Opinion
No. COA10-1242
Filed 21 June 2011 This case not for publication
Appeal by Plaintiff from Order entered 11 March 2010 by Judge Kenneth C. Titus in Wake County Superior Court. Heard in the Court of Appeals 10 March 2011.
Schiller Schiller, PLLC, by David G. Schiller, for Plaintiff-appellant. Attorney General Roy Cooper, by Special Deputy Attorney General Robert M. Curran, for Defendants-appellees.
Wake County No. 09 CVS 1302.
I. Factual and Procedural Background
Phyllis Dianne Smith ("Plaintiff"), when she was last employed by the North Carolina Department of Corrections ("DOC"), before she became disabled, was a medical recruiter. On 22 January 2009 she filed a putative class action on behalf of herself and other state employees similarly situated.
In October 1986, when she started her state employment with DOC, the State deducted 6% of her salary monthly to be contributed to a pension and disability fund entitled "Retirement System for Teachers and State Employees", which was then governed by N.C. Gen. Stat. §§ 135-1 through 135-18.5 (1986) ("the Retirement Plan"). In addition, the employers of teachers and state employees were also required to make monthly contributions to the retirement fund. At the time of her employment this statute provided for disability retirement benefits as follows:
Upon retirement for disability, in accordance with subsection (c) of this section on or after July 1, 1982, a member shall receive a service retirement allowance if he has qualified for an unreduced service retirement allowance; otherwise the allowance shall be equal to a service retirement allowance calculated on the member's average final compensation prior to his disability retirement and the creditable service he would have had had he continued in service until the earliest date on which he would have qualified for an unreduced service retirement allowance.
N.C. Gen. Stat. § 135-5(d4) (1986).
The retirement plan in effect at the time of her initial employment required that a state employee be employed continuously for a five year period before he or she would become vested in the plan and be entitled to some benefits. Before five years had passed, the General Assembly changed the retirement plan which was in effect at the time of her initial hiring and in lieu thereof created a different benefit for state employees who have to retire due to disability. Effective 1 January 1988, the General Assembly adopted the Disability Income Plan ("DIP"). See N.C. Gen. Stat. §§ 135-100 through 135-114 (2009).
Payments under the DIP sometimes provide a lower cash payment for state employees who became vested after its enactment, because the benefits are reduced to offset any benefits a disabled employee may receive from other governmental agencies such as Social Security disability benefits or disability payments received on account of a workers' compensation claim. See N.C. Gen. Stat. § 135-106(b) (2009) (stating that the monthly disability benefit amount under the plan should be reduced by any amount of Social Security disability benefits, Workers' Compensation payments, payments from the federal Department of Veterans Affairs, and payments from other federal agencies).
Plaintiff became disabled in 2001 and was paid from that point forward in accordance with the DIP, which was effective 1 January 1988. Plaintiff contends that her disability benefits and the benefits of those similarly situated have been reduced by about $300.00 per month as a result of the change in legislation from the amount that they would have received had they been treated the same as employees who had been fully vested under the former statute in force in 1986.
Plaintiff's Amended Class Action Complaint alleged three claims for relief. In the first claim, Plaintiff alleges that the change in the statute should not apply to state employees who were hired prior to 1988, because by their employment the State had contracted with them to provide an established benefit which they could not reduce without violating Article I, § 10 of the United States Constitution prohibiting any state from impairing the obligation of contracts. Plaintiff's second, third, and fourth claims are also constitutional in nature, as Plaintiff claims the 1988 statute deprives her of property without due process and in contravenes of constitutional protections of equal protection. As a consequence of the enactment, Plaintiff contends the Defendants' actions violate both the North Carolina Constitution and the United States Constitution.
