City of
Angeles v. Superior Court
Filed 11/19/13 City of Los Angeles v. Superior Court CA2/7
California Rules of Court, rule 8.1115(a), prohibits courts
and parties from citing or relying on opinions not certified for publication or
ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN
THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND
APPELLATE DISTRICT
DIVISION
SEVEN
CITY OF LOS
ANGELES,
Petitioner,
v.
THE SUPERIOR
COURT OF LOS
ANGELES COUNTY,
Respondent;
WATER AND POWER EMPLOYEES’
RETIREMENT PLAN et al.,
Real Parties in Interest.
B246933
(Super. Ct.
No. BC449834)
ORIGINAL
PROCEEDINGS in mandate. Charles F.
Palmer, Judge. Petition denied.
Carmen A.
Trutanich and Michael N. Feuer, City Attorneys, Gregory P. Orland, Adena M.
Hopenstand and Dora A. Gonzalez, Deputy City Attorneys, for Petitioner.
No
appearance for respondent.
Schwartz,
Steinsapir, Dohrmann & Sommers, Henry M. Willis, D. William Heine, and
Steven M. Zimmerman for Real Parties in Interest.
_______________________
This case arises out of an attempted amendment to the
Water and Power Employees’ Retirement Plan (WPERP). WPERP’s Board of Administration (Board)
enacted the amendment and the Board of Water and Power Commissioners
(Commissioners) approved it, but the Los Angeles City Council (City Council) vetoed
it. The City of Los Angeles (City)
demurred to the complaint by real parties in interest—WPERP, the Board, and
four current and former members of the Board—in part on the ground that WPERP
and the Board are sub-units of the City and lack the capacity to sue the
municipal corporation of which they are a part and do not have standing to
maintain this action. The trial court
overruled the demurrer.
The City filed
this petition for a writ of mandate
directing the trial court to vacate its order overruling the City’s demurrer to
the first amended complaint by WPERP and the Board
demurrer without leave to amend. We deny
the petition.
A.
WPERP is an
employee benefit plan providing pension and retirement benefits for employees
of the Los Angeles Department of Water and Power (DWP). The DWP is a “proprietary†department of the
City. (L.A.
City Charter, § 600(a) (City
Charter).) It operates autonomously,
having an independent source of funding and a separate budget. (Id., § 603.) Five Commissioners, appointed by the mayor of
the City, oversee the operation of the DWP.
(Id.,
§§ 600(b), 604(a).) The DWP has a
general obligation to pay WPERP benefits under the City Charter, section 1188(c).
WPERP is
managed by the Board, which is an independent retirement board of the City. (City Charter, § 1104(c).)
administration and management of [WPERP] to, among other things, ‘assure the
competency of the assets’ of [WPERP] in accordance with recognized actuarial
methods.†(See Cal.
Const., art. XVI, § 17; City Charter, § 1106.) The City Charter exempts from City Council
review “actions of the Board†of WPERP.
(City Charter, § 245(d)(4); see id.
§ 1114 [“[t]he right of Council to veto board decisions provided in
Section 245 shall not apply to decisions of the City’s pension and retirement
boardsâ€].)
The Los
Angeles City Employees’ Retirement System (LACERS) is a department of the City
providing retirement benefits to City employees other than DWP employees.
reciprocity agreement, referred to by WPERP as the Reciprocal Arrangement
Between the Plan and the City Employees’ Retirement System (Reciprocal
Arrangement), providing for reciprocity and portability between the two
plans. Under the Reciprocal Arrangement
an employee who enters DWP service from another City department or office and
who has made retirement contributions to LACERS can elect to receive credit
from WPERP for his or her prior City service.
The employee’s contributions to LACERS—but not the City’s contributions
on behalf of the employee—are then transmitted to WPERP, and the DWP contributes
110 percent of that amount to WPERP.
LACERS has similar, but not identical, reciprocity provisions for
employee transfers from DWP to City service.
(L.A. Admin. Code,
§ 4.1060.)
When the
Reciprocal Arrangement was adopted in 1980, WPERP and LACERS estimated that
transfers of employees and funds between the DWP and the City and the resulting
liability of WPERP and LACERS would be roughly equivalent and equitable. WPERP and LACERS, however, each retained the
right to discontinue the Reciprocal Arrangement should the assumption the
transfers would be roughly equivalent prove incorrect. For most of the 30 years the Reciprocal
Arrangement was in place, the transfers were, in fact, roughly equivalent.
Recently,
however, with the City’s encouragement, a “substantially greater†number of
City employees have transferred to the DWP.
“This influx of City employees, to whom [WPERP] was required to provide
benefits based on service credits they earned while in positions covered by
LACERS, but without the benefit of any of the City’s employer contributions
paid to LACERS on behalf of those employees, has created in excess of $183
million in unfunded liabilities for the WPERP.â€
In response
the Board took action to stop WPERP’s losses.
On May 26, 2010 the
Board voted to amend WPERP to suspend the Reciprocal Arrangement while the Board
studied the problem. The Board voted to
amend section IV, subsection J, division (2) to add subdivision (e), which
reads: “Notwithstanding the above,
effective upon the adoption of this subdivision, eligibility for reciprocity
under this subsection shall be suspended for all employees who transfer to the
Department of Water and Power from other positions with the City of Los Angeles
or who are hired by the Department of Water and Power after having been
terminated from other positions with the City of Los Angeles.†The Board also voted to amend Section IV,
subsection L, by adding division (6), which reads: “Effective upon adoption of this division,
new members of [WPERP] shall not be eligible to purchase service with the City
of Los Angeles under this
subsection.†On September 7, 2010 the Commissioners, pursuant to
section 1186 of the City Charter,
name="_ftnref5" title="">[5] approved the amendments.
