Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Board of Trustees of Employees'' Retirement System of City of Baltimore v. Mayor and City Council of Baltimore City

September 1, 1989


Certiorari to the Court of Special Appeals, Circuit Court of Anne Arundel County, Judge Eugene M. Lerner.

Murphy, C.J., and Eldridge, Cole, Rodowsky, McAuliffe, Adkins and Blackwell, JJ.


These cases involve numerous challenges to two Baltimore City ordinances requiring that Baltimore City employee pension systems divest their holdings in companies doing business in South Africa.

The pertinent facts are as follows. The City of Baltimore maintains three employee pension systems: The Elected Officials Retirement System (E.O.S.), the Fire and Police Employees Retirement System (F. & P.), and the Employees Retirement System (E.R.S.). Each system is administered by a Board of Trustees,*fn1 which is responsible for ensuring that members and beneficiaries ultimately receive the benefits to which they are entitled. As of December 31, 1986, the total sum accumulated in the three systems was approximately

$1.2 billion.*fn2 Virtually all of these assets are invested in either equities or common stocks (40% to 50%), fixed income instruments (40% to 50%), or cash and short-term equivalents.

Under each system, members are entitled to specific future benefits (defined benefits). In addition, the systems include a "variable benefits" program, which provides additional benefits that depend directly on the rate of return on the funds. Under this program, if the rate of return in a given year exceeds 7.5%, then all of the excess between 7.5% and 10% goes toward the payment of additional benefits; in addition, if the rate of return exceeds 10%, then half the excess over 10% goes toward the payment of additional benefits while the City receives the other half.*fn3

In 1986 the City Council of Baltimore passed, and on July 3, 1986, the Mayor of Baltimore signed, Ordinance No. 765, which amended Baltimore City Code (1976, 1983 Repl.Vol., 1986 Cum.Supp.), Art. 22, §§ (7)(a), (35)(a). Section 1(i) of the Ordinance provides that no funds of the E.R.S. or the F. & P. shall remain invested in, or in the future be invested in, banks or financial institutions that make loans to South Africa or Namibia or companies "doing business in or with" those countries.*fn4 Section 1(ii) of the Ordinance states that

entities doing business in or with South Africa, within the meaning of § 1(i), "shall be identified by reference to the most recent annual report of the Africa Fund entitled 'Unified List of United States Companies with Investments or Loans in South Africa and Namibia.'"*fn5 Section 3 of the Ordinance further stipulates that divestiture shall occur within a two-year period. That period began to run on January 1, 1987. See § 2(b). Section 2(d) empowers a Board of Trustees to suspend divestiture during this two-year period, provided that, before acting, the Board adopts a resolution. Under § 2(e), the Board, in adopting such a resolution, must find:

"(1) That the rate of return on the funds [is] substantially lower than the average of the annual earnings on the funds over the past five years, and

(2) That continued divestiture under this ordinance will be inconsistent with generally accepted investment standards for conservators of pension funds notwithstanding the intent of this ordinance, or

(3) That divestiture under the divestiture program will cause financial losses to the funds."

Finally, in § 2(f), the Ordinance specifies that, when adopting a suspension resolution, a Board must state in writing its standards and conclusions, and set forth the duration of the suspension; the period of suspension, however,

may not exceed 90 days, and the two-year time period for divestiture is tolled during the suspension.

Apparently because Ordinance No. 765 by its terms applies only to the E.R.S. and the F. & P., it was unclear whether the E.O.S. was also required to divest. As a result, the City Council passed and the Mayor signed Ordinance No. 792, which amended Baltimore City Code (1976, 1983 Repl.Vol., 1986 Cum.Supp.), Art. 22, § 23(b), to provide expressly that the City's divestiture program applies to the E.O.S.*fn6

As of November 1987, the two-year period for divestiture had not begun to run for the F. & P. and the E.R.S. For each quarter since the Ordinances' effective date, the Trustees of those systems have found, among other things, that the "rate of return on the funds [has been] substantially lower than the average of the annual earnings on the funds over the past five years." Thus, as for those systems, the divestiture program has been suspended for successive 90-day periods.

