City of Minneapolis v. Minneapolis Police Relief Ass'n, s. A10–1244

• Citation: 800 N.W.2d 165
• Decision Date: 31 May 2011
• Docket Number: A10–1331.,Nos. A10–1244,s. A10–1244
• Parties: CITY OF MINNEAPOLIS, Respondent,v.MINNEAPOLIS POLICE RELIEF ASSOCIATION, ET AL., Appellants.
• Court: Court of Appeals of Minnesota

800 N.W.2d 165

CITY OF MINNEAPOLIS, Respondent,

v.MINNEAPOLIS POLICE RELIEF ASSOCIATION, ET AL., Appellants.

Nos. A10–1244

A10–1331.

Court of Appeals of Minnesota.

May 31, 2011.

Syllabus by the Court

The Police and Firefighters' Relief Association Guidelines Act, Minn.Stat. § 69.77, subd. 11 (2010), requires covered police and firefighter relief associations to obtain city ratification of bylaw amendments that “increase[ ] or otherwise affect[ ] the retirement coverage provided by or the service pensions or retirement benefits payable from [the associations].” But the statute does not govern when such bylaw amendments must be made.

Clifford M. Greene, Monte A. Mills, Sybil L. Dunlop, Greene Espel P.L.L.P., Minneapolis, MN; and John M. LeFevre, Jr., Peter G. Mikhail, Mary D. Tietjen, Kennedy and Graven Chartered, Minneapolis, MN; and Susan L. Segal, Minneapolis City Attorney, Peter Ginder, Deputy City Attorney, Minneapolis, MN, for respondent.Charles E. Lundberg, Nicole A. Delaney, Bassford Remele, P.A., Minneapolis, MN; and Karin E. Peterson, Ann E. Walther, Rice, Michels & Walther, LLP, Minneapolis, MN; and Robert D. Klausner (pro hac vice), Klausner & Kaufman, P.A., Plantation, FL, for appellants.Patrick J. Kelly, Trevor S. Oliver, Daniel J. Cragg, Kelly & Lemmons, P.A., St. Paul, MN, for amicus curiae Minneapolis Retired Police Officers' Association.Caroline Bell Beckman, Mark Gaughan, Erickson, Bell, Beckman & Quinn, Roseville, MN, for amicus curiae International Association of Fire Fighters.Lawrence P. Schaefer, Douglas L. Micko, Schaefer Law Firm, LLC, Minneapolis, MN, for amici curiae Allen Berryman and Ronald Kastner.Considered and decided by BJORKMAN, Presiding Judge; STONEBURNER, Judge; and CRIPPEN, Judge.^*

OPINION

BJORKMAN, Judge.

These appeals involve a dispute between appellants Minneapolis Police Relief Association (MPRA) and Minneapolis Firefighters Relief Association (MFRA) and respondent City of Minneapolis over the calculation of retirement and surviving-spouse benefits paid from the associations' funds. Following a bench trial, the district court entered judgment declaring that the associations had improperly calculated benefits, and it granted injunctive relief to the city, requiring the associations to recalculate benefits and resulting levy requests, and to recoup overpaid benefits from association members. We conclude that the district court erred by interpreting Minn.Stat. § 69.77 (2010) to require bylaw amendments before certain items were added to the benefits calculation, but find no error in the determinations that the associations improperly calculated certain benefits. And, while the order for recoupment was an appropriate exercise of the district court's discretion, we conclude that the district court abused that discretion by ordering the associations to oppose all challenges to recoupment. Accordingly, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

FACTS

The legislature established the associations to “create, maintain, and administer” pension funds for their members and beneficiaries. Minn.Stat. §§ 423B.04, subd. 2 (police officers), 423C.04, subd. 1 (firefighters) (2010). The associations calculate retiree and surviving-spouse benefits by first determining the number of units to which an individual is entitled based on his or her years of service or as a surviving spouse. Minn.Stat. §§ 423B.09, subd. 1(a), 423C.05, subd. 2(b) (2010). The associations next calculate the value of a unit, which is tied by statute to the salaries of current workers: “1/80 of the current monthly salary of a first grade patrol officer” for police, Minn.Stat. § 423B.01, subd. 20 (2010), and “1/80 of the maximum monthly salary of a first grade firefighter” for firefighters, Minn.Stat. § 423C.01, subd. 28 (2010).

