COURT OF APPEALS OF VIRGINIA
Present: Judges Elder, Frank and Haley
Argued at Chesapeake, Virginia
VIRGINIA RETIREMENT SYSTEM
OPINION BY
v. Record No. 2119-08-1 JUDGE JAMES W. HALEY, JR.
MAY 19, 2009
SUSAN E. CIRILLO
FROM THE CIRCUIT COURT OF THE CITY OF CHESAPEAKE
John E. Clarkson, Judge Designate
Brian J. Goodman, Legal Affairs & Compliance Coordinator
(Robert F. McDonnell, Attorney General, on brief), for appellant.
Arnold H. Abrons (Abrons, Fasanaro & Sceviour, P.L.L.C., on
brief), for appellee.
I.
The Virginia Retirement System (VRS) maintains: (1) the trial court erred in concluding
that the administrative decision denying benefits to Susan E. Cirillo (Cirillo) did not comply with
Code § 2.2-4019(A)(v) of the Virginia Administrative Process Act (VAPA) requiring Cirillo be
informed “briefly and in writing, of the factual or procedural basis” of that decision; (2) even
assuming the trial court was correct as to its initial decision, authorized by Code § 2.2-4027 of
the VAPA, that court, nonetheless, exceeded its remedial authority under Code § 2.2-4029 in
directing the VRS to make disability payments to Cirillo; and (3) the trial court erred in reversing
the administrative decision by employing an erroneous standard of review.
We affirm in part and reverse in part.
II.
VRS
Structurally, a Board of Trustees administers the VRS. Code § 51.1-124.22. The Board
of Trustees may create Medical Boards. Code § 51.1-124.23(A). Medical Boards review
medical reports, examinations, claimant statements, etc., with respect to claims for disability
retirement and submit to the Board of Trustees “a written report as to its conclusions and
recommendations.” Code § 51.1-124.23(B). A Medical Board is “a neutral evaluatory
mechanism for the Retirement System to gather and analyze medical opinions and reports.”
Johnson v. Virginia Retirement Sys., 30 Va. App. 104, 112, 515 S.E.2d 784, 788 (1999). These
Medical Board reports, and the material upon which they are based, are sent to the Director of
the VRS, appointed by the Board of Trustees, for consideration in his final administrative
decision. See Code § 51.1-124.22(A)(1).
III.
FACTS
We only recite those facts necessary for determination of the issues raised.
Cirillo moved from California in August 2002, began work that month in the Chesapeake
Public Schools System, and ceased working in December 2003.
On March 24, 2004, Cirillo filed for disability benefits pursuant to the provisions of Code
§ 51.1-156(E). Succinctly stated, this code section recites two substantive requirements to justify
disability payments: (1) that claimant is mentally or physically incapacitated for the further
performance of duty; and (2) that incapacity is likely to be permanent. However, an award under
this section is subject to the following exception: “A member shall not be retired for disability
for any condition which existed at the time of becoming a member unless medical evidence,
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convincing to the Board, supports the fact that the pre-existing condition has worsened
substantially.” Code § 51.1-156(E).
On April 7, 2004, a Medical Review Board denied Cirillo’s application for disability
benefits. Upon receipt of this denial, Cirillo filed additional information for review. On May 12,
2004, the Board again denied the application. Cirillo filed further information. She followed
this procedure after denials dated August 11, 2004, November 10, 2004, May 10, 2006, June 7,
2006, and February 21, 2007. Following a May 15, 2006 informal fact-finding proceeding
pursuant to Code § 2.2-4019, the fact finder recommended that Cirillo’s application be granted.
On March 9, 2007, VRS issued a final case decision. The basis, or rationale, of that
decision was contained in one paragraph:
Based on the VRS review and contrary to the
recommendation of the independent fact-finder, regular disability
retirement benefits are denied. The medical evidence has not
satisfied each element of § 51.1-156(E) of the Code of Virginia.
This was evidenced by the conclusion of the Medical Review
Board on seven occasions. It is the applicant’s burden to prove
every element required by § 51.1-156(E) to sustain an approval for
disability retirement benefits.
