Young v. Mory
Annotate this Case
NO. 5-97-0089
IN THE
APPELLATE COURT OF ILLINOIS
FIFTH DISTRICT
_________________________________________________________________
BUDDIE YOUNG, ) Appeal from the
) Circuit Court of
Plaintiff-Appellee, ) White County.
)
v. ) No. 96-MR-2
)
MICHAEL L. MORY, as Executive Secretary )
of the State Employees' Retirement )
System of Illinois, and STATE EMPLOYEES')
RETIREMENT SYSTEM OF ILLINOIS, ) Honorable
) E. Kyle Vantrease,
Defendants-Appellants. ) Judge, presiding.
_________________________________________________________________
JUSTICE HOPKINS delivered the opinion of the court:
Defendants, the State Employees' Retirement System of Illinois
(SERS) and Michael L. Mory, the executive secretary of SERS, appeal
from the judgment order and permanent injunction entered in favor
of plaintiff, Buddie Young, by the White County circuit court. On
appeal, defendants contend that plaintiff's complaint was not ripe
for consideration by the trial court, that the trial court erred in
entering a permanent injunction against defendants because
plaintiff had an adequate remedy at law, and that the trial court
erred by ordering SERS to refrain from offsetting plaintiff's
retirement benefits by the attorney-fees portion of his workers'
compensation award. We affirm the trial court.
A. FACTS
The parties agree that the facts are undisputed and the issues
involve only questions of law. Plaintiff is an employee of the
Illinois Department of Transportation (IDOT) and participates in
SERS's pension plan. Plaintiff has pending workers' compensation
claims against IDOT. Plaintiff and IDOT have agreed to settle the
workers' compensation claims for $100,000. Prior to finalizing the
settlement, plaintiff filed a complaint against defendants in the
circuit court, requesting a declaratory judgment and a permanent
injunction.
In the complaint, plaintiff alleged that he sustained work-
related injuries, that those injuries resulted in disability, that
he hired a law firm to represent him on his workers' compensation
claims, that he is required to pay his attorney a fee out of any
workers' compensation benefits he receives, and that he "desires to
accept" IDOT's settlement proposal "but for the matters" alleged in
the complaint. Essentially, plaintiff claims that he should not
have his SERS benefits reduced by the amount of the fees he must
pay his attorney for obtaining the workers' compensation benefits
for him. Plaintiff's claim is based upon the common-fund doctrine,
whereby "an attorney who performs services in creating a fund
should in equity and good conscience be allowed compensation out of
the whole fund from all those who seek to benefit from it." Baier
v. State Farm Insurance Co., 66 Ill. 2d 119, 124 (1977).
In addition to workers' compensation benefits, plaintiff is
entitled to occupational disability benefits from SERS. 40 ILCS
5/14-123 (West 1996). Under section 14-129 of the Illinois Pension
Code, SERS is entitled to offset any amounts plaintiff receives
under the Workers' Compensation Act (820 ILCS 305/1 et seq. (West
1996)) against the amount of occupational disability payments it is
required to pay plaintiff. 40 ILCS 5/14-129 (West 1996). The
statute authorizing the offset provides:
"[B]efore the board takes any action on an application
for an occupational disability or occupational death benefit,
adjudication by the Industrial Commission of Illinois or a
ruling by the agency responsible for determining the liability
of the State under the Workers' Compensation Act or the
Workers' Occupational Diseases Act shall be had on a claim to
establish that the disability or death was incurred while in
the performance and within the scope of the member's duties,
under the terms of the Illinois Workers' Compensation Act or
the Workers' Occupational Diseases Act, whichever applies.
The system shall make payment of an occupational disability or
occupational death benefit only if the claim is found to be
compensable under one or both of those Acts.
Any amounts provided for a member or his dependents under
those Acts shall be applied for the period of time prescribed
by such Acts for payments thereunder as an offset to any
occupational disability *** benefit *** in such manner as may
be prescribed by the rules of the board." (Emphasis added.)
40 ILCS 5/14-129 (West 1996).
In conjunction with the above-quoted statute, SERS has adopted
a regulation which provides, "The amount considered for offset
purposes shall not be reduced by any legal expenses granted from
the award to the member." 80 Ill. Adm. Code 1540.90(5) (1997).
Thus, even though the worker is required to file a workers'
compensation or occupational disability claim as a part of the
process of claiming a disability pension from SERS, SERS still
offsets the portion of the award that the worker is required to pay
his or her attorney. This is the crux of the issue before this
court, whether SERS should be allowed to offset the portion of the
workers' compensation or occupational disability award that is
payable to the workers' attorney.