On September 22, 2010, however, the City
Council voted to assert jurisdiction over the Commissioners’ action pursuant to
section 245 of the City Charter. On October 13, 2010 the City
Council vetoed the Commissioners’ approval of the Board’s action. As a result, millions of dollars in pension
liability has been transferred from LACERS to WPERP, the DWP’s contribution
rate to WPERP has increased, and the City’s contribution rate to LACERS has
decreased. The City Council’s action “effectively
accomplishes what the City cannot do under the City Charter and the California
Constitution: transfer funding from WPERP to LACERS and thereby aid the City’s
efforts to balance its budget.â€
B.
On November 17, 2010 current and former
members of the Board—Javier Romero, Cindy Coffin, Barry Poole, and Michael
Moore—filed this action. They sued the
City and the City Council seeking a writ of mandate, preliminary and permanent
injunctions, and declaratory relief to force the City Council “to rescind its
purported veto†of the Commissioners’ approval of the Board’s amendments to
WPERP.
Meanwhile,
on November 10, 2010 the Board had adopted resolutions to join in this
litigation and to retain as its counsel the attorneys representing the
individual Board members. Pursuant to
section 275 of the City Charter, the Board requested that the Los Angeles City
Attorney consent to the representation.
consent, explaining that “[b]y Charter the City’s Attorney’s ‘consent’ to the
retention of outside counsel is limited to circumstances where outside counsel
would ‘assist’ the City Attorney. Since
the underlying dispute concerns a legislative matter within the purview of the
[WPERP] sponsor and not of the Board, the Board cannot join in the subject
litigation, and there is no need for such assistance. . . . Additionally, we note that without such
consent, the Board cannot retain outside legal counsel to represent it or its
members in the subject litigation, and, accordingly, the Board is not
authorized to expend [WPERP] funds to pay for any services of outside counsel.â€
On January
4, 2011 the City answered the complaint on behalf of itself and the City
Council, which real parties in interest had erroneously sued as a separate
entity. One of the City’s affirmative
defenses was that the Board and its members could not sue the City in their
official capacity because “they are part of the municipal corporation that is
the City and they have no authority under the Charter to bring suit.†The City also alleged as an affirmative defense
that counsel of record for the Board members could not represent them because
only the Los Angeles City Attorney can represent Board members in their
official capacity under section 272 of the City Charter.
On
September 12, 2012, after the trial court had granted their motion for leave to
amend, real parties in interest filed the operative first amended
complaint. The first amended complaint
added WPERP and the Board as involuntary plaintiffs and nominal defendants on
the ground they were necessary parties under Code of Civil Procedure
section 389, subdivision (a).
On October
11, 2012 the City filed a demurrer. In
addition to challenging the various causes of action, the City claimed that “[t]he
First Amended Complaint in its entirety fails to state a claim upon which
relief can be granted as to the ‘Putative Defendants’ because they lack
standing and thus there is defective joinder as a matter of law when their ‘plenary
power’ under Article XVI, section 17 of the California Constitution does not
extend to plan amendments,†and “because ‘Putative Defendants’ are sub-units of
the City without the capacity to sue the municipal corporation of which they
are a part.â€
In
overruling the City’s demurrer, the trial court found that WPERP and the Board “were
not misjoined and that they are appropriate parties to assert the City’s
actions have invaded the plenary powers of the [Board]. The court has reviewed again
105 Cal.App.4th 1095 and, in particular its lengthy discussion of the
legislative history of the amendment by initiative of article XVI, section 17
of the California Constitution and finds that while the discussion is
instructive, it is not definitive of the issues in the present case.â€
The trial
court concluded that “[i]n particular, it appears that [a]rticle XVI, section 17
gives the [Board] ‘the sole and exclusive fiduciary responsibility over the
assets of the public pension or retirement system[.] In this context, the “plenary authority†that
is granted over the “administration of the system†goes to the management of
the assets and their delivery to members and beneficiaries of the
system[.] Thus, with regard to
administration of the system, the Board’s authority is limited to actuarial
services and to the protection and delivery of the assets, benefits, and
services for which the Board has a fiduciary responsibility[. T]he thrust of the ballot arguments in favor
of [a]rticle XVI, section 17 is to prevent the Legislature from “raiding†pension
funds[.] The full argument in favor of
the initiative warns that politicians would continue to raid the pension funds
of retirees unless [a]rticle XVI was passed.
It complains it was “not right†to allow politicians to “balance their
budgets on the backs of senior [citizens] and retirees.â€â€™ [(Westly
v. Board of Administration, supra,]
105 Cal.App.4th at [pp.] 1110-1112.)
Thus, it appears to the court that the [Board] has a fiduciary duty to
protect the assets of the fund in particular from politicians raiding the
pension fund or balancing their budgets on the backs of the fund
beneficiaries. Insofar as the [first
amended complaint] effectively alleges a scheme by the City Council to balance
their budget by wrongfully utilizing the reciprocity provision to relieve the
City’s budget problems by reducing its obligations to another fund, the court
finds that the [Board] and [WPERP] have standing to challenge the encroachment
on the Board’s plenary powers as described in Westly. . . .â€
A.
Review
“‘An order
overruling a demurrer is not directly appealable, but may be reviewed on appeal
from the final judgment. [Citation.] Appeal is presumed to be an adequate remedy
and writ review is rarely granted unless a significant issue of law is raised,
or resolution of the issue would result in a final disposition as to the
petitioner. [Citation.]’ [Citation.]†(Boy
Scouts of America National Foundation v. Superior Court (2012) 206
Cal.App.4th 428, 438; see, e.g., Apple Inc.
v. Superior Court (2013) 56 Cal.4th 128, 134; Teva Pharmaceuticals USA, Inc. v. Superior Court (2013) 217
Cal.App.4th 96, 100.) We agree with the
City that its petition raises a significant issue of law and that writ review
is appropriate.
