Preview
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - R52
IN THE COURT OF COMMON PLEAS
FRANKLIN COUNTY, OHIO
DEAN DENNIS AND BOB BUERKLE, ) CASE NO. 21-cv-006832
INDIVIDUALLY AND ON BEHALF OF )
THOSE SIMILARLY SITUATED, ) JUDGE SHERYL K. MUNSON
Plaintiffs,
v
STATE TEACHERS RETIREMENT
BOARD,
Defendant
DEFENDANT STATE TEACHERS RETIREMENT BOARD’S
PARTIAL MOTION FOR JUDGMENT ON THE PLEADINGS
Defendant State Teachers Retirement Board (STRB), under Civ.R. 12(C), moves this
Court to dismiss Counts 1-5 and Count 7 of Plaintiffs’ Class Action Complaint. These counts fail
to state a claim on which relief can be granted because:
e While Counts 2-4 purport to assert claims under 42 U.S.C. 1983, the
STRB is an “arm of the State” under the Eleventh Amendment and
thus not a “person” that can be sued under Section 1983
Counts | and 5, which assert violations of the Contracts Clauses of
the Ohio and United States Constitutions, fail because Plaintiffs
identify no legislative act that impaired any contractual obligation.
Plaintiffs’ breach of fiduciary duty claim (Count 7) identifies no
statutory fiduciary duty that the STRB allegedly breached, and the
Attorney General alone has standing to assert a violation of any
fiduciary duty the STRB or its members owe to STRS.
The grounds for this motion are more fully explained in the attached brief in support, which
is incorporated by reference.
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - RS
Respectfully submitted,
/s/ Karl A. Bekeny
Karl A. Bekeny (0075332) (Trial Counsel)
Benjamin C. Sassé (0072856)
Michael J. Ruttinger (0083580)
Elisabeth C. Arko (0095895)
Tucker Ellis LLP
950 Main Avenue Suite 1100
Cleveland, OH 44113-7213
Tel: 216.592.5000
Fax: 216.592.5009
E-mail: karl.bekeny@tuckerellis.com
benjamin.sasse@tuckerellis.com
michael.ruttinger@tuckerellis.com
elisabeth.arko@tuckerellis.com
Scott J. Stitt (0073943)
Tucker Ellis LLP
175 S. Third Street, Suite 520
Columbus, OH 43215-7101
Tel 614.358.9717
Fax 614.385.9712
E-mail: scott.stitt@tuckerellis.com
Attorneys for Defendant the State Teachers
Retirement Board
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - R54
IN THE COURT OF COMMON PLEAS
FRANKLIN COUNTY, OHIO
DEAN DENNIS AND BOB BUERKLE, ) CASE NO. 21-cv-006832
INDIVIDUALLY AND ON BEHALF OF )
THOSE SIMILARLY SITUATED, ) JUDGE SHERYL K. MUNSON
Plaintiffs,
Vv
STATE TEACHERS RETIREMENT
BOARD,
Defendant.
MEMORANDUM IN SUPPORT OF DEFENDANT STATE TEACHERS RETIREMENT
BOARD’S PARTIAL MOTION FOR JUDGMENT ON THE PLEADINGS
I INTRODUCTION
The core of this case arises out of Plaintiffs’ claim that the State Teachers Retirement
Board (STRB) failed to comply with statutory prerequisites for adjusting cost-of-living increases
(COLAs) when it reduced future COLAs for the State Teachers Retirement System’s (STRS)
Defined Benefit Plan (DB Plan) participants from 2% to 0%. They assert a vested right to future
COLAs by cherry-picking language from 2012 statutory amendments, Pls.’ Compl. ff 29-44,
while ignoring the General Assembly’s clear directive in the very same bill that they have no such
vested right. See 2012 Sub.S.B. No. 342, Section 7. Needless to say, the STRB denies these
allegations.
This motion, however, focuses on, and seeks to eliminate, several counts that either assert
untenable theories of recovery or are barred by the dismissal of their federal lawsuit. See Dennis
vy. State Teachers Retirement
Bd., 8.D. Ohio No. 1:19-CV-386, 2021 WL 3630513 (Aug. 17, 2021)
(STRB Answer Ex. B). For example, Plaintiffs allege violations of the Contract Clauses of the
Ohio and United States Constitutions, Pls.’ Compl. {| 60-65, 86-89, without identifying any
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - RS
legislation allegedly violating these clauses. Because both Contract Clauses address legislative
acts alone, the lack of any such allegation dooms these claims and both should be dismissed.
