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Ex parte Bronner

Supreme Court of Alabama

December 31, 2014

Ex parte David Bronner, in his official capacities as chief executive officer and secretary-treasurer of the Employees' Retirement System of Alabama and as chief executive officer and secretary-treasurer of the Teachers' Retirement System of Alabama, et al.
v.
David Bronner et al. In re: Tonya Denson and Venius Turner

Page 615

(Montgomery Circuit Court, CV-11-900738). William A. Shashy, Trial Judge.

Joseph B. Mays, James S. Christie, Jr., Marc James Ayers, Bradley Arant Boult Cummings LLP, Birmingham; Robert E. Poundstone IV, Bradley Arant Boult Cummings LLP, Montgomery, for petitioners.

R. Cooper Shattuck, Legal Advisor, Office of the Governor, as additional counsel for petitioner Governor Robert Bentley.

Lee H. Copeland and Robert D. " Bobby" Segall, Copeland, Franco, Screws & Gill P.A., Montgomery, for all petitioners except Joseph Morton, David Perry, Young Boozer, Governor Robert Bentley, Jackie B. Graham.

William S. Pritchard III, Madison W. O'Kelley, Jr., Pritchard, McCall & Jones, LLC, Birmingham; Erby J. Fischer, Dana R. Dachelet, Fischer & Associates, LLC, Birmingham, for respondents.

MURDOCK, Justice. Stuart, Parker, and Wise, JJ., concur. Bolin and Bryan, JJ., concur in the result. Moore, C.J., and Shaw, J., dissent. Main, J., recuses himself.

OPINION

Page 616

PETITION FOR WRIT OF MANDAMUS

MURDOCK, Justice.

Tonya Denson, a member of the Employees' Retirement System of Alabama (" the ERSA" ), and Venius Turner, a member of the Teachers' Retirement System of Alabama (" the TRSA" ), brought this action on behalf of themselves, individually, as well as similarly situated members of the Retirement Systems of Alabama (" the RSA" ), in the Montgomery Circuit Court against (1) David Bronner, in his official capacities as chief executive officer and secretary-treasurer of the ERSA, the TRSA, and the RSA[1] and (2) the officers and members of the respective boards of

Page 617

control of the TRSA and the ERSA, in their official capacities (Bronner and the officers and members of the boards of control are hereinafter referred to collectively as " the RSA defendants" ).

The RSA defendants filed a motion to dismiss the complaint, which the trial court denied. The RSA defendants then filed a petition for a writ of mandamus with this Court, asking that we direct the trial court to vacate its order denying their motion to dismiss and to grant the motion. We grant the petition.

I. Facts and Procedural History

The RSA includes the TRSA, which is administered for the benefit of public-education employees who are members of the TRSA, and the ERSA, which is administered for the benefit of state employees who are members of the ERSA. See supra note 1. Denson is a member of the ERSA; Turner is a member of the TRSA. The board of control of the TRSA is charged by statute with making and overseeing investments on behalf of the TRSA, just as the board of control of the ERSA is tasked with the same responsibility and authority as to the ERSA. See Ala. Code 1975, § 16-25-2(b) and § 36-27-2(b).

Section 16-25-20, Ala. Code 1975, provides:

" (a)(1) The Board of Control [of the TRSA] shall be the trustees of the several funds of the Teachers' Retirement System created by this chapter as provided in Section 16-25-21, and shall have full power to invest and reinvest the funds, through its Secretary-Treasurer, in the classes of bonds, mortgages, common and preferred stocks, shares of investment companies or mutual funds, or other investments as the Board of Control may approve, with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with the matters would use in the conduct of an enterprise of a like character and with like aims; and, subject to like terms, conditions, limitations, and restrictions, the Board of Control, through its Secretary-Treasurer, shall have full power to hold, purchase, sell, assign, transfer, and dispose of any investments in which the funds created herein shall have been invested, as well as the proceeds of the investments and any moneys belonging to the funds.
" (2) The Secretary-Treasurer shall have the authority and it shall be his or her duty to carry out the investment policies fixed by the Board of Control, and pursuant thereto he or she shall examine all offers of investments made to the funds, shall initiate inquiries as to available investments therefor, shall review periodically the investment quality and desirability of retention of investments held, and shall make purchases and sales of investments as he or she shall deem to the best interests of the funds and as the investment committee hereinafter provided for, and as the consultant to the Secretary-Treasurer, if any, appointed by the Board of Control hereunder, to the extent of the purpose for which it is appointed, shall approve. ...
" (3) The Board of Control shall elect an investment committee which shall consist of three members of the board, one of whom shall be the Director of Finance. The investment committee shall act as agent for the board and shall consider all investment recommendations made by the Secretary-Treasurer and shall either approve or disapprove the same in accordance with policies set by the board. ...
" (4) The Board of Control may appoint and employ as consultant to the Secretary-Treasurer, in the purchase, sale, and review of investments of the funds, to the extent the board may

Page 618

designate, a bank having its principal office in the State of Alabama, having capital, surplus, and undivided profits of not less than three hundred million dollars ($300,000,000), and having an organized investment department."

