King v. NYCERS: David Against Goliath

This is a story of the King v. NYCERS case and a lone individual who fought NYCERS and in spite of many setbacks finally won. NYCERS was almost able to deprive this person of two thirds his pension except that Mr. King fought back. He never gave up.

On August 8, 2015, days short of his 95th birthday, Judge Jack Weinstein handed down a decision in the King v. NYCERS case. Ironically Weinstein was appointed as a federal judge to the Eastern District of New York in 1967 by President Lyndon B. Johnson. He is a recognized legal scholar and is one of the most famous judges in the United States.

Start of the Story

David King began working for the City of New York on May 19, 1971 at DEP. On the same day he joined NYCERS in the old Tier 1 pension plan. He was 29 at the time with a birthdate of November 16, 1941. He left DEP in 1977. He withdrew his NYCERS pension contributions on April 14, 1977 which terminated his Tier 1 membership.

In 1984, he started working at the TBTA as Bridge and Tunnel Officer. He rejoined NYCERS on February 16, 1984 as a Tier 4 member. On August 19, 2000, he resigned from the TBTA. He was 58 at that point. He was not yet eligible to retire. He had accrued 9 years of service over the 16 years at the TBTA but was short the needed age of 59.

He did not file a retirement application when he resigned nor when he turned 59 on November 16, 2000, the date he was eligible to retire. He had become a vested member of NYCERS in 1998 when legislation dropped the vesting criteria from ten years to five and therefore his membership remained active indefinitely. It is unclear why Mr. King did not file a retirement application at age 59 point but it is clear he did not.

In 2004, when he became aware that he might be eligible to reinstate his old Tier 1 membership in NYCERS, he filed an application with NYCERS for that reinstatement. The membership reinstatement statute was enacted on December 17, 1999. To be eligible for reinstatement you must be a member and not a retiree.

On October 25, 2005, NYCERS responded to his reinstatement application. They notified him that he was eligible and that he would have to pay $5,584.28 to restore the old Tier 1 membership. The amount reflected the amount he withdrew in 1977 with interest. On June 6, 2006, Mr King submitted his Tier 1 Membership application to NYCERS.

On November 17, 2006, he paid NYCERS $5,917.83 for his reinstatement and $5,544.72 for his Tier 1 deficit. At this point his membership date changed from February 16, 1984 (Tier 4) to May 19, 1971 (Tier 1) and his service credit increased from 9 years to 14.9 years.

On December 16, 2007, NYCERS notifies Mr. King that he had vested right to retire which was effective as of June 6, 2006. That was the day that he filed is Tier 1 membership application. He was 64 as of that date. On January 8, 2008, he filed for retirement under Tier 1. NYCERS began paying Mr. King advanced benefit payments under Tier 1 as of February 29, 2008.

Then the war started.

In a September 4, 2008 letter, NYCERS tells Mr. King that upon further review of his case he was retired under Tier 4 as of his 59 birthday, November 16, 2000 and that in turn made him ineligible for reinstatement to Tier 1 in 2006 because as stated before retirees are not eligible for reinstatement. This letter was signed by Andrew Feneck

NYCERS was absolutely wrong in its September 4, 2008 statement. It is clear case law that a member must file an application with NYCERS for his retirement to be effective. This issue has been litigated many times since 1920. It is settled law.

This is legal incompetence. The NYCERS trustees have a critical problem with its legal advice.

I know Mr. Feneck. I worked with him for over 20 years at NYCERS. He knows his letter was illegal but I am quite sure he was given orders from Karen Mazza, the in-house attorney, to write the letter. You will notice this letter was not signed by Mazza.

This is how corruption infects every phase of an organization’s daily workings. The NYCERS trustees recently appointed Mazza as acting executive director.

This decision by NYCERS changed Mr. King’s retirement benefit as follows:

1. Tier 1: $19,835.87/year starting on June 6, 2006
2. Tier 4: $6,240.80/year starting on November 16, 2000

There are annual cost of living adjustments involved, roughly $270/yr. for Tier 1 starting 2011 and $95/yr. for Tier 4 starting in 2005.

As of September 30, 2008, NYCERS started paying Mr. King Tier 4 retirement benefits and stopped his rightful Tier 1 benefits.

The following fight is over $13,600/yr. payable to a 64 year old man. Not high finance but to Mr. King this was substantial amount.

