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Saturday, November 30, 2013

Case of Ester Marin v Teachers' Retirement System of the City of New York

Matter of Marin v Teachers' Retirement Sys. of City of N.Y.

[*1] Matter of Marin v Teachers' Retirement Sys. of the City of New York 2009 NY Slip Op 51600(U) [24 Misc 3d 1223(A)] Decided on July 14, 2009 Supreme Court, New York County Schlesinger, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports. 

Decided on July 14, 2009
Supreme Court, New York County

In the Matter of the Application of Esther Marin, Petitioner, for a Judgment under Article 78 of the Civil Practice Law and Rules,


Teachers' Retirement System of the City of New York, Respondent.


Attorney for Petitioner
Michael Kalmus, Esq.
Stuart Salles, Esq.
225 Broadway, Ste. 900
New York, NY 10007

Attorney for Respondent
Jeremy I. Huntone, Esq.
Corporation Counsel
100 Church Street
New York, NY 10007


Alice Schlesinger, J.
 Petitioner Esther Marin, a retired Supervisor of Special Education, commenced this Article 78 proceeding to annul the determination of the Teacher's Retirement System of the City of New York to recoup pension overpayments by reducing Ms. Marin's monthly pension allowance by 25%. Respondent has opposed, asserting that the proceeding is time-barred and that, in any event, the decision was proper on the merits. 

Background Facts
Petitioner Marin began teaching in the New York City schools on February 6, 1965. She continued working for thirty years, advancing to different positions until she retired on August 22, 1995. Beginning with her eligibility in 1971 and continuing thereafter for over twenty years, Ms. Marin was a member of the Teacher's Retirement System (TRS), and she made all the required contributions to her account. Contributions were reflected in terms of "units" in various accounts denominated as "Fixed," "Variable A" and "Variable B".
On July 31, 1995, shortly before she retired, Ms. Marin filed an application with TRS for retirement benefits (Answer, Exh. 1). On that same date, she applied to make a lump-sum withdrawal from her account. Following her retirement on August 22, 1995, Ms. Marin received a series of letters relating to her benefits, beginning with a letter dated May 24, 1996, advising her of the breakdown of funds in her various accounts. Based on a final average salary of $61,300.19, her regular pension was set at $40,522.03 plus $738.60 for increased take home pay for a total of $41,260.63 (Answer, Exh. 2). One week later, on May 31, Ms. Marin was advised that her application for a lump sum partial payment had been approved in the amount of $204,889.59 (Answer, Exh. 3). The transfer of those funds reduced the annual retirement [*2]allowance, which was further reduced based on a loan of nearly $50,000 outstanding on the date of Ms. Marin's retirement.
Ms. Marin continued to receive benefits for about twelve years until she was advised by letter dated January 19, 2007 that, during a routine audit, TRS had discovered a calculation error which had resulted in an overpayment to Ms. Marin. The letter was accompanied by detailed calculation sheets explaining both the initial and the revised calculations which showed that funds which should have been in the Fixed account had erroneously been allocated to the Variable A account which had grown at a different rate than the Fixed account (Answer, Exh. 4). Additional information was provided in a Revised Benefit Letter dated February 1, 2007 (Answer, Exh. 5).
Ms. Marin then contacted the Council of School Supervisors & Administrators (CSA), which then wrote to TRS on April 13 on Ms. Marin's behalf requesting an audit and a further explanation. That request led to a May 8, 2007 letter from the TRS confirming the calculation error and explaining again that it was attributable to the misallocation of a certain sum to the Variable A account rather than the Fixed account (Answer, Exh. 6).
On July 6, 2007 petitioner herself wrote directly to the TRS (Answer, Exh. 7). She indicated that, while she understood the explanation, she questioned how any such misallocation of fund units could have occurred, particularly in light of the detailed calculations she had received in 1995 and 1996. Ms. Marin asserted that she had relied on the original calculations and the continued payments for twelve years, and that she would suffer financial hardship if her pension were reduced. She requested a reevaluation.
TRS next sent Ms. Marin a letter dated August 15, 2007 (Answer, Exh. 8). In that letter, TRS confirmed for the first time that the overpayment totaled $300,184.75, and it advised Ms. Marin of her three options: (1) to repay the full amount in one lump sum; (2) to take no action, in which case TRS would automatically initiate a cost-recovery plan after 90 days by deducting 25% of the monthly amount; or (3) appeal using the form provided (Answer, Exh. 8).
In response, Ms. Marin appealed, disputing both the calculation of the overpayment and the proposed cost-recovery plan. Pursuant to the Overpayment Recovery Rules (Answer, Exh. 9), she sought to limit the recoupment to the last three years and the monthly reduction to 10%, arguing that she did not know, nor could she have reasonably been expected to know, that she had been receiving an excess pension amount and that the proposed cost-recovery plan would lead to financial hardship (Answer, Exh. 10). TRS acknowledged receipt of the appeal by letter dated September 24, 2007 (Answer, Exh. 11).
The TRS Appeals Panel then reviewed all the relevant data relating to Ms. Marin's account, as well as the balance in the account of her spouse, who was also a retiree (Answer, Exh. 12). By letter dated November 1, 2007 (Answer, Exh. 13), TRS advised Ms. Marin of its decision against her, stating that: 

