THE CITY OF COUNTRYSIDE, Plaintiff and Counterdefendant-Appellee, v. THE CITY OF COUNTRYSIDE POLICE PENSION BOARD OF TRUSTEES, FRANK BOZZI, KENNETH BRUNKE, BERNARD DUFFY, SUZANNE D‘URSO, PAUL MALLON, ERNEST MILLSAP, LOU MORAVECEK, JOSEPH PEITRANTONI, GARY SCHWAB, TIM SWANSON, JOHN MIKEL, MARK BATTAGLIA, and BRIAN COZEN, Defendants and Counterplaintiffs-Appellants.
First District, Sixth Division Docket Nos. 1-17-1029, 1-17-1069 cons.
Illinois Official Reports Appellate Court
September 28, 2018
2018 IL App (1st) 171029
PRESIDING JUSTICE DELORT delivered the judgment of the court, with opinion. Justices Cunningham and Harris concurred in the judgment and opinion.
Decision Under Review: Appeal from the Circuit Court of Cook County, No. 12-CH-6727; the Hon. Jean Prendergast Rooney and the Hon. Neil H. Cohen, Judges, presiding. Judgment: Affirmed.
Thomas S. Radja Jr., of Collins & Radja, of Naperville, for appellant City of Countryside Police Pension Board of Trustees.
Steve Calcaterra, of Naperville, for other appellants.
OPINION
¶ 1 This dispute between a city, retired police officers, and the city‘s police pension board concerns how the officers’ preretirement salary increase should be factored into their pension calculations. In summary, the circuit court held that the officers had received more in pension benefits than they were entitled to because their pensions had been incorrectly calculated. The court also rejected the pension board and the retirees’ defenses to the city‘s claim. We affirm.
I. BACKGROUND
¶ 2 The events giving rise to this dispute began almost 20 years ago. The following chronology and recitation of facts is taken from the pleadings, exhibits, affidavits, and other evidence of record that the circuit court relied on in granting summary judgment. In 2002, the City of Countryside (City) engaged in collective bargaining with the Fraternal Order of Police union (FOP) regarding contracts for the City‘s police officers, sergeants, and lieutenants. The bargaining resulted in two contracts, one for officers and one for the higher ranks. Both contracts are dated October 24, 2002, and contain the following provision:
“Section 14.3: Longevity Benefit
In addition to the salary amounts set forth in Section 14.1 of this Agreement, eligible officers, employed as of August 1, 2001 and thereafter, shall be paid the following longevity amounts which shall be considered part of the base salary attached to their rank for all purposes: $800.00 effective August 1, 2001; $850.00 effective August 1, 2002. In order to receive this longevity benefit, the following conditions must be met:
- The officer must have twenty (20) years of service with the City of Countryside Police Department;
- The officer must be pension eligible, as set forth by statute; and,
- The officer must designate a pay period in which to receive the longevity increase for either of the following two (2) election periods: January 1st to January 15th; OR July 1st to July 15th;
- In the event the officer fails to select either of the above election periods, the Employer shall issue the longevity stipend on the last payroll period in
December of each calendar year, retroactive to August 1, 2001, for all eligible officers in the bargaining unit as of that date. The foregoing longevity stipend shall only occur for that payroll period affected and shall not increase the value of any accumulated or accrued benefits of the officer which may be payable.” (Emphases in original.)
Furthermore, section 25.1 of the contracts provided an integration clause titled “Complete Agreement.” It states as follows:
“The parties acknowledge that during the negotiations which preceded this Agreement, each had the unlimited right and opportunity to make demands and proposals with respect to any subject or matter not removed by law from the area of collective bargaining. The understandings and agreements arrived at by the parties after the exercise of that right and opportunity are set forth in this Agreement.”
¶ 4 During the negotiation process, the City‘s labor attorney sent a memorandum to City officials outlining provisions of the proposed contracts and touting the inclusion of a new “longevity benefit” that would cost the City‘s pension fund $10,200 per retiring officer annually but save the City itself an estimated $655,347 annually in decreased salary costs because the retirees’ lower-seniority replacements would earn far lower salaries than their predecessors. The memorandum states that the $800 or $850 longevity benefit would increase a retiring officer‘s salary by $20,400 “for pension purposes.” The City‘s general counsel sent a letter to the City‘s negotiators stating that the City could bargain with the union for more generous pension benefits than those permitted by state law, and, if it did, the pension board would have no choice but to honor the City-union agreement and award pensions based on the negotiated agreement.
¶ 5 On October 26, 2002, the City‘s labor attorney and the FOP‘s attorney signed a “Letter of Understanding” (Side Letter). It referred to the recent bargaining for new police contracts and, in particular, to the longevity benefit established by section 14.3. The Side Letter stated that it was “RESOLVED” between the FOP and the City “THAT THEY AGREE AND APPROVE” a particular calculation method regarding section 14.3 longevity benefits. Under this method, when an eligible officer took a longevity benefit, the officer‘s gross wage base for pension purposes would be calculated by multiplying the one-time $800 or $850 longevity benefit times 24 payroll periods, resulting in a final salary for pension purposes that was either $19,200 or $20,400 higher than the officer had actually received in the prior year. The Side Letter provides the following specific example of the calculation method:
“$59,717.22 annual wage base + $20,400.00 longevity benefit ($850) = $80,117.22 base salary upon retirement $60,087.91 75% annual pension amount $ 5,007.32 monthly pension amount”
Thus, under the example, a single $850 one-time salary increase would increase the officer‘s annual pension from $44,787.93 (75% x $59,717.22) to $60,087.91—a $15,299.98 annual increase for the rest of the officer‘s life. This method creates the anomalous result that an officer‘s annual pension would be higher than any annual salary he had ever actually received during active service. Defendants Frank Bozzi, Lou Moravecek, and Tim Swanson
¶ 6 On September 10, 2003, the City adopted a resolution authorizing the mayor and clerk to sign the FOP contracts.1 Copies of the contracts were attached to the resolution, but neither the resolution nor the contracts adopted or even referenced the Side Letter. The record contains some evidence that certain City officials acquiesced to the new longevity benefit and Side Letter with the understanding that it would be paid only to a few officers who were retiring imminently, and that, after it came to light that the benefit was illegal, it would be discontinued. The City and police union later negotiated successor contracts to the 2003 contracts, each of which contained provisions similar to section 14.3. None of the successor contracts were accompanied by any document similar to the Side Letter. Over time, about 10 retiring officers took advantage of the section 14.3 calculation method and received pensions calculated under the method in the Side Letter.
