Court Opinion

ID: 4116593
Source: CourtListenerOpinion
Date Created: 2017-01-18 20:02:15.757989+00
Date Added: 2024-06-11T07:46:16.274870
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                           Pursuant to Sixth Circuit I.O.P. 32.1(b)
                                  File Name: 17a0011p.06

                 UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT

 BOBBY DODD,                                         ┐
                              Plaintiff-Appellant,   │
                                                     │
                                                     >       No. 16-5470
       v.                                            │
                                                     │
                                                     │
 CITY    OF     CHATTANOOGA,       TENNESSEE;        │
 CHATTANOOGA FIRE AND POLICE PENSION FUND,           │
                         Defendants-Appellees.       │
                                                     ┘

                        Appeal from the United States District Court for
                       the Eastern District of Tennessee at Chattanooga.
                 No. 1:14-cv-00358—Harry S. Mattice Jr., District Judge.

                              Argued: November 30, 2016

                          Decided and Filed: January 18, 2017

               Before: NORRIS, GIBBONS, and ROGERS, Circuit Judges.

                                  _________________

                                      COUNSEL

ARGUED: William Gerald Tidwell, Jr., TIDWELL, IZELL & RICHARDSON, Chattanooga,
Tennessee, for Appellant. Zachary H. Greene, MILLER & MARTIN PLLC, Chattanooga,
Tennessee, for Appellee City of Chattanooga. Cameron S. Hill, BAKER DONELSON,
BEARMAN, CALDWELL & BERKOWITZ, PC, Chattanooga, Tennessee, for Appellee
Chattanooga Fire and Police Pension Fund. ON BRIEF: William Gerald Tidwell, Jr.,
TIDWELL, IZELL & RICHARDSON, Chattanooga, Tennessee, for Appellant. Zachary H.
Greene, W. Scott Parrish, MILLER & MARTIN PLLC, Chattanooga, Tennessee, for Appellee
City of Chattanooga. Cameron S. Hill, William E. Robinson, BAKER DONELSON,
BEARMAN, CALDWELL & BERKOWITZ, PC, Chattanooga, Tennessee, for Appellee
Chattanooga Fire and Police Pension Fund.
 No. 16-5470                Dodd v. City of Chattanooga, Tenn., et al.                      Page 2

                                       _________________

                                            OPINION
                                       _________________

       ROGERS, Circuit Judge. This case arises out of a 2012 amendment to the law governing
Chattanooga’s Fire and Police Pension Fund. Before 2013, a Fund member’s surviving spouse
could receive benefits after the member died without incurring a proportional reduction in the
member’s lifetime benefits. In 2012, the City of Chattanooga removed this “default death
benefit” for members who were not eligible to retire as of January 1, 2013. Bobby Dodd was not
eligible to retire on that date and therefore opted for a five-percent reduction in current, lifetime
benefits so that his wife could receive an additional benefit upon his death. Because Dodd would
not have incurred this five-percent reduction prior to the 2012 amendment, he sued the City and
the Fund, asserting claims under the federal Contract Clause, Due Process Clause, and Takings
Clause, as well as Tennessee’s Law of the Land Clause. Dodd also argued that the 2012
amendment was not validly enacted under local law. The district court granted the City’s and the
Fund’s motions for summary judgment on all claims, which Dodd now appeals. Because Dodd
does not have a contract or property right to the default death benefit, his constitutional claims
fail. Dodd’s challenge to the validity of the amendment’s enactment is also without merit.

                                                 I.

       Chattanooga’s fire and police pension plan is codified in §§ 2-400 to 2-425 of the
Chattanooga City Code. Under the plan, a member’s interest in future pension benefits vests
after ten years of active service. Chattanooga, Tenn., Code § 2-415 [hereinafter Code]. At that
point, the member has the right to receive either a full refund of his contributions or a deferred
vested retirement benefit upon turning fifty-five. Id. Then, after twenty-five years of active
service, the member becomes entitled to an annual Service Retirement Pension under § 2-411.
The pension benefit is calculated, pursuant to § 2-411(a), based on the member’s years of active
service and a percentage of his average pay.

