Opinion
Case No. 05-CV-1581 H (POR).
November 1, 2005
ORDER DENYING PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION
On September 26, 2005, Plaintiff filed an application for temporary restraining order ("TRO") and preliminary injunction. The Court set a hearing for September 27, 2005 regarding the TRO. The Court issued an order denying the TRO and set a briefing schedule for the motion for preliminary injunction. On October 4, 2005, Plaintiff filed a motion for preliminary injunction. On October 18, 2005, Defendant City of San Diego filed an opposition. On October 25, 2005, Plaintiff filed a reply. The Court held a hearing on November 1, 2005. Gregory Petersen and Rex Hwang appeared on behalf of Plaintiff; Peter Benzian appeared on behalf of Defendants City of San Diego and certain individual defendants; Rodney Perlman appeared on behalf of Defendant City Attorney Michael Aguirre; and Reginald Vitek, appeared on behalf of Defendant San Diego City Employees' Retirement System. After review of the papers and hearing oral argument, the Court DENIES Plaintiff's motion for a preliminary injunction.
Factual Background
On September 21, 2005, Plaintiff San Diego Police Officer's Association ("SDPOA") filed a first amended complaint against City Attorney Michael Aguirre, City of San Diego, San Diego City Employees' Retirement System ("SDCERS"), current and former members of San Diego City Council and other current and former officials of the City of San Diego for numerous violations based on the unlawful administration of SDCERS.
The SDPOA is a recognized employee organization representing police officers of the San Diego Police Department. The SDPOA's members fall within the purview of the SDCERS. SDCERS provides retirement, health insurance, disability, and death benefits to retired members and their beneficiaries.
Pursuant to the City Charter and the recently expired 2003-2005 Memorandum of Understanding ("MOU") between the City and the SDPOA, SDPOA employees who are eligible to retire, may elect to participate in the Deferred Retirement Option Plan ("DROP") as an alternative way to earn additional retirement benefits. DROP became effective on April 1, 1997 and a permanent benefit effective April 1, 2000. (Hwang Decl, Ex. B, San Diego Mun. Code § 24.1401(a), (c).) Under DROP, an employee must agree to retire no later than five years after he/she starts participating. (Id. § 24.1402(b).) An employee receives his/her monthly retirement allowance plus contributions made by the employer and by the employee, and earned interest on these amounts. (Id. § 24.1404.)
The most recent negotiated MOU, which included the DROP provisions, was effective from June 1, 2003 and expired on June 30, 2005. The City and SDPOA entered into a series of negotiations to renegotiate and/or renew the terms of employment; however, they were unable to reach an agreement. Accordingly, the impasse procedures pursuant to the Meyers-Milias-Brown Act, California Government section 3505.4, were implemented. Section 3505.4 provides,
If after meeting and conferring in good faith, an impasse has been reached between the public agency and the recognized employee organization, and impasse procedures, where applicable, have been exhausted, a public agency that is not required to proceed to interest arbitration may implement its last, best, and final offer, but shall not implement a memorandum of understanding.
Cal. Gov't Code § 3505.4. According to Plaintiff, at the impasse hearing held on May 16, 2005, the City submitted its last, best and final offer and unilaterally imposed new employment terms on the SDPOA for a one year contract. The terms took effect on July 1, 2005.
In Los Angeles County Ass'n of Environ. Health Specialists, the court held that the county had the right to implement the impasse provision under California Government Code § 3505.4. Los Angeles County Ass'n of Environ. Health Specialists v. County of Los Angeles, 102 Cal. App. 4th 1112, 1119-20 (2002). The court stated that the exceptions where consent is needed by both parties after a collective bargaining agreement has expired are statutory provisions, such as union security, dues check-off provisions, no-strike clauses and arbitration clauses. Id. at 1119.
Plaintiff alleges that the last, best and final offer requires non-DROP employees to contribute an additional 3.2% to SDCERS and DROP employees are subject to a "pay reduction corresponding to the amount of the 3.2% CERS employee contribution for non-DROP employees." (Hwang Decl., Ex. D, City of San Diego POA Meet and Confer, City Proposal dated May 11, 2005.) Plaintiff alleges that this amounts to a modification of vested pension rights without any corresponding benefit to DROP members which violates the Contract Clause of the United States Constitution. (See Pl.'s Mot. For Prelim. Inj. at 6-10.) As a result, DROP employees are experiencing $80.00 to over $100.00 bi-weekly loss in take home pay. On the contrary, Defendant City of San Diego contends that the 3.2% is a salary reduction and does not affect the DROP members' vested pension benefits. (Def's Opp. to Prelim. Inj. at 20-22.)
