Moreau v. Flanders
15 A.3d 565, 2011 R.I. LEXIS 39, 2011 WL 1136079 (2011)
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Rule of Law:
A state law authorizing a state-appointed receiver to temporarily assume the powers of elected officials in a financially distressed municipality does not violate the state constitution's home-rule amendment, provided the law is one of general applicability and does not permanently alter the municipality's form of government.
Facts:
- The City of Central Falls, a municipality with a home-rule charter, experienced decades of severe financial distress, culminating in a state takeover of its schools in 1991.
- By 2010, the city's financial crisis was extreme, with negative net assets of nearly $17 million, projected multimillion-dollar budget shortfalls, significant bond debt, and a pension fund liability of over $35 million supported by only $4 million in assets.
- In May 2010, Mayor Charles D. Moreau and the Central Falls City Council, believing they had no other option, petitioned a state court for the appointment of a judicial receiver to manage the city's finances.
- In June 2010, the Rhode Island General Assembly enacted the Financial Stability Act, a law of general application that established a state-controlled process for intervening in fiscally distressed municipalities, including the appointment of a nonjudicial receiver by the Department of Revenue.
- In July 2010, the director of the Department of Revenue appointed Mark A. Pfeiffer as the receiver for Central Falls pursuant to the new Act.
- Pfeiffer promptly informed Mayor Moreau that he had assumed the duties and functions of the mayor's office, relegating the mayor to an advisory capacity and reducing his compensation.
- Subsequently, the Central Falls City Council passed a resolution to hire independent legal counsel to challenge the constitutionality of the Financial Stability Act.
- Acting under the authority of the Act, Pfeiffer rescinded the city council's resolution, directing the council members to serve solely in an advisory capacity regarding any constitutional challenge to the Act.
Procedural Posture:
- Mayor Moreau and the Central Falls City Council filed a petition in Providence County Superior Court (a state trial court) seeking the appointment of a judicial receiver for the city.
- Following the passage of the Financial Stability Act, the city council and mayor obtained a consent order from the Superior Court dismissing their petition for a judicial receiver.
- The state-appointed receiver, Pfeiffer, then filed a complaint in Superior Court seeking a declaratory judgment against Mayor Moreau and the City Council President.
- In response, the City Council filed its own lawsuit in Superior Court against the director of the Department of Revenue and the receiver, challenging the constitutionality of the Act.
- The two actions were consolidated and submitted to the Superior Court on an agreed statement of facts.
- The Superior Court trial justice ruled that the Financial Stability Act was constitutional and entered judgment against the Mayor and City Council.
- The Mayor and City Council (appellants) appealed the judgment to the Supreme Court of Rhode Island, with the state-appointed receiver (appellee) as the responding party.
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Issue:
Does the Rhode Island Financial Stability Act, which authorizes a state-appointed receiver to supersede the powers of elected officials in a financially distressed municipality, violate the home-rule amendment of the Rhode Island Constitution by impermissibly altering the municipality's form of government?
Opinions:
Majority - Justice Flaherty
No, the Rhode Island Financial Stability Act does not violate the home-rule amendment of the Rhode Island Constitution. A state law that temporarily impacts a municipality's governance to address a matter of statewide concern, such as fiscal collapse, is permissible as long as it is a general law applying to all municipalities and does not permanently alter the local form of government. Here, the Act applies to all cities and towns, and the receiver's authority is temporary, contained, and intended to restore fiscal stability. The fact that elected officials are not removed but continue to be elected and serve in an advisory capacity demonstrates that the fundamental form of government has not been altered. Furthermore, the Act does not violate the separation of powers doctrine, which does not apply at the municipal level, nor does it violate due process, as elected office is a public trust, not a protected property right.
Analysis:
This decision solidifies the principle that state legislative power can override municipal home-rule authority when addressing matters of statewide concern, particularly fiscal crises. The court's interpretation of what constitutes 'altering the form of government' is significant, establishing that even a comprehensive, temporary transfer of executive and legislative power to a state appointee does not cross that constitutional line. The ruling provides a legal framework for state intervention in municipal financial emergencies, reinforcing that local autonomy is subordinate to the state's interest in maintaining the financial stability of its political subdivisions. It also affirms the long-standing legal principle that public office is not a personal property right subject to procedural due process protections when its duties are curtailed by statute.
