The City of Providence v. Buck Consultants, LLC
Filing
145
OPINION AND ORDER granting 101 Motion for Summary Judgment. So Ordered by Chief Judge William E. Smith on 11/13/2015. (Jackson, Ryan)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
)
)
Plaintiff,
)
)
v.
)
)
BUCK CONSULTANTS, LLC,
)
)
Defendant.
)
___________________________________)
THE CITY OF PROVIDENCE,
C.A. No. 13-131 S
OPINION AND ORDER
WILLIAM E. SMITH, Chief Judge.
Before
the
Court
is
Defendant
Buck
Consultants,
LLC’s
(“Buck”) Motion for Summary Judgment (ECF No. 103) (“Buck’s Motion”
or “Def.’s Mot.”).
The City of Providence (the “City”) filed an
opposition (ECF No. 108-1) (“Pl.’s Opp’n”), and Buck filed a Reply
(ECF No. 115-2) (“Def.’s Reply”).
The Court conducted a hearing
on July 21, 2015, and both the City and Buck submitted post-hearing
memoranda (ECF Nos. 134 and 137, respectively).
After careful
consideration, Buck’s Motion is GRANTED for the reasons set forth
below.
I.
Background 1
The City is suing Buck, its longtime pension actuary, for
negligence.
In short, the City alleges that Buck overestimated
the amount the City would save by suspending cost of living
adjustments (“COLA’s”) for the City’s pension plans, causing the
City to negotiate a settlement with the unions representing police
officers and firefighters, as well as the association representing
retired police officers and firefighters, that it would not have
agreed to had it known of Buck’s error.
In February 2011, a “Municipal Finance Review Panel” convened
by Mayor Angel Tavares released a report on the City’s financial
condition; it found “that the City would face deficits of $70
million
and
$110
million
in
fiscal
years
2011
and
2012,
respectively” and that “a prime mover of the City’s fiscal crisis
was its retirement system.”
October
2011,
the
(Pl.’s Opp’n 3, ECF No. 108-1.)
Providence
City
Council
established
In
a
subcommittee to evaluate concerns about the impact of COLA’s on
the cost of the City’s pension system.
On April 30, 2012, after
reviewing the subcommittee’s findings, the City Council enacted an
1
The Court must view all facts in the light most favorable
to the non-moving party on summary judgment. Cadle Co. v. Hayes,
116 F.3d 957, 959 (1st Cir. 1997).
The material facts are
undisputed, but to the extent that there are disputes, the City’s
version of the facts is presented.
ordinance suspending COLA’s as of January 1, 2013, Chapter 201220 Ordinance No. 276 (the “Pension Ordinance”).
In May 2012, the City and the Providence Retired Police and
Firefighters’ Association, Inc. (the “Retiree Association”) were
ordered
into
mediation
in
litigation
concerning
the
constitutionality of another ordinance requiring that retirees
switch from their existing healthcare plans to Medicare, Chapter
2011-32
Ordinance
No.
422
(the
“Medicare
Ordinance”).
The
mediation covered issues related to both the Medicare Ordinance
and the Pension Ordinance.
In addition to the City and the Retiree
Association, the mediation included representatives from Local 799
of the International Association of Firefighters, AFL-CIO, and the
Providence Fraternal Order of Police Lodge No. 3 (collectively,
the “unions”), to represent the interests of current employees of
the City.
In conjunction with the mediation, the City asked Buck to
calculate the savings that would result from a ten-year suspension
of COLA’s.
Buck estimated that a ten-year suspension would yield
$180 million in savings.
Relying on that estimate, the City
entered into Memoranda of Understanding (the “MOUs”) with the
Retiree Association and the unions on May 22, 2012.
The
City
contends
that
Buck’s
estimate
negligently
overestimated the City’s savings by using the incorrect start date
for the COLA suspension (January 2011 instead of January 2013),
and that the estimate therefore should have been $170 million
instead of $180 million.
