August 25, 2010
Hon. Paul G. Feinman
New York State Supreme Court
60 Centre Street
New York, NY 10007
Re: Nager v. Teachers’ Retirement System
File No. 119294/02
Dear Judge Feinman:
I have worked as an estate tax attorney and as a journalist. My late father, Eli Ellison, was a plaintiff class member in the captioned action, and I have inherited his status. Around February 17, 2010, I briefly spoke to you by telephone about my dismay with the manner in which the plaintiff and defendant attorneys have handled this matter. At that time, you invited me to write you regarding my concerns and have copies of my letter and any enclosures sent to all representative parties. I have decided to take you up on that kind offer and am writing you to request that you convene a hearing as to why the attorneys in this matter should not be disciplined for the outrageous and excessive delay in the settlement of this action.
Enclosed are the following items:
1. Notice of Proposed Settlement of March 12, 2007 (“Settlement Notice”);
2. Your Order of July 19, 2007 regarding Motion for Settlement and Attorney Fees (“July 19, 2007 Order” or “Order”);
3. Email Messages between David S. Preminger and Stuart Ellison from July 27, 2007 to October 6, 2009 (“Mr. Preminger’s Email Messages”);
4. “Latest News” Excerpts from PerSessionPayCase.com (“Website Excerpts”); and
5. TRS Form Update Letter dated June 21, 2010 (“Update Letter”)
Please recall that Nager extended the decision in Weingarten v. Board of Trustees of the New York City Teachers’ Retirement System to teachers who retired before November 24, 1998, vested employees who left service before that date, and their beneficiaries. The Court in Weingarten held that “per session” pay should be included in calculating teachers’ retirement benefits. Teachers who work at jobs such as tutoring, coaching, and advising, during times other than regular school hours, work per session.
About two months ago, I was informed that the long-awaited implementation of the recently modified Settlement Agreement in this matter had begun. This is welcome news about which I am cautiously optimistic.
I say “cautiously” because I am a firm believer in Yogi Berra’s adage that “it ain’t over until it’s over.” For the reasons stated below, I do not trust the attorneys in this action and will not feel comfortable with implementation of the settlement until I have a check in hand.
Over the past eight years, Nager class members have suffered poor communication, excessive delay, an outrageous fee request, and a sense of powerlessness.
Poor Communication and Excessive Delay
With the exception of the enclosed Settlement Notice of March 12, 2007, I have received no postal mail regarding this action. The enclosed website excerpts say that on June 21, 2010, TRS will begin mailing the enclosed Update Letter to everyone who received a Settlement Notice. Over two months later, I have not received an Update Letter. I suspect that other class members have had this experience.
Pages 5 and 6 of the website excerpts indicate that the plaintiff attorneys’ website was not updated between December 11, 2008 and March 16, 2010, a failure to communicate with class members for about 15 months. This is a serious breach of professional ethics under any circumstances. It is compounded by the extraordinary delay in implementing the settlement in this action.
It is unreasonable to expect any class member to regularly check a website that has not been updated for well over a year. I heard about the implementation of the modified settlement, not from the plaintiff attorneys or TRS, but from my father’s girlfriend, who is not a class member. She was informed by a class member friend about a toll-free number created by the settlement administrator and passed the information on to me.
David Preminger, the plaintiff attorney of record, responded to email messages I sent him between July 27, 2007 and October 6, 2009. I have been informed that he has responded to email inquiries of other class members. Mr. Preminger should be commended for these actions.
However, that responsiveness cannot make up for the failure of the plaintiff attorneys to communicate with the class as a whole, which, according to the website excerpts, includes an estimated 58,000 members, about 11,000 of which are due increased benefits. Mr. Preminger could only have exchanged email messages with a tiny fraction of the class in the 15 months that PerSessionPayCase.com had not been updated.
Moreover, some of the content of Mr. Preminger’s email messages is deeply disturbing. Particularly troubling is Mr. Preminger’s message of July 8, 2009. In this message, he describes two “post-settlement issues”: 1. how to take into account that some class members would do better if “final average salary” were used rather than the “modified final average salary” required by the formulas for increased benefits set forth in the original Settlement Agreement; and 2. the procedure individual class members must follow in order to contest the amount of their settlement.
According to the website excerpts, you approved the original settlement on July 19, 2007 and issued a final judgment on this matter on September 17, 2007. At that point, the only outstanding issues should have involved implementation. To this date, nobody has been able to explain to me how an issue involving formulas could have arisen after a final settlement had been reached and approved by the Court. Any issues involving formulas should have been settled before the settlement was approved, not after.
