Parker v. Wakelin

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT

Nos. 96-2225
96-2226
96-2227
96-2228

RICHARD M. PARKER, ET AL.,

Plaintiffs, Appellees, Cross-Appellants,

v.

DAVID S. WAKELIN, ET AL.,

Defendants, Appellants, Cross-Appellees.

APPEALS FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MAINE

[Hon. Gene Carter, U.S. District Judge]

Before

Torruella, Chief Judge,

Boudin and Lynch, Circuit Judges.

Cabanne Howard, Assistant Attorney General, with whom Andrew
Ketterer, Attorney General, and
Thomas D. Warren
, State Solicitor,
were on brief for appellants.
Donald F. Fontaine, with whom Kaighn Smith, Jr. and Fontaine
& Beal, P.A. were on brief for appellees.

August 11, 1997

TORRUELLA, Chief Judge. The question presented by this

appeal is whether certain legislative amendments to the Maine State

Retirement System ("MSRS") violate the Contract Clause of the

United States Constitution as applied to plaintiffs, a class

comprised of current Maine public school teachers all of whom are

members of the MSRS. Following a bench trial, the district court

held that certain amendments violated the Contract Clause as

applied to those public employees who had satisfied the service

requirements under the MSRS and whose pension rights had thereby

"vested." Finding no unmistakable intent on the part of the Maine

legislature to create private contractual rights against the

reduction of pension benefits prior to the point at which pension

benefits may actually be received, we hold that the Maine

amendments do not violate the Contract Clause with regard to any of

the plaintiffs. Accordingly, we reverse the district court's

holding that the amendments violate the Contract Clause as applied

to "vested" members of the MSRS.

BACKGROUND

None of the relevant facts recited below are in dispute.

I. The Maine State Retirement System (MSRS)

The MSRS operates as a public pension trust pursuant to

Maine's public employee retirement benefit statute.
See 5 M.R.S.A.

SS 17001-18663 (1989 & Supp. 1996). The MSRS was created in 1942

to encourage "qualified persons to seek public employment and to

continue in public employment in their productive years." 5

M.R.S.A. S 17050 (1989). For all Maine state employees, including

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the public school teachers comprising the plaintiff class in the

instant case, membership in the MSRS is mandatory. 5 M.R.S.A.

SS 17001(14), 17651 (1989). All MSRS members make mandatory

contributions into a pension fund. The State of Maine also

contributes annually to maintain the fund's actuarial soundness

with regard to future benefit obligations. 5 M.R.S.A. SS 17701-A,

17701-B, 17153(1-A)(B)(Supp. 1996). The MSRS can be classified as

a "defined benefit system," in that the retirement benefits

provided for teachers are defined upon employment and financed in

part by their fixed contributions into the system.

The teachers, as members of the system, qualify to

receive retirement benefits upon (1) reaching the statutory

retirement age,
and (2) satisfying
either of the following service

requirements: (a) at least ten years of creditable service; or (b)

at least one year of creditable service prior to reaching the

statutory retirement age while in public service. 5 M.R.S.A.

S 17851 (1989 & Supp. 1996). Alternatively, a member may be

entitled to receive retirement benefits when he or she retires

after performing at least 25 years of creditable service. Id. In

the district court's decision, the term "vesting" was used to

describe the satisfaction of the service requirements. See
Parker

v.
Wakelin, 937 F. Supp. 46, 49 n.1 (D. Me. 1996). However, as the

district court in fact noted, the term "vesting" does not figure in

the statutory scheme itself, which simply indicates the age and

service requirements that must be met. See 5 M.R.S.A. S 17851

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(1989 & Supp. 1996). Members who terminate their public service

prior to satisfying the pension eligibility requirements are

entitled to a return of their contributions, with interest. 5

M.R.S.A. S 17705(2).

An eligible retiree earns a pension in the amount of two

percent of his or her "average final compensation" multiplied by

the number of years of total creditable public service (up to 25

years). 5 M.R.S.A. S 17852 (1989). The legislative amendments at

issue on this appeal affect, among other things, the process by

which one computes an employee's "average final compensation" in

such a manner as to reduce the expected pension benefits of many

members.

