Posted: August 11, 2015

Judge Weinstein Chastises New York City for Abusive Revocation of Retirement Benefits

“It is somewhat absurd for a federal district judge to have to slosh its way through the swamps of New York City retirement plans.” So lamented Judge Weinstein as he began his lengthy analysis of the plaintiff’s challenge to a decision by one of New York City’s employee pension systems to revoke the plaintiff’s eligibility for the richest category of benefits. Nonetheless, slosh the judge did in King v. New York City Employees Retirement System (NYCERS), 13 CV 4730 (E.D.N.Y. Aug. 10, 2015), and granted judgment for plaintiff—on a motion to dismiss brought by the Corporation Counsel.

The court suggested that to avoid such an exercise by federal courts, which in this case followed an Article 78 proceeding in state court, there should be “a single state cause of action” for challenging “the accuracy of the administrative decision denying a pension claim,” in which “a possible due process claim, a possible breach of contract claim, and any other challenge to the denial” should be determined “in one litigation, in one state court, by one state judge, on the merits.” Slip op. at 3-4 (emphasis in original). Such a claim, Judge Weinstein continued, “should be adjudicated, where practicable, administratively before a final adverse decision is made by NYCERS.” Id. at 3. In the wake of this decision it would be surprising if NYCERS does not take steps to create a pre-deprivation process for pensioners to challenge adverse decisions on benefits.

Plaintiff David King first worked for New York City for six years in the 1970s, and on that basis became eligible for a Tier 1 pension plan, the most generous of the four tiers of plans offered by NYCERS. By the time he returned to city government employment in the 1980s, the pension laws had been revised and he was now considered a Tier 4 employee, a formula yielding a lower retirement benefit. See id. at 8, 10, 15. He retired in August 2000. Id. at 16. Under state law, he was allowed to, and did, apply for reinstatement as a Tier 1 member, and in an October 2005 letter, NYCERS informed him that was eligible to be reinstated into Tier 1. The letter told King that once he was back in Tier 1, his reinstatement was “irrevocable,” and thereafter King made the necessary payments to become reinstated. Id. at 16, 22.

Despite that seemingly categorical pronouncement, NYCERS subsequently revoked King’s Tier 1 reinstatement. In 2008, the agency informed him by letter that he was erroneously reinstated and in fact belonged in Tier 4, based on what the agency determined was his retirement date of November 16, 2000. See id. at 24-25. The letter did not explain how NYCERS determined that this was his retirement date (other than to say that this was his “payability date”) or that its decision could be challenged in court or with NYCERS. Id. at 25, 26.

After a tortuous path that included an Article 78 proceeding, a district court dismissal, and an appeal to and remand by the Second Circuit, the case returned to the district court on plaintiff’s claims for breach of contract, violation of the due process clause, violation of the pension provision of the New York State Constitution, and violation of section 349 of New York’s General Business Law. Judge Weinstein denied NYCERS’s motion to dismiss and ruled that the agency violated plaintiffs’ due process rights, both procedural and substantive, and committed a breach of contract. The absence of a pre-deprivation hearing at which King could contest the City’s intended revocation of his Tier 1 status violated procedural due process, and the post-deprivation process of an Article 78 proceeding, which King was not informed of, was in any event insufficient because it could not have cured the procedural due process problem of the lack of a pre-deprivation hearing. See id. at 43-44. The City committed a “gross abuse of governmental authority,” and therefore violated substantive due process, by failing to identify the statutory provisions it relied on to determine King was ineligible for Tier 1 benefits or to explain how it determined King’s retirement date and refusing to inform him that he had a right to challenge the decision reducing his benefits. Id. at 44-45. Judge Weinstein granted judgment for the plaintiff and stated that he was deciding the case “on the state contract claim under supplemental jurisdiction . . . rather than on the federal due process claim,” because the latter could leave room for pain and suffering damages “greatly exceeding his contract damages,” and this “would unduly burden the city pension system.” Id. at 53.

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