Chattanooga wins pension lawsuit filed by retired police officers, firefighters

Judge rules city can cut the adjustment for costs of living

Chattanooga Mayor Andy Berke turns to police and firefighter union leaders during his announcement of a decision about the police and firefighters pension plan at the Fraternal Order of Police headquarters on Holtzclaw Avenue.
Chattanooga Mayor Andy Berke turns to police and firefighter union leaders during his announcement of a decision about the police and firefighters pension plan at the Fraternal Order of Police headquarters on Holtzclaw Avenue.

In a big win for Chattanooga Mayor Andrew Berke's administration, a federal court judge dismissed a lawsuit filed by four retired police officers and firefighters that challenged the city's decision to reduce the cost-of-living adjustments to their pensions.

U.S. District Court Judge Curtis Collier granted the city's motion for summary judgment in a decision issued Tuesday.

photo Curtis Collier
photo Current firefighter's Richard Meier, left, and Tim Zink walk with retired firefighter Greg Gaston and more than 30 police and firefighters march to City Hall for a City Council meeting in February in protest of Chattanooga Mayor Andy Berke's pension reform.

Mayor Berke praised the ruling, saying it preserved his pension reform plan. "Last year, the Fire and Police Pension was reformed to ensure the longterm fiscal health of the city and meet our obligations to first responders," he said in a statement. "We are excited this solution was validated by the court today, ensuring the city will be able to continue to provide competitive benefits for our police and firefighters for years to come."

In 2014, the City Council voted to reduce the cost-of-living adjustment, or COLA, for retired police officers and firefighters from a guaranteed annual 3 percent rate to an average of 1.5 percent, depending on the level of benefits a retiree was receiving. Reducing the cost-of-living adjustment level was part of a package of reforms produced by an 18-member task force Berke set up to reduce the city's $150 million unfunded pension liability and address what the mayor said was an increasingly unsustainable city contribution to the pension fund.

The reform also increased employees' pension contributions by nearly 40 percent, while saving the city more than $227 million over the next 24 years, the mayor's office said.

In response, two retired firefighters and two retired police officers filed a class-action lawsuit, claiming that the city was taking away a vested financial interest they felt was promised to them.

In his ruling, Judge Collier rejected that claim, agreeing with the city that the cost-of-living adjustment was not a contract. The initial city pension plan, adopted in 1949, did not contain any adjustment for increases in the cost of living. That was added in 1980 and was pegged to the Consumer Price Index, with a maximum of 3 percent. That was changed in 2000 to a guaranteed 3 percent annual increase.

The judge noted that courts generally do not assume that lawmakers intend to establish a contract unless they specifically say so, citing a 2001 case in which a federal appeals court concluded, "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.'"

He then turned to the city code that sets up the pension plan, noting that while it sets out the specific rights a retired police officer or firefighter has to a pension, it does not mention a cost-of-living adjustment. He concluded that the cost-of-living adjustment was not a vested right.

"The placement of the COLA in a provision of the City Code apart from the vesting provisions and the provisions listing retirement and pension benefits indicates that the COLA is not a vested financial benefit," Judge Collier wrote.

He added that the idea of a cost-of-living adjustment weighs against finding that it is a vested benefit.

"A COLA is an adjustment to the pensioners' benefit rather than a benefit itself," he wrote. "It is designed to ameliorate the effects of inflation It makes sense that the City would preserve its ability to adjust the COLA to respond to shifts in inflation rather than locking itself into a 3 percent COLA for all time."

Retired firefighter Greg Gaston, one of the plaintiffs in the case, said he was disappointed in the outcome, but said he and his fellow plaintiffs will appeal the ruling.

"It's not the end of it," he said. "I just believe right's right and wrong's wrong and the city ought to do what they promised."

Firefighter Chip O'Dell, who led protests against Berke's reform initiative in 2014, said many police officers and firefighters feel betrayed by the city.

"This is a benefit that was promised us back in 1999," he said in an interview Tuesday evening. "A lot of guys retired at 25 years because they were promised the cost-of-living increase. Berke jerked that out from under them."

Contact reporter Steve Johnson at sjohnson@timesfreepress.com, 423-757-6673, on Twitter @stevejohnsonTFP, or on Facebook at stevejohnsonTFP.

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