Courtois v. Maine Pub. Employees Retirement Sys.

• Court: Superior Court of Maine
• Decided: June 27, 2012
• Docket: CUMap-11-26
• Status: Unpublished

Opinion

STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss. CIVIL ACTION Docket No. AP-11-26 -TDvJ- '·l!Jtr\ - {;r _-; · LELAND B. COURTOIS

Plaintiff

V. ORDER

MAINE PUBLIC EMPLOYEES RETIREMENT SYSTEM, et al,

Defendants.

Before the court is the appeal in the above captioned case. In this appeal, brought

pursuant to Rule SOC Leland Courtois challenges a ruling by the Maine Public

Employees Retirement System (MSRS) that Courtois, who began receiving disability

retirement benefits since 1998, exceeded the income limitations for disability retirement

in 2009, resulting in the discontinuation of his disability retirement benefits and an

order directing him to repay MSRS $8,243.26. 1

Courtois is a former employee of the City of Portland who worked as a real

estate tax assessor and began receiving disability benefits in 1998. Under the applicable

statute, after an incapacity qualifying an employee for disability benefits has contirtued

for two years, it must render the recipient unable to engage in any "substantial gainful

activity" for which the member is qualified by training education or experience. 5

M.R.S. § 18521(1)(C). If a recipient receives "compensation . . from engaging in any

gainful activity or from employment" that exceeds a specified amount, the excess must

be deducted from the disability benefit and if the disability benefits are thereby 1 Counsel for MSRS has advised the court that Courtois is now receiving service retirement benefits. eliminated, the disability is deemed to no longer exist and the payment of disability

benefits must be discontinued. 5 M.R.S.§ § 18530(2)(A), (2)(B).

Under Rule SOC and 5 M.R.S. § 11007(C), an agency's decision will be reviewed

for abuse of discretion, error of law, or findings not supported by substantial evidence

in the record.~ Rangeley Crossroads Coalition v. Land Use Regulation Commission,

2008 ME 115 'IT 10, 955 A.2d 223, 227. 2 The court may not substitute is own judgment for

that of the agency and must affirm findings of fact if they are supported by substantial

evidence in the record. An agency's interpretation of the governing statute and its rules

and regulations and procedures will be afforded deference and will not be set aside

unless the statute of the rules or regulations plainly compel a contrary result. Id.

1. Procedural Arguments

At the outset Courtois raises a number of procedural arguments. The first of

these is that, in the annual statement of compensation that MSRS sends to persons

receiving disability retirement benefits, MSRS asked for more information than it was

statutorily entitled to receive. As a result, Courtois argues, MSRS was not allowed to

base its determination on that information.

Courtois is correct that 5 M.R.S. § 18531 directs MSRS to require recipients of

disability benefits to submit an annual statement of "compensation received from any

gainful occupation." The form actually sent by MSRS in that case asked Courtois

whether he had been required to file a Federal Income Tax return for 2009 and if so, to

enclose a copy of that return. (R. 1.12). It also asked Courtois if he had any income other

than MSRS disability and if so, to list any wages from employment and any income

2 Agency decisions may also be reversed for constitutional or statutory violations, if they are in excess of statutory authority, or are made upon unlawful procedure. 5 M.R.S.§ 11007(C)(1)-(3).

2 from "other sources (e.g. rentals, unemployment, royalties, subchapter S partnerships,

farm income)." Id. In response Courtois reported$ 23,061 in wages from Maine Medical

Center and $11,936 in net rental income, which in combination exceeded the applicable

earnings limitation of $26,754.03. See R.1.6.

Courtois does not dispute that his Maine Medical Center wages constituted

compensation but argues that his rental income - which put him over the earnings

limitation- was not compensation and that therefore MSRS was not allowed to ask for

that information under§ 18531. There are three problems with this argument.

The first is that it is entirely circular. If the rental income constituted

"compensation" from a gainful activity or occupation, then under the interpretation

proffered by Courtois, MSRS was allowed to ask for that information and to determine

that Courtois had exceeded the earnings limitation in 5 M.R.S. § 18530(2). If the rental

income did not constitute "compensation" from a gainful activity or occupation, then

according to Courtois, MSRS was not allowed to ask for that information and could not

include it in determining whether he exceeded the income limitation. As a result, even if

Courtois's procedural argument were accepted, it fails if MSRS correctly determined on

the merits that his rental income was compensation from a gainful activity.