       Typically, a member’s retirement benefit takes the form of a single-life annuity paid out
in monthly installments. However, a member may elect a “Joint and Survivor Option,” which
 No. 16-5470               Dodd v. City of Chattanooga, Tenn., et al.                       Page 3

spreads the annuity out over two lives, as an alternative under § 2-418. There are various
alternative options in § 2-418, but only Option D is relevant to this appeal. Under Option D, a
member receives “[a] decreased retirement benefit payable . . . for life,” which continues after
the member’s death to a surviving beneficiary, who receives fifty percent of what the member
received during his lifetime. Code § 2-418(1). When a member selects Option D, he ends up
receiving the actuarial equivalent of a single-life annuity. Id. However, the monthly pension
payments during the member’s lifetime are reduced by five percent to account for the funds paid
to the member’s beneficiary after the member dies.

       In a separate section, the pension plan provides for a “death benefit.” Before the 2012
amendment at issue in this case, § 2-411(c) provided:

                Upon the death of any member employed on November 3, 1992, who is
       retired under the provisions of this Section, or upon the death of such member
       prior to retirement, but eligible for benefits under this Section, there shall be paid
       to said member’s beneficiary a death benefit of $10,000.00, and the benefits under
       Section 2-418, and the surviving spouse shall be paid the sum of $500.00 per
       month until death if said spouse is not a beneficiary under one of the options
       listed in Section 2-418. If the member has not elected any option prior to his
       or her death, a benefit shall be payable to the deceased’s surviving spouse, if
       any, as though he or she had elected Option D., Section 2-418.

Code § 2-411(c) (2003) (emphasis added). Under this provision, if a member was employed by
the City on November 3, 1992, and had elected a Joint and Survivor option, upon the member’s
death his beneficiary would receive whatever benefits the beneficiary was entitled to under the
member’s § 2-418 election. Pursuant to the boldfaced text, if the member did not make an
election under § 2-418, his surviving spouse, if any, would still receive benefits after the member
died as if the member had elected Option D. This is the “default death benefit.” As the district
court explained, the default death benefit created a “loophole by which a retiree could receive the
full amount of his/her pension in the form of a single life annuity, then have his/her spouse
receive a generous death benefit paid in monthly installments, rather than electing a Joint and
Survivor option,” which would have decreased the retiree’s lifetime payments.

       In response to a substantial financial crisis following the 2008 recession, the City
amended the pension plan in 2012 through Ordinance 12674.                See Chattanooga, Tenn.,
 No. 16-5470               Dodd v. City of Chattanooga, Tenn., et al.                     Page 4

Ordinance 12674 (Dec. 11, 2012) [hereinafter Ordinance 12674]. The ordinance eliminated the
default death benefit for plan participants who were not eligible to retire as of January 1, 2013,
by amending § 2-411(c) to read:

       Effective January 1, 2013, upon the death of such member who is eligible for
       benefits under this Section, there shall be paid to said member’s beneficiary a
       death benefit of $10,000.00, and the benefits, if any, elected by the member under
       Section 2-418. If the member has not elected any option prior to his or her death,
       a benefit shall be payable to the deceased’s surviving spouse, if any, as though he
       or she had elected Option D., Section 2-418. Notwithstanding the foregoing, if
       a member who is employed on November 3, 1992, but is not eligible for
       benefits under this Section on January 1, 2013, or is employed after
       November 3, 1992, shall die before retirement and after reaching the
       conditions to be eligible for benefits under this Section or shall die after
       retirement, there shall be paid to his or her beneficiary or beneficiaries the
       benefit of $10,000.00 and such benefits elected under Section 2-418.

Ordinance 12674 (emphasis added). Under the amended § 2-411(c), a member who becomes
eligible to retire after January 1, 2013, must select an option under § 2-418 for the member’s
surviving spouse to receive payments after the member’s death. The benefits are no longer
automatic; a member cannot receive the death benefits without proportionally reducing her
lifetime payments.

       Dodd joined the Chattanooga Police Department on June 6, 1986, and retired as Chief of
Police on December 31, 2013, after twenty-five-and-a-half years of service. Prior to the 2012
amendment, Dodd was eligible for the default death benefit, as he was employed in the police
force on November 3, 1992. After the 2012 amendment, however, Dodd is no longer eligible for
the default death benefit, as he was not eligible to retire until June of 2013—after January 1,
2013. Dodd learned of the change on December 20, 2012, while completing his retirement
paperwork, and accordingly elected Joint and Survivor Option D. Because the 2012 amendment
forced Dodd to elect Option D for his spouse to actually receive benefits upon Dodd’s death, his
current monthly pension has been reduced by five percent—from $6,695.64 to $6,360.86.

