Worcester Reg'l Ret. Bd. v. Pub. Emp. Ret. Admin. Comm'n

180 N.E.3d 417

WORCESTER REGIONAL RETIREMENT BOARD & others¹

v.PUBLIC EMPLOYEE RETIREMENT ADMINISTRATION COMMISSION.

SJC-13137

Supreme Judicial Court of Massachusetts, Suffolk.

Argued November 3, 2021.

Decided February 4, 2022.

Julia E. Kobick, Assistant Attorney General, for the defendant.

Michael Sacco, for the plaintiffs.

Present: Budd, C.J., Gaziano, Lowy, Cypher, Kafker, Wendlandt, & Georges, JJ.

CYPHER, J.

In this appeal, we consider the scope of our prior interpretation of the term "regular compensation" defined in G. L. c. 32, § 1, as excluding vacation or sick leave pay used to supplement workers’ compensation payments. Public Employee Retirement Admin. Comm'n v. Contributory Retirement Appeal Bd., 478 Mass. 832, 832, 90 N.E.3d 744 (2018) ( Vernava ). Here, we are asked to determine whether our construction of "regular compensation" narrowly applies only to determinations of an employee's effective retirement date under the provision in G. L. c. 32, § 7, relating to accidental disability retirement, or more broadly applies to any form of retirement, including the ordinary disability or superannuation retirement provisions of G. L. c. 32, §§ 5 and 6. Additionally, we are asked to address the authority of the Public Employee Retirement Administration Commission (PERAC) to issue memoranda that bind retirement boards to PERAC's interpretation of appellate court decisions, and whether the plaintiff retirement boards (boards) may seek judicial review of such memoranda without first exhausting available administrative remedies.

Because our interpretation of "regular compensation" in Vernava did not depend on the specific retirement provision under which the issue arose, we conclude that this construction applies consistently across uses of the term in G. L. c. 32, §§ 5, 6, and 7, thereby applying to superannuation, ordinary disability, and accidental disability retirement, and does so retroactively. Where the existing statutory framework and case-specific application of the exhaustion doctrine have served amply the parties’ need to address the statutory construction question raised in this case, no actual controversy is raised by the abstract issue of exhaustion of administrative remedies in hypothetical disputes over future PERAC memoranda interpreting appellate opinions.

Background. In Vernava, 478 Mass. 832, 90 N.E.3d 744, we addressed the intersection of G. L. c. 32, concerning retirement systems, and G. L. c. 152, concerning workers’ compensation.² We considered "whether the supplemental pay received pursuant to G. L. c. 152, § 69, constitutes ‘regular compensation’ as defined by G. L. c. 32, § 1, when received in conjunction with workers’ compensation."³

Vernava, supra at 834, 90 N.E.3d 744. In concluding that the two hours of supplemental pay received per week by the employee in Vernava did not constitute "regular compensation" for the purposes of determining the effective date of his accidental disability retirement under G. L. c. 32, § 7, we held that where an employee receives accrued vacation or sick leave pay in conjunction with workers’ compensation benefits, such accrued vacation or sick leave used as supplemental pay is not "regular compensation" because the injured "employee has ceased providing services to the employer." Vernava, supra at 838, 90 N.E.3d 744.

Subsequent to our decision in Vernava, PERAC, the regulatory agency overseeing the 104 retirement systems constituted under G. L. c. 32, issued a memorandum advising retirement boards on the scope of that decision. This memorandum alerted members that the Vernava decision "will have no applicability to any member retiring under any section of [G. L. c.] 32 other than [§] 7." Highlighting footnote 3 of our opinion in Vernava, PERAC interpreted our holding to be limited such that the meaning of "regular compensation" applied solely to calculations of an employee's effective date of accidental disability retirement pursuant to § 7 (2).⁴

PERAC emphasized the language of the first sentence of the footnote, including its direct reference to "the purpose of determining an employee's effective date of retirement under G. L. c. 32, § 7." PERAC concluded that

"[t]he limited language of footnote 3 presents a challenge in determining whether or not a supplemental payment is regular compensation at the time it is received, because many members may receive Workers’ Compensation at certain times during their careers, but may or may not ultimately retire pursuant to the provisions of [G. L.] c. 32, § 7. Thus, a person who was out on Workers’ Compensation mid-career who subsequently retires for superannuation will have those payments counted as regular compensation."

PERAC thereafter issued a second memorandum emphasizing that all Massachusetts retirement boards were bound by its interpretation of the scope of this court's holding in Vernava.

