Case Title: Brown v. Retirement System

Citation: 375 Md. 661

Docket Number: 115/02

State: maryland

Court: Maryland Supreme Court

Date: 2003-06-17T00:00:00Z

Document:
Circuit Court for Baltimore City
No. 24-C-99-003149
IN THE COURT OF APPEALS OF MARYLAND
No. 115
September Term, 2002
______________________________________________
HERBERT BROWN, et al.
v.
FIRE AND POLICE EMPLOYEES’ RETIREMENT
SYSTEM, et al.
______________________________________________
Bell, C.J.
Eldridge
Raker
Wilner
Cathell
Harrell
Battaglia,
JJ.
______________________________________________
Opinion by Raker, J.
______________________________________________
Filed:   June 17, 2003
1All statutory references, unless otherwise indicated, are to Baltimore City Code
(2000 Supp.) Article 22.
Petitioners, all former Baltimore City police officers, in a declaratory judgment
action, ask this Court to decide whether a “deferred retirement option plan” compensation
retirement benefit is marital property pursuant to the Baltimore City Code (2000 Supp.)
Article 221 and the parties’ judgments of divorce and qualified domestic relations orders.
We granted certiorari, and we added the following additional questions: 
“I.  Whether actions for a declaratory judgment and injunctive
relief, to determine whether certain benefits constituted
marital property, were appropriate in this case. 
“II. If an action for a declaratory judgment was appropriate,
particularly in light of Maryland Code (1974, 2002 Repl.
Vol.), Sections 3-409 (b) and 3-409 (d) of the Courts and
Judicial Proceedings Article, whether the Circuit Court erred
in ordering that the ‘Amended Complaint is dismissed with
prejudice . . . .’”  
Brown v. Ret. Sys., 372 Md. 685, 814 A.2d 571 (2003).
We conclude that actions for declaratory judgment were not appropriate in this
case because petitioners failed to exhaust their statutory administrative remedies.  We
thus vacate the trial judge’s dismissal and direct the Circuit Court to dismiss the matter
for failure to exhaust administrative remedies.
I. Facts
Petitioners Herbert Brown, Elmer Dennis, Edmund Lubinski, Joseph S. Moore,
Robin Thacker, Dwight Thomas, Essex Weaver, Kenneth Welsh and Randolph E. Wynn,
2Petitioners also filed a Motion for Certification of Class Action on behalf of all
persons working in the Baltimore City Police Department who elected to participate in
the DROP, who were divorced prior to July 1, 1999, and whose divorce decrees do not
expressly address the DROP benefit, and whose former spouses may be entitled to a
portion of their pensions from the Retirement System.  The motion for class certification
was later withdrawn.
3Maryland Rule 2-211 states as follows: 
“(a) Persons to be joined. Except as otherwise provided by law,
a person who is subject to service of process shall be joined as
a party in the action if in the person’s absence (1) complete
relief cannot be accorded among those already parties, or (2)
disposition of the action may impair or impede the person’s
ability to protect a claimed interest relating to the subject of the
action or may leave persons already parties subject to a
substantial risk of incurring multiple or inconsistent obligations
by reason of the person’s claimed interest.”
2
Jr. are current or retired officers with the Baltimore City Police Department.  Respondents
are the Fire and Police Employees’ Retirement System (“Retirement System”) and the
Mayor and City Council of Baltimore City. Denise Brown, Catherine Dennis, Edna
Sullivan, Adrienne Johnson, Barbara Thacker, Lorraine Thomas, Kathleen Weaver,
Barbara Ann Dailey and Linda Pearlman, petitioners’ former wives, also are respondents.
Petitioners filed in the Circuit Court for Baltimore City on June 29, 1999, a
Complaint for Declaratory and/or Injunctive Relief, seeking a declaration that their
benefits under the City’s Deferred Retirement Option Plan (“DROP”) are not marital
property and should be disbursed solely to them.2  On April 19, 2000, petitioners filed an
Amended Complaint for Declaratory and/or Injunctive Relief, joining their former
spouses as necessary parties under Maryland Rule 2-211.3  Respondents argued that the
Circuit Court lacked jurisdiction to determine marital property and that the ex-spouses
3
were entitled to a share of petitioners’ DROP benefits.  Motions by both sides for
summary judgment were denied. 
