                                                                                               ls


                                                                                        2014 HOVJ

                                                                                         STA




    IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

                                                DIVISION II

KEVIN DOLAN,          and a class of      similarly                         No. 44982 -0 -II
 situated individuals,


                            Plaintiffs /Respondents,


           v.




 KING COUNTY, a political subdivision of
the State of Washington,


                            Defendant /Respondent,


                                                                      UNPUBLISHED OPINION
 STATE OF WASHINGTON, DEPARTMENT
 OF RETIREMENT SYSTEMS,

                                            Appellants.


          WORSWICK, P. J. —      It is axiomatic that an entity cannot be bound by a contract to which it

is not a party except under very limited circumstances. Jones v. Matson, 4 Wn.2d 659, 670, 104

P. 2d 591 ( 1940);   Thane Co. v. Brown- Johnston, Inc., 48 Wn. App. 511, 520, 739 P. 2d 737

 1987). In this   case,   the trial   court ruled   that the Department of Retirement Systems ( DRS), was


bound to a settlement agreement between Kevin Dolan, as representative of a " Class" of public


defenders, and King County. Because DRS was not a party to this contract, it cannot be bound

by its   terms.
No. 44982 -0 -II



           DRS appeals two superior court orders entered in a settled class action lawsuit between


Kevin Dolan, as representative of a Class of public defenders, and King County. First, DRS

appeals the final approval order, which contains findings, conclusions, and rulings approving a

settlement     between the Class   and   the   County. Second, DRS appeals the order granting DRS only

partial intervention.


           DRS argues that ( 1) the Administrative Procedure Act1 ( APA) removed the superior


court' s original subject matter jurisdiction to enter orders affecting PERS ( Public Employees

Retirement System),        and that the superior court erred by (2) ruling that its final approval order

binds DRS, who was not a party to the settlement and ( 3) denying DRS' s motion to intervene as

a "   full party,"   on grounds that DRS' s motion to intervene was untimely. Because the superior

court erred by ruling that a party is bound to a contract to which it is not a party, we reverse the

final approval order. Because the superior court erred by basing its partial intervention order on

the erroneous legal conclusion that DRS' s motion to intervene was untimely, we reverse the

partial intervention order. We remand for further proceedings consistent with this opinion.

                                                     FACTS


A.         Initial Trial and Our Supreme Court' s Review


           In 2006, a class of public defenders represented by Kevin Dolan sued King County,

alleging that the County wrongfully failed to enroll the Class members in PERS, a retirement

program administered by DRS. Following a bench trial, the superior court ruled that the Class

members were " employees" entitled to enrollment in PERS. Dolan v. King County, 172 Wn.2d

299, 301, 258 P. 3d 20 ( 2011).




1 Chapter 34. 05 RCW


                                                         2
No. 44982 -0 -II



       The County petitioned our Supreme Court for direct review of the superior court' s ruling.

See Dolan, 172 Wn.2d at 310. In 2011, our Supreme Court granted review, affirmed, and


remanded the case to the superior court to resolve the remedy issues:

        T] he [ class members] are " employees" under RCW 41. 40. 010( 12) and are entitled
       to be enrolled in the PERS. We affirm the [ superior] court and remand to that court
       for further proceedings regarding remedies.

Dolan, 172 Wn.2d at 301 ( emphasis added).


B.     DRS' s Amicus Curiae Request


       In March of 2012, following our Supreme Court' s remand, DRS sent a letter to the

superior court requesting to become amicus curiae for the remainder of the proceedings:

        DRS] is not a party to this case and does not seek to protect the interests of either
       plaintiffs or defendants. It wishes, instead, to serve as amicus in the truest form of
       that   concept,   to   counsel   the   court as a   friend. We believe that the current parties
       have  differing interests and loyalties than [ DRS], and do, not have the background
        or expertise to identify tax and PERS eligibility related issues for the court.

Clerk' s Papers ( CP)    at   287 -89 ( footnote   omitted).    The Class objected to DRS' s letter requesting

amicus curiae status. On April 4, 2012, following the Class' s objection, DRS sent a letter to the

parties stating its intent to abandon its request to become amicus curiae:

         W] e understand that the parties are discussing the possibility of settlement
        negotiations and, as a result, have agreed not to brief and argue any substantive
        issues in the case except for, possibly, the statute of limitations issue.

