GNS In The News

Lawyer's Clear Thinking Leads To Court's Reversal

JOHN MONK, News Columnist

Simple words and some clear thinking were behind a $1 billion victory in the S.C. Supreme Court last week.

In a much-publicized case involving the state retirement fund, the Supreme Court reversed a decision it made a year ago.

This time, the court ruled that 20,000 retirees in the S.C. Retirement System would not get hefty increases in their monthly checks.

Over time, those increases would have added up to more than $1 billion - and the retirement system that issues monthly checks to 64,000 retired teachers, state agency workers and local government employees would have collapsed without a major bailout from the S.C. General Assembly.

The court's ruling was the exact opposite of how it ruled last year. Then, the court ruled that 20,000 of the 64,000 retirees should get big monthly hikes.

The new decision owed much to a surprisingly simple strategy devised by Columbia lawyer Richard Gergel.

Gergel was hired a year ago, after last year's ruling for higher benefits shocked the S.C. Budget and Control Board, which oversees the retirement system.

"I needed to get some fresh eyes on the case," said Budget and Control Board deputy general counsel Ed Evans, who hired Gergel.

Gergel, who writes about S.C. history in his spare time, believes in keeping things simple - especially when you are talking about a $17 billion retirement fund few people understand anyway.

"If I can't say something in a sentence or two, then I haven't done my job in understanding my case," Gergel, 46, said.

After Gergel read last year's Supreme Court decision, he found it hard to understand.

No wonder. The decision was full of technical gobbledygook and difficult legal principles involving how to interpret a law. The justices drew on those principles to interpret language in a 1986 bill that made changes to the pension law. Those changes concerned a formula involving unused vacation time.

Gergel read the law and found it could be interpreted either for higher benefits or regular benefits. But everyone already agreed the law had two interpretations.

Gergel researched the history of the law. He found that in 1986, when the General Assembly amended the retirement law, it used language that could be interpreted two ways. This had the unforeseen consequence of allowing 20,000 of the pension fund's 64,000 retirees to claim they were owed sharply increased benefits.

"Over time, it would amount to an extra $1 billion drain on people paying for retirement benefits," Gergel said.

But the more Gergel thought about it, the more he decided to focus not on the words of the law but on the actions of the General Assembly. He realized the General Assembly never intended to award higher benefits - even if its language could be interpreted that way.

So he set out to prove that the General Assembly had goofed and passed a sloppily written law.

He reasoned that if the Legislature had intended to give larger benefits to 20,000 people, there should be a clear record of that.

"You would expect to see footprints in the sand," Gergel said. "But there were none."

In arguments, Gergel stressed a list of obvious things that should have happened, but didn't, if the Legislature had intended to give big benefits.

The list included:

Politicians should have taken credit. None did.
A debate in the Legislature should have taken place. None was held.
The Legislature should have commissioned a financial impact study. No study was done.
The Budget and Control Board, under the state constitution, should have examined any increase in retirement benefits, as it's required to do. That was not done.

Gergel told the justices, four of whom are former state lawmakers, they should take their own experience as lawmakers into account. They know a record should exist when politicians award tens of millions of dollars in new benefits, he said.

Last week, by a 4-1 majority, the court reversed itself and agreed with nearly all of the points Gergel raised.

It probably didn't hurt Gergel's case meanwhile that no less than Gov. Jim Hodges last September predicted the entire retirement system would collapse if the Supreme Court didn't reverse itself.

Gergel gives Evans credit for persevering after the Supreme Court's decision last May.

"He had the guts to know he was right, and he wasn't going to take it lying down," said Gergel. The case isn't over.

The retirees' lawyer, Michael Spears, 51, a Columbia native who lives in Spartanburg, said he is deciding whether to ask the Supreme Court to hear the case a third time. He has 15 days to do so. He also may explore whether federal issues exist to appeal in U.S. District court.

Spears estimated his fees, had he won, would have been $20 million to $40 million.

Spears said he wasn't going to spend all of it on himself. He was going to give much of it to the University of South Carolina Law School, which needs at least $25 million for a new building.

"They would get a majority portion of the fee, had the case been won by me," Spears said, adding he had made that pledge in writing. As a lawyer on contingency, Spears gets no fee if he loses.

Spears said Gergel had an excellent strategy.

"It is exactly what I would have done in his position," Spears said.

Jim Stuckey, Gov. Jim Hodges' chief counsel who also had a hand in hiring Gergel, said: ''Richard Gergel is a brilliant legal tactician. We had confidence he could address the issues, and because he has a lot of respect in the legal community, we knew the justices would be interested in what he had to say."

Gergel's bill came to $55,427 for him and his law firm.

Gergel said his usual fees are much higher, but he enjoys working for the state.

"I know 20,000 people won't get a windfall, but the retirement system is now stable, and 4 million South Carolinians won't have to bail it out. The greater good has been served," Gergel said.

Reprinted from The State newspaper
May 27, 2001