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02/10/98 BUDDIE YOUNG v. MICHAEL L. MORY

BUDDIE YOUNG, PLAINTIFF-APPELLEE,
v.
MICHAEL L. MORY, AS EXECUTIVE SECRETARY OF THE STATE EMPLOYEES' RETIREMENT SYSTEM OF ILLINOIS, AND STATE EMPLOYEES' RETIREMENT SYSTEM OF ILLINOIS, DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of White County. No. 96-MR-2

Honorable E. Kyle Vantrease, Judge, presiding.

Welch, P.j., and Chapman, J., concur.

The opinion of the court was delivered by: Justice Hopkins delivered the opinion of the court:

Defendants, the State Employees' Retirement System of Illinois (SERS) and Michael L. Mory, the executive secretary of SERS, appeal from the Judgement order and permanent injunction entered in favor of plaintiff, Buddie Young, by the White County circuit court. On appeal, defendants contend that plaintiff's complaint was not ripe for consideration by the trial court, that the trial court erred in entering a permanent injunction against defendants because plaintiff had an adequate remedy at law, and that the trial court erred by ordering SERS to refrain from offsetting plaintiff's retirement benefits by the attorney-fees portion of his workers' compensation award. We affirm the trial court.

A. FACTS

The parties agree that the facts are undisputed and the issues involve only questions of law. Plaintiff is an employee of the Illinois Department of Transportation (IDOT) and participates in SERS's pension plan. Plaintiff has pending workers' compensation claims against IDOT. Plaintiff and IDOT have agreed to settle the workers' compensation claims for $100,000. Prior to finalizing the settlement, plaintiff filed a complaint against defendants in the circuit court, requesting a declaratory Judgement and a permanent injunction.

In the complaint, plaintiff alleged that he sustained work-related injuries, that those injuries resulted in disability, that he hired a law firm to represent him on his workers' compensation claims, that he is required to pay his attorney a fee out of any workers' compensation benefits he receives, and that he "desires to accept" IDOT's settlement proposal "but for the matters" alleged in the complaint. Essentially, plaintiff claims that he should not have his SERS benefits reduced by the amount of the fees he must pay his attorney for obtaining the workers' compensation benefits for him. Plaintiff's claim is based upon the common-fund doctrine, whereby "an attorney who performs services in creating a fund should in equity and good conscience be allowed compensation out of the whole fund from all those who seek to benefit from it." Baier v. State Farm Insurance Co., 66 Ill. 2d 119, 124 (1977).

In addition to workers' compensation benefits, plaintiff is entitled to occupational disability benefits from SERS. 40 ILCS 5/14- 123 (West 1996). Under section 14-129 of the Illinois Pension Code, SERS is entitled to offset any amounts plaintiff receives under the Workers' Compensation Act (820 ILCS 305/1 et seq. (West 1996)) against the amount of occupational disability payments it is required to pay plaintiff. 40 ILCS 5/14-129 (West 1996). The statute authorizing the offset provides:

"efore the board takes any action on an application for an occupational disability or occupational death benefit, adjudication by the Industrial Commission of Illinois or a ruling by the agency responsible for determining the liability of the State under the Workers' Compensation Act or the Workers' Occupational Diseases Act shall be had on a claim to establish that the disability or death was incurred while in the performance and within the scope of the member's duties, under the terms of the Illinois Workers' Compensation Act or the Workers' Occupational Diseases Act, whichever applies. The system shall make payment of an occupational disability or occupational death benefit only if the claim is found to be compensable under one or both of those Acts.

Any amounts provided for a member or his dependents under those Acts shall be applied for the period of time prescribed by such Acts for payments thereunder as an offset to any occupational disability *** benefit *** in such manner as may be prescribed by the rules of the board." (Emphasis added.) 40 ILCS 5/14-129 (West 1996).

In conjunction with the above-quoted statute, SERS has adopted a regulation which provides, "The amount considered for offset purposes shall not be reduced by any legal expenses granted from the award to the member." 80 Ill. Adm. Code §1540.90(5) (1997). Thus, even though the worker is required to file a workers' compensation or occupational disability claim as a part of the process of claiming a disability pension from SERS, SERS still offsets the portion of the award that the worker is required to pay his or her attorney. This is the crux of the issue before this court, whether SERS should be allowed to offset the portion of the workers' compensation or occupational disability award that is payable to the workers' attorney.

At the hearing on plaintiff's motion for summary judgment, defendants presented testimony from Robert Hicks, a disability supervisor employed by SERS. Hicks testified that, if plaintiff accepted the $100,000 settlement offer, his monthly payment would be $673 during the offset period. If SERS offset the entire $100,000 settlement, plaintiff would receive $673 per month for 62.2355 months and then his monthly payments would be increased to 75% of his final salary while employed. If SERS offset only the amount plaintiff received after deducting the attorney fees of $20,000, plaintiff would still receive $673 per month, but only for 49.884 months, before SERS began to pay him at the higher rate of 75% of his final salary. Plaintiff's interest in whether the offset includes the portion of the award that goes to his attorney is this: he will be paid at a lower rate for nearly 13 months longer if the entire $100,000 is offset. In other words, his disability pension, which is greater than his offset payment, will be payable almost 13 months sooner if only the $80,000 plaintiff actually receives is offset.

The trial court resolved the issue in favor of plaintiff, holding that the regulation (80 Ill. Adm. Code §1540.90(5) (1997)) disallowing the reduction of the offset for legal expenses is invalid "as a matter of law." The court also found that the common-fund doctrine applies to the defendants under the facts of the case, that plaintiff's remedy at law is inadequate, and that plaintiff would sustain irreparable harm if the regulation was allowed to apply to him. The trial court granted plaintiff's motion for summary Judgement and entered a permanent injunction to prohibit defendants from enforcing the invalid regulation. The order provides, in pertinent part, as follows:

"This Court declares that the common fund doctrine is applicable to and serves to reduce the amount of [SERS's] offset provided for [by statute] by the amount of attorneys' fees and legal expenses incurred by the Plaintiff ...


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