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
info@cypen.com

Click here for a
free subscription
to our newsletter

Miami

Cypen & Cypen
NEWSLETTER
for
NOVEMBER 12, 2009

Stephen H. Cypen, Esq., Editor

1.            FRS CLASSIFICATION AS “SPECIAL RISK” NOT NECESSARY TO INVOKE HEART/LUNG PRESUMPTION... REALLY:  On October 8, 2009 the Florida First District Court of Appeal issued an opinion holding that Florida Retirement System classification as “special risk” is not necessary to invoke the heart/lung presumption in Section 112.18(1), Florida Statutes.  However, almost immediately thereafter the Court ordered the opinion withdrawn (see C&C Newsletter for October 15, 2009, Item 2).  Now, the Court has released its opinion, correcting some apparent factual inaccuracies, but coming to the same conclusion.  An analysis of the more recent opinion follows. 

Crystal sought review of an order from the State Retirement Commission, which oversees the Florida Retirement System, denying his claim for disability retirement.  He claimed that his total and permanent disability due to hypertension was presumed to be by accident suffered in-line-of-duty under Section 112.18(1), Florida Statutes.  Crystal began employment with the Department of Corrections as an inspector.  He then transferred to a correctional institution as a classification officer.  With less than three years of total credited service, Crystal applied for in-line-of-duty disability benefits.  (Under FRS, a member who becomes totally and permanently disabled in line of duty can receive disability benefits regardless of years of service.)  Crystal relied upon the presumption in Section 112.18(1), Florida Statutes, to support the argument that his hypertension was in line of duty and would entitle him to disability benefits regardless of years of service.  That section provides, in pertinent part:

Any condition or impairment of health of any Florida state, municipal, county, port authority, special tax district, or fire control district firefighter or any law enforcement officer or correctional officer as defined in s. 943.10(1), (2), or (3) 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 the line of duty unless the contrary be shown by competent evidence.

In turn, Section 943.10(2), Florida Statutes, defines correctional officer as:  

any person who is appointed or employed full time by the state or any political subdivision thereof, or by any private entity which has contracted with the state or county, and whose primary responsibility is the supervision, protection, care, custody and control, or investigation, of inmates within a correctional institution; however, the term “correctional officer” does not include any secretarial, clerical, or professionally trained personnel.

As the sole reason for denying Crystal’s disability claim, the Retirement Commission found that his position as classification officer was not a special risk position under the Florida Retirement System, so he could not claim the statutory presumption under Section 112.18(1), Florida Statutes.  On review by the Florida District Court of Appeal, the court reversed.  Section 112.18(1), Florida Statutes, only refers to Section 943.10(2), Florida Statutes, not any other statute, for the definition of correctional officer.  Nowhere in Section 943.10(2), Florida Statutes, is “special risk” mentioned.  Neither Section 112.18(1), Florida Statutes, nor Section 943.10(2), Florida Statutes, distinguish between regular and special risk classes.  It was undisputed that the primary responsibility of a classification officer was supervision, protection and custody of inmates, as well as investigation of inmate activities and inmate disciplinary actions.  Clearly, the position of “classification officer” fits the definition of “correctional officer” in Section 943.10(2), Florida Statutes.  The Court directed the Retirement Commission, on remand, to enter an order awarding disability benefits to Crystal.  The statutes look crystal clear to us, too.  Crystal v. State of Florida, Department of Management Services, Division of Retirement, 34 Fla. L. Weekly D2272 (1st DCA, November 5, 2009). 

