Jury Demand in DEAN DENNIS Vs STATE TEACHERS RETIREMENT BOARD ET AL VS.STATE TEACHERS RETIREMENT BOARD| Trellis.Law

On October 26, 2021 a Jury Demand was filed involving a dispute between and for OTHER CIVIL in the District Court of Franklin County.

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IN THE COURT OF COMMON PLEAS
FRANKLIN COUNTY, OHIO

DEAN DENNIS and BOB BUERKLE,
individually and on behalf of those
similarly situated, CASE NO.:

Plaintiffs, Judge

Vv.
CLASS ACTION COMPLAINT AND
STATE TEACHERS RETIREMENT JURY DEMAND
BOARD

Defendant.
PRELIMINARY STATEMENT.

All allegations made in this Complaint are based upon information and belief except those

allegations that pertain to Plaintiffs, which are based on personal knowledge. Each allegation in

this Complaint either has evidentiary support or, alternatively, pursuant to Rule 11 of the Ohio

Rules of Civil Procedure, is likely to have evidentiary support after a reasonable opportunity for

further investigation or discovery

INTRODUCTION

1 Plaintiffs Dean Dennis and Robert Buerkle bring this action against the Defendant

Ohio State Teachers Retirement Board (the “Board” or “Defendant”), on behalf of Plaintiffs and

all other similarly situated retirees to challenge the Board’s unlawful and indefinite elimination of

the annual cost of living allowances (“COLA”) for Plaintiffs and all other retirees beginning on

July 1, 2017.
2. Plaintiffs seek damages and declaratory and injunctive relief for themselves and

all other similarly situated persons in the form of reinstatement of their COLA, restitution of
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foregone COLA, and reasonable attorney fees and costs.

3. Plaintiffs previously commenced this action in the United States District Court for

the Southern District of Ohio in May 2019. The action was dismissed without prejudice as to the

Board on August 17, 2021, on the basis of the Eleventh Amendment to the United States

Constitution, and Plaintiffs have promptly refiled their action in this forum.

JURISDICTION AND VENUE

4 This Court has jurisdiction over the claims herein, as the Board may sue and be

sued pursuant to O.R.C. § 3307.03. The Court of Claims does not enjoy jurisdiction over this

action. The General Assembly consented to the Board being sued in the Court of Common Pleas

prior to the enactment of the Court of Claims Act, O.R.C. § 2743.02(A)(1).

5. Venue with this court is appropriate pursuant to O.R.C. § 3307.131, and because

the Court of Claims does not have jurisdiction over this controversy

THE PARTIES

6 Plaintiff Dean Dennis is an Ohio citizen who resides in Hamilton County, Ohio.

Mr. Dennis was employed by the Cincinnati Public Schools and had thirty-five years of State

Teachers Retirement System of Ohio (“STRS”) service when he retired on January 1, 2008

During his employment, Mr. Dennis and his employer contributed to the STRS defined benefit

plan. Upon his retirement, he was approved for a retirement allowance and became vested under

Ohio law in all amounts and other benefits to which STRS retirees are entitled thereunder.

7. Plaintiff Robert Buerkle is an Ohio citizen who resides in Hamilton County, Ohio.

When Mr. Buerkle retired on July 1, 2003, he had over 35 years of STRS service credit, most of

which (twenty-six years) related to his employment with the Cincinnati Public Schools. Mr.

Buerkle also taught at Miami University, Butler County Vocational School, and Cincinnati State.
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During his employment, Mr. Buerkle and his employers contributed to the STRS defined benefit

plan. Upon his retirement, he was approved for a retirement allowance and became vested under

Ohio law in all amounts and other benefits to which STRS retirees are entitled thereunder.

8. Defendant is a swi juris public entity established pursuant to O.R.C. § 3307.03 that

currently oversees and administers approximately $97 billion on behalf of the 494,000 active,

inactive, and retired Ohio public educators. Because Defendant’s assets total approximately $97

billion, it is one of the largest public pension funds in the United States.

9, As an entity created by state statute, Defendant acts at all times under color of state

law. All actions by Defendant complained of herein were undertaken under color of state law as

the official policy, practice, and custom of Defendant.

