Supreme Court rules on KPERS investments

RE: Appeal No. 76,524: Kansas Public Employees Retirement System v. Reimer & Koger Associates Inc. et al.

TOPEKA—The Supreme Court today ruled that the recovery of millions of dollars worth of lost investments by the state's public employee retirement system is not barred by a statute of limitations.

The Court, in a unanimous decision authored by Justice Edward Larson, held that since KPERS's investment activity is a governmental and not a proprietary function, no statute of limitations applies. The court also ruled that if one applied, a law establishing a 10-year statute of limitations on any claims brought by KPERS revived any time-barred claims.

The rulings arose from 10 combined appeals from five of numerous cases filed by KPERS against a number of individuals, accounting firms, and law firms to recover amounts lost in KPERS's direct placement investment programs. The five cases include: * KPERS v. Reimer & Koger Associates Inc. in which KPERS sued its investment advisor, Reimer & Koger, for about $14.2 million in losses from investments made in Tallgrass Technologies Corporation. *KPERS v. Russell et al. in which KPERS sued to recover about $7.85 million from investments made in Emblem graphics Systems and Emblem Tape & Label Corporation. *KPERS v. Ward et al. in which KPERS sued to recover about $4.425 million invested in Affinity Systems Inc. *KPERS v. Byrd et al. in which KPERS sought to recover about $2.5 million for investments made in the Hydrogen Energy Corporation. *And KPERS v. Cohen, Brame & Smith et al. in which KPERS sued for investment losses of $6.38 million in Sharoff Food Services Inc.

Justice Larson wrote that Shawnee County's Judge Franklin R. Theis was correct in his determination that the statute especially enacted for the KPERS litigation is constitutional and may be applied retroactively.

Concerning the 10-year-statute of limitations, Justice Larson wrote that what the "1992 Kansas Legislature did was grant to all parties that may be sued by KPERS for claims arising from a governmental function a 10-year-period of limitations where none had previously existed. As such, the provision does not violate the Equal Protection or Due Process Clauses of either the United States or Kansas Constitutions. The provision did not violate any existing rights because none in fact existed, and it certainly forms no basis for a discrimination claim," Justice Larson wrote.

"All of the arguments made by the defendants as to the validity of these provisions are premised on our holding KPERS's actions to be proprietary. Because we declined to do so, they are left without any arguments which require our considerations..." he said in the opinion.