Untitled California Attorney General Opinion ( 2020 )

TO BE PUBLISHED IN THE OFFICIAL REPORTS
OFFICE OF THE ATTORNEY GENERAL
State of California
XAVIER BECERRA
Attorney General
_________________________
:
OPINION : No. 17-101
:
of : March 3, 2020
:
XAVIER BECERRA :
Attorney General :
:
CATHERINE BIDART :
Deputy Attorney General :
:
________________________________________________________________________
MARTIN D. KOCZANOWICZ, CITY ATTORNEY FOR THE CITY OF
MORENO VALLEY, has requested an opinion on the following questions:
1. Under Government Code sections 53200–53210, may a city council lawfully
provide its members with health and welfare benefits through a plan into which the city
pays a flat rate plus a percentage of the average of the salaries of selected managerial
employees, where the extra percentage is not made available to other city officers and
employees?
2. May an unintentional violation of Government Code sections 53200–53210 lead
to criminal penalties?
3. If a city council provides its own members with health and welfare benefits that
exceed what is allowed under Government Code sections 53200–53210, what recourse
does the city have to recoup its overpayment, including interest on that overpayment?
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4. May a city council approve a settlement agreement between the city and a
current city council member to repay the city for the excessive health and welfare benefits
received—including an agreement that waives some or all of the city’s overpayment—if
that member is recused from voting on the agreement?
CONCLUSIONS
1. No, under Government Code sections 53200–53210, a city may not lawfully
provide its city council members with health and welfare benefits through a plan into which
the city pays a flat rate plus a percentage of the average of the salaries of selected
managerial employees, where the extra percentage is not made available to other city
officers and employees.
2. A violation of Government Code sections 53200–53210 that is unintentional
could lead to criminal penalties only if it resulted from a failure to ascertain the relevant
legal obligations that was so unreasonable as to constitute criminal negligence.
3. The city may seek to recoup its overpayment of city council members’ health
and welfare benefits, including interest, in a civil action against those who received or
approved the excessive benefits.
4. A city council may approve a settlement agreement between the city and a
current city council member to repay the city for the excessive health and welfare benefits
received if that member is recused from voting on the agreement and the other “remote
interest” requirements of Government Code section 1091, subdivision (b)(15) are met.
Although a city has discretion to waive a claim in part or in full if doubt or a dispute exists
as to the claim’s validity or amount, a city may not waive a valid claim of an indisputable
amount because doing so would result in an unconstitutional gift of public funds.
ANALYSIS
This opinion addresses a set of related questions arising from a city council’s
decision to grant its members a specialized package of health and welfare benefits. As
described to us, the members’ benefit plan consisted of city contributions toward a
“cafeteria plan”1 from which members could purchase health-related benefits. For the city
council members’ plan, the city provided contributions at a flat rate plus a percentage of
the average of the salaries of selected city managerial employees, whose salaries were
1
A cafeteria plan is so called “because the beneficiary can choose from a selection of
benefits as would a cafeteria patron choosing food items.” (Sturgeon v. County of Los
Angeles (2015) 242 Cal.App.4th 1437, 1441, fn. 3.)
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higher than that of the city council members themselves.2 The benefit plans that the city
made available to other city employees and officers did not provide the same level of
benefits. Instead, the other plans provided contributions at the flat rate alone, or the flat
rate plus a percentage of the employee’s or officer’s own salary. The facts as presented to
us indicate that the measure adopting this way of calculating the contributions for council
members was presented to the city council by the then city manager, who indicated that the
proposal had been reviewed by the then city attorney and complied with certain
requirements of state law. The possible violation addressed by the present request was
discovered several years later.
The first question to be considered is whether the subject benefit plan was in
compliance with the state statutes governing employment benefits for local legislative
bodies.3 If not, then could unintentional violations of the governing laws result in criminal
penalties? What recourse would the city have to recoup an overpayment of benefits, and
would interest be available? And, finally, could the city approve a settlement agreement—
including one that waived some or all of the overpayment—with a current city council
member who was subject to the agreement, if that member were recused from the vote?
We address each of these questions in turn below.
Question 1
We first consider whether a specialized benefit plan like the one described here is
permitted under the relevant statutes. We conclude that it is not permitted.
