AFSCME Maryland Council 3 v. State of MarylandAFSCME Maryland Council 3 v. State of Maryland
Appeal from the United States District Court for the District of Maryland, at Baltimore. Peter J. Messitte, Senior District Judge. (1:18-cv-02817-PJM)
Argued: January 25, 2023 Decided: February 21, 2023
Affirmed by published opiniоn. Judge Thacker wrote the opinion, in which Judge Wilkinson and Judge Harris join.
ARGUED: David Gray Wright, KAHN SMITH & COLLINS, P.A., Baltimore, Maryland, for Appellant. Ryan Robert Dietrich, OFFICE OF THE UNITED STATES ATTORNEY, Baltimore, Maryland, for Appellees. ON BRIEF: David Maher, KAHN SMITH & COLLINS, P.A., Baltimore, Maryland, for Appellant. Brian E. Frosh, Attorney General, John J. Kuchno, Assistant Attorney General, OFFICE OF THE ATTORNEY GENERAL OF MARYLAND, Baltimore, Maryland, for Appellees.
Appellant American Federation of State, Cоunty and Municipal Employees, Council 3 (“Appellant“) filed suit against the State of Maryland alleging that the State breached a statutorily formed contract with current state employees to provide them with certain prescription drug benefits upon retirement. Though the district court agreed that Maryland law created a contract, it held that the contrаct was unilateral
Though we аffirm the dismissal of Appellant‘s Complaint, we do so because we find that the statutory language does not create a contract with state employees.
I.
This case centers around Maryland‘s offering of retirement health benefits to state employees and retirees. Specifically at issue here is whether Maryland contracted, through statute, to provide retirees with prescription drug benefits as part of their retirement subsidy.
A.
In 1993, the Maryland legislature established a comprehensive health benefits program, which it termed the “State Employee and Retiree Health and Welfare Benefits Program.” See 1993 Md. Laws Ch. 10, § 8-101 (codified at
Then, in 2003, the United States Congress created Medicare Part D, which provides prescription drug coverage for those over the age of 65 who enroll in the program. See
In response to the “doughnut hole,” the Maryland legislature passed legislation clarifying that “[t]he State shall continue to include a prescription drug benefit plan in the health insurance benefit options” available to retired state employees “under §§ 2-508 and 2-509 of this subtitle notwithstanding the enactment of the federal Medicare Prescription Drug, Improvement, and Modernization Act of 2003 or any other federal law permitting states to discontinue prescription drug benefit plans to retirees of a state.” 2004 Md. Laws Ch. 296 (codified at
In 2010, Congress passed the
B.
This case originated in 2018 when the “Fitch Plaintiffs,” a group of retired state employees, filed suit in Maryland state court alleging that the State‘s transition of Medicare-eligible retirees to Medicare Part D violated their contractual right to receive state-subsidized prescription drug benefits. The State removed the case to federal court, and the district court issued a preliminary injunction in October 2018, directing the State to “continue providing prescription drug benefits to current retirees and to any eligible employees who might retire during the pendency of this case.” J.A. 83–84.* Thereafter, in May 2019, the Maryland legislature again amended Section 2-509.1 to create three new avenues for state-subsidized prescription drug benefits for qualifying retirees, their spouses, and their dependents. See
After the Maryland legislature adopted these changes, Appellant moved to intervene and to expand the scope of the preliminary injunction to include the active employees it represents. The district court granted the motion to intervene but declined to expand the scope of the preliminary injunction. Both the Fitch Plaintiffs and Appellant later amended their Complaints to add allegations relating to Maryland‘s 2019 amendments to Section 2-509.1, but they seek principally the same relief. Appellant seeks relief on behalf of its active employee-members, all of whom began their state employment on or befоre June 30, 2011. Appellant alleges that the statutory provisions set forth at
The district court rooted its analysis in
On that basis, the district court dismissed Appellant‘s Complaint in its entirety. The order specified that it was a final judgment as to Appellant pursuant to
II.
