NO. 84-245 IN THE SUPREMECOURT OF THE STATEOF MONTANA 1985

RODNEYNICK, Plaintiff and Appellant,

MONTANA DEPARTMENTOF HIGHWAYS, GARYWICKS asDirector,RUSSELL WRIGG, asAdministrator of Divisionof Motor PoolEquipment, Defendantsand Respondents.

APPEAL FROM: District Courtof the FirstJudicialDistrict, Inand for the County of Lewis & Clark, The Honorable Henry Lohle,Judgepresiding.

COUNSELOF RECORD:

ForAppellant: JohnL. Hollow argued, Helena,Montana

For Respondents: RoyAndes argued,Agency Legal Services, Helena, Montana Jack Holstrom argued, Dept. of Highways, Helena, Montana

Submitted: May 15,1955 Decided: December 27, 1985

Filed:

## DEC2

# :'7985Mr. Justice L. C. Gul-brandsondelivered the Opinion of the Court.Rodney Nick, a disabled veteran, appeals an order of the District Court,of the FirstJudicialDistrict, Lewis and Clark County,granting the State'smotion for judgment on the pleadings. The District Court found that the veterans' preference was a gratuity, repealable or amendable at any time, rather than a constitutionally protected property right; that the retroactive repealer in the newer statutedid not deny him equalprotection; and that the newer statutedid not require a two-thirds vote by the Legislature to repeal the old lawand bar claims under it. We affirm. Nick is a veteran of both World War I1 and the Korean conflict. Hewas employed as a Bureau Chiefwith theMontana Department of Highways from 1978 to 1981. In 1981,Nick was laid-off as part. of the Department's "reduction in force.

### " He then applied for two other similar jobs available in that Department but did not receive either. Nick filed a petition for damages and requested the court issue an order that defendant show causewhy plaintiff should not be employed by the Department of Highways,on the grounds that his veterans' preference right was not considered in his dismissal or in his two subsequent applications for employment. The court granted the Department of Highways' motion for judgment on the pleadinqs

on April 17, 1984. The District Court determined that the Montana Legislature, in Chapter 1, Section 14,Laws of 1983, passed in the 1983 Special Session (hereinafter Section 14) effectively repealed the veterans' preference statute and that this repeal applied retroactively to bar Nick's claim because ithad not been reduced to judgment. After Nick appealed, the State requested an extension of time because the issues raised by Nick's appeal werepending before this Court in Conboy v. State of Montana (Mont. 1985), 693 P.2d 547, 42 St.Rep. 120. Both Nick and the Department of Highways filed amicus briefs in Conboy

# . After this Court affirmed the constitutionality of Section 14,Nick continued topress his appeal. The jssuesNick presents are:

(1) That Section 14 deprives Nick of property without due process of law in violation of Article 2, Section 17 of the Montana Constitution and the Fourteenth Amendment of the United StatesConstitution. (2)That Section 14,by treating Nick differently than other veterans and handicapped persons, denies him equal protection of the laws guaranteedby Article 2, Section 4 of the Montana Constitution and the Fourteenth Amendment of the United StatesConstitution. (3)That Section 14 is invalidunderArticle 2, Section 14 of the Montana Constitution because it bars Nick's suit for injury toproperty and it failed to receive the necessary two-thirds vote of all of the members of the House of Representatives. This is another case following thewake of our decision in Crabtree v. Montana State Library (Mont. 1983)

## , 665 P.2d 231, 40 St.Rep. 963. In Crabtree, we determined that the preference in hiring and firing accorded to qualified veterans and disabled persons by § 10-2-203, MCA was absolute. Subsequently, Governor Schwinden called a Special. Session of the 1983 Montana Legislature to address the situationcreatedby Crabtree. The Legislaturepassed abill. retroactively repealing the statutes interpreted in Crabtree and prospectively making thepreference accorded veterans and disabled persons a tie-breaking device. See Ch. 1, 48th Sp. Session, Laws of Montana, Dec. 1983. The portion of theVeterans' Preference Act that is directly addressed.in this

