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

Telephone 305.532.3200
Telecopier 305.535.0050

Click here for a
free subscription
to our newsletter

Cypen building

June, 1999

Stephen H. Cypen, Esq., Editor

1. DIVISION OF RETIREMENT SCHEDULES RULE DEVELOPMENT WORKSHOP:The Division of Retirement has scheduled a Rule Development Workshop for Wednesday, June 16, 1999 at 10:00 A.M. in Room 317 Capitol, 402 South Monroe Street, Tallahassee, Florida. The Division is seeking public input regarding the promulgation of rules with respect to changes made in Chapters 175 and 185, Florida Statutes, by Chapter 99-1, Laws of Florida (see Special Supplement to C&C Newsletter dated March 15, 1999). The Agenda includes rule issues with respect to definitions of salary, Sections 175.032(3) and 185.02(4); Social Security and Workers' Compensation offsets, Sections 175.021(2) and 185.01(2); Benefit Caps, Sections 175.162(2) and 185.16(2); and Boards of Trustees, Sections 175.061 and 185.05. The workshop is being held pursuant to the provisions of Section 120.54, Florida Statutes, "Rulemaking Authority." A copy of the Agenda may be obtained from Patricia F. Shoemaker, Benefits Administrator, Division of Retirement, Municipal Police Officers' and Firefighters' Retirement Trust Fund Office, Post Office Box 3010, Tallahassee, Florida 32315-3010. Trish's telephone number is 850.922.0667.

2. IFEBP ARTICLE ON EVALUATING MONEY MANAGERS: The May 1999 Employee Benefits Digest, published by the International Foundation of Employee Benefit Plans, has a front-page article entitled "How to Evaluate Your Money Managers." A short conclusion: there are some actions trustees are legally required to take that have little or no impact on plan participants. The legal requirement that trustees prudently choose and monitor money managers, however, can have a profound impact on the amount of benefits plan participants will ultimately receive. Statistics show, in dollar terms, the magnitude of the difference in superior versus poor performance. The trustees' decision-making process is as important as the decision itself. Therefore, it is in both the trustees' and the plan participants' best interest that formal procedures concerning monitoring of managers' performance be put in place and strictly followed. The paper outlines one possible set of procedures. Other variations may be acceptable. The most important point is not which procedures trustees choose, but that they establish some procedures, put them in writing and then apply them uniformly to all managers.

3. "LEAD PLAINTIFFS" HARD TO FIND: A central purpose of the Private Securities Law Reform Act of 1995 was to encourage institutional investors to become "lead," or representative, plaintiffs in class actions under federal securities laws. Experts thought that this occurrence would transfer control of such actions from the "professional plaintiff" and his attorneys into the hands of a party with a large enough stake to monitor the case, control counsel fees and guard against collusive settlements. However, only one thing has become reasonably clear: with the exception of a few pension funds -- mainly in the public sector -- institutional investors have not asserted control over securities class actions by functioning as lead plaintiffs. The May 1999 Plan Sponsor contains an opinion piece entitled "Wanted: Sponsors to act as lead plaintiffs." Written by an attorney who handles class action suits, the article addresses institutional investors' favorite reasons for declining PSLRA's invitation, and debunks them. No. 1, "Litigation is Bad;" Rejoinder: litigation is a fact of commercial life and there is no logical reason why the largest stake holders should sit by passively. No. 2, "Too Busy;" Rejoinder: in a shareholder's suit, most of the work required of plaintiff is actually handled by lawyers. No. 3, "Bad Memories;" Rejoinder: pretending a bad investment was not made will not make the portfolio's returns any better, and if litigation is successful it can vindicate the initial investment decision by proving that the investor was misled, placing blame where it rightfully belongs -- on the issuer or underwriter. No. 4, "The Limelight Factor;" Rejoinder: there may be some benefit in being known as an institution that will not take fraud lying down or being known as trustees who look out for investments of their constituents. No. 5, "Privacy Concerns;" Rejoinder: with private plaintiffs, courts will often shield discovery depositions and documents from public scrutiny (In Florida, privacy is no issue, as the Florida Public Records Act makes most records of public agencies available to anyone.). No. 6, "Fear;" Rejoinder: professional investment is not for the faint of heart and few successful investing strategies are premised on fear. No. 7, "Biting the Hand that Feeds You;" Rejoinder: if issuers believe that disseminating misinformation may result in a lawsuit, they may be more careful about what they say, and the overall quality of information will improve. No. 8, "The Political Factor;" Rejoinder: there are some real frauds out there and there is nothing improper about trying to recover in those situations. No. 9, "Opting Out;" Rejoinder: in all but the largest loss situations, opting out probably means having to pay counsel by the hour and in a drawn-out suit can be more costly. In the same issue, an article entitled "Ducking Lead Plaintiff Status" also attempts to analyze why so few institutional investors have taken the lead. The article makes reference to the extremely successful State of Wisconsin Investment Board/CellStar class action settlement, which we reported on earlier this year (see C&C Newsletter for January, 1999, Item 11). Believing that pension boards are potentially missing the benefits afforded by PSLRA, we have recently sent notices advising of pending class actions in which they might want to consider seeking lead plaintiff status or actively participating.

