Circuit Says Nassau Wage Freeze Claim Belongs in State Court
A judge's decision voiding a wage freeze on Nassau County employees imposed by a state-appointed emergency board has been vacated by the U.S. Court of Appeals for the Second Circuit.
The circuit said that Eastern District Judge Leonard Wexler (See Profile) should not have decided the issue of whether a wage freeze imposed on county employees in 2011 by the Nassau County Interim Financing Authority violated the limits on emergency oversight power granted by the Legislature in 2000 to address a fiscal crisis in Nassau County.
Wexler had jurisdiction over the case under the Contracts Clause of Article I of the U.S. Constitution, but he then exercised pendent jurisdiction on a state claim—that the Financing Authority's power to order a wage freeze under N.Y. Pub. Auth. Law §3669 had expired—and he never reached the federal constitutional claim.
The Second Circuit held Friday that Wexler should not have exercised pendent jurisdiction over the state issue of statuary construction and should have left the matter to state courts.
The case of Carver v. Nassau County Interim Finance Authority, 13-0801, was decided by Second Circuit Judges Rosemary Pooler (See Profile) and Susan Carney (See Profile) and Eastern District Judge Edward Korman (See Profile), sitting by designation. Oral arguments were heard June 10. Korman wrote the court's opinion issued Friday.
The Nassau County Interim Financing Authority (NIFA) is a public benefit corporation that was created by the Legislature in 2000 when the county was $2.7 billion in debt and its bonds were rated one level above junk status.
Under the statute, if NIFA determined that Nassau County was likely to sustain an operating funds deficit of 1 percent or more, NIFA could institute a "control" period that allowed it to take immediate remedial measures, including audits, requiring a revised financial plan, approving or rejecting borrowing by the county and ordering temporary wage freezes.
NIFA's mission was meant to be completed in 2004. However, its authority was twice extended by the Legislature until 2008, when it was no longer required to approve the financial plans of the county.
But in January 2011, NIFA imposed a control period, a move Nassau County challenged without success in an Article 78 proceeding. NIFA then imposed a temporary wage freeze on county employees which forced the county to violate the terms of collective bargaining agreements it had entered into with police unions.
A number of police unions filed suit in the Eastern District alleging a violation of the Contracts Clause, but later amended that complaint to challenge NIFA's authority to impose the wage freeze under §3669, and then prevailed in persuading Wexler to grant them summary judgment.