City of Oakland v. Oakland Police & Fire

Filed 3/26/14 (Unmodified opinion attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FOUR
CITY OF OAKLAND, A136769
Plaintiffs and Respondents.
(Alameda County
v. Super. Ct. No. RG11580626)
OAKLAND POLICE AND FIRE
RETIREMENT SYSTEM et al., ORDER MODIFYING OPINION
AND DENYING PETITION FOR
Appellants and Respondents, REHEARING
[NO CHANGE IN JUDGMENT]
RETIRED OAKLAND POLICE
OFFICERS ASSOCIATION et al.,
Appellants and Interveners.
It is ordered that the opinion filed February 28, 2014, be modified as follows:
1. The section heading on page 31 which currently reads “C. Equitable
Defenses” is corrected to read “D. Equitable Defenses.”
2. Footnote 18 will be added to the end of the last paragraph of section II.D.1. on
page 40, after the last sentence ending “compensation attached to rank.” 1
1
In Crumpler, supra, 32 Cal. App. 3d 567, the executive officer of the PERS board
determined that certain PERS members had been improperly classified years earlier and
reclassified them. The reclassified members asked for an administrative hearing and,
following that hearing, the PERS board determined that retroactive reclassification to
their dates of hire was appropriate. (Id. at pp. 570-571.) The reclassified members then
sought a writ of mandate to review and set aside the decision of the PERS board, and the
trial court granted the writ. (Id. at p. 571.) On appeal, the Crumpler court concluded that
the PERS board was estopped from reclassifying the PERS members prior to the date of
the board’s reclassification decision, but could reclassify them prospectively. (Id. at
1
3. All subsequent footnotes will be renumbered.
There is no change in the judgment.
Respondent’s petition for rehearing is denied.
____________________________
REARDON, ACTING P. J.
We concur:
_________________________
RIVERA, J.
_________________________
HUMES, J.
p. 584-586; see also Gov. Code, § 20160, subd. (e) [correction of PERS benefit errors
shall take place “as of the time that the correction actually takes place” when the
purposes of PERS “will not be effectuated if the correction is performed in a retroactive
manner”].) Thus, the court declined to end the estoppel on the date that PERS first
indicated its change of position through its executive officer, or at any other point prior to
the PERS board’s formal determination that an error had occurred. In the present case,
the record is clear that the Board did not consider the issue of shift differential pay prior
to the commencement of these proceedings. Under these circumstances, we conclude
that estoppel in this case is appropriate for all payments made prior to the date that our
decision in this matter becomes final. (Compare Moradi-Shalal v. Fireman’s Fund Ins.
Companies (1988) 46 Cal. 3d 287, 305 [holding that decision overruling prior case law
will be applied prospectively from the date that the decision becomes final based on
notions of fairness and given reliance on the previous precedent].)
2
Trial Court: Alameda County Superior Court
Trial Judge: Hon. Evilio M. Grillo
Counsel for Plaintiff and Respondent: Nossaman LLP
Stephen N. Roberts
James H. Vorhis
Counsel for Appellants: Olson Hagel & Fishburn
Richard C. Miadich
Counsel for Intervenors: Davis, Cowell & Bowe, LLP
W. David Holsberry
Sarah Grossman-Swenson
3
Filed 2/28/14 (Unmodified opinion)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FOUR
CITY OF OAKLAND,
Plaintiffs and Respondents.
A136769
v.
OAKLAND POLICE AND FIRE (Alameda County
RETIREMENT SYSTEM et al., Super. Ct. No. RG11580626)
Appellants and Respondents,
RETIRED OAKLAND POLICE
OFFICERS ASSOCIATION et al.,
Appellants and Interveners.
In this appeal, we revisit the provisions of the Oakland City Charter that determine
how retirement benefits are calculated for members of the Oakland Police and Fire
Retirement System (PFRS). The Retired Oakland Police Officers Association, along
with several PFRS’s members and beneficiaries (collectively, the “Association”), appeal
from a judgment granting a peremptory writ of mandate and declaratory relief in favor of
the City of Oakland (City). In the trial court, the City successfully argued that the
Oakland Police and Fire Retirement Board (Board) had impermissibly included certain
holiday premium pay and shift differential pay in the calculation of PFRS retirement
1
benefits. The Board was ordered to correct its calculations for all future payments and to
implement a plan for recovering past overpayments made to retirees.1
I. BACKGROUND
A. The Oakland Police and Fire Retirement System (PFRS)
PFRS was created in 1951 when separate police and fire retirement systems were
merged pursuant to article XXVI of the Oakland City Charter (Charter). (Charter,
art. XXVI, § 2600.) Only members of the Oakland Police Department (Department) or
Oakland Fire Department hired prior to July 1, 1976, are eligible for coverage by PFRS.2
(Id., §§ 2600, 2607.) Current members of the Department (except for one sergeant
covered by PFRS who has not yet retired) are included in the state-created Public
Employees’ Retirement System (PERS). Thus, PFRS is essentially a closed system with
a dwindling pool of retirees. As of January 31, 2012, PFRS had 619 retired police
members and widows, with an average age of 73.
PFRS is funded through a combination of member contributions (reportedly
between 5 and 13 percent of each member paycheck), investment returns and additional
monies supplied by the City “as may be necessary.” (Id., §§ 2601, subd. (e), 2619.) Its
governing Board consists of seven members, including representatives of the City, the
Department, the Fire Department and the PFRS retirees, as well as a local life insurance
executive, a banker and a community representative. (Id., § 2601.) Pursuant to the terms
of the Charter, PFRS is managed and administered by the Board, which has “exclusive
control of the administration and investment” of all PFRS funds. (Ibid.)
1
Initially, an appeal was also filed in this case by PFRS and the Board, arguing only that
the City had failed to exhaust its administrative remedies. However, after the filing of
their opening brief, both PFRS and the Board requested that this Court dismiss their
appeal because they had reached a settlement with the City. Over the objection of the
Association, we granted the dismissal request. As the Association has also raised the
exhaustion issue, we will consider it in the context of this appeal.
2
The Department refers to sworn peace officers of all ranks as “members” of the
Department. Non-sworn civilian employees of the Department are called “employees.”
We adopt this nomenclature here.
2
In a fixed pension system, benefits are paid to a retiree based on the compensation
paid to that retiree for a defined period of time prior to retirement. (Kreeft v. City of
Oakland (1998) 68 Cal. App. 4th 46, 48, fn. 1 (Kreeft), citing Dunham v. City of Berkeley
(1970) 7 Cal. App. 3d 508, 511, fn.1 (Dunham).) PFRS, in contrast, is a “fluctuating”
system under which pension benefits paid to retired members increase or decrease over
time as the compensation paid to active members of the Department similarly rises or
falls. (Kreeft, supra, 68 Cal.App.4th at p. 48; see also Dunham, supra, 7 Cal.App.3d at
p. 511.) The primary purpose of a fluctuating pension plan such as PFRS “is to guarantee
the pensioner a fairly constant standard of living despite inflation, and to maintain
equality of position between the retired member and the person (or persons) currently
holding the rank the pensioner attained before his retirement.” (Kreeft, supra, 68
Cal.App.4th at p. 54.) Thus, a PFRS retiree receives benefits based on the compensation
currently paid to active sworn personnel who hold the rank that the member held prior to
retirement. Stated in terms of the applicable Charter language, the retiree receives
benefits based on the current compensation that is “attached to the average rank held” by
that retiree in the three years prior to retirement.3 This appeal involves the inclusion of
certain holiday premium pay and shift differential pay as “compensation attached to
rank” for purposes of calculating PRFS retirement benefits.
3
Specifically, section 2607 of the Charter defines “ ‘[c]ompensation attached to the
average rank held’ ” as “the compensation attached to the lowest rank held during the
three years immediately preceding retirement plus one thirty-sixth (1/36) of the
difference between it and the compensation attached to any higher rank held during that
period of each month, and fraction thereof, the higher rank was held.”
“ ‘Compensation’ ” is defined by section 2607 to mean “the monthly remuneration
payable in cash, by the City, without deduction, for time during which the individual
receiving such remuneration is a member of the Police or Fire Department, but excluding
remuneration paid for overtime . . . .”
3
B. The Disputed PFRS Payments
1. Holiday Premium Pay
Although the relevant provisions of the Charter with respect to the calculation of
pension benefits based on “compensation attached to rank” have not changed over the
years, the application of that Charter language in the context of holiday premium pay has
not been similarly static. Indeed, there is a long and storied history to the holiday pay
issue, involving multiple lawsuits, stipulated settlements, and numerous changes to the
various memoranda of understanding (MOU’s) governing the City’s holiday
compensation obligations with respect to active members of the Department. While the
City attempts to limit the discussion in this case to the current MOU’s provisions
authorizing holiday pay, we find the history instructive and therefore summarize it here.
Before we begin, however, we note that discussion and analysis of the holiday pay
issue has been clouded in the past by failure to define the terms “holiday pay” and
“holiday premium pay” in a precise manner. For purposes of this opinion, we will use
the two terms interchangeably to refer to that pay in excess of the regular or base pay to
which a member of the Department may be entitled due to the occurrence of a holiday.
Thus, holiday pay includes the extra compensation payable to a police officer who works
on a holiday (over and above base pay), as well as the compensation due to an officer
who has a regular day off or takes vacation on a holiday and therefore does not work.
The question of whether holiday pay is “compensation attached to rank” for
purposes of calculating PFRS retirement benefits was first addressed by Division Four of
the First Appellate District in 1971 in the case of Buck v. City of Oakland (August 25,
1971, 1 Civ. 28402) [nonpub. opn.] (Buck). When Buck was decided, the compensation
payable to active members of the Department was set by salary ordinance. (See Oakland
Ord. No. 4817, amending section 1.19 of Oakland Ord. No. 4727 (the 1971 Ordinance).)
With respect to holiday pay, the 1971 Ordinance provided in relevant part: “Time worked
by any officer or member of the Police Department . . . in excess of 40 hours during any
one-week period shall be deemed overtime work; provided, however, that . . . whenever
any legal holiday, as herein designated, shall fall within any such one-week period, the
4
said officer or member of the Police Department shall be credited with 8 hours of work in
computing said 40 hours during said one-week period.” (Ibid.) The 1971 Ordinance,
which designated 11 holidays, maintained that “[s]uch extra compensation shall not be
construed to increase pensions paid from the Police and Fire Retirement Fund, nor
deductions for contributions thereto.” (Ibid.)
In Buck, active and retired members of the Department sought a writ of mandate
to compel the City and the Board to include the value of certain fringe benefits paid to
active members—including holiday pay—as “compensation attached to rank” for
purposes of calculating PFRS retirement benefits. (Buck, supra, 1 Civ. 28402 at pp. 1-3.)
After reviewing the provisions of the Charter set forth above which define
“compensation” and “compensation attached to the average rank held,” the court first
concluded that the express provision in the 1971 Ordinance attempting to exclude
holiday pay from retirees’ pensions was not controlling. (Id. at pp. 2-5 [effectuating such
a provision would permit the City to amend the Charter by ordinance which cannot be
done].) The court went on to determine that remuneration for holiday work did not
constitute overtime and therefore was not excluded from the Charter’s definition of
“compensation.” (Id. at pp. 11-12; see also Charter, art. XXVI, § 2607
[“ ‘compensation’ ” defined as monthly remuneration excluding overtime].) Finally, the
court opined that the eight hours credited to a police officer who worked on a holiday was
most often paid to that officer in cash and was therefore “ ‘extra compensation’ [citation]
for having worked on a ‘legal holiday.’ [Citation.]” (Buck, supra, 1 Civ. 28402 at p. 12.)
