The Honorable Kenneth FIELDS (ret.), a retired state court judge; and The Honorable Jefferson Lankford (ret.), a retired state court judge, on behalf of themselves and others similarly situated, Plaintiffs/Appellees, v. The ELECTED OFFICIALS’ RETIREMENT PLAN; Brian Tobin; Richard Petrenka; Gregory Ferguson; Lauren Kingry; Jeff McHenry; and Randie Stein, are all named in their official capacities as Members of the Board of Trustees of the Elected Officials Retirement Plan of the State of Arizona; and The State of Arizona, Defendants/Appellants.
No. CV-13-0005-T-AP
Supreme Court of Arizona
Feb. 20, 2014
320 P.3d 1160
Bennett Evan Cooper, Shannon E. Trebbe, Steptoe & Johnson, LLP, Phoenix, for Elected Officials Retirement Plan, Brian Tobin, Richard Petrenka, Gregory Ferguson, Lauren Kingry, Jeff McHenry, and Randie Stein.
Thomas C. Horne, Arizona Attorney General, Charles A. Grube, Assistant Attorney General (argued), Arizona Attorney General‘s Office, Phoenix, for State of Arizona.
Gregrey G. Jernigan, Office of the President, Arizona State Senate, Phoenix, for Amicus Curiae Andy Biggs.
Peter A. Gentala, Pele K. Peacock, Office of the Speaker, Arizona House of Representatives, Phoenix, for Amicus Curiae Andrew M. Tobin.
William F. Bock, General Counsel, League of Arizona Cities and Towns, Phoenix, for Amicus Curiae League of Arizona Cities and Towns.
Joseph Sciarrotta, Jr., General Counsel, Office of Governor Janice K. Brewer, Phoenix, for Amicus Curiae Governor Janice K. Brewer.
Justice BRUTINEL authored the opinion of the Court, in which Chief Justice BERCH, Vice Chief Justice BALES, Justice PELANDER, and Justice TIMMER joined.
Justice BRUTINEL, opinion of the Court.
¶ 1
I.
¶ 2 In 1985, the Arizona Legislature established the Elected Officials’ Retirement Plan to provide pension benefits for elected officials, including judges.
¶ 3 Upon retirement, Plan members receive monthly benefits based on 4% of their salary for each year worked, up to a maximum of 80% of their average yearly salary.1
¶ 4 The benefit increase formula in
¶ 5 When the Plan was created, no statutory mechanism for awarding post-retirement benefit increases existed; instead, the legislature passed ad hoc increases. See
¶ 6 In 1996, the legislature removed the 1994 sunset provision, extending the permanent benefit increases indefinitely.
¶ 7 Later that year, Proposition 100 was referred to and passed by the voters, becoming
A. Public retirement systems shall be funded with contributions and investment
earnings using actuarial methods and assumptions that are consistent with generally accepted actuarial standards. B. The assets of public retirement systems, including investment earnings and contributions, are separate and independent trust funds and shall be invested, administered and distributed as determined by law solely in the interests of the members and beneficiaries of the public retirement systems.
C. Membership in a public retirement system is a contractual relationship that is subject to article II, § 25, and public retirement system benefits shall not be diminished or impaired.
¶ 8 Beginning in 2000, the ratio of the Plan‘s assets to its liabilities (“funding ratio“), began to steadily decline.2 Staff of PSPRS, Comprehensive Annual Financial Report/Elected Officials’ Retirement Plan FY 2010 at 7, available at http://azmemory.azlibrary.gov/cdm/singleitem/collection/statepubs/id/12803/rec/1. Between 2000 and 2010, the Plan‘s funding ratio decreased from 141.7% to 66.7%. Id. Nevertheless, the reserve fund allowed retired members to receive a 4% benefit increase each year until 2011.
¶ 9 In 2011, the legislature enacted S.B. 1609, the provision at issue here. S.B. 1609 amended
¶ 10 Effective July 1, 2013, S.B. 1609 also changed the formula used to calculate permanent benefit increases.
¶ 11 In September 2011, retired judges Fields and Lankford, on behalf of themselves and as representatives of a class of retired Plan members and beneficiaries (collectively “Fields“), sued the Elected Officials’ Retirement Plan and its board members (“EORP“), alleging that S.B. 1609 violates
II.
¶ 13 Before we begin our analysis of the legal question presented, we note that the Justices of this Court are not members of the class of retired judges who are appellees in this case. We are, however, members of the Plan, as are most Arizona state judges, and we will be eligible for benefit increases pursuant to
¶ 14 The rule of necessity establishes that a judge is not disqualified because of a personal interest if no other judge is available to decide the case. United States v. Will, 449 U.S. 200, 213-16, 101 S.Ct. 471, 66 L.Ed.2d 392 (1980); see also Scheehle v. Justices of the Sup. Ct., 211 Ariz. 282, 295, 120 P.3d 1092, 1105 (2005). Because our disqualification would “result in a denial of a litigant‘s constitutional right to have a question, properly presented to such court, adjudicated,” Will, 449 U.S. at 214 (quotation omitted), the rule of necessity applies, and we must decide the matter, Wisconsin Judicial Com‘n v. Prosser, 341 Wis.2d 656, 817 N.W.2d 830, 833 (2012).
