Lagerman v. Ariz. State Ret. Sys.

• Decision Date: 07 March 2019
• Docket Number: No. 1 CA-CV 18-0014,1 CA-CV 18-0014
• Citation: 438 P.3d 639,246 Ariz. 270
• Parties: Susan LAGERMAN, Plaintiff/Appellant, v. ARIZONA STATE RETIREMENT SYSTEM, Defendant/Appellee.
• Court: Arizona Court of Appeals

246 Ariz. 270

438 P.3d 639

Susan LAGERMAN, Plaintiff/Appellant,

v.ARIZONA STATE RETIREMENT SYSTEM, Defendant/Appellee.

No. 1 CA-CV 18-0014

Court of Appeals of Arizona, Division 1.

FILED March 7, 2019

Robaina & Kresin PLLC, Phoenix, By Thomas T. Griffin, Counsel for Plaintiff/Appellant

Arizona State Retirement System, Phoenix, By Jothi Beljan, Counsel for Defendant/Appellee

Judge Randall M. Howe delivered the opinion of the Court, in which Presiding Judge Diane M. Johnsen and Judge Maria Elena Cruz joined.

HOWE, Judge:

¶1 Susan Lagerman appeals the superior court’s order affirming a decision by the Arizona State Retirement System ("ASRS") that she (1) could not elect to begin receiving retroactive retirement benefits payable before the date she submitted her retirement application and (2) did not warrant a retroactive retirement date. She also argues that ASRS violated its fiduciary duty in denying her request for a retroactive retirement date. She further argues that ASRS breached statutory and constitutional provisions protecting her retirement benefits against forfeiture, diminution, or impairment.

¶2 We affirm. The plain language of A.R.S. § 38–764(A) prohibits an ASRS member from electing a retirement date before the date that ASRS receives the member’s retirement application. Also, Lagerman’s request for a retroactive retirement date was properly denied because she was unable to show that she could not have submitted a retirement application before the retroactive date that she had sought. Further, ASRS did not violate its fiduciary duty to Lagerman, and it did not cause her to forfeit her benefits or cause her benefits to diminish or become impaired.

FACTS AND PROCEDURAL HISTORY

¶3 In 1978, Lagerman became an ASRS member when she was hired as a securities examiner with the Arizona Corporation Commission, and her membership continued when she later worked as an attorney with the Arizona Attorney General’s Office ("AGO") from 1981 to February 2003. An active member is a state employee who works at least 20 weeks in each fiscal year, works at least 20 hours each week, and makes member contributions to ASRS. A.R.S. § 38–711(1). As an ASRS member, Lagerman received annual member statements. After Lagerman left the AGO in February 2003, ASRS mailed her an annual member statement for the time period of July 1, 2003 through June 30, 2004. The member statement included Lagerman’s early retirement date (the earliest date she could retire under the law) and her normal retirement date for all three statutory definitions of normal retirement. For ASRS members who joined before July 1, 2011, "normal retirement date" means the earliest of the following: (1) a member’s 65th birthday, (2) a member’s 62nd birthday and completion of at least ten years of service, or (3) the first day that the sum of a member’s age and years of service equals 80. A.R.S. § 38–711(27)(a). Lagerman’s earliest normal retirement date was December 23, 2007, under the 80-points definition.

¶4 Although Lagerman was not an active member in 2005, ASRS allowed her to complete a service purchase that she had submitted in 2003 because it had not timely processed her request. An active member of ASRS may purchase credited service for prior public employment by paying a certain amount into ASRS. A.R.S. § 38–743. The service purchase accelerated Lagerman’s 80-points normal retirement date to July 23, 2005, which was reflected in her member statement for the time period of July 1, 2004 through June 30, 2005.

¶5 In summer 2006, Lagerman was diagnosed with cancer

and underwent chemotherapy. During and following chemotherapy, Lagerman’s mental and physical abilities deteriorated; she had difficulty concentrating and holding conversations. During this time, ASRS continued to mail her annual member statements from the fiscal year beginning July 1, 2005, through the fiscal year beginning July 1, 2010. Each member statement that she received moved the stated normal retirement date to the end of the applicable period. The member statements also stated that "[r]etirees receiving a monthly benefit are permitted under certain circumstances to return to work and still receive their benefit. For details on the return to work options, visit the ASRS website."

¶6 ASRS stopped mailing the member statements to its members, including Lagerman, June 30, 2011. ASRS gave notice to its members that they must access their retirement information on their ASRS online accounts. Lagerman had already created an online ASRS account in 2007. She had also contacted ASRS in 2008 for assistance in resetting her account password.

