                                        In the

         United States Court of Appeals
                       For the Seventh Circuit
                            ____________________  

No.  13-­‐‑3790  
MICHAEL  W.  UNDERWOOD,  et  al.,  
                                                            Plaintiffs-­‐‑Appellants,  
                                           v.  

CITY  OF  CHICAGO,  ILLINOIS,  
                                                             Defendant-­‐‑Appellee.  
                            ____________________  

              Appeal  from  the  United  States  District  Court  for  the  
                Northern  District  of  Illinois,  Eastern  Division.  
                No.  13  C  5687  —  James  F.  Holderman,  Judge.  
                            ____________________  

   ARGUED  DECEMBER  10,  2014  —  DECIDED  FEBRUARY  25,  2015  
                  ____________________  

        Before  EASTERBROOK,  SYKES,  and  HAMILTON,  Circuit  Judg-­‐‑
es.  
     EASTERBROOK,   Circuit   Judge.   Since   1982   Chicago   has   pro-­‐‑
vided   free   or   subsidized   health   care   to   retirees   who   receive  
pension   benefits   through   funds   for   police,   fire,   and   some  
other   job   classifications.   In   June   2013   the   most   recent   ordi-­‐‑
nance  establishing  these  benefits  expired.  It  had  been  enact-­‐‑
ed   in   2003   and   contained   a   sunset   clause   providing   for   ter-­‐‑
mination   after   10   years.   When   the   City   notified   the   retirees  
2                                                                 No.  13-­‐‑3790  

that   they   would   have   to   pay   more   for   medical   coverage   in  
2014,  they  filed  suit  in  state  court  against  the  City.  (They  also  
named   the   funds   but   did   not   serve   them   with   process,   so  
they  did  not  become  parties.)  
     The   suit’s   principal   contention   is   that   any   reduction   of  
health  care  or  increase  in  the  retirees’  contribution  toward  it  
violates  Art.  XIII  §5  of  the  Illinois  Constitution  (the  Pensions  
Clause),   which   says   that   “[m]embership   in   any   pension   or  
retirement  system  of  …  any  unit  of  local  government  …  shall  
be   an   enforceable   contractual   relationship,   the   benefits   of  
which  shall  not  be  diminished  or  impaired.”  The  complaint  
also   asserted   that   the   City’s   policy   violates   the   Contracts  
Clause   of   the   United   States   Constitution,   Art.   I   §10   cl.   1,  
which  says  that  “[n]o  State  shall  …  pass  any  …  Law  impair-­‐‑
ing   the   Obligation   of   Contracts”.   The   federal   claim   allowed  
Chicago  to  remove  the  suit  to  federal  court,  which  it  did.  See  
28  U.S.C.  §1441.  The  district  court  dismissed  the  suit  on  the  
pleadings,  ruling  that  the  Pensions  Clause  does  not  apply  to  
health   care   and   that   the   Contracts   Clause   claim   fails   on   the  
merits.  2013  U.S.  Dist.  LEXIS  174455  (N.D.  Ill.  Dec.  13,  2013).  
     While  the  case  was  on  appeal,  the  Supreme  Court  of  Illi-­‐‑
nois  held  that  the  Pensions  Clause  applies  to  health  benefits.  
Kanerva   v.   Weems,   2014   IL   115811   (July   3,   2014).   Both   sides  
then  filed  briefs  asking  us  to  decide  the  merits  of  the  plain-­‐‑
tiffs’  claim,  which  entails  a  contention  that  any  participant  in  
a   pension   plan   who   receives   health   benefits—even   if   from  
another   source,   such   as   the   City   of   Chicago—is   entitled   to  
keep   them   no   matter   what   terms   the   payor   attached.   On  
plaintiffs’  understanding,  if  a   city   promises  health  coverage  
during  one  mayor’s  term  of  office,  or  for  one  year  following  
a   worker’s   retirement,   or   until   2013,   or   any   other   limit,   the  
No.  13-­‐‑3790                                                                  3  