As such, it was “compensation” for purposes of the Charter and “must be included in the
computation of retirement allowances.” (Ibid.)
In the wake of Buck, the City reportedly tried to avoid the inclusion of holiday pay
in PFRS retirement benefits by altering the holiday pay structure for active members of
the Department. Specifically, the Department began giving active officers compensatory
time off in lieu of actual holiday pay. In response to this change, lawsuits were filed and
eventually the City was permanently enjoined from enforcing any “ordinance, resolution
or directive which decreases or attempts to decrease the holiday pay . . . received by
5
Oakland police officers or firemen as ‘monthly compensation comprising salary.’ ”
(Doan v. City of Oakland (Super. Ct. Alameda County, 1972, No. 426926) (Doan).) In
addition, the City was ordered to pay active members retroactively for any lost holiday
pay and was directed “to pay the increased retirement allowances based thereon pursuant
to the [Buck] decision.” (Ibid.)
The City and the Oakland Police Officer’s Association (OPOA) adopted the first
MOU setting Department compensation in 1973 after the Doan decision. As part of the
1973 MOU, the City agreed not to appeal the decision in Doan and to comply with the
terms of the permanent injunction, including the “computation of retirement benefits
under the Buck Decision” with respect to holiday pay. In 1974, a more comprehensive
MOU was adopted which designated 11 holidays and indicated that premium pay for
holidays was to be “computed at the regular hourly base rate of pay for an employee’s
classification, rather than at the [overtime] rate of time and one-half.” Thus, as in Buck,
members of the Department received eight hours of holiday premium pay. Similar
language was carried over into the 1975 MOU. During this timeframe, the extra eight
hours of compensation received by members of the Department as holiday premium pay
was included in the calculation of PFRS retirement benefits.
In 1976, the City and OPOA adopted an MOU increasing holiday premium pay
from the straight-time rate (8 hours) to a rate based on “time and one-half the regular base
rate of pay for an employee’s classification” (12 hours). The 1976 MOU, however,
contained the following language impacting the calculation of PFRS retirement benefits:
“City and [OPOA] agree that premium pay shall not be subject to retirement except for
the straight time portion of holiday pay.” Although the record does not contain MOU’s
covering the period from 1988 through 1994, it appears that similar limiting language
continued from 1976 up through the 1995-1998 MOU. Based on the language of the
MOU’s, PFRS retirees only received credit for 8 hours of holiday premium pay in the
calculation of their retirement benefits from 1976 through 1996. In contrast, active
members of the Department received 12 hours of holiday pay during this same period. At
some point between 1986 and 1995, the number of paid holidays increased from 11 to 12.
6
Holiday premium pay was again the subject of litigation in 1996. (See Oakland
Police & Fire Retirement Assn. v. City of Oakland (Super. Ct. Alameda County, 1996,
No. 763859) (Arca II).) Arca II was a class action lawsuit filed on behalf of PFRS
retirees and their beneficiaries challenging the MOU language that excluded retirees from
receiving credit for the additional four hours of holiday pay that was being paid to active
members of the Department. In that case, the City did not contest the holding in Buck,
but argued that the additional four hours of holiday pay was “overtime” pay and therefore
expressly excluded from the calculation of PFRS retirement benefits. (See Charter, art.
XVI, § 2607 [“ ‘compensation’ ” defined as monthly remuneration excluding overtime].)
The trial court disagreed, granting a writ of mandate in favor of PFRS retirees with the
following instructions: “Respondents are compelled in determining and computing the
amount of the retirement allowances due to Petitioners and the class they seek to
represent to take all actions necessary to include as ‘compensation’ and ‘compensation
attached to the average rank held’ the full twelve hours holiday pay received by current
Oakland Police Officers” (italics added). The City was further ordered to make three
years of retroactive retirement allowance payments with interest. Subsequently, the
parties entered into a settlement agreement in which the City agreed not to appeal Arca II,
to follow the terms of the decision, and to make the required retroactive payments. In
return, the City received a reduction in the interest otherwise payable to PFRS retirees
pursuant to the decision.
In accordance with Arca II and the related settlement agreement, the 1998-2001
MOU between the City and OPOA deleted the language limiting holiday pay for PFRS
retirees, stating simply that premium pay for holidays would be “computed at time and
one-half the regular base rate of pay for an employee’s classification.” Identical
language appeared in the 2001-2006 MOU. In practice, however, the application of
holiday premium pay to the various shifts worked by active members of the Department
was becoming more complex. In 2000, the Department issued Departmental General
Order 8 (DGO 8) interpreting the MOU provisions in light of these changes. Pursuant to
DGO 8, a member that took holiday time off was paid at the straight-time rate of 8 or 10
7
hours, depending on the length of that member’s usual shift. A member of the
Department who worked on a holiday received regular base pay (of either 8 or 10 hours)
plus 1.5 times that base pay in holiday premium pay. When a holiday fell on a member’s
regular day off, that member was allotted 12 hours of holiday pay, regardless of whether
he/she usually worked an 8 or 10-hour shift. Finally, a member who was required to
work on a holiday that was his/her regular day off was granted 12 hours in base pay, plus
1.5 times base pay in holiday premium pay. Thus, while all members were entitled to
holiday pay for each holiday, the amount actually received on a particular holiday varied
from 8 to 18 hours, depending on scheduling and length of shift. During this same time
period, PFRS retirees continued to receive credit for 12 hours of holiday pay for each
holiday in accordance with the terms of Arca II.
Upon expiration of the 2001-2006 MOU, the City and OPOA reached an impasse
in negotiations and thus the terms of the successor MOU were determined through an
arbitration process conducted by Arbitrator Barry Winograd. The resulting 2006-2010
MOU states expressly that it was entered into pursuant to the terms of this arbitration
decision and award, which is attached to the MOU and incorporated as Appendix A
(Winograd Decision). With respect to holiday pay, the 2006-2010 MOU designated 12
holidays and one “floating” holiday and provided for base pay for any regularly
scheduled shift worked on a designated holiday. In addition: “[I]f the holiday is worked,
the employee shall be paid for all hours worked at the overtime rate of time and one-half
(1.5). If the holiday is not worked because of a regular day off, or by employer request,
employee will be paid holiday pay at the straight time rate.” The Winograd Decision did
not alter the holiday pay structure set forth in the body of the MOU and—with respect to
the number of designated holidays —stated simply “[s]tatus quo.”
As a result of additional negotiations between the City and OPOA, the 2006-2010
MOU was subsequently extended into 2013. This amended and extended MOU
temporarily changed the structure of holiday pay for active members of the Department.
Specifically, for the 2009, 2010, and 2011 fiscal years, only seven of the regular holidays
were paid in accordance with the customary policy established by the MOU. For the
8
other six holidays, active members received no holiday pay for holidays that were not
worked and “straight time pay” for holidays that were worked. Currently, holiday pay for
active members of the Department is governed by the 2006-2013 MOU, which has been
extended a second time into 2015. No additional changes have been made with respect to
the provisions governing holiday premium pay except that, for the 2012, 2013, and 2014
fiscal years, active members are not entitled to any holiday pay for Admission Day.
Members who work on Admission Day will still receive their regular base pay for that
shift.
2. Shift Differential Pay
In contrast to holiday premium pay, the inclusion of shift differential pay in the
calculation of PFRS retirement benefits is of fairly recent origin. Prior to the 2001-2006
MOU, active members of the Department in the patrol division received a type of
premium pay called “line-up pay,” which was 30 minutes of extra compensation for the
organizational meeting that occurred prior to the beginning of a shift. The 1974 MOU
(and all subsequent MOU’s contained in the record through 1998) states that
“[c]ompensation for . . . Patrol Division line-up time shall be computed at the regular
hourly base rate of pay for an employee’s classification . . . .” The 1998-2001 MOU
modified this arrangement for certain shifts, stating: “For members working the first and
second watches, line-up shall be accomplished during the regular ten hour shift and such
members shall not receive line-up pay. For members working the third watch and for
members working a five day, eight hour schedule in Patrol, line up time shall be
computed at the regular hourly base rate of pay for an employee’s classification . . . .”
Thereafter, in the 2001-2006 MOU, line-up pay was completely abolished. Pursuant to a
1984 superior court decision, line-up pay had been declared to be compensation for
purposes of the calculation of PFRS retirement benefits. (Arca v. City of Oakland
(Super. Ct. Alameda County, 1984, No. 579832-8) (Arca I).) Under the terms of Arca I,
any PFRS retiree who had been assigned to patrol or traffic at any time during the final
three years of employment was given credit for “the amount of line-up pay received by
active police officers similarly assigned.” (Ibid.)
9
Although it eliminated line-up pay, the 2001-2006 MOU added shift differential
pay as a form of premium pay “for certain hard-to-fill shifts on swing and night shift in
order to encourage more experienced officers to take night shifts.” Pursuant to both the
2001-2006 MOU and the 2006-2015 MOU, a member assigned to a work unit (other than
traffic or vice/narcotics) “that requires a regular work schedule with late evening and/or
early morning hours or to an assignment with a flexible hours schedule,” may be eligible
for shift differential pay of between 6.25 percent and 8.25 percent. In a letter sent to
PFRS retirees dated March 27, 2002, the City indicated that shift differential pay at a rate
of 7.25 percent (an agreed-upon composite rate) had replaced line-up pay and would be
included in the calculation of retirement benefits as of April 1, 2002, for PFRS retirees
who had previously received line-up pay.
C. Proceedings Before the Board
On February 24, 2010, the City and the Association appeared before the Board to
discuss the temporary reduction in holidays implemented by the 2006-2013 MOU for
active members of the Department. Specifically, pursuant to the terms of the MOU, the
Chief of Police was required to designate six holidays for each of fiscal years 2009-2010,
2010-2011, and 2011-2012 that would be unpaid. The City argued before the Board that
this temporary reduction should be reflected in the calculation of PFRS retirement
benefits for the years affected. 4
The Association, in contrast, argued that no reduction was required. Specifically,
it contended that the 2006-2013 MOU contained conflicting provisions with respect to
the number of designated holidays because the Winograd Decision—which was attached
and incorporated into the extended MOU—stated that the number of holidays was “status
quo,” while the three-year reduction in the number of holidays was contained in the
revised body of the MOU. According to the Association, this conflict should be resolved
4
Apparently, as one of the six unpaid holidays, the Chief designated the “floating
holiday” which is granted annually to members of the Department, but has never been
included as a designated holiday in the calculation of PFRS benefits. Thus, the City was
arguing for a reduction in the number of paid holidays credited to retirees from 12 to 7.
10
in the way most beneficial to PFRS retirees. At the conclusion of the hearing, the Board
adopted a resolution endorsing the Association’s position and concluding that the
temporary reduction in the number of paid holidays for active members of the
Department would not be reflected in retiree benefits.
Thereafter, in October 2010, the City informed the Board by letter that PFRS
retirees were being overpaid for holidays under the current MOU because they were
receiving credit for holiday premium pay at the rate of time and one-half, rather than
straight time holiday pay. The City indicated that it intended to exclude the holiday
premium pay from retiree benefits as of January 1, 2011, and requested the Board’s
assistance in determining how best to recover past overpayments. After the Board
responded challenging the City’s authority to alter the benefits payable to PFRS retirees
on a unilateral basis, the City agreed to delay any benefit reduction pending a hearing on
the matter before the Board.