¶7 On April 6, 2016, ASRS received Lagerman’s completed ASRS retirement application and processed her retirement effective as of that date. Lagerman appealed to the ASRS Assistant Director and requested a retirement date of August 2006. In her appeal letter, she noted that she had attended a benefits exposition at the AGO at which the ASRS representative stated that employees could not work more than 20 hours per week after retirement. She also noted that in 2003 the AGO informed her that she could not work more than 20 hours per week after retiring. She further noted that when she left the AGO, she "did not retire because [she] wanted to continue [her] professional career with full time work." The ASRS Assistant Director denied her appeal.

¶8 Lagerman appealed to the ASRS Director, who denied the appeal. She then appealed that decision, and an administrative law judge ("ALJ") held a hearing in January 2017. During the hearing, Lagerman’s counsel asked ASRS employee Jenna Orozco whether the lump sum amount ASRS would have to pay Lagerman if it granted her request for a retroactive retirement under A.R.S. § 38–715(D)(4) was a factor in denying the request. Orozco denied that ASRS considered the amount of money that it would have to pay Lagerman when it rejected her request. Another ASRS employee, Ryan Falls, testified that he had no knowledge about the facts in Lagerman’s case and was called to testify only about the actuarial concepts of the retirement system. During closing argument, counsel for ASRS also explained that Falls’s testimony was offered simply to show that actuarial reasons to limit retroactive retirements under A.R.S. § 38–715(D)(4) exist.

¶9 The ALJ recommended affirming the ASRS Director’s determination, which the ASRS Appeals Committee accepted. Lagerman then appealed to the superior court, which affirmed the ASRS Appeals Committee’s decision. Lagerman timely appealed to this Court.

DISCUSSION

1. Statutory Interpretation of A.R.S. § 38–764(A)

¶10 Lagerman argues that the superior court erred in concluding that A.R.S. § 38–764(A) does not allow her to elect a retirement date that occurred before the date she submitted her retirement application. This Court reviews the superior court’s decision de novo and determines "whether the administrative action was not supported by substantial evidence or was illegal, arbitrary and capricious, or involved an abuse of discretion." Pendergast v. Ariz. State Ret. Sys. , 234 Ariz. 535, 538 ¶ 10, 323 P.3d 1186, 1189 (App. 2014) (quoting Carlson v. Ariz. State Pers. Bd. , 214 Ariz. 426, 430 ¶ 13, 153 P.3d 1055, 1059 (App. 2007) ). "Although we view the evidence in the light most favorable to upholding the agency’s decision, we are not bound by the agency’s or the superior court’s legal conclusions or statutory interpretations." Parsons v. Ariz. Dep't of Health Servs. , 242 Ariz. 320, 322–23 ¶ 10, 395 P.3d 709, 711–12 (App. 2017).

¶11 This Court’s primary goal in interpreting a statute is to give effect to the legislature’s intent. Id. at 323 ¶ 11, 395 P.3d at 712. "In doing so, we look to the statute’s plain language as the best indicator of that intent[ ]" and "must construe the statute in context with other related provisions and its place in the statutory scheme." Id. This Court also attempts to "give meaning to ‘each word, phrase, clause and sentence ... so that no part of the legislation will be void, inert, redundant, or trivial.’ " See Ariz. State Univ. Bd. of Regents v. Ariz. State Ret. Sys. , 242 Ariz. 387, 389 ¶ 7, 396 P.3d 623, 625 (App. 2017) (quoting In re Estate of Zaritsky , 198 Ariz. 599, 603 ¶ 11, 12 P.3d 1203, 1207 (App. 2000) ).

¶12 Arizona Revised Statutes section 38–764(A) states:

Retirement is deemed to commence on a date elected by the member. That date shall not be earlier than the day following the date of termination of employment, the date ASRS receives the member’s completed retirement application or the date specified by the member pursuant to subsection I of this section.

Lagerman contends that because the statute uses the word "or," it should be read in the disjunctive, meaning that she could elect a retirement date that satisfied only the first clause, i.e., a date that occurred after she had terminated her employment. As such, she argues that she could wait until many years after she terminated work to retroactively elect to have her retirement begin just after she was eligible for full retirement. She is incorrect.

¶13 The statute states that a member’s retirement date "shall not be earlier" than (1) the day following the date of termination, (2) the date ASRS receives the member’s completed retirement application, or (3) the date specified by the member under A.R.S. § 38–764(I). As such, the statute’s plain language prohibits a member’s retirement from beginning before all of the aforementioned dates. See Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 119 (2012) (explaining that when the disjunctive "or" is used after a negative, the effect is each item listed is negated and prohibited); see also Schane v. Int'l Bhd. of Teamsters Union Local No. 710 Pension Fund Pension Plan , 760 F.3d 585, 589–90 (7th Cir. 2014) (concluding that "the rule of inference that not (X or Y) is equivalent to not X and not Y ").

¶14 We cannot disregard, however, that A.R.S. § 38–764(I)...