Project Posner

Lead opinion by Richard A. Posner

   MEMORANDUM OPINION

   The ten named court reporters, employed by the United States District Court for the Northern District of Illinois, filed a second amended complaint against the Government alleging that their constitutional rights to due process and equal protection were violated by the method used to calculate their pension benefits and determine 2 their salary increases.^[1] The Government filed a motion to dismiss on the grounds of lack of subject matter jurisdiction, Fed. R. Civ. P. 12(b)(1), and, alternatively, failure to state a claim, Fed. R. Civ. P. 12(b)(6). The parties have fully briefed this motion. The government's motion to dismiss Plaintiffs' constitutional claims relating to the calculation of pension benefits is dismissed for lack of subject matter jurisdiction, and the Government's motion to dismiss Plaintiffs' equal protection claim relating to salary raises is denied.

   I. FACTS 3

   At issue in this case are the methods used to calculate the court reporters' pension benefits and their salary. By federal statute, court reporters receive two types of income: they are paid an annual salary which is set "from time to time by the Judicial Conference of the United States," 28 U.S.C. § 753(e), and they also "may charge and collect fees for transcripts requested by the parties, including the United States, at rates prescribed by the court subject to the approval of the Judicial Conference," 28 U.S.C. § 753(f). The federal government pays for transcripts it requests, as well as transcripts for parties proceeding in forma pauperis under the Criminal Justice Act or in habeas corpus proceedings. 28 U.S.C. § 753(f).

   The Government uses the court reporters annual salary to compute employment benefits, such as their pension payments, but does not include the revenue that court reporters generate from preparing transcripts paid for by the Government. The Government considers court reporters to be independent contractors, as opposed to employees, while they are preparing transcripts. The court reporters assert that the failure to include their transcript revenue in computing 4 employment benefits results in retired court reporters receiving pension payments that are disproportionately small compared with their true annual earnings. They argue that this exclusion violates their right to due process. Plaintiffs assert that they have a property interest in having all their earnings considered under the pension plan. They also argue that their right to procedural due process was violated because the Government deprived them of this property interest without affording them a notice or an opportunity to be heard.

   Retirement benefits for federal employees, including court reporters, are determined pursuant to either the Civil Service Retirement System (CSRS), 5 U.S.C. §§ 8331-8351, or the Federal Employees' Retirement System (FERS), 5 U.S.C. §§ 8401-8479.^[2] Under both systems, a retiree's annuity is calculated based on his "average pay", where average pay is defined as the largest annual rate calculated by averaging the employee's "basic pay" during any three consecutive years of creditable service. 5 U.S.C. §§ 8339, 8331(4) (CSRS); 5 U.S.C. §§ 8415, 8401(3) (FERS). The term "basic pay" is defined to exclude "bonuses, allowances, overtime pay, military pay, pay 5 given in addition to the base pay of the position as fixed by law or regulation," with certain exceptions not applicable here. 5 U.S.C. § 8331(3) (CSRS); 5 U.S.C. § 8401(4) (FERS).

   The court reporters also assert that the scheme used to give them salary raises is less beneficial than the step-in-grade system used for all other judiciary employees, and therefore violates their right to equal protection. There are three levels of salary for court reporters. Both length of service and merit are used to determine their salary level. Reporters start at Level 1 with a basic salary rate. They are promoted to Level 2 and receive a 5% increase over their basic salary rate when they either: (1) receive a certificate of merit from the National Court Reporters 6 Association or pass an equivalent examination; or (2) serve as a full-time reporter with a district court for ten years. (Memorandum in Support of Defendants' Motion to Dismiss, Ex. 1, Guide to Judiciary Policies and Procedures, Vol. VI, Court Reporters' Manual at Ch. V, Part C.) Reporters are promoted to Level 3 and receive a 10% increase over the basic starting salary rate when they have both: (1) received a merit certificate or passed an examination; and (2) served for ten years.^[3] (Id.)

