Cal Fire Local 2881 v. California Public Employees' Retirement System ( 2016 )

Filed 12/30/16
CERTIFIED FOR PUBLICATION
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION THREE
CAL FIRE LOCAL 2881 et al.,
Petitioners and Appellants,
v. A142793
CALIFORNIA PUBLIC EMPLOYEES’
RETIREMENT SYSTEM et al., (Alameda County
Super. Ct. No. RG12661622)
Defendants and Respondents,
THE STATE OF CALIFORNIA,
Intervenor and Respondent.
This is an appeal from the trial court’s denial of a petition for writ of mandate and
injunctive relief filed by plaintiff Cal Fire Local 2881 on behalf of itself and its members.
Plaintiffs, professional firefighters employed by the State of California and the union
representing them, sought this relief against defendant California Public Employees’
Retirement System (CalPERS) to compel it to continue to enforce Government Code
section 20909, a state law enacted by the Legislature in December of 2003 to provide
eligible public employees the option to purchase at cost up to five years of nonqualifying
service credit (sometimes referred to as “airtime”).1
This airtime service credit, when purchased, provided an increase in the pension
benefits paid to state employees during their retirement, as it enabled the purchasers to
increase the amount of service credit factored into their pensions. However, in 2012, the
Legislature eliminated this option as of January 1, 2013 upon enacting the Public
1
Unless otherwise stated herein, all statutory citations are to the Government Code.
1
Employees’ Pension Reform Act of 2013 (PEPRA), a comprehensive reform measure
designed to, among other things, strengthen the state’s public pension system and ensure
its ongoing solvency. (See § 7522.46, § 20909, subd. (g).)
According to plaintiffs, the Legislature’s elimination of the option provided under
section 20909 to purchase airtime service credit is a violation of the contracts clause of
the California Constitution (Cal. Const., art. I, § 9) and, as such, CalPERS lacks authority
to refuse to consider applications for this service credit. For reasons set forth below, we
reject plaintiffs’ position and affirm the trial court’s judgment.
FACTUAL AND PROCEDURAL BACKGROUND
The facts as found by the trial court are not in dispute. CalPERS is the sole
administrative agency responsible for administering the California Public Employees’
Retirement System for the State of California. (Cal. Const., art. XVI, § 17, subds. (b),
(h); see also §§ 20001, 20002, 20004.) Plaintiffs, as state employees, are enrolled in
CalPERS and eligible for certain retirement benefits, including pension benefits.
(§ 20400; Miller v. State of California (1977) 18 Cal. 3d 808, 814 [“Pension rights . . . are
deferred compensation earned immediately upon the performance of services for a public
employer”] [Miller].) These retirement benefits are defined exclusively by statute and
are not subject to expansion or abridgement by CalPERS. (Miller, supra, 18 Cal.3d at
p. 814; see also City of San Diego v. Hass (2012) 207 Cal. App. 4th 472, 495 [“only the
[legislative body] has the power to grant employee benefits, and [the local agency
charged with administering the City’s retirement system] exceeds its authority when it
attempts to “expand pension benefits beyond those the [legislative body] has granted”].)
Of significance here, one such benefit, available to active CalPERS members as of
January 1, 2003, was the option afforded under section 20909 to purchase up to five years
of nonqualifying service credit (aka, airtime). To qualify for this option, the employee
was required to have attained at least five years of state service, to be presently employed
by the state, and to contribute “an amount equal to the increase in employer liability,
using the payrate and other factors affecting liability on the date of the request for costing
of the service credit.” (§ 20909, subds. (a), (b); § 21052.) Thus, this airtime service
2
credit was unique in that it did not reflect the member’s actual service in qualifying
employment. Rather, the credit could be added to the member’s total amount of service
credit when calculating the member’s retirement allowance, but did not affect the vesting
of medical coverage or membership. Further, the cost of the airtime, which was to be
borne entirely by the purchasing member and not by the state, was calculated as a present
value of the projected increase in liability to the CalPERS system. (See § 21052; AB 719
Assembly Bill-Bill Analysis, p. 2 (Aug. 18, 2003) [“this benefit is intended to be cost
neutral to employers. The member pays the full present value cost of the additional
service credit . . . [which] is calculated to be equivalent to the cost of the increased
benefit due to the additional service credit”]; AB 719, Assembly Bill-Bill Analysis,
Senate Rules Committee, p. 2 [“the cost of the ‘air time’ service credit will be fully paid
by the member, with no employer contribution permitted”].)
