The new year has brought a civil war between the city of Atlanta and two of its three pension boards.
Boards for police officers and general employees sued the city, former Mayor Kasim Reed and newly minted mayor Keisha Lance Bottoms last week for pushing through a consolidation, which was approved by city council on Dec. 13.
The pension board for city firefighters has not joined the lawsuit, which says the city “hastily” approved the merger in violation of state law and the city charter. It claims the consolidation will improperly give the mayor power to appoint a majority of pension board trustees who oversee about $3 billion in investments.
The suit also challenges the city's decision to allow up to 288 employees to buy back into the city's defined benefits pension program — a move that could increase the pension system's unfunded liability by up to $30 million, or more than $104,000 per person.
Robert Highsmith, Reed's personal attorney who also handles some city legal issues, wrote a Jan. 2 letter threatening to pursue sanctions against pension board members and their outside legal counsel under the state's abusive litigation statute if the lawsuit proceeds.
“We are notifying you that the city and Mayor Bottoms intend to assert a claim … against you, your law firm, and any other person who takes an active part in the initiation, continuation, or procurement of these proceedings if the lawsuit is not dismissed within 30 days of your receipt of this letter,” Highsmith’s letter says.
Highsmith’s letter also says the pension boards “are not a legal entity or body politic with the capacity to sue or be sued.” The city will also go after board members “for … breaches of their fiduciary obligations to the city and its citizens,” the letter says.
Peter Chan, one of the attorneys representing the pension boards, called Highsmith's letter "a classic intimidation tactic."
“They’re saying: `We’re going to seek sanction because we disagree with your legal position,’” Chan said in an interview with The Atlanta Journal-Constitution. “It is an overdone litigation move that is consistent with the city’s campaign of intimidation and harassment” leading up to passage of the consolidation.
“To this date, we have not heard any substantive response to our core legal arguments, other than threats.”
The lawsuit seeks temporary and permanent injunctions against implementation of the merger, and allowing the employees to rejoin the defined benefits pension system.
Without the injunction, “the boards of the city employee pension funds will cease to exist as entities and will lose the ability to oversee and direct the investment activities of their respective funds,” the lawsuit says.
Highsmith’s letter says the Georgia Supreme Court has ruled that the city can “modify … existing retirement or pension systems.”
“The costs to defend your frivolous and groundless lawsuit should not be paid from finite pension funds or taxed to the citizens of the city, and the mayor and city have a fiduciary obligation to those citizens to recoup those costs and other damages from you and your law firm if they are incurred,” Highsmith’s letter says.
Chan, the pension board attorney, said the city’s legal analysis is “flawed.”
“This attempt to take over all three pensions is against state law,” Chan said. “It is state law that set up three separate boards, and you can’t use city law to usurp state law.”
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