At the hearing on plaintiff's motion for summary judgment,
defendants presented testimony from Robert Hicks, a disability
supervisor employed by SERS. Hicks testified that, if plaintiff
accepted the $100,000 settlement offer, his monthly payment would
be $673 during the offset period. If SERS offset the entire
$100,000 settlement, plaintiff would receive $673 per month for
62.2355 months and then his monthly payments would be increased to
75% of his final salary while employed. If SERS offset only the
amount plaintiff received after deducting the attorney fees of
$20,000, plaintiff would still receive $673 per month, but only for
49.884 months, before SERS began to pay him at the higher rate of
75% of his final salary. Plaintiff's interest in whether the
offset includes the portion of the award that goes to his attorney
is this: he will be paid at a lower rate for nearly 13 months
longer if the entire $100,000 is offset. In other words, his
disability pension, which is greater than his offset payment, will
be payable almost 13 months sooner if only the $80,000 plaintiff
actually receives is offset.
The trial court resolved the issue in favor of plaintiff,
holding that the regulation (80 Ill. Adm. Code 1540.90(5) (1997))
disallowing the reduction of the offset for legal expenses is
invalid "as a matter of law." The court also found that the
common-fund doctrine applies to the defendants under the facts of
the case, that plaintiff's remedy at law is inadequate, and that
plaintiff would sustain irreparable harm if the regulation was
allowed to apply to him. The trial court granted plaintiff's
motion for summary judgment and entered a permanent injunction to
prohibit defendants from enforcing the invalid regulation. The
order provides, in pertinent part, as follows:
"This Court declares that the common fund doctrine is
applicable to [SERS] and serves to reduce the amount of
[SERS's] offset provided for [by statute] by the amount of
attorneys' fees and legal expenses incurred by the Plaintiff
in obtaining his workers' compensation settlement or award.
Final Judgment is hereby entered in favor of the
Plaintiff, BUDDIE YOUNG, and against the Defendants ***.
The Defendants, as well as their agents and employees,
are hereby permanently enjoined and restrained from including
the amount of attorneys' fees and expenses in its computation
of the offset provided for in [section] 14-129."
B. ANALYSIS
1. THE STANDARD OF REVIEW
This court is to conduct a de novo review of the court's grant
of a summary judgment in favor of plaintiff. Outboard Marine Corp.
v. Liberty Mutual Insurance Co., 154 Ill. 2d 90 (1992). However,
the proper standard of review from a decision granting or denying
a declaratory judgment is whether the trial court abused its
discretion. Stone v. Omnicom Cable Television of Illinois, Inc.,
131 Ill. App. 3d 210, 215 (1985). A review of the merits of the
case underlying the court's issuance of the permanent injunction
are subject to de novo review, but the court's ruling with respect
to the elements necessary to establish the right to a permanent
injunction (i.e., a right in need of protection, an inadequate
remedy at law, and irreparable harm) may not be reversed absent an
abuse of discretion. Butler v. USA Volleyball, 285 Ill. App. 3d
578, 582 (1996).
2. WHETHER THE CASE WAS RIPE FOR ADJUDICATION
Defendants argue that the trial court erred in reaching the
merits of plaintiff's complaint, contending that the issue was not
ripe for consideration. According to defendants' argument,
plaintiff presented no actual controversy for the court to
determine, because plaintiff had not yet received any workers'
compensation award and SERS had not yet offset any amount from that
award.
The courts should not adjudicate declaratory judgment actions
involving moot or hypothetical issues, or where a party seeks an
advisory opinion or mere advice from the court regarding
anticipated future difficulties. Weber v. St. Paul Fire & Marine
Insurance Co., 251 Ill. App. 3d 371, 373 (1993). By the same
token, however, a declaratory judgment action is designed to
"settle and fix rights before there has been an irrevocable change
in the position of the parties that will jeopardize their
respective claims of right." First of America Bank, Rockford, N.A.
v. Netsch, 166 Ill. 2d 165, 174 (1995).
A declaratory judgment action is proper if there is an actual
controversy for the court to resolve. A case involves an actual
controversy "if there is a legitimate dispute admitting of an
immediate and definite determination of the parties' rights, the
resolution of which would help terminate all or part of the
dispute." First of America Bank, 166 Ill. 2d at 173. The
plaintiff in a declaratory judgment action need not have suffered
the wrong or incurred the injury prior to filing suit, so long as
a "definitive and immediate determination of the rights of the
parties is possible." Messenger v. Edgar, 157 Ill. 2d 162, 171
(1993). Thus, a certainty of resolution is necessary, but an
occurrence of the injury is not.
