cheatham/huey v. Diciccio/phoenix Law Enforcement Association , 240 Ariz. 314 ( 2016 )

IN THE
SUPREME COURT OF THE STATE OF ARIZONA
WILLIAM R. CHEATHAM AND MARCUS HUEY,
Plaintiffs/Appellees,
v.
SAL DICICCIO IN HIS OFFICIAL CAPACITY AS A MEMBER OF THE PHOENIX CITY
COUNCIL; CITY OF PHOENIX; PHOENIX LAW ENFORCEMENT ASSOCIATION,
Defendants/Appellants,
_____________________
THOMAS COX; VICTOR ESCOTO; RICHARD V. HARTSON; VIVIAN REQUE;
AND DAVID K. WILSON,
Intervenors/Appellants.
_____________________
WILLIAM R. CHEATHAM AND MARCUS HUEY,
Plaintiffs/Appellees,
v.
PHOENIX LAW ENFORCEMENT ASSOCIATION,
Defendant/Appellant.
No. CV-15-0287-PR
Filed September 13, 2016
Appeal from the Superior Court in Maricopa County
The Honorable Katherine M. Cooper, Judge
No. CV2011-021634
REVERSED
Opinion of the Court of Appeals, Division One
238 Ariz. 69, 356 P.3d 814 (App. 2015)
VACATED
COUNSEL:
Jonathan Riches (argued), Scharf-Norton Center for Constitutional
CHEATHAM V. DICICCIO, ET AL.
Opinion of the Court
Litigation at the Goldwater Institute, Phoenix, Attorneys for William R.
Cheatham and Marcus Huey
Brad Holm, Phoenix City Attorney, Phoenix; and John Alan Doran, Lori
Wright Keffer, Matthew A. Hesketh, Sherman & Howard L.L.C., Phoenix,
Attorneys for Sal DiCiccio and City of Phoenix
Michael Napier (argued), Cassidy L. Bacon, Napier, Coury & Baillie, P.C.,
Phoenix, Attorneys for Phoenix Law Enforcement Association
Barbara LaWall, Pima County Attorney, Regina L. Nassen, Deputy
County Attorney, Tucson, Attorneys for Amicus Curiae Pima County
David L. Abney, Knapp & Roberts, P.C., Scottsdale, Attorneys for Amicus
Curiae PORAC Legal Defense Fund
Larry H. James, Crabbe, Brown & James, LLP, Columbus, OH; and Robert
E. Yen, Yen Pilch & Landeen, P.C., Phoenix, Attorneys for Amicus Curiae
National Fraternal Order of Police
James S. Burling, Pacific Legal Foundation, Sacramento, CA, Attorneys for
Amicus Curiae Pacific Legal Foundation
Roopali H. Desai, Shelley Tolman, Coppersmith Brockelman PLC,
Phoenix, Attorneys for Amici Curiae United Phoenix Firefighters
Association, Local 493, Professional Fire Fighters of Arizona, and
International Association of Fire Fighters
Gerald Barrett, Ward, Keenan & Barrett, P.C., Phoenix, Attorneys for
Amicus Curiae National Association of Police Organizations
Susan Martin, Jennifer Kroll, Martin & Bonnett, PLLC, Phoenix; Nicholas
J. Enoch, Lubin & Enoch, P.C., Phoenix, Attorneys for Amici Curiae
American Federation of State, County and Municipal Employees, Locals
2384 and 2960
2
CHEATHAM V. DICICCIO, ET AL.
Opinion of the Court
CHIEF JUSTICE BALES authored the opinion of the Court, in which VICE
CHIEF JUSTICE PELANDER and JUDGE HOWARD joined, and
JUSTICES BRUTINEL and TIMMER dissented.
CHIEF JUSTICE BALES, opinion of the Court:
¶1 The Gift Clause of Arizona’s Constitution bars cities and other
public entities from “mak[ing] any donation or grant, by subsidy or
otherwise, to any individual, association, or corporation.” Ariz. Const. art.
9, § 7. For decades, the City of Phoenix has contracted in collective
bargaining agreements with police officers to allow “release time,” that is,
to pay officers for certain time spent on behalf of their authorized
representative (a police union) rather than regular police duties. We hold
that the release time provisions at issue here do not violate the Gift Clause.
I.
¶2 Police officers employed by the City of Phoenix (“the City”)
are divided into units. Relevant here is Unit 4, which comprises
approximately 2,500 officers, of whom nearly ninety percent are members
of the Phoenix Law Enforcement Association (“PLEA”). PLEA is an
employee organization or, more colloquially, a police union. Pursuant to
the Phoenix City Code, PLEA is the recognized representative for the Unit
4 officers and, every other year, it negotiates with the City the terms of
employment for those officers, whether PLEA members or not. See Phx.
City Code Art. XVII § 2-209. The agreed upon terms are embodied in a
collective bargaining agreement called a Memorandum of Understanding
(“MOU”), which governs the officers’ wages, hours, and general
employment conditions. Since 1977, every MOU has included provisions
for release time, that is, times when officers will be excused from usual
police duties, but are still paid by the City, while they perform PLEA
activities and conduct PLEA business.
¶3 This litigation began in 2011, when William R. Cheatham and
Marcus Huey (collectively “Taxpayers”) sued the City, alleging that four
Justice Clint Bolick has recused himself from this case. Pursuant to article
6, section 3, of the Arizona Constitution, the Honorable Joseph W. Howard,
Judge of the Arizona Court of Appeals, Division Two, was designated to sit
in this matter.
3
CHEATHAM V. DICICCIO, ET AL.
