WILLIAM F. MUNCK,
        Plaintiff,

        vs.            Case No. 01C 153

KANSAS PUBLIC EMPLOYEES
RETIREMENT SYSTEM,
SECURITY BENEFIT LIFE
INSURANCE COMPANY,
        Defendants.

On February 12, 2001, petitioner, William F. Munck, filed a Petition for Judicial Review of the final order of the Board of Trustees of the Kansas Public Employee Retirement System (KPERS) pursuant to K.S.A. 77-601 et seq. Both the petitioner and defendants have filed briefs and response briefs regarding the Petition for Judicial Review. Defendants have captioned their brief as a Motion for Summary Judgment. However, at the oral argument on October 24, 2001, Defendants agreed that their "Motion for Summary Judgment" should be considered as a trial brief. Therefore, plaintiff's "Objection to Motion for Summary Judgment filed by defendants" is now a moot issue.

William Munck is legally blind. In July, 1984 he began working for the Kansas Division for the Blind in the Business Enterprise Program where he installed and operated vending machines at various locales around the state.

In June, 1997 he suffered an injury on the job and in early 1998, Dr. Ebeling, a Topeka neurosurgeon, fused 2-3 vertebrae in Mr. Munck's cervical region. Mr. Munck applied for and was awarded permanent disability by the Kansas Public Employees Retirement System effective August 13, 1998. On February 5, 1999, Mr. Munck's monthly permanent disability benefits were suspended after a report was received by SBL that Mr. Munck was involved in the operation of an antique mall. On February 17, 1999, counsel for plaintiff made a written request for a hearing pursuant to K.S.A. 74-4904. No hearing was held as requested. On July 22, 1999, KPERS advised Munck's attorney that William Munck's claim for reinstatement of disability benefits had been denied. Mr. Munck made a written request for a hearing by letter dated August 3, 1999.

On September 27, 1999 a Notice of Prehearing Conference was sent to both counsel by Stephen E. Good, Presiding Officer, Office of Administrative Hearings. On October, 1999, a Prehearing Order was issued.

On August 2, 2000 KPERS filed a Motion and Memorandum for Summary Judgment. Munck filed his response to KPERS' Motion for Summary Judgment on August 21, 2000 and on November 3, 2000 a hearing was held on the Motion for Summary Judgment. Presiding Officer Good granted the Motion for Summary Judgment and Munck appealed to KPERS' Board of Trustees who affirmed Presiding Officer Good's decision to grant the Motion for Summary Judgment which denied Munck's KPERS' disability benefits.

Munck timely filed his Petition for Judicial Review.

The standard of review applicable in this case is set out in the Act for Judicial Review and Civil Enforcement of Agency Actions (KJRA), K.S.A. 77-601 et seq. The scope of review is set forth in K.S.A. 77-621. The burden of proving the invalidity of the agency action is on the party asserting invalidity. The plaintiff, Mr. Munck, asserts the following:

1. The action of KPERS is unconstitutional on its face in denying him a hearing within 60 days of his written request;

2. KPERS acted beyond the jurisdiction conferred by any provision of law by entering into an agreement with Security Benefit Life Insurance Company (SBL) denying claimants a hearing on their benefit disputes with SBL.

3. KPERS erroneously interpreted or applied the law;

4. KPERS engaged in an unlawful procedure or failed to follow prescribed procedure by prematurely granting a motion for summary judgment filed by its counsel;

5. The action of KPERS was not supported by evidence that is substantial when viewed in light of the record as a whole; or

6. The action of KPERS was otherwise unreasonable, arbitrary, or capricious.

Plaintiff alleges that KPERS' action of denying plaintiff's first request for a hearing was unconstitutional. Plaintiff was notified on February 5, 1999 that his monthly permanent disability benefits were suspended. On February 17, 1999, plaintiff's attorney made a written request for a hearing pursuant to K.S.A. 74-4904. However, no hearing was granted.

In this case, plaintiff complains that the procedures as set out in K.S.A. 74-4904(2) were not followed. The statute provides that:

Any person aggrieved by any order or decision of the board made without a hearing, may within 30 days after notice of the order or decision of the board make written request to the board for a hearing thereon. The board shall hear such party or parties in accordance with the provisions of the Kansas administrative procedure act at its next regular meeting or at a special meeting within 60 days after receipt of such request.

K.S.A. 74-4904(2) does not limit the right to a hearing only to final orders. The clear reading of the statute provides that upon timely written request, the board shall hear such party or parties at the next regular meeting or at a special meeting within 60 days of such request.

