NEA-COFFEYVILLE v. USD NO. 445

• Decision Date: 28 January 2000
• Docket Number: No. 81,992.,81,992.
• Citation: 996 P.2d 821,268 Kan. 384
• Parties: NEA-COFFEYVILLE, Appellee, and ROY GAGE, DARREL HARBAUGH, VELMA McKINNEY, TED CREED, GLORIA GRIGSBY, AND DELPHINE JACKSON, Intervenors/Appellees, v. UNIFIED SCHOOL DISTRICT NO. 445, COFFEYVILLE, MONTGOMERY COUNTY, KANSAS, Appellant.
• Court: Kansas Supreme Court

268 Kan. 384

996 P.2d 821

NEA-COFFEYVILLE, Appellee, and ROY GAGE, DARREL HARBAUGH, VELMA McKINNEY, TED CREED, GLORIA GRIGSBY, AND DELPHINE JACKSON, Intervenors/Appellees, v. UNIFIED SCHOOL DISTRICT NO. 445, COFFEYVILLE, MONTGOMERY COUNTY, KANSAS, Appellant.

No. 81,992.

Supreme Court of Kansas.

Opinion filed January 28, 2000.

Fred W. Rausch, Jr., of Topeka, argued the cause and was on the briefs for appellant.

C.A. Menghini, of Menghini & Menghini, L.L.C. of Pittsburg, argued the cause, and was on the brief for appellee NEA-Coffeyville.

David M. Schauner and Gregory C. Brownfield, of Topeka, argued the cause and were on the brief for intervenor appellees.

The opinion of the court was delivered by

DAVIS, J.:

This case involves a dispute between public school teachers represented by the National Education Association-Coffeyville (NEA-C) and Unified School District No. 445 (the District) over a refund on group health insurance policies for the benefit of teachers. Blue Cross and Blue Shield of Kansas, Inc., (BCBS) paid the refund to the District in accordance with the terms of its contract with the District. The trial court determined that the refund belonged to the teachers. The District appeals. Our jurisdiction is under K.S.A. 20-3018(c).

The amount in controversy is $138,775.52, identified in the group health policies between the District and BCBS as a "divisible surplus." According to the contract between BCBS and the District, a divisible surplus occurs as a result of lower use of insurance benefits by subscribers than was anticipated when the premiums were determined. The period of time over which the divisible surplus accumulated spans the years 1991-1992, 1992-1993, and 1993-1994. The health insurance giving rise to the divisible surplus was part of the teachers' fringe benefit package.

The record below is extensive. Five separate contracts are involved. Two contracts are between the District and BCBS providing group health insurance coverage as a part of the fringe benefit package for individual teachers who elected coverage and were employed during the specified times at the District. Three contracts involved negotiated agreements between the District and the exclusive bargaining representative for the teachers of the district, NEA-C. Before examining these contracts, the following procedural and jurisdictional questions raised by the parties must be resolved: (1) Is NEA-C a proper party; and (2) did the district court have jurisdiction over the subject matter, thus conferring jurisdiction upon this court?

(1) Is NEA-C a proper party?

The District argues that NEA-C should be dismissed as a plaintiff because it is without capacity to maintain an action against the District. The District argues that NEA-C, as an unincorporated association, may only sue a school district under certain situations set forth in Seaman Dist. Teachers' Ass'n v. Board of Education, 217 Kan. 233, 535 P.2d 889 (1997).

This question involves a proper interpretation of our decision in Seaman. Thus, the question presented is one of law, and this court's review is unlimited. In re Estate of Winslow, 23 Kan. App.2d 670, 677, 934 P.2d 1001 (1997) (a de novo standard of review applies to the interpretation of case law).

In Seaman, this court held:

"A primary purpose of the collective negotiations statute was to provide a spokesman and representative for the individual professional employees for the protection and the improvement of their rights. We think the act itself in enabling a professional employees' organization ... to perform its statutory duties... permits the professional employees' organization to sue or be sued in the association's name." 217 Kan. at 244.

The District argues that Seaman limits NEA-C's ability to sue to those situations involving a dispute arising out of the negotiation process. According to the District, claims must have a "negotiations nexus" before a teachers' association may file suit in district court. Because the negotiated agreements do not refer to the divisible surplus, a point which will be discussed more fully below, the District contends the dispute over the surplus is not within the rule of Seaman.

