                                                                                                                           Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


7-22-2004

Boyd v. Rockwood Area Sch
Precedential or Non-Precedential: Non-Precedential

Docket No. 03-4124




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                                                      NOT PRECEDENTIAL

                     UNITED STATES COURT OF APPEALS
                          FOR THE THIRD CIRCUIT


                                    No. 03-4124




                   CLAUDIA L. BOYD; EDGAR W. GNAGEY;
                  CORDELLA B. GREEN; WILLIAM S. HAJEL;
                    DONNA L. JOHNSON; SANDRA KUSCH;
                     LARRY LAVIGNE; JOYCE D. STERN;
                           WILLIAM H. WELSH,

                                         Appellants


                                          v.

                    ROCKWOOD AREA SCHOOL DISTRICT;
                    ANDREAS DEMIDONT; CLAIR E. LEWIS




                   On Appeal from the United States District Court
                      for the Western District of Pennsylvania
                                  (No. 02-cv-00233)
                          District Judge: Hon. Joy F. Conti


                               Argued May 11, 2004

             BEFORE: NYGAARD, M cKEE and WEIS, Circuit Judges.

                                (Filed July 22, 2004)


Kathryn L. Simpson, Esq. (Argued)
P. Daniel Altland, Esq.
Ronald L. Finck, Esq.
Ambrose W. Heinz, Esq.
Mette, Evans & Woodside
3401 North Front Street
P.O. Box 5950
Harrisburg, PA 17110
Counsel for Appellant

Daniel W. Rullo, Esq. (Argued)
Barbera, Clapper, Beener, Rullo & Melvin
146 West Main Street
P.O. Box 775
Somerset, PA 15501
Counsel for Appellees Rockwood Area School District and Andreas Demidont

William K. Eckel, Esq. (Argued)
Central Park Law Building
Suite 210
132 Gazebo Park
Johnstown, PA 15901
Counsel for Appellee Clair E. Lewis




                                         OPINION


McKEE, Circuit Judge.

       Retired employees of the Rockwood Area School District sued the Rockwood

School District, the District Superintendent and the President of the district teachers’

union after the school district changed plaintiffs’ health care coverage pursuant to a new

collective bargaining agreement it had negotiated with the union. The plaintiffs sought

recovery under 42 U.S.C. § 1983 arguing that the change violated their Fifth Amendment

right to procedural due process. They also asserted several causes of action under state

                                              2
law. The district court dismissed the § 1983 claim pursuant to Fed. R. Civ. P. 12(b)(6)

and declined to exercise supplemental jurisdiction over the state law claims pursuant to

28 U.S.C. § 1367(c)(3). We will affirm. I. BACKGROUND

       When reviewing a district court’s Rule 12(b)(6) dismissal, we must “accept all

factual allegations in the complaint and all reasonable inferences to be drawn therefrom in

the light most favorable to the plaintiffs.” Lorenz v. CSX Corp., 1 F.3d 1406, 1411 (3d

Cir. 1993). We will therefore set forth the facts and relevant inferences as derived from

plaintiffs’ complaint.

       When plaintiffs retired they were covered by a collective bargaining agreement

between the Rockwood Area School District (“RASD”) and the Rockwood Educators’

Association (“REA”), the district teachers’ union.1 Article V, paragraph F of this

agreement stated:

              In the event an employee after 30 years of service in teaching
              permanently retires from teaching after date of this contract
              and prior to such retiring employee’s attaining the age of
              eligibility for M edicare, the Employer agrees to continue to
              pay the premiums for such employees’ Blue Cross, Blue
              Shield and major medical or equivalent insurance coverage
              benefits under paragraph “A” of this Article V above until
              such employee attains the age of eligibility for Medicare.

Complaint ¶ 19.



   1
     Seven of the plaintiffs were teachers and members of the REA. The remaining two
plaintiffs were employed as an administrator and a secretary and allege that they were
entitled to the same benefits as the teachers pursuant to their contracts with the school
district.

                                             3
       Article V, paragraph A provided that RASD would “provide and pay the premium

in full for Plan ‘U’ Blue Cross, Blue Shield and Major Medical . . . or [] equivalent

insurance coverage with some other responsible insurance carrier, for each individual

employee and the dependent members of his family.” Complaint ¶ 18. Defendants

Andreas Demidont, the superintendent of RASD, and Clair E. Lewis, the president of the

REA, were able to encourage plaintiffs to take early retirement largely because of

RASD’s obligation to maintain plaintiffs’ level of health care insurance coverage.

Plaintiffs’ desire to maintain their then current level of coverage was pivotal in their

decision to take early retirement.

       However, a collective bargaining agreement that the REA negotiated with RASD

following plaintiffs’ retirement changed the employees’ health insurance from Plan U

Blue Cross to Select Blue Plan Option 1. That change also applied to the plaintiff

retirees’ coverage, and plaintiffs protested arguing that changing their health insurance to

Select Blue Option 1 violated the agreement to maintain the level of benefits they enjoyed

under Plan U Blue Cross.