Based on the information provided in your "Cost-Recovery Appeal," the TRS Committee on Cost Recovery has denied your appeal. Therefore, your cost-recovery plan will be implemented on the November 30, 2007 payroll. The terms of your cost-recovery plan are as follows: Your monthly retirement benefits will be reduced by 25% per month until your deficit amount of 300,184.75 is recovered.
For some unknown reason, TRS sent Ms. Marin another letter on [*3]November 20, 2007 (Answer, Exh. 14). That letter, like the November 1 letter, indicated that the appeal had been denied. The letter was otherwise identical to the prior letter with one exception: it indicated that the monthly recoupment would be 10%, rather than 25%. Under the above-cited Overpayment Recovery Rules, any recoupment is limited to 10% and three years when the retiree did not know, nor could be expected to know, of an overpayment (Answer, Exh. 9 and12).
On January 17, 2008, TRS sent Ms. Marin a Revised Benefits Letter detailing the re-calculation of her pension. The letter included a breakdown of the amounts held in the Fixed Portion and the Variable A and Variable B accounts and provided information regarding payment options and tax consequences (Answer, Exh. 15).
By letter dated February 5, 2008, TRS retracted the 10% error which had been included in its November 20 letter and confirmed that the monthly reduction would be 25%, as previously stated (Answer Exh. 16). Apparently, Ms. Marin had again contacted the Council of School Supervisors & Administrators (CSA) because the February 5 TRS letter referenced receipt of a letter from CSA regarding Ms. Marin's account. As Ms. Marin emphasizes, the February 5 letter, signed by a Member Services Representative, stated: "The [CSA] letter is under review by the Retirement Board and they will contact you. Please be assured that I will continue to monitor your case." (Answer, Exh. 16).
Finally, TRS sent Ms. Marin a lengthy letter dated July 17, 2008 with a multi-page attachment (Answer, Exh. 17). The letter began by acknowledging receipt of an "inquiry " from Ms. Marin to the City Comptroller concerning the November 20, 2007 TRS decision. It indicated that its letter was intended to provide additional information on the calculations. It again attributed the error to the misallocation of certain funds to the Variable A, rather than Fixed, account and set forth both the original and the revised calculations, as well as an annual statement of the account. It appears that no further correspondence was exchanged. This Article 78 proceeding was commenced about four months later, on or about November 6, 2008. 


