NO.

DC-16-15431
MICHAEL S. RAWLINGS, Individually, as
resident of the City of Dallas,

Plaintiff,

v.

THE BOARD OF TRUSTEES OF THE

DALLAS POLICE AND FIRE PENSION

SYSTEM and THE DALLAS POLICE AND

FIRE PENSION SYSTEM,

Defendants

v.

LARRY EDDINGTON, WILLIAM BUTLER,

VINCENT J. AURENTZ, BEN CAPERTON,
and BOB NEUMAN, INDIVIDUALLY AND

COLLECTIVELY AS CLASS

REPRESENTATIVES OF THOSE

SIMILARLY SITUATED,

Intervenors.

IN THE DISTRICT COURT

DALLAS COUNTY, TEXAS

116th JUDICIAL DISTRICT

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION

Robert C. Walters
Veronica S. Lewis
Will Thompson
Scott K. Hvidt
GIBSON, DUNN & CRUTCHER LLP
2100 McKinney Avenue
Suite 1100
Dallas, TX 75201
(214) 698-3100
rwalters@gibsondunn.com

Attorneys for Amici Curiae

TABLE OF CONTENTS
Page(s)
Table of Authorities ...................................................................................................................... iii
Interest of Amici Curiae ................................................................................................................ vi
Introduction .................................................................................................................................... 1
Argument ....................................................................................................................................... 1
I.

II.

A Bank Run Caused by Lump-Sum DROP Withdrawals Would

Irreparably Harm Pension System Participants and the City as a Whole .............. 2
A.

Bank Runs Constitute Irreparable Harm Because They Destroy

Financial Institutions and Leave Beneficiaries Without Any
Recompense ............................................................................................... 2

B.

Both Participants and the City Would Suffer from a Collapse of the
Pension System .......................................................................................... 3

Injunctive Relief Preventing Lump-Sum DROP Withdrawals Is the Only

Way to Prevent These Harms ................................................................................ 5

Conclusion ..................................................................................................................................... 9
Certificate of Service .....................................................................Error! Bookmark not defined.

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION - PAGE ii

TABLE OF AUTHORITIES
Page(s)
Cases
Atwood Turnkey Drilling, Inc. v. Petroleo Brasileiro, S.A.,
875 F.2d 1174 (5th Cir. 1989) ...................................................................................................2
In re Braniff Airways, Inc.,
27 B.R. 222 (N.D. Tex. Bankr. 1982) ....................................................................................6, 7
Butnaru v. Ford Motor Co.,
84 S.W.3d 198 (Tex. 2002)........................................................................................................1
Cherubino Valsangiacomo, S.A. v. Americana Juice Imports, Inc.,
No. 13-98-272-CV, 1999 WL 34973520 (Tex. App.Corpus Christi Jan. 21,
1999, no pet.) .............................................................................................................................2
Doran v. Salem Inn, Inc.,
422 U.S. 922 (1975) ...................................................................................................................2
Eddington v. Dallas Police and Fire Pension System,
No. 05-15-00839-CV, 2016 WL 7217239 (Tex. App.Dallas Dec. 13, 2016,
no pet. h.) ...................................................................................................................................5
Fed. Ins. Co. v. Arthur Andersen LLP,
522 F.3d 740 (7th Cir. 2008) .....................................................................................................8
Michels Corp. v. Cent. States, Se., & Sw. Areas Pension Fund,
800 F.3d 411 (7th Cir. 2015) .....................................................................................................6
Twyman v. Twyman,
No. 01-08-00904-CV, 2009 WL 2050979 (Tex. App.Houston [1st Dist.]
July 16, 2009, no pet.) ................................................................................................................2
Statutes
29 U.S.C. 1003(b)(1) ....................................................................................................................7
29 U.S.C. 1056(g)(3) ....................................................................................................................7
29 U.S.C. 1344(a) .........................................................................................................................6
Other Authorities
Anil K. Kashyap, Bank runs arent madness: This model explained why, CHICAGO
BOOTH REVIEW, June 15, 2015, available at
http://review.chicagobooth.edu/magazine/summer-2014/bank-runs-arentmadness-this-model-explained-why ..........................................................................................3
Deposit Insurance FAQs, FDIC (last visited Dec. 29, 2016), available at
https://www.fdic.gov/deposit/deposits/faq.html ........................................................................6

