Michael K. Jeanes, Clerk of Court *** Electronically Filed *** Danielle Welborn Filing ID 1240164 4/5/2012 4:20:00 PM

Scharf-Norton Center for Constitutional Litigation at the GOLDWATER INSTITUTE Clint Bolick (021684) Taylor Earl (028179) 500 E. Coronado Rd., Phoenix, AZ 85004 (602) 462-5000 [email protected] Attorneys for Plaintiffs IN THE SUPERIOR COURT OF ARIZONA IN AND FOR THE COUNTY OF MARICOPA CHEATHAM, et al., Plaintiffs, vs. GORDON, et al., Defendants.

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Case No. CV2011-021634 PLAINTIFFS’ APPLICATION FOR PRELIMINARY INJUNCTION AND MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT

Hon. Katherine Cooper

Application for Preliminary Injunction Pursuant to Ariz. R. Civ. P. 65, Plaintiffs move to preliminarily enjoin sections 1-3.G, I, K, and Q of the 2010-12 Memorandum of Understanding (MOU) between Defendants City of Phoenix and Phoenix Law Enforcement Association (PLEA) (Exh. 1), for the reasons set forth in the Memorandum of Points and Authorities and supported by the accompanying exhibits. Memorandum of Points and Authorities Background. This lawsuit seeks to prevent the diversion of public funds away from vital public safety purposes for the uncontrolled use and benefit of a private labor union, which violates

the Gift Clause of the Arizona Constitution.1 Plaintiffs are two Phoenix taxpayers who are obligated to contribute to the unlawful use of public funds (Exhs. 2 & 3). PLEA is a labor organization that represents Phoenix police officers below the rank of sergeant who choose to belong to it (City Answer ¶ 16, PLEA Answer ¶ 16).2 Its purpose is to “look after the interest of the police officers” (Exh. 4 at 9-10). Among other things, PLEA negotiates contracts with the City; advocates for increased salaries and benefits; takes positions on legislative and ballot issues; and provides representation for members in administrative, civil, and criminal proceedings (id. at 8, 10, 11, 14, 28-40). PLEA charges its members $65 per month in dues (id. at 11), which works out to annual dues revenue of approximately $1.68 million.3 Pursuant to the City’s “meet and confer” ordinance (Exh. 5 at 3 n.1), the City periodically negotiates labor agreements with designated unions. The current MOU with PLEA expires on or about June 30, 2012 (id. at 4). Every MOU since 1978 has included provisions for union “release time” (id.). The City defines release time as “time taken by members of the represented unit, and authorized by the member’s appropriate manager or supervisor, when the members are relieved of police duties to perform PLEA activities and conduct PLEA business” (id.). The City estimates

Ariz. Const. Art. 9, § 7, provides in relevant part: “Neither the state, nor any . . . municipality . . . shall ever . . . make any donation or grant, by subsidy or otherwise, to any individual, association, or corporation. . . .” 1

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About 2150 officers are members of PLEA and 400 are not (Exh. 4 at 10).

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$65 per month dues x 2150 members x 12 months. -2-

the cost of PLEA release time in wages and benefits is $1,000,000 annually (Exh. 6).4 The MOU contains multiple release time provisions. Although the lawsuit challenges other provisions as well, at this time Plaintiffs seek only to enjoin the most egregious provisions. Section 1-3.G authorizes six full-time paid PLEA release positions. Section 1-3.I creates a bank of 1583 release-time hours each year for officers to use for “legitimate Association purposes,” and provides 500 hours each year for a PLEA legislative representative. Section 1-3.K allows 15 days of release time “to attend Association seminars, lectures and conventions.” Section 1-3.Q provides 160 overtime hours annually for the six full-time release positions (Exh. 7 at 53-54).5 If the Gift Clause means anything, it surely forbids the use of public funds to release police officers from their public duties “to perform PLEA activities and conduct PLEA business” (Exh. 5 at 4). Such unlawful diversion of public funds away from the critical mission of law-enforcement to private purposes constitutes a gift of public funds and endangers the public. It should therefore be enjoined. Preliminary Injunction Standards. The traditional criteria for granting preliminary injunctions are (1) likelihood of success on the merits, (2) possibility of irreparable harm without an injunction, (3) balance of hardships, and (4) public policy. Schoen v. Schoen, 167 Ariz. 58, The City’s release time policies are described more fully in Mark Flatten, “Money for Nothing: Phoenix taxpayers foot the bill for union work,” Goldwater Institute Investigative Report (Sept. 21, 2011) (Exh. 17). 4