III.
¶ 15 We review the constitutionality of S.B. 1609 de novo. State v. Glassel, 211 Ariz. 33, 51 ¶ 65, 116 P.3d 1193, 1211 (2005). We presume that the statute is constitutional, and a “party asserting its unconstitutionality bears the burden of overcoming the presumption.” Eastin v. Broomfield, 116 Ariz. 576, 580, 570 P.2d 744, 748 (1977).
IV.
A.
¶ 16 We first address the argument that because
¶ 17 We similarly reject EORP‘s argument that reading the two clauses of § 1(C) independently renders the reference to the Contract Clause redundant. The Contract Clause applies to the general contract provisions of a public retirement plan, while the Pension Clause applies only to public retirement benefits. Therefore, the Pension
B.
¶ 18 We next consider whether use of the formula established by
¶ 19 In interpreting a constitutional amendment, our primary purpose is to “effectuate the intent ... of the electorate that adopted it.” Jett v. City of Tucson, 180 Ariz. 115, 119, 882 P.2d 426, 430 (1994); see also McElhaney Cattle Co. v. Smith, 132 Ariz. 286, 289, 645 P.2d 801, 804 (1982). Neither the Arizona Constitution nor Arizona case law defines “benefit.” We therefore consider how this term “is generally understood and used by the people.” McElhaney Cattle Co., 132 Ariz. at 290, 645 P.2d at 805; see also State v. Jones, 188 Ariz. 388, 392, 937 P.2d 310, 314 (1997) (when a term is not defined within a statute, “the court first looks to the statute‘s language“). We first examine the provision by assigning each word its “natural, obvious, and ordinary meaning.” State ex rel. Morrison v. Nabours, 79 Ariz. 240, 245, 286 P.2d 752, 755 (1955).
¶ 20 To determine the ordinary meaning of a term, we commonly refer to established and widely used dictionaries. State v. Wise, 137 Ariz. 468, 470 n. 3, 671 P.2d 909, 911 n. 3 (1983). In the retirement-system context, a “benefit” has been defined as “a payment or service provided for under an annuity, pension plan, or insurance policy.” Merriam-Webster‘s Collegiate Dictionary 114 (11th ed.2003); see also The American Heritage Dictionary 168 (5th ed.2011) (defining “benefit” as “a form of compensation, such as ... a pension, provided to employees in addition to wages or salary as part of an employment arrangement“).
¶ 21 We think the dictionary definitions do not determine the meaning of “benefit” as used in the Pension Clause. The parties’ differing interpretations each are reasonable, and the dictionary definitions do not provide sufficient guidance as to whether a “benefit” constitutes only the base benefit or includes the promise of future benefit increase payments using a specified formula.
¶ 22 When terms are unclear or susceptible to more than one reasonable interpretation, we consider extrinsic evidence of the electorate‘s intent, including “the history behind the provision, the purpose sought to be accomplished by its enactment, and the evil sought to be remedied.” McElhaney Cattle Co., 132 Ariz. at 290, 645 P.2d at 805.
¶ 23 The history of the Pension Clause suggests that the term “benefit” includes benefit increases. In 1990, eight years before the voters approved the Pension Clause, the legislature enacted
¶ 24 The Pension Clause neither altered the concept of “benefit” reflected in
¶ 25 We disagree with the State‘s and EORP‘s argument that because
¶ 26 Adopting this reasoning would place
¶ 27 Our interpretation of the Pension Clause is consistent with prior cases. In Yeazell v. Copins, 98 Ariz. 109, 115, 402 P.2d 541, 545 (1965), this Court held that an employee was entitled to have his retirement benefits calculated based upon the formula existing when he began employment, rather than a less-favorable formula subsequently adopted during his employment. The Court explained that the employee “had the right to rely on the terms of the legislative enactment of the Police Pension Act of 1937 as it existed at the time he entered the service of the City of Tucson and that the subsequent legislation may not be arbitrarily applied retroactively to impair the contract.” Id. at 117, 402 P.2d at 549. As in Yeazell, Fields has a right in the existing formula by which his benefits are calculated as of the time he began employment and any beneficial modifications made during the course of his employment. Thurston v. Judges’ Ret. Plan, 179 Ariz. 49, 51, 876 P.2d 545, 547 (1994) (recognizing that “when the amendment [to retirement benefits] is beneficial to the employee or survivors, it automatically becomes part of the contract by reason of the presumption of acceptance“).
