Russo v. Sch. Bd. of Hampton
| Decision Date | 15 December 2011 |
| Docket Number | Civil Action No. 4:11cv68. |
| Citation | 280 Ed. Law Rep. 915,835 F.Supp.2d 125 |
| Court | U.S. District Court — Eastern District of Virginia |
| Parties | Patrick J. RUSSO, Plaintiff, v. SCHOOL BOARD OF the CITY OF HAMPTON, VIRGINIA, Defendant. |
OPINION TEXT STARTS HERE
Susan Childers North, LeClairRyan PC, Richmond, VA, William Leonard Downing, The Consumer and Employee Rights Law Firm PC, Newport News, VA, for Plaintiff.
Andrew K. Rudiger, Stanley G. Barr, Jr., Kaufman & Canoles PC, Norfolk, VA, for Defendant.
Before the Court is Defendant's Motion to Dismiss, or in the alternative, for Summary Judgment, pursuant to Rules 12(b)(1) and 56 of the Federal Rules of Civil Procedure, respectively. This matter has been fully briefed and is ripe for judicial determination. For the reasons set forth herein, Defendant's Motion to Dismiss is GRANTED.
Dr. Patrick J. Russo (“Dr. Russo”) has brought this action against the School Board of the City of Hampton, Virginia (“School Board”), alleging various constitutional and breach of contract claims arising from an employment contract by which the School Board employed Dr. Russo as Superintendent of Hampton City Schools between July 1, 2004 and June 30, 2009. Am. Compl. ¶¶ 1–2, 74–113. As there have been parallel proceedings in Virginia state court on this matter, the procedural history will incorporate that proceeding, which is summarized infra.
The School Board hired Dr. Russo as Superintendent under a four-year contract beginning July 1, 2004. Am. Compl. ¶ 1. This 2004 contract contained a contract extension provision. Def.'s Br. Supp. Mot. Dismiss or Alternative, Summ. J. at ¶ 2, p. 2 (“Def.'s Br. Supp. Mot. Dismiss”). Pursuant to the contract extension provision, Dr. Russo and the School Board entered into a new four-year contract on September 26, 2006, which became effective on July 1, 2006, and expired on June 30, 2010 (“2006 Contract”). Am. Compl. ¶ 6. The 2006 Contract provides that the School Board would pay Dr. Russo an annual salary of $169,260, full premiums for medical and dental insurance for Dr. Russo and his family, all contributions for Dr. Russo to the Virginia Retirement System (“VRS”), and other benefits. Am. Compl. ¶¶ 7–14; Am. Compl., Ex. 1. Section 5(B)(ii) of the 2006 Contract also provides that the School Board would make payments for a tax deferred annuity, titled jointly with Dr. Russo and the School Board, pursuant to either Section 403(b), 415, or 457 of the Internal Revenue Code. Am. Compl., Ex. 1, § 5(B)(ii). Under Section 5(B)(ii), the School Board was to fund twenty-four months of retirement credit for each year Dr. Russo worked under the 2006 Contract. Am. Compl., Ex. 1, § 5(B)(ii). This Section also states that if Dr. Russo terminated his employment with the School Board before the expiration date of the contract, i.e., June 30, 2010, he would forfeit the payments the School Board made for the annuity. Am. Compl., Ex. 1, § 5(B)(ii).
Dr. Russo set up the annuity under 26 U.S.C. § 403(b)(7) of the Internal Revenue Code through his personal financial advisor with whom he had an existing investment account, and Dr. Russo signed a Salary Deferral Agreement. Am. Compl. ¶¶ 10, 16; Am. Compl., Ex. 2; Def.'s Br. Supp. Mot. Dismiss at ¶ 5, p. 2. The annuity was held in Dr. Russo's name only and was not jointly titled with the School Board. Def.'s Br. Supp. Mot. Dismiss at ¶ 10, p. 3; see Am. Compl., Ex. 2. Dr. Russo hired Dr. Victor Hellman as the Chief Operations Officer for the City of Hampton Schools and Dr. Hellman executed the Salary Deferral Agreement on October 11, 2006. Am. Compl. ¶¶ 18–19; Def.'s Br. Supp. Mot. Dismiss at ¶¶ 6–7, p. 2.
The Salary Deferral Agreement states, in relevant part:
The above named Employee [Dr. Russo] of the referenced Employer [the School Board] agrees to work for a reduced salary as indicated herein and the Employer agrees to remit this amount on Employee's behalf into the program selected [pre-tax 403(b)(7) ].... The Employee understands and agrees to the following: 1) this Salary Deferral Agreement is legally binding and irrevocable with respect to all amounts earned while this agreement is in effect; 2) this Salary Deferral Agreement may be terminated at any time for amounts not yet earned 3) this Salary Deferral Agreement may be changed with respect to salary not yet earned in accordance with Employer's administrative procedures....