   Plaintiffs state that the two 5% level raises they can receive is less desirable than the Judiciary Salary plan that provides for step-in-grade pay increases for other judiciary employees. They also assert that unlike other judiciary employees, court reporters have not received a pay 7 raise since 1973. However, according to the Court Reporters' Manual, "all salary rates will be adjusted upwards whenever there is a statutory increase for judiciary employees generally." (Memorandum in Support of Motion to Dismiss, Ex. 1, Guide to Judiciary Policies and Procedures, Vol. VI, Court Reporters' Manual at Ch. V, Part C.) Lastly, Plaintiffs argue that the limitations on salary increases compounds the problem of receiving less pension benefits.

II. DISCUSSION

A. Subject Matter Jurisdiction

   The Government first argues that all of plaintiffs' claims should be dismissed for lack of subject matter jurisdiction. Alternatively, the Government asserts that Plaintiffs' due process claims could be dismissed for failure to state a claim, Fed. R. Civ. P. 12(b)(6), or because they are insubstantial. Plaintiffs assert a violation of both substantive and procedural due process. They argue that they have a property interest in their future retirement benefits and that they were deprived of their property interest in the inclusion of transcript fee income for pension calculations. Plaintiffs assert that a procedural due process violation occurred because they were not given 8 notice or an opportunity to be heard before they were deprived of their property interest. The government argues that the due process claims fail to state a claim because none of the Plaintiffs have retired yet and therefore do not currently have a property interest in their pension benefits. The government also asserts that Plaintiffs' claims must fail because their attempt to recast their garden variety retirement benefit claim in constitutional terms does not open the door for judicial review outside of that provided for by the administrative review scheme. See Czerkies v. United States Dep't of Labor, 73 F.3d 1435, 1442-43 (7th Cir. 1996) (en banc). Similarly, the government argues that Plaintiffs' due process claims could be dismissed because they are insubstantial. See Paige v. Cisneros, 91 F.3d 40, 44-45 (7th Cir. 1996). However, this court need not explore the Government's alternative arguments for dismissal if this court lacks subject matter jurisdiction over the due process claims.

   The Government asserts that Plaintiffs have brought this action in the wrong court. It argues that claims for civil service retirement benefits can only be brought in the United States 9 Court of Appeals for the Federal Circuit after administrative review by the Office of Personnel Management (OPM) and the Merit System Protection Board (MSPB).

   Both the CSRS and FERS create a three-part review process for resolving claims relating to retirement benefits. Ayrault v. Pena, 60 F.3d 346, 348 (7th Cir. 1995) (describing the administrative and judicial review scheme). First, Congress has designated the OPM to administer the CSRS and FERS, and to adjudicate all claims arising under the retirement system. 5 U.S.C. § 8347 (a)-(b) (CSRS); 5 U.S.C. § 8461(b)-(c) (FERS). Second, Congress has directed that OPM's administrative actions and orders that affect "the rights or interests of an individual," may be appealed to the MSPB. 5 U.S.C. § 8347(d)(1) (CSRS); 5 U.S.C. § 8461(e)(1) (FERS). Third, except in discrimination cases, an employee aggrieved by a final order or decision of the MSPB can file a petition for review in the Federal Circuit, which has exclusive jurisdiction over such appeals. 5 U.S.C. § 7703(b)(1); 28 U.S.C. § 1295(a)(9).

   A review of the legislative history of the CSRS illustrates Congress's reasoning behind the administrative review scheme. "A leading 10 purpose of the CSRA was to replace the haphazard arrangements for administrative and judicial review of personnel action." United States v. Fausto, 484 U.S. 439, 444, (1988) (citing S. Rep. No. 95-969, at 3 (1978), 1978 U.S.C.C.A.N. 2723). "The CSRA, . . . replaced the patchwork system with an integrated scheme of administrative and judicial review, designed to balance the legitimate interests of the various categories of federal employees with the needs of sound and efficient administration." Id. at 445 (citing S. Rep. No. 95-969, at 4); see Ayrault, 60 F.3d at 348.

