Opinion
NO. 2014-CA-001622-MR
06-10-2016
BOARD OF TRUSTEES OF KENTUCKY RETIREMENT SYSTEMS APPELLANT v. JEFFREY L. LIZER APPELLEE
BRIEF FOR APPELLANT: Leigh A. Jordan Frankfort, Kentucky BRIEF FOR APPELLEE: Matthew R. Malone Jacob K. Michul Lexington, Kentucky
NOT TO BE PUBLISHED APPEAL FROM FRANKLIN CIRCUIT COURT
HONORABLE THOMAS D. WINGATE, JUDGE
ACTION NO. 13-CI-00464 OPINION
REVERSING
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BEFORE: ACREE, CHIEF JUDGE; JONES AND NICKELL, JUDGES. JONES, JUDGE: This is an appeal from a decision of the Franklin Circuit Court REVERSING and REMANDING a final order from the Board of Trustees of Kentucky Retirement Systems ("Board"). After having reviewed the record and the applicable legal authority, we reverse.
I. Background
The Appellee, Jeffrey Lizer, was employed by the City of Paris Police and Fire Department for approximately twenty-one years. Lizer's employment with the City of Paris Police and Fire Department entitled him to participate in Kentucky Retirement Systems. On March 24, 2011, Lizer submitted a notification of retirement form indicating that he intended to terminate his employment with the City of Paris Police and Fire Department on June 30, 2011, and retire effective July 1, 2011.
"Kentucky Retirement Systems is a statutorily created agency of state government, KRS [Kentucky Revised Statutes] 61.645(1), administered by a board of trustees that manages and administers the retirement funds of the County Employees Retirement System, the Kentucky Employees Retirement System and the State Police Retirement System." Commonwealth v. Kentucky Ret. Sys., 396 S.W.3d 833, 837 (Ky. 2013).
On the same day, Lizer met with Jeffery Pritchett, a counselor for Kentucky Retirement Systems. The two discussed Lizer's retirement. During the meeting, Mr. Pritchett completed a checklist indicating the items he covered with Lizer as well as the forms Lizer completed during the meeting. Mr. Pritchett indicated on the checklist that he provided Lizer with a handout regarding issues related to retirement and reemployment as well as a retirement handbook.
The handout on retirement and reemployment indicates that retirees who wish to return to work in a non-participating position must observe a three (3) calendar month break in service before returning to work with a participating agency, and that "if the employee does not observe the proper break, retirement is voided and all benefits are repaid to KRS." The handout also explains that a retired member, who is to be reemployed, must submit a Form 6751, Member and Employer Certification Regarding Reemployment, and instructs the member that he should not commence new employment until approval has been received from Kentucky Retirement Systems. The handbook contains similar information on reemployment.
Following his retirement, on or about August 9, 2011, Lizer began employment with the Bourbon County Sheriff's Office as a part-time Court Security Officer. The Bourbon County Sheriff's Office participates in Kentucky Retirements Systems, but Lizer's part-time position was not a participating position. Because Lizer began employment with a participating agency less than three months from beginning retirement, his retirement was subject to being voided by Kentucky Retirement Systems. See KRS 61.637(17)(a):
If a member is receiving a retirement allowance from one (1) of the systems administered by Kentucky Retirement Systems . . . and is employed . . . in a position that is not considered regular full-time with an agency participating in one (1) of the systems administered by Kentucky Retirement Systems within three (3) months following the member's initial retirement date, the member's retirement shall be voided.
On October 24, 2011, Lizer submitted a Form 6751, Member and Employer Certification Regarding Employment, to Kentucky Retirement Systems. Along with this form, Lizer submitted a typed letter, which reads as follows:
In a few months prior to my retirement from the City of Paris Police Department, which was on July 1, 2011, I went to Frankfort and sat down with a gentleman named Jeffrey (do not member last name) to discuss my
retirement. He was very nice and went through everything with me and I signed my papers that day to retire on July 1, 2011. In the course of our discussion I inquired about future employment and told him after working all those years I was only interested in a part time job somewhere and asked him how long if any I needed to sit out to be reemployed. He stated that I only needed to sit out 30 days from day of retirement.(R. at 7).
