Bd. of Trs. of the Ark. Pub. Emps. Ret. Sys. v. Garrison

2019 Ark. App. 245

576 S.W.3d 485

BOARD OF TRUSTEES OF the ARKANSAS PUBLIC EMPLOYEES RETIREMENT SYSTEM, Craighead Nursing Center, Hudson Memorial Nursing Home, and Lawrence Hall Nursing Home, Appellants

v.Martha Ella GARRISON, Shawn Marie Hall, Michelle Dawson, Willie Mae Dawson, and Nichelle Underwood, Appellees

No. CV-17-865

Court of Appeals of Arkansas, DIVISIONS III & IV.

Opinion Delivered: May 1, 2019

Frank J. Wills III, for appellant Board of Trustees of the Arkansas Public Employees Retirement System.

Waddell, Cole & Jones, PLLC, by: Paul D. Waddell and Justin Parkey, Jonesboro, for appellants Craighead Nursing Center and Lawrence Hall Nursing Home.

Quattlebaum, Grooms & Tull, PLLC, Little Rock, by: Michael Heister, for appellant Hudson Memorial Nursing Home.

Hall & Taylor Law Partners, by: Randy Hall, Little Rock and Mattie Taylor ; and Law Offices of Gary Green, Little Rock, by: Gary Green, for appellees.

McMillan, McCorkle & Curry, LLP, Arkadelphia, by: F. Thomas Curry, for amici curiae Woodruff Nursing Home Board and Woodruff County Health Center.

RAYMOND R. ABRAMSON, Judge

On July 28, 2014, the Board of Trustees (Board of Trustees) of the Arkansas Public Employees Retirement System (APERS) issued findings of fact and conclusions of law finding that the appellees, all former employees of county-owned nursing homes, were not eligible for membership in APERS. The Board of Trustees determined that the appellees were not "county employees" eligible for APERS benefits because they were paid from revenues generated by the patients of the nursing homes, rather than from appropriations made by the quorum courts of each county. The appellees successfully appealed the Board of Trustees' decision to the Pulaski County Circuit Court, which entered an order and judgment reversing the administrative decision on June 27, 2017. The Board of Trustees now appeals the circuit court's decision. Because we hold that substantial evidence supports the Board of Trustees' finding that the appellees were not "county employees" as the General Assembly has defined that term in the APERS code, we reverse the circuit court's judgment and dismiss the case.

I. Background

The appellees are former employees of nursing homes located in Craighead, Lawrence, and Union Counties. Appellee Martha Ella Garrison was employed by Craighead County Nursing Center from 1981 until 2003. Appellee Shawn Marie Hall was an employee at Lawrence Hall Nursing Center from 1992 until 2007. Appellees Michelle Dawson, Willie Mae Dawson, and Nichelle Underwood were formerly employed by Hudson Memorial Nursing Home in Union County. The nursing-home facilities are owned by their respective counties and operated by administrative boards appointed by the quorum courts. According to the Board of Trustees, the nursing homes' operating expenses, including their employees' compensation, are paid from patient revenues.

In 2013, the appellees asked APERS to determine whether they were entitled to retirement benefits, arguing that they were eligible "county employees" as set forth in Ark. Code Ann. § 24-4-302 (Repl. 2014) and § 24-4-101 (Supp. 2017).¹ Section 24-4-302 provides, in pertinent part, that "all counties shall ... include their employees, as defined in § 24-4-101(14), (17), and (27), in the membership of the Arkansas Public Employees Retirement System[.]"² Arkansas Code Annotated § 24-4-101, moreover, provides the following relevant definitions:

(14)(A) "County employees" means all employees whose compensations are payable, either directly or indirectly, by county participating public employers[.]

....

(17)(A)(i)(a) "Employees" means all officers and employees of any office, agency, board, commission, including the Department of Higher Education, or department of a public employer whose compensations were or are payable from funds appropriated by the public employer and all otherwise eligible employees whose compensations were or are payable in whole or part from federal funds[.]

....

(27) "Nonstate employees" means county employees, municipal employees, rural waterworks facilities board employees, regional airport authority employees, public facilities board employees, joint county and municipal sanitation authority employees, regional water distribution board employees, the employees of economic development districts recognized as planning and development districts under § 14-166-202, school employees, and the employees of the Intergovernmental Juvenile Detention Council[.]

