Comptroller, pension funds: Chicago City Hall can't sue over grant money intercepted for shorted pensions

By Scott Holland | May 20, 2019

CHICAGO — Illinois Comptroller Susana Mendoza and several city worker retiree pension funds have responded to a lawsuit in which the city of Chicago alleged the comptroller's office acted wrongly at the request of the pension funds to seize millions in state grant money because the pension funds claimed the city had shorted pension funds by $23 million.

On May 1, lawyers for City Hall filed a complaint in Cook County Circuit Court, asking a judge to slap an injunction on the comptroller’s office and order the state to release the money, which the pension funds said is being held because the city has shorted its pension contributions. The complaint doesn’t specify how much money the city believes the comptroller’s office has intercepted to date.

The Chicago Policemen’s Annuity and Fund, the Municipal Employees Annuity and Benefit Fund, the Laborers’ Annuity and Benefit Fund and the comptroller’s office filed response motions May 9.

According to the city, Mendoza directed the grant money to be held following notices of “final determination” the three funds submitted in March and April. The city believes the funds told the comptroller City Hall shorted its contributions to the funds by a total of about $23.1 million, which could trigger an embargo on state funds to the city.

Ill. Comptroller Susana Mendoza  

In her response filing, Mendoza said the city has other legal remedies, such as a state law protest procedure that prevents a county judge from granting injunctive relief. Mendoza said the city has 60 days from when she sent letters to the city to protest the amounts in questions, and that it has not yet done so. If no protest is made, the law dictates “the comptroller shall issue a warrant on the State Offset Claims Fund for the amount of that deposit to the claimant entitled to the remittance.”

The funds argued the city can’t establish it would likely win on the merits of its complaint or a protectable right, and also said the city’s position fails because the funds are not an “agency” as defined in the Administrative Procedure Act. They further argued the city can’t establish irreparable harm “since this case involves only money damages and money is fungible. … As of December 31, 2017, the city had $155.5 million in its unassigned balance, which is more than sufficient to cover the total amounts of $23 million claimed by the city funds that may be intercepted by the state comptroller.”

Both the comptroller and the funds said the city doesn’t have any due process rights under state law, and so it can’t argue Mendoza was wrong to freeze the money without a final determination following a hearing before an impartial tribunal. Mendoza said the applicable law forces the city to make its first course of action a protest to her office.

The funds accused the city of attempting “to catastrophize the facts” by speculating about what harm could come absent the requested injunction.

“The city wants an injunction because there is a non-zero possibility of an unanticipated future emergency that may occur during the pendency of this litigation,” according to the funds, “and the city’s use of unassigned and unrestricted general funds reduces its total resources available to respond to that hypothetical, unexpected emergency.”

Ultimately, the defendants said, even if a judge determines a restraining order is appropriate, that still shouldn't lead to release of the money. Rather, it should only lead to a preservation of the status quo until at least a preliminary injunction hearing.

The defendants are represented by Jacobs, Burns, Orlove & Hernandez, of Chicago, and the Illinois Attorney General’s Office.

The city of Chicago's request for a temporary restraining order is pending before Cook County Associate Judge Neil Cohen.

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Organizations in this Story

City of Chicago Illinois Attorney General Illinois State Comptroller Jacobs Burns Orlove & Hernandez

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