Cypen & Cypen  
Home Attorney Profiles Clients Resource Links Newsletters navigation
777 Arthur Godfrey Road
Suite 320
Miami Beach, Florida 33140

Telephone 305.532.3200
Telecopier 305.535.0050

Click here for a
free subscription
to our newsletter


Cypen & Cypen
SEPTEMBER 11, 2008

Stephen H. Cypen, Esq., Editor


Today we remember those individuals, including hundreds of firefighters and police officers, who lost their lives in the terrorist attacks on September 11, 2001. Mere words are inadequate to express our sympathies to the families of the innocent people who were killed and to the brave individuals who lost their lives trying to save others. America will never forget its true heroes.


Institutional investors have once again topped their previous record ownership levels in the largest 1,000 U.S. corporations, according to The Conference Board. Data on institutional investor ownership in the largest 1,000 U.S. corporations show that institutions have substantially and consistently increased their holdings from 1987 with an average of 46.6% of total stock to an average 61.4% of total stock by 2000, and then rising to an unprecedented 76.4% of corporations by year-end 2007. Concentration of ownership also tops all previous data when measured by numbers of companies that have the largest institutional ownership. For example, in 1985, no company had institutional ownership of 60% or above; by 2007, 17 companies had institutional ownership of 60% or above, including six with institutional ownership of 70% or above. Latest available year-end 2006 data show that total institutional investors -- defined as pension boards, investment companies, insurance companies, banks and foundations -- controlled assets totaling $27.1 Trillion, up from $24 Trillion in 2005. Their 2006 level represents a ten-fold increase from $2.7 Trillion in 1980. The equity market value of total institutional equity holdings increased from $571.2 Billion in 1980 (37.2% of total U.S. equity markets) to $12.9 Trillion (66.3% of total U.S. equity markets) in 2006. Pension funds continue to account for the largest block of institutional investor assets, with $10.4 Trillion, or 38.3% of total 2006 assets under management. Within the pension fund category, state and local pension funds -- which tend to be the most activist in terms of exerting corporate governance pressures on companies -- have grown more rapidly than other types of pension funds, such as corporate pension funds. Moreover, these state and local pension funds have also been growing more rapidly in the amount of assets they allocate to equities from bonds and other types of investments. For example, public pension funds have increased their share of equity markets from 2.9% in 1980 to 10% in 2006. By comparison, corporate funds represent a smaller share of equity markets in 2006 than they did in 1980, as their share declined from 15.1% to 13.6%. Historically, U.S. pension funds put very little of their assets into international equities. This amount grew, however, and the largest 25 internationally invested U.S. pension funds put a total of 18.0% of their 1999 assets into international equities. By 2005, this amount had declined to 13.5% of assets, although the number has risen to 15.3% for 2007. For the first time, the report tracks hedge fund investments generally and investments by pension funds into hedge funds. As of September 2007, some $1.8 Trillion in assets was estimated to have been managed by about 10,000 hedge funds worldwide. This amount represents an increase of 23.6% in hedge fund assets and 5.8% growth in the number of funds since 2006. Of these funds, more than half are domiciled in the United States. Pension funds have been increasing investments they make in hedge funds during the last three years. The report shows the largest 200 U.S. employee retirement plans with defined benefit assets in hedge funds. The amounts invested in hedge funds by these pension funds rose from an insignificant amount in prior years to $29.9 Billion for the year ended September 30, 2005, to $50.5 Billion for the year ended September 30, 2006, and then to $76.3 Billion for the year ended September 30, 2007. Nevertheless, this amount represents a fairly small percentage of total assets for these pension funds -- 0.7% in 2005, 1.0% in 2006 and 1.4% in 2007. Thus, while increasing rapidly, hedge fund investments remain a small portion of the total defined benefit plan assets invested by these pension funds. According to its website, The Conference Board is the world’s preeminent business membership and research organization. Best known for the Consumer Confidence Index and the Leading Economic Indicators, The Conference Board has, for over ninety years, equipped the world’s leading corporations with practical knowledge through issues-oriented research and senior executive peer-to-peer meetings.


