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Rhode Island asks court to dismiss suit challenging pension law

By Svea Herbst-Bayliss

PROVIDENCE (Reuters) - A high-stakes legal battle over pension reform in Rhode Island moved ahead on Friday when attorneys for the state and its retirement system asked a judge to dismiss a lawsuit by labor unions that seeks to overturn last year's pension law.

John Tarantino, the lead attorney for the state's retirement system, argued that the case should be dismissed because the pension law does not amount to a contract, as the unions seeking to overturn the reforms argue it is.

Five unions, representing police, firefighters, teachers, and others, are suing Governor Lincoln Chafee and other state officials, charging that legislators who overwhelmingly passed the law last year violated workers' existing labor contracts when they changed the benefits that would be paid. They argue that the changes to benefits constitute a contract.

But Tarantino said legislators do not make contracts, and the law they passed does not constitute one. "The role of legislators is not to make contracts but to make policy," he said.

Lawmakers last year agreed to a package of spending cuts and other changes to the pension system that are estimated to save the state some $4 billion over the next 20 years.

The hearing before Judge Sarah Taft-Carter in Rhode Island Superior Court in Providence marks the first step in what lawyers expect will be a long and closely watched battle that could have national consequences as states and municipalities scramble to meet unfunded pension promises.

Taft-Carter did not rule on the matter immediately, saying she will advise both sides when she has decided.

David Boies, who represented Al Gore in the 2000 presidential election, is also representing Rhode Island, working for $50 an hour, a fraction of his normal $1,250 an hour fee.

"This is a very important case for Rhode Island and nationally," Boies said after the 2-1/2-hour hearing. "There are $5 trillion in unfunded municipal and state obligations, and if we don't find a way to solve this we will all be in trouble," he said, adding that Rhode Island is a national leader in finding a way to preserve pensions.

Rhode Island's new pension law raises the retirement age, temporarily freezes cost-of-living adjustments and moves to a defined-contribution retirement plan, from a defined-benefit plan. It affects 66,000 active and retired state workers.

Taft-Carter approved a motion to admit Boies and one of his associates to practice law in Rhode Island, but Boies kept a low profile during the proceeding, sitting silently before the judge and letting his Providence-based co-counsel do all the talking.

Before asking Taft-Carter to dismiss the case, the state also asked that she recuse herself from hearing it, arguing she would be personally affected by the case's outcome.

Taft-Carter will be eligible in the future to draw a pension from the state, while her mother and uncle already receive benefits from the state, and her son, a state police officer, is expected to draw a pension in the future as well.

Taft-Carter ruled that she would stay on, assuring both parties that she "can be and will be fair and impartial."

"Everything that went on today is exactly what we expected," Carly Iafrate, one of the lawyers representing the unions, said after the hearing. "I have no reason to believe (the judge) will do anything other than what she says she will."

Said Tarantino, the state's lawyer: "She is going to be our judge. I'm very comfortable in arguing motions before her and presenting our case."

(Reporting By Svea Herbst-Bayliss in Providence; Editing by Leslie Adler)

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