Government Code sections 53200–53210 regulate the provision of health and
welfare benefits to officers and employees of local agencies, including cities.4 Health and
welfare benefits refer to “hospital, medical, surgical, disability, legal expense or related
benefits including, but not limited to, medical, dental, life, legal expense, and income
protection insurance or benefits, whether provided on an insurance or a service basis,” as
well as certain group life insurance.5 A city may provide such benefits to its officers and
2
We are informed the benefits equaled 6 percent of the average of the salaries of the
Public Works Director, Community Development Director, Economic Development
Director, Administrative Services Director, Finance Director, and Parks and Community
Services Director.
3
Gov. Code, §§ 53200–53210.
4
For purposes of the statutory scheme, a city is a local agency. (Gov. Code, § 53200,
subd. (a).)
5
Gov. Code § 53200, subd. (d).
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employees, including council members, subject to certain limits.6 These implement an
express statutory purpose to uniformly limit local legislators’ benefits.7
One limit, set out in Government Code section 53202.3, requires that when local
legislators craft a benefit plan for themselves, they must share the same benefit plan widely
with others: “All plans, policies or other documents used to effectuate the purposes of this
article shall provide benefits for large numbers of employees.”8
A second limit, set out in Government Code section 53208.5, subdivision (b)
provides:
Notwithstanding any other provision of law, the health and welfare benefits
of any member of a legislative body of any city, including a charter city, . . .
or any other political subdivision of the state shall be no greater than that
received by nonsafety employees of that public agency. In the case of
agencies with different benefit structures, the benefits of members of the
legislative body shall not be greater than the most generous schedule of
benefits being received by any category of nonsafety employees.9
Here, the members’ benefits were based on a flat rate plus a percentage of the
average of the salaries of some of the city’s executive managerial employees, whose
salaries exceeded those of the city council members themselves. This additional
percentage was not provided to non-council members. Instead, all other city officer and
employee benefits were based on the flat rate alone, or the flat rate plus a percentage of the
employee’s own salary.
6
Gov. Code, § 53201. Government Code section 1090, which prohibits financial
conflicts of interest in making public contracts, does not prohibit local legislators from
providing themselves with benefits generally. (Gov. Code, § 53208 [“Notwithstanding any
statutory limitation upon compensation or statutory restriction relating to interest in
contracts entered into by any local agency, any member of a legislative body may
participate in any plan of health and welfare benefits permitted by this article”].)
7
Gov. Code, § 53208.5, subd. (a) (legislative findings and declarations).
8
Gov. Code, § 53202.3.
9
Gov. Code, § 53208.5, subd. (b).
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The use of an enriched benefit formula for council members is contrary to
Government Code section 53208.5, subdivision (b), which states that local legislators’
benefits “shall not be greater than the most generous schedule of benefits being received
by any category of nonsafety employees.”10 In addition, a failure to offer the same plan to
“large numbers of employees” is contrary to Government Code section 53202.3.11
Thus we conclude that, under Government Code sections 53200–53210, a city may
not provide its city council members with health and welfare benefits through a plan into
which the city pays a flat rate plus a percentage of the average of the salaries of selected
managerial employees, where the extra percentage is not made available to other city
officers and employees.
Question 2
Question 2 asks whether criminal penalties could result from an unintentional
violation of Government Code sections 53200–53210. We conclude that criminal penalties
could only result from such a violation if it met the high standard for criminal negligence.
We have previously opined that a willful violation of sections 53200–53210 may be
punishable as a misdemeanor, and may subject the official to removal from office under
10
See Gov. Code, § 53208.5, subd. (b). The enriched formula used an average of six
higher-paid executive managerial employee salaries (see note 2, ante) instead of the
members’ own individual salaries. Whether those six higher-paid executive managerial
employees would themselves comprise a “category of nonsafety employees” for purposes
of section 53208.5, subdivision (b), is unclear. Even if they did, however, it could not
reasonably be said that they had a similarly “generous schedule of benefits” to the city
council members, because the executive managerial employees’ benefits were based on
their own individual salaries, while the city council members’ benefits were based on the
average salaries of a separate group of higher-paid employees.
