Faella v. Town of Johnston

• Decision Date: 25 May 2022
• Docket Number: 2019-445-Appeal.,PB 10-311,2019-447-Appeal.,PB 10-60
• Citation: 274 A.3d 798
• Parties: Albert A. FAELLA et al. v. TOWN OF JOHNSTON et al. Alan Ross v. Town of Johnston.
• Court: Rhode Island Supreme Court

274 A.3d 798

Albert A. FAELLA et al.

v.TOWN OF JOHNSTON et al.

Alan Ross

v.Town of Johnston.

No. 2019-445-Appeal.

PB 10-311

No. 2019-447-Appeal.

PB 10-60

Supreme Court of Rhode Island.

May 25, 2022

Michael J. Lepizzera, Esq, Timothy J. Robenhymer, Esq., for Plaintiffs.

William J. Conley, Esq., for Defendants.

Present: Suttell, C.J., Goldberg, Robinson, and Long, JJ.

Justice Long, for the Court.

In these consolidated appeals arising from two consolidated Superior Court civil actions, the defendants, the Town of Johnston and Joseph Chiodo, in his capacity as finance director for the Town of Johnston (defendants or the town), appeal from a judgment of the Superior Court granting declaratory judgment in favor of the plaintiffs, Andrea DiMaio, as duly appointed Administratrix of the Estate of John DiMaio (Mr. DiMaio); Alan Ross (Mr. Ross); and Albert Faella (Mr. Faella) (collectively plaintiffs).¹ The trial justice determined that certain accounts bearing the names of the respective plaintiffs constituted deferred compensation, governed by Internal Revenue Code § 457 ; declared the accounts to be the plaintiffs’ property; and ordered the associated funds be remitted to the plaintiffs. For the reasons stated herein, we reverse the judgment of the Superior Court and remand these consolidated cases for entry of final judgment consistent with this opinion.

A summary of the facts relevant to these appeals follows, and additional facts are included in the discussion of the issues on appeal.

Facts and Procedural History

This case stems from a long-running dispute between plaintiffs and the Town of Johnston regarding the entitlement to funds in accounts held first by Aetna Life Insurance and Annuity Company and then by ING Life Insurance and Annuity Company (ING)² on behalf of the town (the funds). The facts of this case may be familiar to the reader; these cases were previously before this Court in Faella v. Chiodo , 111 A.3d 351 (R.I. 2015). In those consolidated appeals, this Court vacated the trial justice's grant of summary judgment in favor of plaintiffs pursuant to a 1993 contract entitled "Town of Johnston Police Department Pension Plan" (the 1993 pension plan). Faella , 111 A.3d at 354, 356, 358. Following our opinion in that case, a nonjury trial took place in the Superior Court, and the decision of the trial justice is the subject of the present appeals. The following facts are largely undisputed.

The plaintiffs were police officers employed by the town beginning between 1983 and 1985. During their tenures with the Johnston Police Department, plaintiffs were members of their local chapter of the International Brotherhood of Police Officers, a police union (the local IBPO). Throughout plaintiffs’ employment with the police department, the local IBPO negotiated collective bargaining agreements (CBAs) on behalf of union members.

The CBAs governed, among other items, police officers’ retirement benefits. The CBAs indicated that the following pension scheme was in effect for officers retiring after July 1, 1979. The CBAs provided for a pension equal to a percentage of an officer's annual salary at the time of retirement or separation from service, for the remainder of the officer's life. The percentage increased with time served on the force. With respect to officers who were injured in the line of duty, the CBAs provided for a disability pension equal to sixty-six and two-thirds percent of the officer's annual salary at the time of retirement, even if that officer would not have qualified for that rate if the officer retired other than on a disability pension.

Pursuant to these CBA provisions, between 2004 and 2008 plaintiffs began receiving disability pensions after sustaining serious injuries in the line of duty that left them unable to perform their duties as police officers.

While continuing to receive their disability pensions, plaintiffs also sought distribution of funds held by ING that were attributable to their contributions and the town's matching contributions. The plaintiffs maintained that the ING accounts held funds to which they were entitled as part of their retirement package with the town. For their part, defendants disputed that plaintiffs were entitled to distribution of the funds in the accounts because, defendants asserted, the accounts contained contributions from police officers and the town to fund the town's pension obligations under the applicable CBAs. The defendants therefore refused to execute procedures to remit the funds in the ING accounts, giving rise to this controversy.

