Richard W. Berg v. Hon. Christopher J. Christie(074612)
137 A.3d 1143
| N.J. | 2016Background
- Chapter 78 of the Laws of 2011 (L.2011, c.78) suspended further pension cost-of-living adjustments (COLAs) for New Jersey public retirees, freezing COLAs at the 2011 level.
- In 1997 the Legislature enacted the “non-forfeitable right” statute, N.J.S.A. 43:3C-9.5, declaring that a vested member has a “non-forfeitable right to receive benefits as provided under the laws governing the retirement system or fund” and that the “benefits program … cannot be reduced,” but expressly excluding post-retirement medical benefits.
- Retirees (Berg, et al.) sued, alleging Chapter 78 breached contractual, statutory, and constitutional (Contract Clause and Due Process) rights to COLAs; trial court dismissed, Appellate Division reversed on Contract Clause grounds, finding the 1997 statute created a contractual right that included COLAs.
- The New Jersey Supreme Court granted certification to decide whether the 1997 statute unmistakably created a contractual right to future COLAs and whether Chapter 78 impaired that contract.
- The core statutory question: does “benefits as provided under the laws governing the retirement system or fund” encompass COLAs (which are substantively provided by the separate Pension Adjustment Act, N.J.S.A. 43:3B-1 et seq.)?
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 1997 non-forfeitable-right statute created a contractual right to future COLAs | The statute guarantees the "benefits program" and expressly excludes only medical benefits, so COLAs (already provided under pension laws) are included | The statute protects benefits "as provided under the laws governing the retirement system or fund"; COLAs are authorized by the separate Pension Adjustment Act and not integrated into each system’s enabling act, so no unmistakable contractual promise | Held for State: plaintiffs failed to show "unmistakable" legislative intent to create a contractual right to yet-unreceived COLAs; no contract found |
| Standard for finding a statutory contract | Plaintiffs rely on remedial/benefit-focused construction of pension statutes to protect retirees | State invokes the presumption against construing statutes as contracts — requires clear, unequivocal legislative expression ("unmistakability"/Spina standard) | Held for State: high ‘‘clear indication/unmistakability’’ standard applies to creation and terms of statutory contracts |
| Whether legislative history or practice establishes that COLAs were part of the non-forfeitable right | Plaintiffs: committee statements and historical treatment of COLAs show they are integral and expected; retirees reasonably relied on continued COLAs | State: legislative history is equivocal; COLAs historically were periodic legislative adjustments and the Legislature expressly excluded only medical benefits for distinct reasons (e.g., IRC qualification) | Held for State: extrinsic history is ambiguous and cannot overcome the high unmistakability requirement |
| Equity, estoppel, and due process claims (alternative remedies) | Ouslander and others: equitable estoppel/procedural & substantive due process should prevent retroactive suspension for vested retirees | State: without an unequivocal statutory guarantee, retirees could not reasonably rely; sovereign/legislative immunity and necessity of clear statutory vesting bar equitable relief | Held for State: alternative equitable and due process claims fail because no vested contractual right was shown; estoppel and due process not available |
Key Cases Cited
- Spina v. Consol. Police & Firemen's Pension Fund Comm’n, 41 N.J. 391 (1964) (statute creates a legislative contract only when intent is "so plainly expressed" that legislators understood they were surrendering legislative prerogative)
- National R.R. Passenger Corp. v. Atchison, T. & S.F. Ry. Co., 470 U.S. 451 (1985) (presumption that statutes do not create private contractual rights absent some clear indication)
- Burgos v. State, 222 N.J. 175 (2015) (applied Spina and National Railroad standards to assess whether legislation created contractual rights)
- Me. Ass’n of Retirees v. Bd. of Trs. of Me. Pub. Emps. Ret. Sys., 758 F.3d 23 (1st Cir. 2014) (applies the "unmistakability" doctrine to determine whether COLAs are included within statutory pension benefits)