Smith v. Pennsylvania Employees Benefit Trust Fund, 031606 PACCA, 369 MD 2005

Docket Nº:369 MD 2005
Party Name:Smith v. Pennsylvania Employees Benefit Trust Fund
Case Date:March 16, 2006
Court:Court of Appeals of Pennsylvania

Samuel H. Smith and Brett O. Feese, Petitioners


Pennsylvania Employees Benefit Trust Fund, and Robert Dubow, Michael J. Masch, Don Adams, Matt Waneck, David Donley, Nancy Derling Martin, David Myers, David Fillman, Edward Keller, Michael Fox, Wendell Young, III, Thomas DeBruin, Mark C. Kornfeld, Joan Bruce, Respondents

No. 369 M.D. 2005

Court of Appeals of Pennsylvania

March 16, 2006

Argued: November 16, 2005




Petitioners Samuel H. Smith, Majority Leader of the Pennsylvania House of Representatives, and Brett O. Feese, Chairman of the House Appropriations Committee, filed their petition for review in this Court's original jurisdiction on July 19, 2005. Petitioners asserted that Respondents Pennsylvania Employees Benefit Trust Fund (PEBTF) and members of its Board of Trustees (Trustees) intended to convene a private, non-public meeting on July 21, 2005 for the purpose of taking official action that would extend medical benefits to same-sex partners of Commonwealth employees and annuitants.

Petitioners also asserted in their petition for review that PEBTF is an "agency" within the meaning of the Sunshine Act, 65 Pa. C.S. §§701 - 716, and that conducting the meeting without notice and being open to the public would violate the Sunshine Act.1] Respondents filed preliminary objections and a motion to dismiss. The parties filed their respective memoranda, Respondents filed a reply memorandum and John Perzel, Speaker of the House of Representatives, filed his amicus curiae brief in support of Petitioners' position.

The petition for review alleged that the executive branch of the Commonwealth government created PEBTF by an Agreement and Declaration of Trust (Trust Agreement) pursuant to its constitutional and statutory authority for the purpose of providing medical benefits to state employees. PEBTF is administered by a fourteen-member Board of Trustees, seven members appointed by the Governor and seven appointed by unions representing Commonwealth employees. It alleged that PEBTF is funded entirely by contributions from the Commonwealth of about $900 million per year and that the Commonwealth maintains legal title to the assets of the fund. PEBTF is vested with sole authority to make decisions and to take official action on behalf of the Commonwealth and the executive branch regarding matters of employee benefits, including the imposition of per capita financial assessments upon Commonwealth agencies in addition to regular negotiated Commonwealth agency financial contributions.


Respondents' preliminary objections assert the following: (1) this Court lacks jurisdiction because PEBTF is not an "agency" as defined in the Sunshine Act; (2) the petition for review fails to state a claim because PEBTF is a product of collective bargaining not "created by or pursuant to a statute" and therefore is not an agency subject to the Sunshine Act; (3) the present issue is moot because Petitioners were invited to the July 21, 2005 meeting and they or their designees attended; (4) the issue is moot because the meeting is concluded, and Petitioners or their designees attended but they declined an offer to address the Trustees; (5) the petition for review sought to enjoin a meeting and so sought by prior restraint to "muzzle" deliberations before they occurred, in violation of First Amendment rights; (6) the Commonwealth and unions negotiated collective bargaining agreements creating PEBTF and it is controlled in part by union trustees, and Petitioners' efforts would alter the bargained-for nature of PEBTF and abrogate the agreements; (7) the petition for review seeks to convert PEBTF from a private employer subject to jurisdiction of the National Labor Relations Board into a public employer subject to the Public Employe Relations Act (PERA), Act of July 23, 1970, P.L. 563, as amended, 43 P.S. §§1101.101 - 1101.2301.

Respondents' memorandum in support of their preliminary objections and motion to dismiss includes a detailed description of the history of PEBTF, with cross-reference to the "Volume of Exhibits" filed with the memorandum.2] It refers to the genesis of PEBTF in the Trust Agreement that became effective October 1, 1988 through collective bargaining between the Commonwealth and Council 13 of the American Federation of State, County and Municipal Employees (AFSCME). Exhibit 3.3] The Trust Agreement provides for the establishment of a trust fund to provide health, medical, and welfare benefits to public sector employees in the Commonwealth as well as employees of one private sector employer. The PEBTF healthcare benefit program covers employees under the Governor's jurisdiction as well as employees of the Treasurer's Office and Auditor General's Office and other independent governmental entities. Moreover, the Trust Agreement explicitly provides that responsibility for PEBTF's operation, administration, development and implementation is vested in the Trustees. They select all vendors (Highmark, Capital Blue Cross, etc.), and the state has no decision-making power over the contracts. The Commonwealth also invested PEBTF with sole and exclusive authority to make decisions and to exercise options with respect to the health, medical and welfare benefits that the Commonwealth provides to its employees.


Respondents do not address each stated preliminary objection separately; rather, they make an overall argument that PEBTF is not an agency or other similar organization and therefore is not subject to the Sunshine Act. They first note that Section 704, 65 Pa. C.S. §704, requires that all official actions of an "agency" be taken at a meeting open to the public. Section 703, 65 Pa. C.S. §703, defines "Agency" as follows:

The body, and all committees thereof authorized by the body to take official action or render advice on matters of agency business, of all the following: the General Assembly, the executive branch of the government of this Commonwealth, including the Governor's Cabinet when meeting on official policymaking business, any board, council, authority or commission of the Commonwealth or of any political subdivision of the Commonwealth or any State, municipal, township or school authority, school board, school commission, the boards of trustees of all State-aided colleges and universities, the councils of trustees of all State-owned colleges and universities, the boards of trustees of all State-related universities and all community colleges or similar organizations created by or pursuant to a statute which declares in substance that the organization performs or has for its purpose the performance of an essential governmental function and through the joint action of its members exercises governmental authority and takes official action.

Respondents assert that PEBTF is not an agency as defined by Section 703 because it is not identified as such either by name (e.g., General Assembly) or by category (e.g., school board). They contend that the fact that PEBTF receives funding from contributions made by state entities does not convert it to an agency, citing Mooney v. Temple University of the Commonwealth System of Higher Education Board of Trustees, 448 Pa. 424, 292 A.2d 395 (1972), which held that increased financial assistance by the state to a non-profit corporation organized for educational purposes did not transform it into a state agency within the definition in Section 2 of the act known as the Right-to-Know Act, Act of June 21, 1957, P.L. 390, as amended, 66 P.S. §66.2.

Further, PEBTF does not qualify as a "committee" under Section 703 because its Trustees are not appointed pursuant to statute, nor does the Board have explicit or implicit authority to act on behalf of the...

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