In approximately May or June of 2008, the Chairman of the School Board, Mr. Fred Brewer, informed Dr. Russo that a majority of the School Board had agreed not to extend Dr. Russo's 2006 Contract at that time. Am. Compl. ¶ 33. Mr. Brewer also knew that the School Board was not in favor of extending Dr. Russo's contract in the future. Am. Compl. ¶ 33. Months after Dr. Russo learned that the School Board did not intend to extend his 2006 Contract, a recruiter approached Dr. Russo about interviewing for another school superintendent position. Am. Compl. ¶ 37. As a result, Dr. Russo informed the School Board in February 2009 that, effective June 30, 2009, he was resigning as Superintendent of the City of Hampton Schools to become Superintendent of Henrico County Public Schools. Am. Compl. ¶ 38.
Following Dr. Russo's notice of resignation, he and the School Board discussed entering into a Superintendent's Transition Agreement and General Release (“Transition Agreement”). Am. Compl. ¶ 41. The School Board's attorney then drafted the Transition Agreement and Dr. Russo reviewed it prior to finalization. Am. Compl. ¶¶ 41–45. Accordingly, on or about April 14, 2009, the School Board approved the Transition Agreement and authorized the Chairman of the School Board to enter into the Agreement, which the Chairman then executed. Am. Compl. ¶¶ 46–47; see Am. Compl., Ex. 4. Dr. Russo also executed the Transition Agreement. Am. Compl. ¶ 48; see Am. Compl., Ex. 4.
The pertinent terms of the Transition Agreement were as follows: 1) Dr. Russo's resignation would be effective June 30, 2009, and an Interim Superintendent would be appointed, effective April 15, 2009; 2) Dr. Russo would be expected to be available until June 30, 2009, to assist the Interim Superintendent with the transition;3) Dr. Russo would be able to use his office, computer, email account, and cell phone until June 30, 2009; 4) Dr. Russo could participate in graduation and other events associated with his position and the School Board would continue to pay for any expenses and insurance associated with Dr. Russo's professional duties; 5) the School Board would continue to provide Dr. Russo with all compensation and other benefits contained in the 2006 Contract from April 15, 2009, until June 30, 2009; and 6) Dr. Russo would be paid his accrued and unused leave time, and he would not be required to use any leave after April 15, 2009. Am. Compl. ¶¶ 49–52.
Within a month of executing the Transition Agreement, the School Board learned that Dr. Russo had not jointly titled the annuity, as required under the 2006 Contract. Am. Compl. ¶ 55; Def.'s Br. Supp. Mot. Dismiss at ¶ 10, p. 3. As a result, the School Board voted to discontinue and then discontinued payment of Dr. Russo's base salary and benefits, including: annuity payments for April, May, and June 2009; contributions to Dr. Russo's VRS account for May and June 2009; dependent care Flexible Spending Account contributions for May and June 2009; Dr. Russo's travel supplement for May and June 2009; and Dr. Russo's accrued but unused leave as of April 15, 2009. Am. Compl. ¶¶ 55–61. The School Board also did not transfer Dr. Russo's accrued and unused sick leave from Hampton City Schools to Henrico County Public Schools. Am. Compl. ¶ 62.
In accordance with Dr. Russo's tendered resignation and the Transition Agreement, his employment with the School Board terminated on June 30, 2009. See Am. Compl., Ex. 4.
Before this matter came to this Court, there was a related proceeding in the Circuit Court of Hampton, Case No. CL09002356. In that case, the School Board filed a two-count complaint against Dr. Russo on November 3, 2009, claiming that Dr. Russo breached the 2006 Contract by not jointly titling the annuity and seeking judgment for the payments the School Board made for the annuity. Def.'s Br. Supp. Mot. Dismiss, Ex. A. On December 11, 2009, Dr. Russo responded by filing a demurrer and counterclaim based on the Transition Agreement, claiming that the Transition Agreement constituted a novation of the 2006 Contract, asserting that the Transition Agreement contained no provision for forfeiture of the annuity payments, and seeking a judgment for salary and benefits under the Transition Agreement. Def.'s Br. Supp. Mot. Dismiss, Ex. B. On July 16, 2010, the School Board filed a motion for partial summary judgment against Dr. Russo, seeking a judgment that the Transition Agreement was not a novation of the 2006 Contract and that Dr. Russo was obligated to reimburse the School Board for the annuity payments it made, pursuant to the 2006 Contract's forfeiture provision. Def.'s Br. Supp. Mot. Dismiss, Ex. C. On July 19, 2010, Dr. Russo then moved for summary judgment on the School Board's claims against Dr. Russo and on Dr. Russo's breach of contract claim against the School Board. Def.'s Br. Supp. Mot. Dismiss, Ex. D.
Following full briefing by the parties and oral argument on the motions for summary judgment, Circuit Court Judge Thomas A. Shadrick first ruled from the bench on March 21, 2011, and later issued a formal opinion on May 23, 2011. 1 Pl.'s Br. Opp'n Mot. Dismiss, Ex. 8 at 24; Def.'s Br. Supp. Mot. Dismiss, Ex. E. Judge Shadrick held that Dr. Russo forfeited the School Board's payments toward the annuity when he resigned his position prior to the expiration of the 2006 Contract and awarded judgment for the annuity payments to the School...
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