11
See Gov. Code, § 53202.3. The governing statutory scheme does not define “large
numbers of employees” as used in Government Code section 53202.3. (Gov. Code,
§ 53202.3, italics added; but see Gov. Code, § 53200, subd. (e) [“‘Employees’ or ‘officers
and employees’ mean all employees and officers, including members of the legislative
body, who are eligible under the terms of any plan of health and welfare benefits adopted
by a local agency pursuant to this article”].) Under any reasonable interpretation of that
term, however, a benefits plan offered only to five council members and not to any other
city employees would not qualify as a plan that “provide[s] benefits for large numbers of
employees.”
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Government Code section 3060 et seq.12 The question here, though, is about an
unintentional violation, not a willful one.13 We conclude that an unintentional violation
could in theory lead to criminal liability as a misappropriation of public funds, but only if
the violation resulted from conduct rising to the level of “criminal negligence.” Penal Code
section 424, subdivision (a), states:
Each officer of this state, or of any county, city, town, or district of this state,
and every other person charged with the receipt, safekeeping, transfer, or
disbursement of public moneys, who . . . [w]ithout authority of law,
appropriates the same, or any portion thereof, to his or her own use, or to the
use of another; . . . [i]s punishable by imprisonment in the state prison for
two, three, or four years, and is disqualified from holding any office in this
state.14
A city council member’s act of authorizing the provision of public benefits could
constitute a disbursement of public moneys within the meaning of Penal Code section
424.15 Doing so without legal authority would amount to a crime, however, only if the
member had the requisite mental state. The California Supreme Court has repeatedly stated
12
83 Ops.Cal.Atty.Gen. 124, 128–129 (2000); see Gov. Code, §§ 1222 (“willful
omission to perform any duty enjoined by law upon any public officer, or person holding
any public trust or employment, where no special provision is made for the punishment of
such delinquency, is punishable as a misdemeanor”) & 3060 et seq. (providing for removal
of official for “willful or corrupt misconduct in office”).
13
The prohibition against conflicts of interest in public contracts (Gov. Code § 1090)
provides for criminal penalties for willful violations (Gov. Code, § 1097), not unintentional
ones.
14
Pen. Code, § 424, subd. (a).
15
See People v. Hubbard (2016) 63 Cal.4th 378, 394 (holding that “an individual is
‘charged with the receipt, safekeeping, transfer, or disbursement of public moneys’ under
the meaning of section 424 so long as he or she exercises a degree of material control over
public funds that amounts to being ‘charged with’ such authority”); see also People v.
Battin (1978) 77 Cal.App.3d 635, 649–650 (supervisor’s certification of time sheets from
which county staff was paid constituted disbursement of public monies under Penal Code
section 424); Webb v. Superior Court (1988) 202 Cal.App.3d 872, 887 (“that petitioner
was not directly, in his job description or the common responsibilities of his position,
charged with receipt, safekeeping, transfer or disbursement of public funds does not
necessarily preclude a prosecution under section 424. It is sufficient if the public official
controls public funds so as to cause their expenditure for nonpublic purposes”).
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that to be convicted under Penal Code section 424, an official must know or be criminally
negligent in not knowing that he or she lacks legal authority.16
Criminal negligence is not ordinary negligence, but is “aggravated, culpable, gross,
or reckless.”17 It requires “a higher degree of negligence than is required to establish
negligent default on a mere civil issue.”18 An official entrusted with control of public funds
would generally not be criminally liable for misappropriation if he or she believed the
action to be legally authorized, unless that belief was “objectively unreasonable, i.e., [was]
the product of criminal negligence in ascertaining legal obligations.”19
Thus, in response to Question 2, we conclude that an unintentional violation of
Government Code sections 53200–53210 could lead to criminal penalties only if it were
criminally negligent.
Question 3
We next consider whether the city may recoup its overpayments from those who
received or approved excessive benefits and, if so, whether interest is available.20
An act that is in excess of what is legally permitted is ultra vires—i.e., outside of
the actor’s authority and beyond his or her legal discretion.21 Therefore if a city adopted a
resolution to provide benefits that were not in compliance with Government Code sections
53200–53210, that resolution would be void.22 A city may seek repayment of excess
16
E.g., People v. Hubbard, supra, 63 Cal.4th at p. 397; People v. Bradley (2012) 208
Cal.App.4th 64, 78; Stark v. Superior Court (2011) 52 Cal.4th 368, 395–396.
17
Stark v. Superior Court, supra, 52 Cal.4th at p. 399.
18
Ibid., internal quotation marks omitted.
