ALBERT A. FAELLA ANDREA DIMAIO in her capacity as the duly appointed administratrix of the Estate of John DiMaio
TOWN OF JOHNSTON and JOSEPH CHIODO in his capacity as Finance Director for the Town of Johnston ALAN ROSS
TOWN OF JOHNSTON and ING LIFE INSURANCE, ANNUITY COMPANY AND CITIGROUP GLOBAL MARKET, INC.
Plaintiff: Scott K. Demello, Esq., Michael J. Lepizzera,
Timothy J. Robenhymer
Defendant: William J. Conley, Jr., Gina Lemay, Andrew S.
SILVERSTEIN, MAGISTRATE J. (RET.)
the Court for decision following a nonjury trial are the
consolidated matters of Albert A. Faella (Faella), Andrea
DiMaio, in her capacity as the duly appointed administratrix
of the Estate of John DiMaio, and Alan Ross (Ross)
(collectively, with Faella and Andrea DiMaio, Plaintiffs).
Faella and Andrea DiMaio bring this action against the Town
of Johnston (Defendant Johnston or the Town) and Joseph
Chiodo, in his capacity as Finance Director for the Town of
Johnston. Ross brings his complaint against Defendant
Johnston. Plaintiffs seek declaratory judgment regarding the
ownership of funds that had been deposited in certain
accounts organized under Internal Revenue Code (I.R.C. or the
Code) § 457 (the § 457 Accounts or the
Accounts). The § 457 Accounts bear the names of
Ross, Faella, and John DiMaio (DiMaio), former Johnston
police officers and members of the International Brotherhood
of Police Officers (IBPO) who retired due to injuries
sustained in the line of duty. Upon their retirement, the
Town placed Ross, Faella, and DiMaio on disability pension
benefits pursuant to collective bargaining agreements (CBAs)
between the IBPO and the Town-either the 2001-2004 or the
2005-2008 CBA, depending upon their date of retirement.
However, the Town refused to remit funds in the § 457
Accounts to Ross, Faella, and DiMaio, arguing that these
Accounts are merely funding mechanisms for the pensions set
forth under applicable CBAs. Jurisdiction is pursuant to G.L.
1956 §§ 9-30-1, et seq. and G.L. 1956
Facts and Travel
January 6, 2010, Ross filed a Complaint against the Town,
ING, and Citigroup, while Faella and DiMaio filed a Complaint
on January 15, 2010 against Joseph Chiodo in his capacity as
Finance Director for the Town, ING, and
Citigroup. In their Complaints, Ross, Faella, and
DiMaio sought distributions from certain § 457 Accounts
to which they contributed during their employment with the
Town. The Town responded that the Accounts were a funding
mechanism for defined benefit plans governed by applicable
CBAs rather than deferred compensation accounts. According to
the Town, it had met-and continued to meet-its obligation to
Ross, Faella, and DiMaio through its payment of their
disability pension benefits.
December 5, 2011, the Court denied Defendant Johnston's
Cross-Motion for Summary Judgment and granted the
Plaintiffs' Motion for Summary Judgment, determining that
a "1993 Contract" (discussed in Section B,
supra) governing the police deferred compensation
plan is binding upon Defendant Johnston, and not preempted by
the defined benefit plans in the CBAs. Ross v. Town of
Johnston, Nos. PB 10-0060, PB 10-0311, 2011 WL 6131032
(R.I. Super. Dec. 5, 2011). Under this reasoning, Ross,
Faella, and DiMaio were entitled to distributions from the
§ 457 Accounts. Id. at *10. The decision was
based, in part, on the doctrine of equitable estoppel.
Id. at *5.
Johnston appealed the decision to the Supreme Court. On March
30, 2015, the Supreme Court vacated the judgment and remanded
the case, finding that factual issues precluded summary
judgment for Plaintiffs on the grounds of equitable estoppel.
Faella v. Chiodo, 111 A.3d 351, 357-58 (R.I. 2015).