The Retirement System is a governmental pension plan offered by Baltimore City
and is codified in Baltimore City Code (2000 Supp.) Article 22.  The Retirement System
provides several different types of benefits, including service retirement benefits, line-of-
duty disability benefits, line-of-duty death benefits, ordinary disability benefits, and
ordinary death benefits.  Membership in the Retirement System is mandatory for all
police employees as a condition of employment.  § 31(1).  The Retirement System is
funded by the mandatory contributions of its members, by the contributions of Baltimore
City, and by the System’s investment earnings.  All benefit-funding assets are held under
the Retirement System’s name and are managed by a Board of Trustees.  The Board
establishes rules and regulations for the administration of the Retirement System’s funds
and for the transaction of its business.  § 33(g).
The Retirement System was amended in 1996 to add the DROP, effective July 1,
1996.  § 36B.  Members with at least twenty years of service under the Retirement
System may elect to participate in the DROP for a maximum of three years.  Eligible
members who do not participate in the DROP may either retire and collect pension
benefits, or continue to work and accrue service credit which will be used to calculate
their retirement income.  
The DROP consists of three components:
4
(1) An amount equal to the annual retirement
allowance (or prorated annual retirement allowance for partial
years) the member would have received if he had retired from
service at that time and actually begun receiving his
maximum retirement allowance; 
(2) An amount equal to the mandatory contributions
the member is required to make to the Retirement System for
his retirement benefits; and,
(3) Interest at 8.25% compounded annually until the
member actually retires.
§ 36B(d).
All mandatory contributions to the DROP are paid to the Board and commingled
with all other contributions to the Retirement System.  No actual separate account is
established, and no funds are segregated.  The Retirement System is a tax-qualified plan
under the Internal Revenue Code.  See 26 U.S.C. § 401(a) et seq. (2000).  All DROP
payments are reported to the IRS on Form 1099R as having been paid from the
Retirement System.  The Board takes the position that, if a qualifying court order requires
payment to a former spouse of an employee-member of the Retirement System, a
percentage of the Member’s benefits under the System (the former spouse’s portion) will
be based on all of the benefits payable to the Member under the System, including the
DROP.
During the period of DROP participation, the M ember’s regular pension is
“frozen,” i.e., the Member will not acquire new service credit toward the regular pension.
At the conclusion of the DROP period, the Member’s regular service retirement benefit
5
remains the same as when he or she entered the DROP.  Various forms of additional
service credits and a bonus accrual can be earned after participating in the DROP. 
Distribution of the DROP benefit depends on how and when the Member retires.
If the Member elects an ordinary retirement, he or she may receive the DROP benefit as a
lump sum or as part of the regular monthly annuity payment.  No part of the DROP
benefit is payable in the event of a line-of-duty disability or a line-of-duty death.  In such
cases, the Member or the qualifying beneficiary receives only the benefit otherwise
payable under the Retirement System. § 36B(k) and (i).
The circuit court granted each couple a final judgment of absolute divorce from
which no appeal was taken; the judgments of divorce had never been subject to a request
for revision or modification.  Under each judgment of divorce and, in most cases, a
subsequently entered consent Qualified Domestic Relations Order (“QDRO”) or
Amended QDRO, each respondent was granted a share of her husband’s pension benefits
from the Retirement System “if, as and when” benefits become payable.  Some of the
parties also entered into settlement agreements that were incorporated into their
judgments of divorce and that agreed to a division of the former husbands’ benefits under
the Retirement System “if, as and when” such benefits become payable.  
Each petitioner was eligible to retire with a regular pension prior to the date of the
divorce decree or QDRO, and each participated in the DROP.  Most of the petitioners
4The circuit court entered divorce decrees and QDROs as to petitioners Dennis,
Lubinski, Moore, Thacker, Thomas and Wynn before the City implemented the DROP. 
Weaver’s QDRO was entered on January 4, 1996.  Brown’s QDRO was entered on May
20, 1997.  Welsh’s QDRO was entered on March 4, 1998.
6
entered into their QDROs before the implementation of the DROP program in July 1996.4
In a letter dated January 20, 1999, the Retirement System informed each petitioner that a
portion of the DROP benefits would be dispersed to each respondent as marital property
under the terms of the respective judgment of divorce and QDRO.  For example, the
Retirement System’s letter to petitioner Dwight Thomas reads as follows:
“In noting that you are presently a participant in the
Deferred Retirement Option Plan (DROP), this office recently
reviewed the Qualified Domestic Relations Order (QDRO)
which you have on file with the Fire and Police Employees’
Retirement System (F&P).  Please be advised that because
your QDRO does not direct the disposition of your DROP
benefit, at the time of your retirement your ex-spouse will
receive the marital property portion of any lump-sum payment
made to you from your DROP account.  If you do not wish
your ex-spouse to receive the marital property portion of any
lump-sum payment you may receive from your DROP
account at the time of your retirement, your QDRO must
specifically state this intention.
