Amos v. Metro. Gov. Nashville Davidson Cty

• Decision Date: 15 August 2008
• Docket Number: No. M2005-00932-SC-R11-CV,M2005-00932-SC-R11-CV
• Citation: 259 S.W.3d 705
• Parties: Willis Bruce AMOS et al. v. METROPOLITAN GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY, Tennessee.
• Court: Tennessee Supreme Court

259 S.W.3d 705

Willis Bruce AMOS et al. v. METROPOLITAN GOVERNMENT OF NASHVILLE AND DAVIDSON COUNTY, Tennessee.

No. M2005-00932-SC-R11-CV

Supreme Court of Tennessee, at Nashville.

June 5, 2008 Session.

August 15, 2008.

C. Dewey Branstetter, Jr., Michael J. Wall, and David L. Raybin, Nashville, Tennessee,

for the appellants, Willis Bruce Amos et al.

Sue Boyd Cain, James L. Charles, Lora B. Fox, and Matthew J. Sweeney, Nashville, Tennessee, for the appellee, the Metropolitan Government of Nashville and Davidson County, Tennessee.

OPINION

GARY R. WADE, J., delivered the opinion of the court, in which WILLIAM M. BARKER, C.J., and JANICE M. HOLDER, CORNELIA A. CLARK, and WILLIAM C. KOCH, JR., JJ., joined.

Willis Bruce Amos and fifteen other individuals, each of whom was formerly employed in the police or fire departments of the Metropolitan Government of Nashville and Davidson County, filed suit, asking to have the lump-sum payments for unused vacation days paid at their retirement included in the formula determining the amount of their pension. Pursuant to applicable provisions of the Metro Code, the trial court granted a motion for summary judgment, holding that the lump-sum payments to Amos and the other individuals were not included in their "average earnings" for purposes of the calculations. The Court of Appeals upheld the judgment of the trial court. We affirm.

I. Facts

Willis Bruce Amos and other former salaried employees (the "Plaintiffs") of the police and fire departments of the Metropolitan Government of Nashville and Davidson County ("Metro"), all of whom were entitled to compensation for unused vacation days at the termination of employment, filed a declaratory judgment action to determine the proper amounts of their respective pensions. Each had worked for Metro for more than twenty-five years. All retired after September 13, 2001, with the last retirement being June 1, 2002.

In compliance with an executive order, Metro has traditionally paid its salaried employees on a semimonthly basis: on the 22nd of each month for work performed from the 1st through the 15th of the month, and on the 7th of each month for work performed from the 16th through the last day of the month.¹ The terms of employment include an entitlement to twenty days of paid vacation per year of service. Unused vacation days may accrue over time to a maximum of sixty days.

Under applicable Metro Code provisions, a retiring or terminating employee may elect to receive payment for unused, accumulated vacation days in one of two ways. The first option is to remain on payroll as a Metro employee on "vacation" status until the unused vacation days are exhausted. A second method, which each of the Plaintiffs chose, is to receive a lump-sum payment based upon the rate of pay at the time of retirement; the total amount due depends on the number of unused vacation days. Sometime after their respective retirements, Metro paid all of the Plaintiffs for their accrued vacation pay.

From 1988 to 2000, when James Luther was the Executive Secretary to the Metro Benefit Board (the "Benefit Board"), that Board used annual W-2 income statements to compute "average earnings" and pensions. Pensions were based upon those earnings and the length of service of each employee. The pension ordinance required that "average earnings" be derived from a period of five calendar years preceding retirement.² Earnings included the total cash compensation, which included a regular rate of pay, overtime, shift differentials, and any benefit received by an employee that was in any way "remunerative." "Anything that [the employees] were paid that they ended up paying taxes on that [the Benefit Board] reported to the government, other than for reimbursement of expenses" were included in the pension calculations. Any vacation pay appearing on an employee's W-2 reports was also made a part of the formula.

