Court Opinion

ID: 2688028
Source: CourtListenerOpinion
Date Created: 2014-07-31 21:45:34.716077+00
Date Added: 2024-06-11T13:17:13.631477
License: Public Domain

IN THE COURT OF APPEALS OF IOWA

                                   No. 13-0606
                               Filed April 30, 2014

ROBERT J. BRUNKHORST and RANDALL E. LEWIS,
Individually and as Representative of all Similarly
Situated IOWA PUBLIC EMPLOYEES’ RETIREMENT
SYSTEM MEMBERS,
       Plaintiffs-Appellants,

vs.

IOWA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM,
THE STATE OF IOWA, INVESTMENT BOARD OF
IOWA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM, and
ALL ADVISORS AND CONSULTANTS OF IOWA PUBLIC
EMPLOYEES’ RETIREMENT SYSTEM,
     Defendants-Appellees.
________________________________________________________________

       Appeal from the Iowa District Court for Polk County, Christopher L.

McDonald, Judge.

       The plaintiffs appeal from the district court ruling granting the defendants’

motion for summary judgment. AFFIRMED.

       Alexander E. Wonio and David L. Brown of Hansen, McClintock & Riley,

Des Moines, for appellants.

       Thomas J. Miller, Attorney General, and Tyler M. Smith, Assistant

Attorney General, Department of Special Litigation, Des Moines, for appellees.

       Heard by Potterfield, P.J., and Doyle and Mullins, JJ. McDonald, J., takes

no part.
                                          2

DOYLE, J.

       Plaintiffs Robert Brunkhorst and Randall Lewis appeal from the district

court’s ruling granting the defendants’ motion for summary judgment. The district

court ruled there was no triable issue of fact on the wanton or malicious conduct

claim as to any defendant, the plaintiffs lacked standing, the plaintiffs’ claims

were barred by the statute of limitations, and the plaintiffs’ claims were barred by

discretionary-function immunity. We choose to affirm on the standing ground.

       I. Background Facts and Proceedings.

       The district court set forth the background facts from the summary

judgment record as follows:

               [The Iowa Public Employees’ Retirement System (IPERS)] is
       an independent agency charged with administering the defined
       benefit retirement system established under Iowa Code chapter
       97B. Iowa Code § 97B.1(1) [(1999)1]. IPERS is administered by its
       chief executive officer, who, at times material to this action, was
       [Gregory] Cusack. Id. § 97B.4. Moneys collected pursuant to
       chapter 97B, together with all interest, dividends, rents, securities
       or investment income, and assets, are held in the Iowa Public
       Employees’ Retirement Fund (“retirement fund”) separate and apart
       from all other public moneys of the state of Iowa. Id. § 97B.7(1).
       The treasurer of the state of Iowa is the custodian of the retirement
       fund. Id. § 97B.7(2). The investment board of [IPERS] (“board”) is
       the trustee of the retirement fund. Id. § 97B.8A. The board is
       charged with establishing policy and reviewing policy
       implementation in matters relating to the investment of the
       retirement fund. Id. The board is also charged with the duty of
       selecting the actuary to be employed by the system and adopting
       all other necessary factors for use in actuarial calculations required
       in administering IPERS. Id. §§ 97B.8, .59.
               Participants in the retirement system are called “members”
       of IPERS. Id. § 97B.1A(14). Active members of IPERS and their
       respective employers are required to make “contributions,” or
       payments, to IPERS to fund retirement benefits.               See id.
       §§ 97B.1A(7), .11. In 1999, an employee member’s required