"Apathy is becoming a major problem, but who cares?"

4. P&I SAYS DB PLANS NEED RESUSCITATION: In seeming-contradiction of a lead article in its March 22, 1999 issue (see C&C Newsletter for April, 1999, Item 1), Pensions & Investments says in an April 19, 1999 editorial that defined benefit plans are on life support and might need a miracle to be revived. Defined benefit plans have served the American worker well, and from at least 1920 until 1985 were the preferred form of pension. Defined benefit pensions are usually greater than can be purchased by employees from proceeds of defined contribution plans, unless employers have extraordinarily generous matching employer contributions or unusually-high investment returns. The reasons: (1) combined employer-employee contributions to a defined contribution plan generally are less than the employer contribution to a defined benefit plan and (2) the average employee will invest too conservatively to reap the highest investment return. Furthermore, many employees will borrow from their defined contribution plans, further reducing returns and hurting their ultimate pensions. So why do employees seem to favor defined contribution plans, even though they directly bear part of the cost? Because so much money and effort has been put into telling employees about defined contribution plans, they don't know enough about defined benefit plans to appreciate them.

5. FINDLAY WEIGHS IN ON SOCIAL SECURITY INVESTING DEBATE: Gary Findlay, Executive Director of the Missouri State Employees' Retirement System, has written a letter to Lawrence Summers, Deputy Secretary of the Treasury. Mr. Findlay wrote to Mr. Summers after hearing him testify in support of the proposal to invest some of Social Security's assets in stocks. Mr. Findlay was particularly disturbed by Mr. Summers's critical comments on alleged political interference in the investment management of public pension funds. Mr. Findlay: "Regarding state and local government investment policies and how those policies are implemented, I believe a review of the facts will reveal that, for the most part, public retirement funds are efficiently managed financial institutions with well-diversified portfolios that have achieved impressive rates of return. As you well know, and as the capital markets theory maintains, value can be added, without commensurate incremental risk, by tilting an equity portfolio slightly in favor of companies which are fundamentally sound but temporarily out of favor. I find it extremely disheartening that federal officials are now forwarding misleading comments that unjustifiably erode confidence in state and local retirement systems." Mr. Findlay shared his letter (and the response) with Pensions & Investments, which published both of them on its Op-Ed Page. We ran a piece in the same vein last month (see C&C Newsletter for May, 1999, Item 8). Footnote: Mr. Summers is President Clinton's choice to succeed Treasury Secretary Robert Rubin, who resigned May 12, 1999.

"Blessed are the inept for they shall inherit the skies."