Second, the court does not agree with the limitation that Courtois reads into the

statute. The Annual Statement of Compensation contained in the file (R. 1.16)

demonstrates that MSRS reasonably interprets § 18531 as allowing it to request the

necessary income information from which it is possible to determine whether a

disability recipient is receiving compensation in excess of his or her earnings limitation.

The alternative would be to allow recipients to be the sole judges of what constituted

compensation to be reported to MSRS- an unworkable interpretation.

3 The other procedural arguments proffered by Courtois are equally unavailing.

Specifically, the court does not read the retirement statutes as requiring a medical

examination when a disability recipient receives compensation from gainful activity

that exceeds the applicable limitations which reduces or eliminates the payment of

disability benefits. See 5 M.R.S. §§ 18530(2)(A), 18530(2)(B) ("if the retirement benefit

payments are eliminated by this subsection, the disability is deemed to no longer

exist").

Similarly, the requirement that disability benefits may not be discontinued until

all appeals have been exhausted applies to discontinuances for refusals to submit to

medical examinations or discontinuations based on medical examinations under 5

M.R.S. § 18529, not to discontinuations of benefits under section 18530. See 5 M.R.S. §

18529(5).

Lastly, Courtois is correct that chapter 507(2)(B) of the Retirement Systems' rules,

94-411 C.M.R. ch. 507(2)(B), is not a model of clarity. However, that provision only

makes sense if it is interpreted, as counsel for MSRS suggests, to mean that when a

recipient of disability benefits receives remuneration consistent with the recipient's

average final compensation, a rebuttable presumption is established that the applicable

standard for determining that the recipient is not unable to engage in any substantial

gainful activity has been met. See 94-411 C.M.R. ch. 507(1)(4) & (5). 3

2. Rental Income Received by Courtois

As noted above, underlying Courtois's arguments is the premise that the net

rental income he received did not constitute "compensation . . . from engaging in any 3 Indeed, Courtois himself argues that if interpreted otherwise, ch. 507(2)(B) would be inconsistent with the governing statute and would be invalid. See Petitioner's Brief dated March 5, 2012 at 15-16.

4 gainful activity" within the meaning of 5 M.R.S. § 18530(2). Section 18530 does not

contain a definition of compensation, but the agency reasonably interpreted

compensation from engaging in gainful activity as remuneration for work performed as

opposed to income from investments. SeeR. 25.6; 94-411 C.M.R. ch. 507(1)(A).

Based on the evidence in the record, the agency could have found that the rental

income received by Courtois in 2009 more closely resembled investment income than

compensation. If the court were evaluating the record in the first instance, it might have

reached that conclusion. However, the court is not entitled to substitute its judgment for

that of the agency, and there is evidence in the record to support a finding that Courtois

performed a limited amount of work in connection with his three rental properties.4

This work totaled approximately 30 hours during 2009, a year in which none of the

existing tenants moved out.

There is no bright line separating investment income from compensation that can

be applied to the circumstances of this case, and the court is therefore compelled to

uphold the agency's finding that the rental income received by Courtois in 2009

constituted compensation from gainful activity.

3. Equitable Estoppel

Courtois's remaining argument is that MSRS should be equitably estopped from

discontinuing his disability benefits. This is an argument that he was not obliged to

4 SeeR. 8.9-8.63 (collecting and depositing rent checks, paying property taxes and insurance, paying utilities for two buildings, scheduling maintenance on the heating and septic systems, arranging for plowing of one parking area, providing sand, ice, and snow shovels to the tenants of two buildings, arranging for painting and minor repairs at two buildings, less than one hour of hallway and window cleaning at one building, one or two hours of gardening at one building).

5 preserve before the agency because the agency did not have jurisdiction to grant

equitable relief. Berry v. Board of Trustees, 663 A.2d 14, 18-19 (Me. 1995).

Courtois is not confined to the administrative record in asserting his equitable

estoppel claim. However, he has proceeded to brief that claim along with his appeal

relying on certain materials provided by MSRS to disability recipients along with their

Annual Statement of Compensation. See Petitioner's Brief dated March 5, 2012 at 16-19.

