Kansas Public Employees Retirement System v. Reimer & Koger Associates, Inc.
| Decision Date | 06 December 1996 |
| Docket Number | Nos. 74394,74395,s. 74394 |
| Citation | 927 P.2d 466,261 Kan. 17 |
| Parties | KANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM, Plaintiff-Appellee, v. REIMER & KOGER ASSOCIATES, INC., Kenneth H. Koger, and Brent A. Messick, Defendants-Appellees/Cross-Appellants, and Gage & Tucker, L.C., Defendant-Appellant/Cross-Appellee. KANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM, Plaintiff-Appellee, v. COHEN, BRAME & SMITH, P.C.; Roger C. Cohen; Reimer & Koger Associates, Inc.; and Kenneth H. Koger, et al., Defendants-Appellees, and Gage & Tucker, L.C., Defendant-Appellant. |
| Court | Kansas Supreme Court |
Syllabus by the Court
1. Interpretation of a statute is a question of law, and it is a function of this court to interpret a statute to give it the effect intended by the legislature. The fundamental rule of statutory construction, to which all others are subordinate, is that the intent of the legislature governs.
2. In determining legislative intent, courts are not limited to a mere consideration of the language employed but may properly look into the historical background of the enactment, the circumstances attending its passage, the purposes to be accomplished, and the effect the statute may have under various suggested constructions. A statute should never be given a construction that leads to uncertainty, injustice, or confusion if possible to construe it otherwise. In construing a statute, words and phrases should be construed according to context and the approved usage of the language, and words in common use are to be given their natural and ordinary meaning.
3. Legislative history attending the enactment of K.S.A.1995 Supp. 74-4904a clearly states that the protection afforded settling parties does not apply to "a contractual right of indemnity"; the statute does not interfere with the rights and obligations created by such contract between the parties.
4. Consistent with legislative intent, historical background, the purpose to be accomplished, and the language used, K.S.A.1995 Supp. 74-4904a differentiates between noncontractual indemnity and rights and obligations created by contract between parties. Under the terms of the statute a judicially approved settlement discharges the settling party from all liability for contribution or noncontractual indemnity but provides no discharge for claims based on a contract or agreement between parties.
5. The constitutionality of a statute is presumed. All doubts must be resolved in favor of its validity, and before the act may be stricken down, it must clearly appear that the statute violates the constitution. In determining constitutionality, it is the court's duty to uphold a statute under attack rather than defeat it. If there is any reasonable way to construe a statute as constitutionally valid, that should be done. A statute should not be stricken down unless the infringement of the superior law is clear beyond substantial doubt.
6. There is no common-law right of contribution between joint tortfeasors in Kansas.
7. Contribution in Kansas is governed by statute (K.S.A.60-2413), and the legislature is free to alter the effects of such statute by a subsequent enactment. In this case, it did so in 1994 by discharging the settling party from all liability for contribution. K.S.A.1995 Supp. 74-4904a. Such legislative action does not violate § 18 of the Kansas Constitution Bill of Rights.
8. The legislature can modify a common-law remedy so long as it provides an adequate quid pro quo or substitute remedy for the right infringed or abolished.
9. K.S.A.1995 Supp. 74-4904a(2), by granting nonsettling parties the right of setoff, provides a remedy of value which did not exist at common law. K.S.A.1995 Supp. 74-4904a(1) and (3) confer a valuable benefit upon any person or entity potentially liable who settles and obtains court approval with prior notice to those parties affected.
10. The State has a legitimate interest in resolving KPERS litigation. K.S.A.1995 Supp. 74-4904a directly addresses this concern by promoting settlement of claims. Under the statutory provisions, nonsettling and settling parties receive real and substantial benefits nonexistent at common law. Such benefits provide an adequate quid pro quo for the common-law remedy of noncontractual indemnity.
11. A cause of action for indemnity does not accrue until the indemnitee suffers actual loss or damage by paying money for which the indemnitee seeks indemnification. A condition precedent to indemnification is that the indemnitee must actually have paid on the obligation for which he or she seeks indemnification.
12. The standards to be applied in deciding whether a statute violates the Equal Protection Clause are stated and applied.
13. K.S.A.1995 Supp. 74-4904a(4) applies to any settlement judicially approved after the effective date of the statute regardless of the date on which KPERS suffered any injury, loss, or damage or the date on which any claim or cause of action of KPERS arose or accrued. This retroactivity is constitutionally permissible and does not violate the doctrine of separation of powers because the claims for contribution or noncontractual indemnity filed are not vested rights.
Jerome W. Pope, of Winston & Strawn, Chicago, IL, argued the cause, and Dan K. Webb and Kurt L. Schultz, of the same firm, and Mark L. Bennett, of Bennett & Dillon, Topeka, were with him on the briefs, for appellant Gage & Tucker, L.C.
