Bohlen v. DiNapoli, 525823
| Decision Date | 09 August 2018 |
| Docket Number | 525823 |
| Citation | 83 N.Y.S.3d 366,164 A.D.3d 1038 |
| Parties | In the Matter of Bruce D. BOHLEN et al., Petitioners, v. Thomas P. DINAPOLI, as State Comptroller, et al., Respondents. |
| Court | New York Supreme Court — Appellate Division |
DeGraff, Foy & Kunz, LLP, Albany (George J. Szary of counsel) and Port Authority of New York and New Jersey, New York City (Stephen Marinko of counsel), for petitioners.
Barbara D. Underwood, District Attorney, Albany (William E. Storrs of counsel), for respondents.
Before: McCarthy, J.P., Lynch, Devine, Clark and Pritzker, JJ.
Proceeding pursuant to CPLR article 78 () to review a determination of respondent Comptroller excluding certain compensation from certain employees' final average salary in calculating retirement benefits.
The operations of the Port Authority of New York and New Jersey (hereinafter the Port Authority) suffered serious adverse consequences following the September 11, 2001 terrorist attack on the World Trade Center that resulted in the destruction of its headquarters, the loss of virtually all of its records and the death of over 70 of its employees, including its Executive Director.1 In the aftermath of this disaster, the Port Authority relied upon the expertise of 11 long-term, executive level key employees, all members of respondent New York State and Local Employees' Retirement System (hereinafter the Retirement System): petitioner Bruce D. Bohlen, petitioner Edward L. Jackson, petitioner Louis J. LaCapra, petitioner Jeffrey S. Green, petitioner Francis J. Lombardi, petitioner Charles R. McClafferty, petitioner Anthony G. Cracchiolo, petitioner Aaron P. Blanco, petitioner John F. Spencer, Lawrence S. Hofrichter and Ernesto L. Butcher.2
In 2002, the Port Authority elected to participate in a temporary retirement incentive program that was passed by the Legislature for employees who were members of the Retirement System but advised petitioners, who were all eligible to retire at that time without penalty, that they would be exempted from the program. Instead, the Port Authority offered each of them, in addition to their regular salary, a "parity" benefit described as a longevity allowance payment that was based on a percentage of their salary to be paid biweekly, provided that they continued their employment beyond December 31, 2002. Petitioners each signed memorandum agreements accepting the offer and the Port Authority began making longevity allowance payments to them under what it called an "Employee Retention Program."
Between 2003 and 2010, Bohlen, Jackson, Green, Lombardi, McClafferty, Cracchiolo, Blanco and Spencer retired from service and each received retirement benefits based upon the inclusion in their final average salaries of the longevity allowance payments. In 2012, LaCapra, Hofrichter and Butcher filed their retirement applications, but the Retirement System concluded that the longevity allowance payments were not includable in their final average salaries because they were paid "in anticipation of eventual retirement." The Retirement System also reevaluated the retirement benefits that were being paid to the other key employees and reached the same conclusion.
Petitioners challenged the determinations of the Retirement System and requested a hearing. Following a consolidated hearing, a Hearing Officer found that the Retirement System acted reasonably in excluding the longevity allowance payments in computing petitioners' final average salaries, consistent with the provisions of Retirement and Social Security Law § 431. Respondent Comptroller accepted the Hearing Officer's findings, and this CPLR article 78 proceeding ensued.
Petitioners maintain that the longevity allowance payments should have been included in the calculation of their final average salaries. We agree. There is no dispute that the 2002 enabling legislation establishing the retirement incentive authorized participating employers to determine which titles would be eligible. To that end, the Port Authority was authorized to determine that petitioners—all recognized as key employees eligible to retire—would be ineligible for the program. Nonetheless, the Port Authority entered into a memorandum agreement with each petitioner that provided for a "longevity allowance in consideration of [petitioners] not retiring" (emphasis added). The "consideration" factor is significant for the Port Authority was entitled to exclude petitioners from the retirement incentive without providing any consideration, regardless of whether petitioners intended to retire at that time. By its terms, the memorandum explains that the longevity allowance would make petitioners' pension calculation "roughly equivalent" to what it would have been under the retirement incentive, provided that they remained employed for three years beyond December 31, 2002. Significantly, the additional payments were made on a biweekly basis in the same way as regular salary for services as they were performed.