On December 31, 1986, the Trustees of each of the City's three employee pension systems, and two employee beneficiaries, filed this action against the Mayor and City Council of Baltimore, asking the Circuit Court for Baltimore City to

declare the Ordinances invalid. In support of this request, the Trustees contended: that § (1)(ii) of Ordinance No. 765 impermissibly delegates legislative power to the Africa Fund, a private entity; that the Ordinances unconstitutionally impair the obligation of the City's pension contracts with the systems' beneficiaries; that the federal Comprehensive Anti-Apartheid Act of 1986, Pub.L. No. 99-440, 100 Stat. 1086 (1986), preempts the Ordinances; that the Ordinances intrude on the federal government's exclusive power to conduct foreign policy; and that the Ordinances violate the Commerce Clause of the United States Constitution, Art. I, § 8, cl. 3. On January 9, 1987, four pension fund beneficiaries, raising related arguments, moved to intervene on the side of the Trustees.*fn7

The Trustees moved for summary judgment.*fn8 After hearing argument on March 26, 1987, the circuit court denied the motion for summary judgment, finding it necessary first to determine facts concerning the Ordinances' financial impact. On April 6, 1987, the circuit court denied the motion to intervene.*fn9

During the trial, which took place between June 22 and July 10, 1987, the parties presented a large amount of highly technical evidence concerning the Ordinances' financial impact. Thereafter the circuit court filed an opinion and a declaratory judgment containing numerous findings and conclusions. The circuit court, based on the evidence of financial impact, held that "it cannot be concluded that the Ordinance[s] will impair the performance of the equity funds."*fn10 In reaching this decision, the trial judge discounted the parties' evidence detailing the performance of other South Africa free (S.A.F.) equity funds:

"Some have fared better than the unrestricted equity funds of the same money manager; some fared worse. Many did better than the [Standard & Poor 500 Index].*fn11 All the experts agreed, however, that the track records of these SAF funds is too short (less than three years) to be statistically significant."

Moreover, the court noted that "not one witness was able to express the opinion that the percentage return on the plaintiffs' equity investment will be reduced because of the Divestment Ordinance[s]."

The circuit court indicated that the Ordinances barred investments in 120 of the 500 companies on the Standard & Poor 500 (S & P 500). The court further recognized that these companies represent approximately 40% of the market capitalization of the S. & P. 500.*fn12 Thus, the court found that, under the Ordinances, the pension systems' portfolio will have more investments in relatively smaller companies whose stock prices tend to be more volatile. The court

stated, however, that this was not necessarily a disadvantage, reasoning that in the long run such stocks perform as well or better than larger companies' stocks.

The Trustees had attempted to show that the Ordinances would adversely affect their money managers' "active" style, which had proved very successful. Generally, this style emphasizes investments in certain sectors of the economy in an attempt to surpass rather than merely to duplicate the market's performance.*fn13 The circuit court found that, by eliminating some potential investments in certain sectors, the Ordinances would affect the active style. Nonetheless, the court deemed any interference to be insignificant, concluding that "adequate SAF [South Africa free] replacement stocks can be found for each sector, even though the SAF companies will be replacing larger companies."

The Trustees had also introduced evidence purporting to show that the Ordinances would diminish the quality of the pension systems' portfolio by requiring money managers to forego their "first choice." The circuit court disagreed, stating that "it is not axiomatic that the manager's second choice is inferior to the first." The court explained that money managers ordinarily invest in a limited number of companies with which they are familiar.*fn14 Thus, the court found that the Ordinances would merely require money managers to do additional research in order to locate adequate replacement stocks.

