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The federal Ninth Circuit Court of Appeals posted today (June 10) its decision that the City's Deferred Retirement Option Plan (DROP) is not a vested benefit protected by the federal constitutional contracts clause. The appellate court was ruling on a suit filed against the City by the San Diego Police Officers' Association in August of 2005. The City argued that DROP was a matter of active employment rather than a constitutional right. The appellate court said, "We hold that the DROP salary is not a vested right subject to the Contracts Clause." The police association's claim to the contrary "fails as a matter of law." Under the controversial DROP program, City employees at the average age of 55 say they will retire in five years. They continue drawing their salaries, while 90% of their highest one-year salary goes into their personal retirement account. It grows at 3.54% annually (formerly 8%) and is eligible for a cost-of-living adjustment. Then the employee retires with both a lump sum and the regular annuity payment. DROP is classic double-dipping. However, efforts to get rid of it have failed.

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Comments

JustWondering June 10, 2009 @ 9:08 p.m.

In particular, and thing you may not have been aware of... as part of the Sanders, do my or else philosophy, in 2005 when the city imposed another set of demands, the added a penalty to those already in DROP... those employees, (only POA represented ones) were required to pay 3.2% of the gross salary right off the top. This deduction, labeled POA 3.2 DROP RED... was Sanders sticking it to the labor group members who did not reach an agreement. Thus lowering the members DROP salary... the POA brought litigation on the matter and the loons in the 9th agreed, for now, with the city.

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Don Bauder June 10, 2009 @ 9:08 p.m.

Response to post #6: That is so stupid of me I am beginning to worry. It's a federal case, as I stated in the original post. Maybe it's my advanced age. Best, Don Bauder

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JakeSD June 11, 2009 @ 10:32 a.m.

Moral behavior. Now that's a laugh.

Unions (and corrupt politicians who the union had in their pocket) have put this city on its back.

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Don Bauder June 10, 2009 @ 9:10 p.m.

Response to post #7: SurfPuppy stated from the outset that it is not over by a long shot. Best, Don Bauder

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JakeSD June 11, 2009 @ 10:44 a.m.

JW, in case you are wondering, I bet no one on here wishes to put employees or retirees in the poorhouse. I think what we ask is that they negotiate a more reasonable pension and retiree healthcare, similar to private sector.

I would also be hesitant to take away any existing pensions or retiree benefits but would insist on defined contribution going forward and a retirement healthcare similar to private sector, which would be closer to a COBRA plan.

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Don Bauder June 10, 2009 @ 9:12 p.m.

Response to post #8: I'll let SurfPuppy field this one. Best, Don Bauder

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Don Bauder June 10, 2009 @ 9:16 p.m.

Response to post #9: Would the Supreme Court be likely to get involved in this one? I doubt it. Best, Don Bauder

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Don Bauder June 11, 2009 @ 7:25 p.m.

Response to post #40: Yes, JW is splitting hairs like the lawyers for City employee labor unions. Best, Don Bauder

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Don Bauder June 10, 2009 @ 9:18 p.m.

Response to post #10: I quoted directly from the decision in the original post. The word "salary" was in that post. People may debate exactly what the court meant by that. Best, Don Bauder

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Don Bauder June 11, 2009 @ 7:27 p.m.

Response to post #41: Since some very good lawyers disagree with your interpretation, the headline stays for now. Best, Don Bauder

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SurfPuppy619 June 10, 2009 @ 4:18 p.m.

I am not going to gloat.

Hi JW~~~~~~~~~~~~~~~~~~~~~!!

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SurfPuppy619 June 10, 2009 @ 4:23 p.m.

Here's the decision;

http://www.ca9.uscourts.gov/datastore/opinions/2009/06/10/07-56004.pdf

This decison is not final (and you know what I say about decisons that are NOT final!), it is still subject to a rehearing and rehearing en banc.

So it is not over until the 9th rules on the rehearings.