        Because none of the substantive issues are scheduled for briefing and argument, it
        appears that there is no current role for [ DRS] to educate the court regarding
        retirement issues implicated by the parties' litigation. However, [ DRS] would like
        to note that it is available to serve as a resource to both sides in settlement
        discussions.


         DRS] has a continuing concern that any settlement agreement be consistent with
        the   law. [
                  DRS] has a statutory duty to make determinations regarding membership
        and benefit eligibility, and to decide any other retirement issues for any employee
        reported to [ DRS] as a member of a [ DRS] -administered retirement system. Any




                                                            3
No. 44982 -0 -II



          settlement negotiated between the parties must conform to the law. Otherwise, the
          settlement agreement may result in further litigation regarding retirement eligibility
          for   members of    the   class;   hence, [ DRS' s] offer to work with both sides.


CP at 112 -13.


C.        Settlement Between the Class and the County

          On December 18, 2012, the Class and the County filed a stipulation announcing that they

had reached a tentative settlement. Under the settlement, the County would make retroactive

payments to PERS on behalf of the County (as employer) and the Class members ( as employees)

from the date that the County should have enrolled the Class members. The settlement granted

the Class members retroactive benefit eligibility and service credits in PERS from the date that

the County should have enrolled the Class members in PERS.

          DRS was not a party to and had no involvement in the settlement. But DRS received a

copy of the settlement agreement, which contained provisions granting DRS the right to object to

the settlement at the reasonableness hearing, where the superior court would hear objections and

approve    the   settlement   only if it found the    settlement   to be " fair,   adequate, and reasonable."   See


Pickett   v.   Holland Am. Line -Westours, Inc., 145 Wn.2d 178, 188, 35 P. 3d 351 ( 2001).                The


settlement also purported to give DRS a right to appeal any order approving the settlement.

          On March 29, 2013, prior to the reasonableness hearing, the Class and the County moved

for preliminary approval of the settlement.2 DRS responded with a motion to shorten time and a
motion to present its " amicus curiae" position. CP at 96. DRS' s motions requested that the




2A preliminary approval is a preliminary ruling which approves the form of the class notice and
the method of providing notice to the settlement class, sets deadlines for the filing of objections,
and sets   the   final   settlement   hearing   date. See CR 23( c); Aguirre       v.   AT &T Wireless Servs., 109
Wn.   App.      80, 83 - 84, 33 P. 3d 1110 ( 2001).
No. 44982 -0 -II



superior court wait to give preliminary approval to the settlement until it was modified to address

DRS'     s concerns.   On the same day, the superior court denied DRS' s two motions and gave

preliminary approval to the settlement. Also on the same day, DRS notified the superior court

that it intended to file a motion to intervene.


D.        DRS' s Motion To Intervene


          On April 22, 2013, DRS       moved     for mandatory intervention          under   CR 24( a)( 2). DRS' s


motion     to intervene   requested allowance     to intervene      as a "   full party," such that its approval of


the settlement would be required before the superior court could approve the settlement. DRS' s

motion to intervene came before a trial to determine remedy. In fact, because the Class and the

County had been in settlement discussions, the trial court had not set any date for that remedy

trial.



           While the Class and the County did not oppose allowing DRS to intervene to object to the

settlement' s approval, they did object to DRS intervening as a " full party" with the ability to be a

party to the settlement, whose approval is necessary for there to be a binding agreement. The

superior court entered an order granting DRS only partial intervention, based on the superior

court' s legal conclusion that DRS' s motion to intervene was untimely:

                  DRS'    s request   to   participate in   this   case as a "   full party"   is untimely. In
           addition, allowing DRS to intervene as a " full party" at this stage of the litigation
           would also unduly complicate and delay the proceedings, and would greatly
           prejudice the parties. This action has been stayed as to all matters other than those
           related to the consideration of the proposed settlement and objections thereto and
           to the implementation of the settlement if it is approved.


                   DRS' s request for " full party" status is denied.

                   The parties do not object to limited intervention by DRS to have its
           objections, already filed, heard by the Court and then appeal if the Court approves



                                                            5
No. 44982 -0 -II



           the   settlement and      DRS    wishes    to   appeal.    Indeed, the parties intended that the
           Settlement Agreement already confers this limited intervention.