New Jersey Governor Jon Corzine’s sympathy with public-employee unions has led to his delay in signing a controversial pension and benefit reform bill long enough to give thousands of new teachers, as well as other new public employees, time to be eligible for bigger pensions. Corzine said he delayed the bill after the New Jersey Education Association asked for more time. The union said it needed time to notify teachers about the measure, passed in late June. At that time, the state’s powerful public-employee unions were furious that lawmakers were even considering pension and benefit reforms, according to The changes apply only to “new” workers. Inasmuch as most new teachers start in September, they will be subject to the older, more generous pension rules. Way to go, Guv.


A. The City of Margate is authorized by Section 112.0801(1), Florida Statutes, to offer retiring employees a one-time opportunity to participate in the city’s employee group health and life insurance program without allowing those retirees who subsequently reject participation in the city’s insurance program another opportunity to renew their participation in that program in the future. Section 112.0801, Florida Statutes, requires a public agency that provides life, health, accident, hospitalization or annuity insurance for its officers and employees through a group insurance plan or self-insurance plan to allow all former personnel who have retired, the option of continuing to participate in the group insurance or self-insurance plan. AGO 2008-41 (August 27, 2008).

B. A qualified interpreter may attend collegial body executive sessions (“shade meetings”) to interpret for hearing impaired board members of the Florida School for the Deaf and the Blind without violating the terms of Section 286.011(a), Florida Statutes. On its face, that statute limits attendance at such meetings to members of the governmental entity, the chief administrator or executive officer of the entity and its attorney. This question is the type we like to see, rather than questions that have previously been clearly answered. AGO 2008-42 (August 29, 2008).

C. Simultaneous service on the Florida New Motor Vehicle Arbitration Board (“Lemon Law Arbitrator”) pursuant to Section 681.1095(3), Florida Statutes, and service on the Board of Directors of the Workforce Florida, Inc., pursuant to Section 445.004, Florida Statutes, would violate Article II, Section 5(a) of the Florida Constitution, the prohibition against dual office-holding. For your information, Workforce Florida, Inc. designs and implements strategies to help Floridians enter, remain in and advance in the workplace, becoming more highly skilled and successful, benefitting these Floridians, Florida businesses and the entire state, and assists in developing the state’s business climate. AGO 2008-45 (August 28, 2008).


A million dollars may sound like a fortune, but the club is not so exclusive any more. According to SmartMoney, some ten million U.S. households have a net worth above $1 Million, excluding home equity. Moreover, a recent survey found that only 8% of millionaires feel “extremely” or “very” rich, while 19% do not feel rich at all. Indeed, while $1 Million was a tidy sum 30 years ago, you need $3.6 Million for the same buying power today. Half of all millionaires have a net worth of $2.5 Million or less. So what does it take to feel truly rich? Get ready for this one: the magic number is $23 Million! Now get back to work.


More than three-quarters of workers view paid sick days as a basic right of employment that should be guaranteed by the government, according to a survey reviewed in Employee Benefit News. About 77% of workers say having paid sick days is “very important,“ while 86% think that employers should be required by law to provide them. Likewise, 80% agree that part-time workers should receive sick days proportional to their working hours. Employees rank paid sick days on a par with the minimum wage, overtime pay and family and medical leave. They considered it more important than maximum hour limits and the right to join union. The support for paid sick days crosses political and demographic lines. More than 40% of private sector workers and 75% of low-wage workers lack paid sick days. A dozen states considered legislation requiring paid sick days this year, and the issue will be on the ballot in Milwaukee in November. (Just as we went to press, backers of an Ohio sick-leave initiative pulled the issue from November’s ballot. Opposition had grown in recent weeks when the Democratic governor said he would not support the measure.) Congress is considering the Healthy Families Act, which would provide seven paid sick days annually to workers in businesses with 15 or more employees. San Francisco and Washington, D.C. already have paid sick day laws in place. About 16% of workers say they, or a family member, have been fired, suspended, punished or threatened with being fired for taking time off due to personal illness or to care for a sick child or other relative. In addition, 68% of workers without paid sick days reported going to work with the flu or some other contagious illness, compared to 53% of workers who received paid sick days. Actually, providing paid sick leave may help employers avoid extra costs from illnesses spread at the workplace. That makes sense.


