Lead Opinion
Affirmed by published opinion. Judge KING wrote the opinion, in which Justice O’CONNOR and Judge DAVIS joined. Judge DAVIS wrote a separate concurring opinion.
OPINION
Retired officers of the Gastonia, North Carolina Police Department appeal the district court’s judgment in favor of the City of Gastonia with respect to several claims arising from the failure of the Gastonia Policemen’s Supplemental Pension Fund (the “Fund”). The judgment incorporated by reference the court’s final Order, which dismissed the officers’ federal claim and granted summary judgment to the City on a pair of related state law claims. See Crosby v. City of Gastonia,
I.
A.
The Fund came into being in 1955 by virtue of an Act of the North Carolina General Assembly. The Act entrusted management of the Fund to a Board of Trustees, comprised of three City officials, but the City proper was accorded no authority to direct or control the Fund’s administration.
The Act was amended a number of times over the years, the most pertinent occasion being in 1959 when the General Assembly added a funding proviso. According to the amended Act, a retired officer who had earned a vested interest in the Fund by meeting age and service requirements
shall receive monthly for the remainder of his life from the [Fund], so long as funds are available, an amount equal to two percent for each five years of service, or major portion thereof, not to exceed fourteen per cent of his average monthly salary for the three highest salaried years while employed by [the Department].
1959 N.C. Sess. Laws ch. 301, § 2 (emphasis added). All subsequent amendments to the Act retained the funding proviso.
The City adopted a parallel Ordinance in 1983. The Ordinance more or less faithfully tracked the language of the Act, although it omitted the 1959 funding proviso, an apparent oversight that remained uncorrected for eight years. The year 1983 also marked the debut of an “Employee Information Guide” distributed generally to City employees. The 1991 version of the Guide explained merely that “[a]dditional pension funds are available as a supplement to the Retirement System for both Police and Fire personnel. Details concerning these are available in the respective departments.” J.A. 243.
In 1989, the City issued a pamphlet entitled “Career Opportunities in Law Enforcement with the City of Gastonia Police Department.” The pamphlet, made avail
B.
In the early 1990s, the Fund began to experience financial difficulties, and, in 1995, the Board of Trustees ordered an audit. The audit revealed that the Fund would fail without additional income. Since its inception, the Fund had been supported through myriad sources, including surcharges on criminal fines, vending machine proceeds, direct allocations from the City, and refunds of State contributions to another retirement fund made on behalf of City officers who subsequently left employment prior to qualifying for benefits.
Responding to the audit’s findings, the Board invoked a provision of the Act authorizing contributions from active officers working toward retirement. In 1996, the active officers approved by referendum a proposal to deduct 2% of their salaries for deposit with the Fund. Unfortunately, the officers’ efforts failed to restore the Fund to solvency. A follow-up audit in 2001 concluded that salary contributions from active officers would have to be increased from 2% to “as much as” 7.5% to avoid utter depletion of the Fund within six years. J.A. 595.
In a second referendum, conducted in April 2002, the active officers voted 154 to 4 to “authorize the Board of Trustees to seek legislation to stop the 2% salary deduction,” and “allow the Board of Trustees to ask for legislation amending [the Act] to allow for an eligible employee to receive their contributions from the [F]und prior to leaving employment.” J.A. 516. Shortly thereafter, the Board asked the City to adopt a resolution requesting the General Assembly to amend the Act to implement the wishes of the active officers as expressed through the referendum. The City complied, with the result that the Assembly amended the Act in October 2002 to foreclose eligibility for supplemental benefits to all new hires, cease further contributions to the Fund from active officers, and refund the entirety of those officers’ prior contributions. See 2002 N.C. Sess. Laws. ch. 130, § 1. The Board carried out its statutory mandate to pay benefits to vested retirees until August 2005, when its assets were at last exhausted.
C.
In October 2006, three of the retirees brought suit in state court against the City, which elected to remove the matter to the Western District of North Carolina. The plaintiffs in that proceeding sought to certify a class comprised of all the vested retirees, but while their motion for certification was pending, another group of more than sixty retired officers filed a similar federal action. The district court ultimately declined to certify a class, but it permitted consolidation of the two cases, the upshot being that, on June 24, 2008, the court received an Amended Complaint filed on behalf of all the plaintiffs.