                      The Court grants DRS limited intervention to have the DRS objections to
           the settlement already filed heard by the Court and to appeal if the Court approves
           the settlement and DRS wishes to appeal. The Court finds this limited intervention
           for DRS is sufficient to protect the interests DRS has articulated in its motion and
           its objection.




                      DRS    will    be   subject    to    this   Court' s    orders,    if   any,   requiring the
           implementation ofthe Settlement Agreement, ifthe settlement is approved.

CP   at   312 -13 (   emphasis added).      The superior court elaborated on its reasoning in its oral ruling:

           DRS has      a right of   intervention,   and   I think it' s   under   Civil Rule 24( a).
                                                                                 I think they
           have a right to intervene because certainly the issues that are addressed in this
           settlement document directly affect DRS. The implementation and follow through

           with the agreement that' s been reached in terms of coverage and those details
           intimately involve [ DRS].

                      But I can' t find it to be a timely intervention, especially for purposes of
           arguing a CR [ 2A] type we- didn' t-sign -so- we' re- not -bound- by -it. I think that the
           minimum time to have intervened if you were going to argue as far as a CR [ 2A]
           type status that if we don' t sign, we' re not bound, would have been immediately
           after the Supreme Court decision was announced. Because at that point in time, the
           Supreme Court had upheld my decision that they had a right to a pension, and
            DRS] would have been put on notice that [DRS] would automatically be involved
           in determining those details.

Verbatim Report         of   Proceedings ( VRP) ( May 10, 2013)              at   34 ( emphasis   added).   Thus, the


superior court determined both that for DRS to have filed a timely motion to intervene, DRS

would have had to have filed the motion " immediately after" the Supreme Court decision was

announced, and that because DRS' s motion to intervene was untimely, it could intervene only

partially.




                                                                  6
No. 44982 -0 -II



E.       Reasonableness Hearing and Entry ofFinal Approval Order

         At the reasonableness hearing, DRS had an opportunity to argue its substantive

objections to the settlement, which we summarize as follows:


         1. The settlement calculated the dollar amount of retroactive contributions that would be


paid to PERS without DRS' s approval, which is contrary to statutes stating that DRS must

determine the amount of retroactive contributions.


         2. The settlement prohibited DRS from charging interest on retroactive contributions

owed to PERS, which DRS claimed would cost PERS over $90 million in interest payments.

         3. The   settlement required    DRS to pay the Class'        s$    12 million attorney fee obligation,

from either the County' s retroactive contributions to PERS or the PERS trust fund, to later be

reimbursed by each Class member individually, either by DRS garnishing the Class member' s

PERS benefits at retirement, or by the Class member paying DRS directly. This scheme violates

RCW 41. 40. 052 ( antialienation       statute),   may   violate   Treas.   Reg. § 1.   401 - 1 ( as amended in 1976)


or   federal law,   and   fails to adequately   ensure   that DRS    will   actually    recover   the $ 12 million in



attorney fees.

         4. The settlement required the County to pay the Class' s members' retroactive

 employee" contributions without the Class reimbursing the County. This conflicts with RCW

41. 40. 042 and RCW 41. 50. 140( 3).


          5. The settlement contains provisions governing the determination of the Class members'

retroactive service credits and benefit eligibility, contrary to many statutory and regulatory

provisions. See generally, RCW 41. 40.023 -.057; chapters 415 -02 and 415 -108 WAC.




                                                            7
No. 44982 -0 -II



         6. The settlement prevents the Class members from choosing between PERS 2 and PERS

3, despite the law mandating that employees receive that choice. RCW 41. 40. 785, 795.

         7. The settlement prevents DRS from following the law in administering the pensions in

many other ways.


         8. The settlement is not fair, reasonable, or adequate for the other PERS members, who


would be penalized by the settlement' s terms.

         9. The settlement places large information technology and administrative costs on DRS.

         10. The settlement does not contain any provisions to shield DRS from liability resulting

from enforcing the settlement, despite its many illegal provisions.3
         The superior court approved the settlement over DRS' s objections. At a later proceeding,

the superior court entered a final approval order that contained findings, conclusions, and rulings


approving the settlement and rejecting DRS' s objections in detail. The final approval order

contained the following rulings adverse to DRS:

         King County      shall   pay            12 million common fund attorney fee
                                        class counsel   the $

         from the employee PERS contributions that King County is making for the class
         members.