Cirillo appealed to the circuit court, pursuant to the provisions of the VAPA, Code
§ 2.2-4000 et seq.
By order entered August 8, 2008, the trial court found: (1) that VRS had committed an
error of law in that the language of the final case decision of March 9, 2007, quoted above,
violated VAPA because it did not “set forth the basis upon which it purports to rest with such
clarity as to be understandable,” citing Harrison v. Ocean View Fishing Pier L.L.C., 50 Va. App.
556, 651 S.E.2d 421 (2007); and (2) that VRS “has not in fact met its legal burden to present
evidence . . . in the record . . . that is legally sufficient to support its denial, and that in fact the
record in great part supports the Petitioner’s application.”
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With these findings, the trial court reversed the decision of the VRS and “awarded Cirillo
all regular disability retirement benefits in accordance with her original application . . . .”
On October 2, 2008, the trial court signed a statement of facts, endorsed by counsel.
Therein it is recited that the hearing in this cause was an informal hearing pursuant to Code
§ 2.2-4019, not a formal hearing pursuant to Code § 2.2-4020. 1
III.
ANALYSIS
A.
Issues of law for court review of administrative action, pursuant to Code § 2.2-4027
include “(ii) compliance with statutory authority . . . [and] . . . (iii) observance of required
procedure where any failure therein is not merely harmless error.” (Emphasis supplied).
1
Code § 2.2-4020(B) (dealing with formal hearings) contains explanatory requirement
language apparently more expansive than that contained in Code § 2.2-4019(A)(v) (dealing with
informal hearings). Pursuant to the former, a decision must “briefly state . . . the findings,
conclusions, reasons or basis therefor upon the evidence presented . . . and relevant to the basic
law under which the agency is operating.” Code § 2.2-4020(E). Harrison, cited by the trial court
in its order, involved a Code § 2.2-4020 formal hearing. As noted, the trial court signed a
statement of facts memorializing that the decision here arose following a Code § 2.2-4019
informal hearing. Counsel have briefed and argued the matter based on that statute.
Despite the apparently less explanatory language requirement in Code § 2.2-4019, we
find this Court’s opinions concerning Code § 2.2-4020 persuasive because the underlying
statutory principle in both is the same: An administrative agency must offer a basis for its
decision, understandable to a party and capable of proper review by a court. See Roanoke
Memorial Hospitals v. Kenley, 3 Va. App. 599, 609, 352 S.E.2d 525, 531 (1987) (“Whether
reviewing the Commissioner’s decision as if a formal proceeding had been conducted pursuant
to Code § 9-6.14:12 [now Code § 2.2-4020] or an informal proceeding conducted pursuant to
Code § 9-6.14:11 [now Code § 2.2-4019] the circuit court was required to determine whether the
Commissioner had complied with statutory or legal authority in reaching his decision.”).
The federal APA, 5 U.S.C. § 551 et seq., likewise, has different explanatory requirements
for formal and informal proceedings. See Pension Benefit Guaranty Corp. v. LTV Corp., 496
U.S. 633, 653-56 (1990), and its progeny. See also Richard J. Pierce, Administrative Law
Treatise, Volume 1, § 8.5, at 546-51 (4th ed. 2002).
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Code § 2.2-4019(A)(v), dealing with informal administrative decisions, requires that a
party “be informed, briefly and generally in writing, of the factual basis for an adverse
decision . . . .”
As noted above, the trial court relied upon Harrison as a basis for its decision. There the
ABC Board had placed time restrictions upon a permit for restaurant operations. Based upon
Code § 2.2-4027 and Code § 2.2-4020, we reversed the agency decision, and remanded the cause
to the circuit court, with directions to remand to the agency, because the ABC Board failed to
“make findings of fact to support the restrictions” imposed in the permit as required by Code
§ 2.2-4020. 50 Va. App. at 576, 651 S.E.2d at 431.
Likewise, in NRV v. Virginia Department of Health, 51 Va. App. 514, 535, 659 S.E.2d
527, 537 (2008), we reversed and remanded with directions to remand to the agency for the
agency to comply with Code § 2.2-4020 by explaining the reasons for its departure from its prior
precedents. See also Goodyear Tire & Rubber Co. v. Pierce, 5 Va. App. 374, 384, 363 S.E.2d
433, 438 (1987).
