Mattis v. STATE UNIVERSITIES RET. SYSTEM, No. 96012

• Court: Supreme Court of Illinois
• Citation: 816 N.E.2d 303,287 Ill.Dec. 541,212 Ill.2d 58
• Decision Date: 20 May 2004
• Parties: Brian MATTIS, Indiv. and on Behalf of All Others Similarly Situated, Appellee and Cross-Appellant, v. The STATE UNIVERSITIES RETIREMENT SYSTEM et al., Appellants and Cross-Appellees.
• Docket Number: No. 96012, No. 96114.

816 N.E.2d 303
212 Ill.2d 58
287 Ill.Dec. 541

Brian MATTIS, Indiv. and on Behalf of All Others Similarly Situated, Appellee and Cross-Appellant,
v.
The STATE UNIVERSITIES RETIREMENT SYSTEM et al., Appellants and Cross-Appellees

Nos. 96012, 96114.

Supreme Court of Illinois.

May 20, 2004.

Rehearing Denied October 4, 2004.

816 N.E.2d 305

Michael R. Cornyn, of Thomas, Mamer & Haughey, Champaign, Charles F. Regan, Jr., Lauren Frank Noll, of Mayer, Brown, Rowe & Maw, L.L.P., Chicago, for appellants and cross-appellees

Michael E. Raub, Edward M. Wagner, of Heyl, Royster, Voelker & Allen, Urbana, for appellee and cross-appellant.

Chief Justice McMORROW delivered the opinion of the court:

On February 16, 1995, appellee Brian Mattis, a retired law professor, brought suit in the circuit court of Champaign County against the State Universities Retirement System (SURS) and the members of the SURS executive committee: William Norwood, Emil Haeflinger and Stanley Rives. Count I of Mattis' complaint sought administrative review of the executive committee's denial of Mattis' administrative claim against SURS. In this claim, Mattis had argued that, following his retirement from his position as a law professor at Southern Illinois University (SIU) in 1994, SURS calculated his retirement annuity based on an incorrect interpretation of certain provisions of article 15 of the Illinois Pension Code (40 ILCS 5/15-101 et seq. (West 1992)). According to Mattis, because of SURS's misconstruction of the statute, his retirement benefits were considerably lower than they should have been. Mattis asked SURS to rectify the situation, but SURS declined, maintaining that its interpretation of the statute was correct.

The remaining counts of Mattis' complaint were based on this same alleged misinterpretation of the statute. In these counts, Mattis sought common law and civil rights relief not only on his own behalf but also on behalf of a purported class of similarly situated individuals.

The circuit court dismissed all counts in Mattis' complaint other than the administrative review claim (count I). Subsequently, the court granted summary judgment in favor of defendants on count I, finding that SURS's administrative "decision is not against the manifest weight of the evidence and is not contrary to law." Mattis appealed, and the appellate court reversed, holding that SURS misconstrued the statute. Mattis v. State Universities Retirement System, 296 Ill.App.3d 675, 231 Ill.Dec. 49, 695 N.E.2d 566 (1998). In addition to reversing the circuit court's judgment on count I, the appellate court also reversed the dismissal of four other counts in Mattis' complaint. Following remand to the circuit court, the relevant provisions of the Pension Code were amended by the legislature. These amendments, which took effect on July 6, 2000, supported SURS's interpretation of the statute. The circuit court declared the amendments unconstitutional, and remanded to SURS "for a recalculation of plaintiff's pension benefits consistent with the language of the Mattis Appellate Court

816 N.E.2d 306

opinion." The circuit court ultimately ruled in favor of Mattis on his administrative claim against SURS. The court also awarded Mattis attorney fees and expenses. However, the remaining counts in Mattis' third amended complaint were dismissed

Given the circuit court's invalidation of the Pension Code amendments, defendants appealed directly to this court. 134 Ill.2d R. 302(a). Defendants' appeal was docketed in this court as cause No. 96012. Mattis appealed to the appellate court. Upon motion by defendants, Mattis' appeal was transferred to this court and consolidated with defendants' appeal. Mattis' appeal was docketed as cause No. 96114.

BACKGROUND

On June 17, 1993, Mattis elected to retire from SIU under the early retirement provisions of section 15-136.2 of the Pension Code (40 ILCS 5/15-136.2 (West 1992)). Mattis' retirement began on May 15, 1994, when he was 55 years and 8 months old. If he had retired at this point without electing the early retirement option (ERO), his retirement annuity under Rules 1 and 3 of section 15-136 of the Pension Code would have been reduced by ½ of 1% for each month that he was under age 60. 40 ILCS 5/15-136(b) (West 1992). However, under section 136.2, which is titled "Early retirement without discount," Mattis could "avoid the early retirement reduction in retirement annuity specified under subsection (b) of Section 15-136" if, at the time of his application for retirement, he elected "to make a one time employee contribution to the System." 40 ILCS 5/15-136.2 (West 1992). The amount of this employee contribution was equal to 7% of the employee's highest annual salary multiplied by the number of years the employee was less than age 60. Section 15-136.2 also provided that if an employee elected to make an ERO contribution to the system, the employer was obligated to make a lump-sum contribution to the system. The amount of the employer contribution was equal to 20% of the employee's highest annual salary multiplied by the number of years the employee was under 60.

