Lagerman v. Asrs , 246 Ariz. 270 ( 2019 )

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE
SUSAN LAGERMAN, Plaintiff/Appellant,
v.
ARIZONA STATE RETIREMENT SYSTEM, Defendant/Appellee.
No. 1 CA-CV 18-0014
FILED 3-7-2019
Appeal from the Superior Court in Maricopa County
No. LC2017-000102-001
The Honorable Patricia A. Starr, Judge
AFFIRMED
COUNSEL
Robaina & Kresin PLLC, Phoenix
By Thomas T. Griffin
Counsel for Plaintiff/Appellant
Arizona State Retirement System, Phoenix
By Jothi Beljan
Counsel for Defendant/Appellee
OPINION
Judge Randall M. Howe delivered the opinion of the Court, in which
Presiding Judge Diane M. Johnsen and Judge Maria Elena Cruz joined.
LAGERMAN v. ASRS
Opinion of the Court
H O W E, Judge:
¶1 Susan Lagerman appeals the superior court’s order affirming
a decision by the Arizona State Retirement System (“ASRS”) that she
(1) could not elect to begin receiving retroactive retirement benefits payable
before the date she submitted her retirement application and (2) did not
warrant a retroactive retirement date. She also argues that ASRS violated
its fiduciary duty in denying her request for a retroactive retirement date.
She further argues that ASRS breached statutory and constitutional
provisions protecting her retirement benefits against forfeiture, diminution,
or impairment.
¶2 We affirm. The plain language of A.R.S. § 38–764(A) prohibits
an ASRS member from electing a retirement date before the date that ASRS
receives the member’s retirement application. Also, Lagerman’s request for
a retroactive retirement date was properly denied because she was unable
to show that she could not have submitted a retirement application before
the retroactive date that she had sought. Further, ASRS did not violate its
fiduciary duty to Lagerman, and it did not cause her to forfeit her benefits
or cause her benefits to diminish or become impaired.
FACTS AND PROCEDURAL HISTORY
¶3 In 1978, Lagerman became an ASRS member when she was
hired as a securities examiner with the Arizona Corporation Commission,
and her membership continued when she later worked as an attorney with
the Arizona Attorney General’s Office (“AGO”) from 1981 to February
2003. An active member is a state employee who works at least 20 weeks in
each fiscal year, works at least 20 hours each week, and makes member
contributions to ASRS. A.R.S. § 38–711(1). As an ASRS member, Lagerman
received annual member statements. After Lagerman left the AGO in
February 2003, ASRS mailed her an annual member statement for the time
period of July 1, 2003 through June 30, 2004. The member statement
included Lagerman’s early retirement date (the earliest date she could retire
under the law) and her normal retirement date for all three statutory
definitions of normal retirement. For ASRS members who joined before July
1, 2011, “normal retirement date” means the earliest of the following: (1) a
member’s 65th birthday, (2) a member’s 62nd birthday and completion of
at least ten years of service, or (3) the first day that the sum of a member’s
age and years of service equals 80. A.R.S. § 38–711(27)(a). Lagerman’s
earliest normal retirement date was December 23, 2007, under the 80-points
definition.
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LAGERMAN v. ASRS
Opinion of the Court
¶4 Although Lagerman was not an active member in 2005, ASRS
allowed her to complete a service purchase that she had submitted in 2003
because it had not timely processed her request. An active member of ASRS
may purchase credited service for prior public employment by paying a
certain amount into ASRS. A.R.S. § 38–743. The service purchase
accelerated Lagerman’s 80-points normal retirement date to July 23, 2005,
which was reflected in her member statement for the time period of July 1,
2004 through June 30, 2005.
¶5 In summer 2006, Lagerman was diagnosed with cancer and
underwent chemotherapy. During and following chemotherapy,
Lagerman’s mental and physical abilities deteriorated; she had difficulty
concentrating and holding conversations. During this time, ASRS
continued to mail her annual member statements from the fiscal year
beginning July 1, 2005, through the fiscal year beginning July 1, 2010. Each
member statement that she received moved the stated normal retirement
date to the end of the applicable period. The member statements also stated
that “[r]etirees receiving a monthly benefit are permitted under certain
circumstances to return to work and still receive their benefit. For details on
the return to work options, visit the ASRS website.”