The City claims that had it “been
provided with a proper calculation, it would not have adopted the
proposed change and it would have less financial liability.”
(Pl.’s Opp’n 1, ECF No. 108-1.)
Specifically, the City claims
that it would have either demanded at least $10 million more in
concessions from the unions, or alternatively, gone forward and
enforced the Pension Ordinance, saving $80 million.
(See id. at
2, 48-49, 54-55.)
II.
Discussion
Summary judgment is appropriate “if the movant shows that
there is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.”
56(a).
Fed. R. Civ. P.
An issue of fact is only considered “‘genuine’ if it ‘may
reasonably be resolved in favor of either party.’”
Cadle Co. v.
Hayes, 116 F.3d 957, 960 (1st Cir. 1997) (quoting Maldonado-Denis
v. Castillo-Rodriguez, 23 F.3d 576, 581 (1st Cir. 1994)).
When
deciding a motion for summary judgment, the court must “examine[]
the entire record ‘in the light most flattering to the nonmovant
and indulg[e] all reasonable inferences in that party’s favor.’”
Id. at 959 (quoting Maldonado-Denis, 23 F.3d at 581).
In support of its summary judgment argument, Buck points to
four allegedly fatal flaws in the City’s case. First, Buck asserts
that it is undisputed that Buck actually underestimated, rather
than overestimated, the City’s savings.
Second, Buck claims that
the experts agree that Buck’s method of calculating the City’s
savings was reasonable.
Third, Buck contends that the City cannot
prove that Buck’s alleged miscalculation caused the City any harm.
Finally,
Buck
argues
inherently speculative.
that
the
City’s
damages
theories
are
The Court will address each of these
arguments in turn; but it is Buck’s fourth argument that carries
the day.
A.
There Are Questions of Fact In Dispute Concerning
Whether Buck Overestimated the City’s Savings
Buck first claims that “the testimony of both Buck’s expert
and the City’s expert is that the City saved $199 million.
For
this reason, the City cannot prevail on its claim that Buck
overestimated the savings.”
in original).)
(Def.’s Mot. 1, ECF No. 103 (emphasis
Unsurprisingly, the City tells a different story:
“What Buck is attempting to do here should horrify any actuary:
Buck asks this Court to evaluate an earlier actuarial valuation
based on June 30, 2011 data by comparing it to the results of a
later actuarial valuation based on June 30, 2012 data.”
Opp’n 29, ECF No. 108-1.)
(Pl.’s
The City further explains that the
higher savings calculation could be due to the plan provision
applying to more people than expected, which would actually result
in higher financial liabilities.
(Id.)
The bottom line is that the $199 million figure is not as
clear-cut as Buck suggests.
Consequently, this Court finds that
the City has shown genuine material facts in dispute concerning
whether Buck’s estimate was in fact an overestimation based on the
data it was given.
B.
There Are Questions of Fact In Dispute Regarding Whether
Buck Breached Its Standard of Care
Buck next contends that summary judgment is warranted because
“the City’s expert [Daniel Sherman] used the same method the City
now contends is improper when he performed similar estimates for
the City,” and conceded at his deposition that this method was
“reasonable.”
(Def.’s Mot. 1, 8-9, ECF No. 103.)
The City retorts
that the argument that Mr. Sherman “used Buck’s patented-COLAskipping formula when he served as the City’s actuary is both
incorrect and irrelevant.”
According
to
the
City,
when
(Pl.’s Opp’n 26, ECF No. 108-1.)
Mr.
Sherman
provided
a
similar
valuation, he “explicitly wrote, as required by the prevailing
actuarial standards, that his valuation was performed ‘[a]ssuming
the COLA had been eliminated as of July 1, 2010 . . . .’”
(Id. at
26-27.)
Moreover, the City represents that Mr. Sherman will testify
that Buck’s “method of coding the COLA suspension and [its] failure
to communicate alternate methods with the City violated Actuarial
Standards of Practice (“ASOP”) No. 4, Paragraph 3.2.1.”
(Id. at
23 (emphasis added).)
