Dennis CROSBY, on behalf of himself and all others similarly situated; Jackie Steven Postell; Danny Ray Cochran, Plaintiffs-Appellants, v. CITY OF GASTONIA, a municipality existing under the laws of the State of North Carolina, Defendant-Appellee.
No. 10-1153.
United States Court of Appeals, Fourth Circuit.
Decided: March 10, 2011.
633 F.3d 634
Argued: Dec. 9, 2010.
We also agree with the District Court that because the underlying claim of trial counsel‘s ineffectiveness has merit, “there is a reasonable probability that Showers’ direct appeal would have been successful had appellate counsel adequately raised the issue.” Id. at 331. As the District Court concluded, Rudinski‘s failure to raise the issue was “unreasonable and did prejudice the defense.” Id.
The Superior Court determined that counsel made a tactical decision not to include all of the arguments on appeal. This court agrees that counsel need not, and should not, raise every non-frivolous claim but rather may select among them in order to maximize the likelihood of success on appeal. Smith v. Robbins, 528 U.S. 259, 288, 120 S.Ct. 746, 145 L.Ed.2d 756 (2000). Here, however, without conducting an independent investigation of the need to consult an expert rebuttal witness, counsel ignored an argument going directly to the issue of guilt that is “clearly stronger than those presented.” Id. (quotation omitted). For example, appellate counsel included an argument challenging the sufficiency of the evidence, which rarely prevails. See, e.g., United States v. Iglesias, 535 F.3d 150, 155 (3d Cir.2008). The fact that counsel had a reason for exclusion, the desire not to “shotgun” the appellate court, does not excuse his performance. App. at 273.
The Commonwealth provides no argument that appellate counsel was not ineffective except insofar as it rejects the claim that trial counsel was ineffective. We agree with Showers that the Commonwealth has all but conceded the point. Thus, we conclude that the Superior Court‘s decision here is contrary to and an unreasonable application of clearly established federal law.
III.
Accordingly, we will affirm the judgment of the District Court granting habeas relief in the form of a new trial.11
Before Sandra Day O‘CONNOR, Associate Justice (Retired), Supreme Court of the United States, sitting by designation, and KING and DAVIS, Circuit Judges.
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
KING, Circuit Judge:
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, 682 F.Supp.2d 537 (W.D.N.C.2010). We affirm.
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. 243.1
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 General 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
The discovery process refined the plaintiffs’ claims and theories, limiting the issues before the district court on cross-motions for summary judgment.4 With respect to the initial count of the Amended Complaint, the court ruled that the City‘s conduct toward the plaintiffs was not an impairment of obligation within the meaning of the Contracts Clause. See Crosby, 682 F.Supp.2d at 544. Absent such an impairment, the court reasoned, it lacked jurisdiction over the subject matter of the claim. See id. at 545.
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, 682 F.Supp.2d at 545-46. Having elected to proceed, the court granted summary judgment to the City on the contract and fiduciary duty claims. In so doing, the court strongly intimated that the plaintiffs had failed to establish the existence of either an enforceable contract or a cognizable legal duty for which the City could be held liable, see id. at 546-47, but ultimately concluded that even in the presence of an enforceable contract, no breach had occurred, see id. at 549.5
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
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....
In Carter v. Greenhow, 114 U.S. 317, 5 S.Ct. 928, 29 L.Ed. 202 (1885), a Richmond property owner tendered negotiable coupons detached from matured State bonds as part payment for real estate taxes owed to the sovereign. Notwithstanding that the 1879 act authorizing the bonds prescribed the coupons as receivable in payment of all State taxes, and that the same prescription was imprinted upon the coupons themselves, the tax collector refused to accept them as legal tender. The basis for the refusal was intervening legislation in 1882 that forbade State collectors from accepting anything in satisfaction of tax liabilities other than “gold, silver, United States treasury notes, and national bank currency[.]” Id. at 319, 5 S.Ct. 928. The dispute remained unresolved, with the result that the tax collector seized personal items from the property owner‘s place of business to satisfy the underlying tax debt. The property owner filed suit, maintaining that he was entitled to a remedy for the seizure under the provisions of the 1871 Civil Rights Act because he had been deprived of one or more constitutional rights under color of state law.
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.” Id. at 322, 5 S.Ct. 928. The Court identified the Contracts Clause as the lone potential constitutional source securing the asserted rights, see id., but held them to be unenforceable through a civil rights action. Justice Matthews, writing for the Court, explained:
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.