Proceedings before the Board with respect to the holiday premium pay issue were
held on November 17, 2010, and January 26, 2011. At those hearings, the City argued
that the 2006-2010 MOU altered the way that active members of the Department are
compensated for holidays by making a distinction between members who work on the
holiday (and receive holiday premium pay at a rate of time and one-half) and members
who do not work on the holiday (and receive holiday premium pay at a straight time
rate). The City claimed that pension benefits should only reflect straight time pay for
holidays because retirees, by definition, do not work.5 According to the City, to conclude
otherwise would constitute a gift of public funds and represent the unlawful expansion by
the Board of pension benefits beyond those specifically authorized by the Charter. The
5
There is some indication that the City was taking the position before the Board that
retirees should be entitled to nothing other than base pay with respect to holidays—that
is, that they should be treated as if they took each holiday off with pay and thus should be
given credit only for their customary monthly salary. However, the 2006-2010 MOU
authorizes holiday premium pay at a straight time rate when a holiday falls on a
member’s regular day off. Under that scenario, the member would be entitled to the
holiday pay at the straight time rate in addition to his/her usual base compensation.
11
City asked for prospective relief and for retroactive relief from the date of the Winograd
Decision (March 11, 2008), which had finalized the terms of the 2006-2010 MOU.
The Association, unsurprisingly, disagreed with the City’s analysis. After
recounting the extensive history of the holiday pay issue summarized above, it noted that
police departments must be adequately staffed around the clock for public safety reasons.
Consequently, unlike most other employees, police officers work on holidays as a matter
of course and the extra pay associated with working on holidays becomes part of a police
officer’s basic monthly compensation package. The Association therefore argued that the
First District’s conclusion in Buck—that extra compensation paid for working on a
holiday is “compensation attached to rank”—was correct and should be controlling. As a
consequence, PFRS retirees were being properly compensated by receiving credit for
holiday premium pay as if they had actually worked the holiday.
The Board continued the matter so that it could receive and consider an opinion
from its attorney on the holiday pay issue. In a letter dated February 16, 2011, the
Board’s counsel opined that the holiday pay language in the 2006-2010 MOU did not
constitute a change, but was instead merely a clarification of longstanding practice.
Counsel further stated that—even if a change in compensation for active members had
occurred—it was irrelevant since the Buck case had concluded that the extra
compensation paid to active police officers for actually working a holiday constitutes
“compensation attached to rank” for retirement purposes despite the fact that retirees,
obviously, do not work on holidays. Finally, the Board’s attorney noted that treating
holiday premium pay earned for working a holiday as “compensation attached to rank” is
consistent with the underlying purposes of a fluctuating pension system like PFRS: Since
active police officers routinely work holidays and historically have received holiday
premium pay for such work, including this extra compensation in the calculation of PFRS
benefits would maintain equality of position between active and retired members of the
Department. After considering all of the information before it, the Board concluded that
no overpayment to PFRS retirees had occurred.
12
As stated above, the new benefit of shift differential pay was made available to
active members of the Department as part of the 2001-2006 MOU. However, no hearings
were ever held before the Board with respect to the inclusion of shift differential pay as
part of “compensation attached to rank.” Rather, shift differential pay was included in
the calculation of benefits for those retirees who had previously received line-up pay in
accordance with the City’s letter of March 27, 2002.
D. Proceedings in the Trial Court
On June 14, 2011, the City filed a petition for writ of mandate and complaint for
declaratory relief against PFRS and the Board in Alameda County Superior Court. In its
papers, the City claimed that the Board was overcompensating PFRS retirees in four
specific ways: (1) by paying retirees at an excessive rate for holidays; (2) by paying
retirees for too many holidays; (3) by including shift differential pay in the calculation of
retiree benefits; and (4) by paying retirees who retired above the rank of Captain at an
excessive rate for holidays.6 The City characterized these errors as “ministerial” and
requested a writ of mandate compelling the Board to cease all such overpayments on a
prospective basis. In addition, the City sought retroactive relief, including a
determination regarding the proper manner for recovering overpayments made to PFRS
retirees.
PFRS and the Board filed their answer on August 1, 2011, disputing all of the
City’s overpayment claims. On August 24, 2011, the trial court granted the Association
leave to intervene, and on August 29, 2011, the Association filed its Complaint in
Intervention, joining PFRS and the Board in contesting the City’s allegations. Evidence
and argument were provided to the trial court largely in the form of declarations and
briefing, although the trial court did hold oral argument on May 2, 2012, and June 1,
2012, in connection with the publication of its tentative decision.
6
The City did not press this final issue in the trial court—that retirees who retired above
the rank of Captain are being overpaid for holidays—and the trial judge did not rule on it.
We therefore do not consider it here.
13
On August 10, 2012, the trial court issued its order granting the City’s petition for
a writ of mandate and adjudicating the City’s request for declaratory relief in the City’s
favor. The trial court’s conclusions were based largely on its analysis of the First
District’s opinion in Kreeft, supra, 68 Cal.App.4th at p. 46, which considered the Charter
provision involving “ ‘compensation attached to the rank’ ” in the context of certain
overtime pay authorized by the federal Fair Labor Standards Act (FLSA). Based on its
reading of Kreeft, the trial court held that holiday pay at the rate of time and one-half
payable to active members of the Department for working on holidays was not
“ ‘compensation attached to the rank’ ” for purposes of calculating PFRS retirement
benefits. Rather, PFRS retirees were entitled to credit only for the straight-time holiday
pay authorized for active members regardless of whether a holiday is actually worked.
The trial court further determined, based on the express language of the 2006-2013
MOU, that PFRS retirees should only have been credited for seven holidays during the
three fiscal years (2009-2010, 2010-2011, and 2011-2012) in which active members of
the Department received similarly reduced holiday pay. With respect to shift differential
pay, the trial court resolved that such pay was also not “ ‘compensation attached to the
rank’ ” and should not be used in calculating PFRS benefits. The trial court ordered
prospective relief and directed the Board to collect any overpayments, subject to the
applicable statute of limitations. Judgment was entered on September 7, 2012, and this
timely appeal followed.
II. DISCUSSION
A. Standards of Review
The trial court properly determined that ordinary mandamus pursuant to section
1085 of the Code of Civil Procedure is the appropriate procedural mechanism for
resolving the dispute in this case. (Kreeft, supra, 68 Cal.App.4th at pp. 52-53.) “In
reviewing a trial court's judgment on a petition for writ of ordinary mandate, we apply the
substantial evidence test to the trial court’s factual findings. However, we exercise our
independent judgment on legal issues, such as the interpretation of statutory retirement
provisions.” (Id. at p. 53; see also Lindelli v. Town of San Anselmo (2003) 111
14
Cal. App. 4th 1099, 1104 (Lindelli).) Similar standards apply when we consider whether a
determination is proper in an action for declaratory relief. (Carson Citizens for Reform v.
Kawagoe (2009) 178 Cal. App. 4th 357, 366 [review of declaratory relief is generally for
abuse of discretion; however, when facts are undisputed and issue is one of statutory
interpretation, independent judgment/de novo review appropriate].)7
Given the factual posture of this case, we are also mindful of several additional
precepts which guide our review. First, it is well settled that pension provisions must be
“liberally construed” in favor of pensioners. (Dunham, supra, 7 Cal.App.3d at p. 513.)
Further, pursuant to article XVI of the California Constitution, the duty of a public
retirement board “to its participants and their beneficiaries shall take precedence over any
other duty,” including minimizing employer contributions and defraying administrative
costs. (Cal. Const., art. XVI, § 17, subd. (b).)8 In addition, “[a] retired employee has a
contractual right, protected by constitutional guarantees, in a pension,” and such benefits
7
Appellants argue at length that the trial court in this case failed to apply an appropriately
deferential standard of review to the Board’s calculation of retirement benefits.
However, we will resolve this appeal through our de novo review of legal issues, such as
the interpretation of the Charter. “Consequently, we are to exercise our own independent
judgment in reviewing the matter, unfettered by any conclusions reached by the trial
court, and any errors committed by the trial court with respect to the proper standard of
review will be cured by our independent analysis of the issues.” (City of Coachella v.
Riverside County Airport Land Use Com. (1989) 210 Cal. App. 3d 1277, 1289 (City of
Coachella); see also Crumpler v. Board of Administration (1973) 32 Cal. App. 3d 567, 578
[“[t]he ultimate interpretation of a statute is of course an exercise of judicial power and it
is the responsibility of the courts to declare its true meaning even if it requires rejection
of an earlier erroneous administrative interpretation”] (Crumpler); cf. Yamaha Corp. of
America v. State Bd.of Equalization (1998) 19 Cal. 4th 1, 11-12 [discussing difference
between review of an agency’s quasi-legislative rulemaking and it’s interpretation of a
statute].)
8
This State constitutional provision was reportedly put in place in 1992 through
Proposition 162 (The California Pension Protection Act of 1992) to “insulate the
administration of retirement systems from oversight and control by legislative and
executive authorities” (Singh v. Board of Retirement (1996) 41 Cal. App. 4th 1180, 1192),
and to protect retirement boards from “political meddling and intimidation” (Westly v.
Board of Administration (2003) 105 Cal. App. 4th 1095, 1101-1102 & fn. 8 [quoting
measure’s “Findings and Declarations”]).
15
“may not be changed to [that employee’s] detriment.” (Dunham, supra, 7 Cal.App.3d at
p. 513.) In the context of a fluctuating pension plan such as PFRS, however, it must be
emphasized that specific plan benefits are not static, but are instead subject to revision
where necessary to maintain equality of position between the retired member and the
members currently holding the rank the pensioner attained before retirement. (See
Kreeft, supra, 68 Cal.App.4th at p. 54.)
B. Holiday Premium Pay
As stated above, the trial court in this case determined that the time and one-half
holiday pay which active members of the Department receive for working on holidays is
not “compensation attached to rank” for purposes of the calculation of PFRS retirement
benefits. Relying on the First District’s decision in Kreeft, the trial court concluded that
PFRS retirees should only be credited with straight-time premium pay for holidays. The
Association challenges the trial court’s holiday pay ruling on a number of grounds. It
asserts, for instance, that prior court decisions by the First District in Buck and by the
Alameda County Superior Court in Arca II are res judicata, barring the City from re-
litigating the issue of holiday pay. The trial court summarily dismissed the doctrine of
res judicata, remarking simply that Buck and Arca II concerned retiree rights when
compensation for active members of the Department was “set by different MOUs.” We,
in contrast, find the doctrine dispositive.
The tenets of res judicata prescribe the preclusive effect of a prior, final judgment
on the merits. (Mycogen Corp. v. Monsanto Co. (2002) 28 Cal. 4th 888, 896 (Mycogen).)
The doctrine has two distinct aspects: claim preclusion and issue preclusion. (Alpha
Mechanical, Heating & Air Conditioning, Inc. v. Travelers Casualty & Surety Co. of
America (2005) 133 Cal. App. 4th 1319, 1326 (Alpha Mechanical).) Claim preclusion,
often referred to as res judicata, provides that “a valid, final judgment on the merits
precludes parties or their privies from relitigating the same ‘cause of action’ in a
subsequent suit.” (Le Parc Community Assn. v. Workers’ Comp. Appeals Bd. (2003) 110
Cal. App. 4th 1161, 1169 (Le Parc).) Issue preclusion, or collateral estoppel, “ ‘precludes
relitigation of issues argued and decided in prior proceedings.’ ” (Mycogen, supra, 28
16
Cal.4th at p. 896, quoting Lucido v. Superior Court (1990) 51 Cal. 3d 335, 341.)
