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October 01, 2012

Federal Circuit Court decides in favor of judges in judicial pay case

Rules that Congress violated compensation clause

The U.S. Court of Appeals for the Federal Circuit ruled this month that Congress violated the Constitution’s compensation clause when it blocked cost-of-living adjustments (COLAs) for federal judges in 1995, 1996, 1997 and 1999, and that Congress improperly withhold COLAs in 2007 and 2010 based on erroneous interpretation of a statute.

In its 10-2 decision in Beer v. United States, the court decided in favor of the six current and former judges who first brought action in 2009. The court held that Congress, when it passed the Ethics Reform Act of 1989, committed to “providing sitting and prospective Article III judges with annual COLAs in exchange for limiting the ability to seek outside income and to offset the effects of inflation.” The court concluded that “Congress broke this commitment and effected a diminution in judicial compensation.”

The 1989 act established automatic annual COLAs for judges and other senior government officials that were to take effect whenever a COLA was conferred on federal workers paid according to the General Schedule. In 1995, 1996, 1997 and 1999, however, Congress passed blocking legislation that denied judges, members of Congress and certain executive branch officials their scheduled COLAs. In 2007 and 2010, COLAs were denied because Congress failed to enact authorizing legislation to allow federal judges to receive salary adjustments as it believed was required under Section 140 of P.L. 97-92. Section 140, originally enacted in 1981 as part of an appropriations bill and made permanent in 2001, bars funds each year from being expended to increase federal judicial salaries “except as may be specifically authorized by Act of Congress hereafter enacted.”

In reaching its decision, the Federal Circuit overruled its 2001 decision in Williams v. U.S., 240 F. 3d. 1019 (Fed. Cir. 2001), which found that Congress did not violate the compensation clause when it withheld judicial salary increases in question because the clause protected only pay that had already taken effect. That decision was based on a 1980 Supreme Court decision in U.S. v. Will, 449 U.S. 200 (1980), which held that Congress could revoke a COLA any time before it vested, defined as the time it was due to be paid.

The Oct. 5 ruling maintained that Williams incorrectly relied on the vesting rules in Will, which applied to an uncertain, discretionary process under the 1975 Adjustment Act that differed substantially from the 1989 act.

Examining whether the blocked COLAs violated the compensation clause, the court concluded that the “precise and definite promise of COLAs in the 1989 act triggered the expectation-related protection of the compensation clause. As such, Congress could not block these adjustments once promised.”    

The court also examined Section 140 and ruled that the 2001 amendment making Section 140 permanent did not set a new benchmark for its “hereafter enacted” requirements. Therefore, the 1989 act’s precise, automatic COLAs satisfy the requirements of Section 140, according to the court.

The ruling explained that the government withheld COLAs from judges in 2007 and 2010 because the government misinterpreted Section 140 as requiring a separate and additional authorizing enactment to put those adjustments into effect.  

The court also noted that Congress is not precluded from amending the 1989 act to set up a scheme promising a certain pay scale of yearly COLAs, but warned that any changes would be limited by the Constitution to prospective Article III judges and would not affect currently sitting judges.    

The case was remanded to the Court of Federal Claims, which will calculate monetary damages owed to the appellants as “the additional compensation to which appellants were entitled since Jan. 13, 2003 – the maximum period for which they can seek relief under the applicable statute of limitations.”

The federal government is expected to appeal the ruling to the Supreme Court.

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