Defendants contend that the United States Supreme Court in Mathews v. Eldridge, 424 U.S. 319, 47 L. Ed. 2d 18, 96 S. Ct. 893 (1976) expressly rejected the necessity of a pre-termination evidentiary hearing regarding social security disability benefits. However, the Court's decision was based on the Court's determination that the Social Security administrative procedures fully comport with procedural due process. Mathews, 424 U.S. at 349. "An additional factor to be considered in determining whether administrative procedures comport with due process is the fairness and reliability of the existing pre-termination procedures, and the probable value, if any, of additional procedural safeguards." Mathews, Id. at 343.

Under the Social Security Act, disability insurance benefit recipients are required to periodically complete questionnaires regarding their disability and list the physicians from whom they receive treatment. The agency then requests reports from the treating physicians. In Mathews, upon receiving and reviewing the physicians' reports, the agency terminated Eldridge's disability payments. Eldridge challenged the agency's procedure of terminating his benefits prior to an evidentiary hearing. In justifying why a pre-termination hearing is required for welfare recipients and not for disabled individuals receiving social security disability benefits, the U. S. Supreme Court in Mathews contrasted the procedure used for disability recipient reviews with the procedure used in welfare determinations. "In short, a medical assessment of the worker's physical or mental condition is required. This is a more sharply focused and easily documented decision than the typical determination of welfare entitlement. In the latter case, a wide variety of information may be deemed relevant, and issues of witness credibility and veracity often are critical to the decision making process." Mathews, Id. at 343-344.

The procedure used to suspend Munck's disability benefits did not include medical reports and is more akin to the subjective procedures used in the determination of welfare entitlement. This court, therefore, does not find that the pre-termination procedures contain the fairness and the reliability of those described in Mathews.

Furthermore, Munck was denied a post-suspension hearing as well. Certainly a timely post- suspension hearing would have been an additional procedural safeguard for Munck. Whether a timely post-suspension hearing comports with procedural due process was addressed in Gilbert v. Homar, 520 U.S. 924, 932, 138 L. Ed. 2d 120, 117 S. Ct. 1807 (1997). In Gilbert, a policeman charged with a drug felony was suspended without pay pending investigation. Subsequently the charges were dismissed and a couple of weeks later he was afforded a hearing. The suspended policeman asserted a property interest in an uninterrupted paycheck but the Court stated that account must be taken of the length and finality of the temporary deprivation of his pay. "So long as a suspended employee receives a sufficiently prompt post-suspension hearing the lost income is relatively insubstantial (compared with termination) and fringe benefits such as health and life insurance are not affected at all." Gilbert, Id.

In Munck's case, he was provided with neither a fair and reliable pre-termination procedure nor a timely post-suspension hearing as an additional procedural safeguard. Therefore, the court does find that the procedure followed in suspending Munck's disability benefits coupled with the agency's failure to follow K.S.A. 74-4904 rendered the suspension procedure as applied to Munck unconstitutional. Therefore, this court awards Munck retroactive disability payments for the period of time that his disability benefits were suspended, ie. February 5, 1999 through July 22, 1999 when Munck was notified that his benefits were terminated.

However, the unconstitutionality of the application of the procedure used to suspend Munck's disability benefits does not render the entire procedure used in terminating Munck's disability benefits unconstitutional. The court must analyze separately whether the procedures used in the final termination process comported with procedural due process.

Munck's attorney was advised on July 22, 1999 that Munck's claim for reinstatement of his disability benefits had been denied. Munck requested a hearing in a letter dated August 3, 1999. A notice of prehearing conference was sent by the Presiding Officer to Munck on September 29, 1999. Pursuant to K.S.A. 77-511(c) "[a] hearing commences when the state agency or presiding officer notifies a party a prehearing conference or other stage of the hearing will be conducted." Since the notice was sent within 60 days of the request for a hearing, the "hearing" referenced in K.S.A. 74-4904(2) commenced within 60 days of Munck's request for a hearing.

This court finds that the opportunity and the granting of a post-termination hearing complies with procedural due process by providing the additional procedural safeguard required by Mathews and Gilbert.

Munck argues that KPERS bargained away all his and other KPERS members' procedural due process rights by unilaterally signing a contract with SBL which provides that "[t]he parties agree that there is no administrative review through KPERS relative to benefit disputes." As cited previously, K.S.A. 74-4904(2) requires KPERS to afford members a hearing within sixty days of written request.