Those materials are attached to the complaint in this action as Exhibit 2. 5

The materials attached as Exhibit 2 are dated July 2010 - the year following the

receipt of rental income that resulted in the discontinuance of Courtois's disability

benefits. July 2010 was also three months after Courtois filed his Annual Statement of

Compensation for 2009 (seeR. 1.12). For purposes of this decision, however, the court

will assume that Courtois had been sent identical materials in preceding years.

Those materials informed recipients that if they exceeded their earnings

limitation, they would have to repay the amount equaling the difference between their

earnings and their limitation amount. Complaint Ex. 2 page 3. Those materials did not

inform recipients that if they exceeded their limitation by a sufficient amount, their

benefits would be discontinued.

However, an essential element of an equitable estoppel claim is that the party

claiming equitable estoppel must establish detrimental reliance on the allegedly

misleading information or conduct.~ Berry v. Board of Trustees, 663 A.2d at 18 n.8.

In this case Courtois has not offered any evidence that he changed his position or failed

to take certain action in reliance on the absence of a warning in the MSRS materials that

his benefits could be discontinued. This precludes his claim for equitable estoppel.

5 Because Courtois has proceeded to brief the equitable estoppel issue based on Exhibit 2 to the complaint, the court understands that he is basing his equitable estoppel claim on Exhibit 2 and is not seeking to offer further evidence.

6 The entry shall be:

The decision of the Maine Public Employees Retirement System is affirmed. The Clerk is directed to incorporate this order in the docket by reference pursuant to Rule 79(a).

Dated: June 'i-'1 2012

t'homas D. Warren Justice, Superior Court

7 STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss. CIVIL ACTION Docket No. AP-11-26 ./ ',.' LELAND B. COURTOIS

Etitioner,

Respondents.

Before the court is a motion by respondents to dismiss the newly-added claim by

plaintiff Leland Courtois that MainePERS' s discontinuation of his disability benefits

violated section 504 of the Rehabilitation Act of 1973, 29 U.S.C. § 794. Also before the

court is a motion by Courtois for the taking of additional evidence pursuant to Rule

SOC( e).

This case arises from a ruling by MainePERS that Courtois, who has been

receiving disability retirement benefits since 1998, exceeded the income limitations for

disability retirement in 2009, resulting in the discontinuation of his disability retirement 5 benefi~ In Count I of his complaint Courtois seeks review of that decision pursuant to

Rule SOC.

The court has previously granted respondents ~ motion to dismiss Courtois's

section 1983 claim. See order dated November 22, 2011. While that motion was pending,

Courtois amended his petition to add a claim that respondents' actions violated section

504 of the Rehabilitation Act. Motion to Dismiss

For purposes of a motion to dismiss, the material allegations of the petition must

be taken as admitted. The petition must be read in the light most favorable to the

petitioner to determine if it sets forth elements of a cause of action or alleges facts that

would entitle petitioner to relief pursuant to some legal theory. In re Wage Payment

Litigation, 2000 ME 162 CJI 3, 759 A.2d 217, 220.

On a motion to dismiss, however, the court is not obliged to accept conclusory

allegations and legal conclusions that are bereft of any supporting factual allegations. In

this case Courtois's amended petition merely recites the provisions of 29 U.S.C. § 794

and that states that by "their above-described actions, Respondents have unlawfully

excluded Petitioner from participation in, denied Petitioner the benefits of, or subjected

Petitioner to discrimination under a program or activity receiving federal financial

assistance." Amended Petition CJICJI 40-41.

Reviewing respondents' "above-described actions" as set forth in the petition,

however, the court fails to discern any allegation that Courtois was an "otherwise

qualified" individual who was denied benefits "solely by reason of his . . . disability"

or that MainePERS receives federal financial assistance. See 29 U.S.C. § 794(a). These are

the essential elements of a cause of action under section 504.

