Opinion
NO. 2011-CA-002092-MR
11-07-2014
THOMAS SEABOLT APPELLANT v. HANK BLANDFORD, INDIVIDUALLY; HANK BLANDFORD, IN HIS OFFICIAL CAPACITY; AND KENTUCKY RETIREMENT SYSTEMS APPELLEES
BRIEFS FOR APPELLANT: Daniel J. Canon Louisville, Kentucky Mark Hall Louisville, Kentucky BRIEF FOR APPELLEE HANK BLANDFORD: Laura H. Hendrix Frankfort, Kentucky BRIEF FOR APPELLEE KENTUCKY RETIREMENT SYSTEMS: Robert W. Kellerman Frankfort, Kentucky
NOT TO BE PUBLISHED APPEAL FROM FRANKLIN CIRCUIT COURT
HONORABLE PHILLIP J. SHEPHERD, JUDGE
ACTION NO. 11-CI-00095
OPINION
AFFIRMING IN PART, REVERSING IN PART AND REMANDING
BEFORE: COMBS, STUMBO AND THOMPSON, JUDGES. THOMPSON, JUDGE: Thomas Seabolt appeals from an order of the Franklin Circuit Court granting motions to dismiss filed by Kentucky Retirement Systems (Retirement Systems) and Hank Blandford, an employee of the Legislative Research Commission (LRC), in his individual and official capacities. The Franklin Circuit Court ruled Seabolt's claims against Retirement Systems are barred by his failure to exhaust his administrative remedies and his claims against Blandford are barred by absolute and qualified immunity. We agree with the Franklin Circuit Court and affirm. However, Seabolt's claim that Retirement Systems violated the Open Records Act was not ruled upon by the circuit court. Based on an examination of the record and the parties' briefs, we cannot determine if Seabolt's claim is legally or factually viable and are compelled to remand on that issue alone for the circuit court to rule.
On January 18, 2011, Seabolt filed this action against Retirement Systems and Blandford which he describes as an administrative appeal, a complaint and petition for declaratory judgment. In addition to requesting "review of the administrative agency's decision," he requests a judgment declaring the statutes and/or regulations permitting Retirement Systems to correct errors in its calculation of the cost to purchase service credit and the actions of Retirement Systems unconstitutional. Against Retirement Systems alone, he asserts: (1) breach of contract; (2) negligent supervision; (3) violation of Kentucky's Open Records Act; and (4) violation of due process and equal protection. Against Blandford alone, he asserts tortious interference with contract/prospective advantage. Against Retirement Systems and Blandford, he asserts the following actions: (1) promissory and/or equitable estoppel; (2) negligence; and (3) conspiracy to violate Seabolt's constitutional rights, in violation of 42 U.S.C. § 1985.
Retirement Systems and Blandford filed motions to dismiss, asserting numerous defenses, including failure to exhaust administrative remedies and immunity. After hearing the parties' arguments, the circuit court ordered Seabolt to submit an affidavit setting forth his good faith basis to assert that Blandford was acting outside the scope of his employment or with improper motive. It further ordered Blandford to identify any contract other than his rights under Kentucky Revised Statutes (KRS) Chapter 61 that gives rise to his claim for tortious interference with contract. After Seabolt submitted his affidavit and responses were filed, the circuit court dismissed Seabolt's complaint.
Preliminary to our discussion, we note Retirement Systems and Blandford have filed motions to strike Seabolt's brief and dismiss his appeal based on his alleged failure to comply with various provisions of Kentucky Rules of Civil Procedure (CR) 76.12. Pursuant to the discretion afforded this Court by that rule, we deny the motions and discuss the merits of the case.
For our recitation of the facts, we rely heavily on the complaint and Seabolt's affidavit. Seabolt is a Sergeant in the Louisville Metro Police Department and a former member of the Unites States military. Since his employment with the Louisville/Jefferson County Metro Government in 2000, Seabolt has been a member of the County Employee Retirement System administered by Retirement Systems. Seabolt's claims arise from a dispute concerning his right to purchase military service credit toward his public retirement pursuant to KRS 61.555.