Application of the doctrine of res judicata “is intended to preserve the integrity of the
judicial system, promote judicial economy, and protect litigants from harassment by
vexatious litigation.” (Vandenberg v. Superior Court (1999) 21 Cal. 4th 815, 829.) It
“rests upon the sound policy of limiting litigation by preventing a party who has had one
fair adversary hearing on an issue from again drawing it into controversy and subjecting
the other party to further expense in its reexamination.” (In re Crow (1971) 4 Cal. 3d 613,
622-623; see also Alpha Mechanical, supra, 133 Cal.App.4th at p. 1327.) Whether the
doctrine of res judicata applies in a particular case is a question of law which we review
de novo. (Noble v. Draper (2008) 160 Cal. App. 4th 1, 10.)
With respect to claim preclusion (res judicata), three requirements must be met.
First, the second lawsuit must involve the same “ ‘cause of action’ ” as the first lawsuit.
Second, there must have been a final judgment on the merits in the prior litigation. Third,
the parties in the second lawsuit must be the same (or in privity with) the parties to the
first lawsuit. (Le Parc, supra, 110 Cal.App.4th at p. 1169.) Under the present facts, the
City, the Board and the PFRS retirees were all parties in Buck, and the First District’s
unpublished decision in that case constitutes a final judgment on the merits. Thus, the
only remaining question is whether this case involves the same “cause of action” as
Buck.9
Whether two lawsuits are based on the same cause of action is determined in
California by reference to the primary right theory. (Mycogen, supra, 28 Cal.4th at
p. 904.) Under this theory, a “cause of action” is comprised of a primary right possessed
by the plaintiff, a corresponding duty imposed upon the defendant, and a wrong done by
the defendant which is a breach of such primary right and duty. (Balasubramanian v.
9
The Association also argues that the Alameda County Superior Court’s decision in Arca
II should be deemed res judicata on the issue of holiday pay. However, the single
paragraph decision in that case—while it certainly indicates that PFRS retirees are
entitled to credit for the full 12 hours of holiday pay earned by active members of the
Department—does not speak in terms of holiday pay received for actually working on a
holiday. We therefore focus our discussion on the preclusive impact of Buck.
17
San Diego Community College Dist. (2000) 80 Cal. App. 4th 977, 991
(Balasubramanian).) The primary right is the plaintiff’s right to be free of the particular
injury, regardless of the legal theory on which liability is premised or the remedy which
is sought. (Mycogen, supra, 28 Cal.4th at p. 904; accord Estate of Dido (2011) 198
Cal. App. 4th 791, 801.) Thus, it is the harm suffered that is the significant factor in
defining the primary right at issue. (Alpha Mechanical, supra, 133 Cal.App.4th at
p. 1327; Balasubramanian, supra, 80 Cal.App.4th at p. 992; Craig v. County of Los
Angeles (1990) 221 Cal. App. 3d 1294, 1301.)
Applying these principles in the present case, it is clear that the harm suffered by
PFRS retirees which led to the First District’s decision in Buck is the same harm for
which they now seek redress. In Buck, PFRS retirees sought a writ of mandate to compel
the City and the Board to include the value of holiday pay in the calculation of retirement
benefits pursuant to the terms of the Charter. After reviewing the Charter provisions
defining “compensation” and “compensation attached to the average rank held,” the Buck
court decided that the remuneration earned by a member of the Department for working
on a holiday did not constitute payment for overtime because it was received for working
part of a regular 40-hour schedule. The court went on to conclude that the extra eight
hours of holiday pay granted to a Department member “who works on a ‘legal holiday’
which falls during his regular 40-hour work week” is “ ‘extra compensation’ ” for
“having worked on a ‘legal holiday’ ” and “must be included in the computation of
retirement allowances.” Now, over 40 years later, the City is arguing—under the exact
same Charter provisions—that the extra compensation payable to active members of the
Department for working on a holiday should not be included in the calculation of PFRS
retirement allowances. However, having had one chance to litigate this issue before the
First District, the City is not now entitled to take another bite at the same apple.
Indeed, when viewed in this light, the fact that the right of active members to
receive holiday premium pay for working on holidays has been contained in a series of
salary ordinances and MOU’s over the years is essentially irrelevant. (Compare Price v.
Sixth Dist. Agricultural Assn. (1927) 201 Cal. 502, 509-510 [cause of action identical for
18
purposes of res judicata where contract in second action is substantially similar to
contract upheld in first action and covers the same subject matter].) Similarly, the
inclusion in the 2006-2015 MOU of express language defining the rights of active
members to certain holiday pay when they do not work on a holiday has no bearing on
active members’ continuing entitlement to receive extra compensation when they do.
Although the amount of remuneration has changed over the years, for over four decades
active members of the Department have possessed an unbroken right to holiday pay for
working on holidays. And, based on Buck, PFRS retirees have been entitled—during that
same period—to have such holiday pay included in the calculation of their retirement
allowance. Under such circumstances, the City should not be allowed to reopen the exact
same issue of holiday premium pay that was previously considered and decided against it
in Buck. (Compare Rynsburger v. Dairymen’s Fertilizer Cooperative, Inc. (1968) 266
Cal. App. 2d 269, 278 [rule of res judicata should not be defeated by “ ‘minor differences
of form, parties, or allegations, when these are contrived only to obscure the real
purpose—a second trial on the same cause between the same parties. . . .’
[Citations]”].)10
10
The City attempts to avoid this result by arguing that the Association has waived its
right to raise the issue of res judicata. We are mindful of the authority stating that the
defense of res judicata can be waived if it is not pled. (See Thibodeau v. Crum (1992) 4
Cal. App. 4th 749, 758 (Thibodeau); see also Code of Civ. Proc., § 1908.5.) In the present
case, however, the Association argued the preclusive effect of Buck before the Board
(Presentation to the Board dated January 26, 2011 at p. 11 [“Buck is binding on the City
and PFRS”]), and these materials were incorporated into the trial record. Further, the
Association argued before the trial court that Buck was controlling. In addition, the
Board expressly pled res judicata as an affirmative defense in its answer (“City’s claims
are barred, in whole or in part, by the doctrines of collateral estoppel and/or res judicata,
by virtue of the prior judgments in Buck and/or Arca.”) And, in its Complaint in
Intervention (which operates as an answer), the Association stated: “Intervenors
affirmatively allege that they are entitled to be compensated for holidays as if they had
worked the holidays, and that this conclusion is warranted through prior court
determinations . . . .” (See Baldwin-Lima-Hamilton Corp. v. Superior Court (1962) 208
Cal. App. 2d 803, 814.) Finally, the trial court reached the issue, finding the doctrine of
res judicata inapplicable. Under such circumstances, we conclude that no waiver
occurred. (Compare Thibodeau, supra, 4 Cal.App.4th at p. 758 [defense of res judicata
19
Of course, we do not mean to imply that the City is forever bound by the mandate
of Buck, regardless of current circumstances. That is clearly not the law. Rather, as the
First District has summarized: “The theory of estoppel by judgment or res judicata . . .
extends only to the facts in issue as they existed at the time the judgment was rendered
and does not prevent a reexamination of the same questions between the same parties
where in the interim the facts have changed or new facts have occurred which may alter
the legal rights of the parties. When other facts or conditions intervene before a second
suit, furnishing a new basis for the claims and defenses of the respective parties, the
issues are no longer the same and the former judgment cannot be pleaded in bar of the
second action.” (American Broadcasting Cos. v. Walter Reade-Sterling, Inc. (1974) 43
Cal. App. 3d 401, 408.) Thus, for example, in California Employment Stabilization Com.
v. Matcovich (1946) 74 Cal. App. 2d 398, 399-401, the court considered whether the
operator of a “ ‘taxi dance hall’ ” and his “taxi dancers” had an employment relationship
sufficient to trigger the payment of unemployment contributions. The owner enforced
numerous rules as to when and how the dancers could work and paid the dancers a
percentage of the house earnings based on the services they performed. Under these
facts, the court concluded that an employment relationship existed. (Id. at pp. 400-402,
404.) However, a previous judgment, covering a different period of time, had concluded
exactly the opposite—that the taxi dancers were not in the employ of the owner. The
appellant argued that this prior decision was res judicata as to the status of the taxi
dancers. (Id. at p. 401.) In addressing the issue, the court noted that, during the time
period covered by the prior case, no written contract existed and the dancers paid
themselves from their own earnings after deducting a portion payable to the owner. (Id.
at pp. 403-404.) The court concluded that a fundamental change in the structure of the
relationship between the taxi dancers and the owner had taken place between the two
lawsuits. Thus, the doctrine of res judicata did not apply, and re-examination of the same
question between the same parties was appropriate. (Id. at. pp. 404-405.)
“adequately, though inartfully” pled by following statement—“ ‘Plaintiffs are estoppel
[sic] from asserting the allegedly wrongful acts described in their Complaint’ ”].)
20
In the present case, in contrast, the City has failed to make any showing that a
material change in circumstances has occurred since Buck with respect to the holiday pay
issue which would justify its re-litigation. As stated above, neither the change in the
underlying document providing the holiday pay benefit, nor the fact that the current
MOU expressly discusses holiday pay for members who do not work holidays are
material changes justifying re-litigation. Further, the City’s specious argument—that
retirees should not be compensated for working on holidays because they currently do not
work—misses the point entirely and, regardless, has been true since Buck was decided.
The appropriate inquiry is not whether retirees no longer work, but rather how active
members are compensated for holiday work and whether this has changed significantly
since Buck. The evidence presented in the trial court on this issue was clear and
essentially uncontested by the City: PFRS members regularly worked holidays when they
were active and, in fact, made contributions to PFRS based on the premium pay they
received for holiday work. Moreover, active members of the Department currently work
most holidays that fall during their regular work schedule and earn premium pay for
doing so. Thus, holiday staffing and compensation practices have been consistent since
Buck. Indeed, this common experience for police officers has been memorialized in a
number of cases that have considered the holiday pay issue. (City of Fremont v. Board of
Administration (1989) 214 Cal. App. 3d 1026, 1031 [“ ‘[b]eing subject to working on
holidays as regular work days is normal for police officers’ ”]; see also Rose v. City of
Hayward (1981) 126 Cal. App. 3d 926, 941 [citing City of Hayward’s administrative rule
that all police officers are regularly required to work on legal holidays].) Since the City
has not pointed to any meaningful change in the holiday work patterns of Department
members, it is not entitled, at this point, to re-open the issue of holiday pay.11
11
In this regard, we note that the unanalyzed and incomplete payroll data submitted by
the City in the trial court is wholly insufficient to indicate the kind of change necessary to
trigger re-litigation of the holiday pay issue. Much of this information was essentially
useless as it failed to connect the holiday pay amounts to a particular officer and/or that
officer’s schedule. We have, however, reviewed the raw payroll data supplied by the
City for the two-week pay period ending January 6, 2012. While we doubt that the two-
21
Nor do we view the First District’s decision in Kreeft as materially changing the
legal landscape with respect to the provisions in the Charter which govern the calculation
of PFRS retirement benefits, including those based on holiday pay. In Kreeft, the First
District considered whether FLSA overtime pay received by certain active firefighters
was “ ‘attached to the rank’ ” PFRS retirees held at the time they retired and must
therefore be included in the calculation of their pensions. (Kreeft, supra, 68 Cal.App.4th
at pp. 48-49.) The evidence in Kreeft included detailed data which showed that active
firefighters received FLSA overtime pay only on an average of 2.21-2.57 times out of the
13.5 yearly pay periods. (Id. at p. 50.) In addition, “the amount and frequency of FLSA
premium pay varied widely from individual to individual and from rank to rank.” (Ibid.)