STATEMENT OF FACTS

THE STRS DEFINED BENEFIT PLAN IS A TRUST CONSISTING OF
AMOUNTS EARNED AND CONTRIBUTED BY EMPLOYEES OF OHIO
PUBLIC SCHOOLS AND UNIVERSITIES AND AMOUNTS CONTRIBUTED
BY THEIR EMPLOYERS ON THEIR BEHALF. ALL AMOUNTS HELD BY
THE STRS BOARD ARE HELD IN TRUST FOR THE BENEFIT OF OHIO’S
PUBLIC EDUCATORS — THE SOLE AND EXCLUSIVE BENEFICIARIES OF
THE STRS TRUST.

10. Plaintiffs and members of the Class were public educators in Ohio who were at

all times during their employment required as a condition of their employment to contribute a

portion of their earnings to the STRS defined benefit trust.

ML Prior to 2001, the STRS defined benefit plan was the only STRS retirement plan

available to Ohio teachers. Beginning in 2001, two additional options were offered — a defined

contribution plan and a combined plan.! Ohio public educators are required to choose their

STRS retirement plan at the outset of their employment. Individuals who select the defined

1 An additional option in the form of privately-run defined contribution plan known as the Alternative
Retirement Plan” (“ARP”) is available to university faculty. The ARP is not a subject of this action.
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benefit plan cannot change their selection. Individuals who select the defined contribution plan

or combined plan may change their selection during their fifth year of employment.”

12. This case concerns the STRS defined benefit plan. Individuals electing the

STRS defined benefit plan do so at the outset of their employment, within the first 180 days of

their employment as Ohio educators, and cannot subsequently change their plan election. Asa

result of this requirement, Ohio’s public educators reasonably rely upon the expectation that

the STRS defined benefit plan will fulfill its benefit commitments, including the payment of a

simple (non-compounded) annual COLA to ensure that the value of their retirement benefits

somewhat keeps pace with inflation. According to the Board’s website, 86 percent of Ohio’s

public educators participate in the STRS defined benefit plan?

13. Ohio public educators electing to participate in the STRS defined benefit plan

are required to contribute a portion of their earned wages and salaries to the STRS defined

benefit trust. Currently the employee contribution rate is 14 percent. Ohio public schools and

universities contribute an amount to the STRS trust on behalf of each employee based on each

employee’s earnings. Currently, the employer contribution rate is also 14 percent. Member

and employer contributions are the sole sources of funding for the STRS defined benefit trust.

Indeed, Defendant’s website states that:

Members’ benefits are created by three sources

* Members’ annual contributions during their career — they currently contribute

14% of their annual salary.

+ Their employer’s contributions during their career.

2 See STRS website detailing retirement plan options and election rights:
Betps: {Awww strsoh.or aboutus/iny act! sians.btmi (last accessed October 26, 2021).
3 Id.
4Id.
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+ Investment earnings resulting from those contributions.*

14. Thus, the amounts received by the STRS defined benefit trust are derived from

the private property of individual Ohio public educators (i.e., their earnings) and amounts paid

to the STRS defined benefit trust on behalf of individual Ohio public educators by their

employers. All such amounts are held in trust by the STRS Board and administered exclusively

for the benefit of members of the STRS defined benefit plan. Indeed, 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.°

Il. THE BOARD OVERSEES THE OPERATIONS, ADMINISTRATION, AND
FUNDING OF STRS —- A TRUST EXISTING FOR THE BENEFIT OF
CURRENT AND RETIRED TEACHERS — INDEPENDENT OF THE STATE.

15. Defendant Board, and the pension system it oversees, are administratively and

financially independent of the state in the following ways

a. Under O.R.C. § 3307.05, the Board is made up of eleven members, four of

whom are appointed to their positions and seven of whom are elected by the

members of the STRS

The Board is the only entity empowered to carry out the provisions of O.R.C

3307.01 ef seg.