Opinion of the Court
release time provisions in the 2010–2012 MOU violated the Gift Clause.
Taxpayers challenged three provisions that authorized six full-time officers
to each receive full pay, benefits, and 160 hours of overtime per year and
allocated to other officers a bank of 1,583 release time hours per year for
“legitimate [a]ssociation business,” including preparing for negotiations
with the City. 2010-2012 MOU § 1-3(G), (I), (Q). The fourth challenged
category allotted a total of fifteen days of paid leave per year for officers to
attend PLEA seminars, lectures, and conventions. Id. § 1-3(K). In June 2012,
the trial court granted a preliminary injunction after concluding that at least
some of the challenged provisions violated the Gift Clause.
¶4 Shortly thereafter, the 2010–2012 MOU was superseded by
the 2012–2014 MOU, which contained similar release time provisions.
Under the new MOU, the six full-time officers, instead of each receiving 160
hours of overtime, could draw on a bank of 960 hours of overtime for time
spent serving on city committees or task forces and the general bank of
release time was increased to 1,859 hours. 2012-2014 MOU § 1-3(B)(3), (Q).
The 2012-2014 MOU also allowed PLEA to designate up to forty-two
representatives who, without losing pay or benefits, and subject to normal
departmental scheduling and assignment, could attend grievance meetings
and other specified meetings and hearings, when the Unit 4 officer involved
in the proceeding designates PLEA as his or her representative. Id. § 1-
3(B)(2)(a). Time spent by these representatives for purposes other than
attending the identified hearings or meetings, such as gathering
information or otherwise preparing, would be charged against the bank of
release time. Id. § 1-3(B). Finally, PLEA was allowed to appoint a legislative
representative who would receive 500 hours of release time, provided the
officer “has agreed to work with and assist the [C]ity’s legislative lobbyist.”
Id. § 1-3(C).
¶5 Taxpayers amended their complaint to challenge the 2012–
2014 provisions. The trial court preliminarily enjoined the provisions and,
after a bench trial, later issued a permanent injunction, ruling that the
provisions violate the Gift Clause because they lack a public purpose and
are not supported by adequate consideration. Additionally, the trial court
permanently enjoined the City and PLEA from entering into future MOUs
with release time provisions absent certain conditions.
¶6 The City and PLEA appealed. Without deciding whether the
release time provisions serve a public purpose, the court of appeals held
4
CHEATHAM V. DICICCIO, ET AL.
Opinion of the Court
that they are not supported by adequate consideration, inasmuch as the
MOU does “not obligate PLEA to perform any specific duty or give
anything in return for the release time.” Cheatham v. Diccicio, 238 Ariz. 69,
74-75 ¶¶ 16, 20, 356 P.3d 814, 819-20 (App. 2015). The court of appeals
affirmed the trial court’s order “to the extent that it enjoins the 2012–2014
MOU release time provisions and that it enjoins the City and PLEA from
entering into future MOUs or agreements with release time, unless they
imposed upon PLEA binding obligations.” Id. at 76 ¶ 27, 356 P.3d at 821.
¶7 We granted review because whether the Gift Clause bars
release time provisions in collective bargaining agreements for public
employees is a legal issue of statewide importance. We have jurisdiction
pursuant to article 6, section 5(3), of the Arizona Constitution and
A.R.S. § 12-120.24.
II.
A.
¶8 We review a trial court’s grant of an injunction for an abuse
of discretion, Valley Med. Specialists v. Farber, 194 Ariz. 363, 366 ¶ 9, 982 P.2d
1277, 1280 (1999), and the interpretation and application of constitutional
provisions de novo. Ross v. Bennett, 228 Ariz. 174, 176 ¶ 6, 265 P.3d 356, 358
(2011).
¶9 The Gift Clause provides: “Neither the state, nor any county,
city, town, municipality, or other subdivision of the state shall ever give or
loan its credit in the aid of, or make any donation or grant, by subsidy or
otherwise, to any individual, association, or corporation.” Ariz. Const. art.
9, § 7. The clause has two primary purposes – preventing the “depletion of
the public treasury or inflation of public debt by engagement in non-public
enterprise” and protecting public funds against use for “the purely private
or personal interest of any individual.” Kromko v. Ariz. Bd. of Regents, 149
Ariz. 319, 320–21, 718 P.2d 478, 479–80 (1986) (internal quotations,
emphasis, and citations omitted); Wistuber v. Paradise Valley Unified Sch.
Dist., 141 Ariz. 346, 349, 687 P.2d 354, 357 (1984) (“The constitutional
prohibition was intended to prevent governmental bodies from depleting
the public treasury by giving advantages to special interests[.]”).
¶10 A two-prong test determines whether a challenged
government expenditure violates the Gift Clause. See Turken v. Gordon, 223
5
CHEATHAM V. DICICCIO, ET AL.
Opinion of the Court
Ariz. 342, 348 ¶ 22, 224 P.3d 158, 164 (2010); Wistuber, 141 Ariz. at 349, 687
P.2d at 357. The expenditure will be upheld if (1) it has a public purpose,
and (2) the consideration received by the government is not “grossly
disproportionate” to the amounts paid to the private entity. Turken, 223
Ariz. at 345, 348 ¶¶ 7, 22, 224 P.3d at 161, 164. In evaluating Gift Clause
challenges, “[a] panoptic view of the facts of each transaction is required,”
and “courts must not be overly technical and must give appropriate
deference to the findings of the governmental body.” Wistuber, 141 Ariz. at
349, 687 P.2d at 357.
B.