During the month of July I was looking around for a part time job and a friend of mine told me that a position had come open in the Judicial Center as a court security officer and it was only 99 hours a month or less. I advised him that was perfect and applied. I relayed that I had to sit out 30 days and I started work for the Bourbon County Sheriff's Office [as] a court security office[er] about the second week of August 2011. I was working on Monday October 24 when I received a call from the Sheriff that the county treasurer had contacted him about the retirement board had called and stated I was supposed to have sit [sic] out 90 days.
I called the retirement board and talked to Paul and asked and he went through the process and told me part time was 90 days and told me to process form 6751 along with this letter explaining the confusion and fax it to the Ky Retirement Systems for review.
On November 4, 2011, Kentucky Retirement Systems notified Lizer by certified letter that his reemployment was in violation of KRS 61.637(17)(a) and 105 Kentucky Administrative Regulations (KAR) 1:390, Section 4, because he did not observe the required three-month break in service. Lizer was further informed that this violation required him to remit the $12,516.87 in retirement benefits he had received to the Kentucky State Treasurer within thirty days.
It should be noted that "voided" as used in Section 4 does not mean canceled indefinitely. The member may reapply for retirement at a later date after terminating his reemployment with the participating agency.
Lizer has since re-retired making him eligible for future retirement benefits.
Following receipt of this letter, Lizer requested an administrative hearing, as was his right under KRS 61.645(16). An administrative hearing was conducted on July 7, 2012. Mr. Pritchett and Lizer were the only witnesses to testify at the hearing.
Mr. Pritchett testified that he has been employed by Kentucky Retirement Systems for the last eight and a half years and has been working as a benefits counselor for the last four and a half years. He explained that he generally meets with eighty or so members a month to discuss issues related to retirement and disability benefits. Mr. Pritchett testified that after each member meeting he makes notations about the meeting in an electronic journal. He further testified that if a member asks him a specific question, he includes a notation of the question in the journal comments.
Mr. Pritchett testified that it is common for retiring members to ask him questions about reemployment. He explained that Kentucky Retirement Systems prefers for the legal department to handle all retiree reemployment inquiries. As such, it is his general practice to refer any retiree who asks about reemployment to the legal department. Mr. Pritchett testified that if a member did ask him questions concerning reemployment, he would make a journal comment entry to reflect that the member was interested in reemployment. He testified that it is his standard practice to provide each retiring member with a member Retiree Handbook and a Reemployment after Retirement handout.
Mr. Pritchett testified that he recalled meeting with Lizer sometime in 2011, but that he could not recollect the specifics of their conversation. Mr. Pritchett testified that he recorded journal comments on the morning of March 25, 2011, documenting his meeting with Lizer. The journal states:
Member i/o to see 7/11 v#0276291; Prep final for 7/11 v# 0276295; Member completed forms 6000, 6010, 6017, 6030, 6120, 6130,6200; Discussed all payment topions [sic] at length. Stated benef and payment options final upon retirement; Discussed open enrollment, check issuances, final audits; Gave retired/reemployed handout.(R. at 23).
Lizer testified that during his meeting with Mr. Pritchett, he asked about reemployment in general. Lizer acknowledged that he did not ask about any specific type of employment because he had not yet retired and was unsure exactly what he was going to do after retirement. However, Lizer testified that he was sure that he told Mr. Pritchett that he was only interested in doing part-time work in the future. Lizer testified that Mr. Pritchett affirmatively represented that he would only need to wait thirty days before commencing new employment. Lizer testified that he relied on this statement by Mr. Pritchett when he obtained employment several months later.