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Don Bauder June 10, 2009 @ 4:26 p.m.

Response to post #1: But you ARE gloating, SurfPuppy. I don't know if the police will take this to the state supreme court. The language in the decision was pretty strong. This is definitely a step in the right direction. If DROP is not a vested benefit, its removal or severe modification may be possible. Best, Don Bauder

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Don Bauder June 10, 2009 @ 4:28 p.m.

Response to post #2: No, it is not over. But it is positive. Best, Don Bauder

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JustWondering June 10, 2009 @ 9:48 p.m.

Really Don, regarding Post #8 I am curious what you believe about promised benefits made years ago when the city proposed the changes... You don't really want to hid behind Johnny's skirt...do you?

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JakeSD June 11, 2009 @ 12:03 p.m.

We also need to get special interests out of city hall. Too many politicans rely on support from unions, developers or others that have vested interest in city hall money or benefit from city hall decisions.

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Don Bauder June 12, 2009 @ 12:28 p.m.

Response to post #50: Sounds like you have "The Law" figured out, too. Best, Don Bauder

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Don Bauder June 11, 2009 @ 4:03 p.m.

Response to post #35: I don't think the question is still open, at least at the Ninth Circuit level for now. DROP SALARY (emphasis mine) is not a vested benefit. But you asked the question of SurfPuppy. Best, Don Bauder

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SurfPuppy619 June 10, 2009 @ 9:59 p.m.

"This is reminiscent of the last four years with Mike Aguirre. This is a sad state of affairs to have to deal with such incompetence not only in the mayor's office but the City Attorney's office at the same time."

"The scary part of all of this is with the total inept, pathetically incompetent people in positions of authority within city government; even a blind squirrel finds a nut once in a while."

By JustWondering

LOL...JW seems to have a disagreement with our new CA Goldsmith now.

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Don Bauder June 11, 2009 @ 12:52 p.m.

Response to post #25: The unions for City workers have done much to put San Diego on its back. But remember that the corporate welfare-loving business establishment has done as much or more mischief in bankrupting San Diego. In both cases, labor and business, the corrupt politicians have been allies. Best, Don Bauder

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Don Bauder June 11, 2009 @ 12:59 p.m.

Response to post #27: JW wants to keep his benefits. Best, Don Bauder

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Don Bauder June 11, 2009 @ 1:01 p.m.

Response to post #28: Yes, get the unions and real estate developers out of City Hall. How? They own the place. Best, Don Bauder

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Don Bauder June 11, 2009 @ 6:30 a.m.

Response to post #17: Who is paying those "several attorneys?" In this one, Goldsmith is right. His predecessor, Mike Aguirre, has the same interpretation: DROP is not a vested benefit, and that's what the court was saying. Certainly, attorneys on the other side will take another position. Don't you realize that the whole legal system is set up to keep attorneys' meters running? Best, Don Bauder

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Don Bauder June 11, 2009 @ 6:32 a.m.

Response to post #18: In many municipalities, promises were made many years ago. Now those municipalities are going broke and can't pay those promised benefits. Do you have a solution to that? Best, Don Bauder

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Don Bauder June 11, 2009 @ 6:37 a.m.

Response to post #19: Yes, Goldsmith and Aguirre are in agreement on this one. They are right. As time goes on, it will be clear that Aguirre was right on a number of things while the U-T, mayor, police chief and others were conspiring to smear him. Best, Don Bauder

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JustWondering June 10, 2009 @ 7 p.m.

DON, Would you care to share your opionion about retiree medical benefits. More specifically, benefits promised to those who left the SS and Medicare systems in 1982 at the request of City officials? Some of these employees, now in their mid 60s are not eligible for medicare as they have not earn the necesseary quarters.

Just Wondering....

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Don Bauder June 12, 2009 @ 12:36 p.m.

Response to post #53: "Point taken." Succinctly said. Best, Don Bauder

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Don Bauder June 11, 2009 @ 10:17 a.m.

