2004 Ohio 7101 | Ohio Ct. App. | 2004
{¶ 2} OAPSE is an employee organization that has among its purposes the representation of active non-teaching school employees.
{¶ 3} Appellants Joann Johntony, Linda Mobley, Sandra Wheeler, Mary Ann Howell, Betty Simmons-Talley, Mary DeVine, Rosella Tope, David Hamilton, William Higgins, Mary Beth Thompson, William Hurlow, Sylvia Holmes, Vicky Laub, Christine Holland, Deborah Weihrauch, Debra Basham, Hoberta Roach, Barbara Ward, Geneva Bates, Mary Blevins, Pam Dolence, and Norma Scholsser ("employee-appellants") are public school employees and are active employee members of SERS. As such, they have an amount equal to ten percent of their income deducted from their gross salaries for each payroll period as a contribution towards the cost of retirement benefits, not including health care insurance.
{¶ 4} Appellants Grace M. Nagel, Julia K. Martin, Bonnie B. Clark, Betty H. Harris, Sally Steagall, Dorothy C. Fannin, Anna M. Stegman, Catherine M. Clouse, Bernice L. Close, and Lee H. Martin ("retiree-appellants") are retired school employees, retirants of SERS, who are currently receiving retirement allowances and health care coverage from SERS.
{¶ 5} Appellee SERS is a public entity authorized to operate and maintain the retirement system on behalf of all non-certified/non-licensed public school employees in Ohio in accordance with Chapter 3309 of the Ohio Revised Code.
{¶ 6} With few exceptions, non-certified/non-licensed public school employees are required by law to contribute to SERS — currently at the rate of ten percent of their gross earnings. Employee contributions are forwarded to SERS and applied to the employees' savings fund. Employers are also required to make contributions to SERS — currently at the rate of 14 percent of the employees' gross earnings, plus any additional contributions required under R.C.
{¶ 7} The general administration and management of SERS is vested in the SERS board, which is composed of appellees auditor of state, attorney general, four SERS employee members (Jeannie Knox, Barbara Overholser, Barbara Miller, and Darlene Mulholland), and one retiree (Orris Fields) who is a recipient of SERS service or disability retirement benefits. The SERS board is a fiduciary of the funds created by R.C.
{¶ 8} Appellee Thomas Anderson is the executive director of SERS. He is employed pursuant to R.C.
{¶ 9} Retirees and disability benefit recipients of SERS are persons who have either met the age and eligibility requirements for service retirement, or became eligible to receive a disability retirement. Retirees and disability benefit recipients paid SERS contributions during the period of their employment in an amount up to ten percent of their earnings, depending on the law applicable at the time they were employed. When an SERS member dies before retirement, qualified beneficiaries of the member may become eligible for monthly survivor benefits from SERS, including health care coverage.
{¶ 10} For many years, SERS has provided a health care plan for retirees in addition to paying pensions, disability benefits and survivor benefits.1 Prior to 1989, all SERS members who retired from covered employment and qualified for SERS pension benefits also received free health care coverage from SERS, in addition to their pension. After 1989, retirees with at least 25 years of service credit with SERS, regardless of their age upon retirement, received free health care coverage. Retirees with less than 25 years of service credit were eligible for health care coverage from SERS in addition to their pension, but, they were required to pay between 5 percent and 75 percent of the monthly premiums. The percentage they were required to pay depended upon their years of service credit.
{¶ 11} On July 16, 2003, SERS approved a number of changes to the costs and scope of the health care plan it would provide to its members. These changes were to take effect on January 1, 2004. The changes included the requirement that all SERS retirees pay at least 15 percent of the premium cost for health care coverage. This minimum premium requirement applied to all currently retired and disabled SERS benefit recipients, regardless of the date on which the SERS member retired or became disabled and regardless of whether they presently pay any portion of the premium for their health care coverage.
{¶ 12} In addition, SERS changed the benefits provided under its health care plan and it increased co-pay amounts and out-of-pocket maximum requirements. These changes, coupled with the increased premium contributions, shifted a greater percentage of the health insurance costs to retiree and disability recipients. SERS undertook these changes to protect and preserve its health care fund in the face of rising health care costs and lower investment returns.