¶11 Our analysis begins by recognizing that the challenged
release time provisions are part of the MOU, a collective bargaining
agreement between the City, PLEA as the authorized representative of the
Unit 4 officers, and the officers who are subject to the MOU. The MOU in
turn must be understood in light of the governing provisions of the Phoenix
City Code.
¶12 The City Code’s Meet and Confer Ordinance recognizes the
right of public employees to representation by an employee organization of
their choosing and “to meet and confer through an authorized employee
organization with their public employer” when negotiating employment
terms such as wages or hours. Phx. City Code Art. XVII §§ 2-214(B), 2-
210(11). The “authorized representative” – here, PLEA – is formally
recognized by the City as representing a majority of the employees of the
appropriate unit – here, Unit 4 – and “is authorized to participate in the
meet and confer process on behalf of the appropriate unit for the purpose
of meeting and conferring on wages, hours, and working conditions.” Id. §
2-210(2). The Code also requires PLEA, as the employees’ representative,
to engage in discussions with the City “to resolve grievances and disputes
relating to wages, hours, and working conditions.” Id. § 2-209.
¶13 All agreements arrived at by the City and the employees’
authorized representative are recorded in an MOU and presented to the
City Council and the employee members of the authorized organization for
approval. Id. § 2-210(12). Thus, a finalized MOU is an agreement that binds
the City as the employer, the authorized representative for the employees,
and the employees themselves.
6
CHEATHAM V. DICICCIO, ET AL.
Opinion of the Court
¶14 Under the MOU for Unit 4, release time is a component of the
overall compensation package negotiated between the City and PLEA on
behalf of the police officers. Before negotiating the specific terms of the
2012–2014 package, the City allocated $660 million for the total
compensation of Unit 4 officers. The parties then negotiated the allocation
of that amount for various purposes (e.g., hourly compensation, overtime,
and paid leave time). In lieu of increased hourly compensation or other
benefits, PLEA negotiated for release time provisions worth about $1.7
million over a two-year period, or $322 annually per unit member. One of
the City’s negotiators testified, without contradiction, that if the City had
not agreed to pay for release time, the corresponding amounts would have
otherwise been part of the total compensation available. The MOU itself
acknowledges that “[t]he cost to the City for these release positions,
including all benefits, has been charged as part of the total compensation
contained in this agreement in lieu of wages and benefits.” 2012-2014 MOU
§ 1-3(B). Interpreting the MOU is a legal question, and our conclusion that
release time is part of the negotiated total compensation package is not
affected by the trial court’s observing that officers could not simply divide
total compensation however they wished or that the MOU does not discuss
release time under “Compensation/Wages.” Similarly, we do not think
that the MOU’s characterization of release time as part of total
compensation is undermined by one Councilman’s statements (made long
after the Council had approved the MOU) that different components of
compensation are negotiated separately and the agreement does not
identify the cost of total compensation. Cf. Taylor v. State Farm Mut. Auto.
Ins. Co., 175 Ariz. 148, 153, 854 P.2d 1134, 1139 (1993) (noting that courts
seek to interpret contracts to give effect to parties’ expressed intent).
¶15 The MOU describes the general purposes of release time.
Noting the benefits of “harmonious and cooperative relationships between
the City and its employees,” the MOU states that the full-time release
positions, and release hours, afford “an efficient and readily available point
of contact for addressing labor-management concerns.” 2012-2014 MOU §
1-3(B). Examples of how officers spend release time include representing
Unit 4 officers “in administrative investigations and grievance/disciplinary
appeal meetings with management; participating in collaborative labor-
management initiatives . . . ; serving on Police Department task forces and
committees; facilitating effective communication between City and
Department management and unit employees; assisting unit members in
7
CHEATHAM V. DICICCIO, ET AL.
Opinion of the Court
understanding and following work rules; and administering the provisions
of the [MOU].” Id.
¶16 The MOU also identifies various rights and obligations with
respect to release time. For example, the use of paid release hours is subject
to “Departmental operational and scheduling factors,” and requires at least
twenty-four hours written advance notice. Id. § 1-3(B)(3)(c). Release hours
must be used for “legitimate [PLEA] business.” Id. § 1-3(B)(3). The full-
time release positions must be filled by full-time, sworn officers who “will
at all times remain qualified to perform” normal police duties and who
remain bound by “the City’s and the Police Department’s rules, regulations,
and operations orders[.]” Id. § 1-3(B)(1). All Unit 4 officers are entitled to
have PLEA serve as their meet and confer representative under the City
Code and to be represented by PLEA concerning grievances and other
matters relating to employment rights and obligations. Id. § 1-4(A), (B).
¶17 It is not unusual for collective bargaining agreements to
include provisions requiring employers to pay certain employees for time
spent on union activities. As noted earlier, Phoenix has included provisions
for release time in its MOU for Unit 4 for decades. The City’s Meet and
Confer Ordinance has provisions similar to those of the federal National
Labor Relations Act with regard to the right of employees to bargain
collectively with respect to “wages, hours, and working conditions.”
Compare Phx. City Code Art. XVII § 2-214(B) with 29 U.S.C. § 158(d). Federal
courts have recognized that employer payments for time spent by
employees during working hours on certain union activities, such as
handling grievances or negotiating with the employer, are a mandatory
subject of collective bargaining because such payments relate to the
employees’ “wages, hours, and other terms and conditions of
employment.” See NLRB v. BASF Wyandotte Corp., 798 F.2d 849, 852-53 (5th
Cir. 1986); Axelson, Inc. v. NLRB, 599 F.2d 91, 95 (5th Cir. 1979); cf. Int’l Ass’n
of Machinists & Aerospace Workers v. BF Goodrich Aerospace Aerostructures
Grp., 387 F.3d 1046, 1055-56 n. 13 (9th Cir. 2004) (noting disagreement
among federal courts whether Labor Management Relations Act allows
full-time release payments as distinct from paid time off for union duties).
