Wabash County v. Ill. Mun. Ret. Fund

• Decision Date: 28 February 2011
• Docket Number: No. 2–10–0025.,2–10–0025.
• Citation: 408 Ill.App.3d 924,349 Ill.Dec. 411,946 N.E.2d 907
• Parties: WABASH COUNTY, Illinois, Plaintiff–Appellant,v.ILLINOIS MUNICIPAL RETIREMENT FUND, Illinois Municipal Retirement Fund Board of Trustees, Sharon U. Thompson, Ruth E. Faklis, Martha H. Rademaker, Max F. Bochmann, Gwen Henry, Marvin Shoop, Jr., William Stafford, and Michael D. Suppan, in Their Capacities as Trustees of the Illinois Municipal Retirement Fund, Louis W. Kosiba, in His Capacity as Executive Director of the Illinois Municipal Retirement Fund, Terry C. Kaid, and The City of Mount Carmel, Illinois, Defendants–Appellees.
• Court: United States Appellate Court of Illinois

408 Ill.App.3d 924

946 N.E.2d 907

349 Ill.Dec. 411

WABASH COUNTY, Illinois, Plaintiff–Appellant,

v.ILLINOIS MUNICIPAL RETIREMENT FUND, Illinois Municipal Retirement Fund Board of Trustees, Sharon U. Thompson, Ruth E. Faklis, Martha H. Rademaker, Max F. Bochmann, Gwen Henry, Marvin Shoop, Jr., William Stafford, and Michael D. Suppan, in Their Capacities as Trustees of the Illinois Municipal Retirement Fund, Louis W. Kosiba, in His Capacity as Executive Director of the Illinois Municipal Retirement Fund, Terry C. Kaid, and The City of Mount Carmel, Illinois, Defendants–Appellees.

No. 2–10–0025.

Appellate Court of Illinois, Second District.

Feb. 28, 2011.

Lee T. Polk, Law Offices of Barnes & Thornburg, Chicago, Cassandra A. Goldman, Wabash County State's Attorney, for Wabash County, Illinois.Michael B. Weinstein, Illinois Municipal Retirement Fund, Oak Brook, for Max F. Bochmann, Ruth E. Faklis, Gwen Henry, Illinois Municipal Retirement Fund, Illinois Municipal Retirement Fund Board of Trustees, Louis W. Kosiba, Martha H. Rademaker, Marvin Shoop Jr., William Stafford, Michael D. Suppan, Sharon U. Thompson.William P. Hardy, Hinshaw & Culbertson LLP, Springfield, Michael L. Wagner, Hinshaw & Culbertson LLP, Belleville, for City of Mount Carmel.John T. Hundley, Sharp Law Firm, P.C., Mt. Vernon, for Terry C. Kaid.

OPINION

Justice HUTCHINSON delivered the judgment of the court, with opinion.

Plaintiff, Wabash County, appeals the trial court's order dismissing its complaint pursuant to section 2–619 of the Code of Civil Procedure (the Code) (735 ILCS 5/2–619 (West 2008)). Plaintiff's lawsuit stemmed from a decision by defendant the Illinois Municipal Retirement Fund (the IMRF) to dismiss plaintiff's request for correction of records regarding a contribution charge of $540,990.79 for a pension for defendant Terry C. Kaid. Three issues are raised on appeal: (1) whether the trial court erred in dismissing plaintiff's complaint for a declaratory judgment that the IMRF exceeded its authority pursuant to the Illinois Pension Code (the Pension Code) (40 ILCS 5/1–101 et seq. (West 2008)); (2) whether the trial court erred in dismissing the complaint after concluding that plaintiff failed to sufficiently allege a claim for relief under the Administrative Review Law (the Review Law) (735 ILCS 5/3–101 et seq. (West 2008)); and (3), if plaintiff did sufficiently allege a claim under the Review Law, whether any deference should be accorded to the IMRF's decision. For the reasons set forth below, we affirm in part and reverse in part the trial court's judgment and remand the case to the IMRF for further proceedings.

I. Background

The relevant facts are not in dispute. Plaintiff is a county existing under the laws of Illinois and is a participating municipality in the IMRF pension program. The IMRF is a pension fund that pays pensions to certain employees and their beneficiaries. The IMRF is administered by a board of trustees and a staff and is governed by the Pension Code. Among other duties, the IMRF charges participating employers, including plaintiff, for the costs associated with the pensions of employees covered by the program. Defendants Sharon U. Thompson, Ruth E. Faklis, Martha H. Rademaker, Max F. Bochmann, Gwen Henry, Marvin Shoop, Jr., William Stafford, and Michael D. Suppan are members of the IMRF board of

[349 Ill.Dec. 416 , 946 N.E.2d 912]

trustees, and defendant Louis W. Kosiba is the executive director of the IMRF. Defendant City of Mt. Carmel is a municipality established pursuant to the Illinois Municipal Code (65 ILCS 5/1–1–1 et seq. (West 2008)) and is a participating municipality in the IMRF pension program. Defendant Kaid is a licensed attorney residing in Wabash County.

