Opinion
6378-09.
Decided March 17, 2010.
Leeds Morelli Brown, P.C., Attorney for Petitioner, Carle Place, NY.
Andrew M. Cuomo, Attorney General, State of New York, Attorney for Respondent.
The Capitol, Albany, New York, (Adele Taylor Scott, Assistant Attorney General of Counsel).
The petitioner, a retired Superintendent of the Elmont Union Free School District ("School District"), has commenced the above-captioned CPLR Article 78 proceeding to review a determination of the respondent dated March 26, 2009. In the determination, the respondent found that a portion of salary increases the petitioner received prior to her retirement (and other compensation items) should not be included in her three year final average salary for purposes of computing her retirement pension.
The petitioner commenced her employment with the School District in 1981, as Title VII Coordinator. In the summer of 1986 she was promoted to the position of Director of Curriculum and Instruction, which she held until July 1994 when she was appointed Interim Superintendent. She was appointed Superintendent of Schools in March 1998 . In July 1998 the petitioner entered into her first contract with the School District as Superintendent. That contract fixed petitioner's salary at $121,275.00 for the 1998-1999, and $123,458.00 for the 1999-2000 school year. As relevant here, on August 29, 2000 the petitioner entered into a second contract with the School District, extending her employment through the 2002-2003 school year. The contract contained a base salary of $140,000.00 for the 2000-2001 school year, with annual salary adjustments in the second and third years in accordance with the Consumer Price Index ("CPI") not to exceed 5%. It also included a provision for a lump sum cash payment for unused sick leave and annual leave upon retirement. Well before expiration of that contract the parties, on December 18, 2001, renegotiated the terms of petitioner's employment. As a consequence, the parties entered into a third contract which called for a Superintendent's salary of $170,000.00 for the 2001-2002 school year, again with annual salary adjustments in the second and third years in accordance with the CPI with a 5% cap. This contract also contained a provision permitting the petitioner to elect to receive a one-time "career increment" of 27.5%; and continued the provision for payment of accumulated unused sick days and vacation days upon retirement. Prior to the expiration of the third contract, on February 10, 2004, the petitioner and the School District entered into a fourth contract. The fourth contract retroactively established petitioner's salary for the 2002-2003 school year at $224,668.00, with salary increases in 2003-2004 and 2004-2005 in accordance with the CPI, capped at 5%. In September 2004 the petitioner submitted to the respondent a request for an estimate of her annual retirement benefits. The final average salary utilized by the respondent in computing her estimated retirement benefits was $222,178.00, based upon the foregoing contractual increases in compensation. In reliance upon this estimate she decided to retire after the 2004-2005 school year. Commencing in July 2005 the petitioner received retirement benefits of $7,350.00 per month. In a preliminary determination dated November 5, 2008, the petitioner was informed by the respondent, as relevant here, that a significant portion of the salary increases which she had received since the August 29, 2000 contract had been disallowed for purposes of computing her final annual salary. The petitioner submitted a lengthy letter in response, dated December 2, 2008, which contained a detailed explanation with regard to why she believed the reductions in her three year final average salary were unfair. That letter was considered by the respondent in making its final determination, which affirmed the preliminary determination.
The respondent also indicated in the letter that it had excluded other compensation paid pursuant to the various employment agreements, as not falling with the definition of regular salary. These included auto allowances and payments to a tax deferred annuity.
The Court is mindful that the Court's role in reviewing an administrative determination is not to substitute its judgment for that of the agency, but simply to ensure that the agency determination has a rational basis and is not arbitrary and capricious ( see Matter of Peckham v Calogero , 12 NY3d 424 , 431; Matter of Warder v Board of Regents, 53 NY2d 186, 194; Matter of Flacke v Onondaga Landfill Sys., 69 NY2d 355, 363; Akpan v Koch, 75 NY2d 561, 570). "An action is arbitrary and capricious when it is taken without sound basis in reason or regard to the facts" ( Matter of Peckham v Calogero, supra), citing Matter of Pell v Board of Educ., 34 NY2d 222, 231). Consistent with the foregoing, in reviewing determinations with regard to final average salary, Courts must uphold the determination so long as it is not irrational ( see Matter of Port Authority Police Benevolent Assn., Inc. v Anglin ( 54 AD3d 495 , 496 [3rd Dept., 2008], aff'd 12 NY3d 885).
