Sharp Judicial Split on Council Law

Sharp Judicial Split on Council Law|Sharp Judicial Split on Council Law

Dissenter say high court shouldn’t have decided issue mayor posed vs. Equal Benefits

Dominique Ghossein, in whose name the Equal Benefits Law was passed, battled cancer for more than three years before her death in 2003, while her partner Leslie Thrope, an employee of the SEIU Local 32B-J Legal Fund, a city contractor, was unable to win domestic partner health benefits for her. Thrope, pictured at a City Council press conference Tuesday regarding the Court of Appeals overturning of the EBL, is still part of the fight to win justice in Dominique’s memory.

Presenting a reverse Valentine to gay and lesbian New Yorkers on February 14, a bare majority of the state’s highest court ruled that the Equal Benefits Law (EBL) passed by the New York City Council in 2004 over the veto of Republican Mayor Michael R. Bloomberg is invalid.

The EBL requires any person or company bidding on city contracts worth at least $100,000 a year to have in place a program providing benefits to the domestic partners of their employees equal to those benefits offered legal spouses. According to the New York Court of Appeals majority, this conflicts with both a state law concerning public contracts and a federal law regulating employee benefit plans.

After the Council enacted the EBL over his veto, Bloomberg adamantly refused to put the new law into effect. Repeating both his policy opposition as well as the legal objections that would be raised in the lawsuit, he filed a declaratory judgment action in state Supreme Court, seeking to have the law declared invalid, and he also sought a temporary order to block the EBL from going into effect pending the outcome of the case. The trial judge did not issue the temporary order, but the mayor refused to put the law into effect anyway, provoking the City Council into filing its own lawsuit. The Council action was taken under Article 78 of the state’s civil practice code, which gives the courts authority to hear lawsuits in which they are asked to order a public official to comply with the law.

Responding to the Council’s lawsuit, the mayor argued that the law was invalid and therefore he should not have to implement it. This is the point on which the seven-member Court of Appeals divided 4-3. Judge Smith ruled that it would be absurd to hold that the mayor could not argue the invalidity of the law as a defense to an action seeking to have a court order him to enforce it.

Writing for the dissenters, Judge Albert Rosenblatt, also a Pataki appointee, contended that the only appropriate vehicle for the mayor to contest the validity of a law duly enacted by the City Council was the declaratory judgment action, and that it was inappropriate for the court to determine the validity of the law in the context of an Article 78 proceeding, which technically is limited to the question whether a public official is failing to enforce a duly enacted law.

These arcane points of civil procedure may seem mainly of academic interest, because the Court of Appeals’ decision on this point is not subject to further judicial review, although it could theoretically be addressed by the Legislature if it disagreed with the court’s approach. But for now it seems to tip the balance of power between the mayor and the City Council, giving the mayor license to refuse to enforce laws enacted over his veto if he has a plausible argument that the laws are preempted or unconstitutional.

The majority’s ruling on the merits is of more direct import. As did the Appellate Division, Smith found that federal and state law in this case trump municipal law through a process called preemption. Federal law is the “supreme law of the land” and overrides any contradictory state law. Within the state system, statutes passed by the Legislature in Albany take priority over local ordinances passed by the City Council.

The key question before the court was whether there is a fatal inconsistency between the requirements of the EBL and the dictates of state and federal law.

Turning first to state law, Smith noted that the New York State General Municipal Law requires that on all city contracts worth at least $20,000 there be competitive bidding and that the contract be awarded to “the lowest responsible bidder.” This was intended, according to Smith, to guard against bias and corruption in the awarding of city contracts, and it tightly restricts the discretion given local officials.

“The Mayor argues, and we hold, that the Equal Benefits Law violates this requirement by excluding from public contracting any ‘responsible bidder’ that does not provide equal benefits to domestic partners and spouses,” wrote Smith. “The provision of equal benefits for domestic partners and spouses may be a desirable end, but it is not one that New York City is free to pursue by departing from the requirements of the competitive bidding statute.”

The court pointed out that a city wanting to favor certain contractors over others could manipulate its requirements in such a way as to disqualify disfavored bidders, and this is precisely what the state law provisions were designed to prevent.

Smith discounted a key argument made by the Council—that the EBL’s legislative history included testimony that the net result of the law would be to save money by reducing the number of uninsured people otherwise reliant on public welfare and benefits for their health care, which, it was contended, would outweigh the minimal additional expense to contractors of providing the coverage, that likely would be passed through to the city by slightly increasing the contract bids. Past judicial decisions have recognized an exception to the lowest bidder requirement in cases involving net cost savings, but the court majority found those cases inapplicable where the law’s primary objective is benefiting workers rather than saving the city money.

Turning to federal issues, Smith found that the U.S. Employee Retirement Income Security Act (ERISA), which preempts state and local regulation of employee benefit plans, divests the Council of the power to require non-governmental employers bidding on contracts to provide any particular benefits to their employees.

The Council had argued that the EBL did not “require” any employer to provide benefits, but merely enacted a policy by which the city would only contract with employers who elected to provide such benefits. The court found this argument inconsistent with U.S. Supreme Court decisions interpreting ERISA. More to the point, the court found it inconsistent with the two prior federal court rulings concerning municipal laws similar to the EBL, from Portland, Maine, and San Francisco.

In both cities, attempts to disqualify companies from bidding on city contracts if they do not provide equal benefits to domestic partners and spouses of their employees faltered on the issue of ERISA preemption. In San Francisco, the court held that only employee benefits not part of an “employee benefit plan,” as defined by ERISA, could be regulated by local law. Thus, San Francisco can require that city contractors provide domestic partnership benefits such as family leave and bereavement leave.

But the picture is more complex concerning pensions and health insurance provided through benefit plans. In the San Francisco case, which was filed by airlines that contract with the city to use the facilities at the municipal airport, the court found that because the city had a monopoly on airport services, applying the EBL would be tantamount to regulating ERISA-covered plans, and thus preempted. But the San Francisco court made no direct ruling regarding the EBL’s application to contractors for whom the city is not their sole or overwhelming customer, and thousands of employers have complied with the EBL and provided domestic partnership benefits in order to sell goods and services to that city.

In Portland, Maine, however, the federal court did find the local law preempted with respect to ERISA-covered employee benefit plans, limiting its application to a narrow range of non-plan benefits.

To date, no federal appellate court has issued a ruling directly deciding the degree to which ERISA would preempt a local law such as the EBL.

The breakdown on the Court of Appeals in this case was not, strictly speaking, along political lines. As noted above, Judge Rosenblatt, author of the dissenting opinion, was appointed by Pataki. The other two dissenters were Chief Judge Judith Kaye and Judge Carmen Ciparick, both appointed to the court by former Governor Mario Cuomo, a Democrat. Another of Cuomo’s appointees, Judge George Bundy Smith, sided with the majority, which was otherwise comprised of Pataki judges.