UNITED STATES DISTRICT COURT DISTRICT OF MAINE MAINE ASSOCIATION OF RETIREES, ) Sally Morrissey, Paul Lynch, Dorothy Davis, and ) Catherine Richard, ) ) Plaintiffs, ) ) v. ) ) Civil Action No. BOARD OF TRUSTEES OF THE MAINE PUBLIC ) EMPLOYEES RETIREMENT SYSTEM, ) Peter M. Leslie, Benedetto Viola, Catherine R. ) Sullivan, Richard T. Metivier, George A. Burgoyne, ) Kenneth L. Williams, Dmitri N. Balatsos, and ) Bruce L. Poliquin, ) ) Defendants. ) COMPLAINT (INJUNCTIVE RELIEF SOUGHT) 1. This is a class action, brought on behalf of more than 28,000 retired state employees and public school teachers, seeking (i) to have the Court declare unconstitutional the action of the 2011 Maine Legislature eliminating for three years and thereafter reducing annual cost-of-living adjustments to their pensions, and (ii) to have the Court require Defendants to make annual cost-ofliving adjustments as required prior to enactment of the 2011 legislation. PARTIES 2. Plaintiff Maine Association of Retirees ( MAR ) is an organization of retired state employees and retired public school teachers, as well as retired employees of participating local districts of the Maine Public Employees Retirement System ( MePERS ). It has over 15,000 members who are retired state employees and retired public school teachers, all of whom are currently receiving service retirement benefits, or pensions, from MePERS. MAR brings this action on behalf of itself and all retired state employees and retired public school teachers.
3. Plaintiff Sally Morrissey is a former state employee and member of MAR who resides in Augusta and retired from state service in 1990. She currently receives a service retirement benefit from MePERS that is subject to cost-of-living adjustments as more fully explained below. 4. Plaintiff Dorothy Davis is a former state employee and member of MAR who resides in Port Clyde and retired from state service in 2006. She currently receives a service retirement benefit from MePERS that is subject to cost-of-living adjustments as more fully explained below. 5. Plaintiff Paul Lynch is a former public school teacher and member of MAR who resides in Presque Isle and retired from teaching in 1988. He currently receives a service retirement benefit from MePERS that is subject to cost-of-living adjustments as more fully explained below. 6. Plaintiff Catherine Richard is a former public school teacher and member of MAR who resides in Bangor and retired from teaching in 2004. She currently receives a service retirement benefit from MePERS that is subject to cost-of-living adjustments as more fully explained below. 7. Defendant Board of Trustees of the Maine Public Employees Retirement System, formerly known as the Maine State Retirement System, administers and operates the Maine Public Employees Retirement System, a program established by 5 M.R.S.A. 17101 for the purpose of providing retirement benefits for state employees and public school teachers, among others. 8. Defendant Board of Trustees of the Maine Public Employees Retirement System consists of eight members, seven of whom serve for fixed terms, and one of whom is the State Treasurer, who serves ex officio. The current appointed members are Peter M. Leslie, Chairman; Benedetto Viola, Vice Chairman; Catherine R. Sullivan; Richard T. Metivier; George A. Burgoyne; Kenneth L. Williams; and Dmitri N. Balatsos. The current State Treasurer is Bruce L. Poliquin. This action is brought against these members individually and in their official capacities. 2
JURISDICTION 9. This action arises under the Constitution of the United States and 42 U.S.C. 1983. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 1331 (federal question) and 1343(3) (protection of federally secured rights). FACTS COST-OF-LIVING ADJUSTMENT PROMISE 10. MePERS, originally known as the Maine State Retirement System (MSRS), was created in 1942. Laws of Maine of 1943, c. 328, effective January 24, 1942. For state employees and public school teachers, membership in the MSRS and MePERS is mandatory, 5 M.R.S.A. 17651, and members make mandatory contributions into a pension fund, 5 M.R.S.A. 17701 et seq. 11. The Legislature s intent in creating the MSRS was to encourage qualified persons to seek public employment and to continue in public employment during their productive years and to assist these persons in making provisions for their retirement years by establishing benefits reasonably related to their highest earnings and years of service and by providing suitable disability and death benefits. 5 M.R.S.A. 17050. 12. The Legislature further acknowledged that the State owes a great debt to its retired employees for their years of faithful and productive service and that [p]art of that debt is repaid by the benefits provided to retirees through the Maine State Retirement System. 5 M.R.S.A. 17151(1), (1)(A). 13. Under the retirement benefit program administered by the United States Social Security Administration, state governments have the option to require their employees to be members of that program. Among only a minority of the states, the Maine Legislature has chosen not to exercise this option. Thus, all state employee and public school teacher members of MePERS are not 3
