Opinion
Nos. CV 07-5008403S, CV 07-5014021S
September 30, 2010
MEMORANDUM OF DECISION
Plaintiffs bring this action against defendant City of Hartford (hereinafter "City") alleging breach of contract of a collective bargaining agreement in that the City allegedly miscalculated retirees' pensions. Plaintiffs seek money damages, an order that the City recalculate retirement pensions in accordance with the provisions of the collective bargaining agreement and pay such recalculated pensions to plaintiffs, and a declaratory judgment that the City recalculate such retirement pensions, as aforesaid, and pay the recalculated pensions to plaintiffs in the future. The specific claim plaintiffs make is that a retiree's final average pay should include the lump sum payments of accrued vacation and sick time made to the retiree at the time of his retirement for purposes of calculating his pension. At issue also is an interpretation of two apparently contradictory provisions of a city ordinance that governs this case.
The plaintiffs allege this is a class action on behalf of various classes of Hartford City employees. However, they have failed to obtain court certification as a class action, pursuant to Connecticut Practice Book Sec. 9-9, and to give proper notice to members of the class, as required by the aforesaid section. Consequently the court determines this is not a class action.
The facts are as follows.
Plaintiffs are retired employees of the City of Hartford and members of the collective bargaining unit, known as Hartford Municipal Employees Association (HMEA), and HMEA itself.
Pensions for retired city employees are calculated by multiplying the highest of their final average pay over a certain number of years times a certain percentage, times the number of years of service.
A predecessor to the 1999 collective bargaining agreement between HMEA and the City expressed final average pay as based upon the highest two of the last five years of an employee's earnings. The retirement allowance was calculated by multiplying the final average pay by 2%, and by the number of whole years of service.
On calculating final average based upon "earnings" under the previous collective bargaining agreement, the final average pay calculations: (1) included lump sum payments for accrued vacation time (but not lump sum payments for accrued sick time); and (2) extended a member's final average pay period out beyond the last day worked to the corresponding number of vacation days for which the member received a lump sum payment. Consequently, these payments were not considered current and paid as of the last day of work.
Using this calculation, if a member had eight weeks of accrued vacation, and his/or her last day of work was October 31, he or she would be kept on the books until December 26 to account for the lump sum payment of the eight weeks of accrued vacation. The member's retirement date would be December 26 and the final average pay would be the highest two of the five years earnings going back from December 26. This would provide a member with eight more weeks of service at his or her highest rate of pay. In addition, the member would be permitted to include the additional eight weeks for purposes of calculating his or her years of service. Thus, if a member actually worked nineteen years and ten months, the use of eight weeks of accrued vacation could provide the member with twenty years of service required to become eligible for a retirement allowance. Likewise, these eight weeks could also be used to take a member beyond an anniversary date of his employment in order to receive 2% of final average pay for that additional year. This way of applying accrued vacation time in calculating pensions is called stretching.
In 1986, Hartford passed an ordinance that based final average pay on gross earnings. Under that ordinance certain of the highest City employees (the city manager, corporation counsel and city treasurer) were allowed to add their lump sum payments of accrued vacation and sick leave to their last year's earnings in calculating final average pay and so increase their pension. This adding the lump sum payments of accrued vacation and sick time to the final year of earnings is called stacking.
As a result of this favorable treatment given to the City's highest officials, city treasurer Denise Napier "expressed her concern that the ordinance does not identify the calculation method for employees retiring after July 13, 1993."
To clarify that situation, on October 25, 1993, the City council adopted an ordinance, incorporated in the city charter as Chapter XVII, Pensions. Section 3(a)ii(4) states "A member's `final average pay' shall be based upon his or her gross earnings only to the extent that the provisions of this Chapter specifically provide for his or her final average pay to be calculated and that manner."
Section 3(a)ii(5)(A) provides that "gross earnings" shall mean amounts paid for services rendered within such time period and shall not include lump sum payments for accrued vacation and sick time except as provided in Subsection (5)(B).
