Opinion ID: 2751752
Heading Depth: 3
Heading Rank: 2

Heading: Standing – 2008 Contract

Text: Similar to its handling of the 1991 Contract, the trial court resorted to cherrypicked facts and resulting summary conclusions to rule that the Board has no standing to assert relief in connection with the 2008 Contract. Intentionally minimizing the Board’s role as a trustee of TRS, the circuit court reasoned that the Board lacked the requisite standing to be a party to any proceeding involving the 2008 Contract.35 For the reasons stated below, we find this conclusion both erroneous and specious. In VALIC’s vision of the trustee position that the Board occupies in relation to the IMB, the Board is nothing but a check issuer. Overlooked by VALIC is both statutory and case law recognizing the significance of the Board’s role as a trustee of this state’s 34 Although we find it unnecessary to address at length the trial court’s conclusion that the Board cannot establish it suffered harm in connection with the 1991 Contract, we are unpersuaded by VALIC’s contention that the issuance of the 2008 Contract fully eliminates the issue of harm to the Board. Whether the Board can demonstrate damages arising from the 1991 Contract has yet to be established. 35 The parties to the 2008 Contract were the IMB and VALIC. 16 various retirement funds. The Board is expressly charged to “administer all public retirement plans in this state.” W.Va. Code § 5-10D-1(a). By law, the Board “has all the powers, duties, responsibilities and liabilities of the Public Employees Retirement System . . . ; the Teachers Retirement System . . .; the Teachers’ Defined Contribution System. . . . ” Id. at § 5-10D-1(d). Contending that the Board is a mere payment processor while the IMB is the actual investor of TRS funds, VALIC maintains that the Board lacks the requisite significant interest in the 2008 Contract to be a party to any dispute arising from that contract. See Syl. Pt. 1, Shobe v. Latimer, 162 W.Va. 779, 253 S.E.2d 54 (1979) (recognizing existence of standing for persons with significant interests who are directly injured or adversely affected by governmental action under Uniform Declaratory Judgements Act). The indefensibility of these arguments is easily demonstrated. The Legislature both envisioned and empowered the Board to be more than a distributor of retirement checks. In designating the Board as a trustee for all the state’s retirement plans, the Legislature expressly accorded the Board “all the powers, duties, responsibilities and liabilities” of each of those plans. W.Va. Code § 5­ 10D-1(d). Inherent to the legislative reposition of trust in the Board is “a fiduciary duty to protect the fund[s] and the interests of all beneficiaries thereof” which requires that “it must exercise due care, diligence, and skill in administering the trust.” Syl. Pt. 14, in part, 17 Dadisman v. Moore, 181 W.Va. 779, 384 S.E.2d 816 (1988).36 As a further means of ensuring proper oversight of this state’s public retirement funds, the Legislature mandated that members of the Board “shall have recognized competence or significant experience in pension management or administration, actuarial analysis, institutional management or accounting.” W.Va. Code § 5-10D-1(b). The extent of the Board’s fiduciary duty to its members has previously been recognized by this Court: The fiduciary duty of the Consolidated Public Retirement Board established by W.Va. Code, 5-10D-1 [1998] and its members, with respect to the public employee pension funds and assets entrusted to the Board, includes the affirmative duty to monitor and evaluate the effect of legislative actions that may affect such funds and assets, and to take all necessary actions including initiating court proceedings if necessary to protect the fiscal and actuarial solvency of such funds and assets.” Syl. Pt. 2, State ex rel. Deputy Sheriff’s Assoc’n v. Sims, 204 W.Va. 442, 513 S.E.2d 669 (1998) (emphasis supplied). As we acknowledged in Sims, the Board has a responsibility as “‘financial prognosticator and micromanager’” to “use the court system to protect the rights 36 Although this holding of Dadisman addressed the authority of the Public Employees Retirement System Board, the same principles equally apply to the Consolidated Public Retirement Board as it replaced the PERS Board upon its creation in 1991. See State ex rel. Deputy Sheriff’s Ass’n v. Sims, 204 W.Va. 442, 448, 513 S.E.2d 669, 675 (1998) (“The affirmative duty of the Board to act . . . in an informed, proactive and independent manner to perform its fiduciary duty is no less now than it was when Dadisman was decided.”). 18 of the beneficiaries of the funds held in trust by the Board.” Id. at 448, 513 S.E.2d at 675 (internal citation omitted). Seeking to nullify the significance of the Board’s role as a trustee of TRS, VALIC places undue emphasis on the IMB’s duty to provide “prudent fiscal administration, investment and management for the funds of” TRS. W.Va. Code § 12-6-3(a) (2014). Critically, the IMB’s duty to invest TRS funds does not extinguish the fiduciary role that the Board occupies as a trustee of TRS. See W.Va. Code § 5-10D-1(a). Inherent to the Board’s continued role as a statutory trustee is its responsibility to act consistent with its legislativelyimposed duty to protect the funds of TRS as well as the interests of the TRS beneficiaries. See W.Va. Code § 12-6-7 (2014) (recognizing continued status, power,37 and duties of public agencies and boards with respect to retirement funds upon creation of IMB); Dadisman, 181 W.Va. at 782, 384 S.E.2d at 819, syl. pt. 14. As the amicus curiae38 correctly observes, the Board and the IMB “serve crucial roles that are inextricably intertwined as they relate to the retirement assets at issue.” We agree. The Legislature has charged both the Board and the IMB to protect the retirement 37 Among those continued powers is “the right to sue and be sued, plead and be impleaded, contract and be contracted with and . . . make all necessary rules and regulations to carry out the provisions of this article [7A].” W.Va. Code § 18-7A-4 (2012). 