State ex rel. Mallory v. Public Employees Retirement Board

82 Ohio St. 3d 235

• Court: Ohio Supreme Court
• Decided: June 24, 1998
• Docket: No. 97-231
• Status: Published

Opinions

Douglas, J.

The parties present a number of arguments for our consideration. We have carefully reviewed these arguments and have conducted a thorough review of the record. For the reasons that follow, we reverse the judgment of the court of appeals and grant appellant’s requested writ of mandamus.'

I

Appellees concede that an action in mandamus is the appropriate remedy to determine appellant’s claimed entitlement to service credit in PERS. See, e.g., State ex rel. Ryan v. State Teachers Retirement Sys. (1994), 71 Ohio St.3d 362, 364, 643 N.E.2d 1122, 1125; McAuliffe v. Bd. of Pub. Emp. Retirement Sys. of Ohio (1994), 93 Ohio App.3d 353, 357, 638 N.E.2d 617, 619-620; R.C. 145.01(A). To be entitled to the requested writ of mandamus, appellant must establish that the board abused its discretion by denying her request for PERS service credit. See State ex rel. Schwaben v. School Emp. Retirement Sys. (1996), 76 Ohio St.3d 280, 282-283, 667 N.E.2d 398, 400-401; McAuliffe, 93 Ohio App.3d at 357, 638 N.E.2d at 620. The board abused its discretion if it acted in an unreasonable, arbitrary, or unconscionable manner. State ex rel. Crabtree v. Franklin Cty. Bd. of Health (1997), 77 Ohio St.3d 247, 249, 673 N.E.2d 1281, 1283.

With a few exceptions that are inapplicable here, membership in PERS is compulsory for public employees of the state and local authorities specified in R.C. 145.01. R.C. 145.03; Lancaster v. Pub. Emp. Retirement Sys. (1987), 40 Ohio App.3d 135, 137, 532 N.E.2d 144, 146. R.C. 145.01(A) provides that “[i]n all cases of doubt, the public employees retirement board shall determine whether any person is a public employee, and its decision is final.” To make the determination required here, an analysis of R.C. Chapter 120 is necessary. The board believed that it was beyond its authority to determine whether the commission and the FCPDO acted lawfully and in accordance with R.C. Chapter 120. The board was in error.

It is true that the board, like other administrative agencies, lacks jurisdiction to rule on the constitutional validity of statutes. See State ex rel. Rootstown Local School Dist. Bd. of Edn. v. Portage Cty. Court of Common Pleas (1997), 78 Ohio St.3d 489, 494, 678 N.E.2d 1365, 1369. However, in' reaching the merits of appellant’s claim, the board was not called upon to decide the constitutionality of a statute. What the board was asked to do was to consider any and all statutes that might be pertinent in regard to appellant’s status as a public employee. In this regard there is nothing in R.C. 145.01(A) that limits the board to interpreting only those statutes that the board administers. Therefore, the board erred in concluding that it did not have the statutory authority to construe R.C. Chapter 120 to determine whether appellant was a public employee for purposes of PERS during her employment at the FCPDO.

II

Appellant asserts that the board abused its discretion by determining that she was not a “public employee” for purposes of compulsory PERS membership when she was employed by the FCPDO. We agree.

R.C. 145.01(A)(1) defines “[p]ublic employee” for purposes of compulsory membership in PERS to include “[a]ny person holding an office, not elective, under the state or any county, township, municipal corporation, * * * or board, bureau, commission * * * or administrative body as the same are, or have been, created by action of the general assembly or by the legislative authority of any of the units of local government named in this division, or employed and paid in whole or in part by the state or any of the authorities named in this division * * *.” This court has previously stated that pension provisions like R.C. 145.01(A) must be liberally construed in favor of the public employees and their dependents who the statutes were designed to protect. See, generally, State ex rel. Solomon v. Police & Firemen’s Disability & Pension Fund Bd. of Trustees (1995), 72 Ohio St.3d 62, 65-66, 647 N.E.2d 486, 489; State ex rel. Teamsters Local Union 377 v. Youngstown (1977), 50 Ohio St.2d 200, 205, 4 O.O.3d 387, 390, 364 N.E.2d 18, 21.