The court did find that the Ordinances would affect the Short Term Investment Fund (S.T.I.F.). The S.T.I.F. is a fund of very short-term investment paper that is pooled in a local bank with the funds of other owners and is issued to

meet immediate or short-term liquidity requirements. The Ordinances affect participation in the pooled S.T.I.F., since that fund invests in companies doing business in South Africa. As comparable substitutes may not be readily available, the pension systems' S.T.I.F. may be forced to increase its ratio of investments in lower-yielding obligations, such as Treasury Bills. Moreover, unlike the pooled S.T.I.F., most South Africa free S.T.I.F.s charge management fees. These two factors, the circuit court found, would result in a decreased annual return on the pension systems' S.T.I.F. of .75% or $900,000.

The court also found that the Ordinances require divestiture of 47% of the pension funds' equity portfolio and 10% of the fixed income portfolio. The parties agreed that replacing these holdings with S.A.F. investments would lead to some initial, one-time costs; however, they disagreed as to the extent of the costs.*fn15 The Trustees had attempted to prove that, in addition to "explicit" costs (such as broker's fees or commissions), transactions of this magnitude adversely affect stock prices and thereby result in additional, "implicit" costs. Noting that other experts reject this theory, the circuit court declined to credit the Trustees' evidence. In addition, the court accepted the City's contention that the cost of transactions that would have occurred absent divestiture should be subtracted from the total costs of divestiture. Consequently, the court fixed the initial cost of divesting the funds' equity and fixed income portfolios at $750,000.*fn16

Finally, the court observed that, because of the smaller size of S.A.F. companies, divestiture will result in a larger

volume of trading. This in turn, the court found, will cause an annual increase in broker's commissions of $300,000.

In summary, the trial court fixed the initial cost of divestiture at $750,000, or one-sixteenth of 1% of the funds' total value. In addition, the court calculated that the ongoing cost of divestiture is $1.2 million per year ($900,000 for the S.T.I.F. and $300,000 for additional commissions), or one-tenth of 1% of the funds' total value. The court reasoned further: "If the Pension Funds earn in excess of 10% (as has regularly been the case since 1984), the loss to the retirees is halved, since the City takes one-half of the excess earnings." Consequently, the court concluded that the initial cost to the systems' beneficiaries is actually only 1/32 of 1% and that the ongoing cost is actually only 1/20 of 1%.*fn17

In light of the Ordinances' "minimal" effect and the "salutary moral principle" underlying them, the circuit court rejected the Trustees' impairment of contract argument.

The court upheld § 1(ii) of Ordinance 765, which provides that entities doing business in South Africa shall be identified by reference to the Africa Fund's "Unified List." The circuit court construed the ordinance to mean that "[t]he Unified List is merely a 'reference,' which the Trustees may accept or reject," and that "the Trustees are the final authority to determine whether a company is disqualified." Accordingly, the court held that § 1(ii) did not impermissibly delegate legislative power to a private entity. The trial judge also rejected the Trustees' other challenges to the


The Trustees and the applicants for intervention both appealed to the Court of Special Appeals. On the parties' joint request, we issued a writ of certiorari to consider the important issues presented.


Initially, we shall address the denial of the motion by four pension fund beneficiaries to intervene on the side of the Trustees. In denying the motion, the circuit court ruled that the applicants were not entitled to intervene as a matter of right under Maryland Rule 2-214(a)(1) or (2), and ruled that they would not be granted permissive intervention under Rule 2-214(b).

We disagree that the applicants were not entitled to intervene as a matter of right under Rule 2-214(a)(2). Rule 2-214(a)(2) provides in pertinent part:

"Upon timely motion, a person shall be permitted to intervene in an action: . . . (2) when the person claims an interest relating to the property or transaction that is the subject of the action, and the person is so situated that the disposition of the action may as a practical matter impair or impede the ability to protect that interest unless it is adequately represented by existing parties."