¶18 That the release time provisions at issue here are part of the
negotiated compensation package between the City, PLEA, and the Unit 4
officers is the beginning but not the end of our analysis. The lower courts,
and Taxpayers, erroneously characterized the $1.7 million value of the
8
CHEATHAM V. DICICCIO, ET AL.
Opinion of the Court
release time merely as a “payment to PLEA” which must be assessed
relative to what the MOU “obligated PLEA to provide the City in return.”
Cheatham, 238 at 75 ¶ 20, 356 P.3d at 820. To be sure, PLEA benefits from
the City’s agreement to pay officers for time (some full-time) spent on
behalf of PLEA. But the release time provisions must be assessed in light
of the entire MOU, including the obligations imposed not only on PLEA but
also on the employees for whom it is the authorized representative. Doing
otherwise would conflict with the requirement that courts adopt a
“panoptic view” of the transaction in assessing Gift Clause challenges.
¶19 We also reject PLEA’s argument that the release time
provisions are not subject to Gift Clause scrutiny because they are part of
the compensation package negotiated on behalf of the Unit 4 officers. That
a public entity is making payments to employees (here, payments for time
spent on union-related activities) pursuant to a collective bargaining
agreement does not necessarily obviate the concerns underlying the Gift
Clause. Public funds conceivably could be expended for private purposes
or in amounts grossly disproportionate to the benefits received even under
a collective bargaining agreement. Accordingly, we turn to our usual Gift
Clause analysis in evaluating Taxpayers’ challenge to the release time
provisions. Cf. Turken, 223 Ariz. at 346 ¶ 10, 224 P.3d at 162 (noting that Gift
Clause seeks to prevent subsidies of private interests putatively serving
quasi-public purposes).
C.
¶20 Taxpayers argue that the release time provisions do not serve
a public purpose because they “foster or promote the purely private or
personal interests” of PLEA. Cf. Kromko, 149 Ariz. at 321, 718 P.2d at 480
(analyzing public purpose before assessing adequacy of consideration)
(emphasis omitted).
¶21 In determining whether a transaction serves a public purpose,
courts consider the “reality of the transaction” and not merely “surface
indicia of public purpose.” Wistuber, 141 Ariz. at 349, 687 P.2d at 357. This
inquiry, however, must reflect appropriate deference to the governmental
entity that has considered and approved the transaction. “[W]e have
repeatedly emphasized that the primary determination of whether a
specific purpose constitutes a ‘public purpose’ is assigned to the political
branches of government, which are directly accountable to the public.”
Turken, 223 Ariz. at 165 ¶ 28, 224 P.3d at 349. For Gift Clause purposes, a
9
CHEATHAM V. DICICCIO, ET AL.
Opinion of the Court
public purpose is lacking “only in those rare cases in which the
governmental body’s discretion has been unquestionably abused.” Id.
(internal quotation marks and citations omitted).
¶22 Consistent with these principles, we have found the existence
of a public purpose in various situations. See id. at 348 ¶ 23, 224 P.3d at 164
(finding that the purchase of parking spaces constituted a public purpose);
City of Glendale v. White, 67 Ariz. 231, 240, 194 P.2d 435, 441 (1948) (finding
that city acted with a public purpose when it joined the Arizona Municipal
League); Humphrey v. City of Phoenix, 55 Ariz. 374, 387, 102 P.2d 82, 87 (1940)
(finding that slum clearance program served public purpose).
¶23 The MOU, including its release time provisions, serves a
public purpose. It procures police services for the City. Furthermore, the
City Council recognized that the MOU identifies PLEA as the authorized
representative of Unit 4 officers with whom the City can deal on all labor-
related matters; under the MOU and the City’s ordinance, PLEA is obliged
to represent and serve all Unit 4 officers, whether or not they are PLEA
members. Moreover, the City benefits from more efficient negotiations
because it collectively negotiates with PLEA, rather than with individual
employees.
¶24 Such provisions obviously may benefit the officers who,
collectively, have chosen PLEA as their representative in dealings with their
employer (one officer testified that he views the release time provisions as
analogous to insurance benefits). The provisions, even considered in
isolation, also benefit the City insofar as they are a benefit offered to current
or prospective employees and they can facilitate the resolution of
grievances and other employee-employer issues under the City’s Meet and
Confer Ordinance. Cf. Int’l Ass’n of Machinists & Aerospace Workers, 387 F.3d
at 1057-58 (recognizing, for purposes of federal labor laws, that employer-
paid union “shop steward” provides services that “benefit union and
corporation alike”).
¶25 The dissent, like the trial court, concludes that release time
does not serve a public purpose but instead benefits PLEA as a “private
entity.” Infra ¶¶ 46, 51. But this position views the release time benefits in
isolation rather than as part of the MOU as a whole, which provides police
services to the public. Wistuber, 141 Ariz. at 349, 687 P.2d at 357 (“panoptic
view” required). This also views too narrowly both the role of public
10
CHEATHAM V. DICICCIO, ET AL.
