Ramsay v. Kane County Human Resource Special Service District

This opinion is subject to revision before
publication in the Pacific Reporter
2014 UT 5
IN THE
SUPREME COURT OF THE STATE OF UTAH
LORI RAMSAY and DAN SMALLING,
Respondents,
v.
KANE COUNTY HUMAN RESOURCE SPECIAL SERVICE DISTRICT,
UTAH STATE RETIREMENT SYSTEM, JOHN HANCOCK LIFE
INSURANCE COMPANY, and DEAN JOHNSON,
Petitioners.
No. 20120349
Filed February 25, 2014
On Certiorari to the Utah Court of Appeals
Third District, Salt Lake
The Honorable L. A. Dever
No. 090921344
Brian S. King, Salt Lake City, for respondents
Timothy C. Houpt, Mark D. Tolman, Chayce David Clark,
Salt Lake City, for petitioner Kane County
Human Resource Special Service District
David B. Hansen, Liza J. Eves, Erin L. Gill, Salt Lake City,
for petitioner Utah State Retirement System
H. Joseph Escher III, San Francisco, CA,
Thomas R. Barton, Florence M. Vincent, Salt Lake City,
for petitioner John Hancock Life Insurance Company
ASSOCIATE CHIEF JUSTICE NEHRING authored the opinion of the
Court, in which CHIEF JUSTICE DURRANT, JUSTICE DURHAM,
JUSTICE PARRISH, and JUSTICE LEE joined.
RAMSAY v. KANE COUNTY
Opinion of the Court
ASSOCIATE CHIEF JUSTICE NEHRING, opinion of the Court:
INTRODUCTION
¶ 1 Plaintiffs Lori Ramsay and Dan Smalling sued various parties
based on the alleged failure of their employer, Kane County Hospital, to
fund their retirement benefits at the level required by the Utah State
Retirement and Insurance Benefit Act. The district court dismissed
Plaintiffs’ claims for lack of jurisdiction because Plaintiffs conceded they
had not exhausted their administrative remedies. The court of appeals
reversed the dismissal and ordered that the case be stayed pending
resolution of the existing administrative action against Kane County
Hospital because the court determined it could not ascertain which claims
were subject to the exhaustion requirement until the pending
administrative action was resolved. We reverse the court of appeals and
affirm the district court, finding that all of Plaintiffs’ claims fall within the
scope of the Retirement Act and none of the exceptions to exhaustion
apply. Therefore we lack jurisdiction over Plaintiffs’ claims based on their
failure to exhaust their administrative remedies.
BACKGROUND
¶ 2 The Utah Legislature adopted the Utah State Retirement and
Insurance Benefit Act (Retirement Act or Act), found in title 49 of the Utah
Code, in order to provide a comprehensive system of retirement and
health insurance benefits to state and local public employees throughout
the State of Utah. 1 In order to administer the program in a uniform and
consistent manner, the legislature created an administrative office charged
with administering the Act—the Utah State Retirement Office, also known
as Utah Retirement Systems (URS)—and a governing body—the Utah
State Retirement Board (Retirement Board). 2 In 1993, the Kane County
Human Resource Special Service District, operator of Kane County
Hospital (Hospital), established a private 401(k) retirement plan for its
employees. Plaintiffs Lori Ramsay and Dan Smalling are employees of
the Hospital. Plaintiffs complained to URS that the Hospital failed to
adequately fund their retirement benefits as required by the Act. In
August 2009, URS initiated an administrative proceeding before the
Retirement Board, pursuant to the Act, seeking recovery of unpaid benefit
1 See UTAH CODE § 49-11-103.
2 See id. § 49-11-201 to -202.
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Opinion of the Court
contributions for Hospital employees. In 2010, Ms. Ramsay and
Mr. Smalling intervened in the agency action against the Hospital.