A non-jury trial ensued. Following the trial and upon the
request of the Court, Defendants submitted a Memorandum of
Law in Support of their Renewed Rule 52(c) Motion for
Judgment on Partial Findings Pursuant to the Rhode Island
Superior Court Rules of Civil Procedure,  and Plaintiffs
submitted their Post Trial Memorandum of Law in lieu of
closing arguments. The Court's findings of fact follow.
See Super. R. Civ. P. 52(a) ("[i]n all actions
tried upon the facts without a jury or with an advisory jury,
the court shall find the facts specially and state separately
its conclusions of law thereon").
The ING Accounts
April 26, 1984, Defendant Johnston entered into an agreement
with ING entitled Town of Johnston Deferred Compensation Plan
(the Deferred Compensation Agreement). Trial Ex. 1. This
contract resulted in the establishment of a system of
employee accounts under I.R.C. § 457, Deferred
Compensation Plans of State and Local Governments and
Tax-exempt Organizations. See id. at 80 ("Type
of plan and section of the Internal Revenue Code (if any)
under which plan is to qualify: 457"). Plan participants
(Participants) were comprised of members of the Town's
police force, and the plan allowed Participants to set aside
6% of their salary while the Town agreed to contribute a 12%
match. Contributions from both Participants and the Town were
held by ING in Accounts bearing the name and social security
number of each Participant.
Faella, and DiMaio voluntarily enrolled in these Accounts
shortly after the commencement of their employment with the
Town. Ross testified that he believed his Account to be a
savings plan and that the funds would be remitted to him upon
his retirement. Tr. 294-96, Oct. 17, 2017 (Vol. 4). Ross and
Faella each testified that although they understood that they
would receive the money in the § 457 Accounts after the
conclusion of their service to the Town, they did not know
how they would receive this money, be it in a lump sum or in
portions. Id. at 329-30.
times relevant to this matter, the Town paid its
invoices-including pension payment obligations-out of a
general fund comprised of taxes and various fees. Tr. 43-44,
July 11, 2017 (Vol. 2). However, Participant contributions to
the § 457 Accounts were held by ING, separately from the
Town's general fund. Vol. 6 Tr. 515. These funds were
organized into two accounts: VB1965 and VB1966. Participant
contributions of 6% of their salaries were held in VB1965,
while the Town's 12% match was held in VB1966. Officers
received quarterly statements from ING, which displayed their
names and social security numbers. The funds were further
organized into a "fixed account," which offered a
guaranteed rate of return of 4%, as well as sub accounts that
were invested in the stock market as a whole. All the
Town's contributions were held in the fixed account.
Participants had the opportunity to designate their 6%
contributions among different accounts and received personal
identification numbers (PINs) through ING that allowed them
to access the Accounts to do so. This structure was unique to
the Town's police force; for instance, the Town provided
a pension to its firemen, the funds for which were pooled
into a single account. See Tr. 213, July 12, 2017
the Accounts were set up in the employees' names and the
employees selected the investment vehicles for the funds held
therein, the Town was owner of all § 457 Accounts. This
structure was required pursuant to I.R.C., under which §
457 deferred compensation accounts are owned by the employer
until some triggering event, such as the employee's
retirement or termination of his or her employment. Ross
testified that he understood, this structure when he signed
the paperwork to enroll in the program.
November 3, 2010, after a hearing upon ING's Motion for
Leave to Interplead Funds, ING was ordered to pay all funds
in the names of Ross, Faella, and DiMaio into the Registry of
the Court (the Registry) to be held pending the adjudication
of entitlement to the funds. On January 13, 2011, the Court
recorded a Receipt of the following checks from ING:
No. 0014011203, $102, 400.73, Albert Faella, VB1965;
No. 0014011204, $176, 106.94, Albert Faella, VB1966;
No. 0014011205, $92, 424.09, John DiMaio, VB1965;
No. 0014011206, $169, 768.15, John DiMaio, VB1966;
No. 0014010614, $97, 278.07, Alan Ross, VB1965;
No. 0014010615, $187, 502.74, Alan Ross, VB1966.
Citigroup were dismissed thereafter. The funds at issue
remain in the Registry pending a decision in this action.
