The U.S. Court of Appeals for the Sixth Circuit has affirmed a ruling by Senior United States District Judge Curtis L. Collier dismissing a lawsuit filed against the city of Chattanooga by a group of retired firefighters and police officers challenging a key aspect of the city’s recent reforms to its fire and police pension plan.
In 2014, the Chattanooga City Council passed, and Mayor Andy Berke approved, multiple amendments to the city code provisions governing the Chattanooga Fire and Police Pension Fund. Since the 2008 financial crisis, the fund had incurred a nearly $150 million unfunded liability that threatened its long-term ability to pay benefits to retirees. The enacted reforms were projected to save the city $227 million over 26 years. The central amendment was a reduction to the cost of living adjustment (“COLA”) paid to retirees. The COLA was changed from a fixed three percent annual increase to a variable rate averaging 1.5 percent.
In April 2014, a group of retired firefighters and police officers sued the city in Hamilton County Chancery Court alleging that the COLA amendment violated three provisions of the United States Constitution: the Contract Clause, which prohibits state and local governments from modifying contractual obligations, as well as the Due Process Clause and Takings Clause. The case was removed to federal court in Chattanooga. Judge Collier granted summary judgment against the plaintiffs in November 2015, and the plaintiffs appealed to the Sixth Circuit in Cincinnati. In affirming Judge Collier’s ruling that the COLA amendment is constitutional, the panel of three appellate judges unanimously ruled, “The retirees do not have a contractual right to a fixed three-percent COLA, because the City Code does not bind the Fund to the fixed COLA.”
The city was represented throughout the litigation by a team of Miller & Martin attorneys retained by the city attorney’s office as special counsel to the city. Lead attorney Zac Greene, who argued the appeal, said of the ruling, “This decision validates the city’s effort to protect the fiscal health of the pension plan and ensure that firefighters and police officers receive the pensions they earned by their years of service.”
City Attorney Wade Hinton commented, “The fire and police pension reform is one of the most significant achievements in City government over the last decade. Those reforms – especially the COLA amendment – placed the pension plan on solid financial footing without a tax increase and gave the City budgetary flexibility to address other matters, such as increasing pay to correct disparities in the fire and police departments.”
Attorney Greene further noted, “This decision is significant, because it could be used to support efforts by other cities facing unfunded pension liabilities to reform their plans and realize greater fiscal stability.”
Other Miller & Martin attorneys representing the City were Scott Parrish, Meredith Lee, and David Barnes. Deputy City Attorney Phil Noblett and Assistant City Attorney Valerie Malueg also represented the city in the district court.