Defendant's argument is that irrespective of the "Administrative Agreement," Munck was in fact provided a hearing within sixty days and the provision in the Agreement was not and is not being complied with by KPERS and SBL.

This court already has addressed the failure of the agency to grant Munck a hearing on the suspension of his benefits. The court's ruling on that issue will not be repeated here. However, Munck also requests that this court enjoin SBL and KPERS from violating K.S.A. 74-4904(2) by failing to grant claimants' written requests for hearings.

The Administrative Services Agreement does conflict with and, if followed, violates K.S.A. 74-4904(2), therefore this court restrains KPERS from complying with the portion of the Administrative Services Agreement that violates K.S.A. 74-4904(2).

Munck sets forth a number of arguments regarding the interpretation and application of the law used by the Presiding Officer in ruling on KPERS' summary judgment motion.

First of all, Munck advocates the adoption of the "treating physician rule" in Kansas for KPERS disability claims. However, the scope of this court's review is whether KPERS erroneously interpreted or applied the law. As conceded by Munck, the rule has not been adopted in Kansas and therefore, it appears to this court that KPERS did not erroneously interpret or apply the law by failing to adopt the treating physician rule.

Munck also argues that KPERS did not apply established Kansas case law on disability claims. KPERS points out that the cases cited by Munck deal with the interpretation of private disability policies and are not applicable in this case. The court finds that a failure to apply the case law for private disability cases is not an erroneous interpretation or application of the law.

The language to be interpreted in this case is K.S.A. 74-4902(32) which defines "total disability" as:

a physical or mental disability which prevents the member from engaging, for renumeration or profit, in any occupation, for which the member is reasonably suited by education, training or experience...

Munck also argues that KPERS erroneously applied workers compensation law in denying disability benefits to Mr. Munck.

The presiding officer in his initial order adopted the reasoning from Foulk v. Colonial Terrace, 20 Kan. App. 2d 277, 887 P.2d 140 (1994) and held that Munck's failure to make a good faith attempt at accommodated work bars a finding that Munck is disabled under K.S.A. 74-4902(32).

Even though Foulk involved workers compensation issues, the presiding officer found that it was applicable and germane to this case. The Kansas Court of Appeals in Foulk held that:

Construing K.S.A. 1988 Supp. 44-510e(a) to allow a worker to avoid the presumption of no work disability by virtue of the worker's refusal to engage in work at a comparable wage would be unreasonable where the proffered job is within the worker's ability and the worker had refused to even attempt the job. The legislature clearly intended for a worker not to receive compensation where the worker was still capable of earning nearly the same wage. Further, it would be unreasonable for this court to conclude that the legislature intended to encourage workers to merely sit at home, refuse to work, and take advantage of the workers compensation system.

Foulk, 20 Kan. App. 2d at 277, Syl. ¶ 4.

While the statutory scheme for workers compensation differs from the statutory scheme for disability benefits under KPERS, the application of some of the reasoning found in workers compensation case law is not in and of itself erroneous. The issue in disability cases is whether a physical or mental disability prevents the KPERS member from engaging in any occupation in which the member is trained, educated, or experienced. Munck was offered accommodated employment at his most recent state employment. Was he physically prevented from engaging in that employment? The presiding officer found that since he refused to attempt the employment without good cause, the question could not be answered and Munck's refusal should bar a finding of disability. Such an application of worker's compensation law to these facts in a disability determination case is not erroneous.

Munck also argues that the fact finder is required to conduct a hearing in order to allow the injured worker an opportunity to explain his refusal to attempt the accommodated work. While this court did not find a case that required a hearing on whether or not there was good cause to refuse accommodated employment, Cooper v. MidAmerican Dairymen, 25 Kan. App. 2d 78, Syl. 2, 957 P. 2d 1120 (1998) does state: "Where the evidence shows that a claimant has the ability to work and earn wages but is not doing so, a hearing must be conducted on whether the claimant made a good faith effort to find work."

In Munck's case the issue was not whether Munck made a good faith effort to find work. Work was available through the accommodated employment. The issue, instead, was whether Munck refused to attempt the accommodated employment without good cause. The presiding officer made a finding based on uncontroverted statements that Munck refused to attempt the accommodated employment without good cause. Although such a finding was made without an evidentiary hearing, this court does not find that the omission of an evidentiary hearing on this issue is an erroneous interpretation or application of the law as long as there was substantive uncontroverted evidence to support the finding.