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION - PAGE iii

TABLE OF AUTHORITIES
(CONTINUED)
Page(s)
Edward J. Green and Ping Lin, Diamond and Dybvigs Classic Theory of
Financial Intermediation: Whats Missing?, FEDERAL RESERVE BANK OF
MINNEAPOLIS, Winter 2000, available at
https://minneapolisfed.org/research/qr/qr2412.pdf ....................................................................5
Its A Wonderful Life, YOUTUBE (last visited Jan. 2, 2017), available at
https://youtu.be/iPkJH6BT7dM .................................................................................................5
Jim Puzzanghera, WaMu failed because of run on bank, former regulatory chief
says, L.A. TIMES, Apr. 17, 2010, available at
http://articles.latimes.com/2010/apr/17/business/la-fi-wamu17-2010apr17; ............................5
Josh McGee and Paulina S. Diaz Aguirre, The Dallas Public Pension Crisis: A
Warning for Cities Across Texas, LAURA AND JOHN ARNOLD FOUNDATION,
October 2016, available at http://www.arnoldfoundation.org/wpcontent/uploads/LJAF_DallasPensionBrief_10-26-16-FINAL.pdf ...........................................9
Lee T. Polk, 1 ERISA PRACTICE AND LITIGATION 7:33................................................................7
Lori Brown, Dallas Police and Firefighters Retiring at Record-Setting Pace, FOX
4 NEWS, Sept. 29, 2016, available at
http://www.fox4news.com/news/20872791-story .....................................................................9
Mark A. Carlson and Jonathan D. Rose, Can a Bank Run Be Stopped?
Government Guarantees and the Run on Continental Illinois, FEDERAL
RESERVE BOARD, Jan. 21, 2016, available at
https://www.federalreserve.gov/econresdata/feds/2016/files/2016003pap.pdf .........................3
Mark Hannam, Money Market Funds, Bank Runs and the First-Mover Advantage,
INSTITUTIONAL MONEY MARKET FUND ASSOCIATION, Jan. 2013, available at
https://www.sec.gov/comments/s7-03-13/s70313-367.pdf .......................................................3
Mary Poppins, YOUTUBE (last visited Dec. 29, 2016), available at
https://www.youtube.com/watch?v=XxyB29bDbBA; ..............................................................5
Patrick Purcell, Lump-Sum Distributions Under the Pension Protection Act,
CONGRESSIONAL RESEARCH SERVICE (Dec. 2007), available at
http://digitalcommons.ilr.cornell.edu/key_workplace/471/ .......................................................7
Rajkamal Iyer and Maju Puri, Understanding Bank Runs: The Importance of
Depositor-Bank Relationships and Networks, AMERICAN ECONOMIC REVIEW,
2012, available at http://www.nber.org/papers/w14280 ...........................................................3
Rick Rothacker and Kerry Hall, Wachovia faced a silent bank run, CHARLOTTE
OBSERVER, Oct. 2, 2008, available at
http://www.charlotteobserver.com/news/article9013478.html; .................................................5
Robert Wilonsky, Credit ratings agency warns Dallas, pension fund to find a fix
or face massive downgrade, DALLAS MORNING NEWS, Jan. 9, 2017, available
at http://www.dallasnews.com/news/dallas-city-council/2017/01/09/creditratings-agency-warns-dallas-pension-fund-find-fix-face-massive-downgrade .........................4

AMICI CURIAE BRIEF IN SUPPORT OF PRELIMINARY INJUNCTION - PAGE iv

TABLE OF AUTHORITIES
(CONTINUED)
Page(s)
Robert Wilonsky, Dallas Broken Police Pension Threatens Streets, Parks
Promised in 2017 Bond Package, DALLAS MORNING NEWS, Sept. 21, 2016,
available at http://www.dallasnews.com/news/news/2016/09/21/dallasbroken-police-pensionthreatens-streets-parks-promised-2017-bond-package ..........................4
Surajeet Chakravarty, Miguel A. Fonseca, and Todd R. Kaplan, An Experiment on
the Causes of Bank Run Contagions, EUROPEAN ECONOMIC REVIEW, Sept.
2013, available at
http://webmeets.com/files/papers/res/2014/817/bankruns_23092013.pdf ................................3
Ted Temzelides, Are Bank Runs Contagious?, FEDERAL RESERVE BANK OF
PHILADELPHIA (last visited Dec. 29, 2016), available at
http://www.und.nodak.edu/instruct/okara/article1.pdf. .............................................................3
Tristan Hallman, Bank Run? $220 Million Withdrawn in 6 Weeks from Troubled
Dallas Police and Fire Pension System, DALLAS MORNING NEWS, Sept. 26,
2016, available at http://www.dallasnews.com/news/news/2016/09/26/bankrun-220-million-withdrawn-6-weeks-troubled-dallas-police-fire-pension-fund .......................9
Tristan Hallman, Dallas Sees Its Credit Score Drop; Fitch Downgrades Bond
Rating Amid Pension Fears, DALLAS MORNING NEWS, Oct. 6, 2016, available
at http://www.dallasnews.com/news/dallas-cityhall/2016/10/06/dallas-seescredit-score-drop-fitch-downgrades-bond-rating-amid-pension-fears ......................................4
William L. Silber, Why Did FDRs Bank Holiday Succeed?, FEDERAL RESERVE
BANK OF NEW YORK, July 2009, available at
https://www.newyorkfed.org/medialibrary/media/research/epr/09v15n1/0907s
ilb.pdf .........................................................................................................................................5
Regulations
29 C.F.R. 2618.4(b) (1981)...........................................................................................................6
29 C.F.R. 4044.4(b) (2011)...........................................................................................................6