Equally flawed is Plaintiffs’ breach of fiduciary duty claim, Pls.” Compl. ff 93-96, which not only
attempts to impose common law duties the STRB does not owe but also overlooks the statute
specifying that the Attorney General is the party with standing to sue for a breach of any fiduciary
duty owed to the system. The breach of fiduciary duty claim should be dismissed for both reasons.
Beyond this, Plaintiffs seek to recover under 42 U.S.C. 1983 for several kinds of alleged
constitutional violations, Pls.’ Compl. {{] 66-85, even though their federal lawsuit ended their right
to do so. Dennis squarely held that the STRB is an “arm of the state” under the Eleventh
Amendment and dismissed Plaintiffs’ claims against it for lack of jurisdiction on this basis. 2021
WL 3630513, at *8 (STRB Answer Ex. A & B). Plaintiffs concede this much. Pls.’ Compl. § 3.
And it is settled that an “arm of the state” is not a “person” that can be sued under Section 1983
Will v. Michigan Dep't of State Police, 491 U.S. 58, 70 (1989). Thus, when Plaintiffs failed to
appeal the federal district court’s holding that the STRB is an “arm of the state,” they forfeited any
right to sue under Section 1983. Because they cannot collaterally attack that holding here, all
claims asserted under Section 1983 should be dismissed too.
IL. FACTUAL AND PROCEDURAL BACKGROUND
A. The STRB oversees and operates STRS.
The STRB administers STRS, one of five Ohio public retirement systems. See Pls.’ Compl
4 8; STRB Answer § 8. R.C. Chapter 3307 creates and governs STRS, which receives funding
from member contributions, employer contributions, and investment returns. Pls.” Compl. ¥ 13;
STRB Answer { 13. Its members include public school teachers and faculty at Ohio’s state colleges
and universities. The STRB too is a creature of statute. R.C. 3307.03; Pls.’ Compl. {{ 8-9; STRB
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - RS
Answer ff 8-9. It follows that R.C. Chapter 3307 specifies any fiduciary duties the STRB or its
members owe to STRS. See, e.g., R.C. 3307.15(A); R.C. 3307.181(D).
B. The STRB has a statutory responsibility to maintain the fiscal integrity of STRS.
The STRB is the trustee of several specific funds within STRS, each of which is a separate
legal entity. R.C. 3307.14; R.C. 3307.141. The annuity and pension reserve fund, for example, is
the fund that pays all pensions under STRS’s DB Plan. See R.C. 3307.031; R.C. 3307.14(C). Both
employees and their employers make financial contributions to the DB Plan. R.C. 3307.26(C);
Pls.’ Compl. ff 13-14, STRB Answer§f 13-14
STRS’s solvency depends on public funds. A portion of the funds come from public
institutions of higher education, whose funding is “derived from the State of Ohio” and thus “state
funds.” Hall v. Med. College of Ohio at Toledo, 742 F.2d 299, 305 (6th Cir. 1984). As for public
school districts and community schools, they receive state funding on a per-pupil basis. See R.C.
3314.08; R.C. 3317.01. For most public school districts, the Ohio Superintendent of Public
Instruction deducts that sum from the employer’s state funding and pays it to STRS. R.C. 3307.31.
The STRB has to ensure that STRS remains solvent and actuarially sound. R.C. 3307.512
requires the STRB to “establish a period of not more than thirty years to amortize [STRS’s]
unfunded actuarial accrued pension liabilities for benefits paid under the STRS defined benefit
plan.”
C. Plaintiffs’ claims concern a reduction to future COLAs, which the General
Assembly said Plaintiffs have no legitimate expectation to receive.
At its core, Plaintiffs’ claim is that the STRB overstepped its statutory authority when it
reduced future COLAs for STRS’s DB Plan participants from an adjustment of 2% to 0%
Plaintiffs concede that R.C. 3307.67(E) empowers the STRB to adjust the COLA in response to
annual actuarial studies required by R.C. 3307.51. Pls.’ Compl. {fj 30-33. They argue, however,
2
3
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - R57
that the STRB violated that statute because even though it commissioned an actuarial study, “there
is no mention in” the study itself that “a reduction or elimination of cost of living allowances was
recommended or necessary to preserve the fiscal integrity of the system.” Pls.’ Compl. § 46.
