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
info@cypen.com

Click here for a
free subscription
to our newsletter

Cypen building

February, 2000

Stephen H. Cypen, Esq., Editor

1. MIAMI BEACH NOT ESTOPPED TO MAKE PROSPECTIVE REDUCTION IN BENEFITS: In 1988 the City of Miami Beach created a pension plan for Unclassified (Managerial) Employees and invited such employees to transfer from the existing General Employees pension plan. Subsequent to a 1992 pension systems review committee recommendation, the City amended the Unclassified Plan to reduce the maximum benefit from 90% of average final compensation to 80% of average final compensation. Present and former City employees sued the City, alleging that when they were offered the opportunity to transfer into the Unclassified Plan, with its attendant higher level of benefits, the offer plainly carried with it the implied assurance that they would be dealt with fairly and certainly that they would not be made worse off than if they had never transferred. In upholding the lower court's ruling, in an opinion reading in its entirety, the court said "We agree with the trial court both that the City of Miami Beach was permitted by the substantive of law to effect a prospective reduction in the benefits payable under the alternative pension plan chosen by the appellant-employees as a matter of their own preference over the existing mandatory plan, and that the City was not equitably estopped to assert that position." One of the three judges filed a sharp dissent, from which the foregoing facts can be gleaned. Thomas v. City of Miami Beach, 25 Fla. L. Weekly D159 (Fla. 3d DCA, January 12, 2000).

"Sometimes one pays most for the things one gets for nothing."

2. FLORIDA SUPREME COURT HOLDS THAT DEPUTY COURT CLERKS ARE "PUBLIC EMPLOYEES": On review of a decision from the Fifth District Court of Appeal, the Supreme Court of Florida answered the following question in the affirmative: "Are deputy court clerks, unlike deputy sheriffs, public employees within the contemplation of Section 447.203(3), Florida Statutes" (See C&C Newsletter for December, 1998, Item 12.) The fact that, like deputy sheriffs, deputy clerks hold their position by appointment rather than employment is of little import. Where the collective bargaining rights of public employees are in issue, the plain language of Chapter 447, Florida Statutes, controls and applies across the board to all public workers, regardless of job title. The abiding bright line for determining coverage under Part II thereof is the simple "public employee/managerial employee" dichotomy set forth in Section 447.203. If an individual works as an employee in the ordinary sense of the word under the criteria set forth in Section 447.203(3) he or she is entitled to the protections of Part II. On the other hand, if an individual works as a managerial level employee under the criteria set forth in Section 447.203(4) or falls within any other exceptions listed in Section 447.203(3), the protections of Part II are inapplicable. Service Employees International Union v. Public Employees Relations Commission, 25 Fla. L. Weekly S34 (Fla., January 13, 2000). Because the Supreme Court used such broad language - and in fact almost scoffed at its own prior decision involving deputy sheriffs -- the next case the high court hears involving the status of a deputy sheriff may well follow this case.

3. FLORIDA SUPREME COURT RESOLVES WHISTLE-BLOWER CONFLICT: Sections 448.101-448.105, Florida Statutes, commonly known as the Whistle-Blower Act, are remedial statutes designed to protect private employees who report or refuse to assist employers who violate laws enacted to protect the public. Under Section 448.102, Florida Statutes, an employer may not take any retaliatory personnel action against an employee because the employee has: (1) disclosed or threatened to disclose to any appropriate governmental agency, under oath, in writing, an activity, policy or practice of the employer that is a violation of a law, rule or regulation; (2) provided information to or testified before any appropriate governmental agency, person or entity conducting an investigation, hearing or inquiry into an alleged violation of a law, rule or regulation by the employer; or (3) objected to or refused to participate in any activity, policy or practice of the employer which is in violation of a law, rule or regulation. However, subsection (1) expressly does not apply unless the employee has, in writing, brought the activity, policy or practice to the attention of a supervisor or the employer and has afforded the employer a reasonable opportunity to correct the activity, policy or practice; subsections (2) and (3) are silent on the requirement of notice. Resolving a conflict among the District Courts of Appeal, the Supreme Court of Florida reversed, and held that written notice is not required for claims based on Subsections 448.102(2) or (3), Florida Statutes. The Golf Channel v. Jenkins, 25 Fla. L. Weekly S31 (Fla., January 13, 2000). Although we try not to toot our own horn, in our July, 1999 Newsletter (Item 20) concerning a companion case, we said "In light of the obvious absence of a presuit notice requirement in subsections (2) and (3), we would predict that this decision will, if reviewed by the Supreme Court, be overturned." Ahem.