¶ 7 In 2004, the City‘s labor attorney wrote to the City‘s police chief, referencing a May 13 report from
¶ 8 Over time, the City administration changed. A new City finance director, Gail Paul, questioned the legality of the Side Letter computation method. In 2009, the City‘s labor attorney provided her with a lengthy written opinion concluding that no court had ever specifically addressed the issue, and that, at any rate, because the City and the union had bargained and contracted for the calculation method, it “resulted in a vested right by present eligible officers to having the ‘longevity benefit’ calculated as part of their ‘salary’ upon retirement.” The City‘s general counsel adhered to his earlier opinion that the calculation was negotiated between the City and the union and that, although “arguments can be made that the Pension Board is not required to be bound by the agreement, should you choose to follow it I feel that there is no grounds to fear liability on your part or the part of the City based on the contractual agreement being negotiated and approved by both parties.”
¶ 9 In 2010, the City‘s labor attorney requested an advisory opinion from the DOI regarding the computation method. In its response, the DOI stated that section 3-125.1 of the
¶ 10 A few months later, the attorney for the City of Countryside Pension Board of Trustees
¶ 11 The City‘s labor attorney then forwarded the DOI response to various City officials, accompanied by a new memorandum in which he asserted that the DOI‘s response represented a departure from an earlier DOI position that had upheld the legality of calculation methods such as those set forth in the Side Letter. The attorney offered three options to the City: (1) disregard the DOI and proceed with the present practice; (2) object to the DOI‘s opinion and seek a declaratory judgment vindicating the City‘s practice; (3) notify the union that the City would cease using the computation method practice in reliance on the DOI opinion.
¶ 12 In April 2011, the Board‘s attorney advised the Board that the Side Letter created a binding contract between the City and the union that did not conflict with state law. Accordingly, he stated, “the Board would be on sound legal foundation to include the longevity amount as set forth in the [contracts] as salary attached to rank for calculating pension benefits.” He warned that if the Board took contrary action, it “could expose the Board to a state law tort claim for interference with contractual relations.”
¶ 13 The Board had routinely retained its own actuary to determine the City‘s annual funding obligation. Sometime after the City received the DOI correspondence opining that the calculation method was illegal, however, the City retained its own actuary to compute the City‘s annual obligation to fund the police pension system. The City‘s actuary based his computations on the assumption that the Side Letter computation method was illegal and that an officer‘s salary at retirement for pension purposes should be computed by prorating his longevity increase over 24 pay periods rather than annualizing it. The City then began funding the Board at the lower amount computed by its own actuary, rejecting the higher amount suggested by the Board‘s actuary.
¶ 14 On February 24, 2012, the City filed this lawsuit against the Board and the FOP, seeking declaratory and injunctive relief regarding certain retired police officers’ pensions. The second amended complaint at issue here, names the Board, the union, ten retired officers, and the widow of one deceased retired officer as defendants. One of the 11 officers and the union were later dismissed as defendants. During the pendency of this case, the Board continued to provide monthly pensions to the defendants using the Side Letter calculation method.
¶ 15 The eight-count second amended complaint generally alleges that the City was “unaware” that the computation method was illegal and that the Board‘s use of the Side Letter created a “systemic miscalculation of benefits.” Count I seeks a declaratory judgment that the computation method is unlawful. Count II seeks a declaratory judgment that the Board had “systematically miscalculated” the amount the City must contribute to the Board, that the “pension spikes” are not pensionable salary under section 3-125.1 of the
¶ 16 While the parties litigated the second amended complaint in the circuit court, the City and the union negotiated the terms of a successor police contract to run from 2010 to 2013. The negotiating parties reached an impasse regarding the contractual longevity benefit. That dispute, among others, was submitted to interest arbitration pursuant to section 14 of the
¶ 17 The arbitrator issued an award on November 22, 2013. The arbitration award recites that the City had made a final offer that section 14.3 of the contract, governing longevity benefits, should read:
“The City will increase the longevity benefit previously paid of $850.00 per year to $910.00 per year but that benefit will be split evenly and paid across each of the 26 pay periods in a year. Therefore, each pay period, those officers eligible for the longevity benefit will receive $35.00 added to their base salary.”
The City‘s proposed new section 14.3 would have clarified how preretirement longevity increases factored into a retiring officer‘s pensionable salary and thus would have superseded the contrary provisions of the Side Letter. The parties disputed whether this proposed revision of section 14.3 placed the “pension spike” computation method at issue before the arbitrator. The City argued that its proposal merely set forth “the intent of the parties” regarding the longevity benefit, would provide “clarity,” and would “prevent the longevity benefit from being used to increase the value of any other benefit.” The City contended that “it was always the intent of the parties that the longevity stipend *** did not increase the value of other benefits.” Since the proposal would not, in the City‘s view, decrease existing benefit, no quid pro quo was required to make this change from the existing contract.
¶ 18 According to the award, the union‘s position at arbitration was somewhat different from the City‘s. The union characterized the issue as involving how the Board should calculate retirement pensions. The union contended that the Side Letter reflected the parties’
“The ‘Pension Spike’ issue was specifically excluded from consideration in this Interest Arbitration. Here, the Employer advocates for adoption of a proposal that would fix the ‘Pension Spike.’ However, the pension issue is specifically not part of the consideration in the instant matter—it formed the basis for the Employer‘s jurisdiction objection.”