In the case at bar, the commission was established and Kura was appointed as the Franklin County Public Defender pursuant to the Public Defender Act of 1976. “A ‘public office’ generally denotes exercise of certain independent public duties and embodies part of the sovereignty of the governmental unit involved.” State ex rel. Buian v. Kadlec (1978), 56 Ohio St.2d 116, 117, 10 O.O.3d 307, 383 ; State ex rel. Mikus v. Hirbe (1965), 5 Ohio App.2d 307, 310, 34 O.O.2d 490, 492, 215 N.E.2d 430, 432. Both the commission and Kura exercised powers and duties pursuant to the Public Defender Act to comply with the governmental duty to provide assistance of counsel to indigent criminal defendants.

Similarly, pre-1984 FCPDO employees like appellant were public employees during their employment with the FCPDO. Pursuant to statutory authority, FCPDO employees were employed by a county agency (the commission) and a county officer (Franklin County Public Defender Kura) to perform a governmental function, ie., the function of providing legal representation to indigent criminal defendants, for which FCPDO employees were paid by the county. In creating the commission and appointing the Franklin County Public Defender, the board of county commissioners acted pursuant to the authority vested in them by the General Assembly. In that same vein, the commission and Kura followed the statutory scheme of the Public Defender Act in creating the FCPDO. See R.C. 120.15(B) (“In carrying out the responsibilities and performing the duties of his office, the county public defender shall: [1] Maintain an office, approved by the commission * * *.”); R.C. 120.14(B) (“The commission shall determine the qualifications and size of the supporting staff and facilities and other requirements needed to maintain and operate the office of the county public defender.”); R.C. 120.14(C) (“In administering the office of county public defender, the commission shall: [1] Recommend to the county commissioners an annual operating budget which is subject to the review, amendment, and approval of the board of county commissioners.”). Further, the state reimbursed Franklin County for some of the operating expenses of the FCPDO in accordance with R.C. 120.18(A). Based upon the foregoing, appellant clearly falls within the definition of “public employee” as defined by R.C. 145.01(A), and consequently was entitled to membership in PERS when she was employed at FCPDO.

Moreover, our conclusion that appellant was a “public employee” covered by PERS during her employment with the FCPDO is also supported by, among other things,¹ the actions of Kura and the commission in actively advocating the 1984 amendment to R.C. Chapter 120. Kura and the commission essentially acknowledged that the 1984 amendment to R.C. Chapter 120 was necessary to “legalize” the FCPDO and thereby conceded that, prior to the amendment, the FCPDO was a county agency staffed by county employees.

Ill

Nevertheless, the court of appeals found no abuse of discretion in the board’s determination that appellant was not a public employee covered by PERS during her employment with the FCPDO. In so holding, the court of appeals noted that prior to the 1984 enactment of R.C. 120.14(F), Kura had authority pursuant to R.C. 120.15(C) and 120.04(C)(3) to “[m]ake all the necessary arrangements to coordinate the services of the office with any * * * private programs established to provide legal representation to indigent persons and others * * *.” The court of appeals concluded that Kura thus had authority to contract with a private program [FCPDO] to provide indigent legal representation. We respectfully disagree with the court of appeals’ analysis of this issue.

The record before us is devoid of any evidence of a contract, written or oral, between Kura and the FCPDO. Contrary to the Franklin County Public Defender’s assertion on appeal, the fact that appellant stipulated that Kura hired attorneys and support personnel to form the FCPDO does not establish a contract between Kura and a “private program” referred to as the FCPDO. This argument, since the FCPDO did not exist before Kura hired a staff, is without merit.

Even assuming evidence of a contract between Kura and the FCPDO, the contract would have been invalid under R.C. 2921.42, which defines unlawful interests in public contracts. R.C. 2921.42(A)(4) prohibits any public official from knowingly having “an interest in the profits or benefits of a public contract entered into by or for the use of the political subdivision or governmental agency or instrumentality with which he is connected[.]” See State v. Pinkney (1988), 36 Ohio St.3d 190, 522 N.E.2d 555. In concluding that Kura had contracted with a private organization known as the FCPDO, the court of appeals neglected to consider that a clear conflict of interest would have existed if Kura, acting in his official capacity as the Franklin County Public Defender, was permitted to determine the adequacy of services provided to the county by the “private agency” Kura himself directed.²

The Franklin County Public Defender, however, argues that the prohibition against a public official having an interest in a public contract does not apply where the criteria set forth in R.C. 2921.42(C)³ are met and that Kura’s dealings with the FCPDO were within the statutory exemption. We disagree.

