Stephen H. Cypen, Esq., Editor

1.            MERRILL DOES SETTLE WITH SOUTH MIAMI PENSION BOARD:  We recently wrote that Merrill Lynch, Pierce, Fenner & Smith, Incorporated reportedly had settled an arbitration proceeding instituted by City of South Miami Pension Plan Board of Trustees in 2007 (see C&C Newsletter for July 15, 2010, Item 2 and C&C Newsletter for November 29, 2007, Item 1).  At the time, not having seen an executed copy of the general release and settlement agreement, we were loathe to print any purported details.  We now have a fully-executed copy, and make the following report:

1.            Merrill Lynch will pay or cause to be paid to the City of South Miami Pension Plan Board of Trustees  the total sum of $115,000 within twenty days of receipt by Merrill Lynch of the agreement executed by the Board.  Merrill Lynch in no way represents or warrants the income tax treatment or consequences of the settlement payment. 

2.            Upon receipt of the settlement payment, the Board shall promptly file with the Financial Industry Regulatory Authority a formal dismissal with prejudice as to Merrill Lynch concerning all claims alleged by the Board in Arbitration No. 07-01946.  The Board shall also promptly send FINRA a letter confirming that all cases against Merrill Lynch related to the arbitration are dismissed with prejudice. 

3.            The Board generally releases Merrill Lynch.

4.            The Board covenants not to sue Merrill Lynch.

5.            The parties bear their own attorneys’ fees, costs and expenses in connection with prosecution, defense, negotiation, execution, and performance of the arbitration and the settlement agreement. 

6.            The agreement contains confidentiality provisions, which are very unusual in the public sector.  Outside of all the factual background related to the case that is already in the public demand, the Board and its counsel agree that the amount of the settlement payment, terms of the agreement, all negotiations relating to the agreement, claims asserted by the Board and facts underlying the claims asserted by the Board shall be kept strictly confidential and shall not be made known to anyone who is not a party to the agreement except as provided below.  The Board specifically agrees that it and its counsel will not disclose the foregoing information to any person affiliated with any media news, television, radio, broadcast, telecommunications, reporting or publishing entity or organization or any other person, organization or entity that disseminates news to the general public.  The Board agrees that a violation of the confidentiality obligation would constitute a material breach of the agreement, and the Board understands that the confidentiality provision is a material and essential term, and its agreement thereto is considered additional consideration for the agreement.  Notwithstanding terms of the confidentiality provisions, nothing shall prevent the Board from producing documents “formally” requested by a “legally valid” request for documents pursuant to Section 286, Florida Statutes, the Florida Sunshine Act, to the extent such documents are not exempt from disclosure under applicable law.  (We assume the parties meant Chapter 119, Florida Statutes, the Florida Public Records Law.) 
7.            The agreement also contains another unique provision.  If the Board or its attorneys receive a “legally valid formal” request under the foregoing statute, purporting to require or compel information that is protected from disclosure under the agreement, immediate written notice shall be given to counsel for Merrill Lynch sufficient to allow them a reasonable opportunity to “intervene” or “appear” before any disclosure is made.  Such notice must include a copy of the written request for information and the Board’s proposed written response to the request, if any.  This provision is in force for two years from the date the agreement is executed. 

8.            The Board and its attorneys expressly agree that they will not in any way in the future use in any legal proceeding against Merrill Lynch any documents or discovery produced by Merrill Lynch and marked confidential and any documents or discovery protected from disclosure by applicable legal privilege.  The obligation does not extend to use by the Board’s attorneys of identical copies of documents that were produced in the proceeding as “confidential,” but which were obtained through other means by the Board’s attorneys for its other clients. 

The agreement was executed in behalf of the Board on March 10, 2010.  The signature in behalf of Merrill Lynch, which appears to be that of its Assistant General Counsel, is undated.  Curiouser and curiouser. 

