Kevin Dolan V State Of Washington Dept Of Retirement Systems

Key Facts

Transaction Type

Issues

• Whether relieving class members who forfeited their pensions from paying their share of the common fund attorney fees conflicted with established precedent (Bowles) requiring fees to be paid from employee contributions to avoid unconstitutional lending of state funds.
• Whether the trial court abused its discretion by ordering DRS to pay the class's attorney fees on appeal as a sanction under RCW 4.84.185, given DRS's arguments were not entirely frivolous despite being incorrect.
• Whether the trial court's order violated the Washington Constitution's prohibition against lending state credit by allowing fee repayment from PERS funds, and whether employer contributions to PERS retained a public character under the constitution.
• Whether the trial court erred in concluding it was bound by its prior unappealed order regarding Silva's fee deduction, and whether the 'law of the case' doctrine applied to prevent DRS from challenging Anderson's fee deduction.
• Whether any statute or court order authorized DRS to deduct common fund attorney fees from a withdrawing class member's employee contribution to PERS, particularly given the stipulated agreement's lack of such provision.

Holdings

• The court concluded that the trial court's order did not violate the Washington Constitution's prohibition on lending state funds because PERS funds are a 'special fund of a proprietary nature,' not public or state funds, and the repayment method posed no risk of loss to the state.
• The court determined that no statute or court order grants DRS authority to deduct common fund attorney fees from a withdrawing class member's employee contribution to PERS, as the stipulation left this issue unresolved and no legal basis was established.
• The court found the trial court abused its discretion by ordering DRS to pay class counsel's attorney fees under RCW 4.84.185, as DRS's arguments, while unsuccessful, were not frivolous and had a rational basis in law and fact.
• The trial court's ruling requiring withdrawing class members to pay their share of attorney fees through pension forfeiture was affirmed as consistent with established precedent (Bowles and Dolan IV), as it ensured equitable repayment without conflicting with prior decisions.
• The court held that the trial court did not err by granting the class members' motion to enforce because it did not rely on the law of the case doctrine, as the written order did not incorporate the oral reference to it and instead addressed each argument on its merits.

Remedies

• The court denied the class's request to award attorney fees on appeal under RCW 4.84.185, concluding that while DRS's arguments were without merit, they were not so devoid of legal basis to be considered frivolous. This remedy overturned the trial court's earlier decision to sanction DRS with attorney fees for the motion to enforce.
• The court granted the class's motion to enforce prior orders, requiring DRS to return attorney fees deducted from the employee contributions of class members who withdrew from PERS and forfeited their pensions. This included specific orders in cases involving Cathy Silva and Elizabeth Anderson, where the court found that forfeiting pensions equitably satisfied the fee obligations. The remedies were affirmed by the appellate court, except for the trial court's award of attorney fees to the class for enforcing the motion.

Monetary Damages

Legal Principles

• The court applied the common fund doctrine to determine that class members' repayment obligations were tied to their receipt of benefits from the litigation. Members who forfeited their pensions were found to have constructively repaid fees through their forfeiture, aligning with precedent in Dolan IV.
• The court held that PERS funds are a 'special fund of a proprietary nature' and not subject to Washington Constitution Article VIII, §5's prohibition against lending state credit. This interpretation was consistent with the Bowles decision, which affirmed that employee contributions to PERS do not constitute public funds.
• The trial court's award of attorney fees under RCW 4.84.185 was found to be an abuse of discretion. While DRS's arguments were rejected, they were not deemed frivolous, so the sanction was unwarranted.
• The trial court's enforcement order was upheld based on equitable principles, including the conclusion that class members who forfeited their pensions constructively repaid their share of attorney fees. The court emphasized that DRS's actions caused a waste of judicial resources by ignoring prior rulings.
• Res judicata does not bar relitigation of the same issue in an appeal, as an appeal is not a subsequent action. The court clarified that res judicata applies to subsequent actions, not appeals, and therefore DRS's appeal was not barred by this doctrine.
• The 'risk of loss' approach from Johnson v. Johnson was used to assess whether the attorney fee arrangement violated the state constitution. The court concluded that the method of repayment did not create a risk of loss to the state, fulfilling the constitutional purpose.

Precedent Name

• Dolan v. King County (Dolan II)
• Lodis v. Corbis Holdings, Inc.
• Johnson v. Johnson
• State ex rel. Quick–Ruben v. Verharen
• DeHeer v. Seattle Post-Intelligencer
• Curhan v. Chelan Cnty.
• Dolan v. King County (Dolan I)
• Christensen v. Grant Cnty. Hosp. Dist. No. 1
• Ferree v. Doric Co.
• Bowles v. Washington Department of Retirement Systems
• City of Marysville v. State
• Advocs. for Responsible Dev. v. W. Wash. Growth Mgmt. Hr'gs Bd.

Key Disputed Contract Clauses

• The settlement agreement between the class members and King County specified that common fund attorney fees would be repaid from the employee contribution portion of PERS contributions, with repayment options including future pension deductions, cash payments, or transfers from existing retirement accounts. This clause became central to the dispute when DRS attempted to deduct fees from withdrawn employee contributions, leading to litigation over its enforceability and equitable implications.
• The settlement agreement included a clause stating that if a class member withdrew from PERS before retirement, DRS would calculate the present value of future fee deductions and offset that amount from the withdrawal payment. This provision was challenged by the class, who argued DRS lacked authority to enforce it, particularly when members forfeited their pensions and had no ongoing benefit. The trial court and appellate court analyzed whether this clause was valid and enforceable under the stipulated agreement and applicable law.

Cited Statute

Judge Name

• CRUSER, C.J.
• PRICE, J.
• MAXA, J.

Passage Text

• The money public employers contribute to PERS on behalf of an employee is part of the employee's compensation for public service... employer contributions, once placed into the PERS system, are part of a 'special fund of a proprietary nature.'
• We hold that the trial court did not err by granting the class members' motion to enforce because (1) the trial court did not rely on the law of the case doctrine, (2) no statute or court order gives DRS authority to withhold the attorney fee payment from a withdrawing class member's employee contribution, (3) the order does not conflict with established precedent because it requires withdrawing class members to pay their share of the attorney fee award, and (4) the trial court's order did not violate the state constitutional prohibition on the lending of state funds because PERS funds are not state or public funds, but a special fund of a proprietary nature.
• We further conclude that the trial court abused its discretion by ordering DRS to pay class counsel's attorney fees as a sanction under RCW 4.84.185 because DRS's arguments were not frivolous.

Damages / Relief Type

• Declaratory Relief confirming DRS lacks authority to deduct attorney fees from withdrawing class members' PERS employee contributions.
• Injunction requiring King County to enroll class members in PERS and make retroactive contributions, including a $12,554,000 common fund attorney fee award.