PERA lawsuit moves forward; court date set

The Colorado Statesman

A Feb. 6, 2012 trial date has been set for the lawsuit challenging the constitutionality of SB 10-001, the General Assembly’s effort to put the Public Employees’ Retirement Association (PERA) on solid financial footing.

Denver District Court Judge Robert S. Hyatt also set aside three weeks for the trial, known as Justus et al v. the state of Colorado. Hyatt is still reviewing the plaintiffs’ request for class-action status, but a decision on that motion isn’t likely before the end of the summer.

The lawsuit charged that SB 1 is unconstitutional “because it impairs the retirees’ contractual rights to receive pension benefits at the level promised” when employees retired or were eligible to do so. The lawsuit initially attempted to block PERA from eliminating the COLA in 2010-11 but after that wants to stop PERA from implementing lower adjustments in future years. The lawsuit affects those who retired with PERA benefits between 1994 and February, 2010.

Under SB 1, the 2010-11 adjustment that would have gone into effect on March 1 was instead cancelled. Beginning in 2011, the COLA will drop to the lower of 2 percent, or indexed based on the Consumer Price Index for Urban Wage Earners (CPI-W). The COLA also could drop to zero if PERA experiences a negative investment return year, as was the case in 2008.

The case has taken an odd turn: in February, PERA demanded every plaintiff disclose any communications with third-party organizations and assumed class members concerning the solicitation of funds and payment of costs and expenses related to the lawsuit. The plaintiffs disclosed they had already given their attorneys a $25,000 retainer but otherwise refused all other documents, citing attorney-client privilege and a First Amendment right of association. In April, PERA asked the courts again to compel the plaintiffs to produce the documents, noting that the association right applies only “where a party can establish that the disclosure of documents would have a chilling affect on associational rights.”

Calls to PERA were not returned.

Two other lawsuits challenging a legislature’s authority to reduce retiree benefits also are continuing to move through the process. In the Minnesota case, Swanson, et al v. State of Minnesota, et al, Ramsey County District Court Judge Gregg Johnson held a hearing during the spring on the parties’ cross-motions for summary judgment. Following that hearing, the judge asked both sides to submit proposed orders for his consideration by May 13. A ruling on those orders is expected within 90 days of that date.

Public pension retirees also are suing the state of South Dakota over changes to their retirement benefits. The case of Tice et al v. South Dakota is still in discovery, according to attorney Stephen Pincus of Stember, Feinstein, Doyle & Payne, which is representing the plaintiffs in all three cases.