6. "NONGOVERNMENTAL" EMPLOYEES MAY BE INCLUDED IN GOVERNMENTAL PLAN: The Department of Labor has issued Advisory Opinion 99-06A, concluding that inclusion of employees of the Kentucky Magistrates and Commissioners Association Inc. in the County Employees' Retirement System would not adversely affect the county system's status as a governmental plan exempt under the Employee Retirement Income Security Act. Section 4(b)(1) of ERISA (29 U.S.C. 1003(b)(1)) excludes from coverage any plan that is a "governmental plan." ERISA defines governmental plan as "a plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing." KMCA is a non-profit, non-stock organization formed to promote the exchange of information among magistrates and commissioners about issues affecting county government and possible solutions, and to promote legislation aimed at enabling magistrates and commissioners to operate their county governments more effectively. KMCA's board of directors comprises elected county officials who are either magistrates or commissioners. As reported by BNA, DOL concluded that KMCA falls within the general category of entities that state law has defined as "counties" for purposes of eligibility for the retirement system, and thus would not of itself adversely affect the county system's status as a governmental plan. Now I know my ABC's... .

7. GASB AMENDS TECHNICAL BULLETIN ON YEAR 2000 DISCLOSURES: On March 29, 1999 the Governmental Accounting Standards Board issued Technical Bulletin 99-1, entitled "Disclosures about Year 2000 Issues - an amendment of Technical Bulletin 98-1." Naturally, the TB is technical (otherwise, why the name?), but, as best as we can tell, among other things, disclosures may now be presented either in the notes to the financial statements or as required supplementary information. TB 98-1, as originally issued on October 22, 1998, required disclosures to be in notes to the financial statements (see C&C Newsletter for November, 1998, Item 1). The amendment is effective immediately and retroactive application is allowed. Nevertheless, we presume it would not be worth the additional cost to reissue statements that take advantage of the relaxed requirements of TB 99-1.

"The chief cause of problems is solutions."

8. RHODE ISLAND PROPERLY WITHHELD PENSIONS: A blurb in BNA indicates that the U.S. Court of Appeals for the First Circuit recently ruled that Rhode Island's temporary withholding of excess pension benefits did not violate the constitutional rights of state legislature pensioners. The trial court granted summary judgment to the pensioners, who had filed a claim under 42 U.S.C. 1983, the Federal Civil Rights Act. But the appeals court reversed and directed that summary judgment be entered in favor of defendants. In 1987 retired Rhode Island legislators became eligible to receive annual pensions many times greater than their pre-retirement salaries, prompting the state legislature to cap annual benefits. Parella v. Retirement Board of The Rhode Island Employees' Retirement System, Case No. 98-1400 (1st Cir., April 16, 1999).

9. EEOC PROPOSES WAIVER RULES UNDER ADEA: In Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998), (see C&C Newsletter for March, 1998, Page 2), the United States Supreme Court held that an individual was not required to return ("tender back") consideration for a waiver in order to allege a violation of the Age Discrimination in Employment Act of 1967 (ADEA), 29 U.S.C. 621 et seq., as amended by the Older Workers Benefit Protection Act of 1990 (OWBPA). OWBPA amended ADEA to set out rules governing validity of waivers, providing that an individual may not waive any right or claim under ADEA unless the waiver is knowing and voluntary. Prior to the Supreme Court's decision in Oubre, the circuits were split on whether an individual who signs an agreement waiving rights and claims under ADEA was required to tender back any consideration paid by the employer in order to challenge validity of the waiver in court. In resolving the split among circuits on the question of tender back, the Supreme Court held that an employee's mere retention of monies does not amount to a ratification equivalent to a valid release of ADEA claims, since retention does not comply with OWBPA any more than the original release. The statute governs effect of the release on ADEA claims, and the employer cannot invoke employee's failure to tender back as a way of excusing its own failure to comply. On June 5, 1998 the Equal Employment Opportunity Commission (EEOC) published a final regulation addressing ADEA waivers but not the tender back issue (see C&C Newsletter for July, 1998, Page 6). In issuing the current proposed legislative regulations to address issues raised by Oubre, EEOC's position is that: (1) an individual alleging that a waiver agreement was not knowing and voluntary under ADEA is not required to tender back the consideration as a precondition for challenging that waiver agreement; (2) a covenant not to sue or any other condition precedent, penalty or other limitation adversely affecting any individual's right to challenge a waiver agreement is invalid under ADEA; (3) although in some cases an employer may be entitled to setoff, recoupment or restitution against an individual who has successfully challenged validity of a waiver agreement, such setoff, recoupment or restitution cannot be greater than the consideration paid to the individual or the damages awarded to the individual, whichever is less; and (4) no employer may unilaterally abrogate its duties under a waiver agreement, even if one or more of the signatories to the agreement successfully challenges the validity of that agreement under ADEA. The proposed regulations are available on EEOC's website at Written public comments may be made until June 22, 1999.