 2.            WHERE PRIVATE PLAN IS SUBSTANTIALLY OVER- FUNDED, PARTICIPANTS SUFFERED NO INJURY FROM ALLEGED ERISA VIOLATIONS:   McCullough, participant in a defined benefit pension plan sponsored and administered by AEGON USA, Inc., brought suit under Employee Retirement Income Security Act of 1974 alleging that various plan fiduciaries had breached their fiduciary duties to the plan and engaged in prohibited transactions in violation of ERISA.  The federal district court granted summary judgment for AEGON.  On appeal, the Eighth Circuit affirmed.  McCullough had alleged that AEGON caused the plan to invest in funds offered by AEGON subsidiaries/affiliates, and to purchase products and services from such subsidiaries/affiliates, resulting in payment of fees that were higher than the norm.  He also alleged that such conduct violated ERISA, which prohibits certain transactions between the plan and fiduciaries and between the plan and parties in interest.  He sought a refund to the plan of all fees paid to AEGON subsidiaries and affiliates by the plan, including disgorgement of profits, as well as equitable restitution and other appropriate equitable monetary relief.  The parties agreed that at the time McCullough filed his complaint, and at all times relevant thereafter, the plan was substantially overfunded.  The parties also stipulated that the plan had never failed to pay benefits owed to participants or beneficiaries, and that AEGON had no intention to terminate the plan.  The court of appeals held that its own binding circuit precedent did not permit a participant in a defined benefit plan to bring suit claiming liability under ERISA for alleged breaches of fiduciary duties when the plan was overfunded.  McCullough v. AEGON USA, Inc., Case No. 08-1952 (U.S. 8th Cir., November 3, 2009). 

 3.            BOSTON FIREFIGHTER-BODYBUILDER-RUNNER-FAKER ARRESTED:  Federal authorities have charged former Boston firefighter Albert Arroyo, 47, with faking career-ending injuries, the Boston Globe reports.  A while back, we did some stories on this scofflaw (see C&C Newsletter for July 31, 2008, Item 8; C&C Newsletter for August 14, 2008, Item 2; C&C Newsletter for August 28, 2008, Item 3 and C&C Newsletter for September 4, 2008, Item 3).  Remember that Arroyo had competed as a body builder just a few weeks after telling the fire department that he had suffered a severe back injury by slipping at a neighborhood fire house.  If convicted, Arroyo faces up to 20 years in prison and a fine of up to $250,000 on each of two counts of mail fraud.  Also charged were a 39-year veteran deputy chief (six counts of mail fraud) and a young clerk (one count of perjury and obstruction of justice).  The former deputy chief faked a back injury; the clerk lied about whether firefighters asked her to extend their tax-free injury pay by delaying processing of their applications for accidental disability retirement.  Incidentally, both firefighters were recommended for disability retirement by the same physician, a Dorchester neurologist.  This same doctor had evaluated 25 other firefighters whose injuries he determined to be so severe that the city should award them accidental disability pensions (see C&C Newsletter for August 28, 2008, Item 3).  Incredible. 

 4.            N.Y. LAWYER SETTLES PENSION PROBE:  A New York private practitioner whose claims in government legal bills to have worked more than 1,200 days in a single year led to a massive probe of state pensions being paid to attorneys, has agreed to give up his own benefits.  Lawrence Reich, according to ABA Journal, will no longer receive the $62,000 annual pension or lifetime health coverage he was awarded as a result of being simultaneously reported as a full-time employee of five school districts.  Reich, 69, will also pay over $240,000 to the state attorney general's office.  The settlement is the latest in a series of settlements by New York attorneys accused of being incorrectly listed as employees of school districts and other government entities while in private practice in order to qualify for state pensions and other benefits.  After working for the state department of education for more than a decade, Reich went into private practice, specializing in education law.  However, at the same time his law firm collected millions of dollars by representing school districts, Reich was simultaneously reported to be a full-time employee of five of them.  In 2000, he was credited with 1,271 days of work.  Let’s face it, Folks, 99% of lawyers give the rest of us a bad name. 