It is not simply Buck’s method in a vacuum
that allegedly violated the standard of care, but the use of this
method
in
these
particular
circumstances,
including
communicated (and not communicated) to the City.
what
was
While Buck’s
expert will surely put forth an opinion to the contrary, “[a]t
summary judgment . . . courts normally assume that the trier of
fact would credit the expert testimony proffered by the nonmovant.”
Den Norske Bank AS v. First Nat’l Bank of Boston, 75 F.3d 49, 58
(1st
Cir.
1996).
Additionally,
the
City
points
to
several
admissions of Buck’s actuaries that suggest that there was an error
in Buck’s valuation.
(See Pl.’s Opp’n 14-17, ECF No. 108-1.)
Thus, the Court finds that there are questions of fact concerning
whether Buck breached the applicable standard of care.
C.
There Are
Causation
Questions
of
Fact
in
Dispute
Concerning
Buck next argues that the City cannot prove that Buck’s
alleged breach proximately caused any damage to the City.
Buck
first claims that the City could not have relied on Buck’s estimate
in negotiating the settlement because “Buck did not produce its
estimate until May 25 – three days after the date of the MOUs.”
(Def.’s Mot. 10, ECF No. 103 (emphasis in original).)
However, as
this Court held in its decision on Buck’s Motion to Dismiss, “the
MOU, executed on May 22, 2012, does not defeat the City’s claim”
because “[t]he City alleges that Buck made several calculations
involving a ten-year COLA suspension prior to that date.”
City of
Providence v. Buck Consultants, LLC, No. CA 13-131 S, 2013 WL
4047133, at *1 n.2 (D.R.I. Aug. 9, 2013).
On summary judgment,
the City maintains that Buck “provided the City with at least three
valuations of prospective COLA suspensions,” including a valuation
on May 8 “with terms nearly identical to the terms to which the
City ultimately agreed.” (Pl.’s Opp’n 36, ECF No. 108-1.) Whether
it
was
reasonable
for
the
City
to
rely
on
those
earlier
communications would be a question of fact for the jury.
Second, Buck contends that its estimate did not proximately
cause any damages because the City was not bound by the settlement
agreement when it discovered the alleged error.
The MOUs clearly
state that they are non-binding, and indeed, it does not appear
that the City disputes this.
The City instead argues that it would
have been effectively impossible – and perhaps even more damaging
– for it to terminate the settlement deal by the time it found out
about Buck’s calculation error.
Relying on Slotkin v. Citizens
Casualty Co. of New York, 614 F. 2d 301 (2d Cir. 1979), the City
argues that the fact it was not legally bound to the settlement at
the time it found out about the error is not fatal to its claim.
(See Pl.’s Opp’n 38-40, ECF No. 108-1.)
In Slotkin, a medical malpractice plaintiff agreed to settle
a case during trial based on the defendant’s representation that
the hospital’s insurance policy limit was $200,000.
614 F. 2d at
314.
Before
the
Court
officially
entered
an
order
on
the
settlement, the plaintiff became aware that the hospital’s policy
was
in
fact
up
to
$1
million;
however,
by
that
time,
the
plaintiff’s health was in jeopardy, her doctors advised that she
should not testify again, her experts refused to testify again,
and she was running out of money to litigate the case.
305-09.
Id. at
The Second Circuit found that the plaintiff’s fraud claim
was not barred because, even though she could legally have reneged
on the settlement and tried the case, it was reasonable for her
counsel not to do so because of “the effort, risk, sacrifice, [and]
expense” that would have been involved.
Id. at 313-14.
This Court agrees with the Second Circuit’s reasoning in
Slotkin, and finds that a cause of action for damages arising from
accepting a settlement is not barred simply because the plaintiff
would have legally been able to get out of the settlement at the
time the alleged misconduct came to light; instead, the relevant
inquiry is whether “the effort, risk, sacrifice, or expense” of
getting out of the settlement justified the decision not to do so.
See id.