¶ 19 On the merits of the issue submitted, the arbitrator determined that the City‘s offer was “designed to alter an existing benefit by affecting how pensions are determined.” He continued:
“The Employer‘s change to the pension calculation is a significant change. Such a significant change requires evidence to support the Employer‘s position and that evidence is not present in the instant matter. The Employer has specifically advocated for excluding consideration of the ‘Pension Spike’ in this Interest Arbitration. Without evidence of the effect of the ‘Pension Spike,’ there is no choice available but to reject the Employer‘s offer. The Union‘s offer of Status Quo on the Longevity Benefit is adopted.”
Thus, section 14.3 of the contracts remained unchanged following the arbitration.
¶ 20 On February 22, 2013, the City moved for summary judgment on counts IV and V of its second amended complaint. After briefing, the circuit court3 granted the City‘s motion and declared the parties’ rights as follows: (1) the collective bargaining agreement alone determines the longevity benefit calculation and (2) the Side Letter does not modify the collective bargaining agreement “in any fashion.” The court‘s opinion indicated that the sole issue then before it was whether the Side Letter affected the police contracts and that it was not addressing either the “legality of any alleged pension spikes” or the issue of funding, as those issues were governed by counts I, II, III, and VIII. The court finally noted that the City “conceded at oral argument” that the rights of retirees currently receiving benefits were “not at issue now.” Because the court found that those retirees’ rights were likely different from those of future retirees, the court indicated that its ruling applied prospectively only and did “not address or affect those pensioners already receiving benefits.”
¶ 21 On April 14, 2014, the defendant retirees and three additional retirees4 filed a four-count counterclaim that relied on the Side Letter. Count I of the counterclaim alleged that the
¶ 22 The City moved to dismiss all counts of the retirees’ counterclaim pursuant to sections 2-615 and 2-619 of the
¶ 23 On May 2, 2016, the Board filed its own counterclaim. Count I sought a declaratory judgment that the City had acted contrary to law by failing to account for the Side Letter‘s benefits when it provided annual funding to the Board. The Board sought compensatory damages and a declaration that the City was required to levy a property tax sufficient to meet the annual requirements of the pension fund. Count II was a claim in mandamus seeking similar relief. The City answered the Board‘s counterclaim, denying the substantive allegations but also specifically stating that it had not levied any property tax for the Board because it had adequate funds from other sources that it used to periodically meet its statutory funding obligations to the Board.
¶ 24 On August 3, 2016, over a year after the circuit court dismissed the retirees’ original counterclaim with prejudice, it granted them leave to file a second counterclaim, over the City‘s objections. The retirees’ second counterclaim did not repeat or reference—in any manner—the four counts of the retirees’ original counterclaim that the court had dismissed with prejudice on January 26, 2015. Instead, the second counterclaim contained a single new
¶ 25 After undertaking discovery and extensive motion practice, the parties filed dispositive motions. On December 13, 2016, the City moved for summary judgment against the Board and retirees on counts I, II, III, and VIII of the City‘s second amended complaint. The retirees also moved for summary judgment on their second counterclaim. Additionally, the Board moved for summary judgment in its favor. The Board‘s motion does not specify whether it was presented defensively against the City‘s second amended complaint, offensively in support of the Board‘s counterclaim, or both. However, the Board‘s motion raises a wide range of arguments applicable in both respects.
¶ 26 We note, in passing, that the City filed a legal malpractice lawsuit against the City‘s original labor attorney in 2014, which expanded to include a third-party complaint against the City‘s original general counsel. That case proceeded to a jury trial in the law division of the circuit court of Cook County in 2016. The parties in this appeal have presented some evidentiary materials from that trial in support of their motions for summary judgment.
¶ 27 After briefing and argument, the circuit court entered an order (1) granting the City‘s motion for summary judgment on counts I, II, III, and VIII of its second amended complaint; (2) granting the City summary judgment on the Board‘s counterclaim and the retirees’ second counterclaim; (3) denying the Board‘s motion for summary judgment; and (4) denying the retirees’ motion for summary judgment. This order resolved all pending claims and counts.
¶ 28 In particular, the circuit court rejected the Board‘s and retirees’ reliance on the fact that City officials knew about the Side Letter all along, stating, “[w]hile such evidence exists in the record, it is also irrelevant” because the Side Letter was neither incorporated into any collective bargaining agreement nor adopted by ordinance. As an additional basis for finding in favor of the City, the court noted that the City‘s annual appropriation ordinance did not constitute an adoption of the Side Letter because pension calculations were done by the Board, not the City. Further, it found, the City‘s approval of Board funding was done through periodic bulk funding requests rather than by an ordinance adopting the Side Letter. As we discuss in detail below, the court also rejected the Board‘s and retirees’ affirmative defenses.
¶ 29 The circuit court further held that (1) the Board‘s reliance on the Side Letter was contrary to the
¶ 31 On appeal, both the Board and the retirees have proceeded holistically. They raise a host of contentions of error that relate to multiple counts and claims. With a few minor exceptions, they do not direct any particular argument to either a particular count of the second amended complaint or a count in either counterclaim. Additionally, both the Board and the retirees have adopted each other‘s arguments as their own. For sake of clarity, we will address the City‘s second amended complaint first, followed by the defendants’ affirmative defenses, and conclude with the defendants’ counterclaims.
¶ 32 We begin by summarizing the issues each party raises in the briefs before us. The Board contends that the circuit court erred in finding that the Side Letter should not be used in the calculation of pension benefits. In particular, the Board argues that (1) the
¶ 33 The retirees, for their part, contend that the circuit court erred in granting summary judgment to the City, first, on counts IV and V of the City‘s second amended complaint (Judge Rooney‘s order) and second, on all the remaining counts. They also contend that they should have prevailed on the following affirmative defenses: (1) unclean hands, (2) laches, (3) equitable estoppels, (4) waiver, (5) statute of limitations, (6) failure to seek administrative review6 of the Board‘s initial computation of benefits, and (7) lack of jurisdiction because the dispute had been resolved in binding interest arbitration. On their counterclaims, they contend that the court should not have dismissed their original counterclaim with prejudice, but instead it should have given them leave to amend it. They also contend that the court erred by granting the City summary judgment on their second counterclaim because their pensions were constitutionally protected against reduction. Finally, they contend that even if the Side Letter was not incorporated into the successor contracts to the 2002 contract, at least the officers who retired during the term of the 2002 contract should have their pensionable salary calculated pursuant to the Side Letter.