This option to purchase airtime service credit was available to CalPERS members
from January 1, 2003 through the end of 2012. However, as mentioned above, in
September of 2012, the Legislature enacted PEPRA, a reform measure intended to
strengthen the state’s public pension system and ensure its ongoing solvency. (Stats 2012
ch 296 § 15 (AB 340), effective January 1, 2013.) One PEPRA provision, section
7522.46, subdivision (b), mandated expiration of the option on January 1, 2013, thereby
providing eligible members one last 15-week window of opportunity (from October 4,
2012 until December 31, 2012) to purchase airtime service credit. Afterward, however,
on January 1, 2013, the option would cease to exist. (§ 7522.46 [“(a) A public retirement
system shall not allow the purchase of nonqualified service credit . . . . [¶]
(b) Subdivision (a) shall not apply to an official application to purchase nonqualified
service credit that is received by the public retirement system prior to January 1, 2013,
that is subsequently approved by the system.”]; see also § 20909, subd. (g) [“This section
shall apply only to an application to purchase additional retirement credit that was
received by the system prior to January 1, 2013, that is subsequently approved by the
system”].)
3
Plaintiffs, representing a putative class of CalPERS members who were eligible to,
but did not, purchase airtime service credit during this statutory time period that expired
on January 1, 2013, initially filed this lawsuit on December 28, 2012. 2 The operative
pleading, to wit, the third amended verified petition for writ of mandate, was then filed on
July 12, 2013. In this petition, plaintiffs assert that the option to purchase airtime service
credit was a vested contractual right and, thus, that the Legislature’s withdrawal of this
right when amending section 20909 and enacting section 7522.46 was a violation of the
contracts clause of the California Constitution (Cal. Const., art. I, § 9). Accordingly,
plaintiffs, reasoning that CalPERS lacks authority to enforce unconstitutional laws,
sought a writ of mandate to compel CalPERS and those acting on its behalf to continue to
allow purchase of the airtime service credit.
The State of California subsequently intervened in this lawsuit for the purpose of
defending the amended statutory scheme. A writ hearing was held on February 24, 2014,
followed by the trial court’s filing of the Amended Final Order on June 5, 2014. In this
order, the trial court concluded that the elimination of the option of a state employee to
purchase up to five years of retirement service credit did not impair or violate any
pension right of plaintiffs because, even if this option could be deemed a vested benefit,
“the Legislature lawfully eliminated that benefit as a permissible modification to the
pension plan.” Accordingly, the trial court entered judgment denying plaintiffs’ petition
for writ of mandate and injunctive relief, and directing that CalPERS and the intervening
State of California recover costs as permitted by law. This appeal followed.
DISCUSSION
The overarching issue in this appeal relates to the proper construction of section
20909 and, more specifically, whether the Legislature intended upon its enactment in
2003 to bestow upon plaintiffs and other CalPERS members a vested contractual right to
purchase airtime service credit. We begin with the relevant legal framework.
2
Plaintiff Shaun Olden is the sole member of the plaintiff class not eligible to make
this purchase because, while employed by the state during this time period, he had not yet
served the mandatory five years for eligibility under section 20909.
4
“A writ of mandate lies ‘to compel the performance of an act which the law
specially enjoins, as a duty resulting from an office, trust, or station; . . .’ [Citation.] ‘
“Two basic requirements are essential to the issuance of the writ: (1) A clear, present and
usually ministerial duty upon the part of the respondent [citations]; and (2) a clear,
present and beneficial right in the petitioner to the performance of that duty [citation].”
[Citation.]’ [Citation.] [¶] As to the petitioner’s interest, the writ may not be issued where
the injury is purely theoretical and the petitioner fails to show any benefit would accrue
to him if the writ were issued, or that he will suffer any detriment if it is denied.
[Citations.]” (Steelgard, Inc. v. Jannsen (1985) 171 Cal. App. 3d 79, 83.) Further,
“ ‘mandamus will not lie to compel the performance of any act which would be void,
illegal or contrary to public policy.’ [Citation.]” (Torres v. City of Montebello (2015) 234
Cal. App. 4th 382, 403; see also Moran v. California Dep’t of Motor Vehicles (2006) 139
Cal. App. 4th 688, 691.)
On appeal, we apply the substantial evidence standard of review to a trial court’s
factual findings in granting or denying a writ of mandate, while independently reviewing
its conclusions on legal issues, including legislative intent. (City of San Diego v. San
Diego City Employees’ Ret. System (2010) 186 Cal. App. 4th 69, 78; see also CalPERS Bd.
of Administration v. Wilson (1997) 52 Cal. App. 4th 1109, 1129 [“The ultimate questions
of whether vested contractual rights exist and whether impairments are unconstitutional
present questions of law subject to independent review”].)
