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Arkansas State Police Retirement System v. Sligh

Supreme Court of Arkansas

March 30, 2017

ARKANSAS STATE POLICE RETIREMENT SYSTEM AND KIRK BRADSHAW, JOHN W. ALLISON, BRANT TOSH, BLAKE WILSON, DONNIE UNDERWOOD, JOE MILES, AND DR. JOHN SHELNUTT, IN THEIR OFFICIAL CAPACITIES AS MEMBERS OF THE BOARD OF TRUSTEES OF THE ARKANSAS STATE POLICE RETIREMENT SYSTEM APPELLANTS
v.
GLENN SLIGH, MYRON HALL, RICKY BRIGGS, LOYD FRANKLIN, MACK THOMPSON, CLEVE BARFIELD, AND OTHERS SIMILARLY SITUATED APPELLEES

         APPEAL FROM THE PULASKI COUNTY CIRCUIT COURT, SEVENTEENTH DIVISION [NO. 60CV-12-344] HONORABLE MACKIE PIERCE, JUDGE

          Leslie Rutledge, Att'y Gen., by: Patricia Van Ausdall Bell, Ass't Att'y Gen., for appellants.

          C. Burt Newell, for appellees.

          COURTNEY HUDSON GOODSON, Associate Justice

         In this class-action case, appellants, the Arkansas State Police Retirement System ("ASPRS") and Kirk Bradshaw, John W. Allison, Brant Tosh, Blake Wilson, Donnie Underwood, Joe Miles, and Dr. John Shelnutt, in their official capacities as members of the Board of Trustees of the Arkansas State Police Retirement System ("the Trustees"), appeal from the Pulaski County Circuit Court's order denying their motion for summary judgment and granting summary judgment to appellees Glenn Sligh, Myron Hall, Ricky Briggs, Loyd Franklin, Mack Thompson, Cleve Barfield, and others similarly situated. For reversal, appellants argue that (1) the circuit court's denial of their summary-judgment motion should be reversed on the basis that article 5, § 20 of the Arkansas Constitution immunizes ASPRS and its Trustees from suit; (2) the circuit court erred in holding that appellees stated a claim under 42 U.S.C. § 1983 because ASPRS and its Trustees are not "persons" subject to suit; (3) alternatively, even if ASPRS and its Trustees are not immune from suit and are "persons" under § 1983, then appellants are entitled to judgment as a matter of law on appellees' claims; and (4) in the event we affirm the circuit court's ruling on liability, appellees are not entitled to prejudgment interest because their alleged damages were not ascertainable at the time of the event that gave rise to their cause of action. Appellees have also filed a cross-appeal from the circuit court's denial of their request for attorney's fees. We reverse the circuit court's denial of appellants' motion for summary judgment based on sovereign immunity and dismiss appellees' complaint. We affirm appellees' cross-appeal, and we deny appellees' motion to strike portions of appellants' reply brief.

         On January 19, 2012, appellees filed a class-action complaint against ASPRS and its Trustees, in their official capacities only, on behalf of certain members of the Arkansas State Police Retirement System Deferred Option Plan ("DROP").[1] An amended complaint was filed on April 20, 2012, and a second amended complaint was filed on June 6, 2013. Appellees alleged that the class, which was composed of Arkansas State Police Officers, had elected to retire into the DROP in reliance on legislation currently in place at the time of their election that had established a minimum rate of return on their DROP retirement accounts. The statutory provision at issue, Arkansas Code Annotated section 24-6-304(b)(1) (Repl. 2000), originally stated that members were to earn interest at a rate of two percentage points below the rate of return of ASPRS's investment portfolio, but no less than the actuarially assumed interest rate as certified by the actuary, which was 7.75% at the time. In Act 1969 of 2005, when the maximum DROP participation period was extended to seven years, the interest rate for the final two years was fixed at the actuarially assumed interest rate. Ark. Code Ann. § 24-6-304(b)(2) (Supp. 2005). However, Act 404 of 2007, which became effective on March 22, 2007, further amended the statute to provide that the ASPRS Board of Trustees shall set the interest rate and that the interest rate "shall not be greater than the actuarially assumed investment rate of return for that time." Ark. Code Ann. § 24-6-304(b)(1) (Supp. 2007). Pursuant to this amendment, the Trustees voted to reduce the interest rate on DROP balances to 3.25% effective July 1, 2009, the start of the 2010 fiscal year.