“We review de novo the grant of a motion to dismiss for failure to state a claim, applying the same standards as the district court.” Speaks v. U.S. Tobacco Coop. Inc., 31 F.4th 838, 841 (4th Cir. 2022) (citation and quotation marks omitted). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.‘” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also Fed. R. Civ. P. 12(b)(6). We review questions of statutory interpretation de novo. Hall v. United States, 44 F.4th 218, 222 (4th Cir. 2022).
III.
Before proceeding to the merits, we must first determine the scope of our review. The district cоurt certified its order dismissing Appellant‘s Complaint as a final order pursuant to
Appellant suggests that our review is limited to the issue of whether the district court was correct that the contract is unilаteral, such that active employees have no vested rights. In other words, Appellant argues that we must accept the district court‘s determination that the statutes at issue form a contract in the first instance and begin our analysis with that conclusion. According to Appellant, it sought a Rule 54(b) certification only on the question of whether the contract was еnforceable by active employees, and Maryland‘s argument that the statutes do not create a contract amount to an appeal of the district court‘s denial of the state‘s motion to dismiss the Fitch Plaintiffs’ Complaint.
Appellant‘s argument fails. The district court‘s final order set forth its findings that “Maryland created a unilateral contract with respect to prescription drug benefits that became binding upon the fulfillment by certain retirees of specific conditions,” “active State employees have no vested entitlement to the prescription drug benefits established in the law,” and “[a]ctive State employees have failed to satisfy all conditions precedent to enforce the contract.” J.A. 107. Based on those findings, the district court granted Maryland‘s motion to dismiss and entered final judgment “against [Appellant] and in favor of [Maryland], pursuant to” Rule 54(b). Id.
Appellant is correct that our review under a Rule 54(b) certification is limited to the claims certified by the district court -- we could not review the district court‘s ruling on a different motion, for example. See United Indus., Inc. v. Eimco Process Equip. Co., 61 F.3d 445, 448 (5th Cir. 1995) (citing United States v. Stanley, 483 U.S. 669, 667 (1987)) (“In an interlocutory aрpeal certified by the district court under . . . Rule 54(b), we have no jurisdiction to consider orders of the district court outside the scope of certification.“). But the certification here is a certification of the district
IV.
The threshold question, then, is whether the versions of
A.
“[A] legislative enactment may contain provisions which, when accepted as the basis of action by individuals, become contracts between them and the State . . . within the protection of [the Contracts Clause of the federal Constitution].” Indiana ex rel. Anderson v. Brand, Trustee, 303 U.S. 95, 100 (1938). “The Contracts Clause restricts the power of the States to disrupt contractual arrangements.” Sveen v. Melin, 138 S. Ct. 1815, 1821 (2018); see also
“In determining whether a particular statute gives rise to a contractual obligation, ‘it is of first importance to examine the language of the statute.‘” Nat‘l R.R. Passenger Corp. v. Atchison Topeka & Santa Fe Ry. Co., 470 U.S. 451, 466 (1985) (quoting Dodge v. Bd. of Educ. of Chi., 302 U.S. 74, 78 (1937)). To that end, “absent some clear indication that the legislature intends to bind itself contractually, the presumption is that ‘a law is not intended to create private contractual or vested rights but merely deсlares a policy to be pursued until the legislature shall ordain otherwise.‘” Id. at 465–66 (quoting Dodge, 302 U.S. at 79). “[T]he party asserting the creation of a contract must overcome this well-founded presumption.” Id. at 466 (citation omitted). It may do so by demonstrating that “both [the contract‘s] existence and the authority to make it . . . clearly and unmistakably appear [in the statutory language], and all doubts must be resolved in favor of the continuance of the power” of the state legislature to modify or repeal enactments of a previous legislature. United States v. Winstar Corp., 518 U.S. 839, 889 (1996) (quoting Home Tel. & Tel. Co. v. Los Angeles, 211 U.S. 265, 273 (1908)). This has become
The Supreme Court has provided examples of the type of statutory language that is sufficiently clear to create a contractual obligation binding upon the state. For example, “‘[i]f [the stаtute] provides for the execution of a written contract on behalf of the state the case for an obligation binding upon the state is clear.‘” Nat‘l R.R. Passenger Corp., 470 U.S. at 466 (quoting Dodge, 302 U.S. at 78) (emphasis in original). Similarly, a statute containing “a provision in which the [state] ‘covenant[s] and agree[s]’ with anyone to do anything,” evinces the kind of unmistakable intent required. Id. at 470 (discussing United States Trust Co. v. New Jersey, 431 U.S. 1, 9–10 (1977)).
