United States District Court, E.D. California
STATE OF CALIFORNIA, acting by and through the CALIFORNIA DEPARTMENT OF TRANSPORTATION; and SACRAMENTO REGIONAL TRANSIT DISTRICT, Plaintiffs,
UNITED STATES DEPARTMENT OF LABOR; and THOMAS E. PEREZ, in his official capacity as SECRETARY OF LABOR, Defendants
[Copyrighted Material Omitted]
For State of California, acting by and through the California Department of Transportation, Sacramento Regional Transit District, Plaintiffs: Mitchell Neil Reinis, LEAD ATTORNEY, Thompson Coburn LLP, Los Angeles, CA; Stephen B. Higgins, PHV, LEAD ATTORNEY, Thompson Coburn LLP, St. Louis, MO; Kathleen E. Kraft, PHV, PRO HAC VICE, Thompson Coburn, LLP, Washington, DC.
For United States Department of Labor, Thomas E Perez, Defendants: Ryan Bradley Parker, GOVT, LEAD ATTORNEY, United States Department of Justice, Civil Division, Washington, DC; Susan Ullman, GOVT, LEAD ATTORNEY, U.S. Department of Justice, Washington, DC.
For Amalgamated Transit Union, Amicus: Benjamin Kerl Lunch, LEAD ATTORNEY, Neyhart Anderson Freitas Flynn and Grosboll, San Francisco, CA; Jeffrey R. Freund, NCAED, Bredhoff & Kaiser, PLLC, Washington, DC; Margot A Rosenberg, Leonard Carder LLP, Oakland, CA; William James Flynn, Neyhart, Anderson, Flynn And Grosboll, San Francisco, CA.
For San Francisco Bay Area Rapid Transit District, Amicus: Victoria Rose Nuetzel, LEAD ATTORNEY, Office Of The General Counsel, Bay Area Rapid Transit Distr, Oakland, CA.
KIMBERLY J. MUELLER, UNITED STATES DISTRICT JUDGE.
This case considers the intersection between a state's interest in public pension reform and provisions of the Urban Mass. Transportation Act (UMTA) requiring state transit to ensure the preservation and continuation of collective bargaining rights as a condition of receiving federal funding for mass transit projects.
The case was before the court on September 30, 2014 for hearing on defendants' motion to dismiss or for summary judgment, ECF No. 9, plaintiffs' motion for partial summary judgment, ECF No. 54, and defendant's subsequent motion to dismiss plaintiffs' Spending Clause claim. ECF No. 64. Stephen Higgins and Kathleen Kraft appeared for plaintiffs Sacramento Regional Transit District (SacRT) and the California Department of Transportation (CalTrans); Ryan Parker and Susan Ullman appeared for defendants Perez and the Department of Labor (collectively DOL); Jeffrey Freund and Benjamin Lunch appeared for amicus Amalgamated Transit Union (ATU). There was no appearance for amicus Bay Area Rapid Transit (BART). After considering the parties' arguments, the court GRANTS defendants' motion to dismiss plaintiffs' Spending Clause claim, but DENIES its motion to dismiss or for summary judgment of plaintiffs' Administrative Procedures Act (APA) claims. The court GRANTS plaintiffs' motion for summary judgment of their APA claims.
Under Section 13(c) of the UMTA, now codified at 49 U.S.C. § 5333(b), state and local governments seeking federal grants for transit assistance must seek certification from the DOL that the " interests of employees affected by the assistance" are protected by " fair and equitable" arrangements. These employee protective arrangements are called 13(c) agreements.
In their complaint, filed October 4, 2013, plaintiffs SacRT and CalTrans challenge DOL's determination that California's enactment of the California Public Employees' Pension Reform Act of 2013 (PEPRA), Cal. Gov't Code § 7522, et seq., prevented 13(c) certification. The complaint raises five claims: (1) DOL's interpretation of PEPRA and Section 13(c) was arbitrary and capricious in violation of the APA; (2) DOL acted in excess of statutory authority in denying 13(c) certification; (3) DOL's refusal to grant 13(c) certification is inconsistent with limits on federal power embodied in the Spending Clause and violates the state's fiscal sovereignty in violation of the Tenth Amendment; (4) DOL prejudged the merits of the issues before it and denied plaintiffs due process in violation of the APA; and (5) a declaratory judgment claim, 28 U.S.C. § 2201. Compl., ECF No. 1 at 15-23.
Defendants filed a motion to dismiss or for summary judgment along with the administrative record on December 9, 2013. Defs.' Mot. for Summ. J., ECF Nos. 9, 9-2, 9-3, 9-4, 9-5.
On January 15, 2014, plaintiffs filed a motion to complete and supplement the administrative record and for limited discovery; on January 26, they filed their opposition to the motion to dismiss. Opp'n, ECF Nos. 18, 21. The court continued the hearing on the motion to dismiss pending the decision on the motion to supplement the record. ECF No. 23.
On April 24, 2014, the court granted the motion to supplement in
part and denied it in part and gave the parties the opportunity to file supplemental briefs. Order, ECF No. 41.
On May 15, 2014, plaintiffs filed a supplemental brief in opposition to the motion to dismiss and a response to ATU's amicus brief. Pls.' Suppl. Opp'n, ECF No. 43; Response, ECF No. 44. Defendants filed their reply on May 15, 2014.