The statutory requirement for agency explanation of agency decisions was set forth by
the United States Supreme Court in SEC v. Chenery Corp., 332 U.S. 194, 196-97 (1947):
If the administrative action is to be tested upon the basis
upon which it purports to rest, that basis must be set forth with
such clarity as to be understandable. It will not do for a court to be
compelled to guess at the theory underlying the agency’s action;
nor can it be expected to chisel that which must be precise from
what the agency has left vague and indecisive.
See also Massachusetts v. EPA, 549 U.S. 497, 534 (2007) (holding the EPA acted arbitrarily and
capriciously when it “offered no reasonable explanation for its refusal to decide whether
greenhouse gases cause or contribute to climate change”); Motor Vehicle Mfrs. Ass’n v. State
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Farm Mut. Auto. Ins. Co., 463 U.S. 29, 48 (1983) (noting that “[w]e have frequently reiterated
that an agency must cogently explain why it has exercised its discretion in a given way”).
The basis of a decision is the rationale, or ratio decidendi, of that decision. Black’s Law
Dictionary 1262 (6th ed. 1990), defines ratio decidendi as “the ground or reason of the decision.”
This Court has defined ratio decidendi as “[t]he essential rationale in the case that determines the
judgment.” Clinchfield Coal Co. v. Reed, 40 Va. App. 69, 73-74, 577 S.E.2d 538, 540 (2003).
See also Vienna Council v. Kohler, 218 Va. 966, 972, 244 S.E.2d 542, 545 (1978) (“The
rationale of the trial court’s decision can be clearly found within its first nine findings of fact.”);
Virginia Power v. Dungee, 258 Va. 235, 251, 520 S.E.2d 164, 173 (1999) (“language in an
opinion is meant to provide a rationale for a decision”); City of Virginia Beach v. Harris, 259 Va.
220, 231, 523 S.E.2d 239, 245 (2000) (“The following excerpts from the court’s letter opinion
underscore its rationale.”). In Giannoukos v. Virginia Bd. of Medicine, 44 Va. App. 694, 699,
607 S.E.2d 136, 138 (2005), referring to the phrase “case decision” as set forth in Code
§ 2.2-4001, we wrote “At the ‘heart’ of a case decision ‘is a fact determination respecting
compliance with law.’ Kenley v. Newport News Hosp. Assoc., 227 Va. 39, 44-45, 314 S.E.2d
52, 55 (1984) (quoting reviser’s note D to predecessor statute Code § 9-6.14:4).”
There were three rationales by which VRS could deny Cirillo’s application pursuant to
Code § 51.1-156(E): They could determine Cirillo was not incapacitated. They could determine
Cirillo was incapacitated, but that incapacity was not “likely to be permanent.” They could
apply the exception, that is, a pre-existing condition has not “worsened substantially.” Had VRS
chosen to explain the basis for its decision, citing one or more of the rationales above, perhaps
with short references to specifics in the record, as required by Code § 2.2-4019, Cirillo, and a
reviewing court, would have been “[i]nformed, briefly and generally in writing, of the factual or
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procedural basis for an adverse decision . . . .” Neither she nor the trial court was so informed.
For example, and by contrast, in Johnson, 30 Va. App. 104, 515 S.E.2d 784, this Court affirmed
a trial court’s decision affirming a VRS denial of benefits sought pursuant to Code § 51.1-156.
We noted in that opinion that “the Retirement System informed Johnson that ‘[t]he medical
evidence has not proved that your incapacity is likely to be permanent . . . .” Id. at 109, 515
S.E.2d at 787.
For these reasons, we conclude that VRS committed a procedural error of law for failing
to adequately comply with the explanatory requirements of Code § 2.2-4019(A)(v); that is, by
failing to provide in writing “the factual or procedural basis for an adverse decision . . . .”
As quoted above, Code § 2.2-4027(iii) further requires that any procedural error be “not
mere harmless error.”