Plaintiff further alleges that when the City was negotiating with the SDPOA, it was also in negotiations with the Firefighters Association ("Fire"), the Municipal Employees' Association ("MEA"), the American Federation of State, County, and Municipal Employees ("AFSCME") and the City Attorney's Association. (Nemec Decl. in Support of Pl's Mot. For Prelim. Inj. ¶ 5.) According to Plaintiff, all unions received the same last, best, and final offer from the City, including the 3.2% salary reduction for DROP employees; however, that provision was deleted once the other associations agreed to the City's terms for a one year contract. (Id.) The salary reduction provision was imposed solely against the SDPOA and was in retaliation for SDPOA's failure to come to agreement with the City. (Id. ¶¶ 5-7.) Defendants contend that the imposition of the 3.2% salary reduction for DROP employees was not retaliatory but the result of negotiations that occurred separately with the other unions. (Kay Decl. in Opp. to Pl's Mot. for Prelim. Inj. ¶¶ 22-41.)
Discussion
A. Legal Standard for Preliminary Injunction
To qualify for a preliminary injunction, Plaintiff must demonstrate "either: (1) a combination of probable success on the merits and the possibility of irreparable harm; or (2) that serious questions are raised and the balance of hardships tips in [their] favor." Preminger v. Principi, 422 F.3d 815, 822-23 (9th Cir. 2005). These two tests are not inconsistent and represent extremes of a single continuum. Walczak v. EPL Prolong, Inc., 198 F.3d 725, 731 (9th 1999). Therefore, the greater the hardship to plaintiff, the less probability of success need be shown. Id.
In the motion for preliminary injunction, Plaintiff seeks to enjoin Defendants from implementing the terms of its last, best and final offer. Specifically, Plaintiffs seeks to have Defendants enjoined from the unilateral imposition of a 3.2% salary reduction from members of SDPOA members who have elected to participate in the DROP program.
B. Probable Success on the Merits
1. Contracts Clause
Article I, section 10, clause 1 of the United States Constitution states "No State shall . . . pass any . . . Law impairing the Obligation of Contracts." U.S. Const. art I, § 10, cl. 1. To comply with the contract clause, impairments of state contractual obligations must be "reasonable and necessary to serve an important public purpose. United States Trust Co. v. New Jersey, 431 U.S. 1, 25 (1977). "[T]he [contract clause's] prohibition is not an absolute one and is not to be read with literal exactness like a mathematical formula." Id. at 1126 (quotation omitted).
To determine whether a state law that involves the contractual obligations of a public entity violates the Contract Clause the court must determine (1) whether the state law creates contractual obligations; (2) whether the state law substantially impairs the State's contractual obligations; and (3) whether the impairment was reasonable and necessary to serve an important public purpose. State of Nevada's Employees Ass'n. Inc. v. Keating, 903 F.2d 1223, 1226 (9th Cir. 1990).
Plaintiff argues a it has established a probable success on the merits for violation of the Contracts Clause alleging that the "pay reduction" on SDPOA's DROP employees constitutes an unconstitutional impairment of the contracts clause in Article I, Section 10 of the United States Constitution. (Pl's Mot. for Prelim. Inj. at 6-7.) It argues that SDPOA members who have entered the DROP have retired for purposes of their pension determination, and the unilateral implemental of a pay reduction affects their vested pension benefits by materially altering and breaching the terms of the DROP agreement. (Id.) Specifically, Plaintiff contends that the salary reduction is actually a mandatory contribution to the SDCERS fund which is contrary to their status as "retired" for pension purposes. (Id. at 7-9.) Plaintiff also claims that DROP members' compensation constitute a vested pension benefit. (Id. at 9-10.) Lastly, Plaintiff argues that even assuming arguendo that the DROP members are not yet considered "retired," an employee's vested contractual pension rights may only be modified before retirement if such changes are reasonable, and necessary to maintain the success of the pension system. (Id. at 10-13.)