“For your convenience, we have included a copy of our
model QDRO for the F&P.  You should note that provisions
throughout this Order address either the inclusion or exclusion
of the member’s DROP account.”
As a result of the letters, petitioners filed their Complaint for Declaratory and/or
Injunctive Relief with the Circuit Court. 
In lieu of testimony, the Circuit Court received the parties’ trial briefs, stipulations,
and documentary evidence and heard oral argument in April 2001.  Respondents asked
5The intermediate appellate court did not address the Circuit Court’s penultimate
dismissal of the declaratory judgment action.
7
for a dismissal of the amended complaint and a judgment that petitioners be required to
pay DROP benefits to their former spouses in accordance with the orders in the divorce
proceedings.  In a written order issued April 11, 2001, the Circuit Court dismissed, with
prejudice, the petitioners’ complaint, but quixotically ordered the Retirement System to
“treat all DROP benefits as ordinary pension benefits for the purposes of payments
pursuant to the parties’ Judgments of Divorce.” 
Petitioners noted a timely appeal to the Court of Special Appeals.  In an unreported
opinion, that court affirmed the trial court’s determination that the DROP should be
treated as an ordinary pension benefit for the purposes of payments pursuant to the
parties’ judgments of divorce.5  The officers filed a petition for a writ of certiorari, and we
granted the petition.
II. Discussion
This Court adheres firmly to the rule that statutorily prescribed administrative
remedies ordinarily must be pursued and exhausted.  See, e.g., Moose v. Fraternal Order
of Police, 369 Md. 476, 492-93, 800 A.2d 790, 801 (2002); Josephson v. City of
Annapolis, 353 Md. 667, 677, 728 A.2d 690, 695 (1998); Comm’n on Human Rel. v.
Mass Transit, 294 Md. 225, 230, 449 A.2d 385, 387 (1982).  Moreover, pursuant to the
Uniform Declaratory Judgment Act, “[i]f a statute provides a special form of remedy for a
8
specific type of case, that statutory remedy shall be followed in lieu” of a declaratory
action proceeding.  Maryland Code § 3-409(b) (1973, 2002 Repl. Vol.) of the Courts and
Judicial Proceedings Article; see Moose, 369 Md. at 486, 800 A.2d at 796-797.
This principle that statutory administrative remedies normally must be exhausted is
a policy embedded in various enactments by the General Assembly and is supported by
sound reasoning.  See Mass Transit, 294 Md. at 231, 449 A.2d at 388.  The exhaustion
doctrine enforces the notion that an administrative agency should have the opportunity to
exercise its expertise first to resolve an issue.  In Soley v. State Commission on Human
Relations, 277 Md. 521, 526, 356 A.2d 254, 257 (1976), we observed as follows: 
“The rule requiring exhaustion of administrative or statutory
remedies is supported by sound reasoning.  The decisions of
an administrative agency are often of a discretionary nature,
and frequently require an expertise which the agency can
bring to bear in sifting the information presented to it.  The
agency should be afforded the initial opportunity to exercise
that discretion and to apply that expertise.  Furthermore, to
permit interruption for purposes of judicial intervention at
various stages of the administrative process might well
undermine the very efficiency which the Legislature intended
to achieve in the first instance.  Lastly, the courts might be
called upon to decide issues which perhaps would never arise
if the prescribed administrative remedies were followed.”
Additionally, following the general rule, a party may appeal only from a final decision of
an administrative agency.  To effect this important public policy requiring exhaustion of
administrative remedies, an appellate court ordinarily will notice the issue of exhaustion
of statutory remedies on its own initiative even though the issue was not raised by the
6We have recognized a few limited exceptions to the requirement that
administrative remedies be exhausted, but none apply here.  See Moose v. Fraternal
Order of Police, 369 Md. 476, 489, 800 A.2d 790, 798 (2002).  One exception to the
exhaustion requirement arises in some actions challenging the facial validity of a statute. 