In our view, these payments are more appropriately characterized as payments genuinely made to delay petitioners' retirements, not to artificially inflate their final average salary in anticipation of retirement. We see the primary purpose of the memorandum agreement as twofold—to retain key employees following the September 11, 2001 terrorist attack and to adequately compensate petitioners for their dedication and commitment to remain in their vital positions (see Matter of Curra v. New York State Teachers' Retirement Sys., 30 A.D.3d 666, 666–667, 815 N.Y.S.2d 791 [2006] ; Matter of Van Haneghan v. New York State Teachers' Retirement Sys., 6 A.D.3d 1019, 1021, 776 N.Y.S.2d 120 [2004] ). This is certainly neither a lump-sum payment on the eve of retirement nor a disproportionate salary increase designed to artificially inflate a pension benefit that would be properly excluded from the computation of the final average salary (compare Matter of Chichester v. DiNapoli, 108 A.D.3d 924, 925, 969 N.Y.S.2d 600 [2013] ; Matter of Thompson v. New York State Teachers' Retirement Sys., 78 A.D.3d 1456, 1457, 912 N.Y.S.2d 141 [2010] ). The statute squarely precludes "any additional compensation paid in anticipation of retirement" from an employee's salary base for purposes of computing the employee's retirement benefit ( Retirement and Social Security Law § 431[3] ). In that regard, it is telling that both the Retirement System and the Hearing Officer, whose recommendation the Comptroller adopted, characterized the payments as having been made "in anticipation of eventual retirement" (emphasis added). The term "eventual" is not part of the statutory standard and actually reflects the Comptroller's own recognition that there was no actual retirement date anticipated in the memorandum agreement. Further, that temporal qualification is consistent with the Port Authority's key objective to further delay petitioners' retirements, not to artificially inflate an impending pension. Given this context and the language of the memorandum agreement, we conclude that the Comptroller's determination to uphold the Retirement System's exclusion of these payments from the computation of petitioners' pension benefits is not supported by substantial evidence. As such, the Retirement System must recalculate petitioners' final average salaries for the purpose of computing their retirement benefits. Having so concluded, we need not address petitioners' remaining argument that the Comptroller's determination violated the constitutional rights of the six petitioners who joined the Retirement System prior to June 17, 1971.
Because we would confirm the determination of respondent Comptroller, we respectfully dissent.
We are mindful of the impact that the confirmation of the Comptroller's determination would have on petitioners' respective retirement benefits and that petitioners, having retired years ago, have likely come to rely on that income. And, we appreciate the value of petitioners' expertise and continued employment at the Port Authority of New York and New Jersey (hereinafter the Port Authority) following the devastating terrorist attack on September 11, 2001. However, what we are confronted with in this case requires us to be equally mindful that Retirement and Social Security Law § 431 furthers the legislative goal of protecting pension funds and ensuring the continued financial viability of respondent New York State and Local Employees' Retirement System (hereinafter the Retirement System) (see Abbatiello v. Regan, 205 A.D.2d 1027, 1029, 614 N.Y.S.2d 451 [1994], lv denied 84 N.Y.2d 808, 621 N.Y.S.2d 517, 645 N.E.2d 1217 [1994] ; Matter of Hohensee v. Regan, 138 A.D.2d 812, 814, 525 N.Y.S.2d 733 [1988], lv denied 72 N.Y.2d 807, 533 N.Y.S.2d 56, 529 N.E.2d 424 [1988] ; see generally Matter of Galanthay v. New York State Teachers' Retirement Sys., 50 N.Y.2d 984, 986, 431 N.Y.S.2d 472, 409 N.E.2d 945 [1980] ), and of the considerable deference that this Court affords to the Comptroller's interpretation of statutes that he is charged with administering, including Retirement and Social Security Law § 431 (see Matter of Porco v. New York State Teachers' Retirement Sys., 140 A.D.3d 1457, 1458, 34 N.Y.S.3d 683 [2016] ; Matter of Brandt v. DiNapoli, 126 A.D.3d 1165, 1166, 5 N.Y.S.3d 587 [2015], lv denied 26 N.Y.3d 904, 2015 WL 5254752 [2015] ).
We disagree with the majority that the longevity allowance payments should have been included in the calculations of petitioners' final average salaries. "[A] member's retirement benefit is based upon his or her final average salary, i.e., ‘the average salary earned by such ... member during any three consecutive years which provide the highest average salary’ " ( Matter of Chichester v. DiNapoli, 108...
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