Our review
of the trial court’s order overruling the City’s demurrer is de novo. (See Teva
Pharmaceuticals USA, Inc. v. Superior Court, supra, 217 Cal.App.4th at p. 102; Boy Scouts of America Nat. Foundation v. Superior Court,
complaint and those of which we can take judicial notice are “‘“sufficient to
state a cause of action under any legal theory.â€â€™â€ (May v.
City of Milpitas (2013) 217 Cal.App.4th 1307, 1324; Law Offices of Mathew Higbee v. Expungement Assistance Services
(2013) 214 Cal.App.4th 544, 551.)
B.
The City
has requested that we take judicial notice of (1) a meeting notice for the
Board that the City claims identified the City Attorney as the Board’s “legal
counselâ€; (2) documents, filed in this case after the trial court
overruled the City’s demurrer, demonstrating that WPERP and the Board have appeared
as plaintiffs in this action; (3) various current and former City Charter
provisions; (4) two formal opinions of the Los Angeles City Attorney
interpreting the City Charter; (5) a minute order in a previous case (
(Super. Ct. L.A. County, 1991, No. BS006789)) discussing the structure of
city government; and (6) a formal ethics opinion by the California State
Bar addressing the ethical duties of a city attorney. Real parties in interest request that we take
judicial notice of additional City Charter provisions.
We grant
the parties’ requests to take judicial notice of the relevant provisions of the
City Charter. Under Evidence Code
section 452, subdivision (b), we may take judicial notice of “[r]egulations and
legislative enactments issued by or under the authority of . . .
any public entity in the United States.â€
(See, e.g., Edgerly v. City of
Oakland (2012) 211 Cal.App.4th 1191, 1194, fn. 1; Howard Jarvis Taxpayers Assn. v. City of Fresno (2005) 127
Cal.App.4th 914, 917, fn. 1.) This
includes the legislative history of the charter provisions. (Giles
v. Horn (2002) 100 Cal.App.4th 206, 225, fn. 6.)
We deny the
City’s request to take judicial notice of the Board’s meeting notice. While the fact of the notice might be subject
to judicial notice under Evidence Code section 452, subdivision (c) [“[o]fficial
actsâ€], or subdivision (h) [“[f]acts and propositions that are not reasonably
subject to disputeâ€], the reference to “legal counsel†in the notice is not an
official act of a public entity or an undisputed fact in the context of this
litigation. (See Silverado Modjeska Recreation & Park Dist. v. County of Orange
(2011) 197 Cal.App.4th 282, 309, fn. 20.)
Machado v. State Water Resources
Control Bd. (2001) 90 Cal.App.4th 720, on which the City relies, states
only that the court took judicial notice of meeting agendas. (Id.
at p. 723, fn. 2.) Machado does not hold that the court may take judicial notice of
the truth of factual statements in those agendas. (See Hill
v. San Jose Family Housing Partners, LLC (2011) 198 Cal.App.4th 764, 770
[court took judicial notice of existence of resolution but “not of the truth of
its contentsâ€]; Sosinsky v. Grant
(1992) 6 Cal.App.4th 1548, 1564 [judicial notice of the existence of documents
in a court file does not equate to judicial notice of hearsay statements within
those documents].)
We also
deny the City’s request to take judicial notice of documents filed in this case
after the trial court overruled the City’s demurrer because they are not
relevant. These documents reflect that
WPERP and the Board joined the litigation as active plaintiffs. The City argues that these documents
establish that WPERP and the Board appeared in this action as plaintiffs, and that
“[t]his is relevant to the issue of the petition’s unitary form of government
issue.†The first amended complaint, however,
already establishes that WPERP and the Board are plaintiffs. The resolution in this appeal of the legal
issue of whether the City’s unitary form of government precludes WPERP and the
Board from suing the City does not depend on whether WPERP and the Board are participating
in this action as voluntary or involuntary plaintiffs. (See Jordache
Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739,
748, fn. 6 [judicial notice denied where “the requests present no issue for
which judicial notice of these items is necessary, helpful, or relevantâ€];
Cal.App.4th 329, 342, fn. 6 [judicial notice denied where materials are not “relevant
or necessary†to the court’s analysis]; San
Diego City Firefighters, Local 145 v. Board of Administration etc. (2012)
206 Cal.App.4th 594, 600, fn 3 [judicial notice denied because “the document at
issue is not necessary to our resolution of this appealâ€] .)
We grant
the City’s request to take judicial notice of formal opinions by the city
attorney under Evidence Code section 452, subdivision (c). (See, e.g., Evans v. City of Berkley (2006) 38 Cal.4th 1, 9, fn. 5; cf.
(2005) 35 Cal.4th 839, 854, fn. 9 [opinion letter from Attorney General’s
office]; Neville v. County of Sonoma
(2012) 206 Cal.App.4th 61, 69 [same].) “Administrative
interpretations [of City Charter provisions] of longstanding are entitled to
great weight unless they are plainly wrong.
[Citations.]†(
Cal.App.3d 120, 123.)
We deny the
City’s request to take judicial notice of the minute order in the
value. (See B.F.
v. Superior Court (2012) 207 Cal.App.4th 621, 627, fn. 2 [denying request
for judicial notice of probate court minute orders because “‘[t]rial court
decisions are not precedent’â€]; Bolanos
v. Superior Court (2008) 169 Cal.App.4th 744, 761 [“[e]ven assuming . . .
that the case in question involves the same issue as the case before us . . . ,
a written trial court ruling has no precedential valueâ€].) And, as noted above, we cannot take judicial
notice of the truth of the statements in the order.