"A penny saved is ridiculous."

10. CUSTODIAN HAS NO AFFIRMATIVE DUTY TO "CREATE" PUBLIC RECORDS TO SATISFY REQUEST THEREFOR: A criminal defendant filed a petition for writ of mandamus seeking to compel the State Attorney and the County Sheriff's Office to comply with his public records request under Chapter 119, Florida Statutes. In response, the State Attorney and the Sheriff's Office represented that they had complied with the public records request. Basically, the criminal defendant sought a single photograph of himself that was allegedly used to identify him for purposes of arrest. However, the public records produced did not include that photograph and it was not contained among any of the State Attorney's or Sheriff's records -- facts of which the criminal defendant was aware before seeking mandamus. In denying the petition, a three-judge panel of the Circuit Court held that "While Respondents have a duty to disclose public records, they have no affirmative duty to create public records to satisfy Petitioner in this case. ... To the extent that Petitioner is unhappy with the agencies' responses, there is no remedy available to him by way of mandamus." Holloman v. State of Florida, 6 Fla. L. Weekly Supp. 370 (Fla. 9th Cir., April 1, 1999).

11. POLICE OFFICER ENTITLED TO DISABILITY PENSION EVEN THOUGH CAPABLE OF PERFORMING SEDENTARY ASPECTS OF JOB: A police officer whose application for service-incurred permanent total disability had been denied sought review of said denial via petition for writ of certiorari. In support of its denial, the Board found, inter alia, that (1) there are tasks of a police officer the applicant can still do; (2) in his own testimony, applicant states that he does not want to take on other jobs that are available because he did not want to disrupt his family life or did not want to go into positions that were of less seniority because he worked his night shifts previously; and (3) the police department has given applicant the opportunity to perform in a less stressful job. The Court quashed the Board's denial of the disability pension, even though "the Court also finds that [applicant] could perform light sedentary aspects of his job description." The Court found significant that "while there is substantial evidence in the record that [applicant's] disability was not total, there is insufficient evidence in the record to establish that the City of Miami Beach was willing or able to permit [applicant] to perform a limited duty position in the City of Miami Beach Police Department with no reduction in pay. ... Again, while the evidence supports the Board's finding that there are tasks of a Police Officer that [applicant] can still do, the evidence failed to show an actual offer to [applicant] of a position comprised of such tasks. By merely stating his unwillingness to disrupt his family life or his unwillingness because of seniority to take a position involving night shifts, [applicant] did not forego his opportunity to make a choice between such an adverse position and unemployment without a service-incurred permanent and total disability retirement." Because we believe the Court has misconstrued the holding in Nuce v. Board of Trustees for City Pension Fund for Firemen and Policemen in the City of Miami Beach, 246 So.2d 610 (Fla. 3d DCA 1971), the case primarily relied upon by the Court, we have been authorized by the Board to seek further review. DeHainaut v. Board of Trustees of the City of Miami Beach Pension Fund for Firemen and Policemen, 6 Fla. L. Weekly Supp. 387 (Fla. 11th Cir., February 26, 1999).

"Hard work never hurt anybody -- but why take chances?"

12. SUPREME COURT OF FLORIDA WILL DECIDE DEPUTY COURT CLERK/PUBLIC EMPLOYEE ISSUE: The Supreme Court of Florida has agreed to answer the certified question "Are deputy court clerks, unlike deputy sheriffs, public employees within the contemplation of Section 447.203(3), Florida Statutes?" A Florida District Court of Appeal has answered the question in the negative (see C&C Newsletter for December, 1998, Item 12). Oral argument is set for September 2, 1999. Service Employees International Union v. Public Employees Relations Commission, Case No. 94,427 (Fla. May 21, 1999).

Copyright, 1996-2004, 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