In Jones v. West, 46 Va. App. 309, 327, 616 S.E.2d 790, 799 (2005), we noted that:
Although what constitutes “mere harmless error” under the
Administrative Process Act is not amenable to precise definition
and inevitably requires a case-by-case analysis, it is clear that
procedural violations that “could have had a significant impact on
the ultimate decision so as to undermine the ‘substantiality of the
evidential support’ for the factual findings are not mere harmless
error, Virginia Board of Medicine v. Fetta, 244 Va. 276, 283, 421
S.E.2d 410, 414 (1992).
(Citation omitted).
In J.B. v. Brunty, 21 Va. App. 300, 305, 464 S.E.2d 166, 169 (1995), we stated that:
“[t]he party seeking review of required agency procedure must demonstrate such failure was not
mere harmless error. In this case, appellant points to no infringement of his rights, other than
claiming his reputation was tainted for a needlessly prolonged time period.” (emphasis in
original).
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More generally, under the doctrine of harmless error, we will affirm the circuit court’s
judgment when we can conclude that the error at issue could not have affected the court’s result.
Blue Stone Land Co. v. Neff, 259 Va. 273, 279, 526 S.E.2d 517, 519 (2000); Rhodes v. Painter,
234 Va. 20, 24, 360 S.E.2d 174, 176 (1987); see Holmes v. LG Marion Corp., 258 Va. 473, 483,
512 S.E.2d 528, 525 (1999); Forbes v. Rapp, 269 Va. 374, 382, 611 S.E.2d 592, 597 (2005). See
also Monahan v. Obici Medical Mgmt. Services, 271 Va. 621, 632 n.10, 628 S.E.2d 330, 338
n.10 (2006) (“this ruling was harmless error as it did not affect the ultimate conclusion”). 2
We conclude the failure of VRS to inform Cirillo, “briefly and in writing, of the factual
or procedural basis” of the rationale for its decision is not “mere harmless error.” Cirillo could
not know on which of the three potential rationales for denial VRS based its decision denying her
benefits. Thus, upon her appeal to circuit court, she was denied her right to intelligently marshal
2
Indeed, the line between what is a substantive administrative error and a procedural
administrative error is often hard to discern.
Thus, in Browning-Ferris Ind. v. Residents Involved in Saving the Env’t, 254 Va. 278,
492 S.E.2d 431 (1997), Code § 10.1-1408.1(D), a portion of the Virginia Waste Management
Act, required the Director of the Department of Environment Quality, to make an “explicit
finding” that the proposed facility poses “no substantial present or potential danger to human
health or the environment.” The Director did not do so. The issuance of the permit was
challenged on the basis that this failure was a violation of Code § 9-6.14:17(ii) (now Code
§ 2.2 4027(ii)); that is, agency failure to comply with statutory authority. The Virginia Supreme
Court agreed, and concluded:
Finally, we disagree with [the] assertion that the Director’s failure
to make an explicit determination . . . was harmless error under
Code § 9-6.14:17(iii) [now Code § 2.2-4027(iii)]. That provision
subjects the failure to comply with required procedures to a
harmless error analysis. Here, however, the statutory compliance
issue involves a substantive provision which is a prerequisite to the
issuance of a permit.
Id. at 285, 492 S.E.2d at 435. See also Volkswagen of America v. Smit, 266 Va. 444, 453, 587
S.E.2d 526, 531-32 (2003).
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facts in the agency record supportive of her position, and that denial could have had, and may in
the future have, a significant impact upon a circuit court decision.
Furthermore, the violation of Code § 2.2-4019(A)(v), by depriving the trial court of the
rationale of the administrative decision, impeded that court in application of the substantive
evidence rule in reviewing that decision. A circuit court reviews an administrative decision as an
appellate court reviews a trial court decision. In Puckett v. Commonwealth, 134 Va. 574,
579-80, 113 S.E. 853, 854 (1922), the then Virginia Supreme Court of Appeals quoted from
Clements v. Hearne, 45 Tex. 415 (1876), as follows: ‘“To require the appellee or the court to
hunt through the record for every conceivable error which the court below may have committed
. . . would obviously be unreasonable and oppressive on the party recovering judgment, and most
burdensome on this court, unnecessarily impeding the progress of its business . . . .’” See also
Nicholas v. Harnsberger, 180 Va. 203, 208, 22 S.E.2d 23, 25 (1942); Fitzgerald v. Bass, 6
Va. App. 38, 56 n.7, 366 S.E.2d 615, 625 n.7 (1988) (“We do not deem it our function to comb
through the record . . . in order to ferret-out for ourselves the validity of these claims . . . .”);
Mullin v. Mullin, 45 Va. App. 289, 306, 610 S.E.2d 331, 339 (2005). As a consequence,
Cirillo’s right to an appropriate review by a circuit court was, likewise, compromised by the
violation of Code § 2.2-4019(A)(v).