Plainly the applicants, as beneficiaries, "clai[m] an interest relating to the property . . . that is the subject of the action." Moreover, a ruling upholding the Ordinances' validity would be res judicata in a separate action by the

applicants. Restatement (Second) of Judgments, § 41(l)(a) (1982). See Ugast v. LaFontaine, 189 Md. 227, 233, 55 A.2d 705 (1947) (judgment for constructive trustee was res judicata in subsequent action brought by beneficiaries of constructive trust). See also Sea-Land Services, Inc. v. Gaudet, 414 U.S. 573, 593-594, 94 S.Ct. 806, 819, 39 L.Ed.2d 9 (1974). Consequently, the applicants are "so situated that the disposition of the action may as a practical matter impair or impede" their ability to protect their interests.*fn19 Indeed, the trial court in its opinion did not find otherwise.

The basis for the trial court's denial of intervention as of right was the court's conclusion that the Trustees adequately represent the applicants' interests.

In Citizens Coordinating Comm. v. TKU, 276 Md. 705, 713, 351 A.2d 133 (1976), we pointed out that under the intervention of right provision of former Rule 208, the rule requires only that the representation by existing parties "may be inadequate." In Maryland Radiological v. Health Serv., 285 Md. 383, 402 A.2d 907 (1979), which was also decided under former Rule 208, we adopted an "interest analysis" test to determine whether existing representation is adequate. Referring to the discussion in 7A C. Wright & A. Miller, Federal Practice and Procedure § 1909 (1972), Judge Digges for the Court explained that test as follows (285 Md. at 390-391, 402 A.2d at 911-912):

"First, these authors suggest the obvious: If the potential newcomer's interest is not represented or advocated to any degree by an existing party, or if the existing parties all have interests that are adverse to those of the proposed intervenor, he is unrepresented and, assuming compliance with the other provisions of Rule 208 a, intervention

should be permitted. . . . Second, if the applicant's interest is similar but not identical to that of an existing party, 'a discriminating judgment is required on the circumstances of the particular case, but he ordinarily should be allowed to intervene unless it is clear that the party will provide adequate representation for the absentee. Id. (footnote omitted). Third, if the interest of an existing party and an intervenor-applicant are identical, or if an existing party is charged by law with representing a movant's interest, 'a compelling showing should be required to demonstrate why this representation is not adequate.'"

Also, in both the TKU case, 276 Md. at 712, 351 A.2d at 138, and the Maryland Radiological case, 285 Md. at 388 n. 5, 402 A.2d at 910 n. 5, we pointed out that intervention decisions under Rule 24 of the Federal Rules of Civil Procedure serve as a guide to interpreting the Maryland Rule.

Because of his fiduciary duties to the trust's beneficiaries, a trustee is charged by law with representing the beneficiaries' interests. Consequently, in cases under Rule 24, F.R.Civ.P., courts often view the interests of a trustee and the beneficiaries as the same, conclude that the trustee will adequately represent the beneficiary's interests, and deny to the beneficiaries intervention as of right. See, e.g., Heyman v. Exchange Nat. Bank of Chicago, 615 F.2d 1190, 1194 (7th Cir.1980); Peterson v. United States, 41 F.R.D. 131, 133-134 (D.Minn.1966); Kind v. Markham, 7 F.R.D. 265, 266 (S.D.N.Y.1945). The cases recognize, however, that where there is a conflict between the interests of the trustee and beneficiaries, or when other circumstances exist whereby the representation by the trustee may be inadequate, the beneficiaries will be granted intervention. See, e.g., Swift v. Swift, 61 F.R.D. 595, 597-598 (E.D.N.Y. 1973); Peterson v. United States, supra, 41 F.R.D. at 134; Federal Home Loan Bank v. Long Beach Fed. S. & L. Ass'n, 122 F.Supp. 401, 435 (S.D.Cal.1954).

The trustees of a public pension system do not necessarily occupy precisely the same position as the trustees of a conventional private trust. It is true that, like ordinary trustees, the persons administering Baltimore's retirement funds are charged with fiduciary duties of loyalty and care toward the systems' beneficiaries. In the present case, however, the Trustees have obligations to the City as well. As to variable benefits, which are the only benefits affected by the Ordinances, Baltimore City receives one-half of the systems' excess earnings over 10%. Thus, with respect to these benefits, the City is a co-beneficiary. Moreover, in this case the Boards of Trustees are agencies of Baltimore City, which is the party opponent in this litigation. The Trustees are municipal officials with some responsibility to comply with the City's directives. In essence, the Trustees are prosecuting this lawsuit against their employer. The present case, therefore, is very different from an ordinary action brought on behalf of beneficiaries. In fact, it should be noted in this context that, during Baltimore's last mayoral election campaign, one of the issues between the candidates concerned the propriety of permitting the Trustees to prosecute an appeal in the present case. See The Sun (Baltimore), August 29, 1987, at 5A.

