The long legal battle by Pittston Area and Dallas school districts against the Northeast Pennsylvania School District Health Trust appears to have ended, with the U.S. Supreme Court denying a request by the districts to consider the case.
The two districts withdrew from the trust in 2007 and started a protracted effort to get what they argued was their share of roughly $18 million the trust had in surplus at the time.
The districts won the case in Luzerne County Court when a judge ruled they should receive the money and ordered the trust to set aside $18 million pending appeal.
The districts lost appeals up through the state Supreme Court, then appealed to the U.S. top court.
In February, attorney Howard Levinson, who has handled the case from the onset for the districts, filed a petition requesting the Supreme Court review a lower-court decision.
The court considered the appeal, along with many others, in conference Friday and issued an order denying it Monday morning. The denial was part of a list of at least 190 cases rejected without comment.
At the heart of the case was a debate about the nature of the trust.
The two districts argued each member district’s rates are separately set and each district’s claims and contributions are tabulated separately, which makes the trust a “segregated trust.” The districts also argued the trust documents explicitly bind it to operate under the codes of the federal Employee Retirement Income Security Act (ERISA).
Under both interpretations, the districts contend, they are legally entitled to their share of any surplus.
The trust countered that it is a “pooled trust,” meaning all payments are ultimately pooled to benefit all members, and that the agreement signed by member districts says any money paid into the trust stays with the trust unless it is dissolved.
In appealing to the high court, the district’s argued such a mandate sets a precedent that upends ERISA, creating a “devil’s alternative” that forces members to stay in a trust for fear of losing millions already contributed and makes taxpayers from the withdrawing districts see their money spent to benefit other districts.
Losing the case could cost the districts more than the loss of up to $8 million combined that has been set aside by the trust. The trust has sought a court order requiring the districts to pay legal costs for the nearly seven-year battle.
On the other hand, the win could be a boon for districts that remained in the trust. The board that runs the trust, comprised of representatives from both union and management of member districts, recently voted to require that, if the $8 million is freed up, it must immediately be used to offset premium costs.
Pittston Area and Dallas would essentially have to concede defeat and not file any more legal efforts, and a judge would have to order the $8 million released for unrestricted use, but if those things happen the Trust must, under conditions set by the board, use the money to give member districts a pro-rata break in premium payments, likely meaning each district would have their premiums waived for at least a month.