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Gold v. Dekalb County School District

Court of Appeals of Georgia, Third Division

June 1, 2018

GOLD et al.



         In March 2011, the appellants[1] sued the DeKalb County School District "the District") and the DeKalb County Board of Education ("the Board")[2] for, inter alia, breaching an agreement to provide two years' advance notice prior to suspending contributions to their Georgia Tax Shelter Annuity Plan ("TSA Plan") accounts. In 2017, after the appellants had twice amended their complaint and after the completion of discovery, the parties filed cross-motions for summary judgment on the issue of liability for the appellees' alleged breach of what the appellants contend is a two-year notice provision that had been made a part of their TSA Plan. After a hearing, the Superior Court of DeKalb County found that the appellants had "failed to establish the existence of an enforceable, valid contract that was breached by the School District when it suspended certain contributions to" the TSA Plan and that the appellees were entitled to judgment as a matter of law on all of the appellants' remaining claims.[3] The superior court did not consider the merits of the appellants' motion for summary judgment or for class certification, finding both moot. The appellants contend that the court's order was erroneous because the evidence shows the existence of an enforceable "governmental promise" that required two years' notice before reducing or suspending funding to the TSA plan. Specifically, the appellants argue that because the promise to provide two years' notice "was adopted as Board Policy, it became part of the employees' employment contracts, protected by Georgia's prohibition on retroactive laws and impairment of contracts." For the reasons set forth below, we agree and reverse the judgment of the superior court on the issue of liability, we vacate the remainder of the court's order, and we remand with direction.

         Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." OCGA § 9-11-56 (c). "On appeal, we review the grant or denial of summary judgment de novo, construing the evidence and all inferences in a light most favorable to the nonmoving party." (Citation and punctuation omitted.) Seki v. Groupon, Inc., 333 Ga.App. 319 (775 S.E.2d 776) (2015). The relevant facts of this case are undisputed.

         Until 1979, the District participated in the Social Security System pursuant to a "§ 418 agreement" with the federal government, an agreement that voluntarily extended Social Security retirement benefits to District employees.[4] In 1977, the Board notified its employees that it was considering terminating its § 418 agreement and withdrawing from the Social Security System, effective October 1, 1979, in favor of an alternative plan.[5] From 1977 through 1979, the District sought the advice of experts and explored the wishes of its employees in the event that it ultimately decided to end its participation in the Social Security System.

         In May 1979, the Board passed a resolution reaffirming its intent to withdraw from Social Security. The Board authorized a referendum to permit its employees to review, debate, and vote on whether to remain in the Social Security System or to adopt an alternative plan. The resolution set forth the method of funding the alternative plan in the event the Board withdrew from the Social Security System. It concluded by resolving

[t]hat the amount required for the forthcoming year to continue funding Social Security shall be the amount budgeted to fund the alternative to Social Security, and that the Board of Education will give a two year notice to the employees before reducing or terminating these funding provisions.

         In late June 1979, after a majority of employees voted in favor of the alternative plan, the Board voted to leave the Social Security System. The meeting concluded with a motion being passed to have a DeKalb County school system insurance consultant meet with experts and "to draw plans and specifications for the alternative plan[.]"

         On September 28, 1979, the Board's superintendent signed a "Master Application" with the Variable Annuity Life Insurance Company ("VALIC") for a "Group Tax Sheltered Fixed Dollar Annuity Contract." The VALIC annuity contract became effective on October 1, 1979. The annuity contract provided that the contract and the application "constitute[d] the entire contract between the parties."[6] The benefits provided by the VALIC annuity contract served as a qualified Social Security alternative plan for PSERS employees and as an additional retirement benefits for TRS and ERS employees.

         On June 14, 1982, the Board met and amended the By-Laws and Policies of the DeKalb County Board of Education. Prior to that meeting, the Board's policy on "Social Security/Alternative Plan of Benefits" provided:

Employees of the DeKalb School System shall have the benefits of Social Security under the Federal Insurance Contributions Act, or an alternative plan of benefits of comparable cost in lieu of Social Security. Salary deductions shall be made for employees as required and the Board of Education shall provide the funds required to support Social Security or the alternative plan of benefits.

         The Board's By-Laws and Policies contained no provision requiring notice of any planned reductions to the funding of the alternative plan. A few weeks before the June 1982 meeting, the chairman of the District's Employees Trust Fund Advisory Committee recommended that the Board add a two-year notice provision concerning any changes to the alternative plan's funding. At the June 14 meeting, the Board followed the chairman's suggestion and amended the "By-Laws and Policies of the DeKalb County Board of Education, " adopting a Board Policy that outlined certain improvements to and components of its alternative plan and which provided that the "Board of Education shall give a two-year notice to employees before reducing the funding provisions of the Alternative Plan to Social Security." This provision was adopted with the requisite "legislative" formalities for Board policies: it was read a month prior to the June 14 Board meeting, it sat "on the table" for a month, and it was voted upon at the next regular monthly Board meeting. Thereafter, it was published.

         Shortly after amending its by-laws, the Board reviewed a July 1982 report from one of its financial advisors which recommended that the Board prepare its own alternative plan to have more flexibility in the event that its contract with VALIC was terminated. In September 1982, the Board recommended that "the firm of Peat, Marwick, Mitchell & Company be retained to assist the DeKalb Board of Education and the Employee Trust Fund Advisory Committee in preparing a Board TSA Plan Document[.]"

         During its July 11, 1983 meeting, the Board voted to establish its own "DeKalb County, Georgia Board of Education Tax Sheltered Annuity Plan." The purpose of the TSA Plan was to provide a "written standard procedure under which retirement benefits to serve in lieu of Social Security are provided and administered on behalf of Eligible Employees." The TSA Plan was a defined-contribution, employer-funded 403(b) plan.[7] The TSA Plan provided that "[t]his Plan may be amended or terminated by the Employer at any time. No amendment or termination of the Plan shall reduce or impair the rights of any Participant or Beneficiary that have already accrued." On August 11, 2003, the Board passed a resolution that "amended and restated" the 1983 TSA Plan. The Board adopted the restated Plan by passing a resolution which was read into the minutes of the August 11, 2003 Board meeting and made available to the public. Neither the 1983 Plan Documents nor the 2003 Plan documents were adopted using the formal legislative protocols for amending Board policies or expressly made a part of the Board's policies. In ...

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