Response to post #23: First, the appellate court has said that DROP is not a vested benefit. That's why the court used the words "DROP salary." Second, I think it's not a matter that the city leaders have no integrity. It's more a matter that the City has no money. (I agree that they lack integrity, but in this case, the dominant motivation is empty pockets.) Best, Don Bauder

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Don Bauder June 11, 2009 @ 3:56 p.m.

Response to post #33: San Diego will some day be like third world countries in which there are a few superrich, and the next-best paid are government employees who owe their jobs to politics. Best, Don Bauder

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Don Bauder June 10, 2009 @ 4:51 p.m.

NOTE: Councilmember Carl DeMaio has just come out with a statement: "Today's court decision is great news for San Diego's taxpayers, as it has the potential for saving billions of dollars. If upheld, this decision will play a critical role in our overall effort to reform not only DROP, but also [deal with] the $1.2 billion unfunded liability for retiree healthcare."

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SurfPuppy619 June 10, 2009 @ 8:37 p.m.

And "b" you and I both know that this court IS overturned so often by the full panel

Yes, it could be overturned by at rehearing or a full panel, that's why I said the decision is not final.

I read the first 5-6 pages and then skimmed the rest of the 30 page decision. Will read the rest when I get time.

I will take 30 days AFTER the SDPOA's request for rehearing is denied (if rehearing is denied) before the decision becomes final-then the SDPOA has a 90 day window to seek review at the US Supreme Court.

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Don Bauder June 11, 2009 @ 4 p.m.

Response to post #34: Again: if prior administrations proffered something that could not be delivered in the future, it is up to people in the present to do something, lest everybody drown. Read up on what happened in Detroit. Best, Don Bauder

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SurfPuppy619 June 10, 2009 @ 5:08 p.m.

I don't know if the police will take this to the state supreme court.

They cannot take the DROP issue to the CA Supreme Court because they brought the issue in Federal court under the Contracts Clause. There were some other supplemental issues that were not ruled on that must be brought in state court-if the SDPOA continues. They might want to cut their losses though. No sense in throwing good money after bad.

The SDPOA could appeal to the US Supreme Court if the 9th refuses rehearing/rehearing en banc. But the chances are more than 100 to 1 against it being accepted there.

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JustWondering June 10, 2009 @ 9:02 p.m.

Well Gloating time is already over and opinions on the court's decision are already in flux. Don will need to amend his blog....

The courts decision had nothing to do with DROP being a vested pension benefit. The only decision the court made was DROP salary may lawfully be modified because the salary is not vested. Also, this decision in no way effects the current litigation that the SDPOA is defending itself against by the city. Again, CA Goldsmith's analysis is flawed just as his opinion on Charter section 143.1.

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JustWondering June 10, 2009 @ 6:55 p.m.

I am not going to gloat.

Hi JW~~~~~~~~~~~~~~~~~~~~~!!

Johnny,

Gloat away, it's earned for now.

Two points; you already know if you actually read the decision. The scope of the issue ruled upon is so narrow, it would be difficult to fit the 30 pieces of paper necessary to explain themselves under the door to their office.

And "b" you and I both know that this court IS overturned so often by the full panel or a higher court its busier than an olympic gymnist trying to hit all four corners of the exercise mat.

Guess we'll have to wait until the ultimate authority weighs in on this one..... but for now, enjoy this minor victory.

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JustWondering June 10, 2009 @ 9:43 p.m.

From another bog on the issue:

"Several attorneys have reviewed the ruling and agree there is nothing in the language that deals with Charter Section 143.1 nor the question of DROP and it being a vested benefit. The City Attorney is AGAIN jumping the gun and making foolish statements and putting out incorrect information. This is reminiscent of the last four years with Mike Aguirre. This is a sad state of affairs to have to deal with such incompetence not only in the mayor's office but the City Attorney's office at the same time."