Under O.R.C. § 3307.14, the Board is the trustee of five funds: The

Teachers’ Savings Fund, made up of funds accumulated from the

contributions deducted from teachers participating in the STRS defined

benefit plan; The Employers’ Trust Fund, made up of funds from employer

5 hittps:/ faboutus/ tm act db. f:tral (last accessed October 26, 2021).
ww.strsoh.or
6 See fittps: (aww. stesoh.ore/ dfs, {board 7 boar ‘J3I-policies.ndf p. 14, last visited October 26, 2021. See
also State ex rel. Hovath v. State Teachers Ret. Bd., 1995 Ohio App. LEXIS 1292 (Ohio App. 1995)
(Noting STRS Board’s “fiduciary obligations.”).
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contributions; The Annuity and Pension Reserve Fund; The Survivors’

Benefit Fund; and The Guarantee Fund, which consists of income derived

from STRS investments and transferred interest

The Board manages the STRS funds in a fiduciary capacity. As trustee of the

aforementioned five funds, the Board is tasked to “discharge their duties with

respect to the funds solely in the interests of the [STRS participants and

beneficiaries].” O.R.C. § 3307.15(A). Furthermore, because the Board and its

individual members exercise discretionary authority or control with respect

to the management of STRS investments, they are specifically defined as

fiduciaries under O.R.C. 3307.01(K)

The contributions from Ohio public educators and their employers are the

only contributions mandated by O.R.C. § 3307.01 ef seg.

Under O.R.C. § 3307.12, the Ohio Treasurer of State is merely the custodian

of the funds enumerated in O.R.C. § 3307.14, and all STRS property is held

in the name of the Board under O.R.C. § 3307.03. As a result, funds

deposited with the Ohio Treasurer of State never cease to be the property of

the STRS.

16. Under the aforementioned statutes, the only funds that can be used to satisfy a

judgment in this case or a debt of STRS are funds belonging to STRS. As a result, the other

monies and funds possessed by the Ohio Treasury will not and cannot be used to satisfy a

judgment in this case.

Til. THE U.S. AND OHIO CONSTITUTIONS PROHIBIT GOVERNMENTAL
IMPAIRMENT OF CONTRACTS AND THE DEPRIVATION OF PROPERTY
INTERESTS WITHOUT DUE PROCESS AND JUST COMPENSATION.
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A. Contract Rights Protected by the Contract Clause

17. Article I Section 10 of the U.S. Constitution provides in pertinent part that “[n]o

state shall . . pass any Law impairing the Obligation of Contracts...” (The “Contract

Clause”). Similarly, Article II section 28 of the Ohio Constitution provides that “[t]he General

Assembly shall have no power to pass laws impairing the obligation of contracts.”

18. A state violates the Contract Clause when: there is a contractual relationship, a

change in law impairs the contractual relationship, and the impairment is substantial. See General

Motors Corp. v. Romein, 503 U.S. 181, 186 (1992).

19. It is clearly established that vested pension rights constitute a contractual

relationship protected by the Contract Clause. See State ex rel. Horvath v. State Teachers

Retirement Bd., 83 Ohio St. 3d 67, 77 (1998), citing State ex rel. Cunat v. Trustees of Cleveland

Police Relief & Pension Fund, 149 Ohio St. 477, 481-482 (1948) (holding that “vested rights”

statutes create contractual rights to public pension benefits).

20. As discussed in greater detail below, Plaintiffs allege that they had an

unconditional, contractual right to a COLA, or alternatively that they had a contractual right to

receive a COLA unless the Board’s actuary determined (in a specific, designated report) that a

reduction was necessary to preserve the fiscal integrity of the system, and the Board then chose

to reduce the COLA based on that determination.

21 As of 07/01/2017, when the Board voted to eliminate the COLA, the “Funded-

Ratio” of the plan administered by the Board stood at 75.1%, which was higher than the 72%

average of all U.S. Public Pension Plans at that time.

B. Property Interests Protected by The Due Process Clause

2. The Fourteenth Amendment to the United States Constitution provides in pertinent
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part that “nor shall any State deprive any person of life, liberty, or property, without due process

of law.” (the “Due Process Clause”). The Supreme Court of the United States explained when a

property interest protected by the Due Process Clause arises:

[T]o have a property interest in a benefit, a person clearly must have more
than an abstract need or desire for it. He must have more than a unilateral
expectation of it. He must, instead, have a legitimate claim of entitlement
toit. Board of Regents v. Roth, 408 U.S. 564, 577 (1972) (emphasis added).

