Benson v. Gates

• Decision Date: 09 May 1994
• Docket Number: No. 92-3225,92-3225
• Citation: 188 Wis.2d 389,525 N.W.2d 278
• Parties: , 96 Ed. Law Rep. 726 Joyce BENSON, Arthur Budzak, Connie Cotter, Donald Duppler, Dave E. Genzmer, Paul Hallingstad, Mary Ann Kellman, Keith Larson, Helen Lawinger, Barbara J. Marten, Susan McCord-Lehman, Yvonne R. Meyer, Rolf Mjaanes, Paul E. Olson, Arless Randall, Marjorie Reek, Delores Rinehart, Carla D. Wuebben, and the Class of Persons Similarly Situated, Plaintiffs-Appellants, v. Gary I. GATES, the Wisconsin Employe Trust Funds Board, and the Department of Employe Trust Funds, Defendants-Respondents. . Oral Argument
• Court: Wisconsin Court of Appeals

Page 278

525 N.W.2d 278

188 Wis.2d 389, 96 Ed. Law Rep. 726

Joyce BENSON, Arthur Budzak, Connie Cotter, Donald Duppler Dave E. Genzmer, Paul Hallingstad, Mary Ann Kellman, Keith Larson, Helen Lawinger, Barbara J. Marten, Susan McCord-Lehman, Yvonne R. Meyer, Rolf Mjaanes, Paul E. Olson Arless Randall, Marjorie Reek, Delores Rinehart, Carla D Wuebben, and the Class of Persons Similarly Situated Plaintiffs-Appellants, v. Gary I. GATES, the Wisconsin Employe Trust Funds Board, and the Department of Employe Trust Funds, Defendants-Respondents.

No. 92-3225.

Court of Appeals of Wisconsin.

Oral Argument May 9, 1994.

Opinion Released Oct. 20, 1994.

Opinion Filed Oct. 20, 1994.

For the plaintiffs-appellants the cause was submitted on the briefs of Simon M. Karter of Wendel & Center of Madison, and orally argued by Simon M. Karter.

For the defendants-respondents the cause was submitted on the brief of James E. Doyle, Atty. Gen., and Warren M. Schmidt, Asst. Atty. Gen., and orally argued by Warren M. Schmidt.

Before EICH, C.J., and SUNDBY and ANDERSON, JJ.

SUNDBY, Judge.

Plaintiffs-Appellants are active or retired Wisconsin public school teachers who seek "creditable service" under § 42.245(1), STATS., 1965, for Wisconsin teaching prior to September 11, 1965. Respondents are the Department of Employe Trust Funds, the Employe Trust Funds Board, and the secretary of the Department. ¹ The teachers are similarly situated to the successful plaintiff in Schmidt v. Wisconsin Employe Trust Funds Board, 153 Wis.2d 35, 449 N.W.2d 268 (1990), with one important exception: if the Board's construction of § 40.08(10), STATS., ² is correct, the teachers' claims are time-barred. The teachers seek declaratory, mandamus and other relief to have the Department and the Board grant them service credits under § 42.245(1), irrespective of § 40.08(10).

The trial court dismissed the teachers' action because several of them failed to resort to the Department and the Board before they began this action, and others failed to exhaust administrative remedies they had initiated under § 40.03(1)(j), STATS.

We conclude that WIS.ADM.CODE § ETF 11.08(2)(b)3 which requires that the hearing examiner dismiss any appeal time-barred under § 40.08(10), STATS., makes prior resort to the Department and exhaustion of the teachers' administrative remedies futile. We further conclude that the period of limitation under § 40.08(10) within which errors in computing teachers' service credits may be corrected begins to run when the Department determines a participant's benefits upon retirement. We reject the Board's alternative defenses, reverse the order dismissing the teachers' action, and remand this cause to the trial court to direct the Department and the Board to determine and grant the teachers teaching service credits to which they are entitled under this opinion. We affirm that part of the trial court's order which dismissed the interest claims of those teachers who the Department has previously granted teaching service credits.

James Schmidt, the plaintiff in Schmidt v. Wisconsin Employe Trust Funds Board, began teaching at a Wisconsin public school in 1957 and left teaching in 1963. ³

As a public school teacher, [Schmidt] was automatically included in the "combined" (with social security) group of the State Teachers Retirement System (STRS). Sec. 42.241(2)(b), Stats. (1957). After terminating his employment as a Wisconsin public school teacher in 1963, he applied for a separation benefit, consisting of his "member's deposits" plus accrued interest 1 under sec. 42.242(5), Stats. (1963). In order to receive his member's deposits, he was required by sec. 42.242(5), Stats. (1963) to sign "a full and complete discharge and release of all right, interest or claim on the part of such member to state deposit accumulations." He signed such a statement and received his member's deposits plus interest.