Subsection (5)(B) provides that when final average pay is based on gross earnings, those earnings will be "adjusted to account for any lump sum payments made to such member for accrued vacation and sick time upon his or her termination of employment by, and only by, adjusting such member's final average pay period such that the last day of that period corresponds to what such member's last day of work would have been had such member continued to work beyond his or her actual last day of work for that period of time equal to his or her creditable accrued vacation and sick time."
Subsection (6) provided:
Unless, and then only to the extent, this chapter provides that a member's final average pay is to be based upon his or her "gross earnings" over a stated period of time, a member's "final average pay" shall not include any amounts pay to such member upon or by reason of his or her termination of employment with the city either for accrued sick time or as a severance payment.
In 1994, after the adoption of the aforesaid ordinance and charter revision, HMEA and the City commenced negotiations on a new collective bargaining agreement. Many proposals and counter proposals were made by each side. As to pensions, HMEA at one point proposed calculating final average pay in the following language:
In calculating pension benefits, an employee's accumulated sick time and vacation pay will be converted to dollar value and added to the employee's earnings to determine the highest two of five year earnings.
This language would have permitted stacking. The City rejected the proposal.
On December 15, 1998, the City's negotiator, Attorney Sigsmund Sapinski, made a number of proposed changes to the pension provision, including an increased employee contribution to pensions, a cap on pension amounts, and a switch from defining final average pay based upon HMEA members "earnings" to a provision under which final average pay was based upon their "gross earnings." His proposal read as follows:
Current bargaining unit employees as of December 1, 1998, shall be eligible for normal retirement upon completion of at least twenty (20) years of full-time service regardless of his or her age. The normal retirement amount for such bargaining unit employees shall be based upon 2.5% of the employee's final average pay for each whole unit of service to a maximum of 70% of final average pay. Final average pay is defined as the highest two (2) of the last five (5) years of his or her gross earnings. (Emphasis added.)
Sapinski testified that the use of "gross" earnings in that proposal was a mistake on his part. He said that he had cut and pasted a provision of a collective bargaining agreement between the City of Hartford and the City of Hartford Professional Employees Association.
The phrase "gross earnings" had never been discussed by the parties before it was proposed by Mr. Sapinski. However, he repeated his proposal at least five times to the union, sent it to the city manager and the city personnel representative at least four times, sent it to the city's corporation counsel at least once, sent it to the city's personnel manager at least three times and submitted it to the City Council which approved it. The city manager signed the final contract with that phrase. At the trial Sapinski admitted that the phrase "accurately reflected what the union and [the city] agreed to" and was "the product of joint work" between Sapinski and HMEA.
HMEA's negotiating team saw the phrase "gross earnings" in the Sapinski's proposal and readily agreed to it because it satisfied their desire to include all earnings in final average pay and formed part of an acceptable whole that included an increase in the percentage of final average pay, a cap on overall pensions, and increased pension contributions for HMEA members.
At one time, a tentative contract was reached, without HMEA's stacking proposal, but it was rejected by the City Council. Negotiations continued through 2006 and 2007 when the parties again tried to settle matters informally.
Finally, a contract was agreed to, approved by the City Council and signed on April 22, 1999. It covered the period from July 1, 1994 to June 30, 2001. A subsequent collective bargaining agreement was entered into between the City and HMEA in 2005 which contained the phrase that final average pay was based upon "gross earnings."
