1. FUNDS HELD IN INHERITED INDIVIDUAL RETIREMENT ACCOUNTS ARE NOT RETIREMENT FUNDS WITHIN MEANING OF BANKRUPTCY EXEMPTION: Clark filed a petition for Chapter 7 bankruptcy, seeking to exclude roughly $300,000 in an inherited individual retirement account from the bankruptcy estate, using the “retirement funds” exemption. The Bankruptcy Court concluded that an inherited IRA does not share the same characteristics as a traditional IRA, and disallowed the exemption. The District Court reversed, explaining that the exemption covers any account in which the funds were originally accumulated for retirement purposes. The Seventh Circuit disagreed, and reversed the District Court. On certiorari, the United States Supreme Court held that funds in an inherited IRA are not “retirement funds” within the meaning of the Bankruptcy Code. The ordinary meaning of “retirement funds” is properly understood to be sums of money set aside for the day an individual stops working. Three characteristics of inherited IRAs provide objective evidence that they do not contain such funds. First, the holder of an inherited IRA may never invest additional money in the account. Second, holders of inherited IRAs are required to withdraw money from the account, no matter how far they are from retirement. Finally, the holder of an inherited IRA may withdraw the entire balance of the account at any time, and use it for any purpose, without penalty. Clark v. Rameker, 24 Fla. L. Weekly Fed. S843 (US June 12, 2014).
2. FLORIDA MUNICIPAL RED LIGHT CAMERA ORDINANCES OPERATING PRIOR TO JULY 1, 2010 ARE INVALID: The Supreme Court of Florida has considered whether municipal ordinances imposing penalties for red light violations detected by devices using cameras were invalid because they were preempted by state law. The issue in the cases was whether operation of ordinances prior to July 1, 2010, the effective date of the Mark Wandall Traffic Safety Act, which authorized use of red light traffic infraction detectors by local government was invalid. There was a split of opinion between the Third District Court of Appeal and the Fifth District Court of Appeal. The Supreme Court of Florida agreed with the Fifth District Court of Appeal, and held such ordinances are invalid because they are in conflict with state law and were both expressly and impliedly preempted by state law. The imposition of penalties other than those specifically provided by state statute for running a red light in a particular municipality does not fall within the specific authority of Chapter 316, Florida Statutes, which appears to contemplate only unique situations for which a statewide law is lacking or is inadequate.Masone, v. City of Aventura, 39 Fla. L. Weekly S406 (Fla June 6, 2014).
3. LAST DEFENDANT SETTLES SEC FRAUD CHARGES IN "PAY-TO-PLAY" CASE INVOLVING NEW YORK STATE COMMON RETIREMENT FUND: Apropos a recent newsletter article (See C & C Newsletter for June 12, 2014, Item 4), a United States District Judge for the Southern District of New York, entered a final judgment against defendant Saul Meyer in the enforcement action arising from the "pay-to-play" scheme involving New York State's Common Retirement Fund. In all, SEC charged seventeen defendants, including various nominee entities through which payments were funneled and certain of the investment management firms and their principals. Meyer was the principal of an investment management firm, and is alleged to have made unlawful payments to Henry Morris, top political advisor to former New York State Comptroller Alan Hevesi. The civil action had been stayed until outcome of the New York Attorney General's Office's parallel criminal action against some of the defendants charged by SEC, including Meyer. U.S. Securities and Exchange Commission Litigation Release No. 23017/June 10, 2014.
