A vested right to retirement benefit to be provided by a New York State public retirement system may neither be diminished nor impaired "retroactively"

A 1957 decision of the New York State Comptroller provided for the inclusion of cash payments for accumulated vacation credits* in determining a member's "final average salary" for the purpose of computing the member's retirement benefits. In 1971 the Retirement and Social Security Law [RSSL] was amended** and eliminated the inclusion of cash payments for accumulated vacation credits in determining a member's retirement allowance.

When the Comptroller thereafter applied RSSL §431.1, as amended, to certain retiring members [Plaintiffs] of the retirement system who joined the system prior to the effective of the amendment, they challenged to "retroactive application" of the amendment with respect to the calculation of their retirement allowances, contending that such action constituted a violation of §7(a) of Article V of the New York State Constitution if retroactively applied to the Plaintiffs and others similarly situated.

The Court of Appeals agreed,*** opining that the Comptroller's 1957 decision constituted "a valid contract between the State Employees' Retirement System and its members" and if retroactively applied to the Plaintiffs and others similarly situated would constitute a violation of Article V, §7(a)**** of the State Constitution. In other words, pre-amendment members of the retirement system acquired a vested right to the benefit flowing from the 1957 decision by the Comptroller and "that benefit may not now be constitutionally impaired."

In contrast, insofar as members joining the Retirement System on or after the effective of the 1971 amendment to the RSSL are concerned, the Court of Appeals noted that such new entrants "acquired contractual rights subject to any statutes then outstanding, whether or not by the terms of the statutes they applied to current or future events."

In the words of the court,  "subdivision 1 of section 431 of the Retirement and Social Security Law ... which eliminates inclusion of cash payments for accumulated vacation credits, violates section 7 of article V of our State Constitution if retroactively applied to the plaintiff and others similarly situated." In other words, the change could only be applied to individuals becoming members of the retirement system on or after the effective date of the change.

* Such payments, said the court, represented "compensation for services actually rendered and are, therefore, properly includable in the computation of a member's final average salary."

** Chapter 503 of the Law of 1971 amended §431.1 of the Retirement and Social Security Law.

*** Kranker v Levitt, 30 NY2d 574.

**** Article V §7(a) provides that "After July first, nineteen hundred forty, membership in any pension or retirement system of the state or of a civil division thereof shall be a contractual relationship, the benefits of which shall not be diminished or impaired."

The decision is posted on the Internet at:

https://www.leagle.com/decision/197260430ny2d5741493

Evaluating a public employer's duty to defend and indemnify an employee named as a defendant in an "underlying action"

The City of Buffalo [Respondent] appealed from a judgment of Supreme Court denying its motion to dismiss the petition of two police officers [Officer A and Officer B] seeking a court order directing the Respondent to provide for their defense and indemnification* in an underlying action brought against them by a nonparty to this CPLR Article 78 proceeding.

Petitioners commenced their Article 78 proceeding after Respondent determined that it would not provide them with a defense or indemnification in the underlying action. Supreme Court ordered the Respondent to provide for a defense and indemnification of both Officer A and Officer B in the underlying action, whereupon the Respondent appealed the ruling to the Appellate Division.

The Appellate Division said it agreed with the Respondent that Supreme Court erred in granting the petition with respect to Officer A by denying that part of the Respondent's motion seeking to dismiss the petition as to Officer A on the ground that he failed to timely commence this proceeding. Accordingly, the Appellate Division so modified the Supreme Court's judgment with respect to Officer A.

In contrast, the Appellate Division said Supreme Court "properly determined, however, that Respondent's determination not to provide [Officer B] with a defense was arbitrary and capricious, noting that the Respondent's determination concerning Officer B was based on its conclusion that Officer B was acting outside the scope of her employment at the time of the incidents concerning the plaintiff in the underlying action.

The Appellate Division, observing that "it is undisputed that [Officer B] was on duty and working as a police officer when the alleged conduct occurred," opined that the facts that Officer B pleaded guilty to a disciplinary charge in connection with her conduct that gave rise to the underlying action "cannot establish, as [Respondent] must, that [Officer B's] was acting outside the scope of her employment at the time of the incidents concerning the plaintiff in the underlying action" by showing that Officer B's actions were "wholly personal" in nature.

Accordingly, the Appellate Division concluded that Supreme Court's determination that Officer B is entitled to indemnification was "premature at this time" and then elected to "further modify the [Supreme Court's] judgment accordingly."

* Presumably Officers A and B sought the Respondent's providing for their "defense and indemnification" pursuant to Public Officers Law §18, a provision in a collective bargaining agreement or as otherwise authorized by law, rule or regulation. §18 provides for the defense and indemnification of officers and employees of public entities which are defined as "(i) a county, city, town, village or any other political subdivision or civil division of the state, (ii) a school district, board of cooperative educational services, or any other governmental entity or combination or association of governmental entities operating a public school, college, community college or university, (iii) a public improvement or special district, (iv) a public authority, commission, agency or public benefit corporation, or (v) any other separate corporate instrumentality or unit of government; but shall not include the state of New York or any other public entity the officers and employees of which are covered by section seventeen of this chapter or by defense and indemnification provisions of any other state statute taking effect after January first, nineteen hundred seventy-nine."

The decision is posted on the Internet at:

http://www.nycourts.gov/reporter/3dseries/2019/2019_05877.htm

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