Opinion ID: 2751752
Heading Depth: 3
Heading Rank: 1

Heading: Justiciable Controversy – 1991 Contract

Text: In granting summary judgment to VALIC with regard to the Board’s averments, the trial court separately examined the Board’s attempt to seek relief under both the 1991 Contract and the 2008 Contract. As to the 1991 Contract, the trial court focused 7 initially on the Board’s right to seek declaratory relief under the Uniform Declaratory Judgments Act (the “Act”). See W.Va. Code §§ 55-13-1 to -16 (2008). Looking to this Court’s recognition in Hustead v. Ashland Oil Co., 197 W.Va 55, 475 S.E.2d 55 (1996), that “there must be an actual, existing controversy” to grant relief under the Act, the trial court concluded that the predicate justiciable controversy was absent with regard to the 1991 Contract. Id. at 61, 475 S.E.2d at 61. In deciding there was no active controversy between the Board and VALIC with regard to the 1991 Contract, the trial court relied upon carefully-crafted factual findings.20 Illustrative of this point is the myopic focus by the trial court on the Board’s failure to “demand immediate cash surrender of the electing teachers’ assets in June 2008 or thereafter.”21 Only by applying a hyper-critical lens to this case can that statement be viewed as veracious; critically, the implication that the Board never sought a cash surrender is not.22 What the record in this case reveals is that on March 14, 2008, the Governor, who is a Board 20 According to the petitioners, the summary judgment orders under review were both prepared by the respondent’s counsel and adopted verbatim by the trial court. 21 By June 2008, the requisite percentage of votes had been cast by the electing DCP participants to join TRS pursuant to West Virginia Code §§ 18-7D-3, -5, -7. 22 According to the deposition testimony of Anne Lambright, the Board’s Executive Director, a phone call was made from the governor’s office to Jim Coppedge, informing him of the dollar amount of the surrender being requested and the number of participants involved. Additional evidence of this request is provided in an email from Mr. Coppedge, dated June 29, 2008, written to Ms. Lambright. See infra note 28. 8 member,23 held a meeting at the state capitol with VALIC representatives and various legislative leaders. That meeting, which took place just two days before the passage of House Bill 101, was held to explore VALIC’s response to the legislation’s anticipated passage. Upon being presented with this information, Mr. Coppedge, as general counsel for AIG Retirement, indicated that an $11.5 million dollar surrender charge would be imposed. Three days after this meeting and the passage of the authorizing legislation, Mr. Coppedge continued to assert VALIC’s right to assess a multi-million dollar surrender charge “in the event that all assets were cashed out in the same year.”24 Although VALIC eventually agreed that the policy prevented the imposition of a surrender charge, another impediment to the immediate withdrawal of these funds arose when VALIC declared that the requested withdrawal was subject to a five-year restriction.25 Looking for a way to avoid this fund-release limitation, the petitioners decided to transfer the funds from the 1991 Contract into a bond fund option within the DCP– the American Funds. The parties were in agreement that the terms of the endorsement permitted a transfer of 23 See W.Va. Code § 5-10D-1(b). 24 Because numerous participants elected to stay in the DCP, all of the assets were never cashed out of the 1991 Contract. At present, $50 million in assets remain invested under the 1991 Contract for DCP members. 25 VALIC relied on the language of the endorsement that addresses an annual 20 percent limitation “in the case of a withdrawal for transfer to another funding entity.” The petitioners maintain that the conditions for invoking this limitation are nonexistent. 9 funds from the annuity to this particular investment without restrictions. The contemplated transfer failed to occur when the American Funds refused to accept the large investment. At this point, months after the transfer to TRS was to have been accomplished,26 the petitioners relented with regard to its attempt to remove the funds from VALIC in toto and agreed to place the funds in another VALIC annuity–the 2008 Contract.27 In view of the numerous communications between VALIC and the petitioners in regards to effecting removal of the subject funds from the 1991 Contract, there is little doubt that VALIC, while fully apprised of the petitioners’ objective to acquire those funds in aggregate fashion, acted in direct response to that specific request.28 Hence, the trial court’s hinging of its ruling on the absence of a cash demand by the Board in June 2008 or later is nothing more than a red herring. Assuming, arguendo, that no demand was in fact 26 The petitioners note that one aspect of the transfer of the DCP funds to the TRS was accomplished by putting those funds into the hands of the IMB (making IMB a party in lieu of the Board to the 2008 Contract), the trustee statutorily charged with investing TRS funds. See W.Va. Code §§ 12-6-3(a), -9a(a) (2014). The physical “movement” of these funds did not begin until May 5, 2009, with the first installment transfer to IMB, and ended with the last transfer of funds from VALIC to the IMB in May 2013. 