{¶ 13} In response to the changes SERS made to its health care plan, appellants filed suit against appellees seeking declaratory, injunctive, and other legal and equitable relief. The complaint set forth six separate claims for relief: (1) declaratory judgment; (2) breach of contract/specific performance; (3) promissory estoppel; (4) unconstitutional taking; (5) breach of fiduciary duty; and (6) injunctive relief.
{¶ 14} Subsequently, appellants filed a motion and application for preliminary injunction and request for an evidentiary hearing. On that same day, appellees filed a motion to dismiss appellants' complaint. The trial court referred both motions to a magistrate pursuant to Civ.R. 52 and Loc.R. 99.02. The magistrate elected to address appellees' motion to dismiss first.
{¶ 15} On December 4, 2003, the magistrate issued a decision recommending that the trial court deny appellees' motion to dismiss except for: (1) any claim premised on the breach of a non-vested contractual right to specific health care coverage and; (2) any breach of fiduciary duty claim premised upon SERS's alleged wasting of SERS funds in constructing its new office building and in paying unreasonable and excessive salaries to SERS employees.
{¶ 16} Appellees timely filed objections to the magistrate's decision with the trial court. Appellants also filed objections to that portion of the magistrate's decision that recommended dismissal of appellants' breach of fiduciary duty claims.
{¶ 17} In the meantime, the magistrate conducted an evidentiary hearing pursuant to appellants' motion for preliminary injunction. On December 31, 2003, the magistrate issued a decision granting appellants' motion for preliminary injunction. Thereafter, appellants filed a motion, pursuant to Civ.R. 53(E), seeking an order from the trial court granting a preliminary injunction consistent with the magistrate's decision. That motion was granted on January 2, 2004, and was effective for a period of ten days.
{¶ 18} On January 12, 2004, the trial court issued an interim decision in which it rejected the magistrate's December 4, 2003 decision in its entirety and vacated its January 2, 2004 interim order granting the preliminary injunction. The trial court also granted appellees' Civ.R. 12(B)(6) motion to dismiss, stating that an opinion would follow.
{¶ 19} On January 23, 2004, the trial court issued its decision sustaining appellees' objections to the magistrate's decision and dismissing appellants' complaint in its entirety for failure to state a claim. The trial court determined that: (1) health care coverage is a benefit under Chapter 3309 and the rules promulgated thereunder; (2) "access" to group health care coverage vests; (3) such vesting does not lock in costs or levels of coverage for SERS retirees or members; and (4) SERS has the authority to change costs and levels of health care coverage. Although the trial court did not specifically address each cause of action alleged in appellants' complaint, the trial court resolved all claims in favor of appellees as a matter of law and, therefore, dismissed the complaint.
{¶ 20} Appellants appeal, assigning the following errors:
[1.] The Court of Common Pleas erred in rejecting the Magistrate's Decision and in granting SERS' motion to dismiss the Complaint pursuant to Civ. R. 12(B)(6).
[2.] The Court of Common Pleas erred in finding that, as a matter of law, premium costs and levels of coverage for health care benefits provided to SERS retirees do not vest, but rather may be changed by the SERS Board.
[3.] The Court of Common Pleas erred as a matter of law in dismissing the entirety of the Complaint without ruling upon each separately pleaded claim thereof.
[4.] The Court of Common Pleas erred, as a matter of law and contrary to Civ.R. 53(E)(4)(b), in dismissing the entirety of the Complaint without ruling upon each objection raised by the parties to the Magistrate's Decision of December 4, 2003.
{¶ 21} Appellees also filed a cross-appeal assigning the following assignment of error:
To the extent that the trial court determined that SERS must provide access to a group health care plan and that such access to group health care coverage vests upon its granting, the trial court erred.
{¶ 22} For ease of analysis, we will address appellants' assignments of error out of order. Appellants contend in their second assignment of error that the trial court erred in finding as a matter of law that premium costs and levels of health care coverage provided to SERS retirees at the time of their retirement do not vest under R.C.
{¶ 23} The state retirement systems, including SERS, are creatures of statute and can only act in strict accordance with their enabling schemes. State ex rel. Horvath v. State TeachersRetirement Bd. (1998),
{¶ 24} R.C.
