Cabarrus Cnty. Bd. of Educ. v. Dep't of State Treasurer

• Decision Date: 18 September 2018
• Docket Number: No. COA17-1017,COA17-1017
• Citation: 261 N.C.App. 325,821 S.E.2d 196
• Court: North Carolina Court of Appeals
• Parties: CABARRUS COUNTY BOARD OF EDUCATION, Petitioner, v. DEPARTMENT OF STATE TREASURER, Retirement Systems Division ; Dale R. Folwell, State Treasurer (in official capacity only); Steven C. Toole, Director, Retirement Systems Division (in official capacity only), Respondents.

261 N.C.App. 325

821 S.E.2d 196

CABARRUS COUNTY BOARD OF EDUCATION, Petitioner,

v.DEPARTMENT OF STATE TREASURER, Retirement Systems Division ; Dale R. Folwell, State Treasurer (in official capacity only); Steven C. Toole, Director, Retirement Systems Division (in official capacity only), Respondents.

No. COA17-1017

Court of Appeals of North Carolina.

Filed: September 18, 2018

Tharrington Smith, LLP, Raleigh, by Deborah R. Stagner ; and Michael Crowell, Attorney, by Michael Crowell, for Petitioner-Appellee.

Attorney General Joshua H. Stein, by Solicitor General Matthew W. Sawchak, Deputy General Counsel Blake W. Thomas, Deputy Solicitor General Ryan Y. Park, and Special Deputy Attorney General Joseph A. Newsome, for Respondents-Appellants.

Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P., Greensboro, by Elizabeth L. Troutman and Jill R. Wilson ; and North Carolina School Boards Association, by Legal Counsel Allison Brown Schafer, for North Carolina School Boards Association, amicus curiae.

McGEE, Chief Judge.

I. Procedural History

The Cabarrus County Board of Education ("Petitioner"), filed a "Request for Declaratory Ruling" pursuant to N.C. Gen. Stat. § 150B-4 (2017) and 20 N.C. Admin. Code 01F.0201 et seq. on 18 October 2016. Pursuant to this filing, Petitioner requested the Retirement Systems Division (the "Division") of the Department of State Treasurer (the "Department") (along with State Treasurer at that time, Janet Cowell,¹ and Steven C. Toole, Director of the Division ("Director Toole"), in their official capacities, ("Respondents") ) to enter a declaratory ruling that the Division’s adoption of a "cap factor" for the Teachers’ and State Employees’ Retirement System ("TSERS") pursuant to N.C. Gen. Stat. § 135-5(a3) (2017) was "void and of no effect because the [Board of Trustees of TSERS (the ‘Board’) ] did not follow the rule making procedures of ... the Administrative Procedure Act [ (the ‘APA’).]"² Director Toole denied Petitioner’s request by letter dated 17 November 2016, and Petitioner filed a "Petition for Judicial Review" of Director Toole’s decision in Superior Court, Cabarrus County, on 16 December 2016. Petitioner moved for summary judgment on 25 April 2017, the matter was heard on 10 May 2017, and the trial court granted summary judgment in favor of Petitioner by judgment entered 30 May 2017. Respondents appeal.

II. Facts

In 2014, the General Assembly enacted new legislation (the "Act"),³ establishing a cap factor for certain employees covered by TSERS ("members"). 2014 N.C. Sess. Laws 88, sec. 1.(a). The purpose of the Act, in relevant part, was to "adopt a contribution-based benefit cap factor" (the "cap factor"), in order to limit retirement benefits paid by TSERS for certain members, whose State salaries had greatly increased in the latter years of their State employment, thereby significantly increasing their retirement benefits in disproportion to their overall contributions to TSERS. See N.C.G.S. § 135-5(a3).⁴

Dr. Barry Shepherd ("Dr. Shepherd") was superintendent of Petitioner for a period of time until his retirement on 1 May 2015. Because of Dr. Shepherd’s employment history with the State, he was eligible for TSERS retirement benefits, but was also subject to having his benefits capped pursuant to the provisions of the Act. Generally, once the Division determines that a member’s benefits will be capped pursuant to the Act, the following actions are required:

If a member’s retirement allowance is subject to an adjustment pursuant to the contribution-based benefit cap established in G.S. 135-5(a3), the [Division] shall notify the member and the member’s employer that the member’s retirement allowance has been capped. The [Division] shall compute and notify the member and the member’s employer of the total additional amount the member would need to contribute in order to make the member not subject to the contribution-based benefit cap. This total additional amount shall be the actuarial equivalent of a single life annuity adjusted for the age of the member at the time of retirement ... that would have had to have been purchased to increase the member’s benefit to the pre-cap level. Except as otherwise provided in this subsection, the member shall have until 90 days after notification regarding this additional amount or until 90 days after the effective date of retirement, whichever is later, to submit a lump sum payment to the annuity savings fund in order for the retirement system to restore the retirement allowance to the uncapped amount.