 2.            FLORIDA MUNICIPAL POLICE OFFICERS WHO HAVE SERVICE PRIOR TO PENSION VESTING UNCONDITIONALLY ENTITLED TO CONTRIBUTION REFUND:  Section 185.19(1), Florida Statutes, provides that if any police officer leaves service of the municipality before being eligible to retire, such police officer shall be entitled to a refund of all contributions, without interest, less any benefits paid.  The City of St. Petersburg and the City of St. Petersburg Police Pension Board of Trustees appealed a final judgment finding that former police officers who left service prior to vesting in the City's police pension fund were entitled to refund of their contributions (see C&C Newsletter for August 27, 2009, Item 1).  The Second District Court of Appeal affirmed.  Relying upon Section 185.35(1), Florida Statutes, requiring municipalities with their own police pension plans to meet minimum benefits and standards of Chapter 185, the city and board claimed that any refund is a pension “benefit” and must await its receipt of premium tax income funds.  They contended that they could not provide a refund because they lacked sufficient premium tax income revenue.  The former officers countered that a refund is not a benefit, and nothing in Section 185.35(1), Florida Statutes, requires that refunds come from premium tax income funds.  The former officers advanced a persuasive and simple argument:  Chapter 185, Florida Statutes, is not ambiguous, and legislative intent is easily seen in the plain language of the statute.  Under Section 185.19(1), Florida Statutes,  former police officers shall be entitled to a refund of his contributions.  A 1958 Florida Attorney General opinion lent support to such conclusion.  The court saw no reason why the requirements of Section 185.35, Florida Statutes, relating to premium tax income, should have any bearing on rights of the former police officers here.  Use of the mandatory term "shall" normally creates an obligation impervious to judicial discretion.  The appellate court also found the City’s and Board’s other arguments unavailing:  that requiring a refund creates an unconstitutional unfunded mandate and that the former police officers were bound by terms of their employment contracts that called for forfeiture absent vesting.  City of St. Petersburg v. Remia, Case Nos. 2D09-4233 and 2D09-4444 (Fla. 2d DCA, July 16, 2010).

 3.            STEINBRENNER’S 2010 DEATH MAY SAVE HEIRS $600 MILLION:  We recently did a story on the death of Dan Duncan, whose death this year saved his family billions of dollars (see C&C Newsletter for June 17, 2010, Item 17).  Now, Yankees owner George Steinbrenner may have saved his heirs as much as $600 Million in estate taxes by dying in 2010.  The estate tax expired in 2009, and a new one does not take effect until 2011, when heirs will be taxed at a top rate of 55 percent, according to abajournal.com.  Steinbrenner’s net worth has been estimated at $1.15 Billion, and dying in 2010 rather than 2011 could amount to a $600 Million savings for his heirs. Steinbrenner’s death may help spur Congress to pass a retroactive extension of the 2009 estate tax of 45 percent. Some experts believe such law would be constitutional, but would be subject to court challenges that could result in years-long litigation.

 4.            WOMEN’S PRISON POLICY TO HIRE ONLY FEMALE CORRECTIONAL LIEUTENANTS VIOLATES TITLE VII:  After a female inmate had been impregnated by a male guard, the Nevada Department of Corrections decided to hire only female correctional lieutenants at a women's prison. A federal district court judge granted summary judgment upholding NDOC's discriminatory employment policy, concluding that the policy imposed only a "de minimis" restriction on male prison employees' promotional opportunities, and, alternatively, that the policy fell within Title VII's exception permitting se.x discrimination in jobs for which se.x is a bona fide occupational qualification.  The Ninth Circuit U.S. Court of Appeals reversed as to both holdings.  The conclusion that maintaining the concededly-discriminatory policy of excluding men as correctional lieutenant positions had only a "de minimis" impact on them, and so did not violate Title VII with regard to them, reflects a fundamental misunderstanding of the basic precepts of Title VII, and is not supported by case law.  It is beyond dispute that denial of a single promotion opportunity, such as the one at issue, is actionable under Title VII.  The Bona Fide Occupational Qualification exception of Title VII is an extremely narrow exception to the general prohibition of discrimination on  basis of se.x that may be invoked only when the essence of the business operation would be undermined by hiring individuals of both se.xes.  Restricting employment opportunity on basis of gender can be justified by need to counter uncontrollably violent inmate behavior.  But, this case concerns behavior of employees, not inmates.  Precluding men from serving in supervisory positions in women's prisons is not a substitute for effective leadership and enforcement of work-place rules.  Breiner v. Nevada Department of Corrections, Case No. 09-15568 (U.S. 9th Cir., July 8, 2010). 