Plaintiffs claim a right to recover for this alleged statutory violation by surmising a vested right to
future 2% COLAs, Pls.’ Compl. §{§ 19-20, 46, 51, even though the General Assembly squarely
said they have no legitimate expectation of any future COLA. 2012 Sub.S.B. No. 342, Section 7
(expressing legislative intent “[t]o recognize that no member has a legitimate expectation of any
particular future cost-of-living adjustment, or payment of future cost-of-living adjustments at any
particular time, under Ohio law”).
Thisis the anchor for all of Plaintiffs’ claims, which include: Contract Clause claims (under
the United States and Ohio Constitutions); Takings Clause claims (under the United States and
Ohio Constitutions); procedural and substantive due process claims (under the Due Process Clause
of the Fourteenth Amendment to the United States Constitution); and Ohio law claims for breach
of contract, breach of fiduciary duty, unjust enrichment, and declaratory judgment. See Pls.’
Compl. ff 60-107.
D. Plaintiffs already brought these claims once, and a federal court determined
that the STRB is an arm of the state.
In Dennis, Plaintiffs filed a substantively identical class action complaint against the
STRB.! Dennis, 2021-WL-3630513 at *1 (STRB Answer Ex. B). The STRB moved to dismiss,
arguing it was an “arm of the state” immune from federal claims under the Eleventh Amendment.
Id. at *1-2. While Plaintiffs opposed the motion, Magistrate Judge Bowman agreed with the STRB
1 Plaintiffs also named the individual STRB board members in their Amended Complaint in Dennis
Dennis, 2021 WL 3630513, at *1 (STRB Answer Ex. B). Plaintiffs do not name the individual members
here. And the individual board members were dismissed with prejudice in federal court. Id. at *3.
4
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - R58
and held that it was an “arm of the state” entitled to immunity. Dennis v. State Teachers Retirement
Bd., No. 1:19-CV-00386, 2020 WL 4334883 (S.D. Ohio July 28, 2020) (hereinafter Dennis R&R)
(STRB Answer Ex. A).
Plaintiffs objected to parts of Magistrate Judge Bowman’s Report and Recommendation.
Dennis, 2021 WL 3630513, at *1 (STRB Answer Ex. B). But Judge Black overruled the
objections, adopting Magistrate Judge Bowman’s “well-reasoned analysis” (id. at *3) and
dismissing Plaintiffs’ claims against the STRB without prejudice “for lack of jurisdiction due to
Eleventh Amendment immunity[.]” /d. at *9. Plaintiffs did not appeal the dismissal
Til. LEGAL STANDARD
Rule 12(C) of the Ohio Rules of Civil Procedure provides that “any party may move for
judgment on the pleadings,” which (as the name suggests) permits consideration of the complaint
and answer. /d. (citation omitted). It also allows “consideration of documents attached and
incorporated into pleadings.” Riolo vy. Oakwood Plaza Ltd. P’ship, 9th Dist. Lorain No
04CA008555, 2005-Ohio-2150, 6, citing Civ.R. 10(C). The standard in a Rule 12(C) motion is
the same as a motion under Rule 12(B)(6). Gawloski v. Miller Brewing Co., 96 Ohio App.3d 160,
163 (9th Dist. 1994). Thus, a court should dismiss a claim where it appears beyond doubt from the
pleadings that the plaintiff can prove no set of facts warranting relief. Lytal v. Crawl for Cancer,
Inc., 2018-Ohio-2017, J 8, 113 N.E.3d 1056 (10th Dist.).
Iv. LAW & ARGUMENT
A. Counts 2-4 should be dismissed because Plaintiffs cannot state a claim under
42 U.S.C. 1983.
First, Counts 2-4 fail to state a claim for relief because they seek recovery under a statute,
42 U.S.C. 1983, which provides no remedy against the STRB. Section 1983 creates a remedy
against “[e]very person who, under color of any statute, ordinance, regulation, custom, or usage,
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - RS
of any State or Territory or the District of Columbia, subjects, or causes to be subjected, any citizen
of the United States or other person within the jurisdiction thereof to the deprivation of any rights,
privileges, or immunities secured by the Constitution and laws[.]” (Emphasis added.) 42 U.S.C
1983. But the STRB is not a Section 1983 “person,” so Counts 2-4 do not state a claim for relief
against it.