The granting of a retirement allowance, annuity, pension, or other benefit to any person pursuant to action of the school employees retirement board vests a right in such person, so long as he remains the recipient of any of the funds established by section
{¶ 25} In ascertaining the meaning of R.C.
{¶ 26} The first question we must address is whether payments for health care coverage are "benefits" as contemplated in R.C.
"Benefit" means a payment, other than a retirement allowance or the annuity paid under section
Thus, only a "payment" can qualify as a benefit under this definition. Except for a retirement allowance or annuity paid under R.C.
{¶ 27} Here, the source of the funds for SERS payments for health care coverage is reflected in R.C.
The school employees retirement board may enter into an agreement with insurance companies, health insuring corporations, or government agencies authorized to do business in the state for issuance of a policy or contract of health, medical, hospital, or surgical benefits, or any combination thereof, for those individuals receiving service retirement or a disability or survivor benefit subscribing to the plan and their eligible dependents.
* * *
The board may contract for coverage on the basis of part or all of the cost of the coverage to be paid from appropriate funds of the school employees retirement system. The cost paid from thefunds of the system shall be included in the employer'scontribution rate provided by sections
(Emphasis added.)
{¶ 28} In turn, R.C.
{¶ 29} Accordingly, because the employers' accumulated contributions fund the payments for the health care plan, we conclude that these payments are "benefits" for purposes of R.C.
{¶ 30} Next, we must determine whether these benefits vest. R.C.
{¶ 31} Appellants argue that the definition of a benefit does not require that payment be to a retiree. We agree. However, simply because payments for health care coverage are benefits does not mean they are vested benefits. Appellants also emphasize the well-settled principle that retirement statutes "must be liberally construed in favor of the public employees and their dependents who the statutes were designed to protect." State exrel. Mallory v. Pub. Emp. Retirement Bd. (1998),
{¶ 32} Our conclusion that payments for health care coverage do not vest under R.C.
{¶ 33} In contrast, SERS is required to pay pension, disability, and survivor benefits and there is a statutory mechanism in place to guarantee those payments. See, generally, R.C.
{¶ 34} The trial court drew a distinction between the vesting of specific health care plan features (and the costs associated therewith), and the vesting of "access" to health care coverage. The trial court found that, although costs and specific health care plan features did not vest under R.C.
{¶ 35} First, the parties did not dispute that SERS negotiated and purchased the health insurance plan at issue here pursuant to R.C.
{¶ 36} Second, the specific issue before the trial court was not whether retirees were entitled to access to health insurance benefits. The parties did not dispute that SERS retirees and beneficiaries had access to a health care plan. Rather, what they disputed was whether the specific cost structure and level of benefits provided by SERS's health care plan were vested under R.C.
{¶ 37} Accordingly, we overrule appellant's second assignment of error and sustain the sole assignment of error in appellee's cross appeal.
{¶ 38} Appellants contend in their fourth assignment of error that the trial court erred by failing to specifically address their objections to the magistrate's December 4, 2003 decision. We disagree.
{¶ 39} Appellants' objections to the magistrate's December 4, 2003 decision related solely to the dismissal of their claim for breach of fiduciary duty. Because the trial court rejected the magistrate's decision in its entirety pursuant to Civ.R. 53(E)(4)(b), appellants were not prejudiced by the trial court's failure to address their specific objections. We recognize that the trial court went on to dismiss all of appellants' claims, including their claim for breach of fiduciary duty. Appellants challenge that aspect of the trial court's decision in their first and third assignments of error, and we will address those arguments below. Accordingly, appellants' fourth assignment of error is overruled.
{¶ 40} Appellants' first and third assignments of error are related and, therefore, we address them together. Essentially, appellants contend that the trial court erred by dismissing the complaint in its entirety and by dismissing the complaint without ruling on each specific cause of action contained therein.