4. DISABLED INDIVIDUAL ALLEGED STANDING TO BRING ACTION AGAINST BUSINESS ENTITY FOR VIOLATION OF ADA: Taylor is a disabled individual as defined by the Americans with Disabilities Act. He alleged that he visited the business premises of Wing It Two, Inc., as a customer. While there, he purchased goods and attempted to use the restroom facilities. He claims that, during his visit, he encountered several unlawful physical barriers, dangerous conditions, and ADA violations, which limited his ability to access the property and experience equal enjoyment of goods, services, and accommodations therein. Taylor further alleged that he lives in the vicinity of the business, and intended to visit there again within the next six months. He brought an action against the business for violation of ADA and ADA's Accessibility Guidelines. The business asserted that Taylor did not have standing to bring the action. A United States District Court judge denied the motion to dismiss. A motion to dismiss encompasses both challenges based on the court's lack of federal subject matter jurisdiction and challenges based on lack of standing. Because standing is jurisdictional in nature, the business proceeded under the Federal Rules of Civil Procedure to dismiss for lack of standing. A standing challenge can be either facial or factual. Facial challenges attack standing based solely on allegations in the complaint and any exhibits attached, and the district court takes the allegations of the complaint as true when deciding the motion. Factual attacks challenge standing in fact, encompassing matters outside the pleadings, and therefore will allow the district court to consider extrinsic evidence, such as testimony and affidavits. When the attack is facial, the trial court must afford the plaintiff the benefit of safeguards similar to those provided in opposing a motion to dismiss; the court must consider the allegations of the complaint to be true. The business also contended that Taylor’s claim that he plans to return to the property was simply implausible. Claims that a review of court records revealed that Plaintiff had brought a staggering 143 cases as Plaintiff, was unpersuasive at this stage of the proceedings.Taylor v. Wing It Two, Inc., 24 Fla. L. Weekly Fed. D369 (SD Fla. June 19, 2013).
5. EMPLOYEE REALLY TAKES THE CAKE: Mayes worked for WinCo Holdings from 1999 until her termination in 2011. She began her employment as a department clerk, and was promoted to a supervisory position as lead crew member of the night time freight crew. She also served as the store safety committee chief. Mayes’s termination arose over her having directed another employee to take a cake out of the stales cart from the bakery for her crew to eat. Use of cakes in this manner, she argued, was a common on-going practice that she had been given approval for by her supervisor. She claims she was terminated not because of the cake but because her supervisor wanted men in charge of the freight crew. WinCo maintained that Mayes was terminated for theft of the cake, which constituted gross misconduct, and, on that basis, she was denied benefits to continue her health care coverage for herself and her dependents. Mayes initated an action by filing a complaint alleging gender discrimination claims under Title VII, 42 U.S.C. § 2000e-1. Mayes sought compensatory, statutory and punitive damages, as well as costs and attorneys’ fees. A United States District Court judge in Idaho granted WinCo Holdings’ motion, and dismissed her case. Because Mayes had established a prima facie case for summary judgment purposes, she enjoined presumption of unlawful discrimination, which WinCo could rebut only if it offered a legitimate, nondiscriminatory reason for the adverse employment action. If WinCo provided a legitimate reason, the burden then shifted back to Mayes to show that the reason given is a pretext. The court found WInCo had shown legitimate reason for Mayes’s termination. WinCo maintained that Mayes was terminated solely because of her theft and dishonesty. This reason is legitimate and non-discriminatory, and, therefore, the burden shifted back to Mayes to show pretext. To show pretext, Mayes needed to produce sufficiently specific and substantial evidence to raise a triable issue of fact as to whether reasons proffered by WinCo for her termination were a pretext for discrimination; that is, that the proffered reason was not the true reason for the employment decision. Mayes was unable to satisfy her burden by producing enough evidence to allow reasonable factfinder to conclude either (a) that the alleged reason for discharge was false, or (b) that the true reason for his discharge was a discriminatory one. Things must be different in Idaho. Mayes v. WinCo Holdings, Inc.Case No. 4:12-CV-00307 (U.S.D. Ida. April 23, 2014).