Here, as stated above, plaintiffs assert a vested contractual right to purchase up to
five years of airtime service credit that is not subject to elimination or destruction by
legislative amendment or repeal “even before the benefit has been accessed or the time
for retirement has arrived.” (See Kern v. City of Long Beach (1947) 29 Cal. 2d 848, 855
[“While payment of these [pension] benefits is deferred, and is subject to the condition
that the employee continue to serve for the period required by the statute, the mere fact
that performance is in whole or in part dependent upon certain contingencies does not
prevent a contract from arising, and the employing governmental body may not deny or
impair the contingent liability any more than it can refuse to make the salary payments
5
which are immediately due.”] [Kern].) Plaintiffs reason that, when their civil service
began, the right to purchase airtime service credit was one of the terms and conditions of
their employment and, as such, the Legislature had no authority to effectively repeal this
right by amending section 20909 and adding section 7522.46 in 2013, during the course
of their employment.3 Accordingly, plaintiffs contend that a violation of the contracts
clause of the California Constitution has occurred, and ask this court to issue a
peremptory writ ordering CalPERS to immediately resume administration of the service
credit purchases by making them available to state employees employed prior to
January 1, 2013, who otherwise meet the service credit eligibility requirements.
As respondents point out, however, in challenging the amended statutory scheme
as contrary to our Constitution, plaintiffs face certain legal hurdles. “The party asserting
a contract clause claim has the burden of making out a clear case, free from all reasonable
ambiguity, a constitutional violation occurred.” (Deputy Sheriffs’ Assn. of San Diego
County v. County of San Diego (2015) 233 Cal. App. 4th 573, 578.) “ ‘When the
Constitution has a doubtful or obscure meaning or is capable of various interpretations,
the construction placed thereon by the Legislature is of very persuasive significance.’ ”
(Methodist Hosp. of Sacramento v. Saylor (1971) 5 Cal. 3d 685, 693.)
The reason for the elevated burden on plaintiffs raising a constitutional challenge
under the contracts clause is this. “ ‘The state occupies a unique position in the field of
contract law because it is a sovereign power. This gives rise to general principles which
may limit whether an impairment has [occurred] as a matter of constitutional law. First,
“[a]n attempt must be made ‘to reconcile the strictures of the Contract Clause with the
3
When enacted in 2003, section 20909 allowed a “member who has at least five
years of credited state service” to purchase “not less than one year, nor more than five
years, in one-year increments, of additional retirement service credit in the retirement
system.” This purchase could only occur one time, at any time prior to retirement.
(§ 20909, subds. (a), (b).) In 2013, the Legislature added subdivision (g) to section
20909, providing, in accord with section 7522.46, that “[t]his section shall apply only to
an application to purchase additional retirement credit that was received by the system
prior to January 1, 2013, that is subsequently approved by the system.” (Stats 2013
ch 526 § 13 (SB 220), effective January 1, 2014.)
6
“essential attributes of sovereign power,” . . .’ ” [Citation.] “Not every change in a
retirement law constitutes an impairment of the obligations of contracts, however.
[Citation.] Nor does every impairment run afoul of the contract clause.” [Citation.] “ ‘The
constitutional prohibition against contract impairment does not exact a rigidly literal
fulfillment; rather, it demands that contracts be enforced according to their “just and
reasonable purport;” not only is the existing law read into contracts in order to fix their
obligations, but the reservation of the essential attributes of continuing governmental
power is also read into contracts as a postulate of the legal order. [Citations.] The contract
clause and the principle of continuing governmental power are construed in harmony;
although not permitting a construction which permits contract repudiation or destruction,
the impairment provision does not prevent laws which restrict a party to the gains
'reasonably to be expected from the contract.” [Citation.]’ ” ’ [Citation.] . . . [¶] ‘Our
analysis requires a two-step inquiry into: (1) the nature and extent of any contractual
obligation . . . and (2) the scope of the Legislature’s power to modify any such
obligation.’ [Citation.]” (CalPERS Bd. of Administration v. Wilson, supra, 52
Cal.App.4th at pp. 1130-1131.)