Defendants filed a Motion to Dismiss pursuant to Rule 12(b)(6) of the Rules of Civil Procedure, arguing that Plaintiff was paid according to the plan at the time her disability benefits vested and that her claim was barred as this identical issue had been previously decided and should be dismissed under stare decisis. Following a hearing, the trial court granted Defendants' motion dismissing Plaintiff's claims under the amended complaint citing Whisnant v. Teachers' State Employees' Ret. Sys., 191 N.C. App. 233, 662 S.E.2d 573, disc. review denied, 362 N.C. 513, 668 S.E.2d 783 (2008), cert. denied, 129 S. Ct. 1370 (2009), and Proctor v. Local Gov't Employees Ret. Sys., 196 N.C. App. 177, 674 S.E.2d 481 (2009) (unpublished).
II. Jurisdiction and Standard of Review
Plaintiff appeals from the final judgment of a superior court and appeal lies of right with this Court pursuant to N.C. Gen. Stat. § 7A-27(b) (2009). We review the trial court's granting of the motion to dismiss for failure to state a claim de novo. Leary v. N.C. Forest Prods., Inc., 157 N.C. App. 396, 400, 580 S.E.2d 1, 4, aff'd per curiam 357 N.C. 567, 597 S.E.2d 673 (2003).
III. Analysis
Plaintiff argues she has a contractual right to retirement benefits as they existed at the commencement of her employment. In prior cases, our courts have held that there is a contractual right to retirement benefits under the terms at the time the retirement rights become vested. Simpson v. N.C. Local Gov't Employees' Ret. Sys., 88 N.C. App. 218, 224, 363 S.E.2d 90, 94 (1987); Faulkenbury v. Teachers' State Employees' Ret. Sys., 345 N.C. 683, 691-92, 483 S.E.2d 422, 427-28 (1997).
In Whisnant, this Court rejected a claim identical in all material respects to the case at hand. 191 N.C. App. 233, 662 S.E.2d 573. The petitioner in Whisnant was hired at the DOC in 1985, prior to the DIP, which was effective 1 January 1988. He worked until 2000, when he had an on-the-job injury and began to receive long-term disability benefits. Id. at 233, 662 S.E.2d at 573-74. Although his benefits were supposed to be offset by the amount he received from Social Security, the system had failed to offset his benefits. Id. at 233-34, 662 S.E.2d at 574. The retirement system alleged that he owed more than $30,000.00 in overpayments and began reducing his monthly benefits to recoup the amount. Id. at 234, 662 S.E.2d at 574. Petitioner filed a petition contesting the reduction in his benefits. Id. The trial court dismissed the petitioner's class action complaint for failure to state a claim. Id. at 234-35, 662 S.E.2d at 574. This Court affirmed the trial court's decision. Id. at 237, 662 S.E.2d at 576.
This Court stated that "`[i]n the context of retirement benefits, a contractual obligation exists once the employee's rights have vested.'" Id. at 236, 662 S.E.2d at 575 (emphasis added) (alteration in original) (quoting Tripp v. City of Winston-Salem, 188 N.C. App. 577, 584, 655 S.E.2d 890, 894 (2008)). Retirement rights for State employees vest after five years of service. Id. (citing Wells v. Consol. Jud'l Ret. Sys. of N.C., 136 N.C. App. 671, 673, 526 S.E.2d 486, 488-89 (2000)). In Whisnant, the petitioner's rights vested in 1990 (after five years of service), which was after the effective date of the DIP. Since the petitioner's benefits had not vested prior to the statutory changes, this Court found no complaint upon which relief could be granted. Id.
Plaintiff in the present case was hired in 1986, prior to the DIP, but her retirement benefits did not vest until 1991, after the DIP became effective. These facts are materially indistinguishable from those in Whisnant. We therefore hold, consistent with Whisnant, that Plaintiff has not stated a claim upon which relief can be granted. See In re Civil Penalty, 324 N.C. 373, 384, 379 S.E.2d 30, 37 (1989) ("Where a panel of the Court of Appeals has decided the same issue, albeit in a different case, a subsequent panel of the same court is bound by that precedent, unless it has been overturned by a higher court."). The decision of the trial court to dismiss the Plaintiff's complaint for failure to state a claim for relief is
Affirmed.
Judges STROUD and THIGPEN concur.
Report per Rule 30(e).