         DRS shall provide the class members with service credit and retirement benefits as
         provided in the Dolan decision by the Supreme Court and the Settlement
         Agreement.       DRS shall assist the parties and the Court in implementing the



3 The Class and the County devote much briefing to arguing that the superior court correctly
approved    the   settlement as "   fair,                      challenging DRS' s substantive
                                            adequate, and reasonable,"

objections to the settlement and the superior court' s final approval order. Br. of Resp' t (County)
at   32 ( responding to those     substantive arguments).       Because DRS did not raise these issues on
appeal, and did not receive a full opportunity to litigate these issues below, we do not address
them.




                                                           8
No. 44982 -0 -II



          Settlement Agreement....              DRS shall not charge interest on the PERS contributions
          required by the Settlement Agreement.



          The parties, including the limited intervenor DRS, are subject to and shall comply
          with      the   Court' s    orders,    including these concerning implementation of the
          Settlement Agreement.


CP   at   514 -15 (   emphasis       added).     Recognizing DRS' s necessary involvement in executing the

settlement, the final approval order contained the following instructions should we reverse it:

          If this   order   is   reversed on appeal and      the   reversal   becomes final ... the Settlement
          Agreement         shall, without notice,      be   automatically terminated.             In the event of

          termination, the [ Class] and King County shall jointly request the Court to set a
          status conference to schedule further proceedings.


CP at 515. DRS appeals both the final approval order and the partial intervention order.

                                                        ANALYSIS


                                          I. SUPERIOR COURT JURISDICTION


          As a threshold issue, DRS argues that the superior court exceeded its original subject


matter jurisdiction by entering its final approval order because RCW 34. 05. 510 of the APA

removed the superior court' s original jurisdiction over PERS administration. We disagree.


           We review the superior court' s interpretation of a statute de novo. Dep' t ofEcology v.

Campbell & Gwinn, LLC, 146                Wn. 2d 1, 9 - 10, 43 P. 3d 4 ( 2002). If a statute' s meaning is plain

on its face, this court must follow that plain meaning. Dep 't ofEcology, 146 Wn.2d at 9 -10. A

statute' s plain meaning is discerned from the language' s ordinary meaning, the statute' s context,

related provisions, and           the statutory   scheme as a whole.          Udall   v.   T.D. Escrow Servs., Inc., 159


Wn.2d 903, 909, 154 P. 3d 882 ( 2007).




                                                                   9
No. 44982 -0 -II


         We also review de novo whether the superior court has subject matter jurisdiction. Bour

v.   Johnson, 80 Wn.        App.    643, 647, 910 P. 2d 548 ( 1996). Subject matter jurisdiction is the


authority to hear and determine the type of action to which a case belongs. 80 Wn. App. at 647.

 The superior courts have broad and comprehensive original jurisdiction over all claims which


are not within    the exclusive jurisdiction of another court."          Orwick v. City ofSeattle, 103 Wn.2d

249, 251, 692 P. 2d 793 ( 1984) (          emphasis added).



         RCW 34. 05. 510 states that the APA " establishes the exclusive means of judicial review


of agency action" with limited exceptions inapplicable here. RCW 34.05. 010( 3) defines " agency

action ":




          L] icensing, the implementation or enforcement of a statute, the adoption or
         application of an agency rule or order, the imposition of sanctions, or the granting
         or withholding of benefits.

RCW 34. 05. 510 limits the superior court' s ability to exercise its original jurisdiction on a claim

challenging     an "   agency   action."    See Wells Fargo Bank, N.A. v. Dep 't ofRevenue, 166 Wn. App.

342, 360, 271 P. 3d 268 ( 2012),           review     denied, 175 Wn.2d 1009 ( 2012). But the plain meaning


of RCW 34. 05. 510' s language renders the statute inapplicable in a situation where no specific

                                                  4
    agency   action"   is   being   challenged.       See Wells Fargo Bank, N.A.,   166 Wn. App. at 360.

          This case concerns the final approval order approving a settlement between the Class and

the County and a partial intervention order, not a challenge to an " agency action" of DRS.