AMICI CURIAE BRIEF IN SUPPORT OF PRELIMINARY INJUNCTION - PAGE v

INTEREST OF AMICI CURIAE

The Dallas Citizens Council, the Dallas Regional Chamber, the Greater Dallas Asian
American Chamber of Commerce, the North Dallas Chamber of Commerce, the Real Estate
Council, and former City of Dallas Mayors Ron Kirk, Laura Miller, and Tom Leppert (collectively,
amici) believe that a temporary injunction preventing lump-sum withdrawals from the Dallas
Police and Fire Pension System (Pension System) is crucial to avoid irreparable harm to the
Pension System, its participants, and the City as a whole.
Amici and their pro bono counsel do not possess a financial interest in the Pension System.
Nor have they have received any compensation for preparing this submission for the Courts
consideration.
The Dallas Citizens Council is a nonprofit organization comprising Dallas business and
civic leaders. Its purpose is to provide leadership on public policy issues to improve the lives of
Dallas citizens.
The Dallas Regional Chamber, a nonprofit organization, is the Dallas areas leading
membership-driven business organization, committed to promoting economic prosperity in the
Dallas region by leading economic development, driving improvements in public education,
influencing public policy, and catalyzing and advocating for regional partnership.
The Greater Dallas Asian American Chamber of Commerce advocates for its members and
the Asian American business community while assisting with the economic development of North
Texas.
The North Dallas Chamber of Commerce seeks to create a unified voice of local business
to effect positive change in the community and take active roles in the issues and opportunities the
region faces.

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION - PAGE vi

The Real Estate Council, a nonprofit organization, is Texas largest organization of its kind
representing more than thousands of individual and corporate members that make up 95% of the
commercial real estate businesses in North Texas. The Real Estate Council engages in state and
local public policy initiatives that affect our industry and the economic vitality of the region and
the state.
Ron Kirk served as Mayor of the City of Dallas from 1995 to 2002.
Laura Miller served as Mayor of the City of Dallas from 2002 to 2007.
Tom Leppert served as Mayor of the City of Dallas from 2007 to 2011.

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION - PAGE vii

INTRODUCTION
If the Pension System resumes lump-sum payments to Deferred Retirement Option Plan
(DROP) participants, then the devastating run on the bank that occurred at the Pension System
in 2016 will also resume. By rapidly depleting the Pension Systems funds, lump-sum DROP
withdrawals threaten the imminent collapse of the Pension System and preclude the adoption of
long-term, stabilizing solutions. While lump-sum DROP withdrawals would ensure recovery of
unprotected funds for a lucky few DROP participants, the vast majority of Pension System
participants would be irreparably harmed by losing their constitutionally protected benefits. And
without a viable Pension System, the City would risk losing even more first responders and
confront debilitating financial pressures, undermining fundamental and sound municipal
governance.
As friends of this Courtand as friends of the City of Dallas and the first responder
community as a wholeamici urge the continued injunction of lump-sum DROP payments to give
our community a chance at finding a fair solution to this crisis.
ARGUMENT
To obtain a temporary injunction, the applicant must show a probable, imminent, and
irreparable injury. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). Amici submit
this brief to underscore that Pension System participants and the City will suffer probable,
imminent, and irreparable injur[ies] without a temporary injunction. Id.
If not restrained by a temporary injunction, DROP participants will be free to make
unlimited lump-sum DROP withdrawals. By depleting the Pension Systems liquid assets, the
inevitable run on the bank would render any future mandamus relief ineffective. Once the money
is gone, the Pension System would be hard-pressed to get it back, and any chance for a resolution
to this crisis will be lost.

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION - PAGE 1

I.

A Bank Run Caused by Lump-Sum DROP Withdrawals Would Irreparably Harm

Pension System Participants and the City as a Whole
A.