The case at bar was properly brought before the court as a
request for declaratory judgment. In order to state a cause of
action for declaratory judgment, a plaintiff must allege (1) that
he has a tangible legal interest with regard to the claim, (2) that
the defendant's conduct is opposed to that interest, and (3) that
there is an ongoing controversy between the parties that is likely
to be prevented or resolved if the court decides the case. Adams
v. Meyers, 250 Ill. App. 3d 477, 484 (1993).
In this case, plaintiff has alleged sufficient facts to meet
all three requirements. Plaintiff has alleged facts to show that
he has a tangible legal interest in having only the amount of
workers' compensation he actually receives offset before he is
allowed to collect the higher monthly payment of his disability
pension. Defendants have made it clear that their conduct is
opposed to plaintiff's interest; defendants admit that they intend
to offset plaintiff's disability pension by the whole workers'
compensation award, including the $20,000 plaintiff will be
obligated to pay his attorney. Finally, the trial court's decision
definitively settled the matter by finding the regulation allowing
the offset as to legal expenses to be invalid and by entering an
injunction to prevent defendants from enforcing the regulation.
The cases defendants cite do not persuade us differently. In
Weber, the court held that a declaratory judgment action to
determine an insurer's duty to indemnify its insured, if brought
prior to the resolution of the question of the insured's liability,
is premature, or not ripe, until the issue of liability is
determined. Weber, 251 Ill. App. 3d at 374. In the instant case,
however, there is no question of liability, as it is clear that
plaintiff's employer, IDOT, is liable for plaintiff's injuries,
which were incurred in the course of his employment. Additionally,
the amount of the liability has been settled; but for this lawsuit,
IDOT has offered and plaintiff has agreed to accept $100,000 as a
full settlement of plaintiff's workers' compensation action.
Defendants cite Clark Oil & Refining Corp. v. City of
Evanston, 23 Ill. 2d 48, 50 (1961), for the proposition that
plaintiff's "alleged desire to enter into the settlement with
[IDOT] is not sufficient to create an actual controversy justifying
the intervention of the courts." The court in Clark Oil decided
that the plaintiff did not have standing to maintain the action.
In the case at bar, there is no question of standing, which is a
separate issue from ripeness. Thus, defendants' reliance upon the
Clark Oil case is misplaced.
Finally, defendants cite the United States Supreme Court case
of International Longshoremen's & Warehousemen's Union, Local 37 v.
Boyd, 347 U.S. 222, 98 L. Ed. 650, 74 S. Ct. 447 (1954), as support
for their argument that no actual controversy exists between
plaintiff and defendants but that plaintiff simply wants an
advisory opinion from the court. In Boyd, the Court found that the
plaintiffs were not seeking to resolve a controversy about a
statute presently affecting them but that they only requested an
advisory opinion about a statute that had not yet been applied
adversely to anyone in the case. Boyd, 347 U.S. at 223-24, 98 L. Ed. at 652, 74 S. Ct. at 448. In the case sub judice, absent the
trial court's decision, the regulation in question was certain to
be applied to plaintiff as soon as he accepted the workers'
compensation settlement. That plaintiff has not yet lost any money
is not the determining factor; the certainty that he will lose
money without a declaratory judgment and that a decision by the
court will resolve the matter are determinative. The trial court
did not abuse its discretion by finding that the issue was ripe for
decision.
3. WHETHER THE PERMANENT INJUNCTION WAS PROPERLY ENTERED
Defendants argue that the permanent injunction was not proper
because it changed the status quo, whereas the law requires that a
permanent injunction maintain the status quo. Defendants
accurately quote cases that set forth the rule that a permanent
injunction is intended to maintain the status quo when the
plaintiff proves that irreparable harm will occur and that there is
no adequate remedy at law. See Butler, 285 Ill. App. 3d at 582;
Orr v. Department of Revenue, 217 Ill. App. 3d 672, 674 (1991). In
Orr, this court found that the plaintiff was not entitled to
injunctive relief because the administrative remedies available to
him amounted to an adequate remedy at law, sufficient to negate the
need for an injunction. Orr, 217 Ill. App. 3d at 674.
The trial court considered this argument and concluded that
the Illinois Supreme Court case of Bio-Medical Laboratories, Inc.
v. Trainor, 68 Ill. 2d 540 (1977), was controlling. In Bio-
Medical, the court held that if a statute or administrative rule is
attacked on its face, the plaintiff does not need to exhaust his
administrative remedies first and the court may properly find that
plaintiff does not have an adequate remedy at law. Bio-Medical, 68 Ill. 2d at 548.
