Kitty Dunn v. Regional Transit Authority

Opinion

KITTY DUNN, ET AL. * NO. 2024-CA-0513

VERSUS * COURT OF APPEAL

REGIONAL TRANSIT * FOURTH CIRCUIT AUTHORITY, ET AL. * STATE OF LOUISIANA

*

* ******* RLB BELSOME, C.J., DISSENTS AND ASSIGNS REASONS.

I respectfully dissent from the majority and would hold that the claims made

by the appellants is a claim for breach of fiduciary duty and is governed by the 10-

year prescriptive period of La. C.C. art. 3499 rather than the 3-year prescriptive

period of La. C.C. art. 3494.

Our courts have always disfavored prescription and shown a strong

preference for preserving claims. “The law requires strict construction of the

prescription statutes ‘in favor of the claim that is said to be extinguished.’”

Faubourg Saint Charles, LLC v. Faubourg Saint Charles Homeowners Ass'n, Inc.,

2018-0806, p.5 (La. App. 4 Cir. 2/20/19), 265 So. 3d 1153, 1157.

In Faubourg, a condominium developer had advanced sums on behalf of the

condominium association because the association had not yet acquired funds

sufficient to maintain its commonly owned assets. The association argued that the

developer’s claim was a suit for money lent that prescribed in three years. The

court held that the developer acted as an agent for the association in a manner that

formed a personal obligation on the part of the association that was the principal.

The court held that the ten-year prescriptive period should be applied in order to

maintain the action.

The Faubourg court relied on our traditional respect for preserving remedies

in order to deliver substantial justice to litigants. Where there was a choice of

1 prescriptive periods under law, the court chose the applicable period that permitted

the plaintiff its day in court. In this case, our court is presented a similar choice.

We should take the same approach here. The retirees in this case are owed a duty

that is much more like a contractual fiduciary duty than an employer-employee

relationship. For traditional legal and equitable reasons, that relationship should be

governed by the 10-year prescriptive period of article 3499.

Definition of compensation

As a general rule, “[t]he words of a law must be given their generally

prevailing meaning.” La. C.C. art. 11; La. R.S. 1:3. While article 11 admits of an

exception for words of art, there is nothing in La. C.C. art. 3494 that suggests that

compensation is a term of art and should be given its ordinary meaning.

The Oxford Advanced Learner's Dictionary, provides these contrasting

definitions of compensation and pension. Compensation is “money received by an

employee from an employer as a salary or wages.” A pension, as defined by the

same dictionary, is “a regular payment made during a person's retirement from an

investment fund to which that person or their employer has contributed during their

working life.”

Article 3494, contains its own definition that tracks the dictionary definition.

It provides that:

The following actions are subject to a liberative prescription of three years: (1) An action for the recovery of compensation for services rendered, including payment of salaries, wages, commissions, professional fees, fees and emoluments of public officials, freight, passage, money, lodging, and board[.]

La. C.C. art. 3494. All the forms of compensation enumerated in the article are

consistent with an ongoing work-for-money relationship. This is emphasized by

the inclusion of living and travel expenses such as freight, passage, lodging, and

board. Considering the exhaustive nature of the types of compensation listed in

2 article 3494, it is even more noteworthy that pension payments are not included in

this list of exclusions to the general rule of prescription for contracts.

The majority acknowledges that the accepted prescriptive period for

contracts is ten years as provided by La. C.C. art. 3499. That article reads, “Unless

otherwise provided by legislation, a personal action is subject to a liberative

prescription of ten years.” The majority holds that article 3494 “otherwise

provides,” or makes an exception, to the general rule of prescription for contracts

in claims for compensation. I would hold that pension payments and retirement

benefits are not “compensation” as that word is used in article 3494 or in ordinary

usage. Therefore, the payments at issue here do not fit within the exception on

which the majority relies.

Article 3494 must be read in pari materia with article 3499 because it

constitutes an exception to the general rule regarding personal obligations. The

article lists the types of payments that are covered by the three-year period. They

are specific and they are in accord with standard definitions of compensation

provided in dictionaries.

