In Wabash County v. Illinois Municipal Retirement Fund, 408 Ill.App.3d 924 (2nd Dist. 2011), the Second District Appellate Court held that it was against the manifest weight of the evidence for IMRF to dismiss Wabash County’s complaint based on laches, a defense alleging that there was an unreasonable delay in asserting a claim. However, the court also held that the County could not seek declaratory judgment under the Administrative Review Law.
In 2002, Kaid, a County state’s attorney, made a request to IMRF to receive pension credits for his years of service as a municipal attorney for the City of Mt. Carmel, Illinois while in private practice from 1981 to 1992. Kaid was granted creditable service for those years and paid IMRF for his omitted service credits pursuant to IMRF’s retroactive grant of creditable service status. With the additional retroactive service credits, Kaid was entitled to a pension of 80% of his pay for 20 years of service, as opposed to a pension of 40% of his pay for 12 years of service as a state’s attorney for the county.
In January of 2005, Kaid applied for his pension, and in March of that year, IMRF approved his pension at 80% of his pay for 20 years of service. In May of 2006, IMRF issued a letter to the County reflecting a large change in the value of benefits and total assets based on Kaid’s retirement. Subsequently in July of 2006, the City reversed its decision to allow Kaid to receive omitted service credits for his years of service as the City attorney.
Kaid filed a lawsuit against the IMRF and the City regarding his pension; however, the County was not a named party, nor did it join the pending suit. The parties eventually reached a settlement agreement which allowed Kaid to keep his pension credits for his time as the City attorney. In July of 2008, after the suit was settled, IMRF sent another letter to the County stating that the contribution charge for the County would be $540,990.79. After receiving the letter, the County requested a correction for records from IMRF requesting that Kaid’s pension credit for his service as City attorney and the $540,990.79 contribution charge be rescinded.
The IMRF conducted a hearing and dismissed the County’s claim as untimely and barred by laches because the County did not act on the claim after receiving the original letter advising it of the change in the value of benefits or during the well-publicized suit involving IMRF and the City. The IMRF advised the County of its decision based on the following:
1. The county was aware of the total charge attributable to Kaid’s pension;
2. The Kaid litigation was covered by the local news, and two City representatives had advised a County board member that it would be in the County’s best interest to join the original litigation;
3. The County’s failure to assert its rights in the original litigation would prejudice both Kaid and the City; and
4. Allowing the County to assert its rights after the conclusion of the original litigation would hinder the resolution of the lawsuit.
The County filed a complaint for administrative review at the trial court level. The trial court dismissed the complaint on three grounds: (1) the County could not seek declaratory judgment upon administrative review; (2) the complaint did not state a cause of action; and (3) the claim could be barred by laches by IMRF. The County appealed the trial court’s decision, and the appellate court affirmed the lower court’s ruling on the first ground, that declaratory judgment could not be sought upon administrative review because such an action would constitute an impermissible attack on the IMRF’s administrative decision; however, the appellate court reversed on the two other grounds.
First, the appellate court held that the county’s complaint was sufficient to state a cause of action for administrative review. Despite the fact that the County’s complaint was not “artfully drafted,” it met the basic requirements for administrative review of the IMRF decision. The court reasoned that the underlying policy of the Illinois Pension Code should be liberally construed so that controversies could be resolved in accordance with the substantive rights of the parties.
Second, the appellate court held that IMRF could not dismiss a complaint based on laches. Laches is an equitable doctrine and a defense of laches requires that (1) a litigant has exhibited unreasonable delay in asserting a claim; and (2) the opposing party suffered prejudice as a result of the delay. However, courts typically are reluctant to impose a laches defense against a government entity because such an imposition would impair the government’s functioning. In such a circumstance, laches will only attach if the government has engaged in an affirmative act that induced the opposing party to act. Furthermore, in order for the IMRF’s decision to be overruled by the court, the court held that the IMRF’s findings and conclusions would have to be against the manifest weight of the evidence.
Pension funds should review the Illinois Pension Code and consult with their attorney prior to allowing individuals to obtain creditable service to ensure they avoid issues such as those present in Wabash County. Furthermore, although the court allowed leniency with regard to a laches defense against government entities, government entities should make every effort to act on matters in a timely fashion.