       1
         The citations to the Iowa Code in this opinion refer to the 1999 Code of Iowa
unless otherwise noted.
                                 3

contribution was 3.7% of the employee’s covered wages. Id.
§ 97B.11. An employer’s required contribution was 5.75% of an
employee member’s covered wages.               Id. . . . [U]nder this
contribution formula, an employee member contributed 40% and an
employer contributed 60% of the total contribution. [See, e.g., id.
§ 97B.72(2)(b); Iowa Admin. Code r. 581-21.24(6)(d) (1999)
(setting forth cost of “service buy-in/buy-back” for legislative
members).]
        ....
        A “member” of IPERS is [statutorily defined as] an employee
or former employee who maintains his or her “accumulated
contributions” in the retirement system. Iowa Code § 97B.1A(14).
In 1999, upon termination of employment prior to retirement, a
member could, among other things, request and receive a refund of
his or her accumulated contributions.         Id. § 97B.53(4).    By
definition, this amount did not include the accumulated employer
contributions for the employee, which IPERS retained. See id.
§ 97B.1A(2) (defining “accumulated contributions” as individual
contributions by the member”). A former employee is no longer a
member of IPERS if he or she received a refund of his or her
accumulated contributions. Id. § 97B.1A(14).
        Under certain circumstances, a member may purchase
service credits by paying additional monies into IPERS and thereby
increasing the number of service years applied toward retirement.
See, e.g., id. § 97B.74. There are two types of service credits: buy-
backs and buy-ins. [See Iowa Admin. Code r. 581-21.24.] Prior to
July 1, 1999, a [former] vested or retired member who received a
refund of his or her accumulated contributions could “buy-back”
service credits by repaying the accumulated contributions received
plus accumulated interest and interest dividends, from the date of
receipt to the date of repayment. See Iowa Code § 97B.74 (1997).
The repayment amount thus only included the employee’s
accumulated contributions refunded. See id. (1997). A [former]
member could also purchase service credit for service rendered to
another public employer, which is referred to as a “buy-in.” [See id.
§ 97B.43 (1997); Iowa Admin. Code r. 581-21.24(2) (1997).] Unlike
a buy-back, a buy-in required the [former] member to pay both the
employee and employer contribution for each calendar quarter of
service purchased. [See Iowa Code § 97B.43 (1997) (requiring the
individual to redeposit any withdrawn “contributions”); see also id.
§ 97B.41(7) (1997) (defining “contributions” as “payments to the
fund required herein, by the employer and by the members, to
provide the benefits of the system”); Iowa Admin. Code r. 581-
21.24(2)(b) (1997) (requiring the individual to make “employer and
employee contributions to IPERS” for buy-in).]
        In 1998, a study conducted by IPERS’s actuarial service
firm, Milliman and Robertson (“Milliman”), concluded that buy-backs
                                 4

and buy-ins were being purchased disproportionately by older
members who were able to determine more easily the net benefit of
the purchase. This adverse selection or selection bias was
resulting in an unfunded actuarial accrued liability because of the
manner in which service purchases were being funded.
         In 1998, the general assembly amended chapter 97B in two
respects material to this litigation. See 1998 Iowa Acts ch. 1183.
The two amendments—and IPERS’s response to the same—are
the crux of the parties’ dispute.
         ....
         The summary judgment record establishes that . . . [the
legislature] made two amendments to chapter 97B relevant to this
litigation. See id. First, one amendment required that, effective
July 1, 1999, all members wishing to purchase service credit “make
contributions in an amount equal to the actuarial cost of the service
purchase.” Id. § 67 (codified at Iowa Code § 97B.74(2)(b)). The
amendment further provided that “the actuarial cost of the service
purchase is an amount determined by the department in
accordance with actuarial tables, as reported to the department by
the system’s actuary, which reflects the actuarial cost necessary to
fund an increased retirement allowance resulting from the purchase
of additional service.” Id. . . .
         Second, the same legislation also amended the provision
regarding payment of contributions upon termination of employment
prior to retirement. See id. § 57 (codified at Iowa Code § 97B.53).
The amendment provided that “for a vested member, the
accumulated employer contributions for the vested member” be
paid on application. See id. Prior to this amendment, the law
allowed only the refund of the employee’s accumulated
contributions and not both the accumulated contributions and the
accumulated employer contributions. [See Iowa Code § 97B.53
(1997).]
         The summary judgment record establishes that IPERS
worked with its actuary, Milliman, to implement the actuarial cost
formula as required. In anticipation of the amendment, Milliman
and IPERS discussed amending their contract to provide for the
calculation of individualized actuarial costs for service purchases.
In December 2008, IPERS finalized the amendment to the Milliman
contract, and Milliman agreed to provide IPERS “twice a month in
the individualized actuarial cost of service purchases.” Notably, the
contract required that the cost of service purchases calculated by
Milliman “shall be based on the applicable law, administrative rules,
and any other written instructions provided by IPERS.” By
February 1999, IPERS and Milliman had agreed upon the
calculation methodology used to determine the “actuarial cost” of
service purchases.       Under the methodology, the contribution
required for a buy-back would reflect a 60% actuarial credit to
                                         5