§ 443 (a) of the New York Retirement and Social Security Law ("RSSL"), entitled "Final average salary", as relevant here, recites as follows:
As a member of Tier 2, petitioner's retirement is governed by the provisions of RSSL Article 11.
"The salary base used for the computation of benefits upon retirement, hereinafter called in this article final average salary, applicable to all members of the retirement systems who are subject to the provisions of this article, shall be the average salary earned by such a member during any three consecutive years which provide the highest average salary, exclusive of any form of termination pay (which shall include any compensation in anticipation of retirement), or any lump sum payment for deferred compensation, sick leave, or accumulated vacation credit, or any other payment for time not worked (other than compensation received while on sick leave or authorized leave of absence); provided, however, if the salary or wages earned during any year included in the period used to determine final average salary exceeds that of the average of the previous two years by more than twenty percentum, the amount in excess of twenty percentum shall be excluded from the computation of final average salary . . ."
§ 5003.1 (a) of the Rules of the New York State Retirement system, entitled "Three-year final average salary for members who join system prior to July 1, 1976" ( see 21 NYCRR 5003.1), recites as follows:
"(a) A three-year final average salary is defined as the highest average annual regular salary earned by a member over a period covering three consecutive years of New York State service credit. Regular salary earned shall exclude termination pay and payments which are not part of the salary base and/or are not paid over a period of years; for example, bonuses and one-time-only increments. It shall also exclude any earnings in excess of 120 percent of the earnings for the preceding year of service credit (the preceding two years of service credit for those members who joined on and after July 1, 1973 and before July 1, 1976), after such earnings have been adjusted to exclude the termination pay."
"Respondent is statutorily required to correct errors in retirement benefit payments and seek repayment of excess benefits already paid in order to ensure that the integrity of the public retirement system is maintained" ( Matter of Blais v New York State Retirement Teachers' System , 68 AD3d 1266 [3d Dept., 2009], citing Education Law § 525 and Matter of Galanthay v New York State Teachers' Retirement System, 50 NY2d 984, 986). It has been repeatedly held, in construing a similar statute, that compensation items such as termination pay, bonuses, lump sum increments, longevity payments, or lump sum cash payments for sick leave and annual leave, may not be included in final average salary in calculating an employees' retirement benefit ( see Martone v. New York State Teachers' Retirement System, 105 AD2d 511 [3d Dept., 1984]; Matter of Miller, 157 AD2d 890 [3d Dept., 1990]). In a similar vein, where payments which clearly are not includable in final average salary are eliminated from an employee's compensation package in exchange for a substantial increase in regular salary, it has been held that this gives rise to an inference that this was done to artificially inflate the employee's final average salary ( see Adler v New York State Teachers' Retirement System, 188 AD2d 732 [3d Dept., 1992]; Holbert v New York State Teachers' Retirement System ( 43 AD3d 530 [3d Dept., 2007])
Such as bonuses, termination pay, payment for unused sick leave or vacation pay, or lump sum increments.
Turning first to the February 10, 2004 contract, the respondent gave consideration to the fact that the contract eliminated the unexercised 27.5% career increment from petitioner's compensation package, and also eliminated lump sum compensation for unused sick leave and vacation leave upon retirement. Neither of these elements of compensation were includable in petitioner's three-year final average salary under RSSL § 443 ( supra). The elimination of these items while simultaneously increasing petitioner's regular salary could fairly give rise to an inference that this was done to artificially inflate petitioner's final average salary. In addition, the $224,268.00 salary was well in excess of 120 percent of petitioner's average salary over the preceding two years, significantly, without any stated increase in responsibilities. Overarching the entire matter was the petitioner's letter to the School Board dated October 20, 2004 in which she indicated that "over two years ago" she had communicated her intention to retire at the end of 2004-2005. All of the foregoing, taken together, supported the inference that petitioner's salary increases constituted an effort to artificially increase her three year final average salary ( see Holbert v New York State Teachers' Retirement System, supra). The Court is mindful of petitioner's explanation with regard to the reasons why she made the statement contained in her letter dated October 20, 2004 (that she did not want it to outwardly appear that she was leaving her position as Superintendent as a consequence of a then-pending state audit/investigation of the School District). The Court is also mindful of the School District's stated reasons for the large salary increase (that the petitioner had been under-paid for a number of years). Lastly, the Court is mindful of the affidavit of Colum P. Nugent, attorney for the School District, in which he unequivocally states that neither he nor the School Board were aware of petitioner's intentions with regard to her retirement, until after the start of the 2004-2005 school year. The Court is of the view, irrespective of the foregoing explanations, that the respondent could rationally take petitioner's October 20, 2004 letter at face value, and upon all of the facts, rationally infer that the salary increase was an attempt to artificially inflate petitioner's final average salary.
