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Kentucky Retirement Systems v. Ashcraft

Supreme Court of Kentucky

November 1, 2018



          COUNSEL FOR APPELLANT: Katherine I. Rupinen Leigh Davis Carrie Slayton Jillian Leigh Hall Anne Caroline Bass

          COUNSEL FOR APPELLEE: Charles Ed Massey



         An incapacitated member of the Kentucky Retirement Systems (KERS)[1] may apply for disability retirement pursuant to Kentucky Revised Statute (KRS) 61.600. If the statutorily-created medical review panel recommends that the member's disability retirement application be denied, the applicant may then request a formal hearing before a hearing officer who will issue a recommended order to the KERS Board of Trustees, the administrative body charged with making the final decision. This case, initially brought by Ronald Ashcraft, a former employee of the Grant County Board of Education, [2] presents an oft- recurring issue regarding the role of the courts on judicial review of KERS's final decision as to a member's entitlement to disability retirement. KRS 61.665(5). Having concluded that the Court of Appeals' disposition of this case is not consistent with the controlling statute and our stated standard of review for disability retirement matters, we reverse.[3]


         In September 2000, Ashcraft became a member of the County Employees Retirement System, which is administered by KERS. The Grant County Board of Education employed Ashcraft as an HVAC technician, a position classified as "medium work."[4] As an HVAC technician, Ashcraft was responsible for maintaining the HVAC systems in Grant County schools and carrying all tools required to repair and install equipment. On August 1, 2011, Ashcraft sustained a work-related injury to his neck, upper back, and shoulders when a 29-pound vacuum pump fell from above and struck him between the shoulder blades.

         In September 2011, Ashcraft was diagnosed with cervical and lumbar strain and with tension headaches from muscle contractions. After seeking treatment, Ashcraft was initially given work activity restrictions on lifting and pulling. He was also placed on light and modified duty at work.

         Ashcraft filed for disability benefits on June 8, 2012, and his application was denied by a majority of the review panel on August 24, 2012. The reviewing physicians noted a lack of objective medical evidence in the record. Ashcraft again applied for disability benefits and supplemented the record with a workers' compensation examination performed by Dr. Vaughn on August 30, 2012. Dr. Vaughn reported his objective findings of pain in the cervical and lumbar areas, but that the findings were due to degenerative changes compatible with Ashcraft's age. Dr. Vaughn believed that Ashcraft could return to work with a 50-pound lifting restriction and that Ashcraft's total impairment was 10 percent, due to his cervical and lumbar impairments. Ashcraft also tendered evidence from his orthopedist, indicating this physician placed him on light duties without strenuous exertion, and the opinion of another physician who stated that Ashcraft could not return to his previously-held position. The medical review panel eventually denied his second application for benefits in a 2-1 decision rendered December 19, 2012.

         Meanwhile, even though Ashcraft was permitted to perform modified duty for some time, he was ultimately taken off work by one of his physicians. After exhausting his Family and Medical Leave Act (FMLA) time and sick leave, his last date of paid employment was October 18, 2012. In a letter dated October 25, 2012, the Grant County Board of Education terminated Ashcraft because no accommodations were available for light duty work in his job classification as an HVAC technician. His employer stated that even though Ashcraft was given modified duties for five months, the job description for an HVAC technician required the ability to lift up to 70 pounds.

         Ashcraft requested an administrative hearing, which was held on October 1, 2013. The hearing officer determined that Ashcraft submitted sufficient objective medical evidence to support his assertion that the cumulative effect of his neck, upper back, and lower back pain, and pain in his left hip and leg physically incapacitated him on a permanent basis. In the report dated December 18, 2013, the hearing officer recommended granting Ashcraft's disability benefits application, with review in two years. KERS filed exceptions to the hearing officer's recommendation.