The State of Maine concedes that the sole purpose for

enacting the changes in the terms and conditions of retirement

benefits ("the 1993 Amendments") was to save money by lowering

budget allocations by the state to the trust funds of the MSRS;

their enactment coincided with other responses to a state fiscal

crisis. The 1993 Amendments may be sorted into two groups: three

changes apply to the pensions of
all current teacher-members of the

MSRS, while three others apply only to those who had not satisfied

the service requirements under the MSRS as of the effective date of

Other non-pension benefits under the retirement system, such as
life insurance and disability retirement benefits, may be received
without having satisfied any minimum service requirement.

A slightly different method applies to those retirees whose
eligibility is based on having completed 25 or more years of
creditable service.

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the amendments. None of the amendments affected retirees earning

pensions as of the effective date. The amendments that affected

all of the plaintiffs were: (1) an increase in the rate of required

member contributions from 6.5 percent of their salary to 7.65

percent; (2) a cap on the salary increase that may be included in

the course of calculating the level of teachers' retirement

benefits; and (3) a six-month delay in the first cost-of-living

adjustment of retirement benefits. See P.L. 1993, ch. 410, pt. L,

SS 28, 13, 31. The district court held that these three

modifications were unconstitutional as applied to those plaintiffs

who had satisfied the service requirements. The other 1993

amendments, which only applied to those who had not served 10 years

as of the effective date of the amendments, were: (1) an increase

in the regular retirement age from 60 to 62; (2) an increase in the

early retirement penalty from 2.25 percent to 6 percent of the

teachers' retirement benefit for each year preceding age 62; and

(3) the elimination of an inclusion of per diem payment of up to

thirty days of unused sick or vacation pay in the course of

calculating teachers' retirement benefits.
See P.L. 1993, ch. 410,

pt. L, SS 33, 35, 37, 12. It is not disputed that the 1993

Amendments operate to the disadvantage of MSRS members without

providing substantive offsetting benefits.

These provisions are codified as amended at 5 M.R.S.A. SS 17001-
B, 17701(13)(C), 17806(3).

These provisions are codified as amended at 5 M.R.S.A. SS 17851
(1-A) & (2-A), 17852(3-A), 17001(13)(B).

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When the MSRS was first adopted in 1942, the legislature

made no express statement as to its ability to amend or alter the

pension benefit structure. In 1975, the Maine legislature enacted

the following provision:

No amendment to this chapter shall cause
any reduction in the amount of benefits
which would be due to the member based on
creditable service, compensation, employee
contributions and the provisions of this
chapter on the date immediately preceding
the effective date of such amendment.

P.L. 1975, ch. 622, S 6, codified at 5 M.R.S.A. S 17801 (1989),

under the title "Amendment not to cause reduction in benefit."

II. The Proceedings Below

Plaintiffs, the Maine Education Association and a class

representing public school teachers throughout the State of Maine,

challenged the constitutionality of the 1993 Amendments under the

Contract Clause, the Due Process Clause, and the Takings Clause,

seeking declaratory and injunctive relief to block implementation.

The district court held that: (1) the 1993 Amendments violated the

Contract Clause only as applied to MSRS members whose benefits had

"vested" under the system; and (2) the 1993 Amendments did not

The current version has a few minor changes in language:

No amendment to this Part may cause any
reduction in the amount of benefits that would
be due to a member based on creditable
service, earnable compensation, employee
contributions, pick-up contributions and the
provisions of this Part on the date
immediately preceding the effective date of
the amendment.

5 M.R.S.A. S 17801 (1989).

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violate any other provision of the constitution. By using the term

"vested" the district court referred to those MSRS members who had

satisfied the service requirements under the system -- a service

requirement is a necessary (but not a sufficient) condition to

being entitled to actually receive a pension. See Parker v.

Wakelin, 937 F. Supp. at 49 n.1.

On appeal, the state defendants ask that we hold that the

1993 Amendments do not violate the Contract Clause as applied to

any of the plaintiffs. In their cross-appeal, the plaintiffs argue

that the 1993 Amendments violate the Contract Clause as applied to

all teacher members of the MSRS prior to the effective date of the

amendments, and that the 1993 Amendments also violate substantive

due process.

