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* Tribune…
The union coalition also contends the pension law is a violation of the state constitution’s contracts clause and breaches another constitutional provision — the so-called takings clause — which prevents a person’s private property from being taken away for public use without “just compensation.”
As part of the “takings” argument, the unions raise the issue of the legal theory of consideration. They counter that provisions in the new law that reduce the current employee contributions to their pensions by 1 percentage point and allow pension systems to file suit to ensure state government pays its proper share for retirement are inadequate and were never agreed upon.
The lawsuit alleged the changes foisted upon public employees are “substantial and will grow in magnitude over the course” a person’s retirement, a point that underscores why the new law is “unconstitutional and unfair.”
By way of example, the lawsuit highlighted the cases of 25 active and retired government workers. One was Chicagoan Lee Ayers, who has worked about 25 years as a clinical lab technician at a state university and expects to get an initial pension of $53,366 when he retires in 2019. Under the new law, he would lose more than $218,000 if he spends 25 years in retirement, the lawsuit contended.
In contrast, the new law lowers the regular pension deduction from his paycheck by 1 percentage point. That means he’d get to keep an extra $3,733 before he retires — a major difference from what he’d give up, according to the court papers.
The 55-page suit notes the plaintiffs have “faithfully” contributed to their pension systems during their tenure with the state.
“Unfortunately, the same cannot be said of the state,” the lawsuit notes. “The state chose to forgo funding its pension systems in amounts the state now claims were needed to fully meet the state’s annuity obligations. Now, the state expects the members of those systems to carry on their backs the burden of curing the state’s longstanding misconduct.”
“Misconduct” is a pretty harsh word.
* WBEZ…
Tuesday’s lawsuit comes on the heels of other similar lawsuits that the Illinois Attorney General’s office has asked be consolidated into one case to be heard in Cook County. But the We Are One Illinois coalition filed its case in Sangamon County, home to Springfield, the state Capitol, and thousands of public workers.
The difference in location could prove significant in the outcome of the case. House Speaker Michael Madigan takes credit for negotiating the compromise and putting the needed votes on the bill for approval. Critics of the law express concerns about whether the suit could come before a Cook County judge who has connections to Madigan, who also serves as the chairman of the state’s Democratic Party.
The case is expected to eventually be argued in front of the Illinois State Supreme Court.
* Bloomberg…
The case was assigned to Sangamon County Circuit Judge Peter C. Cavanagh, according to the court’s electronic docket. Running unopposed as a Republican, Cavanagh was elected to a six-year term in 2010, according to Sangamon County voting records.
* ABC7…
Legal experts agree the case filed Tuesday in a Sangamon County Circuit Court will eventually find its way to the Illinois Supreme Court. The litigation certainly will take months, perhaps more than a year.
* Crain’s…
“This landmark law was urgently needed to resolve the state’s $100 billion pension crisis,” said Mr. Quinn in a statement. “We expect it to be upheld as constitutional.”
Said a spokeswoman for Senate GOP Leader GOP Christine Radogno, “We are hopeful the court will move expeditiously so that we can stabilize the systems for the participants and save taxpayers.” Though unions are unhappy, the law will cut taxpayer payments more than 40 percent over the next three decades, she added.
And from Mr. Cullerton: “I supported (the law) to break the political impasse between the Senate and House, (and) to send a test case to the courts.”
* Sun-Times…
By contrast, Rutherford is not a believer in the law that passed the House and Senate and that Quinn enacted into law. In a brief interview Tuesday, the treasurer said he believes it’s unconstitutional and that pension reform of any sort should be negotiated with the unions.
“We anticipated this latest lawsuit by the We Are One Illinois coalition regarding the new pension law,” Rutherford said in a prepared statement. “We will now wait and see how the Supreme Court rules.”
posted by Rich Miller
Wednesday, Jan 29, 14 @ 10:49 am
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It reminds me a bit of the old Letterman catchphrase they would use after some bits…
“Oh no! … We’re gonna get sued.”