Thus, the initial question here is whether plaintiffs lawfully claim a vested
contractual right to airtime service credit as part of their pension benefits. As explained
in plaintiffs’ authority, “A public employee’s pension constitutes an element of
compensation, and a vested contractual right to pension benefits accrues upon acceptance
of employment. Such a pension right may not be destroyed, once vested, without
impairing a contractual obligation of the employing public entity. [Citation.] [However,
the] employee does not obtain, prior to retirement, any absolute right to fixed or specific
benefits, but only to a ‘substantial or reasonable pension.’ [Citation.] Moreover, the
employee’s eligibility for benefits can, of course, be defeated ‘upon the occurrence of a
condition subsequent.’ [Citation.]” (Betts v. Board of Administration of Public
Employees’ Retirement System (1978) 21 Cal. 3d 859, 863, 864 (Betts).)
“[I]t is well settled in California that public employment is not held by contract but
by statute and that, insofar as the duration of such employment is concerned, no
7
employee has a vested contractual right to continue in employment beyond the time or
contrary to the terms and conditions fixed by law. [Citations.] Nor is any vested
contractual right conferred on the public employee because he occupies a civil service
position since it is equally well settled that ‘[the] terms and conditions of civil service
employment are fixed by statute and not by contract.’ [Citations.] Indeed, ‘[the] statutory
provisions controlling the terms and conditions of civil service employment cannot be
circumvented by purported contracts in conflict therewith.’ [Citation.]” (Miller, supra,
18 Cal.3d at pp. 813-814.)
Thus, when applying these principles, we must keep in mind the presumption that
“a statutory scheme is not intended to create private contractual or vested rights and a
person who asserts the creation of a contract with the state has the burden of overcoming
that presumption.” (Retired Employees Assn. of Orange County, Inc. v. County of
Orange (2011) 52 Cal. 4th 1171, 1186, 1189 [Retired Employees Assn.].) As such,
plaintiffs carry the heavy burden of proving the retirement service credit is a vested
pension right. Specifically, plaintiffs must meet the “heavy burden” of demonstrating
that “ ‘the statutory language and circumstances accompanying its passage clearly “. . .
evince a legislative intent to create private rights of a contractual nature enforceable
against the State . . . .” ’ ” (Retired Employees Assn., supra, 52 Cal.4th at p. 1189.) A
contractual right may also be implied from legislation “in appropriate circumstances.”
(Id. at p. 1190.) However, “ ‘as with any contractual obligation that would bind one party
for a period extending far beyond the term of the contract of employment, implied rights
to vested benefits should not be inferred without a clear basis in the contract or
convincing extrinsic evidence.’ ” (Requa v. Regents of University of California (2012)
213 Cal. App. 4th 213, 226.)
Within this legal framework, plaintiffs theorize the prior version of section 20909
created, not an implied vested right, but an “express vested right” to purchase the airtime
service credit. They reason that section 20909, enacted as part of the Public Employees’
Retirement Law, section 20000 et seq., was a component of the retirement plan adopted
on their behalf by the Legislature. As such, plaintiffs reason, CalPERS members relied
8
upon the option to purchase the service credit as part of their “contemplated
compensation” in exchange for performing labor for the state.4
However, as the trial court found, there is nothing in either the text of the statute
(§ 20909), or its legislative history, that unambiguously states an intent by the Legislature
to create a vested pension benefit. This demonstration of intent, as we explained above,
is required by California law. (Retired Employees Assn., supra, 52 Cal.4th at p. 1190.)
Section 20909, however, does no more than permit an eligible member to “elect, by
written notice filed with the board, to make contributions pursuant to this section and
receive not less than one year, nor more than five years, in one-year increments, of
[airtime service credit.]” In other words, eligible members may choose to pay the
designated amount in exchange for up to five years of this service credit, wholly distinct
and apart from their provision of labor for the state in exchange for compensation.
(§ 20909, subd. (a); see also § 20909, subd. (b) [“A member may elect to receive this
additional retirement service credit . . . by making the contributions as specified in
Sections 21050 and 21052”].) While plaintiffs point to the statutory language, “at any
time,” in subdivision (b) of the statute to argue the Legislature intended to create a vested
right, we agree with the trial court this phrase means just what it says and no more – to
wit, eligible employees could opt to purchase the service credit at any time, at least so
long as the statute remained in effect. We decline to add to this straightforward reading
of this statutory phrase any promise by the Legislature not to modify or eliminate the
option to purchase service credit, particularly in light of the legal presumption against the
creation of a vested contractual right. To the contrary, we agree with the trial court that
the Legislature could have – and would have – used much clearer language if it had in
fact harbored such intent. (Retired Employees Assn., supra, at p. 1186 [courts must apply
a presumption against reading a statute as creating a private contractual or vested right].)
In the absence of any such clear statutory language, we reject plaintiffs’ contention that
there is an “express vested right” to purchase the airtime service credit.