To the extent that Courtois is arguing merely that the decision to discontinue his

disability benefits discriminated against him on the basis of his disability - and

overlooking the absence of any allegation that MainePERS receives federal financial

assistance - Courtois does not state a claim under section 504. This is true for several

reasons. First, section 504' s requirement that a person claiming the protection of that

section be an "otherwise qualified" individual means that- without his disability- he

would qualify for the benefit he is being denied. ~ Grzan v. Charter Hospital, 104

2 F.3d 116, 120-21 (7th Cir. 1997). In this case Courtois would not have received any

disability retirement benefits absent a disability.

Second, Courtois is not alleging that he was denied benefits "solely by reason of

his disability." He is alleging that he was wrongfully denied benefits because

MainePERS wrongfully calculated his outside income. See Amended Petition 1117-18.

Whether or not that MainePERS decision was correct, it was not based on Courtois's

disability.

Finally, the court is aware of no authority that section 504 or any other statute

prohibiting discrimination on the basis of disability forbids a state from determining

that disability benefits may be limited if a recipient earns too much outside income.

Motion for Taking of Additional Evidence

To the extent that Courtois's motion for the taking of additional evidence is

based on the section 1983 claims and Section 504 claims that have been dismissed, that

motion must be denied.

There are two issues which may present a basis for the taking of additional

evidence. First, in the proceedings before the agency, Courtois raised an equitable

argument that MainePERS had violated certain trust obligations by failing to inform

him that excess income could result in the discontinuation of benefits. MainePERS

determined that that issue was outside the scope of the appeal. See R. 25.8. On this issue

Courtois seeks to have the court consider a document distributed by MainePERS and

attached as Exhibit 2 to his amended petition. Once the court has ruled on Courtois's

Rule SOC appeal, it will determine whether it needs to consider Courtois's equitable

argument and whether, in connection with that argument, it should consider Exhibit 2

and any other relevant evidence.

3 Second. Courtois argues that he was requested to submit a document during the

administrative proceeding but that document (Exhibit 1 to the amended petition) is not

included in the record. MainePERS denies that Courtois was ever asked to submit the

document in question. If it is necessary to resolve the appeal, the court will consider

whether additional evidence should be taken on the limited issue of whether Courtois

was in fact requested to submit the document in question.

On all the other issues set forth in Courtois's motion for taking of additional

evidence and the accompanying offer of proof, the court concludes that the remaining

evidence that Courtois seeks to add is either (1) already contained in the administrative

record, (2) not material, (3) could have been presented during the administrative

proceeding, 1 or (4) constitutes an attempt to undertake an inquiry into the mental

processes of an agency decision-maker without having made any prima facie showing

of misconduct or bias. See CarlL. Cutler Co. v. State Purchasing Agent, 472 A.2d 913,

918 (Me. 1984).

The entry shall be:

Respondents' motion to dismiss plaintiff's claim under section 504 of the Rehabilitation Act is granted. Plaintiff's motion for the ta king of additional evidence is denied except as to Exhibits 1 and 2 to the petition, as to which the court reserves decision until it has considered petitioner's appeal on the record. Petitioner shall file his brief within 40 days of the date of this order. Respondents shall file their brief within 30 days after service of petitioner's brief. Petitioner shall have 14 days thereafter in which to file a reply brief. The Clerk is directed to incorporate this order in the docket by reference pursuant to Rule 79(a).

Dated: January t1 2012

Thomas D. Warren Justice, Superior Court 1 See 5 M.R.S. § 11006(1)(B) (requiring that a party proposing to offer additional evidence show that the evidence in question "could not have been presented . . . before the agency").

4 STATE OF MAINE SUPERIOR COURT CUMBERLAND, ss. CIVIL ACTION Docket No. AP-11-?2' -r::i~"'t"J - r,_ !Y'~dl' .~Vff ' . ""'; ,,cJ. j"'i 0'., Ol! I

LELAND B. COURTOIS

MAINE PUBLIC EMPLOYEES STATE OF MAINE Cumberland, ss, Clerk's Office RETIREMENT SYSTEM, et al, hCJV 2 2 2011 Defendants. i\·

which asserts an independent claim for relief pursuant to 42 U.S.C. § 1983 alleging that

the Maine Public Employees Retirement System (MainePERS) unconstitutionally

discriminated against Leland Courtois on the basis of sexual orientation.

