2008-325, PETITION OF CONCORD TEACHERS

In this petition for a writ of certiorari, the petitioners,

Schulman on the brief and orally), for the respondent. Getman, Stacey, Schulthess & Steere, P.A., of Bedford (Andrew R.

petitioners. R. Sacks, of Concord, staff attorney, NEA-New Hampshire, by brief, for the to press. Errors may be reported by E-mail at the following address: Harris and Coleen M. Penacho on the brief, and Mr. Harris orally), and Steven McLane, Graf, Raulerson & Middleton, P.A., of Manchester (Scott H.

No. 2008-325 editorial errors in order that corrections may be made before the opinion goes Original Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any Readers are requested to notify the Reporter, Supreme Court of New ___________________________

THE SUPREME COURT OF NEW HAMPSHIRE

a.m. on the morning of their release. The direct address of the court's home reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00

well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule 22 as compensation. In case of doubt as to the interpretation of service

p. 2 excluding the final 12 months,” Laws 1991, 313:1. determined for the purpose of calculating average final compensation, but the severance pay shall be exempt from the limitation on earnable rendered before the effective date of this act, then such portion of vacation or sick time or other credits earned on account of service

period preceding the final 12 months or the highest compensation year as

or part of such severance pay was based on accrued holiday,

member annuity and the state annuity,” RSA 100-A:1, XXII (2001).

“to 1-1/2 times the higher of the earnable compensation in the 12–month

and demonstrates to the satisfaction of the . . . board . . . that all if the retiring member has received severance pay at termination

“retirement allowance,” RSA 100-A:5 (2001), consisting of “the sum of the amendment). Laws 1991, 313:7 further provided, in relevant part, that Retirement System, 141 N.H. 342, 345 (1996) (discussing the 1991

employer contributions, and the State contributes the remaining 35 percent.

(2001); legislature amended the definition of earnable compensation in 1991, limiting it attributable to one-time payouts in the final twelve months of employment, the Presumably in response to escalated levels of earnable compensation

pay.” RSA 100-A:1, XVII. various other compensation, such as “holiday and vacation pay” and “sick 2008). Upon retirement, members of the NHRS receive a defined lifetime compensation generally includes “the full base rate of compensation paid plus” service.” RSA 100-A:1, XVIII (Supp. 2008) (emphasis added). Earnable compensation of a member during his or her highest 3 years of creditable I(b) (2001). Average final compensation is “the average annual earnable accumulation fund – school districts contribute 65 percent of the total are determined, in part, by their “average final compensation.” RSA 100-A:5, see RSA 100-A:3, I(a) (Supp. 2008). Their member and state annuities The petitioners are “Group I members” of the NHRS. RSA 100-A:1, X(a)

100-A:1, XX, XXI (2001) (defining “Member annuity” and “State annuity”). both member contributions,

interest of the participants and beneficiaries.” RSA 100-A:15, I-a(a)(1) (Supp. See RSA 100-A:16, II(c). The assets of each fund are invested “[s]olely in the

RSA 100-A:16, I(a). Their employers contribute toward the state annuity percent of their compensation toward the member annuity savings fund. See contributions, see RSA 100-A:16, II (Supp. 2008). Teachers contribute five

The NHRS is a “qualified pension trust,” RSA 100-A:2 (2001), funded by

governing the NHRS and the computation of retirement annuities. Before discussing the relevant facts, we summarize the relevant statutes p. 3 District, Dennis Murphy, lobbyist for NEA-NH, Maureen Kryger[,

between Michael Martin[,] Superintendent of the Concord School

the early retirement cash incentive paid herein.

CBA], a meeting was held in late 1993 at the Retirement System for pre-1991 sick leave . . . . To try to clarify the provisions [of the early retirement incentive . . . or whether it was an actual payment teacher salary increase. introduced in the 1992-93 CBA as a compromise measure in exchange for no

exceed an amount equal to the employee’s separation benefit plus incentive paid to the employee under this provision shall not retirement cash payment set out herein. However, the total cash

questioned whether the [early retirement benefit] was a lump sum

before the hearings examiner that the early retirement provision was

schedule of cash payments, the CBA provides, in relevant part: “single cash payment” according to the retiree’s age. After setting out the from the 150 percent cap on earnable compensation. Benefit” consisting of participation in the retiree health insurance plan and a staff rejected their assertion that the early retirement benefits were exempt

applied to reduce by a maximum of up to fifty percent (50%) the

Beginning with the first retirees under the [CBA], NHRS employees

Concord school district when this provision became part of the CBA, testified examiner to conduct an evidentiary hearing, who found: The petitioners appealed to the board. The board appointed a hearings

addition to the separation benefit, the petitioners received an “Early Retirement retirement annuity. In calculating their average final compensation, the NHRS Each petitioner applied to the NHRS and qualified for a service

be paid to the retiree at the retiree’s present per diem and shall be

Michael Martin, who was the assistant superintendent of finance for

payment for certain unused sick leave but is not at issue in this appeal. In received from the school district a “Separation Benefit,” which was a cash 2004. In accordance with the collective bargaining agreement (CBA), each accordance with the [CBA] separation benefit, said sick leave shall (prior to June 30, 1991) in excess of the amount paid in F. To the extent the retiree has accumulated sick leave