Indeed, the City’s economic expert concluded that “the ‘average’ annual number of times
all firefighters received FLSA premium pay from 1992 to 1995 (2.5) was not a
meaningful predictor of the experience of most firefighters.” (Id. at p. 51.)
Based on all of these circumstances, the Kreeft court held that the FLSA overtime
pay at issue was not “compensation attached to the rank” because it was not incident to
the rank held, but was rather a function of the actual hours a firefighter worked during
each pay period and was therefore “attached” to an individual firefighter’s schedule.
(Kreeft, supra, 68 Cal.App.4th at pp. 49, 55, 61.) To be “ ‘attached to the rank’ ” the
court opined, “the employee must be entitled to the compensation by virtue of the rank,
and not his individual efforts over and above what are required to obtain the rank.” (Id.
week pay period encompassing a Sunday New Year’s holiday represents the typical
experience of most Department members for most holidays, even a cursory review of the
data in light of other information contained in the record permits certain conclusions to be
drawn. First, it appears that the majority of active Department members work 10- or 12-
hour shifts, rather than the traditional 8-hour shift. Secondly—although there were
entries that we could not interpret with the information available in the record—it appears
that essentially all active members receive between 8 and 18 hours of holiday pay in
connection with the occurrence of a holiday, based on the length of their usual shift.
Thus, members who work on a holiday receive holiday pay of 12, 15, or 18 hours.
Members for whom a holiday falls on a regular day off receive holiday pay of 8, 10, or 12
hours. And, finally, members who take a holiday off receive holiday pay of 8, 10, or 12
hours.
22
at pp. 57-58.) The court went on to distinguish the circumstances in Kreeft from other
“ ‘variable’ ” cases in which some members of the same rank received a benefit while
others did not. (Kreeft, supra, 68 Cal.App.4th at pp. 58-61; see, e.g., Dunham, supra, 7
Cal.App.3d at pp. 511-516 [salary increase based on longevity and training
requirements]; Estes v. City of Richmond (1967) 249 Cal. App. 2d 538, 541, 546
[“hazardous duty pay” for completing one “tour of duty” each month]; Abbott v. City of
Los Angeles (1960) 178 Cal. App. 2d 204, 213-215 [longevity and merit pay].) In those
cases, the variability was limited to whether an employee did or did not qualify for the
benefit, and there was evidence that the retirees, while working, had performed the
services that would have entitled them to the extra compensation. (Kreeft, supra, 68
Cal.App.4th at p. 60.) Kreeft, in contrast, involved a situation where there was not only
variability regarding who was entitled to the benefit, but there was also a wide disparity
in the amount of extra compensation such members were entitled to. Further, there was
no evidence that the retirees, while working, had schedules that would have qualified
them for the FLSA pay. Under these facts, the FLSA compensation at issue
“ ‘attached’ ” to an individual firefighter’s schedule rather than to his/her rank. (Id. at
pp. 59-61.)
We view Kreeft as a common-sense application of the Charter provisions to
particular facts rather than as a significant departure from existing precedent. Certainly,
there is nothing in the statutory analysis engaged in by the Kreeft court that could not
have been argued to the First District in Buck. For instance, it could easily have been
urged that working on a holiday was based on individual effort and scheduling rather than
rank. (Compare Kreeft, supra, 68 Cal.App.4th at pp. 57-58.) A “ ‘prior judgment is res
judicata on matters which were raised or could have been raised, on matters litigated or
litigable.’ ” (Kronkright v. Gardner (1973) 31 Cal. App. 3d 214, 217, quoting Sutphin v.
Speik (1940) 15 Cal. 2d 195, 202.) “Were the rule otherwise, litigation finally would end
only when a party ran out of counsel whose knowledge and imagination could conceive
of different theories of relief based upon the same factual background.” (Kronkright v.
23
Gardner, supra, 31 Cal.App.3d at p. 216.) Thus, the analysis set forth in Kreeft does not,
itself, provide a basis for re-visiting the issue of holiday pay.12
In sum, the City’s claim in this case constitutes the same cause of action as that
previously decided against the City in Buck. Further, there are no intervening changes in
facts or law that would justify a re-examination of the same issue between the same
parties. Thus, the City is barred by the doctrine of res judicata from re-litigating the issue
of holiday premium pay.
C. Shift Differential Pay
The Association does not, in this appeal, contest the merits of the trial court’s
determination that shift differential pay is not “compensation attached to rank” for
purposes of calculating PFRS retirement benefits. Rather, it cites two procedural grounds
as the bases for its conclusion that the trial court’s decision with respect to shift
differential pay was improper. First, the Association argues that the trial court was barred
from considering the question of shift differential pay because the City did not exhaust
available administrative remedies with respect to that issue. Second, the Association
contends that the trial court decision with respect to shift differential pay was improperly
premised upon inadmissible extra-record evidence. We address each assertion in turn.
12
Indeed, were we to throw out the holding in Buck and reconsider the holiday pay issue
generally in light of Kreeft, it is not at all clear that a different outcome would result. As
stated above, it appears that essentially all members of the Department currently receive
between 8 and 18 hours of holiday pay for every holiday simply for being on the force.
Thus, holiday compensation seems to be incident to rank rather than individual effort.
And, while it is true that there is variation in the amount of extra compensation paid to
each member based on schedule, we disagree with the trial court that any such variability
is fatal under Kreeft. In fact, Kreeft speaks of the FLSA pay at issue being “widely”
varied. (Kreeft, supra, 68 Cal.App.4th at p. 60.) The variation in the present case, in
contrast, is much more narrowly focused and predictable. Were a proper analysis to be
done, we would not be surprised to find that the 12 hours of holiday pay currently used in
the calculation of PFRS retirement benefits pursuant to Buck represents an average that is
a “meaningful predictor of the experience of most” Department members. (Cf. id. at
pp. 50-51.)
24
1. Exhaustion of Administrative Remedies
Section 2603 of the Charter provides in relevant part: “The Board may and in
disputed matters shall hold public hearings in all proceedings pertaining to retirement and
to the granting of retirement allowances, pensions, and death benefits. Notice of the time
and place of such hearing shall be given in writing to the member or dependents affected
thereby . . . . The member or dependents affected thereby shall be entitled to appear
personally at said hearing and to have counsel.” It is undisputed that the City did not
request a hearing before the Board in accordance with section 2603 on the propriety of
including shift differential pay in the calculation of PFRS retirement benefits as
“compensation attached to rank.” The Association contends that such a hearing was an
administrative prerequisite to litigation and, since the City failed to exhaust available
administrative remedies with respect to shift differential pay, its claim should not be
considered. The City, in contrast, argues that section 2603 merely creates a claims
procedure for PFRS members and is therefore inapplicable to disputes between the City
and the Board.13
The trial court ruled that the City had no exhaustion requirement. Agreeing with
the City’s characterization of section 2603 as a claims procedure for members, the trial
court concluded that “[t]he Board’s hearing process is not designed to address disputes
between the City and the Board regarding the System’s obligations to retirees and the
City’s resulting obligation to fund the System.” We review this determination de novo.
(Ortega v. Contra Costa Community College Dist. (2007) 156 Cal. App. 4th 1073, 1080.)
It is well settled in California that, where an administrative remedy is provided,
relief must be sought first from the administrative body before recourse to the courts is
13
Although neither party mentions it, we note that in the Arca II case discussed above the
City argued that the police retirees and their representatives had failed to exhaust
administrative remedies pursuant to section 2603 of the Charter. The Arca II court
ultimately issued a writ requiring the City and the Board to credit retirees with the full 12
hours of holiday pay without any discussion of the City’s exhaustion claim. We have
taken judicial notice of and have reviewed the superior court’s file in Arca II pursuant to
subdivision (d) of section 452 of the Evidence Code.
25
permitted. (Unfair Fire Tax Com. v. City of Oakland (2006) 136 Cal. App. 4th 1424, 1428
(Unfair Fire); see also Abelleira v. District Court of Appeal (1941) 17 Cal. 2d 280, 292.)
This doctrine of administrative exhaustion allows an administrative body to develop the
factual background of the case and apply its expertise to the situation, while keeping the
overworked courts out of the dispute unless absolutely necessary. (California Water
Impact Network v. Newhall County Water Dist. (2008) 161 Cal. App. 4th 1464, 1489-1490
(Newhall County).) Where, as here, traditional mandamus is sought, “ ‘the exhaustion
requirement speaks to whether there exists an adequate legal remedy. If an
administrative remedy is available and has not yet been exhausted, an adequate remedy
exists and the petitioner is not entitled to extraordinary relief.’ ” (Eight Unnamed
Physicians v. Medical Executive Com. (2007) 150 Cal. App. 4th 503, 511 (Eight Unnamed
Physicians), quoting Unnamed Physician v. Board of Trustees (2001) 93 Cal. App. 4th
607, 620.)
Focusing on the Charter provisions at issue in the present case, we agree with the
trial court and the City that the hearing procedures look more like a claims process for
individual PFRS members than a generalized administrative remedy. (See City of Fresno
v. Superior Court (1984) 156 Cal. App. 3d 1137, 1143-1144 [principles of statutory
construction requiring the ascertainment of legislative intent apply to charters; where
there is no direct evidence of such intent, the court must turn to the words of the charter].)
Specifically, section 2603 of the Charter, itself, provides that notice of any hearing must
be given “to the member or dependents affected thereby . . . .” (Italics added.)
Moreover, “[t]he member or dependents affected thereby” are entitled to appear
personally at the hearing with counsel. (Ibid, italics added.) The Charter further
authorizes “[a]ny member . . . who is dissatisfied with any order or decision of the
Board” to seek a writ of mandate in the courts without first applying to the Board for a
rehearing. (Charter, art. XXVI, § 2605, italics added.) Finally, the Charter provides that
the rehearing and writ remedies discussed above “shall be available to any member . . .
affected by any order or decision of the Board without prejudice to the right to pursue any
26
other remedy provided for by the laws of the State of California.” (Id., § 2606, italics
added.) 14
Moreover, even if we were to construe the Charter language requiring a public
hearing before the Board “in all proceedings pertaining to retirement and to the granting
of retirement allowances, pensions, and death benefits” broadly to include disputes with
the City, we would still conclude that the process articulated in the Charter is insufficient
to create a mandatory exhaustion requirement. This is because exhaustion of
administrative remedies is not required where the available remedy is inadequate.
(Newhall County, supra, 161 Cal.App.4th at p. 1490; Eight Unnamed Physicians, supra,
150 Cal.App.4th at p. 511.) As the Supreme Court has opined: “Our courts have
repeatedly held that the mere possession by some official body of a continuing
supervisory or investigatory power does not itself suffice to afford an ‘administrative
remedy’ unless the statute or regulation under which that power is exercised establishes
clearly defined machinery for the submission, evaluation and resolution of complaints by
aggrieved parties.” (Rosenfield v. Malcolm (1967) 65 Cal. 2d 559, 566, italics added
(Rosenfield).)
