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Bouchard v. State Employees Retirement Commission

Supreme Court of Connecticut

February 2, 2018


          Argued September 13, 2017

          Michael J. Walsh, for the appellants-appellees (plaintiffs).

          Michael J. Rose, with whom was Cindy M. Cieslak, for the appellee-appellant (defendant).

          Rogers, C. J., and Palmer, Eveleigh, McDonald, Robinson and Espinosa, Js. [*]


          McDONALD, J.

         In Longley v. State Employees Retirement Commission, 284 Conn. 149, 177-78, 931 A.2d 890 (2007), this court held that the defendant, the State Employees Retirement Commission, had improperly interpreted statutes governing retirement benefits by failing to directly add a retiree's final, prorated longevity payment to the salary earned in the retiree's final year of state employment for the purposes of calculating the retiree's base salary. Although the commission contended in Longley that it had calculated retirement benefits in accordance with its interpretation since the 1960s; id., 166; this court afforded relief to the two plaintiffs in that case without expressing a view on whether the decision applied retroactively. Id., 178. The commission subsequently ordered the recalculation and award of increased retirement benefits, in accordance with Longley, of any person who had retired, or whose benefits were not finalized, on or after October 2, 2001, the six year period preceding the date of the Longley decision. The present case raises the question of whether all state employees, irrespective of when they retired, are entitled to have their benefits recalculated in accordance with Longley.

         This question comes to us by way of an unusual procedural posture-a two count complaint bringing (1) an administrative appeal from the commission's decision denying a petition for a declaratory ruling filed by the plaintiffs, retirees Roger J. Bouchard, James J. Malone and James E. Fox, and (2) a declaratory judgment action on behalf of a class, represented by the plaintiffs, of all state employees who retired and began collecting pensions before October 2, 2001. The trial court granted relief to the plaintiffs in the administrative appeal, but denied relief to the class on the ground that the declaratory judgment count was time barred. The plaintiffs appealed from the trial court's judgment insofar as it denied relief for the class. The commission cross appealed from the judgment insofar as it granted relief to the plaintiffs, and raised numerous alternative procedural and substantive grounds for affirming the judgment denying relief to the class. We conclude that the plaintiffs' claims for recalculation of benefits were time barred, and for the reasons supporting that conclusion neither they nor the class is entitled to relief. Accordingly, we affirm in part and reverse in part the trial court's judgment.

         The record reveals the following undisputed facts and procedural history. The three plaintiffs retired after decades of state service-in 1990, 1997, and 2000, respectively. The commission audited and finalized their retirement benefits in April, 1994, May, 1998, and April, 2001, respectively.

         On October 2, 2007, this court issued its decision in Longley. At a meeting held a few weeks after that date, the commission discussed the effect of that decision. It voted that, with the exception of the two Longley plaintiffs, calculations including the prorated longevity payments would be made only on a prospective basis for persons retiring on or after the date of that decision.

         In December, 2007, Bouchard sent a letter to the commission requesting recalculation of his benefits in accordance with Longley. The commission denied the request, citing its October, 2007 decision. Bouchard delayed further action while a federal class action was pending in which state retirees challenged the application of Longley on a prospective only basis and the commission's multitiered review procedures.

         In the interim, our Superior Court issued a decision rejecting the commission's position that Longley applied prospectively only. See Malerba v. State Employees Retirement Commission, Superior Court, judicial district of New Britain, Docket No. HHB-CV-06-4011383 (July 15, 2008) (45 Conn. L. Rptr. 853). The court in Malerba also rejected the commission's argument that the claims in the consolidated administrative appeals before the court were time barred, noting that this defense had not been raised in the administrative proceedings. Id., 854. The court specifically limited its holding to administrative appeals pending before the court when Longley was decided, expressing no opinion as to its retroactive application to other cases. Id., 855 n.5.

         Thereafter, in April, 2009, the commission adopted a second resolution in order to ‘‘fully conform with'' the October 2, 2007 Longley decision. It directed the retirement services division of the Office of the State Comptroller to calculate and award increased retirement benefits in accordance with Longley to any person who had retired on or after October 2, 2001, or who had retired before that date but whose retirement was not finalized as of that date.