This dispute arises from a ruling by MainePERS that Courtois, who has been

receiving disability retirement benefits since 1998, exceeded the income limitations for

disability retirement in 2009, resulting in the discontinuation of his disability retirement

benefit. In Count I of his complaint Courtois seeks review of that decision pursuant to

Count II of the complaint alleges that in determining Courtois's income in 2009,

MainePERS included $ 6,934 in imputed income constituting the cost of his domestic

partner's health benefits. Complaint <[<[ 15 n.3, 18, 23 n.4. Courtois, who is gay, alleges

that he was subjected to unlawful discrimination based on sexual orientation because MainePERS refused to deduct that $ 6,934 from his 2009 Annual Statement of

Compensation. Complaint

Motion to Dismiss

For purposes of a motion to dismiss, the material allegations of the complaint

must be taken as admitted. The complaint must be read in the light most favorable to

the plaintiff to determine if it sets forth elements of a cause of action or alleges facts that

would entitle plaintiff to relief pursuant to some legal theory. A claim shall only be

dismissed when it appears beyond doubt that a plaintiff is not entitled to relief under

any set of facts that he might prove in support of his claim. In re Wage Payment

Litigation, 2000 ME 162

However, the court may look beyond the pleadings in certain limited

circumstances. Moody v. State Liquor & Lottery Commission, 2004 ME 20

A.2d 43, 47-48. "Official public documents, documents that are central to the plaintiff's

claim, and documents referred to in the complaint may be properly considered on a

motion to dismiss without converting the motion to one for a summary judgment when

the authenticity of such documents is not challenged." kL 2004 ME 20

48.

The Alleged Equal Protection Violation

1 On November 14, 2011 plaintiff filed a motion to amend the complaint to add a further independent claim- a claim that the MainePERS decision violated § 404 of the Rehabilitation Act. Defendants have until December 14, 2011 to respond to that motion.

2 As noted above, plaintiff's section 1983 claim is based on his contention that

MainePERS denied him equal protection when it did not deduct $ 6,934 in imputed

income based on domestic partner health insurance from his 2009 Annual Statement of

Compensation. See Complaint

Compensation is contained in the administrative record. R. at 1.12 - 1.24. That

statement, submitted to MainePERS by Courtois, includes his tax return, R. at 1.15 -

1.24, and a W-2 form showing that he received $23,061.29 in wages, tips, and other

compensation from his employment at Maine Medical Center. R. at 1.14. Annexed as

Exhibit 1 to the complaint is a document from an Employee Benefits Supervisor at

Maine Medical Center stating that $ 6,394.31 of the $ 23,061.29 shown as compensation

on Courtois's W -2 represented the value of domestic partner health coverage that under

federal law was required to be reported as compensation to Courtois.

Courtois's 2009 Statement of Annual Compensation, including his tax return and

W-2 and the explanatory statement from Maine Medical, is central to his claims and is

referred to in the complaint. The court can therefore consider those documents in

connection with defendants' motion to dismiss. Moody v. State Liquor & Lottery

Commission, 2004 ME 20

Accepting all those documents as part of the complaint, the question of whether

Count II of the complaint states a cognizable § 1983 claim is an issue of law. This is

because the applicable IRS statutes and regulations provide that compensation includes

fringe benefits. Internal Revenue Code § 61(a)(1); Income Tax Regulations §§ 1.61-

21(a)(3), 1.61-21(a)(4). Moreover, while employer-provided health coverage is generally

2 Because Courtois is suing under 42 U.S.C. § 1983, he is necessarily relying on the equal protection clause of the U.S. Constitution. The same analysis would apply, however, to an equal protection claim under the Maine Constitution. Bangs v. Town of Wells, 2000 ME 186

3 excluded from income, IRC § 106, the applicable regulations limit that exclusion to

coverage for the employee, his or her spouse, and his or her dependents. Income Tax

Regulations§ 1.106-1. The exclusion therefore does not apply to a domestic partner who

is not a spouse unless the domestic partner qualifies as a dependent under IRC § 152.

Under the regulations, the inclusion of domestic partner health coverage as

imputed income is not based on sexual orientation but rather applies to all unmarried

couples and domestic partners, whether or not they are of the same sex. As a matter of

law, it did not violate the equal protection clause of the U.S. Constitution for

MainePERS to follow the IRS distinction between married and unmarried couples in

determining whether to impute the value of health coverage as part of compensation.