In opposition, Defendant alleges that the 3.2% reduction is a salary reduction and not a reduction of vested pension benefits. It argues that DROP employees have not been forced to make contributions to the SDCERS fund, their contributions to their DROP accounts have not changed and their salaries are not pension benefits. (Def's Opp. to Mot. for Prelim. Inj. at 22-25.) Therefore, the City had authority to impose a salary reduction utilizing the procedure under the MMB Act to deal with the impasse with the SDPOA.
The parties dispute whether the 3.2% is a salary reduction or a diminution of pension benefits. Since the facts are disputed as to how to characterize the 3.2% reduction in pay which is dispositive on whether the Contracts Clause applies and/or whether it was violated, Plaintiff has failed to show a probability of success on the merits.
2. Freedom of Association
Plaintiff also argues a it has established a probable success on the merits contending that the "pay reduction" on SDPOA's DROP employees constitutes a violation of the Plaintiff and its members' right to freedom of association and freedom of speech as guaranteed by the First and Fourteenth Amendment to the United States Constitution. Defendant contends there has been no violation.
The First Amendment of the United States Constitution provides "Congress shall make no law . . . abridging the freedom of speech." U.S. Const., amend. I. As to the right to association, "[o]ne of the foundations of our society is the right of individuals to combine with other persons in pursuit of a common goal by lawful means." Lyng v. Int'l Union, 485 U.S. 360, 366 (1988). The right to association extends to unions as well as its members and organizers. Allen v. Medrano, 416 U.S. 802, 819 n. 13 (1974). The right of association encompasses the right of public employees to associate and speak freely and petition openly.Smith v. Arkansas State Highway Employees, Local 1315, 441 U.S. 463, 464-65 (1979).
In a First Amendment retaliation claim, a plaintiff must show that (1) he was subject to an adverse employment action; (2) "he engaged in speech that was constitutionally protected because it touched on a matter of public concern and (3) the protected expression was a substantial motivating factor for the adverse action." Ulrich v. City and County of San Francisco, 308 F.3d 968, 976 (9th Cir. 2002).
The facts surrounding the retaliation claim is highly disputed between the two parties. Plaintiff contends that Defendants unilaterally imposed a 3.2% salary reduction through the terms of its last, best and final offer while the other unions negotiating with the City at the time was not subject to the 3.2% salary reduction. (Pl's Mot. for Prelim. Inj. at 13-14.) According to Bill Nemic, the current Board Member and President of the SDPOA, the City was in negotiations with the Fire, the MEA, the AFSCME, the City Attorney's Association and the SDPOA. (Nemec Decl. ¶ 5.) The last, best and final offers that were made to all the unions were identical. (Id.) When the other unions agreed to new labor contracts, the City did not impose a salary reduction for their DROP employees. (Id.) However, when SDPOA went to impasse, the City's last, best and final offer imposed a 3.2% salary reduction for the DROP members of SDPOA. (Id.) Nemec was also told that the City did not impose the 3.2% salary reduction on any of the non-represented city employees who were enrolled in DROP. (Id. ¶ 7.) Therefore, the SDPOA was the only organization subject to the 3.2% salary reduction evidencing the City's retaliatory conduct against members of the SDPOA. (Id. ¶¶ 5-7.)
According to Defendant City of San Diego, the last, best and final offer was imposed at the request of SDPOA and not imposed due to retaliation against them. According to William Kay, the City's labor negotiator, the proposal for the 3.2% salary reduction for DROP employees was made at the suggestion of the unions in order to make equal the fact that non-DROP employees would be making a higher pension contribution. (Kay Decl. in Opp. to Mot. for Prelim. Inj. ¶ 22.) The City was involved in intense negotiations with the MEA, Fire, AFSCME and SDPOA because the collective agreements were scheduled to expire on June 30, 2005. (Id. ¶¶ 2, 23.) A key common feature of the City's proposals was the requirement of union salary concessions that would generate a significant recurring budgetary savings to support the City's annual payments on pension obligation bonds. (Id. ¶ 24.) Contrary to Plaintiff, Defendant states that the City did not impose a last, best and final offer to each union. (Id. ¶ 26.) As to negotiations with the SDPOA, due to certain disagreements, the SDPOA requested a last, best and final offer from the city that it could present to its membership meeting on May 12, 2005. (Id. ¶¶ 30, 31.) Despite the City's reluctance to formally propose a last, best and final offer because it would be tantamount to an unofficial declaration of impasse, the City provided the SPPOA with a last, best and final offer. (Id. ¶¶ 31, 32.) At the membership meeting, the SDPOA rejected three options the City and the SDPOA had negotiated, which included the last, best and final offer. (Id. ¶ 32.) Consequently, on May 16, 2005, the City Council imposed the City's last, best and final offer on the SDPOA.