¶ 28 This definition of “benefit” also comports with the use of the term in other states that have similar constitutional provisions protecting public pension benefits. For example, construing a similar definition of “benefit,” New York and Illinois have also determined that benefit calculation formulas are entitled to constitutional protection.5 See Kleinfeldt v. New York City Emps.’ Ret. Sys., 36 N.Y.2d 95, 365 N.Y.S.2d 500, 324 N.E.2d 865, 868-69 (1975) (including the formula utilized in calculating an annual retirement allowance under the Pension Clause); Miller v. Ret. Bd. of Policemen‘s Annuity, 329 Ill.App.3d 589, 264 Ill.Dec. 727, 771 N.E.2d 431, 444 (2001) (holding benefit increases to be constitutionally protected). Additionally, unlike narrower protections found in other states’ constitutions, the protection afforded by the Arizona Pension Clause extends broadly and unqualifiedly to “public retirement system benefits,” not merely benefits that have “accrued” or been “earned” or “paid.” See, e.g.,
¶ 29 Accordingly, we conclude that
C.
¶ 30 The State and EORP argue that retired judges do not have a vested right in the formula because it is contingent upon future events--for example, a rate of return sufficient to trigger the benefit increase. “[Benefits] are contingent when they are only to come into existence on an event or condition which may not happen or be per-
¶ 31 In Yeazell, this Court held that because
¶ 32 EORP relies on Smith v. City of Phoenix, 175 Ariz. 509, 858 P.2d 654 (App.1992), to argue that Fields had only a contingent right. In Smith, a city ordinance set the salaries of city judges at 95% of the salaries of superior court judges. Before a statutory increase in superior court salaries took effect, the city revised its ordinance to preserve the salaries for city judges at the then-existing amount. Id. at 514, 858 P.2d at 659. The court of appeals held that Smith had no vested contractual right to continued salary increases under the city ordinance, observing that his “contract of employment” did not express “that the method of calculating his salary would remain fixed throughout his term,” and “[i]ndeed, the fact that both parties knew his salary was established by a city ordinance, which was naturally subject to change by the city council, suggests just the opposite.” Id.
¶ 33 Smith is inapposite. Assuming the case was correctly decided, we note that it reflects the general principle that statutory provisions do not create contractual rights. See Proksa v. Ariz. State Sch. for the Deaf & the Blind, 205 Ariz. 627, 629 ¶¶ 11-12, 74 P.3d 939, 941 (2003). But statutorily established retirement benefits are an exception to this rule. Id. at 631 ¶ 21, 74 P.3d at 943. Under Yeazell, the right to a public pension on the terms promised vests upon acceptance of employment, 98 Ariz. at 115, 402 P.2d at 545, and “the State may not impair or abrogate that contract without offering consideration and obtaining consent of the employee,” Proksa, 205 Ariz. at 630 ¶ 16, 74 P.3d at 942; cf. Thurston, 179 Ariz. at 52, 876 P.2d at 548 (recognizing that a detrimental modification to retirement benefits “may not be applied absent the employee‘s express acceptance of the modification because it interferes with the employee‘s contractual rights“).
D.
¶ 34 This leaves the question of whether S.B. 1609‘s changes to
¶ 35 First, because S.B. 1609 retroactively prevented the transfer of approximately $31 million to the reserve, 2011 Ariz. Sess. Laws, Ch. 357, § 62(A), (D), the Plan could fund only a 2.47% benefit increase in 2011, rather than the expected 4% increase. Likewise, because S.B. 1609 prevented any transfer for 2012 or 2013 and the reserve did not have sufficient funds, retired members did not receive a benefit increase in those years. Compare id. § 62(A) (eliminating any transfer of excess investment earnings from and after May 31, 2011), with
¶ 36 Second, S.B. 1609 makes it more difficult for retired members to receive future benefits by increasing the rate of return required to fund an increase from 9% to 10.5%. S.B. 1609 also makes it less likely that retired members will receive the maximum 4% increase in benefits by tying increases to
E.
¶ 37 We likewise reject the State‘s and EORP‘s argument that Section 1(C)‘s pension protection is subject to Section 1(A)‘s requirement that the plan be funded “using actuarial methods and assumptions that are consistent with generally accepted actuarial standards.”
V.
¶ 38 Fields has requested an award of attorneys’ fees under the common fund doctrine or
¶ 39 A mandamus action “seeks to compel a public official to perform a non-discretionary duty imposed by law,” and a party that prevails in such an action is entitled to attorneys’ fees and other expenses under
¶ 40 Fields sought to compel EORP to calculate benefit increases according to
¶ 41 Fields also argues that the common fund doctrine supports an award of attorneys’ fees. “Under the common fund doctrine a court may award attorneys’ fees to counsel for the prevailing side whose efforts in litigation create or preserve a common fund from which others who have undertaken no risk or cost will nevertheless benefit.” Kerr v. Killian, 197 Ariz. 213, 217-18 ¶ 19, 3 P.3d 1133, 1137-38 (App.2000). Because “application of [the common fund doctrine] is capable of great abuse, it is exercised only in exceptional circumstances and for dominating reasons of justice.” Id. at 219-20 ¶ 27, 3 P.3d at 1139-40 (quoting Rossi, Attorneys Fees, Second Edition (Lawyers Cooperative Publishing Co.1995)). Even assuming that the doctrine may apply in a case such as this (an issue we need not decide), we decline to award attorneys’ fees in an exercise of our discretion.
VI.
¶ 42 We affirm the decision of the trial court.