Bank Runs Constitute Irreparable Harm Because They Destroy Financial

Institutions and Leave Beneficiaries Without Any Recompense

Here, a resurrected run on the bank would cause irreparable harm in two ways, both of
which courts recognize as justifying injunctive relief. First, it would threaten the solvency of the
Pension System. See, e.g., Cherubino Valsangiacomo, S.A. v. Americana Juice Imports, Inc., No.
13-98-272-CV, 1999 WL 34973520, at *5 (Tex. App.Corpus Christi Jan. 21, 1999, no pet.)
(Imminent, irreparable injury may be proven by showing that without equitable relief, the
applicant would suffer insolvency or bankruptcy. . . .); Doran v. Salem Inn, Inc., 422 U.S. 922,
932 (1975) (the threat of bankruptcy or insolvency [c]ertainly satisfies the standards for
granting interim relief, for otherwise a favorable final judgment might well be useless); Atwood
Turnkey Drilling, Inc. v. Petroleo Brasileiro, S.A., 875 F.2d 1174, 1179 (5th Cir. 1989) (threat of
bankruptcy constitutes irreparable harm).
Second, the bank run would occur through the immediate and improper distribution of
Pension System funds to DROP participants, depleting the constitutionally protected benefits of
non-DROP participants. The ongoing danger of loss of these funds, which cannot practicably
be recovered later, itself constitutes imminent and irreparable harm. See Twyman v. Twyman, No.
01-08-00904-CV, 2009 WL 2050979, at *5 (Tex. App.Houston [1st Dist.] July 16, 2009, no
pet.) (enjoining a trustee from disbursing money to prevent the loss of the trusts funds).

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION - PAGE 2

B.

Both Participants and the City Would Suffer from a Collapse of the Pension
System

A classic run on the bank occurs when customers, fearing that a bank does not have enough
cash to return everyones deposits, try to withdraw their money before the bank runs out of money. 1
On hearing some negative information about the banks financial solvency, customers run to the
bank to withdraw all of their deposits, fearing that if they do not withdraw their money today, there
will not be any money left to withdraw tomorrow. 2 As more customers withdraw their funds, the
threat of insolvency increases, prompting more customers to withdraw their money. 3 This vicious
cycle repeats until the bank is out of cash and other liquid assets. 4 If the withdrawals continue, the
bank has to liquidate illiquid assets (e.g., sell real estate) at fire-sale prices to cover short-term
liabilities, further weakening the banks long-term health. 5
In the end, the bank will not have enough money to return the deposits of all of its
customers. 6 While those customers who rush to the bank first may recover all of their money,
those who are slow to the bank often get nothing. 7

6
7

Surajeet Chakravarty, Miguel A. Fonseca, and Todd R. Kaplan, An Experiment on the Causes of Bank Run
Contagions, EUROPEAN ECONOMIC REVIEW, Sept. 2013, available at http://webmeets.com/
files/papers/res/2014/817/bankruns_23092013.pdf.
The driving force for a bank run is that a bank does not hold enough liquid assets to serve all its customers,
should they all decide to withdraw their deposits at one given time. Anil K Kashyap, Bank runs arent
madness: This model explained why, CHICAGO BOOTH REVIEW, June 15, 2015, available at
http://review.chicagobooth.edu/magazine/summer-2014/bank-runs-arent-madness-this-model-explained-why.
Id. ([P]ure panic can cause a run. If enough depositors become concerned that a bank may experience more
withdrawals than its prepared for, it becomes rational for depositors to try to get their money back rather than
wait and risk getting nothing after the banks other depositors have withdrawn their money.).
Mark A. Carlson and Jonathan D. Rose, Can a Bank Run Be Stopped? Government Guarantees and the Run on
Continental Illinois, FEDERAL RESERVE BOARD, Jan. 21, 2016, available at https://www.federalreserve.
gov/econresdata/feds/2016/files/2016003pap.pdf.
Rajkamal Iyer and Maju Puri, Understanding Bank Runs: The Importance of Depositor-Bank Relationships and
Networks, AMERICAN ECONOMIC REVIEW, 2012, available at http://www.nber.org/papers/w14280; Kashyap,
supra note 2.
Ted Temzelides, Are Bank Runs Contagious?, FEDERAL RESERVE BANK OF PHILADELPHIA (last visited Dec. 29,
2016), available at http://www.und.nodak.edu/instruct/okara/article1.pdf.
Mark Hannam, Money Market Funds, Bank Runs and the First-Mover Advantage, INSTITUTIONAL MONEY
MARKET FUND ASSOCIATION, Jan. 2013, available at https://www.sec.gov/comments/s7-03-13/s70313-367.pdf.

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION - PAGE 3

That is precisely the danger facing the Pension System today.