¶6 ASRS stopped mailing the member statements to its
members, including Lagerman, June 30, 2011. ASRS gave notice to its
members that they must access their retirement information on their ASRS
online accounts. Lagerman had already created an online ASRS account in
2007. She had also contacted ASRS in 2008 for assistance in resetting her
account password.
¶7 On April 6, 2016, ASRS received Lagerman’s completed ASRS
retirement application and processed her retirement effective as of that
date. Lagerman appealed to the ASRS Assistant Director and requested a
retirement date of August 2006. In her appeal letter, she noted that she had
attended a benefits exposition at the AGO at which the ASRS representative
stated that employees could not work more than 20 hours per week after
retirement. She also noted that in 2003 the AGO informed her that she could
not work more than 20 hours per week after retiring. She further noted that
when she left the AGO, she “did not retire because [she] wanted to continue
[her] professional career with full time work.” The ASRS Assistant Director
denied her appeal.
¶8 Lagerman appealed to the ASRS Director, who denied the
appeal. She then appealed that decision, and an administrative law judge
(“ALJ”) held a hearing in January 2017. During the hearing, Lagerman’s
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LAGERMAN v. ASRS
Opinion of the Court
counsel asked ASRS employee Jenna Orozco whether the lump sum
amount ASRS would have to pay Lagerman if it granted her request for a
retroactive retirement under A.R.S. § 38–715(D)(4) was a factor in denying
the request. Orozco denied that ASRS considered the amount of money that
it would have to pay Lagerman when it rejected her request. Another ASRS
employee, Ryan Falls, testified that he had no knowledge about the facts in
Lagerman’s case and was called to testify only about the actuarial concepts
of the retirement system. During closing argument, counsel for ASRS also
explained that Falls’s testimony was offered simply to show that actuarial
reasons to limit retroactive retirements under A.R.S. § 38–715(D)(4) exist.
¶9 The ALJ recommended affirming the ASRS Director’s
determination, which the ASRS Appeals Committee accepted. Lagerman
then appealed to the superior court, which affirmed the ASRS Appeals
Committee’s decision. Lagerman timely appealed to this Court.
DISCUSSION
1. Statutory Interpretation of A.R.S. § 38–764(A)
¶10 Lagerman argues that the superior court erred in concluding
that A.R.S. § 38–764(A) does not allow her to elect a retirement date that
occurred before the date she submitted her retirement application. This
Court reviews the superior court’s decision de novo and determines
“whether the administrative action was not supported by substantial
evidence or was illegal, arbitrary and capricious, or involved an abuse of
discretion.” Pendergast v. Ariz. State Ret. Sys., 234 Ariz. 535, 538 ¶ 10 (App.
2014) (quoting Carlson v. Ariz. State Pers. Bd., 214 Ariz. 426, 430 ¶ 13 (App.
2007)). “Although we view the evidence in the light most favorable to
upholding the agency’s decision, we are not bound by the agency’s or the
superior court’s legal conclusions or statutory interpretations.” Parsons v.
Ariz. Dep’t of Health Servs., 242 Ariz. 320, 322–23 ¶ 10 (App. 2017).
¶11 This Court’s primary goal in interpreting a statute is to give
effect to the legislature’s intent. Id. at 323 ¶ 11. “In doing so, we look to the
statute’s plain language as the best indicator of that intent[]” and “must
construe the statute in context with other related provisions and its place in
the statutory scheme.” Id. This Court also attempts to “give meaning to
‘each word, phrase, clause and sentence . . . so that no part of the legislation
will be void, inert, redundant, or trivial.’” See Ariz. State Univ. Bd. of Regents
v. Ariz. State Ret. Sys., 242 Ariz. 387, 389 ¶ 7 (App. 2017) (quoting In re Estate
of Zaritsky, 198 Ariz. 599, 603 ¶ 11 (App. 2000)).
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LAGERMAN v. ASRS
Opinion of the Court
¶12 Arizona Revised Statutes section 38–764(A) states:
Retirement is deemed to commence on a date elected by
the member. That date shall not be earlier than the day
following the date of termination of employment, the
date ASRS receives the member’s completed retirement
application or the date specified by the member
pursuant to subsection I of this section.