¶ 34 Summary judgment is appropriate “if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact
¶ 35 Our analysis begins with the operative statutes and the related administrative regulations. The cardinal rule of statutory construction is to ascertain and give effect to the legislature‘s intent, and the plain language of the statute is the best indication of that intent. Acme Markets, Inc. v. Callanan, 236 Ill. 2d 29, 37-38 (2009). “The best evidence of legislative intent is the language used in the statute itself, which must be given its plain and ordinary meaning.” Roselle Police Pension Board v. Village of Roselle, 232 Ill. 2d 546, 552 (2009). “The statute should be evaluated as a whole, with each provision construed in connection with every other section.” Id. If the statutory language at issue is clear and unambiguous, a reviewing court must interpret the statute according to its terms without resorting to aids of statutory construction. Branson v. Department of Revenue, 168 Ill. 2d 247, 254 (1995). Furthermore, “[a]dministrative rules and regulations have the force and effect of law, and must be construed under the same standards which govern the construction of statutes.” People ex rel. Madigan v. Illinois Commerce Comm‘n, 231 Ill. 2d 370, 380 (2008).
¶ 36 Because it has a population of less than 5000, the City is governed by article 3 of the
“the salary attached to the rank held on the last day of service or for one year prior to the last day, whichever is greater. The pension shall be increased by 2.5% of such salary for each additional year of service over 20 years of service through 30 years of service, to a maximum of 75% of such salary.” (Emphasis added.)
40 ILCS 5/3-111(a) (West 2002).7
¶ 37 Section 3-125.1 of the
” ‘Salary’ means the annual salary, including longevity, attached to the police officer‘s rank, as established by the municipality‘s appropriation ordinance, including any compensation for overtime which is included in the salary so established, but excluding any ‘overtime pay‘, ‘holiday pay‘, ‘bonus pay‘, ‘merit pay‘, or any other
cash benefit not included in the salary so established.” 40 ILCS 5/3-125.1 (West 2016).
¶ 38 The General Assembly has granted the DOI authority to issue regulations governing municipal police and fire pension systems.
¶ 39 The DOI has promulgated regulations defining salary for the purpose of calculating a retiree‘s pension under article 3 of the
A. Operative Effect of the Side Letter
¶ 41 We first consider the defendants’ appeal from Judge Rooney‘s order granting the City summary judgment on counts IV and V of the second amended complaint. The order declared the parties’ rights as follows: (1) the collective bargaining agreement alone determines the longevity benefit calculation and (2) the Side Letter does not modify the collective bargaining agreement “in any fashion.” Closely related issues arose again when Judge Cohen dismissed the retirees’ first counterclaim. Judge Cohen declined to depart from Judge Rooney‘s earlier opinion.
¶ 42 Judge Rooney‘s order was based on the contracts’ integration clause in section 25.1. Although neither she nor the parties characterized the argument as such, section 25.1 of the contracts is more commonly known as an integration clause. She found, in particular, that the integration clause was clear and unambiguous. As such, it foreclosed the possibility that the Side Letter could somehow modify the contract. In addition to the integration clause analysis, the court found that because the Side Letter was never incorporated into any successor contracts, it did not apply to them, and it was “a nullity.”
¶ 43 Illinois follows the “four corners rule,” which precludes the consideration of extrinsic evidence where a contract contains an integration clause and is facially unambiguous. Air Safety, Inc. v. Teachers Realty Corp., 185 Ill. 2d 457, 462 (1999). When parties include a formal integration clause into a contract, “they are explicitly manifesting their intention to protect themselves against misinterpretations which might arise from extrinsic evidence.” Id.
¶ 44 In this case, the contracts themselves were duly approved by the City‘s corporate authorities. The Side Letter was not. In its ruling granting summary judgment on counts IV and V and in its later orders relying on that prior ruling, the circuit court properly found that the Side Letter was of no force or effect.
B. Validity of the Department of Insurance Longevity Benefit Proration Regulation
¶ 46 We next consider whether the circuit court properly granted summary judgment to the City on the remaining counts of its second amended complaint. In essence, these counts concerned whether the Board validly and legally calculated the retirees’ pensions by multiplying the longevity bonus by 24 and adding that sum to the base salary to compute the retirees’ pensions. If this method was illegal or invalid, the next question is what the appropriate remedy should be.
¶ 47 The parties devote a considerable portion of their argument to the validity of the DOI regulation providing that a longevity bonus must be prorated.
¶ 48 At the outset, we reject the retirees’ claim that the regulation is invalid. The DOI regulation is consistent with the salary-related provisions of the
¶ 49 Compensation plans for public employees can be complex, including elements such as seniority pay, holiday pay, bonus pay, and overtime pay. Depending on how the term “salary” in section 3-111(a) of the
¶ 50 Along the same lines, section 3-125.1 also provides that certain irregular compensation elements, such as overtime, holiday, bonus, and merit pay, are not part of pensionable salary.
¶ 51 If we were to assume that the regulation was invalid or that the Side Letter calculation method itself was valid, we would easily obtain an utterly irrational result. Under the defendants’ interpretation of the law, a municipality and its employees’ union could agree that on the last paycheck, an officer would receive a longevity increase of, say, $100 for the officer‘s last hour of work. Assume, for the sake of this example, that the municipality duly appropriated specific funds to pay the $100 last-hour bonus in an appropriation ordinance, thus fulfilling the “approved through an appropriations ordinance” requirement. Under the defendants’ argument, that miniscule $100 expenditure would be multiplied by 24 hours in a day, and then remultiplied by 365 days in a year, to generate a pensionable salary $876,000 higher than that the officer actually earned in the prior year. This is an absurd result. When construing a statute, we must assume that the legislature did not intend to produce an absurd or unjust result and we must avoid, if possible, a construction leading to an absurd result. Hubble v. Bi-State Development Agency of the Illinois-Missouri Metropolitan District, 238 Ill. 2d 262, 283 (2010).