See Comm’n on Human Rel. v. Mass Transit, 294 Md. 225, 232, 449 A.2d 385, 388
(1982).  The requirement also may not apply when the Legislature expresses an intent that
the administrative remedy need not be invoked and exhausted.  See id. at 232 n.4, 449
A.2d at 388 n.4.  We have also recognized that exhaustion of administrative remedies
may not be required when an agency is palpably without jurisdiction.  See Comm’n on
Human Relations v. Freedom Express/Domegold, Inc., ___ Md. ___, ___ , ___ A.2d ___,
___  (2003); SEFAC Lift & Equipment Corp. v. Mass Transit, 367 Md. 374, 382, 788
A.2d 192, 197 (2002).  
9
parties and even if the parties desire a decision on the merits.  See, e.g., Moose, 369 Md.
at 488, 800 A.2d at 797; Mass Transit, 294 Md. at 232, 449 A.2d at 388.6 
Instructive is Commission on Human Relations v. Mass Transit, 294 Md. 225, 449
A.2d 385 (1982), where this Court held that the principle of exhaustion of administrative
remedies barred an employer’s declaratory judgment action seeking a statutory
interpretation.  The employer, the Mass Transit Administration (MTA), denied
employment to three women, Jacquelin Wilson, Dorothea Goodman, and Betty R.
Wright, on the basis of obesity.  The women filed complaints with the Maryland
Commission on Human Relations, alleging unlawful employment discrimination.  The
Commission’s staff investigated and found probable cause that the MTA discriminated.
The MTA refused to concur with those findings, resulting in a hearing before an
examiner.  Before any hearing was held, however, the MTA filed in the Circuit Court a
complaint for declaratory and injunctive relief against the Commission. The MTA
requested a declaration determining whether obesity is covered within the meaning of the
10
discrimination statute.  We held that the MTA was required to exhaust administrative
remedies and judicial review remedies and ordered the complaint dismissed for their
failure to do so.  Id. at 227, 449 A.2d at 386.  Judge Eldridge, writing for the Court,
outlined the important policy underpinnings of the exhaustion of administrative remedies
requirement.  He concluded that
“[B]ecause of the strong public policy underlying this
requirement that administrative remedies be exhausted, this
Court, if it notices in a particular case an issue as to whether
administrative remedies have been exhausted, will sua sponte
address the issue despite the failure of the parties to raise the
matter . . . . This Court has consistently held that statutorily
prescribed administrative and judicial review remedies must
be exhausted in cases involving the interpretation of statutory
language.  Moreover, to hold that the existence of a statutory
interpretation issue furnishes an excuse to abort the
administrative proceedings before a final agency decision,
would also be inconsistent with the principle that the agency's
construction of a statute which it administers is entitled to
weight.” 
Id. at 232-33, 449 A.2d at 388-89 (citations omitted).  
In light of these principles, we address the issue of exhaustion of administrative
remedies.  Pursuant to Article 22 of the Baltimore City Code, Members of the Retirement
System have two avenues to appeal a decision regarding respective categories of benefits.
First, the Panel of Hearing Examiners, appointed by the Baltimore City Board of
Estimates, conducts hearings on all matters regarding claims for ordinary disability,
special disability, and special death benefits.  § 33(l).  These hearings are in the nature of
adversarial proceedings, and the assigned hearing examiner must issue written findings of
7In the Circuit Court proceeding, the Board represented in its response to request
for admission of facts that the Board has the authority to determine the validity of claims
for benefits other than those subject to the Panel of Hearing Examiners. 
11
fact setting forth the reasons for the final determination.  Id.  Aggrieved parties may seek
judicial review of the hearing examiner’s determination in the Circuit Court for Baltimore
City as follows: 
“The final determination of the hearing examiner shall be
presumptively correct and shall not be disturbed on review
except when arbitrary, illegal, capricious or discriminatory.  If
either party is aggrieved by a decision of the Baltimore City
Court, the aggrieved party may further appeal such decision to
the Court of Special Appeals, subject to review by the Court
of Appeals.”  
Id.  If neither party files an appeal, the hearing examiner’s determination becomes final
within thirty days, subject to the Panel’s right of reexamination.  Id. 
Second, the Board of Trustees of the Retirement System has the authority to
determine the validity of claims for benefits other than those claims subject to resolution
by the Panel of Hearing Examiners.7  Section 41 describes the process as follows:
“The Board of Trustees, upon its own initiative, or upon the
request of an applicant for the benefits provided for by this
subtitle [including service retirement benefits, ordinary death
benefits, and DROP benefits], shall conduct a hearing on said
claim, which hearing shall be conducted as a judicial
proceeding, all witnesses testifying under oath or by
affirmation, and a record of the proceedings shall be made
and kept.  At such hearing, the investigation shall be
conducted in such manner as to ascertain the substantial rights
of the parties and the Board of Trustees shall not be bound by
common law or statutory rules of evidence or by technical or
formal rules of procedure.”