27 The petitioners maintain that the creation of the 2008 Contract as a funding vehicle for the DCP members electing to transfer into TRS was VALIC’s idea. 28 Through email correspondence dated June 29, 2008, Jim Coppedge, Senior Vice President and General Counsel for AIG Retirement, wrote to Anne Lambright, the Board’s Executive Director: “I am writing to follow up on a request that we received from Great West [DCP plan administrator] late last week to transfer $237 Million in assets from the VALIC Group Fixed Annuity Contract offered through the Plan. . . .” 10 made,29 the lack of demand in June 2008 or later was clearly linked to VALIC’s vacillating position that such a release of funds would either cost $11.2 million or be subject to specified per annum limits. Given the ongoing motivation of the Board to act consistent with its fiduciary responsibilities,30 the lack of a demand at this particular point in time was necessarily impelled by the need to limit the costs associated with removal of those funds. Returning to the issue of whether an active controversy existed between the Board and VALIC regarding the Board’s entitlement to an immediate surrender without fees or restrictions under the 1991 Contract, we revisit the nature of a justiciable controversy. Integral to the maintenance of a declaratory judgment action is the existence of a live “case.” Instructive of this requirement, we have stated: “Courts are not constituted for the purpose of making advisory decrees or resolving academic disputes. The pleadings and evidence must present a claim of legal right asserted by one party and denied by the other before jurisdiction of a suit may be taken.” Mainella v. Board of Trustees of Policemen’s Pension or Relief Fund, 126 W.Va. 183, 185-86, 27 S.E.2d 486, 487-88 (1943) (emphasis supplied). Clarification of legal rights and obligations before a party is forced to act upon those rights and obligations is the ideal which the Act seeks to promote. See Cox v. Amick, 195 W.Va. 29 While we are not resolving the factual determination of whether a cash demand was made by the Board in June 2008 or later, we observe that the overly-constrained manner in which the trial court framed and ruled on the issue of a demand suggests that such a demand may have been made at some point by some entity. 30 See supra note 12. 11 608, 618, 466 S.E.2d 459, 469 (1995) (Cleckley, J., concurring). The crux of the actual controversy requirement, however, is that the facts must be known and existing at the time of the filing of a declaratory judgment proceeding and the rights and obligations at issue cannot have been previously adjudicated. See Hustead, 197 W.Va. at 61-62, 475 S.E.2d at 61-62. We adopted the following four-pronged test in syllabus point four of Hustead to assist judges with the identification of a justiciable controversy: In deciding whether a justiciable controversy exists sufficient to confer jurisdiction for purposes of the Uniform Declaratory Judgment Act, West Virginia Code §§ 55-13-1 to ­ 16 (1994), a circuit court should consider the following four factors in ascertaining whether a declaratory judgment action should be heard: (1) whether the claim involves uncertain and contingent events that may not occur at all; (2) whether the claim is dependent upon the facts; (3) whether there is adverseness among the parties; and (4) whether the sought after declaration would be of practical assistance in setting the underlying controversy to rest. Id. at 56, 475 S.E.2d at 56. Application of these factors demonstrates that a justiciable controversy existed at the time the petitioners filed their complaint against VALIC. In this case, there is no concern that the matter at issue– the petitioners’ attempt to resolve their right to an immediate and aggregate removal of the annuity funds–is a contingent event. As the facts of this case demonstrate, the removal of the subject funds has 12 been accomplished. What has yet to be determined, however, is whether the petitioners had the right to the immediate withdrawal of those annuity funds, free of temporal or quantitative restrictions. Consequently, the relevant adverseness still exists between the parties and the declaration of rights sought by the petitioners is required to put this controversy to rest. Seeking to circumvent the existence of a justiciable controversy, VALIC posits that the Board never asserted its