In 2004, Seabolt contacted Retirement Systems regarding his options to purchase four years of military time. He was informed he could finance the purchase through Retirement Systems, roll over a qualifying account (pre-tax/tax deferred account), or purchase the time outright with cash. However, he was advised his service time had not vested.
In 2009, Seabolt's service time had vested and he again contacted Retirement Systems regarding purchase of his military time and scheduled an appointment to meet with a Retirement Systems' representative. Prior to that meeting, he received a cost estimate and a financing agreement from Retirement Systems. However, Seabolt believed the estimate was incorrect as to how much time he could purchase.
Seabolt met with Retirement Systems' representative, Lori Wells, and expressed his view the military time calculation was incorrect. Wells informed Seabolt that Retirement Systems required documentation verifying his date of entry and discharge for periods of military service. Seabolt maintained all periods of his active and reserve time were properly calculated on the DD-214 provided. Despite his disagreement, Seabolt began to write a check for the purchase amount. However, according to Seabolt, Wells then informed him that because he did not pay into the retirement system prior to July 1, 1999, he could not make a cash purchase.
A DD-214 is the equivalent of a discharge certificate. United States v. King, 27 M.J. 327, 329 (C.M.A. 1989). Pursuant to 105 KAR 1:330 Section (3)(3), an employee wishing to purchase military time is required to provide a copy of a DD-214 or other official military document clearly showing the date of entry into and discharge from active service and type of discharge.
After obtaining an additional copy of his DD-214, Seabolt met with a second Retirement Systems' counselor. Seabolt continued to disagree with the calculation of his military time. No agreement was signed.
A short time later, Seabolt met with a third counselor who informed him that Retirement Systems had recalculated the time resulting in a correction of the cost to purchase Seabolt's military time. A financing agreement was signed by Seabolt on August 20, 2009, for the purchase of 6 years and 3 months of military time for $116,031.86.
Before any installment payments were made, Retirement Systems conducted an audit as authorized by 105 KAR 1:330 Section (5)(1), which states:
After the employee has purchased service, the retirement system may recalculate the cost of the service if, upon audit, the retirement system determines that any of the information utilized to calculate the cost of the service was incorrect.KRS 61.685 provides in part:
[U]pon discovery of any error or omission in system records, the system shall correct all records including, but not limited to, membership in the system, service credit, member and employer contributions, and benefits paid or payable.
Retirement Systems discovered an error in the calculation and, on September 11, 2009, sent Seabolt a letter informing him that the purchase cost would be $119,699.93. An installment purchase contract to purchase the service credit at the increased cost was provided.
Retirement Systems acknowledges receipt of correspondence from Seabolt in September 2009. It responded in an October 12, 2009, letter to Seabolt stating Seabolt "requested an administrative hearing to obtain an explanation of the multiple estimates and costs" received to purchase military service. After setting forth the chronological history of Seabolt's contact with Retirement Systems, the letter explained the discrepancy between the August 2009 calculation and the most recent calculation which was summarized as follows:
On August 20, 2009, you had another appointment with a counselor. According to the DD-214s in your file, Kentucky Retirement Systems could now determine that you had total of seventy-five (75) months of military service available to purchase. Unfortunately, the counselor calculated the cost incorrectly because he divided the service, and provided you with a cost for forty-eight (48) months and twenty-seven (27) months rather than providing you with a total cost for the entire seventy-five (75) months. This was error under the controlling statute and administrative regulation.The letter concluded by advising Seabolt of his right to request an administrative hearing as follows:
After you have reviewed this explanation, if you continue to wish to have an administrative hearing on the cost to purchase your military service, please send another written request for an administrative hearing within thirty (30) days of the date of this letter. You may address your request to Angela Stevens, Administrative Appeals Coordinator, Kentucky Retirements System, 1260 Louisville Road, Frankfort, Kentucky 40601.