       Dodd sued the City and the Fund over Ordinance 12674’s elimination of the default death
benefit, asserting claims under the Contract Clause, Due Process Clause, and Takings Clause of
the U.S. Constitution, as well as the Law of the Land Clause of the Tennessee Constitution.
 No. 16-5470                    Dodd v. City of Chattanooga, Tenn., et al.                              Page 5

Dodd also claimed that Ordinance 12674 was not validly enacted under Chattanooga law
because the City Council passed it after two readings, see Ordinance 12674 p. 5, whereas the
pension plan required three. Code § 2-411(d) reads: “The City Council . . . may, by ordinance,
passed on three separate readings, amend any section of” the pension plan.1                         In contrast,
Chattanooga’s Charter provides that “[n]o ordinance shall be valid unless passed on two
(2) separate readings.” Chattanooga, Tenn., Charter § 11.2 [hereinafter Charter]. Previously, the
Charter provided for three readings, but the City amended the provision to two readings in 2004.
See Chattanooga, Tenn., Ordinance 11590 (Aug. 3, 2004) [hereinafter Ordinance 11590]. While
amending the Charter from requiring three readings to requiring two, the City also declared
“[t]hat all laws constituting the present Charter of the City of Chattanooga, not in conflict with
this amendatory home rule ordinance, be and the same are continued in full force and effect, and
all laws or parts of laws in conflict therewith are hereby repealed.” Id. sec. 2. Despite this
declaration, the pension plan still requires—on its face—the City Council to read an ordinance
that amends the plan three times before adopting it. When the City passed Ordinance 12674—
the law challenged in this case—this three-readings requirement existed side-by-side with the
two-readings requirement in the City Charter.2

        Below, the City and the Fund argued that, because the “all laws or parts of laws in
conflict therewith are hereby repealed” language effectively repealed the pension plan’s three-
readings requirement, only two readings were required to amend the plan through Ordinance
12674. Dodd responded that a separate City Charter provision, § 11.12, prevented the City from
repealing the pension plan’s three-readings requirement through the ordinance that amended the
Charter from requiring three readings to requiring two. The district court rejected Dodd’s
argument.      The court reasoned that, because the City Charter controls over conflicting
ordinances, the Charter’s two-readings requirement controlled. The court held that, therefore,
Ordinance 12674 was validly enacted after only two readings.
        1
         When the City passed Ordinance 12674, this provision was in the City Charter, not the Code. See
Chattanooga, Tenn., Ordinance 11012 sec. 1, item 7 (May 9, 2000).
        2
          Currently, a provision in the City Charter specific to the pension plan allows the City Council to amend
the plan after only two readings. See Chattanooga, Tenn., Ordinance 12677 sec. 28 (Dec. 18, 2012). Because the
provision was not enacted until after the City passed Ordinance 12674, however, presumably it is not relevant to
Dodd’s case. Furthermore, because none of the parties raises an argument on appeal about how this change affects
Dodd’s validity argument, we do not consider it.
 No. 16-5470                Dodd v. City of Chattanooga, Tenn., et al.                     Page 6

       The district court also rejected Dodd’s constitutional arguments, starting with his
Contract Clause claim. The court held that Dodd’s Contract Clause claim failed as a matter of
law because he had no contract right to the default death benefit. The court reasoned that the
City Code “unambiguously states that employees only have a contractual interest in vested and
accrued financial benefits.” The court further noted that, under the former Code, the default
death benefit did not vest or accrue until a member reached twenty-five years of service.
Because Dodd had not completed twenty-five years of service when the City amended the
default death benefit, he had no vested, accrued interest in the benefit, and thus no contract right
to it. The district court rejected Dodd’s Due Process Clause, Law of the Land Clause, and
Takings Clause claims along the same lines. The court held that, even if Dodd was entitled to
the default death benefit, he would not have a cognizable substantive due process claim.
Furthermore, the court reasoned that Dodd had no constitutionally protected property interest in
the default death benefit to support his Takings Clause and procedural due process claims.
Accordingly, the court granted the City’s and the Fund’s motions for summary judgment, which
Dodd now appeals.

                                                II.

       Dodd’s Contract Clause claim fails because he had no contract right to the default death
benefit when the City amended the benefit in 2012. Frazier v. City of Chattanooga, Tennessee,
841 F.3d 433 (6th Cir. 2016), largely forecloses Dodd’s claim. In Frazier, several members of
Chattanooga’s Fire and Police Pension Fund challenged a 2014 amendment to the plan that
reduced retirees’ annual cost-of-living adjustment. We held that, pursuant to Chattanooga Code
§ 2-411(d), the City expressed an intent to be bound only to—and thus pension-plan members
can claim a contract right only to—vested, accrued financial benefits. See id. at 436. Because
the cost-of-living adjustment was neither vested nor accrued, the members’ Contract Clause
claim failed. Id. at 438. So too here; because the default death benefit is neither vested nor
accrued, Dodd cannot claim contractual entitlement to it.