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The parties informally have agreed that it is fair to characterize the two types of release time as “full-time release time” and the “bank of hours.” -3-

63, 804 P.2d 787, 792 (App. 1990). An injunction is warranted if either there is (1) a probability of success on the merits and the possibility of irreparable injury or (2) serious legal questions are presented and the balance of hardships weighs strongly in favor of an injunction. Id.; accord, Smith v. Ariz. Citizens Clean Elections Comm’n, 212 Ariz. 407, 410-11, 132 P.3d 1187, 1190-91 (2006). Likelihood of Success on the Merits. The union here takes the position that the City and PLEA are free to agree to anything. They could, if they chose, agree that the City would provide police officers with Ferraris (Exh. 4 at 34-35). They could indeed, were it not for the Gift Clause, which requires both a public purpose and consideration. Fortunately, the Arizona Supreme Court has established a Gift Clause framework that makes clear that the taxpayers here have a substantial likelihood of success in proving that the release time provisions that are the subject of this motion are unconstitutional. The applicable parameters are set forth in Turken v. Gordon, 223 Ariz. 342, 351, 224 P.3d 158, 167 (2010), in which the Supreme Court found that a promised $97 million payment to a shopping mall developer, ostensibly for parking garage spaces, “quite likely violates the Gift Clause.” The analysis consists of a two-part inquiry. First, does the transaction have a public purpose? It is a “core Gift Clause principle” that “‘[p]ublic funds are to be expended only for ‘public purposes’ and cannot be used to foster or promote the purely private or personal interests of any individual.’” Id., 223 Ariz. at 347-48, 224 P.3d at 163-64. A court will find absence of public purpose where the government’s discretion has been unquestionably abused. Id., 223 -4-

Ariz. at 349, 224 P.3d at 165 (citation omitted). But “[w]hen public funds are used to purchase something from a private entity, finding a public purpose only begins the constitutional inquiry.” Id. The second Gift Clause inquiry “quite appropriately focuses on adequacy of consideration because paying far too much for something effectively creates a subsidy from the public to the seller.” Id., 223 Ariz. at 350, 224 P.3d at 166. The Court applies the settled contract-law meaning of “consideration,” which is “what one party to a contract obligates itself to do . . . in return for the promise of the other contracting party.” Id., 223 Ariz. at 349, 224 P.3d at 165 (emphasis added). The Court held that while “anticipated indirect benefits may well be relevant in evaluating whether spending serves a public purpose, when not bargained for as part of the contracting party’s promised performance, such benefits are not consideration under contract law.” Id., 223 Ariz. at 350, 224 P.3d at 166 (citation omitted). Rather, “analysis of adequacy of consideration for Gift Clause purposes focuses instead on the objective fair market value of what the private party has promised to provide in return for the public entity’s payment.” Id. (emphasis added). As Plaintiffs demonstrate below, these criteria are dispositive here because PLEA, in return for extravagant release time, has promised and obligated itself to exactly nothing. It happens that the Court considered the release time issue in Wistuber v. Paradise Valley Unif. Sch. Dist., 141 Ariz. 346, 687 P.2d 354 (1984), in which taxpayers as here challenged release-time provisions in a public employee contract. The case differs in that the provision affected only a single employee, the employee was required under the contract to perform -5-