N.C. Gen. Stat. § 135-4(jj) (2015) ;⁵ see also N.C.G.S. § 135-8(f)(2)(f). Upon Dr. Shepherd’s retirement, the Division informed him and Petitioner that, pursuant to the Act, a contribution of $208,405.81 would be required to restore Dr. Shepherd’s benefits to their pre-cap amount. Petitioner submitted this amount to the Division on behalf of Dr. Shepherd, but also initiated this action, as indicated above, to challenge the validity of the cap factor "adopted" by the Board and applied in this case to determine the $208,405.81 amount.

Because the Division and the Board, as subdivisions of the Department, are subject to the contested case provisions of the APA, Petitioner requested a declaratory ruling from the Division that the cap factor as adopted by the Board was invalid for two reasons: (1) "because the [B]oard did not follow the rule making procedures of [the APA];" and (2) that because the cap factor "is not an actuarial assumption under 20 N.C. Admin. Code 02B.0202 [,]"⁶ it was "not exempt from the rule making procedures of the APA[.]" Petitioner further asked for a ruling that the invoice sent by the Division for $208,405.81 was void since the cap factor used to calculate this amount had not been properly adopted pursuant to APA rule making requirements. As noted above, the Division denied Petitioner’s requested rulings and Petitioner petitioned for judicial review, which ultimately resulted in the 30 May 2017 summary judgment in favor of Petitioner that is currently before us on appeal.

We note that there are seven additional appeals by the Department—and certain of its subdivisions and employees—currently before us that involve identical issues and arguments. The resolution of this appeal will also determine the resolution of those seven additional appeals, because our holdings in this appeal will apply equally to the seven additional appeals.⁷ Additional relevant facts will be included in our analysis below.

III. Analysis

Respondents argue that the trial court erred in granting summary judgment in favor of Petitioner, because the rule making provisions of the APA do not apply to N.C.G.S. § 135-5(a3) and, therefore, the Board acted within the law and its authority in adopting the cap factor outside of the APA rule making process. We disagree and affirm summary judgment.

Summary judgment is properly granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that any party is entitled to a judgment as a matter of law." N.C. Gen. Stat. § 1A-1, Rule 56(c) (2017). " ‘On appeal, this Court reviews an order granting summary judgment de novo .’ " Manecke v. Kurtz , 222 N.C. App. 472, 475, 731 S.E.2d 217, 220 (2012) (citations omitted). Findings of fact and conclusions of law are not required in an order granting summary judgment, and " ‘[i]f the granting of summary judgment can be sustained on any grounds, it should be affirmed on appeal. If the correct result has been reached, the judgment will not be disturbed even though the trial court may not have assigned the correct reason for the judgment entered.’ " Save Our Schools of Bladen Cty. v. Bladen Cty. Bd. of Educ. , 140 N.C. App. 233, 237–38, 535 S.E.2d 906, 910 (2000) (citation omitted). This Court is, however, limited to Respondents’ arguments on appeal when considering whether to overturn the trial court’s decision.⁸ Ahmadi v. Triangle Rent A Car, Inc. , 203 N.C. App. 360, 363, 691 S.E.2d 101, 103 (2010) (on appeal from grant of summary judgment, pursuant to N.C. R. App. P. 28(b)(6), arguments the appellant failed to make in its brief were considered abandoned and not considered by this Court).

Respondents make two arguments in support of their position that the Board acted properly in the procedure it used to adopt the cap factor and, therefore, summary judgment in favor of Petitioner was granted in error: (1) "The legislature chose to have the cap factor adopted by resolution, not by rule[;]" and (2) "[t]he superior court erred by failing to give weight to the [Division’s] interpretation of its enabling statute." We address each argument in turn.

A. The General Assembly’s Intent—Application of Rule Making

The trial court found and concluded that "[t]he cap factor meets the [APA] definition of a rule in that it is a regulation or standard adopted by the Board ... to implement G.S. 135-5(a3). As such, the cap factor is subject to the rule making requirements of [the APA] unless otherwise exempted." Although findings of the trial court on summary judgment do not control our de novo review, we note that Respondents do not argue on appeal that the cap factor fails to meet the APA definition of a "rule." Instead, Respondents argue: "The General Assembly has distinguished functions that require rule[ ]making from functions that do not[,]" and further argue that determination of a cap factor by the Board is a "function" that the General Assembly intended to exempt, by implication, from the rule making provisions of the APA.

1. Express Exemption

As our courts have repeatedly noted:

The purpose of the APA "is to establish as nearly as possible a uniform system of administrative rule making and adjudicatory procedures for State agencies," and the APA applies "to every agency as defined in G.S. 150B-2(1), except to the extent and in the particulars that any statute,

...