A complaint in this action was filed on August 29, 2002, almost exactly eight years ago. According to Page 4 of your July 19, 2007 Order, class certification was granted on January 20, 2004 and settlement negotiations began shortly thereafter, as stated on Page 16 of that Order. Negotiations continued for the next three-and-a-half years. During that time, actuarial experts hired by the plaintiff and defendant attorneys developed formulas which became the subject of the Settlement Agreement approved by you on July 19, 2007.
About a year and a half later, on December 11, 2008, the plaintiff attorneys announced on PerSessionPayCase.com an “unexpected delay” during which the settlement formulas would have to be modified. See pages 5-6 of the enclosed website excerpts.
Why, after three-and-a-half years of negotiations resulting in a final Settlement Agreement accepted by the Court, was an oversight discovered? Why did anyone feel there was a need to check the formulas after the settlement was finalized? And why did it take another year and a half for the plaintiff attorneys to announce the oversight on PerSessionPayCase.com?
There seem to be no answers to these questions other than an “it’s complicated” refrain sprinkled throughout the website excerpts. If that isn’t legal malpractice, I don’t know what is.
Consider this gem from Mr. Preminger’s July 8, 2009 email message: “We sent a proposal to Corporation Counsel months ago…We are not sure what the holdup is.”
It is Mr. Preminger’s job to know what the holdup is. Nowhere in Mr. Preminger’s email messages does he say that anyone from his firm contacted Corporation Counsel during those months of silence to find out why it was taking so long for the defendants to respond.
The Code of Professional Responsibility directs lawyers to provide zealous advocacy for their clients. This behavior is not even minimal advocacy.
Similarly, the website excerpts indicate that a review of the modified formulas by the New York City Actuary’s Office was expected to be completed by January 2009. However, completion of the review was not announced until March 16, 2010. No explanation for this holdup is offered either. Had the formula been modified before you accepted the Settlement Agreement on July 19, 2007, further review by the Actuary’s Office would have been unnecessary.
These shenanigans are not only a source of anguish to class members, they foster uncertainty in, and disrespect for, our judicial system. Final settlements should be final. Only in the most exigent circumstances should they be revised.
If every civil action in New York were handled in the way the attorneys behaved here, our court system would collapse. Settlement Agreements could be upended at any time, even years after they were approved by a judge. They would not be worth the paper they were written on.
Outrageous Fee Request and Excessive Delay
Page 10 of your July 19, 2007 Order indicates that the plaintiff attorneys requested a fee of about $50 million even though their billable time, according to their own calculations, only amounted to $445,711.50. The plaintiff attorneys requested a fee 112 times the amount they had billed up to that point. On Page 7 of your Order, you said that the plaintiff attorneys based their fee request on 15 percent of their estimate of the settlement amount, which was $332.4 million.
However, your discussion on Page 10 of your Order indicates that the plaintiff attorneys’ estimate of the settlement amount was significantly inflated. You found that the actual settlement amount was more likely between $200 million and $300 million.
The plaintiff lawyers claimed that their request for a $50 million fee was justified because of the risk their firm was taking in pursuing this litigation. But your discussion of this issue on Pages 10 through 16 of your Order clearly indicates that the position of the plaintiff lawyers was nonsense. Your Order indicates that most of the work done by the plaintiff attorneys was settlement negotiation, not litigation, and, because it was merely an extension of the Weingarten ruling, there were no significant legal issues in this action.
Moreover, on Pages 18 and 19 of your Order, you said that any work on the calculation and processing of settlement amounts due individual class members would be handled by TRS, not the plaintiff attorneys, and that TRS would bear the expenses related to those tasks. As a result, you wisely approved plaintiff attorney fees only to the extent of their billable time of $445,711.50 instead of the $50 million they had requested.
On Page 18 of your Order, you aptly describe the request for a $50 million legal fee as “an unjustified golden harvest.” It is abundantly clear from the excessive delay in this action, and the unjustified attempt to harvest a fee 112 times the value of their billable hours, that the plaintiff attorneys have been more interested in helping themselves than in assisting the 11,000 class members who are due increased benefits in this action.
Sense of Powerlessness and Excessive Delay
I have filed complaints about the delay in this action with the UFT, the New York State Attorney General’s Office, and the New York State Supreme Court Disciplinary Committee. All of them refused to get involved because this matter has been in litigation. The plaintiff attorneys have done a poor job of expediting implementation of the settlement. I have been advised that the only other recourse is to appeal to this Court. That is why I contacted you.
