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Cypen & Cypen
NEWSLETTER
for
FEBRUARY 28, 2008

Stephen H. Cypen, Esq., Editor

1. PARTICIPANT CAN RECOUP INVESTMENT LOSSES AGAINST ERISA FIDUCIARY:

In a rare 9-0 ruling, the United States Supreme Court has upheld a claim for damages against an ERISA fiduciary for a participant’s investment losses. LaRue, a participant in a defined contribution pension plan, alleged that the plan administrator’s failure to follow his investment directions “depleted” his interest in the plan by approximately $150,000, and amounted to a breach of fiduciary duty under Employee Retirement Income Security Act of 1974. The district court granted a judgment on the pleadings against LaRue, and the U.S. Fourth Circuit Court of Appeals, holding that ERISA Section 502(a)(2) provides remedies only for entire plans not for individuals, affirmed. On certiorari, the United States Supreme Court held that although Section 502(a)(2) does not provide a remedy for individual injuries distinct from plan injuries, it does authorize recovery for fiduciary breaches that impair value of plan assets in a participant’s individual account. Section 502(a)(2) provides for suits to enforce the liability-creating provisions of Section 409, concerning breaches of fiduciary duties that harm plans. The principal statutory duties imposed by Section 409 relate to proper management, administration and investment of plan assets, with an eye toward ensuring that benefits authorized by the plan are ultimately paid to plan participants. The misconduct that LaRue alleged fell squarely within that category. Misconduct by a plan’s administrator will not affect an individual’s entitlement to a defined benefit unless it creates or enhances risk of default by the entire plan. For defined contribution plans, however, fiduciary misconduct need not threaten the entire plan’s solvency to reduce benefits below the amount that participants would otherwise receive. Whether a fiduciary breach diminishes plan assets payable to all participants or only to particular individuals, it creates the kind of harm that concerns Section 409's draftsmen. LaRue vs. DeWolff, Boberg & Associates, Inc., Case No. 06-856 (U.S., February 20, 2008).

2. EX-JERSEY MAYOR LOSES PENSION OVER FEDERAL GRAFT CONVICTION:

Former Ocean Township mayor Terrance Weldon, who started serving a 58-month federal prison sentence for corruption this month, has been stripped of his entire $20,000 annual public pension earned over a 20-year career in public office. Weldon pleaded guilty to accepting bribes from developers for helping them get city permits. Members of the Public Employees Retirement System board found Weldon’s actions so egregious that they took the unusual step of forfeiting his entire pension, despite evidence that the crimes for which he was convicted occurred only during his last decade of service. (In Florida, under Section 112.3173, Florida Statutes, there is no provision for partial forfeiture.) According to the (New Jersey) Star-Ledger, Weldon’s attorney had asked the board to forfeit only the portion of retirement credit accrued after 1998, when the crimes he was convicted of started occurring.

3. EEOC INTAKE QUESTIONNAIRE AND AFFIDAVIT CONSTITUTE “CHARGE” UNDER ADEA:

The Age Discrimination in Employment Act of 1967 requires that “no civil action...be commenced...until 60 days after a charge alleging unlawful discrimination has been filed with the Equal Employment Opportunity Commission,” but does not define the term “charge.” After FedEx initiated programs tying its couriers’ compensation and continued employment to certain performance benchmarks, Kennedy, a FedEx courier over age 40, filed with the EEOC, in December 2001, a Form 283 “Intake Questionnaire” and a detailed affidavit supporting her contention that the FedEx programs discriminated against older couriers in violation of ADEA. In April 2002, Kennedy and others filed a suit under ADEA, claiming that the programs were veiled attempts to force out, harass and discriminate against older couriers. FedEx moved to dismiss the action, contending that Kennedy had not filed the “charge” required by ADEA. Although Kennedy countered that her Form 283 and affidavit did constitute a valid charge, the District Court disagreed and granted FedEx’s motion. After the Second Circuit Court of Appeals reversed, the United States Supreme Court granted certiorari. In an opinion authored by Justice Kennedy, the Supreme Court reversed, and held that (1) the subject documents were reasonably construed as a request for the agency to take remedial action to protect the employee’s rights or otherwise settle the dispute between employer and employee and (2) EEOC’s determination that Kennedy’s December 2001 filing was a charge is a reasonable exercise of its authority to apply its own regulations and procedures in course of the routine administration of the statute it enforces. Justice Thomas filed a dissenting opinion, in which Justice Scalia joined. Federal Express Corp. v. Holowecki, Case No. 06-1322 (U.S., February 27, 2008).