The Amended Complaint asserted four counts for relief: (1) that the City was liable pursuant to 42 U.S.C. § 1983 for, among other things, “[i]nterfering with [the plaintiffs’] contractual rights as guaranteed by the Contract Clause of the Unit
The discovery process refined the plaintiffs’ claims and theories, limiting the issues before the district court on cross-motions for summary judgment.
The ruling on the jurisdictional issue left only state law claims, which a North Carolina court might thereafter have adjudicated. The district court chose instead to decide the state claims on the merits in recognition of the developed record and because the case had been pending for more than three years. See Crosby,
II.
A.
The City removed the initial filing to the district court on the ground that it gave rise to a federal question within the contemplation of 28 U.S.C. § 1331, in that the plaintiffs had asserted a claim pursuant to the Civil Rights Act of 1871. The current iteration of that Act provides in pertinent part:
Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States ... to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress....
42 U.S.C. § 1983.
In Carter v. Greenhow,
The Supreme Court characterized those rights as the freedom to pay the taxes in the desired fashion and immunity from enforcement of the tax debt as a delinquency, each “derive[d] from the contract with the state, contained in the act of March 28, 1879, and the bonds and coupons issued under its authority.”
That constitutional provision, so far as it can be said to confer upon or secure to any person any individual rights, does so only indirectly and incidentally.... In any judicial proceeding necessary to vindicate his rights under a contract affected by ... legislation, the individual has a right to have a judicial determination declaring the nullity of the attempt to impair its obligation. That is the only right secured to him by that clause of the constitution.
Id. Justice Matthews observed that the plaintiff had not shown any deprivation of his right to seek declaratory or injunctive relief through the judicial process, having “simply chosen not to resort to it.” Id.
The Supreme Court surmised that “[i]t might be difficult to enumerate the several descriptions of rights secured to individuals by the constitution, the deprivation of which, by any person, would subject the latter to an action for redress under [the civil rights laws].”
As a result of the Supreme Court’s holding jn Carter, then, recourse to § 1983 for the deprivation of rights secured by the Contracts Clause is limited to the discrete instances where a state has denied a citizen the opportunity to seek adjudication through the courts as to whether a constitutional impairment of a contract has occurred, or has foreclosed the imposition of an adequate remedy for an established impairment. Section 1983 provides no basis to complain of an alleged impairment in the first instance.
We acknowledge that one of our sister circuits has reached the opposite conclusion. See S. Cal. Gas Co. v. City of Santa Ana,
has already given that decision a narrow reading, stating that the case “held as a matter of pleading that the particular cause of action set up in the plaintiffs pleading was in contract and was not to redress deprivation of the ‘right secured to him by that clause of the Constitution’ [the contract clause], to which he had ‘chosen not to resort.’ ”
Dennis,
Our view, in opposition to that of the Ninth Circuit, is that Justice White’s reference to the “narrow reading” accorded Carter was intended to address the usefulness of that case in providing a framework for the analysis of § 1983 claims invoking parts of the Constitution other than the
B.
We need not scrutinize the Amended Complaint in especial detail to discern that the plaintiffs are attempting to pursue a prohibited claim. Count I of the Amended Complaint — subtitled “(Violation of Federal Constitutional Rights) (42 U.S.C. § 1983)” — alleges, inter alia, that a contract existed between the plaintiffs and the City, and that certain acts by the latter “violate[d] the constitutional rights of each plaintiff ... by [i]nterfering with his contractual rights as guaranteed by the Contract Clause of the United States Constitution.” Amended Complaint 5. As a component of the remedies prayed for, the plaintiffs requested the district court to “find the termination of the vested pension plan ... to be unconstitutional ... and that the [City] be enjoined from not paying future retirement benefits to the vested police officers.” Id. at 8.
The most reasonable interpretation of the Amended Complaint is that it seeks a judicial determination under § 1983 that the City unconstitutionally deprived the plaintiffs of their right to receive supplemental pension payments. There is no allegation that the City had impermissibly thwarted the plaintiffs in any prior attempt on their behalf to vindicate the application of the Contracts Clause to the parties’ dispute by resort to the courts.
The question presented in this case is therefore indistinguishable in any meaningful way from that in Carter, which controls the result we announce today. We conclude that Count I of the Amended Complaint, insofar as it does not allege that the plaintiffs have been deprived of a
C.