The 1993 Document
trial, Faella presented a document entitled Town of Johnston
Police Department Pension Plan (the 1993 Document) as
evidence. However, Faella's copy was missing its first
page, and a diligent search by Johnston Town Clerk Vincent P.
Baccari, Jr. failed to yield the complete, original document.
Vol. 3 Tr. 233. Moreover, witnesses including Faella, who
signed the document in 1993, were unable to sufficiently
testify to its authenticity. The 1993 Document was initially
admitted de bene after the Town sought to exclude it
during pretrial hearings on motions in limine, but
the Court ultimately deemed it inadmissible after Plaintiffs
were unable to authenticate the document. Therefore, the 1993
Document shall not be considered in the decision herein.
The Collective Bargaining Agreements
times relevant to this action, the Town was a party to CBAs
with the IBPO, which were renegotiated approximately every
three years. Pursuant thereto, the Town had an obligation to
provide a pension to its police force. The CBAs set forth the
parameters of this pension plan including the formula used to
calculate pension benefits, as well as the benefits offered
for early retirement. Notably, the Early Retirement section
of relevant CBAs included the same 6% and 12% contribution
language as that contained in the Deferred Compensation
Agreement. At trial, the parties stipulated that there was no
mention in the CBAs of 6% and 12% payments from the officers
or the Town, except in the Early Retirement section of the
relevant CBA. See Tr. 616, Nov. 29, 2017 (Vol. 7).
Disability pension benefits are also set forth in the CBAs
from the time period relevant to this action; such payments
are calculated as two-thirds of the full pension an officer
would have received but for retirement due to a disability.
the Town's adoption of the Deferred Compensation
Agreement, the Town officials expressed concerns that the
§ 457 Accounts could create an additional retirement
benefit for police officers beyond their pensions. According
to Defendant Johnston's Finance Director Dennis Quaranta
(Quaranta), who oversaw pension payments from 1992 through
1995, the Town made these payments from its general fund and
there was no designated pension fund that he could remember.
Vol. 2 Tr. 44. When the Town entered into the Deferred
Compensation Agreement, Quaranta reasoned that these Accounts
would create a double retirement benefit for the police
officers. Id. at 72-73. When he notified Mayor
aRusso of this possibility, Mayor aRusso responded that the
Town "[had] it covered." Tr. 97.
the Town made changes to the structure of the retirement
benefits it offered its police officers, such that officers
would not have the ability to establish additional savings
accounts beyond the Town's pension plan. However, these
changes went into effect after Ross, Faella, and DiMaio
retired from service to the Town.
Standard of Review
considering anon-jury trial pursuant to Super. R. Civ. P.
39(b), this Court is subject to Super. R. Civ. P. 52(c),
"If... a party has been fully heard on an issue and the
court finds against the party on that issue, the court may
enter judgment as a matter of law against that party with
respect to a claim or defense that cannot under the
controlling law be maintained or defeated without a favorable
finding on that issue, or the court may decline to render any
judgment until the close of all the evidence. Such a judgment
shall be supported by findings of fact and conclusions of law
as required by subdivision (a) of this rule."
trial justice weighs 'the credibility of witnesses and
determines the weight of the evidence presented by
plaintiff" when ruling on a motion pursuant to Super. R.
Civ. P. 52(c). Broadley v. State,939 A.2d 1016,
1020 (R.I. 2008) (quoting Pillar Property Management,
L.L.C. v. Caste's, Inc.,714 A.2d 619, 620
(R.1.1998)). Moreover, "when deciding a motion for
judgment as a matter of law in a nonjury trial, unlike a jury
trial, the trial justice need not view the evidence in the
light most favorable to the nonmoving party."
Id. (citing Estate of Meller v. Adolf Meller
Co.,554 A.2d 648, 651 (R.I. 1989)). Upon a
defendant's motion for judgment folio wing the close of a
plaintiffs evidence, '"the trial justice may either
determine the case on the record as it exists at the time the
defendant files his motion or defer his [or her] judgment
until both parties have completed their presentations of
evidence.'" Shove Insurance, Inc. v.
Tenreiro,667 A.2d 532, 534 (R.I. 1995) (considering
Rule 41(b)(2), the ...