I am particularly grateful that you have agreed to read this letter and the enclosed materials since Page 7 of the Settlement Notice seems to eliminate this option when it states: “Inquiries should not be directed to the Court, the Clerk of Court, or to the defendants or their counsel.”
Given that this action has dragged on for eight years, I suspect that the settlement amount will be closer to $200 million than $300 million, and perhaps significantly less than $200 million. Original class members stopped working for the City at least 12 years ago. Assuming that they typically stopped working at 65, most of the original class members are now in their late 70s or older.
Many class members like my father who were due increased benefits have died during the course of this action. More will die in the year or so that it will take to fully implement the modified Settlement Agreement.
It stands to reason that some of the beneficiaries of deceased class members will not be found, even after a diligent search. Therefore, by the time the settlement is fully implemented, the class will be smaller than it was when this action began.
These are not merely statistics. They are, or were, people who will never enjoy a penny of the amounts that were due them.
My father was not a wealthy man. His primary sources of income were his Social Security and pension. The average pension for a New York City teacher retiring now is about $45,000 a year. But the average pension of class members in this action is considerably less because they stopped working at least 12 years ago. For example, my father’s last full-year pension was about $22,000. He could have used the benefits that were due him, especially since he had been battling prostate cancer for several years before his death. Now he’ll never enjoy them, and that makes me mad as hell.
A lot of other class members are also mad as hell about the delay in this matter. I have been chronicling this situation on my blog, which is available at Associated Content.com. The anger and sense of powerlessness among class members is palpable.
Here’s a sampling of posted comments:
“I am appalled and outraged that nothing has been done to settle this case and pay us…Where is our union? Where is the retired teachers’ chapter?”
—Harold Roth, October 27, 2009
“I am also angry and outraged that we have not received payment under the terms of the settlement and [that] there has been no update posted on the website for almost a year.”
—Charlie Schwartz, November 12, 2009
“This discourse makes me quite angry. We have no control about any resolution.”
—Ken Lambert, October 14, 2009
“I am a 50-year member of the UFT and am very disappointed that our union is doing nothing to expedite the payment of the money due.”
—Tom Grey, December 2, 2009
“Is anything happening?? Will this case ever be finalized? It has been almost three years since we were first notified about settlement.”
—Judy Gold, January 26, 2010
“I would like to get my pension increase now, while I can enjoy it. At the rate this case is progressing, it will be my great-grandkids who get to spend the money.”
—Elaine Finkelstein, November 19, 2009
I am grateful to the lead plaintiff, Arnold Nager, for bringing this action before the Court. I am also grateful to Mr. Nager for the comments he posted on my blog, in which he clarified some technical aspects of this action.
However, I am puzzled by a comment he posted on November 15, 2009 about simple interest of five percent to be paid on all settlement amounts accrued from August 31, 1996: “If you don’t need the extra money right away, that’s a lot better than banks are paying.”
With all due respect to Mr. Nager, the amounts due individual class members are “on paper” until they are actually paid. Many class members have not, or will not, live to enjoy the additional benefits due them, a situation exacerbated by the extraordinary delay in this matter, a delay which, with more diligence on the part of the attorneys and their actuarial experts, could have been avoided.
Speculative investors earn a lot of interest. Conservative investors earn a little. The dead earn nothing.
If the formulas in this action had been properly modified before the original settlement was accepted by the Court on July 19, 2007, payment to class members would probably have begun in late 2008. Now, payment can begin no earlier than late 2010. The failure to timely modify the formulas has lead to a delay in payment to class members of at least two years.
A delay of this magnitude, and under these circumstances, could only have been possible with the explicit or tacit cooperation of the attorneys on both sides. The motivation of the defendant attorneys in delaying settlement implementation is obvious: the more time that passes, the more class size shrinks and the less money that has to be paid. The motivation of the plaintiff attorneys in delaying is more difficult to determine. Perhaps it has something to do with their not getting that $50 million fee.
For the reasons stated above, I respectfully request that you convene a hearing on this action as to why the attorneys of record should not be professionally disciplined. In the meantime, I’ll keep my fingers crossed and hope that there are no further delays.
Thank you for your kind consideration, and I look forward to hearing from you.
cc (with enclosures):
David S. Preminger
Alan M. Sandals
Corporation Counsel of the City of New York