On June 6, 2014, plaintiffs gave notice of their intent to file a motion for partial summary judgment and on June 30, they filed their motion. ECF Nos. 49, 54.
On July 23, 2014, the court granted the motion to dismiss plaintiffs' Spending Clause and declaratory judgment claims, but deferred ruling in light of plaintiffs' pending motion for summary judgment.
In an amended complaint, filed August 5, 2014, plaintiffs SacRT and CalTrans challenge DOL's determination that California's enactment of PEPRA prevented 13(c) certification. The amended complaint raises four claims: (1) DOL's interpretation of PEPRA and Section 13(c) was arbitrary and capricious in violation of the APA; (2) DOL acted in excess of statutory authority in denying 13(c) certification; (3) DOL's refusal to grant 13(c) certification is inconsistent with limits on federal power embodied in the Spending Clause and violates the state's fiscal sovereignty in violation of the Tenth Amendment; and (4) DOL prejudged the merits of the issues before it and denied plaintiffs due process in violation of the APA. Am. Compl., ECF No. 1 at 15-23.
On August 8, 2014, ATU and DOL filed oppositions to plaintiffs' motion for summary judgment. ECF Nos. 60 & 61.
On September 2, 2014, DOL filed a motion to dismiss plaintiffs' spending clause claim. ECF No. 64. Plaintiffs filed their opposition on September 16 and DOL filed its reply on September 23, 2014. ECF Nos. 66, 70.
Plaintiffs filed their replies to DOL's and ATU's oppositions on September 23, 2014. ECF Nos. 71-72.
II. THE ALLEGATIONS OF THE AMENDED COMPLAINT AND THE ADMINISTRATIVE RECORD
SacRT is a special regional transit district formed under California law, Cal. Pub. Util. Code § 102000, et seq., based in Sacramento. ECF No. 59 ¶ 29. SacRT employs approximately 942 people, 492 of whom are represented by ATU, Local Division 256. Id. ¶ 41. During the time at issue here, relations between SacRT and ATU were governed by a collective bargaining agreement (CBA), effective September 1, 2009 through February 28, 2013. AR 345. The CBA defines the bargaining unit as " all employees within the service of this DISTRICT in [certain] classifications or occupations" and requires all employees covered by it to become union members as a condition of continued employment. CBA, Art. 1 § 3 & Art. 3 § 1; AR 349, 350.
Under its statutory authority and through collective bargaining, SacRT has established a pension plan for its unionized employees. ECF No. 59 ¶ ¶ 42-43. The plan in effect at the relevant time was refined in 2010 to take account of certain changes in the tax laws and was adopted by the SacRT Board of Directors on July 23, 2012. AR 407, 409. This defined benefit plan provides an annual benefit upon
retirement, based on a percentage of the employee's final average compensation multiplied by years of service. ECF No. 59 ¶ 43; AR 409. The plan is funded exclusively through employer contributions and earnings on plan assets. Id.; see also CBA Art. 67 § 2 & Art. 97 § 4 (transit officers); AR 386, 402. " The Plan Document applies to every Member who is credited with an Hour of Service on or after July 1, 2010." AR 409. An " Hour of Service will be credited for each hour for which the Member is paid, or entitled to payment, for the performance of duties for the District as an Eligible Employee subsequent to the Member's most recent date of hire." Plan, Art. 4 § 4.2(a), AR 411. The Plan defines " Date of Hire" as " the date on which an Employee is first entitled to payment for a Hour of Service for the District." Plan, Art. 2 § 2.9, AR 410. A person becomes an " Eligible Employee on the date he or she first (a) becomes an Employee; and (b) is a member of the bargaining unit represented by ATU." Plan, Art. 3 § 3.1, AR 411. An employee is " any person who is employed by the District under a common-law relationship. . . . A person's status as an Employee will be determined by the District . . . ." Plan, Art. 2 § 2.15, AR 411.
A Plan Member is eligible to retire when he or she is 55 years old and has worked for ten years or has completed 25 years of service. Plan, Art. 7 § 71, AR 413. The retirement payment is calculated using the employee's final compensation, years of service and a percentage multiplier. Plan, Art. 7 § 7.2, AR 413. Pensionable compensation includes overtime, shift differential, bonuses and cashed-out sick leave or vacation. Plan Art. 2 § 2.6, AR 410. A Plan Member who has left employment because of a disability but who returns to service may purchase additional years of service for the time of the disability. Plan, Art. 7 § 7.9, AR 414. The Plan may be modified or amended with the consent of the District and ATU; no such change " may adversely affect any accrued rights of any Member without corresponding advantages, but in all other respects such amendments, alterations, or modifications will be binding upon Members." Plan, Art. 12 § 12.3, AR 416.
In its 418-square mile service area, SacRT operates 69 bus routes with 3,140 bus stops, 38.6 miles of light rail, 50 light rail stations, 33 bus and light right transfer centers, and 18 park-and-ride lots. ECF No. 59 ¶ 40. It " relies heavily on federal funding . . . for its capital expenditures." Id. ¶ ¶ 40, 44. For example, in fiscal year 2014, SacRT budgeted $28 million from federal grant ...