¶ 52 The $100 bonus in the example above was clearly intended to be granted one time only. Therefore, the “salary attached to the rank” under the
C. Legality of the Side Letter Benefits
¶ 54 Having found the regulation to be valid, we continue our analysis of the order granting summary judgment to the City on counts I, II, III, and VIII of the second amended complaint. This court has had frequent occasion to examine the statutes and regulations at issue here in the context of preretirement longevity pay increases. A consistent line of cases instructs that, to be considered pensionable salary, extra pay elements must be duly appropriated by ordinance. In Smith v. Board of Trustees of the Westchester Police Pension Board, 405 Ill. App. 3d 626, 632-33 (2010), an officer contended that his pension should reflect a pay increase that the village‘s president and trustees instructed the village manager to give to the officer. The Smith court found that such mere instructions did not satisfy the requirement that
¶ 55 Village of Chicago Ridge v. Chicago Ridge Firefighters’ Pension Board of Trustees, 2016 IL App (1st) 152089, even more closely parallels the dispute before us. The Chicago Ridge firefighters received a preretirement 20% “buyout” bonus that was never approved through an appropriations ordinance. Id. ¶¶ 1, 18. The bonus, paid “per hour” only for the firefighter‘s last day of service, was explicitly set forth in a letter of understanding between the village and the union. Id. ¶ 4. The letter of understanding, in turn, was specifically incorporated into a collective bargaining agreement that was duly approved by resolution of the village board. Id. ¶ 13. The court first rejected reliance on the approval of the letter of understanding by resolution, stating, “that is not the same as being approved through an appropriations ordinance.” Id. ¶ 18. Specifically, relying on what is known as the “equal dignity rule,” the court held that a mere resolution was insufficient to effectuate what the law requires to be accomplished by ordinance. Id. (citing Illinois Municipal Retirement Fund v. City of Barry, 52 Ill. App. 3d 644, 647 (1977)). See also McCarty v. City of Rockford, 96 Ill. App. 3d 531, 534 (1981) (collecting cases regarding the equal dignity rule). Second, the Chicago Ridge court stated the resolution approving the union contract was not an appropriation at all because “[a]n appropriation involves the setting apart from public revenue a certain sum of money for a specific object.” 2016 IL App (1st) 152089, ¶ 18.
¶ 56 Here, there is no dispute that the City never enacted any ordinance appropriating the longevity bonus times 24 pay periods for any of the retirees. Additionally, the Side Letter was never approved by the City corporate authorities in any manner, either by resolution or ordinance. Accordingly, under section 3-125 of the
D. The City‘s Actuarially Determined Funding Obligations to the Pension Board
¶ 58 We next address the portion of the City‘s motion for summary judgment as to count III, which requested a declaratory judgment that the City was funding the Board in accordance with the
“annually levy a tax upon all the taxable property of the municipality at the rate on the dollar which will produce an amount which, when added to the deductions from the salaries or wages of police officers, and revenues available from other sources, will equal a sum sufficient to meet the annual requirements of the police pension fund.”
The statute proceeds to specifically define “annual requirements,” an amount computed based on assets on hand, future needs of the fund, and application of various actuarial principles to determine the reserves necessary to ensure adequate future funding.
¶ 59 This court has determined that a municipality is not strictly bound by its employees’ pension board‘s calculations but rather enjoys some level of discretion in determining the required annual funding amount based on its own actuarial assumptions. The municipality, is, nonetheless, bound by the requirements of section 3-125 of the
¶ 60 The defendants contend that the City has not levied any pension tax at all, but that assertion is misleading. When questioned at oral argument, counsel for the Board indicated that the Board takes the position that the statutory requirement that the City “shall” levy a property tax to fund the pension system is mandatory and that the City may not fulfill its statutory funding obligations by drawing available funds from non-property tax sources. The record reveals that the City has not ignored its statutory funding obligations, because the City has provided funding through non-real estate tax sources, as it is entitled to do. See M. Neal Smith, Police Officers’ and Firefighters’ Pension Boards, in Municipal Law: Financing, Tax, and Municipal Property § 7.32 (Ill. Inst. for Cont. Legal Educ. 2018) (noting that municipalities that “receive lucrative sales tax proceeds” and “do not levy a property tax could theoretically fund their pension requirements through sources other than property taxes“). The real dispute stems from the fact that the City funds the Board using its own section 3-125 actuarial calculations, which do not take the Side Letter benefits into account. To a creditor, receiving payment for a $100 debt from a wallet is the functional equivalent as receiving it from a cash box. So if the City funds the Board in an amount computed pursuant to statute, we do not believe that the Board has a right to insist on its own preferred source of that funding. Thus, the dispute before us simply boils down to whether the City must account for the Side Letter benefits when calculating its annual funding obligations to the Board. We have already found that the collective bargaining agreement alone governs the retirees’ salary for pension purposes, the Side Letter does not modify the collective bargaining agreement in any way, and the Side Letter calculation method violates the
E. Affirmative Defenses
¶ 62 Up to this point, we have considered the City‘s claims set forth in counts I, II, III, and VIII of its second amended complaint, and have found that those claims are meritorious. However, we have done so without considering whether City is barred from relief by any of the defendants’ affirmative defenses. We consider each of those defenses in turn.
