United States District Court, Southern District of New York
October 9, 1990
PETER R. CASTELLANO ET AL.
BOARD OF TRUSTEES OF THE POLICE OFFICER'S VARIABLE SUPPLEMENTS FUND, BOARD OF TRUSTEES OF THE POLICE SUPERIOR OFFICERS' SUPPLEMENTS FUND, HARRISON J. GOLDIN, AND THE CITY OF NEW YORK.
The opinion of the court was delivered by: Kevin Thomas Duffy, District Judge.
Plaintiffs, Peter R. Castellano et al. ("Castellano"), former
police officers, former police superior officers, and former
police detectives who retired on accident disability, ordinary
disability, or with a vested right to a deferred retirement
allowance, bring action pursuant to 42 U.S.C. § 1983 (1982)
against defendants, Board of Trustees of the Police Officer's
Variable Supplements Fund, Board of Trustees of the Police
Superior Officers' Supplements Fund, Harrison J. Goldin, and
The City of New York ("Board of Trustees"), claiming
deprivation of, and entitlement to receive, certain
supplementary payments from either the Police Officers'
Variable Supplements Fund or the Police Superior Officers'
Variable Supplements Fund ("VSFs"). Castellano claims that the
denial by the Board of Trustees to pay the officers from the
VSFs constitutes, under color of state law, a: (1) denial of
equal protection of the laws under the fourteenth amendment;
(2) deprivation of property without just compensation and
without due process of the law; (3) deprivation of both a
contractual right as well as a property interest; and (4) an
impairment of property rights in the assets of the Police
Pension Fund, Art. II and the VSFs. The Board of Trustees moves
pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss Castellano's
complaint for failure to state a claim and lack of standing;
Castellano cross-moves pursuant to Fed.R.Civ.P. 56 for summary
judgment to receive payments.
Specifically, Castellano is one of more than 180 police
officers who, prior to retiring, were members of the Police
Fund, Article 2 ("Pension Fund"). They are currently
beneficiaries of the Pension Fund, pursuant to § 13-214(5) of
the Administrative Code of the City of New York
("Administrative Code").*fn1 These VSFs were established
pursuant to vast legislation, they are separate legal entities
from the Pension Fund, and are governed by their own Boards of
Trustees. Admin.Code §§ 13-269, 13-270, 13-272, 13-278 through
287. The statute establishing the VSFs expressly provides that
the supplemental payments made by these Funds shall not
constitute pension or retirement benefits under the Pension
Fund. Admin.Code §§ 13-271(b)(2)(ii), 13-281(b)(2)(ii).
Administrative Code § 13-232 provides the source of funds for
the VSFs. A portion of the investment earnings generated by the
assets managed by the Pension Fund, including assets
contributed both by police officers and by the City, is
transferred to fund the VSFs. When the Pension Fund's earnings,
from assets invested in equities, exceed the hypothetical
earnings which the same amount of assets would have generated
if invested in fixed income securities, then the equivalent of
this excess is transferred to the VSFs. The Board of Trustees
of the two VSFs may authorize payments from the Funds to
pension fund beneficiaries in such amount and in such cases as
they may in their discretion determine, subject to standards of
"equity, fairness and prudent management." Admin.Code §§
13-269(b), 13-279(b). Payments may be made to "eligible pension
fund beneficiaries" and such payments may be discontinued at
any time. Admin.Code §§ 13-271(b)(2)(i), 13-281(b)(2)(i).
"Pension fund beneficiary" is defined in various sections of
the Administrative Code as a police officer or police superior
who has "retired for Service."*fn2 Castellano et al. did not
retire for service. They retired either for ordinary
disability, accident disability, or with a vested right to a
deferred retirement allowance. Complaint ¶¶ 2, 11. As such,
Castellano does not fall within the purview of the class of
persons to whom the Boards of Trustees of the VSFs are
authorized to make variable supplement payments.
It is of no moment that Castellano asserts the Board of
Trustees deprived him and his fellow officers of property
without just compensation and without due process of the law in
violation of the fourteenth amendment to the United States
Constitution. In order to have a property interest in a
benefit, a plaintiff must have "a legitimate claim of
entitlement" to such benefit, which is cognizable under state
law. Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct.
2701, 2709, 33 L.Ed.2d 548 (1972). Castellano contends that a
protected property interest exists because police officers
contributed, through payroll deductions, to the funds
comprising the VSFs and as such have an interest therein in the
investment earnings which the VSFs have generated. Complaint ¶¶
4, 8. This is belied by the fact that Castellano et al.
contributed to the annuity portion of the total retirement
allowance which they now receive. See Admin.Code § 13-256(c)(1)
(vested right retirement allowance); § 13-257(1) (ordinary
disability retirement allowance); § 13-258(1) (accident
disability retirement allowance). Moreover, those contributions
constitute entitlement to investment
earnings of neither the Pension Fund, nor VSFs. See Crown v.