DISCUSSION

The essential facts being undisputed, this appeal turns

on questions of law over which we exercise de
novo review. See

Villafane-Neriz v. FDIC, 75 F.3d 727, 730 (1st Cir. 1996). This

appeal raises a legal issue of considerable importance, one we

specifically left unresolved in
McGrath v.
Rhode Island Retirement

Board, 88 F.3d 12, 19 (1st Cir. 1996). When stated broadly, the

issue is whether a legislative amendment to a state employee

retirement pension plan that is detrimental to employees triggers

further scrutiny under the Contract Clause as applied to state

employees whose pension rights under the plan have "vested" prior

to such amendment. In McGrath, we did not need to resolve this

issue, because the plaintiff's pension rights had not vested prior

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to the legislative amendment at issue, and because the legislature

specifically reserved the power to amend or terminate the plan as

to nonvested members. 88 F.3d at 19-20. We now conclude that a

blanket answer to the issue of Contract Clause protection for

vested employees is not possible, because, as we explain below, a

detailed examination of the particular provisions of a state

pension program will be required prior to determining the nature

and scope of the unmistakable contractual rights, if any, that are

created by a given state legislature.

I. General Contract Clause Principles

Although the wording of the Contract Clause appears

uncompromising -- "No state shall . . . pass any . . . Law

impairing the Obligation of Contracts . . . "
-- the Supreme Court

does not interpret it as an absolute bar on the impairment of

either governmental or private contractual obligations.
See
United

States
Trust
Co. v. New
Jersey, 431 U.S. 1, 21 (1977) ("'[T]he

prohibition is not an absolute one and is not to be read with

literal exactness like a mathematical formula.'" (quoting Home

Bldg.
&
Loan
Ass'n v. Blaisdell, 290 U.S. 398, 428 (1934))).

Rather, the Supreme Court has elaborated an analysis under which a

court must first ascertain whether a change in state law has

resulted in "'the substantial impairment of a contractual

relationship.'" General Motors Corp. v. Romein, 503 U.S. 181, 186

(1992) (quoting Allied Structural Steel Co. v. Spannaus, 438 U.S.

U.S. Const. art. I, S 10, cl. 1.

-8-

234, 244 (1978)). Next, the reviewing court must determine whether

the impairment is nevertheless justified as "reasonable and

necessary to serve an important public purpose." United
States

Trust
Co., 431 U.S. at 25-26. Where the contract allegedly

impaired is one created, or entered into, by the state itself, less

deference to a legislative determination of reasonableness and

necessity is required, because "the State's self-interest is at

stake." Id. at 25;
see also

McGrath, 88 F.3d at 16 (when the state

itself is a party, it "must do more than mouth the vocabulary of

the public weal in order to reach safe harbor.").

The first step described above can be further broken down

into "three components: whether there is a contractual

relationship, whether a change in law impairs that contractual

relationship, and whether the impairment is substantial." Romein,

503 U.S. at 186. In the instant case, we need not reach the issue

of impairment or substantiality, because the plaintiffs fail to

demonstrate the existence of a contractual relationship protected

by the Contract Clause. At the same time that less deference is

given to state legislatures when it is the state that wishes to

relieve itself of contractual obligations, a clear showing must be

made that a state law has created a contractual obligation on the

part of the state in the first place. See
Hoffman v.
Warwick, 909

F.2d 608, 614 (1st Cir. 1990) ("The Contract Clause is applicable

to contracts into which the state enters, but normally state

statutory enactments do not of their own force create a contract

with those whom the statute benefits.").

