Arken v. City of Portland

• Decision Date: 06 October 2011
• Docket Number: (CC 060100536; SC S058881) (CC 060504584; SC S058882).
• Citation: 263 P.3d 975,351 Or. 113
• Parties: Michael ARKEN, Dale Cannon, Robyn Carrico, Carol Young, John Hawkins, Leslie Hunter, Rick Mullins, S.M. Ruonala, Patricia Thompson–Westover, and Myrna Williams, Plaintiffs–Appellants,v.CITY OF PORTLAND, Western Oregon University, Portland School District, City of Gresham, Linn County, University of Oregon, Portland Community College, Multnomah County, Central School District 13J, Forest Grove School District # 15, and Public Employees Retirement Board, Defendants–Respondents.Ruth Robinson, Gerald Button, Norman Fabian, Becky Hanson, Rene Reulet, Linda Gray, Laren Ferrell, Stuart Gillett, Robert Pearson, Gary Reese, and Bruce Johnson, Petitioners–Respondents,v.Public Employees Retirement Board, Respondent–Appellant,andState of Oregon, City of Portland, Portland School District, City of Gresham, Linn County, Portland Community College, Multnomah County, Central Catholic School District 13J, and Forest Grove School District # 15, Intervenors–Appellants.
• Court: Oregon Supreme Court

351 Or. 113

263 P.3d 975

Michael ARKEN, Dale Cannon, Robyn Carrico, Carol Young, John Hawkins, Leslie Hunter, Rick Mullins, S.M. Ruonala, Patricia Thompson–Westover, and Myrna Williams, Plaintiffs–Appellants,

v.CITY OF PORTLAND, Western Oregon University, Portland School District, City of Gresham, Linn County, University of Oregon, Portland Community College, Multnomah County, Central School District 13J, Forest Grove School District # 15, and Public Employees Retirement Board, Defendants–Respondents.Ruth Robinson, Gerald Button, Norman Fabian, Becky Hanson, Rene Reulet, Linda Gray, Laren Ferrell, Stuart Gillett, Robert Pearson, Gary Reese, and Bruce Johnson, Petitioners–Respondents,

v.Public Employees Retirement Board, Respondent–Appellant,andState of Oregon, City of Portland, Portland School District, City of Gresham, Linn County, Portland Community College, Multnomah County, Central Catholic School District 13J, and Forest Grove School District # 15, Intervenors–Appellants.

(CC 060100536; SC S058881) (CC 060504584; SC S058882).

Supreme Court of Oregon.

Argued and Submitted Jan. 6, 2011.Decided Oct. 6, 2011.

Gregory A. Hartman, Bennett, Hartman, Morris & Kaplan, LLP, Portland, argued the cause for plaintiffs-appellants Michael Arken et al. With him on the briefs were Michael J. Morris and Aruna A. Masih.William F. Gary, Harrang Long Gary Rudnick P.C., Eugene, argued the cause for defendants-respondents City of Portland et al. With him on the briefs was Sharon A. Rudnick.Joseph M. Malkin, Orrick, Herrington & Sutcliffe, LLP, Pro Hac Vice, San Francisco, California, argued the cause for respondent-appellant Public Employees Retirement Board. With him on the briefs were Townsend Hyatt and Sarah C. Marriott, Pro Hac Vice.James S. Coon, Swanson, Thomas & Coon, Portland, argued the cause for petitioners-respondents Ruth Robinson et al. With him on the briefs was Gene Mechanic.Joseph M. Malkin, Orrick, Herrington & Sutcliffe, LLP, Pro Hac Vice, San Francisco, California filed the briefs for defendant-respondent Public Employees Retirement Board. With him on the briefs were Townsend Hyatt and Sarah C. Marriott, Pro Hac Vice.Jeremy D. Sacks, Stoel Rives LLP, Portland, filed the briefs for defendants-respondents Western Oregon University and University of Oregon. With him on the briefs was Amy Edwards.

William F. Gary, Harrang Long Gary Rudnick P.C., Eugene, filed the briefs for intervenors-appellants City of Portland et al. With him on the briefs was Sharon A. Rudnick.Amy Edwards, Stoel Rives LLP, Portland, filed the briefs for intervenor-appellant State of Oregon. With her on the briefs was Jeremy D. Sacks.Before DE MUNIZ, Chief Justice, and DURHAM, BALMER, KISTLER, WALTERS, and LINDER, Justices.^*DE MUNIZ, C.J.