The petitioners retired early from Concord school district in 2003 and

Laws 1991, 313:7.

interpreted to the best interest of the retiring member. data in determining when credits were earned, the data shall be benefits. . . .

p. 4 under penalty of perjury and directing Ms. Kryger to certify the

Agreement. the Concord School District certify that the forms were correct amount of the early retirement incentive spelled out in the Master compensation,” RSA 100-A:1, XVII, factored into their retirement annuities. member received a lump sum that was based on age and the retirement benefit because of its impact upon the amount of “[e]arnable of certiorari. The dispute concerns the characterization of their early

impaired; and (4) their rights to equal protection have been violated.

director, Eric Henry. Director Henry resolved the issue by having benefits, and met with the new retirement system executive. . . Contrary to certifications from . . . [the school district], the filings [of certain early retirement forms], refused to certify the 4 unsuccessfully moved for reconsideration. We granted their petition for a writ

determination; (3) their contractual rights have been unconstitutionally

they still received th[e same amount of early retirement incentive] . Kryger[, however,] was troubled by . . . inconsistencies in the 2001 that regardless of how many sick days an individual may have, determination. The board accepted the recommendation. The petitioners an individual. . . . As a result of this document, it became clear . . .

sick time; (2) the NHRS is collaterally estopped to make any such assertion that the early retirement benefits were based on unused, pre-1991 The petitioners argue that: (1) the NHRS erred by rejecting their part of the early retirement benefit. . . .

benefit] was other than what they were representing. . . . Ms. The hearings examiner recommended affirming the NHRS staff’s intervening years to make [it] think that [the early retirement that . . . laid out how the school district was paying the benefit for there was nothing in the forms that came in during those (Quotations omitted.)

for the Concord School District to report the sick-leave payment

In 2003, the retirement system received a document from Concord accurately and appropriately represent what the payment was and

payment for pre-1991 sick days and the parties worked out a way Dennis Murphy that the early retirement benefit included a this meeting, the Retirement System accepted the explanation of

Until 2001, the Retirement System relied on the district to

Director or Maurice Daneault, Deputy Director . . . . As a result of the benefits administrator,] and either Harry Descoteau, Executive p. 5 “there was a great deal of discussion about it in the [NHRS] office with the

were receiving, because ultimately it enhanced their pension benefit,” and that

the actuary attributed this increase “to the severance payments that members the 150 percent cap was in place, employer contribution rates increased, that retired employees were in line with employer contributions, testified that after

centers upon the application of this definition.

Maureen Kryger, who ensured for the NHRS that retirement annuities paid to

supporting factor.” (Quotation omitted.) Accordingly, the instant dispute that the NHRS clearly exercised its discretion unreasonably or unlawfully. adduced by the hearings examiner, the petitioners have failed to demonstrate time” before exemption from 150 percent cap applies). Given the evidence early retirement benefits unexpectedly increased employer contribution rates.

compensation to be based on unused, pre-1991 sick time and computed their leave or not.” Nevertheless, they argue that the school district intended for this same total amount in severance whether they had accumulated pre-1991 sick

basis,” and that the plain meaning of “basis” is “the base, foundation, or chief

or part of . . . severance pay was based on accrued holiday, vacation or sick The evidence before the hearings examiner indicated that the petitioners’

demonstrate that severance pay was based on unused, pre-1991 sick time.

unlawful.” The petitioners concede that teachers retiring early would receive “the

unreasonably, or capriciously.” the plain meaning of “based on,” Laws 1991, 313:7, means “having as its 1991 sick time. The petitioners assert, and the NHRS does not dispute, that rejected the petitioners’ assertion that payments were based on unused, pre- retiring member must “demonstrate[] to the satisfaction of the [board] that all discretion to accept or reject the proffered explanation. See id. (stating that See Laws 1991, 313:7. Laws 1991, 313:7 further vests the NHRS with

Laws 1991, 313:7 places the burden upon the retiring members to

burden is to demonstrate that the board’s decision “is clearly unreasonable or

or observance of the law, has abused its discretion, or has acted arbitrarily,

board. Both parties agree that the threshold issue is whether the board correctly

I. Interpretation and Application of Laws 1991, 313:7

Id.

