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Boards of Trustees of the Chicago Heights Police Pension Fund v. Department of Insurance

Case Date: 06/26/2001
Court: 1st District Appellate
Docket No: 1-99-1589 Rel

SECOND DIVISION
June 26, 2001




No. 1-99-1589

THE BOARDS OF TRUSTEES OF THE CHICAGO 
HEIGHTS POLICE PENSION FUND; EVANSTON 
POLICE PENSION FUND; NORRIDGE POLICE 
PENSION FUND; NORTHLAKE POLICE PENSION 
FUND; TINLEY PARK POLICE PENSION FUND; 
MIDLOTHIAN POLICE PENSION FUND; EVERGREENPARK POLICE PENSION FUND; OAK BROOK POLICEPENSION FUND; MONTGOMERY POLICE PENSIONFUND; WOOD RIVER POLICE PENSION FUND;FOREST PARK POLICE PENSION FUND; FORESTPARK POLICE PENSION FUND; WESTMONT POLICEPENSION FUND; ADDISON FIRE PROTECTIONDISTRICT PENSION FUND; CHICAGO HEIGHTSFIREFIGHTERS' PENSION FUND; PEORIAFIREFIGHTERS PENSION FUND; ROCK ISLANDFIREFIGHTERS' PENSION FUND; BYRONFIREFIGHTERS' PENSION BOARD; and THE ILLINOISPUBLIC PENSION FUND ASSOCIATION,

                       Plaintiffs-Appellees,                         

          v.

THE DEPARTMENT OF INSURANCE, and ARNOLD DUTCHER, Acting Director,

                      Defendants-Appellants

(Thomas R. Jones, Chief Adm'r, Public Pension Funds 
Division, in his official capacity,

                     Defendant).

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)		 Appeal from the
Circuit Court of
Cook County













No. 98 CH 6967












Honorable
Aaron Jaffe,
Judge Presiding.


PRESIDING JUSTICE CAHILL delivered the opinion of the court:

In 1997 the General Assembly created a public pension division (the Division) within theDepartment of Insurance (the Department) (40 ILCS 5/1A-101 et seq. (West 1998)). Among theobligations imposed upon the Division was a duty to automate its operations, services andcommunications "to the fullest practical extent." 40 ILCS 5/1A-107 (West 1998). Included wasthe duty to provide electronic exchange of information between the Division and public pensionfunds, and the authority to receive from public pension funds data on "computer processiblemedia." 40 ILCS 5/1A-107 (West 1998). The Division read this statutory language in a way thatwould authorize a rule to compel public pension funds to pay annual compliance fees in only oneway: depositing the amount of the fee in a bank account that could be electronically debited bythe Department. The rule was adopted. When several of the public pension funds that areappellees here attempted to pay their annual compliance fees by check in 1998, the Departmentrefused to accept them.

The public pension funds filed suit for declaratory and injunctive relief. Count I of theirsecond amended complaint alleged that the Department's mandatory automated clearinghouseelectronic debit system (ACH) violated certain fiduciary duties imposed upon the Department bythe Illinois Pension Code (the Code) (40 ILCS 5/1A-101 et seq. (West 1998)) and that theDepartment rule was beyond the scope of authority granted by statute. On cross-motions forsummary judgment, the trial court found that the statute directing the Division to pursue fullautomation could not be read to compel public pension funds to participate in a mandatory ACHprogram. The Department appeals but has complied with the trial court order to accept checkspending the outcome. Our resolution does not require us to reach the pension funds' argumentthat compliance with the rule would violate fiduciary duties. We affirm.

We review the grant of summary judgment de novo. Petrovich v. Share Health Plan ofIllinois, Inc., 188 Ill. 2d 17, 30, 719 N.E.2d 756 (1999).

Administrative rules have the force and effect of law and are presumed to be valid. Celotex Corp. v. Pollution Control Board, 94 Ill. 2d 107, 126, 445 N.E.2d 752 (1983). But anadministrative agency is a creature of statute. Rule-making power exercised by the agency mustfind its source in the enabling statute. Granite City Division of National Steel Co. v IllinoisPollution Control Board, 155 Ill. 2d 149, 613 N.E.2d 719 (1993); Business & ProfessionalPeople for the Public Interest v. Illinois Commerce Comm'n, 136 Ill. 2d 192, 243, 555 N.E.2d693 (1989). "When an agency has acted in its rule-making capacity, a court will not substitute itsjudgment for that of the agency. [Citation.] Regulations adopted by [an administrative agency]pursuant to its statutory authority will not be set aside unless they are arbitrary and capricious." Granite City, 155 Ill. 2d at 162.

Section 1A-107 of the Code (40 ILCS 5/1A-107 (West 1998)) directed the Division toautomate its functions. This section reads:

"Automation of Services. The Division shall automate its operations,services, and communications to the fullest practical extent. This automationshall include, but need not be limited to, the acquisition, use, and maintenance ofelectronic data processing technology to (i) automate Division operations asnecessary to carry out its duties and responsibilities under this Code, (ii) provideby FY 2000 electronic exchange of information between the Division and pensionfunds subject to this Code, (iii) provide to pension funds and the general publicand receive from pension funds and the general public data on computerprocessible media, and (iv) control access to information when necessary toprotect the confidentiality of persons identified in the information." (Emphasisadded.) 40 ILCS 5/1A-107 (West 1998).

Section 1A-103 gives the Department authority to enact rules necessary for theadministration and enforcement of its responsibilities under the Code. 40 ILCS 5/1A-103 (West1998).

The Department enacted section 4415.70 of the Illinois Administrative Code on April 27,1998. Under it plaintiffs must pay annual compliance fees through an automatic clearing housedebit. 50 Ill. Adm. Code