The executive director of APERS rejected the appellees' claims for membership. According to the director, the appellees were not eligible "county employees" because their compensation was payable from the patient revenues of the nursing homes, rather than funds appropriated by the quorum courts of their respective counties as required by Ark. Code Ann. § 24-4-101(17)(A)(i)(a) .

The appellees appealed the executive director's decision, and, after an administrative hearing on April 30, 2014, the APERS Board of Trustees made the following relevant factual findings:

4. Each of the three nursing homes is operated by its governing board, not by their respective counties' quorum courts. Each of the three nursing homes generates its own operating funds from patient revenues. None of the three nursing homes receives its operating funds from county appropriations.

5. None of the Applicants' compensations came from appropriated county funds, i.e. , from county quorum court appropriations, either directly or indirectly. The Applicants' compensations were paid out of the revenues received from the nursing homes' patient revenues. No ordinances that appropriated county funds for the nursing homes' employee salaries have been found by any party.

Based on these findings, the Board of Trustees concluded that the appellees were not "county employees."

According to the Board of Trustees, § 24-4-302 required the appellees to meet a combination of the definitions appearing in § 24-4-101(14), (17), and (27), in order to be eligible for membership in APERS, and the appellees fell short because there was no evidence that any of the county quorum courts appropriated funds for their compensation as required by § 24-4-101(17)(A)(i)(a) . The Board of Trustees unanimously determined, therefore, that the appellees "were not eligible for membership in APERS because of their employment at their respective nursing homes," and affirmed the executive director's decision.

The appellees sought judicial review in the Pulaski County Circuit Court pursuant to Ark. Code Ann. § 25-15-212(a) – (b) (Repl. 2014). The circuit court reversed the Board of Trustees' decision, finding, inter alia , that APERS was "clearly wrong" when it "combined the definitions in Ark. Code Ann. § 24-4-101(14), (17), and (27), and required [the appellees] to meet all three definitions, rather than treat each definition as separate and distinct."

Nevertheless, the circuit court found that the appellees met both the definition of "county employee" in § 24-4-101(14)(A) and the definition of "employee" in § 24-4-101(17). The nursing-home administrative boards, which the circuit court found fell within the definition of "county" in the APERS Code, were "participating public employers," for purposes of paying "county employee[s]" under Ark. Code Ann. § 24-4-101(14)(A). The court found, moreover, that the appellees were "paid from revenues generated by the respective facilities at which they worked, thus making Petitioners' compensations payable, either directly or indirectly, by a county participating public employer" under Ark. Code Ann. § 24-4-101(14)(A). The circuit court also found that the appellees met the definition of "employee" in § 24-4-101(17), concluding that the nursing-home administrative boards, as public employers, "appropriated" county funds to pay the appellees.

The Board of Trustees and the nursing homes now appeal from the circuit court's order. We reverse the circuit court and affirm the Board of Trustees' decision denying the appellees' membership in APERS.

II. Standards of Review

"Review of administrative agency decisions by both the circuit court and the appellate court is limited in scope." Shaw v. Ark. Dep't of Human Servs. , 2018 Ark. App. 322, at 5, 550 S.W.3d 925, 928. The standard of review is "whether there is substantial evidence to support the agency's findings." Id. at 5, 550 S.W.3d at 928–29. The appellate court's review, moreover, is directed toward the agency, rather than the circuit court, "because administrative agencies are better equipped by specialization, insight through experience, and more flexible procedures than courts, to determine and analyze legal issues affecting their agencies." Seiz Co. v. Ark. State Highway & Transp. Dep't , 2009 Ark. 361, at 2, 324 S.W.3d 336, 338. This court also

may reverse or modify an agency decision if the substantial rights of [the appellees] have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:

(1) In violation of constitutional or statutory provisions;

(2) In excess of the agency's statutory authority;

(3) Made upon unlawful procedure;

(4) Affected by other error or law;

(5) Not supported by substantial evidence of record; or

(6) Arbitrary, capricious, or characterized by abuse of discretion.

Ark. Code Ann. § 25-15-212(h) (Repl. 2014).

"Substantial evidence is valid, legal, and persuasive evidence that a reasonable mind might accept as adequate to support the agency decision." Shaw , 2018 Ark. App. 322, at 5, 550 S.W.3d at 929. The party challenging the agency decision "must prove an absence of substantial evidence and must demonstrate that the proof before the administrative agency was so nearly undisputed that fair-minded persons could not reach [the administrative agency's] conclusion." Id. , 550 S.W.3d at 929. "The question is not whether the evidence would have supported a contrary finding, but whether it supports the finding that was made." Id. , at...