Up to this point, this is not an unusual story in so far as that NYCERS illegally hammers its members, retirees and employees all the time. What is unusual is Mr. King’s ability to fight back and win.

On August 25, 2011, Mr. King filed an Article 78 in NY State Supreme Court, Kings County challenging the September 4, 2008 action.

On January 12, 2012, his claim was dismissed because King had missed his 4 month deadline for filing an Article 78 claim against the September 4, 2008 action. The court, however, also dismissed all his arguments and found them without merit. As I said before, this was a case where NYCERS was without doubt wrong on the law and should have been correcting its error according to Section 13-182 of the NYC Admin Code.

On August 22, 2013, Mr King filed a claim in federal court on his own without a lawyer. Mr. King was not done yet. He claimed

1. that the state court without conducting an evidentiary hearing dismissed his claims on the merits,
2. that NYCERS had violated his constitutional rights to due process,
3. that NYCERS was in breach of contract and its fiduciary duties pursuant to Section 7 of Article V of the NYS Constitution and the NYCERS Rules and Regulations, and
4. that NYCERS violated Section 349 of the NY General Business Law.

On October 16, 2013 NYCERS moved to dismiss Mr. King’s federal action because all Mr King’s claims had already been resolved in state court.

On November 25, 2013, Judge Weinstein thinking his hands were tied dismissed Mr. King’s federal action.

In a last ditch effort Mr. King appealed to the Court of Appeals of the Second Circuit again on his own.

On December 10, 2014 the Second Circuit issued a summary order denying his appeal against the Article 78 dismissal but overturning the state court decision rejecting Mr King’s arguments on the merits. It then remanded Mr. King’s substantive claims to Judge Weinstein from determination.

King Wins

This was a win for a retired Bridge and Tunnel Officer fighting by himself against the Law Department of the City of New York before the premier federal appeals court in the United States. It was truly a David against Goliath moment. In addition the Second Circuit assigned Mr. King pro bono counsel

With the direction of the Second Circuit to consider the merits of the remanded claims, Judge Weinstein went to work. He wrote a 54 page decision dealing with due process, contractual rights and general business law.

He was not happy with the fact that a state issue was being marched through the federal courts but given the appeals decision he addressed the issues. In short, Judge Weinstein found that Mr. King was retired under Tier 1 as on June 6, 2006 and not under Tier 4 on November 16, 2000 and that NYCERS was wrong in 2008.

Specifically he found that Mr. King had both a due process claim and a contract claim.

The full details of his analysis exposes serious problems for NYCERS and the city in dealing with challenges to administrative pension decisions.

Judge Weinstein granted Mr. King equitable estoppel with respect to his due process claim and its three year filing requirement. He based his decision on the fact that NYCERS had provided no post-deprivation notice to Mr. King of his right to file an Article 78 against NYCERS and the four month time limitation for that filing. If fact, he found that NYCERS must provide a pre-deprivation hearing regardless of the adequacy of the post-deprivation (Article 78) remedy.

As far as I know, the NYC Law Department has never informed NYCERS that its members and pensioners have a due process right to pre-deprivation hearing based on the 14Th Amendment of the U.S. Constitution.

Judge Weinstein found that NYCERS violated Mr. King’s due process rights by not providing him with an opportunity to contest NYCERS’ decision prior to the reduction of his benefits.

Judge Weinstein also found that NYCES breached its contract with Mr. King in that the agency denied Mr. King his Tier 1 retirement benefit. This was the basis on which Judge Weinstein settled Mr. King’s claim stating that he did not want to impose damages which could attach to a due process finding.

NYCERS tried to appeal the 2015 decision. Remember this is a case where the city and NYCERS were clearly wrong on the substantive issue. This case was not about justice. It was about crushing a lone member. I can only guess what the legal costs were for this case.

At this point Mr. King's counsel was prevented in defending Mr. King further. Mr. King was, however, able to obtain legal counsel from Mr. Gary Stone at the Brooklyn Legal Services located at 105 Court Street in downtown Brooklyn. Mr Stone was also able to get the help of Mr. Edgar Pauk who has a long history of fighting the city.

The parties eventually settled the case with a resulting 2016 decision (7/25/2016) slightly modified allowing NYCERS to escape interest charges.

Let’s hope Mr. King is receiving his Tier 1 benefits.

