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Md. high court affirms $30.7M award to Baltimore police, fire retirees

A unanimous Maryland high court on Monday upheld a $30.7 million award to Baltimore police and firefighters who were retired or retirement eligible as of June 30, 2010, to compensate them for the city’s elimination that year of a stock market-based benefit from its pension program.

The Court of Appeals affirmed Baltimore City Circuit Judge Julie R. Rubin’s ruling that the retiree and retirement-qualified responders were shortchanged beginning in 2010, when the city revised the Fire and Police Employees’ Retirement System to eliminate a variable benefit that increased as the market thrived but made no provision for the city when the market struggled.

The $30,716,108.79 award — plus interest but less any future award of reasonable attorneys’ fees and costs — will be divided among the 1,459 responders who were retired or eligible to retire as of June 30, 2010, and sustained a pension reduction due to elimination of the variable benefit, counsel for Baltimore has said.

By ordinance, the city changed the terms of its pension plan in 2010 by replacing the variable benefit with a tiered cost of living adjustment after the stock market tanked beginning in 2008, threatening Baltimore’s financial well-being.

In its 7-0 decision, the Court of Appeals expressed sympathy for Baltimore’s plight and understanding for the city’s “challenge” in confronting a pension program that had become “actuarially unsound.”

“The challenge is magnified when the city is in dire financial straits,” Judge Jonathan Biran wrote for the high court.

“In such a situation, the city may have to choose between the lesser of two evils: change the plan without the consent, and to the consternation, of employees who have devoted their careers to public service; or keep the plan as is and put the city deeper into debt, perhaps even risking financial ruin. In 2010, Baltimore City faced this choice.”

By enacting Ordinance 10-306, however, the city essentially breached its contract with retired and retirement-eligible police and firefighting employees because it retroactively diminished their benefits, the Court of Appeals said.

But the enacted change in the pension plan did not breach the city’s contract with active members ineligible to retire as of June 30, 2010, because they had no settled expectation that they would qualify for the same benefits upon their retirement, the high court added.

“(W)e recognize that, for some active members, Ordinance 10-306 moved the goalposts very shortly before they were about to cross the goal line and achieve service retirement eligibility,” Judge Jonathan Biran wrote for the Court of Appeals.

“Many of those employees undoubtedly had given the best years of their careers to Baltimore City, serving the public daily in dangerous and stressful jobs,” Biran added. “In this case, the circuit court correctly found that, with respect to active members, the changes in the plan were balanced by ‘a combination of essential and overwhelming public welfare considerations, and new benefits or qualifying conditions.’ In other words, Ordinance 10-306’s changes were reasonable and necessary.”

The police and firefighters’ attorney said Tuesday that the court’s decision is bittersweet.

“We are pleased that the Court of Appeals affirmed that there was a breach of contract” regarding the retired and retirement-eligible employees, said Charles O. Monk II, of Saul Ewing Arnstein & Lehr LLP in Baltimore.

“We are disappointed with the court’s conclusion with the computation of damages,” Monk added. “The consequences of the statutory changes caused damage to the actives and the retirees.”

Monk is also representing the first responders in a related challenge to Ordinance 10-306 in U.S. District Court in Baltimore based on the argument that the reduction in benefits due to the pension plan change was a governmental “taking” of property for which just compensation is owed.

The Baltimore Law Department and James P. Ulwick, the city’s outside counsel in the case, said it a statement Tuesday that “we respect the careful opinion by the Court of Appeals affirming in all respects the decisions by Judge Rubin. We are pleased that the court’s decision allows the city’s reforms to remain in place, which will help insure the recovery of the pension system to the benefit of its members and the city.”

Ulwick is with Kramon & Graham PA in Baltimore.

The city’s pension plan was instituted in 1962. In 1983 the variable benefit was established to allow retirees to receive increases to their basic pension benefits.  If the plan’s investments the prior year earned enough, benefits would increase. Those increases would be compounded in the future.

Active, retired and retirement-eligible police officers and firefighters sued the city over its 2010 change in the pension program.

Rubin’s ruling in favor of retired and retirement-eligible employees prompted Baltimore and active first responders to seek review by the intermediate Court of Special Appeals. The active personnel also appealed directly to the high court, which agreed to hear the case.

The Court of Appeals rendered its decision in Robert F. Cherry et al. v. Mayor and City Council of Baltimore City, No. 36 September Term 2020.

The pending litigation in U.S. District Court is docketed as Robert F. Cherry et al. v. Mayor and City Council of Baltimore City, 1:10-cv-01447-CCB.