January 16, 1979
DR. WILLIAM H. WITHERS, DR. DOROTHY N. NAIMAN, AND DR. MARK W. ZEMANSKY, PLAINTIFFS-APPELLANTS,
TEACHERS' RETIREMENT SYSTEM OF THE CITY OF NEW YORK, ROBERT CHRISTEN, VICTOR F. CONDELLO, BERNARD GOLDBERG, HARRISON J. GOLDIN, REUBEN W. MITCHELL, JAMES F. REGAN, AND JOSEPH SHANNON, DEFENDANTS-APPELLEES, UNITED STATES OF AMERICA, INTERVENOR-DEFENDANT-APPELLEE.
Present: HONORABLE LEONARD P. MOORE, HONORABLE WALTER R. MANSFIELD, Circuit Judges; HONORABLE INZER B. WYATT, District Judge.
Upon this appeal by plaintiffs-appellants from a decision and order entered on March 9, 1978, after a non-jury trial by Judge William C. Conner of the Southern District of New York dismissing the complaint, which sought declaratory relief and damages based on claims (1) that defendants-appellees breached their fiduciary duties toward plaintiffs, retired beneficiaries of the retirement fund administered by the Teachers' Retirement System of the City of New York ("TRS"), by investing approximately $860 million of the fund's assets in the purchase of New York City bonds, and (2) that state and federal enabling statutes (Chs. 868, 890 of the Laws of New York and Public Law 94-236, 90 Stat. 238 (1976)) violate plaintiffs' Fifth and Fourteenth Amendment rights by taking property without due process Constitution of the United States, the said order is hereby
AFFIRMED, substantially for the reasons set forth in Judge Conner's well-reasoned opinion reported at 447 F. Supp. 1248 (S.D.N.Y. 1978). The Trustees of TRS, faced with the risk that New York City's annual payments to the TRS might cease unless the City obtained financing essential to enable it to stave off bankruptcy, acted prudently in furtherance of their fiduciary duty to all TRS beneficiaries (as distinguished from plaintiffs alone) in using TRS funds to purchase City obligations. As a result, the City has been able to continue functioning and, since the TRS purchase of the obligations, has paid to TRS approximately the same amount in contributions as it received from TRS by way of investment in its obligations.
It is doubtful whether appellants could show a threat federal statute, see Kirshner v. United States, F.2d , Slip Op. 5237, 5246 (2d Cir. Nov. 30, 1978). But even assuming appellants' standing, the federal and state laws under attack, which do not mandate but merely authorize the purchase of City obligations by TRS, appear to be rationally based, arising out of federal and New York State interests in avoiding bankruptcy of the City.
Appellants lacked sufficient control over the TRS fund or investment of it to qualify their interest as property that might be taken in violation of due process or impaired. See Kirshner, supra, at 5247; Tron v. Condello, 427 F. Supp. 1175, 1189-90 (S.D.N.Y. 1976). Moreover, the challenged statutes have a rational relationship to the lawful objective of saving the City as a viable financial entity and protecting investments toward that end by federal and state governments.
Nor has there been any impairment of appellants' contract rights in violation of Art. I, § 10, Cl. 1 of the Constitution since the statutes merely authorized the purchase of City obligations at the Trustees' discretion and appellants had no contractual right to hold the Trustees personally liable for TRS investments made in the prudent exercise of that discretion.
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