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United Steel Paper & Forestry Rubber Mfg. Allied Indus. & Serv. Workers Int'l Union AFL-CIO-CLC v. Gov't of the Virgin Islands

United States Court of Appeals for the Third Circuit

December 8, 2015, Argued; November 15, 2016, Filed

Nos. 14-4357, 14-4358

Opinion

 [*204]  OPINION OF THE COURT

(November 15, 2016)

Fisher, Circuit Judge.

In 2011, the Virgin Islands faced a severe budget crisis as a result of the economic recession. In response to this crisis, the Government of the Virgin Islands enacted the Virgin Islands Economic Stability Act of 2011 (“VIESA”), 2011 V.I. Sess. Laws 84, which reduced most Government employees' salaries by 8%. Many of the Government employees, [**2]  however, were  [*205]  covered by collective bargaining agreements negotiated on their behalf by their representative unions. The collective bargaining agreements, agreed to and signed by the Governor on behalf of the Government, set forth detailed salary and benefit schedules to be paid to covered Government employees.

The unions brought suit alleging that the salary reductions in VIESA constituted an impermissible impairment of the collective bargaining agreements, in violation of the Contract Clause of the United States Constitution. The District Court, after a bench trial, held that VIESA did not violate the Contract Clause. We will reverse.

 [***473] I.

Beginning in 2009, the Virgin Islands experienced a fiscal crisis: for the fiscal year 2009, the Government projected a budget deficit in excess of $300 million; in 2010, the deficit was $275 million; in 2011, after initially predicting a small surplus, a revised report projected a $75.1 million deficit for 2011 and a $131.5 million deficit for 2012. On February 22, 2010, Debra Gottlieb, from the Government's Office of Management and Budget, testified before the Virgin Islands Legislature. She warned the Legislature of the financial crisis, stating that “the territory's cash balances are precariously low,” App. [**3]  321, 328, and that the operating deficit for fiscal year 2009 was estimated to be $159 million. She predicted that the operating deficit would continue throughout fiscal year 2011.

As an initial response to the crisis, on June 5, 2009, the Virgin Islands Legislature authorized the Governor to borrow up to $500 million. Despite borrowing, the situation continued to worsen, and so from December 30, 2010, to June 21, 2011, the Government undertook additional measures to combat the deficit. It imposed a marine terminal user's tax of $1 per cruise ship passenger; reduced appropriations to the executive branch by 3%, or $17.7 million; reduced appropriations to the judicial branch by 3%, or $1.1 million; increased the tax on all gross receipts from 4% to 4.5%; increased the hotel tax from 8% to 10%; increased marriage licensing fees, liquor-licensing fees, court filing fees, fines for traffic violations, and the motor-vehicle rental surcharge; and reduced its expenditures related to its employment functions, including limiting energy consumption, freezing all hires, and cutting back on training and travel.

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842 F.3d 201 *; 2016 U.S. App. LEXIS 20479 **; 65 V.I. 468 ***; 167 Lab. Cas. (CCH) P10,966

UNITED STEEL PAPER AND FORESTRY RUBBER MANUFACTURING ALLIED INDUSTRIAL AND SERVICE WORKERS INTERNATIONAL UNION AFL-CIO-CLC, Appellant v. GOVERNMENT OF THE VIRGIN ISLANDS; GOVERNOR OF THE VIRGIN ISLANDS; ANGEL DAWSON, Finance Commissioner; DEBRA GOTTLIEB, Director of Management and Budget;ST. CROIX FEDERATION AFT LOCAL 1826; ROSA SOTO-THOMAS, Appellants v. GOVERNOR OF THE VIRGIN ISLANDS; VI COMM. OF FINANCE ANGEL DAWSON, JR.; DIR. OF VIOMB DEBRA GOTTLIEB; 29TH LEGISLATURE OF THE VIRGIN ISLANDS; VIRGIN ISLANDS DEPARTMENT OF EDUCATION; GOVERNMENT OF THE VIRGIN ISLANDS

Prior History:  [**1] On Appeal from the District Court of the Virgin Islands. (D.V.I. No. 3-11-cv-00076), (D.V.I. No. 3-11-cv-00079). District Judge: Honorable Curtis V. Gomez.

United Steel, Paper & Forestry, Rubber, Manufacturing, Allied Indus. & service Workers Intl. Union AFL-CIO-CLC v. Gov't of the United States Virgin Islands, 2012 U.S. Dist. LEXIS 43461 (D.V.I., Mar. 29, 2012)

CORE TERMS

impairment, collective bargaining agreement, salary, district court, crisis, employees, moot, deficit, budget, arbitration, contracts, expiration, reductions, union employee, territorial, effective, parties, fiscal, substantial impairment, collateral, deference, legitimate public purpose, negotiated, repetition, projected, quotation, measures, violates, evading, borrow

Civil Procedure, Appeals, Standards of Review, Clearly Erroneous Review, De Novo Review, Constitutional Law, The Judiciary, Case or Controversy, Appellate Jurisdiction, Case or Controversy, Mootness, Mootness, Conduct Capable of Repetition, Justiciability, Evading Review Exception, Preliminary Considerations, Congressional Duties & Powers, Contracts Clause, Scope, Governments, Police Powers, Application & Interpretation, Labor & Employment Law, Employment Contracts, Conditions & Terms, Compensation & Benefits, Constitutional Law § 23.30, Judicial Powers and Duties, Case or Controversy Requirement, Constitutional Law § 23.75, Mootness, Appeal and Error § 37.19, Questions Considered on Appeal, Moot Questions, Appeal and Error § 14.70, Dismissal on Appeal, Particular Cases, Constitutional Law § 27.10, Obligation of Contracts, Generally, Constitutional Law § 27.30, Labor § 9.05, Constitutional Law § 27.20, Government Contracts