4
This argument is joined by amicus curiae in support of plaintiffs, which includes
several local chapters of unions representing correctional officers and firefighters.
9
In so concluding, we acknowledge plaintiffs’ reliance on statements made in
CalPERS’s “widely-read” publication, Vested Rights of CalPERS Members: Protecting
the Pension Promises Made to Public Employees, to try to show the existence of a vested
contract right to purchase airtime service credit. In particular, plaintiffs point to the
following exert from the CalPERS material:
“Public employees obtain a vested right to the provisions of the applicable retirement law
that exist during the course of their public employment. Promised benefits may be
increased during employment, but not decreased, absent the employees’ consent. [¶]
These rules apply to all active CalPERS members whether or not they have yet performed
the requirements necessary to qualify for certain benefits that are part of the applicable
retirement law. For example, even if a member has not yet satisfied the five-year
minimum service prerequisite to receiving most service and disability benefits, the
member’s right to qualify for those benefits upon completion of five years of service vests
as soon as the member starts work.” (Italics added.)
We accept plaintiffs’ point that CalPERS’s statements on this issue are entitled to
significant weight given the agency’s designated role as administrator of the state’s
retirement system. (Bernard v. City of Oakland (2012) 202 Cal. App. 4th 1553, 1565.)
Nonetheless, the fact remains that, notwithstanding any statements or suggestions by
CalPERS to the contrary (published or otherwise), California law is quite clear that the
Legislature may indeed modify or eliminate vested pension rights in certain cases. As the
California Supreme Court has explained: “Although vested prior to the time when the
obligation to pay matures, pension rights are not immutable. For example, the
government entity providing the pension may make reasonable modifications and
changes in the pension system. This flexibility is necessary ‘to permit adjustments in
accord with changing conditions and at the same time maintain the integrity of the system
and carry out its beneficent policy.’ (Kern, supra, 29 Cal. 2d 848, 854-855; see also
Wallace v. City of Fresno (1954) 42 Cal. 2d 180, 183 . . . ; Packer v. Board of Retirement
(1950) 35 Cal. 2d 212, 214 . . . .) In Wallace, referring to Kern, we again emphasized
‘that a public pension system is subject to the implied qualification that the governing
10
body may make reasonable modifications and changes before the pension becomes
payable and that until that time the employee does not have a right to any fixed or
definite benefits but only to a substantial or reasonable pension.’ (42 Cal.2d at p. 183.)”
(Miller, supra, 18 Cal.3d at p. 816.)
“We have described the applicable principles as follows: ‘An employee’s vested
contractual pension rights may be modified prior to retirement for the purpose of keeping
a pension system flexible to permit adjustments in accord with changing conditions and
at the same time maintain the integrity of the system. [Citations.] Such modifications
must be reasonable, and it is for the courts to determine upon the facts of each case what
constitutes a permissible change. To be sustained as reasonable, alterations of
employees’ pension rights must bear some material relation to the theory of a pension
system and its successful operation, and changes in a pension plan which result in
disadvantage to employees should be accompanied by comparable new advantages.
[Citations.] . . .’ [Citation.]” (Betts, supra, 21 Cal.3d at p. 864. Accord Miller, supra, 18
Cal.3d at p. 816 [“ ‘[It] is advantage or disadvantage to the particular employees whose
own contractual pension rights, already earned, are involved which are the criteria by
which modifications to pension plans must be measured.’ [Citation.]”].)
It is to this California Supreme Court authority, rather than to CalPERS
statements, that we must defer. (See Bernard v. City of Oakland, supra, 202 Cal.App.4th
at p. 1565 [while “the contemporaneous administrative construction of [an] enactment by
those charged with its enforcement . . . is entitled to great weight,” it is not controlling,
particularly where “clearly erroneous or unauthorized”].) Were we to do otherwise, we
would upset the proper functioning of a system designed to facilitate timely adaptation of
the law in light of new or changing circumstances: “The rule permitting modification of
pensions is a necessary one since pension systems must be kept flexible to permit
adjustments in accord with changing conditions and at the same time maintain the
11
integrity of the system and carry out its beneficent policy.” 5 (Kern, supra, 29 Cal. 2d at
pp. 854-855.) Indeed, CalPERS itself acknowledged the possibility of legislative
elimination of the airtime service credit in its member literature, warning in a document
entitled, “What is Additional Service Credit (Frequently referred to as ‘Air Time’),” that
the credit “will be available on an ongoing basis (unless repealed by future legislation).”
(Italics added.)