The plaintiffs filed the instant actions in Superior Court in 2010, seeking declarations that they were entitled to distribution of all amounts contributed to the ING accounts, as well as mandatory injunctive relief to that effect. Originally named as a party, ING subsequently filed a motion to interplead the funds, which the trial justice granted. ING thereafter deposited the funds into the registry of the court, where the funds remain, and the trial justice dismissed ING from the actions.

As was the case when this Court reviewed the trial justice's grant of summary judgment in 2011, the parties disputed the history and purpose of the ING accounts at trial. See Faella , 111 A.3d at 353. As evidence in support of plaintiffs’ view of the ING accounts, they introduced and relied upon an agreement executed by ING and the town, effective April 1984, pursuant to which ING created the accounts (the ING agreement). The ING agreement was labeled on its face as the "Johnston Town Hall Deferred Compensation Plan" and identified the contract holder as "Johnston Town Hall." The master application, which was incorporated into the ING agreement, identified the name of the plan as "Town of Johnston Deferred Compensation – Police Officers" and the type of plan as a "457" under the Internal Revenue Code. The ING agreement established two "group contracts," contract number VB 1965 and contract number VB 1966. Each contract created an account, one housing payroll deductions from police officers, and the other housing contributions made by the town (collectively the accounts).

The accounts segregated contributions by social security number, and plaintiffs received quarterly statements tracking contributions. They could also view the accounts using a personal identification number provided by ING, and, at some point, they were permitted to decide how the individual contributions should be invested.

According to plaintiffs, the ING agreement established a retirement savings program for police officers that was separate and distinct from the police pension plan established under the CBAs; plaintiffs maintained that, under this purported separate retirement savings program, police officers who chose to participate contributed six percent of each of their salaries to the accounts, and the town contributed a twelve-percent match. In support of this assertion, plaintiffs relied upon deposition testimony from Christina Menard, an ING employee who serviced the accounts, wherein she stated that the ING agreement established a § 457 deferred compensation plan.

In addition to relying on the deposition testimony of Ms. Menard, plaintiffs also called as witnesses Dennis Quaranta, the town finance director in 1993; Robert Civetti, a certified public accountant whose company provided auditing for the town from 1994 through 2014; Ronald Capraro Jr., a CitiGroup Global Markets, Inc. investment adviser who was a broker of record for the accounts from about 2006 to 2012; and Vincent Baccari Jr., who was the town clerk from 2007 through the time of his trial testimony in 2017. Additionally, plaintiffs provided testimony and documentary evidence, such as enrollment forms and account statements.

The plaintiffs also sought relief under, and presented evidence concerning, the 1993 pension plan, which the trial justice initially admitted de bene . The 1993 pension plan was ultimately deemed inadmissible at trial, however, and the relationship between the 1993 pension plan, the ING agreement, and the resulting accounts remains opaque as developed in the trial record. The plaintiffs have not taken issue on appeal with the trial justice's ruling on this evidentiary matter.

At the close of plaintiffs’ case-in-chief, defendants moved for judgment on partial findings pursuant to Rule 52(c) of the Superior Court Rules of Civil Procedure. After considering the parties’ arguments, the trial justice reserved decision on the motion.

In presenting their case-in-chief, defendants did not dispute that plaintiffs contributed six percent of their salaries to the accounts, or that the town contributed a twelve-percent match. Rather, defendants maintained throughout the trial that plaintiffs were not entitled to distribution of the funds held in the ING accounts, arguing that the accounts held mandatory contributions to, and were a funding mechanism for, the town's pension obligations under the CBAs. The defendants further maintained that the CBAs established the pension benefit for all town police officers, and that it was pursuant to the CBAs that plaintiffs had been receiving a disability pension since the time of their respective retirements.

At the close of trial, defendants renewed their Rule 52(c) motion for judgment on partial findings; the parties agreed to close with posttrial memoranda.

In their posttrial memorandum, plaintiffs narrowed the relief they sought. Because the 1993 pension plan was ultimately deemed inadmissible at trial, plaintiffs withdrew their claims for relief pursuant to that document and relied solely on the ING agreement as establishing entitlement to the funds. The plaintiffs further withdrew their claims for a mandatory injunction with respect to the accounts, conceding that the claim was moot because the funds were held in the court registry and therefore an injunction was not necessary to distribute the funds if declaratory judgment was granted in their favor. Thu...