"Succeed in spite of management."

4. FRS MAY SUPPORT LOCAL HIGH-TECHS: According to a report in the Wall Street Journal, Governor Jeb Bush's Internet Task Force is considering a proposal for FRS to invest as much as $500 Million in Florida-based venture-capital firms that help finance new high-tech and Internet businesses in the state. The money, about .5% of the $100 Billion fund, might also be invested directly in the start-ups themselves. If the Task Force gives the nod, it will make a recommendation to the Florida Legislature, which will decide whether the idea ever becomes law. As the author of the proposal says, the amount is "peanuts" to the pension fund, "but from the entrepreneurs' standpoint, holy moley, that's half a billion dollars." Incidentally, CalPERS has invested about $1 Billion (.6% of its $165 Billion fund) in California venture investments.

5. U.S. PENSION FUNDS IN GREAT SHAPE: Because of rising equity markets and rising interest rates, pension fund assets outgrew liabilities at a record pace last year, according to a front page story in Pensions & Investments. Assets of the two hundred largest public and private U.S. pension funds are now 26% greater than liabilities, the widest gap since 1989. Total assets grew last year by 13.4% while liabilities dropped 12.7%. The author believes it's a good time to reappraise a fund's asset allocation and match it to current liabilities. In fact, he proposes that trustees of plans with surpluses should break their portfolios into two distinct parts to meet different objectives: one portfolio could be structured to match liabilities and another to generate incremental returns. First, funds would match all pension liabilities with zero-coupon 30-year Treasury bonds, insuring that the fund would never fall below a fully funded position. Then, the fund could aggressively invest remaining assets for incremental return. The author currently estimates that no more than 15% of U.S. pension funds employ such a strategy. Incidentally, average asset allocation as of September 30, 1998 of the two hundred funds studied was 45.6% U.S. equity, 30.6% fixed income, 12.1% international equity, 2.2% cash and 9.5% in other investments.

6. SMALL-CAPS BEAT LARGE-CAPS FOR FIRST TIME IN SIX YEARS: For the first time in six years, U.S. small-capitalization stock returns outperformed large-capitalization in 1999. As measured by the Russell 2000 Index, domestic small-cap stocks returned 21.3% last year, topping the S&P 500 (21%) and the Russell 1000 (20.9%). Technology became the heaviest-weighted sector within the Russell 2000, making up 23.6% of the Index -- compared with financial services (17.5%) and consumer discretionary services (16.8%). Only six months earlier, in June, the Russell 2000 had a 14.8% technology weighting! These year-end data were reported by Pensions & Investments.

7. SEC CALLS FOR DECIMAL PRICING: The Securities and Exchange Commission issued an order requiring the nation's stock exchanges to begin quoting at least some share prices in dollars and cents by July 3, 2000. U.S. securities exchanges are required to submit a decimal pricing plan by the middle of March and must have decimal prices fully phased in by the end of the year. We're not exactly sure how the SEC got authority to intervene in the markets' operation, because when last we heard, legislation on the subject was being proposed (see C&C Newsletter for May, 1997, Page 1). In any event, as you probably noticed, the two biggest exchanges -- the New York Stock Exchange and the Nasdaq stock market -- as an interim step have been quoting prices in minimum increments of 1/16th of a dollar instead of the customary 1/8th.

"We should go metric every inch of the way."

8. FLORIDA CIVIL RIGHTS ACT DOES NOT RECOGNIZE CAUSE OF ACTION FOR MARITAL STATUS DISCRIMINATION AGAINST CLAIMANT'S SPOUSE: Acting on a certified question from the Eleventh U.S. Circuit Court of Appeals, the Florida Supreme Court answered the following question in the negative: "Can an individual proceed under the Florida Civil Rights Act by alleging that he was discharged, in violation of the prohibition on marital status discrimination, because he is married to an individual who filed suit against his employer?" Section 760.10, Florida Statutes, makes it unlawful for an employer to discharge or fail or refuse to hire any individual, or otherwise to discriminate against any individual with respect to compensation, terms, conditions or privileges of employment, because of such individual's race, color, religion, sex, national origin, age, handicap or marital status. The Supreme Court held that the term "marital status" as used in the statute means the state of being married, single, divorced, widowed or separated, and does not include the specific identity or actions of an individual's spouse. Therefore, Florida does not recognize a cause of action for marital status discrimination where the basis of the claim rests on the allegedly unlawful discharge of an employee for actions by the employee's spouse. Donato v. American Telephone and Telegraph Co., 25 Fla. L. Weekly S44 (Fla., January 20, 2000).

