In the Matter of the Request to Change Non-duty Disability Benefits to Duty Related Disability Benefits of Edward Kunze, Relator, vs. Public Employees Retirement Association of Minnesota, Board of Trustees, Respondent.

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In the Matter of the Request to Change Non-duty Disability Benefits to Duty Related Disability Benefits of Edward Kunze, Relator, vs. Public Employees Retirement Association of Minnesota, Board of Trustees, Respondent. A06-2077, Court of Appeals Unpublished Decision, December 18, 2007.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (2006).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

A06-2077

 

In the Matter of the Request to Change Non-duty
Disability Benefits to Duty Related Disability Benefits of Edward Kunze,
Relator,
 
vs.
 
Public Employees Retirement Association of Minnesota, Board of Trustees,
Respondent.

 

Filed December 18, 2007

Reversed and remanded

Ross, Judge

 

Public Employees Retirement Association of Minnesota

File No. 802947

 

 

Michael D. O'Neill, Lesley J. Adam, Johnson, Provo-Petersen, O'Neill, LLP, First National Bank Building, 332 Minnesota Street, Suite West 975, St. Paul, MN 55101 (for relator)

 

Lori Swanson, Attorney General, 1800 Bremer Tower, 445 Minnesota Street, St. Paul, MN 55101-2134; and

 

Rory H. Foley, Assistant Attorney General, 900 Bremer Tower, 445 Minnesota Street, St. Paul, MN 55101-2127 (for respondent)

 

 

Considered and decided by Ross, Presiding Judge; Kalitowski, Judge; and Worke, Judge.

U N P U B L I S H E D   O P I N I O N

ROSS, Judge

Edward Kunze brings this certiorari appeal from the Public Employees Retirement Association's decision that his coronary-related disability did not directly result from his employment as a [police officer] for the City of White Bear Lake.  Because the association did not determine whether Kunze's disability was duty-related or non-duty-related when he applied for disability benefits in 1995 and the association's 2006 decision based on its review of his file did not consider all relevant evidence, we reverse and remand for further consideration.

FACTS

Edward Kunze was employed as a White Bear Lake police officer from 1966 to 1995.  In 1981 Dr. Randall Johnson diagnosed Kunze with coronary artery disease, and in 1995 Dr. Johnson advised him to stop working as a police officer.  Kunze applied to the Public Employees Retirement Association (PERA) for disability benefits.  In a medical disability report form that accompanied Kunze's April 1995 benefits application, Dr. Johnson checked a box to indicate that Kunze's condition was a direct result of an injury or illness that occurred during or arose out of an act of duty.  Minnesota Department of Health physician Dr. James Mankey reviewed the records and on April 18 rendered his written opinion concerning causation, stating that "Kunze is disabled from doing the duties of a policeman."  In contrast to Dr. Johnson's and Dr. Mankey's statements as to cause, when the city filed its certification of Kunze's disability on May 5, 1995, it noted that Kunze was not disabled as the direct result of his employment with the city.

Before the city submitted this certification, on April 26, 1995, PERA wrote to Kunze and informed him that it had approved his application for "total and permanent disability benefits."  But the letter did not specify whether PERA had designated Kunze's disability as resulting from a duty-related incident.  PERA staff had not needed to consider whether Kunze's disability was duty-related or non-duty-related because the monetary amount of the benefit was the same for either designation.  In a June 1995 letter, PERA advised Kunze of his monthly disability benefits amount "prior to taxation" and stated that the benefit would be fully taxable until Kunze reached retirement age.  Kunze then began to receive monthly disability benefits.

PERA continued paying disability benefits to Kunze for ten years until Kunze reached retirement age.  On December 6, 2005, PERA wrote to Kunze informing him that although he had been placed on retirement status, he would be returned to disability status because an exception to the tax code excluded duty-related disability benefits from taxable income.  One week later, it wrote Kunze that it was retracting the December 6 letter, stating, "After a review of your account, we find that you were granted a ‘Non-Duty' disability benefit."  The parties acknowledge that this is the first document in the record in which PERA expressly designates Kunze's disability benefit in relationship to his duty.

Kunze appealed, and in August 2006 PERA announced that it would review "Mr. Kunze's non-duty disability designation."  At a September 2006 hearing, Kunze's attorney argued to the PERA Board of Trustees that the evidence showed that Kunze had a line-of-duty disability.  He referenced a July 6, 2006, letter written by Dr. Johnson that opined that Kunze's vascular disease resulted from his strain as a police officer and that the workers' compensation presumption stated in Minnesota Statutes section 176.011, subdivision 15, supported this determination.  The PERA Board declined to consider this letter, but its members discussed the fact that the letter might have been considered if the question of designation had just arisen.  The PERA Board denied Kunze's request that it designate his disability as one arising in the line of duty.  From that denial, Kunze filed this certiorari appeal.