¶ 3 In addition to intervening in the agency action, Ms. Ramsay and
Mr. Smalling filed a separate class action complaint in Third District
Court, naming the Kane County Human Resource Special Service District
(as operator of the Hospital); URS; Dean Johnson, the insurance agent who
advised the Hospital on the 401(k) plan; and John Hancock Life Insurance
Company (John Hancock), the investment agent for the Hospital’s private
401(k) plan. In the complaint, Ms. Ramsay and Mr. Smalling alleged
breach of contract, breach of the implied covenant of good faith and fair
dealing, breach of fiduciary duty, negligence, and a right to declaratory
and injunctive relief against each of the defendants. The relief requested
by Plaintiffs is “the defined benefits to which they were entitled under the
Act” and consequential damages flowing from the failure to provide the
required benefits, including attorney fees and costs.
¶ 4 Defendants sought to dismiss Plaintiffs’ complaint for lack of
subject matter jurisdiction because Plaintiffs had failed to exhaust their
administrative remedies pursuant to the Retirement Act and the Utah
Administrative Procedures Act (UAPA). Defendants’ motion to dismiss
also presented alternate bases for dismissal and asserted improper venue.
The district court reasoned that it was required to confront the
jurisdictional issue before addressing the merits of the motion. The court
concluded it lacked jurisdiction because Plaintiffs failed to exhaust their
administrative remedies under UAPA and dismissed the complaint. The
district court did not reach Plaintiffs’ remaining contentions, except to
opine that the case was filed in the improper venue and should have been
filed in Kane County.
¶ 5 Ms. Ramsay and Mr. Smalling appealed. They asserted that the
district court should have stayed, rather than dismissed, the complaint.
Defendants responded, arguing that (1) the Retirement Act separately
preempted the complaint, (2) Ms. Ramsay and Mr. Smalling had not
preserved arguments that their contract claims and request for declaratory
relief were beyond the scope of the Retirement Act, and (3) the tort claims
against the Hospital were separately barred by the economic loss doctrine.
The court of appeals reversed. 3 The court acknowledged that UAPA
deprives a court of subject matter jurisdiction in any action for which
3 Ramsay v. Kane Cnty. Human Res. Special Serv. Dist., 2012 UT App 97,
¶ 9, 276 P.3d 1174.
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RAMSAY v. KANE COUNTY
Opinion of the Court
administrative remedies are available but have not been exhausted. 4 But,
reasoning that the scope of the URS proceeding before the Retirement
Board was narrower than the action in the district court, the court of
appeals accepted Plaintiffs’ contention that “some of the causes of action”
fell outside the scope of the Retirement Act. 5 However, the court of
appeals did not identify which claims were outside the scope of the
Retirement Act because it found that “under the unique facts and
circumstances of this case, the scope and nature of most of the claims that
should have survived dismissal cannot be determined until the
administrative remedies are exhausted.” 6 The court of appeals also
reasoned that “each of the claims . . . will be affected by the outcome of the
administrative proceeding irrespective of the result.” 7 Thus, according to
the court, while certain claims were properly subject to dismissal, the
impossibility of ascertaining their scope required a stay of the action
pending the outcome of the administrative proceedings. 8 The court of
appeals did not address the merits of Defendants’ alternative arguments.
¶ 6 Defendants then petitioned for a writ of certiorari, which we
granted. We have jurisdiction pursuant to Utah Code section 78A-3-
102(3)(a).