Instead of requesting a hearing as directed in the Retirement Systems' letter, Seabolt contacted the offices of his state representative and senator and was later contacted by Blandford. Seabolt maintains Blandford assured Seabolt he would take care of the matter, but that he could not do so if Seabolt pursued an appeal and requested a hearing. In reliance on Bradford's statements, Seabolt did not request a hearing within thirty days of the October 12, 2009, letter.
In January 2010, Blandford sent Seabolt an email stating Retirement Systems would send a new letter of explanation and agreed to base the purchase agreement on the same estimate used in August 2009. After Seabolt received a new purchase agreement from Retirement Systems containing a purchase estimate different than that stated in the agreement signed in August 2009, he contacted Retirement Systems and was informed it would not send a second letter of explanation.
On February 10, 2010, four months after receiving the requested explanation from Retirement Systems, Seabolt requested an administrative appeal to "challenge and contest multiple estimates for purchasing military time." Retirement Systems denied the appeal as untimely. Seabolt did not appeal.
CR 12.02 and CR 12.03 require that a motion which raises issues outside the pleadings are considered be treated as a motion for summary judgment. Because, the circuit court considered Seabolt's affidavit in ruling on the motion to dismiss, it is properly considered under the summary judgment standard of review.
We will affirm only if "the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law." Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App. 1996). Summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, 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 judgment as a matter of law." CR 56.03. The trial court must view the record "in a light most favorable to the party opposing the motion for summary judgment and all doubts are to be resolved in his favor." Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d 476, 480 (Ky. 1991). Under that standard, we address whether the Franklin Circuit Court properly dismissed all of Seabolt's claims against Retirement Systems.
The exhaustion of administrative remedies doctrine is one embedded in our jurisprudence. "Exhaustion of administrative remedies is a well-settled rule of judicial administration that has long been applied in this state." Kentucky Retirement Systems v. Lewis, 163 S.W.3d 1, 3 (Ky. 2005). It is a "jurisdictional prerequisite to seeking judicial relief." Commonwealth v. DLX, Inc., 42 S.W.3d 624, 625 (Ky. 2001) (emphasis added). The reason for the rule was explained in Popplewell's Alligator Dock No. 1, Inc. v. Revenue Cabinet, 133 S.W.3d 456, 471 (Ky. 2004)(quoting 2 AM. JUR.2D. Administrative Law § 505 (1994)):
Exhaustion is generally required as a matter of preventing premature interference with agency processes, so that the agency may: (1) function efficiently and have an opportunity to correct its own errors; (2) afford the parties and the courts the benefit of its experience and expertise without the threat of litigious interruption; and (3) compile a record which is adequate for judicial review. In addition, an agency has an interest in
discouraging frequent and deliberate flouting of the administrative process.The exhaustion doctrine does not preclude judicial review but simply defers it until the administrative body "has built a factual record and rendered a final decision." Id.
The exhaustion rule is not without exceptions. "These exceptions are: 1) where a regulation is void on its face; or 2) where continuation of the administrative process would be an exercise in futility." Board of Trustees of Kentucky Retirement Systems v. Com., Board of Claims, 251 S.W.3d 334, 339 (Ky.App. 2008). Here, neither exception applies.
The statutory scheme governing Retirement Systems provides for an appeal by a member aggrieved by a final agency action to the Franklin Circuit Court in accordance with KRS Chapter 13B. KRS 61.645(16). KRS 13B.140(1) permits an appeal within the thirty days following the issuance of an administrative final order. In conformity with the exhaustion doctrine, "[a] party may file a petition for judicial review only after the party has exhausted all administrative remedies available within the agency whose action is being challenged, and within any other agency authorized to exercise administrative review." KRS 13B.140(2).
105 KAR 1:215 establishes the administrative appeals procedure applicable to Retirement Systems. Section 12 provides:
Any affected person aggrieved by a final order of the board may seek judicial review after all administrative appeals have been exhausted by filing suit
in the Franklin Circuit Court within the time period prescribed by KRS 13B.140.As explained in Lewis, 163 S.W.3d at 3, "[t]he Board of Trustees of Kentucky Retirement Systems is responsible for entry of final administrative orders and is the agency head as defined by KRS 13B.010(4)." In the absence of a final order issued by the Board of Trustees of Retirement Systems, there is no right to seek judicial relief. Id.