Lump-sum DROP

withdrawals allow DROP participants to rush to the bank at the expense of the constitutionally
protected benefits of all Members, Pensioners, and Beneficiaries of the Pension System
including the DROP participants themselves. As a result, if the bank run resumes, some DROP
participants will be paid in fulldespite the admittedly unprotected nature of DROP accounts 8
but those payments will come at the expense of all Members, Pensioners and Beneficiaries
(including the DROP participants themselves), who will eventually be left empty handed.
But this is not simply a question of fairly allocating Pension System funds between DROP
and non-DROP participants (though that would be reason enough to prevent lump-sum DROP
withdrawals). Continued lump-sum DROP withdrawals would force accelerated sales of illiquid
assets, reducing the total funds available for all participants. The Pension System would lose not
only the funds in DROP accounts but also the difference in value between its current illiquid assets
and the fire-sale prices for which those assets can be sold on short notice.
On top of this harm to participants, the City itself will face potentially insuperable
difficulties if lump-sum DROP withdrawals continue. The threat to the Pension System has
already caused a downgrade in the Citys credit rating, 9 and Fitch Ratings threatened further
drastic reductions if the Pension System cannot adopt a long-term, stabilizing solution.10

8
9

10

Original Petition 44.

See Tristan Hallman, Dallas Sees Its Credit Score Drop; Fitch Downgrades Bond Rating Amid Pension Fears,
DALLAS MORNING NEWS, Oct. 6, 2016, available at http://www.dallasnews.com/news/dallascityhall/2016/10/06/dallas-sees-credit-score-drop-fitch-downgrades-bond-rating-amid-pension-fears.
See Robert Wilonsky, Credit ratings agency warns Dallas, pension fund to find a fix or face massive
downgrade, DALLAS MORNING NEWS, Jan. 9, 2017, available at http://www.dallasnews.com/news/dallas-citycouncil/2017/01/09/credit-ratings-agency-warns-dallas-pension-fund-find-fix-face-massive-downgrade (Fitch
Ratings warned that if the City and the Pension System fail to come up with a solution, further increases in
carrying costs would reduce Dallass expenditure flexibility, weaken the citys budget management capabilities,
and reduce overall financial resiliencewhich may result a multi-notch downgrade in Dallass credit
profile.).

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION - PAGE 4

Additionally, the threat to the Pension System has endangered the proposed 2017 bond package. 11
If the system collapses, these harms would multiply. Moreover, a functioning Pension System is
crucial for attracting and retaining talented police officers and firefighters. In the event of collapse,
the City would face a shortage of these crucial employees, endangering Dallas citizens. The DROP
program was created to help the City attract and keep talented first responders, 12 so it would be
sadly ironic if the DROP program itself ultimately prevented the City from doing so.
II.

Injunctive Relief Preventing Lump-Sum DROP Withdrawals Is the Only Way to

Prevent These Harms
This country has a long history of bank runs, and an equally long history of trying to prevent
them. 13 While banks and regulators have developed a number of tools for combatting bank runs,
all of them focus on preventing panicked customers from withdrawing too much money. 14 And

11

12

13

14

See Robert Wilonsky, Dallas Broken Police Pension Threatens Streets, Parks Promised in 2017 Bond
Package, DALLAS MORNING NEWS, Sept. 21, 2016, available at http://www.dallasnews.com/news/news/
2016/09/21/dallas-broken-police-pensionthreatens-streets-parks-promised-2017-bond-package.
Eddington v. Dallas Police and Fire Pension System, No. 05-15-00839-CV, __ S.W.3d __, 2016 WL 7217239,
at *2 (Tex. App.Dallas Dec. 13, 2016, no pet. h.) (DROP was first implemented by the Pension System in
1993 in response to a request by the City of Dallas to find an incentive to retain experienced police officers and
firefighters as part of the workforce after they become eligible to otherwise retire.).
Although relatively rare today, bank runs have been a common feature of economic crises throughout history.
Bank runs occurred during the financial panics of 1873, 1884, 1890, 1893, and 1907, as well as during the Great
Depression. They even occurred during the Savings and Loan crisis of the 1980s and the Great Recession.
Temzelides, supra note 6; Rick Rothacker and Kerry Hall, Wachovia faced a silent bank run, CHARLOTTE
OBSERVER, Oct. 2, 2008, available at http://www.charlotteobserver.com/news/article9013478.html; Jim
Puzzanghera, WaMu failed because of run on bank, former regulatory chief says, L.A. TIMES, Apr. 17, 2010,
available at http://articles.latimes.com/2010/apr/17/business/la-fi-wamu17-2010apr17; Carlson and Rose, supra
note 4. Historically, Americans were familiar enough with bank runs that classic movies like Its a Wonderful
Life and Mary Poppins featured dramatic bank-run scenes. Fidelity Fiduciary Bank, Mary Poppins,
YOUTUBE (last visited Dec. 29, 2016), available at https://www.youtube.com/watch?v=XxyB29bDbBA; Its
A Wonderful Life Bank Run, Its A Wonderful Life, YOUTUBE (last visited Jan. 2, 2017), available at
https://youtu.be/iPkJH6BT7dM.
For example, in response to bank runs during the Great Depression, banks temporarily suspended withdrawals
or temporarily closed to stop runs and keep themselves out of bankruptcy. Edward J. Green and Ping Lin,
Diamond and Dybvigs Classic Theory of Financial Intermediation: Whats Missing?, FEDERAL RESERVE
BANK OF MINNEAPOLIS, Winter 2000, available at https://minneapolisfed.org/research/qr/qr2412.pdf. When
bankers failed to control bank runs on their own, the federal government stepped in. As an initial matter,
President Franklin Delano Roosevelt prevented customers from withdrawing their deposits by ordering the
banks to close for an entire week until Congress passed the Emergency Banking Act of 1933 and he had an
opportunity to inform the public about the provisions of that statute. During these federally-declared bank
holidays customers were unable to demand withdrawals. The government-mandated reprieve gave the