Opinion of the Court
employee unions and the public’s interest. PLEA, as the authorized
representative chosen by a majority of Unit 4 officers, serves not only its
own interests, but also those of its members. While the City may sometimes
be in an adversarial role relative to the union (sitting across the table, so to
speak, in labor negotiations or employment-related disputes), the City – as
its own ordinance recognizes – may also benefit as an employer by having
an identified representative of the Unit 4 officers for employment-related
issues. See Phx. City Code Art. XVII § 2-209 (“It is also the purpose of this
ordinance to promote the improvement of employer-employee relations”
by recognizing public employees’ right to be represented by an
organization of their choosing in their “employer-employee dealings with
the City”). Further, as a governmental entity, the City has interests broader
than a private employer based on “the unique fact that the public employer
was established by and is operated for the benefit of all the people . . . .”
Phx. City Code Art. XVII § 2-209(4).
¶26 Moreover, it is well established that labor unions, which have
existed in the United States for over two hundred years, generally work to
advance the employment interests of represented employees. See, e.g.,
Charles B. Carver, The Impact of Labor Unions on Worker Rights and on Other
Social Movements, 26 ABA J. Lab. & Emp. L. 267, 269-70 (2011). Contrary to
the dissent’s contention, a public purpose may be served by PLEA’s
representational activities to the extent they promote improved labor
relations and employment conditions for public safety officers. Phx. City
Code Art. XVII § 2-209(1) (“The people of Phoenix have a fundamental
interest in the development of harmonious and cooperative relationships
between the City government and its employees.”).
¶27 The City Council did not abuse its discretion in concluding
that the MOU, including the release time provisions, serves a public
purpose by specifying the “wages, hours, and working conditions” for Unit
4 officers, recognizing the role of PLEA as the officers’ authorized
representative, and by providing, as part of the aggregate compensation,
that certain officers will be paid for release time spent on behalf of PLEA.
D.
¶28 Because we hold that the MOU serves a public purpose, we
next examine whether the consideration paid by the City under that
agreement is grossly disproportionate to the benefits the City receives.
11
CHEATHAM V. DICICCIO, ET AL.
Opinion of the Court
¶29 Consideration is a “performance or return promise” that is
bargained for in exchange for the other party’s promise. Schade v. Diethrich,
158 Ariz. 1, 8, 760 P.2d 1050, 1057 (1988) (citing Restatement (Second) of
Contracts § 71 (Amer. Law Inst. 1981)). Although courts do not normally
scrutinize the adequacy of consideration between parties contracting at
arm’s length, we appropriately examine consideration when analyzing a
contract under the Gift Clause “because paying far too much for something
effectively creates a subsidy from the public to the seller.” Turken, 223 Ariz.
at 350 ¶ 32, 224 P.3d at 166.
¶30 In analyzing the adequacy of consideration, courts also adopt
a “panoptic view” of the transaction. See id. at 352 ¶ 47, 224 P.3d at 168
(noting that Wistuber’s language “was thus meant to reject an overly
technical view of the transaction”); State v. Nw. Mut. Ins. Co., 86 Ariz. 50, 54,
340 P.2d 200, 202 (1959) (using term “panoptic” in rejecting contention that
a mutual insurance company’s return of excess premiums to its members,
including a school district, established that the initial premium payments
violated the Gift Clause). Such an approach is particularly appropriate with
respect to a collective bargaining agreement, which is not merely an
exchange of discrete promises, but instead is “a long-term relational
contract” governing the whole employment relationship. Int’l Union of
Operating Eng’rs, Local 139, ALF-CIO v. J.H. Findorff & Son, Inc., 393 F.3d 742,
746 (7th Cir. 2004); see Consol. Rail Corp. v. Ry. Labor Execs.’ Ass’n, 491 U.S.
299, 312 (1989).
¶31 Thus, when considering a Gift Clause challenge to provisions
of a collective bargaining agreement, we cannot consider particular
provisions in isolation. For example, if such an agreement provided for
paid vacation or personal leave time for public employees, the adequacy of
the consideration received by the employer would not be evaluated by
asking if the employees must use their time in a way that benefits the
employer. In that situation, the consideration received by the employer is
the work the employees generally agree to provide under the agreement,
not only during their paid leave or vacation times.
¶32 Our analysis therefore recognizes that the MOU is an
agreement between not only the City and PLEA but also the Unit 4 officers,
who approved and are bound by its terms. Even if PLEA is viewed as the
primary beneficiary of the release time provisions, in gauging whether the
City has received consideration for those provisions it is necessary to
12
CHEATHAM V. DICICCIO, ET AL.
Opinion of the Court
consider what the Unit 4 officers have agreed to do – to work under the
wages, hours, and conditions specified in the MOU – in exchange for the
compensation package (which includes the release time provisions). This
reflects the general contractual principle that one party’s performance
(here, the City’s agreement to pay release time) may be supported by
“consideration” in the form of performance or a return promise by either
the promisee (arguably PLEA) or another person (the Unit 4 officers). See
Restatement (Second) of Contracts § 71(4), cmt. e (Amer. Law Inst. 1981); cf.
Turken, 223 Ariz. at 350 ¶ 33, 224 P.3d at 166 (relying on contract law to
conclude that anticipated indirect benefits, when not bargained for as part
of the contracting party’s performance, are not consideration for Gift Clause
purposes).
¶33 The City’s payments for release time are supported by
consideration both in terms of PLEA’s obligations under the MOU and the
City Code as the employee’s authorized representative and the agreement
by the Unit 4 employees to work under the terms and conditions of the
MOU. There is no contention that the $660 million the City pays under the
MOU is grossly disproportionate to the services to be provided by police
officers. Viewed in the context of the MOU overall, the $1.7 million for
release time payments is not “grossly disproportionate,” Turken, 223 Ariz.
at 350 ¶ 35, 224 P.3d at 166, to the value of what PLEA and the Unit 4 officers
have agreed to provide in return.