Despite being expressly advised of his right to request a hearing in the letter of explanation sent on October 12, 2009, Seabolt chose not to appeal and, instead, sought Blandford's assistance. Well after the expiration of 30 days and after being advised of his right to request an administrative hearing, Seabolt requested an administrative hearing which was denied as untimely. He did not appeal that order to the Franklin Circuit Court.
Although Seabolt maintains there is a factual dispute over whether he exhausted his administrative remedies requiring discovery, there is none. 105 KAR 1:215 Section (2) provides that a request for a hearing must be made in writing within thirty days of receiving notice of the opportunity for a hearing and "shall be filed with the executive director of the system at its office in Frankfort." "[A]n appeal from an administrative decision is a matter of legislative grace and not a right" and a party seeking review of administrative decisions must strictly follow the designated procedures. Triad Development/Alta Glyne, Inc. v. Gellhaus, 150 S.W.3d 43, 47 (Ky. 2004).
Seabolt did not file in the record any document requesting a hearing after he was first informed of the increase in the purchase cost. In fact, his affidavit contradicts his position and indicates he only orally requested an explanation for the change in purchase cost. He states:
I was informed at this point that a new purchase agreement would be mailed to me. I received the new agreement that included a new, higher cost estimate despite the fact that my actual salary that should been used to make that estimate had decreased.
I called KERS and requested an appointment with a supervisor or senior staff member that could explain why the numbers changed so drastically. I also requested an explanation as to how a signed contract could be arbitrarily and unilaterally cancelled. I was informed that I would receive a letter of explanation from his supervisor.
Thus, based on Seabolt's admission, he requested an explanation which is precisely what he received. In light of Seabolt's admission, we can find no merit in his contention that he was not required to request a hearing if he was dissatisfied with that explanation. There was nothing unreasonable or unfair about Retirement Systems' directive that Seabolt request a hearing if the explanation was not satisfactory. Most importantly, he was advised to request a hearing within thirty days and failed to do so.
In an attempt to fit his case within the exception to the exhaustion rule, Seabolt states he also requested "a judgment declaring that the statutes and/or regulations allowing defendant KERS to breach its contract with members/prospective retirees to be declared unconstitutional under the Kentucky and/or federal constitutions." (emphasis added). Therefore, he contends his request for relief was erroneously dismissed under the exhaustion doctrine.
As explained in Lewis, where a constitutional challenge is to an agency's application of a statute or regulation, the exception to the exhaustion rule does not apply. Lewis, 163 S.W.3d at 4. Moreover, Seabolt's allegation that the statutes or regulations pertaining to Retirement Systems' responsibility to correct any errors in calculating the cost to purchase service credit is unconstitutional cannot survive. His theory is premised on the erroneous assumption that he and Retirement Systems entered into a contract.
In Ryan v. Board of Trustees of Kentucky Retirement Systems, 2007-CA-000332, 2008 WL 1757236 (Ky.App. 2008), an unpublished but well reasoned opinion, this Court rejected the contention that an agreement to purchase service credit is a contract. This Court pointed out the fallacies in such an assertion and agreed with Retirement Systems that a service credit purchase is governed solely by KRS 61.552, KRS 61.5525, and 105 KAR 1:330 and, without those statutes and regulations, there could be no purchase of service credit. Id. at 4. Further, this Court noted there is no mutual consideration to support a contract because Retirement Systems receives no benefit from a member's purchase. Id. Retirement Systems "simply has the statutory and fiduciary duty to ensure [a member] qualifies to purchase the service credit and pays the full actuarial cost of such service." Id.
CR 76.28(4)(c) permits citation to unpublished opinions rendered after January 1, 2003, when there is no published opinion adequately addressing the issue before the court.
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For the same reasons, Seabolt cannot succeed on his breach of contract claim. With that in mind, we address Seabolt's arguments to avoid application of the exhaustion of administrative remedies rule.