B. Constitutionally protected property interests are not created by the Constitution,

but rather by “existing rules or understandings that stem from an independent source such as

state law — rules or understandings that secure certain benefits and that support claims of

entitlement to those benefits.” /d.

24. With regard to pension benefits, a plaintiff “need not demonstrate that their

benefits are ‘vested’ under local or state law in order to show a ‘legitimate entitlement’ to

those benefits.” Kahles v. City of Cincinnati, 2015 U.S. Dist. LEXIS 112504, **14-15, 2015

WL 5016505 (S.D. Ohio 2015) (emphasis added). Rather, the existence of a protected

property interest (i.e., a reasonable expectation of entitlement) is determined by whether the

language of the statute or rule conferring the benefit is framed in mandatory terms and whether

it imposes substantive constraints on official discretion to award the benefit. See Med. Corp.,

Inc. v. City of Lima, 296 F.3d 404, 409 (6" Cir. 2002) (citations omitted).
2. A Constitutionally protected property interest is not recognized if an official,

board or agency is granted unfettered discretion to deny the benefit. /d. at 410. However,

where, as in this case, applicable law grants a board limited or no discretion to reduce or

discontinue benefits, the actor does not possess unfettered discretion, and a Constitutionally

protected property interest is recognized. See Kahles v. City of Cincinnati, 2015 U.S. Dist

LEXIS 112504, *15, 2015 WL 5016505 (S.D. Ohio 2015) (“The only basis upon which the
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Board could reduce or discontinue the benefits is defined in the Code and is not left to the

Board's unfettered discretion. The Court finds these facts are sufficient to establish an interest

in the receipt of the benefits that is protected by procedural due process.”)

26. According to the U.S. Supreme Court, the “unique mandates” of the particular

statutory scheme at issue must be examined to determine whether unfettered discretion has

been conferred to the board or official in question See Connecticut Bd. Of Pardons v.

Dumschat, 452 U.S. 458, 466 (1981). Likewise, the Ohio Supreme Court has held that “the

nature and extent of a contributor’s protected property rights in the STRS are determined solely

by the statutes that govern the system.” See State ex rel. Horvath v. State Teachers Retirement

Bad., 83 Ohio St. 3d 67, 74 (1998) (emphasis added).

27. Applying these principles, courts have recognized that the Board does not

possess unfettered discretion but rather clearly limited authority with respect to the

modification of benefits mandated by statute. See Smith v. State Teachers Retirement Board,

1998 Ohio App. LEXIS 403, **20-22, 1998 WL 54362 (10 Dis. App. 1998) (“Appellees [the

Board] have pointed to no authority to demonstrate that they have discretion to decrease a

retirement benefit which has been increased by the state legislature”) (emphasis in original).

Likewise, the Ohio Attorney General rendered an opinion on future COLA rights of retirees

concluding that applicable law “entitled” retirees to the COLA set by statute. 1987 Ohio Op.

Atty. Gen. No. 44, 1987 Ohio AG LEXIS 68, *12. Indeed, the Sixth Circuit has expressly

recognized that a state pension fund COLA statute “may create a property interest under the

Due Process Clause.” See Puckett v. Lexington-Fayette Urban Cnty. Gov't, 833 F.3d 590, 605

(6" Cir, 2016)
2. To apply the foregoing principles to this case, it is necessary to review the
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express language of the General Assembly as set forth in the Ohio Revised Code. As discussed

in detail below, O.R.C. § 3307.67(A) mandates that the Board pay retirees an annual COLA

of two percent beginning on August 1, 2013. On its face, O.R.C. § 3307.67(E) does not grant

the STRS Board “unfettered discretion” to modify the COLA mandated by the plain and

unambiguous language of O.R.C. § 3307.67(A).

IV. IN 2012 THE OHIO GENERAL ASSEMBLY CREATED A STATUTORY
ENTITLEMENT TO AN ANNUAL COLA’ BENEFIT FOR’ STRS
BENEFICIARIES, LIMITING THE BOARD’S DISCRETION TO ADJUST
THE COLA BENEFIT.