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II. The Unmistakability Doctrine

In order to deem a state legislative enactment a contract

for the purposes of the Contract Clause, there must be a clear

indication that the legislature intends to bind itself in a

contractual manner. See
National R.R. Passenger Corp.
v.
Atchison,

Topeka & Santa Fe Ry. Co., 470 U.S. 451, 465-66 (1985) ("[A]bsent

some clear indication that the legislature intends to bind itself

contractually, the presumption is that 'a law is not intended to

create private contractual or vested rights but merely declares a

policy to be pursued until the legislature shall ordain

otherwise.'" (quoting Dodge v. Board
of
Educ., 302 U.S. 74, 79

(1937))); United States Trust Co., 431 U.S. at 17 n.14 (a statute

may be treated as a binding contract "when the language and the

circumstances evince a legislative intent to create private rights

of a contractual nature enforceable against the state.").

This threshold requirement for the recognition of public

contracts has been referred to as the "unmistakability doctrine."

See McGrath, 88 F.3d at 19 (citing United
States v. Winstar, 116

S. Ct. 2432 (1996)). In United
States v. Winstar, the Supreme

Court traced the history of the unmistakability doctrine from

Justice Marshall's opinion in
Fletcher v.
Peck, 10 U.S. (6 Cranch)

87 (1810), and explained its purpose. Because legislatures should

not bind future legislatures from employing their sovereign powers

in the absence of the clearest of intent to create vested rights

protected under the Contract Clause, courts developed canons of

construction disfavoring implied governmental contractual

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obligations. Thus, "'neither the right of taxation, nor any other

power of sovereignty, will be held . . . to have been surrendered,

unless such surrender has been expressed in terms too plain to be

mistaken.'" Winstar, 116 S. Ct. at 2455 (quoting
Jefferson Branch

Bank v. Skelly, 68 U.S. (1 Black) 436, 446 (1862)). The

requirement that "the government's obligation unmistakably appear

thus served the dual purposes of limiting contractual incursions on

a State's sovereign powers and of avoiding difficult constitutional

questions about the extent of State authority to limit the

subsequent exercise of legislative power." Winstar, 116 S. Ct. at

2455.

In its most recent Contract Clause case holding a state

to its obligations under a public contract, the Supreme Court found

ample evidence that a promise on the part of the state had been

made in a contractual setting, in return for a specific bargained-

for benefit, and found that the statutory scheme clearly employed

the language of contract. See
United States Trust Co.
, 431 U.S. at

17-18 (involving a legislative covenant between New York and New

Jersey and future bondholders where the very "purpose of the

covenant was to invoke the constitutional protection of the

Contract Clause as security against repeal"). In the instant case,

we must determine whether the MSRS also evinces a clear intent on

the part of the Maine legislature to create contractual rights

against the modification of pension benefits.

III. Pension Plans as Contractual Obligations

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The law governing the rights of members of public

employee retirement plans varies greatly from state to state, and

has not been the subject of federal regulation or harmonization.

There is no modern Supreme Court case that provides guidance as to

the rights public employees have to their pensions. Pennie v.

Reis, 132 U.S. 464 (1889), stands for the proposition that public

employee pension programs do not create vested rights against

legislative modifications, and thus are gratuities that a state may

freely revoke. See Pennie, 132 U.S. at 470-71 (holding

California's adjustment of a pension benefit plan for police

officers did not constitute deprivation of property without due

process). Although this "gratuity" approach has been rejected by

most state courts,
Pennie has never been explicitly overruled.
See

generally 60A Am. Jur. 2d, Pensions and Retirement Funds, SS 1620-

29 (discussing the shift away from the gratuity approach toward the

contract approach). Pennie has, however, been ignored as a

precedent, perhaps because its dicta regarding public pension

benefits arose in the context of a Due Process claim.

Although only two other circuits have addressed this

question, state courts have generally viewed a public pension plan

as creating implied-in-fact unilateral contracts. See
McGrath, 88

F.3d at 17 (collecting cases). The Ninth Circuit in State
of

Nevada Employees Ass'n v. Keating, 903 F.2d 1223 (9th Cir. 1990),

agreed with the Nevada Supreme Court that the "'better reasoned

view' recognizes that non-vested employees have contractual rights

in pension plans 'subject to reasonable modification in order to

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keep the system flexible to meet changing conditions, and to