Thus, for instance, in City of Coachella, supra, 210 Cal.App.3d at pp. 1281-1283,
the local airport land use commission appealed from the grant of a writ of mandate in
favor of the City of Coachella which voided the commission’s Thermal Airport Land Use
Plan (TALUP). The commission argued that the city had failed to exhaust available
administrative remedies, which included the public hearings held by the commission
14
Indeed, pursuant to section 2603 of the Charter, proof of service to all affected
members and dependents must be made at any scheduled public hearing. Moreover, all
individuals so noticed are entitled to be present and represented by counsel. (Ibid.) In
the instant case, the City’s hearings on the holiday pay issue clearly affected the rights of
all PFRS police members and dependents and thus—if the hearings were held pursuant to
section 2603—all such members and dependents should have been notified and could
have appeared with counsel. There is no indication in the record, however, that this mass
notification occurred or that an unwieldy number of individual retirees appeared with
counsel in tow. Thus, it appears that even the Board did not think that the City’s hearing
was proceeding pursuant to the Charter process.
27
incident to the adoption of the TALUP and a commission regulation requiring it to
schedule a meeting “ ‘to consider matters relevant to its duties and responsibilities when
requested by . . . a local planning agency . . . .’ ” (Id. at pp. 1287-1288.) Citing
Rosenfield, the appellate court concluded that exhaustion was not required. (City of
Coachella, supra, 210 Cal.App.3d at p. 1287.) Specifically, the court determined that the
public hearing process did not constitute an adequate administrative remedy because the
“public hearings held by the [c]ommission with regard to the adoption of the TALUP did
not require that the [c]ommission do anything in response to submissions or testimony
received by it incident to those hearings.” (Ibid.) Similarly, the commission’s meeting
requirement also failed to establish an adequate administrative remedy: “While it is true
that this rule does contain a mandatory provision requiring the scheduling of meetings, it
is also true that the rule does not mandate that anything be done as a result of such
meetings. This duty to hold meetings amounts to nothing more than an obligation to
exercise a general investigatory power.” (Id. at p. 1288.)
The First District has consistently endorsed the approach announced in Rosenfield
and applied in City of Coachella. (See, e.g., Unfair Fire, supra,136 Cal.App.3d at
pp. 1429-1430 [ordinance allowing appeal to city council contesting the city’s creation of
a fire suppression district insufficient to create adequate administrative remedy where
“nebulous” procedure does not state how the appeal should be taken, whether there will
be a hearing, when the matter will be heard, what evidence may be presented or the
standard for reconsideration of the council’s initial decision]; Lindelli, supra, 111
Cal.App.4th at pp. 1105-1106 [opportunity to participate in a public hearing not an
adequate administrative remedy where city council “not required to do anything in
response to their participation”]; Martino v. Concord Community Hospital Dist. (1965)
233 Cal. App. 2d 51, 57 [no adequate administrative remedy for a physician whose
application for appointment to hospital medical staff was “deferred” where hospital
bylaws provide only that appeal will be “considered” and fail to set forth “any procedure
for the hearing or determination of the appeal”] (Martino).) Applied to the facts of this
case, these precedents compel the conclusion that section 2603 of the Charter does not
28
supply an “adequate” administrative remedy for the City. Exhaustion of administrative
remedies was therefore not required.
For instance, as in City of Coachella and Lindelli, the public hearing requirement
contained in section 2603 does not require the Board to do anything in response to the
submissions or testimony received by it at the hearing. Thus, the procedure does not
provide for the acceptance, evaluation and resolution of disputes. (See Rosenfield, supra,
65 Cal.2d at p. 566.) Further, as in Unfair Fire and Martino, the Charter contains no
clearly defined procedures for the conduct of a hearing involving the City. (Rosenfield,
supra, 65 Cal.2d at p. 566.) Specifically, there are no procedures regarding how to
request a hearing, no timelines for when such a hearing will be held or concluded, and no
standards for decision making. Simply put, even if section 2603 creates an available
administrative remedy for the City, it is inadequate to trigger a mandatory exhaustion
requirement. The cases cited by the Association and the Board in which exhaustion was
required are distinguishable as involving challenges brought in the context of
comprehensive regulatory schemes and do not change our analysis. (Compare Newhall
County, supra, 161 Cal.App.4th at pp. 1489-1490 [appellant required to raise its concerns
about water supply assessment with lead agency as part of comprehensive CEQA process
before seeking judicial intervention]; Chavez v. Civil Service Com. (1978) 86 Cal. App. 3d
324, 328-331 [single sentence dismissing challenge under Rosenfield; charter provisions
at issue in Rosenfield “far less comprehensive” than civil service charter provisions and
related commission rules at issue]; Woodward v. Broadway Federal Sav. & Loan Assoc.
(1952) 111 Cal. App. 2d 218, 223-225 [challenge to the validity of an election in the
savings and loan context must be brought first to the Home Loan Bank Board under
comprehensive federal regulations it has promulgated which “govern the operation of
federal savings and loan associations from their inception to their dissolution”].) Thus,
while it might certainly be the better practice to air any PFRS disputes before the Board
prior to resorting to the courts, the City was not required to do so.
29
2. Extra-Record Evidence
Having passed the exhaustion hurdle, we must now decide whether the trial
court’s determination with respect to shift differential pay must nevertheless be
overturned because the trial court impermissibly considered extra-record evidence in
reaching its decision. Specifically—in response to an express request by the trial court—
the City submitted significant additional evidence, including an analysis of payroll
records, supporting its argument that shift differential pay is not “compensation attached
to the rank” under Kreeft. Citing Western States Petroleum Assn. v. Superior Court
(1995) 9 Cal. 4th 559, 574 (Western States), the Association urges that in mandamus
proceedings challenging quasi-legislative administrative decisions, the trial court is
strictly limited to the administrative record, and thus consideration of this additional
evidence was error. Under the facts of this case, however, the Association’s argument is
easily dismissed.
We recognize that there is an “ ‘unbroken line’ ” of cases holding that extra-record
evidence is not admissible to challenge quasi-legislative decisions. (San Joaquin County
Local Agency Formation Com. v. Superior Court (2008) 162 Cal. App. 4th 159, 167.)
Equally well settled, though, is the exception to this general rule allowing for the
“admission of extra-record evidence in traditional mandamus actions challenging
ministerial or informal administrative actions if the facts are in dispute.” (Western States,
supra, 9 Cal.4th at p. 576.) This exception applies “because the record upon which a
public agency’s informal action is based is often inadequate to permit meaningful
review.” (California Oak Foundation v. Regents of University of California (2010) 188
Cal. App. 4th 227, 255.) Generally, administrative actions that do not involve public
hearings are considered “informal.” (Ibid.; see also California Hospital Assn. v.
Maxwell-Jolly (2010) 188 Cal. App. 4th 559, 581.) Here, there was no administrative
hearing with respect to the inclusion of shift differential pay in the calculation of PFRS
benefits, and we have concluded that such a hearing was not a prerequisite to judicial
review. Under such circumstances, the development of essential facts by the trial court
with respect to shift differential pay was not error.
30
C. Equitable Defenses
Based on its analysis of the holiday pay and shift differential pay issues before it,
the trial court determined that PFRS retirement benefits had been calculated improperly
in a number of ways, leading to overpayments to PFRS retirees. The court further
concluded that the City had not waived its right to collect these overpayments by failing
vigorously to press the matter. Rather, the trial court opined that the retirees had no right
to retain benefits paid to them improperly and directed the Board to “develop and
implement a plan to collect the overpayments.”
The Association argues that the trial court erred by mandating the recovery of
overpayments made to PFRS retirees. Specifically, the Association contends that any
retroactive application of the decision should be barred by the equitable doctrines of
estoppel and laches, by the statute of limitations, and/or by the hardship exception to
retroactivity. Alternatively, the Association claims that the matter should have been
remanded to the Board so that it could consider the Association's equitable claims and
defenses in the first instance. With respect to the rate of holiday premium pay, we have
concluded that PFRS benefits were appropriately calculated in accordance with Buck, and
thus no repayment is required. We will therefore consider the Association’s arguments in
the context of the two other types of overpayments that remain at issue.
1. Shift Differential Pay
As noted earlier, the Association did not contest on appeal the trial court’s
underlying conclusion that shift differential pay is not “compensation attached to rank,”
and therefore the propriety of that decision is not before us. However, the Association
does argue that any past overpayments made to PFRS retirees due to the improper
inclusion of shift differential pay in their benefit calculation should not be recoverable.
We believe these shift differential overpayments are best analyzed under theories of
equitable estoppel.
The doctrine of equitable estoppel is founded on notions of equity and fair dealing
and provides that a person may not deny the existence of a state of facts if that person has
intentionally led others to believe a particular circumstance to be true and to rely upon
31
such belief to their detriment. (Killian v. City and County of San Francisco (1978) 77
Cal. App. 3d 1, 13.) “ ‘Generally speaking, four elements must be present in order to
apply the doctrine of equitable estoppel: (1) the party to be estopped must be apprised of
the facts; (2) he must intend that his conduct shall be acted upon, or must so act that the
party asserting the estoppel had a right to believe it was so intended; (3) the other party
must be ignorant of the true state of facts; and (4) he must rely upon the conduct to his
injury.’ ” (Golden Gate Water Ski Club v. County of Contra Costa (2008) 165
Cal. App. 4th 249, 257 (Golden Gate), quoting Driscoll v. City of Los Angeles (1967) 67
Cal. 2d 297, 305 (Driscoll).) Where, as here, a party seeks to invoke the doctrine of
equitable estoppel against a governmental entity, an additional element applies. That is,
the government may not be bound by an equitable estoppel in the same manner as a
private party unless, “in the considered view of a court of equity, the injustice which
would result from a failure to uphold an estoppel is of sufficient dimension to justify any
effect upon public interest or policy which would result from the raising of an estoppel.”
(Long Beach v. Mansell (1970) 3 Cal. 3d 462, 496-497 (Mansell); see also Driscoll,
supra, 67 Cal.2d at p. 306 [“doctrine of equitable estoppel may be applied against the
government where justice and right require it”].)
Arguing that it raises factual questions, the Association contends that the issue of
equitable estoppel should be considered first by the Board. However, where the facts are
undisputed, whether equitable estoppel applies is a question of law. (Golden Gate, supra,
165 Cal.App.4th at p. 257.) Moreover, where the issues require a weighing of policy
concerns, they too present a question of law. (Ibid.) In the present case, the record
contains undisputed facts sufficient to inform our determination regarding the
applicability of equitable estoppel to the shift differential overpayments.
The record reflects, for instance, that certain PFRS retirees received retirement
benefits based on line-up pay since the 1984 judicial determination in Arca I that line-up
pay was “compensation attached to rank.” Further, it is clear that shift differential pay
was instituted for active members of the Department as part of the 2001-2006 MOU, the
same MOU that abolished line-up pay for active members. It is also undisputed that, on
32
March 27, 2002, the City sent a letter to PFRS retirees asserting in a definitive fashion
that shift differential pay had “replaced” line-up pay and would be included in the
calculation of retirement benefits as of April 1, 2002, for PFRS retirees who had
previously received line-up pay. The City was clearly aware (as it had been litigating the
matter for decades) that only “compensation attached to rank” is properly included in the
calculation of PFRS benefits. However, the City never asked the Board to determine
whether shift differential pay was appropriately characterized as “compensation attached
to rank.” Nor is there any indication in the record that the City disputed the inclusion of
shift differential pay in PFRS retirement allowances until it filed this action in July 2011.
