Opinion ID: 2318702
Heading Depth: 2
Heading Rank: 2

Heading: The Majority Opinion's Main Underpinnings

Text: The Majority opinion dispatches with any consideration of the State's role by pointing out that [t]he State ... was not a party before us, nor before the Board [of Contract Appeals].... Majority op. at 162, 25 A.3d at 1007. The Majority finds supportive in this regard a medical malpractice case in which, according to the Majority opinion, we precluded a physician who had been adjudicated as negligent from seeking contribution from the three alleged `joint tortfeasors' who were not joined as parties in the original action, because the [three tortfeasors] did not have an opportunity to participate in the primary case. Majority op. at 163, 25 A.3d at 1007 (analyzing Hashmi v. Bennett, 416 Md. 707, 7 A.3d 1059 (2010)). The instructive value of Hashmi is far from evident. Here, we confront a breach of contract, involving a government claim against a private contractor. Hashmi was also a medical malpractice case, involving only private and distinct (legally and biologically) parties. Moreover, in Hashmi, we held that a tortfeasor-physician could not seek contribution from other alleged tortfeasors primarily because the hospital release protected them. See Hashmi, 416 Md. at 724-25, 7 A.3d at 1069-70. We then stated in the alternative (and, thus, arguably in dicta) that a post-trial judicial determination of contribution would deprive the alleged tortfeasors of notice or... an opportunity to defend, in violation of the Maryland Rules. Hashmi, 416 Md. at 725, 7 A.3d at 1070 (Even if we were to determine that the ... [r]elease was ambiguous, we would not countenance the separate, post-trial proceeding Dr. Hashmi proposes [of the other alleged tortfeasors]....); Hashmi, 416 Md. at 729, 7 A.3d at 1072 (citation omitted). In the present case, Milliman is not trying to reduce possible damages by seeking contribution from the State as a joint tortfeasor; it is arguing that there are little to no damages in the first instance, given the fact that the non-breaching party did not suffer, in fact, an actual loss. Indeed, Milliman is asking this Court (fairly in my estimation) and the Board of Contract Appeals not to blind itself to certain facts when determining the proper measure of damages to make a non-breaching party whole. Ordinarily, I would rebuff contentions that the State lacked notice and an opportunity to defend itself, but doing so credits Hashmi with an unjustifiable amount of applicabilitycomparing the present case to Hashmi is like forcing a round peg into a square hole. Rather, I will address the premise of the Majority opinion's damages calculationthat the State and the System are not part of a single entity.
Acknowledging that we have never had occasion to consider the identity of the System and the State, the Majority opinion considers in depth two foreign cases Day v. New Hampshire Retirement System, 138 N.H. 120, 635 A.2d 493 (1993), and Traub v. Board of Retirement of the Los Angeles County Employees Retirement Association, 34 Cal.3d 793, 195 Cal. Rptr. 681, 670 P.2d 335 (1983). Both cases involve a government employee who was awarded, by an administrative adjudication, workers' compensation benefits and then attempted to use that decision to estop collaterally the retirement system from denying similar benefits. Day, 635 A.2d at 494; Traub, 195 Cal.Rptr. 681, 670 P.2d at 337. In each case, the respective court concluded that, for purposes of collateral estoppel, the workers' compensation board and the retirement system were not in privity. Day, 635 A.2d at 497; Traub, 195 Cal.Rptr. 681, 670 P.2d at 338. They noted that any payout to the government employee would come not just from the State, but also the employees who contributed to the retirement system. Day, 635 A.2d at 497; 670 P.2d at 338. Those employees were not represented in the initial workers' compensation decision. See Day, 635 A.2d at 497. The present case does not involve the sometimes perplexing world of collateral estoppel. Rather, we confront the issue of contractual damages flowing to the State/System (including employees, who contributed voluntarily to a State-created and -managed fund). We need not concern ourselves with privity; we need only determine (as we did supra ) that the State and System are one entity for purposes of evaluating the true financial injury in this case. See A.S. Abell Pub. Co., 297 Md. at 35, 464 A.2d at 1072. Nevertheless, even if the oneness of the State and Systemfor purposes of calculating damagesdepends on a finding of privity, such evidence exists in the record. The State, System, and employees all possessed the same interest in the $34 million. The State is obliged to make up any shortfalls in the System; the System has a duty to govern toward fiscal solvency; and, the employees want to secure their retirement future. [6] In short, their interests are aligned sufficiently.