maintain the actuarial soundness of the system.'" 903 F.2d at 1227

(quoting
Public Employees' Retirement Board
v.
Washoe, 96 Nev. 718

(1980)). Thus the Ninth Circuit in
Keating concluded that a Nevada

law penalizing the withdrawal of pension contributions and thereby

altering the previous law that contained no such penalty, violated

the Contract Clause because it did not represent a reasonable

modification of the pension plan. The court in Keating noted,

however, that the state did not dispute that Nevada's statutes

providing pensions for public employees created contractual

obligations. See
Keating, 903 F.2d at 1225-26. The Fourth Circuit

also ignored the gratuity approach in the course of holding that

legislative amendments to a North Carolina public employee

disability benefit plan did not violate the Contract Clause

because, under relevant state law interpretations of the statute,

rights to benefits under the plan did not vest until retirement.

See Kestler v. Board of Trustees of North Carolina Local

Governmental Employees' Retirement Sys.
, 48 F.3d 800, 804 (4th Cir.

1995) (no Contract Clause violation where plaintiff was not vested

at the time of the effective date of the amendment).

These cases reflect the modern trend among state supreme

courts, which is to protect pension rights on the theory that a

state's promise of pension benefits represents an offer that can be

accepted through the employee's performance -- thus, a unilateral,

implied-in-fact contract is created that is binding on the state.

See generally
Andrew Mackenzie, "
Spiller v.
State: Determining the

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Nature of Public Employees' Rights to Their Pensions," 46 Me. L.

Rev. 355, 357-59 (1994); Note, John J. Dwyer, "'Til Death Do Us

Part: Pennsylvania's 'Contract' With Public Employees For Pension

Benefits," 59 Temp. L.Q. 553 (1986). There is much disagreement on

the details, however, under this unilateral contract approach. One

widely held view is that at some point, public employees'

contractual rights to pension benefits vest; after vesting, the

state is contractually bound to honor its obligation to provide a

pension without any further modifications or decreases in overall

benefit levels. See, e.g., Petras v. State
Bd.
of
Pension

Trustees, 464 A.2d 894, 896 (Del. 1983) (rights vest upon

completion of minimum service requirement); Baker v. Oklahoma

Firefighters
Pension
&
Ret.
Sys., 718 P.2d 348, 353 (Okla. 1986)

(same);
Leonard v.
City of Seattle
, 503 P.2d 741, 746 (Wash. 1972)

(en banc) (same);
Sylvestre v.
State, 214 N.W.2d 658, 666-67 (Minn.

1973) (rights vest at start of employment);
Yeazell v.
Copins, 402

P.2d 541 (Ariz. 1965) (en banc) (same as Sylvestre). Several

states have provisions in their constitutions declaring that

vesting occurs at the moment of public employment and barring any

legislative modifications that retroactively reduce the accrued

benefits of public employees. See, e.g., Alaska Const. art. XII,

S 7; Haw. Const. art. XVI, S 2; Ill. Const. art. XIII, S 5; Mich.

Const. art. IX, S 24; N.Y. Const. art. V, S 7. Several states

follow a modified contract approach, which permits some unilateral

legislative modifications of pension plans as long as the

legislature offsets any new disadvantage with comparable new

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advantages, as seen from the point of view of the public employee.

See,
e.g.,
Singer v.
City of Topeka
, 607 P.2d 467, 475 (Kan. 1980);

Betts v.
Board of Admin. of the Pub. Employees' Ret. Sys.
, 582 P.2d

614, 617 (Cal. 1978) (en banc);
Opinion of the Justices
, 303 N.E.2d

320, 328 (Mass. 1973). At least two state supreme courts,

including Maine's, have declined to use the language of "vesting"

in the course of upholding modifications to pension benefits at any

time during the employment relationship.
See
Spiller v.
State, 627

A.2d 513, 516 (Me. 1996);
Pineman v.
Oechslin, 488 A.2d 803 (Conn.