6. NUMBER OF POLICE OFFICERS KILLED ON JOB UP 40% OVER LAST YEAR: The recent Las Vegas shootings that left five dead, including two on-duty police officers, coincides with a nationwide increase of officers killed in 2014. A report from foxnews.com says that, according to the Nationwide Law Enforcement Memorial Foundation, 63 officers have died on the job this year, compared to 45 at the same time last year -- a 40% increase. Twenty-three of those deaths were due to firearm-related incidents, a 53% increase from the same time last year. Previously, the overall number of officer fatalities had been on a steady decline since 2011. The biggest challenge today is that if somebody is set on taking his own life, he is not afraid of taking another person's life.
7. DETROIT REACHES TENTATIVE PENSION AGREEMENT WITH UNION: Marketwatch.com reports that Detroit has reached a tentative agreement with its largest union to cut pensions by 4.5% rather than the 27% cuts proposed by the city's bankruptcy reorganization plan. The city and the American Federation of State County and Municipal Employees Council 25 jointly announced the agreement. If the deal clears a vote by union members and is approved by the state, it would help circumvent pension issues that posed the greatest obstacle on Detroit's bankruptcy, the largest municipal bankruptcy case in U.S. history. It would also set a precedent of struggling cities reducing pension obligations in the face of opposition by unions. If the union votes no, private and state funding to help buttress the pension system would disappear, meaning cuts could potentially go more deeply. The tentative agreement is result of months of bargaining, was made possible by more than $800 million in contributions from the state, private foundations, the Big Three automakers and fundraising by the Detroit Institute of Art.
8. N.J. GOVERNOR NOT THE ONLY ONE TO STEAL WORKER PENSIONS TO BALANCE BUDGET: In 2011, Gov. Chris Christie and the New Jersey legislature passed a law raising retirement ages and increasing the amount some state employees would contribute to their pension fund, which was underfunded after years of the state failing to make its full contributions. The 2011 law also contractually obligated the state to make its contributions, according to m.dailykos.com. But, here, in 2014, Christie is using money that was supposed to go to the pension fund to balance his budget. A long list of unions is suing to block Christie's plan (See C & C Newsletter for June 12, 2014, Items 2 and 3). But while Christie is a particularly odious assailant of public workers, he is not alone in robbing them of their pensions. In what may be a trend, states that long underfunded their pensions are now targeting the workers who have paid into those pensions or accepted lower salaries in exchange for the deferred pay of a safe pension. And even if a state has made cuts or demanded increased contributions from workers in the past few years, that does not mean the state will keep up its end of the new, worse-for-workers bargain. Take Pennsylvania. Like New Jersey, Pennsylvania's public pension system was underfunded because the state and local governments had not been putting in their share, followed by the stock market crash. In 2010, the state passed pension reform, lowering benefits for new employees and calling for increased contributions from state and local governments. Nevertheless, Pennsylvania’s new budget proposal calls for deferral of $300 million in pension payments at the state and local level next year. Although the deferments will add to the state’s long term pension costs -- already exceeding $47 billion and set to grow as high as $65 billion within a few years -- the administration promised to offset additional costs with changes to benefits for new employees. Then there is Virginia. In 2010, state worker pension contributions were increased. But the state continued not paying its full share of pension contributions, and 2012 brought more pension "reforms," which were taken out of the backs of workers. For decades, workers have taken state and local government jobs knowing that they were making a trade-off: lower wages than they might make otherwise, but long-term stability including retirement security. Now that bargain is increasingly being broken. The new way of doing things is that workers make their full required contributions, but their employers do not do the same. Then workers are called on to make greater contributions or see benefits cut, with the promise that this time, their employers will really pay their full contributions, and maybe even start catching up on their failures of the past. And then that promise is broken, and governments once again rob teachers, librarians, police officers and firefighters of their pensions in order to balance budgets. It is just one more part of the upward shift of income and wealth in the United States, and intentional chipping away at the American middle class. Bye, bye, Miss American Pie.