1. THE ISSUE OF MISTAKE
The law of contracts relating to mistake is very clear. A unilateral mistake of one party in entering into a contract or understanding the meaning of the contract is not grounds for voiding the contract or reforming it. Bender v. Bender, 292 Conn. 691, 730 (2009); Gebbie v. Cadle Company et al., 49 Conn.App. 265, 276 (1998). However, a unilateral mistake may be grounds for relief "only when the mistake is induced by the conduct of the other party, or when he seeks unconscionably to take advantage of it." Bender v. Bender, supra, p. 731. (Italics as in the opinion.) Restatement (2nd) Contracts § 153 p. 394 (1981) states that a "contract is voidable if (a) the effect of the mistake is such that enforcement of the contract would be unconscionable or (b) the other party had reason to know the mistake or his fault caused the mistake." The classic definition of an unconscionable contract is one in which "no man in his senses, not under delusion, would make, on the one hand, and which no fair and honest man would accept, on the other." Smith v. Mitsubishi Motor Credit of America, Inc., 247 Conn. 342, 349 (1998).
In this case, even if Attorney Sapinski, representing the City, made a mistake in counter-proposing to HMEA the phrase "gross earnings" as the basis for final average pay, there is no evidence that HMEA had reason to know of the mistake or any fault on its part caused the mistake. Nor was there any evidence of fraud or inequitable conduct on the part of HMEA. Shawmut Bank Connecticut v. Connecticut Limousine Service, 40 Conn.App. 268, 273, cert. denied, 236 Conn. 915 (1996). The fact that HMEA accepted the counterproposal as part of the bargaining process under which the union also agreed to increase contributions to the pension fund by its members does not constitute unlawfully taking advantage of the inclusion of the term "gross earnings" in the contract. Moreover, the contract as worded with the term "gross earnings" does not constitute an unconscionable contract such that no reasonable person would enter into it.
When however, a mutual mistake is made as to any term of the contract, the court may conclude there was not a meeting of the minds as to that term and so it will not be enforceable.
As stated in Harlach v. Metropolitan Property Liability Ins. Co., 221 Conn. 185, 190 (1992), quoting Homeloaners' Loan Corporation v. Stevens, 120 Conn. 6, 9-10 (1935): "Reformation is appropriate in cases of mutual mistake — that is, where, in reducing to writing an agreement made or transaction entered into as intended by the parties thereto, through mistake, common to both parties, the written instrument failed to express the real agreement or transaction."
The mutual mistake here in question is the inclusion of the phrase "gross earnings" in the collective bargaining agreement.
The evidence is clear that during the course of bargaining over the 1999 contract, the parties never discussed the term "gross earnings." However, Attorney Sapinski testified that he mistakenly used the phrase "gross earnings" in his counterproposal to HMEA. Although Sapinski testified to the mistake, it's significant that he exchanged a draft of the contract containing the language "gross earnings" a number of times with the union, the city manager and city personnel representative, the city's corporation counsel, the city's personnel manager, and submitted it to the City Council which approved it. HMEA's negotiating team saw the phrase "gross earnings" in the city's counterproposal and readily accepted it as part of the bargaining that included an increase in the pension percentage of final average pay, a cap on overall pensions, and increased contributions from HMEA members.
A few months after the contract was signed, the City sought to get HMEA to agree to eliminate the word "gross." The union refused to do so. Thus, the union did not consider the phrase "gross earnings" to be a mutual mistake.
The City argues that after the contract was signed, plaintiffs and HMEA members made claims for calculating their pensions on grounds other than based on "gross earnings," indicating that they did not rely on the phrase in agreeing to the contract.
But, there was also evidence that the HMEA's president complained to city manager Sandra Key Borges on April 24, 2000, that because of "gross earnings" in the contract, pensions were being incorrectly calculated.
Moreover, both parties permitted the phrase "gross earnings" to be used in the renewal of the 1999 contract in 2005, clearly indicating the phrase was not a mutual mistake.
While there is a dispute between the parties as to whether or not "gross earnings" means stacking, the court finds that the phrase "gross earnings" in the contract was seen and agreed to by the union as part of the bargaining process and so its inclusion was not a mutual mistake.