29. Plaintiffs and members of the Class were public employees required, as a

condition of their employment, to contribute a portion of their earnings to the STRS defined

benefit plan. Upon retirement and the payment of a monthly retirement benefit, Ohio law vests a

right in such individuals, including Plaintiffs and members of the Class, to receive such retirement

benefits so long as they remain beneficiaries of any of the funds established as part of the STRS

See O.R.C. § 3307.42

30, O.R.C. § 3307.67 was amended by the General Assembly in 2012 to provide in

pertinent part as follows:

(A) Except as provided in divisions (D) and (E) of this section, the state teachers
retirement board shall annually increase each allowance or benefit payable under the
STRS defined benefit plan. Through July 31, 2013, the increase shall be three per cent
On and after August 1, 2013, the increase shal/ be two per cent. (Emphasis added)

31 O.R.C. § 3307.67(E) restricted the ability of the STRS Board to “adjust” the

annual increases provided for in subsection (A), granting it the discretion to do so only if:

[T]he board’s actuary, in its annual actuarial valuation required by section 3307.51 of the
Revised Code or in other evaluations conducted under that section, determines that an
adjustment does not materially impair the fiscal integrity of the retirement system or is
necessary to preserve the fiscal integrity of the system. (Emphasis added).

32. The Board’s discretion to adjust annual increases under O.R.C. § 3307.67(E) is

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not unfettered. Of particular import to this case, the Board may only reduce the annual increase

payable under the STRS defined benefit plan if the Board’s actuary “determines” that such a

reduction is “necessary to preserve the fiscal integrity of the system,” and such determination

is set forth either in the actuary’s annual actuarial valuation or other evaluations conducted

under O.R.C. § 3307.51

33. The requirement that the Board’s actuary certify that a reduction in the

statutorily mandated COLA is “necessary to preserve the fiscal integrity of the system” is a

substantive limitation on the Board’s authority to adjust the COLA. Under ORC. §

3307.01(J), the Board’s actuary must be a member of the American Academy of Actuaries.

Members of the American Academy of Actuaries are required to adhere to a strict Code of

Professional Conduct requiring, among other things, professional integrity, and standards of

practice. Thus, the actuary’s certification of necessity is not a meaningless requirement that

can be obtained upon request. The requirement to include such certification in a publicly filed

and disseminated report serves a significant and meaningful interest in affording interested

parties, including retirees such as Plaintiffs and the Class they seek to represent, an opportunity

to be publicly heard and challenge such a determination before the Board.

#4. In addition to the actuary’s annual actuarial valuation, O.R.C. § 3307.51

provides for four other reports that may be prepared by the actuary under the section’s

purview

a. An actuarial investigation of the mortality, service, and other experience of
the members, retirants, and beneficiaries of the system, and other system
retirants as defined in section 3307.35 of the Revised Code to update the
actuarial assumptions used in the actuarial valuation required by division
(A). O.RC. § 3307.51(B).
Other studies or actuarial valuations to determine the adequacy of the
normal and deficiency rates of contribution provided by section 3307.28 of

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the Revised Code. O.R.C. § 3307.51(C).

An actuarial analysis of any introduced legislation expected to have a
measurable financial impact on the retirement system ORC. §
3307.51(D)
A report giving a full accounting of the revenues and costs relating to the
provision of benefits under section 3307.39 of the Revised Code. O.R.C. §
3307.51(B).
35, Significantly, O.R.C. § 3307.51 expressly requires each of the reports it

describes to be publicly filed with specified public offices, councils, and committees. For

example, the annual actuarial evaluation must be submitted to the Ohio retirement study

council, the director of budget and management, and the standing committees of the house of

representatives and the senate with primary responsibility for retirement legislation. It must be

submitted to each of these parties immediately, but no later than the first day of January

following the year for which the valuation was made. O.R.C. § 3307.51(A).

36. The timely preparation and filing of the reports provided for in O.R.C. § 3307.51

serves a significant public interest in allowing concerned members of the public including,

among others, beneficiaries of the STRS, to be informed of the performance of the system,

and to provide advance notice of any proposed or recommended changes or adjustments to the

system Indeed, Defendant’s board meetings are public meetings at which beneficiaries

(including Plaintiffs and Class members) are entitled to address the Board on issues of concern.