Finally, this Court has already held, in Harrison, that the failure of an agency to meet the
requirements of Code § 2.2-4020 is not harmless error:
Nevertheless, in order to support the imposition of restrictions on
the licenses, the APA required the Board to “briefly state . . . the
findings, conclusions, reasons, or basis [for the restrictions] upon
the evidence presented by the record and relevant to the basic law
under which the agency is operating.” Code § 2.2-4020. Failure to
make such findings is not harmless error . . . .
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Harrison, 50 Va. App. at 574-75, 651 S.E.2d at 430. ‘“If those grounds are inadequate or
improper, the court is powerless to affirm the administrative action by substituting what it
considers to be a more adequate or proper basis. To do so would propel the court into the
domain which [the legislature] has set aside exclusively for the administrative agency.’” Id. at
575, 651 S.E.2d at 430 (quoting Chenery, 332 U.S. at 196). We believe this reasoning applies
with equal force to VRS’s failure to comply with Code § 2.2-4019(A)(v).
Accordingly, that finding of law by the trial court is affirmed.
B.
Nonetheless, the remedy granted by the trial court for this error was not authorized by
statute or case law.
Code § 2.2-4029 states in relevant part that when a court has determined an agency has
committed an error of law, that court:
may compel agency action unlawfully withheld . . . except that the
court shall not itself undertake to supply agency action committed
by the basic law to the agency. Where . . . a case decision is found
by the court not to be in accordance with law under § 2.2-4027, the
court shall suspend or set it aside and remand the matter to the
agency for further proceedings, if any, as the court may permit or
direct in accordance with law.
(Emphasis supplied).
Here, as noted, the trial court reversed the VRS decision and awarded benefits. Both
remedies constitute error.
As we stated in Virginia Imports v. Kirin Brewery of America, 41 Va. App. 806, 831,
589 S.E.2d 470, 482 (2003):
If a court finds that an agency has failed to comply with
statutory authority, “the court shall suspend or set the decision
aside and remand the matter to the agency.” Virginia Bd. of
Medicine v. Fetta, 244 Va. 276, 280, 421 S.E.2d 410, 412 (1992);
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Code § 2.2-4029. Hence, having found in this case that the ABC
Board had “failed to address and rule upon all the issues raised by
Kirin with respect to its grounds for termination of the agreement,”
the circuit court, rather than imposing its own judgment on the
matter, should have suspended the ABC Board’s decision and
remanded the matter back to the ABC Board with instructions to
make the additional required factual determinations.
See also Fetta, 244 Va. at 280, 421 S.E.2d at 413 (“The court itself may not undertake the agency
action directly.”); NRV, 51 Va. App. at 534; 659 S.E.2d at 537; Harrison, 50 Va. App. at 575-76,
651 S.E.2d at 431.
Accordingly, we reverse the decision of the trial court reversing the VRS decision and we
remand to the trial court with directions to set aside the decision of the VRS and to remand to
VRS for compliance with Code § 2.2-4019(A)(v). We further reverse the decision of the trial
court ordering the payment of disability benefits.
C.
Code § 2.2-4027 begins: “The burden shall be upon the party complaining of agency
action to designate and demonstrate an error of law subject to review by the court.”
Among designated errors of law subject to review is: “(iv) the substantiality of the
evidentiary support for findings of fact.” Continuing, the statute expounds:
When the error on review is to be made on the agency record, the
duty of the court with respect to issues of fact shall be limited to
ascertaining whether there was substantial evidence in the agency
record upon which the agency as the trier of the facts could
reasonably find them to be as it did.
