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Cypen & Cypen
NEWSLETTER
for
DECEMBER 16, 2010

Stephen H. Cypen, Esq., Editor

1.      FEDERAL JUDGE EVISCERATES OBAMACARE:   The Commonwealth of Virginia challenged constitutionality of the pivotal enforcement mechanism of the health care scheme adopted by Congress in the Patient Protection and Affordable Care Act:  Section 1501, commonly known as the Minimum Essential Coverage Provision.  That provision requires virtually every United States citizen to maintain a minimum level of health insurance coverage for each month beginning in 2014.  Failure to comply will result in a penalty included with the taxpayer’s annual return.  As enacted, Section 1501 is administered and enforced as part of the Internal Revenue Code.  The Commonwealth sought both declaratory and injunctive relief, specifically urging the Court to find that enactment of Section 1501 exceeded the power of Congress under the Commerce Clause and General Welfare Clause of the United States Constitution.  Alternatively, the Commonwealth contended that the provision is in direct conflict with the Virginia Health Care Freedom Act, thus implicating the Tenth Amendment.  Each party filed a motion for summary judgment.  The present procedural posture of the case was summarized as follows: 

While this case raises a host of complex constitutional issues, all seem to distill to the single question of whether or not Congress has the power to regulate—and tax—a citizen’s decision not to participate in interstate commerce.  Neither the U.S. Supreme Court nor any circuit court of appeals has squarely addressed this issue.  No reported case from any federal appellate court has extended the Commerce Clause or Tax Clause to include the regulation of a person’s decision not to purchase a product, notwithstanding its effect on interstate commerce. 

In a final analysis, the Court granted the Commonwealth’s motion for summary judgment and denied the government’s.  The Court went on to sever Section 1501 from the balance of the ACA and deny the Commonwealth’s request for injunctive relief.  (The award of declaratory judgment is sufficient to stay the hand of the government pending appellate review.)  Indeed, the Court specifically recognized that the final word will undoubtedly reside with a higher court.  In fact, other federal judges have thrown aside challenges to ACA.  Commonwealth of Virginia ex rel. Cuccinelli v. Sebelius, Case No. 3:10CV188-HEH (E.D. Va., December 13, 2010). 

2.      FLORIDA STATUTE THAT ALLOWS FOR DISCONTINUATION OF DISABILITY PENSION IF FIREFIGHTER CAN RENDER USEFUL AND EFFICIENT SERVICE ONLY SETS MINIMUM STANDARDS FOR TERMINATION OF PENSION, AND DOES NOT PROHIBIT CITY FROM IMPOSING ADDITIONAL LIMITATION:   Stubblefield was a City of Clearwater firefighter who suffered spinal cord injuries in line of duty.  Upon determination that he was permanently and totally disabled from further performance of his duties as a firefighter, the City of Clearwater Pension Advisory Committee granted a service–connected disability retirement.  About two years later, Stubblefield became employed as a deputy sheriff in Pasco County.  The PAC arranged for independent medical examination of petitioner, which determined that he continued to be totally disabled from performing his duties as a firefighter/medic, and noted that Stubblefield’s job as a deputy sheriff “apparently is rather light duty.”  However, the Pasco County Sheriff’s Office confirmed that Stubblefield was employed as full-time law enforcement deputy, but not in a light duty position.  Upon interview for position of certified law enforcement deputy with the Pasco County Sheriff’s Office, Stubblefield indicated that he had a prior neck injury but was recovered from that injury.  In addition, the physician who performed the pre-employment physical for deputy sheriff position found Stubblefield capable of performing essential functions of a law enforcement officer.   After a hearing conducted to determine whether Stubblefield continued to be disabled or whether his disability benefits should be recalled, the PAC determined that such benefits should be discontinued because Stubblefield had accepted employment with another employer in an occupation or line of work similar to the occupation or line of work that resulted in his being eligible for disability benefit from the City of Clearwater.  Stubblefield thereupon sought review via petition for writ of certiorari in the circuit court.  On such review, the court is limited to determining (1) whether procedural due process has been accorded, (2) whether the essential requirements of law have been observed and (3) whether the administrative findings and judgments are supported by competent substantial evidence.  Stubblefield first argued that the PAC’s decision to recall his service-connected disability retirement failed to comport with Section 175.191(2), Florida Statutes, which provides that a firefighter will be considered totally disabled if he is wholly prevented from rendering useful and efficient service as a firefighter and will be considered permanently disabled if he is likely to remain so disabled continuously and permanently.  Additionally, Section 175.191(7), Florida Statutes, provides if a board of trustees finds that a firefighter who is receiving disability income is no longer disabled, the board shall direct that the disability retirement be discontinued.  “Recovery from disability” means ability of a firefighter to render useful and efficient service as a firefighter.   Instead, the PAC applied the standard set forth in its code:  if an employee accepts employment with another employer in an occupation or line of work similar to the occupation or line of work that resulted in the employee being eligible for a disability benefit, he shall forfeit his disability benefit.  Stubblefield countered that because the city code conflicted with state law, state law governs, and the PAC should have applied the standard in Section 175.191, Florida Statutes.  Section 175.191(7), Florida Statutes, however, only sets a minimum standard for termination of disability benefits if a person may once again work as a firefighter; it does not prohibit additional limitations on disability benefits.  There is no state preemption that would prevent the City of Clearwater from enacting legislation concerning firefighter pensions.  Because the city code includes the minimal requirements for discontinuation of disability retirement income under Section 175.191(7), Florida Statutes, the PAC followed the essential requirements of law by recalling Stubblefield’s disability benefits in accordance with the city code.  At bottom, PAC determined that firefighter and deputy sheriff were similar, based upon the job descriptions and testimony that the occupations had similar physical requirements.  This evidence, coupled with medical records and medical testimony, constituted competent substantial evidence to support the PAC’s decision to discontinue Stubblefield’s disability benefits based on his employment in a line of work similar to firefighting.  Stubblefield v. City of Clearwater, Florida Pension Advisory Committee, Case No. 09-000044AP-88B (Fla. 6th Cir., October 29, 2010).   (Counsel for Stubblefield advises that he will seek further review in the District Court of Appeal.) 