Who didn’t see this coming, also I think Misconduct might be right word at least it sounds better than lazy stupidity…
Comment by OneMan Wednesday, Jan 29, 14 @ 10:55 am
A question about how the stay requested operates. If a stay is granted, the effective date of the law is put off–until resolution of the issue in the courts. If the court ultimately finds the law (or parts of it) is in fact constitutional–when does the law go in effect–the date of the court’s ruling–or a date specified by the court. In other words, will there be a period of time that will allow someone to get out after the court’s decision before the law becomes effective?
Comment by SIUPROF Wednesday, Jan 29, 14 @ 11:05 am
‘ “Misconduct” is a pretty harsh word.” ‘
It may be harsh, but it’s not inaccurate.
Comment by Joan P. Wednesday, Jan 29, 14 @ 11:16 am
Why do they call it pension reform - reform would be to correct a fault - that would mean the legislature paying what it should when it should and what is owed. What they want is pension restructure or reduction
Comment by Marie Wednesday, Jan 29, 14 @ 11:22 am
The lawsuit also asks for what looks like punitive damages in requesting “such additional relief as is just and equitable”.
Comment by PublicServant Wednesday, Jan 29, 14 @ 11:30 am
=== will cut taxpayer payments more than 40 percent over the next three decades====
we can cut taxpayer payments 100% if the State just declines to pay any of its creditors, and seizes what it needs. If the justification is taxpayer savings then lets expand the the bills we are not going to pay.
Mel Brooks/madigan…. its good to be the king….
Comment by Ghost Wednesday, Jan 29, 14 @ 11:37 am
““Misconduct” is a pretty harsh word.”
I’ve said that for years. When an attorney makes an error, it’s unilaterally termed “misconduct.” I think “mistake’ is more apt. Misconduct happens, mistakes are much more common, however.
Comment by Lobo Y Olla Wednesday, Jan 29, 14 @ 11:38 am
I would say that misconduct is not harsh enough, criminal comes to mind. They took the pension holidays not the retirees. If a private company did to there pension funds what the State/ law makers have done jail time would be in there future.
Comment by Rob Roy Wednesday, Jan 29, 14 @ 11:38 am
re –misconduct –
Back in the day, when my father-in-law was a treasurer for a private company, if he had diverted employer pension payments to cover other company bills, he would have gone to prison. Just saying’ …
Comment by Diogenes in DuPage Wednesday, Jan 29, 14 @ 11:39 am
If you don’t like the word misconduct”, then how about “breach of fiduciary responsibility”? (for failure to provide funding)The GA made repeated willful choices over the years to fund other projects and operations, to the detriment of the pension system.
Comment by One of the 35 Wednesday, Jan 29, 14 @ 11:45 am
Couple legal questions. Legally, what’s the difference between a contract and a contractual relationship.
Also, what does the term “impair” mean in a legal sense? How would one impair a benefit?
Comment by Jack Handy Wednesday, Jan 29, 14 @ 11:46 am
One of the 35
Don’t forget that usually the General Assembly appropriated what the Governor requested. How sad is it that of the pre-Quinn governors the only one to pay what was required when he took office and didn’t change the law / underfund the pension payments was George Ryan?
Comment by Anyone Remember Wednesday, Jan 29, 14 @ 11:50 am
–Back in the day, when my father-in-law was a treasurer for a private company, if he had diverted employer pension payments to cover other company bills, he would have gone to prison. Just saying’ … –
Plenty of private sector corporations stiffed their stiffed their pension plans for years then shed liabilities in bankruptcy court. Who went to prison?
Comment by wordslinger Wednesday, Jan 29, 14 @ 11:52 am
Jack Handy, when they froze judges cost of living increases, the judges said that impaired their salaries and was unconsitutional.
I guess the freeze should have said it would save taxpayers money and was under the States police powers to violate its constitution and then it would have been upheld….
Comment by Ghost Wednesday, Jan 29, 14 @ 11:53 am
The 1% reduction in employee contributions does not apply to retirees. So what is retirees consideration? The right to sue? What a joke. I do agree with RR that misconduct is not strong enough and the intentional decisions by the legislature to ignore the constitution is a criminal act.
Comment by Soccertease Wednesday, Jan 29, 14 @ 11:53 am
If and when the ISC strikes down part or all of this law, will any of those who voted for it really be surprised?