Under the Police and Firefighters' Relief Association Guidelines Act (guidelines act), the city is required to make an annual contribution to the associations' funds in an amount determined by the associations to be the “minimum obligation” of the city. Minn.Stat. § 69.77, subds. 4, 6. To the extent that the city does not include the full amount of its minimum obligation “in the levy that the [city] certifie[s] to the county auditor in any year, the officers of the relief association shall certify the amount of any deficiency to the county auditor.” Id., subd. 7(c). Upon verification of a deficiency, the county auditor is required to “spread a levy over the taxable property of the municipality in the amount of the deficiency certified to by the officers of the relief association.” Id. The state auditor and the commissioner of revenue are responsible for determining compliance with the guidelines act. Id., subd. 1(c); see also Minn.Stat. § 6.495 (2010) (requiring auditor to conduct annual audits of associations and file reports with association boards and related municipalities).¹

In February 1995, the city sued the associations, challenging their unit-value calculations and corresponding computations of the city's minimum obligations. The city alleged that the associations improperly included, for police, a shift differential,² sick leave pay, and semi-annual overtime pay; and for firefighters, a selection premium,³ sick leave pay, and overtime pay. The parties settled that litigation in September 1995.

The settlement agreement required the associations to amend their bylaws to define the term “salary” for purposes of calculating unit value, subject to approval by the city. The agreement expressly stated that “[t]he purpose of defining the term by amendment to the by-laws is to prevent future differences of opinion on the elements of compensation to be included in salary.” Pursuant to the agreement:

The term “salary” shall include the following elements of compensation, to the extent they are payable under a collective bargaining agreement [ (CBA) ]:

For [MFRA]: (a) base wages, including the FLSA overtime attributable to the regularly scheduled work period; (b) selection premium; (c) the uniform and professional allowance paid to firefighters; (d) longevity payments; (e) an average of overtime actually worked in excess of FLSA overtime amounts by firefighters with 25 years or more of service, up to a maximum of 136 hours; in the immediately preceding year; (f) the maximum sick leave buy-back benefit available to first grade firefighters. Salary shall not include severance payments, workers' compensation payments, and employer-paid amounts used by employees toward the cost of health and medical insurance coverage. Any new item of compensation granted to first grade firefighters in the collective bargaining process after April 15, 1995, may be included in salary by action of the [MFRA], provided that at least 50 percent of all first grade firefighters are eligible to receive the new compensation item. The amount to be included in salary for any such new compensation item shall be the average amount paid to those first grade firefighters who received the compensation item.

For MPRA: (a) base wages; (b) shift differential; (c) the uniform and professional allowance paid to patrol officers; (d) longevity payments; (e) 60 hours of accumulated compensatory time; (f) work-out program payments; and (g) the maximum sick leave buy-back benefit available to top grade patrol officers. Salary shall not include severance payments, workers' compensation payments, and employer-paid amounts used by employees toward the cost of health and medical insurance coverage, and canine maintenance fees. Any new item of compensation granted to top grade patrol officers in the collective bargaining process after April 15, 1995, may be included in salary by action of the MPRA, provided that at least 50 percent of all top grade patrol officers are eligible to receive the new compensation item. The amount to be included in salary for any such new compensation item shall be the average amount paid to those top grade patrol officers who received the compensation item.

Both associations amended their bylaws to incorporate substantially similar language, and the city ratified the amendments.

The state auditor issued management letters for the years ending December 31, 2003, and December 31, 2004, opining that the associations had improperly calculated unit values by including salary items that were not permitted under the settlement agreement and amended bylaws. The auditor indicated that the MPRA improperly (1) added a shift differential to the payout of compensatory time, sick leave, and vacation time; and (2) included the maximum available vacation time, holiday pay, overtime cash out, and performance premium, rather than the average amount paid to top-grade patrol officers in each of those categories. With respect to the MFRA, the auditor stated that the association improperly (1) added a selection premium to the payout of vacation time, sick leave, and holiday pay; and (2) included the maximum available 136 hours of overtime, rather than the average worked by firefighters with 25 or more years of service, and the maximum available 48 hours of vacation payout, rather than the average amount paid to first-grade firefighters. The associations disputed the auditor's conclusions.

In 2006, the city commenced this litigation seeking (1) a declaration that the associations' “determinations of salary for pension calculations were and are not calculated according to law, are in breach of the 1995 Settlement Agreement and are declared invalid and should be recalculated,” (2) injunctive relief, and (3) recoupment of “amounts paid by the City based on improper calculations.”

The associations moved to dismiss the complaint, arguing in relevant part that their members—retired police officers, firefighters, and their surviving spouses—were indispensable parties to the litigation, and that the city's claims were barred by the statute of limitations. The district...