case is Section 14,which states: Sections 10-2-201 through 10-2-206, MCA, are repealed. This repeal applies retroactively to bar any claim of violation or application of 10-2-201 through 10-2-206 that has not been reduced to judgment, whether or not the judgment is final,on [theeffective date of this act]. Claims under 10-2-201 through 10-2-206 that have been reduced to judgment, whether or not the judgment is final, on [theeffective date of this act] are enforceable. No claim for a violation of 10-2-201 through 10-2-206 may be made under [section 81 of this act. (Effectivedate December 20, 1983.) The Act passed the House of Representatives by a vote of 66-33, with one member absentand notvoting. Legislative records disclose that, at the time of the Special Session, approximately fourteen 1a.wsuitswere pending against the Statebased on this Court's interpretationof § 10-2-203, MCA in Crabtree. The legislative history of Section 14 shows that the Legislaturewas unequivocal in its aim to bar those pending claims. Minutes of the meeting of the House Judiciary Committee on December 13, 1-983,p. 1-5,point out the Legislature's intent: CHAIRMAN BROWN introduced a second amend-ment to bar any claims pending under thepreference rule:

He said his concern arose yesterday when SuperintendentKoke, from the East Helena Schools, described the situa-tion they were in concerning the decisions they made after the Crabtree case to hire all veteransbeca.usefive of seven peoplewho had applied for employmentwere veterans and there were only five positions available

# . Essentiall-y, what this amendment does is bar any cla-imspending except those that are pending final judgement [sic]

# . Senator Mazurek indicated in testimony that there were only one or two cases at the judgement

[sic] stage. Representative Keyser seconded themotion. REPRESENTATIVEHANNAH asked JohnMcMaster what the discussion was in the interimcommittee on this particular issue. Can the legislature goback and take away the rights of people who have already filed under the current statutes? John McMaster stated that the only thing that is really questionable iswhether we can take away a judgement [sic] that is already conclusive. REPRESENTATIVE HANNAH asked Johnwhatwas the point he had made during the interim committee hearing that said, in effect, that it was questionable whether or not you could go back and take away rights that somebodyhad under the previous law. Mr. McMaster said thatwhat hewas saying was limited to the right to filewhere a judgement [sic] had already been made. Generally speaking, if you have a statutory right and a statutory methods [sic] of enforcing that right, and the whole statute is repealed, then that right is losteven ifa lawsuit is filed. In Conboy, 693 P.2d 549, we ruled on the validity of Section 14. Conboy involved a complaint of wrongful discharge by a former deputy clerk of the Supreme Court who

was not reappointed to that position. We upheld the district court's granting of summary judgment to the State because Conboy never legally held the job before he was discharged. Conboy also alleged that he was not granted his veterans' preference inhis discharge. We observed in Conboy: In substance, the District Court held that the veterans' preference was a government gratuity which was repealable by the legislature at any time by a majority vote. We adopt the analysis of veterans' preference rights in State ex rel. Dolan v. Civil Service Bur. of St. Paul (1972), 293 Minn. 477, 197 N.W.2d 711, 714, where the Minnesota Supreme Court stated: "Veterans

### ' preference rights are not rights that have been earned through years of service to the state. They are a gratuity,given to the class ofpersons to show the state's appreciation for service in theArmed Forces of the United States, and they do not amount to vested rights in the recipients

# . . .

# . Therefore, a veterans' preference right can be adjusted when and as the legislature sees fit without violating any vested rights.'I (Citations omitted)We hold that the veterans