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION - PAGE 5

that is precisely what the proposed temporary injunction would do in this case. By preventing
lump-sum withdrawals through the DROP program, an injunction would ensure that the Pension
System retains enough assets to maintain stability. 15
When a pension fund is threatened by a run on the bank, courts and regulators do everything
they can to prevent it. Because most pension plans are subject to federal regulation under the
Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq., federal precedent
is instructive. Here, although the Pension System is not subject to ERISA, the same economic
logic applies: panicked withdrawals must be prevented.
When a pension fund is terminated due to insolvency, ERISA regulates the allocation of
the remaining assets among the beneficiaries. See 29 U.S.C. 1344(a). As a result, participants
worried that ERISAs allocation rules will leave them with less money have an incentive to
withdraw their money early, to the extent that they can. If a sufficient number of pensioners do
so, they will cause a run on the bank, leaving the pension fund in even worse financial shape and
increasing the likelihood that other pensioners will receive nothing. To prevent a run on the bank
and maintain the respective positions of the participants in a plans assets, the Department of

15

customers time to calm down and stopped the bank runs from worsening. William L. Silber, Why Did FDRs
Bank Holiday Succeed?, FEDERAL RESERVE BANK OF NEW YORK, July 2009, available at https://www.new
yorkfed.org/medialibrary/media/research/epr/09v15n1/0907silb.pdf. As a longer-term solution to prevent many
bank runs before they start, the federal government created the Federal Deposit Insurance Corporation
(FDIC). Temzelides, supra note 6. The FDIC insures bank deposits up to a threshold (today, $250,000),
which gives customers increased security and reduces the incentive to withdraw their deposits, even if they hear
rumors of a banks insolvency. Deposit Insurance FAQs, FDIC (last visited Dec. 29, 2016), available at
https://www.fdic.gov/deposit/deposits/faq.html. After all, even if the bank fails, customers can get their money
back from the government. As a result, customers do not trigger a run by rushing to make withdrawals.
Despite their name, bank runs can happen to other financial institutions, not just banks. See Hannam, supra
note 7. If a pension fund allows lump-sum withdrawals, then the pension accounts function like bank accounts,
subjecting the pension fund to bank runs if the account holders grow nervous about the solvency of the fund.
See Michels Corp. v. Cent. States, Se., & Sw. Areas Pension Fund, 800 F.3d 411, 418 (7th Cir. 2015)
(recognizing that Congress feared a domino effect of withdrawals could lead a pension plan to insolvency much
like a bank run).

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION - PAGE 6

Labor limits distributions made in anticipation of plan termination. In re Braniff Airways, Inc.,
27 B.R. 222, 227 (N.D. Tex. Bankr. 1982). 16
To take an example, when Braniff Airways declared bankruptcy, former employees were
understandably worried that the company would cease to fund its pension plan. Id. at 22728.
Although some participants previously had been eligible for lump-sum distributions, historically
there had been very few applications. Id. at 228. However, [i]n the two months following the
filing of the bankruptcy case[,] 155 lump sum applications were filed. Id. In response, the court
enjoined further lump-sum distributions. Id. at 226. The court concluded that permitting [t]he
requested lump sum distributions, while authorized by plan provisions in ordinary situations, [is]
contrary to the plan administrators duty not to discriminate in favor of any group of participants
in the extraordinary situation presented here. Id. at 228. 17
While the Pension System is not governed by ERISA, 18 Braniff Airways treatment of
lump-sum distributions from an underfunded pension fund is instructive because the same key
facts are present here. With participants fearful about the future of the Pension System, DROP
16