Virginia appellate courts have repeatedly and consistently set forth this standard of
review for agency factual determinations.
In Doctors’ Hospital v. Stroube, 52 Va. App. 599, 607, 665 S.E.2d 862, 865-66 (2008),
we stated:
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Under this standard of review, this Court will reject an
agency’s finding ‘“only if, considering the record as a whole, a
reasonable mind would necessarily come to a different
conclusion.’” Tidewater Psychiatric Inst. v. Buttery, 8 Va. App.
380, 386, 382 S.E.2d 288, 291 (1989) (quoting Va. Real Estate
Comm’n v. Bias, 226 Va. 264, 269, 308 S.E.2d 288, 291 (1983)).
“Substantial evidence” refers to “such relevant evidence as a
reasonable mind might accept as adequate to support a
conclusion.” Bio-Medical Applications of Arlington, Inc. v.
Kenley, 4 Va. App. 414, 427, 358 S.E.2d 722, 729 (1987).
Thus, “[u]nder VAPA, the circuit court reviews the agency’s action in a manner
‘equivalent to an appellate court’s role in an appeal from a trial court.’” Mattaponi Indian Tribe
v. Dep’t of Envtl. Quality ex rel. State Water Control Bd., 43 Va. App. 690, 707, 601 S.E.2d 667,
676 (2004) (citations omitted), aff’d sub nom Alliance to Save the Mattaponi v. Commonwealth
Dep’t of Envtl. Quality ex rel. State Water Control Bd., 270 Va. 423, 621 S.E.2d 78 (2005). The
circuit court has no authority under VAPA to reweigh the facts in the agency’s evidentiary
record. Boone v. Harrison, 52 Va. App. 53, 61-62, 660 S.E.2d 704, 708 (2008). See also
Johnston-Willis, Ltd. v. Kenley, 6 Va. App. 231, 242, 369 S.E.2d 1, 7 (1998) (“The sole
determination as to factual issues is whether substantial evidence exists in the agency record to
support the agency’s decision.”); Smith v. Dept. of Mines, Minerals & Energy, 28 Va. App. 677,
685, 508 S.E.2d 342, 346 (1998) (“The burden of proof rests upon the party challenging the
agency determination to show that there was not substantial evidence in the record to support
it.”); Bias, 226 Va. at 269, 308 S.E.2d at 125 (“The phrase ‘substantial evidence’ refers to ‘such
relevant evidence as a reasonable mind might accept as adequate to support a conclusion.’”
(quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229 (1938) (emphasis in original)).
In this case, the trial court’s order recited that VRS “has not met its legal burden to
present evidence . . . in the record . . . that is legally sufficient to support its denial and that in
fact the record in great part supports the Petitioner’s application.” (Emphasis supplied). This
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language makes clear that the trial court re-weighed the evidentiary record and applied a
preponderance of the evidence standard in reviewing the agency decision, rather than the
appropriate substantial evidence standard set forth above. Accordingly, the decision of the trial
court reversing the VRS decision is reversed. 3
V.
CONCLUSION
In summary: (1) the decision of the circuit court that VRS violated the provisions of
Code § 2.2-4019(A)(v) is affirmed; (2) the decision of the circuit court reversing the decision of
VRS is reversed; (3) the decision of the circuit court awarding benefits is reversed; and (4) this
cause is remanded to the circuit court with directions to set aside the decision of the VRS and to
remand the same to VRS directing its compliance with Code § 2.2-4019(A)(v).
Affirmed in part,
reversed and
remanded in part.
3
As the Virginia Supreme Court wrote in Bias: “The circuit court’s ruling reflects a
misconception of the limited role of a court reviewing a decision by an administrative agency, on
the agency’s record, pursuant to the Administrative Process Act . . . .” Bias, 226 Va. at 268, 308
S.E.2d at 125.
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Virginia Retirement System v. Cirillo
Court: Court of Appeals of Virginia
Date filed: 2009-05-19
Citations: 676 S.E.2d 368, 54 Va. App. 193
Copy CitationsCombined Opinion