With regard to the December 18, 2001 contract, the large salary increase (which by the Court's calculation was actually a 29% increase over the average regular salary paid to the petitioner over the preceding two years), entered into less than one and one half years into a three year employment contract (retroactive to July 1, 2001), could rationally lead respondent to conclude that the salary increase violated the provisions of RSSL § 443, and was given in anticipation of her retirement ( see Holbert, v New York State Teachers' Retirement System, supra).
Petitioner's regular salary for 1999-2000 and 2000-2001 was $123,458 and $140,000 respectively. The average of the two was $131,729. $170,000 minus $131,729 = $38,271, which is 29% of $131,729.00.
In the Holbert case ( supra), the Retirement System, rather than crediting Holbert with the 30% raise, recalculated his salary by crediting him with a 7.6 % raise, that being the next highest salary increase for an administrator in his school district ( id., at 531-523).No such evidence exists in the instant record to permit the respondent to do likewise. The respondent here took notice that the August 29, 2000 employment contract contained, as noted, a provision for annual salary increases based upon the CPI, and calculated petitioner's three year final average salary utilizing the CPI. The Court finds, even if there may be other methods of calculating petitioner's three year final average salary, that this is not irrational.
Lastly, the petitioner points out that the respondent's final determination was made nearly three and one half years after her retirement. She indicates that had she known that her pension would be drastically reduced from respondent's original estimate, she would have delayed retirement. She indicates that she relied upon (and budgeted for) the original pension estimate. Petitioner, in essence, argues that the respondent should be estopped from reducing petitioner's pension. Notably, "[i]t is well settled that estoppel cannot be invoked against a governmental agency to prevent it from discharging its statutory duties'" ( Matter of Mitchell Schorr v New York City Department of Housing Preservation and Development, 10 NY3d 776, 779, quoting Matter of New York State Med. Transporters Assn. v Perales, 77 NY2d 126, 130, other citations omitted). Nor may it be used to prevent a government agency from rectifying an administrative error ( see Matter of Sheer Pleasure Lingerie Inc. v Town of Colonie Planning Board, 251 AD2d 859, 861 [3d Dept., 1998]). Moreover, erroneous information given by a government employee does not ordinarily constitute an exception to the rule ( see Matter of Grella v Hevesi , 38 AD3d 113 , 117-118 [3d Dept., 2007]; Matter of Amsterdam Nursing Home Corporation (1992) v Daines , 68 AD3d 1591 , 1592 [3rd Dept., 2009]; Notaro v. Power Auth. of NY , 41 AD3d 1318 [3d Dept., 2007). The Court finds that the doctrine of equitable estoppel does not apply.
The Court has reviewed and considered petitioner's remaining arguments and finds them to be without merit. The Court finds that the determination was not made in violation of lawful procedure, is not affected by an error of law, and is not irrational, arbitrary and capricious, or an abuse of discretion. The Court concludes that the petition must be dismissed.
Accordingly, it is
ORDERED and ADJUDGED, that the petition be and hereby is dismissed.
This shall constitute the decision, order and judgment of the Court. The original decision/order/judgment is returned to the attorney for the respondent. All other papers are being delivered by the Court to the County Clerk for filing. The signing of this decision/order/judgment and delivery of this decision/order/judgment does not constitute entry or filing under CPLR Rule 2220. Counsel is not relieved from the applicable provisions of that rule respecting filing, entry and notice of entry.