Prior to Luther's term as the Executive Secretary, Metro employees had been required to exhaust their vacation days prior to retirement. In 1991 or 1992, however, Luther implemented a change in that policy, deciding that staying on the payroll until the accrued vacation time had ended was no longer necessary. Afterward, some employees requested and received from their respective departments their payment for unused vacation in their next-to-last paycheck on December 22, prior to their retirement on January 1 of the following year. If a lump-sum payment for accrued vacation was included in the W-2 statement, then it was used to compute earnings for pension purposes. If the payment was paid in a later year and not part of the W-2, then it was not included in the calculation. By deposition, Luther confirmed that during his tenure as secretary there was no uniformity amongst the various departments within the Metro government; rather, "[s]ome [departments] might do it one way [and] some, another." He did acknowledge that the Police and Fire Departments routinely granted requests for the lump-sum payments for accrued vacation time prior to the actual date of retirement, thereby increasing the amount of the pensions. Luther also stated that the pension ordinance did not address when the payment for accrued vacation was to be made, and that the decision was, therefore, left to the department head, payroll supervisor, and Director of Personnel.³

On September 13, 2001, some ten years after Luther's policy change, an attorney in the Metro Department of Law issued Legal Opinion 2001-03 to Metro's Finance Director and its Director of Personnel:

The practice of paying vacation pay in a lump sum to a retiring employee prior to termination to increase pension benefits is not authorized. Until such time as this practice is appropriately authorized, it is the opinion of the Department of Law that it is unlawful and the Director of Finance has a duty to disallow such payments.

(Emphasis added). Pursuant to the opinion, the Director of Finance and the Director of Personnel⁴ issued an October 31, 2001 memorandum instructing department heads not to issue lump-sum payments for unused vacation days to an employee until after the date of retirement. In consequence, each of the Plaintiffs received their lump-sum entitlement for unused vacation days subsequent to the conclusion of their employment. The amount was not used in calculating pensions.

On September 3, 2002, fifteen of the Plaintiffs filed suit against Metro and the Benefit Board, alleging that their lump-sum payments for unused vacation days should have been included in determining the amount of their pension benefits. Specifically, the Plaintiffs presented two claims: first, they sought a declaratory judgment that would set forth their rights as to the pension issue; and second, they alleged that the "irrational change in policy" as to the pension calculations had denied them their rights to equal protection. An amended complaint was filed in May of 2003, adding another police officer to the list of Plaintiffs. On February 11, 2004, the parties entered a Scheduling Order under which discovery was to be completed by July 31, 2004, so that the case could be tried in October of 2004. Approximately two months before the discovery deadline, the Plaintiffs filed a second motion to amend, seeking to add fifty-one other individuals as claimants; that motion, however, was never heard. Later, the parties agreed to dismiss the Benefit Board as a defendant. On July 22, 2004, the Plaintiffs filed a third motion to amend the complaint, asking for class action status; shortly thereafter, the trial court denied the motion on the grounds of potential delay in the trial.

Metro then filed a motion for summary judgment, and, in response, the Plaintiffs filed a motion for partial summary judgment on the issue of liability. After arguments, the trial court issued a memorandum and order granting summary judgment to Metro and denying the Plaintiffs' claims, holding that unused "vacation pay is not `earnings,' as defined by the Metro Code for purposes of pension calculation." The trial court also denied a claim of estoppel, which the Plaintiffs based upon both the policy implemented during Luther's tenure and a 2002 statement by a representative of Metro's Benefit Board to the effect that unused vacation day payments would be included in the calculation of pension benefits.

On direct appeal, the Court of Appeals framed the issue as "whether the lump-sum payment is for `personal services.'" The majority answered the question in the negative, denying relief to the Plaintiffs and holding that they "are receiving the lump-sum payment for their accrued vacation time, not for performing personal services." Our intermediate court upheld the trial court's denial of the estoppel claim and deemed as moot the class action issue. Amos v. Metro. Gov't of Nashville & Davidson County, Tenn., No. M2005-00932-COA-R3-CV, 2007 WL 2254571, at *3, 2007 Tenn.App. LEXIS 505, at *7-9 (Tenn.Ct.App. Aug.2, 2007). Judge Frank Clement dissented. It was his opinion that the lump-sum payments for accrued vacation time qualified as compensation for personal services and ought "to be included in the calculation of ... [the] pension benefits." Id. 2007 WL 2254571, at **5-7, 2007 Tenn.App. LEXIS 505, at *16-17 (Clement, J., dissenting).⁵

We granted the Plaintiffs' application for review under Rule 11 of the Tennessee Rules of Appellate Procedure to determine: (1) whether the lump-sum payments for unused vacation days made at retirement were includable in the "average earnings" under the Metro Code; and, if so, (2) whether the trial court should have granted the motion to certify the claims as a class action. Tenn. R. Civ. P. 23.

II. Standard of Review

Our review is guided by a variety of well-established principles. "Initially, a trial court's grant of a motion for summary judgment presents a question of law that we review de novo without a presumption of correctness."...