1. An “arm of the state” is not a “person” who can be sued under Section 1983.
A state is not a “person” under Section 1983. Will v. Michigan Dept. of State Police, 491
US. 58, 71 (1989). Nor are “governmental entities that are considered ‘arms of the State’ for
Eleventh Amendment purposes.” /d. at 70. One reason “arms of the state” are not Section 1983
“persons” is that Congress never intended to allow state court remedies against state entities that
cannot be sued in federal court:
Given that a principal purpose behind the enactment of § 1983 was to provide a
federal forum for civil rights claims, and that Congress did not provide such a
federal forum for civil rights claims against States, we cannot accept petitioner’s
argument that Congress intended nevertheless to create a cause of action against
States to be brought in state courts, which are precisely the courts Congress sought
to allow civil rights claimants to avoid through § 1983
Id. at 66. Yet that is precisely what Plaintiffs want here: a state court remedy after a federal district
court found that the STRB is an arm of the state and dismissed their claims under the Eleventh
Amendment. See Dennis, 2021 WL 3630513, at *8-9 (STRB Answer Ex. B); Pls.’ Compl. § 3.
Because the federal district court’s holding cannot be revisited and, in any event, is correct
under binding Tenth District precedent, the STRB is not a Section 1983 “person” and thus all
counts that seek relief under Section 1983 fail to state a claim for relief and should be dismissed.
2. The federal court’s holding that the STRB is an “arm of the state” cannot be
revisited.
The federal district court dismissed Plaintiffs’ claims under the Eleventh Amendment after
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - R60
thoroughly analyzing whether the STRB is an “arm of the State” and holding that it was. See
Dennis, 2021 WL 3630513, at *3-9 (holding that the state’s potential liability for a judgment
against the STRB, state statutes and case law, state appointments to the STRB, and the retirement
system’s state-wide operation all support a finding that the STRB is an arm of the state) (STRB
Answer Ex. B). Plaintiffs forfeited any challenge to that holding by failing to appeal this dismissal.
They cannot collaterally attack it here.
Federal law determines the preclusive effect of a federal decision on a federal issue. E.g.,
Heck v. Humphrey, 512 U.S. 477, 488 n. 9 (1994) (“State courts are bound to apply federal rules
in determining the preclusive effect of federal-court decisions on issues of federal law.”); Musa v.
Gillett Communications, Inc., 119 Ohio App.3d 673, 682 (8th Dist.1997) (explaining that it is
“appropriate to analyze the preclusive effect of a federal judgment by applying federal principles
of res judicata”), citing 2 Restatement of the Law 2d, Judgments, Section 87 (1982) (“Federal law
determines the effects under the rules of res judicata of a judgment of a federal court.”).
Under federal law, “the general rule is that ‘[w]hen an issue of fact or law is actually
litigated and determined by a valid and final judgment, and the determination is essential to the
judgment, the determination is conclusive in a subsequent action between the parties, whether on
the same or a different claim.”” B&B Hardware, Inc. v. Hargis, Indus., Inc., 575 U.S. 138, 148
(2015), quoting 1 Restatement, Section 27. For issue preclusion, a final judgment includes a
dismissal for lack of jurisdiction. See NextWave Personal Communications, Inc. vy. F.C.C., 254
F.3d 130, 148 (D.C.Cir.2001); Unity House, Inc. v. First Commercial Fin. Group, Inc., 7th Cir
No. 98-1060, 1999 WL 164924, at *2 (Mar. 17, 1999); 1 Restatement, Section 27, Illustration 3.