       RASD held a hearing in response to plaintiffs’ complaints about the change in

coverage but concluded that the shift did not violate any agreement with the plaintiffs.

Thereafter, plaintiffs filed the instant 1983 action arguing that the change in health care

benefits in violation of their understanding at retirement improperly deprived them of a

protected property interest, and that RASD’s post-deprivation hearing did not cure the



                                              4
constitutional deprivation.. 2

       The defendants moved to dismiss the 1983 claim pursuant to Fed. R. Civ. P.

12(b)(6), and they moved to dismiss the state law claims under Fed. R. Civ. P. 12(b)(1)

for lack of subject matter jurisdiction.3 The district court concluded that plaintiffs failed

to state a cause of action under § 1983. Accordingly, the court dismissed that claim

pursuant to Rule 12(b)(6), and declined to exercise supplemental jurisdiction over the

remaining state law claims. This appeal followed.

                                     II. DISCUSSION

       We review the district court’s dismissal under Rule 12(b)(6) to determine if any

relief could be granted under the facts plaintiffs alleged. Lorenz v. CSX Corp., 1 F.3d

1406, 1411 (3d Cir. 1993). In order to prevail on their Fifth Amendment procedural due

process claim, plaintiffs have to allege that they were deprived of a constitutionally

protected interest without due process of law. Zinermon v. Burch, 494 U.S. 113, 125

(1990); Reich v. Beharry, 883 F.2d 239, 242 (3d Cir. 1989).

       The plaintiffs argue that they were involuntarily deprived of their protected


   2
    As noted above, plaintiffs also asserted pendent state law claims for breach of
contract and equitable estoppel against RASD, and claims of intentional interference with
contract, fraudulent misrepresentation and civil conspiracy against defendants Lewis and
Demidont.
   3
    Defendants Demidont and RASD also argued that the claims against them should be
dismissed under Fed. R. Civ. P. 12(b)(7) for failure to join an indispensable party, the
REA. The district court did not reach this argument because it based its decision to
dismiss the claims before it on other grounds, and we need not address this argument
because we affirm its dismissal on those grounds.

                                              5
property right to continue employment with RASD because RASD made material

misrepresentations regarding future health care coverage and plaintiffs relied upon those

representations in deciding to take early retirement. Alternatively, plaintiffs argue that

they were deprived of their property right to continued health care benefits that arose

from the collective bargaining agreement in effect when they took early retirement and

their employer’s commitment to continue those benefits.

       The district court held that plaintiffs did not allege a property interest protected by

the Due Process Clause, and that any interest plaintiffs may have had was adequately

protected by the hearing the district held after the change in coverage.

                            A. The Claimed Property Interest.

       Constitutionally protected property interests arise only from independent sources

such as state law. However, “federal constitutional law determines whether [an interest

under state law] rises to the level of a legitimate claim of entitlement protected by the Due

Process Clause.” Memphis Light Gas & Water Div. v. Craft, 436 U.S. 1, 9 (1978)

(internal quotation marks and citation omitted). The plaintiffs’ purported property

interest arises from two different sources: (1) their interest in continued employment, and

(2) their agreement with RASD to retire early in return for a continuing level of health

care coverage.

       The Supreme Court has held that state law can create a property interest in tenured

school teachers, administrators, or nonprofessional school employees. 24 P.S. §§ 5-514 et



                                              6
seq., 11-1101 et seq.; cf. Bd. of Regents v. Roth, 408 U.S. 564, 566 (1972) (noting that

Wisconsin law created a protected property interest in tenured teaching positions).

Plaintiffs argue that their interest in continued employment with RASD rises to the level

of a protected property interest because their agreement to take early retirement was

contingent on their health benefits remaining the same or increasing. They maintain that

the subsequent collective bargaining agreement changed their coverage in violation of

that agreement and that the resulting deprivation is sufficiently severe to rise to the level

of a protected property interest.

       We have previously stated that retirement decisions are presumed to be voluntary.

Leheny v. City of Pittsburgh, 183 F.3d 220, 227 (3d Cir. 1999). Accordingly, we assume

that the plaintiffs’ decision to take early retirement was voluntary. However, that

presumption can be overcome by evidence of coercion or misrepresentation of facts

material to the retirees’ decision.. Id. at 228. The plaintiffs argue that their retirement was

involuntarily because RASD misrepresented a material fact to them.

       We apply an objective test to determine if a retirement decision is voluntary.

Covington v. Dep’t of Health and Human Services, 750 F.2d 937, 942 (Fed. Cir. 1984);

see also, Scharf v. Dep’t of the Air Force, 710 F.2d 1572, 1574-75 (Fed. Cir. 1983).

Under that test, we do not inquire into the subjective perceptions of the employee or the

subjective intentions of the employer. Covington, 750 F.2d at 942. Rather, the plaintiff

need only prove that a reasonable person would have been misled by the agency’s



                                              7
statements. Id. (quoting Scharf, 710 F.2d at 1575).