       reflect that IPERS retained the accumulated employer contributions
       after the member received the refund of accumulated contributions.
       Under the methodology, buy-ins did not receive actuarial credit
       because no corresponding accumulated employer contributions
       reduced the actuarial cost of the service purchase. IPERS
       implemented the statutory changes by the effective date and began
       requiring members to pay the actuarial costs, as determined by
       IPERS and Milliman, for both buy-backs and buy-ins.
               IPERS continued to distinguish between the contributions
       required for buy-backs and buy-ins through January 14, 2004, on
       the basis that, with respect to buy-backs, the accumulated
       employer’s contributions remained with IPERS after the member
       received a refund of his or her accumulated contributions. Effective
       January 14, 2004, IPERS changed its actuarial cost formula for
       buy-backs by discontinuing the application of the actuarial credit. In
       January 2004, Cusack sent a memo to members explaining the
       change. Cusack explained that the actuarial credit applied to buy-
       backs was unsound insofar as it failed to reflect the 1999
       amendment that allowed vested members to receive a portion of
       accumulated employer contributions plus interest. He explained
       that IPERS and “especially ‘me,’ Greg Cusack” “goofed in not
       catching the need for this change five years ago!”
               [The Fiscal Services Division of the Iowa Legislative Service
       Agency] concluded that between the effective date of the law and
       the effective date of IPERS’s January 2004 change, 3523
       employees purchased buy-backs. If those members had paid
       contributions in accord with IPERS’s new actuarial cost
       methodology for buy-backs, IPERS would have collected an
       additional $29.2 million in contributions, assuming that the same
       number of members would have completed the buy-backs at the
       higher price. In addition, because IPERS honored price quotes
       through September 2004, IPERS would have collected an
       additional $8.6 million in contributions from an additional 600
       employees who exercised their buy-back rights under the old
       formula. In total, viewing the facts in the light most favorable to the
       plaintiffs, IPERS admitted incorrect actuarial cost methodology
       resulted in lost contributions in the amount of $37.8 million.

(Internal footnotes omitted.)

       Plaintiff Robert Brunkhorst first became an IPERS member in 1995, and

he made contributions to IPERS from then until sometime in 2006. In 2006,

Brunkhorst stopped making contributions to IPERS; however, he did not request

a refund of his contributions. He thereby became an inactive member of IPERS.
                                        6

See Iowa Code § 97B.1A(12) (2005) (defining “inactive member”). He remained

inactive from 2007 to 2009. He became an active member again in 2010, when

he returned to public service. At that time, he re-enrolled in IPERS and again

began making contributions to IPERS, changing his status from an inactive

member to active member.         See id. § 97B.1A(3) (2007) (defining “active

member”).     At all relevant times, Brunkhorst never received a refund of

contributions nor did he ever purchase a service credit via buy-back or buy-in.

      On January 13, 2006, Brunkhorst filed a claim with the Iowa State Appeal

Board pursuant to the Iowa Tort Claims Act, Iowa Code chapter 669, alleging a

tort claim against the State, IPERS, and others, as a member of a class. His

claim was based upon the flaw in IPERS’s actuarial methodology implemented in

response to the 1999 legislation. He alleged $37 million in property damages.