STANDARD OF REVIEW
¶ 7 “On certiorari, we review for correctness the decision of the court
of appeals, not the decision of the trial court.” 9 “Where this correctness
review requires us to examine statutory language, we look to the plain
meaning of the statute first and go no further unless it is ambiguous.” 10
4 Id. ¶ 4.
5 Id. ¶¶ 6–7 (first alteration in original).
6 Id. ¶ 7.
7 Id.
8 Id. ¶ 8.
9 State v. Levin, 2006 UT 50, ¶ 15, 144 P.3d 1096.
10 Hous. Auth. v. Snyder, 2002 UT 28, ¶ 10, 44 P.3d 724.
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Opinion of the Court
ANALYSIS
I. PLAINTIFFS’ CLAIMS FALL WITHIN THE SCOPE OF
THE RETIREMENT ACT AND ARE THEREFORE
SUBJECT TO THE EXHAUSTION REQUIREMENT
¶ 8 On certiorari, Defendants argue the court of appeals erred when it
overturned the district court’s dismissal. As both the district court and the
court of appeals properly determined, the requirement that a party
exhaust administrative remedies before seeking judicial review is a matter
of subject matter jurisdiction. Subject matter jurisdiction is required for
any court, including this court, to have the “authority to address the
merits of a particular case.” 11 “[B]ecause it is a threshold issue, we
address jurisdictional questions before resolving other claims.” 12
¶ 9 District courts in this state “have original jurisdiction in all
matters except as limited by [the] constitution or by statute.” 13 By statute,
district courts are courts of general jurisdiction, 14 and a “district court has
subject matter jurisdiction over a legal claim unless adjudicative authority
for that claim is specifically delegated to an administrative agency.” 15 If
such authority has been delegated, then under the UAPA, a party seeking
relief must exhaust “all administrative remedies available” before seeking
judicial review. 16 “The basic purpose underlying the doctrine of
exhaustion of administrative remedies is to allow an administrative
agency to perform functions within its special competence—to make a
factual record, to apply its expertise, and to correct its own errors so as to
moot judicial controversies.” 17 In order to determine whether
adjudicative authority has been delegated, we look to the plain language
of the applicable statute, in this case, the Retirement Act.
¶ 10 Utah Code section 49-11-613 provides the pertinent language
regarding the scope of the Retirement Act. Subsection 613(1)(b) defines
the scope of the Act in expansive terms. It requires that “any dispute
11 Hous. Auth. v. Snyder, 2002 UT 28, ¶ 11, 44 P.3d 724.
12 Id.
13 UTAH CONST. art. VIII, § 5.
14 UTAH CODE § 78A-5-101(1).
15 Mack v. Utah State Dep’t of Commerce, 2009 UT 47, ¶ 33, 221 P.3d 194.
16 UTAH CODE § 63G-4-401(2).
17Maverik Country Stores, Inc. v. Indus. Comm’n, 860 P.2d 944, 947 (Utah
Ct. App. 1993) (internal quotation marks omitted).
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Opinion of the Court
regarding a benefit, right, obligation, or employment right under this title
is subject to the procedures provided under this section.” 18 Section 613
goes on to say that “[a] person who disputes a benefit, right, obligation, or
employment right under this title shall request a ruling by the executive
director” 19—the first step in the administrative relief procedure outlined
by the Act. On its face, this language is both broad and mandatory.
¶ 11 Plaintiffs argue for a narrower reading of the statute. They urge
that additional language from section 613 “suggests that only ‘members,
retirees, participants, alternative payees, or covered individuals of a
system, plan, or program’ under the Act are subject to the authority of the
Board.” Plaintiffs glean this “suggestion” from the portion of section 613
which in 2009 read; “All members, retirees, participants, alternative
payees, or covered individuals of a system, plan, or program under this
title shall acquaint themselves with their rights and obligations under this
title.” 20 We disagree that this language narrows the scope of the Act. This
section cannot serve to limit the authority of the Retirement Board to those
listed categories because it is undisputed that the Retirement Board has
always had authority to bring an action against an employer under the
Act, as it did against the Hospital, even though “employer” was not
always listed in section 613(1)(a). 21 Having further reviewed the Act, we
find no language that narrows its scope to something less than “any
dispute regarding a benefit, right, obligation, or employment right” under
title 49. Nor do we find any language that would limit the scope of the
Act to claims only against particular defendants. In sum, the Act is both
broad in encompassing all claims and mandatory in requiring compliance
with administrative procedures. Having interpreted the scope of the Act,
we must now determine whether Plaintiffs assert any claims that are not a
“dispute regarding a benefit, right, obligation, or employment right
under” title 49.
18 UTAH CODE § 49-11-613(1)(b).
19 Id. § 49-11-613(1)(c) (emphasis added).
20 Id. § 49-11-613(1)(a) (2009). See note 21, infra.
21 Section 613(1)(a) was amended in 2011 to add “employer,
participating employer, and covered employer” to the list of those
required to “inform themselves of their rights and obligations under” title
49. 2011 Utah Laws 3052. The claims in this case arose prior to these
amendments and we decline to decide what impact, if any, those changes
had on the scope of the Act, as this does not affect our analysis.
