Cypen & Cypen
JUNE 9, 2011
Stephen H. Cypen, Esq., Editor
1. FLORIDA COURT DECLINES TO DECIDE WHAT CONSTITUTES “FINANCIAL URGENCY” IN PUBLIC COLLECTIVE BARGAINING CONTEXT: A union that represents teachers and paraprofessionals appealed a final order of the Florida Public Employees Relations Commission dismissing an unfair labor practice charge the union filed against the School Board of Manatee County, alleging that the School Board had committed an unfair labor practice by improperly invoking Section 447.4095, Florida Statutes. The statute provides:
In reversing in part, the district court of appeal held the Florida Public Employees Relations Commission’s determination that a union must participate in Section 447.4095 negotiations in order to file (at some later time) an unfair labor practice charge -- on grounds the public employer improperly invoked 447.4095 in absence of a real “financial urgency” -- has no statutory warrant, is clearly erroneous and must be reversed. To permit public employers to declare a financial urgency, then to modify a collective bargaining agreement unilaterally, without permitting the union to contest accuracy of the declaration, would render collective bargaining agreements illusory and the collective bargaining process nugatory. However, PERC’s determination that Section 447.4095 does not place any temporal preconditions on initiation of the process section 447.4095 authorizes was affirmed. Note, the court declined to decide what constitutes a “financial urgency.” Manatee Education Association, FEA, AFT (Local 3821), AFL-CIO v. School Board of Manatee County, Florida, 36 Fla. L. Weekly D1183 (Fla. 1st DCA, June 2, 2011).
2. SECURITIES FRAUD PLAINTIFFS NEED NOT PROVE LOSS CAUSATION IN ORDER TO OBTAIN CLASS CERTIFICATION: Erica P. John Fund, Inc. was lead plaintiff in a putative securities fraud class action against Halliburton Co. EPJ Fund alleged that Halliburton made various misrepresentations designed to inflate the company’s stock price, in violation of the Securities Exchange Act of 1934. EPJ Fund also contended that Halliburton later made a number of corrective disclosures that caused the stock to drop and, consequently, investors to lose money. EPJ Fund sought to have its proposed class certified pursuant to Federal Rule of Civil Procedure 23. The District Court found that the suit could proceed as a class action under Rule 23, but for one problem: Fifth Circuit precedent required securities fraud plaintiffs to prove “loss causation” – that is, defendant’s deceptive conduct caused the investors’ claimed economic loss -- in order to obtain class certification. The District Court concluded that EPJ Fund had failed to satisfy that requirement. The Court of Appeals agreed and affirmed denial of class certification. On review by the United States Supreme Court, the Court unanimously reversed, holding that securities fraud plaintiffs need not prove loss causation in order to obtain class certification. Halliburton defended the judgment on the ground that the Court of Appeals did not actually require EPJ Fund to prove “loss causation” as the Court has used that term. According to Halliburton, “loss causation” was shorthand for a different analysis: whether EPJ Fund had demonstrated “price impact;” that is, whether the alleged misrepresentations affected the market price in the first place. The high Court did not accept Halliburton’s interpretation of the Court of Appeals’ opinion. Loss causation is a familiar and distinct concept in securities law, but it is not price impact. Whatever Halliburton thought the Court of Appeals meant to say, what it said was loss causation. The Court took the Court of Appeals at its word. Erica P. John Fund, Inc. v. Halliburton Co., Case No. 09-1403 (U.S., June 6, 2011).
3. FLORIDA DROP APPLICATIONS UP, AS PENSION LAW NEARS: Applications to Florida’s Deferred Retirement Option Program are spiking before a law kicks in that would dramatically reduce interest rates the program pays out, according to a report from the (Jacksonville, Fla.)Financial News & Daily Record. Changes to DROP, which allows public employees to work while “retired” for five years without accruing additional benefits, were part of a vast overhaul of the Florida Retirement System this year (see C&C Special Supplement for May 12, 2011). Instead of receiving further retirement benefits, the state holds onto the benefits for DROP members, and pays interest on them during the five-year period. That interest rate will fall from 6.5 percent per annum to 1.3 percent for members who join the program on or after July 1, 2011. State officials believe the number of new DROP participants could increase by 400 percent, but nobody knows how high the figures might climb. (Still, the most common question for the Division of Retirement is about the new law’s provisions requiring state employees to contribute 3 percent of their income toward retirement.)
4. NYC PENSIONS SUSTAINABLE: New York City’s comptroller has issued a report on sustainability of the City’s pension costs through 2060. The study provides a baseline projection for understanding how pension obligations will affect New York City’s future budgets if ail current laws relating to municipal pensions are left in place and if historical economic trends remain largely intact. Here are major findings of the study (assuming an 8% rate of return on assets):
5. DIFFERENT OPINIONS ON NYC PENSION REPORT: A piece from ai-cio.com indicates that New York City Mayor Michael Bloomberg believes the above NYC Pension Report is deeply flawed. However, the mayor was short on specifics, mentioning only that the subject report assumed life-expectancy would not change. In the same piece, Teresa Ghilarducci, a national expert on public pensions and retirement issues, said the impact of any pension reform takes time to have an effect. The study demonstrates that, over the long-term, New York City’s pension funds provide a secure retirement for firefighters, police officers, teachers and other City employees at a reasonable cost to taxpayers. (Sidebar: perhaps Mayor Bloomberg’s stance has something to do with the comptroller’s being a potential 2013 mayoral candidate.)