The local news reporting on this issue is a feeding frenzy and also indicative of the lack of experience and knowledge of REAL Investigative reporting and the ability to do their due diligence BEFORE putting false information out to the public.

The scary part of all of this is with the total inept, pathetically incompetent people in positions of authority within city government; even a blind squirrel finds a nut once in a while.

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JustWondering June 11, 2009 @ 7:01 a.m.

One could equate it as a promise made to you for your pension, a promise you planned and relied on. One to be honored by people who claimed to be honorable. But in reality have no integrity.
Alas, it appears that both you and Johnny are delighted that our city leaders are less than honorable, have little, if any, integrity to live up to promises made.

You and I both know it is completely unethical and dishonorable to renege on an obligation you chose to assume. Sadly, it's amplified even more when those who led before convinced employees to support you in the process and now claim poverty because you mismanaged the assets. These people are not much different than the ones you report on regularly in the Scam San Diego Blog.

But what really saddens me, if you and Surfpuppy-Johnny-BillyBobHenry really believe this is acceptable business and moral behavior you're no better than those who are perpetrating these acts now.

Until San Diegans realize their government leaders only serve THEIR own interest and not the people's best interest this situation will only get worse.

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Don Bauder June 11, 2009 @ 12:58 p.m.

Response to post #26: I don't think there is enough savings if you just stop the excesses going forward. If the unions won't give up DROP and other excessive benefits, and such cuts can't be achieved through the courts, then worker salaries can be cut or massive layoffs instituted. The point is that the City can't go on with its huge structural deficits. Employees can't go on making more than 100 percent of their pay when retiring below 60 years of age. Sump'n's gotta give. Best, Don Bauder

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SurfPuppy619 June 11, 2009 @ 2:29 p.m.

One could equate it as a promise made to you for your pension, a promise you planned and relied on. One to be honored by people who claimed to be honorable. But in reality have no integrity.

Alas, it appears that both you and Johnny are delighted that our city leaders are less than honorable, have little, if any, integrity to live up to promises made.

JW, you are right that there was little "integrity" in the pension process, and that goes BOTH ways-as in quid pro quo.

As for the "promises" that were made, they were very one sided (in favor of employees) and not above board.

Last, NO cop or FF is going to be living in the poor house in "retirement", but they are certainly not going to be driving a Rolls and living at the Ranch now either.

BTW, here is an excellent report on how public employee pay and pensions went through the roof in the last decade. It is a very good read, little long, but powerful;

"Political barriers to change exist because all those negotiating employee contracts--staff, unions and city council members--benefit when wage and compensation packages increase."

http://www.sanmateocourt.org/grandjury/2008/Employee_compensation.pdf

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JustWondering June 11, 2009 @ 3:21 p.m.

As for the "promises" that were made, they were very one sided (in favor of employees) and not above board.

Tell me, when the City proposed to the employees, we need to shed Social Security and Medicare in the early eighties, who initiated the bargain, claiming it would be a temendous savings to the City? It was Pete Wilson, you know former Mayor and Govenor of California, Favorite Son of San Diego. The employee initially opposed the idea... it was only when then Mayor Wilson and I believe it City Manager John Lockwood at the time, offered to create a supplemental savings program AND lifetime medical care to replace SS and Medicare. Twenty five years later, Mayor Sanders doesn't like the deal and wants to end it, but, of course keep it for himself. What a hypocrite!

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JustWondering June 11, 2009 @ 3:25 p.m.

Hey Johnny, I forgot to ask... now that you have had a chance to re-read the 9th's ruling carefully, in your learned opinion is "DROP SALARY" and its vested state the same or different than the DROP program? Or did the Court separate the two? Leaving the question of whether, DROP, as a program, is a vested benefit open still?

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SurfPuppy619 June 11, 2009 @ 4:03 p.m.

Tell me, when the City proposed to the employees, we need to shed Social Security and Medicare in the early eighties, who initiated the bargain, claiming it would be a temendous savings to the City? It was Pete Wilson, you know former Mayor and Govenor of California, Favorite Son of San Diego.