In this connection, the court is aware of no authority suggesting that marital

status triggers strict scrutiny under the equal protection clause. See Smith v. Shalala, 5

F.3d 235, 239 (7th Cir. 1993) (in the absence of interference with a fundamental right,

classification based on marital status analyzed under the rational basis test). Moreover,

differentiating between married and unmarried couples for purposes of income

taxation has been found to have a rational basis. See Kellems v. Commissioner, 58 T.C.

556 (1972), aff'd per curiam 474 F.2d 1399 (2d Cir. 1973). Indeed, if this were not true,

unmarried couples who live together would be able to claim a right to file joint returns.

Plaintiff's opposition to the motion to dismiss appears to argue that MainePERS

engaged in unconstitutional discrimination because it discontinued plaintiff's disability

retirement benefits rather than merely seeking repayment of the amount by which

plaintiff exceeded the applicable income limits. See Plaintiff's Opposition to Motion to

Dismiss dated September 2, 2011 at 4. Plaintiff does not, however, allege that

MainePERS has discontinued the disability retirement benefits of over-income

individuals with same-sex domestic partners but has not discontinued such benefits for

4 similarly situated individuals in heterosexual relationships. Accordingly, the court

agrees that plaintiff's section 1983 claim alleging unconstitutional discrimination based

on sexual orientation fails to state a claim upon which relief may be granted. 3

The above ruling applies only to plaintiff's claim of unconstitutional

discrimination. It does not in any way foreclose Courtois's arguments that, as a matter

of Maine law, MainePERS should not have included certain of the amounts shown on

Courtois's tax return in determining whether he had exceeded the income limitations

applicable to disability retirement. Nor does it foreclose Courtois's argument that the

proper remedy for exceeding the income limits was a repayment order rather than a

discontinuance of benefits. Those issues remain to be resolved in the context of

Courtois's Rule 80C appeal.

Defendants' motion to dismiss Count II of the complaint is granted. The Clerk is directed to incorporate this order in the docket by reference pursuant to Rule 79(a).

Dated: November "Z-1.- 2011

Thomas D. Warren Justice, Superior Court

3 Courtois can perhaps argue that because same-sex marriages are not recognized under Maine law, he could not have married his domestic partner in order to exclude his domestic partner's health coverage from his income. If Courtois were to advance an equal protection claim on this ground, however, he would have to bring a lawsuit challenging Maine's marriage laws. Plaintiff has not mounted such a challenge in this case. Moreover, even if Maine law were changed to allowed plaintiff to marry his domestic partner, the Internal Revenue Service appears to take the position that the federal Defense of Marriage Act precludes it from recognizing same sex marriages for purposes of the Internal Revenue Code. See, ~., IRS Private Letter Ruling 200339001, 2003 PLR LEXIS 879 (June 13, 2003). This position is being challenged by individuals in California, a state which recognizes same-sex marriage. See Dragovich v. Department of the Treasury, 764 F.Supp.2d 1178 (N.D. Cal. 2011).

5 Date Filed -~0~7---=-1 ~ 3 -__.:1~1~-- Cumberland Docket No. _ _. .::.cA::::.P_--=-1-=-1-_2_6_ _ County

• Action _ ____:::8_.:::0~C_:A::.:.PI:..lPr....:e:..:a:..:l=-·_ _ _ _ _ _ _ _ __

LELAND B. COURTOIS MAINE PUBLIC EMPLOYEES RETIREMENT SYSTEM SANDRA J. MATHESON THE BOARD OF TRUSTEES OF MAINE PUBLIC EMPLOYEES RETIREMENT SYSTEM

vs. Plaintiff's Attorney Defendant's Attorney

JAMES A. CLIFFORD, ESQ. CHRISTOPHER MANN, ESQ. ONE MONUMENT SQUARE, SUITE 421 ASSISTANT ATTORNEY GENERAL PORTLAND, ME 04101 OFFICE OF THE ATTORNEY GENERAL 6 STATE HOUSE STATION AUGUSTA, ME 04333-0006

Date of Entry