Salaries for state government professionals registered a modest 2.4% increase from 2007 to 2008, according to the Ninth Annual American Federation of Teachers and Public Employees Compensation Survey. The 2.4% increase, the average across the 45 occupations surveyed, was less than the inflation rate (4%) for the time period surveyed and significantly less than the previous year’s average increase of 5.7%. The increase was also lower than the increase in overall state spending for fiscal year 2008, estimated at 5.1%. Salary changes from 2007 to 2008 ranged from a low of -2.6% to a high of 5.8%. The highest-paying jobs were senior psychologists ($71,010) attorneys ($67,985) senior environmental engineers ($66,576) and senior economists ($65,804). The lowest-paying jobs were data-processing clerks ($26,801), correctional officers ($36,495), licensed practical nurses ($37,803) and family support specialists ($37,885). For the ninth consecutive year, the AFT study shows that salaries of most state-employed professionals trail those of their private sector peers. This year, private sector salaries exceed state employee salaries in 20 of the 24 job classifications in which comparisons were made. Across all 24 classifications, private sector salaries average 26% higher than those of state employees. The report also finds that, for the ninth consecutive year, collective bargaining is a key factor in reducing the private-public sector salary gap. For example, foresters in collective-bargaining states earn 18% more than their noncollective-bargaining counterparts, licensed practical nurses earn 15% more and economists earn 14% more. The study shows a collective-bargaining advantage in 42 of the 45 occupations surveyed; in 25 job classifications, the advantage is 10% or more. Despite the results of this survey, Florida state workers should not hold their breath.


Miami Police Chief John Timoney appealed from a Circuit Court order denying his motion to dismiss the City of Miami’s Civilian Investigative Panel’s investigation for lack of jurisdiction, and granting CIP’s petition to enforce a subpoena requiring him to testify before the panel and provide documents. In 2002, as authorized by a Charter amendment, the City of Miami passed an ordinance creating CIP; describing its purposes, powers and duties; explaining its procedures; and granting CIP subpoena power in order to conduct its activities consistent with applicable law. The purpose of CIP is to act as an independent civilian oversight of the sworn police department. CIP is charged with conducting investigations, inquiries and public hearings to make factual determinations, facilitate resolution and propose recommendations regarding allegations of misconduct by any sworn officer of the city police department. CIP received a written complaint alleging that Chief Timoney accepted a free Lexus and drove the car for approximately fifteen months in violation of local police regulations and state laws. CIP initiated an investigation into the complaint and served subpoenas upon Chief Timoney, requiring him to appear, produce documents and testify. When Chief Timoney declined, CIP filed a petition to enforce subpoenas in the Circuit Court, which granted CIP’s petition and directed Chief Timoney to comply with the subpoenas. Again, Chief Timoney declined, and moved to quash the subpoenas, alleging that he was not subject to CIP’s jurisdiction and that the documents CIP requested were not public records and therefore not subject to subpoena. Subsequently, Chief Timoney moved to dismiss the petition for lack of jurisdiction, claiming that CIP no longer had jurisdiction to investigate his alleged misconduct because CIP’s prescribed deadline of 120 days for completing an investigation had passed four days earlier. The Third District Court of Appeal affirmed:

A. Although the Chief of Police is exempt from an internal police investigation as set forth in Section 112.532, Florida Statutes, the “Police Officers’ Bill of Rights,” CIP’s authority extends to independent, external investigations, from which the Chief of Police is not exempt.

B. The fact that CIP is required to give the Chief of Police, among others, a written report of its findings, to which he is required to respond, does not evidence an intent to exclude the Chief of Police from CIP’s authority.