i. Laches
¶ 64 The defendants argue that the City‘s claims are barred by the doctrine of laches. ”Laches is an equitable principle which bars recovery by a litigant whose unreasonable delay in bringing an action for relief prejudices the rights of the other party.” People ex rel. Daley v. Strayhorn, 121 Ill. 2d 470, 482 (1988). For laches to bar a claim, “it must appear that a plaintiff‘s unreasonable delay in asserting his rights has prejudiced and misled the defendant, or caused him to pursue a course different from what he would have otherwise taken. [Citations.] If the defendant is not injured by the delay, then plaintiff is not guilty of laches.” People ex rel. Casey v. Health & Hospitals Governing Comm‘n of Illinois, 69 Ill. 2d 108, 115 (1977). Because it is an equitable doctrine, a court has discretion to determine whether laches applies in a particular case. Finley v. Finley, 81 Ill. 2d 317, 330 (1980). Therefore, we reverse a trial court‘s determination regarding applicability of laches only if that decision was an abuse of discretion. Lozman v. Putnam, 379 Ill. App. 3d 807, 822 (2008). A court abuses its discretion when its decision was ” ‘palpably erroneous, contrary to the manifest weight of the evidence, or manifestly unjust.’ ” Id. (quoting O‘Brien v. Meyer, 281 Ill. App. 3d 832, 835 (1996)). A court also abuses its discretion only when its decision is arbitrary, fanciful, or unreasonable, or where no reasonable person would take the view adopted by the circuit court. Seymour v. Collins, 2015 IL 118432, ¶ 41.
¶ 65 The record amply supports the circuit court‘s finding that laches does not apply. The issue presented involves the illegal expenditure of public funds. Our supreme court has cautioned that while governmental bodies do not enjoy total immunity from laches, the doctrine is to be applied sparingly against them and only under “compelling,” “unusual[,] or extraordinary circumstances.” Van Milligan v. Board of Fire & Police Commissioners, 158 Ill. 2d 85, 90 (1994). This is because “valuable public interests may be jeopardized or lost by the negligence, mistakes or inattention of public officials.” Hickey v. Illinois Central R.R. Co., 35 Ill. 2d 427, 447-48 (1966). While we recognize that the retirees may have proceeded in reliance on the Board‘s original (but illegal) computations, the public interest in enforcing the
ii. Estoppel
¶ 67 Similarly, the defendants contend that the City should be estopped from seeking modification of the retirees’ pensions because the City offered the Side Letter calculation method to the retirees but then later sued to invalidate the benefits that the method granted to the retirees. Equitable estoppel prevents a party from asserting rights where doing so would
¶ 68 Our supreme court‘s recent decision in Patrick Engineering, Inc. v. City of Naperville, 2012 IL 113148, is instructive. Patrick involved whether equitable estoppel applied against a city based on the act of a city employee. The Patrick court stated that equitable estoppel against a municipality will lie only “in extraordinary and compelling circumstances.” Id. ¶ 35.
“[A] plaintiff seeking to invoke equitable estoppel against a municipality must plead specific facts that show (1) an affirmative act by either the municipality itself or an official with express authority to bind the municipality; and (2) reasonable reliance upon that act by the plaintiff that induces the plaintiff to detrimentally change its position.” Id. ¶ 40.
Agency and reliance are typically questions of fact, but a plaintiff still “must offer more than mere conclusions on these elements because Illinois is a fact-pleading jurisdiction, and because, when public revenues are at stake, estoppel is particularly disfavored.” Id. ¶ 39. Further, “the private party must have not only substantially changed its position, based on the affirmative act of the municipality or its officials [citation], but also justifiably done so, based on its own inquiry into the municipal official‘s authority.” Id.
¶ 69 The defendants vehemently argue the point that the City itself bargained with the FOP in 2002 to give retiring officers a “pension spike,” and that everyone involved knew exactly what they were doing and what it would cost. They also argue that the City, as employer, and the union, representing the employees, can collectively bargain and contract to give the employees rights or benefits of whatever level they so chose. Once the Board went along with the Side Letter program, they contend, the deal was sealed and the retirees’ benefits were locked in place in perpetuity. What this argument misses is that the City, Board, and employees all function within a larger system created by state law. To give one example: The assets from which police pensions are paid result from a combination of employee payroll withholding, funding from the host municipality through a property tax levy or other source, and earnings on investments.
¶ 70 When the Side Letter was used to increase the retirees’ pensions, the
iii. Arbitration
¶ 72 The defendants also presented an affirmative defense regarding the City‘s submission of a claim regarding the longevity calculation method to binding arbitration between the City and the union. The arbitrator issued an award against the City on that issue. Despite the City‘s lack of success in the arbitral forum, there are several reasons why the City‘s claims nonetheless survive. First, the arbitration in question only applied to one particular contract term, 2010-13. More importantly, though, the arbitration did not, and could not, address the legality of the “pension spike” as to individual defendants who had already retired and were therefore not subject to the contract being arbitrated. Essentially, the arbitrator held that because there was no evidence presented regarding “the effect of the ‘Pension Spike,’ ” the City failed to meet its burden to justify a change from the existing contract language regarding the longevity benefit. The arbitrator did not address the issue presented here, which is whether the calculation method conformed to the
¶ 73 A very similar issue arose in Chicago Ridge. There, the court rejected the pension board‘s reliance on a prior arbitration hearing, noting that because “the language of the
iv. Failure to Seek Administrative Review
¶ 75 The defendants also contend that the City waited too long to seek relief. They characterize these claims under various theories: statute of limitations, failure to timely seek administrative review, and standing. Regardless of how the defendants characterize these defenses, we find them unavailing.
¶ 76 The Board clearly has the statutory authority to calculate and award pensions to retirees.
¶ 77 Here, in contrast, the dispute is between the City, which funds the Board, on the one hand, and the aligned interests of the Board and retirees on the other. The dispute here did not arise from a matter in which the City was a party to some case, application, or dispute formally adjudicated by the Board. Instead, it arose through a systematic miscalculation, which falls outside the definition of an “administrative decision” under the
¶ 78 The Burge decision supports the Chicago Board court‘s analysis. In Burge, the court emphasized that because preventing “significant violations of the Pension Code and ensuring the fiscal integrity” of pension funds were such important goals, “challenges to actions taken by a retirement board have been authorized both within the context of administrative review and without.” Id. The Burge court cited Chicago Board with approval, stating:
“In addition, our appellate court has recognized that, in certain circumstances, a governmental entity which was not a party before a pension board proceeding may contest a retirement board‘s administrative decision when it would result in the diminution of a pension fund. Karfs v. City of Belleville, 329 Ill. App. 3d 1198 (2002); see also Board of Education of the City of Chicago v. Board of Trustees of the Public Schools Teachers’ Pension & Retirement Fund, 395 Ill. App. 3d 735 (2009) (‘systemic miscalculations’ by a pension board are not administrative decisions and may be challenged outside the Administrative Review Law). These avenues for legal challenge to the actions of a pension board exist in addition to general civil and criminal oversight, including criminal provisions found in the Pension Code itself [citation], and regulatory oversight provided by the Department of Insurance [citation].” Id.
