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Arizona State University Board of Regents v. Arizona State Retirement System

Court of Appeals of Arizona, First Division

May 11, 2017

ARIZONA STATE UNIVERSITY BOARD OF REGENTS, Plaintiff/Appellant,
v.
ARIZONA STATE RETIREMENT SYSTEM, Defendant/Appellee.

         Appeal from the Superior Court in Maricopa County No. LC2012-000689-001 The Honorable Crane McClennen, Judge Retired

         REVERSED AND REMANDED

          Osborn Maledon PA, Phoenix By Thomas L. Hudson, Eric M. Fraser Arizona State University, Office of General Counsel, Tempe By Lisa K. Hudson Co-counsel for Plaintiff/Appellant

          Arizona Attorney General's Office, Phoenix By Jothi Beljan Counsel for Defendant/Appellee

          Presiding Judge Peter B. Swann delivered the opinion of the court, in which Judge Kent E. Cattani and Judge Donn Kessler joined.

          OPINION

          SWANN, Judge

         ¶1 In Arizona State University v. Arizona State Retirement System, 237 Ariz. 246 (App. 2015) (hereinafter "ASU v. ASRS"), we held that the Arizona State Retirement System ("ASRS") wrongly collected $1, 149, 103 from Arizona State University (the "University"). This appeal concerns the rate of prejudgment interest that applies to ASRS's liability for the refund. The superior court held that the refund was in the nature of a "judgment, " and not a "debt" - a distinction that determines the applicable interest rate under A.R.S. § 44-1201. We disagree, and hold that ASRS's over-collection of money created a debt that was not dependent on the existence of a judgment. We therefore reverse and remand for entry of judgment with prejudgment interest computed at 10%.

         FACTS AND PROCEDURAL HISTORY

         ¶2 The underlying litigation arose from an invoice ASRS sent to the University for a purported actuarial unfunded liability resulting from 17 employees' participation in the University's termination incentive program. See generally A.R.S. § 38-749; ASU v. ASRS, 237 Ariz. 246. ASRS determined the unfunded liability to be $1, 149, 103 and demanded payment within 90 days. ASU v. ASRS, 237 Ariz. at 249, ¶ 9. It also asserted under § 38-749 that ASU would owe ASRS 8% interest on any "balance" until the $1, 149, 103 was paid in full. The University paid the invoice and then pursued an administrative appeal. Id. at 223, ¶ 9.

         ¶3 In ASU v. ASRS, we concluded that ASRS was required to follow the Administrative Procedure Act's rulemaking procedures before enforcing the policy under which it charged the University. 237 Ariz. at 253-54, ¶ 32. We remanded the case to the superior court with instructions "to enter an order directing ASRS to refund $1, 149, 103 to the University, with interest thereon if and as authorized by law - an issue the superior court should address on remand." Id. at 254, ¶ 33.

         ¶4 The superior court entered judgment for the original invoice- $1, 149, 103 - together with prejudgment interest at the rate of 4.25%. The only issue before us in this appeal is whether the court chose the correct interest rate.

         DISCUSSION

         ¶5 The parties agree that the interest rate is determined by A.R.S. § 44-1201. That statute provides in pertinent part:

A. Interest on any loan, indebtedness or other obligation shall be at the rate of ten per cent per annum, unless a different rate is contracted for in writing, in which event any rate of interest may be agreed to. Interest on any judgment that is based on a written agreement evidencing a loan, indebtedness or obligation that bears a rate of interest not in excess of the maximum permitted by law ...

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