Comment by Anon Wednesday, Jan 29, 14 @ 12:15 pm
So far, all anybody has to kick around is the plaintiffs’ allegations in the several pending pension related law suits. When the defendants answer and raise their issues, I suspect some folks will get a real education on contract law. Assuming the defendants vigorously defend these cases on behalf of the citizens (and I have some doubts there along with the impartiality of state court judges), the law of reformation of contracts will surprise many people.
Comment by Cook County Commoner Wednesday, Jan 29, 14 @ 12:20 pm
“Misconduct” is an apt word in this case.
A well-established principle of contract law is that the parties to a contract must comply with what is known as the “covenant of good faith and fair dealing.” When you and I enter into a contract, I can’t then engage in conduct that would undermine the contract itself. State leaders made a promise in the Pension code and re-iterated that promise year after year when they did nothing to revise that promise), and for this reason, the State is clearly a party to the pension contract. Undermining that promise is the precise sort of “misconduct” that contract law prevents.
To phrase this another way: The implied covenant requires that parties to a contract use good faith and fair dealing in the performance of the contract. More specifically, “[t]he doctrine of good faith. . . requires the party vested with contractual discretion to exercise that discretion reasonably and with proper motive, not arbitrarily, capriciously, or in a manner inconsistent with the reasonable expectations of the parties.” Bass v. Innovative Consultants, Inc., 328 Ill. App. 3d 492 (1st Dist. 2002).
Comment by Chicago Publius Wednesday, Jan 29, 14 @ 12:31 pm
Do we prefer misfeasance or malfeasance?
Comment by Norseman Wednesday, Jan 29, 14 @ 12:35 pm
Does anyone think that the unions had a say in how much money went into pensions for their members and how much went into salaries? If not, you don’t know how unions and the legislature work.
Comment by Tom Joad Wednesday, Jan 29, 14 @ 12:38 pm
A stay of the law has been requested. If a stay is granted and if the case is not finally decided for many months or even years, what will the impact be of the budget process? Are we looking at tax increases or spending cuts or both until the court cases play out? Am I also correct in saying that a stay of the implementation of the pension reform bill will increase multi-billion dollar general fund deficit currently listed by the Governor’s Office of Management & Budget for FY15-FY17?
Comment by Hit or Miss Wednesday, Jan 29, 14 @ 12:39 pm
@Tom Joad - Care to back that allegation up with some facts bud? Or are you just doing a right wing drive by?
Comment by PublicServant Wednesday, Jan 29, 14 @ 12:42 pm
I have the same question as SIUPROF - @ 11:05 am.
Will this be up to the courts? Or is there a standard that if s stay is granted that the effective date of the law will not be the original date but the date the final decision is made?
Comment by Irish Wednesday, Jan 29, 14 @ 12:46 pm
If they’re trying to utilize the takings clause, then a plausible rationale could be made that the “just compensation” they receive is the survival/improved health of the pension system. There’s a huge difference between compensation being equitable vs. equivalent.
Comment by Brendan Wednesday, Jan 29, 14 @ 12:52 pm
Cook County Commoner
To your point. Contract reformation is a type of equitable remedy wherein the contract is rewritten in a way that better expresses the intentions of the parties. For example, sometimes a breach of contract may occur because the parties were mistaken as to one of the contract terms, such as the delivery date or the definition of a word in the contract. In such cases, the contract may then be rewritten or “reformed” in order to remedy the breach. However, a contract cannot be “reformed” if it is either unfair or damages either party. One party cannot gain advantage at the expense of the other. Reforming the “pension contract” would appear to be a non starter given this caveat.
Comment by Old and in the Way Wednesday, Jan 29, 14 @ 12:52 pm
I wouldn’t say that “misconduct” is especially harsh when “malfeasance” is more accurate.
Comment by Skirmisher Wednesday, Jan 29, 14 @ 12:54 pm
The We Are One Complaint is very well crafted in terms of challenging pension-reform under both the pension clause and the “takings” clause of state/federal constitutions — far better than the complaints filed in the other lawsuits.