The district court, however, did not dismiss Count I on Rule 12(b)(6) grounds, but instead relied on Rule 12(b)(1) to dismiss Count I for lack of subject matter jurisdiction. The court concluded that the plaintiffs had failed to plead facts constituting an “impairment” of obligation of contract, and thus could establish no violation of the Contracts Clause. See supra Part I.C. In so ruling, the court appears to have construed Count I to allege a direct constitutional challenge to the actions taken by the City, rather than to complain more indirectly that the City’s supposed contravention of the Constitution deprived the plaintiffs of one or more rights protected by § 1983.
The district court had the discretion, and indeed the duty, to construe the pleadings “so as to do justice.” Fed.R.Civ.P. 8(e). Having construed the Amended Complaint as formulating a direct challenge, the district court correctly analyzed the alleged acts of the City as establishing nothing more than a mere breach of contract, not rising to the level of a constitutional impairment of obligation. See St. Paul Gaslight Co. v. City of St. Paul,
Moreover, we cannot criticize the court’s decision to proceed under Rule 12(b)(1) in dismissing the “direct” portion of Count I, although courts have also entered a dismissal in such cases pursuant to Rule 12(b)(6). Numerous reported cases take either course. Compare, e.g., St. Paul Gaslight Co.,
In parsing Count I to discover a direct constitutional challenge, however, the district court was not free to disregard the more straightforward § 1983 claim. Absent a conclusion that the pertinent allegations of the Amended Complaint were so “plainly insubstantial” or “entirely frivolous” as to be manifestly outside federal jurisdiction, see Lovern v. Edwards,
Similar to the situation in Bell v. Hood, the plaintiffs’ Amended Complaint served to “raise serious questions, both of law and fact, which the district court can decide only after it has assumed jurisdiction over the controversy.”
Whether for lack of subject matter jurisdiction (under Rule 12(b)(1)) or for failure to state a claim upon which relief may be granted (under Rule 12(b)(6)), the end result is the same: the district court should have dismissed, and did dismiss, Count I. The court’s judgment as to that count must therefore be affirmed. See Catawba Indian Tribe v. City of Rock Hill,
A.
We move on at last to address the district court’s grant of summary judgment to the City on the plaintiffs’ state law claims for breach of contract and for breach of fiduciary duty. At the outset, we observe that the lower court exercised supplemental jurisdiction over these non-federal claims under the authority of 28 U.S.C. § 1367(a), which provides that “in any civil action of which the district courts shall have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy.” See also Hinson v. Norwest Fin. S.C., Inc.,
Had the federal claims in this matter truly been susceptible to dismissal solely for lack of subject matter jurisdiction, as the district court supposed, its discretionary exercise of supplemental jurisdiction over the state-law claims would have been problematic. See Arbaugh v.Y & H Corp.,
Arbaugh left undisturbed, however, the long-standing principle that, “[i]n contrast, when a court grants a motion to dismiss for failure to state a federal claim, the court generally retains discretion to exercise supplemental jurisdiction ... over pendent state-law claims.”
Rather than embark on a lengthy analysis of North Carolina law to decide whether the various actions of the City over the years engendered an enforceable contract with the plaintiffs, we will assume, as the district court did, that such a contract existed. Even so, the gorilla in the room is that a fundamental term of the contract since 1959, before any of the plaintiffs can be said to have acquired vested rights in the Fund, was the statutory caveat that benefits would be paid only “so long as funds are available.” 1959 N.C. Sess. Laws ch. 301, § 2. The plaintiffs maintain that the funding proviso ceases to apply upon vesting of an officer’s entitlement to benefits, but that contention is unavailing and finds no support in the clear language of the statute.
“One of the ‘chief purposes’ of contract law is ‘to secure the realization of expectations reasonably induced by the expressions of agreement.’ ” Joyner v. Adams,
IV.
Pursuant to the foregoing, the district court’s judgment in favor of the City is affirmed.
AFFIRMED.
Notes
. Citations herein to "J.A. -” refer to the contents of the Joint Appendix filed by the parties to this appeal.
. The Clause provides, in pertinent part, that "[n]o State shall ... pass any ... Law impairing the Obligation of Contracts.” U.S. Const, art. I, § 10, cl. 1. The Supreme Court and nearly all federal courts have, over the years, inconsistently denominated this key provision of Article I as both the "Contract Clause” and the "Contracts Clause.” Because the text of the Constitution speaks of the obligation of "contracts” in the plural, we will use that form of the noun to refer to the Clause in this opinion.