The hearing officer recommended that Kentucky Retirement Systems' determination that Lizer's retirement was void for violation of KRS 61.637(1)(17)(a) and 105 KAR 1:1390 Section 4 be affirmed. Lizer filed exceptions to and appealed the hearing officer's recommended order to the Board of Trustees. On March 13, 2013, the Board issued its final order denying Lizer's appeal. The Board also issued a modified order which contains findings of fact and conclusions of law. As related to the issues before us, the Board's order provides:
5. Claimant was not a reliable witness. At the Administrative Hearing Claimant testified on direct examination that he did not remember receiving the Retiree Handbook or the Reemployment After Retirement handout. Later on cross-examination, he testified that he never received the Retiree Handbook or the Reemployment After Retirement handout, despite documentation in his file that he acknowledged receipt of these materials. It is also difficult to believe that, given his twenty-one (21) years worth of experience interpreting complex statutes and other criminal law-related material, and having to deal with regulations in the regular performance of his duties as the Lieutenant overseeing the Narcotics Unit and the Criminal Investigations Unit, the Claimant could not read and interpret the information found in the Retiree Handbook or the Reemployment After Retirement handout.
6. Claimant maintains that his retirement should not be voided on the theory of equitable estoppel. Claimant testified he relied on a representation of Jeffery Pritchett that he needed only a thirty (30) day break in service before re-employment in a part-time job. . . . Mr. Pritchett had a duty to use care, skill and caution in advising Claimant concerning his retirement and in answering his questions concerning re-employment; and he also had a duty to provide a good-faith interpretation of the law governing the retirement system in his meeting with Claimant on March 24, 2011. KRS 61.650. However, the evidence shows that Mr. Pritchett did not engage in conduct which amounts to a false
representation or concealment of material facts because Mr. Pritchett did not discuss any specifics regarding any possible re-employment. The only proof Mr. Pritchett made any statement regarding re-employment is the Claimant's own testimony. The Claimant's credibility has already been ruled on in Finding of Fact #5 above, and the Board concurs with that finding. His testimony clearly serves his own self-interest [in] this matter. Given the choice between self serving testimony from a less than credible source and objective documentations that was generated before there was even a potential issue on the horizon (that documentation being the checklist and folder comments), the Board has thoroughly weighed the evidence and declines to apply the extraordinary remedy of equitable estoppel. Additionally, Claimant did have the means of knowledge of the truth as to the facts in question, both from the handouts provided to him at his meeting with Mr. Pritchett and through investigation of the statutes and regulations concerning re-employment. The Claimant certainly did not intend to violate KRS 61.637(1)(17)(a) and 105 KAR 1:1390 section 4. Be that as it may, Claimant's situation is not similar to the Respondent in Kentucky Retirement Systems v. Fryrear, Ky.App., 316 S.W.3d 307 (2010) as alleged by counsel. In Fryrear, the Respondent met with a Kentucky Retirement Systems Benefits Counselor for specific guidance concerning re-employment with the Taylor Circuit Clerk's Office. Respondent and the Benefits Counselor were both confused about whether the Clerk's Office was a member of the Kentucky Employment Retirement Systems or the County Employees Retirement System, a pivotal fact in the Respondent's re-employment situation. In Claimant's case, no specific facts concerning re-employment were discussed at his meeting with Mr. Pritchett, as Claimant had yet to retire from the Paris Police Department and presumably was not aware of any potential employment with the Bourbon County Sheriff's Office. Given the controlling case law, equitable estoppel does not apply to Claimant's Case.(R. at 142-45).
Lizer appealed the Board's decision to the Franklin Circuit Court. KRS 61.665(5). The circuit court held that the Board erred because there was "no evidence in the record to support a finding that Lizer was not a credible witness." Accordingly, the circuit court determined that the Board's opinion was arbitrary as it completely discounted Lizer's testimony, which it characterized as "the only evidence presented regarding the representations made during Lizer's March 24 meeting with Pritchett." The circuit court held that "while it is true that the only testimony to support a finding that Pritchett made such a representation is Lizer's own testimony, it is disingenuous to assume that Lizer made the thirty day waiting period up out of whole cloth." The circuit court also rejected the Board's attempt to distinguish Fryrear, supra.