       The plaintiffs’ constitutional challenge rests upon provisions in a collective

bargaining agreement, and the only reasonable conclusion here is that plaintiffs should

have known that their health care benefits as retirees were subject to change pursuant to

subsequent collective bargaining agreements between RASD and the REA. The

agreement they rely upon for the source of a protected property interest in continued

inclusion in Plan U specifically stated that different health care insurance could be

substituted as long as it was equivalent to the Plan U Blue Cross Blue Shield coverage.

Thus, they were clearly aware of the possibility of different, though equivalent, health

care coverage in the future. Given that knowledge, their decision to take early retirement

is hardly rendered involuntary because a subsequent collective bargaining agreement

afforded different coverage.4

       Not every contract results in a protected property interest. Reich v. Beharry, 883

F.2d 239, 242 (3d Cir. 1989). Rather, a contract creates a protected property interest



   4
     The plaintiffs cite to both Leheny and Hargray v. City of Hallandale, 57 F.3d 1560
(11th Cir. 1995), to establish that reasonable reliance on a misrepresentation could
amount to an involuntary deprivation of their property interest in continued employment.
However, neither case furthers our inquiry. In Leheny, we affirmed the district court’s
finding that plaintiffs were not forced to retire as a matter of law because the plaintiffs
had decided to retire four months before the alleged misrepresentation occurred. 183 F.3d
at 228. In Hargray, the plaintiff alleged that his decision to retire was rendered
involuntary by his employer’s fraudulent threat to bring charges against him. However,
the court held that the employing municipality had probable cause to bring criminal
charges against him. Thus, there was no fraud and the city’s actions did not make the
plaintiff’s decision to retire involuntary. 57 F.3d at 1569-71.

                                             8
subject to the limitations of the Due Process Clause only if it confers a status of

permanence or extreme dependence, or if it provides that the contract can only be

terminated for cause. Unger v. Nat’l Residents Matching Program, 928 F.2d 1392, 1399

(3d Cir. 1991). The collective bargaining agreement here does neither. The situation

here is not analogous to the circumstances in Goldberg v. Kelly, 397 U.S. 254, 261-62

(1970). The welfare benefits conferred there resulted in the recipient’s “extreme

dependence” for day-to-day survival. In fact, as defendants note, “[t]here is no claim . . .

that any [plaintiffs] have paid money out of pocket for medical care or been denied

insurance coverage for medical treatment as a result of not having Plan ‘U’ health

insurance.” Appellees’ Br. at 23. Moreover, as appellees also note without contradiction,

“[p]laintiffs can still obtain Plan ‘U’ health insurance through the School District health

benefit plan by paying the cost differential for such insurance.” Id. Although we do not

minimize the actual and psychological importance of health care benefits and related

costs to retirees, we can not help but note that plaintiffs here are not alleging that their

day-to-day survival has been threatened by the “reduction” in coverage under the new

collective bargaining agreement. See S&D M aintenance Co., Inc. v. Goldin, 844 f.2d 962,

966 (2d Cir. 1988 (the claimed property interest must be “characterized by a quality of

either extreme dependence” or “permanence . . . or sometimes both [to rise to the level of

a constitutionally protected interest.”). 5

   5
     The plaintiffs also argue that “Congress recognized the importance of sound
retirement plans with it enacted the Employee Retirement Income Security Act [29 U.S.C.

                                               9
              B. The process due given the property interest involved

       Plaintiffs’ challenge to the adequacy of the post-deprivation hearing RASD held is

contingent on the significance of the property right involved. We have already explained

that plaintiffs have not alleged a constitutionally protected property interest. Accordingly,

the district court correctly held that plaintiffs were not entitled to procedural due process

under the Fifth Amendment before their health plan was changed.6 There may be an issue

of whether the substituted benefits were “equivalent” to the benefits plaintiffs received

under Plan U. However, absent more indicia of extreme dependence of permanence than

exists here, the post deprivation hearing plaintiffs were afforded was more than adequate

to protect plaintiffs’ interests. See Mathews v. Elridge, 424 U.S. 319 335 (1976). As the

district court correctly recognized, the question of whether the subsequent plan was

“equivalent” to Plan U is a contract dispute that turns on issues of state contract law that

do not implicate the Constitution.

       The plaintiffs can pursue their state law claims, but not in federal court. Since the



§§ 1001 et seq.]” Br. at 21. The passage of ERISA certainly indicates that Congress
thought that employees’ receipt of retirement benefits was important enough to be
federally regulated, but it does not necessarily follow that Congress intended to indicate
that retirement benefits rose to the level of being a constitutionally protected property
interest.
   6
     In his individual brief on appeal, Lewis argues that he did not have the authority as
either a RASD teacher or the president of the REA to provide the plaintiffs with a pre-
deprivation hearing and can not be held liable for any due process violations that may
have occurred as a result. We need not address this argument because we find that the
plaintiffs did not have a due process right to a pre-deprivation hearing.

                                              10
district court correctly dismissed the section 1983 claim, it was within its authority to

remand the state law claims. 28 U.S.C. § 1367(c)(3).

                                      III. Conclusion.

       For all of the above reasons, we will affirm the district court’s order dismissing all

claims against the defendants.




                                             11