Finally, we
deny the City’s request to take judicial notice of the State Bar’s formal
ethics opinion. The cases on which the
City relies do not support the City’s broad claim that we may “take judicial
notice of matters posted on the State Bar’s website.†Rather, they address specific documents not
at issue here. (See Ketchum v. Moses (2001) 24 Cal.4th 1122, 1135, fn. 1 [judicial
notice of State Bar report]; People v.
Vigil (2008) 169 Cal.App.4th 8, 12, fn. 2 [judicial notice of attorney’s
disciplinary record].) “Because the State
admissions and disciplinary functions [citation], the record of [other actions
taken by the State Bar are] not subject to judicial notice as a record of the
acts of the judicial department under subdivision (c) of Evidence Code section
452. Although the State Bar has been
described as a public corporation and akin to a state public body or agency
clearly make its actions matters subject to judicial notice as acts of either
the legislative or executive department.â€
(Brosterhous v. State Bar
(1995) 12 Cal.4th 315, 325.) The City
cites no other authority to suggest the opinion is subject to judicial
notice. In any event, the opinion
interprets rules 3-310 and 3-600 of the California Rules of Professional Conduct,
and the City fails to explain how the opinion is relevant to this petition.
Enterprises, Inc. v. Brobeck, Phleger & Harrison, supra, 18 Cal.4th at p. 748, fn. 6; Appel v. Superior Court, supra,
214 Cal.App.4th at p. 342, fn. 6.)
C. WPERP
Has the Capacity To Sue and Was Properly Joined as a Party.
The City
contends that the trial court erred in ruling that WPERP has “standing to
challenge the encroachment on the Board’s plenary powers.†The City’s contentions fall into two general
categories: that WPERP lacks the capacity
to participate in this litigation and that WPERP lacks standing to challenge the City Council’s veto of WPERP’s suspension
of the Reciprocal Agreement.
A party to
litigation “must have both capacity to sue (the right to come into court) and
standing to sue (the right to state a cause of action seeking particular
relief). [Citation.]†(Smith
v. Cimmet (2011) 199 Cal.App.4th 1381, 1390; accord, Washington Mutual Bank v. Blechman (2007) 157 Cal.App.4th 662,
669.) “Incapacity is . . . a
legal disability, such as minority or incompetency, which deprives a party of
the right to represent his or her own interests in court. On the other hand, standing to sue—the real
party in interest requirement—goes to the existence of a cause of action, i.e.,
whether the plaintiff has a right to relief.
[Citations.]†(
Windridge, Inc. (1996) 42 Cal.App.4th 551, 559; accord,
Mutual Bank, supra, at p. 669;
Cal.App.4th 1599, 1604.)
The City
Charter gives the boards of pension and retirement systems, including WPERP, “sole
and exclusive responsibility†to administer the pension and retirement
systems. (City Charter, § 1106(a).)
The boards’ actions are exempt from City
Council review. (Id., §§ 245(d)(4), 1114.)
Unlike other sub-units of the City, their participation in litigation is
not under the control of the City Attorney, and the boards have the right to
make decisions in litigation involving their policies and funds. (Id.,
§ 272(c).) The City Charter also
gives them the authority to settle litigation over those matters. (Id.,
§ 273(a).)
Section
1106 of the City Charter, delineating the powers and duties of pension and retirement
boards, states that it is “[c]onsistent with [a]rticle XVI, [s]ection 17 of the
California Constitution.†Article XVI,
section 17, the “California Pension Protection Act of 1992,†was enacted by the
passage of Proposition 162. (
or this Constitution to the contrary, the retirement board of a public pension
or retirement system shall have plenary authority and fiduciary responsibility
for investment of moneys and administration of the system, subject to all of
the following:
The 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. The retirement board shall also have sole and
exclusive responsibility to administer the system in a manner that will assure
prompt delivery of benefits and related services to the participants and their
beneficiaries. . . .
“
public pension or retirement system shall 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. A retirement
board’s duty to its participants and their beneficiaries shall take precedence
over any other duty.
[¶] . . . [¶]
“
retirement system, consistent with the exclusive fiduciary responsibilities
vested in it, shall have the sole and exclusive power to provide for actuarial
services in order to assure the competency of the assets of the public pension
or retirement system.
[¶] . . . [¶]
As used in this section, the term ‘retirement
board’ shall mean the board of administration, board of trustees, board of
directors, or other governing body or board of a public employees’ pension or
retirement system; provided, however, that the term ‘retirement board’ shall
not be interpreted to mean or include . . . the elected legislative
body of a jurisdiction which employs participants in a public employees’
pension or retirement system.’†(
The court
in City of San Diego v. San Diego City
Employees’ Retirement System (2010) 186 Cal.App.4th 69 addressed the effect
of these provisions. The issue in
Diego City Employees’ Retirement System (SDCERS) had the right to charge the
City of San Diego for a shortfall in the funding of service credits purchased
by city employees. (Id. at pp. 72-73.) The court
observed “that public employee retirement system boards operate under a
constitutional grant of plenary authority which grants to them ‘sole and
exclusive fiduciary responsibility over the assets of the public pension or
retirement system.’ (Cal. Const., art.
XVI, § 17, subd. (a) . . . .)[
authority over retirement system assets . . . to protect such boards
from ‘political meddling and intimidation’ and to ‘strictly limit the
Legislature’s power over such funds.’
(Prop. 162, §§ 2, subd. (f), 3, subds. (e) & (g) (eff. Dec. 12,
1992).) Article XVI, section 17 was
intended to ‘insulate the administration of retirement systems from oversight
and control by legislative and executive authorities.’ [Citation.]