“prima facie lawful and reasonable.” RSA 541:13 (2007). The petitioners’ Staff, 150 N.H. 795, 798 (2004). We consider the board’s findings of fact

the board of trustees has acted illegally with respect to jurisdiction, authority, Milette, 141 N.H. at 344. “The reviewing court will grant relief where certiorari is the sole remedy available to a party aggrieved by a decision of the Because RSA chapter 100-A does not provide for judicial review, a writ of resolved in favor of the retirees. The NHRS does not dispute the amount of

p. 6 interpretation of service data in determining when credits were earned” be 1991, 313:7. We disagree. Laws 1991, 313:7 requires only doubts “as to the time, this doubt should be resolved in their favor in accordance with Laws

sick time. the early retirement benefits were based, at least in part, on unused, pre-1991 sufficient the school district’s assurances, including sworn certification, that

whether the early retirement benefits were based on unused, pre-1991 sick

1991 sick time. rates,” one rate for unused, pre-1991 sick time and another for unused, post- She also found it “very unusual . . . to see[] sick leave paid at two different

retirement benefit calculation. of the early retirement benefit. The NHRS, however, continued to accept as

The petitioners contend that, to the extent doubt existed regarding WITH NHRS!” Hansen, 360 U.S. 446, 461 (1959), not arbitrary labels attached by the CBA. Human Services v. Allard, 141 N.H. 672, 675 (1997); cf. Commissioner v. that the substance of the benefit controls its character, see N.H. Division of retirement benefit was based on unused, pre-1991 sick time, finding instead In this light, the NHRS rejected the petitioners’ assertion that their early generally “lump sum payment[s]” and were not expressed in terms of days.

investigation revealed to the NHRS that age was the only variable in the early to abide by the CBA’s fifty percent cap on unused, pre-1991 sick time as part the same regardless of the amount of her unused, pre-1991 sick time. Further retirement benefit. calculated and made it clear that the retiree’s early retirement benefit remained

The document explained how the individual payout was

prominently labeled, in bold print, “INTERNAL DOCUMENT – NOT FOR USE because a document included within one petitioner’s NHRS submission was In 2003, the NHRS looked anew at the early retirement benefit, in part

report the early retirement benefit because early retirement incentives were

figures were not properly reconciled. She testified that the school district failed refused to certify the early retirement benefit forms because, in her opinion, the pre-1991 sick time to be exempt from the 150 percent cap by virtue of the early Nancy Mahar, who served as payroll manager for the school district, sound accounting methods to determine its contributions to the NHRS,

Kryger also questioned the forms generated by the school district to

N.H. CONST. pt. I, art. 36-a, had neither anticipated nor accounted for unused,

contribution rates suggests that the school district, which presumably used actuary, even with the legislature at times.” The need to increase employer only when the issue has been actually litigated.”

p. 7 they received was based on unused, pre-1991 sick leave.

“[c]ollateral estoppel may be invoked to preclude reconsideration of an issue the matter but chose not to do so. We disagree. It is well established that they argue that the NHRS is estopped because it had the opportunity to litigate

from asserting and attempting to demonstrate to the NHRS that compensation

retirement benefits were discussed between representatives of the school meaning of the statute.” compensation given the result of the two meetings at which the early Moyers to great weight,” any such construction could not prevail over “the plain, 140 N.H. 190, 195 (1995); see Restatement (Second) of Judgments excluding the early retirement benefits from the 150 percent cap on earnable pensions could “amount to a prior administrative construction which is entitled M.A. Crowley Trucking v.

concede that the NHRS never litigated the issue at either meeting. Instead, Day v. N.H. Retirement System, 138 N.H. 120, 122 (1993). The petitioners “Findings by administrative agencies may be given preclusive effect.” their contention. Likewise, we note that nothing herein prevents future retirees determining that the petitioners had presented insufficient evidence to sustain Laws 1991, 313:7 in accordance with its plain meaning by reasonably

The petitioners next argue that the NHRS is collaterally estopped from on unused, pre-1991 sick time. Although we might agree that granting

II. Estoppel the NHRS may reach different outcomes under different circumstances. interpretation to which the NHRS is bound and to which this court must defer.

