Cypen & Cypen
JULY 16, 2009
Stephen H. Cypen, Esq., Editor
1. COURT UPHOLDS PROHIBITION ON TROOPERS PRACTICING LAW:
The New Jersey Department of Law and Public Safety enacted a new ethics code that prohibits private practice of law by members of the New Jersey State Police. The troopers’ collective bargaining agents brought an action on behalf of several officers, all of whom are licensed attorneys in the State of New Jersey, to enjoin the State’s enforcement of the new ethics code. The challenge was based on violations of (1) the Fourteenth Amendment Equal Protection Clause; (2) the Fourteenth Amendment Due Process Clause, specifically the troopers’ liberty and property interests; (3) Due Process and Equal Protection provisions of the New Jersey Constitution; and (4) Article I, Section 10 of the United States Constitution, which prohibits the state from impairing existing contractual obligations. The state filed a motion to dismiss, which a United States District Judge granted. Among other things, if the troopers were to prevail, state agencies would be precluded from holding their public employees, specifically attorneys, to a higher ethical standard than those imposed on private attorneys, regardless of contents of the regulation. The New Jersey Supreme Court has clearly rejected such a rigid, formalistic approach to separation of power disputes, instead, requiring that the government advance some legitimate purpose for its actions. Because the state has again advanced an interest in preserving the public trust, the court found that the revised code is not an improper infringement upon the New Jersey Supreme Court’s plenary authority to govern practice of law in the state. State Troopers Non-Commissioned Officers Association of New Jersey v. State of New Jersey, Case No. 3:08-cv-5326 (D. NJ, July 8, 2009).
2. BROKERAGE COMMISSIONS COULD SHRINK:
Greenwich Associates reports that U.S. institutional investors have revealed key U.S. equity market trends. The pool of commission dollars earned by brokerage firms on institutional trades of U.S. equities is expected to contract by nearly 25% in 2009 -- a reduction that could prove problematic for sell-side firms and institutional investors alike. From 2008 to 2009, the amount of commissions paid by U.S. institutions to equity brokers on trades of domestic stocks grew 12%, to $13.7 Billion. However, sell-sides firms project a decline of 23% in overall U.S. equity commission revenues in calendar year 2009, with an even more severe 32% contraction expected in hedge fund commission payments. The end result is a fall in total domestic equity commissions back to 2007 levels. We would call it sharing the pain.
3. APPELLATE COURT UPHOLDS PUERTO RICO MANDATORY RETIREMENT FOR POLICE OFFICERS:
The Age Discrimination in Employment Act contains an exemption provision that allows state and local governments to set mandatory retirement ages for law enforcement officers and firefighters. The United States Court of Appeals for the First Circuit recently examined for the first time revised criteria for invoking that exemption, including a provision that conditions its use on the employer's compliance with fitness testing regulations that have yet to be promulgated by the Secretary of Health and Human Services. Appellants in the case were former Puerto Rico police officers who claimed that their forced retirement at age fifty-five, pursuant to Puerto Rican Law, violated ADEA and the Due Process Clause of the Fourteenth Amendment. The officers filed suit against the commonwealth, seeking declaratory and injunctive relief and damages. The district court dismissed all claims, concluding that Puerto Rico's mandatory retirement law was consistent with ADEA and that officers' terminations also conformed to constitutional requirements. On appeal, the lower court’s ruling was affirmed. The statute explicitly provides that states or their subdivisions may discharge a law enforcement officer or firefighter pursuant to a mandatory retirement plan that either was in effect on March 3, 1983 or was enacted after September 30, 1996. The only age-related limitation on the latter option is that the discharge occur no earlier than fifty-five. Nothing in the language of the provision even suggests that governments that had mandatory retirement laws in place as of March 3, 1983 could not enact new laws with lower retirement ages after September 30, 1996. The language of ADEA unambiguously requires testing as a pre-condition to mandatory retirement only for those employees who would be discharged after promulgation of the appropriate tests. The Court rejected an interpretation of “subterfuge” that would effectively nullify the exemption, because the exemption’s purpose is to allow termination of police officers and firefighters on the basis of age. The Due Process Clause of the Fourteenth Amendment was not violated by terminations without fitness testing or individualized hearings. Correa-Ruiz v. Fortuño, Case No. 06-2578 (U.S. 1st Cir., July 7, 2009). The case also contains a very handy chronology of events leading to an exemption under ADEA for mandatory retirement of firefighters and law enforcement officers, which we reproduce in the next item. Note, in Florida, all mandatory retirements are prohibited by Chapter 760, Part I, the Florida Civil Rights Act of 1992.
4. CHRONOLOGY OF EVENTS LEADING TO AN EXEMPTION UNDER ADEA FOR MANDATORY RETIREMENT OF FIREFIGHTERS AND LAW ENFORCEMENT OFFICERS:
As indicated in the above item, the First Circuit’s recent ruling contains the following Chronology of Events Leading to an Exemption Under ADEA for Mandatory Retirement of Firefighters and Law Enforcement Officers:
5. CITIES TO RECEIVE MONEY FOR FIGHTING HOMELESSNESS:
According to the Housing and Urban Development Department, numerous cities, counties and communities will receive stimulus money to combat homelessness. Here are the names and amounts for some of our clients among the 32 Florida cities participating: Fort Lauderdale - $852,872.00; Gainesville - $567,404.00; Hialeah - $1,734,021.00; Hollywood - $625,671.00; Miami - $3,392,918.00; Miami Beach - $715,418.00; and North Miami - $507,641.00.