Similarly, the City[ of San Diego]’s charter gives the [SDCERS] board ‘exclusive
control of the administration and investment of such fund or funds as may be
established.’ [Citation.]†(Id.
at pp. 78-79.) The court observed,
however, that “[u]nder article XVI, section 17(a), ‘[p]lenary power does not
mean unreviewable power’ and does not ‘insulate pension boards from judicial
oversight.’ [Citations.]†(Id.
at p. 79; accord, Singh v. Board of
Retirement, supra, 41 Cal.App.4th
at p. 1190, fn. 9.) The court concluded
that the SDCERS board had exceeded its authority because “the enabling
legislation passed by the City [of San Diego] for purchase of service credits
specifically dictated that the total cost of such purchases would be borne by
the employees. Charging the City [of San
Diego] for SDCERS’s underfunding exceeded SDCERS’s authority as it was in
violation of this legislation and exceeded its powers to administer retirement
benefits.†(City of San Diego, supra,
at pp. 79-80.)
In
explained that article XVI, section 17 of the California Constitution was “intended
by its proponents to insulate the administration of retirement systems from
oversight and control by legislative and executive authorities, and also return
control of the actuarial function to the retirement boards themselves. This ‘increased level of independence would
make the [retirement] systems less of a target for local and state officials
looking for a way to balance a budget.’
[Citation.]
[¶] . . .
Clearly, the word ‘plenary’ was intended to mean that retirement boards
would have the sole and complete power to invest their funds and to administer
their systems, as opposed to being subject to direction from state and local
legislative and executive bodies in these matters.†(Singh,
supra, at p. 1192.)
such as WPERP has the power to operate independently of the City’s control in
certain situations. Bringing an action
against the City in response to an attempt to encroach on the Board’s
authority, or defending an action by the City challenging the Board’s
authority, are two such situations. If
retirement systems could not sue, they would have no way to “protect
[themselves] from ‘political meddling and intimidation’†by local legislative
and executive authorities. (
Employees’ Retirement System, supra,
186 Cal.App.4th at p. 79; Singh v. Board
of Retirement, supra, 41
Cal.App.4th at p. 1192.) If they could
not be sued, local legislative and executive authorities could not seek
judicial review of a retirement system’s actions if they believed those actions
encroached on their authority, which is what occurred in City of San Diego. In that
case the city brought an action against a retirement system for exceeding its
authority and violating the city’s exclusive power to set retirement benefits,
and the retirement board defended itself and litigated in its own name. (City
of San Diego, supra, at pp.
79-80.) We see no reason why a retirement
board cannot do the opposite: If the
City can sue a public retirement system to prevent encroachment on its
exclusive authority, then a public retirement system can sue the city to
protect itself from City interference in matters within the retirement system’s
plenary authority.
The fact
that the City has a unitary form of government does not deprive WPERP of the
capacity to sue the City under these circumstances. The City is a municipal corporation. (City Charter, § 100.) It has a City Attorney who “represent[s] the
City in all legal proceedings against the City†and “initiate[s] appropriate
legal proceedings on behalf of the City.â€
(Id., § 271(a); see also
§ 272.) Although a municipal
corporation may have many departments and subdepartments, for certain purposes “it
is a single entity.†(
89 Cal.App.3d 877, 888.) As a general
rule, the various departments of a municipal corporation do not function
independently of the city of which they are a part. They do not have the power to employ
independent counsel and charge the city for the cost of counsel. (See Diamond
International Corp. v. Boas (1979) 92 Cal.App.3d 1015, 1028;
(1929) 99 Cal.App. 607, 608.)
As the City
acknowledges, however, there are exceptions to these general principles. One exception arises where the municipal
corporation’s governing document gives a department the authority to act
independently. For example, in
(1984) 163 Cal.App.3d 70, the issue was whether county counsel was disqualified
from representing the county in litigation against a county department that county
counsel previously had represented. The
court characterized the department, the civil service commission, as “a ‘quasi-independent’
county agency.†(Id. at p. 77.) Under the
county charter, it had the authority to act “independent of the County’s normal
hierarchical structure.†(
Thus, when the county sued the commission, county counsel was disqualified
from representing the county against its former “client,†the commission. (Id.
at p. 83.) The court emphasized that “the
functions of government make it necessary for some public agencies within a
governmental body to be accorded a
independence vis-a-vis that body†(id.
at pp. 73-74), and “that a conflict of this nature only arises in the case of
and to the extent that a county agency is independent of the County such that
litigation between them may ensue.†(
Another
exception, also applicable here, is a lawsuit by the municipality against its
officers or bodies to resolve a controversy regarding the officer’s or body’s
authority. (See, e.g.,
22 Cal.2d 685, 693-694; City of Redondo
Beach v. Delong (1981) 123 Cal.App.3d 1035, 1043.) Significantly, one example of this exception involved
a lawsuit by a city against a city retirement system whose governing board took
action of which the city disapproved. (
Employees’ Retirement System, supra,
186 Cal.App.4th at pp.72-73.)
name="_ftnref10" title="">[10] The City does not explain why in these
circumstances a municipal corporation with a unitary form of government can sue
one of its sub-units but the sub-unit cannot sue the municipal corporation.
The City
also asserts that “[t]he role of the City Attorney reflects the unitary nature
of municipal corporations,†because the City Attorney “singularly represents the
at times competing sub-units of the unitary municipal corporation.†Section 272 of the City Charter provides
generally for control of litigation involving the City by the City
Attorney. It also provides, however, in
subdivision (c) that “[t]he boards of the Proprietary Departments,†including
WPERP, “shall make client decisions in litigation exclusively involving the
policies and funds over which the Charter gives those boards control.†(City Charter, § 272(c).) The City does not address the effect of
subdivision (c). Nor does the City cite
any authority in support of its contention that the Board’s right to make
client decisions only authorizes it “to sue in
the name of the municipal corporation.â€
D. WPERP
Has Standing To Sue.