¶34 The dissent twice observes that there is no showing that
absent release time, the City would be unable to employ police
officers. Infra ¶¶ 47, 52. But the same could be said about various forms of
benefits ranging from vacation time to life insurance. The pertinent issue
for a Gift Clause analysis is not whether a particular expenditure is the only
way to achieve a public purpose, but instead whether a comprehensive
examination of the agreement reveals that the expenditure is grossly
disproportionate to the benefit the public receives. Turken, 223 Ariz. at 350
¶ 35, 224 P.3d at 166.
¶35 In applying the “consideration” prong of the Gift Clause, just
as in assessing “public purpose,” courts must give due deference to the
decisions of elected officials. “The Gift Clause is violated when [the]
consideration, compared to the expenditure, is ‘so inequitable and
unreasonable that it amounts to an abuse of discretion.’” Id. at 349 ¶ 30, 224
P.3d at 165 (quoting Wistuber, 141 Ariz. at 349, 687 P.2d at 357). The
13
CHEATHAM V. DICICCIO, ET AL.
Opinion of the Court
Taxpayers have the burden of proving gross disproportionality of
consideration, Wistuber, 141 Ariz. at 350, 687 P.2d at 358, and they have not
met that burden here.
¶36 Our decision in Wistuber is not to the contrary. The court of
appeals cited Wistuber in holding that the MOU’s release time provisions
lacked consideration. 238 Ariz. at 75 ¶ 20, 356 P.3d at 820. In that case, this
Court upheld a provision in a school district’s collective bargaining
agreement providing release time for a teacher who was the president of
the teacher’s association. The contract provisions specified how the teacher
would spend her release time. In rejecting a Gift Clause challenge, Wistuber
noted that “the duties imposed upon [the association’s president] are
substantial, and the relatively modest sums required to be paid by the
District [were] not so disproportionate as to invoke the constitutional
prohibition.” 141 Ariz. at 350, 687 P.2d at 358. Here, the court of appeals
noted that, “[u]nlike the detailed, mandatory contractual provisions upheld
in Wistuber,” the MOU does “not obligate PLEA to provide any specific
duty in exchange for release time.” Cheatham, 238 Ariz. at 75 ¶¶ 20, 22, 356
P.3d at 820.
¶37 Wistuber, however, did not hold that, as a general proposition,
release time provisions can only be upheld if they impose specific duties on
the employees involved. Nor does Wistuber stand for the proposition that
in evaluating the adequacy of consideration for benefits (such as release
time) afforded under a collective bargaining agreement, a court should
consider only the performance by the authorized representative, exclusive
of the represented employees.
¶38 Moreover, the court of appeals and the trial court erred as a
matter of law insofar as they construed the MOU as not limiting how
officers can use release time. Cf. Powell v. Washburn, 211 Ariz. 553, 555 ¶ 8,
125 P.3d 373, 375 (2006) (noting that contractual interpretation generally is
a matter of law). Collective bargaining agreements, like other contracts,
should be construed to avoid making their provisions illusory. Ariz.
Laborers, Teamsters & Cement Masons Local 395 Health & Welfare Trust Fund v.
Hatco, Inc., 142 Ariz. 364, 367, 690 P.2d 83, 86 (App. 1984).
¶39 The MOU here, particularly when construed in light of the
City Code provisions, clearly contemplates that release time will be used
for activities related to PLEA’s role as the authorized representative for the
14
CHEATHAM V. DICICCIO, ET AL.
Opinion of the Court
Unit 4 officers, even if it does not specify minutely how release time will be
used. (This includes the provision affording release time for a legislative
representative, who is “to work with and assist the [C]ity’s legislative
lobbyist.” 2012-2014 MOU § 1-3(C).)
¶40 We accordingly disagree with the dissent in its characterizing
the use of release time as “almost unchecked.” Nor is the dissent right to
contend that release time involves “diverting officers from safeguarding the
public.” Infra ¶ 46. The MOU acknowledges that the costs to the City
associated with release time were in lieu of wages and benefits; had the
release time provisions been omitted, the officers might have received other
benefits under the compensation package, such as personal time or paid
vacation time. Notably, after the trial court enjoined the use of release time
under the 2012-2014 MOU, the City agreed that the remaining release time
would be allocated to police officers as additional vacation time. Thus,
while it is true that particular officers will not be engaged in their usual
police duties while using release time, it is incorrect to suggest that the
MOU, by including release time, reduces total on-the-job time by Unit 4
officers. (The MOU also requires officers to obtain approval to absent
themselves from duties to use release time and such approval is “subject to
Departmental operational and scheduling factors.” 2012-2014 MOU § 1-
3(B)(3)(c).)
¶41 Nor is our conclusion affected by Taxpayers’ arguments that
release time under prior MOUs was used in some instances for reasons
unrelated to PLEA’s representational role. Even if those assertions are
correct (an issue we do not reach), the improper use of release time would
not establish that the MOU violates the Gift Clause (just as the prospect of
a breach does not mean a contract is contrary to public policy or lacks
consideration), but instead that the Unit 4 officers or the City might have
reason to complain of PLEA’s violation of the collective bargaining
agreement. See id. § 1-5(F) (noting that penalties, pursuant to the City Code,
may be assessed against PLEA for breach of obligations); see also Vaca v.
Sipes, 386 U.S. 171, 195 (1967) (“The appropriate remedy for a breach of a
union’s duty of fair representation must vary with the circumstances of the
particular breach.”). Although one could reasonably argue that greater
specificity regarding the use of release time would better serve the City –
and perhaps the Unit 4 officers themselves – such issues of labor-
management relations should be decided through the collective bargaining
process rather than dictated by the courts under the guise of the Gift Clause.