While not disputing the TRS conclusion that her pension was initially miscalculated, resulting in an overpayment, Ms. Marin complains herein (and correctly so) that the letters sent her by TRS were oftentimes complicated and occasionally conflicting. She asserts that it was not until July 17, 2008 that she received a detailed analysis of all the relevant calculations supporting the November 1, 2007 decision by TRS. In that November 1 decision, TRS had advised Ms. Marin that it had denied her appeal and was confirming that she had been overpaid $300,184.75,and that the overpayment would be recouped at the rate of a 25% reduction in her monthly benefits until the sum was recovered in full.
Even though she now appears to understand the calculations, Ms. Marin insists that the terms of the cost-recovery plan must be annulled as arbitrary and capricious. Specifically, she asserts that the miscalculation was entirely the fault of the TRS and that she did not know, nor could she have reasonably been expected to now, about the error. Further, she relied on the TRS calculations in purchasing a home and establishing a particular lifestyle and would suffer hardship if a 25% reduction were imposed to recoup the overpayment. Accordingly, under the Overpayment Recovery Rules (Answer, Exh. 9), Marin asserts that she is entitled to have the recoupment rate reduced to 10%, with any recoupment ending after three years. [*4]
Respondent TRS opposes on two grounds. First, it asserts that the proceeding is barred by the four-month Statute of Limitations applicable to Article 78 proceedings. CPLR §217. In addition, it asserts that the decision is rationally based on the evidence and entitled to judicial affirmance.
Turning first to the threshold issue of the Statute of Limitations, the four-month period begins to run when the agency's determination becomes "final and binding" against the petitioner, within the meaning of CPLR §217. The Court of Appeals has identified two requirements for fixing that time. "First, the agency must have reached a definitive position on the issue that inflicts actual, concrete injury and second, the injury inflicted may not be prevented or significantly ameliorated by further administrative action or by steps available to the complaining party ..." Matter of Best Payphones, Inc v Department of Information Technology, 5 NY3d 30, 34 (2005)(citations omitted)(letter advising petitioner that it had failed to meet a condition of City approval and that the City was deemed to have determined not to approve a franchise for petitioner, indicated that agency had reached a definitive position which caused injury and caused the statute of limitations to begin to run).
In the case at bar, TRS communicated a definitive position that inflicted actual injury to Ms. Marin when it stated in its November 1, 2007 letter that "Based on the information provided in your "Cost-Recovery Appeal,' the TRS Committee on Cost Recovery has denied your appeal." The letter then went on to confirm the precise overpayment amount of $300,184.75 and the monthly reduction of 25% to recoup that amount. The letter was written in response to Ms. Marin's appeal, submitted on the form provided by TRS for that purpose. As there was no ambiguity in that letter and no question as to its finality, the four-month Statute of Limitations began to run on that date, and the commencement of this proceeding on November 6, 2008, nearly a year later, was untimely. See Saddlier v Teachers' Retirement System of the City of New York, 7 AD3d 430 (1st Dep't 2004)(statute of limitations began to run upon petitioner's receipt of letter denying her application, as letter was unambiguous and raised no question as to finality).
Ms. Marin argues that in her case an ambiguity was created by the November 20, 2007 letter, which was identical to the November 1 letter but for the change in the recoupment amount to 10%. However, the error in the November 20 letter was corrected by the February 5, 2008 letter which reinstated the 25% amount. The February 5 letter gave no indication of a right to a further administrative appeal or of any other steps that Ms. Marin could take to ameliorate the decisions against her. But even if one were to accept Ms. Marin's argument and calculate the four-month period from February 5, 2008, the commencement of this proceeding on November 6, 2008 was untimely.