   Plaintiffs disagree with the Government's contention that they are required to bring their claims under this administrative review system. However, both parties jointly moved to dismiss the first complaint, without prejudice and with leave to reinstated within one year from the dismissal, in order to provide Plaintiffs with an opportunity to pursue the administrative remedies. This court granted this motion and Plaintiffs raised the pension issue to the OPM. The OPM responded to their claim with an advisory opinion stating that income from transcript fees is in addition to 11 base pay and not "creditable for retirement computation purposes." (Motion to Reinstate Complaint, Ex. F.) The OPM stated that a claim could not be adjudicated until there was a case where a court reporter actually applies for benefits and raises the issue of transcript fees. The OPM also made it clear that it was giving an advisory opinion rather than adjudicating the Plaintiffs' claims, and that there is no right to appeal from an advisory opinion. Notwithstanding, the Plaintiffs appealed the OPM's advisory opinion to the MSPB. The MSPB issued an initial decision denying Plaintiffs a hearing and stated that they lacked jurisdiction over the appeal because the OPM advisory opinion was not appealable. (Memorandum in Opposition to Motion, Ex. 1.) The MSPB also stated that there was no case or controversy because none of the Plaintiffs had applied for retirement benefits. (Id. at 3 n.2) Plaintiffs filed a petition for review with the MSPB, but the parties' memoranda do not state whether the MSPB has responded to this petition. (Memorandum in Opposition to Motion, Ex. 2.)

   Prior to appealing the OPM's advisory opinion to the MSPB, Plaintiffs filed a motion to reinstate their complaint 12 before the Northern District of Illinois because their one year time period to reinstate their complaint was about to lapse. This court granted that motion. Despite Plaintiffs' attempt to litigate their claims in this court, they apparently have not abandoned their claims under the administrative scheme. Thus, they are attempting to litigate the identical issues in two fora simultaneously. Plaintiffs assert that they can bring their claims in this court because they "seek only non-monetary relief for constitutional violations." (Memorandum in Opposition to Motion to Dismiss at 9.) They also assert that they are not challenging the calculation of their pensions, "but rather the systemic violations of their constitutional right to equal protection and due process." (Id.)

   Because Plaintiffs are seeking declaratory and injunctive relief for alleged constitutional violations, as opposed to attempting to bring a Bivens action, the precise issue is whether the administrative and judicial review scheme of the CSRS and FERS precludes jurisdiction in the district courts. A circuit split exists over this issue and the Seventh Circuit has not specifically weighed in on this issue.

   Several 13 courts of appeals have held that the CSRA does not affect the general grant of federal question jurisdiction in 28 U.S.C. § 1331 and waiver of sovereign immunity in 5 U.S.C. § 702 for cases seeking injunctive and declaratory relief, but not damages, for alleged constitutional violations. Mitchum v. Hurt, 73 F.3d 30, 35-36 (3rd Cir. 1995); Hubbard v. EPA, 257 U.S. App. D.C. 305, 809 F.2d 1, 11 n.15 (D.C. Cir. 1986), vacated in part sub nom. Spagnola v. Mathis, 859 F.2d 223 (D.C. Cir. 1988) (en banc). However, three other circuits have held that the CSRA precludes both monetary and equitable relief. Saul v. United States, 928 F.2d 829, 843 (9th Cir. 1991); Stephens v. Dep't of Health and Human Services, 901 F.2d 1571, 1575-77 (11th Cir. 1990); Lombardi v. Small Bus. Admin., 889 F.2d 959, 961-62 (10th Cir. 1989). In Paige, 91 F.3d at 44, the Seventh Circuit declined to decide this jurisdictional issue and instead found that "Paige lacks the sort of substantial constitutional claim that activates the rule requiring doubts to be resolved in favor of judicial review."