However, it is disappointing that the We Are One Complaint doesn’t challenge the pension-reform legislation as violating constitutional prohibitions against “special legislation,” “bills of attainder,” and “equal protection.”
For example, the Illinois Constitution specifically prohibits “special legislation” and the federal constitutional prohibits “bills of attainder” – that is, legislation that imposes a harm on a select group of people.
Ordinarily, these prohibitions are analyzed under principles similar to those regarding “equal protection.” And under this analysis, the state of Illinois can’t discriminate against a select group of people (i.e., pensioners) unless (1) there is a reasonable basis for so doing (2) in the context of an acceptable public purpose.
But think about this for a moment. . . . If the state enacted legislation to collect a gasoline surtax in Wilmette so that the state could pay for its highway bonds, people in Wilmette could easily demonstrate that the only reason they are being penalized is because they have extra money – and that would not be a rational reason for treating them differently from everyone else. You would get a similar outcome if the state enacted legislation under which it would pay ALL CREDITORS 72 cents on the dollar. Beyond issues presented by the constitutional prohibition against “contract impairment,” the creditors could argue that the only reason they are being discriminated against is because they are owed the money in the first place. And when presented with such an argument, a court could well conclude that this is not a rational reason for discriminating against a group of people. In this context, a court might well conclude that the State has available a range of other means to promote the alleged public purpose of finding some budgetary relief.
Certainly, a similar argument could be presented in the case of pension reform: the only reason that pensioners are the victims of this special legislation is that they are owed money.
The advantage of adding this type of challenge is that it gives the courts another (and far less vexing) means of over-turning this travesty known as pension reform. Through this approach, the courts could avoid an issue that no one really wants to address: under what conditions, if at all, is it acceptable for a state to impair a pension promise?
Comment by Chicago Publius Wednesday, Jan 29, 14 @ 12:55 pm
Brendan
Brush up on your contract law. No. The takings clause, as you call it, does not work that way. It must be equitable or preserve the status of the parties within the contract. The court has already held that the state must fund the pensions so they are not gaining anything they didn’t have before.
Comment by Old and in the Way Wednesday, Jan 29, 14 @ 12:57 pm
==the law of reformation of contracts will surprise many people==
Learning that there is a principle that says you can unilaterally “reform” a contract because you would rather spend the money you owe for services already performed on something else or that one party can declare what is adequate consideration for the other party to accept a reformation would certainly surprise me. I must have slept through that part of contracts class in law school.
Comment by Anon. Wednesday, Jan 29, 14 @ 1:09 pm
Chicago Publius
An interesting possibility. Despite some initial hurdles there may be a case here. Still the initial hurdle would be the public good or purpose. I like it as a wedge argument in the case.
Comment by Old and in the Way Wednesday, Jan 29, 14 @ 1:13 pm
+++ PublicServant - Wednesday, Jan 29, 14 @ 11:30 am:
The lawsuit also asks for what looks like punitive damages in requesting “such additional relief as is just and equitable”. +++
No - that isn’t how one askes for punitive damages in a complaint. That is standardized ‘boilerplate’ language to other cover general relief that may turn out to be appropriate as the discovery and such unfolds and the court makes rulings along the way. If you want punitive damages, you ask for them explicitly.
Comment by titan Wednesday, Jan 29, 14 @ 1:20 pm
Rube B Bumpkin here, and I live in a van down by the river in Pope county, so I would like to ask ifn it makes any difference a’tall whether they hear this in Sangamon or Cook county court? Thankee.
Comment by Rube B Bumpkin Wednesday, Jan 29, 14 @ 1:40 pm
Not to mention it’s a violation of the U.S. Constitutions 14th amendment (equal protection under the law) because, they exempted the judges from the pension reform therefore, treating us differently. Isn’t that what the gays won their battles on not being treated equally? And their still winning on state by state rulings. It’s grounded on not treating people equally i.e. judges and us. I think the AMAC are the only group that’s filed under the 14th amendment violation.
Comment by Anthony Wednesday, Jan 29, 14 @ 2:12 pm
Old and in the Way - Wednesday, Jan 29, 14 @ 12:57 pm:
Technically, in the initial IFT case, didn’t the IL SC actually say the pensions had to paid when due but was silent on the actual method of funding / pre-funding (pension payment funds) said pension payments, leaving that to the General Assembly?
