Ky. Ret. Sys. v. Foster, No. 2009–CA–001369–MR.

Decision Date23 July 2010
Docket NumberNo. 2009–CA–001369–MR.
Citation268 Ed. Law Rep. 541,338 S.W.3d 788
PartiesKENTUCKY RETIREMENT SYSTEMS, Appellant,v.Barbara FOSTER, Appellee.
CourtKentucky Court of Appeals

OPINION TEXT STARTS HERE

Supreme Court June 8, 2011.

Schuyler Olt, Katherine Rupinen, Frankfort, KY, for appellant.Debra H. Dawahare, Leila G. O'Carra, Lexington, KY, for appellee.Before MOORE and THOMPSON, Judges; WHITE,1 Senior Judge.

OPINION

MOORE, Judge:

Kentucky Employees Retirement Systems (KERS) appeals the Franklin Circuit Court's decisions to: 1) deny KERS relief from a court order granting Barbara Foster's request to purchase twenty-three months of service credit for the time she was employed as a professor at the University of Kentucky; 2) hold KERS in contempt for refusing to allow Foster to purchase those twenty-three months of service credit; 3) impose the expense of Foster's attorney's fees upon KERS as a sanction for contempt; 4) direct KERS to restore a month of sick leave service credit KERS removed following an audit of her account; and 5) enjoin KERS from further auditing or adjusting Foster's account below a total of 325 months of service credit. For the reasons stated herein, we affirm the first three of these rulings and vacate the latter two.

I. STATEMENT OF FACTS

In 2002, Foster made three written requests to purchase service credit from KERS with the intention of maximizing her future state-government retirement benefits. In May of 2002, Foster asked to purchase service credit for her work at the Internal Revenue Service from April 10, 1978, through August 7, 1982. In July of 2002, Foster asked to purchase service credit for her work at the United States District Court from November 1, 1991, through August 28, 1992. In August of 2002, Foster requested to purchase service credit for two periods of employment at the University of Kentucky: 1) student employment from July 1, 1977, through February 28, 1978; and 2) employment as a full-time visiting assistant professor from July 1, 1982, through June 1, 1984.

KERS calculated the number of months of service credit available for purchase in each instance, with the exception of Foster's employment as a professor at UK. KERS offered Foster fifty-two months of service credit for her IRS employment, ten months for her district court employment, and eight for her UK student employment. On October 28, 2002, Foster purchased all seventy months. With respect to Foster's employment as a professor at UK, however, KERS determined that Foster was not eligible to purchase any service credit and its general counsel sent Foster a letter to this effect on February 21, 2003.

Subsequently, Foster initiated administrative proceedings, specifically requesting that KERS grant her the right to purchase twenty-three months of service credit for that employment. On June 21, 2004, a KERS hearing officer denied Foster's request to purchase that service credit. Foster appealed to the Board of Trustees and, on June 18, 2005, Foster was notified that the Board had affirmed the hearing officer's decision.

On July 15, 2005, Foster appealed to the Franklin Circuit Court. On September 19, 2006, the circuit court reversed KERS and specifically held that Foster was entitled to purchase twenty-three months of service credit representing her tenure as a professor at UK. KERS then appealed to this Court and its sole contention of error was that a proper construction of the relevant statutes mandated that instructional positions, such as the one at which Foster was employed, did not qualify for any service credit. However, we upheld the circuit court's decision. See Kentucky Employees Retirement Systems v. Foster, 272 S.W.3d 198 (Ky.App.2007).2 The Supreme Court of Kentucky denied discretionary review of our decision on January 14, 2009.

On February 13, 2009, Foster requested to purchase the twenty-three months of service credit that were at issue in Foster I. On March 19, 2009, KERS again refused Foster's request, this time citing the results of an audit it had performed on her retirement account after the Supreme Court denied discretionary review in Foster I. In relevant part, KERS stated that 1) Foster's UK employment from July 1, 1982, through June 1, 1984, encompassed twenty-four months rather than twenty-three months; 2) Foster was not eligible to purchase two of her twenty-four months of UK service credit, i.e., July and August of 1982, because they overlapped with her employment with the IRS; 3) Foster's employment with the IRS, from April 1978 through August 1982, encompassed fifty-three months rather than fifty-two months; 4) Foster was entitled to purchase this newly discovered fifty-third month of service credit for her work at the IRS; 5) Foster had only five months of sick leave service credit rather than six months at the time she retired, making her liable to KERS for $1,101.05 in overpayments; and 6) this was a final administrative decision regarding the sick leave and must be appealed within thirty days.