Standing to
sue requires that the party bringing the action have suffered “‘“an invasion of
a legally protected interest . . . .â€â€™â€ (People
ex rel. Dept. of Conservation v. El Dorado County (2005) 36 Cal.4th 971,
986; accord, Angelucci v. Century Supper
Club (2007) 41 Cal.4th 160, 175; Great
Lakes Construction, Inc. v. Burman (2010) 186 Cal.App.4th 1347, 1356.) To satisfy the requirements of standing, the
plaintiff must allege and prove that the plaintiff or those whom the plaintiff
represents have suffered or are about to suffer injury. (Blumhorst
v. Jewish Family Services of Los Angeles (2005) 126 Cal.App.4th 993,
1001.) Standing requires a plaintiff to
show “‘(1) injury in fact, (2) a causal connection between the injury and
the conduct complained of and (3) a likelihood that the injury will be
redressed by a favorable decision. ’†(Daro
v. Superior Court (2007) 151 Cal.App.4th 1079, 1098, italics omitted.)
The City
argues that WPERP lacks standing to sue because WPERP and its members and
beneficiaries have not suffered a cognizable injury. The City argues that real parties in interest
have not alleged injury to WPERP or its members because, as a matter of law, an
increase in unfunded accrued actuarial liability (UAAL) is not injury.
The first
amended complaint alleges that the recent “influx of City employees, to whom
[WPERP] was required to provide benefits based on service credits they earned
while in positions covered by LACERS, but without the benefit of any of the
City’s employer contributions paid to LACERS on behalf of those employees, has
created in excess of $183 million in unfunded liabilities for the WPERP.†The first amended complaint alleges that “[b]y
virtue of the City’s Council’s ‘veto’ of the suspension of the Reciprocal
Arrangement, WPERP and DWP have suffered and will continue to suffer real,
present financial damage in the form of unfunded retirement obligations—present
obligations to make future payments, a liability that DWP must amortize over 15
years.†The first amended complaint
further alleges that DWP’s failure to meet these obligations will “result in a
reduction of employee benefits and/or default in the WPERP’s obligations to its
members and beneficiaries.â€
Public
employees “have a contractual right
to an actuarially sound retirement system.â€
(Board of Administration v. Wilson
(1997) 52 Cal.App.4th 1109, 1137.) The
Board has an obligation to “‘“maintain the integrity of the system.â€â€™â€ (Ibid.) WPERP alleges that the UAAL, which will
continue to accrue as a result of the City Council’s veto of the Board’s
suspension of reciprocity, jeopardizes WPERP’s integrity and its ability to
meet its obligations to its members and beneficiaries. These allegations, which we assume are true,
sufficiently allege injury, and WPERP and the Board have standing to sue the
City to maintain the integrity of WPERP on behalf of the members and
beneficiaries they represent. (See,
e.g., id. at p. 1118.)
Cal.App.4th 140, on which the City relies, does not support its position. In Bandt
the court stated that “[a] decision that increases UAAL is not necessarily bad for members.†(Id.
at p. 157, italics added.) The court did
not hold that an increase in UAAL can never harm system members, but found only
that there was substantial evidence in the record in that case to support the
trial court’s finding that the increase in UAAL “‘did not impair the ability of
the fund to pay benefits to its members.’â€
(Ibid.) This case is still at the pleadings stage,
and we assume that WPERP’s allegations of injury and “real, present financial
damage†are true. Moreover, the UAAL in
the UAAL alleged in this case. The UAAL
in Bandt originated from the county’s
decision to increase pension benefits to the plan’s members by $1.1 billion,
which the court noted “[o]bviously . . . [did] not harm members,†and
to reduce the unfunded liability by voluntarily issuing bonds and contributing
$550 million rather than amortizing the full amount of the $1.1 billion. (Id.
at pp. 144, 157.)
name="_ftnref12" title="">[12] The City’s action in this case gave no
benefit to WPERP; it only gave WPERP a multi-million dollar UAAL detriment. There is no suggestion that the City has any
intention of making any contributions (by issuing bonds or otherwise) to the
$183 million UAAL problem that WPERP alleges the City’s action created.
The City also
argues that “[t]his case concerns an internal political dispute and not an
actual or threatened invasion of the [Board’s] ‘plenary authority’ to
administer the WPERP.†Rather, the City
asserts, the litigation involves an internal political dispute between WPERP
and the City Council over “whether a particular retirement benefit—reciprocity
of the WPERP with another City retirement system (the LACERS)—should
continue. . . . The
resolution of this question would affect benefits [of] employees City-wide in
the LACERS and the potential transfer of those employees to the LADWP.â€
We agree
with the City’s first assertion, well-established in the case law, that “[t]he
granting of retirement benefits is a legislative action within the exclusive
jurisdiction of the City.†(
Employees’ Retirement System, supra,
186 Cal.App.4th at p. 79; see San Diego
City Firefighters, Local 145 v. Board of Administration etc.,
assertion that reciprocity in this case is the kind of retirement benefit with
respect to which only the City, and not WPERP (or LACERS), can take action.
The City has
not identified any legislation or regulation stating or suggesting that reciprocity
is a benefit to which members of WPERP or LACERS are entitled under the plan. Nor has the City submitted any document, such
as a description of plan benefits or a publication describing WPERP or LACERS,
that identifies reciprocity as a benefit (and of which on demurrer we can take
judicial notice). WPERP does not allege
that the Reciprocity Arrangement is a plan benefit, but rather that it is an
“arrangement to help provide portability of pension benefits between . . .