This appeal followed.
II. Standard of Review
"Kentucky case law establishes that it is the role of the administrative agency, acting as the trier of fact, to determine the credibility of witnesses and pass on the weight of the evidence." Johnson v. Galen Health Care, Inc., 39 S.W.3d 828, 832 (Ky. App. 2001). "The circuit court's role as an appellate court is to review the administrative decision, not to reinterpret or to reconsider the merits of the claim, nor to substitute its judgment for that of the agency as to the weight of the evidence." 500 Associates, Inc. v. Nat. Res. & Envtl. Prot. Cabinet, 204 S.W.3d 121, 131 (Ky. App. 2006). The circuit court's review of an agency's factual findings is quite limited. See Runner v. Commonwealth, 323 S.W.3d 7, 10 (Ky. App. 2010).
Our Supreme Court recently explained the nature of this limited review as follows:
When the decision of the fact-finder is in favor of the party with the burden of proof or persuasion, the issue on appeal is whether the agency's decision is supported by substantial evidence, which is defined as evidence of substance and consequence when taken alone or in light of all the evidence that is sufficient to induce conviction in the minds of reasonable people. Where the fact-finder's decision is to deny relief to the party with the burden of proof or persuasion, the issue on appeal is whether the evidence in the party's favor is so compelling that no reasonable person could have failed to be persuaded by it.Kentucky Ret. Sys. v. Brown, 336 S.W.3d 8, 14-15 (Ky. 2011) (quoting McManus v. Kentucky Retirement Systems, 124 S.W.3d 454 (Ky. App. 2003)).
III. Analysis
Kentucky Retirement Systems sought to void Lizer's retirement benefits pursuant to KRS 61.637(17)(a) and 105 KAR 1:390. Thus, the initial burden of persuasion fell on Kentucky Retirement Systems. See KRS 13B.090(7) ("[T]he agency has the burden to show the propriety of a penalty imposed or the removal of a benefit previously granted."). It is undisputed that Lizer's reemployment violated both of these sections because it occurred less than three months from the date of his retirement. Kentucky Retirement Systems met its burden.
Lizer's position was that Kentucky Retirement Systems should be equitably estopped from voiding his retirement benefits because he accepted his reemployment based on Mr. Pritchett's statements to him on March 24, 2011. "Equitable estoppel is a defensive doctrine founded on the principles of fraud, under which one party is prevented from taking advantage of another party whom it has falsely induced to act in some injurious or detrimental way." Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581, 594-95 (Ky. 2012). Because equitable estoppel is an affirmative defense, Lizer bore the burden of proving its applicability. See KRS 13B.090(7) ("The party asserting an affirmative defense has the burden to establish that defense."). Thus, the question on appeal is whether the Board's failure to find for Lizer on his defense of equitable estoppel was arbitrary. In other words, the question is whether the evidence in favor of Lizer was so compelling that "no reasonable person could have failed to be persuaded by it." Brown, 336 S.W.3d at 15; Bourbon Cty. Bd. of Adjustment v. Currans, 873 S.W.2d 836, 838 (Ky. App. 1994).
"The doctrine of equitable estoppel should not be applied as freely against governmental agencies as it is applied in the case of private persons." Board of Trustees, Kentucky Ret. Sys. v. Grant, 257 S.W.3d 591, 595 (Ky. App. 2008). Before equitable estoppel can be invoked against a governmental entity, "a court must find that exceptional and extraordinary equities are involved." Sebastian-Voor Properties, LLC v. Lexington-Fayette Urban Cty. Gov't, 265 S.W.3d 190, 194 (Ky. 2008). "Further, estoppel is a question of fact to be determined by the circumstances of each case." Weiand v. Bd. of Trustees of Kentucky Ret. Sys., 25 S.W.3d 88, 91-92 (Ky. 2000); see also Spalding v. Marion Cty. Bd. of Educ., 452 S.W.3d 611, 617 (Ky. App. 2014) ("Equitable estoppel is a factual determination, which must be made by the appropriate fact-finder.").