Milliman argues that the State and the System are one legal entity and that, as a result, it should be allowed to recoup or offset the benefit of the funds retained by the State against any damages claimed by the System.... (Emphasis added.) As part of this claim, Milliman refers to the federal unitary creditor doctrine, a principle which allows federal agencies to set off debts owed by one agency against claims that another has against a single debtor. Turner v. Small Bus. Admin., 84 F.3d 1294, 1296 (10th Cir.1996) (en banc). A classic illustration is where Agency 1 owes money to a person, but that person owes money simultaneously to Agency 2. The agencies and individual debtor are permitted to setoff those claims. Transposed to the present context, such a claim fits awkwardly, as we are not dealing with a company that simply owes money to the government, whether we define that government as the State or the System. I believe that the set-off claim may be better understood under ordinary contract law and damages canons, as explained supra. Nonetheless, the argument may be made that, should the System receive a judgment for all contributions and investment interest, Milliman would be able to assert a claim against the State. Thus, Milliman should be able to skip a step and simply have its own claim heard in the same action. Indeed, in a case remarkably similar to the one at bar, the U.S. District Court for the Central District of California allowed an actuary who committed mathematical errors, which caused a county government to underpay its retirement system, to argue for such a setoff. Towers, Perrin, Forster & Crosby, 2002 WL 32919576, at , 2002 U.S. Dist. LEXIS 27916, at . The actuary, in particular, claimed that: [A]ny recovery by [the retirement system] must be reduced based on the amounts that allegedly should have been contributed by the [c]ounty but were not, because [the retirement system] and the [c]ounty are effectively a closed system. [The actuary] contends that it is ... entitled to offset ... any funds, including any earnings on such funds, the [c]ounty did not contribute ... and thus retained for other uses.... Towers, Perrin, Forster & Crosby, 2002 WL 32919576, at , 2002 U.S. Dist. LEXIS 27916, at . Even in the absence of the precise articulation of the claim to be setoff against [the one at hand], the court held that a setoff defense is appropriate in light of the ultimate goal of eliminat[ing] a superfluous exchange of money between the parties.... Id. (internal quotation marks omitted). To so conclude, the court needed to find sufficient mutuality between the actuary and the governmententer the unitary creditor doctrine. This reliance, the Majority opinion concludes, renders the decision wholly-inapplicable to the present case, as we have not ascribed to that doctrine. Majority op. at 163, 25 A.3d at 1008 n. 10. I disagree respectfully. In Lomax v. Comptroller of Treasury, 323 Md. 419, 420, 593 A.2d 1099, 1100 (1991), we considered a case where a state school teacher, Mary Lomax, received retirement benefits from the System. The Comptroller of the Treasury (Comptroller) obtained a judgment and lien against Lomax for unpaid income tax. Id. In an attempt to satisfy this judgment against Lomax, the Comptroller filed with the Clerk of the Circuit Court for Baltimore County a request for writ of garnishment to be served on the ... System[].... Id. We held that the State could effectuate such an inter-governmental maneuver, explaining that: In the instant case, the Retirement System and the Comptroller are both agencies under the control of the same sovereign, the State. Maryland Code (1957, 1988 Repl.Vol., 1990 Cum.Supp.), Art. 73B, § 16 provides that payment of all pensions, as well as all expenses for the administration and operation of the state retirement systems are obligations of the State. The [administrative] inconveniences enumerated in City of Baltimore [v. Comptroller, 292 Md. 293, 439 A.2d 1095 (1982)] and Hughes [v. Svboda, 168 Md. 440, 178 A. 108 (1935), dealing with a local government paying benefits to the State rather than local-government employees] clearly do not apply here since the Comptroller and the Retirement System work within the same governmental unit and both are even represented by the same attorney, the Attorney General. The public affairs of the State government would in no way be disrupted if these two agencies of the same government were permitted to cooperate in the garnishment of Lomax's pension benefits. City of Baltimore is clearly inapposite. It is a fundamental principle of creditors' rights that creditors have a right to set-off and may apply moneys owed to debts due. See United States v. Munsey Trust Co., 332 U.S. 234, 67 S.Ct. 1599, 91 L.Ed. 2022 (1947): The government has the same right `which belongs to every creditor, to apply the unappropriated moneys of his debtor, in his hands, in extinguishment of the debts due to him.' Id. at 239, 67 S.Ct. at 1602, 91 L.Ed. at 2027 (quoting Gratiot v. United States, 40 U.S. (15 Peters) 336, 370, 10 L.Ed. 759, 771 (1841)). We doubt that the Legislature intended to extinguish the State's right to accomplish through the legal process of garnishment that which it might be entitled to do by a self-help mechanism such as set-off. Lomax, 323 Md. at 426-27, 593 A.2d 1099 (emphasis added). This is the most classic form of the unitary creditor doctrine, where one agency (i.e., the System) owes money to a debtor, but that debtor owes money to another agency (i.e., the Comptroller). Indeed, these were similar to the facts of the case in which the U.S. Supreme Court adopted originally the unitary creditor doctrine Cherry Cotton Mills v. United States, 327 U.S. 536, 105 Ct.Cl. 824, 66 S.Ct. 729, 90 L.Ed. 835 (1946). See Turner, 84 F.3d at 1296-97 ([T]he Court's language [in Cherry Cotton Mills] clearly indicates that agencies of the United States government are deemed a unitary creditor....); Turner, 84 F.3d at 1296 ([I]n Cherry Cotton Mills ... the Supreme Court made clear that the United States has a right to effect interagency setoffs.). As a further indication that this Court adopted the unitary creditor concept in Lomax, we quoted there Munsey Trust Co., a case which relies explicitly on Cherry Cotton Mills to conclude that an agency need not pay a contractor who owed a greater sum of money to another agency. See Munsey Trust Co., 332 U.S. at 240, 67 S.Ct. at 1602, 91 L.Ed. at 2028. [7] , [8] , [9]