As a result of the Supreme Court‘s holding in Carter, then, recourse to
We acknowledge that one of our sister circuits has reached the opposite conclusion. See S. Cal. Gas Co. v. City of Santa Ana, 336 F.3d 885, 887 (9th Cir.2003) (per curiam) (“The City‘s argument that section 1983 provides no relief for a party deprived of its rights under the Contracts Clause is without merit.“). The short opinion issued in Santa Ana briefly addressed Carter, maintaining that the precedent set forth in the latter was “not to the contrary” of the Ninth Circuit‘s holding. The court of appeals rested its assertion on a lone quote from Dennis v. Higgins, 498 U.S. 439, 111 S.Ct. 865, 112 L.Ed.2d 969 (1991), in which Justice White responded via footnote to the dissent‘s citation of Carter by noting that the Court
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 plaintiff‘s 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, 498 U.S. at 451 n. 9, 111 S.Ct. 865 (quoting Chapman v. Houston Welfare Rights Org., 441 U.S. 600, 613 n. 29, 99 S.Ct. 1905, 60 L.Ed.2d 508 (1979) (internal citation omitted) (alteration in original)). The Supreme Court in Dennis recognized a
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
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) (
The most reasonable interpretation of the Amended Complaint is that it seeks a judicial determination under
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
The district court had the discretion, and indeed the duty, to construe the pleadings “so as to do justice.”
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., 181 U.S. at 151, 21 S.Ct. 575 (dismissing appeal for want of subject matter jurisdiction), and Pitsch Recycling & Disposal, Inc. v. County of Ionia, 386 F.Supp.2d 938, 943 (W.D.Mich.2005) (plaintiff seeking declaratory judgment “fail[ed] to state a claim under the Contract Clause that implicates the federal question jurisdiction of the Court“), with, e.g., United Auto., Aerospace, Agric. Implement Workers of Am. Int‘l, 633 F.3d 37,
In parsing Count I to discover a direct constitutional challenge, however, the district court was not free to disregard the more straightforward
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.” 327 U.S. at 683-84, 66 S.Ct. 773. As evidenced by the foregoing discussion, Count I was susceptible to nuances of interpretation requiring a careful examination of its allegations “to decide whether [they] state a cause on which the court can grant relief as well as to determine issues of fact arising in the controversy.” Id. at 682, 66 S.Ct. 773. The allegations in Count I could not be said to have been insubstantial or frivolous, and inasmuch as the matter originated in state court, the claims under federal law plainly were not asserted solely for the purpose of invoking the jurisdiction of the district court.
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, 501 F.3d 368, 374 (4th Cir.2007) (where district court had granted summary judgment to defendant on direct Contracts Clause challenge on ground that assumed impairment served legitimate public purpose, affirmance was proper even though court of appeals concluded instead that no impairment had occurred).10
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
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., 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006) (“[W]hen a federal court concludes that it lacks subject-matter jurisdiction, the court must dismiss the complaint in its entirety.“). The effects of a Rule 12(b)(1) dismissal, which can occur at any stage of the litigation, see id. at 506, 126 S.Ct. 1235, can seem draconian. Arbaugh was itself a rather extreme illustration, in that the district court granted the defendant‘s motion to dismiss and vacated its judgment notwithstanding that a jury had already awarded damages to the plaintiff on her combined federal and state claims. The Supreme Court reversed the district court‘s dismissal on the ground that subject matter jurisdiction had actually existed, id. at 515-16, 126 S.Ct. 1235, but the warning klaxon sounded by the Court in Arbaugh cannot fail to reverberate throughout the federal bench and bar.
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.” 546 U.S. at 514, 126 S.Ct. 1235. In this case, Count I could not have been legitimately dismissed in its entirety without invoking Rule 12(b)(6), so although the district court purported to act pursuant to Rule 12(b)(1) exclusively, we are confident that the court‘s misapprehension had no bearing upon its decision to assume supplemental jurisdiction. In other words, the court below would certainly have proceeded in the same manner had it announced the proper grounds for dismissal, and in doing so would not have abused the discretion afforded it under the law.11 Hence, we find no error in the district court‘s decision to address the state-law claims, and we proceed to review the court‘s grant of summary judgment to the City.12
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, 97 N.C.App. 65, 387 S.E.2d 235, 239 (1990) (quoting 3 A. Corbin, Contracts § 537 (1971)). It is not reasonable, in our opinion, to expect that a contractual obligation expressly contingent upon available funding may nonetheless be enforced once funding has dissipated and the contingency has been frustrated. The far less tortured interpretation leads one to expect that once the funding evaporates, so does the obligation. And without a contractual obligation, there can be no cognizable breach thereof and, thus, no legal claim for damages. See One Beacon Ins. Co. v. United Mech. Corp., 207 N.C.App. 483, 700 S.E.2d 121, 124 (2010) (“The elements of a claim for breach of contract are (1) existence of a valid contract and (2) breach of the terms of that contract.” (citations and internal quotation marks omitted)). In the absence of an actionable breach, the district court correctly concluded that the City was entitled to summary judgment on the state law contract claim.13
IV.
Pursuant to the foregoing, the district court‘s judgment in favor of the City is affirmed.
AFFIRMED.
DAVIS, Circuit Judge, 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 North Carolina, 345 N.C. 683, 483 S.E.2d
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.