       As a preliminary matter, § 2-411(d)’s amending language applies to Dodd, even though it
was not part of the plan until fourteen years after Dodd joined the police force. From the time
Dodd entered the force in 1986 until § 2-411(d) was amended in 2000, the pension plan’s
 No. 16-5470                Dodd v. City of Chattanooga, Tenn., et al.                      Page 7

amending language only mentioned increasing benefits. See Chattanooga, Tenn., Ordinance
9778 sec. 1, item 3 (Aug. 18, 1992). In contrast, the current language in § 2-411(d) reads:

               The City Council, City of Chattanooga . . . may, by ordinance, passed on
       three separate readings, amend any section of the [pension plan]; provided that
       such amendment is not inconsistent with sound actuarial principles, methods, and
       actuarial assumptions and further provided that such amendment shall not in any
       way decrease any vested financial benefits accrued by any participant or
       beneficiary of the . . . Fund.

Chattanooga, Tenn., Ordinance 11012 sec. 1, item 7 (May 9, 2000) [hereinafter Ordinance
11012]. It does not automatically follow that, because the pension plan did not specifically allow
the City to decrease benefits until fourteen years into Dodd’s service, the current language that
allows the City to do so cannot apply to him. This premise ignores the fundamental assumption
in Contract Clause analysis that legislation merely expresses current government policy—and
future legislatures are free to change that policy—rather than creating contractual obligations.
See Nat’l R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry. Co., 470 U.S. 451, 465–66
(1985). Under this rule, because the plan did not specifically limit the City’s ability to reduce
pension benefits before 2000, the City likely could have freely amended the plan until it added
the current § 2-411(d) language. Furthermore, in Tennessee a pension plan is not “‘frozen’
against detrimental changes or modifications the moment an employee begins to participate in
it.” Blackwell v. Quarterly Cty. Court of Shelby Cty., 622 S.W.2d 535, 541 (Tenn. 1981). The
plan was similarly not set in stone the moment Dodd’s right to some future benefits vested upon
reaching ten years of service. Section 2-411(d), along with its limits on decreasing vested,
accrued financial benefits, therefore applies to Dodd.

       Dodd’s interest in the default death benefit had not vested before the City removed the
benefit in 2012. The pension plan’s express vesting provision is § 2-415, titled “Termination of
employment after ten years of service; vesting; death after termination.” Code § 2-415. As we
recognized in Frazier, “[a]fter ten years of service, § 2-415 gives a participant the right either to
a full refund of her contributions or to retirement benefits upon turning fifty-five.” Frazier,
841 F.3d at 437. Just because Dodd’s interest in some future benefits vested after ten years of
service does not mean that Dodd became entitled to the default death benefit when he hit ten
 No. 16-5470                Dodd v. City of Chattanooga, Tenn., et al.                       Page 8

years. Section 2-415 lists which interests vest after ten years of service, and those interests do
not include the default death benefit. Dodd thus does not have a vested interest in the benefit.

       Furthermore, Dodd’s interest in the default death benefit had not accrued before the
2012 amendment. In Frazier, we defined “accrued,” as the term is used in Code § 2-411(d), to
mean “‘[t]o come into existence as a claim that is legally enforceable.’” Id. (alteration in
original) (quoting American Heritage Dictionary of the English Language 12 (4th ed. 2000)).
Section 2-411(c) requires a member to be “retired under the provisions of this Section [or]
eligible for benefits under this Section” before the member is entitled to the death benefit.
Code § 2-411(c). That is, the member must have completed twenty-five years of active service.
Thus, Dodd’s right to the default death benefit would not have become legally enforceable until
he reached twenty-five years of service. Dodd did not hit twenty-five years until June 2013, after
the City passed Ordinance 12674 in December of 2012. Dodd therefore did not have an accrued
interest in the default death benefit before the City made him ineligible for the benefit.