JW, I don't know WHO'S plan it was to get out of SS and into the Calpers system. I also do not take your word that it was Pete Wilson and not the employees. But that is beside the point.

Back in 1971, or whenever the City implemented it's own pension, there were no gold plated, Cadillac benefits (like 3%@50-2001, DROP-1997, Purchase Of Service Credit-???.... and so forth).

Having your own pension system is NOT the problem, it was boosting the payouts, unfunded payouts, to completely unsustainable levels that is the problem.

That is in addition to getting yearly COLA's, sometimes as high as 7%, while private sector males have seen no pay increase in the last decade and private sector female pay has risen 1-2% in the last decade.

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SurfPuppy619 June 11, 2009 @ 4:04 p.m.

Hey Johnny, I forgot to ask... now that you have had a chance to re-read the 9th's ruling carefully, in your learned opinion is "DROP SALARY" and its vested state the same or different than the DROP program? Or did the Court separate the two? Leaving the question of whether, DROP, as a program, is a vested benefit open still?

By JustWondering

I have no opinion on the DROP legal decision. As I have always said, until a legal decision becomes final (no longer subject to appeal) it means nothing. But one thing is certain, you are starting to sound a lot like Ann Smith to me.

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JustWondering June 11, 2009 @ 5:02 p.m.

First Jim Warning, now Ann Smith. I suppose I'll keep you guessing.

Don, that's the point DROP salary, the salary you earn while active in the DROP program is what the court narrowly focused on. This three judge panel from the 9th believes it is not vested and I understand their reasoning. This panel did NOT opine on whether "DROP" the pension benefit program in its entirety is vested on not. I think I can get even Johnny to go along with that much FOR NOW pending appeal. My point, the title of this blog thread is inaccurate or purposely misleading at worst, IF you read AND understood the Court's ruling.

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Don Bauder June 12, 2009 @ 6:15 a.m.

Response to post #44: If I name names, you will come back and say they are not good. Some claim that "good lawyer" is an oxymoron. There is wisdom to that assertion, but I don't agree in this case. I would say that your interpretation of the court's decision is one that I have heard nowhere else. Best, Don Bauder

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JustWondering June 12, 2009 @ 6:29 a.m.

"...[i]t was boosting the payouts, unfunded payouts, to completely unsustainable levels that is the problem.

Well then you should be pleased.

The city has eliminated most of the benefits you object to as of July 2005. According to the City's Risk Mgt Department, somewhere in the neighborhood of 500 employees are leaving city service befor July 1st. Many of these positions will go unfilled for months, some for years, and others will be eliminated from the City's budget.

In addition, we have been discussing the DROP. The justices from the ninth have opined that an employee's "salary" while participating in DROP is NOT a vested benefit. So the Mayor's vindictive action against one labor group who reached impasse stands for now. POA represented employees give back, or should I say the City took 3.2% of their salary right off the top. So POA members are supporting the City by sending thousands of dollars back to the general fund. Now, with the ruling the city could, if it wants to, apply the same practice to all labor groups and the employees who are in DROP.

As you know this year two labor groups reached impasse once again. Mayor Sanders imposed his last best final offer and the council supported him in an 8-0 vote. In the LBFO the Mayor implemented more change. Entry into DROP was raised by 5 years for each group and medical benefits for retiree are now frozen. The City also substantially reduce benefit dollars for active employees, ranging from $1400 to $2500 LESS depending on the individual situation. Furthermore, the City required each employee to pay more of their salary into their pension fund.

The point is changes are in process, and progress is being made to reduce the unfunded liability while controlling future costs. Now Johnny, isn’t this just what you wanted?

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JustWondering June 12, 2009 @ 8:13 a.m.

Funny, your comment, the headline stays for now indicates you have your own doubts or it's temporary. The phrase "for now" tell us a change may occur.