Thus, for almost a decade, the City actively asserted that shift differential pay should be
treated as “compensation attached to rank,” and the Board had knowledge of, and
acquiesced in, the City’s characterization.15
15
Whether the City’s representation in this case is characterized as a statement of fact
(shift differential pay will be included in the calculation of benefits for certain PFRS
retirees as of a specified date) or a legal conclusion (shift differential pay is
“compensation attached to rank” and therefore properly included in the caculation of
PFRS benefits) is not dispositive. Clearly, it has been held that “(in the absence of a
confidential relationship) where the material facts are known to both parties and the
pertinent provisions of law are equally accessible to them, a party’s inaccurate statement
of the law . . . cannot give rise to an estoppel. Some cases assert that this simply amounts
to a ‘mutual mistake of law’ and others remark that the estoppel elements of ignorance
and reasonable reliance are absent.” (Jordan v. City of Sacramento (2007) 148
Cal. App. 4th 1487, 1496.) However, where, as here, a confidential relationship exists
among the parties, estoppel can be applied based on the advice given to PFRS retirees
regarding their substantive rights. (Id. at pp. 1497-1498 [discussing Driscoll]; see also
Driscoll, supra, 67 Cal.2d at pp. 306-310; Canfield v. Prod (1977) 67 Cal. App. 3d 722,
731-733 [county estopped from asserting statute of limitations against public assistance
recipient who had confidential relationship with, and was improperly advised by,
county]; Crumpler, supra, 32 Cal.App.3d at pp. 571-572, 581-582 [city estopped from
retroactively reclassifying animal control officers as miscellaneous members of PERS
where officers were advised by the city that they would be classified as local safety
members and were treated as such for years].) Under such circumstances, the court
considers a variety of factors focused on the culpability of the public agency and the
impact of the advice on the claimant, including: (1) whether the advice was negligent at
the time it was made; (2) whether the agency acted in bad faith; (3) whether the agency
purported to “advise and direct” the claimant rather than merely “inform and respond”;
33
Under these circumstances, we believe that all of the requisite elements of
equitable estoppel are present. As stated above, the City clearly knew that only
“compensation attached to rank” could be included in the calculation of PFRS retirement
benefits, yet it negligently asserted that shift differential pay was pensionable without
verifying the accuracy of this position either through advice from the Board or from any
other qualified source. (Compare Crumpler, supra, 32 Cal.App.3d at p. 582.) As the
Fourth District opined in Crumpler: “The fact that the advice may have been given in
good faith does not preclude the application of estoppel. Good faith conduct of a public
officer or employee does not excuse inaccurate information negligently given.
[Citations.] In a matter as important to the welfare of a public employee as his pension
rights, the employing public agency ‘ “bears a more stringent duty” ’ to desist from
giving misleading advice. [Citation.]” (Ibid.; see also Mansell, supra, 3 Cal.3d at p. 491
[“[e]specially in cases where the party to be estopped has made affirmative
representations . . . knowledge of the true facts will be imputed to one who, in the
circumstances of the case, ought to have such knowledge].)
Further, the City manifestly intended that its careless representation regarding
shift differential pay would be acted upon by the PFRS retirees to whom it was directed,
and the retirees had the right to believe that this was the City’s intent. In addition, the
retirees were unaware that the City’s advice was erroneous and were likely not in a
position to uncover the error. (See Driscoll, supra, 67 Cal.2d at p. 308 [significant for
estoppel purposes that claimant “is one who purports to have no knowledge or training
which would aid him in determining his rights and the public agency purports to be
informed and knowledgeable in these matters”].) Finally, the PFRS retirees reasonably
relied upon the City’s representation by ordering their financial affairs for almost a
(4) whether the agency acted with certitude in dispensing the advice; (5) whether a
confidential relationship exists; (6) whether the right asserted was one of “great
magnitude”; and (7) whether the claimant purports to have no knowledge or training
while the agency purports to be informed and knowledgeable. (Driscoll, supra, 67
Cal.2d at pp. 306-311.) Any one of these factors can be determinative under the facts of
a particular case. (Id. at pp. 309-310.)
34
decade under the misapprehension that their retirement benefits were, in fact, larger than
they actually were.16
In addition, after weighing the interests at stake in this case, we conclude that “the
injustice which would result from a failure to uphold an estoppel is of sufficient
dimension to justify any effect upon public interest or policy which would result from the
raising of an estoppel.” (Mansell, supra, 3 Cal.3d at pp. 496-497.) Cases which have
applied the doctrine of equitable estoppel in the area of public employee pensions have
emphasized the “unique importance” of pension rights to the well-being of the holders of
those rights. (Longshore v. County of Ventura (1979) 25 Cal. 3d 14, 28 (Longshore); see
also Driscoll, supra, 67 Cal.2d at p. 310 [noting case involved “fundamental” claims
involving pension rights of “great magnitude”].) In contrast to these significant pension
entitlements, the City highlights the “important public policy” of protecting the integrity
of the PFRS fund, and, ultimately, City taxpayers. It is certainly true that, pursuant to the
Charter, the City is required to contribute “such amounts as may be necessary” over and
above member contributions and investment income to the PFRS fund. (Charter, art.
XXVI, § 2619.) Thus, it is possible that resolution of this overpayment issue may
ultimately have some impact on the contribution obligation of the City and its taxpayers.
However, the people of this State have already weighed these competing interests and
have determined that fiscal concerns can be trumped, in certain circumstances, by
individual pension rights. Specifically, pursuant to article XVI of the California
16
Indeed, the record reflects that PFRS members who were active in 2003 were offered a
one-time opportunity to transfer from PFRS to PERS. (See Charter, § 2600.) It is
reasonable to assume that their decisions to remain with PFRS were based, at least
partially, on their understanding of the benefits to which they were entitled under PFRS
and to which they would be entitled upon transfer to PERS. (Compare Gov. Code,
§ 20636, subd. (g)(3)(B) [including as “ ‘compensation earnable’ ” for purposes of
calculating PERS benefits “[c]ompensation for performing normally required duties, such
as holiday pay, bonuses (for duties performed on regular work shift), educational
incentive pay, maintenance and noncash payments, out-of-class pay, marksmanship pay,
hazard pay, motorcycle pay, paramedic pay, emergency medical technician pay, Peace
Officer Standards and Training (POST) certificate pay, and split shift differential”].)
35
Constitution, the duty of a public retirement board to its participants and their
beneficiaries “shall take precedence over any other duty,” including minimizing
employer contributions and defraying administrative costs. (Cal. Const., art. XVI, § 17,
subd. (b).) Similarly, under the present facts, we conclude that the City’s budgetary
issues, while not insignificant, must give way to the legitimate pension concerns of the
impacted PRFS retirees, especially in the absence of any evidence that such a decision
will negatively impact the City’s contribution rate or impair the financial integrity of the
PFRS fund. (Compare Baillargeon v. Department of Water & Power (1977) 69
Cal. App. 3d 670, 680 [interest in actuarially sound pension and benefit system not
controlling where little likelihood estoppel would harm the system from any actuarial
standpoint]; see also In re Retirement Cases (2003) 110 Cal. App. 4th 426, 458 [no
evidence that underfunding due to retroactive increase in benefits “would in any way
jeopardize the financial integrity of any retirement system”].)17
The City contends, however, that estoppel is improper in this case because it
would enlarge the statutory power of the Board. Specifically, according to the City,
invoking estoppel under these facts would require the Board to act in violation of the
Charter. We do not find this argument compelling. Undoubtedly, there is a line of cases
holding that estoppel cannot lie to contravene any statutory limitation on an agency’s
authority. (See Longshore, supra, 25 Cal.3d at p. 28 [“no court has expressly invoked
principles of estoppel to contravene directly any statutory or constitutional limitations”];
City of Pleasanton v. Board of Administration (2012) 211 Cal. App. 4th 522, 542-543
[estoppel barred as matter of law where PERS statute precludes treatment of standby pay
as pensionable compensation]; Medina v. Board of Retirement (2003) 112 Cal. App. 4th
17
We are well aware of the financial pressure currently being brought to bear on local
governmental entities throughout California, as pension costs have continued to spiral
upward during this period of economic constriction. (See, e.g., Lyman & Walsh, Police
Salaries and Pensions Push California City to Brink, N.Y. Times (Dec. 27, 2013) U.S.
pp. 1-2; Onishi & Lyman, Cut Salaries, Not Pensions in San Jose, Judge Rules, N.Y.
Times (Dec. 23, 2013) U.S. p. 1.) While compelled to reach the conclusions we have in
the context of these proceedings, we are not unsympathetic to the City’s overarching
financial concerns.
36
864, 869-871 [estoppel not available because retirement board lacked authority to classify
as safety members employees that do not meet the statutory definition]; Fleice v. Chualar
Union Elementary School Dist. (1988) 206 Cal. App. 3d 886, 893 [estoppel cannot expand
a public agency’s powers]; Crumpler, supra, 32 Cal.App.3d at p. 584 [not a case where
invoking estoppel would enlarge the statutory power of the board].) Indeed, were we
dealing with the prospective application of estoppel on these facts, we might well find
this authority controlling, as prospective application of estoppel would require the Board
to calculate retirement allowances using an item of compensation that has been judicially
determined not to be “compensation attached to rank,” in contravention of the express
dictates of the Charter. (Charter, art. XXVI, §§ 2607, 2608 & 2610.) Under such
circumstances, the Board could be deemed to “ ‘utterly [lack] the power to effect that
which an estoppel against it would accomplish.’ ” (Crumpler, supra, 32 Cal.App.3d at p.
584, quoting Mansell, supra, 3 Cal.3d at p. 499.)
Here, however, we are dealing with the treatment of overpayments by the Board,
an area in which we believe the Board has some discretion. As we have emphasized,
pursuant to the terms of both the California Constitution and the Charter, the Board has
“plenary authority and fiduciary responsibility for investment of moneys and
administration of” PFRS. (Cal. Const., art. XVI, § 17; see also id., § 17, subd. (a) [“[t]he
retirement board of a public pension or retirement system shall have the sole and
exclusive fiduciary responsibility over the assets of the public pension or retirement
system”]; Charter, art. XXVI, § 2601(e) [the Board is responsible for the management
and administration of PFRS and has “exclusive control of the administration and
investment” of all PFRS funds].) This includes the periodic actuarial valuation of the
system based on the “mortality, service, and compensation experience of the members
and beneficiaries” as well as on the amount of interest being earned. (Charter, art. XXVI,
§ 2602(b).) At the conclusion of this multi-faceted analysis, the Board may adjust
interest rates, mortality and service tables, and member and City rates of contribution in
accordance with the terms of the Charter to ensure the actuarial health of the system.
(Ibid.; see also In re Retirement Cases, supra, 110 Cal.App.4th at p. 459 [“ ‘[a]ctuarial
37
methodology is designed to address and consider unforeseen events on a regular basis so
as to ensure the financial integrity of the retirement system,’ ” quoting the trial court].) In
making the many complex adjustments required for system administration, the discretion
of the Board is circumscribed by section 17 of article XVI of the California Constitution
which mandates that public retirement boards “discharge their duties with respect to the
system solely in the interest of, and for the exclusive purposes of providing benefits to,
participants and their beneficiaries, minimizing employer contributions thereto, and
defraying reasonable expenses of administering the system.” (Cal. Const., art. XVI, § 17,
subd. (b).) Further, “[a] retirement board’s duty to its participants and their beneficiaries
shall take precedence over any other duty.” (Ibid.) Since the Charter does not contain
any express provisions regarding the collection of improper payments from retirees, any
such overpayments must be analyzed under these general grants of Board authority.