3.      DEFINED BENEFIT PROGRAMS HELP EMPLOYERS ATTRACT AND RETAIN NEW WORKERS:    Retirement benefits, especially defined benefit programs, are giving employers an added advantage when it comes to attracting or retaining new employees according to a Towers Watson survey reported by Business Wire.  The survey found that 60% of new employees at employers with DB plans cited the retirement program as an important reason they chose to work for their current employer, a sharp increase from just 27% in 2009.  And nearly three-fourths of new employees said the retirement program is an important reason they will stay with their employer, up from 51% in 2009.  Conversely, just 20% of new employees with only a defined contribution plan said it played a role in their decision to work for their employer, up from 16% in 2009.  Meanwhile, one-fourth said the retirement program was an important reason to remain with their current employer, unchanged from 2009.  The percentage of younger workers (less than 40 years old) who cited their DB plans as an important reason to work for their current employer jumped by more than half, from 28% in 2009 to 43% this year.  On the other hand, corresponding figures for those with a DC-only plan declined, from 19% last year to 17% in 2010.  The survey also found that two-thirds of employees would like to continue working for their current employer until they retire, an increase from 56% in 2009.  However, DB plans are much more likely than DC plans to be an important factor in retention of employees.  Four of five workers at organizations with DB plans said they plan to continue working for their employer until they retire, compared with only 62% at companies with DC plans.  Younger employees at organizations with DB plans are also much more interested in remaining with their employer until retirement – increasing from 44% last year to 70% this year.  Employers, take heed. 

4.      ALTERNATIVE ASSETS SURVEY:   J.P. Morgan Asset Management has released results of its latest poll of institutional investors, entitled “Market Pulse:  Alternative Assets Survey.”  The goal was to test the hypothesis that after an initial “pause” and re-assessment of portfolio strategies following the depths of the recent financial crisis, investors are resuming their steady march from the traditional to the alternative.  This type of survey is designed to capture the changing perspectives, shifting allocations and developing portfolio management trends of investors as they continue their passage out of crisis, into recovery and beyond.  Conducted in March and April of this year, the survey asked investors to share where they are now, where the y are headed over the next 12 months and what their strategic investment objectives are over a two to three-year horizon, specifically as to alternative assets like hedge funds, private equity, real estate, infrastructure, commodities and other real assets.  Survey results confirm that overall, investors are carving out a broader role for alternatives within their portfolios, while trimming back traditional long-only equity allocations:

  • Nowhere is this trend toward alternatives more pronounced than among public pension plans, where alternative allocations are set to increase from 14% to 21% of assets over the next two to three years.
  • Corporate plans, driven by need to control volatility of funded status while enhancing returns, are increasing fixed income allocations (and their duration) and expanding alternatives (though at a slower rate than their public fund counterparts). 
  • While liquidity is a primary concern, the need for liquidity has also created opportunity; among those investing or planning to invest in private equity, almost 40% have invested or intend to invest in the secondary market. 
  • Investors have begun to adopt a more risk factor-based view of hedge funds within the portfolio context – treating them, not as a separate asset class, but rather as a less constrained, more actively managed and less liquid extension of their traditional debt and equity allocations. 

One caveat:  the survey was conducted when equity markets had rebounded, credit spreads had tightened considerably from their wides and real estate was poised to rebound.  Admittedly, recent developments in Greece and other Eurozone economies, disappointing U.S. employment results and May/June market declines have since shaken investors’ confidence to some degree.  How much, only subsequent surveys will tell. 