         In August, 2009, after the federal class action was dismissed; see Belanger v. Blum, 628 F.Supp.2d 260, 267 (D. Conn. 2009); the plaintiffs followed a series of administrative steps before the commission in an unsuccessful effort to challenge its limited retroactive application of Longley that excluded them and other retirees similarly situated.[1] They filed a petition for a declaratory ruling, which the commission treated as a ‘‘claim'' for benefits; see General Statutes § 5-155a (j); an appeal from the final decision denying that claim; see General Statutes § 5-155a (k); a request for reconsideration of the denial of the appeal; see General Statutes § 5-155a (k); and a second petition for a declaratory ruling as to each plaintiff, which was treated as a separate petition for each plaintiff by the commission. See General Statutes § 4-176.

         The commission issued a final decision denying the plaintiffs' petitions, citing four broad conclusions as support. First, it concluded that its decision to adopt a six year limitation on recalculation was reasonable, and thus was not arbitrary or capricious. It explained that, like the approach taken for claims under federal pension law, which also contains no statute of limitations, it had looked to the most suitable time limit to apply in light of the nature of the action and the rights at issue. It found the six year limitation for actions sounding in contract to be the most suitable. See General Statutes § 52-576.

         Second, relying on the six year limitation period to establish the scope of ‘‘pending'' cases, the commission concluded that its decision to limit retroactive relief to pending cases was not arbitrary or capricious. It reasoned that Longley was a new interpretation of the law and that, in the absence of impermissible discrimination, it was reasonable to limit retroactive relief to pending cases.

         Third, it concluded that its decision to limit retroactive relief to pending cases also was proper in light of the significant adverse financial effect that unlimited retroactive application would have on the state retirement plan. The commission noted that it had construed and applied the retirement statutes; see General Statutes §§ 5-154 and 5-162; so as not to include the final, prorated longevity payment since 1967. The commission estimated that unlimited retroactive application of Longley would cost the retirement fund between approximately $48 million and $157 million, if statutory interest of 5 percent was applied.

         Fourth, the commission concluded that the plaintiffs could not avoid the six year time bar in § 52-576 under theories of either a continuing violation of §§ 5-154 and 5-162 or a deliberate concealment of that violation. The commission deemed the continuing violation theory inapplicable as a matter of law because the retirement plan was neutral (i.e., nondiscriminatory) in operation. It rejected the allegation of wrongful concealment as unsupported by any proof and contradicted by the Appellate Court's view in Longley that the construction of § 5-162 raised a question on which there was little precedent to provide guidance. See Longley v. State Employees Retirement Commission, 92 Conn.App. 712, 717, 887 A.2d 904 (2005), rev'd in part, 284 Conn. 149, 931 A.2d 890 (2007).

         Finally, the commission made clear that its ruling applied only to the three plaintiffs. It noted that the petitions had sought the recalculation of not only the plaintiffs' benefits but also the pensions of ‘‘all retirees.'' The commission asserted that, to the extent that the plaintiffs were attempting to bootstrap a class action onto their petitions for a declaratory ruling, the Uniform

         Administrative Procedure Act, General Statutes § 4-166 et seq., does not permit class certification in an administrative proceeding.[2]

         Following the commission's decision, the plaintiffs filed a two count ‘‘Administrative Appeal and Class Action Complaint'' in the Superior Court. Count one, captioned ‘‘Administrative Appeal, '' alleged that the plaintiffs had been deprived of benefits owed to them by virtue of the commission's arbitrary and capricious application of its 2009 resolution imposing the six year time limitation. Count two, captioned ‘‘Declaratory Judgment for Class, '' incorporated the allegations in count one and alleged that, in addition to bringing their individual administrative appeal, the plaintiffs brought this action as a class action under Practice Book § 9-8. The plaintiffs subsequently filed a motion seeking to certify a mandatory class in the declaratory action (i.e., certification covering all members of the class without a procedure for members to ‘‘opt in'' or ‘‘opt out'' of the class).