Here, the rule set forth in Bio-Medical is even more
applicable. Plaintiff is attacking SERS's regulation that provides
that legal expenses cannot be exempted from the offset of the
workers' compensation award. Defendants have made it clear that
they have no intention of interpreting this regulation as invalid.
If plaintiff had settled his workers' compensation claim and
submitted his claim for a disability pension to SERS before
obtaining a court ruling on the validity of the regulation, SERS
clearly would have enforced the regulation. Thus, without the
permanent injunction prior to the settlement of the workers'
compensation claim, plaintiff would receive the lower offset amount
for an additional 13 months before SERS began paying his higher
disability pension. Additionally, SERS claims only to be
responsible for paying disability benefits as they come due each
month, and not as a total lump-sum figure. Because of this,
plaintiff would most likely have to litigate the issue on a monthly
basis, at least until plaintiff could get a court to rule on the
validity of the regulation. Under the ruling in Bio-Medical, under
these facts, and in the interest of justice, we hold that the court
did not abuse its discretion in finding that plaintiff did not have
an adequate remedy at law and that, without a permanent injunction,
plaintiff would be irreparably harmed.
4. THE INVALIDITY OF THE OFFSET REGULATION
Section 14-129 of the Illinois Pension Code requires that a
claimant, such as plaintiff, who requests disability pension income
from SERS must first obtain a ruling from the Illinois Industrial
Commission or other appropriate agency to establish that the
disability was incurred in the scope of and in the performance of
the member's duties under the terms of the Workers' Compensation
Act (820 ILCS 305/1 et seq. (1996)) or the Workers' Occupational
Diseases Act (820 ILCS 310/1 et seq. (1996)). 40 ILCS 5/14-129
(West 1996). Section 14-129 additionally requires that "[a]ny
amounts provided for a member or his dependents" under either the
Workers' Compensation Act or the Workers' Occupational Diseases Act
"shall be applied for the period of time prescribed by such Acts
for payment thereunder as an offset to any occupational disability
or occupational death benefit or to a survivors annuity ***." 40
ILCS 5/14-129 (West 1996).
In response to the requirements of section 14-129, the SERS
board of trustees has implemented a regulation governing the manner
in which benefits are to be offset. That regulation is as follows:
"The amount considered for offset purposes shall not be
reduced by any legal expenses granted from the award to the
member." 80 Ill. Adm. Code 1540.90(5) (1997).
Thus, under section 14-129 of the Illinois Pension Code and the
corresponding SERS regulation, plaintiff was required to obtain a
ruling from the Illinois Industrial Commission that his injuries
are job-related. In order to obtain that ruling, plaintiff was
compelled to hire an attorney to represent him. The attorney
obtained a final settlement offer of $100,000 from plaintiff's
employer for plaintiff's total disability. Out of the $100,000
settlement, plaintiff is obligated to pay his attorneys $20,000.
Defendants claim that the above-quoted regulation gives them
the right to offset the entire $100,000 settlement prior to paying
plaintiff his full disability pension. Defendants claim that the
circuit court erred in ruling that the regulation is invalid.
The trial court fully explained its ruling in a clear and
detailed memorandum of decision. We agree with the trial court's
reasoning and conclusion on this issue. The relevant parts of the
order are as follows:
"Under the common-fund doctrine, `an attorney who
performs services in creating a fund should in equity and good
conscience be allowed compensation out of the whole fund from
all of those who seek to benefit from it.' Taylor vs. State
Universities Retirement System, 203 Ill[.] App[.] 3d 513[, 520
(1990)] ***, quoting from Baier vs. State Farm Insurance Co.
(1977), 66 Ill[.] 2d 119[, 124] ***.
The plaintiff and the defendants rely upon Taylor, supra,
in support of their respective positions concerning the
application of the common-fund doctrine to SERS. Taylor
involved a claim for attorney's fees by the attorney who
represented a participant in the State University Retirement
System (`SURS') in an occupational disease claim. SURS had
already received the full amount of its recoupment from the
participant's occupational disease award[,] and Taylor sought
20% of the amount of the recoupment as fees under the common-
fund doctrine. SURS is governed by the Illinois Pension Code
(40 ILCS 5/15-101 et seq. [(West 1996)]). Section 15-153.1 of
the Code contains a provision similar to section 14-129
governing SERS.