Lagerman contends that because the statute uses the word “or,” it should
be read in the disjunctive, meaning that she could elect a retirement date
that satisfied only the first clause, i.e., a date that occurred after she had
terminated her employment. As such, she argues that she could wait until
many years after she terminated work to retroactively elect to have her
retirement begin just after she was eligible for full retirement. She is
incorrect.
¶13 The statute states that a member’s retirement date “shall not
be earlier” than (1) the day following the date of termination, (2) the date
ASRS receives the member’s completed retirement application, or (3) the
date specified by the member under A.R.S. § 38–764(I). As such, the
statute’s plain language prohibits a member’s retirement from beginning
before all of the aforementioned dates. See Antonin Scalia & Bryan A.
Garner, Reading Law: The Interpretation of Legal Texts 119 (2012) (explaining
that when the disjunctive “or” is used after a negative, the effect is each item
listed is negated and prohibited); see also Schane v. Int’l Bhd. of Teamsters
Union Local No. 710 Pension Fund Pension Plan, 760 F.3d 585, 589–90 (7th Cir.
2014) (concluding that “the rule of inference that not (X or Y) is equivalent
to not X and not Y”).
¶14 We cannot disregard, however, that A.R.S. § 38–764(I) creates
an exception to the termination-of-employment requirement in the first
clause of subpart (A): “A member who attains a normal retirement date
may retire at any time without terminating employment if the member is
employed for less than the hours required for active membership pursuant
to section 38–711, paragraph 23, subdivision (b).” Subpart (I) thereby allows
a member who is eligible for normal retirement to retire without
terminating employment if the member works less than 20 weeks in the
fiscal year and less than 20 hours per week, which are the active
membership hours defined in A.R.S. § 38–711(23)(b). By allowing a member
to retire without terminating employment, A.R.S. § 38–764(I) is inconsistent
with the plain language of A.R.S. § 38–764(A), under which a member may
not retire and continue work. To address this inconsistency, we apply the
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LAGERMAN v. ASRS
Opinion of the Court
rules of statutory construction and consider the statute’s history, context,
and purpose. See Stein v. Sonus USA, Inc., 214 Ariz. 200, 202 ¶ 8 (App. 2007).
¶15 The history of A.R.S. § 38–764 shows that the legislature did
not intend by adding subpart (I) to eliminate the requirement in subpart (A)
that a member’s retirement cannot begin before the member submits a
completed retirement application. The legislature added what is now
subpart (I), allowing a retired member to continue to work on a limited
basis, in 1999 with Senate Bill 1083. Before that amendment, A.R.S.
§ 38–764(A) provided that the commencement of a member’s retirement
“shall not be earlier than the day following the date of termination of
employment or the date ASRS receives the member’s completed retirement
application.” The legislature added the third clause to subpart (A) (“the
date specified by the member”) in 1999, at the same time it amended the
statute to add what is now subpart (I). 1999 Ariz. Sess. Laws, ch. 327, § 15
(1st Reg. Sess.).
¶16 The plain language of the statute before the amendment
provided that a member could not elect to begin receiving retirement
benefits before the date of the member’s termination of employment or the
date that ASRS received the member’s completed retirement application.
The purpose of the amendment was merely to allow retired members to
work on a limited basis:
2. Redefines the term “member” and “compensation” to
assist employers who hire part-time employees who
meet the work-time requirements for ASRS.
...
12. Clarifies that a member who has attained a normal
retirement date but continues to work less than the
hours required for active ASRS membership may do so
without losing that member’s retirement pension.
Senate Fact Sheet, S.B. 1083, 44th Leg., 1st Reg. Sess. (Ariz. Feb. 1, 1999); see
A.R.S. § 38–764(I). Nothing in the legislative history indicates that when the
legislature amended subpart (A) to accommodate the new provision in
what is now subpart (I), it intended to eliminate the requirement that a
member must submit a completed retirement application before beginning
retirement, or that it intended to allow an employee to retroactively elect a
retirement date many years in the past.
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LAGERMAN v. ASRS
Opinion of the Court
¶17 Related statutes support this interpretation. Arizona Revised
Statutes section 38–757(A) states, “After application on a form prescribed by the
director, a member may retire on reaching the member’s normal retirement
date.” (Emphasis added.) Also, A.R.S. § 38–766(A) states that a retired
member who works at least 20 weeks in a fiscal year and at least 20 hours
per week resumes active membership in ASRS. In such event, the statute
states that the member’s retirement benefits will be suspended until the
member either (1) terminates employment and completes an application for
re-retirement or (2) attains a normal retirement date, no longer meets the
active membership criteria, and completes an application for re-retirement.