Issues that cannot be relitigated after dismissal for lack of jurisdiction include any issue
necessary to the dismissal. NextWave Personal Communications, 254 F 3d at 148 (explaining that
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - R61
“if a court makes a substantive determination in order to arrive at a jurisdictional holding, the
substantive determination can have preclusive effect so long as it was ‘actually litigated and
oo
determined in the prior action ). Examples include:
e The scope of the Chapter 11 automatic stay in the Bankruptcy Code,
see id.;
A finding that a third party is not the defendant’s agent, Unity
House, 1999 WL 164924, at *2; and
A finding that the defendant did not agree to assume a third party’s
contractual obligations, see Matosantos Commercial Corp. \
Applebee's Internatl., Inc., 64 F.Supp.2d 1105, 1110-1112
(D.Kan.1999)
Here, Plaintiffs cannot relitigate whether the STRB is an “arm of the State” because: (1)
Plaintiffs and the STRB were parties in Dennis; (2) whether the STRB is an “arm of the State” was
actually litigated and determined in Dennis; and (3) the holding that the STRB is an “arm of the
State” was essential to the dismissal for lack of jurisdiction. See Dennis, 2021 WL 3630513, at *8
(because the STRB showed “that it is an arm of the state entitled to Eleventh Amendment
immunity,” the trial court dismissed “Plaintiffs[’] claims against the STRB for lack of
jurisdiction”) (STRB Answer Ex. B). As a result, the STRB is not a Section 1983 “person,” Will,
491 US. at 70-71, and all Section 1983 claims asserted against it should be dismissed.
3. In any event, binding Tenth District precedent confirms that the STRB is
not a “person” who can be sued under Section 1983.
But even if Plaintiffs had not already litigated the issue, the Section 1983 claims still would
have to be dismissed under binding Tenth District precedent holding that the STRB is not a Section
198. 23 «6, person.”
The Tenth District addressed that issue in State ex rel. Schumacher y. State Teachers
Retirement Bd., 65 Ohio App.3d 623 (10th Dist. 1989). State ex rel. Schumacher affirmed the trial
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - R62
court’s ruling that the STRB is “not a person for purposes of Section 1983 claims * * *.” /d. at
627, citing In re Appeal of Ford, 3 Ohio App.3d 416, 418 (10th Dist. 1982)
This Court must follow State ex rel. Schumacher. E.g., Young v. Durrani, 2016-Ohio-5526,
61 N.E.3d 34, § 29 (1st Dist.) (trial court is “bound to follow” the decision of a superior court).
For this reason too, the STRB is not a Section 1983 “person” and all Section 1983 claims asserted
against it should be dismissed.
B. Plaintiffs’ Contract Clause claims (Count 1 & 5) fail because Plaintiffs do not
allege a legislative act impaired their right to contract.
Counts 1 and 5, asserted under the Contract Clauses of the United States and Ohio
Constitutions, also should be dismissed for failure to state a claim. They do not state a claim
because, among other things,” they identify no law passed by the General Assembly that allegedly
violated their rights. Pls.” Compl. ff] 63, 88
On their face, both Section 28, Article II of the Ohio Constitution and Section 10, Article
I of the United States Constitution address only legislative action impairing contractual
obligations. Section 10, Article I of the United States Constitution thus states that “[n]o State shall
* * * pass any * * * Law impairing the Obligation of Contracts * * *.” (Emphasis added.) Section
28, Article II of the Ohio Constitution similarly addresses “/t/he general assembly,” specifying
that the General Assembly “shall have no power to pass * * * Jaws impairing the obligation of
contracts * * *.” (Emphasis added.)
The case law aligns with this textual focus on legislative action. The United States Supreme
2 Plaintiffs also identify no statute that allows them to assert claims for damages under the Contract Clauses
of the United States and Ohio Constitution, Pls.’ Compl. §§ 60-65, 86-89, and the Contract Clauses create
no private cause of action. Kaminski v. Coulter, 865 F.3d 339, 346-47 (6th Cir. 2017) (explaining that the
remedy for a violation of the Contracts Clause is not a private cause of action against a state official but a
judgment declaring the impairment a nullity); Bass Energy, Inc. v. Highland Hts., 139 Ohio App.3d 725,
2010-Ohio-2102, § 10 (interpretation of Ohio’s Contracts Clause aligns with federal precedent).
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - R6
Court holds that the United States Constitution’s Contract Clause, “as its terms indicate, is directed
against legislative action.” Barrows v. Jackson, 346 U.S. 249, 260 (1953); see also Tidal Oil Co.
yv. Flanagan, 263 U.S. 444, 451 (1924). The same is true of the Ohio Constitution’s Contract
Clause, which imposes its “express restriction * * * on the General Assembly,” not any other
branch of state government or arm of the state. Kissinger v. Pavlus, 10th Dist. Franklin No. 01AP-
1203, 2002-Ohio-3083, | 23.
