Opinion ID: 2360503
Heading Depth: 2
Heading Rank: 2

Heading: District Court's Rationales for Determining Board's Interpretation Was Arbitrary

Text: Three of the rationales stated by the district court related to the question of whether the Retirement Board's interpretation of Wichita Code Section 2.28.150(d)(3) was reasonable. First, the district court concluded such an interpretation was contrary to the stated purposes of the retirement disability fund. Second, the district court determined the interpretation was contrary to public policy because it penalized Robinson for the exercise of her rights under the Kansas Act. Third, the district court noted the Retirement Board had not previously determined the issue and, consequently, there was no long-standing policy.
In the first of these three rationales, the district court discounted the plain language of subsection (d)(3) of Wichita Code Section 2.28.150 and instead focused on the first half of the self-described purpose of the retirement plan, as laid out in Wichita Code Section 2.28.010, which states: The purpose of the Wichita employees' retirement plan, hereinafter referred to as the `retirement plan,' is to establish an orderly means whereby noncommissioned personnel employed by the city who have attained retirement age or who have become disabled as set forth in this chapter may be retired from active service without prejudice and without inflicting a hardship on the employees retired, and to enable employees to accumulate reserves for themselves and their dependents to provide for old age, disability, death and termination of employment, and for the purpose of effecting economy and efficiency in the administration of governmental affairs. Citing this provision, the district court specifically found that [t]he reduction by the Board of the disability retirement benefits by the amount of attorney fees retained by petitioner's counsel in her workers compensation case creates a hardship on the petitioner and will not be permitted because that action thwarts the very purpose of the disability retirement plan. In support of this finding, the court detailed Robinson's difficult financial situation. The district court did not explain, however, why Robinson's personal financial statusa case-specific factrequires the interpretation of any amount received under the Wichita Code to be the equivalent of net receipts, i.e., the award after deduction of attorney fees. Nowhere does Wichita Code Section 2.28.150(d)(3) require that the claimant's personal financial status be considered. In addition, Robinson cites no authority for the notion that an individual's disability income must meet a certain level of adequacy. Finally, as the Retirement Board argues, by emphasizing the purpose provision of the Wichita Code, the district court essentially found that the general purpose provision, Section 2.28.010, controls over the specific deduction provision of Wichita Code Section 2.28.150(d)(3). Yet, well-established rules of construction hold that specific statutes control over general ones. Ft. Hays St. Univ. v. Fort Hays State University Ch., Am. Ass'n of Univ. Profs., 290 Kan. 446, 228 P.3d 403 (2010). Also, in focusing on the general purpose provision, the district court changed the universal applicability of the deduction provision because performing a prejudice and hardship analysis requires a case-by-case consideration. This could lead to inconsistent results, bypassing systematic calculations in order to consider the facts of each case. The Retirement Board argues that this case-by-case approach would jeopardize compliance with a different portion of Wichita Code Section 2.28.010, specifically that portion which states: It is the intent that the Wichita employees' retirement plan be established as a qualified governmental pension plan under Section 401(a) and 414(d) of the Internal Revenue code. Section 401(a) of the Internal Revenue Code requires that actuarial assumptions be specified in a pension plan in order for the plan to qualify for tax exempt status. See 26 U.S.C. § 401(a)(25) (2006). Additionally, 26 C.F.R. § 1.401-1(b)(1)(i), which was issued under section 401(a) of the Internal Revenue Code, requires pension plans to provide definitely determinable benefits in order to meet the requirements for special tax treatment. Eaton v. Onan Corp., 117 F.Supp.2d 812, 847 (S.D.Ind.2000). The Retirement Board contends that this objective would be defeated, and the tax status of the retirement plan imperiled, if the Board or the courts were to apply the general purpose provision of the Wichita Code to use discretion in calculating benefits for individuals based on hardship. The Retirement Board makes a valid point. The district court did not consider the possibility that it is the City's act of providing determinable disability retirement benefits to all eligible retirees which fulfills the purpose of the City's retirement plan. Focusing on the terms prejudice and hardship in the purpose provision of the Wichita Code, the district court essentially ignored the plain language in Section 2.28.150(d)(3).