And applying this legal standard to the case at hand, it is clear that, even if we had
accepted plaintiffs’ argument that the option to purchase airtime service credit under
section 20909 was an express vested right (we did not), the Legislature nonetheless had
ample authority to eliminate it through statutory amendment in light of the given
circumstances. Specifically, as the trial court found in denying writ relief to plaintiffs,
the undisputed legislative history demonstrates the “adoption of [section] 7522.46 and the
addition of [section] 20909(g) were materially related to the theory and successful
5
As recently noted by our First District appellate colleagues: “[T]here are
acceptable changes aplenty that fall short of ‘destroying’ an employee’s anticipated
pension. ‘Reasonable’ modifications can encompass reductions in promised benefits.
(E.g., Miller, supra, 18 Cal. 3d 808 [change of retirement age with reduction of maximum
possible pension]; . . . [repeal of cost of living adjustments]; Brooks v. Pension Board
(1938) 30 Cal. App. 2d 118 . . . [pension reduced prior to retirement from two-thirds to
one-half of employee's salary].) Or changes in the number of years service required.
(Miller, supra, at p. 818 [‘Upon being required by law to retire at age 67 rather than age
70, plaintiff suffered no impairment of vested pension rights since he had no
constitutionally protected right to remain in employment until he had earned a larger
pension at age 70’]; Amundsen v. Public Employees’ Retirement System (1973) 30
Cal. App. 3d 856 . . . [change in minimum service requirement].) Or a reasonable increase
in the employee’s contributions. (§ 31454; [citations]; cf. Allen v. City of Long Beach,
supra, 45 Cal. 2d 128, 131 [invalidating ‘provision raising the rate of an employee’s
contribution . . . from 2 per cent of his salary to 10 per cent’].) [¶] Thus, short of actual
abolition, a radical reduction of benefits, or a fiscally unjustifiable increase in employee
contributions, the guiding principle is still the one identified by Miller in 1977: ‘ “the
governing body may make reasonable modifications and changes before the pension
becomes payable and that until that time the employee does not have a right to any fixed
or definite benefits but only to a substantial or reasonable pension.” ’ ” (Marin Assn. of
Public Employees v. Marin County Employees’ Retirement Assn. (2016) 2 Cal.App.5th
674, 702, review granted November 22, 2016, see Cal. Rules of Court, rules
8.1105(e)(1)(B), 8.1115(e).)
12
operation of a pension system because they restricted the pension system to providing
retirement benefits based on work performed, which is the primary purpose of a pension
system.” In particular, the court referred to the Governor’s “12 Point Plan,” which
indicated that pensions were intended to provide retirement stability for time “actually
worked” rather than for mere “airtime.” The court also referred to the legislative history
of the PEPRA, which is consistent in noting the “traditional linkage between time worked
and benefits received.” In other words, pension benefits are “deferred compensation that
has been earned through the performance of work,” not, as here, an option to purchase
nonqualifying service credit wholly unrelated to actual services provided or work
performed. As such, the court went on to explain, when enacting section 20909 in 2003,
the Legislature actually departed from the central theory of a pension system, and,
conversely, when effectively repealing this legislation in 2013, the Legislature
“eliminated something that was not related to the theory of a pension system and . . . was
in fact detrimental to the successful operation of the pension system.”
Plaintiffs do not challenge the trial court’s findings or reasoning in concluding that
a material relationship exists between the challenged legislative modifications that
accompanied California’s recent pension reform and the basic theory of the pension
system and its successful operation. (Accord Marin Assn. of Public Employees v. Marin
County Employees’ Retirement Assn. (2016) 2 Cal.App.5th 674, 704-705 [“the catalyst
for the Pension Reform Act was dire financial predictions necessitating urgent and
fundamental changes to improve the solvency of various pension systems”] [Marin Assn.
of Public Employees].)6 Instead, plaintiffs challenge the trial court’s additional finding
that, in this instance, the amended statutory scheme eliminating the option to purchase
airtime service credit resulted in no disadvantage to state employees. In this regard, the
court pointed to statements in section 20909’s legislative history that airtime service
credit was never intended by the Legislature to provide state employees a monetary
6
The California Supreme Court granted review in this matter on November 22,
2016. (See Cal. Rules of Court, rules 8.1105(e)(1)(B), 8.1115(e)).)
13
advantage because it did not correspond to any service actually performed. Rather, the
credit was designed to be cost-neutral. (See, e.g., AB 719, Assembly Bill-Bill Analysis,
p. 3 [“In this case, the member pays for the full cost of the increase in benefit that results
from the service credit purchase. This cost method . . . applies when an employer does
not directly benefit from the member’s service”].)