C. CIP has power to execute its investigations by requesting issuance of subpoenas, after consultation with the State Attorney and approval of CIP independent counsel, for purpose of obtaining evidence and witnesses and productions of books, papers and other evidence. CIP’s subpoena authority is not limited to public records.

D. CIP did not lose jurisdiction over the matter upon expiration of the 120-day limitations period provided in its enabling ordinance. The doctrine of equitable estoppel prevents Chief Timoney from profiting by his own purposeful delay or misconduct. Because Chief Timoney chose to rebuff or postpone CIP’s legal inquiries and directly caused delay of CIP’s investigation, he is barred by asserting expiration of the 120-day limitations period.

On the last point, considering Chief Timoney’s conduct, he is fortunate that the appellate court did not use much harsher language. Timoney v. City of Miami Civilian Investigative Panel, 33 Fla. L. Weekly D2095 (Fla. 3d DCA, September 3, 2008).


Dobos appealed from a trial court judgment denying her petition for writ of administrative mandate brought against Voluntary Plan Administrators, Inc. Long Term Disability and Survivor Benefit Plan and Los Angeles County. In her petition, Dobos challenged an administrative decision that upheld denial of her application for benefits under the long-term disability benefit plan provided by her former employer, the County. The trial court denied the petition on grounds that Dobos did not meet eligibility requirements of the plan because she was not employed by the County for the duration of a six-month qualifying period. The appellate court concluded that, based on the plain language of the County Code provisions setting forth terms and conditions of the plan, Dobos had to be employed by the County until end of the qualifying period to be eligible for long-term disability benefits. Because it was undisputed that Dobos’s employment with the County terminated before expiration of the qualifying period, she was not eligible for benefits under the County plan. Among other things, Dobos claimed that construing the County Code to require current employment with the County would create an illusory promise by granting the County unilateral power to discharge employees without preserving their vested disability benefits. She also argued that such interpretation would be contrary to public policy because it would allow an employer to discharge employees who are on disability-related leaves of absence in violation of both Family Medical Leave Act and California Family Rights Act. (Notably, however, Dobos did not contend that the County terminated her employment because she took a disability leave or because she filed an application for long-term disability benefits. She simply asserted that such a scenario could exist for other disabled employees.) Dobos’s argument was unavailing. To begin with, a County employee does not become entitled to long-term disability benefits until she completes six-month qualifying period and satisfies the other requirements for eligibility. Thus, the County’s decision to discharge an employee who has not yet met eligibility criteria for reasons unrelated to her application for benefits does not deprive the employee of right to any vested disability benefits. Moreover, the requirement that an applicant for benefits be employed by the County at end of the qualifying period does not give the County free reign to discharge disabled employees in violation of state and federal law. The County’s plan simply requires that a disabled employee be employed by the County at end of the qualifying period to be eligible for long-term disability benefits. It does not in any manner exempt the County from compliance with applicable state and federal laws protecting rights of disabled employees. Dobos v. Voluntary Plan Administrators, Inc., Case No. B199870 (Cal. App. 2d, September 3, 2008).


The Securities and Exchange Commission voted to publish for comment a proposed road map that could lead to use of International Financial Reporting Standards by U.S. issuers beginning in 2014. Currently, U.S. issuers use U.S. Generally Accepted Accounting Principles. The Commission would make a decision in 2011 on whether adoption of IFRS is in the public interest and would benefit investors. The proposed multi-year plan sets out several milestones that, if achieved, could lead to use of IFRS by U.S. issuers in their filings with the Commission. Increasing integration of the world’s capital markets, which has resulted in two-thirds of U.S. investors owing securities issued by foreign companies that report their financial information using IFRS, has made establishment of a single set of high quality accounting standards a matter of growing importance. A common accounting language around the world could give investors greater comparability and greater confidence in the transparency of financial reporting worldwide. Today, more than 100 countries around the world, including all of Europe, currently require or permit IFRS reporting. Approximately 85 of those countries require IFRS reporting for all domestic, listed companies. (Our understanding is that IFRS prohibits, or at least frowns upon, asset smoothing of any kind.) We see a bad moon a-rising. SEC Release 2008-184 (August 27, 2008).