A.R.S. § 38–766(A). Therefore, the ASRS statutory scheme requires that a
member’s retirement may not commence before the member submits a
retirement application.
¶18 Lagerman contends that any ambiguity in A.R.S. § 38–764(A)
must be construed in her favor. “[I]f the meaning of a . . . provision remains
uncertain after consideration of the parties’ intentions, as reflected by their
language in view of surrounding circumstances, a secondary rule of
construction requires the provision to be construed against the drafter.”
Pendergast, 234 Ariz. at 541 ¶ 19 (quoting MT Builders, L.L.C. v. Fisher
Roofing, Inc., 219 Ariz. 297, 302 ¶ 10 (App. 2008)). Here, the plain language
in the statute is unambiguous because the language can be interpreted only
one way grammatically. And an inconsistency created by the 1999
amendment has been resolved by looking at the legislative history and
statutory scheme, which show that the legislature intended that a member
cannot receive retirement benefits before the member submits a retirement
application. Because the intent of the legislature is clear, we need not
construe the statute against ASRS.
2. ASRS’s Fiduciary Duty to Lagerman
¶19 Under A.R.S. § 38–715(D)(4), the ASRS Director may “[m]ake
retirement under this article effective retroactively to on or after the day
following the date employment is terminated if the member was unable to
apply before the retroactive effective date through no fault of the member.”
Lagerman challenges the decision by ASRS rejecting her request for
retroactive retirement under this statute. She claims that ASRS breached its
fiduciary duty by (a) taking financial and actuarial consequences into
account when denying her request for a retroactive retirement date under
A.R.S. § 38–715(D)(4) and (b) failing to raise her retirement options during
her previous conversations with ASRS representatives.
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LAGERMAN v. ASRS
Opinion of the Court
¶20 ASRS owes a fiduciary duty to its members, including
Lagerman. See Ariz. State Univ. ex rel. Ariz. Bd. of Regents v. Ariz. State Ret.
Sys., 237 Ariz. 246, 252–53 ¶ 28 (App. 2015). Whether a party breached a
duty is a question of fact. Keg Rests. Ariz., Inc. v. Jones, 240 Ariz. 64, 77 ¶ 45
(App. 2016). “We review the evidence in the light most favorable to
upholding [an agency]’s decision and will not substitute our judgment for
that of the agency regarding factual questions and agency expertise.” Wassef
v. Ariz. State Bd. of Dental Exam’rs through Hugunin, 242 Ariz. 90, 93 ¶ 11
(App. 2017). Here, nothing in the record shows that Lagerman was unable
to apply before the retroactive effective date through no fault of her own.
Therefore, ASRS did not breach its fiduciary duty by declining to grant her
a retroactive retirement date.
¶21 Lagerman cites other instances in which ASRS granted
retroactive retirement dates, and she contends that her cancer history
warranted a retroactive date. But ASRS granted retroactive retirement dates
in those cases because the members were not at fault, including instances
of administrative errors and instances when the member clearly expressed
an intent to retire. Although Lagerman experienced mental and physical
difficulties after receiving chemotherapy, her cancer diagnosis could not
serve as a basis for allowing a retroactive retirement date because she was
not diagnosed with cancer until summer 2006, a year after she became
eligible for retirement in July 2005. Furthermore, she did not clearly show
her intent to retire until 2016. Following the language of A.R.S.
§ 38–715(D)(4), this evidence supports the ALJ and Director’s decision that
her cancer did not prevent her from applying for retirement when she
became eligible in 2005. Although she claims that she did not retire in 2005
because an ASRS representative had previously advised her that she would
not be able to return to work full-time for the State if she collected
retirement benefits at any time, she provides no evidence for this other than
her own testimony. See Royal Globe Ins. Co. v. Indus. Comm’n, 20 Ariz. App.
432, 434 (App. 1973) (this Court defers to the ALJ’s credibility
determinations).
