Washington Teachers’ Suit Remanded for Relief Calculations

Washington public school teachers have won, for the second time, an appeal to the U.S. 9th Circuit Court of Appeals of the district court decision in a 2015 lawsuit filed against the director of the Washington State Department of Retirement Systems, Tracy Guerin.

According to the appeals court’s decision filed on November 26, the U.S. District Court for the Western District of Washington did not have the authority to consider the grounds it used in 2021 to grant summary judgment in favor of the Department of Retirement Systems. The district court was not permitted to address any issues other than the mandate it was given for the remand from an earlier 9th Circuit ruling.

Original Case

The Department of Retirement Systems serves more than 330,000 Washington public employees and is currently led by Tracy Guerin. The DRS administers 15 retirement plans across eight individual retirement systems. Guerin, as well as former director Marcie Frost—now the CEO of the California Public Employees’ Retirement System—are both named in the lawsuit.

The original complaint, Fowler et al. v. Guerin, explains that in 1996, the teachers transferred their retirement funds from the Washington State Teachers’ Retirement System Plan 2 to TRS Plan 3. However, the teachers alleged that when they withdrew their contributions from their TRS Plan 2 individual accounts to transfer to new TRS Plan 3 individual accounts, not all of the interest earned on their contributions at the 5.5% annual interest rate transferred to their new accounts.

The plaintiffs argued that Frost, then the director of the DRS, refused to provide the teachers all of the interest earned by their contributions in their TRS Plan 2 individual accounts. This “failure” to provide the earned interest affects more than 20,000 public school teachers, according to the complaint.

Back-and-Forth Appeals

In a 2018 appeal, the 9th Circuit held that “the teachers state a takings claim for daily interest withheld by the DRS.” The appeals court remanded the case back to the district court to reconsider class certification and, if necessary, allow further discovery before deciding if the class should be given the injunctive relief that plaintiffs requested.

On remand, the district court certified the class and the Department of Retirement Systems provided account data needed to calculate the accrued interest. But in 2021, the district court allowed the DRS to amend its answer to add the defense that the teachers’ takings claim was barred by a statute of limitations. The district court agreed and dismissed the lawsuit.

After the plaintiffs appealed, the most recent ruling saw a three-judge panel from the 9th Circuit rule that it specifically remanded the case only for reconsideration of class certification and for determination of whether the teachers should receive prospective injunctive relief, which meant additional issues were “not open for review.”

“The district court violated our mandate and exceeded its jurisdictional limit by allowing the DRS to amend her answer on remand to raise the statute of limitations defense,” the appeals court stated.

The DRS argued that there was no pecuniary loss to the teachers’ accounts because they received a transfer payment when the transfer was made, but the appeals court disagreed. The court stated that it is undisputed that the DRS did not pay the teachers daily interest, and there are no “transaction and administrative costs or bank fees” to offset the teachers’ earned interest.

Only Remaining Issue

As a result, the 9th Circuit affirmed the district court’s holding that the teachers established a pecuniary loss and a complete “per se takings claim” and remanded to the district court the remaining issue of injunctive relief. Thus, the only remaining issue for the district court to resolve is the approval of the teachers’ proposed formula to correct their account balances.

If approved, the district court will then order the Department of Retirement Services to correct the teachers’ accounts, according to the 9th Circuit.

Plaintiffs Mickey Fowler and Leisa Maurer, both public school teachers in Washington, are represented by law firm Stobaugh & Strong P.C., and the DRS is represented by K&L Gates LLP and the Washington attorney general’s office.

The DRS did not immediately respond to a request for comment.