Wholly unavailing is petitioner's attempt to toll the running of the Statute of Limitations based on inquiries made by the CSA on Ms. Marin's behalf at her urging. For example, the February 5, 2008 letter acknowledges such an inquiry and indicates that the "letter is under review by the Retirement Board and they will contact you." While Ms. Marin has not included in the record either her letter to the CSA or the CSA letter to the TRS, it appears the letters were similar to the April 13, 2007 letter from the CSA responded to by TRS in May (Answer, Exh. 6). There, CSA, apparently a member organization, asked the TRS in a one-sentence letter to provide a fuller explanation of its findings, and the TRS responded by explaining its calculations again. This type of inquiry, which did not even come directly from Ms. Marin and in no way amounted to a formal administrative challenge [*5]or appeal of the determination, did not extend the Statute of Limitations. See Lubin v Board of Education of the City of New York, 60 NY2d 974, 976 (1983), citing Matter of De Milio v Borghard, 55 NY2d 216 ("petitioner's direction of correspondence to respondents, which can be viewed, at most, as a request for reconsideration, did not toll or revive the Statute of Limitations").
Nor did the February 5 letter create any ambiguity as to finality, even though it did indicate that the TRS was reviewing the matter. In sharp contrast to the November 1 letter, the February 5 letter did not indicate that any further administrative appeal was available to Ms. Marin. At most, it intended to respond to the CSA inquiry, as it had responded to prior letter inquiries, by providing a fuller explanation of its calculations. Thus, the injury inflicted by the November 1 denial of Ms. Marin's appeal could not be prevented or significantly ameliorated by further administrative action or by steps taken by petitioner as required by the Court of Appeals to toll the running of the Statute of Limitations. The fact that a TRS customer service representative agreed to "monitor" the case did not reasonably suggest that a person with managerial authority from the Retirement Payroll Unit, like the person who had authored the November 1 appeal determination, would reopen the case.
Similarly, Ms. Marin's February 20, 2008 complaint to the City Comptroller about an "abuse of power" by the TRS (Petition, Exh J), which resulted in the TRS explanatory letter of July 17, 2008, did not extend the Statute of Limitations. See Lubin, supra. Ms. Marin had no reason to believe that a complaint letter to the Comptroller would be treated as some sort of administrative appeal or yield any different result than the one she had received by filing a formal appeal with the TRS. What is more, the July 17 responding letter, like so many before it, simply provides details explaining the calculations and does not address the issues central to the denial of Ms. Marin's appeal of the cost-recovery plan; namely, whether Ms. Marin had reason to know of the overpayment or would suffer hardship from the 25% recoupment.
Ms. Marin's reliance on A.C. Transportation, Inc. v Board of Education, 253 AD2d 330 (1st Dep't 1999) is misplaced. The Appellate Division found that the letter at issue was not "final and binding" because, while it advised plaintiff of an intention to recoup any overpayment of funds, it "went on to state plaintiffs could still present documentation to substantiate any increase in their operating costs. Thus, there is no indication that the Board had made a final determination with respect to the amount of the overpayments ..." 253 AD2d at 336 (citations omitted). In contrast here, the TRS November 1 letter explicitly denied Ms. Marin's appeal and confirmed the overpayment total and monthly recoupment amounts; it did not request any further information or otherwise suggest that Ms. Marin could take any administrative steps to cause the TRS to modify its decision, and it had no duty to advise Ms. Marin of the availability of Article 78 relief.
While petitioner contends in its memorandum of law (at p 8) that the February 5 letter indicated that the TRS agreed "to consider additional material submitted," the letter does not say that. Further, the record is devoid of any evidence that any additional material was submitted with the CSA letter which might lead the TRS to change its final determination, and such speculation is particularly unwarranted in light of the brevity of the CSA's prior one-sentence inquiry. Further, contrary to petitioner's claim (memorandum at p 14), Ms. Marin had received ample information explaining the calculation error, and the [*6]provision of additional explanatory information in the July 17 letter did not extend the Statute of Limitations.
Even if this Court were to accept Ms. Marin's argument that the February 5 TRS letter created an ambiguity which was not finally resolved until the TRS issued its July 17, 2008 letter, the petition must fail. While the commencement of the proceeding on November 6, 2008 would be timely if the four-month period were calculated from July 17, it cannot be said that the TRS decision is arbitrary and capricious on the merits and must be annulled. Ms. Marin does not, and cannot, reasonably dispute that the TRS made a calculation error. As such, TRS has a duty to correct its erroneous calculations, and no claim of estoppel based on detrimental reliance is available to Ms. Marin. See Matter of Galanthay v New York State Teachers' Retirement System, 50 NY2d 984, 986 (1980)(erroneous calculations could not be basis of estoppel claim by retiree).