retiree   is   nonetheless   entitled   to   benefits   for   life.   Chicago  
contends  that  this  is  not  a  sound  understanding  of  the  Pen-­‐‑
sions   Clause,   which   says   that   membership   is   “contractual”  
and   does   not   imply   that   the   terms   on   which   benefits   were  
established  can  be  overridden.  Cf.  M&G  Polymers  USA,  LLC  
v.  Tackett,  135  S.  Ct.  926  (2015)  (health  benefits  vest  for  pur-­‐‑
poses   of   federal   law   when   analysis   under   the   ordinary   law  
of   contracts   shows   that   a   lifetime   promise   has   been   made;  
courts  should  not  use  a  presumption  for  or  against  vesting).  
    We  are  reluctant  to  resolve  a  novel  issue  of  state  constitu-­‐‑
tional  law.  The  Supreme  Court  of  Illinois  has  not  addressed  
the   subject   on   which   the   parties   disagree.   Each   finds   some  
support   in   state   decisions,   but   the   Supreme   Court   has   not  
tackled  the  issue  directly,  and  it  could  not  have  done  so  until  
after   holding   in   Kanerva   that   the   Pensions   Clause   applies.  
The   state’s   highest   court   has   granted   review   in   Matthews   v.  
Chicago  Transit  Authority,  2014  IL  App.  (1st)  123348  (Apr.  25,  
2014),  petition  for  leave  to  appeal  allowed,  2014  IL  LEXIS  954  
(Sept.  24,  2014),  which  may  shed  light  on  the  issues,  but  that  
case  has  yet  to  be  briefed,  and  the  eventual  decision  in  Mat-­‐‑
thews   may   or   may   not   control   this   case.   Health   benefits   in  
Matthews  were  created  by  a  collective  bargaining  agreement,  
and   the   holding   may   be   limited   to   how   a   CBA’s   silence  
about  the  duration  of  health  benefits  interacts  with  the  Pen-­‐‑
sions  Clause;  but  the  court  also  could  choose  to  embrace  (or  
reject)   plaintiffs’   contention   that   all   health   benefits   vest   au-­‐‑
tomatically  by  virtue  of  the  Pensions  Clause.  
    There  is,  moreover,  a  potentially  important  question  that  
the   parties   have   not   addressed:   What   “benefits”   does   the  
Pensions   Clause   protect?   Plaintiffs   assume   that   it   covers   in-­‐‑
kind   benefits   such   as   health   care,   no   matter   the   cost   to   the  
4                                                                  No.  13-­‐‑3790  

employer.   Yet   pensions   promise   a   particular   amount   of  
money  (for  defined-­‐‑benefit  plans)  or  the  balance  in  a  particu-­‐‑
lar   fund   (for   defined-­‐‑contribution   plans),   not   a   particular  
quantum   of   buying   power.   If   the   cost   of   automobiles,   food,  
or  health  care  rises,  the  Pensions  Clause  does  not  require  the  
state  to  supplement  pensions  beyond  the  promised  level.  A  
parallel  approach  for  health  care  would  imply  that  the  Pen-­‐‑
sions   Clause   locks   in   the   amount   of   the   promised   subsidy  
but   does   not   guarantee   a   particular   level   of   medical   care.  
Kanerva   implies   as   much   by   saying   that   the   state’s   contribu-­‐‑
tions  to  health-­‐‑insurance  premiums  are  the  protected  benefit.  
But  it  did  not  tackle  that  issue  directly.  Silence  makes  it  hard  
for  a  federal  court  to  resolve  this  appeal.  
     The   state-­‐‑law   issues   came   to   federal   court   via   the   sup-­‐‑
plemental   jurisdiction.   We   are   free   to   resolve   the   federal  
claims   and   return   the   state   claims   to   state   court.   28   U.S.C.  
§1367(c)(1),  (3).  Although  plaintiffs’  appellate  briefs  asked  us  
to   decide   the   whole   case,   a   post-­‐‑argument   supplemental  
memorandum  asked  us  to  remand  the  state-­‐‑law  claims.  Chi-­‐‑
cago   maintained   its   position   that   all   issues   should   be   re-­‐‑
solved   now.   Given   the   uncertainty   surrounding   the   state-­‐‑
law   claims,   their   importance   to   employees   across   Illinois,  
and  the  fact  that  the  district  court  did  not  even  begin  to  ad-­‐‑
dress   them   on   the   merits   (having   held   that   the   Pensions  
Clause   does   not   apply),   we   conclude   that   a   remand   is   the  
best   step—if   the   federal   claims   can   be   resolved   without   de-­‐‑
ciding  the  state-­‐‑law  claims  too.  
    The   Contracts   Clause   does   not   create   a   right   to   have   all  
contractual   claims   enforced   in   federal   court.   It   provides   in-­‐‑
stead  that  states  may  not  enact  any  law  impairing  the  obliga-­‐‑
tion  of  contracts—that  is,  taking  away  entitlements  that  pre-­‐‑
No.  13-­‐‑3790                                                                 5  