These two cases are before this court on certified appeals from the Court of Appeals. ORS 19.405. Both cases involve the Public Employees Retirement Board's (PERB or the Board) revision or reduction of benefits with respect to so-called “Window Retirees.” ¹ These cases involve the Board's efforts to recoup overpayments of benefits to retirees that were predicated on a 20 percent earnings credit for calendar year 1999 that the Board approved by order in 2000. PERB has sought to recoup these overpayments to the Window Retirees through an overpayment recovery mechanism set out in ORS 238.715.² PERB has done so in two steps. First, in an order issued by the Board on January 27, 2006, the Board established a general method for the recovery of overpayments made to PERS members based on the 20 percent crediting order. Subsequently, the Board made individualized recovery determinations based on the individual circumstances of each affected PERS member.³

The Arken plaintiffs⁴ and the Robinson petitioners ⁵ both filed challenges to PERB's January 7, 2006, Order Adopting Repayment Methods. That order established the methods that PERB intended to use to recover what PERB had determined to be overpayments to the Window Retirees. That order provided in part that earnings on Tier One member regular accounts for 1999 would be recalculated at an earnings rate of 11.33 percent and that benefit payments to Window Retirees who had regular member accounts in 1999 would be adjusted consistently with the recalculated earnings rate. That order relied on PERB's authority to recover overpayments set out in ORS 238.715, and the order provided that the overpayments could be repaid either in a lump sum or by an actuarial reduction of monthly benefits payments. The order further provided that cost of living adjustments (COLAs) would be applied to those recalculated benefit payments beginning in 1999 and continuing into the future.

Although the trial court did not consolidate these two cases, it determined that the cases raised interrelated issues concerning the effects of PERS legislation enacted in 2003 (the “2003 PERS reform legislation”).⁶ The trial court therefore decided motions filed in these cases together and issued opinions that were filed in both cases.

The Arken plaintiffs raised claims based on four theories, including breach of contract, promissory estoppel, wage claim, and declaratory and injunctive relief under the Administrative Procedures Act (APA). The trial court granted summary judgment in favor of the Arken defendants on all four claims.

The Robinson petitioners challenged the Board's January 27, 2006, order as an order in other than a contested case under ORS 183.484, alleging that the order violated Oregon Laws 2003, chapter 67, Section 14b(1) (discussed more fully below). The Robinson petitioners contended that Section 14b(1) provides the exclusive methods to recover erroneously paid retirement benefits to petitioners. They also alleged that the order violates ORS 238.715 because PERB failed to comply with the terms of that statute. The trial court granted summary judgment in favor of the Robinson petitioners on both of their claims for relief.

For the reasons set out below, we determine that the trial court correctly granted summary judgment to the Arken defendants on all four of the claims raised by the Arken plaintiffs. We further determine that the trial court erred in granting summary judgment to the Robinson petitioners on their claims for relief. Because we conclude that PERB correctly applied ORS 238.715 to recoup overpayments that were made to the Window Retirees based on the 20 percent earnings credit for 1999, we also determine that the trial court erred in denying PERB's cross-motion for summary judgment.

I. BACKGROUND

Before addressing the specific claims and arguments presented in these cases, we believe it is important to review the factual and legal circumstances that gave rise to the PERB order that is challenged in these proceedings. Oregon has provided its public employees with a retirement plan (PERS) as a contractual benefit of public employment since 1945. PERB administers PERS and acts as trustee for the Public Employment Retirement Fund (PERF or the fund). ORS 238.601; ORS 238.660(1). PERB sets employer contribution rates, adopts actuarial equivalency factors and assumed earnings rates, establishes reserve accounts, and allocates annual earnings to accounts and reserves. ORS 238.225; ORS 238.255; ORS 238.605; ORS 238.607; ORS 238.670; Strunk v. PERB, 338 Or. 145, 157, 108 P.3d 1058 (2005). The Oregon Investment Council (OIC) invests the assets of the fund. Each year, PERB allocates the annual investment earnings of the fund from the previous year to member, employer, and reserve accounts. Every PERS member has a PERS member account, which includes the member's contributions to PERS and earnings that PERB has credited to those contributions.

Public employees who joined PERS before January 1, 1996, are commonly denominated as Tier One members. Tier One members are entitled to a guaranteed minimum annual rate of return on their regular member accounts equal to the system's assumed earnings rate. ORS 238.255. The assumed rate is set by the Board based on advice from an actuary. ORS 238.605; ORS 238.670(2). The assumed earnings rate has been 8 percent for all time periods relevant to these cases. On retirement, PERS Tier One members receive a monthly service retirement allowance calculated according to one of three formulas: pension plus annuity (only available to members who contributed to PERS before August 21, 1981), full formula, or Money Match. ORS 238.300. At retirement, a PERS member is entitled to receive a service retirement allowance based on the formula that produces the highest pension amount.

For many retirees, including the retirees involved in this litigation, the Money Match formula results in the highest pension amount. Under the Money Match formula, a member's monthly service retirement allowance is calculated by determining the sum of the actuarial equivalent of the member's account balances at retirement (the annuity component) and then adding a sum in an equal amount that is charged to the employer, i.e., the “match” (the pension component).⁷ The resulting service retirement allowance therefore amounts to twice the actuarial equivalent of the member's account balances at retirement.

Member accounts are credited annually as of December 31 of each calendar year. PERB reviews changes in the value of the fund and allocates earnings to various accounts within the fund on an “equal crediting” basis— i.e., earnings are allocated on the same percentage share to funds in each account. In years in which the earnings on the fund equal or exceed the assumed earnings rate, PERB is statutorily required to “set aside * * * such part of the income as [PERB] may deem advisable, not exceeding seven and one-half percent of the combined total of such income, which moneys so segregated shall remain in the fund and constitute therein a reserve account.” ORS 238.670(1) (1999). During the time period relevant to this litigation, ORS 238.255 (1999) also charged PERB...