6. P & I REPORTS SMALL MANAGERS OUTPERFORMED LARGE MANAGERS: The market period from 2006-2010 was extremely difficult for many active long-only (and long/short) equity managers, which found their ability to produce alpha acutely challenged, particularly if their investment decisions were based on intrinsic fundamental characteristics of individual stocks. Heightened macro uncertainty and correlations over this period, as well as increased use of index trading products, replaced stock fundamentals as the driving determinants for securities price changes. FIS Group conducted extensive due diligence on investment management firms with less than $2 Billion under management, to identify the best performers. The majority of these small emerging managers employ an active, fundamentally-driven investment approach. Research was conducted on major factors driving the alpha impairment in an overall environment of extreme macro uncertainty caused by the global financial crisis and fiscal interventions implemented by the G20 governments to remedy it. The research produced two factors that had the highest impact on active investment strategies: (1) extreme market volatility and (2) unprecedented market correlation. Researchers analyzed return data for entrepreneurial managers for the five major (by assets held) long-only equity categories: large cap core, large cap value, large cap growth, small cap and global (non-U.S.). Research showed that entrepreneurial managers produced more excess return per unit of tracking error for four of the equity categories: large value, large growth, small cap and global ex-U.S. equity. Established managers had the edge in only one category: large core. However, even for that category, entrepreneurial managers actually outperformed the Russell 1000 index.
7. FIREFIGHTER SUES DUE TO TERMINATION FOR FACEBOOK POSTS: A firefighter axed for writing Facebook posts concerning the fire department is suing the town for allegedly violating his First Amendment rights. The (Hyannis, Mass.) Cape Cod Times reports that Richard Doherty, a firefighter/paramedic in the Bourne, Massachusetts, Fire Department for 16 years before being fired in February, filed suit in the U.S. District Court of Massachusetts. Doherty seeks reinstatement and to “recover his reputation.” According to the suit, the town violated Doherty’s right to freedom of speech by firing him for posts on his private Facebook page. The posts referenced the fire department and issues Doherty had with some of its practices. (One example is Doherty’s unhappiness when he was forced to work a July 4 overtime shift.) But Doherty says his real concern was for the safety and well-being of other firefighters. Separately, Doherty appealed his termination to the state Civil Service Commission, an agency that handles public employees’ termination complaints.
8. WAGES – WORSE THAN GREAT DEPRESSION: The past decade of wage growth has been one for the record books, but not one to celebrate, according to Investor’s Business Daily. The increase in total private-sector wages, adjusted for inflation, from the start of 2001 has fallen far short of any 10-year period since World War II. In fact, if the data are to be believed, economywide wage gains have even lagged those in the decade of the Great Depression (adjusted for deflation). Two years into the recovery, and 10 years after the nation fell into a post-dot-com bubble recession, this legacy of near-stagnant wages has helped ground the economy despite unprecedented fiscal and monetary stimulus -- and even an impressive bull market. Over the past decade, real private-sector wage growth has scraped bottom at 4%, just below the 5% increase from 1929 to 1939. To put that statement in perspective, since the Great Depression, 10-year gains in real private wages had always exceeded 25% with one exception: the period ended in 1982-83, when the jobless rate spiked above 10% and wage gains briefly decelerated to 16%.
9. INJURED PORNSTER DID NOT “CONSTRUCTIVELY REFUSE” LIGHT-DUTY WORK: Employer and the Utah Workers’ Compensation Fund sought review of a state Labor Commission Appeals Board’s order affirming an administrative law judge’s decision to award temporary disability benefits to Gonzalez during periods when he was unable to perform light duty work for employer because he no longer worked for employer. After suffering an industrial accident, Gonzalez was released to light-duty work, which employer provided at full pay. Gonzalez continued to perform light-duty work until employer terminated his employment for sending pornographic images to other employees’ cell phones and on company email accounts. WCF terminated temporary disability benefits on the ground that light-duty work remained available pursuant to statute, but Gonzalez had constructively rejected it because of his bad acts resulting in termination. The statute provides that if a light duty medical release is obtained before employee reaches a fixed state of recovery and no light duty employment is available to employee from employer, temporary disability benefits shall continue to be paid. The statute does not explicitly address whether an employee is entitled to benefits in a situation where no light duty employment is available to employee from employer because employee has been fired for violating company policy. In affirming, the Utah Court of Appeals held that if an injured worker on light duty assignment intentionally engages in misconduct with purpose of severing the employment relationship, such misconduct should be viewed as a refusal of light duty work. Importing a “good cause” concept into the statute would greatly expand circumstances in which light-duty work would be considered “available” and constructively rejected, impermissibly expands meaning of “available” as used in the statute. Stampin’ Up, Inc. v. Labor Commission, Caser No. 20100122 (UT App., May 12, 2011).
10. RAMBLINGS: CIA News: It is now being reported that CIA agents have been in Libya since early February. We are not sure how long they will be staying in Libya, but some of them just left Vietnam.
11. PARAPROSDOKIAN: (A paraprosdokian is a figure of speech in which the latter part of a sentence or phrase is surprising or unexpected in a way that causes the reader or listener to reframe or reinterpret the first part. It is frequently used for humorous or dramatic effect.): Why do Americans choose from just two people to run for president and 50 for Miss America?
12. QUOTE OF THE WEEK: “We are confronted with insurmountable opportunities.” Pogo
13. ON THIS DAY IN HISTORY: In 1954, Joseph Welch asks Senator Joseph McCarthy “Have you no sense of decency, Sir?” during Senate-Army hearings.
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