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Opinion of the Court
¶ 12 Plaintiffs’ complaint includes breach of contract, breach of
fiduciary duty, negligence, and declaratory and injunctive relief claims
against the Hospital, URS, Dean Johnson, and John Hancock. Plaintiffs
concede that all of their claims turn on whether the Hospital provided its
employees with the appropriate amount of benefits required by the Act.
¶ 13 Based on the complaint, we conclude that all of Plaintiffs’ claims
fall within the scope of the Act, and therefore UAPA’s exhaustion
requirement governs each. Plaintiffs argued below that Mr. Johnson and
John Hancock were not parties to the administrative proceeding, and that
therefore those claims must be outside the scope of the Act. 22 This is not
relevant. Whether a claim is within the scope of the Retirement Act does
not turn on whether URS has addressed the claim Plaintiffs seek to bring,
but rather whether the Retirement Act requires Plaintiffs to bring their
claims before the Retirement Board. In this case, Plaintiffs joined an
existing administrative action against the Hospital, and they now
complain that not all of the parties and claims are in that action. Plaintiffs’
remedy is to add or join those parties or claims, or file a separate
administrative action. Their remedy is not a conclusion that those claims
are outside the scope of the Act. Thus, we conclude that exhaustion is
required for all of Plaintiffs’ claims and turn to Plaintiffs’ argument that
they should be excused from the exhaustion requirement.
II. PLAINTIFFS’ CLAIMS DO NOT FIT THE UNUSUAL
CIRCUMSTANCES WHERE EXHAUSTION
MAY BE EXCUSED
¶ 14 Under limited circumstances, a party may be relieved of the
requirements of exhaustion. 23 Under UAPA, a “court may relieve a party
seeking judicial review of the requirement to exhaust any or all
administrative remedies if: (i) the administrative remedies are
inadequate; or (ii) exhaustion of remedies would result in irreparable
harm disproportionate to the public benefit derived from requiring
exhaustion.” 24 Additionally, exhaustion is not required where
(iii) “exhaustion would serve no purpose, or is futile,” or (iv) “an
22 Ramsay v. Kane Cnty. Human Res. Special Serv. Dist., 2012 UT App 97,
¶ 6, 276 P.3d 1174.
23Salt Lake City Mission v. Salt Lake City, 2008 UT 31, ¶ 11, 184 P.3d 599
(“We have previously noted a number of exceptions to the exhaustion
requirement in unusual circumstances.” (internal quotation marks
omitted)).
24 UTAH CODE § 63G-4-401(2)(b).
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Opinion of the Court
administrative agency or officer has acted outside the scope of its defined,
statutory authority.”25 Although the parties characterize the court of
appeals’ decision as having excused Plaintiffs from the exhaustion
requirement, we disagree with that interpretation. Nowhere did the court
of appeals make any findings or determination that would excuse
exhaustion under the recognized exceptions. The court of appeals merely
determined that it was unable to ascertain which claims should have been
exhausted, and therefore that the action should be stayed pending
resolution of the administrative proceeding. However, Plaintiffs argue
before us that they should be excused from exhaustion. The argument
was preserved below, so we address it here. Plaintiffs argue that both of
the statutory exceptions to exhaustion apply.
A. Plaintiffs Have Failed to Meet Their Burden to Show
That Administrative Remedies Are Inadequate
¶ 15 Plaintiffs first argue that they should be excused from exhaustion
because the administrative remedies are inadequate to address (1) their
request for consequential damages, (2) their attempt to represent a class,
and (3) their claims against third parties. Our jurisprudence provides
little guidance about the standard for what makes a remedy inadequate in
a manner that would render exhaustion unnecessary. Plaintiffs do not
argue that monetary damages are inadequate in a manner that might be
likened to the standard of inadequacy for an injunction. 26 Rather,
Plaintiffs’ argument is that the Retirement Board cannot award them all of
the monetary damages they are seeking. We agree with URS that the
guiding inquiry for adequacy of the remedy is whether the party can be
made whole by the administrative remedies available. 27 In this case,
25 Salt Lake City Mission, 2008 UT 31, ¶ 11.
26 In the context of an injunction, a “legal remedy is inadequate when
[a party] is unlikely to be made whole by an award of monetary damages
or some other legal . . . remedy[.]” Mack v. Utah State Dep’t of Commerce,
2009 UT 47, ¶ 23, 221 P.3d 194 (first two alterations in original) (internal
quotation marks omitted).