The Franklin County Public Defender has fallen substantially short of satisfying the stringent four-part test set forth by R.C. 2921.42(C). The Franklin County Public Defender has made no showing, beyond mere assertions, that the exemption of R.C. 2921.42(C) is applicable herein. In fact, contrary to these assertions, attorneys for the Franklin County Public Defender admit that Kura actively participated in both the commission’s discussions and vote regarding the .employment of the FCPDO, essentially conceding that Kura’s actions failed to satisfy R.C. 2921.42(C)(4). Finally, it must be noted that appellees failed to introduce any evidence which might have established that the division (C) exemption applied.

IV

The Franklin County Commissioners and the Franklin County Public Defender also claim that appellant’s mandamus action is barred by the doctrine of laches. For the following reasons, we find that the equitable defense of laches is not well taken.

Approximately sixteen years elapsed from the time appellant was first employed with the FCPDO to the time that appellant requested that PERS grant her service credit for her FCPDO employment. However, the Franklin County Commissioners and the Franklin County Public Defender lack standing to raise the equitable, affirmative defense of laches because they have unclean hands. See, generally, Kettering v. Berger (1982), 4 Ohio App.3d 254, 261-262, 4 OBR 471, 479, 448 N.E.2d 458, 466. See, also, Patterson v. Blanton (1996), 109 Ohio , 672 N.E.2d 208, 211 (discussing the doctrine of unclean hands). The minutes from the commission’s meetings indicate that the commission and the Franklin County Public Defender knew that they were operating the FCPDO illegally as a “private” unincorporated organization before 1984. Laches is an equitable doctrine and it is fundamental that he who comes into equity must come with clean hands. Christman v. Christman (1960), 171 Ohio St. 152, 154, 12 O.O.2d 172, 173, 168 N.E.2d 153, 155. A knowing violation of applicable law would certainly preclude a party from asserting the affirmative, equitable defense of laches.

Assuming, however, that appellees do have standing to raise the issue, the elements of laches are (1) unreasonable delay or lapse of time in asserting a right, (2) absence of an excuse for the delay, (3) knowledge, actual or constructive, of the injury or wrong, and (4) prejudice to the other party. State ex rel. Polo v. Cuyahoga Cty. Bd. of Elections (1995), 74 Ohio St.3d 143, 145, 656 N.E.2d 1277, 1279. Prejudice is not inferred from the mere lapse of time and “ ‘in order to successfully invoke the equitable doctrine of laches it must be shown that the person for whose benefit the doctrine will operate has been materially prejudiced by the delay of the person asserting his claim.’ ” Stevens v. Natl. City Bank (1989), 45 Ohio St.3d 276, 285, 544 N.E.2d 612, 621, quoting Smith v. Smith (1959), 168 Ohio St. 447, 7 O.O.2d 276, 156 N.E.2d 113, paragraph three of the syllabus.

The Franklin County Commissioners and Franklin County Public Defender argue that appellant’s delay in bringing this action has caused “substantial budgetary prejudice” to the commissioners and that “[i]f [appellant] is successful in this action, all former pre-1984 employees of the FCPDO will also be entitled to PERS contributions for their service with the FCPDO,” thereby “opening] the floodgates for hundreds of potential claims” and creating an “onerous” financial burden on the commissioners and the county taxpayers. The Franklin County Public Defender further asserts that granting a writ of mandamus to appellant, entitling all pre-1984 FCPDO employees to similar service credit, “will have a devastating economic impact on the existence of the Franklin County Public Defender and will threaten its ability to provide legal services to indigent clients in Franklin County.”

This court, however, rejected similar claims in State ex rel. N. Olmsted Fire Fighters Assn. v. N. Olmsted (1992), 64 Ohio St.3d 530, 537, 597 N.E.2d 136, 142, where we stated that “[w]here no evidence of material prejudice is presented, * * * a court of appeals properly rejects laches as a defense.” Here, there is an absence of evidence in the record of prejudice, budgetary or otherwise. There is also no evidence or argument that appellant’s delay in asserting her rights under PERS prejudiced appellees’ ability to defend against her claim. See State ex rel. Chavis v. Sycamore City School Dist. Bd. of Edn. (1994), 71 Ohio St.3d 26, 35, 641 N.E.2d 188, 196.

