Pivotal Colorado II, L.L.C. v. Ariz. Public Safety Personnel Retirement System – 3/13/2014

March 31, 2014

Arizona Court of Appeals Division One Holds That the Arizona Public Safety Personnel Retirement System Is a State Agency for Purposes of the Notice of Claim Statute and One-Year Statute of Limitations That Applies to Public Agencies.

In 2011, the plaintiffs sued the Arizona Public Safety Personnel Retirement System (“PSPRS”) in connection with a real estate investment gone bad, alleging claims including aiding and abetting fraud and aiding and abetting breach of fiduciary duty.  The plaintiffs admittedly had not filed a notice of claim against PSPRS, as is required for a suit against a public agency under A.R.S. § 12-821.01, and had not sued it within the one-year statute of limitations in A.R.S. § 12-821 for suits against public agencies.  The trial court granted PSPRS’s motion to dismiss, agreeing that PSPRS is a state agency under the notice-of-claim and one-year limitations statutes.

The Court of Appeals affirmed.  It pointed out that it had previously concluded that PSPRS is a state agency because “it was created by the Legislature, its board is appointed by the Governor, it manages pension funds for state and local public safety employees, the Arizona Attorney General serves as its counsel, and it is subject to state agency sunset laws.”  The plaintiffs argued, however, that later amendments in the enabling legislation for PSPRS required a reevaluation of that conclusion and that it could not be a state agency because its assets are not derived from the state’s general revenues.

With respect to the changes made in 1987 to PSPRS’s enabling legislation, those amendments simply exempted PSPRS from the procurement code and the salary recommendations of the Department of Administration.   They did not undermine the reasoning leading to the court’s conclusion that PSPRS is a state agency.  In fact, the exemptions from those laws that generally apply to state agencies provide further support that PSPRS is a state agency.

The court also rejected the plaintiffs’ argument that PSPRS is not a state agency because its funds are not stated money.  The court reasoned that, even though PSPRS funds are not stated money because they are not part of the state treasury, they are still public money, just held in an independent public trust fund.  “State money is a subset of public money, which encompasses a broad range of funds lawfully in the State’s possession or under its control, including state employee retirement funds held in independent trust.”

Judge Kessler authored the opinion; Judges Johnsen and Norris concurred.