FLOWERS v. PUBLIC EMPLOYEES RETIREMENT SYSTEM OF MISSISSIPPI (1999)

MODIFIED OPINION ON MOTION FOR REHEARING

¶ 1. The original opinion is withdrawn and the following is substituted.   The motion for rehearing is denied.

¶ 2. Patricia Flowers appeals the judgment of the Hinds County Circuit Court affirming the denial of her disability benefits.   Flowers argues that (1) the decision of the Public Employees' Retirement System (PERS) was arbitrary, capricious, and not supported by substantial evidence and (2) that she was denied benefits due to an unfair conflict of interest within the appeals process.   Finding merit in Flowers's second assignment of error, we address only that issue and reverse and remand this case to the Hinds County Circuit Court with instructions to remand to PERS for proceedings consistent with this opinion.

FACTS

¶ 3. Patricia Flowers's employment with Hinds Community College was terminated on May 20, 1994, after serving as an employee of the college for a period of 10 1/212 years.   Flowers maintains that her termination was due to her physical inability to meet the responsibilities of her position;  however, PERS claims that whether Ms. Flowers was terminated for health reasons or was simply fired for poor job performance is questionable at best.

 ¶ 4. On May 25, 1994, Flowers filed for duty-related benefits, and her application was thereafter presented to the PERS Medical Review Board, which was composed of Dr. Rahul Vohra and Dr. Michael Winkelmann.   The Board denied Flowers's 1994 claim on two occasions.   In October 1994, following a second review of her application and additional documentation, Ms. Flowers was advised of the decision to deny duty-related disability benefits.   In October 1994, Ms. Flowers was advised of her right to appeal the denial of her claim within a sixty day time period.   Although Ms. Flowers was given notice of her right to appeal, she chose not to appeal the decision to deny her 1994 application.   If timely prosecuted, an appeal in 1994 was available before the Disability Appeals Committee, which at that time consisted of five individuals-two of whom were Drs. Vohra and Winkelmann.   Having failed to exhaust her administrative remedies, Ms. Flowers waived her right to appeal the 1994 decision in Court.   Ms. Flowers did not appeal the Medical Board's decision to deny her 1994 application for duty-related disability benefits.

¶ 5. In 1996, Ms. Flowers submitted a second application for duty-related disability benefits.   This application was received by PERS on January 8, 1996.   Following the practice of the time, a second application was allowed.   However, Ms. Flowers was informed that the entire process began anew upon submission of the second application.   The initial review of the documentation in support of her 1996 claim was by the Medical Board.   The Medical Board denied Ms. Flowers' request for disability benefits.   At that time, if an appeal was timely filed, review was available before the Disability Appeals Committee, which was comprised of two Medical Board Members, Drs. Vohra and Winkelmann, two members of the Board of Trustees, and an attorney from the Attorney General's office.   This time, Ms. Flowers timely appealed the Medical Board's decision to the Disability Appeals Committee.

¶ 6. The PERS Board of Trustees adopted the Committee's recommendation, and Flowers thereafter appealed the Board's order to the Hinds County Circuit Court.   Thus, it is the denial of benefits under the 1996 application for benefits which is the subject of this appeal.   Therefore, any award of duty-related disability benefits due to Ms. Flowers would be payable from the first month following receipt of the application.   On December 2, 1997, the circuit court rendered its opinion affirming the decision of the PERS Board of Trustees.   It is from this order that Flowers now brings forth her appeal to this Court.

 DISCUSSION

DID AN UNFAIR CONFLICT OF INTEREST DEPRIVE FLOWERS OF DISABILITY BENEFITS?

 ¶ 7. When reviewing the decision of an administrative agency, this Court is limited in that we may only reverse upon a showing that the agency's decision was (1) unsupported by substantial evidence, (2) arbitrary and capricious, (3) beyond the agency's powers, or (4) violated some statutory or constitutional right of the complaining party.  Brinston v. Public Employees' Retirement Sys., 706 So.2d 258(¶ 6) (Miss.Ct.App.1998).   “[T]here is a rebuttable presumption in favor of the action of an administrative agency and the burden of proof is upon one challenging its action.”  Ricks v. Mississippi State Dep't of Health, 719 So.2d 173(¶ 11) (Miss.1998).   Both the United States and Mississippi Constitutions guarantee the right to due process of law before an administrative agency.  U.S. Const. amend. XIV;  Miss. Const. art. 3, § 14.   Administrative proceedings must be “conducted in a fair and impartial manner, free from any just suspicion or prejudice, unfairness, fraud, or oppression.”  Mississippi State Bd. of Health v. Johnson, 197 Miss. 417, 427, 19 So.2d 445, 447 (1944).

 ¶ 8. After a careful review of the record, it appears that Ms. Flowers has met her burden of proving that her constitutional guarantees of due process have been violated by virtue of Drs. Vohra and Winkelmann sitting in judgment of their own conclusions that Ms. Flowers was not entitled to disability benefits.   The conflict of interest at issue in this case casts serious doubts on the integrity of the process by which PERS reviews its disability claims.   By evaluating Ms. Flowers and then sitting on the Medical Review Board as well as on the Disability Appeals Committee, Drs. Vohra and Winkelmann were essentially reviewing their own disability benefit decisions.   As such, we are of the opinion that Flowers may have been prejudiced by the denial of her 1996 claim for duty-related benefits.   Accordingly, we reverse and remand this case to the Hinds County Circuit Court with instructions to remand to PERS for a neutral and unbiased review of Ms. Flowers's disability claim.

¶ 9. THE JUDGMENT OF THE HINDS COUNTY CIRCUIT COURT IS REVERSED AND REMANDED FOR PROCEEDINGS CONSISTENT WITH THIS OPINION.   COSTS OF THIS APPEAL ARE ASSESSED TO THE APPELLEE.

