Last updated: February 20. 2013 4:16AM - 605 Views

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Attorney Howard Levinson said Pittston Area and Dallas School District will likely take their case against the Northeast Pennsylvania School District Health Trust to the state Supreme Court

Earlier today, an appellate court reversed a Luzerne County judge's ruling that had ordered the Trust – a consortium of area school districts and agencies - to set aside nearly $8 million to be used exclusively by Dallas and Pittston Area, which withdrew from the Trust in 2007.

In an opinion penned by Commonwealth Court Judge Kevin Brobson, the five-judge appeal panel ruled that the Luzerne County Judge Lewis Wetzel erred as a matter of law in approving the district's contention that they were entitled to their share of the Trust's surplus.

Levinson, who has represented the two districts in the long legal battle, said he believes there are a number of errors in the decision as a matter of law

We will be taking the case to the Pennsylvania Supreme Court and think the Supreme Court will see merit in the decision by Judge Wetzel, Levinson said.

The districts withdrew form the Trust because they believed it had built an excess surplus, at one point topping $20 million. The districts argued that such a large surplus showed they could save money by leaving the Trust and seeking insurance elsewhere.

After leaving the Trust, the two districts sought what they contend is their share of the surplus. The Trust claimed the agreement signed by all members kept any surplus with the Trust even if members withdrew, and that the surplus could only be distributed if the Trust dissolved.

The two sides went to court, and in December, 2011, Wetzel ruled in favor of the districts, ordering the Trust to pay $2.8 million to Dallas and $2.3 million to Pittston Area. The Trust appealed, and the districts asked that the money be set aside until the appeal was settled. The judge agreed, ordering the Trust to set the money, plus interest, in a separate account, totaling about $7.9 million.

The decision issued today notes the districts' argument hinged on whether the Trust is a pooled multiple employer trust or an aggregate of segregated single employer plans. The arcane distinction is important. In the former, the money is considered pooled for all members, while in the latter the money is tracked separately for each member.

The panel noted that the lower court judge agreed that the Trust was an aggregate of single employer plans, a determination the appeals court rejected, based on the panels' review of the Trust agreement.

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