The essential elements of equitable estoppel are[:] (1) conduct which amounts to a false representation or concealment of material facts, or, at least, which is calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; (2) the intention, or at least the expectation, that such conduct shall be acted upon by, or influence, the other party or other persons; and (3) knowledge, actual or constructive, of the real facts. And, broadly speaking, as related to the party claiming the estoppel, the essential elements are (1) lack of knowledge and of the means of knowledge of the truth as to the facts in question; (2) reliance, in good faith, upon the conduct or statements of the party to be estopped; and (3) action or inaction based thereon of such a character as to change the position or status of the party claiming the estoppel, to his injury, detriment, or prejudice.Sebastian-Voor, 265 S.W.3d at 194-95 (quoting Weiand v. Bd. of Trs. of Kentucky Ret. Sys., at 91.)
The only evidence in the record to support that Mr. Pritchett made an incorrect statement to Lizer was Lizer's own testimony. The Board determined that Lizer's testimony was not credible. The circuit court held that the Board's conclusion on the credibility issue was arbitrary and unsupported by substantial evidence. The circuit court then went on to decide that the evidence was conclusive that Mr. Pritchett made the statement at issue because there was no direct testimony offered from Mr. Pritchett or any other witness to contradict Lizer's assertion that Mr. Pritchett told him that there was only a thirty-day waiting period for part-time employment.
"The general rule in respect to the weight to be accorded uncontradicted testimony is: If the witness is disinterested, and in no way discredited by other evidence, and the testimony is as to a fact not improbable or in conflict with other evidence, and is within his own knowledge, such fact may be taken as conclusive." Bullock v. Gay, 177 S.W.2d 883, 885 (Ky. 1944) (emphasis added). However, where the evidence comes from an interested witness, it need not be considered conclusive as a matter of law. Id. Rather, the weight, if any, of such testimony is for the trier of fact. See Grider Hill Dock, Inc. v. Sloan, 448 S.W.2d 373 (Ky.1969) (holding that even the uncontradicted testimony of an interested witness does not bind the fact-finder); Schechter v. Hann, 205 S.W.2d 690, 692 (Ky. 1947) (same).
Lizer was an interested witness. The Board was not bound to accept Lizer's testimony even though it was the only direct evidence regarding what Mr. Pritchett told Lizer. Furthermore, while no witness testified in direct contravention of Lizer's assertion, some evidence did cast doubt on it. Mr. Pritchett testified that while he did not recall his conversation with Lizer, it was his practice to note on the journal comments if a member asked about reemployment. He further testified that it was his practice to refer members contemplating reemployment to the legal department for more specific information. Mr. Pritchett's journal comment for Lizer does not reference Lizer having made any specific inquiries concerning reemployment or a referral having been made to the legal department.
Lizer attempts to analogize his case with Fryrear to support the circuit court's conclusion that it was error for the Board to discount Lizer's testimony. Fryrear, 316 S.W.3d at 312. Like Mr. Pritchett, Ms. Devine, Fryrear's benefits counselor, could not remember what she discussed with Fryrear. Ms. Devine's written notations were also not conclusive. Under those facts, we held that the evidence compelled a finding that Counselor Devine made the alleged statements. Id. There are two central facts that distinguish Fryrear. First, unlike Mr. Pritchett, Ms. Devine, did not testify at all. Accordingly, there was no testimony presented under oath regarding her normal practice in recording comments or referrals to the legal department. Furthermore, in Fryrear, there was no discussion of the claimant's credibility or lack thereof.