His claim was denied in August 2006.

      On February 7, 2007, Brunkhorst filed a petition in district court against the

defendants alleging a class action suit with numerous counts, including a

common-law claim for breach of fiduciary duty. At that time, Brunkhorst was not

an active member of IPERS because he was not paying any contributions to

IPERS and had not sought retirement benefits.

      The defendants filed a motion to dismiss the petition on numerous

grounds.     After a hearing, the motion was granted by the district court.

Brunkhorst appealed the ruling, and we reversed the district court’s dismissal

order and remanded the case for further proceedings. See Brunkhorst v. Iowa

Pub. Emps.’ Ret. Sys., No. 07-1340, 2008 WL 4724726, *1 (Iowa Ct. App. Oct.

29, 2008).
                                           7

       In July 2009, an amended petition was filed adding plaintiff Randall E.

Lewis to the case (hereinafter “the plaintiffs”). Lewis had been an active member

of IPERS from 1991 to 2007. He made an application for a service purchase on

December 21, 2007, but he never completed the purchase. He began receiving

IPERS benefits in January 2009. He filed a tort claim on July 1, 2009, which was

denied on October 5, 2009. Lewis never claimed a reduction in benefits.

       The defendants filed a motion for summary judgment. Following briefing

and hearings, the district court entered its thorough and well-reasoned twenty-

nine-page ruling granting the defendants’ motion.2 Specifically, the court found

each of the grounds urged by the defendants supported summary judgment,

concluding: (1) the plaintiffs failed to create a triable issue of fact on their breach-

of-fiduciary-duty common-law claim because there was not sufficient evidence

from which a jury could infer that the defendants engaged in wanton or malicious

conduct; (2) the plaintiffs lacked standing to bring the claim; (3) the district court

was without jurisdiction over the plaintiffs’ claim, and (4) discretionary-function

immunity barred the plaintiffs’ claim against the defendants.

       The plaintiffs now appeal.

       II. Scope and Standards of Review.

       We review a district court’s ruling on summary judgment for correction of

errors of law. Iowa R. App. P. 6.907; Osmic v. Nationwide Agribusiness Ins. Co.,

841 N.W.2d 853, 858 (Iowa 2014). Summary judgment is appropriate if “the

pleadings, depositions, answers to interrogatories, and admissions on file,

       2
            In its ruling, the court also granted the defendants’ motion to dismiss the
plaintiffs’ claims against Gregory Cusack, individually and as a representative of all
personnel of IPERS. This is not an issue on appeal.
                                        8

together with the affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment as a matter of

law.” Iowa R. Civ. P. 1.981(3); Thomas v. Gavin, 838 N.W.2d 518, 521 (Iowa

2013). We examine the record in the light most favorable to the nonmoving

party, Sallee v. Stewart, 827 N.W.2d 128, 133 (Iowa 2013), and we “afford the

nonmoving party every legitimate inference that can be reasonably deduced from

the evidence.” Boelman v. Grinnell Mut. Reins. Co., 826 N.W.2d 494, 501 (Iowa

2013) (citation and internal quotation marks omitted).

      “An issue is ‘material’ only when the dispute is over facts that might affect

the outcome of the suit, given the applicable governing law.” Sallee, 827 N.W.2d

at 132-33 (citation and internal quotation marks omitted). “If reasonable minds

can differ on how the issue should be resolved, a fact question is generated, and

the district court should deny summary judgment.” Boelman, 826 N.W.2d at 501

(citation and internal quotation marks omitted).     However, if the “motion for

summary judgment is properly supported, the nonmoving party is required to

respond with specific facts that show a genuine issue for trial.”       Mueller v.