4. IN WORKERS’ COMP, FIREFIGHTER ENTITLED TO STATUTORY PRESUMPTION FOR PERIPHERAL VASCULAR DISEASE:

Butler appealed an order of the Judge of Compensation Claims denying his claim for permanent total disability benefits resulting from a compensable accident. He argued that he was entitled to the presumption that his peripheral vascular disease was caused by his occupation as a firefighter. Butler also claimed that he was entitled to PTD benefits because his PVD met or equaled a listed impairment. The appellate court agreed on both points, and reversed. Section 112.18(1), Florida Statutes, known as the “Heart/Lung Bill,” provides that any condition or impairment of health of any Florida municipal firefighter caused by tuberculosis, heart disease or hypertension resulting in total or partial disability or death shall be presumed to have been accidental and to have been suffered in line of duty, unless the contrary is shown by competent evidence. The statute applies to workers’ compensation cases and provides for a presumption of compensability. The presumption relieves claimants from the necessity of proving an occupational causation of the disease resulting in disability or death. The presumption switches the burden of proof from the claimant to the employer, and may be overcome by clear and convincing evidence that the disease was caused by a specific non-work-related event or exposure. Here, both Butler and the employer presented evidence that Butler’s PVD was caused by his atherosclerosis, which was, in turn, caused by his hypertension. The employer conceded that Butler was entitled to the presumption as to his hypertension. The employer did not present any evidence that Butler’s PVD was caused by a specific non-work-related event or exposure. Thus, Butler was entitled to the presumption that his PVD was caused by his occupation as a firefighter. On the issue of PTD benefits, the court held that a claimant is entitled to PTD benefits only if he can show that he has suffered a catastrophic injury. A catastrophic injury is defined as one that would otherwise qualify a claimant to receive Social Security Disability Income benefits under the Federal Social Security Act as it existed on July 1, 1992. Because Butler met a listed impairment as required, he must be found to be disabled regardless of any other circumstances. Butler v. City of Jacksonville, 33 Fla. L. Weekly D384 (Fla. 1st DCA, January 31, 2008).

5. UNDER PUBLIC RECORDS LAW, CUSTODIAN’S SPECIAL CHARGE NOT LIMITED TO JUST COST OF SALARY:

In Florida, access to public records is a matter of such importance that it is constitutionally guaranteed. At the same time, Florida has long required those who seek such records to defray the extraordinary cost associated with their request. A Florida appellate court recently examined the scope of a county’s authority to charge a fee under Florida law permitting a records custodian to assess a “special service charge” when the “nature or volume of public records requested to be inspected or copied...is such that as to require extensive use of information technology resources or extensive clerical or supervisory assistance by personnel of the agency involved, or both.” The charge is in addition to the cost of duplication, which may also be charged to the person requesting the copies. However, Section 119.07(4), Florida Statutes, provides that a special service charge shall be reasonable and shall be based on cost incurred for such extensive use of information technology resources or labor cost of personnel providing the service that is actually incurred by the agency or attributable to the agency for the clerical and supervisory assistance required, or both. The county had adopted a policy to the same effect as the statute, but specifically defined “extensive” and “labor cost.” Under county policy, “extensive” means the public records request will take more than 15 minutes to locate, review for confidential information, copy and refile the requested material. “Labor cost” is calculated by multiplying the research time by the responding employee’s hourly wage and benefits. Reversing a circuit court holding to the contrary, the Second District Court of Appeal (1) approved the county’s formula that includes both an employee’s salary and benefits when calculating the labor costs to be included in the special service charge authorized by statute; (2) determined that the special service charge applies to requests for both inspection and copies of public records when extensive clerical assistance is required; and (3) the county may collect a deposit before beginning the research, as long as it is reasonable and based on the labor cost that is actually incurred by or attributable to the county. The Board of County Commissioners of Highlands County, Florida v. Colby, 33 Fla. L. Weekly D342 (Fla. 2d DCA, January 25, 2008).

6. THE SUBPRIME PRIMER:

Although the subprime debacle has been in the news for quite some time now, we wonder how many people really understand the true nature of the problem. Enter “The Subprime Primer,” which, in cartoon-like form, explains the whole situation -- really. However, we must forewarn readers who object to moderately-foul language: this presentation is not for you. Others may bone up on subprime issues by going to http://www.cypen.com/pubs/02-08/SubPrimePrimer.pdf.

7. DAFFY-NITIONS:

Divorce: Future tense of marriage.

8. QUOTE OF THE WEEK:

“The probability that we may fail in the struggle ought not to deter us from the support of a cause we believe to be just.” Abraham Lincoln


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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.


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