¶ 79 Based on these authorities, we find that the circuit court did not err in rejecting the defendants’ affirmative defense based on failure to timely seek administrative review.
v. Pension Protection Clause of the 1970 Illinois Constitution
¶ 81
“While the pension protection clause guarantees the vested rights provided in the contract that defines a participant‘s retirement system membership, it does not change the terms of that contract or the essential nature of the rights it confers. Accordingly, the pension protection clause does not transform a nonvested right to retirement benefits into one that is vested.” Id.
The governing contract here is the collective bargaining agreement, unmodified by the Side Letter, and we have found that the collective bargaining agreement itself does not support the application of the Side Letter calculation method.
¶ 83 In recent years, our supreme court has confronted a number of legislative attempts to reduce vested pension rights. The court has consistently held that, under the pension protection clause, public employees have an absolutely inviolable contractual right to their vested pension benefits, a right that can never be diminished or impaired. See, e.g., Jones v. Municipal Employees’ Annuity & Benefit Fund, 2016 IL 119618; In re Pension Reform Litigation, 2015 IL 118585; Kanerva v. Weems, 2014 IL 115811. The defendants rely on these cases to support their contention that the circuit court could not enter any order diminishing the benefits that the Board awarded them upon their respective retirements. Again, we find these cases distinguishable and the defense ineffective. We acknowledge that, in light of this line of authorities from a higher court, that holding might seem anomalous. It is not. In Kanerva and the other cases, the supreme court was called upon to review legislation that diminished the vested pension rights of current or retired employees and, thus, breached the contract between the State and the retiree. No issue arose in those cases that the employees’ pensions had been incorrectly calculated from the beginning. Here, in contrast, the retirees’ pensions were calculated incorrectly on day one—based on the employment contract, statutes, and regulations then and now in force. The retirees could only “contract” for benefits allowed by law. Put simply, “[a] right cannot be protected if it does not exist.” Underwood v. City of Chicago, 2017 IL App (1st) 162356, ¶ 26. A host of individuals affiliated with the City, aided by the employees who sat at the bargaining table, constructed a fictitious calculation method based on erroneous advice and used the method to award pensions far higher than those permitted by law. They steadfastly refused to rectify the situation after the DOI admonished them—several times over the course of a number of years—that the method was illegal. Although we understand that some or all of the retirees may have left service in reliance on the advice given to them at the time of retirement, they are nonetheless charged with knowledge of the laws. See Schlosser v. Jursich, 87 Ill. App. 3d 824, 826 (1980) (“individuals are presumed to have contracted with knowledge of existing law“). The pension protection clause does not prevent the court from imposing a remedy to bring the retirees’ pensions to the correct level permitted by law existing upon their retirements.
¶ 85 The defendants contend that the City “waived its arguments concerning the collective bargaining agreement and side letter by renegotiating these agreements and re-entering into agreements with the same effect.” Aside from a fleeting reference to a single case containing a boilerplate definition of waiver, they fail to support this argument with any specific legal authorities. Therefore, we consider the point forfeited. See Vancura v. Katris, 238 Ill. 2d 352, 370 (2010) (“even where the brief includes both argument and citation, a party may nonetheless forfeit review if the cited authority is irrelevant and does not represent a sincere attempt to comply with the rule“). Forfeiture aside, the defendants’ waiver argument is largely duplicative of their estoppel and laches arguments, and it fails for the same reasons. Additionally, the defendants’ argument regarding the City-appointed members of the Board fails to note that these appointees only constitute two of the five members of the Board. See
vii. Statute of Limitations
¶ 87 The defendants contend that the City‘s claims are barred by the five-year statute of limitations generally applicable to civil actions (
“The parties agree that the City Council is a continuing body, the existence of which never ceases by reason of a change of membership. The continuing body concept serves as the useful legal fiction needed to accomplish such desirable public policy considerations as protecting the contract rights of persons who had contracted with the previous municipal body, sustaining the existence of a body that can act during periods of transition and affirming the ability of one city council to act upon the uncompleted business of a previous council.” Roti v. Washington, 114 Ill. App. 3d 958, 969 (1983).
The City‘s position is reminiscent of this classic scene in Casablanca:
“CAPTAIN RENAULT: I‘m shocked! Shocked to find that gambling is going on in here.
[a croupier hands Renault a pile of money]
CROUPIER: Your winnings, sir.
CAPTAIN RENAULT: [sotto voce] Oh, thank you very much.
[aloud]
CAPTAIN RENAULT: Everybody out at once.” Casablanca (Warner Bros. 1942).
We are likewise concerned that many individuals who loyally served the city as first responders relied on the City administration‘s acquiescence to the Side Letter computation method, illegal though it was, when they made decisions regarding their retirement and financial plans. Their reliance interest is substantial and cannot be ignored. The City argues that it had no duty to know the legality of the Side Letter computation method. But the record demonstrates that even City officials who were not at the bargaining table and who did not vote to approve the Side Letter were fully aware of what would occur when the senior officers retired and applied for pensions. Therefore, we cannot reject the defendants’ statute of limitation defense merely because a new group of City officials “discovered” the illegal pension spike after they took office.
