NBA Pension Plan Defeats Stale Claim

Nov 22, 2019

By Jeff Birren, Senior Writer
This is a case that comes down to the passage of time. It was filed as Employee Retirement Income Security Act (“ERISA”) 29 U.S.C. Section 1001 et seq, but it quickly reduces to simple concepts that those representing former players must understand. A retired NBA player filed an ERISA case against the NBA Pension Plan nearly 14 years after he had stopped receiving Plan benefits. That might not have been the longest time-lapse for such a claim to be asserted, but time does not stand still, and the courts determined that the case was filed too late. Any other position would mean the courts would spend energy on such cases time after time, and that is not a good use of judicial resources.
The Time of His Seasons and Benefits
Zaid Abdul-Aziz was born Donald Smith in 1946. He played college basketball at Iowa State and was the Big 8 conference’s 1968 Player-of-the-Year. He was selected by the Cincinnati Royals with the the fifth pick of the 1968 NBA draft. Over the course of his career he also played for Milwaukee, Seattle, Houston, Buffalo and Boston. His career ended after the 1978 season. During several of his years he only played part of a season so when he retired, he was credited with eight seasons under the NBA pension plan. Abdul-Aziz converted to Islam in 1976 and consequently changed his name. In 2006 he wrote an autobiography, Darkness to Sunlight.
The pension plan provided that if a retired player waited until the normal retirement date, it would pay $200 a month for every credited season. Abdul-Aziz’s normal retirement date was May 1996 (Abdul-Aziz v. NBA Players’ Pension Plan, Case No.1:17-cv-08901, U.S.D.C. S.D.N.Y., March 20, 2019 (“Order”) at 3).He elected to receive his benefits for a fixed term of 10 years, beginning in 1991.That option provided the actuarial equivalent of the normal pension. The application for that option stated that upon “the expiration of this period, all benefits will cease. The total value of all payments you receive will equal the tenure value of your retirement benefit” ( Id. ). Moreover, he opted to receive retirement benefits early, before age 50, so his normal monthly amount was reduced by approximately one-third (Id. at 4). 
The Plan wrote to Abdul-Aziz in July 1991, confirming that he would begin receiving his benefits “in the form of the 10 Year Certain Only” and he would “cease receiving a benefit under this plan on July 31, 2001” (Id). Due to an amendment in the plan following the 1995 Collective Bargaining Agreement, his benefits were increased but only for payments that had not yet been made (Id. at 5).The plan sent another letter, dated Oct. 30, 1997 that reminded him that his benefits were “scheduled to cease July 31, 2001.” He received his final payment in 2001 (Id. at 7).
In April 2015 Abdul-Aziz’s lawyer wrote the Plan and claimed that the buy-out improperly reduced his benefits. The Plan responded that the benefits had been paid in full, that the payments ended in 2001 and that he “had no further rights under the Plan” ( Id. at 8). 
This time, Abdul-Aziz responded by filing a class action lawsuit against the Plan. It alleged two separate breaches of ERISA. The ERISA specifics were ultimately irrelevant to both courts so they are not discussed here.
The District Court
The Plan filed a motion to dismiss (Id.) that stated that time was on its side because the claims were time-barred and failed to state a claim upon which relief could be granted (Id. at 9). Since ERISA does not have a statute of limitations, courts turn to state law. An employee benefit plan is a written contract, and thus for an ERISA claim filed in New York, that state’s six-year statute of limitations applies. 
An ERISA cause of cause of action “accrues upon a clear repudiation of the plan that is known, or should be known to plaintiff (Id. at 11). When a claim is based on an underpayment of benefits, the plaintiff is “put on notice that the defendants believed the method used to calculate his pension was correct” (Id.). 
The parties agreed that the six-year statute of limitations applied so the argument was when the time period began. Abdul-Aziz contended that it did not begin to run until the Plan formally rejected his claim for additional benefits. The Plan argued that it began to run at the very latest in July 2001 when he received his final payment (Id. at 12).