Although Munck alleges in the scope of review section in his brief that the motion for summary judgment was prematurely granted, this court did not find any specific arguments raised by Munck that the presiding officer granted the motion for summary judgment prematurely. Therefore, this court finds no support for Munck's allegation that KPERS engaged in an unlawful procedure regarding KPERS' summary judgment motion that was filed in the agency action.

Munck argues that some of the evidence relied upon by KPERS is inadmissible and, therefore does not constitute substantial evidence. In particular, Munck cites the expert opinion of Bud Langston, consultant at the Menninger Clinic, who had been hired by the state to give an opinion as to Mr. Munck's employability in his workers compensation case. The presiding officer incorporated Langston's expert opinion into his Findings of Fact No. 4-6. Munck complains that expert witnesses must meet the threshold requirement of K.S.A. 60-456(b) which states:

If the witness is testifying as an expert, testimony of the witness in the form of opinions or inferences is limited to such opinions as the judge finds are (1) based on facts or data perceived by or personally known to the witness at the hearing and (2) within the scope of the special knowledge, skill, experience or training possessed by the witness.

Munck argues that the presiding officer should have required that Langston be examined regarding the data upon which he based his report of August 1, 2000.

Although defendants contend that none of the evidence relied on by KPERS was inadmissible, defendants correctly argue that administrative bodies are not bound by the rules of evidence. The Kansas Court of Appeals held in Kansas State Board of Healing Arts v. Burwell, 5 Kan. App. 357, 361, 616 P.2d 1084, 1088-89 (1980):

Appellant complains that much of the testimony was inadmissible hearsay, but it should be remembered that liberality is allowed in the taking of testimony and the admission of evidence in proceedings before administrative boards, and that such agencies are not bound by strict and technical rules of evidence or procedure.

Furthermore, the findings that the presiding officer relied upon dealt only with the accommodations recommended by Langston and not on any opinions of Langston that Munck alleged in his brief were based on hearsay. (Munck argued that Langston's opinion that Munck could work as a food service operator or as a telemarketer was based on hearsay).

This court finds that Munck's arguments regarding insubstantial evidence are without merit.

Munck argues that the presiding officer's order was arbitrary because he held that Mr. Munck "refused without good cause" to return to work at SRS even though a return to work would have required Munck, a blind man with a cervical injury, to ignore the medical opinion of his personal physician, Dr. Rhodes.

The presiding officer, however, adopted one of the findings of the Administrative Law Judge in Munck's workers compensation case: "The Court finds that the Respondent (SRS) offered employment which was within the restrictions of Dr. Sankoorikal and the abilities of the claimant, but that the claimant has without good cause refused this employment."

The presiding officer, in addition, cited the opinions of Dr. Sankoorikal and Mr. Langston, both of whom believed that Mr. Munck could probably perform the tasks of his SRS job with accommodation. The presiding officer further noted that while opinions may differ about whether Munck could perform the SRS job with accommodations, there was "no disagreement that he didn't try." The presiding officer found that Munck's refusal to even attempt the accommodated employment was unreasonable.

In light of the evidence presented to the presiding officer and KPERS, this court does not find that KPERS' action was unreasonable, arbitrary, or capricious.

KPERS argues that the Restatement of Torts 2d does not apply to Munck's claim. In addition, they state that § 874A has never been adopted by Kansas appellate courts nor even cited in any Kansas appellate decision.

§ 874A provides:

TORT LIABILITY FOR VIOLATION OF LEGISLATIVE PROVISION

When a legislative provision protects a class of persons by proscribing or requiring certain conduct but does not provide a civil remedy for the violation, the court may, if it determines that the remedy is appropriate in furtherance of the purpose of the legislation and needed to assure the effectiveness of the provision, accord to an injured member of the class a right of action, using a suitable existing tort action or a new cause of action analogous to an existing tort action.

KPERS argues that Munck has a civil remedy for an alleged violation of the KPERS benefit plan as set forth in K.S.A. 74-4904 and K.S.A. 77-501 et seq. In addition, Munck has filed a petition for judicial review of the agency's actions pursuant to K.S.A. 77-601 et seq. which does provide civil remedies pursuant to K.S.A. 77-622.

This court finds that the legislature has provided a civil remedy for the violations of statute alleged by Munck. Therefore, this court finds that § 874A of the Restatement of Torts 2d does not apply to Munck's claim and that the claim should be dismissed.

