Oral arguments expected to be set soon in Local 1889’s appeal of pension ruling

Motion filed by MFPD attorney seeks to dismiss appeal or strike union’s brief

By MIKE ANTHONY

Oral arguments are expected to be scheduled soon in an appeal filed by Mehlville Fire Protection District union employees that seeks to overturn a ruling that upheld the Board of Directors’ authority to make 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 Aug. 27, 2007, by St. Louis County Circuit Court Judge Thea A. Sherry.

On Dec. 24, Sherry denied union employees’ motion for a new trial, but granted their motion for an injunction pending appeal that prohibits the board from making any changes to the district’s pension plan. However, Sherry’s injunction excludes district employees hired after March 31, 2006.

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. Chairman Aaron 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 a 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.”

In June 2006, the Board of Directors adopted Resolution 6-06, which states, in part, that “the board has deemed it to be in the best interest of plan participants that the district commit to fully fund the plan so that plan participants receive the full amount of their accrued benefits under the terms of the plan as of March 31, 2006.”

John Goffstein, an attorney representing Local 1889, has filed his appellate brief and a motion requesting oral arguments be scheduled.

Mathew Hoffman, an attorney representing the Mehlville Fire Protection District, last week filed his brief in response to Goffstein’s. He also filed a motion to dismiss the appeal, or in the alternative, to strike Goffstein’s brief.

In support of his motion, filed Sept. 17, Hoffman contended:

• “That appellant’s brief does not conform to Rule 84.04(h) of the Missouri Rules of Civil Procedure in that the appendix did not include ‘the judgment, order or decision in question.'”

• “Appellant’s brief does not contain a Standard of Re-view.”

• “Appellant’s brief is 64 pages long and 15,326 words, in excess of the limit prescribed.”

In his brief, Goffstein relies on these points:

• The trial court erred in ruling that Amendment No. 5 was valid because the MFPD had no authority to terminate the defined-benefit plan with respect to vested and other participants in that the Missouri Constitution, Article 1, Section 13, prohibits impairment to the obligation of contracts.

• The trial court erred in ruling that the MFPD directors can implement Amendment No. 5 terminating the defined-benefit plan with respect to all current employees because Amendment No. 5 fails to provide for the payment of earned and accrued benefits for vested employees and other participants subsequent to the termination of the defined-benefit plan in that the Missouri Constitution, Article 1, Section 13, prohibits the impairment of contracts.

• The trial court erred in ruling that there was no credible evidence that the directors of the MFPD breached their fiduciary duties to the plan participants in regard to the means and manner of the adoption of Amendment No. 5 and termination of the defined-benefit plan and the attempted establishment of a defined-contribution plan because the uncontroverted evidence clearly established that the directors committed serious fiduciary breaches in regard to the adoption of Amendment No. 5, when the MFPD undermined the financial soundness of the defined-benefit plan in that the MFPD failed to fund the defined-benefit plan, wrongfully transferred dedicated and restricted pension monies from the pension account to pay for expenses of the district and retained investment service providers with conflicts of interest and without competitive bids who acted to facilitate the defined-benefit plan termination to create a defined-contribution plan in violation of RSMo 105.662, RSMo 105.688, RSMo 321.200, RSMo 110.010, RSMo 110.070, RSMo 110.090, RSMo 321.600(4), RSMo 321.610, Article 1, Section 13 of the Missouri Constitution, and IRS Code Section 401(a)(12)(13).

In his brief, Hoffman relies on these points:

• Standard of review.

• The trial court properly ruled that Amendment 5 was valid because the Board of Directors of the MFPD had the authority to change the plan pursuant to the plan language and statutory authority.

• The trial court properly ruled that the MFPD could implement Amendment 5 and the decision did not violate federal law or the Missouri Constitution.

• The trial court properly ruled that the Board of Directors of the MFPD did not violate their fiduciary duty to the plan participants or violate Missouri law with the enactment of Amendment 5.

In his brief, Goffstein noted that an expert witness called by the plaintiffs, Robert Klausner, “testified that the practical effect of Resolution 6-06 was to effectuate the immediate distribution of Plan benefits after receipt of a favorable determination letter from the Internal Revenue Service with respect to the termination of the plan. Resolution 6-06 calls for the immediate distribution of assets, which is inconsistent to the previous court orders stating that the directors should do nothing which sells or liquidates the assets, and orders the maintenance of the fund.

“Thus, we have another impairment of the obligation of contracts, along with what took place with the transfers of administration to pay for the legal obligations of the district, including legal defense costs, actuarial expenses and reversion of interest to the district of trust-fund monies, which further impaired the obligation of the district to the pension contract because it caused damages to the fund and weakened the ability of the DBP (defined-benefit plan) to pay its obligations to the participants.”

In his brief, Hoffman wrote, “Concerns over the future financial viability of the pension plan were a motivating factor in the transition to a defined-contribution plan. In fact, the pension fund had recently made lump-sum payouts to retiring firefighters in excess of $2 million … To cover shortfalls, the pension fund received approximately $400,000 from the general fund ..”

Hoffman also wrote, “Plaintiffs also allege that defendants have commingled assets. No proof has been offered by plaintiffs to substantiate this allegation. Further, the funds of the pension have not been improperly commingled with any other funds of the district.

“In fact, funds were moved into the plan to cover yearly financial losses.”

Hoffman also noted in his brief that “former Director Ottoline, in his testimony on April 24, 2006, conceded that prior administrative expenses had been paid in the past out of the pension fund … In his testimony, former Director Ottoline answered as follows:

“Q: Would you agree with me that the professional fees [were paid out of the] pension fund, including the expenses of legal fees and counsel?

“A: Correct.”