19
Ibid.20
We address only the question we have been asked: whether a city may recoup its
“overpayment” under the circumstances described to us. We understand that
“overpayment” refers to the amount in excess of what could have been provided lawfully.
We have not been asked to address, nor do we, whether a city could recoup anything
beyond that amount on the ground that the resolution was void.
21
See People ex rel. Harris v. Rizzo (2013) 214 Cal.App.4th 921, 941–944; Lockyer v.
City and County of San Francisco (2004) 33 Cal.4th 1055, 1086 (where public official’s
authority to act in particular area derives wholly from statute, the scope of that authority is
measured by terms of the governing statute).
22
Big Creek Lumber Co. v. County of Santa Cruz (2006) 38 Cal.4th 1139, 1150 (“Local
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compensation through, among other means, a civil action for waste23 or to declare void a
resolution purporting to approve excess benefits.24 Those who approved the excessive
benefits would be liable for the unlawful expenditures, but only if they failed to use due
care or reasonable diligence in approving the excess benefits.25 Those who received the
excessive benefits would be liable to the city for repayment,26 and no immunity would be
available for receiving excess benefits in good faith.27
In addition, a city could seek to recover the unlawful benefits through a cause of
action under Government Code section 1090, which prohibits conflicts of interest in public
contracts. A cause of action under section 1090 could seek to recover from members who
approved benefits in which they had a prohibited financial interest and from members who
received the benefits.28 Finally, a city could also seek to recover against those who
approved the unauthorized expenditures under a cause of action for a breach of fiduciary
duty.29
Lastly, interest would be recoverable on a city’s claim for damages. By statute,
prejudgment interest would apply to damages if their amount were certain or capable of
legislation in conflict with general law is void,” quotation marks and citations omitted);
83 Ops.Cal.Atty.Gen. 14, 19 (2000) (“Where local legislation conflicts with general law,
it is void”).
23
People ex rel. Harris v. Rizzo, supra, 214 Cal.App.4th at p. 945. Although “waste
does not encompass the great majority of governmental outlays of money . . . nor does it
apply to the vast majority of discretionary decisions made by state and local units of
government” (Chiatello v. City and County of San Francisco (2010) 189 Cal.App.4th 472,
482–483), an illegal expenditure of public funds is waste (Humane Soc. of U.S. v. State Bd.
of Equalization (2007) 152 Cal.App.4th 349, 356).
24
People ex rel. Harris v. Rizzo, supra, 214 Cal.App.4th at pp. 941, 945.
25
People ex rel. Harris v. Rizzo, supra, 214 Cal.App.4th at pp. 942–943, citing Stanson
v. Mott (1976) 17 Cal.3d 206; see id., p. 945; see also 83 Ops.Cal.Atty.Gen. 124, supra.
26
People ex rel. Harris v. Rizzo, supra, 214 Cal.App.4th at pp. 935–936, 942.
27
Stevens v. Geduldig (1986) 42 Cal.3d 24, 35; Aebli v. Board of Ed. of City and County
of San Francisco (1944) 62 Cal.App.2d 706, 727–728.
28
See Gov. Code, § 1090 et seq.; Los Angeles Memorial Coliseum Com. v. Insomniac,
Inc. (2015) 233 Cal.App.4th 803, 822–824); People ex rel. Harris v. Rizzo, supra, 214
Cal.App.4th at pp. 948–949 & fn. 29; Thomson v. Call (1985) 38 Cal.3d 633, 645–652.
29
People ex rel. Harris v. Rizzo, supra, 214 Cal.App.4th at pp. 950–951.
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calculation.30 Post-judgment interest would apply on any unpaid principal of a judgment
from its date of entry.31
So, in response to Question 3, we conclude that a city may seek to recoup its
overpayment of city council members’ health and welfare benefits, including interest, by a
cause of action against those who received or approved the excessive benefits.
Question 4
Question 4 asks whether a city council may enter into a settlement agreement with
a sitting council member who received or approved excess benefits. We conclude that the
parties may enter into such an agreement if they observe requirements for disclosure and
recusal set forth in Government Code section 1091, subdivision (b)(15), which governs
this situation.