9. SUMMARY JUDGMENT ERROR WHERE TESTIMONY INDICATES DUE PROCESS DENIAL IN GRIEVANCE PROCEDURE: A police sergeant was demoted after an internal affairs investigation found he had used inappropriate language in referring to the chief and to a subordinate officer. A pre-disciplinary hearing panel, which included the chief, issued the demotion. The officer invoked the city's grievance procedure and requested a three-person committee to hear his complaint. After the grievance committee recommended against the demotion, the city manager overruled the recommendation and affirmed the discipline. In a suit filed against the city, police chief and city manager, there was testimony that an assistant city manager (who was on the grievance committee) had been ordered by the city manager not to "fight" the chief's decision. Because the Police Officers' Bill of Rights gives police officers a property interest in their positions, there was an issue as to whether or not the officer was accorded due process of law during the pre-disciplinary and grievance procedures. Thus, the appellate court was compelled to reverse summary judgment in favor of defendants. Goreck v. Rumbley, 25 Fla. L. Weekly D166 (Fla. 2d DCA, January 12, 2000).

10. PENSION SURPLUSES LARGE ENOUGH TO WITHSTAND MARKET DROP: On the heels of its report on how a booming stock market has swelled defined benefit plans (see C&C Newsletter for January, 2000, Item 6), Pensions & Investments has other "good" news: The stock market would have to fall 30% or more before the surplus assets in defined benefit plans would evaporate. Although such a drop would deflate asset cushions and shatter investment confidence, it would not necessarily mean an immediate increase in contributions. Remember that for actuarial purposes most pension plans spread investment results over a five year period, thus recognizing in any one year only 20% of the investment results, above or below the assumed actuarial rate of return -- making funding less sensitive to the stock market. The author was not making a stock market prediction; he was just considering the worst-case scenario.

"Good news is just life's way of keeping you off balance."

11. SOME PENSION PLANS COULD "BUY THE COMPANY": Speaking of defined benefit plans, General Motors, the world's largest industrial corporation, has defined benefit pension assets almost twice the company's market value! At the end of last September, GM had a market capitalization of about $40 Billion, while its defined benefit plan had assets of almost $70 Billion, according to a Pensions & Investments analysis. Several other Fortune-100 corporations, including Lockheed Martin and U.S. Steel, have market capitalizations substantially less than their defined benefit fund assets. Yet, few observers express surprise at the phenomenon: stock prices of some of the nation's largest industrial corporations have lagged behind, as "dot-com" stocks have gone through the roof. At the same time, these old-line corporations have large pension funds to support their aging work forces while new companies tend to reward their employees with stock options instead of pension benefits.

12. P&I URGES RESCUE OF DBs: In a January 24, 2000 Editorial entitled "Save the Dinosaurs," Pensions & Investments waxes nostalgic about the success of defined benefit pension plans -- so far. "But dinosaurs were also incredibly successful in their era, and they are extinct. The extinction of defined benefit plans is not inevitable, but it might take government intervention to prevent it." Defined contribution plans are excellent savings vehicles, especially for highly-mobile employees, but they are not truly pension plans. Defined benefit pension plans, on the other hand, are far richer and far more secure for long-term and older employees. And absent the burdens of excessive government regulation, DB plans would be a far more efficient and effective way of providing retirement income for workers than DC plans. DB plans have helped to finance much of the innovation that has lead to the incredible growth in the U.S. economy. If DB plans are allowed to become extinct, the economy will lose that engine of innovation and growth. So, the time has come to seek ways of reversing the decline in the number of defined benefit plans. All presidential candidates should begin to debate possible solutions, which the next administration should tackle in its first year.

13. AND MORE DEFINITIONS:

Finance A sector classification that includes securities of firms engaging in making loans to individuals or businesses.

Fixed Income Debt instruments issued by corporations, governments or government agencies characterized by a fixed interest rate and stated maturity date, which represent terms of the arrangement between someone who borrows money and someone who lends it.

Foreign Exchange Transactions involving the purchase and sale of currencies.

Forward Market A market in which participants agree to trade some commodity, security or foreign exchange at a fixed price in the future.

Forward Rate The rate at which forward transactions in some specific maturity are being made; for example, the dollar price at which Swiss francs can be bought for delivery three months later.

"My intuition nearly makes up for my lack of good judgment."

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