During this time, the City was negotiating with the other unions through May 17 and came to an agreement. (Id. ¶¶ 34-37.) In the final days of negotiations, the other unions opposed the pay reduction for DROP employees and as part of the overall settlement, the City eliminated the salary for DROP members. (Id. ¶ 38.) Defendant argues that SDPOA decided to end negotiations early and declared an impasse on May 12 well in advance of the deadline to complete salary negotiations. (Id. ¶¶ 40-41.) Therefore, there is no evidence that the imposition of the 3.2% salary reduction was retaliatory.
Both parties present differing version of what transpired during negotiations. Based on the disputed facts, the Court concludes the Plaintiff has failed to show a probable success on the merits.
C. Irreparable Harm
Plaintiff contends that there will be irreparable injury to public safety because many these DROP officers are actively seeking employment elsewhere. In opposition, Defendant contends that there is no immediate threat of irreparable harm because Plaintiff alleged loss of earnings can be compensated by monetary damages and Plaintiff's claim is essentially one of breach of contract.
"The basis of injunctive relief in the federal courts is irreparable harm and inadequacy of legal remedies." Los Angeles Memorial Coliseum Comm'n v. Nat'l Football League, 634 F.2d 1197, 1202 (1980). Monetary injury does not constitute irreparable injury. Id. Injunctive relief is not appropriate where money damages provides an adequate remedy. See Flynt Distrib. Co., Inc. v. Harvey, 734 F.2d 1389, 1396 (9th Cir. 1984). In the motion for preliminary injunction, Plaintiff seeks to enjoin Defendants from imposing the 3.2% salary reduction on DROP members. Members of SDPOA state the 3.2% salary reduction amounts to an $80 to $100 bi-weekly reduction in salary. (See Sweeney Decl. ¶ 7; Massey Decl. ¶ 7.) Therefore, if the Court concludes that the pay reduction was a violation of the constitutional rights, their injury can be fully remedied by an award of damages equal to the amount of the benefits not paid to them. Therefore, Plaintiff has not made a showing of irreparable harm.
Plaintiff also contends that as a result of the City's last, best and final offer, officers are deciding to leave the City of San Diego. (See McMillan Decl. ¶ 8.) As a result, morale is low among the police officers, grievances are increasing, and officers are deciding to leave San Diego for employment elsewhere. (Id. ¶¶ 10-16.) If officers leave for other cities, it will have a negative impact on public safety due to reduced police coverage throughout the City. (See Hubbs Decl. ¶ 10, Dupree Decl. ¶ 10.)
The 3.2% salary reduction affects about 300 DROP members as opposed to the 1900 officers who are members of SDPOA. (See FAC ¶ 57.) These DROP members are considered retired for pension purposes and will retire within the next five years. (Hwang Decl. filed in Support of Ex Parte Application for TRO, Ex. B, San Diego Mun. Code § 24.1402(b).) DROP members may decide to end his or her participation in DROP at any time without any reason. (Id. § 24.1403(a).) DROP members can also be terminated from the program if they are terminated for cause, if the members dies or the Retirement Board grants the member a disability retirement. (Id. § 24.1403(b).) Based on these provisions, DROP members are not guaranteed a permanent position during their five year term in DROP. According to Defendant, many of the current DROP members's terms will expire in a few years. (Lawrence Decl. in Opp. to Pl's Mot. for Prelim. Inj. ¶ 13.) The average length of time an officer in DROP remains in the program is about four years. (Id. ¶ 12.) The last, best and final offer is only valid for one year and will expire on June 30, 2006. It was implemented pursuant to the Meyers-Milias Brown Act, California Government Code section 3505.4, as a way to handle the impasse between the City and the SDPOA. The DROP members are still currently employed and receiving vested pension benefits through their and the City's contributions. There is no showing that the DROP members will be irreparably harmed or that the Plaintiff will be harmed or that the public will be irreparably harmed.
Conclusion
Based on the above, the Court DENIES Plaintiff's motion for a preliminary injunction.
IT IS SO ORDERED.