Preliminary injunction prohibits changes to MFPD pension plan

Circuit court hearing for Mehlville fire district, firefighters’ union set for Oct. 2

By MIKE ANTHONY

A St. Louis County Circuit Court judge last week granted a preliminary injunction prohibiting the Mehlville Fire Protection District Board of Directors from making any changes to the district’s pension plan.

In separate votes, the Board of Directors voted 2-1 March 16 to adopt an amendment and two resolutions changing the district’s pension plan from a defined benefit plan to a defined contribution plan. Board Chairman Aaron Hilmer and Treasurer Bonnie Stegman voted in favor of the motions. Board Secretary Dan Ottoline Sr. was opposed.

Within days of the board’s action, Local 1889 of the International Association of Fire Fighters filed suit challenging the board’s action, and Judge Thea A. Sherry on March 30 issued an order granting a temporary restraining order prohibiting the board from taking any action to change the pension plan from a defined benefit plan to a defined contribution plan.

The defined benefit plan was to end March 31 and the defined contribution plan was to begin April 1 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, Sherry granted Local 1889’s request for a preliminary injunction, prohibiting the board from making any changes to the pension plan and setting a hearing on the union’s request for permanent injunctive relief during the week of Oct. 2.

In her judgment, Sherry wrote that after the election of Hilmer and Stegman in April 2005, “the directors set out to terminate the defined benefit plan, ostensibly to reduce the cost to the (district), but without regard to the effect on the plan participants. The assurances from defendants that there will be no reduction in benefits to the current retirees and vested members were unpersuasive.

“The change in the plan affects future employees, retired employees and current employees, both vested and non-vested,” Sherry wrote. “There is no credible evidence that the aforedescribed Amendment 5 does not adversely affect the protected interest of at least the retired employees and vested current employees.”

Sherry’s judgment further noted that the members of the Board of Directors are “fiduciaries with respect to employees’ interest in the defined benefit plan. As fiduciaries, the directors are required to act solely in the interest of plan participants … As the fiduciaries also must act responsibly and reasonably, the manner used to pass Amendment 5 is indicative of a failure to fully, responsibly and reasonably consider the impact upon all the plan participants.”

Besides prohibiting the Board of Directors from taking any action to implement the changes to the pension plan, Sherry’s preliminary injunction states, “It is further ordered that the defendant directors shall take no action to further sell or liquidate the assets of the plan and shall maintain all funds that have been so sold or liquidated in appropriately insured accounts pending further direction from the court.”

Local 1889 attorney John Goffstein told the Call Friday that he “couldn’t be more pleased” with the judge’s ruling.

“Her order pretty much mirrored what the plaintiffs were requesting, and it’s an excellent order and it’s very much in the public’s best interest. I just couldn’t be more pleased,” he said.

In an April 4 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,” Goffstein wrote.

On Friday, the Local 1889 attorney said that the pension fund’s assets already have been liquidated “arguably in violation of two court orders. Right now, we’re going to have to get in there and assess what damages have been done to the pension plan. So we’re going to be calling for an independent public accounting so that we can see what the damages are to the plan.”

In fact, he already has made a request to the district for an independent public accounting of the liquidated plan assets.

“… It’s unbelievable to me that they — it’s just irresponsible to liquidate over $30 million in assets in violation of court orders. It’s unbelievable,” he said. “I mean it’s like ready, fire, aim. And what was the hurry?”

Mehlville Fire Protection District attorney Mathew Hoffman told the Call Friday that the board has followed both state statutes and pension plan procedures and will continue to do so.

Regarding Sherry’s judgment granting the preliminary injunction, Hoffman said, “It is my opinion that the Board of Directors will address the judge’s concerns and facilitate resolution of this matter. The judge’s order is consistent with prior statements made by individual board members in which they expressed their intent to fund vested benefits of district employees.”

Local 1889 first filed suit against the district’s three board members in late 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.

St. Louis County Circuit Court Judge Barbara Crancer granted a preliminary injunction in early August prohibiting enactment of the proposed changes to the district’s disability plan. Crancer ruled that the Board of Directors did not follow the proper procedures to change retirement benefits under state law and the federal Employee Retirement Income Security Act, or ERISA. She also ruled that the Board of Directors did not violate the state’s Meet and Confer Law or the Open Meetings and Records Law, also called the Sunshine Law.

On Feb. 24, Crancer granted the board’s motion for a summary judgment, dissolving the preliminary injunction and dismissing Local 1889’s suit. In her ruling, Crancer stated, “This court has never questioned the power of the defendants to enact the proposed changes, only the manner in which the proposed changes were sought to be implemented.”

After the ruling, Goffstein’s firm filed motions asking Crancer to set aside her ruling granting the board’s motion for summary judgment. On March 28, Crancer denied Local 1889’s motion for a new trial. On April 1, Crancer granted Local 1889’s motion for an injunction prohibiting enactment of the changes to the disability plan pending the outcome of an appeal.

In his appeal to the Eastern District of the Missouri Court of Appeals, Goffstein alleges, among other things, that Crancer “refused to admit plaintiffs’ evidence of fiduciary breach in the form of deposition testimony and affidavits. Therefore, the record before the trial court was incomplete and it was (an) error to enter summary judgment on defendants’ behalf.”

Between now and the week of Oct. 2 when the hearing is conducted before Sherry, Goffstein said, “We’re going to do everything we can to give them a chance still to do the right thing by the district and make this thing whole, and get on to the business of running a fire district and not have all these bogus issues out there. So we just want them to do the right thing, and if they don’t, then I’m certain the court will make it just worse on them … We will make every attempt to resolve this to the public’s best interest between now and then, but if not … If I were them, I wouldn’t want to go back to court (the week of) Oct. 2.”