PRNewswire reports that employers believe changes to current pension accounting standards are necessary, but most are not in favor of changes proposed by International Accounting Standards Board’s preliminary views paper. With last week’s Securities and Exchange Commission’s vote to move the United States toward international accounting rules (see Item 10 above), the proposed changes could have a significant impact on U.S. employers’ financial statements. A recent survey shows that most respondents said change is needed in several key areas of pension accounting. The improvements to requirements for measurement of cash balance and similar pension plans are viewed as most necessary, with 8 in 10 employers desiring change in this area. A narrower majority (56%) agrees that pension accounting should change by removing options to defer recognition of plan gains and losses. Eighty percent of respondents, however, do not support the suggestion to recognize all plan experience immediately in the profit and loss account, one of three IFRS options in this area. We see trouble on the way.


A 2000 United States Supreme Court case held that a plaintiff can successfully state a class-of-one claim by alleging that it was intentionally treated differently from others similarly situated and that there is no rational basis for the difference in treatment. The Supreme Court revisited the class-of-one theory this year, in a case where a state employee alleged she had been effectively laid off for arbitrary, vindictive and malicious reasons. The 2008 Court began by setting forth the long held view that there is a crucial difference, with respect to constitutional analysis, between government exercising the power to regulate or license, as lawmaker, and government acting as proprietor, to manage its internal operation. The Court explained that government’s interest in achieving its goals as effectively and efficiently as possible is elevated from relatively subordinate interest when it acts as sovereign to a significant one when it acts as employer. Therefore, government has significantly greater leeway in its dealings with citizen employees than it does when it brings its sovereign power to bear on citizens at large. To treat like employees differently is not to violate the equal protection clause; rather, it is an accepted consequence of the broad discretion that typically characterizes the employer-employee relationship. As a result, the class-of-one theory of equal protection has no application in the public employment context. In a recent case, a contractor brought suit against Georgia Department of Transportation asserting that GDOT intentionally treated it differently without rational basis by authorizing invalid testing procedures that were not performed on others. The federal trial judge, relying upon the 2000 United States Supreme Court decision, partially denied GDOT’s motion for judgment on the pleadings, finding that GDOT was not sheltered from liability by its defense of qualified immunity with respect to the contractor’s class-of-one equal protection claim. In reversing, on appeal, the Eleventh Circuit had little trouble applying the reasoning of the 2008 U.S. Supreme Court case, directed at the government-employee relationship, to circumstances involving a government-contractor relationship. The government needs to be free to terminate both employees and contractors for poor performance, to improve efficiency, efficacy and responsiveness of service to the public, and to prevent appearance of corruption. Absent contractual, statutory or constitutional restriction, government is entitled to terminate employees and contractors for no reason at all. Douglas Asphalt Co. v. Qore, Inc., Case No. 07-14849 (U.S. 11th Cir., September 2, 2008).


City that has been and likely will continue to incur fiscal deficits, that is authorized under state law to file for bankruptcy and that has negotiated unsuccessfully with its union and with the bank that serves as credit enhancer of its bond obligations is entitled to seek Chapter 9 protection under a Pendency Plan that caps at 6% debt service it will pay on its municipal debt obligations. Adverse economic conditions have negatively impacted city’s primary revenue sources: property taxes, sales taxes, assessments and fees. Achieving solvency will require, among other things, serious consideration of economic concessions from the city’s labor groups. Our thanks to Chuck Carlson, who digested the entire 52-page opinion. In Re: City of Vallejo, California, Case No. 08-26813-A-9 (Bankr. E.D. Cal., September 5, 2008).


Be careful reading the fine print. There's no way you're going to like it.


“The biggest argument against democracy is a five-minute discussion with the average voter.” Winston Churchill (Boy, is this one ever timely!)

Copyright, 1996-2009, all rights reserved.

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.

Site Directory:
Home // Attorney Profiles // Clients // Resource Links // Newsletters