Despite this legislative history, plaintiffs (as well as the amicus curiae supporting
them) insist the right to purchase the airtime service credit was indeed financially
beneficial, and that “no comparable advantage has been offered to offset the loss of [the
elimination of this right]. This is barred under the Contracts Clause.” We disagree.
First, plaintiffs suggest that the state was required to provide a comparable
advantage to offset the loss arising from elimination of the option to purchase airtime
service credit, citing Allen v. City of Long Beach (1955) 45 Cal. 2d 128. However, as our
colleagues in this District recently explained after an exhaustive review of the case law:
“ ‘Should’ [provide some new compensating benefit], not ‘must,’ remains the court’s
preferred expression. And ‘should’ does not convey imperative obligation, no more
compulsion than ‘ought.’ (Lashley v. Koerber (1945) 26 Cal. 2d 83, 90 . . . ; see People v.
Webb (1986) 186 Cal. App. 3d 401, 409, fn. 2 . . . [‘the word “should” is advisory only and
not mandatory’].) In plain effect, ‘should’ is ‘a recommendation, not . . . a mandate.’
[Citation.]” (Marin Assn. of Public Employees, supra, 2 Cal.App.5th at p. 699, review
granted November 22, 2016, see Cal. Rules of Court, rules 8.1105(e)(1)(B), 8.1115(e).)
We agree with this conclusion reached by our colleagues and, as such, reject plaintiffs’
claim that, absent proof that CalPERS members were granted a comparable advantage,
the Legislature’s elimination of the airtime service credit must be deemed constitutionally
barred. (Marin Assn. of Public Employees, supra, 2 Cal.App.5th at p. 699 [concluding
that California Supreme Court authority such as Allen v. Board of Administration (1983)
34 Cal. 3d 114, 120, which used the term “must” rather than “should,” was not meant to
“introduce an inflexible hardening of the traditional formula for public employee pension
14
modification. Consequently, we do not deem ourselves bound by expressions in Court of
Appeals opinions . . . reiterating the [“must”] language”].)7
Further, plaintiffs also disregard the fact that, when amending the statutory scheme
governing pension rights, the Legislature in fact provided eligible CalPERS members
(like plaintiffs) a several-month window in which to purchase the airtime service credit
before the option terminated. Specifically, as set forth above, while PEPRA was enacted
in September of 2012 (Stats 2012 ch 296 § 15 (AB 340)), the option to purchase airtime
service credit did not expire until January 1, 2013, giving eligible members several weeks
to apply to purchase this credit before its expiration. (§ 7522.46, subd. (b); see also
§ 20909, subd. (g) [“This section shall apply only to an application to purchase additional
retirement credit that was received by the system prior to January 1, 2013, that is
subsequently approved by the system”].) Thus, nothing in the revised statutory scheme
immediately destroyed plaintiffs’ right to purchase the airtime service credit; rather, the
revised scheme set forth a deadline by which plaintiffs had to exercise this right in order
to avoid losing it. To the extent plaintiffs lost out on the opportunity to purchase the
airtime service credit, such loss was, accordingly, a product of their own doing.
And, finally, we agree with the trial court that, while the airtime service credit
clearly provided something valuable for those state employees choosing to purchase it,
the fact remains that the employees, not the state, paid for this benefit. (See § 21052; AB
719 Assembly Bill-Bill Analysis, p. 2 (Aug. 18, 2003) [“this benefit is intended to be cost
neutral to employers. The member pays the full present value cost of the additional
service credit . . . [which] is calculated to be equivalent to the cost of the increased
benefit due to the additional service credit”]; AB 719, Assembly Bill-Bill Analysis,
7
As explained in Allen v. Board of Administration, supra, 34 Cal.3d at pp. 119-120,
“ ‘[T]he contract clause and the principle of continuing governmental power [must be]
construed in harmony; although not permitting a construction which permits contract
repudiation or destruction, the impairment provision does not prevent laws which restrict
a party to the gains “reasonably to be expected from the contract.” ’ [Citation.]
Constitutional decisions “have never given a law which imposes unforeseen advantages
or burdens on a contracting party constitutional immunity against change.” ’ [Citation.]”
15
Senate Rules Committee, p. 2 [“the cost of the ‘air time’ service credit will be fully paid
by the member, with no employer contribution permitted”].) As such, contrary to the
arguments of plaintiffs and their amicus curiae, this simply is not a case where the state
provided a retirement benefit to its employees in exchange for their work performance,
and then took the benefit away, despite the employees’ continued service, without
offering a comparable benefit.