1985). The Connecticut Supreme Court in fact rejected the contract

model altogether and indicated that public employees have a

property interest in pension benefits that may not be arbitrarily

confiscated by the state, under the Due Process Clause. Pineman,

488 A.2d at 809-810.

Although we have recognized the diversity of contract

theories adopted by state courts -- in particular the divergence of

approaches with regard to when exactly binding rights to a certain

level of retirement benefits "vest" -- we have never chosen to

adopt a particular approach to
public pension rights. See
McGrath,

88 F.3d at 16-18.

In
McGrath, we noted that, as a general matter, pensions

are viewed as "a species of unilateral contracts," although there

is considerable disagreement as to when rights in public pension

plans vest, if at all. Id. at 17. But in the course of analyzing

a Contract Clause challenge to certain amendments to the Rhode

Island public employee retirement system, we eschewed participating

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in abstract contract theory in favor of performing a close analysis

of the statutory provision at issue. Such an approach is wise,

because the unmistakability doctrine mandates that we determine

whether the challenged legislative enactment evinces the clear

intent of the state to be bound to particular contractual

obligations. It may well be that the variety of approaches adopted

by state supreme courts reflect, in part, differences in the

structure of the various state pension programs, and of the

intention of the different state legislatures that created them.

There is a danger, however, in adopting a theory of pension rights

and subsequently forcing a given program to fit under it. Any

given theoretical approach will make assumptions regarding the

intent of legislatures to be bound, as well as the time at which

vesting should occur, which may be contradicted by particular

statutory provisions such as, for example, an express reservation

of the right to revoke pension benefits. When reviewing a

particular enactment, therefore, we must suspend judgment and

"proceed cautiously both in identifying a contract within the

language of a regulatory statute and in defining the contours of

any contractual obligation." Atchison, Topeka & Santa Fe Ry. Co.
,

470 U.S. at 466. The district court's decision protects Maine

public employees from benefit reduction once employees' rights are

"vested." Unfortunately, the line it drew between teachers who had

In McGrath, we specifically reserved judgment on the question of
whether such express reservations are valid after the point at
which pension rights are "vested." 88 F.3d at 19.

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and had not completed a minimum service requirement, cannot be

justified on the basis of the Maine statute, which nowhere speaks

of "vesting" as understood by the district court.

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IV. Contractual Rights Under the MSRS

Turning to the MSRS, we ask whether the Maine Legislature

has unmistakably evinced the intention to create binding

contractual rights. See Hoffman, 909 F.2d at 614 (determining

whether "language and circumstances" of Rhode Island benefits

statute reveal "a legislative intent to create private contractual

rights"). Specifically, in light of the plaintiffs' claims, we

must ask whether Maine has bound itself not to modify or alter, at

any time before the employee's retirement, the level of pension

benefits an employee would expect to receive. The statutory

language is the primary focus of the inquiry. Atchison, Topeka &

Santa Fe Ry. Co., 470 U.S. at 466.

Under the terms of the MSRS, public employees who have

met certain service and age requirements are entitled to receive

pensions. At the heart of this case is 5 M.R.S.A. S 17801, which

reflects the state's intent to reserve the power to amend the

amount of pension benefits, as well as, arguably, the state's

intent to create private contractual rights. That is, the State's

self-imposed limitations on its legislative power through section

17801 may reasonably serve as an indication of its intent to

guarantee pension benefits once they are "due," as well as an

obvious reservation of amendment powers with regard to the amount

of benefits that are not "due." The parties disagree as to the

unmistakable intentions section 17801 represents.

Section 17801 states that "no amendment . . . may cause

any reduction in the amount of benefits which would be due a member

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. . . on the date immediately preceding the effective date of the

amendment." Much turns on the meaning of "due." The plaintiff

public school teachers argue that benefits are "due" from the

moment of employment, and that this section merely confirms the

applicability of a strict implied-in-fact, unilateral contract

approach. The State contends that section 17801 is a reservation

of the power to alter benefits until the retirement benefits are

literally due to be received. The third alternative, not the basic

position of either party, is that benefits are "due" if a teacher

has completed the statute's initial service requirements, although

pension benefits are not yet currently payable.