15
CHEATHAM V. DICICCIO, ET AL.
Opinion of the Court
¶42 We also reject Taxpayers’ assertion that our decision in Turken
establishes that the release time provisions violate the Gift Clause. In
Turken, we held that the City’s agreement to pay a developer as much as
$97.4 million for the use of garage parking spaces in a mixed-use project
likely violated the Gift Clause. 223 Ariz. at 350-51 ¶¶ 40-43, 224 P.3d at 166-
67. Our opinion clarified that indirect benefits, when “not bargained for as
part of the contracting party’s promised performance,” do not satisfy the
“consideration” prong of the Gift Clause analysis. Id. at 350, ¶ 33, 224 P.3d
at 166. In this respect, Turken is inapposite because here the consideration
received by the City is not indirect benefits, but instead the obligations the
MOU itself imposes on both PLEA and the Unit 4 officers.
¶43 Finally, we note the limits of our holding. Our conclusion that
the release time provisions do not violate the Gift Clause reflects our
consideration of the MOU in its entirety, viewed in light of the City’s Meet
and Confer Ordinance. From this perspective, we cannot find that the City
Council abused its discretion in determining that the MOU, including its
release time provisions, serves a public purpose and that the City’s
payments are reasonable in light of the benefits it receives. We do not
comment on the desirability of such provisions as a matter of labor relations
or public policy. Nor do we address Taxpayers’ arguments, which were
not raised in the trial court, that the release time provisions violate either
the “right to work” provisions of article 25 of the Arizona Constitution and
A.R.S. §§ 23-1301 through 1307 or the First Amendment rights of non-PLEA
members.
IV.
¶44 Because the challenged release time provisions do not violate
the Gift Clause, we reverse the trial court’s judgment and entry of a
permanent injunction and vacate the opinion of the court of appeals.
16
CHEATHAM V. DICICCIO, ET AL.
JUSTICE TIMMER, joined by JUSTICE BRUTINEL, Dissenting
TIMMER, J., joined by BRUTINEL, J., dissenting.
¶45 By permitting the City to subsidize PLEA simply because the
release time terms are tucked within a collective bargaining agreement, the
majority undercuts the Gift Clause’s aim “to prevent governmental bodies
from depleting the public treasury by giving advantages to special interests
. . . or by engaging in non-public enterprises.” Wistuber, 141 Ariz. at 349,
687 P.2d at 357. I respectfully dissent.
¶46 The substantial benefits bestowed on PLEA are allowable
under the Gift Clause only if they serve a public purpose. See Turken, 223
Ariz. at 345 ¶ 7, 224 P.3d at 161. No public purpose is served by diverting
officers from safeguarding the public to work almost unchecked for PLEA.
The City has no control over how PLEA directs the officers on release time
and is not even told what the officers do for PLEA. Cf. Kromko, 149 Ariz. at
321, 718 P.2d at 480 (stating that “the fear of private gain or exploitation of
public funds envisioned by the drafters of our constitution” is absent when
private entity’s operation of public hospital is subject to the control and
supervision of public officials). As a testifying labor expert put it, “[PLEA
officials] are given a blank check to do . . . as they determine is appropriate
to meet the needs of their organization.” Officers on release time can lobby
the legislature for and against laws that interest PLEA and its members,
campaign for elected officials who support PLEA, attend PLEA functions,
manage PLEA elections, and engage in any activities that promote PLEA’s
private interests, even if it is to the City’s detriment. While these activities
may benefit officers and certainly benefit PLEA, they do not serve a public
purpose. Cf. Small v. Operative Plasterers’ & Cement Masons’ Int’l Ass’n Local
200, AFL-CIO, 611 F.3d 483, 486 (9th Cir. 2010) (“After all, the very purpose
of labor unions is to advocate zealously for their members.”).
¶47 The majority finds that the release time provisions serve a
public purpose because they are set forth in the MOU, which in turn serves
the public by enabling the City to hire and collectively negotiate with Unit
4 officers. See supra ¶¶ 23, 25. In my view, the majority conflates the public
purpose served by securing City employees through collective bargaining
with the public purpose served by the terms reached through such efforts.
The City may derive some benefits from negotiating with Unit 4 officers
through a single representative rather than by negotiating with individual
officers. But the public benefit resulting from collective bargaining does not
mean that the release time provisions agreed to through that process
17
CHEATHAM V. DICICCIO, ET AL.
JUSTICE TIMMER, joined by JUSTICE BRUTINEL, Dissenting
necessarily serve a public purpose. If that were so, public entities could
easily circumvent the Gift Clause simply by placing a gift within a collective
bargaining agreement. And nothing suggests that PLEA would not have
negotiated an MOU for Unit 4 officers absent those provisions. Why else
would officers pay approximately $1.7 million in annual dues to PLEA to
represent them in determining wages, hours, and working conditions if not
for PLEA to negotiate on their behalf?
¶48 The majority’s stronger argument is that the release time
provisions promote a public purpose by serving as a component of the
compensation package for Unit 4 officers. See supra ¶ 24. The majority
emphasizes that the City originally allocated $660 million for Unit 4 officer
compensation before negotiating with PLEA to use a “chunk” of that
money for release time. See supra ¶ 14. A City negotiator testified that this
“chunk” was “costed” against the compensation package as a whole, and if
it was not used for release time, it would be folded back into the
compensation package. As the City had included release time provisions
in its MOUs since 1977, however, it is hardly surprising that it built release
time moneys into its Unit 4 allocation. Nothing indicates that the City
would have allocated $660 million for Unit 4 officers if release time was off
the table. Indeed, before negotiations for the 2010-2012 MOU commenced,
the police department suggested to City negotiators that “[a] reduction in
cost of City funded PLEA operations” would “increas[e] funds available for
mission-critical functions;” the department did not suggest that a reduction
would free up money to increase officer benefits.