Vv. IN 2013, THE STRS BOARD CREATED A VESTED A RIGHT TO AN ANNUAL
COLA BENEFIT FOR THEN CURRENT RETIREES,

37. O.R.C § 3307.42(A) provides, in pertinent part, that:

[T]he granting to any person of an allowance, annuity, pension or other benefit under the
STRS defined benefit plan... pursuant to an action of the state teachers’ retirement board
vests a right in such person, so long as the person remains the beneficiary of any of the
funds established by section 3307.14 of the Revised Code, to receive the allowance, annuity,
pension, or benefit at the rate fixed at the time of granting the allowance, annuity, pension,

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or benefit. (Emphasis added)

38, The “STRS defined benefit plan” means “the plan described in sections 3307.50

to 3307.79 ofthe revised code.” O.R.C. § 3307.42(N).

39. Under the STRS defined benefit plan, an “allowance” is “the pension plus the

annuity, or any other payment under the STRS defined benefit plan.” O.R.C. § 3307.50(E)

(Emphasis added).

40, O.R.C. § 3307.67 provides for an annual increase payable to beneficiaries of the

STRS defined benefit plan.

Al. Pursuant to O.R.C. § 3307.50(E), this annual increase constitutes an

“allowance” under the STRS defined benefit plan.

gD In August 2013, the Board adopted OAC 3307:1-10-01, mandating that the

Board “shall annually increase each allowance or benefit payable under the defined benefit plan

by two percent. 7

4B, The 2013 version of OAC 3307:1-10-01(B) is effectively a verbatim restatement

of O.R.C. § 3307.67, but the Board chose not to reserve for itself any authority to adjust the

COLA for vested beneficiaries.

44. Under the express language of O.R.C. § 3307.42(A), each beneficiary who

became entitled to a 2% COLA by virtue of the aforesaid Board Rule thereby acquired a vested

right to said COLA, subject to no exceptions, and this vested right was to last “so long as the

person remains the beneficiary of any of the funds established by section 3307.14.”

VI. IN 2017 THE STRS BOARD ABRUPTLY, INDEFINITELY, AND
UNLAWFULLY ELIMINATED THE COST OF LIVING ALLOWANCE FOR
ALL CURRENT AND PROSPECTIVE STRS BENEFICIARIES.

7 Retirees with effective dates following August 1, 2013, are subjected to a 60-month waiting period. OAC
307:1-10-01(C).
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45. On November 14, 2016, the STRS Board’s actuary submitted the annual

actuarial valuation required by O.R.C. § 3307.51(A). The annual valuation reported, among

other things, that the STRS plan had experienced net gains during the year and maintained a

steady funding percentage. Significantly, there is no indication in the valuation report that a

reduction or elimination of cost of living allowances was recommended or necessary to

preserve the fiscal integrity of the system.

46. On March 3, 2017, the Board’s actuary submitted the actuarial experience

review contemplated by O.R.C. § 3307.51(B). The experience review recommended changes

to several actuarial assumptions utilized by Defendant. For example, the review recommended

a reduction in the rate of inflation from 2.75% to 2.5%, and a reduction in the assumed rate of

return from 7.75% to 7.00%. The actuarial experience review projected that the effect of the

proposed assumption changes would be to reduce the plan’s funding percentage. However,

there is no mention in the actuarial experience review that a reduction or elimination of cost

of living allowances was recommended or necessary to preserve the fiscal integrity of the

system

47. On or about March 16, 2017, the Board voted to accept in large part the actuary’s

recommended assumption changes. Minutes of the meeting reflect that the Board anticipated

considering “plan design changes” at its next meeting in April 2017

48, On April 20, 2017, the Board attempted to exercise the limited authority granted

to it by O.R.C. § 3307.67(E) to “adjust” annual COLA benefits by amending OAC 3307:1-10-

01 to eliminate all such increases, regardless of the beneficiary’s retirement date, indefinitely

49, The Board had previously relinquished any right it had to reduce the COLA for

beneficiaries who had retired prior to this date, by virtue of its 2013 promulgation of OAC

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3307:1-10-01, which had vested in those beneficiaries the right to an annual two percent

COLA pursuant to O.R.C. § 3307.42(A).