PS: I’ll check back in late tonight
Comment by RNUG Wednesday, Jan 29, 14 @ 2:21 pm
I keep wondering why it is rarely mentioned that the consistent underfunding and “pension holidays” were done DELIBERATELY in order to create the so-called crisis we have today. Most of the same players were there all along and they knew exactly what they were doing with each diversion of funding that should have gone to pensions and each ERI. If Madigan can willfully create his own constitutional crisis with his very actions, how is there any constitutional protection for any of us. It would seem he simply makes a mockery of the entire system.
Comment by kimocat Wednesday, Jan 29, 14 @ 2:53 pm
RNUG
You are correct. A “promise” that you will pay is in fact no new consideration. Nor is a statuary funding level guarantee. The pensioners already have that right as affirmed by the courts. Besides the GA left room open to change their mind should the “need arise.”
Comment by Old and in the Way Wednesday, Jan 29, 14 @ 3:01 pm
kimocat - Take a deep breath and count to 10. We’re all upset - to put it politely, but we need to keep it rationale. The underfunding was to enable them to spend money on other things. It was not to deliberately create crisis.
Comment by Norseman Wednesday, Jan 29, 14 @ 3:04 pm
By the time Court rules that the pension reform law is unconstitutional, the election will be over. The bill will have served its real purpose. It got the politicians reelected.
Comment by Anonymous Wednesday, Jan 29, 14 @ 3:07 pm
Old and in the way at 3:01 is correct. A promise that I really really really will do what I already promised to do cannot be deemed “consideration” for purposes of reforming a contract — especially if there is no mutual agreement.
And RNUG at 2:21: Yes, in the McNamee case, the IL Supreme Court said that pensioners do not have a right to a well-funded pension fund — only a right to the pension benefit. Effectively, the state, through its courts, told pensioners: don’t worry - you’re pension is secure. And that fact is another one that should have been pleaded, to show malfeasance on the part of the state.
Comment by Chicago Publius Wednesday, Jan 29, 14 @ 3:16 pm
@Anonymous - Wednesday, Jan 29, 14 @ 3:07 pm:
=By the time Court rules that the pension reform law is unconstitutional, the election will be over. The bill will have served its real purpose. It got the politicians reelected.=
Could not agree more! That is what this is all about — a political solution trying to solve a legal and moral issue. Eventualy I beleive the answers of how do you politicaly fix the pensions and how do you moraly and legaly do it will become one. This is all that process playing out.
Comment by facts are stubborn things Wednesday, Jan 29, 14 @ 3:18 pm
I understand your point norseman, but I do know MJM and I simply will not believe that this was not in the back of his mind for some time now.
Comment by kimocat Wednesday, Jan 29, 14 @ 3:29 pm
public pensioners and employees urged state leaders to contribute their share to pensions and even went to court to get relief. state political and judicial leaders said ‘don’t worry, your pension is secure.’ all of this sets up m marvelous case of pension impairment, contract impairment, and promissory estoppel.
Comment by sad Wednesday, Jan 29, 14 @ 3:41 pm
‘Misconduct’ isn’t too harsh of a word. Actually, it’s way too light. Any company (in the S&P 500) who’s financial officers didn’t properly fund their pensions would have the pension plans shut down. Mike Madigan should look in the mirror: he more than any individual is responsible for the financial mess Illinois is in pension wise. Whether you agree with the unions or not is irrelevant. The pensions weren’t funded properly , someone deserves to be in prison for this. Actually , this is mail and wire fraud for sending out checks when a pension plan is massive underfunded. ‘Misconduct’ isn’t the best word. A better phrase is RICO.
Comment by Steve Wednesday, Jan 29, 14 @ 3:59 pm
“And that fact is another one that should have been pleaded, to show malfeasance on the part of the state.” Malfeasance or misconduct are legally irrelevant. It violates the constitution to diminish or impair a pension benefit no matter how good or bad the intent or the management of the pension fund. Lots of comments here baiting on red herrings and losing sight of exactly what the court will be called upon to determine.