Under a temporary amendment to the ERO provisions of section 15-136.2 in effect from July 1, 1993, to June 30, 1994, Mattis did not make an employee ERO contribution, as would normally have been required. Instead, Mattis' employer, SIU, made both the employee and employer contributions under section 15-136.2. SIU's one-time, lump-sum payment to SURS totaled $122,928.60.

Section 15-136(a) of the Pension Code sets forth four formulas, or rules, by which the amount of a participant's retirement annuity is determined. The statute provides that "[t]he amount of the retirement annuity shall be determined by whichever of the following rules is applicable and provides the largest annuity." 40 ILCS 5/15-136(a) (West 1992). In the case at bar, the parties agree that only Rules 1 and 2 are relevant. Under Rule 1, the retirement annuity is calculated based on the number of years of service and the final rate of earnings. As noted, if a participant retires before age 60 without electing the ERO, the annuity calculated under Rule 1 is reduced by½ of 1% for each month the participant is under age 60. Under Rule 2, the calculation is based on the participant's contributions, rather than on years of service and rate of earnings. Because the Rule 2 calculation is based on contributions rather than years of service, there is no discount for early retirement under Rule 2 as there is with Rule 1.

SURS calculated Mattis' retirement annuity under both Rule 1 and Rule 2. Under Rule 1, with the SIU lump-sum

816 N.E.2d 307

payment taken into account, SURS determined that Mattis' annuity was $2,815.98 per month. Without the SIU payment taken into account, Mattis' annuity under Rule 1 would have been $2,097.91 a month. The difference is attributable to the early retirement discount, which Mattis avoided by electing the section 15-136.2 ERO. Under Rule 2, SURS determined that Mattis' annuity was $2,586.37 per month. In making this calculation, SURS did not take the one-time SIU payment into account. Because Mattis' annuity as calculated under Rule 1 was greater than the annuity under Rule 2, SURS began paying the Rule 1 annuity amount to Mattis upon his retirement on May 15, 1994. The first payment was made on June 1, 1994

Mattis objected to SURS's calculations, arguing that SIU's lump-sum payment of $122,928.60 should have been taken into account in determining his Rule 2 annuity amount. According to Mattis, if this had been done, his Rule 2 annuity would have been approximately $3,500 per month. Because this amount was greater than the $2,815.98 monthly annuity calculated by SURS under Rule 1, Mattis argued that it was this Rule 2 annuity amount that should have been paid to him.

On August 29, 1994, Mattis presented his claim before a hearing of the SURS claims committee. The committee recommended that Mattis' claim be denied and that his retirement annuity remain at the amount calculated under Rule 1. In its findings and conclusions, the claims committee noted that the Rule 2 formula is based on "accumulated normal contributions" (40 ILCS 5/15-136(a)(i), (a)(ii) (West 1992)), and the committee questioned whether the legislature "considered a payment such as the $122,929.00 paid by Southern Illinois University under Section 5/15-136.2 [sic] to be an `accumulated normal contribution' which must be included in calculating [Mattis'] retirement annuity under the money purchase formula [Rule 2]." The committee pointed to the definition of "normal contributions" in section 15-114, noting that this definition "stated that normal contributions are `specified under Section 15-157.'" The committee noted further that section 15-157, which is titled "Employee contributions," deals only with employee contributions and "does not include contributions made by the employer."

The committee saw "no indication that one[-]time employer contributions under Section 136.2 are to be considered normal contributions." Accordingly, the committee concluded that "the Legislature did not intend to define Section 136.2 one[-]time early retirement contributions as `normal' contributions such that they could be used in calculating a retirement annuity under the money purchase formula (40 ILCS 5/15-136(a) Rule 2)." The claims committee's recommendation to deny Mattis' claim was forwarded to the SURS board of trustees executive committee, which consisted of William Norwood, Emil Haeflinger, and Stanley Rives, the three individual defendants named in Mattis' initial complaint in the case at bar. The executive committee affirmed the claims committee's recommendation. This decision was forwarded to Mattis on January 13, 1995.

On February 16, 1995, Mattis filed his complaint in the circuit court of Champaign County against SURS and the individual members of the executive committee. As noted, in count I of the...