Here, the City advances five reasons why its decision to
go forward with the settlement even after learning of Buck’s
alleged error passes this test:
(1) Reneging on the settlement agreement at the eleventh hour
would have numerous adverse political and social consequences
that were concrete but could not be easily measured, (2) the
settlement agreement also ended the Medicare Ordinance
litigation, (3) reneging on the settlement agreement could
expose the City to legal claims for breach of contract and
related torts, (4) reneging on the settlement agreement could
prejudice the City’s defense of the constitutionality of the
Pension Ordinance, and (5) Buck vociferously denied that its
estimates were flawed in the manner it originally admitted,
thereby depriving the City of any certainty in its
deliberations.
(Pl.’s Opp’n 41, ECF No. 108-1.)
The Court finds that the City
has presented sufficient evidence to create a question of fact as
to whether its decision to go forward with the settlement even
after finding out about Buck’s alleged error was justified by the
“effort, risk, sacrifice, or expense” that would have been involved
in reneging on the deal with the Retiree Association and the unions
at that point.
D.
The City’s Damages Are Speculative
Last, but not least, is Buck’s argument that the City’s
damages are speculative.
Here, the City does not fare so well.
The City offers two damages theories: 1) but for Buck’s
overestimation, the City would have been able to negotiate a better
deal with the Retiree Association and the unions, resulting in $10
million in savings; and 2) but for Buck’s overestimation, the City
would have enforced the Pension Ordinance, saving $80 million.
In
support of these theories, the City points to the testimony of
Michael D’Amico, the City’s Director of Administration and “chief
negotiator.”
(See Pl.’s Opp’n 48-49, ECF No. 108-1.)
deposition, Mr. D’Amico testified that:
At his
Had the numbers been correct in the spring and we knew
that the savings, in particular the ARC payment was not
- was not going down as much as we thought it was, we
would not have agreed to these terms with the unions and
retirees.
We would have insisted on some further
concession from those groups.
. . .
[I]f we could not have gotten some further concession to
reach the savings that I thought we had reached based on
Buck’s
calculations,
it
would
have
been
my
recommendation not to settle. Because the savings were
not going to be sufficient for our needs.
(Id. (citing Plaintiff’s Statement of Undisputed Facts (“Pl.’s
SUF”) ¶¶ 61-63, ECF No. 111).)
If
damages
warranted.
are
merely
speculative,
summary
judgment
is
See Tiboni v. Milliman, Inc., CASE NO. 1:08 CV 1642,
2010 U.S. Dist. LEXIS 131896, at *26 (N.D. Ohio Aug. 10, 2010)
(granting
summary
judgment
because
the
plaintiff
failed
to
“offer[] any testimony to show what changes the Trustees would
have made or which decisions would have been altered (and how) if
they
had
been
given
a
more
accurate
estimate
of
the
plan
liabilities”); Lifespan/Physicians Prof’l Servs. Org., Inc. v.
Combined Ins. Co. of Am., 345 F. Supp. 2d 214, 226-27 (D.R.I. 2004)
(granting summary judgment where the plaintiff failed to present
evidence that but for a misunderstanding about its insurance
coverage, it would have acquired a policy that would have provided
a higher reimbursement).
decision in
The City relies heavily on this Court’s
Probate Court of City of Warwick ex rel. Lawton v.
Bank of Am., N.A., 813 F. Supp. 2d 277 (D.R.I. 2011), to support
its argument that the fact finder may “consider evidence of the
party’s probable, alternative conduct.”
108-1.)
(Pl.’s Opp’n 51, ECF No.
The Court does not disagree that it may consider a party’s
likely conduct; however, the problem for the City is that, unlike
in Lawton, the evidence here is insufficient to infer what the
City’s “probable, alternative conduct” would be.
Even taking Mr. D’Amico’s statements as true, the City has,
at best, established that it would have attempted to negotiate a
better deal, and that Mr. D’Amico would have recommended that the
City not settle.