Anne Lamborn Baker, of Wright, Henson, Somers, Sebelius, Clark & Baker, L.L.P., Topeka, argued the cause, and Thomas E. Wright, of the same firm, was with her on the brief, for defendant-appellees Cohen, Brame & Smith, P.C., and Roger C. Cohen.
Brian G. Boos, of Yeretsky & Maher, L.L.C., Shawnee Mission, argued the cause, and Gregory F. Maher and James M. Yeretsky, of the same firm, and Kathleen A. Hardee, of Gilliland & Hayes, Kansas City, MO, were with him on the brief, for defendant-appellees/cross-appellants Reimer & Koger Associates, Inc., Kenneth H. Koger, and Brent A. Messick.
Frank M. Rice, of Schroer, Rice, P.A., Topeka, argued the cause, and Gene E. Schroer and Charles D. McAtee, of the same firm, and Eugene I. Pavalon and Geoffrey L. Gifford, of Pavalon & Gifford, of Chicago, IL; Barry J. Freeman, Robert S. Atkins, Timothy K. McPike, and Bess Schenkier, of KPERS Litigation Group, Chicago, IL; Robert F. Coleman, Eugene J. Schiltz, Kenneth Philip Ross, and Jerry S. Menge, of Robert F. Coleman & Associates, Chicago, IL; and Robin R. LaFollette, Donald H. Loudon, Jr., and James L. Ungerer, of KPERS Litigation Group, Shawnee Mission, were on the brief, for appellee Kansas Public Employees Retirement System.
This interlocutory appeal involves the construction and constitutional validity of the recently enacted Kansas Public Employees Retirement System (KPERS) settlement statute, K.S.A.1995 Supp. 74-4904a. The question posed is whether the cross-claims for "contribution and noncontractual indemnity" filed by Reimer & Koger Associates, Inc., (Reimer & Koger) against appellants are discharged under the provisions of K.S.A.1995 Supp. 74-4904a(1). We conclude that such claims are discharged and that K.S.A.1995 Supp. 74-4904a is constitutional. We, therefore, reverse the decision of the trial court.
This appeal involves two consolidated cases from the Shawnee County District Court in which KPERS sued to recover for losses suffered in direct placement investments. In 92 CV 805, KPERS sought recovery for investment losses in Sharoff Food Service, Inc., (Sharoff) from Reimer & Koger and certain of its present or former directors, officers, or agents; the law firm of Gage & Tucker, L.C. (Gage & Tucker); and the law firm of Cohen, Brame, & Smith, P.C., (Cohen & Brame) and partner Roger C. Cohen (Cohen). In 93 CV 588, KPERS sought recovery for investment losses in Tallgrass Technology Corporation (Tallgrass) from Reimer & Koger.
In count 2 of 92 CV 805, KPERS alleges that Reimer & Koger was an investment advisor having discretion to invest KPERS money. In June 1987, Reimer & Koger invested $6.4 million of that money in Sharoff, primarily in subordinated ventures. In August 1988, Reimer & Koger made an additional $1.5 million unsecured investment of KPERS' money in Sharoff. At the time of each of the investments, Reimer & Koger, according to the allegations contained in KPERS' petition, knew or should have known that Sharoff was having severe financial difficulties and was in danger of failing. According to the petition, at the time of the $1.5 million unsecured investment, Reimer & Koger knew that Sharoff was in violation of covenants contained in the purchase agreement for the initial investment and that Sharoff and its principal, Gary Fox, had made misrepresentations in connection with the initial investment. Nevertheless, according to the petition, Reimer & Koger failed to exercise the remedies available for the covenant violations, waived those violations, and proceeded with a second investment. Finally, according to the petition, after both investments were made, Reimer & Koger continued to receive information indicating that Sharoff was having severe financial difficulties and was in danger of failing but again failed to exercise any of the covenant remedies. Reimer & Koger's acts and omissions constituted, according to the petition, reckless conduct, gross negligence, and a violation of their contractual and fiduciary duties to KPERS.
In 1989, Sharoff's primary secured lender foreclosed, and Sharoff was placed in bankruptcy. KPERS' entire investment in Sharoff, approximately $9 million dollars, was lost.
Counts 1 and 3 of KPERS' petition are directed against Cohen & Brame and further allege misconduct by Fox. KPERS alleges, among other things, that the Cohen & Brame firm was Sharoff's attorney. Cohen was also an officer of Sharoff. It is alleged that Sharoff, Fox, and Cohen & Brame induced Reimer & Koger to invest KPERS' money in Sharoff by fraudulently...
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