In this case, it is clear that the plaintiff has
established the general requirements for applying the common-
fund doctrine: (1) the fund with respect to which fees are
sought was created as a result of legal services performed by
plaintiff's attorneys; (2) the claimant (SERS) did not
participate in its creation; and (3) the claimant (SERS) will
benefit from the fund, by setoff. Taylor, [203 Ill. App. 3d
at 520] ***."
Defendants argue that they reasonably interpret the phrase,
"[a]ny amounts provided for a member or his dependents," found in
section 14-129, as requiring an offset of the portion of the
workers' compensation or occupational disease award that is payable
for the worker's legal expenses and attorney fees. According to
defendants, "The attorney fees component of such an award is an
amount provided for the member's benefit as it satisfies the
member's obligation to compensate the attorney whose services
helped to procure the award."
We find it impossible to follow this line of reasoning without
concluding that plaintiff does not fully benefit from the
attorney's services under these circumstances. Here, plaintiff was
required by statute to obtain a ruling from the Industrial
Commission prior to obtaining his full disability pension from
SERS. SERS did not participate in plaintiff's claim for workers'
compensation benefits, but SERS is allowed to offset plaintiff's
workers' compensation award, paying plaintiff a lesser amount
during the offset period than the amount of plaintiff's full
disability pension. SERS clearly benefits from the services of
plaintiff's attorney. Therefore, the trial court was correct in
finding that the common-fund doctrine applies to the facts of this
case and did not err in finding SERS's regulation to be invalid.
Defendants argue that the Taylor case was wrongly decided and
that we should decline to follow it. Defendants contend that the
Taylor court erred by rejecting the argument that the common-fund
doctrine should not apply to SURS, as it is an administrative
agency. Defendants quote City of Chicago v. Fair Employment
Practices Comm'n, 65 Ill. 2d 108, 115 (1976), for the proposition
that the common-fund doctrine "is founded on the inherent equity
jurisdiction of the courts [citation] and thus has no application
to administrative agencies, whose powers are strictly confined to
those granted in their enabling statutes." According to
defendants, the City of Chicago case prohibits the application of
the common-fund doctrine to administrative agencies such as SERS
and SURS. Defendants' analysis is flawed.
In the City of Chicago case, an administrative agency awarded
a successful litigant attorney fees. The supreme court found that
the agency had no statutory authorization for such an award. By
contrast, in the case at bar, the administrative agency that will
approve the portion of the settlement applied to an attorney's fee
is the Industrial Commission. The Industrial Commission does have
statutory authority for such an approval of an attorney's fee. 820
ILCS 305/16 (West 1996). The trial court assessed whether SERS was
authorized by section 14-129 to offset the portion of plaintiff's
workers' compensation award that plaintiff will be required to pay
his attorney. The trial court correctly found that the regulation
requiring that attorney fees and other legal expenses be included
in the offset formula is invalid. The trial court properly
exercised its "inherent equity jurisdiction" to find that SERS
cannot validly offset the portion of plaintiff's workers'
compensation award payable as attorney fees and other legal
expenses. City of Chicago, 65 Ill. 2d at 115. The trial court did
not err by following Taylor in its application of the common-fund
doctrine to an administrative agency.
The underlying justification of the common-fund doctrine is to
prevent the unjust enrichment of a beneficiary of funds where the
beneficiary played no role in creating the fund from which it
stands to benefit. Scholtens v. Schneider, 173 Ill. 2d 375, 385
(1996). The doctrine is a common law rule of general application,
applicable to "all funds created, increased or preserved by a party
in which others have an ownership interest." Scholtens, 173 Ill. 2d at 386. In Scholtens, the supreme court thoroughly examined the
history of the common-fund doctrine and held that ERISA (the
Employee Retirement Income Security Act) does not preempt
application of the common-fund doctrine to ERISA retirement plans.
Scholtens, 173 Ill. 2d at 386. Although SERS is not covered by
ERISA (Matsuda v. Cook County Employees' & Officers' Annuity &
Beneficiary Fund, 278 Ill. App. 3d 378, 385 (1995), aff'd, 178 Ill. 2d 360 (1997)), the ruling in Scholtens is readily analogous to the
situation created by SERS. SERS attempted to lock in benefits that
it does not participate in creating but that workers, who have
rights to disability income from SERS, are required to obtain prior
to receiving their disability income. By enacting a regulation,
SERS cannot override the long-standing equitable rule of the
common-fund doctrine, and the trial court did not err in applying
it to the facts of this case.
C. CONCLUSION
For all of the reasons stated, we affirm the trial court's
entry of summary judgment in favor of plaintiff and the judgment
order and permanent injunction entered on January 17, 1997.
Affirmed.
WELCH, P.J., and CHAPMAN, J., concur.
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