271 P.3d 966
Wash. Ct. App.2012Background
- Plaintiffs Mickey and Leisa Fowler, TRS members, sued the Washington DRS for failing to pay daily interest on funds transferred from TRS Plan 2 to Plan 3 before Jan 20, 2002.
- The superior court held the DRS had authority to calculate interest but did not must pay daily interest and that the calculation method was not arbitrary or capricious.
- Probst similarly challenged the DRS’s interest calculation practices in a related action; the actions were consolidated with the class action.
- The DRS uses a quarterly interest crediting method, based on the quarter-end balance, which can deny interest if transfers occur with zero end-of-quarter balance.
- Legislation: RCW 41.50.033 (2007) expressly authorizes the director to determine when interest is credited and the amount and method of regular interest, with quarterly crediting required if interest is credited.
- The court held that RCW 41.50.033 abrogates the common-law daily-interest rule for TRS by giving the DRS authority to determine how interest is earned and credited.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the DRS may determine how interest is earned | Fowlers: common law daily interest applies; DRS must pay daily interest. | Fowler: DRS has authority to set rate only; cannot decide when/how earned. | DRS has authority to determine how interest is earned. |
| Does RCW 41.50.033 abrogate the daily interest rule | Fowlers: RCW 41.50.033 preserves daily accrual; agency misapplied statute. | DRS: statute grants authority to determine when/amount of regular interest; daily rule abrogated. | Yes, the statute abrogates daily interest as a matter of law. |
| Is the DRS's quarterly interest calculation arbitrary and capricious | Fowlers: practice chosen without due consideration; harms class members. | DRS considered options but chose quarterly method; not arbitrary. | DRS decision to use quarterly calculation was arbitrary and capricious; remanded. |
Key Cases Cited
- Int'l Ass'n of Fire Fighters Local 3266, AFL-CIO v. Dep't of Retirement Sys., 97 Wash.App. 715 (Wash. Ct. App. 1999) (APA standard of review and agency action standards applied)
- Jenkins v. Dep't of Soc. & Health Servs., 160 Wash.2d 287 (2007) (statutory interpretation with agency deference considerations)
- Bostain v. Food Express, Inc., 159 Wash.2d 700 (2007) (statutory interpretation and agency authority principles)
- City of Redmond v. Cent. Puget Sound Growth Mgmt Hearings Bd., 136 Wash.2d 38 (1998) (when there is room for two opinions, due consideration negates arbitrary action)
- Hayes v. City of Seattle, 131 Wash.2d 706 (1997) (arbitrary and capricious agency action standard)
- Overlake Hosp. Ass'n v. Dep't of Health, 170 Wash.2d 43 (2010) (APA arbitrary and capricious review; factual record sufficiency)
- Dep't of Ecology v. Campbell & Gwinn, LLC, 146 Wash.2d 1 (2002) (plain meaning and statutory interpretation approach)