adjudication). Under the circumstances of this case, the NHRS administered (stating that administrative agencies may choose to formulate policy through and brackets omitted)); NLRB v. Bell Aerospace Co., 416 U.S. 267, 294 (1974) administrative agency is not disqualified from changing its mind” (quotation determine whether and to what extent the early retirement benefits were based Appeal of Public Serv. Co. of N.H., 141 N.H. 13, 22 (1996) (noting that an “[a]n

on unused, pre-1991 sick leave. This discretion necessarily contemplates that retirement benefits to be exempt from the cap amounts to an agency demonstrate “to the satisfaction of the . . . board” that compensation was based Laws 1991, 313:7 plainly requires that each retiring member

Div. 1963). We disagree. Laws 1991, 313:7 vests the NHRS with discretion to See Casale v. Pension Com., Etc., of Newark, 187 A.2d 372 (N.J. Super. Ct. Law

The petitioners also argue that roughly ten years of permitting early

no doubt about the interpretation of their service data. unused, pre-1991 sick time each petitioner has accrued. Accordingly, there is p. 8 8

of certain legislation affecting employee’s vested benefits), Constitution.” requisites of a violation in context of union challenge to city’s implementation delegation of its administrative authority to do so preceded the 1992-93 CBA.

under the Federal Constitution as we do under the State Constitution. 47 (2d Cir. 2006), cert. denied, 549 U.S. 11 p. 8 80 (2007), we reach the same result

duplicates the protections found in the contract clause of the United States (collecting federal case law regarding Federal Contract Clause, including well after the early retirement benefit became a feature of the 1992-93 CBA, the Local p. 8 818 v. City of Waterbury, 389 F. Supp. 2d 431, 435 (D. Conn. 2005) requisites of a State Constitutional Contract Clause violation), with AFSCME the 1992-93 CBA. counterpart in this instance, compare Fournier, 158 N.H. at ___ (discussing Because the State Constitution is at least as protective as its federal

Cir. 19 p. 8 86), cert. denied, 480 U.S. 940 (1987). States, 604 F. Supp. 1375, 1378-79 (D. Alaska 1985), aff’d, 807 F.2d 759 (9th demonstrate retroactive application of a law. contracts to which the agency was not a party. See Marathon Oil Co. v. United See Laws 1991, 313:7, :8. This authority cannot be divested by private

expressly reference existing contracts, “we have held that its proscription (19 p. 8 81). Although the NHRS applied the cap to the 2003 and 2004 early retirees 1991.”); Sexton Motors, Inc. v. Renault Northeast, Inc., 121 N.H. 460, 463

and became effective prior to inclusion of the early retirement provision within upon the CBA’s early retirement provision retroactively because it was enacted The 150 percent cap within Laws 1991, chapter 313 does not operate

(quotation omitted). The party asserting a Contract Clause violation must first the State and Federal Contract Clauses.

State v. Fournier, 15 p. 8 8 N.H. ___, ___ (decided January 8, 2009)

“for the decision of civil causes,” N.H. CONST. pt. I, art. 23. Though it does not Part I, Article 23 of the State Constitution prohibits retrospective laws

2006), 155 N.H. 557, 564 (2007). for guidance only, id. at 232-33; In re Grand Jury Subpoena (Issued July 10, Constitution, State v. Ball, 124 N.H. 226, 231 (19 p. 8 83), and cite federal opinions N.H. CONST. pt. I, art. 23. We first address this claim under the State

district], and the State’s own contractual obligations to [them]” in derogation of “impair[ed] both the[ir] . . . fundamental right to contract with the [school The petitioners next argue that the NHRS has unconstitutionally

two meetings. in rejecting this argument because no estoppel effect attached by virtue of the § 27 comment e at 256 (19 p. 8 82). Accordingly, the NHRS did not act unlawfully constitutional standard to be applied is that of rationality. p. 9 application of some recognized suspect classification, the

of a fundamental right, an important substantive right, or

this level of review is the same. Finally, absent some infringement than do the federal courts, although our analysis when applying applied this intermediate review to a broader category of rights

be protected if they retired early.

rights . . . [receive an intermediate level of review]. We have

the prior actions of the [NHRS] that their sick leave benefit would protecting that sick leave, and were promised by the [CBA] and by leave, were beneficiaries of the “grandfather” clause of the statute

legitimate purpose. Classifications involving important substantive interest and must be necessary to the accomplishment of its muster, they must be justified by a compelling governmental

credit. Like those teachers, [they] had accumulated pre-1991 sick

subject to the most exacting scrutiny; to pass constitutional

retirement from 1993 through 2002 and who had pre-1991 service

was exempted from the 150 percent cap. The petitioners contend that this was who retired early from 1993 to 2002, and whose unused, pre-1991 sick time

based upon suspect classes or affecting a fundamental right are

are similarly situated to the Concord teachers who took early

The petitioners argue that they were treated differently from the teachers

Id. at 637-38 (quotations and citations omitted).

classification and the individual rights affected. Classifications review by examining the purpose and scope of the State-created Constitution, we must first determine the appropriate standard of

persons similarly situated should be treated alike.’”

