Kansas Public Employees Retirement System v. Reimer & Koger Associates, Inc.

• Decision Date: 27 June 1997
• Docket Number: No. 76524,76524
• Citation: 941 P.2d 1321,262 Kan. 635
• Parties: KANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM, Appellee, v. REIMER & KOGER ASSOCIATES, INC., et al., Appellants.
• Court: Kansas Supreme Court

Page 1321

941 P.2d 1321

262 Kan. 635

KANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM, Appellee, v. REIMER & KOGER ASSOCIATES, INC., et al., Appellants.

No. 76524.

Supreme Court of Kansas.

June 27, 1997.

Syllabus by the Court

1. Under the Kansas Public Employees Retirement System (KPERS), benefits payable to retired or disabled employees or their beneficiaries are contractual obligations of the State of Kansas.

2. As KPERS is a classic "defined benefit" retirement plan, the State of Kansas and the numerous public entities whose employees are subject to the plan have an unequivocal constitutional, statutory, and contractual obligation to ensure that KPERS has sufficient funds to pay the required benefits to public employees who are participating in the plan.

3. The beneficiaries of KPERS's investment activities are not KPERS members and beneficiaries, but rather Kansas taxpayers and the taxpayers of hundreds of public entities throughout the state who provide retirement plans to their employees through KPERS provisions. As such, KPERS's investment function is primarily for the advantage of the state as a whole.

4. A statute of limitations does not run against the state unless expressly so provided, and all doubts as to whether it shall run are to be resolved in favor of the state.

5. K.S.A. 60-521 subjects the claims of governmental entities arising from proprietary functions to the general statutes of limitations. However, causes of action arising out of a governmental function are not subject to any statute of limitations.

6. Governmental functions are those which are performed for the general public with respect to the common welfare for which no compensation or particular benefit is received, while proprietary functions are exercised when an enterprise is commercial in character, is usually carried on by private individuals, or is for the profit, benefit, or advantage of the governmental unit conducting an activity.

7. Governmental entities may act in both a proprietary and governmental capacity.

8. The reasons for restricting governmental immunity from suit do not support a restriction of the State's immunity from the statute of limitations. Kansas has taken a more favorable view of governmental immunity from the statute of limitations than governmental immunity from suit. The doctrine of governmental immunity from statutes of limitation has been and remains supported in modern law by the important policy that public rights and causes of action should not be lost by the acts or omissions of public officers.

9. The investment of KPERS funds is necessary to promote the public welfare generally and to satisfy the contractual obligations of the State of Kansas, the school districts, the municipalities, and the other governmental entities to their employees, through which each entity acts and functions. The public is much more than indirectly interested in the investment affairs of KPERS when it has the taxation obligation to uphold KPERS's financial integrity. KPERS investments are in fact "affairs of the state and promote the public welfare generally," thus making them governmental in nature.

10. The actions of KPERS involved in this litigation are all governmental in character, to which no statute of limitations applied until the Kansas Legislature enacted K.S.A. 60-522 in 1992.

11. Application of collateral estoppel under the unique facts of the KPERS litigation would have the effect of fostering injustice and allowing a federal court to preclude consideration of its erroneous determination of state law.

12. Federal court decisions on issues of state law are not binding on and have limited precedential effect in state courts.

13. The requirements of collateral estoppel are: (1) There must be a prior judgment on the merits which determined the rights and liabilities of the parties on the issue based upon ultimate facts as disclosed by the pleadings and judgment; (2) the parties must be the same or in privity; and (3) the issue litigated must have been determined and necessary to support the judgment.

14. The unique facts of this case warrant an exception to the application of collateral estoppel, as the doctrine should not be applied to bar relitigation of unmixed questions of law erroneously reached in a decision.

15. K.S.A. 60-522 grants all parties that may be sued by KPERS for claims arising from a governmental function a 10-year period of limitations where none had previously existed. As such, the provision does not violate the Equal Protection or Due Process Clauses of either the United States or Kansas Constitutions.

16. Statutes of limitation are measures of public policy and are entirely subject to the will of the legislature. The legislative history is clear that the 1993 Kansas Legislature intended K.S.A. 60-522 to be applied retroactively.

17. A court should not declare a statute violative of Article 2, § 16 of the Kansas Constitution unless invalidity is manifest. Legislation is valid under § 16 so long as the provisions of the bill are all germane to the subject expressed in the title. Duly enacted legislation should only be invalidated where an act embraces two or more dissimilar and discordant subjects that cannot reasonably be considered as having any legitimate connection with or relationship to each other.

18. The retroactivity amendment to K.S.A. 60-522 does not violate Article 2, § 16, of the Kansas Constitution. All of its provisions aregermane to one subject, KPERS, and statutes of limitations are frequently among those "innumerable minor subjects" that are properly included in a broad and comprehensive bill.