       Because Dodd’s interest in the default death benefit was neither vested nor accrued when
the City passed Ordinance 12674, Dodd is not contractually entitled to the benefit. Blackwell v.
The Quarterly County Court of Shelby County, 622 S.W.2d 535 (Tenn. 1981), does not change
this result. In Blackwell, the Tennessee Supreme Court “held that a reduction in [pension] plan
participants’ base benefits cannot constitutionally be applied to employees whose interests have
vested after ten years of creditable service.” Frazier, 841 F.3d at 438. In Frazier, we noted that
Blackwell was unhelpful to determining whether the pension plan’s cost-of-living adjustment
was a vested, accrued financial benefit, because Blackwell only dealt with decreasing base
retirement benefits. See id. The 2012 amendment to the default death benefit similarly did not
adjust Dodd’s base benefit—even though Dodd’s lifetime payments were reduced when he
elected Option D, he and his wife will ultimately receive the actuarial equivalent of a single-life
annuity. So Blackwell is also inapposite here.
 No. 16-5470                  Dodd v. City of Chattanooga, Tenn., et al.                            Page 9

        Dodd’s alternative constitutional arguments fail along with his Contract Clause claim.3
First, to the extent Dodd relies on a substantive due process theory, he has no cognizable claim.
We have reasoned that “[s]tate-created rights such as [the] contractual right to promotion do not
rise to the level of ‘fundamental’ interests protected by substantive due process.” Charles v.
Baesler, 910 F.2d 1349, 1353 (6th Cir. 1990). This rationale applies equally to Dodd’s interest
in the default death benefit. Dodd’s due process claim is cognizable, if at all, under procedural
due process, not substantive due process. Second, Dodd’s procedural due process and Takings
Clause theories fail because he does not have a constitutionally protected property interest in the
default death benefit. “[T]o have a property interest in a contractual benefit, a person must ‘have
a legitimate claim of entitlement to it.’” City of Pontiac Retired Emps. Ass’n v. Schimmel,
751 F.3d 427, 432 (6th Cir. 2014) (quoting Bd. of Regents of State Colls. v. Roth, 408 U.S. 564,
577 (1972)). If the state has total discretion to award or remove a benefit, a person cannot claim
entitlement to the benefit. Puckett v. Lexington-Fayette Urban Cty. Gov’t, 833 F.3d 590, 605
(6th Cir. 2016). As discussed in the Contract Clause analysis above, in 2012 the City had
discretion to remove the default death benefit from those, like Dodd, who were not yet eligible to
retire. Dodd therefore has no protected property interest in the benefit and no viable procedural
due process or Takings Clause claim.

                                                    III.

        Dodd’s only argument on appeal that Ordinance 12674 was not validly enacted—that
City Charter § 11.12 prevented the City from repealing the three-readings requirement—is also
without merit. Charter § 11.12 reads:

                The City of Chattanooga, in the preparation of any digest of its local laws
        and ordinances is hereby empowered and authorized to codify, revise and collect
        in the form of a Code all ordinances of a general nature, and in so doing, the city
        council shall have full power and authority without special ordinance referring to
        each ordinance amended, altered, repealed or modified, to amend, alter, repeal or
        modify any ordinance of a general nature other than contract ordinances, franchise
        ordinances, ordinances relating to bond issues or other ordinances in or by which

        3
         Because Tennessee courts interpret the state’s Law of the Land Clause as synonymous with the federal
Due Process Clause, Daugherty v. State, 393 S.W.2d 739, 743 (Tenn. 1965), we address the two together.
 No. 16-5470                Dodd v. City of Chattanooga, Tenn., et al.                  Page 10

       the city has assumed such contract obligations as are protected by the Constitution
       of the United States or the State of Tennessee.

Charter § 11.12. Dodd argues on appeal that the City could not repeal § 2-411(d)’s three-
readings requirement through the ordinance that purported to repeal it because the ordinance was
a “general ordinance,” whereas § 11.12 requires a “special ordinance,” one specifically referring
to the ordinances it modifies, to amend the pension plan.

       However, Dodd’s argument ignores the opening clause of Charter § 11.12.                The
provision’s limitations only apply, if at all, when the City modifies the pension plan through its
codification power. Yet the City did not repeal the three-readings requirement through its
codification power. The relevant ordinance’s preamble states that it was passed pursuant to
Article XI, Section 9 of the Tennessee State Constitution, which is the home-rule provision that
gives the City the power to amend its charter. See Ordinance 11590 pmbl. There is no
indication in the ordinance—and Dodd has presented no argument to this court—that the City
was legislating pursuant to its codification power, rather than this general power to amend the
Charter. Thus, Charter § 11.12’s limitations did not apply when the City repealed the three-
readings requirement. Because Dodd presents no other argument that Ordinance 12674 was not
validly enacted, his challenge is unsuccessful.

                                                  IV.

       The judgment of the district court is affirmed.