¶22 Lagerman also argues that Falls and Orozco’s testimony
showed that ASRS considered the potential financial and actuarial
consequences of granting her request for retroactive retirement in denying
her request. Assuming without deciding that ASRS might breach a
fiduciary duty by considering the financial consequences of a waiver, the
record shows that ASRS provided Falls’s testimony to simply demonstrate
that the limiting of retroactive retirements under A.R.S. § 38–715(D)(4) has
an actuarial purpose. Falls testified that he had no knowledge of the facts
in Lagerman’s case and was called to testify only about the actuarial
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LAGERMAN v. ASRS
Opinion of the Court
concepts for the retirement system. Moreover, Orozco testified that
financial consequences were not a factor in determining whether to grant
Lagerman’s request for a retroactive retirement date. Therefore, this
argument is not persuasive.
¶23 Next, Lagerman notes that she had various contacts with
ASRS between 2003 and 2016, and she argues that ASRS breached its
fiduciary duty by failing to inform her of her retirement options before
2016. Under A.R.S. § 38–755(A), ASRS “shall make information concerning
a member’s account accessible to the member in written or electronic form.
This information shall include the member’s current account balance,
contact information, beneficiary election, estimated retirement date and
estimated benefit amount.” The record shows that ASRS complied with
A.R.S. § 38–755(A) by mailing Lagerman retirement statements and by later
posting the information online for Lagerman to review. The record also
shows that each time Lagerman contacted ASRS, the contact’s purpose was
logged—and none of the contacts before 2016 concerned how or when she
could receive her retirement benefits. Instead, the contacts focused on other
subjects, such as resetting her password or addressing service purchase
issues. The last contact logged was in March 2016, when Lagerman called
to update her beneficiary designation and to schedule an appointment in
April 2016 to start her retirement. Lagerman does not cite any authority for
the proposition that ASRS representatives must explain a member’s
retirement options every time they hear from a member, and we know of
no authority. As such, this argument fails.
¶24 Lagerman also excuses her delayed application by claiming
that she was confused because of the multiple normal retirement dates and
because ASRS began including return-to-work information on the member
statements after she began her battle with cancer. If Lagerman was
confused about the member statements and the normal retirement dates,
she could have contacted ASRS for clarification, but she did not do so.
Likewise, if she had questions about returning to work, she could have
searched for the information on the ASRS website or contacted an ASRS
representative, but again, she did not do so. As such, this argument is not
persuasive.
3. Remaining Arguments
¶25 Lagerman argues that ASRS’s refusal to allow her to elect a
retirement date that was before the date she had submitted her retirement
application caused her to forfeit about $220,000 in retirement benefits,
thereby violating A.R.S. § 38–757(A). That subsection states that a member’s
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Opinion of the Court
right to retirement benefits is nonforfeitable upon attainment of the
member’s normal retirement date. A.R.S. § 38–757(A). Although the statute
affirms that a member’s right to retirement benefits is vested after reaching
the member’s normal retirement date, the vesting does not extinguish the
member’s need to satisfy other statutory requirements before making a
retirement effective, such as filing a retirement application. See Hall v.
Elected Officials’ Ret. Plan, 241 Ariz. 33, 44 ¶ 33 (2016). Thus, this argument
fails.
¶26 She also argues that ASRS’s actions diminished or impaired
her retirement benefits. The Arizona Constitution, Article 29, Section
1(C)–(D) provides, “Membership in a public retirement system is a
contractual relationship that is subject to article II, section 25[,]” and
“[p]ublic retirement system benefits shall not be diminished or impaired[.]”
The ASRS contractual relationship is described in the ASRS statutes, which
require a member to file a retirement application before the member can
receive retirement benefits. A.R.S. §§ 38–757(A), –764(A), –766(A). After
submitting her application in April 2016, which the contractual relationship
requires, Lagerman has been receiving monthly payments from ASRS. And
because Lagerman elected a joint and survivor annuity option naming her
husband as the beneficiary, ASRS will pay any remaining monthly benefits
to her husband after her passing. Thus, her retirement benefits have not
been diminished or impaired.
¶27 Lagerman requests attorneys’ fees under Arizona Rule of
Civil Appellate Procedure 21 and A.R.S. §§ 12–341.01 and –348. As the
unsuccessful party on appeal, she is not entitled to attorneys’ fees.
CONCLUSION
¶28 For the foregoing reasons, we affirm.
AMY M. WOOD • Clerk of the Court
FILED: AA
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