right to an aggregate release of the electing DCP members’ funds. See State Farm Mut. Auto Ins. Co. v. Schatken, 230 W.Va. 201, 211, 737 S.E.2d 229, 239 (2012) (finding declaratory relief improper based on insurer’s failure to plead contractual provision upon which it relied for claimed right to reimbursement and failure to assert right to reimbursement pre-suit). As evidence of the Board’s failure to seek a lump sum payout, VALIC asserts that the necessary paperwork to complete a withdrawal of the subject funds was supplied to, but never returned by, Great-West Retirement Services (“Great West”), the third-party administrator of the DCP. The record of this case amply demonstrates why the “Transition Information Form” supplied to Great West for processing the fund release was not returned to VALIC. By completing and submitting the form, the Board would have been agreeing to a five-year payout of the requested funds. At this point in the process, the Board was simply unwilling to act in accordance with VALIC’s interpretation of the 1991 13 Contract.31 Importantly, the fact that the paperwork necessary to process the Board’s demand for funds was not returned to VALIC does not evidence the failure of the Board to seek such a payout under the facts of this case. All it proves is that the Board, fully aware of the financial consequences of a cash demand based on VALIC’s position and its control of the subject funds, was seeking to find an alternate way to gain full access to the necessary funds without the attendant imposition of fees or withdrawal restrictions. Our review of the record compels us to conclude that the trial court erred in finding that VALIC had not denied any right asserted by the Board under the 1991 Contract. That finding is clearly tied to the circuit court’s acceptance of VALIC’s argument that the Board never requested a cash payout under the 1991 Contract. Only by turning a blind eye to the events that transpired in this case can it even be suggested that the Board failed to assert its claimed right to an aggregate payout of the subject funds. VALIC cannot expect this Court, or any court for that matter, to believe that the statutory objective of gaining access to the funds of the electing DCP members was not adequately articulated by the Board in a manner that VALIC fully comprehended. On the facts of this case, the Board’s failure to submit the form authorizing the withdrawal of funds is simply not determinative of whether the Board previously asserted its right to a lump sum payout. Moreover, unlike the 31 By failing to submit the form, VALIC argues that the Board was “tacitly agreeing that the withdrawal restriction applied to the transfer.” We find this statement to be selfserving and unsupported by the record. 14 situation in Schatken, the pleadings of this case fully evidence that the Board asserted its right to an immediate demand of the subject funds without fees or restrictions from the initial filing of this case in May 2009. In clear contrast to the circuit court, we find that the requisite assertion of a legal right by one party and the denial of that right by another party to a declaratory judgment action has been demonstrated. See Board of Educ. v. Board of Public Works, 144 W.Va. 593, 601, 109 S.E.2d 552, 557 (1959). VALIC’s actions in response to the Board’s unmistakably clear and statutorily-mandated objective of removing the corpus of the electing DCP members’ funds32 constituted the necessary controversy to proceed under the Act.33 See Robertson v. Hatcher, 148 W.Va. 239, 247, 135 S.E.2d 675, 681 (1964) (“‘The controversy between the plaintiff and the defendant is actual, existing and justiciable in the sense that the defendant has made evident his purpose to enforce provisions of the statute and that such enforcement will directly and materially affect the rights of the plaintiff.’”) (internal citation omitted). That controversy has yet to be resolved. See Mainella, 126 W.Va. at 186, 27 32 VALIC’s sophistic suggestion that the statutory mandate was met when the 2008 Contract was created and IMB was given “control” of the funds is decidedly wrong. As long as the funds remained with VALIC, IMB lacked the ability to utilize those moneys for the benefit of the TRS system as a whole and, correspondently, it had no ability to increase the return on the investment. 33 As noted above, every investment provider other than VALIC transferred the assets of the electing DCP members without restriction or penalty in accordance with the Board’s instructions. See supra note 19. 15 S.E.2d at 488 (recognizing need for resolution through declaratory judgment of former policeman’s right, that had been partially denied, to pension or restoration to active duty). Accordingly, we reverse the trial court’s finding that no justiciable controversy exists between the Board and VALIC with regard to the 1991 Contract.34