Trustees of Patrolmen's Variable Supplements Fund, 819 F.2d 47,
47-48 (2d Cir. 1987) (motion to dismiss granted where
plaintiffs, former patrolmen and superior officers of the New
York City Police Department, failed to allege a
constitutionally protected property right to variable
supplements fund payments because there is no entitlement to
assets or earnings of assets held for investment purposes in a
pension fund); Poggi v. New York, 109 A.D.2d 265, 491 N.Y.S.2d
331 (1st Dep't 1985), aff'd mem. on other grounds, 67 N.Y.2d
794, 501 N.Y.S.2d 324, 492 N.E.2d 397 (1986) (investment
earnings not considered statutory element of Pension Fund
Benefits). The enabling state legislation expressly provides
that the supplementary payments are not considered pension or
retirement payments, are legally distinct from the pension
funds, and are not payable to people such as Castellano et al.
who had not retired "for service," as delineated in the code.
Castellano therefore fails to allege a constitutionally
recognized property right in the VSFs. The retirees at bar
already receive all the due pension payments to which they are
Castellano further avers that the Board of Trustee's actions
in making VSF payment to those who have retired for service,
while denying such payments to all other classes of retirees,
denies them equal protection of the laws in violation of the
fourteenth amendment to the United States Constitution.
Complaint ¶ 14. In the area of economic and social welfare, a
State does not violate the Equal Protection Clause merely
because the classifications made by its laws are less than
perfect. If the classification has some "reasonable basis," it
does not offend the Constitution. U.S. Railroad Retirement Bd.
v. Fritz, 449 U.S. 166, 177, 101 S.Ct. 453, 460-61, 66 L.Ed.2d
368 (1980); Dandridge v. Williams, 397 U.S. 471, 485, 90 S.Ct.
1153, 1161-62, 25 L.Ed.2d 491, reh. denied, 398 U.S. 914, 90
S.Ct. 1684, 26 L.Ed.2d 80 (1970) (citing Lindsley v. Natural
Carbonic Gas Co., 220 U.S. 61, 78, 31 S.Ct. 337, 340, 55 L.Ed.
369 (1911)). "A statutory discrimination will not be set aside
if any state of facts reasonably may be conceived to justify
it." McGowan v. Maryland, 366 U.S. 420, 426, 81 S.Ct. 1101,
1105, 6 L.Ed.2d 393 (1961). Where a disability retiree of the
Pension Fund also challenged the VSF on equal protection
grounds, the Court held that it is "not arbitrary or capricious
to limit the Variable Supplement Fund payments to service
retirees" as the court has found "respondents' allocation of
Variable Supplement Fund payment to be based on a rational and
reasonable classification." Ryan v. Board of Trustees,
138 Misc.2d 826, 525 N.Y.S.2d 487 (Sup.Ct.N.Y.Co. 1988). Moreover,
the legislature is afforded due deference for having
"investigated and found facts necessary to support the
legislation." In re Adoption of Malpica — Orsini, 36 N.Y.2d
568, 571, 370 N.Y.S.2d 511, 331 N.E.2d 486 (1975) (citation
omitted), app. dismissed, 423 U.S. 1042, 96 S.Ct. 765, 46
L.Ed.2d 631 (1976). Therefore, it may be presumed that the
legislature was fully aware of the features of the statutory
retirement scheme that operate in favor of some retirees and
The Board of Trustees avers that the legislative decision to
reserve VSFs only for service retirees was a legitimate attempt
to equalize benefits among the various classifications of
retired members. I find that this provides a plausible and
rational basis for the classification of VSF payments. In a
nutshell, the State shows a legitimate interest, in recognition
of service retirees' longer periods of service and greater
lifetime contributions to the Pension Fund, as well as
effectuating the collective bargaining process, to justify the
classification complained of by Castellano. The classification
passes constitutional muster under the Equal Protection Clause.
Finally, Castellano claims that the denial of VSF payments
constitutes a violation of the Contract Clause. U.S. Const.
Art. I, sec. 10. Complaint ¶¶ 1, 12, 20. Additionally,
Castellano claims state impairment of the contract under
Article V, section 7 of the New York Constitution. Complaint ¶¶
1, 13, 21, 22, 23. In order to prevail on claims of violations
of the federal
contract clause and state non-impairment clause, Castellano
must show that some identifiable benefit set forth in these
statutory sections is diminished or impaired by the enactment
of the VSFs. See Lippman v. Board of Education, 66 N.Y.2d 313,
317-19, 496 N.Y.S.2d 987, 487 N.E.2d 897 (1985). Quite simply,
none of the current benefits paid depend on the earnings of
either the Pension Fund or VSFs; none of these benefits
fluctuate with or depend upon investment earnings of the
Pension Fund; and receipt of VSF payments apparently was not a
subject of negotiation in the Pension Fund contract. Thus, the
pleadings wholly fail to indicate a denial of benefits
triggering the federal contract clause. The VSF payment scheme
has neither diminished nor impaired any benefit set forth in
the statutory Pension Fund contract. In sum, having failed to
demonstrate that the receipt of VSF payments was an integral
part of the original Pension Fund contract, Castellano et al.
wholly fail to state a federal contracts clause or
non-impairment clause violation.
For the foregoing reasons, the Board of Trustees motion to
dismiss is granted and the complaint is dismissed in its
entirety. Castellano's cross-motion for summary judgment is