### ' preference rightsgranted under the repealed portion of the Veterans Preference Act are not rightsearned through years of serviceto the state, but are a gratuity given to citizens of Montana by the State to show its appreciation for service in theArmed Forces. They do not amount to rights vested in the veterans. Conboy, 693P.2d at 552. Nick argues that Conboy and Dolan are distinguishable from the case at bar because neither involved a situation where a veteran had claimed. (or "accepted") his statutory preference, only to have it retroactively taken by the legislature. In Conboy, the plaintiff had not claimed the preference prior to filing his complaint. In Dolan, the Minnesota Supreme Court only upheld the legislature's power to prospectively modify the preference scheme. This distinction is legally significant and, for that reason, we must gobeyond Conboy and examine Nick's dueprocess claim in lightofhis situation. As presented in this case,the dispositive question is: What, for due process purposes, is the nature of a claimed veterans' preference? Nick's equal protection argument also hinges on this inquiry. The due process clause in the Fourteenth Amendment to the United States Constitution, and in Section 17,Article 2 of the Montana Constitution provides that the statemay not deprive a person of life, liberty, or property without "due process of law." This poses the question of whether "claiming" or "accepting" a veterans' preference creates a property interest sufficiently great to hold sway over the legislature'spower to retract the same. Nick suggests two ways in which he acquired a property interest in his preference; by contract or by reliance. Neither of these convince us that Nick had an interest thelegislature was powerless to revoke absent "just compensation." For Nick's first argument,we reaffirm the position we adopted in Conboy that the veterans' preference is a gratuity, not a contractual right. This Court held that veterans did not acquire any rights beyond those of other citizens for their service in the Armed Forces. Conboy, 693 P.2d at 552. The United States Supreme Court expressly rejected the same contractual right argument inUnited States

v. Teller (1883), 107 U.S. 64, 2 S.Ct. 39, 27 L.Ed. 352. This principle was reaffirmed in Lynch v. United States

(1934),292U.S. 571, 54 S.Ct. 840, 78 L.Ed. 1434, where that Court reasoned: Pensions, compensation allowances, and privileges are gratuities. They involve no agreementofparties; and the grant of them creates no vested right. The benefits conferred by gratuities may be redistributed orwithdrawn at any time in the discretion of Congress. (Citations omitted.) 292 U.S. at 577. Noting that this principle has never been overruled or modified, the Ninth Circuit Court ofAppeals, in Monaco v. United States (9thCir. 1975), 523 F.2d 935, cert. den. 424U.S. 914, 96 S.Ct. 1.11.4,47 L.Ed.2d 319,upheld the constitutionality of the "Dual Compensation Act of 1964," 5 U.S.C. SS3501-3503. That Act revoked preferences originally granted to veteransby the "Veterans' PreferenceAct of 1944"

(originally codified at 5 U.S.C. S861 et. seq.)

# . InMonaco, "the plaintiffs

# ..

# .were threatened with loss of their civil service jobs as a consequence of a substantial reduction in force at the [military facility]

# ." 523 F.2d at 937. Addressing the veterans' argument that they were unconstitutionally denied rights vested under the Veterans' PreferenceAct, the court noted:



# . . . [Wlhatever anticipations a serviceman entertained between 1944 and1964 with respect to preferential advantage in the federal civil service were no more than some sort of floating expectancy entirely dependent upon the Government's bounty. A claim of unconstitutional deprivation cannot be built upon this foundation. 523 F.2d at 940. See also Kizasv. Webster (D.C.Cir. 1983), 707 F.2d 524 and Mack v. United States (Ct. of Claims 1980),

Nick does nothave a reliance interest in theveterans' preference unless and until. it is actually received. Before thatpoint,Nick did not incur any direct, specific financial detriment in gaining the status of aveteran--the cost ofwar and the armed services falls on all shoulders, albeit on some

more heavily than others. The preference was given by the legislature to those more heavily saddled with that burden forpublic purposes. For a reliance interest to be valid, it must be reasonable. We held in Conboy thatveteransacting under the veterans' preference statute did so in contemplation of the legislature's power of repeal and cited S 1-2-110,MCA: Any statute may be repealed at an.ytime except when it is otherwise provided therein. Persons acting under any statute are deemed to have acted in contemplation of this power of repeal.

Along this line,Nick argues that Article 11, Section 35 of the Montana Constitution requires this Court to find tha.t the veterans' preference is, in Montana, more than a gratuity. That Section states: "The people declare that Montana servicemen, servicewomen, and veterans may be given special considerationsdeterminedby the legislature." Our reading of thisprovision is that it ispermissive and does not provide an independent, substantive ground for finding that the veterans' preference has any greater incidentsofproperty than that found inConboy,Dolanor thefederal cases discussed above. The meaning of the above clause and the context of the term "special considerations" lead us to the conclusion that the use of the word consideration was not meant as implying a term of art from contract law. This is supportedby theminutes ofdiscussion of the above clause at the Constitutional Convention. DelegateMcKeon,who proposed Section 35 stated that:



# . .. [Tlhis section is a permissive section to be added to the Bill of Rights, allowing the Legislature to give special consideration to veterans of wars

# ... I think that we should include a section of this nature in the Bill of Rights to give the Legislature an impetus to try and help these individuals

# .

# .. Vol. VI, Montana Constitutional Convention, verbatim transcript,p. 1842. Section 35 is permissive, laudatory and suggestive in nature, and was designed to remove any other constitutional impediment that might stand in the way of the preferential treatment ofvetera.ns. Wick also contended at oral argument that the statement in White v. State of Montana (Mont. 1983), 661 P.2d 1272, 1275, 40 St.Rep. 507, 510, that "all persons have a speedy remedy for every injury" is an independent ground for his lawsuit. This language alone does not provide Nick a new

cause of action not otherwise recognized. Further,White is distinguishable from the case at bar in that here, as discussed above,no fundamental right isburdened. This result is supported by Jensen v. State of Montana (Mont. 1984), 689 P.2d 1231, 41 St.Rep. 1971, holding that the remedy for denial of the statutory preference alone,

(i.e. absent the other elements of wrongful discharge or discrimination) is a writ of mandamus directing the hiringagency to re-open the application process and fill the vacancy in accordance with Crabtree. This brings us to Nick's argument that Section 14 offends the equal protection clauses of the Fourteenth Amendment to the United States Constitution, and Article TI, Section 4 of the Montana Constitution. In order for this Court to apply a strict scrutiny analysis to this claim,Nick must show that Section 14 either burdens a fundamental right or involves a suspect class. Oberg v. City of Rillings

(Mont. 1983), 674 P.2d 494, 40 St.Rep. 2034. Otherwise, Section 14 survives review if the legislaturehas a rational basis for its action. Nick argues that Section 14 created three classes of veterans: (1) those who received the full Crabtree preferen.ce; (2) his class, those who were denied the preference post- Crabtree but failed to obtain a judgment before Section 14 took effect and received nothing; and (3) those who received the tie-breaker preference articulated in Section 14. These classes do not involve a suspect criteria such as race, nationality or alienage, so a strict scrutiny analysis isnot required. The legislativehistory, of Section 1.4 showsthe legislature'svalid and rational reasons for its actions. Testimony indicated that many governmental bodies were thrust into difficult situations by the Crabtree decision after interpreting the preference statutes differently for decades. Legislators voiced concerns of fiscal integrity, employee competence, and academic freedom. Ch. 1, Laws 1983, including Section 14, was a rational response to these legitimate concerns. The legislature's giving of aveterans'preference does not cause that preference to be a fundamenta.1right, as discussed in the first issue. This government gra-tuityfits within one group of statutory rights discussed by ProfessorCharles R. Hochman in his article,The Supreme Court and the 

### -- Constitutionality 

### - of Retroactive Legislation, 73 Harv.L.Rev.

There are two special types of statutory rightwhich may be altered or repudiated at any time until the benefits conferred by them are actually received. The first of these embraces rights arising from statutes granting gratuities from the government. The Court has said that the general principle governing such statutes is that "benefitsconferred by gratuities may be redistributed or withdrawn at any time in the d-iscretion of Congress."

[CitingLynch, 292U.S. at 577.1

The key element in both the gratutiy and penalty cases appears to be the absence of any financial cost in the acquisition of the right based upon the original statute. [Citing Steamship Co. v. Joliffe (1865), 69 U.S. (2Wall.) 450.1

It should be stressed that the reliance



### - riht from the required to remove 

## a g

. 

