Jacobs v. STATE TEACHERS'RET. SYS. OF VT

• Decision Date: 06 September 2002
• Docket Number: No. 01-474.,01-474.
• Citation: 816 A.2d 517
• Parties: Susan JACOBS v. STATE TEACHERS' RETIREMENT SYSTEM OF VERMONT.
• Court: Vermont Supreme Court

816 A.2d 517

Susan JACOBS v. STATE TEACHERS' RETIREMENT SYSTEM OF VERMONT.

No. 01-474.

Supreme Court of Vermont.

Motions for Reargument and Amendment Denied November 27, 2002.

September 6, 2002.

Charles F. Storrow of Kimbell & Storrow, Montpelier, for Plaintiff-Appellant.

William H. Sorrell, Attorney General, and Bridget C. Asay, Assistant Attorney General, Montpelier, for Defendant-Appellee.

Present: AMESTOY, C.J., DOOLEY, MORSE, JOHNSON and SKOGLUND, JJ.

DOOLEY, J.

Plaintiff Susan Jacobs sued defendant State Teachers' Retirement System of Vermont ("the System") for denying her certain retirement benefits. The parties filed cross-motions for summary judgment, and the trial court found for defendant based on sovereign immunity. On appeal, plaintiff argues that the trial court erred in two respects: by finding that the System was protected by sovereign immunity, and by concluding that the State did not waive its immunity. We affirm.

"In reviewing a decision to grant summary judgment, we regard all allegations made in opposition to the motion as true if supported by affidavits or other evidentiary material." LaShay v. Dep't of Soc. & Rehab. Servs., 160 Vt. 60, 62, 625 A.2d 224, 225-26 (1993). The facts according to the plaintiff are as follows. Plaintiff was a school teacher for twenty-eight years in the Vermont public school system after teaching in New York City public schools for seven years. While she taught in Vermont, she was a member of the System, as all public school teachers were required to be by statute. See 16 V.S.A. § 1933(a). Until 1981, the System offered just one retirement plan, the Group A plan. The Group A plan was contributory, funded partially by a 5.5% salary deduction. See id. § 1944(b)(2). In 1981, the System's enabling act was amended to create a second retirement plan, the Group B plan. This second plan was noncontributory and thus was totally funded by the state and by investment income and not by member contributions. Membership in the Group B plan was optional, but members had a limited time to elect whether they wished to switch to the new plan or remain covered by the old plan. See id. § 1950(a). The System, in order to help members make this decision, was statutorily required to give a "general written explanation of the election and its consequences." See id. § 1950(b). In order to meet this requirement, the System mailed out an informational flyer comparing the two retirement plans.

Under the statute, members who converted from Group A to Group B would keep all service credit earned as a Group A member, forfeit future benefits under Group A, and become entitled to the benefits under Plan B. See id. § 1950(c). Importantly, upon switching they would receive a refund of all their "accumulated contribution balance," consisting of their contributions to the original plan, plus interest. See id. §§ 1931(1), 1950(c). Further, a member of Plan A could also purchase up to ten years of service credit for any time spent teaching in public schools outside of Vermont. See id. § 1944(b)(6)(A). Money put towards purchasing such credit became part of the member's accumulated contribution balance, see id., and would thus be refunded to any member who changed from Plan A to Plan B. See id. § 1950(c). Because switching members retained all of their service credit under Plan A, members could obtain up to ten years of service credit by buying it while under Plan A and then transferring to Plan B, receiving the purchase price back as part of their refunded accumulated contribution balance as a result of the transfer.

The leaflet circulated by the System to members made it clear that they would be unable to acquire such out-of-state service credit under Plan B, and that if they were considering such a purchase, they should do so before changing plans. However, neither the leaflet sent by the System nor the handbook circulated to members explicitly stated that the accumulated contribution refund would include money put towards the purchase of out-of-state credit.

Plaintiff opted for Plan B in 1981, but did not purchase any service credit for her seven years teaching experience in New York City "[d]ue to a variety of factors." Aside from there being no explicit statement in the written materials sent to her by the System that the purchase price of any service credit would be refunded, plaintiff claims there were other reasons she did not obtain the credit. The language of the System's flyer and handbook spoke in terms of "purchasing" credit, which indicated to plaintiff that the System kept that money, not that it could be returned. Despite this misconception, plaintiff still had some interest in acquiring the credit and contacted the System. She claims that in a telephone conversation with a System representative in which she inquired about purchasing credit, the representative did not mention that the purchase price would be refunded along with her accumulated contribution balance.