Prior to KERS' audit, KERS had informed Foster that she had a total of 301 months of service credit and, therefore, the purchase of an additional 23 months would, in that case, have left her with a total of 324 months. However, the result of KERS' audit left Foster with a total of 323 months of service credit. Specifically, KERS had allowed Foster to purchase an additional month of service credit for her employment with the IRS but had subtracted one month of sick leave service credit and had subtracted another month after discovering that one of the twenty-three months described in the September 19, 2006 order overlapped with a month of Foster's employment with the IRS which Foster had already purchased in 2002.

Consequently, because KERS members in nonhazardous positions, such as Foster, do not become eligible for full retirement benefits until they have reached age 65 or have accumulated 324 months of service credit, Foster was now one month short of full retirement benefits. See KRS sections 61.510(18), 61.595, and 61.595(2)(b). On March 30, 2009, Foster requested KERS to comply with the circuit court's judgment regarding the purchase of UK service credit and also demanded KERS restore the amount of her sick leave service credit to six months. KERS instead informed Foster that it would treat her March 30, 2009 letter as a request for an administrative hearing, and, on April 3, 2009, moved the Franklin Circuit Court for relief from its September 19, 2006 order, pursuant to Kentucky Rules of Civil Procedure (CR) 60.02.

Foster purchased the twenty-two months of UK service credit and one month of IRS service credit that KERS offered. However, Foster opposed KERS' CR 60.02 motion on the basis of res judicata. She also filed her own motion with the circuit court to hold KERS in contempt of the September 19, 2006 order for refusing to allow her to purchase the full twenty-three months of service credit described in the circuit court's September 19, 2006 order, and for removing one month of sick leave service credit from her retirement account.

On July 1, 2009, the circuit court held KERS in contempt; it also ordered the further relief specified earlier in this opinion. In a separate order of July 22, 2009, the circuit court also denied KERS' motion for relief from judgment. The circuit court's July 1 and July 22, 2009 orders are the subject of this appeal.3

II. ANALYSIS
A. THE JULY 22, 2009 ORDER DENYING CR 60.02 RELIEF

To analyze KERS' CR 60.02 arguments, it is first necessary to address whether res judicata bars KERS from reducing the number of service credit months Foster is entitled to purchase, from twenty-three to twenty-two, to account for the overlap between her IRS employment and UK employment which KERS discovered during its 2009 audit of her account. We conclude that KERS is barred from doing so, but res judicata does not act as the bar in this case. Rather, it is the doctrine of the law of the case.

This Court recently described the nature of the law of the case doctrine in Brooks v. Lexington–Fayette Urban County Housing Authority, 244 S.W.3d 747 (Ky.App.2007):

Our Supreme Court said that “where a contention was not made, if it could or should have been made on appeal, the doctrine of res judicata prevented re-litigation [sic] of the same contention in a subsequent appeal.” Lebow v. Cameron, 394 S.W.2d 773, 778 (Ky.1965) (Citation omitted). This is essentially an expression of the law of the case doctrine.

Id. at 750. Brooks further stated:

The law of the case doctrine is “an iron rule, universally recognized, that an opinion or decision of an appellate court in the same cause is the law of the case for a subsequent trial or appeal however erroneous the opinion or decision may have been.” Union Light, Heat & Power Co. v. Blackwell's Adm'r, 291 S.W.2d 539, 542 (Ky.1956). The doctrine is predicated upon the principle of finality.

The law of the case rule is a salutary rule, grounded on convenience, experience and reason. It has been often said that it would be intolerable if matters once litigated and determined finally could be relitigated between the same parties, for otherwise litigation would be interminable and a judgment supposed to finally settle the rights of the parties would be only a starting point for new litigation.

Id. The law of the case doctrine is similar to but distinct from the doctrine of res judicata. “There is a difference between such adherence (the law of the case doctrine) and res adjudicata. One directs discretion; the other supersedes it and compels judgment. In other words, in one it is a question of power, in the other of submission.” Southern Ry. Co. v. Clift, 260 U.S. 316, 43 S.Ct. 126 [127], 67 L.Ed. 283, 284 (1922).

Sowders v. Coleman, 223 Ky. 633, 4 S.W.2d 731 (1928), enunciates that the doctrine considers as settled “all errors lurking in the record on the first appeal which might have been, but were not expressly, relied...

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