6. POLICE UNION IS NOT “STATE ACTOR”:
Expelled from their union after they reported alleged misconduct by the union president, Hallinan sued the Union for violations of his First and Fourteenth Amendment rights. The District Court found that Hallinan had failed to plead the state action necessary to maintain an action pursuant to Section 1983, and granted the union’s motion to dismiss. On appeal, the United States Court of Appeals for the Seventh Circuit affirmed. Despite its exclusive agency agreement with the city, unions are not state actors; they are private actors. Here it was the union, not the employer, that barred Hallinan from membership. Hallinan v. Fraternal Order of Police of Chicago Lodge No. 7, Case No. 06-3602 (U.S. 7th Cir., June 25, 2009). We relied upon Chuck Carlson’s summary for this one. (We note, with some curiosity, that this case was orally argued on April 30, 2007, more than two years before the court’s decision.)
7. MOST SPONSORS OF DB PLANS REMAIN COMMITTED TO PLAN VIABILITY:
While the financial crisis has negatively affected the financial health of many defined benefit plans, most executives of U.S. firms with DB plans remain committed to financial viability of their plans, according a study conducted by Towers Perrin. While cash and credit are generally scarce, the overwhelming majority of companies -- more than 80% -- say they are confident they will have the cash to meet plan funding requirements. Over 71% of respondents indicate they currently plan to pursue the long-term viability of their DB plans rather than seek alternatives to DB plan sponsorship. Of those committed to sticking with their DB plans, more than 76% say they are shifting their DB strategy to focus more on reducing risk than on seeking additional investment returns. Further, survey respondents who remain committed to DB plans are much more likely to be using structured investment products, such as derivatives, futures and inflation swaps, to manage better their exposure to interest rate risk or to increase investment returns. According to survey data, pensions that have used financial instruments to manage risk have suffered less during the economic downturn. Interestingly, while most DB plans have been hurt financially, 20% of executives say their plans have actually fared well despite the current financial crisis.
8. NEW JERSEY ADDS PLACEMENT AGENT REQUIREMENTS:
The New Jersey Division of Retirement will require that placement agents assisting in money manager selection meet new minimum standards, including disclosure of all fee arrangements. According to pionline, the Division’s investment policy committee preferred to adopt additional standards with respect to transparency in qualifications in lieu of outright ban on placement agents (see C&C Newsletter for April 30, 2009, Item 8, C&C Newsletter for May 14, 2009, Items 3 and 5 and C&C Newsletter for May 21, 2009, Item 11). Among the requirements, placement agents must be registered with an appropriate regulatory body (SEC, FINRA and state regulators), the agent firm’s executives should be licensed by state and federal regulators; and the agent’s supervisory personnel should have at least three years of experience in the securities industry.
9. PENSIONS BENEFIT TAXPAYERS:
Public pensions offer good value for taxpayers. In addition to providing modest but secure retirements for public employees -- emergency responders, firefighters, health care workers, teachers, police officers and more -- defined benefit pension plans help provide vital public services and stimulate the economy. The average annual benefit for a public worker, who has spent a career working for our communities at modest salary, is about $20,000, according to an opinion piece in USA Today. On average, taxpayers fund only 25% of the pension benefit; employee contributions and investments make up the rest. While a handful of public pension plans are experiencing funding shortfalls, most are working well. Employers should be required to make regular contributions, which would solve the problem of shortfalls and protect the system that works for employers, employees and taxpayers. Some proposals would only make matters worse. States that have experimented with the private accounts, for example, saw lower investment returns -- nearly a 50% reduction. Florida, Nebraska, North Dakota and West Virginia all tried private accounts, but they left taxpayers footing the bill. When private retirement investment plans fail, they leave retirees more reliant on governmental financial assistance, costing taxpayers more in the long run and hurting our communities. Public pensions create almost $360 Billion for the economic activity and 2.5 million jobs. Shifting to a private system would have a dramatic and detrimental impact on local economies because businesses depend upon the stimulus of investment income from public pension systems. In California, switching to a system of private accounts could cost citizens $7.6 Billion. Experimenting with a system of private accounts could put vital public services at risk and cost taxpayers significantly more for at least ten to fifteen years. All Americans should have retirement benefits that they can count on, not to gamble with private types of 401(k) plans run by the same Wall Street bankers who drove our economy into the ditch. Pensions are proven and critical tools to provide public services, stimulate the economy, secure retirement for public employees and provide the best value for taxpayer dollars. Pensions work, so they should be preserved in order to create retirement security for everyone who works hard for a living. The author is President of American Federation of State, County and Municipal Employees.
10. TEN RULES FOR DELEGATION:
Smart Moves lists the following ten rules for delegation:
Now, to whom can we delegate editing this Newsletter?
11. ON DEVELOPMENT:
It is a rare self-improvement book that does not stress, “Set goals.” But, according to You, Inc., we often misunderstand goal-setting. The value does not come from just the goals. It comes from the thinking that went into the planning and the knowledge that comes out. Set goals with others and you learn. You learn what others value and learn more about them and that helps you make better and more informed decisions every day. In business, the same regularly proves true. Goals and strategies change early and often. That we ignore these plans does not matter. What matters is what happened as you made the plan: Everyone learned.
If you gathered 100 experienced managers and asked for their advice, here is what The Manager’s Intelligence Report says you might hear:
Why do we print this stuff? I don’t know.
13. FIVE MORE LESSONS ON LIFE BY REGINA BRETT:
14. DISORDER IN THE AMERICAN COURTS:
15. CREATIVE PUNS FOR “EDUCATED MINDS”:
Two hats were hanging on a hat rack in the hallway. One hat said to the other, “You stay here; I'll go on a head.”
16. QUOTE OF THE WEEK:
“Once you can accept the universe as matter expanding into nothing that is something, wearing stripes with plaid comes easy.” Albert Einstein (One of the best quotes ... ever.)
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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.