Judge rules against MFPD firefighters’ union in pension case

Order makes it clear board can change plan, Hilmer says

By MIKE ANTHONY

A judge has ruled against Mehlville Fire Protection District union employees in their bid to prohibit the Board of Directors from making changes to the district’s pension plan.

Union employees’ request for a permanent injunction prohibiting the Board of Directors from changing the fire district’s pension plan to a defined-contribution plan from a defined-benefit plan was denied last week by St. Louis County Circuit Court Judge Thea A. Sherry.

Board of Directors Chairman Aaron Hilmer hailed Sherry’s Aug. 27 ruling as “a tremendous victory” while union attorney John Goffstein said employees were “very disappointed” with the decision.

Goffstein also told the Call Friday it was too soon to determine whether the ruling would be appealed.

Local 1889 of the International Association of Fire Fighters filed the lawsuit in March 2006, just days after the Board of Directors voted on March 16, 2006, to adopt an amendment and two resolutions changing the district’s pension plan from a defined-benefit plan to a defined-contribution plan. Hilmer and Treasurer Bonnie Stegman voted in favor of the change while then-board Secretary Dan Ottoline Sr. was opposed.

On March 30, 2006, Sherry issued an ruling granting a temporary restraining order prohibiting the board from taking any action to change the pension plan.

The defined-benefit plan was to end March 31, 2006, and the defined-contribution plan was to begin April 1, 2006, as a result of approval of Amendment 5 and the two resolutions. However, the temporary restraining order granted by Sherry stated that the board “shall maintain the current retirement and disability plan in full force and effect, without modification, as relates to the defined-benefit plan, while this temporary restraining order remains in effect or until such further time as designated by the court in granting further temporary, preliminary or permanent injunctive relief.”

On May 25, 2006, Sherry granted Local 1889’s request for a preliminary injunction, prohibiting the board from making any changes to the pension plan.

Asked about last week’s ruling, Goffstein said, “Well, we’re still studying it. We’re very disappointed in the ruling. We think it is clear error … I don’t think the fire district has anything to cheer about. There should be no joy in taking people’s pensions away from them, and the means and manner in which they went about it, we still feel are clear issues of fiduciary breach. And I’m just hoping the men and women in the fire department will continue to allow us to fight so that we can see what a reviewing court has to say about this matter.”

Attorney Mathew Hoffman, who represents the fire district, told the Call Friday, “I am pleased with the ruling of Judge Sherry. I think that she followed the law and upheld the provisions of the pension plan. At this time, we’re going to wait on a decision from the plaintiffs in this matter to determine whether the judgment is final or whether it will be appealed.”

Union employees had contended that by changing the pension plan to a defined-contribution plan, Hilmer and Stegman had breached their fiduciary duties, “resulting in lost pension benefits and damages related to lost profits sustained by the plan as a result of the liquidation of the plan,” the judge wrote in her ruling.

“Directors do not have the right to terminate or amend the plan without regard to their fiduciary duties,” Sherry wrote. “However, this responsibility does not mean that the plan can never be altered or modified.

“The court is not persuaded that there was credible evidence that the directors breached their fiduciary duty by modifying the retirement/pension plan under the facts presented to the court.

“There was credible evidence that there had been a consistent infusion of general-revenue funds to maintain the pension plan at its proper level of funding.”

After the board voted to change the pension plan to a defined-contribution plan, the plan assets were liquidated into fixed-income securities in anticipation of the change.

In an April 4, 2006, letter written to Hilmer and Stegman, Goffstein wrote that Local 1889 members “were stunned to learn that you were acting to liquidate the assets of the defined-benefit plan prior to the effective date of the proposed termination of March 31, 2006. The court has enjoined the termination of the defined-benefit plan, yet you continue to act as if the court order was not in existence.

“In all due respect, this can be characterized only as misconduct in office. It is also a violation of the express terms of the investment policy of the defined benefit plan which remains in full force and effect.

“This misconduct in the execution of your office is grounds for your removal from office, and further, has caused the pension plan serious damages,” he wrote.

But in her ruling, Sherry wrote, “This court finds at the time of the liquidation, the actions of the defendant directors did not violate their duties … Accordingly, plaintiffs’ request for damages for loss profits allegedly sustained by the plan as a result of the liquidation of plan assets is DENIED.”

In her ruling, Sherry also wrote:

• “The court further finds that the plaintiffs have not proven the termination of the defined-benefit plan violated the due-process clause of either the Missouri Constitution or the U.S. Constitution.”

• “The court further finds that plaintiffs have not proven that plan assets were, in fact, improperly commingled with other district funds.”

In denying the union’s request for a permanent injunction, the judge wrote, “This order does not preclude the defendant directors and defendant district from implementing Amendment 5, terminating the defined-benefit plan of the Mehlville Fire Protection District with respect to all current employees as well as future employees, and any subsequent retirees to the date of the amendment pursuant to the terms of the plan.”

Union employees were unsuccessful in an earlier lawsuit filed against the board.

Local 1889 filed suit in June 2005, asking the court to prohibit the board from implementing a disability-benefit contract with Standard Insurance and eliminating current disability benefits from the district’s existing pension plan.

On Feb. 24, 2006, St. Louis County Circuit Judge Barbara Crancer granted the board’s motion for summary judgment, dissolving a preliminary injunction and dismissing Local 1889’s suit. Earlier this year, a three-judge panel of the Eastern District of the Missouri Court of Appeals issued an order affirming Crancer’s dismissal of Local 1889’s lawsuit.

In May, the Missouri Supreme Court declined to hear the lawsuit. At that time, Hoffman said the Supreme Court’s decision ended the lawsuit that had been filed nearly two years earlier.

Asked about Sherry’s decision, Hilmer said, “I don’t think that we could have written the order any better than Judge Sherry did.

“I think she covered all the points. She exonerated us of all the claims that were made against us and made it clear that the fire board does indeed have the power to make the change,” he added.