Plaintiffs’ own authorities also reflect this focus on legislative action. See Pls.’ Compl. J
18-19. Gen. Motors Corp. v. Romein, 503 U.S. 181, 183, 191-192 (1992), upheld Michigan
legislation requiring two automakers to repay workers’ compensation benefits withheld relying on
a prior statute. State ex rel. Horvath v. State Teachers Retirement Bd., 83 Ohio St.3d 67, 76-78
(1998), upheld a statutory provision that delayed crediting of interest on members’ accumulated
contributions until retirement. And State ex rel. Cunat v. Trustees of Cleveland Police Relief &
Pension Fund, 149 Ohio St. 477, 481-483 (1948), held that amendments to two General Code
provisions could not be applied to retirees whose right to a pension had vested.
Asa result, Plaintiffs cannot state a claim for relief under either the state or federal Contract
Clause. Plaintiffs claim (although incorrectly)3 that the STRB’s decision to reduce the COLA from
2% to 0% violated statutes and regulations already on the books. Pls.’ Compl. {{ 60-65, 86-89.
Whatever else may be said about this allegation, it does not claim the STRB could or did take
legislative action that impaired any contractual obligation owed to Plaintiffs. Plaintiffs thus fail to
state a claim for relief under the Contract Clauses of the Ohio and United States Constitutions and
Counts 1 and 5 should be dismissed.
3 The STRB violated no statute or regulation when it reduced the COLA to preserve the fiscal integrity of
the retirement system. See generally STRB Answer.
10
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - R64
Cc. Plaintiffs have not alleged a breach of a statutory fiduciary duty.
Finally, Count 7 fails to state a claim for relief against the STRB. This count asserts a claim
against the STRB for breach of a common law fiduciary duty to act primarily for Plaintiffs’ benefit
regarding “the STRS and the payment of benefits owed.” Pls.’ Compl. { 94. Because the STRB
owes no common law fiduciary duty of any kind and Plaintiffs lack standing to enforce any
statutory fiduciary duties owed to STRS, Count 7 should be dismissed.
1. Statutes define the fiduciary duties owed to STRS.
The General Assembly created the STRB under R.C. Chapter 3307 to manage STRS, the
retirement system that chapter creates. As a result, the STRB is “a creature of statute [and] can
exercise only such powers as have been conferred upon it by statute.” Appeal of Ford, 3 Ohio
App.3d at 418
It follows that the General Assembly prescribes the fiduciary duties owed by the STRB or
its members to the STRS. Those duties relate to investment of the funds— which are separate legal
entities, see R.C. 3307.141— and the need to avoid particular transactions. See, e.g., R.C
3307.15(A)-(B) (noting STRB members “shall be the trustees of the funds created by [R.C.]
3307.14” and thus the board has a “fiduciary responsibility with respect to the investment” of these
funds); R.C. 3307.181 (fiduciary duty to avoid engaging in specified transactions). On the other
hand, the Ohio Supreme Court has explained that obligations not expressly identified by the
General Assembly as fiduciary duties are not fiduciary in nature. See, e.g., State ex rel. Powell v.
Ohio Pub. Emps. Retirement Sys., Ohio St.3d , 2021-Ohio-4030, {J 20-23 (holding that
relator failed to “establish[] the existence of a fiduciary duty” when the statute at issue did not
“mention[] a fiduciary duty, let alone impose[] one on the OPERS board”).
Plaintiffs thus cannot show that the STRB owes any common law fiduciary duties to
11
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - R6
individual plan participants. Plaintiffs claim “Ohio law and the STRS Board expressly recognize
and acknowledge that it and its members are trustees of the STRS owing fiduciary duties to STRS
beneficiaries such as Plaintiffs.” Pls.’ Compl. § 14 & n. 6. Not true. The sources Plaintiffs cite
simply confirm that the STRB and its members owe only those fiduciary duties prescribed by R.C
Chapter 3307 and that those duties are owed to STRS
Start with the Tenth District’s decision in State ex rel. Horvath v. State Teachers
Retirement Bd., 10th Dist. Franklin No. 94APE07-988, 1995 WL 141049, at *1 (Mar. 31, 1995).