50. In addition, as of April 20, 2017, the requirements of O.R.C. § 3307.67(E) for

adjusting the COLA of any retiree had not been satisfied. Specifically, no report prepared in

compliance with O.R.C. § 3307.51 contained a determination by the Board’s actuary that such

an indefinite elimination of COLA benefits was necessary to preserve the fiscal integrity of

the system.

51 Despite the fact that no report prepared in compliance with O.R.C. § 3307.51

contained a determination by the Board’s actuary that the elimination of COLA benefits was

necessary to preserve the fiscal integrity of the system, the Board voted to indefinitely

eliminate the COLA for all beneficiaries

52. Asa direct result of the Board’s April 20, 2017 decision to eliminate the COLA

benefits, no cost of living increases have since been issued to Plaintiffs and the Class they seek

to represent.*

CLASS ALLEGATIONS

53. Plaintiffs seek to represent a class pursuant to Rule 23 of the Ohio Rules of Civil

Procedure, defined as all STRS defined benefit plan beneficiaries who would have received a

two percent COLA benefit on or after July 1, 2017, but for the Board’s April 20, 2017 vote

eliminating those increases (the “Class”).°

54. Members of the Class are so numerous — more than one hundred forty-five

8 As of filing and since May 2021, the United States is experiencing a projected annual inflation rate of at
least five percent (5.4% as of September 2021). hitus: //www.usinflationcalculator.con/inflation/current-
inflation-rates/. For this very reason, the Federal Government’s Social Security Administration recently
approved a 5.9 percent cost of living increase for approximately 70 million Americans.
nttps://www.ssa.sov/cola/
9 Plaintiffs reserve the right to revise this class definition prior to moving for class certification.

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thousand — that joinder of individual claims is impracticable. Membership in the Class can

be objectively determined based on information found in Defendant’s records.

55. There are significant questions of fact and law common to the members of the

Class which predominate over questions affecting only individual members. The following

questions of law and fact, among others, are common to all members of the Class:

a. Whether the Board’s promulgation of OAC 3307:1-10-01 vested a right to

an annual 2% COLA for those who became entitled to it by virtue of that

action;

Whether the Board’s April 20, 2017, decision to reduce the COLA to 0%,

without compensation to those retirees who had a vested property interest

in an annual 2% COLA, violated the Takings Clause of the U.S.

Constitution and the Ohio Constitution;

Whether the Board’s April 20, 2017 decision to reduce the COLA to 0%

violated O.R.C. 3307.67;

Whether Plaintiffs and the Class have received annual COLAs since July

1, 2017;
Whether the Board’s April 20, 2017 decision to indefinitely eliminate the

annual COLAs was supported by a prior determination in a report prepared

by the Board’s actuary, in accordance with R.C. Section 3307.51, that the

reduction was necessary to preserve the fiscal integrity of the retirement

system;

Whether the Board’s April 20, 2017 decision to indefinitely eliminate the

annual COLAs without a prior determination by the Board’s actuary, in a

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report prepared in accordance with R.C. Section 3307.51, was a violation

of the Due Process guaranteed by the Fourteenth Amendment of the United

States Constitution;

Whether the Board’s April 20, 2017 decision to indefinitely eliminate the

annual COLAs was a violation of Article I, Section 16 of the Ohio

Constitution;

Whether the Board’s decision to indefinitely eliminate the annual COLAs

violated the Contracts Clause of the United States Constitution;

Whether the Board’s decision to indefinitely eliminate the annual COLAs

breached the Board’s fiduciary duties owed to Plaintiffs and the Class; and

Whether the Board has been unjustly enriched to the detriment of Plaintiffs

and the Class by indefinitely eliminating the annual COLAs since July 1,

2017.

56. Plaintiffs’ claims are typical of the claims of the Class because their claims arose

from the same events as those of the Class, including but not limited to the events of April 20,

2017, when the Board unlawfully eliminated the annual cost of living increases prescribed by

Ohio law.