extensive and specified duties, and the union paid part of the employee’s compensation. Id., 141 Ariz. at 348, 687 P.2d at 356, 356 & n. 2, 3. In the absence of factual evidence to the contrary, the Court concluded that “the duties imposed upon [the release-time employee] are substantial, and the relatively modest sums required to be paid by the District are not so disproportionate as to invoke the constitutional prohibition.” Id., 141 Ariz. at 350, 687 P.2d at 358. Here, in stark contrast, the “duties imposed” upon release-time employees are virtually nonexistent and the expense is anything but modest.6 Other Gift Clause cases also help flesh out the constitutional inquiry. In Kromko v. Ariz. Bd. of Regents, 149 Ariz. 319, 322, 718 P.2d 478, 481 (1986), the Court sustained favorable lease terms to a nonprofit hospital. The Court emphasized that “no ‘private or personal interests of any individual’ will be served by the operation of the hospital under this lease” and that “operations are still subject to the control and supervision of public officials.” Id., 149 Ariz. at 320-21, 718 P.2d at 479-80. Accord, Town of Gila Bend v. Walled Lake Door Co., 107 Ariz. 545, 549-50, 490 P.2d 551, 555-56 (1971); City of Tempe v. Pilot Properties, Inc., 22 Ariz. App. 356, 361, 527 P.2d

515, 520 (1974) (both upholding expenditures “where the ownership of the subject matter . . . remains in the city”). Those criteria doom the provisions here because, as will appear, private and personal interests are served by the contract and exclusive control of release time is vested in the union rather than the City. 6

Following Wistuber, the legislature abolished the practice of union release-time for school districts. See A.R.S. § 15-504. -6-

Further, in Arizona Center for Law in the Public Interest v. Hassell, 172 Ariz. 356, 837 P.2d 158 (App. 1991), the court invalidated on Gift Clause and other grounds legislation relinquishing the State’s interest in certain riverbed lands. Although the defendants asserted several tangible bases of consideration for relinquishing the State’s claims, the court held it “cannot judge their adequacy” because of a “central defect” in the legislation: “the legislature acted without particularized information, and established no mechanism to provide particularized information, to support even an estimate of the value of those claims.” Id., 172 Ariz. at 171, 837 P.2d at 369. Here, too, it is impossible to evaluate any asserted consideration given that in most instances the City neither controls nor even has any idea how the release time is being used. Those Gift Clause holdings distill to several concrete principles that can be applied to determine the validity of the release time scheme at issue here: (1) the contract provisions must have a public purpose; (2) the private party must obligate itself to tangible obligations that are not disproportionate to the amounts expended; (3) the public must have control over those obligations; and (4) the proportionality of consideration must be ascertainable from particularized information or a mechanism to provide such information. All of those criteria must be satisfied to comply with the Gift Clause. Most Gift Clause cases involve direct transactions between the government and the party receiving the alleged subsidy. See, e.g., Turken. Here, the contract is between the government and the agent for certain employees, for the purpose of providing public safety services. But a significant share of the City’s promised expenditure is directed not to public safety but for the -7-