Plaintiffs insist State ex rel. Horvath notes the STRB’s “fiduciary obligations.” Pls.’ Compl. { 14
n. 6. But that description is misleadingly incomplete. What State ex rel. Horvath actually says is
that “[t]he plan’s provisions and [the STRB’s] fiduciary obligations in managing the plan are
contained in R.C. Chapter 3307.” (Emphasis added.) 1995 WL 141049, at *1. In other words, far
from establishing that the STRB owes common law fiduciary duties, Plaintiffs’ own authority
confirms the STRB’s fiduciary duties are limited to those prescribed by statute.
Turn next to the State Teacher Retirement System of Ohio’s Board Policies. Pls.’ Compl.
4 14 n. 6; STRB Answer STRB 14, Ex. C. Even if these policies had the force of law, they do
not show that the STRB owes common law fiduciary duties. Plaintiffs cite the statement on page
14 that the STRB members “[s]erve as trustees of the funds created by Section 3307.14 of the
Revised Code.” But simply identifying members as “trustees” does not suggest they owe common
law fiduciary duties in addition to their statutory duties. And the Board Policies’ later description
of the fiduciary duties the STRB members owe tracks the statutory fiduciary duties discussed
above. Compare Board Policies at 55 (STRB Answer Ex. C) with R.C. 3307.15(A).
In short, the STRB and its members owe only the fiduciary duties R.C. Chapter 3307
expressly imposes and those duties are owed to the STRS. Because Count 7 alleges no breach of
12
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - R6
any of those duties, it fails to state a claim for relief and should be dismissed.
2. The Attorney General alone has standing to bring a civil action for a breach
of a fiduciary duty owed to STRS.
But that is not the only reason why Count 7 fails to state a claim. Count 7 would have to
be dismissed even if Plaintiffs could allege the breach of an R.C. Chapter 3307 statutory fiduciary
duty owed to the system, because the General Assembly vested the Attorney General—not specific
beneficiaries of any R.C. Chapter 3307 fund—with the authority to institute a civil action for
breach of a statutory duty owed to the system
A private remedy does not exist for every alleged statutory violation. Nielsen v. Ford Motor
Co., 113 Ohio App.3d 495, 500 (9th Dist. 1996); Grey v. Walgreen Co., 197 Ohio App.3d 418,
2011-Ohio-6167, § 11 (8th Dist.). Rather, the General Assembly may “expressly authorize[] and
designate[] the authority to enforce particular regulations and statutes to certain persons and
agencies.” Ayers v. City of Cleveland, 2017-Ohio-8571, 99 N.E.3d 1269, ¥ 29 (8th Dist.), aff'd,
160 Ohio St.3d 288, 2020-Ohio-1047. When it does so, a claim to enforce the statute or regulation
must “be instituted by [that] particular person or office, [and] the suit may not be instituted by
another.” Nielsen, 113 Ohio App.3d at 500, quoting Crull v. Maple Park Body Shop, 36 Ohio
App.3d 153 (12th Dist. 1987); see also Fawcett v. G. C. Murphy & Co., 46 Ohio St.2d 245, 248
(1976), holding modified by Greeley v. Miami Valley Maint. Contractors, Inc., 49 Ohio St.3d 228
(1990) (finding plaintiff did not have a cause of action for a statutory breach when the General
Assembly gave the Department of Industrial Relations authority to enforce the statute).
Here, R.C. 109.98 designates the Attorney General as the sole office responsible for
enforcing statutory fiduciary duties owed to STRS:
If a member of a state retirement board breaches the member’s fiduciary duty to the
retirement system, the attorney general may maintain a civil action against the
board member for harm resulting from that breach.
13
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - R67
The Attorney General may recover damages or injunctive relief, but “[a]ny damages awarded shall
be paid to the retirement system.” Jd.
This statutory mechanism for enforcing fiduciary duties owed to the system shows no
“{ntent to create a private remedy; if anything, [it] suggest[s] the opposite.” Alexander v. Sandoval,
532 U.S. 275, 289 (2001). And the reason the General Assembly did not create a private remedy
is simple: the statutory fiduciary duties owed to the STRS as a system require STRB members to
make decisions that ensure STRS remains solvent and actuarially sound while balancing the
interests of current and future retirees. See R.C. 3307.512. Individual members can, and often do,
have competing interests. What is necessary for STRS may not directly benefit every member. The
General Assembly thus wisely designated the Attorney General alone to enforce the fiduciary
duties owed to the system
Plaintiffs thus have no private right of action for any alleged breach of the duties owed to
STRS and lack standing to sue for any breach of those duties. Ayers, 2017-Ohio-8571, § 29;
Nielsen, 113 Ohio App.3d at 500; Grey, 2011-Ohio-6167, § 11; Alexander, 532 U.S. at 289. This
aligns with the Board Policies Plaintiffs cite, Pls.” Compl. {| 14 n. 6, which confirm the Attorney
General enforces the fiduciary duties owed to STRS. See Board Policies at 55 (explaining that
“[c]ivil action by the Attorney General is possible”).
