Hebert v. The City of Woonsocket

GLEN HEBERT, et al., Plaintiffs, v. THE CITY OF WOONSOCKET, et al., Defendants.

C. A. No. PC-2013-3287

Superior Court of Rhode Island, Providence

January 25, 2021

For Plaintiff: Edward C. Roy, Jr., Esq.

For Defendant: Matthew H. Parker, Esq. John J. Desimone, Esq. Sara Rapport, Esq.

DECISION

LANPHEAR, J.

Before this Court is a motion for injunctive relief made by a group of retired Woonsocket police officers (Plaintiffs) alleging violation of the Rhode Island Constitution's Contract Clause by the City of Woonsocket and the Woonsocket Budget Commission (WBC) (collectively, City). This matter is before the Court on remand from the Supreme Court of Rhode Island with instructions to "implement a 'less deference' standard where the City is required to prove that the substantial impairment to plaintiffs' contractual rights was nonetheless reasonable and necessary to fulfill an important public purpose." Hebert v City of Woonsocket by and through Baldelli-Hunt, 213 A.3d 1065, 1088 (R.I. 2019), as corrected (Sept. 6, 2019), reargument denied (Sept. 10, 2019). Jurisdiction is pursuant to G.L. 1956 § 9-30-1.

I

Facts and Travel^[1]

In the early 2000s, the City of Woonsocket addressed its unfunded pension obligations with municipal bonds that conditioned issuance on the City's subsequent elimination of its shortfalls-and then the Great Recession struck. See Hebert, 213 A.3d at 1069-70. These prior budgetary issues were aggravated by the loss of state aid when Rhode Island imposed its own budget cuts. See id. at 1070. The City made multiple efforts to curtail its fiscal spiral in the years from 2007 to 2010: raising taxes, imposing a trash collection fee, closing a school, and abandoning infrastructure improvement plans. See id. at 1070-71. After these changes failed to eliminate the budgetary deficit, the City began negotiating with its collective bargaining units to reduce its overhead with regard to personnel. See id. at 1071. Even then, the deficit remained, and Moody's Investor Service downgraded the City's bond rating to "junk bond status" in April of 2010. See id. Despite the resultant high interest rates from this change in rating, in July 2010 the City resorted to issuing $11.5 million in deficit reduction bonds in an attempt to continue its operations. See id. One of its pension funds then fell into "critical status." Id. at 1072.

In May of 2012, pursuant to the Rhode Island Fiscal Stability Act (the FSA), G.L. 1956 §§ 45-9-1, et seq., the City requested the appointment of a budget commission to help resolve its extreme financial distress. See id. The WBC, when appointed, enacted a five-year plan to resolve the City's budgetary issues, in accordance with the FSA. See id. The five-year plan increased taxes, reduced homestead exemptions, reduced staffing, reorganized municipal departments, and reformed the City's health benefit plans, opting for a single uniform plan for all city employees and retirees. See id. at 1072-73. As part of this larger process, the City enacted resolutions on March 19, 2013, effective July 1, 2013, that imposed on retirees a mandatory monthly co-share payment, a yearly deductible, and copayments for medical services (Retiree Resolutions). See id. at 1074; Hebert, 2016 WL 493215, at *3. The prior year, the City had required that all retirees who were eligible to apply for Medicare do so. See Hebert, 2016 WL 493215, at *4.

A group of retired Woonsocket police officers filed a request for a preliminary injunction with this Court in October of 2013, seeking to restrain the City from altering their health insurance benefits. See id. at *1. They argued that the Retiree Resolutions violated the Contract Clause of the Rhode Island Constitution. See id. at *6. At the evidentiary hearings held in late 2013 and early 2014, the Director of the Rhode Island Department of Revenue testified that those changes had been implemented for an "indefinite" period of time. See id. at *9. After seven months of evidentiary hearings, the parties submitted their memoranda and this Court found in favor of the Plaintiffs, granting their request for a preliminary injunction. See id. at *1, *15.

The City appealed to the Rhode Island Supreme Court. See Hebert, 213 A.3d at 1077. In the intervening time, the co-share requirement expired, effective July 1, 2017. See id. at 1074. The Supreme Court agreed that Plaintiffs' contractual rights to their health insurance benefits had vested and did not contest this Court's finding that the modifications to those rights were substantial. See id. at 1082, 1087 n.24. However, the Supreme Court vacated this Court's judgment and remanded for consideration of whether the substantial impairment was nevertheless reasonable and necessary to fulfill an important public purpose, under a "less deference" standard of review. See id. at 1088. The Supreme Court also stated that, even should this Court determine on remand that the City's actions did not violate the Contract Clause, "the requirement that plaintiffs pay deductibles on their health insurance should be of a finite and reasonable duration." Id.