Contrary to the District's position, our holding in Seaman was not so limited. In Seaman, we recognized that a professional employees' association is charged by statute with a task of improving the employees' rights. The act authorizing collective negotiations, enabling a professional employees' organization organized pursuant to statute to perform its statutory duties, responsibilities, and functions, permits the professional employees' organization to sue or be sued in the association's name. 217 Kan. at 244. NEA-C, as the exclusive bargaining agent for the District's teachers, has standing to sue where the protection of teachers' rights is at issue. See K.S.A. 72-5414.

The United States Supreme Court has held that an association has standing to sue on behalf of its members when: (1) the members have standing to sue individually; (2) the interests the association seeks to protect are germane to the organization's purpose; and (3) neither the claim asserted nor the relief requested require participation of individual members. Hunt v. Washington Apple Advertising Comm'n, 432 U.S. 333, 343, 53 L. Ed.2d 383, 97 S. Ct. 2434 (1977).

NEA-C satisfies the requirements of the above test. Its members are identified as beneficiaries of the District's BCBS contract. As such, the members have standing to sue individually under a third-party beneficiary theory. See Fasse v. Lower Heating & Air Conditioning, Inc., 241 Kan. 387, Syl. ¶ 1, 736 P.2d 930 (1987). Moreover, the interest NEA-C seeks to protect is the monetary refund from insurance contracts made for the members' benefit and generated by their conduct. Finally, none of the individual member's participation is necessary. We conclude that NEA-C is a proper party plaintiff.

(2) Did the district court have jurisdiction to consider plaintiffs' claim or more specifically, did NEA-C fail to exhaust its administrative remedies?

An allegation that a party is required to or has failed to exhaust its administrative remedies presents a question of law. This court's review is unlimited. Nora H. Ringler Revocable Family Trust v. Meyer Land and Cattle Co., 25 Kan. App.2d 122, 132, 958 P.2d 1162, rev. denied 265 Kan. 886 (1998).

The resolution of this question depends upon the provisions of the negotiated agreements between the members of NEA-C and the District with reference to grievance procedures. The agreements do provide for a procedure and define grievance as "any alleged violation of this negotiated agreement." The agreements provide for four levels of grievance procedure. An appeal may be taken from one level to the next until resolution of the grievance is obtained. The negotiated agreements do not "include in such agreement procedures for final and binding arbitration of such disputes as may arise involving the interpretation, application or violation of such agreement" provided for in K.S.A. 72-5424. Instead, the general rules in the negotiated agreements provide: "Nothing contained in this grievance procedure shall deprive teachers or the Board of Education or its representatives of any legal rights otherwise established by Kansas Law."

When the District received a refund, it did not notify the Board or the individual members insured under their contract with BCBS. Of the $138,775.52 refund, the District deposited $60,000 of the surplus into a special education fund. The remaining $78,775.52 was deposited into a health insurance reserve account.

During contract negotiations in July 1996, NEA-C negotiator Darrel Harbaugh discovered that BCBS had refunded the $138,775.52 to the District the year before. Harbaugh discovered this through information given to him by a representative of BCBS. In August 1996, Harbaugh requested a copy of the previous year's BCBS policy, but the District was unable to locate a copy of the policy. Harbaugh spent the next 6 months writing letters and making telephone calls attempting to gather information about the refund. Harbaugh corresponded directly with District Superintendent Larry Thomas and the business manager for the District, Richard Hendrix. Finally, Harbaugh made a written request to all members of the Coffeyville School Board (Board) that he be put on the agenda during the next regularly scheduled meeting to ask for a return of the surplus to the subscribers. Superintendent Thomas informed Harbaugh that he would be permitted to make the formal request.

On March 10, 1997, Harbaugh appeared before the Board during its regularly scheduled meeting to ask for a return of the refund to the subscribers. The Board heard Harbaugh's request, made no decision, and tabled the matter until its next meeting on April 14, 1997. At the April meeting, the Board had an executive session to discuss the refund. The Board then stated it would delay its action until July when the newly elected members of the Board were in place. NEA-C filed this action May 15, 1997, before the scheduled July meeting.

In response to the District's argument that NEA-C failed to exhaust available administrative remedies, the district court held: (1) The grievance procedure in the negotiated agreements was neither available nor adequate; (2) if plaintiffs were required to exhaust their administrative remedies, they did so under the facts here; and (3) the District waived any right it had to this jurisdictional claim.

Failure to Use an Adequate and Available Administrative Remedy

This court has consistently held that where an administrative remedy is provided by statute, such remedy ordinarily must be exhausted before a litigant may resort to the courts. Pecenka v. Alquest, 232 Kan. 97, Syl. ¶ 3, 652 P.2d 679 (1982). The District maintains that the grievance procedure in the negotiated agreements was both available and adequate...