Comment by Anonymous Wednesday, Jan 29, 14 @ 4:16 pm
Steve, Rob Roy, and others, who claim that if anything like this happened in the private sector, someone would go to jail — are completely wrong.
What happened in the private sector to hundreds of pension programs, from the 1980’s onward, make the Illinois Legislature look like saints.
One CFO, of a Fortune 100 company, who figured out a way to drive his employees’ pension program into bankruptcy, and then pass off the remaining liability to the Federal government (i.e. taxpayers), was then honored by Fortune Magazine as “CFO of the Year”.
The reason this is important, is that much of the precedent on the ability, under certain conditions, to break the “contract” which is a pension, has already been argued (and mostly won) in the private sector. There have probably been dozens of cases on the issue of the absolute enforceability of this kind of “contract”.
That is why I believe the key legal arguments will be more about the “enforceable contract” language, than about the “shall not be diminished”. Also why I keep thinking this isn’t a “slam dunk” case, like some would have it.
Not a lawyer, just someone whose pension was taken away back in the heyday of such takings in the private sector.
One of the many reasons I so hate the phrase “let’s run government like a business.”
Comment by walker Wednesday, Jan 29, 14 @ 5:09 pm
Private sector pensions don’t have Constitutional protections not to diminish them and also not to pass ex post facto laws which impair contractual obligations. The State is also not allowed to take property without compensation. What we are taking about with “reform” is exactly what the State is prohibited from doing. Also didn’t some Enron officials go to prison?
Comment by Fed up and retired Wednesday, Jan 29, 14 @ 5:17 pm
Some of the comparisons to private pension systems depends on if the impairment/diminshment to the private pension was before or after ERISA.
Prior to ERISA, companies could underfund pensions and generally set up a pension crisis.
Since ERISA, companies must fund pensions and private pensions can be frozen - but the anti-cutback rule would never allow a reduction to already earned pension benefits.
SB1 reduces earned benefits as well as future benefits not yet earned.
Comment by archimedes Wednesday, Jan 29, 14 @ 5:34 pm
I wish politicians like Rutherford and others interested in government would read the state constitution. Article III Section 5 makes a contractual commitment between the pension system and its members. Membership has nothing to do with membership in a union. Non-union state workers like me stand equal with union workers in terms of membership in the state pension system.
Importantly though, the union cannot negotiate for me or on my behalf because the contract is between the state and me, not between the state and a union or the state and any group of people.
The relevant section reads: “Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”
Nothing in that sentence implies that a union or anyone else can negotiate a diminishment or impairment of the benefits I have earned as a member of the state pension system. The contract is with me, not them.
I am confident that the State Supreme Court will toss the recently-passed legislation out as unconstitutional. I’m very happy to see the lawsuits coming forward which take my interests at heart.
I have been surprised and disappointed at the number of state legislators (including my own) who feel that a bit of diminishing here and a little impairing there aren’t so bad after all. They go on tv and tell us that the plain English language of the constitution does not mean what it says. It’s truly disgusting.
Comment by DuPage Dave Wednesday, Jan 29, 14 @ 6:46 pm
Well, we all know the new pension legislation is Unconstitutional, in both the spirit of the law, and in the letter of the law. What is going to be fun is watching how the Supremes try their best to claim otherwise.
Comment by Justan Observer Wednesday, Jan 29, 14 @ 9:02 pm
DuPage Dave — everything you said regarding the unconstitutionality - and the polictics — is true. And , accurate. However, you also said this — “I am confident that the State Supreme Court will toss the recently-passed legislation out as unconstitutional.” - I am not at all so confidant. I have seen previous cases where judges in this state bent over backwards to make judgments that are ridiculously and obviously incorrect, merely because of politics. Sad. But, true. I guess I am just more jaded…
Comment by Justan Observer Wednesday, Jan 29, 14 @ 9:10 pm
Dupage Dave said “…tell us that the plain English language of the constitution does not mean what it says.”
Reminds me of Bill Clinton saying “…depends on what the definition of ‘is’ is.”
Those politicians will twist anything…
Comment by Springfield Steve Thursday, Jan 30, 14 @ 7:12 am