Robert L. Howard, of Foulston & Siefkin, L.L.P., Wichita, argued the cause, and Timothy B. Mustaine, of the same firm, was with him on the briefs, for appellant Fran Jabara.

Thomas P. Sullivan, of Jenner & Block, Chicago, IL, argued the cause, and David P. Sanders and David A. Schwartz, of the same firm; J. Paul Oetken, of Jenner & Block, Washington, D.C.; and Elizabeth Drill Nay, of Lewis, Rice & Fingersh, L.C., Kansas City, MO, were with him on the briefs, for appellants Brown, Koralchik & Fingersh; Lewis, Rice & Fingersh, L.C.; Jacob Brown; Robert J. Campbell; William E. Carr; Peter M. DiGiovanni; Jack N. Fingersh; Alan G. Keith; Charles F. Miller; C. Robert Monroe; and H. Boone Porter, III.

Anne Lamborn Baker and Thomas E. Wright, of Wright, Henson, Somers, Sebelius, Clark & Baker, L.L.P., Topeka, were on the briefs, for appellants Cohen, Brame & Smith, P.C., and Roger C. Cohen.

David J. Waxse and Timothy M. O'Brien, of Shook, Hardy & Bacon, L.L.P., Overland Park, and John K. Villa, Mary G. Clark, and Eric A. Kuhl, of Williams & Connolly, Washington, D.C., were on the briefs, for appellants Shook, Hardy & Bacon; defendant partners of Shook, Hardy & Bacon; and Shook, Hardy & Bacon, P.C.

Karen D. Wedel and R. Frederick Walters, of Walters, Bender & Strohbehn, P.C., Kansas City, MO, were on the briefs, for appellants Linde Thomson Langworthy Kohn & Van Dyke, P.C., and Thomas W. Van Dyke.

Heather S. Woodson, of Stinson, Mag & Fizzell, P.C., Overland Park, and Lawrence M. Berkowitz and John C. Aisenbrey, of the same firm, Kansas City, MO, were on the briefs, for appellants GKB, Inc., William D. Thomas, and G. Kenneth Baum.

Gregory F. Maher and Brian G. Boos, of Yeretsky & Maher, L.L.C., Kansas City, MO, and Kathleen A. Hardee, of Gilliland & Hayes, P.A., Kansas City, MO, were on the briefs, for appellants Reimer & Koger Associates, Inc., Kenneth H. Koger, Brent Messick, and Edward Hart.

Marc K. Erickson, of Lathrop & Gage L.C., Overland Park, and Timothy K. McNamara, Kansas City, MO, were on the brief, for appellant Frank L. Victor.

Wayne T. Stratton, of Goodell, Stratton, Edmonds & Palmer, L.L.P., Topeka; Steven D. Ruse, of Shughart, Thomson & Kilroy, P.C., Overland Park; and R. Lawrence Ward, Russell S. Jones, Jr., and Richard M. Paul III, of Shughart, Thomson, & Kilroy, P.C., Kansas City, MO, were on the briefs, for appellants Blackwell Sanders Matheny Weary & Lombardi and Kutak Rock.

Frank M. Rice, of Schroer, Rice, P.A., Topeka, argued the cause, and Gene E. Schroer and Charles D. McAtee, of the same firm; Eugene I. Pavalon and Geoffrey L. Gifford, of Pavalon & Gifford, Chicago, IL; Bess Schenkier and Timothy K. McPike, of KPERS Litigation Group, Chicago, IL; Robert F. Coleman, Eugene J. Schiltz, and Kenneth Philip Ross, of Robert F. Coleman & Associates, Chicago, IL; and Robin R. LaFollette, James L. Ungerer, and Donald H. Loudon, Jr., of KPERS Litigation Group, of Shawnee Mission, were on the brief, for appellee Kansas Public Employees Retirement System.

Thomas L. Theis, Jeffrey W. Jones, and Gregory J. Bien, of Sloan, Listrom, Eisenbarth, Sloan & Glassman, L.L.C., Topeka, were on the brief, for amicus curiae Hershberger, Patterson, Jones & Roth, L.L.C.

LARSON, Justice:

These 10 combined interlocutory appeals arise out of 5 of the numerous pending cases filed by the Kansas Public Employees Retirement System (KPERS) against a number of individuals, accounting firms, and law firms to recover amounts lost in KPERS's direct placement investment programs.

The defendants filed motions for summary judgment, alleging KPERS's claims were barred by the statute of limitations. The issue submitted was limited to which, if any, statute of limitations applies to KPERS's claims arising from its investment activities.

The trial court denied the defendants' motions, holding that KPERS's investment activity is a governmental and not a proprietary function, and, as such, no statute of limitations applies. It also held that if a period of limitations did apply, K.S.A. 60-522, which established a 10-year statute of limitations on any claims brought by KPERS, applies retroactively to revive any time-barred claims. The order was certified for an interlocutory appeal and accepted pursuant to K.S.A. 60-2102(b). We have jurisdiction under K.S.A. 20-3018(c).

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