¶ 88 “As a reviewing court, we can sustain the decision of a lower court on any grounds which are called for by the record, regardless of whether the lower court relied on those grounds and regardless of whether the lower court‘s reasoning was correct.” Leonardi v. Loyola University of Chicago, 168 Ill. 2d 83, 97 (1995). We agree with the circuit court that the statute of limitations defense fails but for a different reason. Section 13-205 of the
¶ 89 Generally, “a limitation period begins ‘when facts exist which authorize one party to maintain an action against another.’ ” Id. at 266 (quoting Davis v. Munie, 235 Ill. 620, 622 (1908)). However, under the “continuing violation rule,” if a claim involves a continuing or repeated injury, the limitations period does not begin to run until the date of the last injury or the date the acts cease. Belleville Toyota, Inc. v. Toyota Motor Sales, U.S.A., Inc., 199 Ill. 2d 325, 345 (2002). A continuing violation stems from continuing unlawful acts and conduct, not merely by continual ill effects from an initial violation. Feltmeier v. Feltmeier, 207 Ill. 2d 263, 278 (2003). Accordingly, we must determine whether the Board‘s issuance of monthly
¶ 90 We find Belleville Toyota, 199 Ill. 2d at 348-49, instructive on this issue. There, our supreme court reviewed whether the statute of limitations barred automobile dealers’ claims against a manufacturer for breaching a supply agreement and for violations of the
¶ 91 This case involves the Board‘s monthly issuance of each retiree‘s pension check and annual disputes between the City and the Board over the level of required funding. These occurrences parallel the allocations at issue in Belleville Toyota. We therefore find that (1) the applicable date for statute of limitations analysis is not 2002 when the Board first began miscalculating pensions using the Side Letter method, (2) each monthly check and annual funding dispute triggers a separate limitation period, (3) the five-year statute of limitations in section 13-205 of the
¶ 92 Judge Rooney‘s order granting summary judgment to the City on counts IV and V of the second amended complaint stated the following: “As such, this ruling applies prospectively and does not address or affect those pensioners already receiving benefits.” Judge Cohen‘s ruling granting summary judgment on the remaining counts found that the use of the Side Letter calculation method was contrary to the
“(2) the City is not required to levy taxes or otherwise fund pension amounts based on the calculations set forth in the Side Letter; (3) the Pension Board must recalculate the pensionable salaries of the Individual Defendants in accordance with the provisions of the CBA and award future pension benefits to the Individual Defendants on this basis; and (4) the Pension Board is hereby enjoined from using the provisions of the Side Letter to calculate any future retiree‘s pensionable salary.”
¶ 93 Thus, the orders before us only require that, going forward, (1) the City may fulfill its annual funding obligations through an actuarial analysis that complies with section 3-125 of the
¶ 94 In sum, we find that the circuit court did not err in granting summary judgment to the City on its claims, properly finding for the City on the merits of counts I, II, III, IV, V, and VIII, and by rejecting the defendants’ affirmative defenses.
F. Counterclaims
¶ 96 We next consider the defendants’ contentions regarding their counterclaims. On appeal, the retirees contend the circuit court erred in dismissing all four counts of the first counterclaim with prejudice. About a year after that dismissal, the retirees sought leave to file a new counterclaim. The retirees captioned that counterclaim as their “SECOND” counterclaim. The second counterclaim contained a single count alleging that diminishing the retirees’ pensions would violate the pension clause of the Illinois Constitution. They raised no such constitutional claim in their original counterclaim and the second counterclaim contained no reference to the previously dismissed four counts of the original counterclaim. Our supreme court has explained that “a party who files an amended pleading waives any objection to the trial court‘s ruling on the former complaints,” and ” ‘[w]here an amendment is complete in itself and does not refer to or adopt the prior pleading, the earlier pleading ceases to be a part of the record for most purposes, being in effect abandoned and withdrawn.’ ” Foxcroft Townhome Owners Ass‘n v. Hoffman Rosner Corp., 96 Ill. 2d 150, 153-54 (1983) (quoting Bowman v. County of Lake, 29 Ill. 2d 268, 272 (1963)). The Foxcroft court explained:
“When a complaint is amended, without reference to the earlier allegations, it is expected that these allegations are no longer at issue. Defendants would be disadvantaged by a rule which would, in effect, permit a plaintiff to proceed to trial on different issues contained in separate complaints. In contrast, we perceive no undue burden in requiring a party to incorporate in its final pleading all allegations which it desires to preserve for trial or review.” Id. at 154.
We find that the retirees forfeited their ability to appeal the dismissal of their first counterclaim.
¶ 97 The retirees contend that the circuit court should have given them leave to amend the dismissed first counterclaim. They forfeited this argument as well, since they never asked to amend the first counterclaim and, thus, gave the court no opportunity to decide whether to allow them to amend. Thompson v. N.J., 2016 IL App (1st) 142918, ¶ 64. Forfeiture aside, we will review the denial of leave to amend for abuse of discretion. County of Cook ex rel. Rifkin v. Bear Stearns & Co., 215 Ill. 2d 466, 474 (2005). Since the court eventually granted
¶ 98 The retirees filed a second counterclaim that contained a single count, alleging that the Illinois Constitution‘s pension protection clause protected the retirees’ original pensions from reduction. The circuit court granted summary judgment in favor of the City on this counterclaim, finding that the collective bargaining agreement—not the Side Letter—was the only contract between the retirees and the City. For the reasons set forth in our discussion of the defendants’ pension protection clause affirmative defense, the court did not err in granting summary judgment to the City on the retirees’ second counterclaim.
¶ 99 The Board filed a two-count counterclaim alleging that the City improperly failed to provide funding to the Board as required by section 3-125 of the
III. CONCLUSION
¶ 101 We affirm the orders of the circuit court (1) granting summary judgment in favor of the City on counts IV and V of its second amended complaint; (2) granting summary judgment in favor of the City on counts I, II, III, and VIII of its second amended complaint; (3) granting summary judgment in favor of the City on the Board‘s counterclaim and the retirees’ second counterclaim; (4) dismissing the retirees’ first counterclaim; (5) denying the Board summary judgment on its counterclaim; and (6) denying the retirees summary judgment on their second counterclaim.
¶ 102 Affirmed.