B.
Between 2004 and 2011, Section 2-508(b)(1) provided, “a retiree may enroll and рarticipate in the health insurance benefit options established under the [State Employee and Retiree Health and Welfare Benefits] Program” if he or she retired with a sufficient number of years of creditable service. 2004 Md. Laws Ch. 87. Section 2-508(c) further specified that a retiree with 16 years or more of creditable service “is entitled to the same State subsidy аllowed a State employee,” and a retiree with between five and 16 years of creditable service “is entitled to 1/16 of the State subsidy allowed a State employee.” 2004 Md. Laws Ch. 87.
Section 2-509.1, which was first added to Maryland code in 2004, provided, in its entirety:
The State shall continue to include a prescription drug benefit plan in the health insurance benefit optiоns established under the Program and available to retirees under §§ 2–508 and 2–509 of this subtitle notwithstanding the enactment of the federal Medicare Prescription Drug, Improvement, and Modernization Act of 2003 or any other federal law permitting states to discontinue prescription drug benefit plans to retirees of a state.
2004 Md. Laws Ch. 296.
The district court concluded that Section 2-508‘s use of the word “entitled” “reveals all one needs to know about the [legislature‘s] intent” because “[t]o ‘entitle’ means to ‘grant a legal right to or qualify for.‘” J.A. 88 (quoting Black‘s Law Dictionary (11th ed. 2019)). And because Section 2-509.1 cross-references Section 2-508, the district court held that the two statutes created a contractual obligation for the State to provide prescription drug benefits as part of its retirement subsidy.
Reviewing the language of the statutes at issue here, we have little trouble concluding that they do not create a contract binding upon the State. While Section 2-508 does “entitle” retirees to a subsidy, it does not include any unmistakable contract language. It does not use terms such as contract, covenant, or bind. Nоr does it set forth the specific benefits provided under the subsidy. Rather, it only “entitles” a retiree to the “same State subsidy allowed a State employee.” 2004 Md. Laws Ch. 87. And Section 2-509.1 says nothing on its own that gives rise to an inference of contract. Instead, it establishes a policy that the State “shall continue to include a prescription drug benefit plan in the health insurance benefit options” notwithstanding the enactment of Medicare Part D. 2004 Md. Laws Ch. 296.
Even under Maryland‘s general contract standard, for a contract to be enforceable, “its language must . . . be sufficiently definite to clearly inform the parties
That is in stark contrast to the city ordinance at issue in Cherry v. Mayor of Baltimore City, 257 A.3d 1087 (Md. 2021), a case upon which Appellant relies. The city ordinance in Cherry provided that when a covered employee became a member of the pension plan offered by the city, the employee was “deemed to have entered into a contract with the Mayor and City Council of Baltimore” and explained that the terms of that contract would be those in effect at thе time the employee became a member of the pension plan and would “not thereafter be in any way diminished or impaired.” Id. at 1093 (quoting Balt. City Code, art. 22, § 42). Unlike the language in Sections 2-508 and 2-509.1, the language used in the city ordinance in Cherry easily satisfies the Nat‘l R.R. Passenger standard.
Nothing in Sections 2-508 or 2-509.1 leaves us with an unmistakably “clear indication that the legislature intend[ed] to bind itself contractually.” Nat‘l R.R. Passenger Corp., 470 U.S. at 465–66. Therefore, “all dоubts must be resolved in favor of the continuance of the power” of the state legislature to modify or repeal enactments of a previous legislature. Winstar, 518 U.S. at 889 (citation omitted).
V.
We hold that Sections 2-508 and 2-509.1 do not create a contract between the State of Maryland and its employees or retirees. Therefore, while we disagree with the district court‘s reasoning, its order dismissing Appellant‘s Complaint is
AFFIRMED.