Maybe it's all that clean air in Colorado. If there wasn't any doubt as you profess, and, as we've read from other "good" attorney's Mr. Goldsmith's interpretation of the ruling is way off base. As you know the focus of this litigation and the 9th's ruling is very narrow as discussed above.

But lets add in the newest twist; a state court Judge has issued a TRO against the City over DROP and the city's attempts to unilaterally change it as of July 1st. A hearing on the matter is scheduled for June 25th for a preliminary injunction. So we wait again....

I must admit, Johnny right, until this issues exhaust all appeals nothing will really change.

But, if you really believed the rhetoric in your head and heart, your answer would have been ...the headline stays...or the headline is correct, not "the headline stays for now."

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Don Bauder June 12, 2009 @ 9:05 a.m.

Response to post #46: There has been progress. But the structural deficit remains mind-boggling. So has enough been done? No. Best, Don Bauder

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Don Bauder June 12, 2009 @ 9:12 a.m.

Response to post #47: I would hope you have been through this before. One group of lawyers (including Goldsmith) says that ruling means DROP is not a vested benefit. Another group -- say, lawyers for the POA and MEA -- says the ruling is very narrow. That's what "The Law" is all about. Until the Supreme Court reviews the case or refuses to hear it, the debate rages on, and the lawyers' meters keep running. The fact that I said "for now" hardly means that I am waffling. Best, Don Bauder

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paul June 12, 2009 @ 11:15 a.m.

surfpuppy,

There is no way that JW is Ann Smith. Have you ever read anything she has written? She never fails to use 100 words where 10 are required. JW's answers are much too short and concise to have come from Smith.

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SurfPuppy619 June 12, 2009 @ 12:19 p.m.

In addition, we have been discussing the DROP. The justices from the ninth have opined that an employee's "salary" while participating in DROP is NOT a vested benefit.

That decison is rather complex and certainly covers MORE than the DROP salary issue. My limited reading of it is that it covers more than the DROP salary issue.

To me the decision makes the claim that DROP and retiree healthcare are NOT vested benefits, but are contracted benefits, on a contract to contract basis. So once a current contract ends so does the benefit.

So I disagree with JW's claim that the score of the ruling is a narrow one.

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SurfPuppy619 June 12, 2009 @ 12:20 p.m.

surfpuppy,

There is no way that JW is Ann Smith. Have you ever read anything she has written? She never fails to use 100 words where 10 are required. JW's answers are much too short and concise to have come from Smith.

By paul

Point taken.

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SurfPuppy619 June 12, 2009 @ 12:26 p.m.

I would hope you have been through this before. One group of lawyers (including Goldsmith) says that ruling means DROP is not a vested benefit.

Another group -- say, lawyers for the POA and MEA -- says the ruling is very narrow. That's what "The Law" is all about.

By dbauder

It is "contrived complexity", that is what "The Law" is all about.

The judges will go through all the cases that are similar and then they will pick the cases they want to apply and exclude the ones they do not want to apply by using small, insignificant variations of the facts.

Then these judges will be called "brilliant" (usually by other "brilliant" colleagues/judges) for being able to "distinguish" between the "complex cases" to come to the conclusion of law they have.

See Don, your common sense and knack for uncovering fraud has guided me to the light of truth.

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Don Bauder June 12, 2009 @ 12:30 p.m.

Response to post #51: You're another who understands "The Law." Lawyers are paid by the word, both in print and orally. That's why they are so long-winded -- both in print and orally. Best, Don Bauder

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Don Bauder June 12, 2009 @ 12:34 p.m.

Response to post #52: It's remotely possible that the court's use of the word "salary" is opening up the door to narrow interpretations. Best, Don Bauder

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Don Bauder June 12, 2009 @ 12:40 p.m.

Response to post #54: I have always said that "contrived complexity" is the essence of white collar fraud. Now I learn that it is also the essence of "The Law." You have written a concise and precise summary of what "The Law" is all about. Best, Don Bauder

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