County of Luzerne v. LUZERNE COUNTY RET.

• Decision Date: 09 June 2005
• Citation: 882 A.2d 531
• Parties: The COUNTY OF LUZERNE v. The LUZERNE COUNTY RETIREMENT BOARD, Appellant.
• Court: Pennsylvania Commonwealth Court

882 A.2d 531

The COUNTY OF LUZERNE v. The LUZERNE COUNTY RETIREMENT BOARD, Appellant.

Commonwealth Court of Pennsylvania.

Argued April 4, 2005.

Decided June 9, 2005.

Publication Ordered September 8, 2005.

Carl A. Solano, Philadelphia and Christopher P. Cullen, Dunmore, for appellant.

Christopher B. Jones, Scranton, for appellee.

BEFORE: COLINS, President Judge, FRIEDMAN, Judge, and COHN JUBELIRER, Judge.

OPINION BY President Judge COLINS.

This case involves an appeal by the Luzerne County Retirement Board (Board) from the order of the Court of Common Pleas of Luzerne County (trial court) granting Luzerne County's (County) Motion for Preliminary Injunction enjoining the Board from paying legal fees from the Retirement Fund (Fund) to the law firm of Schnader, Harrison, Segal & Lewis, LLP (Schnader) related to a federal civil action. Additionally, the Board attempts to appeal a ruling from the bench, not discussed in the trial court's opinion, denying a Motion to Disqualify the County's attorney, John P. Moses (Attorney Moses), for an alleged conflict of interest. We reverse as to the grant of the Preliminary Injunction¹ and conclude that the denial of the Board's Motion to Disqualify is interlocutory and not properly before this Court.

The Board retained Schnader as legal counsel to conduct an investigation that later led to the filing of a federal civil action for alleged mismanagement of a retirement fund maintained for retired employees of Luzerne County. The County originally sought to enjoin the Board from paying Schnader's legal fees back in April of 2003. At that time the trial court denied injunctive relief because Schnader's estimated fee was only $45,000.00 for the investigation and that sum was not thought to impair the Fund actuarially. Schnader later filed suit in federal court on behalf of the Board. At the time the federal suit was instituted, two sitting County Commissioners were named as defendants. These two defendants are no longer County Commissioners, but while they were still in office the County failed to make a required annual payment to the Retirement Fund after the federal civil suit was filed. On December 29, 2003, upon learning that the legal fees associated with the investigation and filing of the federal suit cost over $400,000.00, the County again sought to enjoin the Board from paying any legal fees to its counsel. This time the trial court agreed with the County and granted the injunction ex parte on December 29, 2004 and affirmed that ruling at the close of its February 2, 2004 hearing. The trial court based its ruling on a finding that the costs of continuing the litigation would amount to between $3,000,000.00 and $4,000,000.00, which the court also found would actuarially impair the fund. Also raised with the trial court below was the issue of Attorney Moses's alleged conflict that could require disqualification. After hearing brief argument on that issue on January 23, 2004, the trial court denied the Board's Motion to Disqualify from the bench and without a written order.

From the outset, this Court notes that due to the manner in which the government of Luzerne County is arranged, the three County Commissioners also sit on the Board of the Retirement Fund at issue in this case, along with the County Controller and the County Treasurer. Thus, there are at least three individuals common to both sides of the present case. Nevertheless, for clarity's sake, this Court will continue to refer to the opposing parties as the "County" and the "Board," despite the overlapping roles of the County Commissioners.²

In order to obtain injunctive relief, the County must show the following elements: (1) that a preliminary injunction is needed to prevent immediate and irreparable harm that cannot be adequately compensated by damages; (2) that more harm would result from not granting the injunction than from granting it and that the injunction will not harm other interested parties in the proceedings; (3) that the injunction will restore the parties to their status as it existed immediately prior to the alleged wrongful conduct; (4) that the injunction is designed to abate the offending activity; and (5) that the preliminary injunction will not negatively affect the public interest. Warehime v. Warehime, 580 Pa. 201, 208-11, 860 A.2d 41, 46-47 (2004). We will address the requirements below.

The Fund was established under the County Pension Law.³ Section 9 of the County Pension Law, 16 P.S. § 11659, states in relevant part, "The members of the board shall be trustees of the fund, and shall have exclusive management of the fund. . . ." Further, Section 5 of the County Pension Law states,

The expense of the administration of this act, exclusive of the payment of retirement allowances, shall be paid by the county by appropriations made on the basis of estimates submitted by the board. However, such administrative expenses may from year to year be paid from the fund unless it is determined by the actuary that such payment will impair the actuarial soundness of the fund.

16 P.S. § 11655 (emphasis added).

Based upon the plain language of the County Pension Law we find that the trial court erred as a matter of law in its rulings with respect to the actuarial soundness of the Fund. The trial court stated in its opinion, "Obviously, this Court found the testimony presented by Luzerne County's witnesses, that the spending of pension fund monies to pursue a Federal RICO action would have an adverse impact on the actuarial soundness of the pension fund and for this reason granted the Preliminary Injunction." (Trial Court Opinion p. 4.) One witness's testimony is relevant to whether the Fund is actuarially impaired, and that is the actuary appointed under the County Pension Law. 16 P.S. § 11655. The County's witnesses have no authority to determine the actuarial soundness of the Fund, and it is an error of law to base the granting of a Preliminary Injunction on such testimony. The actuary appointed under the County Pension Law testified on direct as follows,

Q: Would the payment of legal fees for 2003 in the amount of $400,000 — $400,000 to $500,000 have an actuarial — impair the actuarial soundness of the plan, in your opinion?

A: In my opinion, it won't impair the actuarial soundness of the Fund if the resulting increased contribution, which would be about $50,000 in 2004, is met by the county.

Reproduced Record (RR), p. 604a (emphasis added).⁴ It is clear from the testimony of the actuary that paying Schnader's current and even prospective legal fees will not impair the actuarial soundness of the fund. Based upon this testimony we find that the County failed to meet the first element required for granting a preliminary injunction because there is no immediate or irreparable harm to the Fund according to actuary. Also, we fail to see how a dispute over the spending of monies from a pension fund cannot be adequately compensated by money damages. Indeed, the entire dispute before this Court is about nothing if not money.

In addition, we find that the County failed to satisfy the second and third elements necessary for a Preliminary Injunction to be appropriate.⁵ The second element, where the County needed to show that no other interested parties would be harmed by the proceedings, is not met because the effect of this injunction is to deprive the Board, whose members act as fiduciary to the pensioners benefited by the Fund, of the ability to pay its legal counsel already engaged in litigation that may ultimately benefit the Fund.⁶ The third element required for the granting of preliminary injunction is not satisfied because the injunction itself disrupts the status quo as it is set forth by statute. As noted above, the members...