 5.            TRANSITION MANAGER VIEWPOINT:  A transition manager has released the latest in a series of “research papers” pertaining to broker selection and oversight to help in making better trading decisions.  Last year’s liquidity crisis caused great turmoil in the equity markets worldwide.  A few full-service brokers were taken down in the undertow so quickly that it shocked the industry to its foundation.  The surviving bulge-bracket firms felt the one-two punch of diving equity markets that coincided with a collapse in their mortgage and derivative portfolios.  These circumstances have forced a wholesale re-evaluation by investors with regard to their brokers’ business models and order routing assumptions.  After a survey of the current liquidity and trading landscape, this research paper focuses on four areas that have greatly affected demand for broker selection and oversight: Number and type of Broker Relationships; Reduction in Client Service; New Routing Opportunities; and The Power of Transparency.  One firm’s opinion. 

 6.            PA BUILDER TO PAY $200,000 FOR SEX DISCRIMINATION AND RETALIATION:  A Pennsylvania utility contractor has agreed to pay $200,000 and furnish significant remedial relief to settle a federal sex discrimination and retaliation suit filed by the U.S. Equal Employment Opportunity Commission.  The lawsuit, filed in July 2008, alleged that Danella Construction Corporation of Pennsylvania refused to allow Lisa Drozdowski to apply for a laborer position because of her sex.  Drozdowski worked as a flagger and assisted the crew by performing laborer duties.  EEOC charged that, despite her good job performance, company supervisors repeatedly rejected her attempts to apply for a substantially higher-paying laborer position and even advised her that female employees cannot be laborers.  EEOC asserted that other female employees were not hired as laborers because of their sex, while the company hired male applicants with little or no experience as laborers.  The agency also charged that the company failed to provide portable restroom facilities at some work sites, which forced women to urinate outside in public.  The two-year consent decree will provide $150,000 in monetary relief to Drozdowski and $50,000 to four other class members.  The consent decree further  provides substantial equitable relief, including enjoining Danella from discriminating based on sex or retaliation and requiring Danella to make adequate portable toilets available for all its female employees.  Danella has offices located in ten states, including Florida.  Whether or not this settlement is a good one ... depends. 

  7.            A FORFEITURE PROVISION OF VOLUNTARY EMPLOYEE INCENTIVE COMPENSATION PLAN NOT VIOLATIVE OF STATE LABOR CODE:   In a class action against Citigroup by its former employees challenging its forfeiture provisions in a voluntary employee incentive compensation plan upon termination as violative of the state Labor Code, the judgment of the State Court of Appeals granting Citigroup’s motion for summary judgment was affirmed, as the company plans’ forfeiture provision did not run afoul of the state Labor Code because no earned wages remained unpaid upon termination for cause or resignation.  Citigroup offered a voluntary employee incentive compensation plan that provided employees with shares of restricted company stock at a reduced price in lieu of a portion of that employee's annual cash compensation.  Employees agreed that, should they resign or be terminated for cause before their restricted shares of stock vested, they would forfeit the stock and the portion of cash compensation they directed to be paid in the form of  restricted stock. In affirming, the Supreme Court of California concluded that because no earned, unpaid wages remained outstanding upon termination according to terms of the incentive plan, the forfeiture provision did not run afoul of the state Labor Code.  (Participating employees could elect to receive elect 5, 10, 15, 20 or 25 percent of their total compensation in form of restricted stock, the purchase price of which was discounted at a rate of 25 percent of its then-current market price, averaged over the five days preceding date of acquisition, to reflect impact of restrictions on value of the restricted stock, as well as possibility of forfeiture.)  Here, the broker voluntarily terminated his employment before his restricted stock fully vested.  By the terms of the plan, and by the broker's own concession, he was not entitled to those unvested shares of restricted stock. Having elected to receive some of his compensation in form of restricted stock, a transaction he was aware carried a risk as well as potential for reward, the broker cannot now assert that he should have been paid in cash that portion of his compensation he elected to receive as restricted stock.  The company persuasively argued that the broker's "bargained-for wages”' had been paid in full.  He received all of his promised cash compensation, received immediately exercisable voting and dividend rights in the restricted stock and was awarded contingent rights of full ownership in that stock.  The only thing that had not been paid is something he never earned -- fully vested company stock.  Therefore, the broker had no claim under the state Labor Code.  Schachter v. Citigroup, Inc., Case No. S161385 (Cal., November 2, 2009). 