Thus, for all the reasons stated, we conclude plaintiffs’ constitutional challenge to
the identified PEPRA provisions must fail given their failure to make out a clear case,
free from all reasonable ambiguity and reasonable doubt, that any contract clause
violation occurred. To the contrary, the record supports the trial court’s conclusion that
the Legislature’s modification of the statutory law governing the airtime service credit
was wholly reasonable and carried “some material relation to the theory of a pension
system and its successful operation.” (Miller, supra, 18 Cal.3d at p. 816.) While
plaintiffs may believe they have been disadvantaged by these amendments, the law is
quite clear that they are entitled only to a “reasonable” pension, not one providing fixed
or definite benefits immune from modification or elimination by the governing body.
(Kern, supra, 29 Cal.2d at pp. 854-855.) Plaintiffs have made no showing that, following
the elimination of their right to purchase airtime service credit, their right to a reasonable
pension has been lost. (See Marin Assn. of Public Employees, supra, 2 Cal.App.5th at
p. 707 [“Repeated invocation of the inviolability of their ‘vested rights’ cannot substitute
for analysis of just how the change to [the statutory law] demonstrates that employees
will not retire with a ‘substantial’ or ‘reasonable’ pension”], review granted
November 22, 2016, see Cal. Rules of Court, rules 8.1105(e)(1)(B), 8.1115(e).)
Accordingly, plaintiffs’ petition for writ of mandate and injunctive relief was
properly rejected. The judgment thus stands.8
8
Given this holding, we need not address the separate argument raised by CalPERS
in its Respondent’s Brief that, even if this court were to find a contract clause violation in
this case, plaintiffs cannot meet the standard for issuance of a traditional writ of mandate
because CalPERS has no ministerial duty to act contrary to the provisions of section
16
DISPOSITION
The judgment is affirmed.
_________________________
Jenkins, J.
We concur:
_________________________
Pollak, Acting P. J.
_________________________
Siggins, J.
Cal Fire Local 2881 et al. v. California Public Employees’ Retirement System et al., A142793
7522.46 or section 20909, subdivision (g). (See Torres v. City of Montebello, supra, 234
Cal.App.4th at p. 403 [mandamus will not lie to compel the performance of an act that is
illegal or contrary to public policy].)
17
Trial Court: Alameda County Superior Court
Trial Judge: Hon. Evelio M. Grillo
Counsel for Appellants Cal Fire Gary M. Messing
Local 2881 et al. Gregg McLean Adam
Jason H. Jasmine
CARROLL, BURDICK & McDONOUGH LLP
Counsel for Respondents California Matthew G. Jacobs
Public Employees’ Retirement Wesley E. Kennedy
System et al. CALIFORNIA PUBLIC EMPLOYEES’
RETIREMENT SYSTEM
Counsel for Intervenor and Kamala D. Harris, Attorney General of
Respondent, The State of California California;
Douglas J. Woods, Senior Assistant Attorney
General;
Tamar Pachter, Supervising Deputy Attorney
General;
Rei R. Onishi, Deputy Attorney General
Nelson Ryan Richards
California Attorney General’s Office
18
Cal Fire Local 2881 et al. v. California Public Employees’ Retirement System et al., A142793
19
Amicus Curiae in Support of Petitioners/Appellants Cal Fire Local 2881, et. al.
Counsel for Amicus Curiae Stephen H. Silver
Ventura County Professional Fire Jacob A. Kalinski
Fighters Association SILVER, HADDEN, SILVER AND LEVINE
Counsel for Amicus Curiae David E. Mastagni
Lake County Correctional Officers’ Isaac S. Stevens
Association; Jeffrey R.A. Edwards
Mendocino County Deputy Sheriffs’ Erich A. Knorr
Association; MASTAGNI HOLSTEDT, APC
Merced City Firefighters,
International Association of
Firefighters, Local 1479, AFL-CIO;
Napa City Firefighters Association,
International Association of Fire
Fighters, Local 3124, AFL-CIO;
Palo Alto Firefighters, International
Association of Fire Fighters, Local
1319, AFL-CIO;
Sacramento Area Firefighters,
International Association of
Firefighters, Local 522, AFL-CIO;
Santa Clara County Correctional
Peace Officers Association
Counsel for Amici Curiae IFPTE Peter W. Saltzman
Local 21, et al. Kate Hallward
LEONARD CARDER, LLP
20
Cal Fire Local 2881 et al. v. California Public Employees’ Retirement System et al., A142793
21