2. THE MEANING OF GROSS EARNINGS IN THE CONTRACT
The collective bargaining agreement in Section 3.5 provides that effective December 1, 1998: "The normal retirement allowance for such bargaining unit employees shall be based upon 2.5% of the employee's final average pay for each whole year of service to a maximum of 70% of the final average pay. The final average pay is defined as the highest two (2) of the last five (5) years of his or her gross earnings."
As defined in Webster's Dictionary, "gross" means: "without or before deductions, total." Thus, plaintiffs claim the word is unambiguous and not subject to any tortured interpretation. In their eyes, "gross earnings" means all earnings, including sick and vacation lump sums paid to an employee at the time of his retirement and thus increase his final average pay for purposes of calculating the pension. In essence the plaintiffs claim gross earnings requires "stacking" of accrued vacation and sick time payments.
However, the meaning of "gross earnings" in this context is not as simple as plaintiffs are asserting. The collective bargaining agreement at Section 3.1 provides:
The City and the Association shall recognize and adhere to provisions of Federal, State and City laws and ordinances which are in effect on the date this Agreement is ratified by the Association and which are not otherwise specifically superceded by the terms of this Agreement.
The City ordinance adopted October 25, 1993 and incorporated into the City charter at Chapter XVII, Pensions, provides at Section 3(a)(ii)(4):
A member's "final average pay" shall be based upon his or her gross earnings only to the extent that the provisions of this charter specifically provides for his or her final average pay to be calculated in that manner. (Emphasis added.)
Section 3(a)(ii)(5)(A) provides:
Commencing August 1, 1993, a member's "gross earnings" with respect to any year of service shall mean and include all amounts payable by the City directly to such member for services rendered by such member to the City . . . within such time period which amounts shall include, but not necessarily be limited to, such member's basic salary . . . but, except as provided in Subsection (B) below, shall not include either any amounts for services rendered in some other time period or any payments made to a member upon and by reason of his or her termination of employment (including, but not limited to . . . lump sum payments for accrued vacation and sick time). (Emphasis added.)
Section 3(a)(ii)(5)(B) provides:
Commencing August 1, 1993, any member who's final average pay is based upon his or her "gross earnings" over a stated period of time shall have his or her "gross earnings" adjusted to account for any lump sum payments made to such member for accrued vacation and sick time upon his or her termination of employment by, and only by adjusting such member's final average pay period such that the last day of that period corresponds to what such member's last day of work would have been had such member continued to work beyond his or her actual day of work for that period of time equal to his or her credible accrued vacation and sick time; providing however, that nothing herein shall be construed to permit or require the adjustment of the length of time included within a member's final average pay. Thus, expressed as a formula and subject to the foregoing provisions, a member's final average pay based upon "gross earnings" shall have his or her final average pay adjusted as follows: last day of final average pay period `last day worked + credible accrued vacation and sick time.
(Emphasis added.)
This section clearly provides that when final average pay is based upon gross earnings, gross earnings shall be adjusted to account for any lump payments made to such member for accrued vacation and sick time only by adjusting such member's final average pay such that the last day of actual work is extended by the accumulated days of vacation and sick time. This section gives an enormous benefit to retired employees. If the extension of the service by the amount of accrued vacation and sick time goes past an anniversary date of employee's employment, the employee gets an additional year of service. Moreover, if the extension brings the employee into a higher pay rate, the employee gets that benefit in increasing his average pay.
If the court finds there is no mutual mistake as to the inclusion of gross earnings in the agreement, as the court does find, the City concedes that accrued vacation and sick time should be stretched in the manner provided in Subsection (5)(B) above. However, since the City has considered gross earnings in the contract to be a mistake, it has calculated the pensions of retirees since 1999 as if the contract said "earnings" and has stretched the accrued vacation time of retirees, but has not stretched accrued sick time.
