Pension case provides unique situation in which justices have simultaneous conflict of interest
By Gary Grado
The Daily Record Newswire
PHOENIX - The Arizona Supreme Court has taken the unprecedented step of disqualifying itself from ruling on a case and appointing five lower-court judges to take it over.
The case challenges the legality of a 2011 overhaul of a retirement plan that reduced annual cost-of-living raises for judges and increased their contributions to the plan.
Veteran attorneys said it is not unusual for an individual justice to step away from a case due to a conflict of interest, but this is the first time in memory the entire court disqualified itself from hearing a case.
Attorney Paul Eckstein, who has argued many cases in front of the Supreme Court, said the case, Hall v. Elected Officials Retirement Plan, provides the unique situation in which all of the justices have a simultaneous conflict of interest.
"An issue that affects their pocketbook would be the kind of issue that they would have to do that on," Eckstein said.
Attorney Dan Barr said judges will disqualify themselves for various reasons such as a case involving a law firm of previous employment, a relative, or a financial issue that would affect the judge.
The high court did not give a reason for its disqualification in a July 6 order, but court and pension plan records show the replacement judges took the bench after the law at issue took effect on July 20, 2011, meaning they will not rule on their own benefits.
The order names Court of Appeals Judges Randall Howe and Kent Cattani, and Superior Court Judges Michael Butler from Pima County; Karl Eppich from Pinal County; and Patricia Trebesch from Yavapai County, to replace the five justices on the Supreme Court for the case.
Barr said a Supreme Court justice could have stayed on the case only if he or she were appointed to the bench after the law changed, but all of the justices except Chief Justice Scott Bales had served on lower courts for years before moving up. Bales has been a justice since 2005.
The case was sparked by SB1609, a 2011 measure that overhauled state pensions for elected officials and public safety workers.
The 2011 pension overhaul changed the formula used for calculating cost-of-living payments to retirees. It also increased employees' contributions to 10 percent from 7 percent in fiscal year 2012, 11.5 percent in fiscal year 2013 and ultimately to 13 percent, depending on the performance of the retirement plan.
Former Maricopa County Superior Court Judge Douglas Rayes ruled that the new law violated a constitutional provision enshrining membership in a public retirement plan as a binding contract, and another provision prohibiting laws that impair contractual obligations.
The state appealed, but had a hard time finding an appellate court to take it.
The Supreme Court agreed to take over the case from the Arizona Court of Appeals Division 1 on June 11.
The appellate court initially transferred the case to Division 2 in Tucson because the plaintiffs included one sitting judge and one retired judge from Division 1, but Division 2 had to return the case because of unspecified conflicts.
The parties agreed the Supreme Court should take the case under the "rule of necessity."
The parties said in a joint motion that, even though nearly every state judge belongs to the retirement plan, the Supreme Court can hear the case under the rule because the justices cannot be disqualified for conflict of interest if no one else is available to decide the case.
The Supreme Court has already decided a case involving the pension in Fields v. EORP, and ruled in favor of retired judges in 2013, finding that the statute "diminishes and impairs" their benefits by decreasing their annual cost of living increases. Fields involved only retired judges.
A 2013 measure changed EORP from a defined benefit plan to a defined contribution plan.
Defined contribution plans are similar to the ones that the private sector offers its employees. The annual benefit is based on the value in the account at retirement and the retiree's life expectancy.
For a defined benefit plan, the benefit is guaranteed, no matter how long the retiree lives, and it is based on a formula that uses the employee's years of service and average salary, not the value of the account at retirement.
The state's opening briefs in the Hall case are due on July 15 and the judges have 40 days to respond. No oral arguments have been set.
Published: Wed, Jul 15, 2015
