Amer. Federation of State v. Hot Spring County, Ar

Citations: 362 F. Supp. 2d 1035; 176 L.R.R.M. (BNA) 3250; 2004 U.S. Dist. LEXIS 27440; 2004 WL 3245689Docket: 6:03-cv-06133

Court: District Court, W.D. Arkansas; October 1, 2004; Federal District Court

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Defendants terminated an agreement to pay insurance premiums for Plaintiffs' dependents, leading to claims for breach of contract and constitutional violations. The court granted Plaintiffs' motion for summary judgment on the breach of contract claim, ruling in their favor, while dismissing Defendants' motion regarding claims under the Contract Clause of the United States Constitution, the Arkansas Constitution, and the Arkansas County Government Code with prejudice. The background highlights that a collective bargaining agreement was established on October 1, 2002, under which the County was to continue paying health insurance premiums. The agreement had a termination provision requiring written notice at least ten days prior to the desired termination date. Following a change in county leadership, both County Judge Homan and his successor, James A. Bailey, expressed intentions to terminate this agreement without following the proper notice procedure.

On March 11, 2003, the quorum court enacted Appropriation Ordinance No. 03-08 to allocate funds for insurance premiums for county road workers' dependents as per a collective bargaining agreement. On September 9, 2003, it voted to reimburse road workers for out-of-pocket insurance expenses incurred between April 1 and September 2003 and to cover premiums for September 2003. However, on October 27, 2003, the court passed Appropriation Ordinance No. 03-21, indicating it would not renew the collective bargaining agreement. Since March 1, 2003, the County has not made payments for the insurance premiums.

In their complaint, the Plaintiffs claim the County failed to pay the agreed premiums under the October 1, 2002 collective bargaining agreement and improperly terminated the agreement. They seek monetary relief for out-of-pocket expenses and a court declaration that the contract remains in effect. Defendants countered with a motion for summary judgment, arguing that the agreement was not enforceable because County Judge Parker lacked the authority to enter into it without prior approval from the quorum court. Alternatively, they claimed that if the contract were found valid, its termination complied with the agreement's provisions.

Plaintiffs also moved for summary judgment, asserting that Judge Parker had the authority to bind the County under the Arkansas Constitution. The legal framework requires that a county agent cannot enter into contracts without prior appropriation, and failure to do so renders the contract unenforceable. The Arkansas Constitution allows county judges to authorize disbursement of appropriated funds, but they must first receive quorum court approval. There is an exception for county judges concerning the compensation of county employees. The case is to be assessed under Arkansas law, with the court favoring the non-moving party's view in determining the appropriateness of summary judgment.

The phrase "forms of compensation" includes fringe benefits such as insurance and medical coverage, which employees receive for their services. Judge Parker, as an agent of the County, typically cannot bind the County in contract without prior approval from the quorum court. However, by entering into a collective bargaining agreement with AFSCME on October 1, 2002, he utilized his executive authority to provide additional compensation, specifically by continuing to pay insurance premiums for the dependents of county road workers. 

The court concluded that Judge Parker had the authority to bind the County to the agreement, even though the Defendants argued the agreement was void due to lack of prior appropriation from the quorum court. Subsequently, the quorum court appropriated funds to support the agreement on March 11, 2003, and again on September 9, 2003, indicating its intent to adhere to the agreement. However, a resolution passed by the quorum court on October 27, 2003, explicitly denied ratifying the agreement, creating ambiguity about its intent.

Under Arkansas law, a county judge can bind successors for up to one year, and the county may ratify unauthorized contracts it could have made initially. The court determined that the agreement made by Judge Parker was contingent on the quorum court's appropriation of funds, which was granted on two occasions. Thus, the court concluded that a contract was formed obligating the County to pay insurance premiums for the road workers' dependents. The plaintiffs allege a breach, noting that the County has not paid these premiums since March 1, 2003, a point not disputed by the Defendants.

Defendants, in their motion for summary judgment, alternatively assert that even if a contract existed between the County and AFSCME, there was no breach. They reference Article XIV, Section 5 of the October 1, 2002 agreement, which required the County to pay insurance premiums for county road workers' dependents from October 1, 2002, to October 1, 2003. The Plaintiffs' affidavits indicate that the County failed to make these payments, constituting a breach of the agreement. 

Regarding the agreement's termination, Plaintiffs argue it was automatically renewed due to improper termination. However, the Court concludes it was terminated according to the agreement's provisions, which required a sixty-day notice for changes and a ten-day notice for termination prior to the renewal date of October 1, 2003. The County provided notice of its intent to terminate on two occasions—December 27, 2002, and May 29, 2003—thus properly terminating the agreement.

On the issue of damages due to the breach, Arkansas law allows for money damages to compensate the aggrieved party. Plaintiffs incurred $8,197.84 in medical expenses as a result of the County's failure to pay insurance premiums during the period from March 1, 2003, to August 17, 2003. As there are no allegations of bad faith by the Plaintiffs, the Court grants summary judgment in their favor for reimbursement of these expenses.

Plaintiffs also claim violations of the Contract Clause of the U.S. Constitution and a similar clause in the Arkansas Constitution. However, since the County terminated the collective bargaining agreement in compliance with its provisions, there was no violation. The analysis of the Contract Clause requires determining if there was a substantial impairment of a contractual relationship, which involves assessing the existence of a contract, the nature of the impairment, and its substantiality.

A substantial impairment of a contract must be assessed for legitimate public purpose, and actions by state actors must be narrowly tailored. In this case, the Plaintiffs failed at the first step of the analysis because the collective bargaining agreement allowed either party to seek modification or termination. The County's proper termination of the agreement on October 1, 2002, left no contractual obligations, thus the Defendants did not impair any contracts, leading to their entitlement to summary judgment on the Contract Clause claim, which was dismissed. Similarly, the Plaintiffs' claims under the Arkansas Constitution for impairment of contract obligations were found to lack merit, as the termination provisions in the agreement provided a legitimate method for contract termination. The Defendants also received summary judgment on these claims, which were dismissed.

Additionally, the Plaintiffs alleged a violation of the Arkansas County Government Code due to the quorum court's adoption of Resolution Number 03-21, intending to terminate the collective bargaining agreement. However, the court clarified that the quorum court did not enact any ordinance affecting collective bargaining, as their action merely indicated intent not to renew the agreement, consistent with the contract provisions. Consequently, the Plaintiffs' claims under the Arkansas County Government Code were also dismissed.

In conclusion, the Plaintiffs' motion for summary judgment on their breach of contract claim was granted, while the Defendants' motion concerning the Contract Clause claims and Arkansas County Government Code was granted, with all claims dismissed with prejudice. Each party is responsible for their own costs and fees, and a judgment order will be issued accordingly.