The plaintiffs recognized that Subsection (5)(B) may apply and, therefore, may limit gross earnings to mean stretching of both vacation and sick time. Nevertheless, they argue that Section 3(a)(ii)(6) requires stacking of sick leave only. That subsection provides:
Unless, and then only to the extent, this chapter provides that a member's final average pay is to be based upon his or her "gross earnings" over a stated period of time, a member's "final average pay" shall not include any amounts paid to such member upon or by reason of his or her termination of employment with the city either for accrued sick time or as a severance payment.
The subsection is phrased as a conditional negative: unless final average pay is based on gross earnings, no sick time shall be included in final average pay. The plaintiff asserts that when the section as read as a positive, it translates as follows:
When a member's final average pay is based upon "gross earnings," a member's final average pay shall include any amounts paid to such member by reason of accrued sick time.
That rephrasing of the statute is consistent with court cases interpreting the words "unless" in a statute. In WJIV-TV, Inc. v. Federal Communications Commission, 231 Fed.2d 725 (1956), the United States Court of Appeals for the District of Columbia Circuit was required to interpret Section 319 of the Communications Act of 1931 that provided:
No license shall be issued . . . for the operation of any stations . . . unless a permit for its construction has been granted by the commission.
The court examined a number of instances where a statute was phrased as unless "A," no "B." It held: "Obviously, if the condition introduced by the conjunction `unless,' be met, we have an affirmative not a negative result." (P. 729.) It gave as an example the following:
When (the statute) says that the officer shall not be bound to keep the property, or to deliver it to the plaintiff, unless the plaintiff, on demand, shall indemnify the officer against the claim of a third party, although negative in form it conveys the affirmative meaning, that if the plaintiff does so indemnify, then the officer shall keep the property or deliver it to the plaintiff. ( Id.)
The court went on to say:
The word "unless" has the force of except; its primary meaning is "unloosened from," so what follows in the sentence after the word "unless" is excepted or unloosened from what went before it . . . For such a form of expression in a statute amounts to an affirmative enactment, and in fact . . . confers all that is excepted from a negative or restricted provision. ( Id.)
Plaintiffs point to the testimony of the Lorraine Sattensky, pension plan administrator, to the effect that Subsection (6) required her to include the amounts paid for sick pay lump sums in final average pay. Her testimony under cross-examination was:
Q: You understood that that language [in Section 6] meant that where a member's final average pay is to be based upon gross earnings, a member's final average pay shall include any amounts paid to such member by reason of accrued sick time, correct?
A: Yes.
However, it is significant that despite that testimony of Sattensky, the Pension Commission, after the adoption of the October 1993 ordinance, never stacked both vacation and sick time, but simply stretched them as required by Subsection (5)(B).
The legislative history of the subject ordinance indicates that prior to its adoption on October 25, 1993, the Common Council received a report from the chairman of the operations, management and budget committee. It stated:
The proposed amendment would address the issue of stacking of accrued sick and vacation time, as well as, effectively change the date to close the window.
The Pension Committee reported to the Common Council on October 22, 1993, three days before adoption of the ordinance, as follows:
As you may recall, certain non-bargaining city employees receive pension benefits based on the stacking of their lump sum sick and/or vacation payout in the final year of earnings. This ordinance discontinues this practice, effective August 1, 1993. (Italics added.)
The legislative history further reveals that both Subsections (5) and (6) were adopted together. If Subsection (6) is construed as requiring stacking of sick time, it directly conflicts with Subsection (5) which requires both vacation and sick time to be stretched.
The language of (6) does not expressly require stacking. It says, if read in the affirmative, that when final average pay is based on gross earnings, amounts paid for sick time shall be "included" in final average pay. Significantly it does not say how it will be "included."
Our law is that a city charter must be interpreted so as reasonably to promote its ultimate purpose. "Its parts must be reconciled and made operative so far as possible." Armino v. Butler, 183 Conn. 211, 218 (1981).