In light of the Trustees' peculiar role, we conclude that the beneficiaries' interests are "similar but not identical" to those of the Trustees. See Maryland Radiological v. Health Serv., supra, 285 Md. at 390, 402 A.2d at 912. In our opinion it is not sufficiently clear, under the facts of the present case, that the Trustees will adequately represent the applicants. The prospect that the Trustees might not ask the United States Supreme Court to review an unfavorable ruling in this Court is not entirely unlikely in light of past events. A decision not to seek Supreme Court review would adversely affect the applicants, who would be bound by our ruling.

Consequently, under these circumstances, we hold that the Trustees may not adequately represent the applicants' interests. Thus, the trial court erred in holding that the

applicants were not entitled to intervene as a matter of right under Rule 2-214(a)(2).*fn20

When a trial court has erroneously denied a motion to intervene, the ordinary remedy is to reverse and remand the case so that the intervenor may present the evidence that he originally would have produced. See, e.g., Citizens Coordinating Comm. v. TKU, supra, 276 Md. at 714, 351 A.2d at 139. In the case at bar, however, the applicants took the position, during oral argument before us, that they do not desire a remand for this purpose. Rather, they only wish to have the status of parties in the present proceeding before this Court and for all future proceedings in the case, including the right to seek review in the United States Supreme Court. As a consequence, the circuit court's error does not require reversal. Instead, we shall exercise our authority under Rule 8-604(e) to modify the circuit court's judgment so as to grant the applicants' motion to intervene.


Section 1(ii) of Ordinance 765 provides that "[b]usiness entities doing business in or with the Republic of South Africa shall be identified by reference to the most recent annual report of the Africa Fund entitled 'Unified List of United States Companies With Investments or Loans in South Africa and Namibia.'" The Trustees contend that this provision constitutes an impermissible delegation of legislative power to a private entity.

The City agrees that if the Trustees are bound by the South Africa Fund Unified List, and with respect to Namibia

bound by the determinations of the United Nations' offices referred to in the Ordinances, then the Ordinances are unconstitutional (City's Brief, p. 31). The City, however, urges that the language of the Ordinances is ambiguous, and it points to the circuit court's construction of the Ordinance No. 765 which was as follows:

"The directive in the Ordinance that [corporations doing business in or with South Africa] 'shall be identified by reference to the most recent annual report' of the Africa Fund Unified List is merely a 'reference,' which the Trustees may accept or reject."*fn21

Under the circuit court's construction, the City's argument continues, there is clearly no impermissible delegation of legislative power.

As the Court stated in Comm'n on Med. Discipline v. Stillman, 291 Md. 390, 413, 435 A.2d 747, 759 (1981), "[i]n the enactment of laws, the legislature acts in the exercise of a power conferred upon it by the people; it cannot validly redelegate its lawmaking authority to others." See Md. Co-op. Milk Producers v. Miller, 170 Md. 81, 88, 182 A. 432, 435 (1935); Brawner v. Supervisors, 141 Md. 586, 595-596, 119 A. 250 (1922); Bradshaw v. Lankford, 73 Md. 428, 430, 21 A. 66 (1891); Fell v. State, 42 Md. 71, 83 (1875); Hammond v. Haines, 25 Md. 541, 562 (1866). See also Anne Arundel County v. Fraternal Order, 313 Md. 98, 111, 114-115, 543 A.2d 841 (1988); Maryland Cl. Emp Ass'n v. Anderson, 281 Md. 496, 508-509, 380 A.2d 1032, 1039 (1977). This principle follows from the nature of representative democracy. Pursuant to Article XI-A of the Maryland Constitution, and as authorized by Maryland Code (1957, 1987 Repl.Vol.), Art. 25A, the Baltimore City Council has the sole power to enact local legislation for the people of Baltimore City. Cheeks v. Cedlair Corp., 287 Md. 595, 608-609,