 8.            CHANGE SOUGHT IN FRS OVERSIGHT:  A Florida state Senator  says the proposed anticorruption package he revealed earlier is more vital than ever in light of the Securities and Exchange Commission's investigation of possible fraud by the board that oversees the state pension fund.  The package would remove the attorney general from the State Board of Administration, which now consists of the governor, chief financial officer and attorney general.  The legislator says the attorney general should have more arm's length oversight that will lead to prosecuting wrongdoing, if needed.  The proposal would replace the attorney general with the commissioner of agriculture.   According to the Miami Herald, the federal investigation centers on whether state and three Wall Street firms misled the public about the risk and liquidity of some of the SBA's investments.  The investment fund holds more than $130 Billion, including retirement savings for more than 1 million Floridians.  The board also manages the Local Government Investment Pool for cities and counties throughout the state.  The CFO has been advocating for changes in the board since taking office, and more urgently over the past year as the pension fund fell to a low of $87 Billion amid questions over its management.  She wants to expand membership to add at least one person with financial expertise and one person who participates in the pension fund.  Also, under the CFO’s proposal, all trustees would get financial training and there would be regular external audits of the pension's management and performance.  A recent survey of other states' funds found that Florida is unique in its small governance structure, especially since it is one of the nation's largest pension funds.

 9.            FLORIDA TEACHERS LOSE CONTRACT SUIT:  The Broward County, Florida, school district did not breach employment contracts with a group of teachers forced to retire last year after being told they would have jobs this fall, a circuit judge recently ruled.  The Miami Herald reports that the Broward Teachers Union had filed a class action on behalf of teachers in June, after the school board, tightening its budgetary belt, changed its policy to prohibit most teacher retirement extensions -- but not before telling 32 teachers they would have jobs this school year.  Those teachers had received  letters early in the school year, saying they could delay their retirements one more year.  But after the school district grasped its budget woes, the teachers received letters rescinding the extensions.  Florida teachers, like other public officials, can delay their planned retirements in some school districts under the popular Deferred Retirement Option Program (DROP).  The court found that the school board did not vote on approvals for the one-year extensions. 

10.            GLITCH ZAPS RETIRED NEW YORK TEACHERS’ CHECKS:  Pension checks of tens of thousands of retired New York City teachers and school staff members were electronically canceled just days after they had been deposited, according to the New York Times.  City and union officials laid blame on the custodian bank, which handles electronic transfers for the Teachers Retirement System of the City of New York,  serving 178,000 current and former city educators.  The checks, totaling $185 Million, were part of the monthly pension payments made by New York City through the city comptroller’s office.  Many retirees depended on the money, and had already written checks or withdrawn the money.  In a rather obvious statement, a bank spokesman said the funds will be returned and participants will be compensated for any overdraft fees incurred.  If you are one of these unfortunate souls, the bank has set up a toll free number: 800.627.8000.  Apparently, not even automatic deposits are completely safe. 

11.            YOU COULD HAVE HEARD A PIN DROP:  At a time when our president and other politicians tend to apologize for our country`s prior actions, here`s a refresher on how some of our former patriots handled negative comments about our country.

John F. Kennedy's Secretary of State, Dean Rusk, was in France in the early 60's when President Charles de Gaulle decided to pull out of NATO.  He said he wanted all U.S. military out of France as soon as possible. 

Rusk responded "does that include those who are buried here?”  

President de Gaulle did not respond.

You could have heard a pin drop

12.            AN OLD FARMER’S ADVICE:  Every path has a few puddles. 

13.            IDIOSYNCRASIES OF OUR LANGUAGE:  Why is there an expiration date on sour cream? 

14.            QUOTE OF THE WEEK:  “Winning isn’t everything, but the will to prepare to win is everything.”  Vince Lombardi (And we always thought he said “Winning isn’t everything, it’s the only thing.”)

 

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