         The commission filed a motion to dismiss and/or strike the second count of the complaint, as well as an objection to class certification. The court, Hon Howard T Owens, Jr, judge trial referee, concurrently issued decisions granting the plaintiffs' motion for class certification, but not as a mandatory class, and denying the commission's motion to dismiss or strike count two.

         Discovery and disclosure of expert witnesses ensued, largely directed at the question of the actual financial impact of a decision requiring retroactive relief for the entire class. Thereafter, the plaintiffs moved for judgment on the merits as to count one, the administrative appeal, and for summary judgment as to count two, the declaratory judgment action. The defendant filed a brief in opposition to the motion for judgment on count one, and filed a cross motion for summary judgment on count two.

         The court sustained the plaintiffs' administrative appeal. The court determined that the commission's decision to award increased benefits for only those persons who had retired on or after October 2, 2001, based on application of an analogous six year statute of limitations for contract claims, was arbitrary and capricious. It reasoned that the six year contract statute of limitations applied by the commission, if properly applied, would have commenced when the right of action accrued, such right accruing when Longley was decided in 2007, not six years prior to that date.[3] Having rejected the time limitation set forth in the commission's resolution, the court pointed to the absence of a statute or regulation in effect when Longley was decided that prescribed a time limit for filing a petition for a declaratory ruling with the commission. It declined to consider the commission's alternative arguments that the statute of limitations for tort actions; see General Statutes § 52-577; or the time limitation under a regulation the commission recently adopted[4] would apply, concluding that the commission had to defend its decision on the grounds on which it was based. Nonetheless, the court concluded that, insofar as the commission relied on case law permitting the borrowing of an analogous statute of limitations to fill such a gap, that precedent did not apply to an administrative proceeding and should not apply, given the commission's authority to promulgate a regulation prescribing time limits.

         In the absence of any governing time limitation, the court determined that (1) the plaintiffs' benefit awards were ‘‘pending'' and not a final judgment when Longley was decided, (2) Longley presumptively applied retroactively to those pending awards; see Marone v. Waterbury, 244 Conn. 1, 10-11, 707 A.2d 725 (1998) (judgment not limited to prospective application presumed to apply retroactively to pending cases); and (3) the commission had not satisfied one of the criteria necessary to overcome that presumption, namely, that ‘‘[given its prior history, purpose and effect] retrospective application of the rule would retard its operation . . . .'' See Chevron Oil Co. v. Huson, 404 U.S. 97, 106-107, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971) (prescribing three part test); accord State v. Harrell, 199 Conn. 255, 267-68, 506 A.2d 1041 (1986) (applying Chevron Oil test). But see Neyland v. Board of Education, 195 Conn. 174, 182, 487 A.2d 181 (1985) (test inapplicable to jurisdictional determination). Accordingly, the trial court ordered the commission to apply Longley to the plaintiffs' retirement income calculation from the date of their retirement, as well as to pay postjudgment interest.

         The court, however, rendered summary judgment in favor of the commission on the declaratory judgment count, concluding that the class' claim was time barred. In reaching this conclusion, the court acknowledged that it had applied a different analytical approach than in its resolution of the administrative appeal, which it justified on the basis of the different procedural postures of the two counts. Specifically, the court noted that case law dictates that the timeliness of a declaratory judgment action is assessed by the time limitation applicable to the underlying right being enforced in such an action. Although the statutes governing the calculation of retirement benefits contained no time limitation, the court cited case law from this court sanctioning the borrowing of an analogous statute of limitations. The court reasoned that a claim for pension benefits is more akin to a claim asserting a breach of a statutory duty, to which the tort statute of limitations applied, than to a breach of contract claim. As such, the court held that the class' claim was untimely because the three year tort statute of limitations would commence when the class members first sustained injury, i.e., when they received their finalized pension calculation, not when they discovered the wrongful act. Because the ...

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