Ex-Cops File Federal Lawsuit Against Dallas Police and Fire Pension System

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The hits, apparently, are going to keep on coming for Dallas’ woebegone police and fire pension system. On Monday afternoon, a group of six former Dallas cops sued the system’s board in U.S. District Court in Sherman, alleging that the trustees’ decision to temporarily stop withdrawals from members’ Deferred Retirement Option Program (DROP) accounts violates the retirees’ rights. They cite the 14th Amendment and claim the refusal to withdraw money is depriving them of their property.

The DROP accounts allowed uniformed city employees to deposit their pension checks into accounts that guaranteed 8 to 10 percent interest. They are, with this new suit, at the center of two ongoing lawsuits involving the pension. The first, filed late last year by Dallas Mayor Mike Rawlings in his capacity as a private citizen, hopes to shut down DROP withdrawals entirely.

In response to the mayor’s lawsuit, members of the DPFP board voted to suspend DROP withdrawals until March 31. At that point, retirees will be able to make limited, monthly withdrawals from their DROP accounts. Monday’s lawsuit says the board’s decision is unconstitutional.

“By severely limiting distributions of DROP funds denying the plaintiffs access to their full DROP accounts, the defendants deprived the plaintiffs of their property interest in violation of the due process clause of the 14th Amendment to the U.S. Constitution,” the lawsuit says. “[The] defendants’ actions have deprived the plaintiffs of access to their DROP funds, without any meaningful opportunity to be heard in connection with the same and when there were available methods to the defendants to distribute such funds.”

Each of the four Dallas City Council members on the DPFP board — Scott Griggs, Philip Kingston, Erik Wilson and Jennifer Staubach Gates — is named as a defendant in the suit as an individual. Dallas City Attorney Larry Casto wrote a Dec. 1 memo that all members of the board, whether they are on the city council or not, are protected from any personal losses by the city’s indemnity rules.

A judgment for the plaintiffs in the case would likely accelerate the run on DPFP drop funds that began as concerns about the fund’s solvency grew last summer. Over a three-month span, retirees withdrew $500 million, about a quarter of the fund’s cash assets from DROP accounts. When the board stopped DROP withdrawals, another $154 million in withdrawals were pending. Last week, Kingston said that the fund’s overall liquidity could be threatened within a year, if something isn’t done to shore up the pension’s financial positions.

Both the city of Dallas and the DPFP have issued plans for righting the fund’s ship. The city’s plan would rely on clawing back interest already paid to retirees with DROP accounts. DPFP prefers that the city shore up the fund with a $1 billion cash infusion. Mediation talks between the parties are ongoing.

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