In a closely related analysis, the district court found that the Retirement Board's action of deducting [workers compensation] attorney fees from [Robinson's] disability retirement penalizes her for exercising her statutory right to recover workers compensation benefits. The court stated that [b]ecause she sought to exercise her right to recover those [workers compensation] benefits as well as seek compensation and reimbursement for medical expenses, [Robinson] will actually end up with less because the Board has required her to pay the attorney fees to recover the money for the Board. In other words, Robinson was prejudiced by the Retirement Board's decision requiring her to pay the workers compensation attorney fees. According to the minutes from the Retirement Board's meeting on October 15, 2008, Robinson's city retirement disability payment was calculated to be $1,281.45 per month. Her workers compensation payment, before the 25 percent attorney fee deduction, was approximately $1,400 per month (after attorney fees, the monthly workers compensation payment was $1,050 per month). The Retirement Board acknowledged that Robinson's outcome was negatively affected by the order in which she applied for both benefits. The Board noted: The dollar amount collected over a period of years through the Pension System [generally] exceeds the Worker's Compensation settlement upon application of the required offset. ... [Robinson] actually does come out a bit worse by virtue of having done things the way she did because the Worker's Compensation benefit was higher, but it was not more than 25% higher. Even so, Robinson fails to show how her payment of workers compensation attorney fees, by itself, is a penalty. The provisions in the Wichita Code do not specifically show the intent to maximize the injured employee's benefits. Further, Kansas appellate courts have determined that K.S.A.2009 Supp. 44-501(h), which allows employer contributions in private pension plans, paid to retired injured workers, to be reduced by the amount of employer-funded workers compensation benefits paid to the same workers, is not a penal statute. See, e.g., Robinson v. Southwestern Bell Telephone Co., 39 Kan.App.2d 342, 347, 180 P.3d 597 (2008), overruled on other grounds Bergstrom v. Spears Manufacturing Co., 289 Kan. 605, 214 P.3d 676 (2009). The statutory purpose and function is much the same as the ordinance at issue in this case and, therefore, to suggest that the Wichita Code at issue imposes a penalty upon former City employees would be contrary to the analysis in Robinson. Further, provisions allowing an award of attorney fees are not passed to benefit the attorney or to burden litigants. Rather, they are passed to enable litigants to obtain competent counsel. Hatfield v. Wal-Mart Stores, Inc., 14 Kan.App.2d 193, 199, 786 P.2d 618 (1990); see Grendel's Den, Inc. v. Larkin, 749 F.2d 945, 950 (1st Cir.1984); Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 719 (5th Cir.1974), abrogated on other grounds Blanchard v. Bergeron, 489 U.S. 87, 109 S.Ct. 939, 103 L.Ed.2d 67 (1989). Robinson's contingency fee contract enabled her to obtain counsel, and she received economic benefits by hiring counsel in her workers compensation case. Therefore, we conclude Robinson has not been penalized by having to pay her attorney a fee deemed reasonable by the workers compensation director.