Liu, the Pension Trustees, Transparency, and the NYS Freedom of Information Law

Recently the NY Post made a request of the NYC Comptroller, John Liu, for copies of the contracts, invoices, and payment authorizations for the 10 highest paid investment managers for real estate, private equity and hedge funds working for the five city pension funds.

Liu has tried to build a reputation for pushing transparency in city finances.

However, in response to the request Liu refused to disclose these documents. His reason was as follows:

“such records are exempt from disclosure under New York State Public Officers Law Section 87(2)(d) as trade secrets or are submitted to an agency by a commercial enterprise or derived from information obtained from a commercial enterprise, which if disclosed would cause substantial injury to the competitive position of the subject enterprise”.

Liu did not specify whether he was invoking the trade secret or competitive injury exclusion.

This position is absurd on its face. What organization would put a trade secret or information that was competitively damaging into a commercial contract, a document that in the future could possibly be at the heart of a nasty court fight? There is nothing in these contracts that qualify as a trade secret or would injure the competitive position of the investment managers.

The idea that this specious excuse would apply to invoices and payment vouchers is delusional.

There is of course the real possibility that the public disclosure of these contracts, invoices and payment vouchers might be politically embarrassing. That is assuming that they actually exist.

In addition, Liu threw in the truly inane excuse that “such disclosure would breach the confidentiality provisions in our contracts with the funds, be contrary to industry practice and standards and potentially cause the flight of top performing funds who want to guard their confidential information”.

I do suspect that there are confidentiality provisions in the contracts. These provisions, however, are in violation of the above referenced NYS Freedom of Information Law (NYS Public Officers Law Section 87(2)). This makes them null and void.

The idea of adhering to this industry’s practice and standards is laughable.

The possibility of top preforming funds fleeing a potential customer is not credible. First of all, what makes Liu think that the pension funds have hired the top performing funds. Second, no one walks away from “2 and 20” fees. Third, the pension funds should be so lucky to escape these piranhas.

As per the city’s FY-2012 financial statement, the five city pension funds incurred $340M worth of investment expenses in 2012.

The bottom line is that if the NY Post doesn’t drag Liu into court and get a judge to force him disclose the these documents, he can continue to hide behind this garbage. While Liu is the point man here, the trustees of the five city pension funds are all equally culpable for this deception.

The Dog Ate My Homework. Why Is Mazza Spending $411K?

In 1996 the NYS legislature gave NYCERS the authority to pay its administrative expenses out of the assets of the system independent of the city budget structure. Prior to this law NYCERS was part of the regular budget process applicable to standard city agencies.

In drafting the proposed budget legislation the NYC Law Department particularly included the following provision (S.13-103.c.(5) of the NYC Admin Code)

(5) The provisions of chapter seventeen of the charter shall continue to apply to the retirement system and the retirement system shall constitute an agency for the purposes of such chapter seventeen. The board of trustees shall not obtain any legal services by the retention of employees or by contract unless the corporation counsel shall consent thereto.

You can easily guess why the Law Department wanted this limitation on NYCERS new budgeting authority.

Susan Sanders worked for many years as an attorney in the pension division of the NYC Law Department. At some point after 2005 she left the Law Department for the private sector.

As of FY-2009 NYCERS reported in its Comprehensive Annual Financial Report on page 177 that it had paid Ms. Sanders $104,000 for legal services in 2009. In the same way, NYCERS reported payments to Ms. Sanders for FY-2010, FY-2011, and FY-2012 of $99,750, $100,000, and $107,250, all for legal services. That is a total of $411,000 over four years. I’m sure, if she’s a pensioner, that she has the proper waivers.

On January 11, 2013, in response to my request for a copy of the authorization from the NYC Law Department for Ms. Sanders’ legal services contract with NYCERS, I received the following reply from the NYCERS Records Officer who incidentally works for the director of the NYCERS legal division:

“In response to your inquiry for a copy of the Authorization from the Law Department pertaining to Susan Sanders, please be advised that Susan Sanders does not have a Legal Services Contract with NYCERS. Therefore, there is no information that can be submitted at this time.”

I’m not exactly sure but someone at NYCERS is either grossly incompetent or a pathological liar.

For the record, the director of the NYCERS legal division is Karen Mazza. I wonder if NYCERS has a copy of the authorization from the Law Department for the retention of Mazza as NYCERS general counsel. In 1997 I hired her as an administrative staff analyst, not as a general counsel.

I also wonder if DOI ever finished the perjury investigation involving Mazza and Baksh/Ramsami.