Because this case does not concern a challenge to agency action, RCW 34.05. 510 has not vested


4
  Similarly, RCW 41. 40. 068, which requires "[ a] ny person aggrieved by any decision of [DRS]"
to file a claim with the director of DRS before appealing to the superior court, applies only where
an agency has made a decision that a litigant then appeals.




                                                              10
No. 44982 -0 -II



jurisdiction over this case exclusively in some other court, and thus has not removed the superior

court' s original subject matter jurisdiction to hear this case. 5


                           II. RULING THAT THE FINAL APPROVAL ORDER BINDS DRS


           DRS argues that the superior court erred by entering a ruling in the final approval order

binding DRS to the final approval order because DRS was not a party to the settlement. We

agree. 6

           The   superior court ruled    that " the limited intervenor DRS, [           is] subject to and shall


comply with the Court' s orders, including these concerning implementation of the Settlement."

CP   at   515. This is     a conclusion of   law   reviewed   de   novo.   Robel   v.   Roundup Corp.,    148 Wn.2d


35, 42, 59 P. 3d 611 ( 2002).


           Settlements      are contracts.   Evans &   Son, Inc. v. City of Yakima, 136 Wn. App. 471, 477,

149 P. 3d 691 ( 2006). Thus, "[ s] ettlements are considered under the common law of contracts."


Condon      v.   Condon, 177 Wn.2d 150, 162, 298 P. 3d 86 ( 2013). As noted above, it is axiomatic


that an entity cannot be bound by a contract to which it is not a party except under very limited

circumstances. Jones, 4 Wn.2d at 670; Trane, 48 Wn. App. at 520.

           Here, all the parties agree that DRS was not a party to the settlement, and cannot be

bound by the settlement agreement. But the superior court ruled that while DRS was not bound


5 The Class and the County argue that the Supreme Court affirmatively gave the superior court
                                                                                                            See Dolan,
jurisdiction      by    remanding " to that court for further proceedings regarding            remedies."

 172 Wn.2d        at   301. We do not address this argument because the superior                court had jurisdiction
to hear this case.


6 The Class and the County argue that DRS can be bound to the findings and conclusions as a
partial intervenor, but cite no authority to support this argument. Thus, we do not consider it.
See Cowiche Canyon Conservancy v. Bosley, 118 Wn.2d 801, 809, 828 P. 2d 549 ( 1992).

                                                           11
No. 44982 -0 -II



by the settlement agreement, DRS was bound by the final approval order approving that

settlement. This is a distinction without a difference.


       Here, an agreement to which DRS was not a party required DRS ( and by extension other

members of PERS) to incur arguably millions of dollars in unpaid interest and costs. Binding

DRS to the order approving a settlement is equivalent to binding DRS to that settlement, and is

contrary to contract law. See generally Green v. City of Wenatchee, 148 Wn. App. 351, 363,

368, 199 P. 3d 1029 ( 2009) ( holding,      although as a matter of collateral estoppel rather than

contract law, that stipulated judgments, findings and conclusions based on a settlement cannot

bind third parties who did not participate in those stipulations).

        Thus, because DRS was not a party to the settlement, the trial court could not force DRS

to be bound to the settlement by its order approving the settlement. The superior court' s order is

erroneous as a matter of law.


                                          III. PARTIAL INTERVENTION


        DRS argues that the superior court abused its discretion by entering its partial

intervention order based on its legal conclusion that DRS' s motion to intervene was untimely.

We agree.


        The trial   court   properly determined that DRS had        a right   to intervene stating, "[ T] he


issues that   are addressed   in this   settlement   document   directly   affect   DRS. The implementation


and follow through with the agreement that' s been reached in terms of coverage and those details


intimately    involve [ DRS]."   VRP ( May 10, 2013) at 34. Neither the Class nor the County

contests that DRS had an intervention of right. Thus, we examine only whether the superior




                                                         12
No. 44982 -0 -II



court abused its discretion by basing its partial intervention order on the legal conclusion that

DRS' s motion to intervene was untimely.

           CR 24( a) states:


           Upon   timely     application anyone shall     be    permitted     to intervene in          an action: (     1)
           when a statute confers an unconditional right to intervene; or (2) when the applicant
           claims an interest relating to the property or transaction which is the subject of the
           action and he is so situated that the disposition of the action may as a practical
           matter impair or impede his ability to protect that interest, unless the applicant' s
           interest is adequately represented by existing parties.

