Board of Trustees v. City of Omaha
858 N.W.2d 186
Neb.2015Background
- Omaha City Council created the City of Omaha Police and Fire Retirement System (the System) and vested trust fund assets in a seven-member board of trustees charged to "formulate policy for" and "supervise" the System's operation.
- Omaha Mun. Code § 22-69 designates the city finance director as administrative head and provides that "the city attorney shall be the legal advisor to the board," and that "the board . . . may employ an actuary." § 22-71 directs that all administration costs be paid by the City, but allows investment expenses to be charged to the fund.
- The board voted to retain (a) its actuarial consultant to study disability benefits (suspecting unusually high disability payouts contributing to underfunding) and (b) potential outside legal counsel to evaluate whether separate counsel was required when the City or unions are involved.
- The City (via city attorney and finance director) advised the board that the city attorney is the board’s legal advisor and that the City would not pay for outside counsel or the study absent a conflict or City authorization.
- The board sued for declaratory relief seeking (1) authorization to retain consultants and independent counsel and (2) a declaration that related expenses are administrative and payable from the City’s general fund. The district court granted summary judgment for the board.
- The Nebraska Supreme Court narrowed the controversy, affirmed in part (actuary authority and City payment for that study) and reversed in part (board’s general discretion to hire independent counsel at City expense).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether board may retain an actuary to study disability benefits | Board: §22-69 expressly authorizes employing an actuary as technical advisor; board may obtain such assistance to fulfill fiduciary duties | City: Board may employ an actuary for enumerated tasks only; if allowed, board must pay because it is an investment expense | Court: Board may retain an actuary when necessary to "formulate policy" and "supervise" operations; retention must be reasonable and fiduciary-driven (affirmed) |
| Whether City must pay for the actuarial study | Board: §22-71 makes administrative costs payable by City; the study is an administrative expense | City: The study is an investment expense (not City-payable) or otherwise requires City authorization | Court: Study was an administrative expense under §22-71; City must pay unless board acted unreasonably, arbitrary, or beyond fiduciary duty (affirmed) |
| Whether board may retain independent legal counsel at City expense whenever it deems necessary | Board: §22-69 gives the board discretion to hire outside counsel as needed; costs are City-payable | City: §22-69 makes the city attorney the board’s legal advisor; "subject to" does not permit board to ignore city attorney; City control remains | Court: "Subject to the board" means the city attorney serves under the board’s direction; the board must use the city attorney unless a conflict prevents representation. The district court’s broad declaration that board may hire independent counsel as it deems necessary was reversed and vacated |
Key Cases Cited
- Fisher v. PayFlex Systems USA, 285 Neb. 808, 829 N.W.2d 703 (2013) (statutory construction principle: consider whole statute)
- Davenport Ltd. Partnership v. 75th & Dodge I, L.P., 279 Neb. 615, 780 N.W.2d 416 (2010) (appellate review of declaratory judgment questions of law)
- Boyles v. Hausmann, 246 Neb. 181, 517 N.W.2d 610 (1994) (requirements for a justiciable declaratory judgment)
- Professional Firefighters Assn. v. City of Omaha, 282 Neb. 200, 803 N.W.2d 17 (2011) (standing/justiciability context for municipal disputes)
- Bass v. County of Saline, 171 Neb. 538, 106 N.W.2d 860 (1960) (trustee fiduciary duties; limits on discretion)
- State ex rel. Johnson v. Tilley, 137 Neb. 173, 288 N.W. 521 (1939) (construction of "subject to" in municipal context)
- People ex rel. Todd v. Board of Education, 258 Ill. App. 271 (1930) (interpretation of "subject to" and limits on board control over legal department)