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Arnold v. Borough

December 28, 2007

RAYMOND E. ARNOLD, JR. AND SANDRA L. ARNOLD, PLAINTIFFS
v.
RED LION BOROUGH, ET AL., DEFENDANTS



The opinion of the court was delivered by: Judge Conner

MEMORANDUM

Presently before the court are defendants' motions to dismiss (Docs. 25, 29) the claims asserted by plaintiffs Raymond E. Arnold, Jr. ("Raymond") and Sandra L. Arnold. Defendants argue that: (1) the court lacks subject matter jurisdiction because plaintiffs have failed to exhaust their administrative remedies, and (2) plaintiffs have failed to state a claim upon which relief can be granted. For the reasons that follow, the motions will be granted, and this case will be dismissed.

I. Factual Background*fn1

The dispute in this case centers around the amount of pension benefits to which Raymond is entitled because of his participation in a defined-benefit pension plan offered by defendant Red Lion Borough ("Borough"). (Doc. 21 ¶¶ 5, 7-8.) The defendants are the Borough, five Borough Council members,*fn2 and the Pennsylvania State Association of Boroughs Municipal Retirement Trust ("PSAB MRT"), a nonprofit entity that administers the Borough's pension plan. (Id. ¶¶ 2-5.)

In 1977, Raymond began working for the Borough and elected to participate in its pension plan. (Id. ¶¶ 6, 8.) In April of 2005, Raymond began suffering from health problems and decided to seek an early retirement.*fn3 (Id. ¶ 9.) On May 17, 2005, Raymond met with the Borough's actuary regarding the impact of his proposed early retirement on his pension benefits. (Id. ¶ 10.) The actuary projected Raymond's pension benefits using a 2.0% pension benefits multiplier*fn4 and an early retirement date of January 1, 2006. (Id.) In the summer of 2005, Raymond negotiated with several members of the Borough Council Administration Committee ("the Committee") regarding his retirement package. (Id. ¶ 12.) Raymond and the Committee reached an agreement regarding his retirement package, which Raymond alleges was calculated using a 2.0% multiplier and included his proposed early retirement date. (Id. ¶ 14.) Thereafter, the Committee requested that Raymond present the proposal to the entire Borough Council ("the Council"). (Id. ¶ 13.) On September 12, 2005, Raymond alleges that the Council unanimously accepted the retirement package as proposed.*fn5 (Id. ¶¶ 14-15.)

On October 28, 2005, the Borough's actuary notified Raymond that the initial pension projections had included an estimated salary for three years of service that Raymond had not actually performed. (Id. ¶ 16.) The actuary explained that the inclusion of these additional years of service could be rejected by the Pennsylvania Department of Auditor General and suggested that the projections be recalculated to eliminate this problem. (Id. ¶¶ 17-18.) The actuary then revised the projections to remove the three additional years of service. In return, he increased the multiplier to 2.257% so that the resulting pension benefit would be identical to that previously approved by the Council. (Id. ¶ 18.) On November 3, 2005, the Council president executed a joinder agreement, which implemented Raymond's pension benefits as modified by the actuary.*fn6 (Id. ¶¶ 19-20.) Defendants deny that the Council president was ever authorized by the Council to approve the joinder agreement. (Doc. 25 ¶ 20.)

On January 1, 2006, Raymond retired. (Doc. 21 ¶ 21.) On January 18, 2006, Raymond received a benefit option election form from the Borough, which ratified his early retirement date and based his benefits calculation on a multiplier of 2.257%. This was to result in a lump-sum distribution of $439,727.00. (Id. ¶ 22.) On January 26, 2006, Raymond selected the lump-sum option, executed the form, and returned it to the Borough. (Id. ¶ 23.) On the same day, defendant Council Member Jeffrey Herrman ("Herrman") signed the form on behalf of the Borough.*fn7 (Id. ¶ 24.) The form was then forwarded to PSAB MRT, which received it on January 30, 2006. (Id.)

Sometime thereafter, the Borough defendants allegedly discovered that the joinder agreement contained a 2.257% multiplier, rather than the 1.18% multiplier typically used by the Borough. (Doc. 25 ¶ 24.) On February 20, 2006, defendant Council Member Kandy L. Paules-Sowards ("Paules-Sowards") made a motion to make the typical 1.18% multiplier retroactively applicable to all employee pension benefit plans approved since June 13, 2005. (Doc. 21 ¶ 26.) The motion passed unanimously. (Id.) Raymond alleges that Paules-Sowards' motion was ambiguous as to its applicability to his pension plan, while defendants allege that PaulesSowards' motion was clearly intended to amend Raymond's pension calculations to include a 1.18% multiplier. (Id.; Doc. 25 ¶ 24.) On March 13, 2006, defendant Council Member Cynthia A. Barley made a motion to calculate Raymond's pension benefits using the "correct multiplier." (Doc. 21 ¶ 27.) This motion also passed unanimously. (Id.) Raymond also alleges that this motion was ambiguous as to the multiplier to be applied when calculating his pension benefits, while defendants allege that this motion was intended to authorize the actuary to recalculate Raymond's benefits using a 1.18% multiplier. (Id.; Doc. 25 ¶ 25.)

On March 14, 2006, the Borough solicitor advised Raymond that PSAB MRT was not authorized to pay his pension benefits to the extent that such benefits were based on a multiplier greater than 1.18%. (Doc. 21 ¶ 28.) On March 24, 2006, Raymond received a modified benefit option election form from Borough, which based his benefits calculation on a multiplier of 1.18%. The modified election form provided for a lump-sum distribution of $229,847.00. (Id. ¶ 29.)

On April 10, 2006, a non-defendant Council member made a motion to honor Raymond's pension benefits based upon a 2.0% multiplier. The motion failed. (Id. ¶ 30.) On April 17, 2006, Raymond filed a notice of claim with PSAB MRT, believing that entity to be the plan administrator. Pursuant to the plan documents, the plan administrator has ninety days in which to respond to such a claim. (Id. ¶¶ 31-32.) Raymond has yet to receive a response. (Id. ¶ 35.) On June 12, 2006, Raymond and the Borough entered into a partial payment agreement that permitted PSAB MRT to pay the undisputed pension amount to Raymond, pending resolution of the disputed pension benefits. (Id. ¶ 33; see also Doc. 27, Ex. C.) The partial payment agreement was sent to PSAB MRT on June 20, 2006, but PSAB MRT failed to pay Raymond the undisputed amount.*fn8 (Doc. 21 ¶¶ 34, 36.)

On August 18, 2006, plaintiffs filed the instant action, alleging that defendants deprived Raymond of his vested pension benefits in violation of his rights to substantive and procedural due process pursuant to the Fourteenth Amendment. (See Doc. 1; see also Doc. 21 ¶¶ 39-48.) Plaintiffs also assert the pendent state claims of breach of contract, tortious interference with contractual relations, and loss of consortium. (Id. ¶¶ 49-65.) Defendants filed the instant motions to dismiss, arguing that this court lacks subject matter jurisdiction over plaintiffs' claims and that plaintiffs have failed to state a claim upon which relief can be granted. (See Docs. 25, 29.) The motions have been fully briefed and are ripe for disposition.

II. Standard of Review

The instant motion is premised on both lack of subject matter jurisdiction and failure to state a claim; therefore, both ...


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