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Court Rules Union Lacked Standing to File 'Taxpayer Action' Disputing Workers' Exclusion from Early Retirement Plan

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2011-0569.  State ex rel. Teamsters Local Union No. 436 v. Cuyahoga Cty. Bd. of Commrs., Slip Opinion No. 2012-Ohio-1861.
Cuyahoga App. No. 94703, 194 Ohio App.3d 258, 2011-Ohio-820. Judgment reversed.
O'Connor, C.J., and Lundberg Stratton, O'Donnell, Lanzinger, Cupp, and McGee Brown, JJ., concur.
Pfeifer, J., concurs in judgment only.
Opinion: http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2012/2012-Ohio-1861.pdf

Video clip View oral argument video of this case.

(May 1, 2012) The Supreme Court of Ohio ruled today that a union representing some employees of the Cuyahoga County Sanitary Engineering Division did not have standing to pursue a “taxpayer” lawsuit challenging the exclusion of division employees from an early retirement plan offered to other county employees.  The court also held that a separate declaratory judgment action on behalf of the excluded employees should have been dismissed because the workers did not exhaust available administrative remedies before filing suit against the county.

The Court’s 7-0 decision, authored by Justice Yvette McGee Brown, reversed a ruling by the Eighth District Court of Appeals.

The case arose from a November 2008 resolution passed by the Cuyahoga County Commissioners that established an early retirement incentive plan (ERIP) that would be open from January 2009 to January 2010 to all employees of the commissioners except those working in the Sanitary Engineering Division. Teamsters Local Union No. 436 represents some of the workers excluded from the plan.

A few days before passage of the resolution, some employees of the Sanitary Engineering Division, none of whom were union members, filed a grievance on behalf of all Sanitary Engineering Division employees regarding eligibility for the retirement plan.  The county administrator, James McCafferty, held a hearing on the grievance on January 9, 2009.  Approximately 15 Sanitary Engineering Division employees, at least four of whom were union members, attended the hearing and were given an opportunity to be heard.  On January 20, 2009, the administrator issued a decision, determining that the Sanitary Engineering Division employees were not permitted to participate in the retirement plan.  The administrator mailed the decision to each employee who had attended the hearing, including the four identified union members, Kevin Lesh, Jerry Tharp, Richard Dryer, and Thomas Spracale.  None of the employees attempted to appeal the administrator’s decision.

On December 22, 2009, the union sent a taxpayer demand letter to the Cuyahoga County prosecutor.  The union urged the prosecutor to file an action to compel the commissioners to extend the retirement plan to the Sanitary Engineering Division employees, or to recover the funds used for the retirement plan due to its allegedly unlawful exclusion of the Sanitary Engineering Division.  The prosecutor declined to initiate the requested action. On December 30, 2009, the union filed a taxpayer action against the commissioners, on behalf of all union-member Sanitary Engineering Division employees, seeking injunctive and declaratory relief. Specifically, the union sought a declaration that the commissioners violated R.C. 145.297 when they authorized the ERIP for all board employees excluding the Sanitary Engineering Division and sought an order compelling the commissioners to include the Sanitary Engineering Division in the ERIP.  The union sought similar relief in a separate cause of action for declaratory judgment and in a request for writ of mandamus.

In addition to denying the merits of the union’s claims, the commissioners asserted that the union did not have standing to bring its taxpayer action, and that it was otherwise barred from requesting equitable remedies because the Sanitary Engineering Division employees had failed to exhaust their administrative remedies.  The trial court denied the union’s request for injunctive relief and its action in mandamus. However, the trial court did issue a declaratory judgment that the commissioners’ failure to include the Sanitary Engineering Division as part of the “employing unit” that was eligible for the ERIP did not comply with the definition of “employing unit” in R.C. 145.297, and that the commissioners were therefore in violation of the statute. 

The commissioners appealed to the Eighth District Court of Appeals, which affirmed the trial court’s judgment. The commissioners sought and were granted Supreme Court review of the case.

In today’s decision reversing the Eighth District, Justice McGee Brown noted the court did not reach the underlying legal question of whether the commissioners had budgetary discretion to exclude one division from an ERIP offered to other county employees because the court’s findings on other issues rendered that question moot.

Justice McGee Brown wrote: “Before a court may consider the merits of a party’s legal claim, the party seeking relief must establish that he or she has standing to bring the claim.  ... An analysis of standing in a statutory taxpayer action against a county entity must begin with R.C. 309.12, which allows a county prosecutor to initiate legal action to restrain the contemplated misapplication of county funds or completion of illegal contracts or to recover funds or damages from illegal contracts that have been executed or funds that have been misapplied.” 