27 See Huang v. N.C. State Univ., 421 S.E.2d 812, 815–16 (N.C. Ct. App.
1992) (“The remedy is considered inadequate unless it is calculated to give
relief more or less commensurate with the claim. For example, if a party
seeks monetary damages and the agency is powerless to grant such relief,
the administrative remedy is inadequate.” (citation omitted) (internal
quotation marks omitted)).
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Plaintiffs concede that nothing in the Retirement Act prevents the
Retirement Board from granting their request for consequential damages.
And although Defendants candidly conceded at oral argument that it is
unlikely that the Board would award consequential damages, “the mere
possibility that an administrative agency may deny a party the specific
relief requested is [not] a ground for an exception to the exhaustion
requirement.” 28 As to Plaintiffs’ attempt to proceed as a class in the
administrative action, we find nothing in the Act that limits their ability to
proceed as a class. Moreover, Plaintiffs have made no attempt to show
why proceeding as a class is necessary for them to recover for their own
injury. And finally, as explained above, we find no language in the Act
that would preclude Plaintiffs from using the procedures set forth in the
Act to pursue their claims against third parties in an administrative action
before the Retirement Board. In sum, Plaintiffs have failed to meet their
burden to establish that the available administrative remedies will be
inadequate to redress their alleged injury. 29
B. Plaintiffs Have Failed to Establish That They Will Suffer
Irreparable Harm by the Exhaustion Requirement
¶ 16 Plaintiffs assert that requiring them to exhaust their
administrative remedies will cause them to suffer irreparable harm—
specifically, that by the time the administrative proceeding is concluded,
the statute of limitations will have run, extinguishing their cause of action.
Defendants’ position is that the statute of limitations had already run on
Plaintiffs’ claims as of the filing of the complaint. While we express no
opinion about the merits of defenses that may be available to defendants
in any forum, we note that defendants conceded at oral argument that the
filing of the complaint in this case tolled the limitations period during the
pendency of this action and that the savings statute, Utah Code section
78B-2-111, would apply here. Because the requirement to exhaust
administrative remedies will have no bearing on timing for the purpose of
the statute of limitations, Plaintiffs claim that they will be irreparably
injured by the requirement of exhaustion fails.
¶ 17 Because Plaintiffs’ claims were subject to the exhaustion
requirement pursuant to Utah Code section 63G-4-401, none of the
28Hous. Auth. v. Papandrea, 610 A.2d 637, 642 (Conn. 1992) (internal
quotation marks omitted).
29 See Huang, 421 S.E.2d at 815 (“The burden of showing the
inadequacy of the administrative remedy is on the party claiming the
inadequacy[.]”).
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RAMSAY v. KANE COUNTY
Opinion of the Court
exceptions to exhaustion apply, and Plaintiffs failed to exhaust their
administrative remedies, we lack subject matter jurisdiction over
Plaintiffs’ claims. Therefore, we cannot reach the merits of Defendants’
remaining arguments to affirm dismissal on alternate grounds because
when a court determines it lacks subject matter jurisdiction, it “retains
only the authority to dismiss the action.” 30 We reverse the court of
appeals and reinstate the judgment of the district court dismissing
Plaintiffs’ complaint for lack of subject matter jurisdiction.
CONCLUSION
¶ 18 All of the claims asserted in Plaintiffs’ complaint fall within the
scope of the Retirement Act, which covers “any dispute regarding a
benefit, right, obligation, or employment right under” title 49. Plaintiffs
failed to meet their burden to establish that they should be excused from
exhaustion in this case, and Plaintiffs concede they did not exhaust their
administrative remedies. We therefore lack jurisdiction over Plaintiffs’
claims. We reverse the court of appeals and affirm the district court’s
dismissal of Plaintiffs’ complaint for lack of jurisdiction.
30 Varian-Eimac, Inc. v. Lamoreaux, 767 P.2d 569, 570 (Utah Ct. App.
1989).
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