Smalls v. New York City Employees' Retirement System

Background

James Smalls, representing himself, sued the New York City Employees’ Retirement System (NYCERS) over the temporary suspension of his pension benefits. He asserted federal and New York constitutional due-process claims, a breach-of-contract claim, and a breach-of-fiduciary-duty claim. The court treated his federal constitutional claims as claims under 42 U.S.C. § 1983, a law allowing suits for violations of federal rights by state actors.

In an earlier ruling, the court dismissed the claims against individual defendants Melanie Whinnery and Scott M. Stringer and dismissed the breach-of-fiduciary-duty claim against all defendants. The court allowed Smalls’s due-process and breach-of-contract claims against NYCERS to proceed. At the March 11, 2020 bench trial, the court granted NYCERS’s motion for judgment as a matter of law on the breach-of-contract claim because Smalls had offered no evidence of damages. The court then decided the remaining due-process claim in this Opinion.

Facts Found by the Court

NYCERS administers a pension plan for public-sector employees. Smalls was a former New York City Transit Authority employee and a NYCERS member. The court found that he had both an unpaid pension-loan overage and a deficit in his Member Contribution Accumulation Fund. Together, those amounts totaled $3,455.03 at retirement.

In a September 14, 2017 letter, NYCERS told Smalls that he had to pay the $3,455.03 lump sum to reduce his loan balance to the legally permitted amount. The letter warned that if he did not pay within 20 days, his advance pension payments would be suspended and the revision of his retirement allowance would be delayed. The letter did not inform him that he could challenge the suspension through a proceeding under Article 78 of New York’s Civil Practice Law and Rules, which allows state courts to review actions by state agencies and officials.

Smalls did not contact NYCERS about the deficiency or pay the requested amount. NYCERS suspended his pension payments in November 2017. Under an agreement between the parties, the suspension ended on May 10, 2018, and Smalls received the payments that had been withheld.

Due-Process Analysis

The court had previously determined, and NYCERS did not dispute, that Smalls had a protected property interest in receiving his pension payments and that the suspension deprived him of that interest. The remaining question was whether the deprivation occurred without adequate procedural protections.

The court held that the availability of an Article 78 proceeding provided constitutionally adequate process in this pension context. It rejected Smalls’s argument that NYCERS had an additional duty to tell him specifically about that proceeding. Relying on Supreme Court and Second Circuit authority, the court explained that due process does not require officials to give individualized notice of remedies established by publicly available statutes and case law.

The court distinguished a prior case involving NYCERS because, in that case, NYCERS had allegedly misled a claimant into waiving other review rights while failing to explain what rights were being waived. The court stated that NYCERS may not mislead or deceive people into surrendering legal rights. But the letter to Smalls merely omitted information; it did not misrepresent his rights or induce him to waive them. The court also rejected Smalls’s argument that NYCERS’s having informed another person about an Article 78 proceeding created a constitutional requirement to provide that information in every case.

Disposition

The court concluded that NYCERS’s failure to tell Smalls about his right to seek Article 78 review did not violate procedural due process under either the federal or New York Constitution. It ruled that Smalls’s procedural due-process claim failed, ordered that NYCERS have judgment in the action, directed the Clerk to enter judgment, and directed the Clerk to close the case.