17

18

Today, that regulation is found at 29 C.F.R. 4044.4(b) (2011), but at the time of Braniff Airways, it was found
at 29 C.F.R. 2618.4(b) (1981). That regulation prohibit[s] claims for distribution which are made at a time
the participants know or should know that plan termination is a likely prospect if the distribution would upset
the priority rules governing post-termination allocations. Braniff Airways, Inc., 27 B.R. at 227.
Federal law later went even further in preventing runs on pension plans. Under the Pension Protection Act of
2006, lump-sum distributions are prohibited not only when participants expect the plan to be terminated, as in
Braniff Airways, but also whenever a plan is sufficiently underfunded. See 29 U.S.C. 1056(g)(3); (prohibiting
lump-sum distributions when the plans adjusted funding target attainment percentage for a plan year is less
than 60%); Patrick Purcell, Lump-Sum Distributions Under the Pension Protection Act, CONGRESSIONAL
RESEARCH SERVICE (Dec. 2007) (Lump-Sum Distributions from Underfunded Plans), available at
http://digitalcommons.ilr.cornell.edu/key_workplace/471/; Lee T. Polk, 1 ERISA PRACTICE AND LITIGATION
7:33 (PPA 2006 subjects lump sum payments under plans that are below specified funding levels to
restrictions.).
See 29 U.S.C. 1003(b)(1) (The provisions of this subchapter shall not apply to any employee benefit plan
if . . . such plan is a governmental plan (as defined in section 1002(32) of this title).); id. 1002(32) (The
term governmental plan means a plan established or maintained for its employees by the Government of the
United States, by the government of any State or political subdivision thereof, or by any agency or
instrumentality of any of the foregoing.); id. 1321(b)(2) (This section does not apply to any plan . . .
established and maintained for its employees by the Government of the United States, by the government of any
State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing.).

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION - PAGE 7

withdrawals exploded in 2016, increasing 1,115%from an average of $47 million per year to
over $568 million. 19 This extraordinary and unprecedented situation threatened the solvency of
the Pension System and would have aided a few DROP participants at the expense of all other
participants. As a result, the temporary restraining order was indispensable to saving the Pension
Fund, and a temporary injunction is likewise necessary.
This logic has been regularly employed by courts analyzing non-ERISA pensions as well.
When the pension fund for Arthur Andersen LLPs partners suffered massive lump-sum
withdrawal requests, the plans trustee did not honor any requests for lump-sum distributions, but
continued to permit monthly pension payments. Fed. Ins. Co. v. Arthur Andersen LLP, 522 F.3d
740, 74142 (7th Cir. 2008). 20 The Seventh Circuit concluded the trustees fiduciary duty required
temporarily blocking the lump-sum withdrawals. Id. at 743. In bank-run situations, a fiduciary
does exactly what [the plan trustee] did: it defers payments so that all creditors can be treated alike
and may receive a higher percentage of their investments than would be possible if the fiduciary
liquidated assets on short notice to pay the early demanders immediately and in full. Id.
The same is true here. If DROP participants are allowed to continue making lump-sum
DROP withdrawals, some of them may be paid in full, but the system as a whole will suffer. Every
dollar a DROP participant withdraws harms the actuarial soundness of the Pension System,21
injuring the constitutionally protected service retirement benefits of other participants, 22 and
making the Pension Systems expected 7.25% return on its investments even more impractical, if

19
20
21
22

See Original Petition 8588 (within the first two weeks of November 2016 alone, over $80 million in DROP
funds were withdrawn).
Arthur Andersen treated its senior accountants as partners rather than employees and thus as outside of
ERISA. Arthur Andersen LLP, 522 F.3d at 741.
Original Petition 5455.
Id. 10.

