James CARVER, as President of the Nassau County Police Benevolent Association, Gary Learned, as President of the Superior Officers Association of Nassau County, Thomas R. Willdigg, as President of the Nassau County Police Department Detectives Association, Inc., Plaintiffs-Appellees, v. NASSAU COUNTY INTERIM FINANCE AUTHORITY, Ronald A. Stack, Leonard D. Steinman, Robert A. Wild, Christopher P. Wright, George J. Marlin, Thomas W. Stokes, in their official caрacities as directors/members of the Nassau County Interim Finance Authority, Edward Mangano, in his official capacity as County Executive of Nassau County, George Maragos, in his official capacity as Nassau County Comptroller, County of Nassau, Defendants-Appellants.
Docket Nos. 13-0801, 13-0840
United States Court of Appeals, Second Circuit.
Argued: June 10, 2013. Decided: Sept. 20, 2013. Corrected: Sept. 27, 2013.
730 F.3d 150
Before: POOLER and CARNEY, Circuit Judges, and KORMAN, District Judge.
CONCLUSION
For the reasons stated above, the exemption from the time-and-a-half requirement appliеs to appellant, and the judgment of the district court is affirmed.
Alan M. Klinger, Stroock & Stroock & Lavan LLP, New York, NY, Harry Greenberg, Seth H. Greenberg (on the brief), Greenberg Burzichelli Greenberg P.C., Lake Success, NY, for Plaintiffs-Appellees.
Christopher J. Gunther, Skadden, Arps, Slate, Meagher & Flom, New York, NY, for Defendants-Appellants Nassau County Interim Finance Authority, Ronald A. Wild, Christopher P. Wright, George J. Marlin and Thomas W. Stokes, in their official capacities as directors/members of the Nassau County Interim Finance Authority.
Marc S. Wenger (Ana C. Shields, on the brief), Jackson Lewis LLP, Melville, NY, Special Consel for the County Attorney, for Defendants-Appellants, Edward Man-
Howard Wein, Koehler & Isaacs LLP, New York, NY, for Nassau County Sheriff‘s Correctiоn Officers Benevolent Association as amicus curiae in support of Plaintiffs-Appellees.
Steven A. Crain and Daren J. Rylewicz, (Leslie C. Perrin, of counsel), Civil Service Employees Association, Inc., Albany, NY, for Civil Service Employees Association, Inc., as amicus curiae in support of Plaintiffs-Appellees.
EDWARD R. KORMAN, District Judge:*
The district court granted summary judgment to the police unions on their state law claim without reaching the constitutional question. On appeal, defendants argue that the applicable statute was wrongly construed. They also contend, principally, that the district judge abused his discretion in exercising jurisdiction over the pendent state law claim.
BACKGROUND
The Nassau Interim Finance Authority is a public benefit corporation created by the New York State Legislature in June 2000 in response to the growing financial crisis facing Nassau County. The County, which was $2.7 billion in debt, had been forced to allocate nearly one quarter of its spending to servicing that debt, and the County‘s debt was downgraded by rating agencies to one level above junk status. The Legislature passed the NIFA Act, creating NIFA as a public benefit corporation to oversee the county‘s finances.
The NIFA Act also provided $105 million in State taxpayer grants to Nassau County through 2004 and allowed NIFA to issue bonds to refinance and restructure the County‘s debt.
During the interim finance period, NIFA had the responsibility of approving the County‘s budgets and financial рlans.
On January 26, 2011, NIFA imposed a control period. After Nassau County unsuccessfully challenged the imposition of the control period in an Article 78 proceeding, County of Nassau v. Nassau County Interim Finance Authority, 33 Misc.3d 227, 920 N.Y.S.2d 873 (N.Y.Sup.Ct.2011), NIFA passed two resolutions freezing wages for all County employees on March 24, 2011. The wage freeze forced the County to breach the terms of the collective bargaining agreements it had entered into with the various County pоlice unions. On April 1, 2011, the police unions commenced this action in federal court, alleging that the wage freeze violated the Contracts Clause, Article I, Section 10 of the Constitution. They later amended their complaint to add a second claim that NIFA lacked the authority under state law to order a wage freeze after the conclusion of the interim finance period.
After discovery on the Contracts Clause claim, the parties filed cross-motions for summary judgment. The district court granted summary judgment to the police unions, agreeing with their interpretation of the NIFA Act that NIFA‘s authority to freeze wages was limited to the duration of the interim finance period. The district court did not discuss the issue of jurisdiction beyond the observation that “[f]ederal jurisdiction is bаsed upon Plaintiffs’ claim that the wage freeze violates the Contracts Clause of Article I of the United States Constitution.” Carver v. Nassau Cnty. Interim Fin. Auth., 923 F.Supp.2d 423, 424 (E.D.N.Y.2013). Nevertheless, the district court did not reach this claim, observing that the statutory question was “most appropriate for summary disposition.” Id. at 427.
DISCUSSION
The district courts have supplemental jurisdiction over pendent state law claims “that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.”
This case concededly presents an unresolved question of state law and is also one in which there are exceptional circumstances which provide compelling reasons for declining jurisdiction. Unlike a case involving a dispute between private parties, this case involves the construction of a significant provision of an extraordinarily consеquential legislative scheme to rescue Nassau County from the brink of bankruptcy, to monitor its financial condition, and to take steps necessary to prevent a relapse. In order to carry out this legislative scheme, the Legislature created NIFA, which it denominated a “corporate governmental agency and instrumentality of the state constituting a public benefit сorporation.”
that the continued existence of such condition of fiscal difficulties is contrary to the public interest of the county and the state and seriously threatens to cause a decline in the general prosperity and economic welfare of the inhabitants of the county and the people of this state [and that] [t]he impairment of the credit of the сounty of Nassau may affect the ability of other municipalities in the state to issue their obligations at normal interest rates. Such effect is a matter of state concern.
request[ed] the enactment of all of the provisions of [the] act as necessary and in the public interest to accomplish the objective of improving market reception for the necessary sale of bonds and other obligations of the county by discouraging certain practices which have occurred in the past and providing direction and assistance in budgetary and financial matters to restore the county to fiscal health, while retaining the county‘s right to operate independently as a municipal corporation of the state of New York.