Mr. Schmidt returned to Wisconsin teaching in 1964 and was again automatically a combined group STRS member. Sec. 42.241(2), Stats. (1963). Thereafter, on September 11, 1965, the "formula group" portion of the STRS was created. Sec. 42.244, Stats. (1965). He elected to be a member of the formula group. The retirement benefit available under the "formula group" then was determined by multiplying "final average compensation" 2 times a formula factor times the years of creditable service. Sec. 42.245(1) and (2), Stats. (1965). Years of creditable service thus became part of the primary method for determining the amount of STRS retirement benefit. This contrasted with the benefit determination method under the preceding "separate group" (without social security) and "combined group" (with social security) wherein the benefit was determined on a money purchase basis from the accumulations from "member's" and "state" deposits. See secs. 42.242(1) and 42.49(2) and (3), Stats. (1963).3

The STRS submitted annual statements of account to its participants which contained a statement of "years of Wisconsin teaching service." Following the creation of the formula plan in 1965, the Department of Employe Trust Funds began an audit of all 70,000 teacher accounts to establish which "years of Wisconsin teaching" constituted years of "creditable service" under the formula plan. When, in 1977, the Department completed this audit, the annual statements of account were corrected to reflect years of "creditable service." Mr. Schmidt's statement of account for 1977 and thereafter indicated six years less service than his previous statements due to his receipt of a separation benefit for the years 1957-63.

Mr. Schmidt appealed the Department's determination to deny him creditable service for the 1957-63 years to the ETFB [Employe Trust Funds Board] under sec. 40.03(1)(j), Stats. ⁴

The Board concedes that the teachers present employment and retirement plan participation which, like Schmidt, entitle them to teaching service credits under § 42.245(1), STATS., 1965. However, unlike Schmidt, the teachers did not apply for such credits within seven years after the Department's "alleged error" in calculating their credits, or by January 1, 1987. The Board claims that the teachers should have known the Department's position when their "Years of Wisconsin Teaching Service" shown on their annual account statements changed after the Department completed its survey. Schmidt's annual statement received in 1977 (for 1976) showed eighteen years of Wisconsin teaching service, and his 1978 statement (for 1977) showed thirteen years of service.

After the Schmidt decision, some of the teachers inquired of the Department as to the effect of the decision on their right to teaching service credits. The Department informed them that Schmidt affected only the plaintiff therein and, in any event, their claims were time-barred by § 40.08(10), STATS.

We first examine the statute upon which the teachers base their claims.

Section 42.245(1), STATS., 1965, provided:

(a) Creditable service shall be expressed in years and such fractions thereof as the board determines. The creditable service of each member any time prior to July 1, 1966, shall be the number of years of service as a teacher in Wisconsin teaching (including prior service) theretofore creditable to him pursuant to the applicable statutes and rules....

....

(c) Creditable service for Wisconsin teaching prior to September 11, 1965[,] shall be reduced by one-half of any period included therein with respect to which the required deposits of a member have been withdrawn, unless repayment of any such withdrawal has been made prior to July 1, 1966, pursuant to any applicable law. Nothing in this paragraph shall be construed to reinstate any rights waived in connection with the payment of a withdrawal or separation benefit.

For purposes of its motion to dismiss, the Board accepts that the teachers would be eligible for "creditable service" under § 42.245(1), STATS., 1965, except for the time-bar of § 40.08(10), STATS. In this action, the teachers seek to review the Department's and the Board's determination that § 40.08(10) bars their claims. However, the trial court concluded that the teachers must first resort to the agencies, and, if dissatisfied, to the courts by certiorari under § 40.08(12), STATS.

The teachers argue that the doctrines of primary resort and exhaustion of administrative remedies do not apply because the Department and the Board by administrative rule have made those remedies futile. We agree.

Section 40.03(1)(j), STATS., provides for an appeal from a determination of the Department to the Board; § 40.08(12), STATS., provides for certiorari review of a decision of the Board.

Where a statute sets forth a procedure for review of an administrative decision, such remedy is exclusive, unless the remedy is inadequate. Nodell Inv. Corp. v. Glendale, 78 Wis.2d 416, 422, 254 N.W.2d 310, 314 (1977). This requirement is sometimes termed the exhaustion of remedies doctrine and sometimes the primary jurisdiction doctrine. Here, the exhaustion of remedies doctrine applies rather than the primary jurisdiction doctrine because the administrative process began when the County addressed the classification of its jailers under sec. 40.02(48)(a), Stats. See Nodell, 78 Wis.2d at 427 n. 13, 254 N.W.2d at 316 n. 13 (if administrative procedure has begun, the primary jurisdiction rule does not apply).

The premise of the ... rule is that the administrative remedy: (1) is available to the party on his or her initiative, (2) is relatively rapid, and (3) will protect the party's claim of right. Nodell, 78 Wis.2d at 424, 254 N.W.2d at 315....

The exhaustion rule is a doctrine of judicial restraint which the legislature and the courts have evolved in drawing the boundary line between administrative and judicial spheres of activity. Castelaz v. Milwaukee, 94 Wis.2d 513, 532, 289 N.W.2d 259, 268 (1980) (quoting Nodell, 78 Wis.2d at 424, ...