“If a taxpayer presents a written request to the county prosecutor to take action pursuant to R.C. 309.12 and is denied assistance from the county prosecutor, the taxpayer may initiate his own action on behalf of the county. ...  (T)he taxpayer must also demonstrate that the remedy sought will benefit the public in order to have standing. ... (W)hen a remedy being pursued is one that is merely for the individual taxpayer’s benefit, the taxpayer cannot claim that he is vindicating a public right, and he will not have standing to pursue a taxpayer action.”

“(T)he union here has failed to allege any concrete taxpayer interest that is threatened by the county’s ERIP resolution. Instead, the union merely alleges that the existence of a statutorily noncompliant county resolution constitutes an injury in and of itself. Although it is well established that taxpayers ‘may judicially contest the validity of any official act which directly affects prejudicially their rights as taxpayers by increasing the burden of taxes or otherwise,’ taxpayers cannot contest official acts ‘merely upon the ground that they are unauthorized and invalid.’ ... Thus, without more than the bare claim that the county has failed to comply with R.C. 145.297, the union cannot establish taxpayer standing. ... (T)here is no vindication of public rights or conferral of public benefits to be found in the union’s attempt to obtain retirement benefits for a small number of employees.  Therefore, we hold that the union lacked taxpayer standing to challenge the board’s ERIP resolution, and the courts below erred in failing to dismiss the union’s taxpayer action for that reason.”

With regard to the issue of administrative remedies, Justice McGee Brown wrote: “(T)o the extent that the union’s complaint sought relief that was separate from the taxpayer cause of action, we examine whether the union and the Sanitary Engineering Division employees were required to exhaust administrative remedies prior to initiating a declaratory-judgment action.”

“We first look to what administrative remedies were available to the union-represented Sanitary Engineering Division employees. ... Pursuant to R.C. 145.297(B), ‘[e]very retirement incentive plan shall include provisions for the timely and impartial resolution of grievances and disputes arising under the plan.’  The ERIP in question complied with the above statutory requirements by providing: ‘Any employee determined to be ineligible to participate in this early retirement incentive plan may file a grievance ... Such grievances shall be heard and decided by the Cuyahoga County Administrator.  ... The decision of the Cuyahoga County Administrator shall be final.’ ... Accordingly, the Sanitary Engineering Division employees were required to file a grievance with the administrator, and to file an R.C. 2506.01 administrative appeal from the administrator’s decision, in order to exhaust their administrative remedies.”

“Although none of the union-represented employees was named in the grievance that was filed on behalf of all of the Sanitary Engineering Division employees, some of the union-represented employees availed themselves of the grievance process by participating in the hearing with the administrator.  After the administrator issued a final order denying the grievance, none of the sanitary engineering division employees filed an administrative appeal. Accordingly, the employees failed to exhaust all of their administrative remedies.”

“(T)he union asserts that an exception to the general rule applies and that the Sanitary Engineering Division employees were not required to exhaust their administrative remedies because continuing to participate in the grievance process would have been futile.  It is true that parties need not pursue their administrative remedies if doing so would be futile or a vain act.  ... However, a ‘“vain act” occurs when an administrative body lacks the authority to grant the relief sought; a vain act does not entail the petitioner’s probability of receiving the remedy. The focus is on the power of the administrative body to afford the requested relief, and not on the happenstance of the relief being granted.”’

“(T)he board’s ERIP made the grievance process available to the employees, and union-represented employees were given an opportunity to be heard during the grievance hearing.  Nothing would have prevented the union from attacking the validity of the ERIP in an administrative appeal.  Therefore, we hold that the Sanitary Engineering Division employees’ continued participation in the grievance process would not have been a vain act, and we reverse the Eighth District’s decision allowing the union to pursue the declaratory judgment action without exhausting the available administrative remedies.”

Justice McGee Brown’s opinion was joined by Chief Justice Maureen O’Connor and Justices Evelyn Lundberg Stratton, Terrence O’Donnell, Judith Ann Lanzinger and Robert R. Cupp.  Justice Paul E. Pfeifer concurred in judgment only.

Dale Pelsozy, 440.248.4210, for the Cuyahoga County Board of Commissioners.

Joseph J. Guarino III, 216.397.5844, for Teamsters Local Union No. 436.