(Compare Gov. Code, § 20160 [specific statute setting standards for the correction of
payment errors under PERS].)
Given this statutory backdrop—where the Board’s decision making must prioritize
the rights of retirees while making complex decisions impacting multiple variables—we
believe that the Board has discretion to decide whether, how and to what extent any
overpayments made to PFRS retirees should be repayable to PFRS. And, in fact, courts
in analogous situations have reached similar conclusions. In In re Retirement Cases,
supra, 110 Cal.App.4th at 426, for instance, the First District determined that retirement
boards operating under the County Retirement Law of 1937 (CERL) have the power to
collect arrears contributions to help defray the cost of unanticipated benefits owed to
retirees, but that the boards were not mandated to do so. (In re Retirement Cases, supra,
110 Cal.App.4th at pp. 469-472.) The court noted that the retirement boards had a
number of options for handling “the shortfall resulting from their mistaken interpretation
of CERL” and that it could not determine whether a board had abused its discretion until
it had exercised that discretion to “correct for its miscalculations.” (Id. at pp. 470-471.)
The court observed in this regard that the board’s discretion was not unfettered, but was
instead necessarily constrained by the requirements of section 17 of article XVI of the
38
California Constitution which we have previously summarized. (In re Retirement Cases,
supra,110 Cal.App.4th at pp. 471-472.) Similarly, in Barrett v. Stanislaus County
Employees Retirement Assn. (1987) 189 Cal. App. 3d 1593, the Fifth District considered a
reclassification under CERL that entitled affected employees to earlier retirement
eligibility and increased pension benefits. (Id. at p. 1597, fn.1.) The trial court had
concluded that the reclassification must be done without requiring the payment of any
arrears contributions and/or interest by the affected employees. (Id. at pp. 1600-1601.)
The Fifth District reversed, holding that the retirement board had the authority to collect
arrears contributions from employees, but that it was improper for the courts to mandate
it do so. (Id. at pp. 1608-1610, 1613-1614.) Specifically, the Barrett court opined:
“When a statute imposes upon an administrative body discretion to act under certain
circumstances, mandate will not lie to compel the exercise of such discretion in a
particular manner.” (Id. at p. 1613.) Thus, the trial court’s attempt to “compel” the
retirement board to “exercise its discretion in a particular manner” was improper. (Id. at
pp. 1613-1614.) These cases support our conclusion that the Board has discretion
(subject to the constitutional constraints described above) with respect to the collection of
overpayments. (Compare Gov. Code, § 20160, subd. (e)(3) [retroactive correction of
errors under PERS shall not take place if “the purposes of this part will not be
effectuated” by the retroactive correction].) Since the Board has discretion in this area,
applying the doctrine of estoppel to prevent the Board from collecting certain specified
overpayments would not result in a situation where the Board is required to act in excess
of its statutory authority.
Finally, we also reject the City’s argument that failure to mandate the return of
overpayments in this case is somehow a “gift of public funds” in contravention of section
6 of Article XVI of the California Constitution. Our conclusion in this regard does not,
as the parties argue, hinge on whether the constitutional ban on such gifts applies to
charter cities such as the City. (See Tevis v. City & County of San Francisco (1954) 43
Cal. 2d 190, 197.) Rather, we find dispositive the character of the funds at issue. The
PFRS retirement account contains not just public moneys supplied by the City, but also
39
significant private assets contributed by active PRFS members. (See Charter, art. XXVI,
§ 2619.) Pursuant to section 17 of article XVI of the California Constitution, “[t]he
assets of a public pension or retirement system are trust funds and shall be held for the
exclusive purposes of providing benefits to participants in the pension or retirement
system and their beneficiaries and defraying reasonable expenses of administering the
system.” (Cal. Const., art. XVI, § 17, subd. (a).) Moreover, by the express terms of
section 17, the fiduciary responsibilities it embodies take precedence over all other
provisions of law, including other constitutional mandates. (Cal. Const., art. XVI, § 17.)
We have previously concluded that both section 17 and the Charter provide the Board
with significant discretion in the administration of PFRS, including in the collection of
any overpayments made to PFRS retirees. To allow the exercise of this discretion to be
challenged as a gift of public funds whenever someone disagrees with the fiscal
consequences of a particular Board decision would seriously undermine the Board’s
“plenary authority” with respect to PFRS administration.
We find, then, that, in the present case, all of the requisite elements justifying
estoppel are present. Moreover, application of the doctrine to these facts is not barred by
any of the arguments advanced by the City. We therefore conclude that the City and the
Board are estopped from requiring PFRS retirees to repay any retirement benefits based
on the improper inclusion of shift differential pay as “compensation attached to rank.”
2. Number of Designated Holidays
We turn lastly to the overpayments generated in connection with the temporary
reduction in the number of designated holidays for the 2009, 2010, and 2011 fiscal years.
As discussed above, the 2006-2013 MOU briefly changed the structure of holiday pay for
active members of the Department. Specifically, for the 2009, 2010, and 2011 fiscal
years, only 7 of the regular 13 holidays were paid in accordance with the customary
policy established by the MOU. For the other six holidays, active members received no
holiday pay for holidays that were not worked and “straight time pay” for holidays that
were worked. Although the total holiday compensation paid to active members of the
Department was clearly reduced during this timeframe, the Board continued to calculate
40
retirement benefits for PFRS retirees as if this temporary reduction had not occurred.
Based on the plain language of the Charter and the 2006-2013 MOU, the trial court held
that the reduction in holiday pay experienced by active members should have been
reflected in PFRS benefits for the years in question. Specifically, retirees, during the
relevant timeframe, should only have been credited with 7 holidays, rather than 12.18 The
Association does not here contest the trial court’s conclusion that PRFS retirees received
credit for too many holidays during the fiscal years in question. Rather, as with the shift
differential overpayments, the Association argues that, for equitable reasons, the retirees
should not be required to return any overpayments they received based on this excess
holiday pay.
We do not see any grounds for estoppel based on the facts relevant to the
temporary holiday reduction. The record reflects that the City negotiated an extension to
the 2006-2010 MOU effective in July 2009 which extended its term to June 30, 2013, and
added the language effecting the temporary reduction in holidays here at issue. In
January 2010, a Board agenda item disclosed the City’s position that the number of
holidays credited to retirees should be reduced from 12 to 7 for fiscal years 2009, 2010,
and 2011 based on the provisions of the extended MOU. On February 24, 2010, the City
appeared before the Board and argued this position. The Board, however, determined on
that same date that the temporary reduction in the number of paid holidays for active
members of the Department would not be reflected in retiree benefits. The City then
challenged this decision in the instant action, filed on June 14, 2011. Clearly, this is not a
situation where the City has intentionally led others to believe a particular circumstance
to be true and to rely upon such belief to their detriment. (Killian v. City and County of
San Francisco, supra, 77 Cal.App.3d at p. 13.) The City has never counseled retirees
that they are not bound by the temporary reduction in holidays to which active members
of the Department were subjected. Rather, it has consistently taken the position that
18
As stated in footnote 4, supra, active members have historically received an extra
“floating holiday” in addition to the 12 designated holidays for which PFRS retirees have
traditionally been credited.
41
failure to reduce the number of holidays when calculating pension benefits for the fiscal
years in question was error. Although the Board calculated pension benefits in a way that
was ultimately determined to be improper, there are no facts suggesting that they should
be estopped from subsequently correcting this mistake.
The Association, however, also argues that repayment should be barred under a
theory of laches. Laches is based on the principle that those who neglect their rights may
be barred, in equity, from obtaining relief. (Golden Gate, supra, 165 Cal.App.4th at
p. 263.) The elements required to support a defense of laches include unreasonable delay
and either acquiescence in the matter at issue or prejudice to the defendant resulting from
the delay. (Ibid.) Generally, laches is a question of fact, but where the relevant facts are
undisputed, it may be decided as a matter of law. (Ibid.) Also, as with estoppel “laches
is not available where it would nullify an important policy adopted for the benefit of the
public.” (Feduniak v. California Coastal Com. (2007) 148 Cal. App. 4th 1346, 1381.)
Under the present circumstances, any delay by the City in bringing this action does
not appear to have been unreasonable. The improper payments at issue occurred between
July 2009 and June 2012. Although it waited for 16 months after the Board refused to
reduce pension benefits based on the temporary reduction in holidays, the City
commenced this action in June 2011, less than two years after the earliest date any
improper payments were made and well within any applicable statute of limitations
asserted by the parties. (See Code of Civ. Proc., § 338, subd. (a) [three-year statute of
limitations for a liability created by statute]; id., § 338, subd. (d) [three-year statute of
limitations for mistake].) While it is true that the defense of laches may be invoked even
though the lapse of time is less than the applicable period of limitations where “the
unjustified delay has operated to the injury of another,” Holt v. County of Monterey
(1982) 128 Cal. App. 3d 797, 801, any delay in this case has not significantly injured
PFRS retirees. Rather, the improper payments were not substantial and were time-limited
by the terms of the MOU. Moreover, these proceedings have already been pending for
32 months. Thus, even if the City had commenced this litigation immediately after the
Board’s adverse decision in February 2010, it seems likely that final resolution of the
42
overpayment issue would still have occurred after all of the disputed payments had
already been made. Given these facts, the equities do not support a laches finding.19
Thus, we conclude that the Board is not barred by theories of equitable estoppel or
laches from recouping the benefits improperly paid to PFRS retirees based on an inflated
number of pensionable holidays for fiscal years 2009, 2010, and 2011. However, the trial
court in this case ordered the Board “to develop and implement a plan to recover the
overpayments” made to PFRS retirees. To the extent this order mandates that the Board
act in a particular manner with respect to the identified overpayments, it was error.
Rather, as discussed at length above, the Board has discretion regarding how its
miscalculations should be handled. The matter should therefore be remanded to the
Board so that it can exercise this discretion subject, if necessary, to additional judicial
review.
III. DISPOSITION
The judgment and writ of mandate are vacated, and the matter is remanded to the
trial court to fashion new relief consistent with this opinion. Each party to bear its own
costs.
19
The cases cited by the Association in support of its laches claim do not change our
opinion. Both Johnson v. City of Loma Linda (2000) 24 Cal. 4th 61 (Johnson) and
Womack v. San Francisco Community College Dist. (2007) 147 Cal. App. 4th 854
(Womack) involved public employees seeking writ review of adverse personnel
decisions. The exigencies involved in such cases—where success could lead to thorny
reinstatement and back pay issues—strike us as different in magnitude from those
generated by the pension overpayments at issue in these proceedings. (See Johnson,
supra, 24 Cal.4th at pp. 68-69; Womack, supra, 147 Cal.App.4th at pp. 864-866.)
43
____________________________
REARDON, ACTING P. J.
We concur:
_________________________
RIVERA, J.
_________________________
HUMES, J.
City of Oakland v. Oakland Police and Fire Retirement et al. A136769
44
Trial Court: Alameda County Superior Court
Trial Judge: Hon. Evilio M. Grillo
Counsel for Plaintiff and Respondent: Nossaman LLP
Stephen N. Roberts
James H. Vorhis
Counsel for Appellants: Olson Hagel & Fishburn
Richard C. Miadich
Counsel for Intervenors: Davis, Cowell & Bowe, LLP
W. David Holsberry
Sarah Grossman-Swenson
City of Oakland v. Oakland Police and Fire Retirement A136769
45