   The main case that Plaintiffs rely on to assert that the Northern District of Illinois has 14 jurisdiction over this case is Czerkies v. United States Dep 't of Labor, 73 F.3d 1435 (7th Cir. 1996) (en banc). In Czerkies, a federal employee brought an action against the Department of Labor for denying workers' compensation benefits for an on the job injury without due process. The Department of Labor argued that the district court did not have jurisdiction to hear his claim in light of the Federal Employees Compensation Act (FECA), which provides that:

(b) The action of the Secretary or his designee in allowing or denying a payment under this [Act] is-- (1) final and conclusive for all purposes and with respect to all questions of law and fact; and (2) not subject to review by another official of the United States or by a court by mandamus or otherwise.

5 U.S.C. § 8128(b). The Seventh Circuit discussed what effect door-closing statutes, such as the one in FECA, have on constitutional claims. "The circuits are in agreement: door closing statutes do not, unless Congress expressly provides, close the door to constitutional claims, provided that the claim is colorable and the claimant is seeking only a new hearing or other process rather than a direct 15 award of money by the district court." Czerkies, 73 F.3d at 1439.

   However, the situation faced by the court reporters is starkly different than that faced by Czerkies, who had no appellate remedies of any kind. In this case, the court reporters are not restricted from any judicial review. The CSRS and FERS not only allow for an appeal to the MSPB, but also allow claimants to present their claims to the Federal Circuit. 5 U.S.C. § 7703(b)(1); Ayrault, 60 F.3d at 349 (appropriate forum for judicial review of claim under CSRS is the Federal Circuit). Therefore, this case does not present a situation where Plaintiffs would be denied any judicial review for the alleged constitutional violations if the district court concludes that it lacks subject matter jurisdiction. See Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 215-216, (1994) (district court jurisdiction over alleged due process violation precluded by the administrative review scheme of the Federal Mine Safety and Health Amendments Act because review scheme provided for review by appropriate court of appeals); Weinberger v. Salfi, 422 U.S. 749, 762, 16 (1975) (district court lacks jurisdiction to hear constitutional claim relating to denial of Social Security insurance benefits until a final decision of the Secretary as provided for in the administrative review scheme, 42 U.S.C. 405(g)-(h)); Bisson v. Office of Personnel Management, 908 F.2d 947, 950 (Fed. Cir. 1990) (as part of administrative review scheme covering retirement benefits, proper jurisdiction was in the Federal Circuit to hear employees claim that his equal protection right was violated when he was not given retirement credit under the CSRS for the time he worked as a "private roll" employee of the Smithsonian Institution.). Despite Plaintiffs' contentions, a finding by this court that we do not have jurisdiction would not "slam[] the courthouse door in the face of holders of constitutional claims." Czerkies, 73 F.3d at 1441. Therefore, this court grants the Government's motion to dismiss for lack of subject matter jurisdiction Plaintiffs' claims relating to the calculation of pension benefits and base pay.^[4]

    17

B. Equal Protection Claim

   Having found that this court lacks subject matter jurisdiction over Plaintiffs' due process claim, the remaining claim before this court is Plaintiffs' equal protection claim relating to the disparity between their system of salary raises and the step-in-grade system of other judicial employees. Plaintiffs argue that their right to equal protection was violated because they are treated less favorably than other judiciary employees who receive salary increases under a step-in-grade pay system. Neither the CSRS nor the FERS discuss how raises are determined. Court reporters salaries are discussed in 28 U.S.C. § 753(e)-(f), which provides that the Judicial Conference of the United States shall set court reporters' salaries. Raises for court reporters are explained in the Guide to Judiciary Policies and Procedures, Vol. VI, Court Reporters' Manual at Ch. V, Part C. (Memorandum in Support of Defendants' Motion to Dismiss, Ex. 1.) Because Plaintiffs challenge the constitutionality of 28 U.S.C. § 753(e)-(f) and the salary scheme established by the Judicial Conference under the authority of that statute, this court has jurisdiction over this claim pursuant 18 to 28 U.S.C. § 1331.