SOUTHWICK, P.J., concurring in part and dissenting in part.

¶ 10. The basis for my disagreement with the majority was explained in my separate opinion in Dean v. Public Employees' Retirement System, 98-CC-00033-COA 1999 WL 228174 (Miss.Ct.App.1999).¹   In summary, I find no defect in the PERS procedure that permits one of the three physicians who are the sole members of the medical review board to conduct a physical examination of an applicant.   However, I agree that members of the medical review board cannot later sit as members of an appellate review tribunal regarding their own decision.

¶ 11. Therefore I agree that we should reverse, but without invalidating the first level review procedures being following by PERS.

¶ 8. With respect for the views of the majority and the significance of the issue that is raised, I am constrained to dissent to one part of the decision. I find that administrative procedures require neutral decision-making but do not require that agencies follow the model of court procedures. Within discretion granted agencies, the procedures established by the Public Employees' Retirement System are valid for initial review of an applicant's disability request. I concur in the finding that the next level of review was improper.

¶ 9. It is first important to understand what each stage of the proceedings here concerned. It is from that perspective that we can best determine what procedural safeguards are required.

¶ 10. Dean applied with PERS for disability retirement. Benefits cannot be awarded after such an application until the Board of Trustees for PERS has accepted a disability medical determination either from its own medical board or from the Social Security Administration.  Miss. Code Ann. ” 25-11-113(1)(a) (Supp.1998).

¶ 11. This medical board, which is composed of three physicians, is autorized by statute to make disability determinations. Miss. Code Ann. § 25-11-103(p) & 25-11-119(7) (Supp.1998). The medical board “shall arrange for, and pass upon, all medical examinations” required for the disability determination and then report its results to the PERS Board of Trustees. Miss. Code Ann. § 25-11-119(7). A member of the medical board, Dr. Vohra, conducted the medical examination. That is one of the objections raised by the majority.

¶ 12. If an appellant for disability benefits is dissatisfied with the medical board's determination, he may request a hearing. Though the statute refers to a hearing officer, it also provides that the PERS Board of Trustees may instead authorize a committee composed of some of the Board's own members to serve as the “hearing officer.”  Miss. Code Ann. § 25-11-120 (1) & (3). Two members of the medical board sat on the committee, which is the next argument of a conflict of interest. After the hearing, the results are certified to the Board of Trustees with a proposed statement of facts and recommendation. The Board of Trustees makes its decision based solely on the record. Miss. Code Ann. § 25-11-120(2).

¶ 13. First, general administrative law principles do not require that all fact-finding and all adjudication be kept entirely separate. An investigator can at times become the prosecutor and then the adjudicator, so long as that is not the final available level of agency action. II KENNETH CULP DAVIS & RICHARD J. PIERCE, JR., ADMINISTRATIVE LAW TREATISE § 9.8 (1994) at 81, relying upon Goss v. Lopez, 419 U.S. 565, 95 S.Ct. 729, 42 L.Ed.2d 725 (1975). When the statute creates a board of physicians to review disability claims, I find no due process error in allowing one of those physicians to conduct a physical examination and then report to fellow board members on the findings. At this stage of the administrative process, that is the benefit of having the board be composed of physicians. Consistent with Goss, an adjudicator can be an evidence gatherer as well. Thus I disagree with Dean and with the majority that any defect existed in Dr. Vohra's both examining Dean and then voting with his two colleagues that Dean was not disabled.

¶ 14. Dean also attacks Dr. Vohra's conclusions as being based on an inadequate examination and against the weight of the evidence, which are differect issues that are outside my dissent.

¶ 15. The dissatisfied applicant for benefits may seek review of the medical board's conclusions that disability does not exist. The statute provides that the “board is authorized to appoint a committee of the board to serve as hearing officer․” for the appeal.  Miss. Code Ann. § 25-11-120(3). Though this section of the Code also refers to the “medical board,” whenever the word “board” is used by itself, that refers to the governing body for PERS, the Board of Trustees. Miss. Code Ann. § 25-11-103(h). Thus unless Dr. Vohra or other members of the medical board are also members of the Board of Trustees, they by statute are not eligible to be on a committee that reviews the disability decision of the medical board.

¶ 16. The record reflects that the appeals committee consisted of a hearing officer, Steve Lawrence, and Michael Winkelmann, Rahul Vohra, Richard C. Miller, and Virgil F. Belue. Though nothing in the record indicates the membership of the Board of Trustees, a review of one published source indicates that Belue and Miller were members and the other three were not. MISSISSIPPI OFFICIAL AND STATISTICAL REGISTER 1996-2000 at 285 (1997). Perhaps on the date of the 1996 hearing the membership was slightly different, but I assume that some of the committee members were not Board of Trustees members.

¶ 17. I find that the appeals committee cannot by statute be composed of members of the medical board, but must consist only of members of the Board of Trustees. Conversely, in only one person is designated to hear the evidence, that is to be a hearing officer. Either one or the other, but not a blend, must then make the findings that are certified to the full Board of Trustees. The absence of a neutral decision-maker arises from the fact that medical board members sat on the review of the medical board determination, when by statute they may not do that.

¶ 18. Therefore I agree that we should reverse, but the problem in my view is that PERS is not properly interpreting the statute on the formation of the appeals committee. I dissent to any holding that a physician-member of the medical board cannot also conduct an examination of an applicant.

DIAZ, J., for the Court:

KING, P.J., BRIDGES, COLEMAN, IRVING, LEE, PAYNE, AND THOMAS, JJ., Concur. SOUTHWICK, P.J., concurs in part and dissents in part with separate written opinion, joined by McMILLIN, C.J.