II

Standard of Review

The Court's Declaratory & Equitable Powers

The Superior Court is empowered to grant declaratory relief pursuant to the Uniform Declaratory Judgments Act (UDJA) and to grant equitable relief, including injunctions, as a court of general equitable jurisdiction. G.L. 1956 § 9-30-1; G.L. 1956 § 8-2-13; see Rhode Island Republican Party v. Daluz, 961 A.2d 287, 295 (R.I. 2008). Furthermore, "'a decision to grant or deny declaratory or injunctive relief is addressed to the sound discretion of the [hearing] justice[.]'" K &amp W Automotive, LLC v. Town of Barrington, 224 A.3d 833, 836 (R.I. 2020) (quoting La Gondola, Inc. v. City of Providence, 210 A.3d 1205, 1213 (R.I. 2019) (further citations omitted)).

Under the UDJA, the Superior Court possesses the "power to declare rights, status, and other legal relations whether or not further relief is or could be claimed." Section 9-30-1; see also P.J.C. Realty, Inc. v. Barry, 811 A.2d 1202, 1207 (R.I. 2002) (quoting § 9-30-1). Section 9-30-2 of the UDJA provides as follows:

"Any person interested under a deed, will, written contract, or other writings constituting a contract, or whose rights, status, or other legal relations are affected by a statute, municipal ordinance, contract, or franchise, may have determined any question of construction or validity arising under the instrument, statute, ordinance, contract, or franchise and obtain a declaration of rights, status, or other legal relations thereunder." Section 9-30-2.

"'A party seeking injunctive relief must demonstrate that it stands to suffer some irreparable harm that is presently threatened or imminent and for which no adequate legal remedy exists to restore that plaintiff to its rightful position.'" Hebert, 213 A.3d at 1077 (quoting Nye v. Brousseau, 992 A.2d 1002, 1010 (R.I. 2010)) (further citation omitted). "'Irreparable injury must be either presently threatened or imminent; injuries that are prospective only and might never occur cannot form the basis of a permanent injunction.'" Id. (quoting Nye, 992 A.2d at 1010). "A party seeking an injunction must also demonstrate likely success on the merits and show that the public-interest equities weigh in favor of the injunction." National Lumber & Building Materials Co. v. Langevin, 798 A.2d 429, 434 (R.I. 2002).

On remand, the Supreme Court treated this Court's grant of a preliminary injunction as the granting of a permanent injunction, to facilitate its own review. Hebert, 213 A.3d at 1076 n.11 ("By treating the trial justice's decision as the granting of a permanent injunction, we may now 'resolve the underlying substantive issues' as we normally would 'after the imposition of a permanent injunction.'") (quoting Gianfrancesco v. A.R. Bilodeau, Inc., 112 A.3d 703, 708 (R.I. 2015) (further citation omitted). Consequently, the standard under the "likelihood of success" prong on remand is whether the Plaintiffs have achieved actual success on the merits. Coit v. Celico, No. KB-2013-1156, 2016 WL 1134797, at *4 (R.I. Super. Mar. 18, 2016) ("The standard for a permanent injunction is . . . that the plaintiff must prove its actual success on the merits rather than the likelihood of success on the merits.") (citing Amoco Production Co. v. Village of Gambell, Alaska, 480 U.S. 531, 546 n.12 (1987)).

The Contract Clause

Article I, section 12 of the Rhode Island Constitution states that "[n]o ex post facto law, or law impairing the obligation of contracts, shall be passed." R.I. Const. art 1 § 12. The Rhode Island Supreme Court has adopted the United States Supreme Court's three-part analysis for Contract Clause claims. See Hebert, 213 A.3d at 1085. Thus, to establish a violation of the Rhode Island Constitution's Contract Clause, a plaintiff must show three things. First, a plaintiff must show that a contract exists. Second, a plaintiff must show that the contested modification results in a substantial impairment of that contract. Third, a plaintiff must show that the impairment is not reasonable and necessary to fulfill an important public purpose. Id.

The burden of persuasion in proving a violation of the Rhode Island Constitution's Contract Clause always remains with the plaintiffs. Id. at 1086 (citing Cranston Police Retirees Action Committee v. City of Cranston 208 A.3d 557, 573 (R.I. 2019)). However, although the plaintiff also has the burden of production for the first two prongs of the Contract Clause test, it shifts to the defendant for the third prong. See Cranston Police Retirees, 208 A.3d at 573. At that point, a defendant must produce evidence that the impairment was reasonable and necessary to fulfill an...