   The Government argues that this part of the complaint should be dismissed for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). "'[A] complaint [or part of a complaint] should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Gastineau v. Fleet Mortgage Corp., 137 F.3d 490, *7 (7th Cir. 1998) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, (1957)). The Government cites to Peterson v. Lindner, 765 F.2d 698, 705 (7th Cir. 1985), for the proposition that, in order to state a claim, Plaintiffs must allege "that the varying treatment of different groups or persons is so unrelated to the achievement of any combination of legitimate purposes that [a court] can only conclude that the legislature's actions were irrational." Id. (internal quotation marks omitted).

   The salary scheme challenged by Plaintiffs neither burdens a suspect classification nor implicates a fundamental right; therefore, this claim will be subject to the rational relationship test, which 19 mandates that legislation is presumptively valid and will be upheld so long as it is rationally related to a legitimate governmental interest. Kaplan v. United States, 133 F.3d 469, 474 (7th Cir. 1998). Plaintiffs clearly allege in their complaint that "there is no rational basis for treating Court Reporters differently than other federal employees, including judiciary employees." (Second Amended Complaint at P 25.) Therefore they have sufficiently stated a claim and the Government's motion to dismiss the equal protection claim for lack of subject matter jurisdiction or failure to state a claim is denied.

   Despite the fact that Plaintiffs have successfully stated a claim, it is highly unlikely that they will be able to survive a motion for summary judgment on this issue because they will bear the heavy burden of having to create a genuine issue of material fact that their salary scheme is not rationally related to a legitimate governmental interest. Kaplan, 133 F.3d at 474 (affirming grant of summary judgment under rational relationship test); Smith on Behalf of Smith v. Severn, 129 F.3d 419, 429 (7th Cir. 1997) (same); University Professionals of Illinois, Local 4100, 20 IFT-AFT, AFL-CIO v. Edgar, 114 F.3d 665, 667 (7th Cir. 1997) (in order for the Government to defeat Plaintiffs' equal protection claim it need only proffer a sound reason for the legislation).

IV. CONCLUSION

   This court lacks subject matter jurisdiction over Plaintiffs' claims relating to the calculation of pension benefits and base pay because the administrative review scheme provided for under the CSRS and FERS allows for judicial review in the Federal Circuit. This court does have jurisdiction over Plaintiffs' equal protection claim and Plaintiffs adequately stated such a claim. Therefore, Plaintiffs' challenges to the calculation of pension benefits and base pay are dismissed, and the Government's motion to dismiss Plaintiffs' equal protection claim is denied. The government is invited to file a motion for summary judgment within 30 days of the date of this memorandum opinion. Plaintiffs shall have 10 days thereafter to respond to the summary judgment motion.

   ENTER:

   RICHARD A. POSNER, Chief Judge

   United States Court of Appeals for the Seventh Circuit

Footnotes

[1]

   Plaintiffs' complaint also included a claim for breach of contract, pursuant to 28 U.S.C. § 1346(a)(2) (known as the Little Tucker Act), but they subsequently voluntarily dismissed this claim in their Memorandum in Opposition to Defendants' Motion to Dismiss. (Memorandum in Opposition to Defendants' Motion to Dismiss, 2-3 n. 1, 9.) Additionally, plaintiffs voluntarily dismissed their claim against L. Ralph Mecham in his individual capacity. (Id. at 9.)

[2]

   Congress enacted FERS in 1986 as a successor to CSRS, which was established in 1920. Both systems remain in effect, but persons first employed on or after January 1, 1984, are automatically placed under FERS. Anthony v. OPM, 58 F.3d 620, 622 n.1 (Fed. Cir. 1995).

[3]

   In addition to three levels, salaries also vary slightly based on locality. In 1997, the rates of pay for the three levels in Chicago were $ 49,459, $ 51,932, and $ 54,405. (Memorandum in Support of Defendants' Motion to Dismiss, Ex. 2.)

[4]

   If Plaintiffs had exhausted their administrative remedies before the OPM and MSPB before reinstating their complaint in this court, it might be proper to transfer this case to the Federal Circuit pursuant to 28 U.S.C. § 1631.