dated   the   change.   See,   e.g.,   General   Motors   Corp.   v.   Romein,  
503  U.S.  181,  186  (1992);  Allied  Structural  Steel  Co.  v.  Spannaus,  
438   U.S.   234,   244   (1978);   Ogden   v.   Saunders,   25   U.S.   (12  
Wheat.)  213  (1827).  
    The  Contracts  Clause  covers  legislative  as  opposed  to  ex-­‐‑
ecutive  action.  See,  e.g.,  St.  Paul  Gas  Light  Co.  v.  St.  Paul,  181  
U.S.  142,  148  (1901);  E&E  Hauling,  Inc.  v.  Forest  Preserve  Dis-­‐‑
trict   of   Du   Page   County,   613   F.2d   675,   678   (7th   Cir.   1980).  
Plaintiffs   attempt   to   satisfy   this   requirement   by   contending  
that   various   state   statutes   have   impaired   their   rights   to  
health  benefits.  But  to  the  extent  that  they  contest  state  stat-­‐‑
utes,  they  have  sued  the  wrong  party.  Chicago  is  not  respon-­‐‑
sible  for  the  content  of  state  law.  
   So  have  plaintiffs  identified  any  legislative  action  by  the  
City  that  impairs  contractual  rights?  They  have  not.  They  do  
not   accuse   the   City   of   making   legislative   changes   that   pre-­‐‑
vent  implementation  of  contracts.  
     Many  decisions  hold  that  legislation  can  breach  a  contract  
without  impairing  the  obligation  of  contracts.  That’s  the  point  
of  E&E  Hauling  and  the  cases  on  which  it  relied.  See,  e.g.,  St.  
Paul  Gas  Light,  181  U.S.  at  149;  Hays  v.  Port  of  Seattle,  251  U.S.  
233,  237  (1920);  Jackson  Sawmill  Co.  v.  United  States,  580  F.2d  
302   (8th   Cir.   1978).   A   statute   or   ordinance   preventing   en-­‐‑
forcement   of   contracts   would   create   a   problem   under   the  
Contracts  Clause,  see  E&E  Hauling,  613  F.2d  at  680–81  &  n.7.  
But  plaintiffs  do  not  contend  that  Chicago  has  adopted  legis-­‐‑
lation   overriding   or   otherwise   blocking   the   enforcement   of  
contracts  about  health  benefits.  
   Illinois   law   provides   plaintiffs   with   ample   remedies,   if  
their   state-­‐‑law   theories   are   correct.   Cf.   Mid-­‐‑American   Waste  
6                                                                  No.  13-­‐‑3790  

Systems,  Inc.  v.  Gary,  49  F.3d  286  (7th  Cir.  1995);    Simmons  v.  
Gillespie,  712  F.3d  1041  (7th  Cir.  2013);  Kay  v.  Chicago  Board  of  
Education,  547  F.3d  736  (7th  Cir.  2008).  Far  from  superseding  
contracts,   Illinois   law   arguably   gives   promises   more   force  
than  they  would  have  under  the  common  law.  The  2003  or-­‐‑
dinance  had  a  time  limit;  no  one  contends  that  its  expiration  
was   a   breach   of   contract.   Older   promises,   which   plaintiffs  
and   the   district   court   characterize   as   “handshake   deals,”  
likewise  are  not  enforceable  as  contracts.  The  Illinois  Statute  
of   Frauds,   see   McInerney   v.   Charter   Golf,   Inc.,   176   Ill.2d   482,  
490   (1997),   prevents   the   enforcement   of   oral   promises   that  
extend  more  than  a  year  into  the  future,  as  these  “handshake  
deals”   did.   (We   have   omitted   details   about   the   sequence   of  
promises   underlying   the   plaintiffs’   claims.   The   district  
court’s  opinion  recounts  them;  they  do  not  matter  to  analysis  
under  the  Contracts  Clause.)  Plaintiffs  contend  that  the  Pen-­‐‑
sions   Clause   of   the   Illinois   Constitution   gives   the   City’s  
promises   greater   force   than   the   common   law   of   contracts  
provides,  but  that  is  a  proposition  of  state  law  only  and  does  
not  create  a  claim  under  the  federal  Contracts  Clause.  
   At   oral   argument   plaintiffs’   counsel   suggested   that   Chi-­‐‑
cago   may   have   violated   the   Takings   Clause   of   the   Fifth  
Amendment   by   discontinuing   or   reducing   health   benefits.  
No  such  argument  appears  in  the  briefs,  and  a  takings  claim  
would  be  premature.  The  federal  Constitution  does  not  for-­‐‑
bid   takings;   instead   it   requires   just   compensation.   This  
means   that   any   takings   claim   belongs   in   state   court,   which  
may   award   compensation.   See   Williamson   County   Regional  
Planning   Comm’n   v.   Hamilton   Bank   of   Johnson   City,   473   U.S.  
172  (1985).  An  unripe  takings  claim  cannot  keep  this  suit  in  
federal  court.  
No.  13-­‐‑3790                                                                  7  

      The   federal   judiciary   has   an   institutional   interest   in   al-­‐‑
lowing  states  to  resolve  novel  issues  of  state  law.  It  would  be  
an  abuse  of  discretion  for  a  district  court  to  retain  the  state-­‐‑
law  claims,  once  the  federal  claims  have  been  resolved,  and  
it   would   be   a   mistake   for   us   to   say   anything   more   about  
them.  Because  the  Supreme  Court  of  Illinois  has  granted  re-­‐‑
view  of  a  case  whose  disposition  may  cast  light  on  plaintiffs’  
claims,  and  because  this  suit  began  in  state  court,  relinquish-­‐‑
ing   supplemental   jurisdiction   is   preferable   to   certifying   one  
or  more  questions  to  the  state  judiciary.  The  judgment  of  the  
district   court   is   vacated,   and   the   case   is   remanded   with   in-­‐‑
structions   to   remand   the   state-­‐‑law   claims   to   state   court   un-­‐‑
der  §1367(c).  
