Puckett v. Lexington-Fayette Urban County Government, 833 F.3d 590

Background

Plaintiffs (two retired LFUCG police/fire employees) receive pensions from the Lexington-Fayette Policemen’s and Firefighters’ Retirement Fund governed by KRS 67A.360–67A.690 (the Act). They retired under a pre-2013 COLA scheme providing 2–5% annual adjustments determined by the board.
In March 2013 the Kentucky legislature amended the Act to tier and reduce COLAs (including suspending larger COLAs when the fund’s actuarial level fell below 85%), and made the amendments effective as emergency legislation.
Plaintiffs sued under 42 U.S.C. § 1983 against state officers, LFUCG, and the Commonwealth alleging violations of the Contract, Due Process, and Takings Clauses (and parallel state claims), seeking declaratory and injunctive relief.
The district court granted defendants’ motions to dismiss under Rule 12(b)(6), finding no contractual right to an immutable COLA formula and dismissing federal claims; state claims were dismissed without prejudice. Plaintiffs’ post-judgment motion to amend was denied; appeal followed.
On appeal the Sixth Circuit affirmed: it held (1) Eleventh Amendment bars suit against the Commonwealth (Ex parte Young allows suits against officials for prospective relief), (2) plaintiffs failed the unmistakability test to show the legislature intended to bind itself to a fixed COLA, and (3) plaintiffs failed to plead viable procedural or substantive due process or Takings claims.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Contract Clause: Did the 2013 Act impair a contract right to a specific pre-2013 COLA formula?	Plaintiffs: the Act (and prior amendments) created a vested contractual right to COLAs at the 2–5% formula in effect when they retired.	Defendants: no statute unmistakably binds the legislature to an immutable COLA; the unmistakability doctrine forecloses finding a perpetual contract.	Held: No contractual right to a specific COLA; plaintiffs fail unmistakability burden; Contract Clause claim dismissed.
Due Process — Procedural: Were plaintiffs denied required notice/hearing because the Act was passed as emergency legislation?	Plaintiffs: emergency designation deprived retirees of process and representation required by KRS 67A.530.	Defendants: emergency clause was validly invoked; KRS 67A.530 does not give retirees a veto or entitlement to a legislative hearing; retirees were represented on the board.	Held: Plaintiffs failed to plead any deprivation of process; procedural due process claim fails.
Due Process — Substantive: Is the amendment irrational so as to violate substantive due process?	Plaintiffs: reductions in COLA lack a rational basis.	Defendants: amendments were rationally related to a legitimate interest (fund solvency); rational-basis review is highly deferential.	Held: Plaintiffs’ conclusory allegation lacked factual support; substantive due process claim fails.
Takings Clause: Did the amendment effect a taking of a property interest in a fixed COLA?	Plaintiffs: the diminished COLA is a taking of their vested property right.	Defendants: no cognizable property interest in a specific COLA formula; thus no taking.	Held: Because no protected property right to a specific COLA exists, Takings claim fails.

Key Cases Cited

Ernst v. Rising, 427 F.3d 351 (6th Cir. 2005) (discussing state sovereign immunity and official-capacity suits)
Will v. Michigan Department of State Police, 491 U.S. 58 (U.S. 1989) (official-capacity suits are suits against the state)
United States Trust Co. v. New Jersey, 431 U.S. 1 (U.S. 1977) (Contract Clause framework and scrutiny when the state is a contracting party)
United States v. Winstar Corp., 518 U.S. 839 (U.S. 1996) (unmistakability doctrine; legislature’s surrender of sovereign powers must be unmistakably clear)
General Motors Corp. v. Romein, 503 U.S. 181 (U.S. 1992) (Contract Clause two-step: impairment and justification)
Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading standard: plausibility required to survive Rule 12(b)(6))