D E C I S I O N

Kunze asks this court to reverse PERA's designation decision.  The Minnesota Supreme Court has compared a public retirement fund board to an administrative agency.  Axelson v. Minneapolis Teachers' Ret. Fund Ass'n, 544 N.W.2d 297, 299 (Minn. 1996).  The quasi-judicial decision of PERA will not be reversed unless it is "fraudulent, arbitrary, unreasonable, unsupported by substantial evidence, not within its jurisdiction, or based on an error of law."  Id.; In re Hildebrandt, 701 N.W.2d 293, 298 (Minn. App. 2005).  Because we find that the PERA Board's decision rested on the mistaken understanding that it could not consider what it perceived as new evidence, we reverse that decision and remand.

Kunze contends that the PERA Board's decision was arbitrary because it denied him line-of-duty disability status despite unrebutted medical evidence supporting that determination.  If an agency's decision represents its will rather than its judgment, the decision is deemed arbitrary and capricious.  Pope County Mothers v. Minn. Pollution Control Agency, 594 N.W.2d 233, 236 (Minn. App. 1999).  At a minimum, an agency must have the reasons for its decision "recorded or reduced to writing and in more than just a conclusory fashion."  Honn v. City of Coon Rapids, 313 N.W.2d 409, 416 (Minn. 1981).  In evaluating those reasons, an appellate court reviews the contemporaneous record made by the agency.  Metro 500, Inc. v. City of Brooklyn Park, 297 Minn. 294, 300, 211 N.W.2d 358, 362 (1973).  Failure of an agency to contemporaneously record a legally sufficient basis for its determination constitutes a prima facie showing of arbitrariness.  Id., 211 N.W.2d at 363.  We conclude that there was not a legally sufficient basis for the Board's decision because it failed to review all relevant evidence.  See Minn. Stat. § 353.656, subd. 12 (2006) ("[R]eview of existing disability cases must be made by the executive director based upon all relevant evidence.").

It is true that "a police officer [has] the obligation to tie [the] disability to a task or function that was performed by the officer."  In re PERA Police and Fire Plan Line of Duty Disability Benefits of Brittain, 724 N.W.2d 512, 520 (Minn. 2006).  But it seems clear from the record that in 1995 PERA did not actually decide and give notice as to whether Kunze's disability was duty-related or non-duty-related.  At oral argument, PERA's attorney contended that Kunze had notice of the type of benefit that he received in 1995 because PERA informed him that his benefit would be taxable.  But counsel acknowledged that whether Kunze's benefits were taxable would only put Kunze on notice if Kunze understood the distinction in the tax code exempting duty-related disability benefits from taxable income.  And PERA made no express statement to Kunze of the non-duty designation until ten years later.  The first notice to Kunze was the December 2005 letter, and the hearing in September 2006 was the only proceeding in which Kunze had the opportunity to contest the late, expressly declared designation.  The PERA Board therefore was mistaken in essentially characterizing the September 2006 hearing as an appeal of a ten-year-old designation decision.

Because the September 2006 hearing was the first opportunity for Kunze to address the issue of the designation to apply to his 1995 application for disability benefits, PERA was required to consider all relevant evidence, "including advice from the medical advisor and the evidence provided by the member and employer."  Minn. Stat. § 353.656, subd. 12 (2006).[1]  That sort of initial assessment never occurred, and on "review" by the PERA Board, the transcript of the 2006 hearing shows that the Board found that the medical evidence presented in 1995 demonstrated only that Kunze had heart problems.  The Board agreed that under its procedures in 1995 and as they are now, it would have requested more evidence to explore the requested line-of-duty-disability designation.  But Kunze was never asked to give more evidence in 1995, and, in 2006, the Board did not request or consider more evidence, such as Dr. Johnson's 2006 explanation or the city's contrary 1995 certification that the disability was not directly caused by Kunze's employment.  Because the 2006 hearing was the first opportunity to address the contested issue, the Board erred by failing to consider all relevant evidence, rendering its decision arbitrary.

We need not consider Kunze's related argument that there is no substantial evidence to support the Board's non-duty designation.  The PERA Board did not fully analyze the evidence.

On remand, the PERA Board may choose, at its discretion, to rehear the issue de novo or to direct that it be decided initially through the former procedures established in Minnesota Statutes section 353.656, subdivision 12 (2006), or the amended disability determination procedures of section 353.031, subdivision 3 (2007), for the Board's later potential review on appeal.  But PERA must weigh all relevant evidence and determine whether Kunze's disability was incurred in or arising out of an act of duty.

Reversed and remanded.


[1]   In a footnote to his appellate brief, Kunze notes that the board did not apply the workers' compensation presumption that a heart-related condition is an occupational disease.  Minn. Stat. § 176.011, subd. 15(b) (2006).  He does not argue that the presumption should apply in this different legal frame, and we do not reach the question.