In 1990, the Group B plan was dissolved, and plaintiff, along with all of the other former Group B members, was automatically transferred to Group C, a new contributory plan that allowed the acquisition of out-of-state service credit again. Between 1998 and 1999, plaintiff became interested in buying service credit under this plan because she could become eligible for early retirement with full benefits if she obtained credit for her work in New York. During this time, she received a memorandum from the Vermont chapter of the National Education Association informing her that the purchase price for procuring service credit under the Group A plan would have been included in the refund received in 1981 after transferring to Group B. With this new knowledge, plaintiff asked the System to give her service credit for her work in New York without payment, but this request was denied by System staff. Plaintiff eventually paid approximately $70,000 to get the service credit she needed for early retirement.

Plaintiff brought a class action suit against the System to recover that money plus interest, claiming that the System had breached statutory and fiduciary duties to accurately inform her and those similarly situated of the consequences of switching from Plan A to Plan B. In two counts, she claimed that the System's failure to accurately inform her and the class was negligent [count I], and breached a duty to deal with her and the class "fairly and in good faith" [count II]. In addition to the approximately $70,000 in issue for plaintiff, the complaint sought similar relief for the class members.

The superior court denied the motion to certify the class, concluding that "plaintiff appears more in a class by herself." Both parties filed cross-motions for summary judgment. The court found that the System was part of the state government and, as a result, was protected by sovereign immunity unless the State had waived such immunity. It rejected two theories of waiver. First, it rejected the theory that the System's obligation to provide the information was contractual and that the State had waived sovereign immunity by entering into the contract. It found instead that any liability would have to be based on tort.

Second, it rejected plaintiff's theory that if the action were characterized as one in tort, sovereign immunity was waived by the Vermont Tort Claims Act, 12 V.S.A. §§ 5601-5606. The court held that the suit fell within one of the exceptions for state tort claim liability for "any claim arising out of ... misrepresentation." Id. § 5601(e)(6). The court based its decision on interpretations of the Federal Tort Claims Act, 28 U.S.C. §§ 1346(b), 2671-2680 (1993 & Supp.2002), upon which Vermont's statute is based.

Because the court found that the System was protected by sovereign immunity, and that such immunity had not been waived, it granted summary judgment for the System. Jacobs appeals from that decision arguing that: (1) the System is not an arm of the State and is, therefore, not covered by sovereign immunity; and (2) sovereign immunity does not apply to this action because it is based on a breach of contract or a tort theory covered by the Vermont Tort Claims Act.

In reviewing a summary judgment decision, we apply the same standard as the trial court: "summary judgment is appropriate where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law." Kelly v. Lord, 173 Vt. 21, 42, 783 A.2d 974, 990 (2001). Because the System is created by remedial legislation, we must construe these statutes liberally in favor of their beneficiaries. See Duhaime v. Treasurer, 161 Vt. 157, 160, 636 A.2d 754, 756 (1993).

We start with the issue of whether the System is covered by sovereign immunity. The concept of sovereign immunity has generally embodied two principles: citizens cannot sue a state in that state's own courts without its consent; and the state is immune from torts committed by its agents. See 1 Civil Actions Against State and Local Government § 1.1, at 2 (J. Craig ed., 2d ed.1992). The reasons for such a policy include the protection of the operation of state government from interference by the judiciary and by private citizens, elimination of the burden on the State of defending lawsuits, and insulation of the state treasury from litigation claims. Id. § 1.2, at 8-9. This doctrine is not without its criticisms, for example, that sovereign immunity subordinates the interests of injured citizens to those of the public treasury. See Roman Catholic Diocese of Vt., Inc. v. City of Winooski Hous. Auth., 137 Vt. 517, 519, 408 A.2d 649, 650 (1979). Such criticisms have weakened the doctrine, see 1 Civil Actions Against State and Local Government, supra, § 1.8, at 23 (describing how many jurisdictions have abrogated judicially-created sovereign immunity), but not eliminated it in Vermont. Because sovereign immunity is procedural, a state may choose to waive...