WPERP and LACERS.â€
The only
regulation we are aware of that addresses reciprocity between WPERP and LACERS,
section 4.1060 of the Los Angeles Administrative Code, does not refer to
reciprocity as a benefit. Subdivision
(14) of section 4.1060, entitled “Reciprocity of Benefit
Provisions . . . ,†states:
“It is the intent and purpose of this section to provide or help to
provide portability between the LACERS and the WPERP. The achievement of complete portability of
benefits is dependent upon appropriate action by the governing body of the
WPERP. Should the implementation of any provisions
of this section be possible only if some specific action is taken by the WPERP,
then and as to such provisions only, the effect of this section shall be
suspended until appropriate action has been taken by the WPERP.†Far from demonstrating, as the City contends,
that reciprocity is a benefit set by legislative action, this provision
indicates that reciprocity is not a retirement benefit granted by the City, but
rather it is an agreement between the City and WPERP authorizing portability of
retirement benefits. Reciprocity was not
established and implemented solely by the City Council as the City’s
legislative body, but rather it required approval by WPERP.
Retirement System (2010) 187 Cal.App.4th 98 was an action by a former city
attorney who became a judge and who was a member of both LACERS and the Judges’
Retirement System (JRS). The plaintiff
sought “to compel LACERS to pay him retirement benefits based on his judicial
salary earned while a member of JRS†based on reciprocity provisions in the
statutes governing the Public Employees’ Retirement System (PERS). (Id.
at p. 103.) There was a reciprocity
agreement between LACERS, on the one hand, and PERS and “all other agencies
having reciprocity with PERS,†on the other hand. (Id.
at p. 104.) Although there was no
reciprocity agreement between JRS and LACERS, the plaintiff argued that an
amendment to Government Code section 20639 “extended reciprocity from JRS to
LACERS.†(Khan, supra, at p. 104
its position in this litigation, that “any reciprocity under LACERS was
extended only to those retirement systems which agreed, by contract entered
into pursuant to statutory provisions governing PERS and the county retirements
systems, to provide reciprocal benefits to LACERS members,†and that there was
no such agreement between LACERS and PERS.
(Id. at p. 105.)
The court
in Kahn agreed with the City and held
that under the statutes governing PERS, “a pool of reciprocal agencies is
established among . . . those public agencies having a reciprocal
v. Los Angeles City Employees’ Retirement System, supra, 187 Cal.App.4th at pp. 109, 112.) The court explained that “[t]rue reciprocity
is mutual†and requires “a two-way agreement between retirement
systems . . . .†(
‘[r]eciprocity is an agreement among public retirement systems to allow members
to move from one public employer to another public employer within a specific
time limit without losing some valuable retirement and related benefit
rights.’ [Citation.]†(Id.
at p. 108, fn. omitted.) “[R]eciprocity
encourages career public service by granting reciprocal retirement benefits to
members who are entitled to retirement rights or benefits from two or more retirement
systems, and delineates the financial obligations of each system and related
political entities so that no system or political entity is liable for more
than its just financial obligation.
[Citation.]†(
another when they change public employers.
The cases
cited by the City do not support the City’s position. Maffei
v. Sacramento County Employees’ Retirement System (2002) 103 Cal.App.4th
993 at page 998 and Bonner v. County of
San Diego (2006) 139 Cal.App.4th 1336 at page 1353 used the terms “benefitâ€
and “benefits of reciprocity†to mean the advantage or assistance of
reciprocity. The issue in each of these cases
was the application of reciprocity provisions in the County Employees
Retirement Law of 1937 (CERL) to the calculation of retirement allowances or
benefits for employees who had been members of two different retirement systems.
The reciprocity provisions affected the
calculation of employee benefits but were not retirement benefits. As other courts have explained, the purpose
of the CERL reciprocity provisions is not to confer retirement benefits but “‘to
permit movement of employees from public employer to public employer without
impairment of retirement rights,’†and “to ‘protect[] the individual retirement
system by avoiding the transfer of financial liabilities.’†(Block
v. Orange County Employees’ Retirement System (2008) 161 Cal.App.4th 1297,
1317; accord, Lear v. Board of Retirement
(2000) 79 Cal.App.4th 427, 433.)
In
Cal.App.3d 329, the court noted that “article 15 of the 1937 [CERL] Act,
entitled ‘Reciprocal Benefits,’†states that “‘[t]he provisions of this article
are intended to encourage career public service by granting reciprocal
retirement benefits to members who are entitled to retirement rights or
benefits from two or more retirement systems . . . .’†(Id.
at p. 336.) Reciprocity was not the
benefit; “retirement rights or benefits from†a retirement system were the
benefits. (See Stillman v. Board of Retirement of Fresno County Employees’ Retirement
Assn. (2011) 198 Cal.App.4th 1355, 1363, fn. 4 [where certain “provisions
of article 15 of CERL—Reciprocal Benefits—do provide additional benefits to
employees entering into reciprocal employment,†such as Government Code section
31833, which “provides that a qualifying employee shall be deemed to have
entered the second retirement system at the age at which he or she entered the
first retirement system,†the benefit is the “lowering [of] his or her rate of
contribution in the second systemâ€].) “Reciprocalâ€
was an adjective describing the noun “benefits.â€
The City
also cites an Attorney General opinion that referred to “the benefits given by
the reciprocity sections†and “the benefits of the reciprocity sections.†(54 Ops.Cal.Atty.Gen. 221, 224 (1971).) The “benefit†to which the opinion referred
is the ability to leave employee contributions on deposit in a retirement
system after departing public service. (
Thus, contrary
to the City’s assertion, WPERP is not attempting “to establish or terminate retirement
benefits.†WPERP is trying to preserve
existing retirement benefits and make sure they will be available for its
members. Reciprocity under the
Reciprocal Arrangement is not a benefit that is within in the exclusive purview
of the City that only the City, through legislative action, can give or take
away.