Construing the subsections of Section 3(a)(ii) together, Subsection (5)(A) provides "gross earnings" "shall include all amounts payable by the City directly to such member for services rendered by such member . . . within such time period . . . but, except as provided in Subsection B below, shall not include . . . lump sum payments for accrued vacation and sick time." Note that the exception is made for Subsection B, but not for Subsection 6. Note also that accrued sick time paid at the time of termination is not paid for services rendered within that time period.
Subsection (5)(B) provides that when final average pay is based on "gross earnings," those earnings shall be adjusted to account for lump sum payments for accrued vacation and sick time upon termination of employment " by and only by" stretching the employee's services and not by stacking.
Section 6 says, if read positively, that when final average pay is based upon gross earnings, final average pay shall "include" amounts paid for accrued sick time. But subsection (5)(A) provides that gross earnings shall not "include" lump sum payments for accrued vacation and sick time except as provided in subsection (5)(B). And, subsection (5)(B) provides that such payments for vacation and sick time shall be considered in calculating pensions only by stretching and not by stacking those amounts. Thus, Section 6 reaffirms Subsections (5)(A) and (5)(B) in that amounts paid for accrued sick time shall be included, but only for purposes of stretching and not for stacking.
To construe Subsection (5)(B) as plaintiffs assert, to require stretching of vacation and sick time and Subsection (6) to require stacking sick time alone would not only distort the meaning of those provisions, but also defeat the purpose of the ordinance. This is especially so because the Pension Commission had stated to the Common Council that the intent of the entire ordinance was to discontinue all stacking as of August 1993.
Moreover, while Subsection (6) is ambiguous as to how sick time is to be included in final average pay, Subsection (5)(B) is specific and crystal clear. When final average pay is based upon gross earnings, vacation and sick days are to be stretched. This is how the same language in the CHPEA contract has been construed by the Pension Commission since 1999.
Thus, this Court construes Subsection (6) as reinforcing Subsection (5)(A) and (B) by including the amounts paid for both accrued vacation and sick time in final average pay but including them only by stretching, as provided for in Subsection (5)(B).
3. RELIEF
Although this Court determines that plaintiffs have failed in their claims for stacking both vacation and sick time, or for stacking sick time alone, they are entitled to some relief.
The evidence is that because the City considered the phrase "gross earnings" in the collective bargaining to be a mistake, it unilaterally eliminated the word "gross" and construed "earnings" as the basis of final average pay to mean it was obligated to stretch only vacation time and not sick time. Since this Court has found that the inclusion of "gross earnings" in the contract was not a mutual mistake, the City has illegally denied the plaintiffs the benefit of also stretching sick time in calculating their pensions.
Accordingly, the court renders a declaratory judgment to the effect that, pursuant to the terms of the collective bargaining agreement and to Section 3(a)(ii)(5)(B) of the October 25, 1993 city ordinance, the City shall recalculate the pensions of the plaintiffs by stretching not only their accrued vacation time but also their accrued sick time. The City shall, starting with the next monthly payment due following completion of the calculation and continuing with all subsequent payments, increase the plaintiffs' pension payments by the additional monthly pension amounts derived from the recalculation. It is further ordered that the City shall pay, within ninety days of this Court's decision, the arrearage on the corrected amounts, retroactive to each plaintiffs' retirement date.
In light of the complexity of this case, and on the basis of the reasons for the City's conduct, the court will not order prejudgment interest. But, it will order postjudgment interest at the statutory rate from the date of this decision to the date of payment of the additional pension amounts due the plaintiffs.
Plaintiffs also seek counsel fees by reason of this purporting to be a class action. However, the plaintiff has never sought to certify the action as a class action, pursuant to Section 9-9 of the Connecticut Practice Book, and has never given proper notice to the class. Consequently, plaintiffs are not entitled to counsel fees on the basis of this being a class action. The underlying action is simply a breach of contract claim and such a case cannot be the basis for the awarding of counsel fees. Plaintiffs' claim for counsel fees is thus denied.
The court shall retain jurisdiction of this case in order to enforce its orders.