The only issue is whether the TRS misapplied the Overpayment Recovery Rules when setting the terms of Ms. Marin's cost-recovery plan. Under those Rules (Answer, Exh. 9), the monthly pension allowance is reduced by 25% until the overpayment is recovered in full. If the retiree establishes that she "did not know or could not have reasonably been expected to know that an overpayment had been made," the recovery will be limited to three years prior to the date of the TRS notice and the monthly recoupment rate will be limited to 10%. The rate may also be reduced for reasons of financial hardship. Ms. Marin was well aware of the Rules, which she quoted at length in her appeal (Answer, Exh. 10).
As indicated above, the overpayment error was attributable to the misallocation of certain funds to the Variable A account, rather than the Fixed account. While Ms. Marin might not have had reason to know about that specific error, the consequences of the misallocation would have led a reasonable person to know that she was being overpaid. For example, Ms. Marin confirms in her TRS appeal and herein that she met with a pension consultant upon her retirement. She was told at that time that her final benefit would be $47,323, calculated at 77.2% of her final salary of $61,300, plus an additional amount for employer deposits over the years for Increased Take-Home Pay (ITHP).
Ms. Marin argues that it was reasonable to assume that the ITHP would be substantial, as it had been invested in the Variable A account which held stocks. TRS persuasively disputes that argument. It notes that, due to the initial miscalculation, Ms. Marin's total annual retirement allowance was calculated to be approximately $65,000. For that number to be correct, the value of the ITHP would have been $18,000, an extraordinarily high amount particularly considering that the May 17, 1996 statement set it at less than $1000. What is more, the $65,000 figure was not only far greater than the $47,000 figure quoted by the retirement consultant, but it exceeded Ms. Marin's final salary by nearly $4000. In addition, since Ms. Marin chose to make a lump-sum withdrawal from her account of over $200,000, and since she knew her account would be further reduced by her outstanding $50,000 loan, it was unreasonable to believe that her retirement allowance would exceed her final salary. Considering all these circumstances, this Court cannot find that it was arbitrary and capricious for the TRS to conclude that Ms. Marin could have reasonably been expected to know that an overpayment had been made.
Similarly, this Court cannot find that it was arbitrary and capricious of the TRS to decline to reduce the 25% recoupment based on financial hardship. The only information provided by Ms. Marin with her appeal was a general statement that the 25% reduction [*7]would force her to sell her home at a loss in a weak market. No specifics were provided. TRS balanced this claim against the following evidence: Ms. Marin's account balance when the overpayment was discovered was $522,529.83, arguably allowing her to repay the entire $300,000 overpayment in one lump-sum; the 25% monthly reduction would allow Ms. Marin to repay the overpayment over 21 years with no interest charged; even with the reduction, Ms. Marin's benefits would be $3563.12 monthly or $42,757.44 annually, still a relatively substantial amount and not significantly less than the figure originally quoted to her by the retirement consultant; and Ms. Marin shares expenses with her spouse, who also receivesTRS benefits.
In an Article 78 proceeding such as this one, the court's function is limited to a determination whether the administrative determination is arbitrary and capricious in that it is "without sound basis in reason and is generally taken without regard to the facts." Matter of Pell v Board of Education, 34 NY2d 222, 231 (1974). Unless the decision is arbitrary, the court cannot substitute its judgment, even if it would have reached a different result if presented with the issue in the first instance. Cuccia v Martinez & Ritorta, P.C., 61 AD3d 609,610 (1st Dep't 2009), citing Flacke v Onondaga Landfill Sys., 69 NY2d 355, 363 (1987). Applying this standard, the petition must be denied.
Accordingly, it is hereby
ADJUDGED that the petition is denied and the proceeding is dismissed without costs or disbursements. The Clerk is directed to enter judgment accordingly. 

Dated: July 14, 2009