Opinion ID: 217175
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Heading Rank: 3

Heading: Whether a Money Judgment in the Retirement Systems' Favor Could Benefit the State of Missouri's Treasury

Text: Having found that the Retirement Systems possess a relative lack of independence from the State of Missouri, we next consider whether a money judgment in favor of the Retirement Systems could benefit the State of Missouri's treasury. The Supreme Court has indicated that a money judgment's potential impact upon a State's treasury is of considerable importance, Regents, 519 U.S. at 430-31, 117 S.Ct. 900, and we generally treat this factor as more important than others when determining whether an entity is an arm of a State, Thomas, 447 F.3d at 1084. If both legally and practically a money judgment will have no affect on a State's treasury, then the entity is not an arm of a State. Hess, 513 U.S. at 51, 115 S.Ct. 394. The question is one of potential benefit, however; whether a money judgment in this particular case will actually benefit the State of Missouri's treasury is not the relevant inquiry. Regents, 519 U.S. at 431, 117 S.Ct. 900. A State's role in financing an entity's operation can indicate whether a money judgment in favor of the entity may benefit the State's treasury. For example, courts have found that an entity is more likely to be an arm of a State if a State makes annual appropriations to finance the entity's operating expenses or if a State retains custody over the entity's funds. Hess, 513 U.S. at 45, 115 S.Ct. 394 (noting that a bistate entity received no money from the States in concluding that it was not an arm of either of the States that created it); Hadley, 76 F.3d at 1439 (finding that a State's appropriations for part of an entity's annual budget suggested the entity was an arm of the State); McGinty, 251 F.3d at 96-98 (noting that a State retained custody over an entity's funds and provided some revenue to the entity in concluding that the entity was an arm of the State). In this case, the Retirement Systems are financed by contributions from public-school employees and their employing school districts, not by periodic state appropriations. [4] §§ 169.030(1),.620(1). Moreover, the Retirement Systems' funds are in the Board's custody and are not to be placed into the Missouri treasury's custody or commingled with the State's funds. §§ 169.040(1), .610(3). Thus, the State of Missouri's role in financing the Retirement Systems' operations is restricted. [5] In addition to a State's role in financing an entity's operations, a State's responsibility to pay an entity's obligations may also determine whether a money judgment in favor of an entity could benefit a State's treasury. Regents, 519 U.S. at 430, 117 S.Ct. 900; Moor, 411 U.S. at 719, 93 S.Ct. 1785. This is true for at least two reasons even when, as in this case, the relevant entities are plaintiffs who seek a money judgment rather than defendants against whom a money judgment is sought. [6] First, as a practical matter, if a State is responsible to pay the obligations of an entity, an entity's recovery of a money judgment as a plaintiff increases the solvency of the entity, which decreases the potential that the State will have to pay the entity's debts. Cf. Md. Stadium Auth., 407 F.3d at 263-64 (noting the relevance of a State's obligation to finance an entity's annual budget because this obligation would be reduced by the entity's recovery of a money judgment). Second, and more generally, the Supreme Court has noted that a State's responsibility for an entity's debts, apart from its implications for a State's treasury, is an indicator of the relationship between the State and the entity. Regents, 519 U.S. at 430-31, 117 S.Ct. 900. Thus, even in litigation where the State would not actually have had to pay a money judgment, the Supreme Court has noted that a State's responsibility for an entity's debts was of considerable importance. Id. at 430, 117 S.Ct. 900. Therefore, it is appropriate to analyze the extent of the State of Missouri's responsibility to pay the Retirement Systems' obligations. The portions of the Missouri Revised Statutes which define the Systems' powers and duties do not explicitly provide that the Retirement Systems' debts are the State of Missouri's debts. These statutes also do not implicitly provide that the State of Missouri must pay the Retirement Systems' debts by, for example, providing that the general assembly must appropriate sufficient funds to balance the Retirement Systems' budget for a particular fiscal period. See, e.g., Ernst v. Rising, 427 F.3d 351, 360 (6th Cir.2005) (statutory requirement); McGinty, 251 F.3d at 99 (constitutional