In sum, Plaintiffs’ breach of fiduciary duty claim fails because (1) the STRB is a creature
of statute and Plaintiffs have not alleged a breach of a statutory fiduciary duty and (2) the Attorney
General is the office responsible for enforcing the fiduciary duties owed to STRS
Vv. CONCLUSION
The Court should streamline this case by dismissing all Section 1983 claims, which
collaterally attack the federal court’s prior holding that the STRB is not an “arm of the state,” the
14
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - R68
two Contract Clause claims, and Plaintiffs’ breach of fiduciary duty claim. Plaintiffs cannot revisit
the holding that the STRB is an arm of the state—and thus not a Section 1983 person—here. The
two Contract Clause claims are fatally flawed because they identify no legislative action that
allegedly impairs any contractual obligation. And the breach of fiduciary duty claim attempts to
impose common law duties that do not exist and to usurp the Attorney General’s authority to
enforce fiduciary duties owed to STRS. For these reasons, and those detailed above, the Motion
for Judgment on the Pleadings should be granted.
Respectfully submitted,
/s/ Karl A, Bekeny
Karl A. Bekeny (0075332) (Trial Counsel)
Benjamin C. Sassé (0072856)
Michael J. Ruttinger (0083580)
Elisabeth C. Arko (0095895)
Tucker Ellis LLP
950 Main Avenue Suite 1100
Cleveland, OH 44113-7213
Tel: 216.592.5000
Fax: 216.592.5009
E-mail: karl.bekeny@tuckerellis.com
benjamin.sasse@tuckerellis.com
michael.ruttinger@tuckerellis.com
elisabeth.arko@tuckerellis.com
Scott J. Stitt (0073943)
Tucker Ellis LLP
175 S. Third Street, Suite 520
Columbus, OH 43215-7101
Tel: 614.358.9717
Fax: 614.385.9712
E-mail: scott.stitt@tuckerellis.com
Attorneys for Defendant the State Teachers
Retirement Board
1S
Franklin County Ohio Clerk of Courts of the Common Pleas- 2022 Jan 14 1:02 PM-21CV006832
OF767 - R6
PROOF OF SERVICE
A copy of the foregoing was filed electronically on January 14, 2022. Service of this filing
will be made under Civ.R. 5(B)(3) through this Court’s electronic and under Civ.R. 5(B)(2)(f) at
the email addresses below:
Jeffrey S. Goldenberg Paul J. Minnillo
Todd B. Naylor MINNILLO LAW GROUP CO. LPA
GOLDENBERG SCHNEIDER, LPA 2712 Observatory Avenue
4445 Lake Forest Drive, Suite 490 Cincinnati, OH 45208
Cincinnati, OH 45242 Phone: 513.723.1600
Phone: 513.345.8291 Fax: 513.723.1620
Fax: 513.345.8294 pimn@mle-Ipa.com
goldenbera@ gs-leeal com
tmaylon@¢s-legal com
Stephen E. Imm David J. Butler
Matthew S. Okiishi James D. Abrams
FINNEY LAW FIRM, LLC TAFT STETTINIUS & HOLLISTER, LLP
4270 Ivy Pointe Blvd., Suite 225 65 E. State Street, Suite 1000
Cincinnati, OH 45245 Columbus, OH 43215
stephen @finnevlawfirm cor Phone: 614.221.2838
raild@fioneylawfirm com Fax: 614.221.2007
dbutler@taflaw.com
jabrams@taflaw.com
Attorneys for Plaintiffs Dean Dennis, Bob
Buerkle, and all others similarly situated.
Respectfully submitted,
S/ Karl Bekeny
Karl A. Bekeny (0075332)
One of the attorneys for Defendant the State
Teachers Retirement Board
16