415 A.2d 255 (1980).*fn22 Thus, in enacting legislation, City Council members generally have no authority to substitute the judgment of others for their own judgment. Md. Co-op. Milk Producers v. Miller, supra, 170 Md. at 88, 182 A. at 435; Bradshaw v. Lankford, supra, 73 Md. at 430, 21 A. at 66.

The principle of nondelegation, however, is not absolute. See Bradshaw v. Lankford, supra, 73 Md. at 430, 21 A. at 66. As this Court stated in Department of Transportation v. Armacost, 311 Md. 64, 72, 532 A.2d 1056, 1060 (1987), "[o]ur cases have long sanctioned delegations of legislative power to administrative officials where sufficient safeguards are legislatively provided for the guidance of the agency in its administration of the statute." Furthermore, the Court noted in Price v. Clawns, 180 Md. 532, 538, 25 A.2d 672, 675 (1942), that "[t]here are many instances in which authority is lodged in and permitted to private persons by the Legislature." See, Portsmouth Stove and Range Company v. Mayor and City Council of Baltimore, 156 Md. 244, 251-253, 144 A. 357, 360-361 (1929). Nonetheless, delegations of legislative authority to private entities are strictly scrutinized because, unlike governmental officials or agencies, private persons will often be wholly unaccountable to the general public. See Group Health Ins. of N.J. v. Howell, 40 N.J. 436, 445, 193 A.2d 103 (1963); Fink v. Cole, 302 N.Y. 216, 224, 97 N.E.2d 873 (1951); Union Trust Co. v. Simmons, 116 Utah 422, 427-428, 211 P.2d 190 (1949); Note, The State Courts and Delegation of Authority to Private Groups, 67 Harv.L.Rev. 1398, 1402 (1954).*fn23

A number of cases have held that no impermissible delegation takes place when a legislature merely adopts a fixed standard promulgated by a private entity. See, e.g., St. Louis, Iron Mt. & Southern Railway Co. v. Taylor, 210 U.S. 281, 28 S.Ct. 616, 52 L.Ed. 1061 (1908); Kingery v. Chapple, 504 P.2d 831, 836 n. 13 (Alaska 1972); City of Bakersfield v. Miller, 64 Cal.2d 93, 97-98, 48 Cal.Rptr. 889, 410 P.2d 393, cert. denied, 384 U.S. 988, 86 S.Ct. 1890, 16 L.Ed.2d 1005 (1966); City of Warren v. State Const. Code Com'n, 66 Mich.App. 493, 239 N.W.2d 640 (1976); People v. Shore Realty, 127 Misc.2d 419, 486 N.Y.S.2d 124 (1984); Meyer v. Lord, 37 Or.App. 59, 586 P.2d 367, 371 (1978); Dudding v. Automatic Gas Co., 145 Tex. 1, 193 S.W.2d 517, 520 (1946). But cf. Cawley v. Northern Waste Co., 239 Mass. 540, 132 N.E. 365 (1921).