. For example, although Count II of the Amended Complaint alleged state constitutional violations, the plaintiffs’ summary judgment motion did not mention the North Carolina Constitution at all, instead confining its citations and argument to authorities construing the federal Constitution. The district court followed the plaintiffs’ lead, requesting supplemental briefing regarding whether the parties’ supposed contract had been "impaired,” but restricted solely to the interpretation of that term in the context of its appearance within the Contracts Clause of the Constitution of the United States; tellingly, in their responsive submissions, both parties observed the court’s parameters. Thus, the district court quite evidently considered the plaintiffs to have forgone their state constitutional claims, see e.g., Forrest Drive Assocs. v. Wal-Mart Stores, Inc.,
. With particular respect to the fiduciary duty claim, the district court premised its summary judgment for the City upon alternative holdings that the plaintiffs had abandoned the issue by not proffering supporting evidence or argument, and that the City had in any case retained its governmental immunity. See Crosby,
. Federal subject matter jurisdiction over a § 1983 civil rights claim also lies specifically in accordance with 28 U.S.C. § 1343(a), which confers jurisdiction upon the district courts "of any civil action authorized by law to be commenced by any person ... (3)[t]o redress the deprivation, under color of any State law ... of any right, privilege or immunity secured by the Constitution of the United States or by any Act of Congress providing for equal rights.”
. The dispute underlying Kestler v. Board of Trustees,
We were not called upon in Kestler to decide at the threshold whether § 1983 might provide a remedy for impairments in violation of the Contracts Clause, and neither the panel majority nor Judge Hall raised the issue sua sponte, as we have now chosen to do. We point out, however, that the trail we have blazed today is entirely consistent with our prior, non-precedential decision in Andrews v. Anne Arundel County,
. As the Seventh Circuit has explained, "when a state repudiates a contract to which it is a party it is doing nothing different from what a private party does when the party repudiates a contact; it is committing a breach of contract.” Horwitz-Matthews, Inc. v. City of Chicago,
. In either case, we review de novo the district court’s decision to dismiss. See Pitt County v. Hotels.com, L.P.,
. Justice Black, writing for the Court in Bell v. Hood, elaborated that jurisdiction "is not defeated ... by the possibility that the averments might fail to state a cause of action.... For it is well settled that the failure to state a proper cause of action calls for a judgment on the merits and not for a dismissal for want of jurisdiction.”
. In Catawba Indian Tribe, we reiterated our oft-repeated admonition that "we review judgments, not opinions.... We are accordingly entitled to affirm the district court on any ground that would support the judgment in favor of the party prevailing below.”
. A district court '‘enjoy[s] wide latitude in determining whether or not to retain [supplemental] jurisdiction over state claims.” Shanaghan v. Cahill,
. A “court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a).
. From the outset, the plaintiffs have lived on the edge regarding the preservation of their fiduciary duty claim. See Crosby,
Concurrence Opinion
concurring:
I concur fully in Judge King’s fine opinion for the panel. I simply note that no one doubts that the Appellants, dedicated former public servants who spent a career in law enforcement regularly putting their lives on the line, are deserving of every consideration. As the panel opinion notes, it appears that the Supreme Court of North Carolina, in ways that vary significantly from the approach of federal courts, has been especially solicitous of Contracts Clause claims asserted in a wide range of circumstances by government employees against their state and local employers. See, e.g., Faulkenbury v. Teachers’ and State Employees’ Retirement System of
Notably, two of the Appellants actually served long terms as Trustees of the fund and were actively involved in earnest attempts to forestall the fund’s collapse. The record shows that up until the bitter end, neither the Trustees nor any one else ever suggested that the City of Gastonia was legally obligated to come to the fund’s rescue. This belatedly-filed litigation against the City of Gastonia is entirely understandable, given the circumstances. Nevertheless, the Appellants’ claims fail as a matter of law.
The failure of the Trustees to stave off the demise of the fund was not for want of sincere efforts; it was a political failure that does not in any manner lessen the moral imperative that clearly underlies the Appellants’ claims. Yet, that said, for the reasons stated in the panel opinion, we have no warrant to upset the district court’s sound legal determinations.