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Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

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Monday, June 4, 2012

Seventh Circuit Affirms Dismissal of Labor Union's Contracts Clause Claims

7th CirCouncil 31 of the American Federation of State, County and Municipal Employees, AFL-CIO (the Union) represents 40,000 employees in the state of Illinois.  It agreed to certain cost-saving measures, including deferred wage increases, in order to help Illinois address significant budget pressures.  When Illinois did not emerge from its financial woes, it instituted a wage freeze, repudiating the earlier deal.

The Union brought suit, citing inter alia the Contracts Clause, and seeking an injunction forcing the state to pay the wage increases as they came due. Illinois brought a motion to dismiss, which the District Court granted.  In Council 31 v. Quinn, the Seventh Circuit affirmed.  

The case is procedurally complex, especially since the parties proceeded with arbitration, in which the Union prevailed in part, and that ruling is subject to an on-going appeal in the state courts.  Meanwhile, the 7th Circuit addressed only constitutional claims brought pursuant to the Contracts Cluase and the Equal Protection Clause against Illinois Governor Quinn and from the State's Department of Central Management Services Director Malcolm Weems, both in their offiical capacities.

Although the Union characterized its claims as seeking only injunctive and declaratory relief, the true aim was to get the state to make expenditures from its treasury.  As such, not withstanding Ex parte Young, the Eleventh Amendment barred the Union's Contracts Clause claims against the defendants.  

Even if there were no Eleventh Amendment bar to the suit, the Court also found that the Union could not state a claim under the Contracts Clause because it alleged only an ordinary breach of contract, which is insufficient to constitute an "impairment" of contractual relations for the purposes of the Contracts Clause.  The reasons why this is so have to do with the state's defenses to the Union's claims in the arbitration proceedings and the state court appeals thereof.  The basic argument is that appropriate legislative appropriations were a condition precedent to its duties to pay the wage increases.  If that argument succeeds, there was no contractual impairment.  If it fails, there is no need for a federal court injunction because the Union will have prevailed.

The Court dismissed the Union's Equal Protection claim because the challenged state rules withstand rational basis scrutiny.

[JT]

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