospective modification; contribution rates are not a protected benefit	Contribution-rate increases violate Yeazell (unilateral retroactive impairment of contract). Court did not need to decide Pension Clause protection for the rate (but concurrence would treat rate as Pension Clause violation)
Whether the 2000 vesting statute displaced Yeazell’s protections	Members: vesting statute addresses eligibility, not the substantive contractual terms established at hiring	Defendants: vesting statute means rights do not vest until application/retirement, so Legislature can change terms beforehand	Vesting statute construed to refer to contingent (eligibility) vesting; it does not permit unilateral retroactive modification of substantive contractual pension terms established at hiring
Remedies: entitlement to attorneys’ fees, prejudgment interest, and judgment against the State	Members seek fees under A.R.S. § 12-341.01, prejudgment interest on liquidated amounts, and judgment also against State (intervenor)	EORP/State argue claims are statutory/constitutional (not contractual) for fees, prejudgment interest inappropriate because fund incapable of payment, and State should be insulated because it merely defended constitutionality	Action arises out of the contractual relationship so fees statute applies; prejudgment interest allowed because amounts are liquidated; judgment may run against State because it intervened and actively litigated

Key Cases Cited

Fields v. Elected Officials’ Ret. Plan, 234 Ariz. 214, 320 P.3d 1160 (Ariz. 2014) (PBI formula is a pension benefit; amendment diminished retirees’ benefits)
Yeazell v. Copins, 98 Ariz. 109, 402 P.2d 641 (Ariz. 1965) (statutory pension terms become part of the employment contract and cannot be unilaterally modified retroactively to members’ detriment)
Proksa v. Ariz. State Sch. for the Deaf & the Blind, 205 Ariz. 627, 74 P.3d 939 (Ariz. 2003) (discusses contractual nature of pension rights under Yeazell and Gift Clause)
Thurston v. Judges’ Ret. Plan, 179 Ariz. 49, 876 P.2d 545 (Ariz. 1994) (beneficial amendments can be assimilated into the contract by presumed acceptance)
Schade v. Diethrich, 158 Ariz. 1, 760 P.2d 1050 (Ariz. 1988) (prejudgment interest on liquidated contract claims is a matter of right)