Wellmark, Inc., 818 N.W.2d 244, 253 (Iowa 2012) (citation and internal quotation

marks omitted).    Our role on appeal is to decide whether the district court

correctly determined there was not sufficient evidence to submit the issue to the

jury. See Dorshkind v. Oak Park Place of Dubuque II, L.L.C., 835 N.W.2d 293,

300 (Iowa 2013); see also Nelson v. James H. Knight DDS, P.C., 834 N.W.2d 64,

73 (Iowa 2013) (finding a defendant’s conduct did not amount to unlawful

discrimination under the facts). “We can resolve a matter on summary judgment
                                          9

if the record reveals a conflict concerning only the legal consequences of

undisputed facts.” Boelman, 826 N.W.2d at 501.

       III. Discussion.

       On appeal, the plaintiffs challenge all of the grounds for summary

judgment found by the district court in its ruling. However, we need only find one

ground sustainable to uphold the ruling. See Bartsch v. Bartsch, 636 N.W.2d 3,

6 (Iowa 2001); see also In re Estate of Voss, 553 N.W.2d 878, 879 n. 1 (Iowa

1996); Grefe & Sidney v. Watters, 525 N.W.2d 821, 826 (Iowa 1994). Because

we agree with the district court that summary judgment was proper because the

plaintiffs lacked standing, we find that ground dispositive. Therefore, it is the only

issue we will discuss.

       Standing refers to “[a] party’s right to make a legal claim or seek judicial

enforcement of a duty or right.” Black’s Law Dictionary 1413 (7th ed. 1999). If

the party asserting a claim lacks standing, the court will not hear the claim, even

if the legal controversy asserted could be meritorious. See Alons v. Iowa Dist.

Ct., 698 N.W.2d 858, 864 (Iowa 2005). Stated another way, “[w]hether litigants

have standing does not depend on the legal merit of their claims, but rather

whether, if the wrong alleged produces a legally cognizable injury, they are

among those who have sustained it.” Citizens for Responsible Choices v. City of

Shenandoah, 686 N.W.2d 470, 475 (Iowa 2004).                Consequently, when a

standing issue is raised, our focus is on the party asserting the claim and not the

merits of the party’s claim. See Alons, 698 N.W.2d at 864.

       Iowa’s “standing inquiry has two distinct prongs, each of which a plaintiff

must satisfy to proceed with a claim.         Our cases have determined that a
                                        10

complaining party must (1) have a specific personal or legal interest in the

litigation and (2) be injuriously affected.”   Horsfield Materials, Inc. v. City of

Dyersville, 834 N.W.2d 444, 452 (Iowa 2013) (citation and internal quotation

marks omitted). “To satisfy the first element, we require the litigant to allege

some type of injury different from the population in general.       To satisfy the

second element, the injury cannot be ‘conjectural’ or ‘hypothetical,’ but must be

‘concrete’ and ‘actual or imminent.’” Hawkeye Foodservice Distribution, Inc. v.

Iowa Educators Corp., 812 N.W.2d 600, 606 (Iowa 2012) (internal citations and

quotation marks omitted).

      The Iowa Supreme Court has further observed:

               While both Iowa and federal case law on the application of
      standing to public-interest litigation has largely focused on the type
      of factual injury required to support standing, federal law has also
      developed additional elements that are particularly applicable when
      the “asserted injury arises from government’s allegedly unlawful
      regulation (or lack of regulation) of someone else,” as opposed to
      cases in which the “plaintiff is himself an object of the action (or
      foregone action) at issue.” Lujan v. Defenders of Wildlife, [504 U.S.
      555, 561-62 (1992)]. Under such a circumstance, the plaintiff must
      establish “a causal connection between the injury and the conduct
      complained of” and that the injury is “‘likely,’ as opposed to merely
      ‘speculative,’ to be ‘redressed by a favorable decision.’” [Id.].
      These two additional considerations largely relate to the prudential
      concerns we have recognized, and we too have relied on them to
      resolve standing claims in the past. For example, in Citizens for
      Responsible Choices, we were presented with an action by a group
      of citizens who sought a declaration that a public-improvement
      project was illegal because the bonds to finance the project were
      allegedly issued in violation of the law. 686 N.W.2d at 472. The
      project included the construction of a recreational lake and park on
      land owned or rented by the citizens. Id. We held the citizens
      group had no standing to challenge the action in the issuance of the
      revenue bonds because the injury claimed came from the project
      itself, not the governmental action in the issuance of the bonds. Id.
      at 475. To borrow from the federal language, the injury was not
      “fairly traceable” to the challenged action. Lujan, [504 U.S. at 560].
                                        11

Godfrey v. State, 752 N.W.2d 413, 421-22 (Iowa 2008); see also Alons, 698

N.W.2d at 867-68 (discussing the additional standing elements established by

federal case law as discussed in Lujan).