{¶ 41} As a preliminary matter, we note that a trial court is not required to specifically enumerate and explain the basis for granting a Civ.R. 12(B)(6) motion to dismiss. In fact, the trial court has no obligation to issue a written opinion when granting a Civ.R. 12(B)(6) motion to dismiss. Thompson v. Cent. OhioCellular, Inc., (1994),
{¶ 42} When a Civ.R. 12(B)(6) motion is granted, it is presumed the trial court found that the plaintiff failed to state a claim. Therefore, in the case at bar, the trial court did not err solely because it failed to specifically enumerate and explain the basis for granting appellees' Civ.R. 12(B)(6) motion to dismiss. However, because the complaint alleged multiple causes of action, we must examine each claim separately to determine whether appellants pled sufficient facts to withstand a Civ.R. 12(B)(6) motion to dismiss.
{¶ 43} A complaint may not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. State ex rel. Jennings v. Nurre (1995),
{¶ 44} Appellants' complaint contains six separate claims for relief: (1) declaratory judgment; (2) breach of contract/specific performance; (3) promissory estoppel; (4) unconstitutional taking; (5) breach of fiduciary duties; and (6) injunctive relief.3 Appellants' claims for declaratory judgment, breach of contract/specific performance, unconstitutional taking and injunctive relief are all premised on the assertion that SERS's health care plan vests pursuant to R.C.
{¶ 45} Likewise, to the extent that appellants' breach of fiduciary duty claim is premised on the alleged vesting of health care benefits granted pursuant to R.C.
(E) Wasting assets of the SERS funds in their care and abusing their discretionary authority over the administration of SERS funds by incurring and approving unnecessary expenses for the construction of a new SERS administration building; and
(F) Wasting assets of the SERS funds in their care and abusing their discretionary authority over the administration of SERS funds by incurring and approving unreasonable and excessive increases in salary and bonuses for Defendant Anderson and other SERS employees.
{¶ 46} Because we must presume these allegations to be true for purposes of a Civ.R. 12(B)(6) motion to dismiss, we find that appellants have stated a claim for breach of fiduciary duties to the extent their claim is based on: (1) the alleged wasting of SERS's funds in connection with the construction of the new SERS administration building; and (2) the alleged payment of unreasonable and excessive salary and bonuses to its executive director and other SERS employees. Accordingly, we find that the trial court erred by dismissing this claim in its entirety.4
{¶ 47} Lastly, in count three of the complaint, appellants assert a claim for promissory estoppel. Appellants allege that SERS representatives promised them that the percentages of premium costs appellants would pay upon retirement, whether from 0 percent to 75 percent, would not change. Appellants allege they relied on these promises to their detriment. Therefore, appellants argue that appellees should be estopped from raising appellants' out-of-pocket costs and from reducing the level of health care coverage.
{¶ 48} As a general rule, promissory estoppel does not apply against the state, its agencies, arms and agents. Sun RefiningMarketing Co. v. Brennan (1987),
{¶ 49} The reasons for this general rule are apparent. A properly functioning government cannot tolerate individual state actors binding the state to actions that exceed or contravene its authority. This court has consistently echoed the rationale for the general rule and has refused to apply promissory estoppel to contravene statutory authority. Drake v. Med. College of Ohio
(1997),
{¶ 50} However, some Ohio courts have applied promissory estoppel when the alleged promise of the state representative or agent was consistent with statutory authority. See, e.g.,Mechanical Contrs. Assn. of Cincinnati, Inc. v. Univ. ofCincinnati,
{¶ 51} In the case at bar, we find that the exception to the general rule does not apply because the promises upon which appellants allegedly relied are inconsistent with SERS's discretionary authority under R.C.
{¶ 52} In conclusion, we overrule appellants' second and fourth assignments of error in their entirety. We overrule appellants' first and third assignments of error to the extent that they relate to the dismissal of appellants' claims for declaratory judgment, breach of contract/specific performance, promissory estoppel, unconstitutional taking and injunctive relief. We also overrule appellants' first and third assignments of error to the extent they relate to the dismissal of that portion of their breach of fiduciary duty claim which is premised on the alleged vesting of health care benefits granted pursuant to R.C.
Judgment affirmed in part, reversed in part, and causeremanded.
Bowman and McCormac, JJ., concur.
McCormac, J., retired, of the Tenth Appellate District, assigned to active duty under authority of Section