38 Specifically, the American Federation of Teachers–West Virginia, AFL-CIO. 19 assets of public education employees. As part of their duties as trustees, the petitioners serve as the legal representatives of the participants in the subject retirement plans. In bringing the subject action in tandem, the petitioners acted consistent with their public charge to protect the assets of the public education employees whose retirement depends upon the fiscal soundness of TRS. Had the IMB brought this action on its own, it is likely that the Board would have been required to intervene as a necessary party. See Mainella, 126 W.Va. at 188, 27 S.E.2d at 488 (recognizing need for joinder of necessary parties to fully adjudicate merits of pension-related matter). Consequently, we are unpersuaded by VALIC’s attempt to discount the Board’s role as a trustee of TRS. While the Legislature established the IMB as an independent public body corporate, it did not create a body authorized to act without review or oversight. See W.Va. Code § 12-6-1a(b) (2014) (recognizing need for “independent board with its own fulltime staff of financial professionals, immune to changing political climates, in order to provide a stable and continuous source of professional financial management”). This is evident from the fact that the IMB is statutorily required to provide the Board with monthly and quarterly performance reports. W.Va. Code § 12-6-6(b), (c) (2014). Of further significance is the Legislature’s decision not to eliminate or reduce the powers and duties the Board had with regard to TRS when it adopted legislation pertaining to the IMB. See W.Va. Code §§ 12-6-7, 5-10D-1(d). The legislative creation of the IMB as a public body corporate 20 for investment purposes was designed as “the best means of assuring prudent financial management of these [retirement] funds under rapidly changing market conditions and regulations.” W.Va. Code § 12-6-1a(e). Equally evident, however, is the fact that the statutes imbuing the IMB with investment authority do not abrogate the Legislature’s reposition of trust in the Board with regard to the state’s public retirement plans. Finally, it cannot be ignored that the Board is one of the entities charged with ensuring that the IMB meets its objective of administering, investing, and managing TRS in a fiscally prudent fashion. See W.Va. Code §§ 12-6-3(a), -6. By choosing to dichotomize the relief awarded based upon the signatories to the respective annuity contracts, the trial court engaged in a misadvised manner of evaluating the issues presented in this case. While the annuity agreements are contractual in nature, those contracts were formed for a specific governmental purpose–the investment of public employees’ retirement funds. In view of this uncontroverted public purpose–a purpose that entails both asset administration and protection–the signatory status of IMB to the 2008 Contract is simply not determinative of the Board’s interest in that annuity contract. As we discussed above, the Board has “all the powers, duties, responsibilities and liabilities” of TRS. W.Va. Code § 5-10D-1. And, as a statutory trustee of TRS, the Board in its fiduciary role has the inherent authority “to take all necessary actions including initiating court proceedings if necessary to protect the fiscal and actuarial solvency of such funds and 21 assets.” Sims, 204 W.Va. at 443, 513 S.E.2d at 670, syl. pt. 2, in part. Therefore, we wholly reject VALIC’s attempt to remove the Board as a party to the controversy surrounding the 2008 Contract. Rather than constituting precedent for the Board’s lack of standing, as VALIC contends, this Court’s decision in Shobe demonstrates the exact converse. Addressing the nature of the interest necessary to proceed under the Act, we concluded in Shobe that a group of plaintiffs had standing under the Act to obtain relief with regard to riparian rights allegedly affected by a contract between two governmental entities. Repudiating the considerations that typically prevent third-parties from obtaining a declaration of rights regarding a contract between private citizens, we explained that “there is a logical nexus between the status plaintiffs in error assert and the contract claim sought to be adjudicated.”39 162 W.Va. at 787, 253 S.E.2d at 59. In discussing the distinction between standing and the case or controversy test for assessing a justiciable controversy, we recognized that standing involves “‘the question [of] whether the interest sought to be protected by the complainant is arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question.’” Id. at 787, 253 S.E.2d at 59-60 (quoting Ass’n of Data Processing Serv. Organizations, Inc. v. Camp, 397 U.S. 150, 153 (1970)). Looking to the 39 As we explained in Shobe, “[b]ut for the contract the diversion [of water] would not be taking place.” 162 W.Va. at 787, 253 S.E.2d at 59. 22 remedial purposes of the Act, this Court expressly rejected the requirement that to proceed under the Act, a party must have a personal legal right or interest. See Shobe, 162 W.Va. at 788, 253 S.E.2d at 60 and syl. pt. 2. Under the reasoning of Shobe, the laws charging the Board with the duties and responsibilities of being a trustee of this state’s public retirement plans establish the requisite “zone of interests” for the Board to seek a declaration of rights with regard to the 2008 Contract. To conclude otherwise, as we observed in Shobe, “would be contrary to the express purpose and spirit of the [Declaratory Judgments] Act.” Id. at 787, 253 S.E.2d at 59. With the objective of setting this issue to rest, we hold that, as a statutory trustee of this state’s public retirement funds, the Consolidated Public Retirement Board has standing to bring an action under the Act to resolve disputes arising from investment-related contracts that involve public retirement funds, irrespective of whether it is a party to such contracts. Accordingly, we reverse the trial court’s finding that the Board lacks standing in relation to seeking and obtaining a declaration of rights and/or relief under the 2008 Contract.40 40 Not only is the trial court’s finding that the Board has not suffered any damages related to the 2008 Contract premature, but we further reject its conclusion that the Board was not impacted by any lost return on investments during the relevant time period. As the personal representative of TRS, the Board was an interested party necessarily affected by any losses that can properly be demonstrated to arise from the annuity contracts at issue. 23