12
This statutory provision does not outline expressly a judicial review procedure.  Despite
the absence of such a statutory provision, a party aggrieved by the Board’s decision may
seek judicial review.  See Bd. of License Comm’rs v. Corridor Wine, Inc., 361 Md. 403,
410-12, 761 A.2d 916, 919-20 (2000) (noting that “when there is no statutory provision
for judicial review of final adjudicatory decisions by administrative agencies, either a
certiorari or a mandamus action in the appropriate circuit court is normally available for
ordinary ‘substantial evidence’ judicial review of the adjudicatory administrative
decisions”); Heaps v. Cobb, 185 Md. 372, 380, 45 A.2d 73, 76 (1945) (noting that “where
the statute or ordinance makes no provision for judicial review, an implied limitation
upon an administrative board’s authority is that its decisions be supported by facts and
that they be not arbitrary, capricious or unreasonable”).  
In the instant case, petitioners did not exhaust their specific administrative
remedies.  Each petitioner received a letter from the Administrator of the Retirement
System.  The letter noted that the Retirement System recently reviewed the Members’
QDROs and determined that because the orders did not exclude DROP benefits, those
benefits would be paid out as marital property along with the Members’ other retirement
benefits.  Petitioners, however, did not seek a hearing before the Board, from whose
determination they could have petitioned for judicial review.  Instead, dissatisfied with
the substance of the letter regarding their DROP benefits, petitioners filed an action for
8Respondent wives were joined later in the amended complaint.  See supra
footnote 3 and accompanying text.
13
declaratory and injunctive relief against the Retirement System.8  In the Circuit Court
complaint, petitioners sought a declaration that DROP benefits “be excluded from marital
property” to be paid out under the divorce decrees and QDROs and that the entire amount
of the DROP benefits be disbursed to them.  Petitioners also sought and obtained an
injunction to enjoin the Retirement System from disbursing DROP monies until the court
declared the parties’ rights.  The basis for the declaratory action, petitioners argue to this
Court, was to determine whether the Retirement System was correct in its interpretation
of the relationship between DROP and other Retirement System benefits and whether the
Retirement System properly was distributing DROP benefits.  Petitioners desired a
determination of DROP’s role in the Retirement System—whether DROP is separate
from or integral to ordinary pension benefits.  As such, petitioners first should have
sought a hearing before the Board for a determination of this issue, one within the
Board’s purview.  We hold that petitioners failed to exhaust their statutory administrative
remedies.
Although the trial court properly dismissed the action, albeit on different grounds,
that court erred in following its dismissal of the complaint with an order that the
Retirement System “treat all DROP benefits as ordinary pension benefits for purposes of
payments pursuant to the parties’ Judgments of Divorce.”  Once the court dismissed the
action, the Retirement System was no longer before the court.  The court erred in ordering
14
the Retirement System to take any action.  Once a court dismisses an entire action, there
is nothing then pending, and the court is without authority to issue an order with respect
to the matter.  See State v. Sampson, 297 So. 2d 120, 122 (Fla. Dist. Ct. App. 1974).  All
jurisdiction of the court as to the matter previously pending was at an end when the court
dismissed the amended complaint, with prejudice.  See Hagan v. Robert & Co., 150
S.E.2d 663, 665 (Ga. 1966).  Moreover, when the Circuit Court dismissed the Amended
Complaint, with prejudice, there was no longer an actual controversy before it and thus
there was no issue before the court to be decided.
JUDGMENT 
OF 
THE 
COURT 
OF
SPECIAL APPEALS VACATED. CASE
REMANDED TO THAT COURT WITH
INSTRU CTIONS 
TO 
VACATE 
THE
JUDGMENT OF THE CIRCUIT COURT
FOR 
BALTIMORE 
CITY 
AND 
TO
REMAND THE CASE TO THE CIRCUIT
COURT 
WITH 
INSTRUC TIONS 
TO
DISMISS THE ACTION.  COSTS IN THIS
COURT 
AND 
IN 
THE 
COURT 
OF
SPECIAL APPEALS TO BE PAID BY
PETITIONERS.