### - category of gratuity or penalty is a financialdetriment

## -- in txe acquisitiono? the right,and not merely reliance on t& 

### -- 

### -- fiht after it accrues,as, for example, the making - 

## OF - a financiaTcommitmen; 

### - in reliance upon the statute. The reason for this stricter requirement isprobably similar to that encountered in the cases sustaining the extension of statutes of limitations; the penalty or gratuity is given by a statute for public purposes which are not controlledby themerits of the donee's claim to the right. Under these circumstances, the Court is reluctanttopermit the donee to obstruct a rea~sessme~t of these purposes by the legislature. (Emphasisadded.) 73 Harv.L.Rev. at 724-726. Again, no strict scrutiny analysis applies since Section 14 does not burden a fundamental right and the legislature's reasons for its actions, articulated above, satisfy the rationalbasis test. Finally,Nick argues that Section 14 failed to garner the Constitutionally required two-thirdsvote of the House of Representatives, and is thus invalid; see Art. 11, Sec 18, Mont.Const. We affirm the following holding in Conboy: "Weconclude that the legislature properly could repeal the veterans' preference by a majority vote at any time

# .. . "

The District Court's order is affirmed

We concur: '7 

# n 

# 6g

Justice

Justices /I 

### /-"-7

Honorable Thoma Judge of the sitting in JusticeWilliam Hunt, Sr.Mr. Justice Frank R. Morrison, Jr. dissentsas follows: The majority opinion simply fails to address the paramount issue presented in this appeal. That issue is: WHERE A CAUSE OF ACTION CAN BE STATED FOR A WRONGFUL TERMINATION OR WRONGFUL FAILURE TO HIF.E, CAN THAT CAUSE OF ACTION RE ELIMINATED WITHOUT OFFENDING THE ACCESS CLAUSE OF THE MONTANA CONSTITUTION? Nick was terminated in 1981 and shortly thereafter applied for two similar jobs, but did not receive either. Nick was entitled to preference points under the veterans1 preference statute then in existence. If Nick had a claim, themerits of which arenot before thisCourt, that claimhad ripened prior tothe legislative repeal in 1983. This case does not involve the question of whether veterans' preference points area gratuitywhich can be taken by the legislature. I do agree that a statute granting preference points can be repealed. In otherwords, a veteran is not entitled to preference points for the life of the veteran simply because they existed at the time the veteran entered the service. Nick alleges that he was terminated and not rehired because the State of Montana failed tocomply with the legal mandate granting preference points. Rather than seek a reopening of thebidding process, Nick sued fordamages. The damages claimed arose out of a wrongful discharge and wrongful failuretorehire inthatthe State failedtofollow the law and therefore violated public policy. Such a cause of action is recognized inMontana. Nye 17. Department of Livestock (1982), 196Mont. 222, 639 P.2d 498. Nick alleges damages. If it be true that the State violated the law in failing to give preference points and Nick was damaged, the cause of actionripened atthetime the State acted. At that point Nick had a claim for damages which had value, if true. In enacting the legislation in 1983, and applying it retroactively, the legislatureabolished a cause of action for damage to Nick's property interest whichwas, at that time,recognizedby law. Article 11, Section 16 of the 1972Montana Constitution provides: The administration of justice. Courts of justice shall be open to every person, and speedy remedy afforded for every injury of person, property, or character. We have interpreted this section to afford a constitutional right to full legal redress for every injury to person or property. White v. State of Montana (Mont. 1983), 661P.2d 1272, 40 St.Rep. 507. The constitutional right stated in Article 11, Section 16 has not been held by this Court to be an absolute right. Rather we have held that the right, being stated in the Declaration of Rights section of the Constitution, is fundamental in character. Being a fundamental right, classification systems which discriminateamong litigants are subjected to a strict scrutiny analysis. Here we have a group ofpeople, veterans and handicapped persons, who had a cause of action when their preference points were unlawfully taken from them. All other employees who were terminated by the State or other employers, in violation of the law, have a recourse in the court system. Veterans are singled out and are denied any recourse although the law was violated in their discharge. Such treatment of veterans, the group to which Nick belongs, must be strictly scrutinized and the discriminatory scheme fail unless there is a compelling state interest shown. White v. State of Montana, supra. The State cannot satisfy a compelling state interest showing by a mere claim on the legislature's part that a compelling state interestexists. White v. State ofMontana, supra. The majority opinion does not even contend that a compelling state interesthasherebeen shown.The discrimination against veterans who had a cause of action and were entitled to redress under the Constitution must fail when subjected to a strict scrutiny analysis. I would remand this case for trial.

I concur in the dissent of Jus