In response to the PERAC memoranda, the boards filed a complaint in the county court pursuant to G. L. c. 231A, § 1. The complaint sought two declarations: first, that the Vernava construction of regular compensation as excluding supplemental pay when paid in conjunction with workers’ compensation applies regardless of whether a retirement system member retires for disability under G. L. c. 32, § 6 or 7, or for superannuation under G. L. c. 32, § 5 (count 1); and, second, that PERAC's memoranda interpreting case law are not binding on retirement boards, who have independent authority to interpret retirement statutes and associated case law (count 2).⁵

The case was transferred to the Superior Court by order of a single justice. In the Superior Court, the boards requested that, in the alternative, the judge declare as to count 2 that retirement boards may seek review of PERAC memoranda interpreting appellate court opinions by an action for declaratory judgment without first exhausting administrative remedies. With regard to the first claim, the judge rejected PERAC's interpretation of our holding in Vernava and held that footnote three did not restrict the construction of "regular compensation" to apply only with respect to accidental disability retirement. The judge declined to reach the merits of either version of the boards’ second claim, characterizing the declarations sought as akin to an advisory opinion. PERAC appealed from the judge's declaration as to count 1; the boards appealed from the judge's decision to decline to reach the merits of count 2, pressing on appeal their alternative request for a declaration that retirement boards may seek review of PERAC memoranda interpreting appellate court opinions without first exhausting administrative remedies.⁶ We granted PERAC's application for direct appellate review.

Discussion. 1. Jurisdiction. Declaratory relief pursuant to G. L. c. 231A, § 1, in the form of "binding declarations of right, duty, status and other legal relations," is limited to cases where "an actual controversy has arisen and is specifically set forth in the pleadings." "An actual controversy arises under our law where there is ‘a real dispute caused by the assertion by one party of a legal relation, status or right in which [that party] has a definite interest, and the denial of such assertion by another party also having a definite interest in the subject matter, where the circumstances attending the dispute plainly indicate that unless the matter is [adjudicated] such antagonistic claims will almost immediately and inevitably lead to litigation.’ " Libertarian Ass'n of Mass. v. Secretary of the Commonwealth, 462 Mass. 538, 546-547, 969 N.E.2d 1095 (2012), quoting School Comm. of Cambridge v. Superintendent of Sch. of Cambridge, 320 Mass. 516, 518, 70 N.E.2d 298 (1946). Where no actual controversy is presented by a claim for declaratory relief, the court lacks subject matter jurisdiction over the matter, and the claim must be dismissed. Hingham v. Department of Hous. & Community Dev., 451 Mass. 501, 502, 505, 887 N.E.2d 231 (2008) (affirming judgment of dismissal for lack of subject matter jurisdiction on ground that "in order for a court to provide declaratory relief, an actual controversy ... must exist"). "[W]henever a problem of subject matter jurisdiction becomes apparent to a court, the court has both the power and the obligation to resolve it" (quotation omitted). Doherty v. Civil Serv. Comm'n, 486 Mass. 487, 491, 159 N.E.3d 653 (2020), quoting Rental Prop. Mgt. Servs. v. Hatcher, 479 Mass. 542, 547, 97 N.E.3d 319 (2018).

Here, we find no problem of subject matter jurisdiction concerning count 1:

there is an actual controversy as to the scope of our holding in Vernava regarding the meaning of "regular compensation." Each party has asserted a specific interest in the scope of our construction of "regular compensation" in Vernava -- PERAC has a specific interest in its duty of "efficient administration of the public employee retirement system," G. L. c. 7, § 50, and the boards have a specific interest in accurate calculations of retirement allowances and creditable service for workers and retirees under G. L. c. 32. Litigation arising from this issue appears inevitable; the boards assert that PERAC's interpretation of Vernava already has been contradicted by the Division of Administrative Law Appeals in several proceedings currently pending before the Contributory Retirement Appeal Board. For that reason, we conclude that this court has subject matter jurisdiction over count 1, and we reach that question on the merits.

However, although not raised by the parties, we conclude that we do not have subject matter jurisdiction as to count 2. No actual controversy is presented by the alternative declaration the boards press on appeal, which would identify a sweeping prospective right to proceed directly, without first exhausting administrative remedies, to judicial review of PERAC memoranda concerning appellate statutory interpretation opinion. "A mere difference of opinion or uncertainty...