The District Court began by noting that “as early as June 22, 1991…and repeatedly thereafter by letter, the Plan advised Plaintiff that his benefit payments would cease entirely in July 2001” ( Id. at 13).This was in the application that Abdul-Aziz completed in June 1991.That document stated that if he picked payments for a term of years, after that period ended “all benefits will cease” ( Id. ).This was confirmed by a July 2, 1991 letter that that reminded him that as he had “elected to receive your benefit in the form of the 10 Year Certain only, you will cease receiving a benefit from this Plan on July 31, 2001” ( Id. ).This steady stream of notices continued every time he received a cost-of-living adjustment ( Id. at 14).
The Court next found that “all benefits…that Plaintiff received from 1996 to 2001 did in fact cease as of July 31, 2001.If Plaintiff believed he was entitled to additional monies from the Plan, the complete termination of his benefits on July 31, 2001 was undoubtedly sufficient to put him on notice” (of any errors that he now claimed were made by the plan).“Accordingly, I find that the Plan’s repeated written warnings throughout the 1990s, followed by the actual cessation of any and all benefit payments on July 31, 2001, served a clear repudiation of the Plan of any claim by Plaintiff to future benefits” ( Id. at 15). 
The Court rejected his argument that the statute of limitations did not commence until the Plan rejected his claim for additional benefits. To do so “would reward Plaintiff’s lack of diligence and permit other potential ERISA claimants to effectively extend the limitations period” ( Id. at 16-17). Several other courts had rejected this theory as such “an approach would wholly undermine the very purpose of a state of limitations” ( Id. at 17).The Court held that the six-year statute of limitations “began to run no later than July 31, 2001, and expired six years later, on July 31, 2007—more than ten years before Plaintiff initiated this suit” ( Id. ). The Court therefore dismissed the case and declined to address the Plan’s challenge to the merits of the case. Abdul-Aziz appealed.
Abdul-Aziz Turns to the Big Time Second Circuit
The District Court issued its opinion on March 20, 2019 and the Second Circuit ruled less than eight months later, in the form of a “Summary Order” on Nov. 12, 2019. Such orders “do not have precedential effect” and a party citing such an order must serve a copy of it on any party not represented by counsel” (Abdul-Azizv. NBA Players’ Association Pension Plan, 19-782-cv (2nd Cir, 11-12-19) (“Summary Order”) at 1). The opinion is nearly 2 ½ pages long but the analysis is a mere page. 
The Summary Order began by stating that the District Court found the case to be barred by the statute of limitations and that it reviews such actions de novo ( Id. at 2). The Court then stated that the statute of limitations begins to run when a plan “clearly and inequitably repudiates the plaintiff’s claim for benefits, and that repudiation is known, or should be known” by the plaintiff ( Id. at 2).The District Court concluded that such knowledge could be “imputed to Abdul-Aziz by, at the latest, July 2001” and that if he “believed he was owed more money at that point, then he should have brought action immediately after the benefits ended, or at some time within the next six years” ( Id. ).
The Circuit was not interested in spending a lot of time analyzing the claim. “By July 2001, Abdul-Aziz had sufficient notice that he would receive no future benefits—including any future cost-of-living adjustments” ( Id. at 3). In fact, he had notice “as early as 1997 that he would not be compensated for future” cost-of-living adjustments (Id.).The Court concluded that even if it were to adopt the later date, he “filed this action at least ten years too late” (Id.).
There was simply no time left for him to bring such a claim, and no doubt Nov. 12, 2019 was an unpleasant date for Abdul-Aziz.
Time does not stand still and one of the lessons from this case is that for those retired athletes seeking additional pension benefits, their ERISA claims will be covered by a statute of limitations for written contracts. New York has a six-year statute. In Texas and California it is four years, but the first thing counsel should check is the relevant plan’s written documents to determine if claims must be brought in a specific state. Retired players and their representatives will be well-advised to not sit on such claims but act expeditiously if they believe that grounds for a valid claim exist. Sending a letter of inquiry will not resurrect a stale claim. 
Birren is the former general counsel of the Oakland Raiders and is an adjunct professor of law at Southwestern.


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