[*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uncorrected and will not be published in the printed Official Reports.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,
against
Teachers' Retirement System of the City of New
York, Respondent.
114942/08
Attorney for Petitioner
Michael Kalmus, Esq.
Stuart Salles, Esq.
225 Broadway, Ste. 900
New York, NY 10007
212-267-9090
Attorney for Respondent
Jeremy I. Huntone, Esq.
Corporation Counsel
100 Church Street
New York, NY 10007
212-788-0989
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.
Discussion
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