The City does not present any evidence showing
that it actually could have succeeded in getting any further
concessions from the unions, let alone in what amount. 2 Indeed,
Mr. D’Amico himself testified at the March 2013 Fairness Hearing
in Rhode Island Superior Court - after Buck’s alleged malpractice
came to light - that further negotiations would have been to no
avail.
(See Def.’s Statement of Undisputed Facts (“Def.’s SUF”)
¶¶ 89-91, ECF No. 103-1 (quoting Mr. D’Amico’s testimony that,
“[h]onestly, I think that was as far as we could go, that was the
best
we
2
could
do,”
“[t]his
was
the
most
that
the
retiree
As this Court has already recognized, that “the mere fact
that Buck may have overstated the City’s savings by $10 million
does not mean that the City suffered a loss of that amount.” City
of Providence v. Buck Consultants, LLC, No. CA 13-131 S, 2013 WL
4047133, at *2 n.4 (D.R.I. Aug. 9, 2013) (citing Tiboni v.
Milliman, Inc., No. 1:08 CV 1642, 2010 U.S. Dist. LEXIS 131896, at
*26 (N.D. Ohio Aug. 10, 2010)).
association was willing to do,” and “that [the Retiree Association]
would not give up anymore”).)
In an attempt to lessen the blow of Mr. D’Amico’s testimony,
the City makes the absurd claim that, despite being “the City’s
chief negotiator” on whose testimony it relies heavily, Mr. D’Amico
was merely a “non-party with an opinion” when he testified at the
Fairness Hearing.
(Pl.’s Opp’n 48, 53, ECF No. 108-1.)
As Buck
notes, the City cannot choose to rely on Mr. D’Amico’s testimony
as their “chief negotiator” only “when he provides evidence the
City likes.”
(Def.’s Reply 33, ECF No. 115-2.)
The City also
argues that Mr. D’Amico’s “belief that the counterparties would
not further negotiate is not inconsistent with the determination
to try anyway.”
(Pl.’s Opp’n 52, ECF No. 108-1.)
That may be
true, but in order to prove its damages theory, the City must do
more
than
present
evidence
that
it
would
have
attempted
to
negotiate a better settlement; it must present some evidence that
it actually could have been successful.
With regard to the City’s second damages theory, the Court is
not convinced that Mr. D’Amico’s testimony that “it would have
been [his] recommendation not to settle” (Pl.’s Opp’n 48-49, ECF
No. 108-1) is sufficiently non-speculative to survive summary
judgment, particularly given the risks in going forward and the
number of decision-makers involved.
One of the City’s attorneys
testified at the Fairness Hearing that there was “a substantial
question about the likelihood of success in litigation for both
sides” and that is “why there was such a risk to both parties in
moving forward to a final disposition.”
115-2.)
(Def.’s Reply 35, ECF No
Furthermore, Mayor Taveras admitted that the City could
not legally suspend COLA’s without enabling legislation from the
General
Assembly,
which
Assembly never passed.
the
City
repeatedly
sought,
but
the
(Id. at 37.)
However, even assuming that the City would have gone forward
and
enforced
the
ordinance,
and
prevailed
in
the
consequent
litigation despite the risks, the City’s damages theory is still
speculative.
As Buck notes:
The City makes no allowance for the costs of litigation, the
costs and impact of the bankruptcy that it stated would occur
if such litigation continued, the injury to its relationships
with the Retiree Association and Unions that it mentions
elsewhere in the Objection, and any number of other hurdles
for it to cross before it would be able to enforce the
Original Pension Ordinance.
(Id. at 35.)
Without taking into account the cost of litigation
and any number of other costs the City would have incurred going
that route, it is not at all clear that the City would have come
out ahead, let alone $80 million ahead.
Thus, this Court finds
that the City’s damages are far too speculative to survive summary
judgment.
III. Conclusion
For the foregoing reasons, Defendant’s Motion for Summary
Judgment is hereby GRANTED.
IT IS SO ORDERED.
William E. Smith
Chief Judge
Date: November 13, 2015
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