See also Ala. Code 1975, § 36-27-25(a), (c), (d), and (e) (substantially similar provisions as to the board of control of the ERSA).[2]

In their complaint, the plaintiffs alleged that the RSA defendants had violated their fiduciary duties. Quoting Ala. Code 1975, § 16-25-20(a)(1), governing the TRSA, and citing § 36-27-25(a), governing the ERSA and which, in all material respects, is identical to § 16-25-20(a)(1), the plaintiffs alleged that the RSA defendants are obligated to invest the respective retirement funds being managed by them " 'with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with the matters would use in the conduct of an enterprise of a like character and with like aims.'"

The plaintiffs also alleged that the RSA has adopted a policy statement entitled " Investment Policies and Procedures" that states, in part, as follows:

" The Boards of Control, as Trustees of the Teachers' Retirement System and Employees' Retirement System (Systems), have full power, through each System's secretary-treasurer, to invest and reinvest System funds in accordance with the Prudent Man Rule: 'with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.' Other funds currently and hereafter under the management of the Systems will be governed by this Investment Policy Statement within each System's limitations and/or by other applicable legislated restrictions.
" It is the objective of the Boards [of Control of the TRSA and the ERSA] that funds be invested in such a manner as to maximize the total return of each System within prudent risk parameters. Also, the Systems recognize that a stronger Alabama equates to a stronger Retirement System, and as such, investments in Alabama businesses are encouraged to the extent the investment meets the criteria delineated by this policy statement." [3]

The plaintiffs alleged that, " for as much as the most recent fifteen year period," the RSA defendants have made investments

Page 619

" in Alabama golf courses, office buildings, condominiums, hotels, resorts and stock and debt holdings in companies conducting business in Alabama (collectively referred to as 'Alabama Investments'), which investments have historically yielded lower returns than investments which could or should have been made in compliance with the mandates of the law, the Prudent Man Rule, the Investment Policy of the RSA, and its Mission Statement."

( Emphasis added.) In this regard, the plaintiffs contended that " up to ... approximately 15%" of the investments made by the boards of control have been in such Alabama-based investments. They contend that the ERSA and the TRSA received lower returns on those investments than could have been realized on other investments, which, in turn, made it necessary for members of the ERSA and the TRSA and the State of Alabama to pay more to enable the ERSA and the TRSA to meet their obligations to retirees. They alleged that, " though the Alabama Investments may have been well intended, and may serve as a vehicle for creating goodwill, they have not been made in compliance with the Prudent Man Rule."

The plaintiffs asked the trial court to enter a judgment declaring

" that the duties of the [RSA] Defendants, separately and severally, are specifically subject to the statutory provisions, mandates and restrictions specified in § 36-27-25 and § 16-25-20, Code of Alabama, and that any deviation from those provisions, mandates and restrictions [is] unlawful"

and declaring further that it is " beyond the authority" of the boards of control to invest " any assets and funds ... in Alabama Investments which the [RSA defendants] expected or were aware would yield less of a return than alternative or other investments." Similarly, the plaintiffs requested in their complaint that the trial court enjoin the RSA defendants from, among other things, investing " any assets" within their control in a manner not in accord with the " Prudent Man Rule" and from investing " in Alabama Investments ... which the [RSA defendants] expect or are aware will yield less of a return than alternative or other investments."

The RSA defendants filed a motion to dismiss the complaint. The motion, as initially filed, asserted two grounds for dismissal of the complaint. First, the RSA defendants asserted that State, or sovereign, immunity precluded prosecution of the claims. See Art. I, § 14, Ala. Const. 1901; Ala. Code 1975, § § 16-25-2(b) and 36-27-2(b) (recognizing that the boards of control of the TRSA and the ERSA are instrumentalities of the State, that the TRSA and the ERSA are funded by the State, and that their officers and employees are immune from suit in their official capacities to the same extent as the State, its agencies, and its officers and employees). According to the RSA defendants, the plaintiffs' claims do not fall within any of the recognized " exceptions" to State immunity applicable to State officials. Second, the RSA defendants asserted that Denson and Turner lacked standing.[4]

Page 620

Denson and Turner filed a reply in opposition to the motion to dismiss, contending that the plaintiffs' claims did in fact fall within recognized " exceptions" to State immunity. They also contended that they had standing, relying principally on a 1981 decision of this Court, Lee v. Bronner, 404 So.2d 627 (Ala. 1981).

The RSA defendants filed a response to Denson and Turner's reply in opposition, adding arguments that the plaintiffs' claims were nonjusticiable and that Denson and Turner had failed to exhaust administrative remedies.

In December 2011, the trial court denied the motion to dismiss. The RSA defendants filed a timely petition for the writ of mandamus with this Court.

II. Standard of Review

A writ of mandamus is an

" 'extraordinary writ that will be issued only when there is: 1) a clear legal right in the petitioner to the order sought; 2) an imperative duty upon the respondent to perform, accompanied by a refusal to do so; 3) the lack of another adequate remedy; ...

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