37. Plaintiffs will fairly and adequately represent the Class because they have the

Class members’ best interests in mind, their claims are co-extensive with, and identical to,

those of the Class, and because they are represented by qualified counsel experienced in

litigation of this nature, including counsel that successfully represented (and continues to

represent under a 30 year consent decree) a class of current Cincinnati employees in the

relatively recent employee benefits litigation titled, Sunyak, et al v. City of Cincinnati, et al.,

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Case No. 1:11-cv-00445-MRB

58, A class action is superior to other available methods for fair and efficient

adjudication of these claims since individual joinder of all members of the Class (more than

one hundred forty thousand class members) is impracticable, and most members of the Class

are without the financial resources necessary to pursue this matter because most are now living

on their retirement benefits. Even if some members of the Class could afford to litigate their

claims separately, such a result would unduly burden the courts in which the individual cases

would proceed. Further, separate individual litigation will increase the time and expense of

resolving this common dispute — a dispute that flows from The Board’s identical unlawful

conduct described above.

59. The Class may also be certified pursuant to Rule 23(B)(1) and (2) of the Ohio

Rules of Civil Procedure because the prosecution of separate actions by individual members

of the Class would create the risk of inconsistent adjudications that would establish

incompatible standards of conduct for Defendant. Further, adjudications with respect to

individual class members, as a practical matter, would be dispositive of the interests of the

other members not parties to the individual adjudications or would substantially impair or

impede their ability to protect their interest. Moreover, Defendant has acted on grounds that

apply generally to the Class, thereby making appropriate final injunctive or corresponding

declaratory relief with respect to the Class as a whole including, but not limited to, the payment

of the two percent cost of living adjustment going forward and providing to Plaintiff and the

Class restitution for the prior unpaid cost of living adjustments.

STATEMENT OF CLAIMS

COUNT 1: IMPAIRMENT OF CONTRACT
(United States Constitution, Article 1, Section 10)

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6 The General Assembly empowered the Board to create vested interests, through

Board action, in O.R.C. § 3307.42(A). The Board exercised that authority in 2013 when it

enacted OAC 3307:1-10-01 and created a vested right to an annual two-percent COLA for

retirees then participating in the STRS defined benefit plan, and in those who subsequently

became entitled to a two-percent COLA under the 2013 Rule.

2. It is clearly established under Ohio law that vested pension benefits give rise to

Constitutionally protected contractual rights.

63. In 2017 the Board unlawfully and without authority withheld from Plaintiffs and

members of the class their vested pension benefit consisting of an annual two-percent COLA

increase. Having created a vested right to an annual two-percent COLA, the Board lacked all

authority to rescind that right.

4. The Board’s actions substantially impaired Plaintiffs’ and the Class’s

contractual interests.

65, As a direct and proximate result of the Board’s unlawful impairment of

Plaintiffs’ and the Class’s vested contractual interest, Plaintiffs and the Class are entitled to

damages and all other appropriate relief.

COUNT 2: UNCONSTITUTIONAL TAKING
(42 U.S.C. § 1983, Article 1 Section 19 OH Constitution)

67. O.R.C. § 3307.42 expressly provides that the granting of a benefit to any person,

pursuant to an action of the Board, vests a right in such person to continue to receive that

benefit for as long as that person remains a beneficiary of funds established by R.C. 3307.14.

Thus, the General Assembly empowered the Board to create vested interests through Board

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action.

68. The Board exercised that authority in 2013 by enacting OAC 3307:1-10-01,

effective August 1, 2013, thereby creating a vested right to an annual two-percent COLA for

retirees then participating in the STRS defined benefit plan, and in those who subsequently

became entitled to a two-percent COLA under the 2013 Rule

@. Pursuant to O.R.C § 3307.42, this action of the Board gave to those who then (and

subsequently) began receiving a two percent COLA benefit, a vested interest in that COLA

benefit for as long as they remained beneficiaries of the funds established by O.R.C. § 3307.14.

70. Plaintiffs’ vested interest in the two percent COLA benefit was a property interest

of which they could not lawfully be deprived without just compensation.

71. By taking the two percent COLA benefit from those retirees in whom it had

vested, the B

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SHERYL K MUNSON Track Judge’s New Case

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October 26, 2021

Case Filing Date

October 26, 2021

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Jury Demand: DEAN DENNIS Vs STATE TEACHERS RETIREMENT BOARD ET AL VS.STATE TEACHERS RETIREMENT BOARD

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