Nature of the obligation

As shown above, both the statutory and the dictionary definition strongly

imply relatively simultaneous performance of work in exchange for pay. Payments

of pension benefits are markedly different. “Compensation” as used in the code

article and the dictionary definition involves bilateral obligations (work for

money). In the context of pension obligations, the retiree has already satisfied all

obligations owed to the employer by working the required time period. In addition

to the retiree’s work, the employer typically deducts a portion of the employee’s

own earnings to contribute to the pension fund. The obligation to pay a pension is

unilateral in nature. The employer has assumed the obligation of investing the

employees’ funds generated by work and wages (the forms of compensation

3 enumerated in La. C.C. art. 3494). The former employer has a fiduciary duty to

the retiree to pay the obligations undertaken by it. The retiree owes nothing to the

former employer and stands in the same legal position as a beneficiary to a trust.

It is well settled that a fiduciary obligation is personal in nature and is

governed by the 10-year prescriptive period of La. C.C. art. 3499. In Trust for

Melba Margaret Schwegmann v. Schwegmann Family Trust, 09-968 (La. App. 5

Cir. 9/14/10), 51 So. 3d 737. The plaintiff/beneficiary alleged that the trustee had

converted funds for his own use. The defendant filed an exception of prescription

arguing that the tort of conversion was subject to a one-year prescriptive period

and had prescribed. The court wrote:

After a review of the allegations and prayer in plaintiffs original and amended petition, we do not agree with the trial court that the true nature of plaintiffs' action is conversion alone. Although plaintiffs have asserted that John F. Schwegmann wrongfully converted funds of the Margie Trust as a basis for this declaratory action, we cannot ignore the fact that this declaratory action seeks remedies beyond a claim against John F. Schwegmann individually for any acts of conversion. La. C.C. art. 3499 provides that “[u]nless otherwise provided by legislation, a personal action is subject to a liberative prescription of ten years.” Based on the claims made by plaintiffs in the original and amended petition, including the claims for unjust enrichment or revendication, we find this ten year prescriptive period is applicable, the petition was timely filed, and the trial court incorrectly granted the exception of prescription.

Trust for Melba Margaret Schwegmann v. Schwegmann Family Trust, 09-968, p.9

(La. App. 5 Cir. 9/14/10), 51 So. 3d 737, 743.

In federal court, the appellants have already argued, successfully, that the

pension fund that is the subject of this suit is public in nature. Therefore, the RTA

pension fund falls within La. Const. art. X, § 29, which declares that public pension

plans are a form of contract between the public body and the retiree:

(B) Other Officials and Employees. The legislature shall enact laws providing for retirement of officials and employees of the state, its agencies, and its political subdivisions, including persons employed jointly by state and federal agencies other than those in military

4 service, through the establishment of one or more retirement systems. Membership in any retirement system of the state or of a political subdivision thereof shall be a contractual relationship between employee and employer, and the state shall guarantee benefits payable to a member of a state retirement system or retiree or to his lawful beneficiary upon his death.

La. Const. Ann. art. X, § 29

The majority cites Born v. City of Slidell, 2015-0136 (La. 10/14/15), 180 So.

3d 1227 as binding authority on the issue of prescription. A careful reading of

Born shows that the court did not analyze or discuss the possibility of the

application of a 10-year prescriptive period. In fact, the issue in Born was not the

applicable prescriptive period but the date on which the prescription began to toll.