We review a superior court' s decision to grant or deny a motion to intervene on grounds of

timeliness, as well as its decision to limit the scope of intervention generally, for an abuse of

discretion. Kreidler         v.   Eikenberry,   111 Wn.2d 828, 832, 766 P. 2d 438 ( 1989);                see Marino Prop.

Co.   v.   Port Comm'   rs    of the Port of Seattle, 97 Wn.2d 307, 316, 644 P. 2d 1181 ( 1982). A


superior court abuses its discretion where either no reasonable person would adopt the superior


court' s position, or the superior court based its ruling on an erroneous legal conclusion.

Kreidler, 111 Wn.2d           at   832; Wash. State Physicians Ins. Exch. & Ass' n               v.   Fisons   Corp.,    122


Wn.2d 299, 339, 858 P. 2d 1054 ( 1993).


           Washington law clearly states that if a party files a motion to intervene prior to the

commencement of trial, that motion is timely. Am. Disc. Corp. v. Saratoga W. Inc., 81 Wn.2d

34, 43, 499 P. 2d 869 ( 1972).           But post judgment, the superior court should allow a motion to


intervene " only upon a strong showing after considering all circumstances, including prior

notice, prejudice     to the       other parties, and reasons   for   and   length   of   the   delay."   Kreidler, 111


Wn.2d at 833.


            Here, the motion to intervene was filed after the trial and judgment on liability, but before

the trial on remedy. But the trial and judgment on liability, i.e., whether the County should have


                                                            13
No. 44982 -0 -II


enrolled   the   public   defenders in PERS, had     no effect on   DRS'   s   interests.   Conversely, the trial on

remedy, how to enroll the public defenders in PERS and make retroactive PERS payments on

their behalf, did affect DRS' s interests.


         The trial court ruled that DRS' s motion to intervene was untimely because the " minimum

time" for DRS to have intervened would have been " immediately after" the announcement of the

Supreme Court decision that affirmed the trial court' s liability decision. VRP (May 10, 2013) at

34. But DRS filed its motion to intervene before the trial that affected its interests. At the time


of DRS' s motion, the trial court had not even set a trial date on these issues. Thus, DRS' s


motion   to intervene     was   timely   as a matter of   Yaw. Am. Disc.   Corp., 81 Wn.2d at 43:

         By concluding that DRS' s motion to intervene was untimely, the superior court reached

an erroneous legal conclusion. Because the superior court based its partial intervention order on


this erroneous legal conclusion, the partial intervention order constitutes an abuse of discretion.7' 8

Wash. State Physicians, 122 Wn.2d at 339.


         We reverse the superior court' s ruling that DRS is bound to the final approval order.

Because the final approval order' s viability rests on the ruling binding DRS to it, we reverse the




7 DRS also argues that the superior court erred as a matter of law by concluding that CR 24( a)
allowed DRS to intervene from the date our Supreme Court remanded the case to resolve the
remedy issues. We do not consider this issue because it does not affect the result that the
superior court abused its discretion by ordering that DRS could not intervene as a full party on
timeliness grounds.


8
    By this ruling, we do not mean to imply that should DRS intervene in this proceeding, such'
intervention would allow the trial court to bind DRS to a settlement to which it is not a party.




                                                            14
No. 44982 -0 -II



final   approval order   in its entirety. 9   Esmieu v. Schrag, 15 Wn. App. 260, 266, 548 P. 2d 581
 1976), aff'd, 88 Wn.2d 490 ( 1977).          Finally, because DRS' s motion to intervene was timely, we

reverse the partial intervention order. We remand for further proceedings consistent with this


opinion. I°

          A majority of the panel having determined that this opinion will not be printed in the

Washington Appellate Reports, but will be filed for public record in accordance with RCW


2. 06. 040, it is so ordered.




 We concur:




 Maxa,




Lee,




9 DRS argues that binding it to the settlement agreement violates CR 2A and RCW 2.44.010.
We do not address these issues, and instead resolve this case under the common law of contracts.

10 DRS argues that the superior court erred in its final approval order by entering findings and
conclusions that reached ultimate conclusions on the contested issues of fact and law which
underlie the merits of the dispute. Because we reverse the final approval order on other grounds,
we do not consider this argument.




                                                         15