         Appellees alleged that Act 404 of 2007 was unconstitutional as applied to those officers who had elected to enter the DROP prior to March 22, 2007, because it impaired their contractual rights under article 2, § 17 of the Arkansas Constitution and article 1, §10 of the United States Constitution. Appellees also alleged that Act 404 deprived them of a vested property right without due process of law in violation of the Fourteenth Amendment to the United States Constitution and that the Trustees had breached their fiduciary duties to the class by voting to reduce the interest rate. Appellees claimed that the Trustees' actions were arbitrary, capricious, and in violation of the class members' constitutional rights, and they asserted that these violations were actionable pursuant to 42 U.S.C. §§ 1983 and 1988. The complaint sought "legal and equitable" remedies. Specifically, appellees alleged that each class member was either entitled to an equitable remedy by ordering that his or her DROP accounts be corrected or a legal remedy by awarding damages for the money that each member should have received under the law in existence at the time that he or she began participating in the DROP. Alternatively, appellees requested a writ of mandamus or injunctive relief compelling the Trustees to comply with their statutory and fiduciary duties by accurately providing interest on each member's DROP account consistent with the law in effect at the time the member entered the DROP. Appellees also prayed that attorney's fees and costs be awarded.

         Appellants filed an answer to the complaint and denied appellees' claims. Appellants also affirmatively asserted that the claims were barred by the doctrine of sovereign immunity, that the complaint failed to state facts upon which relief could be granted, that appellees had failed to exhaust their administrative remedies, and that the claims were barred by the statute of limitations and by laches.[2]

         On August 11, 2014, appellees filed a motion for summary judgment, arguing that there were no material facts in dispute and that they were entitled to judgment as a matter of law. Appellees contended that appellants were not entitled to sovereign immunity because (1) the interest payments in the DROP come from the ASPRS trust fund, not from the state general treasury; (2) the State has waived sovereign immunity in the event of errors in retirement calculations pursuant to Arkansas Code Annotated section 24-6-205; and (3) the State has violated appellees' constitutional rights. In support of their motion, appellees attached multiple exhibits, including ASPRS annual reports from 2006 through 2013; deposition excerpts from Gail Stone, the executive director of the Arkansas Public Employees Retirement System ("APERS") and executive secretary of ASPRS, and Richard Weiss, the former director of the Arkansas Department of Finance and Administration ("DFA"); minutes from ASPRS board meetings; and excerpts from the depositions of two Trustees.

         On October 6, 2014, appellants filed a response to appellees' motion as well as a cross-motion for summary judgment. Appellants agreed that there remained no genuine issues of material fact in dispute but argued that appellees' claims against them were barred by sovereign immunity and that appellees had also failed to state a claim pursuant to 42 U.S.C. § 1983 because ASPRS and its Trustees are not "persons" amenable to suit. Regarding appellees' argument that appellants violated the contract clause in the state and federal constitutions by reducing the interest rate, appellants asserted that this claim did not apply to them because they were not responsible for the change in state law, and even if it did apply, the claim was barred by the statute of limitations. Appellants also contended that appellees could not establish a constitutionally protected contractual right or property interest in a certain amount of interest on the DROP funds, which are composed solely of the employer's contributions. In addition, appellants argued that the Trustees' vote to reduce the interest rate pursuant to the express statutory authority of Act 404 of 2007 was not a mistake or error contemplated under Arkansas Code Annotated section 24-6-205 and that the Trustees did not violate any fiduciary duty by taking an action that was authorized under the statute. In support of their cross-motion, appellants attached the affidavits of Weiss, Stone, and Trustee Blake Wilson, in addition to deposition excerpts from Weiss and Stone.

         Following a response to the cross-motion filed by appellees and a reply filed by appellants, the circuit court entered an order on May 27, 2015, granting appellees' motion for summary judgment on all claims and denying appellants' cross-motion. With respect to sovereign immunity, the circuit court specifically found that "the interest money they seek is not a general financial obligation that would cause the legislature to appropriate funds from the state Treasury. All funds at issue are derived from member contributions and belong to the officers, not to the State." The circuit court further stated that "retroactive application of Act 404 of 2007 would impair and disturb contractual vested rights of the officers regarding the interest rate on their DROP contributions."

         Appellees then filed a motion for summary judgment on the issue of damages, requesting that the circuit court order that each of the fifty-one class members should be paid the difference between "the erroneous distribution" and what they should have received based on the interest rates set out in the statute prior to the 2007 amendment. Appellees also argued that they were entitled to costs, attorney's fees, and prejudgment interest. Attached to appellees' motion were exhibits setting forth the amounts allegedly owed to each class member. Appellees subsequently amended their motion to correct certain errors contained in these exhibits.

         There were two hearings on appellees' motion for summary judgment on damages, and the circuit court entered an order on December 23, 2015, granting summary judgment to appellees. The court awarded damages to each class member consistent with the exhibits that had been provided and eventually agreed upon by the parties. The court also found that appellees were entitled to prejudgment interest at the rate of 6% per annum from the date of each officer's final DROP payment through December 10, 2015.[3] However, the court denied appellees' request for attorney's fees, finding that this claim was barred by sovereign immunity. Appellants filed a timely notice of appeal from the circuit court's orders granting summary judgment to appellees on both liability and damages, and appellees cross-appealed from the denial of attorney's fees.

         In their first point on appeal, appellants argue that the circuit court erred by denying their motion for summary judgment and granting summary judgment to appellees because both ASPRS and its Trustees were immune from suit pursuant to article 5, § 20 of the Arkansas Constitution. Appellants contend that there were no ...


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