The Maine Supreme Judicial Court's Spiller decision,

which deserves our "'respectful consideration and great weight,'"

Romein, 503 U.S. at 187 (quoting
Indiana ex rel. Anderson
v.
Brand,

303 U.S. 95, 100 (1938)), clearly rejects the alternative pressed

by the teachers. The court was "unpersuaded by the reasoning of

those jurisdictions that have discerned in the statutory language

the creation at the time of employment of binding contractual

rights." Spiller, 627 A.2d at 516. It held that, as to the

Spiller plaintiffs, none of whom had satisfied the statute's

service requirements at the time of the statutory amendment

challenged in Spiller, "[n]one of the benefits at issue here were

due . . . on the effective date of [the] legislation." Id.

The question remains, however, whether section 17801

should be read to protect a teacher -- and possibly to create

contract rights -- whenever a teacher satisfies the service

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requirements even though the teacher is still in active service and

no pension is currently payable. Section 17801 does not clearly

compel such a reading, since "due" could easily be read to mean

currently payable. And such a reading would also arguably conflict

with some of the language in
Spiller (although not its holding) and

with the dissent's reading of the majority. See
Spiller, 627 A.2d

at 516 ("By implication, the [statutory] language reserves to

future legislatures the power to modify prospective service

retirement benefits for employees to whom benefits are not then

due"); id. at 519 ("Although the Court does not reach the issue

today, its interpretation of section 17801 also undermines the

pension benefits of those employees who have met the eligibility

conditions for pension benefits but [have not yet retired].")

(Wathen, C.J., dissenting).

Even if we treat the statute as unclear and conclude that

Spiller leaves the issue open, we think that the principle of

unmistakability would defeat the teachers' claim that the contract

rights are created when service requirements are satisfied. We

need not decide whether the statute ever gives rise to a

contractual relationship; it is enough to say that it does not

clearly do so before a teacher retires, and thus gains an immediate

right to the payment of pension benefits. Because there is no

attempt here to take away retirees' benefits, there can be no

plausible contract clause claim in this case.

The district court reasoned that "due" should be

construed as referring to the point at which a member qualifies for

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retirement benefits. But even if this is a possible reading, we do

not think this language could be said to reflect the unmistakable

intent of the Maine Legislature, particularly when the legislature

could very well have indicated as much. In fact, the MSRS makes no

reference to "vesting." As the district court points out, and as

the plaintiffs have vigorously argued, there is some evidence

indicating that certain legislators wanted to protect vested

rights; and that the Maine Legislature, in enacting section 17801,

responded to a report that recommended the protection of employees'

accrued retirement benefits from retroactive reductions. But the

language of section 17801 remains at best ambiguous, and we cannot

find that the legislature as a whole unmistakably intended to

create contract rights at the time that service requirements were

satisfied -- especially where, as here, it would have been easy to

make any such intention crystal clear.

We do not decide today whether, in order to satisfy the

unmistakability doctrine, a public pension statute must explicitly

employ the language of contract. Nor need we decide whether

Contract Clause principles would apply if Maine sought to reduce

pension benefits already "due" to present retirees, a step that

would in any case appear to require revision of the present section

17801. To resolve this appeal, we need only conclude that there is

no unmistakable intent by the Maine Legislature to create an

enforceable private contract right against the modification of the

plaintiffs' retirement benefits until they are actually receivable.

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As we indicated in McGrath, public employment contracts

operate in a "special employment environment" requiring recognition

of "the states' flexibility vis-a-vis the retirement benefits that

it offers public employees." 88 F.3d at 19. Whether the

amendments here are wise or justified as a matter of political

philosophy is not our concern. As Contract Clause challenges

arise, we must look to the language of the pension statutes to

determine, as a threshold matter, whether the unmistakability

doctrine is satisfied. Here, as it relates to Maine's purported

obligation not to alter the benefits of its public teacher

employees, it is not. Thus, no violation of the Contract Clause

may be found.

With regard to the teacher-plaintiffs' due process claim

on cross-appeal, we affirm the decision of the district court,

finding no due process violation, for the reasons given in its

opinion, extending that reasoning to all plaintiffs. See 937 F.

Supp. at 58.

CONCLUSION

For the reasons stated in this opinion, the decision of

the district court, to the extent that it found the Maine

legislative amendments violative of the Contract Clause, is

reversed in part, and to the extent that it found no constitutional

violations, is affirmed in part.

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