members of the Social Security System in connection with their employment as state employees or teachers. As a result, any service retirement benefit that they may receive from MePERS may well be their only source of income upon which to live once they retire. 14. In 1965, the Maine Legislature amended the MSRS statute to provide retroactive costof-living adjustments to the service retirement benefits of all retired state employees and retired public school teachers, and to authorize the Board of Trustees to propose further adjustments to the Legislature. Laws of Maine of 1965, c. 337, enacting 5 M.R.S.A. 1128. 15. In 1975, the Maine Legislature enacted the following promise to retirees of the MSRS: No amendment to this chapter shall cause any reduction in the amount of benefits which would be due to a member based on creditable service, compensation, employee contributions and the provisions of this chapter on the date immediately preceding the effective date of such amendment. Laws of Maine of 1975, c. 622, Section 6, enacting 5 M.R.S.A. 1005, subsection 3. 16. In 1977, the Maine Legislature amended the MSRS statutes to authorize the Board of Trustees each September to grant cost-of-living adjustments to the service retirement benefits of all retired state employees and retired public school teachers in an amount equal to any increase in the Consumer Price Index (CPI) for the preceding period of July 1 to June 30 of the current year, but not to exceed 4 per cent, and to authorize the Board of Trustees to propose further adjustments to the Legislature if the CPI for the preceding year exceeded 4 per cent. Laws of Maine of 1977, c. 573, Section 3, amending 5 M.R.S.A. 1128. The purpose of the amendment was to insure that the purchasing power of the service retirement benefits of retired state employees and public school teachers, who depend upon those benefits for the necessities of life, would not be eroded over time. 17. In 1986, the Maine Legislature, as part of a recodification of the MSRS statutes, reallocated without substantive change the promise contained in 5 M.R.S.A. 1005, subsection 3, to 5 4
M.R.S.A. 17801, and reallocated without substantive change the cost-of-living promise contained in 5 M.R.S.A. 1128 to 5 M.R.S.A. 17806. Laws of Maine of 1985, c. 805, Section 5, effective January 1, 1987. 18. In 1999, the Legislature made a solemn contractual commitment under the Contract Clauses of the United States and Maine Constitutions never to alter certain sections of the public employee retirement statutes dealing with how the underlying retirement benefits that current state employees and public school teachers would receive were to be calculated. Laws of Maine of 1999, c. 489, Section 3, amending 5 M.R.S.A. 17801. As one member of the Labor Committee stated during the legislative debate, [t]he bill s main purpose is to provide state employees protection against their pension fund being raided by the Legislature. House Leg. Rec. May 24, 1999 at H-1301 (Remarks of Rep. Mack). HISTORY OF COST-OF-LIVING ADJUSTMENTS FOR MePERS MEMBERS 19. For thirty-four years, the Legislature kept its promise not to reduce retiree benefits, including cost-of-living adjustments. During this time, cost-of-living adjustments were made annually by the Board of Trustees in accordance with 5 M.R.S.A. 1128 and 17806, as described above. 20. Between 1983 and 2011, the Board of Trustees made annual cost-of-living adjustments to the service retirement benefits of retired state employees and retired public school teachers averaging 2.85% per year. In consequence of these adjustments, a retiree receiving a service retirement pension of $8,840 in 1983 (the average pension in that year) received a service retirement benefit of $18,636 in 2010. 21. In 2011, thirty-four years after the enactment of the cost-of-living provision described in paragraph 16, supra, the Maine Legislature enacted a statute prohibiting the Board of Trustees from making a cost-of-living adjustment to the service retirement benefits of retired state employees and 5