The choice in that case was the date on which the City of Slidell announced the

change in its retirement plan or the date on which the plaintiff became eligible to

retire. The court chose the latter date, which fell within the three-year period

argued by the city and was not contested by the retiree in that case. Because article

3499 was not implicated or invoked, it was not discussed. As a result, the majority

opinion is founded on dicta, not binding precedent. Born does, however, shed light

on the nature of the obligation owed by the city:

Through his acceptance and compliance with those conditions offered by the City of Slidell, plaintiff and the City entered into a contract, which is not a “mere gratuity or illusory promise” but resulted in plaintiff's vested right to the promised benefit, his participation in the City's health plan as originally chosen. See, Knecht, supra, at 695. Through the enactment and retroactive application of City Ordinance 3493, the City of Slidell is inappropriately attempting to move plaintiff from his promised retirement plan to a plan that requires him (“shall apply”) to select Medicare Coverage. Born v. City of Slidell, 2015-0136, p.13 (La. 10/14/15), 180 So. 3d 1227, 1235.

(emphasis added)

The lesson that should be drawn from Born is that the employer’s duty to pay

pension benefits includes the obligation to pay for insurance as promised. The

insurance benefit is a vested right according to Born.

5 Continuing obligation

In addition to, or in the alternative to the discussion above, our court has

already held that errors in pension payments may be corrected prospectively long

after the expiration of the three or ten-year prescriptive periods. In New Orleans

Fire Fighters Pension & Relief Fund v. City of New Orleans, 2017-0320 (La. App.

4 Cir. 3/21/18), 242 So. 3d 682, the defendant (“City”) had made an error in the

method of calculating payments due to retired firefighters. The error inured to the

benefit of the retired firefighters and was uncontested for more than ten years

before the City raised the issue in a reconventional demand. The retirees argued

that the City was precluded from changing the erroneous practice by the three-year

prescription of La. C.C. art. 3494. Our court held that the City could correct its

error prospectively,1 notwithstanding the prescriptive period. The court wrote:

NOFF asserts the City's claims have prescribed.18 Specifically, NOFF argues that the City's reconventional demand was filed on September 17, 2015, and, pursuant to La. C.C. 3494, the Fund should not be required to recalculate the benefits of anyone “who retired more than three years before the date of the filing of the reconventional demand, or September 17, 2012.”19 The district court, although not specifically addressing the three-year prescriptive period, indicated prescription was not a viable issue.20 We agree. The City seeks prospective application of La. R.S. 11:3384(B)(1) and is not seeking to be reimbursed for any amounts erroneously paid to the retirees over the years; the City agreed to waive its right for reimbursement under La. R.S. 11:192 in the settlement agreement.21 This assignment of error regarding prescription is without merit 2017-0320 at p.26, 242 So. 3d at 700–01

By applying the same principles to the retirees as we did in New Orleans

Firefighters, we should reach two conclusions: (1) the retirees’ forbearance in

delaying litigation does not deprive them of all rights, regardless of the length of

the delay; and (2) each payment due is a separate obligation so that prospective

correction is always allowed. This holding would allow all 183 retirees to regain

1 The City had voluntarily waived its right, if any, to recoup any past overpayments.

6 the benefits going forward even if the ten-year prescriptive period is not applied. It

would also restore balance between the manner in which the law is applied to the

retirees and employers under the law.

Conclusion

It is settled law that retirement plans, including insurance benefits, are vested

contractual rights. These rights should be governed by a 10-year contractual

prescription. Even if they fall within the “compensation exception” of La. C.C. art.

3494, the retirees are entitled to prospective relief at a minimum.

People choose occupations and build careers with long range goals of

supporting themselves and their families. Included in those choices is how they

will support themselves in their retirement. They rely on promises made by their

employers and invest their work, earnings, and in a real sense, they invest their life

energy in a promise that they should be able to trust. Once a person has reached the

age of retirement, they are not in a position to change those decisions—they cannot

take a second job or seek employment with a more reliable employer in this

economy. Their work life is finished and they are entitled to enjoy the fruits of

their labors. The employers here have chiseled away at this life-changing promise

and the workers have tolerated it, perhaps because they remain loyal to their

employer. Regardless of the reason, the employers have been the beneficiary of

their forbearance. Now, RTA seeks to use the patience and loyalty of their former

employees as a cudgel against them. That may be an even worse transgression and

breach of contract than the original non-payment of benefits.

Therefore, I dissent.