¶49 Other evidence supports the trial court’s finding that the
MOU provisions were negotiated individually and “not as a total package
offered to Unit 4 with those members being allowed to divide it how they
wished.” See Shooter v. Farmer, 235 Ariz. 199, 200 ¶ 4, 330 P.3d 956, 957 (2014)
(“We defer to the trial court’s findings of fact unless they are clearly
erroneous.”). City Councilman Sal DiCiccio testified that the MOU
provisions were “separately negotiated” rather than as part of a “total
package.” The MOU does not require that unused release time be paid to
officers. And release time cannot be accurately “costed” to officers’ salaries
because a large amount of release time – representation hours – are
unlimited. Tellingly, after the court preliminarily enjoined the release time
provisions in the 2010-2012 MOU, the City did not use the funds designated
for release time under that MOU to compensate Unit 4 officers. (After the
court found that release time is not compensation, in part because the City
18
CHEATHAM V. DICICCIO, ET AL.
JUSTICE TIMMER, joined by JUSTICE BRUTINEL, Dissenting
did not treat it as such after the preliminary injunction, and entered the
permanent injunction, the City and PLEA amended the 2012-2014 MOU to
provide additional vacation time to officers equaling the number of unused
release time hours. This belated act does not vitiate the evidence before the
court at the time of its ruling that the City did not treat release time as
compensation.).
¶50 The majority cites language in the MOU providing that
release time is funded “in lieu of wages and benefits.” See supra ¶ 14.
Declaring this does not make it so. If we look no further than a self-serving
contractual provision, private subsidies could escape Gift Clause scrutiny
whenever the parties agree that subsidies are “compensation.” Cf. Wistuber,
141 Ariz. at 349, 687 P.2d at 357 (stating that in determining the existence of
a public purpose, the court should consider the “reality of the transaction”
and not just the “surface indicia of public purpose”).
¶51 Even if the money designated for release time would have
otherwise been paid to officers, it does not necessarily follow that release
time serves a public purpose as “compensation.” Following the majority’s
logic, the City could compensate officers by giving money to a private
business to establish a coffee house near a police station for the officers’
enjoyment. If “public purpose” can be stretched this far, the Gift Clause,
at least in the public employment context, has met its end.
¶52 The majority characterizes my position as positing that
release time benefits violate the Gift Clause because they benefit a private
organization. See supra ¶ 25. Not true. Payments to a private entity to
provide benefits to public employees undoubtedly can serve a public
purpose by providing an incentive for public employment. Benefits such
as health insurance, gym memberships, and emergency child care for
employees fall within this category. Without attempting to precisely define
what payments to private entities constitute employee compensation for
Gift Clause purposes, at a minimum, such payments must substitute for the
moneys an employee would otherwise pay for the benefit provided directly
to the employee by the third party. Thus, payments to PLEA to represent
an officer in grievance proceedings could be compensation because the
officer would otherwise have to pay money to hire a representative. But
when public resources given to a private entity can be used for any purpose
directed by the entity, as here, and the public expenditure does not
19
CHEATHAM V. DICICCIO, ET AL.
JUSTICE TIMMER, joined by JUSTICE BRUTINEL, Dissenting
substitute for an expense the employee would otherwise pay, that
expenditure cannot be considered compensation.
¶53 Alternatively, I agree with the trial court and the court of
appeals that the release time provisions violate the Gift Clause because the
City does not receive sufficient consideration in return for its $1.7 million
outlay. Cf. Turken, 223 Ariz. at 345 ¶ 7, 224 P.3d at 161 (stating that to
comply with the Gift Clause, a governmental entity must receive
consideration in return for expenditure that “is not so inequitable and
unreasonable that it amounts to an abuse of discretion”) (citation and
internal quotation marks omitted). Whether the City receives sufficient
consideration turns on “the objective fair market value” of what PLEA
promised to provide. See id. at 350 ¶ 33, 224 P.3d at 166. The record does
not reflect such a value. Indeed, the City lacks a mechanism to quantify the
value of benefits it receives from the release time provisions.
¶54 I cannot see how any value the City receives from the release
time provisions approaches a fair market value of $1.7 million. The MOU
does not obligate PLEA to provide any services to the City. Any promotion
of employer-employee relations, see supra ¶ 25, fostered by the release time
provisions are indirect benefits that cannot constitute consideration. Cf. id.
(rejecting assertion that “indirect benefits” constitute consideration). The
majority concludes that Unit 4 officers’ agreement to work as police officers
in exchange for a compensation package that includes release time
provisions is sufficient consideration. See supra ¶ 32. Because I agree with
the courts below that the extensive benefits given to PLEA do not serve as
officer compensation, I likewise reject the majority’s reasoning here.
Nothing in the record suggests that the City could not employ police
officers without subsidizing PLEA with release time benefits. And any
release time that could be compensation, for example, time used to
represent officers in grievance proceedings, has neither been quantified nor
assigned a monetary value.
¶55 To subsidize a labor organization under the guise of
employee compensation violates the Gift Clause. That is what has occurred
here. In light of the lack of any contractual assurance that PLEA release
time actually serves a public purpose, this generous benefit cannot be
considered anything other than a gift to PLEA prohibited by the Gift
Clause. I would uphold the trial court’s injunction.
20