In this case, the Board made a determination that Lizer was not credible. The Board explained that it reached this conclusion based on: (1) Lizer's inconsistent testimony regarding receipt of the handbook; (2) what it believed was a disingenuous assertion of confusion by Lizer in light of his past experience; and (3) and the fact that Mr. Pritchett's journal comment contained everything the two apparently discussed that day except the reemployment time period.
The circuit court believed that Lizer was a credible witness. Accordingly, it accepted his statement that Mr. Pritchett made the representations at issue. We would not have a problem with the circuit court's conclusion had it been deciding this matter as a fact-finder at the administrative level. The problem in this case is that the circuit court was not the fact-finder. The circuit court was charged with reviewing the record as an appellate court. As such, it was required to accept the Board's credibility determination because "judging the credibility of witnesses and weighing evidence are tasks within the exclusive province of the trial court." Moore v. Asente, 110 S.W.3d 336, 354 (Ky. 2003) (emphasis added).
Even though we may have reached a different conclusion than the Board regarding Lizer's credibility, we cannot decide this appeal based on our own assessments. The Board is not bound to accept the testimony of an interested witness regardless of whether or not the evidence is directly contradicted by other testimony. If the Board believes that the witness is not credible, the Board is permitted to reject the witness' entire testimony. In this case, the Board exercised its discretion in determining that Lizer was not credible. It then provided sufficient reasons to support its ultimate finding on Lizer's credibility. In sum, the Board did not act arbitrarily when it rejected Lizer's testimony regarding Mr. Pritchett's statements. Likewise, based on the remaining evidence of record, it was reasonable for the Board to conclude that "Mr. Pritchett did not engage in conduct which amounts to a false representation or concealment of material facts because Mr. Pritchett did not discuss any specifics regarding any possible re-employment." In the absence of a representation by Mr. Pritchett, Lizer cannot establish the first element necessary to support an estoppel claim.
For this reason, there is no need to consider the remainder of the circuit court's opinion. Nevertheless, it bears noting that Fryrear should not be held to apply to every case regarding reemployment. Fryrear dealt with a very specific question from a retiree about specific employment before she retired. Fryrear's question did not relate to some undefined, hypothetical future employment. It was a pointed question that she immediately acted on to her detriment. It was the type of case where exceptional and extraordinary equities came into play.
The same cannot be said about this situation. At best, even if the Board had believed Lizer, he showed only that he was given an incomplete answer to a general question regarding how long he would need to wait before resuming some type of undefined reemployment. He was also provided with a handbook and a handout covering reemployment. Both the handout and the handbook contained accurate information and advised that members should contact Kentucky Retirement Systems for approval before beginning any reemployment.
We use the term "incomplete" because "a member who retired from a hazardous position shall have a one (1) calendar month break in service before returning to work with a participating employer in a hazardous participating position." 105 KAR 1:390 Section 3.
Over four months passed between Lizer's general question and his reemployment. Unlike in Fryrear, no one ever made a direct representation to Lizer about his specific reemployment. The reason for this is that he did not follow up with Kentucky Retirement Systems after he secured a reemployment offer. Had he done so and been advised that the specific job he was going to start only required a thirty-day rest period, then he would have a case for equitable estoppel. Under these facts, however, we do not believe exceptional and extraordinary equities are present.
Lizer violated state law when he failed to notify Kentucky Retirement Systems regarding his planned future employment with an agency participating in the Kentucky Retirement Systems. 105 KAR 1:390, Section 7(2). Fryrear at least notified her benefits counselor prior to her retirement regarding her exact situation. --------
IV. Conclusion
For the reasons set forth above, we reverse the Franklin Circuit Court's September 5, 2014, Opinion and Order.
ALL CONCUR. BRIEF FOR APPELLANT: Leigh A. Jordan
Frankfort, Kentucky BRIEF FOR APPELLEE: Matthew R. Malone
Jacob K. Michul
Lexington, Kentucky