direct benefit of the agent (i.e., the union). PLEA contends that the officers may direct a part of their compensation to the union, and that release time simply is a portion of the overall compensation package. But as Wistuber instructs in the release time context, individual contract provisions are subject to Gift Clause scrutiny. 141 Ariz. at 348, 687 P.2d at 356 & n. 2, 3. Surely the City could not negotiate to furnish City staffers to work for McDonald’s at taxpayer expense, even as part of a larger contract for legitimate public services. So too does the Gift Clause forbid the assignment of police officers to work at public expense for, and under the control of, a labor union to conduct what Defendants all concede is “union business” (Exh. 5 at 4). Moreover, the contract on its face demonstrates that release time is a form of payment to the union, not to officers. The entirety of the release time provisions is found within a section of the contract (§ 1-3) entitled “Rights of Association” (Exh. 1 at 6-11), as juxtaposed with “Rights of Unit Members” (§ 1-4, id. at 11-18), “Compensation/Wages” (Art. 3, id. at 25-40), and “Benefits” (Art. V, id. at 43-53). The category used by the City to account for release time is “union business” (Exh. 7 at 43-44) (denominated on time slips as “PW” (id. at 48; Exh. 16 at 06681)). The release time provisions may not even satisfy the public purpose requirement. After all, the public purpose of the Police Department is the “safety of the community” (id. at 30-31). By definition, release time diverts resources from that essential public purpose. As the City testified, full-time release is “where an employee is released from their regular City duties to work -8-

full-time for the union” (id. at 14-15 (emphasis added)). Indeed, PLEA’s current president has worked full-time for the union, while paid by the City, for 14 years (Exh. 4 at 23).7 Similarly, the bank of release time hours is available for “other individual representatives of the union . . . to do union business” (Exh. 7 at 15). “[I]f you’re using the release bank . . . you’re being released from your regular job duties, but it’s part of your regular normal workday, that’s counted as time worked for purposes of that week’s payroll” (id. at 75). The regular duties from which the officers are released include detective work, patrolling, Violent Crimes Unit, etc. (id. at 28, 61). For full-time release, the City must “backfill for that position” (id. at 37). The City explains, “if there is a patrol officer that’s put into full-time release, they’re moved into a new position just for the union release position. And then they can rehire (sic) a new patrol officer for that job they left” (id. at 37-38). “If the full-time release were no longer funded,” the City testified, “then that would be six positions, six active police officers that could be returned to regular police work” (id. at 26-27). In addition to regular compensation, the six full-time release positions automatically are entitled to 160 hours of overtime, paid at time and a half, with no requirement for demonstrating that the recipients actually worked overtime (Exh. 1, § 1-3.Q; Exh. 7 at 53-54). The only constraint on release time is that it must be used for “legitimate Association purposes” (Exh. 1, § 1-3.I(1)). That term is not contractually defined and is left to the union’s 7

In addition to full-time pay and overtime from the City, the union also provides a stipend and vehicle allowance (Exh. 4 at 8). -9-

determination (Exh. 7 at 58). The union considers “legitimate Association purposes” to encompass a wide array of activities (Exh. 4 at 37; Exh. 8). Among other things, it includes collecting signatures for ballot measures; supporting ballot measures (such as pension, tax increase, and transportation measures); and lobbying (Exh. 4 at 29-40). PLEA uses both full-time and bank of hours release time for lobbying (id. at 30; Exh. 7 at 63, 69-72). When PLEA testifies, it does so on its own behalf, not for the City (Exh. 4 at 31-32). The union has taken different positions from the City on proposed legislation (id. at 30). It also negotiates for increased pay and benefits and for other public policy that it believes promotes its members’ interests (id. at 10). The bottom line is that release time not only diverts precious resources from the Police Department’s public purpose, but in some situations it is used in ways that are contrary to the City’s own positions and perceived interests. However elastic the concept of public purpose, this use of public resources stretches beyond its limit. See Turken, 223 Ariz. at 350, 224 P.3d at 166. Defendants have offered two justifications for the release time provisions. The City contends they serve the public purpose of “performing the necessary tasks associated with representing officers in official proceedings, investigations, incidents and grievances” (Exh. 5 at 5). PLEA adds that “[r]elease time also provides, in a general sense, better labor relations between the employees and the City of Phoenix” (Exh. 9 at 3). The latter may articulate a legitimate public purpose, but does not constitute a tangible, direct, enforceable obligation that qualifies as consideration under Turken, 223 Ariz. at 350, 224 -10-

