Supreme Court Summaries

Opinions filed October 18, 2013

Prazen v. Shoop, 2013 IL 115035

Appellate citation: 2012 IL App (4th) 120048.

      JUSTICE THOMAS delivered the judgment of the court, with opinion.

      Chief Justice Kilbride and Justices Garman, Karmeier, and Theis concurred in the judgment and opinion.

      Justice Freeman dissented, with opinion, joined by Justice Burke.

      At the end of 1998, the plaintiff in this case, Joseph Prazen, elected to participate in the state’s early retirement incentive plan and retired from his position as superintendent of the electrical department of the City of Peru. He had over 27 years of service, and he also had purchased five years of age-enhancement credit so as to raise his years of service to over 32 years for pension purposes.

      Plaintiff had an unincorporated electrical business, which was incorporated just before he retired, of which he was then secretary and president. Just before he retired, the City entered into an agreement with this corporation for the operation of the City’s electrical department. It provided for management and supervision. Mayor Donald Baker signed the agreement on behalf of the City. The first year’s compensation under the contract was about $7,000 higher than plaintiff’s prior annual salary. This relationship lasted until 2009, when the corporation was dissolved. After that, the City used other independent contractors to perform the same duties.

      In 2010, the Illinois Municipal Retirement Fund notified the plaintiff that, after participating in the early retirement incentive plan, he had violated the statutory prohibitions against returning to work because he had created a corporation that employed him and then contracted with the City so that plaintiff could simply go back to work at the same job. The Fund recalculated plaintiff’s years of service as 27 and claimed he should repay $307,100 as a statutory forfeiture. The circuit court of Sangamon County upheld the Fund.

      In 2012, the appellate court held that the view taken below was not supported by statute, and, in this decision, the supreme court agreed. The supreme court held that the work which was done between 1999 and 2009 was done by a separate corporate entity and was not precluded by statute. If the legislature had wanted to specifically prohibit this, it could have said so. In so deciding, the supreme court held that the legislature did not grant the Board of Trustees of the Illinois Municipal Retirement Fund the power to find that a corporation was a “guise” to circumvent the statutory forfeiture provisions. The court also noted that, earlier in the period under consideration, the Board had expressed the view that what the plaintiff had done was permissible, but that its position had evolved over time to the one presented in this appeal. The supreme court held it could not find a clear intent expressed in the statutes to prohibit outsourcing to a corporation created by a retired employee and imposing a forfeiture for doing so. To provide otherwise, legislative action is required.