Munck has contended in his Amended Petition for Judicial Review that KPERS unlawfully delegated legislative authority to SBL in the "Administrative Service Agreement" in violation of Article 1, Section 2, of the Kansas Constitution as was condemned in Gumbhir v. Kansas State Board of Pharmacy, 228 Kan. 579, 582, 618 P.2d 837 (1980).

K.S.A. 74-4927(3) provides in part that:

(B) The board may contract with one or more insurance companies, which are authorized and licensed to transact group life and group accident and health insurance in Kansas, to underwrite or to administer or to administer or to both underwrite and administer either the insured death benefit or the long-term disability benefit or both such benefits...

Delegation of legislative power is improper unless it is specifically recognized constitutionally. However, the legislature may delegate administrative functions. Lyon-Coffey Electric Coop v. State Corp Com., 2001 WL 930574.

The question is whether K.S.A. 74-4927(3) delegates legislative power or administrative power.

If the legislature has included specific standards in a delegation, then it has already enacted the law, and it is simply delegating the administrative power to administer the law, based on the standards included in the delegation. On the other hand, if the legislature has not included specific standards within a delegation, then the legislature has delegated the legislative power to make the law. Such legislation is improper without constitutional authorization.

Lyon-Coffey, 2001 WL 930579, P.8

K.S.A. 74-4927(3) provides for KPERS to contract with an insurance company to administer the long term disability benefit. In addition, K.S.A. 74-4927(3) sets out in detail the standards for administration of KPERS funds. This court finds that K.S.A. 74-4927(3) is not an unlawful delegation of legislative authority as it instead is a delegation of administrative authority.

Munck has filed suit against SBL claiming that SBL along with KPERS acted improperly with regard to his disability benefits. However, Section XII of the Administrative Services Agreement between KPERS and SBL states as follows:

SBL in performing its obligations under this Agreement is acting only as the agent of the Trustees and the rights and responsibilities of the parties shall be determined in accordance with Kansas Law of Agency except as otherwise stated; ...

SBL is an agent of KPERS and is not subject to liability in this case. K.S.A. 74-4904(1) provides: "The system may sue and be sued in its official name, but its officers, employees and agents shall not be personally liable for acts of the system." (emphasis added).

All of Munck's allegations against SBL are identical to the allegations against KPERS. Based on K.S.A. 74-4904(1) SBL cannot be held liable for the acts of KPERS and, therefore, this court dismisses SBL from this action.

This court does find that the agency unconstitutionally applied the law as it relates to Munck's procedural due process right to a post-suspension hearing after he had made written request for the hearing pursuant to K.S.A. 74-4904. The court, therefore, awards Munck retroactive disability payments for the period of time that his benefits were suspended, ie. February 5, 1999 through July 22, 1999.

This court also finds that KPERS acted beyond the jurisdiction conferred by any provision of law by entering into an agreement with SBL which provides that there would be no administrative review relative to benefit disputes. This court enjoins and restrains KPERS from complying with that provision in the Administrative Services Agreement with SBL.

In all other respects, the court upholds the validity of the agency's action in terminating the disability benefits of Munck.

As SBL is an agent of KPERS and is not subject to liability, this court dismisses SBL from this action. This court, in addition, dismisses petitioner's claim under § 874A of the Restatement of Torts 2d.

The court has not ruled on Munck's request for attorney's fees pursuant to 42 U.S.C. 1983-1988 as that issue was not briefed by the parties. In light of this court's decision, petitioner will have 10 days to file an itemized request and brief on the issue of whether attorney's fees apply in this case. KPERS will have an additional 10 days to respond upon their receipt of petitioner's brief.

The above findings and conclusions of law constitutes this court's rulings on each of the issues raised in Munck's Petition for Judicial Review except for attorney's fees and no other journal entry is required.

IT IS SO ORDERED.

Dated this 4th day of February, 2002.

 
_______________
Nancy Parrish
District Judge, Third Judicial District
Division 14

I hereby certify that a copy of the above and foregoing MEMORANDUM DECISION AND ORDER was mailed this 4th day of February , 2002, to the following:

 
Frank D. Taff
3601 SW 29th Street
Topeka, Kansas 66614

 
Ronald W. Fairchild
J. Phillip Gragson
5851 SW 29th Street
Suite 1
Topeka, Kansas 66614

 
__________________
Norma J. Dunnaway
Administrative Assistant