In considering an equal protection challenge under our State

432, 439 (1985)). 634, 637 (2004) (quoting Cleburne v. Cleburne Living Center, Inc., 473 U.S.

“[T]he equal protection guarantee is ‘essentially a direction that all

guidance only, id. at 232-33. State Constitution, Ball, 124 N.H. at 231, and cite federal opinions for XIV, § 1; N.H. CONST. pt. I, arts. 2, 12. We first address this claim under the Federal Constitutional rights to equal protection. See U.S. CONST. amend. Finally, the petitioners argue that the NHRS has violated their State and

IV. Equal Protection p. 10 10

p. 10 100-A:1, XVII to

upon the general public.”

RSA p. 10 100-A:15, I (Supp. 2008). the interest of all participants and beneficiaries, RSA 100-A:15, I-a(a)(1); see because “[i]t was . . . necessary to the . . . state interests of (a) applying RSA see RSA 100-A:14, II (2001), and faithfully discharging its fiduciary duties in board has an important interest in properly administering RSA chapter 100-A,

retaining qualified employees, RSA chapter p. 10 100-A “confers a significant benefit Constitution and our jurisprudence. By attracting to public service and employees with retirement benefits finds support in both our State As discussed above, the importance of providing eligible public satisfies this test. fiduciary obligations of pension fund trustees.” We agree. Legislature, and (b) maintaining sound actuarial practices consistent with the

all present NHRS members in the manner intended by the

The NHRS maintains that its action survives intermediate scrutiny

Constitutional protection. 152, 154 (2008). the determination and use of contributions to the NHRS enjoy State 515, 533 (1996)); see Cmty. Res. for Justice v. City of Manchester, 157 N.H. attract qualified persons to enter and remain in State employment”). Indeed, ‘overbroad generalizations.’” Id. (quoting United States v. Virginia, 518 U.S. hypothesized or ‘invented post hoc in response to litigation,’ nor upon

(2007). The NHRS has the burden of demonstrating that the challenged action objective.” Cmty. Res. for Justice v. City of Manchester, 154 N.H. 748, 762 determine whether it is “substantially related to an important governmental Accordingly, we conduct an intermediate review of the agency action to

believe such rights constitute important substantive rights. Constitutions.”); See N.H. CONST. pt. I, art. 36-a. As such, we

substantive right: that of eligible public employees to retirement benefits. N.H. 597, 601-02 (1978) (recognizing that retirement and other benefits “can employee and his family.” Id.; see Jeannont v. N.H. Personnel Comm’n, 118 employee’s compensation” and “are essentially created for the protection of the benefits under RSA chapter p. 10 100-A “constitute a substantial part of an N.H. v. Belknap County, 122 N.H. 614, 621 (1982). Retirement and related employees with an enforceable right to benefits.” State Employees’ Ass’n of have concluded that “RSA ch[apter] 100-A provides all eligible governmental (stating that right to recover for injuries is an important substantive right). We

Lorette v. Peter-Sam Inv. Properties, 140 N.H. 208, 211 (1995)

property is a fundamental right protected by both the State and Federal Spengler v. Porter, 144 N.H. 163, 166 (1999) (“The right to use and enjoy one’s

with the petitioners that the classification at issue does impact an important Although this case does not implicate a suspect classification, we agree p. 11 11

rational review in public employment context);

administer RSA chapter 100-A in the interest of

rational justification of classification as to property and collecting cases of

BRODERICK, C.J., and DALIANIS and DUGGAN, JJ., concurred.

under the Federal Constitution as we do under the State Constitution. earnable compensation. Consistent with its statutory duties to properly property interests protected by Due Process Clause), we reach the same result sick time had the effect of subjecting the benefits to the 150 percent cap on 408 U.S. 564, 576 (1972) (discussing public employment and benefits as argument that their early retirement benefits were based on unused, pre-1991 cf. Board of Regents v. Roth,

2146, 2153, 2155 (2008) (noting that Federal Equal Protection Clause requires its federal counterpart, see Engquist v. Oregon Dept. of Agriculture, 128 S. Ct. Because the State Constitution is at least as protective in this context as

excess of the 150 percent cap. thereby declined to award retirement benefits based upon compensation in

Commissioning a hearings examiner and ultimately rejecting the petitioners’ The NHRS acted to substantially advance these important interests.