         The Disability Appeals Committee (DAC) of the Board of Trustees of the Kentucky Retirement Systems (Board) met on February 21, 2014, and on March 27, 2014, [5] to consider the hearing officer's recommendation. After fully considering the administrative record, the DAC denied Ashcraft's application for disability benefits. In its findings, the DAC noted that two physicians (Vaughn, Lyon), a vocational consultant (Crystal) and an exercise physiologist (Pounds) determined that Ashcraft could lift up to 50 pounds, which is the stated requirement for "medium duty work" as outlined in KRS 61.600(5)(c). The DAC found that Ashcraft did not prove by a preponderance of objective medical evidence that he was functionally incapacitated from performing the HVAC technician job or a job of like duties. Additionally, the DAC pointed out that Ashcraft himself stated that he would still be able to do many jobs that did not require bending over or kneeling down to work, as the HVAC technician position did.

         After the DAC denied his claim, Ashcraft appealed to the Franklin Circuit Court. In an order entered December 28, 2015, the trial court affirmed the final order of the Board. The trial court concluded that the Board's decision was supported by substantial evidence and that, upon judicial review, Ashcraft had failed to show that the evidence was so overwhelming as to compel a finding in his favor. The trial court cited the McManus standard, which provides that "[w]here the fact-finder's decision is to deny relief to the party with the burden of proof or persuasion, the issue on appeal is whether the evidence in that party's favor is so compelling that no reasonable person could have failed to be persuaded by it." McManus v. Ky. Retirement Sys., 124 S.W.3d 454, 458 (Ky. App. 2003). As the trial court noted, Ashcraft had the burden of proof in making his claim for KERS disability benefits.

         On appeal to the Court of Appeals, that court reversed, having concluded that substantial evidence compelled a finding in Ashcraft's favor.[6] The appellate court remanded the case to the trial court with instructions that that court order the Board to reinstate the hearing officer's recommendation.

         We granted discretionary review to reexamine the appropriate standard for judicial review of denials of applications for state permanent disability retirement benefits, and to address the deference accorded to the fact-finding agency pursuant to KRS 13B.150. Additional facts relevant to the specific issues presented are discussed below.


         I. The KERS Board Is the Fact-Finder and Its Final Decision Must Be Supported by Substantial Evidence

         A person whose retirement is administered by KERS may seek disability retirement when he or she is physically or mentally incapacitated to perform his or her job, or jobs of like duties. KRS 61.600(3).[7] A medical review panel consisting of three physicians appointed by the KERS Board evaluates the medical evidence submitted in support of the application and recommends either approval or denial. KRS 61.665. If two or more examiners recommend approval, "the system [KERS] shall make retirement payments in accordance with the retirement plan selected by the person." KRS 61.665(2)(e). If two or more examiners recommend denial, the applicant may file additional supporting medical information for further consideration or file a request for a formal hearing. KRS 61.665(2)(f). If a formal hearing is requested, KERS may require the applicant to submit to one or more medical or psychological examinations. KRS 61.665(3)(c).

         The hearing is conducted by a hearing officer in accordance with KRS Chapter 13B. KRS 61.665(3). The applicant has the burden of proof, with the burden of persuasion being "met by a preponderance of the evidence in the record." KRS 13B.090(7). Pursuant to statute and regulations, the hearing officer is required to make a report and recommended order containing findings of fact and conclusions of law, and the parties are allowed to file exceptions. KRS 13B.110; 105 Ky. Admin. Reg. 1:215, § 5.

         The hearing officer's report and recommended order and any exceptions are submitted to the KERS Board, which is authorized to establish an appeals committee "to act upon the recommendations and reports of the hearing officer . . . ." KRS 61.665(4). The Board's final order "shall be based on substantial evidence appearing in the record as a whole and shall set forth the decision of the board and the facts and law upon which the decision is based." KRS 61.665(3)(d).

         Judicial review of the KERS disability retirement decision is controlled by KRS 13B.150, with subsection (2) setting forth the standard of review.

The Court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact. The court may affirm the final order or it may reverse the final order, in whole or in part, and remand the case for further ...

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