9. ANNUAL REPORT ON NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS: As required by the Credit Rating Agency Reform Act of 2006, in December 2013 the U.S. Securities and Exchange Commission issued its Annual Report on Nationally Recognized Statistical Rating Organizations. Among other things, the Rating Agency Act establish self-executing requirements on Nationally Recognized Statistical Rating Organizations (“NRSROs”), and provide the Commission with the authority to implement a registration and oversight program for NRSROs. The subject report relates generally to the period of June 26, 2012 to June 25, 2013. Incredibly, there are only ten credit rating agencies registered as NRSROs. Even more incredibly, the largest seven in terms of number of ratings are (predictably) S&P (45.6%), Moody’s (36.9%) and Fitch (14.0%). The total is 96.5%, meaning that the other seven “nationally known” NRSROs have a total of 3.5%! Current rating agencies operate under one of two business models, and there are potential conflicts of interest inherit in both. Most NRSROs, including the largest ones, operate under the “issuer-pay” model, which is subject to a potential conflict in that the credit rating agency may be influenced to determine more favorable ratings than warranted in order to retain the obligors or issuers as clients. This conflict could theoretically affect an entire asset class if, for example, an NRSRO becomes known for issuing higher credit ratings with respect to such class, resulting in that NRSRO’s retaining or attracting business from most or all issuers of securities in such class. The other business model is the “subscriber-pay” model, which means investors pay the rating agency a subscription fee to access its ratings. This model is also subject to potential conflicts of interest, albeit perhaps to a lesser degree. For example, the NRSRO may be aware that an influential subscriber holds a securities position that could be advantaged if a credit rating upgrade or downgrade causes the market value of the security to increase or decrease; or that the subscriber invests in newly issued bonds and would obtain higher yields if the bonds were to have lower ratings. Potential for conflicts of interest involving an NRSRO may be particularly acute in structured finance products, where issuers are created and operated by a relatively concentrated group of sponsors, underwriters and managers, and rating fees are particularly lucrative.
10. TOP TEN PRODUCTIVITY KILLERS AT WORK: New research from CareerBuilder identifies behaviors that employers say are the biggest productivity killers in the workplace:
- Cell phone/texting – 50% [only half?]
- Gossip – 42%
- The Internet – 39%
- Social media – 38%
- Snack breaks or smoke breaks – 27%
- Noisy co-workers – 24%
- Meetings – 23%
- Email – 23%
- Co-workers dropping by – 23%
- Co-workers putting calls on speaker phone – 10%
Employers also shared real life examples of some of the more unusual things they’ve seen employees doing when they should have been busy working:
- Employee was blowing bubbles in sub-zero weather to see if the bubbles would freeze and break.
- A married employee was looking at a dating web site, then denied it while it was still up on his computer screen.
- Employee was caring for her pet bird that she had smuggled into work.
- Employee was shaving her legs in the women’s restroom.
- Employee was laying under boxes to scare people.
- Employees were having a wrestling match.
- Employee was taking selfies in the bathroom.
- Employee was warming her bare feet under the bathroom hand dryer.
11. FPPTA 30TH ANNUAL CONFERENCE: The Florida Public Pension Trustees Association’s 30th Annual Conference will take place on June 29 – July 2, 2014 at the Hilton Bonnet Creek, Orlando. A link on FPPTA’s web site, www.fppta.org, will take you to the Hilton Bonnet Creek site to make your room reservations. You may access information and updates about the Conference at FPPTA’s website. All police officer and firefighter plan participants, board of trustee members, plan sponsors and anyone interested in the administration and operation of the Chapters 175 and 185 pension plans should take advantage of this Conference.
12. WHY TEACHERS DRINK: Q. What are steroids? A. Things for keeping carpets still on the stairs.
13. TODAY IN HISTORY: In 1973, “Rocky Horror Picture Show” stage production opens in London.
14. KEEP THOSE CARDS AND LETTERS COMING: Several readers regularly supply us with suggestions or tips for newsletter items. Please feel free to send us or point us to matters you think would be of interest to our readers. Subject to editorial discretion, we may print them. Rest assured that we will not publish any names as referring sources.
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