In addition, the district court focused on the fact that the issue of including the attorney fees in the amount of the reduction had never been previously presented to the Retirement Board. Consequently, the district court questioned the Board's statements that it hesitated to veer away from its current practice of utilizing the full workers compensation award in its calculation of available disability retirement benefits and that a deduction of workers compensation attorney fees might require a written rule. Because the district court considered the Retirement Board's interpretation of Wichita Code Section 2.28.150(d)(3) to be arbitrary and capricious, it did not consider the fact that the existence of the ordinance itself established a long-standing policy. Because we have reached the opposite conclusion and have found the Retirement Board's interpretation to be reasonable, we do not have the same difficulty and can conclude the policy was long-standing, having been adopted on passage of the ordinance. Further, the record discloses that the Retirement Board examined the statutes and regulations related to other public plans with similar deduction provisions. Our independent review of those provisions underscores the reasonableness of the Retirement Board's decision because, in other Kansas contexts involving the reduction of one type of benefit because of the entitlement to another benefit, this court has consistently held that where two governmental benefits arise from a common cause, there is no entitlement to both. For example, the Kansas Act, specifically K.S.A.2009 Supp. 44-501(h), provides: If the employee is receiving retirement benefits under the federal social security act or retirement benefits from any other retirement system, program or plan which is provided by the employer against which the claim is being made, any compensation benefit payments which the employee is eligible to receive under the workers compensation act for such claim shall be reduced by the weekly equivalent amount of the total amount of all such retirement benefits, less any portion of any such retirement benefit, other than retirement benefits under the federal social security act, that is attributable to payments or contributions made by the employee, but in no event shall the workers compensation benefit be less than the workers compensation benefit payable for the employee's percentage of functional impairment. (Emphasis added.) Applying this provision, this court and the Court of Appeals have noted that the purpose of this statutory reduction is to prevent wage loss duplication. Injured Workers of Kansas v. Franklin, 262 Kan. 840, 872, 942 P.2d 591 (1997); Lleras v. Via Christi Regional Med. Center, 37 Kan.App.2d 580, Syl. ¶ 5, 154 P.3d 1130 (2007); McIntosh v. Sedgwick County, 32 Kan.App.2d 889, 897, 91 P.3d 545, rev. denied 278 Kan. 846 (2004). If a claimant is injured before he or she retires, the employer is entitled to the statutory reduction, as an injured employee is not entitled to recover both retirement benefits and workers compensation benefits beyond the value of the functional impairment. McIntosh, 32 Kan.App.2d at 894, 897-98, 91 P.3d 545. Conversely, if an employee retires and then returns to work to supplement his or her income, the reduction does not apply, as the employee's receipt of both workers compensation benefits and social security retirement benefits are not duplicative. Dickens v. Pizza Co., 266 Kan. 1066, 1071, 974 P.2d 601 (1999). Neither K.S.A.2009 Supp. 44-501(h) nor Wichita Code Section 2.28.150(d)(3) contains a provision requiring the deduction to be reduced by the amount of attorney fees incurred in obtaining the benefits that reduce the pension or disability retirement benefit. Similarly, the Kansas Public Employees Retirement System Act (KPERS), K.S.A. 74-4901 et seq., deduction provisions do not provide for adjustments due to attorney fees. For example, disability payments for certain correctional employees are addressed in K.S.A. 74-4914e, which provides in part: Benefits payable under this section shall be reduced by the original amount of any disability benefits received under the federal social security act or the workers compensation act. ... In no case shall a correctional employee who is entitled to receive benefits under this section receive less than $100 per month. (Emphasis added.) K.S.A. 74-4914e(11). The above statute references the original amount and does not provide for a reduction for any attorney fees the retiree incurred in pursuing social security or workers compensation benefits. We also note that the Kansas Legislature has obviously become aware of the attorney-fee-adjustment argument in the context of KPERS and has clearly rejected it, as seen in another provision, K.S.A.2009 Supp. 74-4927(1)(B). That statute provides for the deduction of social security and workers compensation benefits from long-term disability benefit payments and specifically states: As used in this section, `workers compensation benefits' means the total award of disability benefits payments under the workers compensation act notwithstanding any payment of attorney fees from such benefits as provided in the workers compensation act. (Emphasis added.) K.S.A.2009 Supp. 74-4927(1)(B). Hence, although the Retirement Board had not considered the attorney fee issue, its interpretation of Wichita Code Section 2.28.150(d) was consistent with similar provisions in Kansas law and with the language of the provision. Because the Retirement Board applied the clear language of the provision, the fact that the interpretation was a matter of first impression does not render it arbitrary. Consequently, we conclude none of the rationales stated by the district court established that the Board's interpretation was unreasonable or contrary to established principles.