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Zoglio v. Mnuchin

United States District Court, District of Columbia

October 4, 2018




         In 2017, the Office of DC. Pensions (“ODCP”), an office within the Department of Treasury, denied Plaintiff Eugene Zoglio's request to reestablish a decades-old disability pension. He has brought suit against the Secretary of the Treasury (the “Secretary”) seeking reversal of that denial. The parties have cross-moved for summary judgment. ECF Nos. 9, 11.[1] For the reasons set forth below, the Secretary's motion will be granted and Zoglio's motion will be denied.

         I. Statutory and Regulatory Background

         As far back as 1916, Congress created retirement plans for police, firefighters, and other employees of the District of Columbia (the “District”). See S. Rep. No. 96-237, at 2 (1979). These plans “were funded on a ‘pay as you go' basis, ” and by the 1970s they had created a vast “unfunded liability” for the District. D.C. Ret. Bd. v. United States, 657 F.Supp. 428, 430 (D.D.C. 1987). In 1979, Congress enacted the District of Columbia Retirement Reform Act, Pub. L. No. 96-122, 93 Stat. 866 (1979), in the hopes of providing “adequate funding” to these “financially strapped” programs. McNeal v. PFRRB, 488 A.2d 931, 934 (D.C. 1985). Nonetheless, by 1997, these unfunded liabilities had increased to $4.8 billion, and associated payments constituted 10% of the District's annual revenue. See Balanced Budget Act of 1997, Pub. L. No. 105-33, tit. XI, subtit. A, District of Columbia Retirement Protection Act of 1997 § 11002(a)(2), (6), 111 Stat. 251, 715-16.

         Congress responded by passing the District of Columbia Retirement Protection Act of 1997 (“DCRPA”) (enacted as Title XI, Subtitle A of the Balanced Budget Act of 1997), which transferred the obligation to pay for certain of these retirement programs to the federal government. Id. § 11002(b)(2), 111 Stat. at 716.[2] These programs were transferred “as in effect on the day before” the statute's “freeze date” of June 30, 1997. DCRPA § 11003(5), (9), 111 Stat. at 717. That is, the federal government took on the District's liabilities that had accrued under these programs on or before June 30, 1997, with the District continuing to be responsible for liabilities arising from employee service rendered after that date. See Id. § 11012(b), 111 Stat. at 718; Rivera v. Lew, 949 F.Supp.2d 266, 267 (D.D.C. 2013); Federal Benefit Payments under Certain District of Columbia Retirement Plans, 70 Fed. Reg. 60003, 60003 (Oct. 14, 2005).

         Congress vested the administration of the DCRPA in the Secretary, see DCRPA § 11083, 111 Stat. at 730, who delegated that authority to the ODCP, see Def.'s Br. at 1-2. In particular, the Secretary may promulgate procedures for handling claims. DCRPA § 11022(a), 111 Stat. at 720. The relevant regulations provide for the processing of claims by a “Benefits Administrator, ” 31 C.F.R. § 29.404(a), a role apparently filled by the District of Columbia Retirement Board (“DCRB”) during the time period relevant to this case, see Def. 's Br. at 6. In the event that a claim is denied, the decision must be accompanied by “adequate written notice of such denial, setting forth the specific reasons for the denial in a manner calculated to be understood by the average participant.” DCRPA § 11022(a)(1), 111 Stat. at 720. Applicants may seek reconsideration before the Benefits Administrator, followed by an appeal to the Department of the Treasury. 31 C.F.R. § 29.404(b)-(e). See generally Vincent v. Geithner, 890 F.Supp.2d 8, 10 n. 1 (D.D.C. 2012) (discussing review process).

         The DCRPA gives this Court exclusive jurisdiction and venue to review benefits decisions. DCRPA § 11072(a)(1), 111 Stat. at 728. It also sets out a standard of review. “Any factual determination made by the [Secretary] shall be presumed correct unless rebutted by clear and convincing evidence.” DCRPA § 11022(b), 111 Stat. at 721. Moreover, the Secretary's “interpretation and construction of the benefit provisions of the [transferred retirement programs] and [the DCRPA] shall be entitled to great deference.” Id.

         II. Factual and Procedural Background

         In 1958, Zoglio became an officer in the District's Metropolitan Police Department. JA 1. In 1970, he retired with a disability annuity. JA 1-2. Zoglio subsequently attended law school and started his own practice. JA 2. In 1984, the Police and Firefighters' Retirement and Relief Board (“PFRRB”) terminated Zoglio's pension, on the ground that his earning capacity had been restored by his “lucrative” law practice. JA 269, 279. Of particular note, the PFRRB concluded that Zoglio's “earning capacity” included not just the personal “income” he had actually drawn from his firm (which was incorporated as a professional corporation), but also his “demonstrated capacity to earn” based on the firm's revenues. JA 280-82

         In 1991, Zoglio petitioned the PFRRB for reestablishment of his annuity. Zoglio v. PFRRB (“Zoglio I”), 626 A.2d 904, 905 (D.C. 1993). He argued that, by virtue of having turned 50, he was necessarily entitled to reestablishment. Id. The District of Columbia Court of Appeals rejected this argument, holding that District law recognized only “two corresponding conditions upon which the annuity, once terminated, can be ‘reestablished': recurrence of the disability and reduction of income below the statutory percentage ceiling.” Id. The Court of Appeals also rejected Zoglio's theory that the disability program discriminated against him based on his age. See Id. at 907-08.