Kaid was an attorney in private practice from January 1981 through November 1992 and, in this capacity, provided legal services to Mt. Carmel, which designated him “city attorney.” During his years in the private practice of law, Kaid was not enrolled as a participant in the IMRF and did not receive pension benefits as an employee of Mt. Carmel. According to the record on appeal, Kaid was compensated for his legal services to Mt. Carmel as an independent contractor. From December 1, 1992, through November 30, 2004, Kaid served as State's Attorney for Wabash County. While serving as State's Attorney, Kaid earned 12 years of creditable service for IMRF pension purposes, but that service is not at issue in this appeal.

The current matter arose when the IMRF charged plaintiff $540,990.79 based on pension credits Kaid received for his legal services to Mt. Carmel from 1981 through 1992. In August 2002, the city clerk for Mt. Carmel submitted to the IMRF an omitted service credit verification to verify omitted creditable service toward Kaid's IMRF pension based on his service as city attorney. After initially concluding that Kaid did not qualify for creditable service for the years he served as city attorney, in December 2002 the IMRF granted Kaid creditable service status for those years. Beginning in May 2003 and concluding in June 2004, Kaid made a series of payments to the IMRF to purchase his omitted service credit, pursuant to the IMRF's retroactive grant of creditable service status. As a result, in June 2004, Kaid had purchased 96 months of omitted service credit. Without the retroactive credit, Kaid was entitled to a pension equal to 40% of his pay for his 12 years of service as State's Attorney. With the retroactive credit, however, Kaid became entitled to a pension equal to 80% of his pay for 20 years of service. In January 2005, Kaid applied for his pension, and the IMRF approved the pension of 80% of his pay for 20 years of service, which included the 8 years of omitted service credit. Kaid's pension began to be paid in March 2005.

On May 10, 2006, the IMRF sent plaintiff a letter that provided in pertinent part:

“The present value of benefits decreased from $1,100,734 in 2004 to $566,356 in 2005, a 94% decrease. The total assets decreased from $531,596 in 2004 to negative $687,473 in 2005. This decrease was due to the retirement of [Kaid], whose annuity decreased your assets by $1,191,593.55. Your unfunded liability increased from $569,138 in 2004 to $1,253,829 in 2005. This is the main reason for the increase in the employer rate.”

The letter did not mention that Kaid had retroactively received eight years of omitted service credit for his service as city attorney for Mt. Carmel.

In July 2006, Mt. Carmel reversed its 2002 decision and informed Kaid that he was not entitled to the omitted service credit for the years he served as city attorney. Shortly thereafter, the Mt. Carmel city council passed a resolution providing that Kaid was ineligible for the omitted service credit. Subsequently, the IMRF requested Mt. Carmel to hold an evidentiary hearing regarding Kaid's employment status for his service as city attorney, the determination of which the board of trustees for the IMRF could adopt or reject.

[946 N.E.2d 913 , 349 Ill.Dec. 417]

On September 1, 2006, in light of the evidentiary hearing, Kaid filed a lawsuit against the IMRF and Mt. Carmel (the Kaid litigation), seeking a declaratory judgment regarding his pension. Kaid did not name plaintiff as a party to the litigation. During the lawsuit, Kosiba filed an affidavit averring that the IMRF did not investigate Kaid's status as an employee of Mt. Carmel or his application for the omitted service credit. The parties reached a settlement agreement in which Kaid agreed to pay Mt. Carmel $5,000 a year for 20 years or until his death if earlier, and Mt. Carmel and the IMRF agreed to drop with prejudice the administrative proceedings regarding Kaid's pension and grant Kaid pension credit for his service as city attorney.

On July 10, 2008, the IMRF sent plaintiff a letter stating that the contribution charge for Kaid's pension was $540,990.79. Plaintiff then exhausted its administrative remedies by filing with the IMRF a request for correction of records on October 6, 2008, asking that Kaid's pension credit for his service as city attorney and the $540,990.79 contribution charge be rescinded. Pursuant to the request, the IMRF asked the parties to submit briefs regarding whether plaintiff's challenge to Kaid's omitted service credit was timely and whether plaintiff had standing to challenge the contribution charge.

On July 1, 2009, after a hearing was conducted, the IMRF informed plaintiff that its request for correction of records was dismissed as untimely and barred by laches. In reaching its determination, the IMRF's “findings and conclusions” were that plaintiff was aware of the total charge attributable to Kaid's pension; the Kaid litigation was “extensively covered” by the local news media; two representatives of Mt. Carmel had advised a county board member that it would be in plaintiff's best interest if it joined the Kaid litigation; plaintiff's “unreasonable failure” to assert its rights in the Kaid litigation would prejudice Kaid and Mt. Carmel; and allowing plaintiff to “insist upon its rights” at this time, after failing to assert its rights in the Kaid litigation, would unreasonably hinder the resolution reached in that lawsuit. Having found plaintiff's request untimely and barred by laches, the IMRF did not decide whether plaintiff had standing to challenge the contribution charge for Kaid's pension.

On August 3, 2009, plaintiff filed a complaint in the trial court seeking, inter alia, a declaratory judgment that the IMRF's contribution charge of $540,990.76 violated the Pension Code. Count I alleged that the IMRF's administrative decision was void because it did not provide plaintiff an adequate opportunity to challenge the merits of the charge. Count II alleged that the charge was unauthorized under the Pension Code because the IMRF did not have authority to give Kaid retroactive omitted service credit for the years he served as city attorney....