 5.            OHIO FUNDS SETTLE WITH AIG FOR $725 MILLION:  Three Ohio pension funds and other investors could gain hundreds of millions of dollars under a settlement reached with insurance giant American International Group Inc.  Cleveland.com says that AIG, which was accused in a lawsuit of defrauding the three Ohio public pension funds and many others, has agreed to pay $725 Million to settle the case.  The huge settlement brings to more than $1 Billion the amount expected to be recovered in the case, which was originally filed in 2004, and involved three previous settlements totaling $285 Million.  The plans involved are Ohio Police & Fire Pension Fund, Ohio Public Employees Retirement System and State Teachers Retirement System of Ohio.  Hey, wait a minute.  Didn’t AIG get this money and more from the bailout in 2008? 

 6.            CalSTRS REBOUNDS WITH DOUBLE-DIGIT RETURNS:  The California State Teachers’ Retirement System investment portfolio posted a solid 12.3 percent return at the end of the 2009-10 fiscal year.  The investment portfolio’s market value at fiscal-year’s end was $129.77 Billion.  The 12.3 percent return rate beat the actuarial rate of 8 percent, and brought in more than $10 Billion, as the fiscal year ended on June 30.  However, because CalSTRS bases its investment portfolio performance on a rolling average (as do most funds), the last two years’ losses still have an effect.  Returns by asset class were 14.5 percent for global equities (U.S. 15.7 percent, non-U.S. 12.1 percent), fixed income at 12.3 percent, private equity with 21.7 percent and real estate with -12.4 percent.  As of June 30, 2010, portfolio holdings were as follows:  51.7 percent in U.S. and non-U.S. stocks, 22 percent in fixed income, 14.5 percent in private equity, 10.1 percent in real estate, 0.9 percent in absolute return assets and 0.8 percent in cash.

 7.            AN INTERESTING APPROACH TO RETIREMENT:  As we get older, we sometimes begin to doubt our ability to "make a difference" in the world.  At these times, our hopes are boosted by the remarkable achievements of other seniors who have found the courage to take on challenges that would make many of us wither.  Harold Schlumberg is such a person.  Harold has often been asked, “What do you old folks do now that you are retired?”  Harold responds:  “Well, I am fortunate to have a chemical engineering background, and one of the things I enjoy most is turning beer, wine, Scotch and margaritas into urine.”  Harold should be an inspiration to all of us. 

 8.            D.C. HIT WITH $900,000 POLICE RETALIATION VERDICT:  Caudle and four others were African-American officers in the District of Columbia Metropolitan Police Department.  They charged their commanding officer with violating civil rights of African-American officers in their unit by initiating an anonymous complaint sent to MPD, and by filing a signed complaint two months later.  The district and MPD allegedly retaliated against the officers for asserting their civil rights, by, among other things, promptly singling them out for transfer and demotion from their elite unit.  They brought an action under Title VII of the Civil Rights Act of 1964 and the District of Columbia Human Rights Act to redress injuries they had suffered and continued to suffer as a result of the retaliation.  Now, after an extended trial, a U.S. District Court jury has ruled in favor of the officers, awarding $200,000 each to Caudle and another officer, $250,000 each to two other officers and no amount of damages to the fifth officer.  Caudle v. District of Columbia, Case No. 08-0205 (DC DC, July 8, 2010). 

 9.            ALL PUNS INTENDED:  An invisible man marries an invisible woman. The kids were nothing to look at either.

10.            OXYMORON:   Why do "fat chance" and "slim chance" mean the same thing?

11.            FABULOUS RANDOM THOUGHTS:  Bad decisions make good stories.

12.            QUOTE OF THE WEEK:   “Make your next move from where you actually are.”  Frank Kuppner 

13.            PLEASE SHARE OUR NEWSLETTER:  Our newsletter readership is not limited to the number of people who choose to enter a free subscription.  Many pension board administrators provide hard copies in their meeting agenda.  Other administrators forward the newsletter electronically to trustees.  In any event, please tell those you feel may be interested that they can subscribe to their own free copy of the newsletter at http://www.cypen.com/subscribe.htm.  Thank you.