P.3d at 166. That leaves the first rationale, representation of officers in official proceedings. Pursuant to A.R.S § 38-1101, law enforcement officers have a right to representation in such circumstances, but “at no cost to the employer” (§ 38-1101(A)(1)). Assuming that providing such representation at public expense is a valid public purpose, assuming that PLEA expends some significant amount of its release time hours on such activities, and assuming even further that PLEA also performs other meritorious activities that benefit the public, all of that is beside the point for Gift Clause consideration purposes. For the relevant inquiry is what the private party “obligates itself to do.” Turken, 223 Ariz. at 349, 224 P.3d at 165; accord, Wistuber, 141 Ariz. at 350, 687 P.2d at 358 (focusing on “duties imposed”). The provisions obligate the union to do none of those things. Indeed, the union is militant that it, rather than the City, controls release time (Exhs. 10, 11, 12, 13, 14, 15), and the City acknowledges that (Exh. 7 at 58). The union decides which officers will receive full-time release (Exh. 4 at 17, Exh. 7 at 54),8 and once designated the City may not return them to their prior positions (id. at 56). The union president directs the activities of the other full-time release positions (Exh. 4 at 20). Those positions do not even report to the Police Department; “they have their own union offices and they report there” (Exh. 7 at 51, 77; Exh. 4 at 22). PLEA directs the activities of its release time lobbyists (Exh. 4 at 29-30). It decides which officers can use release

The current president’s predecessor, Mark Spencer, occupied a full-time release position until he was no longer president; then he combined the designated lobbying hours with time from the bank of hours to remain on full-time release until he retired (Exh. 7 at 63-65). 8

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time to go to seminars and conventions, and which they will attend (Exh. 7 at 73-74). PLEA also manages the release time bank of hours (id. at 36). Nor does the City have any mechanism by which to determine adequacy of consideration, for it has no idea how the release-time is used. “The City has no formal accounting system for tracking the six full-time PLEA positions” (Exh. 18 at 2). As for the bank of hours, “The City tracks the total amount of hours used; specifically each different purpose, no, but the total hours, yes” (id. at 33). PLEA is not required to account for its use of release time hours nor is the City authorized to audit how the hours are used (PLEA Answer ¶ 36). The City requires no description of how officers use release time (Exh. 4 at 22-23).9 Likewise, the City maintains no records on how release time is used for lobbying (Exh. 7 at 72). Apart from the MOU, the City has no specific policies regarding the use of release time except for one operations order (Exh. 7 at 42), and all that does is to require justification if travel expenses are requested to attend a conference or convention (Exh. 15, Exh. 4 at 51-52). Even the release time hours specified in the MOU apparently do not provide an actual limit, as PLEA has substantially exceeded the contractually authorized amount of release time (Exh. 12). The release time provisions flunk all applicable Gift Clause criteria. Not only does release time not promote a public purpose, it detracts from it. To the extent a public purpose is

9

A sampling of release time leave slips (Exh. 16) demonstrates that most officers simply use the code “PW” and/or “union business.” Some are more specific, such as “Explorer Post 2906 Fundraiser Cookout” (id. at 6762) and “PLEA Office coverage” (id. at 6764). -12-

served, the provisions violate the test for consideration set forth in Turken because the union is not “obligated” to provide anything for the resources it receives from the City. Unlike Wistuber, the “duties imposed” are minimal while the costs are substantial. The union rather than the City controls release time, contrary to Kromko, and no mechanism exists for the City to determine the value of any services rendered, because it cannot and does not know how release time is being used, contrary to Hassell. Unbounded as it is in this contract, the release time here is exactly the type of subsidy that the Gift Clause wisely and categorically prohibits. For all those reasons, Plaintiffs have a substantial likelihood of success on the merits. Equitable Factors. “The police function fulfills a most fundamental obligation of government to its constituency.” Foley v. Connelie, 435 U.S. 291, 297 (1978). Release time diverts precious resources from the core public safety mission to “union business.” Although voters approved a sales tax increase to provide additional funding in 2007 (Exh. 7 at 81), a major City budget deficit (id. at 19) led to a hiring freeze and a resulting decline in the number of police officers (id. at 80-81, Exh. 4 at 10, 48). Were release time curtailed, officers would return to their important police duties (Exh. 7 at 26-27). To the extent that the City wishes to provide representation to officers in official proceedings, it can make on-duty officers available for that purpose without gifting hours to PLEA by contract (id. at 49). The City already sometimes uses on-duty officers for that purpose without using release time (id. at 49-50). Or, of course, PLEA could provide such services through member dues, as unions do in some jurisdictions (id. at 33). School districts already are prohibited from providing release time. A.R.S. § 15-504. What the -13-