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION - PAGE 8

not impossible.23 Most unfortunately, non-DROP participants will be left with little or nothing in
their pension accounts. 24 Like the courts in Braniff Airways and Arthur Andersen, this Court
should recognize that preventing further lump-sum DROP withdrawals is the only way to prevent
the irreparable harm flowing from a run on the Pension System.
CONCLUSION
Without an injunction, DROP participants will increase their withdrawals, 25 deplete the
Pension System of all liquid assets, 26 force the sale of illiquid assets at fire-sale prices, 27 and deprive
non-DROP participants of a chance to recover their own benefits. 28 This Court should continue to
enjoin lump-sum DROP withdrawals so that the interested parties can find long-term solutions to
save the Pension System and protect the financial interests of all participants. 29

23
24
25

26

27

28

29

Id. 6973.
Hannam, supra note 7.
[P]ure panic can cause a run. If enough depositors become concerned that a bank may experience more
withdrawals than its prepared for, it becomes rational for depositors to try to get their money back rather than
wait and risk getting nothing after the banks other depositors have withdrawn their money. Kashyap, supra
note 2.
The Board of Trustees Executive Director, Kelly Gottschalk, acknowledged that if withdrawals continue at
the current pace, the fund will have to start selling its assets to come up with the cash. That could mean selling
assets at a loss. It also means the fund as a whole wont be able to make its investment return targets. The fund
depends on those investment returns to pay its current and future bills. Tristan Hallman, Bank Run? $220
Million Withdrawn in 6 Weeks from Troubled Dallas Police and Fire Pension System, DALLAS MORNING
NEWS, Sept. 26, 2016, available at http://www.dallasnews.com/news/news/2016/09/26/bank-run-220-millionwithdrawn-6-weeks-troubled-dallas-police-fire-pension-fund.
Economist Michael Davis explained, Its deadly for a Pension System thats made long-term investments to
have to sell short term to generate cash. Lori Brown, Dallas Police and Firefighters Retiring at RecordSetting Pace, FOX 4 NEWS, Sept. 29, 2016, available at http://www.fox4news.com/news/20872791-story.
If withdrawals continue at the current rate or accelerate, they will affect the plans ability to make benefit
payments. Josh McGee and Paulina S. Diaz Aguirre, The Dallas Public Pension Crisis: A Warning for Cities
Across Texas, LAURA AND JOHN ARNOLD FOUNDATION, October 2016, available at http://www.arnold
foundation.org/wp-content/uploads/LJAF_DallasPensionBrief_10-26-16-FINAL.pdf.
Id. (The most immediate issue is the recent run on the bank. . . . Yet, much more is needed to truly solve
Dallas pension problems.).

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION - PAGE 9

DATE: January 11, 2017

Respectfully submitted,
/s/ Robert C. Walters
Robert C. Walters,
State Bar No. 20820300
rwalters@gibsondunn.com
Veronica S. Lewis,
State Bar No. 24000092
vlewis@gibsondunn.com
Will Thompson,
State Bar No. 24088531
wtthompson@gibsondunn.com
Scott K. Hvidt,
State Bar No. 24097864
shvidt@gibsondunn.com
GIBSON, DUNN & CRUTCHER LLP
2100 McKinney Avenue, Suite 1100
Dallas, Texas 75201-6912
Telephone: (214) 698-3100
Facsimile: (214) 571-2900
Attorneys for Amici Curiae

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION - PAGE 10

CERTIFICATE OF SERVICE
I hereby certify that on the 11th day of January, 2017, a true and correct copy of the
foregoing was delivered in accordance with Texas Rules of Civil Procedure as follows:
VIA E-SERVICE
G. Michael Gruber
mgruber@getrial.com
Brian N. Hall
bhail@getrial.com
Jason T. Weber
jweber@getrial.com
Gruber Elrod Johansen Hail Shank
1445 Ross Avenue, Suite 2500
Dallas, Texas 75202
Attorneys for Plaintiff
VIA E-SERVICE
David Feldman
david.feldman@feldman.law
Cris Feldman
cris.feldman@feldman.law
Shannon Smittick
shannon.smittick@feldman.law
Feldman & Feldman, P.C.
3355 West Alabama, Suite 1220
Houston, Texas 77098

VIA E-SERVICE
John Turner
john.turner@haynesboone.com
Benjamin L. Mesches
ben.mesches@haynesboone.com
Jason N. Jordan
jason.jordan@haynesboone.com
Andrew W. Guthrie
andrew.guthrie@haynesboone.com
Kelli Bills
kelli.bills@haynesboone.com
Haynes and Boone LLP
2323 Victory Avenue, Suite 700
Dallas, Texas 75219
Attorneys for Defendant
/s/ Robert C. Walters
Robert C. Walters

Kirkland Pittard
kpittard@kdplawfirm.com
F. Leighton Durham, III
ldurham@texasappeals.com
Thad D. Spalding
tspalding@texasappeals.com
Kelly, Durham & Pittard, LLP
2223 W. Jefferson Blvd.
Dallas, Texas 75208
Attorneys for Intervenors

AMICI CURIAE BRIEF IN SUPPORT OF TEMPORARY INJUNCTION - PAGE 11