Seabolt argues Retirement Systems is estopped from asserting exhaustion of administrative remedies because it made misstatements and misrepresentations concerning the cost to purchase his military time. In support, he cites Kentucky Retirement Systems v. Fryrear, 316 S.W.3d 307 (Ky.App. 2009) and Board of Trustees, Kentucky Retirement Systems v. Grant, 257 S.W.3d 591 (Ky.App. 2008). Both cases held equitable estoppel may be applied against Retirement Systems when a member is provided misinformation or erroneous calculations and, as a result, stands to suffer a reduction in benefits. However, in both cases, the employees properly and timely filed administrative appeals where the issue of equitable estoppel was first presented.
In Kentucky Retirement Systems v. Foster, 338 S.W.3d 788, 800 (Ky.App. 2010), the Court held equitable estoppel on the basis of misinformation or miscalculation provided by Retirement Systems must be first invoked at the administrative level. Seabolt's equitable estoppel claim is precluded by his failure to present the issue at the administrative level.
Seabolt next contends his tort claims against Retirement Systems and claim he was denied due process are not subject to the exhaustion rule. As to any common law torts asserted, Retirement Systems is a statutorily created agency which performs an integral function of state government. Commonwealth v. Kentucky Retirement Systems, 396 S.W.3d 833, 837 (Ky. 2013). Consequently, Retirement Systems is entitled to the protection of governmental immunity from tort actions. Yanero v. Davis, 65 S.W.3d 510, 519 (Ky. 2001).
Seabolt claims he was denied due process by Retirement Systems' failure to conduct a hearing is specious in light of his failure to request a hearing. A Retirement Systems' member cannot fail to timely request a hearing and then claim he was not afforded due process. "[O]ne must first show injury as the result of a statutory application, before that application may be attacked as unconstitutional." DLX, Inc., 42 S.W.3d. at 626.
Contained within his plethora of arguments are the concepts of equitable tolling and promissory estoppel. Even if equitable tolling would apply to confer jurisdiction on the Franklin Circuit Court when it is otherwise lacking, Seabolt is precluded from asserting it because he was notified of his right to request a hearing but simply choose not to do so. Additionally, he cannot claim promissory estoppel. Promissory estoppel can only "be invoked when a party reasonably relies on a statement of another and materially changes his position in reliance on the statement." Rivermont Inn, Inc. v. Bass Hotels & Resorts, Inc., 113 S.W.3d 636, 642 (Ky.App. 2003).
Seabolt suggests Retirement Systems should be vicariously liable for any torts committed by Blandford. There is no allegation of a principal and agent relationship in the complaint and, in his affidavit, Seabolt admits Blandford is an LRC employee. In simple but concise words, we hold a legislative branch employee cannot bind an agency within the executive branch. As stated in Curd v. Kentucky State Bd. of Licensure for Professional Engineers and Land Surveyors, 433 S.W.3d 291, 299 (Ky. 2014): "[T]he Kentucky Constitution provides strong separation of powers among our three departments of state government: Executive, Legislative, and Judicial." Retirement Systems, an agency within the executive branch, cannot be held liable for any acts by Blandford, an employee of the legislative branch.
Seabolt's final claim against Retirement Systems is an Open Records Act violation. Seabolt alleges he requested a copy of Retirement Systems' policies and procedures manual, a copy of his file, and the table of actuarial percentages used in calculating the purchase of his military service. Below, Retirement Systems argued the Open Records Act issue based on the belief that no proper request had made and, therefore, there was no valid request to which it could respond. However, after the circuit court ruled, and presumably after this appeal was filed, Retirement Systems located a September 18, 2009, letter addressed to Seabolt which states it is in response to "the open records request."
The trial court did not rule on Seabolt's claim that Retirement Systems violated the Open Records Act. In light of Retirement Systems discovery of a letter responding to Seabolt that is not a part of the record and of the circuit court's lack of any discussion of the issue in its written order, we believe it is proper to remand for the purpose of permitting the circuit court to consider the issue.
