Opinion ID: 2223849
Heading Depth: 1
Heading Rank: 1

Heading: contract clause issues

Text: Appellants argue that the Act unconstitutionally impairs contractual obligations between public employers and employees regarding the level of public employee pension contributions. [6] This court recently addressed the issue of the nature of a public employee's interest in a public pension or retirement plan and the degree to which that interest is afforded constitutional protection. In Christensen v. Minneapolis Municipal Employees Retirement Board, 331 N.W.2d 740 (Minn.1983), we abandoned the gratuity approach in analyzing such issues in favor of an expanded contract approach. Recognizing that a conventional contract approach, with its strict rules of mutuality, can seldom operate to provide protection for specific, legitimate interests of public employees in this context, the Christensen case augmented the contract approach to include the closely related doctrine of promissory estoppel. Id. at 747. Under Christensen, public employees can challenge changes affecting their interests in a public pension plan under the contract clause by establishing their right to the maintenance of the preexisting terms or conditions as a matter of either express contract, implied-in-fact contract, or promissory estoppel. [7] In the case at bar, appellants advance each of these theories in arguing that the Act unconstitutionally impairs contractual obligations between public employers and employees regarding the level of public employee pension contributions. We conclude that no contract or contract term, express or implied, existed between public employers and employees which guaranteed fixed levels of employee retirement contributions to the pension funds. We further hold that the record does not support appellants' claim to a fixed level of employee pension contributions based on a theory of promissory estoppel. Because we therefore affirm the trial court's findings that appellants have failed to establish a right, based either on conventional contract or promissory estoppel theories, to a fixed level of employee pension contributions, we need not address the issue of whether the Act operates to unconstitutionally impair such a right. It cannot be disputed that the record contains no evidence of an express contract designating rates at which public employees must contribute to their pension funds. In the absence of an express contract, appellants argue that the legislature's promise to supply pension benefits to public employees constitutes an implied-infact contract to maintain employee pension contributions at a fixed level during their employment. Where the evidence does not prove the existence of an express agreement, a contract implied in fact may be established by circumstantial evidence showing a mutual intention to contract. See Bergstedt, Wahlberg, Berquist Associates, Inc. v. Rothchild, 302 Minn. 476, 479-80, 225 N.W.2d 261, 263 (1975). Whether a contract is to be implied in fact, and the existence of the terms of such a contract, are questions of fact to be determined by the trier of fact, and the trier's findings in this regard will not be set aside by this court unless they are found to be clearly erroneous. Id., Minn.R.Civ.P. 52.01. Appellants urge that the pension plans themselves constitute contracts between public employees and their employer, and that the maintenance of employee pension contributions at a fixed level may be implied as a term of these contracts. The trial court found, however, that a contract right to the maintenance of fixed employee contribution levels could not be implied from evidence in the record concerning the pension plans. In so finding, the trial court relied, in part, upon specific statutory provisions which greatly restrict the contract rights created by the establishment and maintenance of public pension plans. For example, in Minn.Stat. § 353.38 (1982), the legislature addressed the rights of members of the Public Employees Retirement Association by providing that: Nothing done under the terms of this chapter and acts amendatory thereof shall create or give any contract rights to any person, except the right to receive back upon withdrawal from the association through separation from the public services, the accumulated deductions, as by law defined, standing to his credit on the books of the association. Similar restrictive statutory provisions exist with regard to most of the state's other major public retirement funds. See, e.g., Minn.Stat. §§ 354.07, subd. 8 (teachers' retirement fund), 352.022 (1982) (state retirement fund); see also Minn.Stat. § 645.27 (1982) (state not bound by statute unless statute expressly provides). These statutes clearly support the trial court's conclusion that the legislature did not intend to enter into a contractual obligation with public employees concerning a particular rate of employee contributions to the pension plans. [8] We therefore affirm, as not clearly erroneous, the trial court's finding that no implied contract exists. Relying upon the doctrine of promissory estoppel, appellants next contend that the legislature promised that their contribution levels would remain fixed throughout their contribution periods and that they relied upon that promise to their detriment. Promissory estoppel is applicable when (1) a promise has been made, (2) which the promisor expected or should have reasonably expected to induce action of a definite and substantial character by the promisee, (3) which in fact induced such action, and (4) in circumstances requiring the enforcement of the promise to avoid injustice. See Grouse v. Group Health Plan, Inc., 306 N.W.2d 114, 116 (Minn.1981); Restatement (Second) of Contracts § 90 (1981). The trial court found both that the legislature made no promise regarding fixed employee pension contribution levels and that, even if such a promise had been made, the appellants did not establish the essential element of detrimental reliance. These findings must be upheld unless they are shown to be clearly erroneous. Minn.R.Civ.P. 52.01. Appellants have failed to designate evidence in the record which tends to establish that the legislature made any promise to maintain employee contributions to the pension plans at a fixed level during the contribution period. [9] To the contrary, the record shows that the state had varied contribution levels in the past within a number of the pension funds at issue and that employees were aware of such changes. Consequently, appellants were unable to produce a single witness to testify to any reliance on a fixed, unchanging level of employee contributions. This record belies the appellants' claim to promissory estoppel. [10] In this regard, we endorse the following conclusion of the trial court: There is no basis for the contention that, no matter what the legislature has said, what it has done is induce employee contributors to rely on the expectation that contributions levels would remain fixed. The employee contributions, the employer contributions, and the appropriations to cover unfunded liabilities have been modified on a number of occasions in the past decade. Therefore, an employee aware enough of his or her pension contribution rate to formulate some kind of reliance interest would be aware that those contribution levels have fluctuated over time. Given that history, an expectation that contribution rates would remain fixed is patently unreasonable. We conclude that the trial court's findings that the state made no promise regarding guaranteed levels of employee contributions, and that, even if such a promise had been made, appellants have not established that they reasonably and detrimentally relied upon such a promise, are not clearly erroneous.