requirement). On the other hand, these statutes do not appear to have vested the Retirement Systems or its Board with the power to issue bonds or levy taxes. Such powers generally indicate that an entity can cover its own debts, and the Supreme Court has indicated that an entity's possession of these powers suggests the entity is not an arm of a State. Mount Healthy, 429 U.S. at 280-81, 97 S.Ct. 568; see also Gilliam v. City of Omaha, 524 F.2d 1013, 1015 (8th Cir.1975) (noting that the City of Omaha's power to make a levy to pay outstanding judgments against it showed that the city would clearly be liable for any judgment rendered against it). Although the portions of the Missouri Revised Statutes defining the Retirement Systems' powers and duties do not clearly indicate whether the State of Missouri is obligated to pay the Systems' debts, a different portion of the Missouri Revised Statutes suggests the State of Missouri does bear responsibility for certain types of the Systems' debts. Missouri's general assembly appropriates funds to the State Legal Expense Fund (SLEF). § 105.711(1). The SLEF makes funds available for the payment of any claim or any amount required by any final judgment rendered by a court of competent jurisdiction against . . . any agency of the state. § 105.711(2)(1). Generally, we have noted that the Missouri courts have recognized that if an entity is an agency of the state for purposes of the SLEF, judgments obtained against [the entity] would be paid from the state treasury. Thomas, 447 F.3d at 1084 (citing Smith v. State, 152 S.W.3d 275, 277 (Mo.2005)). Neither party in this case mentions the SLEF, but there is good reason to believe that Missouri law would treat the Retirement Systems as agencies of the state for purposes of the fund. First, the statutes creating the SLEF do not define agency of the state, but we noted in a prior section of this opinion that part of the Missouri Revised Statutes defines rule-making bodies like the Retirement Systems as state agenc[ies], § 536.010(8), and Missouri courts have referred to PSRS as an agency. Savannah R-III Sch. Dist., 912 S.W.2d at 576-77. Second, the Supreme Court of Missouri found that St. Louis, Missouri's police board was an agency of the state for purposes of the SLEF because the board's members were appointed by the governor with the senate's consent, because state statutes restricted much of the board's operational independence, and because Missouri courts had historically referred to the board and its actions in ways that indicated that the courts believed the board was a state agency and that its actions were actions of the State. Smith, 152 S.W.3d at 277-79. Based on the factors that the Supreme Court of Missouri found relevant in Smith, we believe it is likely that Missouri courts would label the Retirement Systems as agenc[ies] of the state for purposes of the SLEF. Thus, it is likely that judgments obtained against the Retirement Systems could be paid from Missouri's treasury through the SLEF. Consequently, a money judgment in favor of the Retirement Systems could benefit the State of Missouri's treasury by increasing the Systems' solvency. As a final indicator of how a money judgment in favor of the Retirement Systems could benefit the State of Missouri's treasury, we note that Missouri courts have indicated that employees who make contributions to the Retirement Systems have a contractual right to receive retirement benefits. Wehmeier v. Pub. Sch. Ret. Sys. of Mo., 631 S.W.2d 893, 896 (Mo.Ct.App.1982) ([T]he Missouri legislature established contractual rights for members of [PSRS] when it created that system. (citing State ex rel. Phillip v. Pub. Sch. Ret. Sys. of St. Louis, 364 Mo. 395, 262 S.W.2d 569 (1953))). Missouri courts have not clearly indicated whether the obligation to perform the contract lies with the State of Missouri, the Retirement Systems, or both entities. See, e.g., Savannah R-III Sch. Dist. v. Pub. Sch. Ret. Sys. of Mo., 950 S.W.2d 854, 857 (Mo. 1997). Missouri courts have indicated, however, that the contractual rights that the Retirement Systems' members possess are the product of a statutory offer. Wehmeier, 631 S.W.2d at 896. This suggests that the State of Missourias the entity who made the statutory offeris obligated to perform the contract that the offer created. [7] Whether the State of Missouri's treasury must be tapped to perform this obligation depends upon the financial solvency of the Retirement Systems, which is affected by a money judgment in litigation involving the Systems. Thus, for this additional reason, we think it is evident that a money judgment in favor of the Retirement Systems could benefit the State of Missouri's treasury.