The Ordinance in the present case, however, does not incorporate a fixed standard but a standard that is subject to periodic revision by the Africa Fund. Section 1(ii) of Ordinance No. 765 requires the Trustees to employ the "most recent annual report" of the Africa Fund's Unified List. Courts have frequently viewed the legislative incorporation of future changes or revisions in a standard promulgated by a private entity as an impermissible delegation of authority. See, e.g., City of Tucson v. Stewart, 45 Ariz. 36, 40 P.2d 72, 80-81 (1935); Agnew v. City of Culver City, 147 Cal.App.2d 144, 153-157, 304 P.2d 788, 795-797 (1956); People v. Pollution Control Board, 83 Ill.App.3d 802, 38 Ill.Dec. 928, 404 N.E.2d 352 (1980); Gumbhir v. Kansas St. Bd. of Pharmacy, 228 Kan. 579, 618 P.2d 837, 843 (1980); State v. Crawford, 104 Kan. 141, 177 P. 360 (1919); Coffman v. State Board of Examiners in Optometry, 331 Mich. 582, 50 N.W.2d 322, 326 (1951); People v. Mobil Oil Page 96} Corp., 101 Misc.2d 882, 422 N.Y.S.2d 589, 592 (1979); State v. Emery, 55 Ohio St. 364, 370, 45 N.E. 319 (1896); Hillman v. Northern Wasco County People's Util. Dist., 213 Or. 264, 323 P.2d 664, 674-675 (1958), overruled on other grounds in Moulding v. Clackamas County, 278 Or. 359, 563 P.2d 731 (1977); Woodson v. State, 95 Wash.2d 257, 623 P.2d 683, 685 (1980).*fn24

On the other hand, courts have sometimes upheld legislative adoption of private organizations' standards which are periodically subject to revision, in limited circumstances such as where the standards are issued by a well-recognized, independent authority, and provide guidance on technical and complex matters within the entity's area of expertise. See, e.g., Ex parte Gerino, 143 Cal. 412, 419, 77 P. 166 (1904); Colorado Polytechnic College v. State Board for Community Colleges and Occupational Education, 173 Colo. 39, 476 P.2d 38, 42 (1970); Rosenthal v. State Bar Examining Committee, 116 Conn. 409, 165 A. 211, 214 (1933); State v. Dee, 77 So.2d 768 (Fla.1955); Lucas v. Maine Com'n of Pharmacy, 472 A.2d 904 (Me.1984); Application of Hansen, 275 N.W.2d 790, 796-797 (Minn.1978), appeal dismissed, 441 U.S. 938, 99 S.Ct. 2154, 60 L.Ed.2d 1040 (1979); Appeal of Murphy, 482 Pa. 43, 393 A.2d 369 (1978), appeal dismissed, 440 U.S. 901, 99 S.Ct. 1204, 59 L.Ed.2d 449 (1979); State v. Wakeen, 263 Wis. 401, 407-412, 57 N.W.2d 364, 367-369 (1953); Potter v. New Jersey Supreme Court, 403 F.Supp. 1036, 1040 (D.N.J.1975), aff'd,

546 F.2d 418 (3rd Cir.1976). These cases usually involve accreditation or similar programs by established professional organizations.*fn25

We need not in the present case express agreement or disagreement with the specific holding in any of the above-cited opinions of our sister states concerning delegation to private entities. It is sufficient to point out, in light of the prior decisions of this Court and the cases generally throughout the country, that if the Trustees are bound by the determinations of the private entities listed in the Ordinances, there arises a serious question concerning the validity of the Ordinances under Article XI-A of the Maryland Constitution.

It is a settled "principle that a court will, whenever reasonably possible, construe and apply a statute to avoid casting serious doubt upon its constitutionality." Yangming Transport v. Revon Products, 311 Md. 496, 509, 536 A.2d 633 (1988). See, e.g., Craig v. State, 316 Md. 551, 552, 560 A.2d 1120 (1989); Heileman Brewing v. Stroh Brewery, 308 Md. 746, 763-764, 521 A.2d 1225 (1987); In re Criminal Investigation No. 1-162, 307 Md. 674, 685, 516 A.2d 976, 982 (1986); Davis v. State, 294 Md. 370, 377, 451 A.2d 107, 111 (1982). We agree with the circuit court and the City that this principle is fully applicable to the Ordinances.

As Judge Greenfeld pointed out for the court below, the language of the Ordinances, designating the South Africa Fund's Unified List as a "reference," is reasonably subject to the construction that the Trustees are not bound by the list. It is, in the words of the circuit court, "merely a 'reference' which the Trustees may accept or reject."