5.      CONGRESS EXEMPTS LAWYERS FROM “RED FLAGS RULE”:  Congress has enacted the Red Flag Program Clarification Act of 2010, exempting lawyers from the so-called Red Flags Rule (see C&C Newsletter for August 6, 2009, Item 1 and C&C Newsletter for September 3, 2009, Item 3).  If applied, the rule would have required lawyers to comply with the potentially onerous consumer-protection legislation intended to protect individuals from identity theft, which would have increased the cost of law office administration and legal services for clients.  Adopted by the Federal Trade Commission to enforce the Fair and Accurate Credit Transaction Act, the Red Flags Rule applies to creditors.  Although FTC contended lawyers and law firms are creditors because they extend credit by performing work now that will be billed later, Congress agreed that the statute was not so intended.  The American Bar Association successfully challenged the Red Flags Rule in federal court, apparently encouraging other professional organizations to do the same.  An appeal by the Federal Trade Commission of a district court’s ruling in ABA’s favor is now pending in the U.S. Court of Appeals for the District of Columbia Circuit, but that case is expected to be dismissed after the President signs the clarification bill into law. 

6.      “SHOP WITH A COP” SHOWS KIDS A DIFFERENT SIDE OF THE LAW:   The Jonesboro, Arkansas, Police Department recently gave even more to the community.  Kids with City Youth Ministries got to spend the morning hitting department stores with JPD officers, as reported by kait8.com.  "Shop with a Cop" has been happening for the past three years.  The Rotary Club provided a one hundred dollar gift card for each child to spend as he chose.  The event gave the children a chance to see a different side of law enforcement, and gave the officers a chance to spend time with them.  It sure beats that old program "Shoplift with a Crook.” 

7.      TEN WORST STATES FOR RETIREMENT:   Plenty of folks are aware of the best states for retirees.  But what are the 10 worst states in which to spend your golden years?  Well, according to chicagobreakingbusiness.com, people of Illinois, California, New York, Rhode Island, New Jersey, Ohio, Wisconsin, Massachusetts, Connecticut and Nevada probably already know the answer. This dubious distinction was earned because of three factors: fiscal health, taxation and climate.  Retirees and would-be retirees might want to avoid States in fiscal peril, because these locales might face decreasing services and increasing taxation.  Although the study focused mostly on the three criteria listed, the full list to consider when searching for a state in which to retire includes: topography, crime, recreation, transportation, health care, education, cultural resources, susceptibility to natural disasters, proximity to friends/family and fitting in socially/politically/religiously. 

8.      TEN MOST OBSCENE CITIES IN AMERICA:   To find the most obscene cities in America, businessinsider.com plugged the “seven dirty words you can never say on television” – made popular by George Carlin – into Google Trends.  Each city received a score for each of the seven words, receiving more points for being higher up on each list.  Here is the list: 

1.       Ashburn, Virginia (Huh?)
2.       Tampa
3.       Herndon, Virginia
4.       Rochester, New York
5.       Irvine, California
6.       Newark
7.       Philadelphia
8.       Louisville
9.       Pittsburgh
10.      Los Angeles

This list is the third of its kind.  Last year, another DC suburb, Herndon, Virginia, took the crown.  (What is it with Virginia?)  In 2008, Louisville was the most obscene city.  Frankly, my Dear, we don’t give a damn.   

9.      ONE FOR THE BIRDS:   A talking parrot provided what could be taken as chilling evidence in the case of a 60-year-old South Carolina woman charged with neglecting her 98-year-old mother, who was found on the verge of death suffering from severe bedsores.  The parrot was mimicking, “Help me.  Help me.”  Then he would laugh, according to abajournal.com.  Police think he was mimicking the mother when he said “Help me.  Help me,” and mimicking the daughter when he laughed.  The mother died after a short hospital stay.  The daughter has been charged with abuse and neglect, resulting in death of a vulnerable adult.  We are not making this stuff up, Folks. 

10.    REMARKABLE QUOTES FROM REMARKABLE JEWS:    I once wanted to become an atheist but I gave up. They have no holidays.  Henny Youngman 

11.    BLESSED ARE THE CRACKED, FOR THEY LET IN THE LIGHT:  My husband and I divorced over religious differences. He thought he was God and I didn't. 

12.    AGING JOKES:  I'm getting into swing dancing. Not on purpose. Some parts of my body are just prone to swinging. 

13.    FABULOUS RANDOM THOUGHTS:   Whenever I'm Facebook stalking someone and I find out that their profile is public I feel like a kid on Christmas morning who just got the Red Ryder BB gun that I always wanted.

14.    QUOTE OF THE WEEK:   “Talent is only the starting point.”  Irving Berlin

15.    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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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.


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