Accordingly, laches does not bar appellant’s mandamus action.

V

Two additional questions remain. First, as previously noted, the 1984 enactment of R.C. 120.14(F) authorized the county public defender commission to contract with non-profit organizations to provide county public defender services. After the FCPDO incorporated, the commission, pursuant to R.C. 120.14(F), contracted with the FCPDO to perform the required services. Did such action in 1984 terminate appellant’s continued membership in PERS? It did not.

R.C. 145.01(A)(2) specifically provides that for purposes of PERS, a “public employee” includes “[a] person who is a member of the public employee retirement system who continues to perform the same or similar duties under the direction of a contractor who has contracted to take over what before the date of the contract was a publicly operated function.” (Emphasis added.) Post incorporation of the FCPDO, appellant continued to act as an attorney providing representation to indigent criminal defendants. Thus, appellant retained her right to be included as a PERS covered employee.

VI

The last question remaining involves the matter of the amount of the liability of the Franklin County Commissioners. As provided in State ex rel. Pub. Emp. Retirement Bd. v. Baker (1959), 169 Ohio St. 499, 9 O.O.2d 1, 160 N.E.2d 262, an employer who fails to deduct public employee retirement benefits is liable for the delinquent contributions to the PERS that the employer failed to make and also liable for those contributions the employer neglected to deduct from the employee’s salary. See, also, Lancaster v. Pub. Emp. Retirement Sys. of Ohio (1987), 40 Ohio App.3d 135, 138, 532 N.E.2d 144, 147.

Accordingly, the Franklin County Commissioners are liable for both employer and employee contributions to PERS for appellant for her fourteen years of service with the FCPDO.

Conclusion

For the foregoing reasons, we reverse the judgment of the court of appeals and grant a writ of mandamus (1) directing the Public Employees Retirement Board to credit appellant for her years of service with the Franklin County Public Defender’s Office and (2) directing the Franklin County Commissioners to remit employer and employee contributions to PERS on appellant’s behalf.

Judgment reversed and unit granted.

Resnick, F.E. Sweeney and Pfeifer, JJ., concur. Moyer, C.J., Cook and Lundberg Stratton, JJ., dissent.

1 . Further, our finding is in accord with administrative opinions, including the informal 1980 opinion by the Administrative Agencies Section Chief of the Attorney General’s Office cited by the parties. See, also, 1979 Ohio Atty. Gen. Ops. No. 79-084 (County public defender commission members and county public defenders are county officers, and staff hired to assist public defenders are county employees.); 1987 Ohio Atty. Gen. Ops. No. 87-102; and 1976 Ohio Ethics Comm. Ops. No. 76-001.

2 . The Administrative Agencies Section Chief of the Attorney General’s Office concluded in his March 14,1980 informal opinion that R.C. 2921.42 “prohibits a county public defender from serving as the director of a non-profit corporation supplying legal services pursuant to contract to the office of the county public defender.” The section chief reasoned that “[w]ere it otherwise, the county public defender would be in the anomalous position of passing, in his official capacity, upon the adequacy of the services delivered to the county by the agency he directs.” We find this reasoning to be persuasive.

3 . R.C. 2921.42 provides:

“(C) This section does not apply to a public contract in which a public official, member of his family, or one of his business associates has an interest, when all of the following apply:

“(1) The subject of the public contract is necessary supplies or services for the political subdivision or governmental agency or instrumentality involved;

“(2) The supplies or services are unobtainable elsewhere for the same or lower cost, or are being furnished to the political subdivision or governmental agency or instrumentality as part of a continuing course of dealing established prior to the public official’s becoming associated with the political subdivision or governmental agency or instrumentality involved;

“(3) The treatment accorded the political subdivision or governmental agency or instrumentality is either preferential to or the same as that accorded other customers or clients in similar transactions;

“(4) The entire transaction is conducted at arm’s length, with full knowledge by the political subdivision or governmental agency or instrumentality involved, of the interest of the public official, member of his family, or business associate, and the public official takes no part in the deliberations or decision of the political subdivision or governmental agency or instrumentality with respect to the public contract.”