retired public school teachers that otherwise would have been made in 2011, 2012, and 2013, and limiting the power of the Board of Trustees to make further cost-of-living adjustments thereafter to only 3 per cent and only to the first $20,000 of the retirement benefit. Laws of Maine of 2011, c. 380 Sections T-10 (cost-of-living adjustments after 2013) and T-21 (cost-of-living adjustments for 2011, 2012, and 2013) (the 2011 Amendments ). IMPACT OF 2011 AMENDMENTS 22. In August 2011, the Board of Trustees made a cost-of-living adjustment to the service retirement benefits of retired members of participating local districts of MePERS, which members were not subject to the 2011 Amendments described in paragraph 21 above, of 3.2%. Because of the 2011 Amendments, retired state employees and retired public school teachers did not receive this adjustment. 23. In September 2011, the United States Social Security Administration made a cost-ofliving adjustment of 3.6% to the retirement benefits of the members of its retirement benefit program. 24. If the Board of Trustees were to make the cost-of-living adjustments promised in 5 M.R.S.A. 17806 in 2011 and thereafter, and if the average annual cost-of-living adjustment that the Board made between 1983 and 2011 remained the same (2.85%), a person receiving a service retirement benefit of $20,000 in 2011 would receive a benefit of $35,084 in 2031, twenty years later; a person receiving a service retirement benefit of $30,000 in 2011 would receive a benefit of $52,627 in 2031; a person receiving a service retirement benefit of $40,000 in 2011 would receive a benefit of $70,170 in 2031; and a person receiving a service retirement benefit of $50,000 in 2011 would receive a benefit of $87,711 in 2031. 6
25. If the prohibitions against cost of living increases imposed by the 2011 Amendments are allowed to stand, and if the average annual cost-of-living adjustment that the Board made between 1983 and 2011 remained the same, a person receiving a service retirement benefit of $20,000 in 2011 would receive a benefit of $32,248 in 2031, twenty years later, a decrease of $2,836, and would sustain an aggregate loss of $42,363 over that period; a person receiving a service retirement benefit of $30,000 in 2011 would receive a benefit of $42,248 in 2031, a decrease of $10,379, with an aggregate loss of $114,661; a person receiving a service retirement benefit of $40,000 in 2011 would receive a benefit of $52,248 in 2031, a decrease of $17,922, with an aggregate loss of $186,662; and a person receiving a service retirement benefit of $50,000 in 2011 would receive a benefit of $62,248, a decrease of $25,463, with an aggregate loss of $258,843. 26. The retired members of MePERS relied on the promises of the Legislature set forth above in making their decisions to continue to work for state government and to retire. Since few of these retirees are members of the Social Security System, this benefit may well be their only source of income for meeting the necessary expenses of life. 27. Considering the ages of these retirees, the losses outlined above will be impossible to replace. 28. According to actuarial data presented to the Maine Legislature, the amount that the Legislature was not required to appropriate and pay to MePERS as a result of the denial of COLAs to retired state employees and public school teachers by the 2011 Amendments was $47,824,924 for the Fiscal Years 2012 and 2013. 29. The same Legislature that enacted the 2011 Amendments reducing COLA benefits for retired state employees and public school teachers also enacted broad tax reductions, including a reduction in the top tax brackets for individual income taxes. According to a summary of the fiscal 7
effects of these reductions on the biennial budget prepared by the Legislature s Office of Fiscal and Program Review, the total amount of revenue lost for the Fiscal Years 2012 and 2013 from all tax reductions was $167,956,145, of which the amount attributable to the reductions on individual income taxes for high earners was $88,538,000. CLASS ACTION ALLEGATIONS 30. Plaintiffs MAR, Sally Morrissey, Dorothy Davis, Paul Lynch and Catherine Richard bring this action as a class action pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of themselves and all retired state employees and retired public school teachers who were receiving service retirement benefits on June 20, 2011, the effective date of the 2011 Amendments. 31. In light of the number of class members, joinder of all class members is impracticable. 