         In December 2014, Zoglio again sought reestablishment of his annuity, this time on the ground that his earning capacity had declined to less than 80% of the position he held at his retirement. JA 268. There followed a series of administrative decisions that both parties agree were erroneous. See Pl.'s Br. at 6; Def.'s Br. at 6 n.7. The DCRB interpreted his request as one for “deferred retirement benefits, ” JA 267, and granted him such benefits in the amount of $631 per month, JA 261. This decision was incorrect because Zoglio had neither requested, nor was he entitled to, deferred benefits. See Def.'s Br. at 27. The DCRB promptly reversed course and voided the award, suggesting he instead seek relief from the PFRRB. JA 260. That suggestion was also in error, because the PFRRB lacked jurisdiction over his case and promptly dismissed it. JA 249, 254.

         In September 2015, Zoglio returned to the DCRB with a renewed request for reestablishment, explaining the previous errors. JA 252-53. On October 30, 2015, DCRB denied the request. JA 248. It reasoned, first, that he had failed to show that his “earned income for [calendar year] 2014 was below the statutory earnings threshold.” JA 249. It noted that Zoglio continued to maintain the “lucrative law practice” that underlay the PFRRB's 1984 decision to terminate his benefits. Id. It also concluded that Zoglio had misled the PFRRB about his income in the earlier proceedings, and that this “materially false information” had caused his annuity to be “forfeited.” JA 249-50.

         On November 24, 2015, Zoglio appealed the denial to ODCP. JA 101-02. He argued that the “only relevant issue” was his “2014 earned income.” JA 106. While acknowledging that “he and his wife had adjusted gross income of $162, 820” in 2014, he explained that most of this amount (including certain retirement benefits and payments from a purchased annuity) did not count toward his “earned income.” JA 113. He also claimed that his tax return did “not show any income from his ‘lucrative' law firm in 2014 because his law firm did not make a profit in 2014 and he received no salary or other earned income from the firm in 2014.” JA 114. His wife continued to work at the firm, but her salary had been reduced from $35, 000 to $25, 000. Id. He also disputed the DCRB's conclusion that he had previously misled the PFRRB. JA 96, 114-15.

         ODCP followed up with two requests for additional information. First, it requested additional tax documents and a description of any “services performed in 2014 and 2015 by Mr. Zoglio on behalf of” his firm. JA 94. Zoglio provided the tax documents, along with the following explanation:

Mr. Zoglio did not actively engage in the practice of law in 2014 and 2015 for the firm he founded many years ago, Eugene M. Zoglio, P.A. He is almost 80 years old. As to the services performed by Mr. Zoglio in 2014 and 2015, they are as follows: He occasionally writes checks for routine bills for the firm and the attorneys will on occasion consult with him, for which he receives no salary. All legal work and fees generated by the firm are done by the other attorneys and paralegals. Mr. Zoglio's wife has done administrative work for the firm for the past 30 years as an employee of the firm, for which she receives a salary of $25, 000 per year. Mr. Zoglio's income from investments, sales of real estate, pensions, annuities, Social Security and rent from real property does not disqualify him from restoration of the disability pension to which he is entitled by law.

JA 15.

         Next, ODCP requested medical documentation showing that Zoglio “is currently suffering from the disabling illness/injury he incurred while employed by the Metropolitan Police Department prior to his disability retirement, and that this has caused a reduction in his earnings capacity below the statutory threshold.” JA 11. Zoglio refused to provide this information, which he argued was “not relevant to the legal issue to be decided regarding the reinstatement of his annuity.” JA 9. He argued again that “[t]he only relevant issue regarding restoration of [his] annuity is whether his earned income for 2014 fell below the 80% statutory limitation.” Id. “Thus, ” he argued, “ODCP has all the relevant information it needs to make a decision.” Id.

         On March 24, 2017, ODCP denied Zoglio's appeal, on two grounds. JA 1-8. It concluded that Zoglio was required to establish that he continued to suffer from his disability, but had refused to do so. JA 4-6. It further concluded that Zoglio had failed to establish that his “earning capacity” had declined below the threshold required to reestablish his annuity. JA 6-8. ODCP's conclusion about earning capacity rested, in turn, on two independent bases. ODCP reasoned, first, that “earned income” is not necessarily identical to “earning capacity, ” which is the relevant standard under the statute. JA 6-7.[3] In particular, it reasoned that “an annuitant who at one point was entitled to a disability annuity under the Plan but is now capable of gainful employment cannot draw a disability annuity by simply choosing not to work.” JA 7. It concluded that, “[b]y all indications, Mr. Zoglio's reduction in earned income is the result of a voluntary decision to retire.” Id. Zoglio admitted that he sometimes consulted with attorneys at his firm, which in ODCP's view suggested he had the ability to work. Id. And ‚Äúnothing in the documentation provided suggests Mr. Zoglio lacks such ...

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