City cannot permissibly do under the Gift Clause is to expend public funds to make City personnel available to a private entity to do with what it wishes. Whatever the City might now say in defense of the release time scheme, the balance of equities was well-stated by the City during negotiations over the current MOU when it unsuccessfully attempted to reduce full-time release positions from six to four, to eliminate overtime for the full-time release positions, and to eliminate the 500 designated hours for a PLEA lobbyist, at an estimated savings of $255,669 (Exh. 6): A reduction in cost of City funded PLEA operations will have the effect of increasing funds available for mission critical functions that provide a direct benefit to the citizens of Phoenix. An added bonus to these reductions is there is not a reduction in direct compensation or benefits provided by the City to officers to achieve these budget savings. Also the current vacancy rate has reduced the workload of PLEA representatives. ... A release bank of 500 hours was created for a PLEA lobbyist to work with the City lobbyist. City and PLEA objectives are not always the same, which calls into question the benefit this bank of hours provides the City. City staff is capable of performing lobbying on behalf of the City without assistance. Providing taxpayer funding to decrease the efficiency of City Government during the current financial crisis places the City at risk of loosing (sic) public support for necessary programs. Thus the City admits that the release time positions reduce funds for “mission critical functions” that directly benefit the citizens, that the use of release time by PLEA sometimes operates at cross-purposes with the City’s objectives, and that release time decreases the efficiency of city government. The same document also raises concerns about release officers wearing their police uniforms in public and media appearances, which “causes confusion with the -14-

public in that the Association position may be attributed to the City” (id.). That observation underscores that the publicly funded release time is used for the union’s private purposes. An injunction would prevent the unlawful use of taxpayer dollars and promote the vital interest in public safety. Moreover, negotiations are underway on a successor MOU (Exh. 7 at 12). An injunction would provide guidance to public officials so that the next MOU conforms to the Arizona Constitution. For all the foregoing reasons, the Court should grant the requested relief.

RESPECTFULLY SUBMITTED this 5th day of April, 2012 by: /S/ Clint Bolick

Clint Bolick (021684) Taylor Earl (028179) Scharf-Norton Center for Constitutional Litigation at the GOLDWATER INSTITUTE 500 E. Coronado Rd., Phoenix, AZ 85004 (602) 462-5000 [email protected] Attorneys for Plaintiffs

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E-FILED this 5th day of April, 2012 with: Clerk of Court 101 W. Jefferson St. Phoenix, AZ 85003 COPY of the foregoing HAND-DELIVERED and E-MAILED this 5th day of April, 2012 to: John Alan Doran Thomas J. Kennedy Rose C. McCaffrey 201 E. Washington Street, Suite 800 Phoenix, Arizona 85004 [email protected] [email protected] [email protected] Attorneys for City of Phoenix, Phoenix Mayor, Phoenix City Council Members, and Phoenix City Manager Michael Napier Kathryn R. E. Baillie 2525 East Arizona Biltmore Circle Suite 135 Phoenix, Arizona 85016 [email protected] [email protected] Attorneys for Phoenix Law Enforcement Association

By:

/S/ Sulane Voyles Sulane Voyles

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