Government Code section 1090 generally prohibits a city council from making a
contract32 (including a litigation settlement agreement33) if a member of the council has a
financial interest in the contract.34 Some financial interests are remote enough not to be
absolutely prohibited.35 A city council may make a contract despite a member’s remote
interest if: “(1) the officer in question discloses his or her financial interest in the contract
to the public agency, (2) such interest is noted in the entity’s official records, and (3) the
officer abstains from any participation in the making of the contract.”36
30
Civil Code, § 3287, subd. (a); Leaf v. Phil Rauch, Inc. (1975) 47 Cal.App.3d 371, 376
(prejudgment interest is matter of right where damages-certainty requirement in Civil Code
section 3287 is met); see Collins v. City of Los Angeles (2012) 205 Cal.App.4th 140, 150,
fn. 7 (surveying cases).
31
Code Civ. Proc., §§ 685.010–685.020.
32
The “making of a contract” includes “planning, preliminary discussions,
compromises, drawing of plans and specifications and solicitation of bids.” (Stigall v. City
of Taft (1962) 58 Cal.2d 565, 571.)
33
Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 810–811
(settlement agreement is a contract).
34
Gov. Code, § 1090, subd. (a).
35
See Gov. Code, § 1091, subd. (a).
36
89 Ops.Cal.Atty.Gen. 217, 220 (2006).
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A public official has a remote interest in a settlement agreement where he or she is
“a party to litigation involving the body or board of which the officer is a member in
connection with an agreement” and the following requirements are met:
(A) The agreement is entered into as part of a settlement of litigation in which
the body or board is represented by legal counsel.
(B) After a review of the merits of the agreement and other relevant facts and
circumstances, a court of competent jurisdiction finds that the agreement
serves the public interest.
(C) The interested member has recused himself or herself from all
participation, direct or indirect, in the making of the agreement on behalf of
the body or board.37
In entering into such a settlement, may a city waive a reimbursement obligation for
excess benefits? “[G]enerally speaking, a municipality has the power to settle and
compromise claims in its favor or against it where there is a bona fide reasonable doubt or
dispute as to the validity thereof or the amount due with respect thereto.”38 On the other
hand, a city may not waive a repayment obligation if the waiver constitutes a gift of public
funds contrary to section six of article XVI of the California Constitution.39
The threshold question in determining whether an expenditure (including the failure
to collect money owed) constitutes a gift of public funds is whether the funds would be
used for a public purpose.40 If the city were entitled to reimbursement in an amount certain,
but waived its right to receive all or part of those funds without good reason, the amount
retained by the council member and not returned to the city could be a gift. On the other
hand, if there were consideration for waiving or compromising the reimbursement
amount—for instance, if there were a legitimate question about the validity of the debt or
the amount owed—then the settlement could serve a valid public purpose.41
37
Gov. Code, § 1091, subd. (b)(15). See also Sen. Jud. Comm., analysis of Assem. Bill
No. 2801 (2007–2008 Reg. Sess.), as amended May 27, 2008 (remote interest exception
for party to litigation should be added in light of 91 Ops.Cal.Atty.Gen. 1 (2008) and
86 Ops.Cal.Atty.Gen. 142 (2003)).
38
Whitson v. City of Long Beach (1962) 200 Cal.App.2d 486, 505.
39
Cal. Const., art. XVI, § 6.
40
Jordan v. California Dept. of Motor Vehicles (2002) 100 Cal.App.4th 431, 450.
41
Ibid. (“The settlement of a good faith dispute between the State and a private party is
an appropriate use of public funds and not a gift because the relinquishment of a colorable
legal claim in return for settlement funds is good consideration and establishes a valid
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Thus, in response to Question 4, we conclude that a city council may approve a
settlement agreement between the city and a current city council member to repay the city
for the excessive health and welfare benefits received if that member is recused from voting
on the agreement and the other “remote interest” requirements of Government Code
section 1091, subdivision (b)(15) are met. Although a city has discretion to waive a claim
in part or in full if some real doubt or dispute exists as to the claim’s validity or amount, a
city may not waive a valid claim of an indisputable amount because doing so would result
in an unconstitutional gift of public funds.
*****
public purpose. . . . The compromise of a wholly invalid claim, however, is inadequate
consideration and the expenditure of public funds for such a claim serves no public purpose
and violates the gift clause”). In an analogous situation, the court of appeal held that a
city’s retirement board would make an unconstitutional gift of public funds if its failure to
enforce an ordinance would result in an overpayment of retirement benefits. (Atchley v.
City of Fresno (1984) 151 Cal.App.3d 635, 651.)
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