The circuit court's construction of the Ordinances, which we uphold, avoids casting substantial doubt upon their validity under the cases dealing with delegation of legislative power to private entities. The Trustees have cited no case, and we are aware of none, indicating that it is an impermissible delegation of legislative authority for a legislative body to direct a government agency to use a private entity's list merely as an advisory reference, with the agency being free to decline to follow the list.

Consequently, it is for Trustees to determine whether a particular company is doing business in South Africa. While the view of the South Africa Fund must be taken into consideration, the Trustees may reject that view with regard to any particular company.

The concept of "doing business" in a particular area involves a matter of degree. If viewed expansively, "doing business" would encompass even the most tangential contacts with South African entities. On the other hand, if construed very narrowly, "doing business" might signify only actual ownership or control of productive assets, such as mines or factories, in South Africa. Clearly, however, the City Council did not contemplate a definition so narrow as to frustrate the objectives of divestiture. Nevertheless, from the Ordinances' references to the Africa's Fund's and United Nations organizations' definitions, it is clear that the City Council sought a responsible standard, and did not wish to bar investments in firms "doing business" under the most expansive sense of that term. In other contexts, we have construed the statutory phrase "doing business" in a geographical area to mean doing a "substantial amount of

business" or engaging "in significant business activity" in that area. See, e.g., Yangming Transport v. Revon Products, supra, 311 Md. at 504-509, 536 A.2d at 637-640; S.A.S. Personnel Consult v. Pat-Pan, 286 Md. 335, 339-340, 407 A.2d 1139, 1142 (1979); G.E.M., Inc. v. Plough, Inc., 228 Md. 484, 488-489, 180 A.2d 478, 481 (1962). In our view, this is the definition which the Trustees should utilize.


According to the Trustees and the beneficiaries, the Ordinances impair the obligations of the beneficiaries' pension contracts with the City, in violation of the Contract Clause of the United States Constitution, Art. I, § 10. We disagree.


In Robert T. Foley Co. v. W.S.S.C., 283 Md. 140, 151-152, 389 A.2d 350, 357 (1978), we reviewed the framework for determining if governmental action unconstitutionally impairs contractual obligations, saying:

"Consideration of a claim that particular governmental action invalidly impairs contractual obligations involves several steps. See United States Trust Co. v. New Jersey, 431 U.S. 1, 17-21, 97 S.Ct. 1505, 52 L.Ed.2d 92 (1977). First, it must be determined whether a contract existed. If that hurdle is successfully cleared by the claimant, a court next must decide whether an obligation under that contract was changed. Finally, if the second question is answered in the affirmative, the issue becomes whether the change unconstitutionally impairs the contract obligation, '[f]or it is not every modification of a contractual promise that impairs the obligation of contract under federal law. . . .' City of El Paso v. Simmons, 379 U.S. 497, 506-507, 85 S.Ct. 577, 582-583, 13 L.Ed.2d 446 (1965)."

See State v. Good Samaritan Hospital, 299 Md. 310, 318, 473 A.2d 892, 896, appeal dismissed, 469 U.S. 802, 105 S.Ct. 56, 83 L.Ed.2d 7 (1984). See also State v. Burning Tree Page 100} Club, Inc., 315 Md. 254, 271, 554 A.2d 366 (1989); Chevy Chase Savings & Loan v. State, 306 Md. 384, 416, 509 A.2d 670 (1986).

There is no doubt that, by establishing the pension systems, the City imposed contractual obligations on itself. Under Maryland law, pension plans create contractual duties toward persons with vested rights under the plans. See, e.g., Archer v. Archer, 303 Md. 347, 357, 493 A.2d 1074 (1985); Lookingbill v. Lookingbill, 301 Md. 283, 289, 483 A.2d 1 (1984); Deering v. Deering, 292 Md. 115, 124-128, 437 A.2d 883 (1981); City of Frederick v. Quinn, 35 Md. App. 626, 371 A.2d 724 (1977). Moreover, the Baltimore City Code expressly recognizes the existence of a contractual ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.