Justus v. State
2012 COA 169
Colo. Ct. App.2012Background
- PERA provides state retirement benefits; prior COLA laws amendment history significantly altered COLA formulas.
- Senate Bill 10-001 (2010) changed COLA for PERA; in 2010, 2010 COLA was the lesser of 2% or CPI; post-2010 COLA tied to funding ratio triggers.
- Plaintiffs Justus, Hopkins, Halaas, and Laird receive PERA benefits and challenge SB 10-001 sections 19–20 reducing their COLA.
- District court granted summary judgment finding no vested contractual right to a specific lifelong COLA.
- Plaintiffs appeal arguing they have a contractual right to the COLA in effect when they vested or retired under McPhail and Bills; takings/due process claims tied to that right.
- Court remands for further proceedings to address substantial impairment and reasonableness/necessity under current framework.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs have a vested contractual right to a specific COLA. | Pls have right to COLA in effect when vested. | Cms: McPhail/Bills outdated; no vested right to unchanged COLA. | Partially for plaintiffs; COLA right vesting exists but requires impairment and purpose analysis. |
| Whether any impairment of the contractual COLA right is substantial. | Impairment is substantial under modern DeWitt framework. | Impairment may be insubstantial or justified. | Remanded to district court to determine substantial impairment under DeWitt framework. |
| Whether the COLA changes are reasonable and necessary to serve a public purpose. | Changes fail public-necessity test. | Changes are reasonable/necessary to fund PERA. | Remanded; district court to decide reasonableness/necessity. |
| Takings Clause viability given contract-right findings. | Contract rights protect against taking or devaluation. | If no vested right, no takings issue. | Reversed summary judgment on Takings in light of contractual-right holding. |
Key Cases Cited
- McPhail v. Police Pension & Relief Bd., 139 Colo. 330 (1959) (held vested rights in post-retirement benefits under escalation provision)
- Bills v. Police Pension & Relief Bd., 148 Colo. 383 (1961) (limited vested rights; substantial changes require beneficial change or actuarial need)
- In re Estate of DeWitt, 54 P.3d 849 (Colo.2002) (modern Contract Clause framework; substantial impairment test)
- General Motors Corp. v. Romein, 503 U.S. 181 (1992) (substantial impairment and public purpose balancing under Contract Clause)
- United States Trust Co. v. New Jersey, 431 U.S. 1 (1977) (test for whether impairment is reasonable and necessary for public purpose)
- Energy Reserves Grp., Inc. v. Kansas Power & Light Co., 459 U.S. 400 (1983) (public purpose requirement for contract impairment cases)
- Buffalo Teachers Fed'n v. San Diego City Univ. Ret. Sys., 464 F.3d 362 (2d Cir.2006) (public purpose/impairment analysis in contract clause context)