32. All questions of law and fact are common to the Class, including but not limited to: a. Whether a contract exists between the State and its retired employees and public school teachers; b. Whether the 2011 Amendments impairs that contract in violation of the Contract Clause; and c. Whether the 2011 Amendments constitute a taking of the class members property without just compensation in violation of the Fifth Amendment. 33. Plaintiffs are members of the Class, Plaintiffs claims are typical of the claims of the Class members, and Plaintiffs will fairly and adequately protect the interests of the Class. Plaintiffs are all retired state employees or public school teachers who retired before June 20, 2011. In addition, Plaintiffs are represented by counsel who are competent and experienced in the prosecution of class action litigation. 34. The prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications, establishing incompatible standards of conduct for Defendants. 8
35. The questions of law and fact common to the members of the Class predominate over any questions affecting only individual members. 36. A class action is superior to other methods for the fair and efficient adjudication of this controversy. Treatment as a class action will permit a large number of similarly situated persons to adjudicate their common claims in a single forum simultaneously, efficiently, and without the duplication of effort and expense that numerous individual actions would engender. The class action likely presents no difficulties in management that would preclude maintenance as a class action. Finally, the Class is readily ascertainable. herein. COUNT I (Contract Clause Violation) 37. Plaintiffs repeat and reallege the allegations of paragraphs 1-36 as if fully set forth 38. The actions of the Maine Legislature in 1975 and 1977 described in paragraphs 15-16, supra, among others, constituted a contractual obligation of the State of Maine with regard to retired state employees and public school teachers to make annual cost-of-living adjustments to their service retirement benefits if warranted by the Consumer Price Index once they qualify for and begin receiving those benefits. 39. All members of the class for which certification is sought relied on this contractual commitment in determining whether to continue their government employment and when to retire and receive their service retirement benefits. 40. The 2011 Amendments violated the State s contractual commitment to its retirees and impaired the retirees contract with the State in violation of Article 1, Section 10 of the United States Constitution. 9
COUNT II (Taking Without Just Compensation) 41. Plaintiffs repeat and reallege the allegations of paragraphs 1 36 as if fully set forth herein. 42. The interest of the state employees and public school teachers in their service retirement benefits created by the actions of the Maine Legislature described above constitutes a property interest within the meaning of the Fifth Amendment to the United States Constitution. 43. The 2011 Amendments constitute a taking of that property without just compensation in violation of the Fifth Amendment to the United States Constitution. herein. COUNT III (Section 1983) 44. Plaintiffs repeat and reallege the allegations of paragraphs 1-36 as if fully set forth 45. The constitutional violations described in paragraphs 37-43 also violate 42 U.S.C. 1983 and, accordingly, Plaintiffs are entitled to an award of fees and costs pursuant to 42 U.S.C. 1988. PRAYER FOR RELIEF WHEREFORE, the Plaintiffs ask this Court: 1. To declare Laws of Maine of 2011, c. 380, Sections T-10 and T-21 unconstitutional as a violation of Article 1, Section 10 of the United States Constitution; 2. To declare Laws of Maine of 2011, c. 380, Sections T-10 and T-21 unconstitutional as a violation of the Fifth Amendment to the United States Constitution; 3. To order the Board of Trustees of the Maine State Retirement System to make cost-ofliving adjustments retroactively beginning in September 2011 and continuing thereafter, pursuant to 10
the provisions of 5 M.R.S.A. 17806(1)(A), as it provided prior to the enactment of Laws of Maine of 2011, c. 380, Sections T-10 and T-21, for members of the System who were retired as of June 20, 2011; 4. To award Plaintiffs their costs and reasonable attorney s fees pursuant to 42 U.S.C. 1988; and 5. To award such other and further relief as this Court deems just and proper. Dated: February, 2012 /s/ James T. Kilbreth James T. Kilbreth, Bar No. 2891 Attorneys for Maine Association of Retirees, Sally Morrissey, Paul Lynch, Dorothy Davis and Catherine Richard VERRILL DANA LLP P.O. Box 586 Portland, ME 04112-0586 Telephone: (207) 774-4000 E-mail: jkilbreth@verrilldana.com 3743418_1 11