Moreover, the NIFA Act itself provides that “the creation of NIFA and the carrying out of its purposes are in all respects for the benefit of the people of the state of New York and are public purposes. Accordingly, NIFA shall be regarded as performing an essential governmental function in the exеrcise of the powers conferred upon it by this title.”
The parties debate whether the claim substantially predominates over the Contracts Clause cause of action simply because it was decided first by the district court. We need not resolve this debate. It is enough that the construction of the provision of the NIFA Act at issue raises an unresolved issue of state law—the interpretation of a poorly drawn statute—that should be resolved by the New York state courts because the manner in which the statute is construed implicates significant state interests. As we have previously observed, “[w]here a pendent state claim turns on novel or unresolved questions of
The Nassau County defendants argue that jurisdiction over this pendent state law claim should be denied because of the special statutory procedure that New York law—
We need not decide, however, whether Article 78 can, on its own, deprive a federal court of jurisdiction over claims brought under that provision, as some district court cases have held, see, e.g., Cartagena v. City of New York, 257 F.Supp.2d 708, 710 (S.D.N.Y.2003). City of Chicago v. International College of Surgeons, 522 U.S. 156, 164-68 (1997), a case which goes unmentioned by the parties, would suggest otherwise, as long as those clаims would otherwise fall within the court‘s pendent jurisdiction. See also Casale v. Met. Transp. Auth., No. 05-cv-4232, 2005 WL 3466405, at *6 (S.D.N.Y. Dec. 19, 2005). For present purposes, it is enough to recognize that Article 78 reflects a state preference for a state mode of procedure that “is designed to facilitate a summary disposition of the issues presented . . . and has been described as a fast and cheap way to implement a right that is as plenary as an action, culminating in a judgment, but is brought on with the ease, speed and inexpensiveness of a mere motion.” Davidson v. Capuano, 792 F.2d 275, 280 (2d Cir. 1986) (internal quotation marks and citations omitted). Whether or not Article 78 can itself deprive the district court of jurisdiction over claims brought under its provisions, the state preference to try Article 78 claims in state court bears on our assessment оf whether the district court abused its discretion in deciding nonetheless to exercise pendent jurisdiction here, where other factors, too, strongly support declining that jurisdiction. We hold that the district court abused its discretion in exercising pendent jurisdiction.
On remand the district court should dismiss the state-law claim, but retain jurisdiction over plaintiffs’ federal constitutional claim. If plaintiffs decide to pursue their state-law statutory-construction or other related claims in state court, the district court may decide, within its discretion, to stay the federal action until the state-court litigation has completed because the state courts’ resolution of the state claim may obviate the need to resolve the federal constitutional question. Railroad Comm‘n of Tex. v. Pullman Co., 312 U.S. 496 (1941);
In choosing to reverse the district court‘s exercise of pendent jurisdiction, we have passed over the argument that NIFA is entitled to sovereign immunity—an argument that was raised for the first time on appeal. Normally, in cases involving the issue of Article III subject matter jurisdiction, this issue would have to be addressed first. See Steel Co. v. Citizens for a Better Env‘t, 523 U.S. 83, 94 (1998) (striking down the “doctrine of hypothetical jurisdiction,” by which difficult subject matter jurisdiction questions were bypassed to allow district courts to rule on the merits of the case when the merits were more easily resolved). Nevertheless, whether the claim of sovereign immunity constitutes a true issue of subject matter jurisdiction or is more appropriately viewed as an affirmative defense is an open question in the Supreme Court and the Second Circuit. Wisconsin Dep‘t of Corr. v. Schacht, 524 U.S. 381, 391 (1998) (leaving open the question of whether “Eleventh Amendment immunity is a matter of subject-matter jurisdiction“). More recently, we held that the burden of proof in a case involving the assertion of sovereign immunity is on the party asserting it—a holding that we acknowledged is more consistent with the understanding that sovereign immunity was an affirmative defense. Woods v. Rondout Valley Cent. Sch. Dist. Bd. of Educ., 466 F.3d 232, 237-39 (2d Cir.2006).
We need not resolve this issue because, even if sovereign immunity is a “matter of subject matter jurisdiction,” Steel Co. makes clear that we are not bound to decide any particular jurisdictional question before any othеr. 523 U.S. at 100 n. 3 (noting that it is permissible to decide a “discretionary jurisdictional question before a nondiscretionary jurisdictional question“); see also Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 584 (1999) (The Court‘s opinion in Steel Co. “does not dictate a sequencing of jurisdictional issues.“). We have exercised the discretion that Steel Co. allows us to reach the issue of the exercise of supplemental jurisdiction rather than applying a complicated six-part test tо an arguably close question.
CONCLUSION
Under the circumstances of this case, the district judge should have declined to reach the pendent state law claim, which required it to interpret, as a matter of first impression, an important state legislative scheme to prevent the fiscal demise of Nassau County. Consequently, the judgment of the District Court granting the plaintiffs’ motion for summary judgment on the pendent state law claim is vacated and the case is remanded with instructions to dismiss that claim.
VACATED and REMANDED.
NEWSDAY LLC, News 12 Networks LLC, Intervenors-Appellants,