With the exception of our discussion of the exhaustion rule, much we have said concerning the claims against Retirement Systems apply equally to those against Blandford. For completeness, we separately address whether Blandford was properly dismissed. Although there are a myriad of reasons why Seabolt cannot prevail, we affirm the circuit court on the basis of qualified official immunity.
The LRC is a state agency that performs an integral governmental function. See Legislative Research Com'n v. Brown, 664 S.W.2d 907 (Ky. 1984). As an employee of the LRC, in his official capacity, Blandford is entitled to absolute immunity. Yanero, 65 S.W.3d at 522. In his individual capacity, Blandford is entitled to qualified official immunity, "which affords protection from damages liability for good faith judgment calls made in a legally uncertain environment." Id.
As an LRC employee, Blanford had the power to engage in "the gathering of information." KRS 7.100. As noted in Brown, the LRC engages in "fact-finding, investigation, information gathering, record-keeping, publishing, research and education. It is a service organization of the General Assembly." Brown, 664 S.W.2d at 916. Viewing Seabolt's allegations in the most favorable light, we can only conclude, based on the undisputed facts, that Blandford was acting within the scope of his duties as an LRC employee and was performing a discretionary duty when he investigated and attempted to resolve Seabolt's dispute with Retirement Systems.
Seabolt, a constituent, contacted Blandford who made the decision to assist him. Such a decision is clearly a discretionary act envisioned by the Yanero Court and one for which a state employee is entitled to qualified official immunity. Although the circuit court gave Seabolt the opportunity to respond to Blandford's motion to dismiss based on immunity with an allegation that Blandford acted in bad faith, with malice, acted outside the scope of employment, or violated any law, no such allegation is made in Seabolt's affidavit. Consequently, the circuit court properly ruled Blandford was entitled to immunity.
We believe our opinion thoroughly addresses the menagerie of arguments Seabolt presents. However, we briefly address his inartfully pled claim of conspiracy under 42 U.S.C. § 1985 (3) against Retirement Systems and Blandford. To state a claim, it must be alleged: "(1) a conspiracy; (2) for the purpose of depriving, either directly or indirectly, any person or class of persons of the equal protection of the laws, or of equal privileges or immunities of the laws; (3) an act in furtherance of the conspiracy; and (4) whereby a person is either injured in his person or property or deprived of any right or privilege of a citizen of the United States.'" Vakilian v. Shaw, 335 F.3d 509, 518 (6th Cir. 2003) (quoting United Broth. of Carpenters & Joiners v. Scott, 463 U.S. 825, 828-29, 103 S.Ct. 3352, 77 L.Ed.2d 1049 (1983)). Moreover, "[t]he language requiring intent to deprive of equal protection, or equal privileges and immunities, means there must be some racial or perhaps otherwise class-based, invidiously discriminatory animus behind the conspirators' action." Griffin v. Breckenridge, 403 U.S. 88, 102, 91 S.Ct. 1790, 1798, 29 L.Ed.2d 338 (1971). There are no facts alleged to support a conspiracy claim.
We affirm the opinion and order of the Franklin Circuit Court except we must reverse and remand to the Franklin Circuit Court for the sole purpose of ruling on the alleged Open Records Act violation by Retirement Systems.
STUMBO, JUDGE, CONCURS.
COMBS, JUDGE, CONCURS IN RESULT ONLY BY SEPARATE OPINION.
CO MBS, JUDGE, CONCURRING IN RESULT: This case is a lamentable illustration of bureaucratic arrogance and/or incompetence in performing statutory functions to a level of bare efficiency. Although the legal result cannot be reversed on any grounds available to this Court, the outcome is unpalatable. No wonder our citizens grow disillusioned with the quality of service provided by public servants. BRIEFS FOR APPELLANT: Daniel J. Canon
Louisville, Kentucky
Mark Hall
Louisville, Kentucky
BRIEF FOR APPELLEE HANK
BLANDFORD:
Laura H. Hendrix
Frankfort, Kentucky
BRIEF FOR APPELLEE
KENTUCKY RETIREMENT
SYSTEMS:
Robert W. Kellerman
Frankfort, Kentucky