       In Lujan, the U.S. Supreme Court discussed the additional standing

elements in relation to a motion for summary judgment. See 504 U.S. at 560-61.

The Court noted that because the standing elements are “an indispensable part

of [a] plaintiff’s case, each element must be supported in the same way as any

other matter on which the plaintiff bears the burden of proof, i.e., with the manner

and degree of evidence required at the successive stages of the litigation.” Id. at

561. Although general factual allegations by the plaintiff of injury resulting from

the defendant’s conduct may suffice at the pleading stage, the plaintiff can no

longer rest on mere allegations in response to a defendant’s summary judgment

motion. See id. Rather, the plaintiff “must set forth by affidavit or other evidence

specific facts which for purposes of the summary judgment motion will be taken

to be true.” Id. (internal citation and quotation marks omitted). “Standing is not

an ingenious academic exercise in the conceivable, but as we have said

requires, at the summary judgment stage, a factual showing of perceptible harm.”

Id. at 566 (internal citation and quotation marks omitted). The Court further noted

that “standing is to be determined as of the commencement of suit.” Id. at 571

n.5.

       The plaintiffs acknowledge in their reply brief that the additional standing

elements set forth in Lujan, as discussed in Godfrey, apply here. See Godfrey,

752 N.W.2d at 421-22; see also Lujan, 504 U.S. at 560-61. Additionally, the

plaintiffs agree that standing is to be determined as of the commencement of
                                            12

suit, as stated in Lujan.3 However, they maintain that they suffered an “injury-in-

fact” because they have continued “to allege that the failure to implement the

statutory change jeopardized [their] future benefits.” We disagree.

       Here, when Brunkhorst filed suit, he was an inactive member of IPERS

and was not making any contributions to the fund. He pled in his original petition

that the defendants’ “failure to implement the statutory mandate . . . has

contributed toward a need for increased and/or additional contributions from

[Brunkhorst].”    The evidence, as consequently fleshed out in the summary

judgment record, shows Brunkhorst had not paid any increased contribution rate

at the time of the filing of his suit. There is no evidence in the summary judgment

record, but for his own belief, that his future IPERS benefits were in jeopardy.

The same applies for Lewis. Although he was an active member and making

contributions to IPERS at the time Brunkhorst filed suit, he was not, at that time,

required to pay at an increased rate. Again, there was no evidence presented,

but for his own belief, that his future IPERS benefits were in jeopardy. The

plaintiffs have failed to present any evidence they suffered an actual injury in fact,

and, thus, a legally cognizable injury. Consequently, we agree with the district

court’s determination that there was not sufficient evidence of a genuine issue of

material fact as to standing to submit the matter to the jury.

       3
         Although our supreme court has not officially adopted this language and could
choose to interpret our constitution differently, its prior adoption of language from Lujan,
along with its general acceptance of similar parallel federal standing analysis, supports
the conclusion our supreme court would agree. See Godfrey, 752 N.W.2d at 418; Alons,
698 N.W.2d at 869. Nevertheless, because the plaintiffs do not challenge the
proposition, we do not address it any further.
                                              13

       Because we agree, for purposes of summary judgment, the plaintiffs failed

to establish a genuine issue of material fact that they suffered an actual injury in

fact and therefore a legally cognizable injury, we conclude the district court did

not err in granting the defendants’ motion for summary judgment. Accordingly,

we affirm the ruling of the district court.

       AFFIRMED.