E.
Assets Gives It the
Power To
Suspend Reciprocity.
The City also
contends the Board’s “‘plenary authority’ over WPERP’s assets cannot serve as a
basis for suspending the reciprocity [agreement].†We think the Board’s plenary authority
extends to entering into, suspending, and even withdrawing from the Reciprocal
Arrangement. The City, which is attempting
to keep the Reciprocal Agreement in place, does not contend that the Board did
not have the authority to enter into the agreement in the first place. If WPERP had the authority to enter into the
Reciprocal Arrangement, which WPERP alleges it had and which the City does not
dispute, then WPERP should have the authority to suspend or withdraw from the
Reciprocal Arrangement.
name="_ftnref16" title="">[16] The allegation in the first amended
complaint, which we accept as true on demurrer, is that both WPERP and LACERS
“retained the separate right to unilaterally discontinue the Reciprocal
Arrangement in their respective governing
documents . . . .â€
Moreover, including
in the Board’s plenary authority the ability to suspend the Reciprocal
Arrangement is consistent with the purpose of article XVI, section 17 of the
California Constitution. The findings
and declarations of Proposition 162 state that “‘“[p]oliticians have undermined
the . . . security of all citizens who depend on pension benefits for
their retirement by repeatedly raiding their pension funds,â€â€™â€ that “‘“politicians
must be prevented from meddling in or looting pension funds,â€â€™â€ and that “‘“retirement
board trustees must be free from political meddling and intimidation.’’†(Westly
v. Board of Administration, supra,
105 Cal.App.4th at p. 1102, fn. 8.) The
declaration of purpose provides that the intent of the People of the State of
California was to “‘“protect the taxpayers of this state against future tax
increases which will be required if state and local politicians are permitted
to divert public pension funds to other uses,â€â€™â€ and to “‘“give the sole and
exclusive power over the management and investment of public pension funds to
the retirement boards elected or appointed for that purpose, to strictly limit
the Legislature’s power over such funds, and to prohibit the Governor or any
executive or legislative body of any political subdivision of this state from
tampering with public pension funds.â€â€™â€
(Id. at p. 1102, fn. 7.)
WPERP
alleges that these concerns were the basis for the Board’s decision to suspend the
Reciprocal Arrangement. WPERP alleges
that the City’s veto of the Board’s suspension of the Reciprocal Arrangement is
“the very kind of municipal invasion of retirement funds sought to be prevented
by the City Charter and [a]rticle [XVI], [s]ection 17 of the Constitution of
the State of California,†and “effectively accomplishes what the City cannot do
under the City Charter and the California Constitution: transfer funding from
WPERP to LACERS and thereby aid the City’s efforts to balance its budget.â€
have “threatened the independence and plenary authority†of the Board, “interfered
with Plaintiffs’ authority and responsibilities as fiduciaries,†and “jeopardized
the financial stability of [WPERP] upon which the Plaintiffs and other
beneficiaries depend for retirement benefits.â€
The City’s
reliance on Westly v. Board of
Administration, supra, 105
Cal.App.4th 1095 is misplaced.
PERS Board of Administration had the plenary authority “to set the salaries of
its employees, to determine their civil service status, to determine the amount
to reimburse its members and its members’ employers, and to pay its employees
without a warrant from or the review of the [State] Controller.†(Id.
at p. 1109.) The court reviewed the
provisions of article XVI, section 17(a) of the California Constitution and concluded
that, “with regard to administration of the system, the Board’s authority is
limited to actuarial services and to the protection and delivery of the assets,
benefits, and services for which the Board has a fiduciary responsibility. No such power is given over the
administration of the matters at issue here.â€
(Westly, supra, at p. 1110.) The
court also determined that “the voter intent [in enacting Proposition 162],
evidenced by the published ballot materials, is that [a]rticle XVI, section 17
would give the Board the authority to administer the investments, payments, and
other services of CalPERS, but not the compensation of the Board or the Board’s
employees.†(Id. at p. 1112.) Nothing in
authority to administer WPERP does not include the power to suspend the Reciprocal
Arrangement in order to “protect[] and deliver[] . . . the assets,
benefits, and services for which the Board has a fiduciary responsibility.†(Id.
at p. 1110.)
The City
also argues that the Board cannot have plenary authority to amend WPERP because
section 1186 of the City Charter requires Commission approval of the amendment,
and that allowing the Board “unilaterally to suspend reciprocity would deprive
the . . . Commission of its Charter authority under section 1186 to
approve benefit changes.†Article XVI,
section 17 of the California Constitution, however, gives “the retirement board
of a public pension or retirement system . . . plenary authority and
fiduciary responsibility for investment of moneys and administration of the
system.†The City cannot by charter limit
that authority if doing so would conflict with the California
Constitution. (See Cal. Const., art. XI,
§ 5;
title="">[18] Johnson
v. Bradley (1992) 4 Cal.4th 389, 395 & fn. 6; Miller v. City of Sacramento (1977) 66 Cal.App.3d 863, 867-868.) In addition, subdivision (h) of article XVI, section
17 provides that the term “‘retirement board’†can mean many things, including “the
board of administration, board of trustees, board of directors, or other
governing body or board of a public employees’ pension or retirement system,â€
but the one thing “that the term ‘retirement board’ shall not be interpreted to
mean or include [is] the elected legislative body of a jurisdiction which
employs participants in a public employees’ pension or retirement system.†Thus, article XVI, section 17 allows a
governing body of a municipal department, such as the Commission, to approve or
disapprove the Board’s actions, but it does not allow the City Council, “the elected
legislative body,†to approve or disapprove the Board’s action.
DISPOSITION
The petition for writ of mandate is denied. Real parties are to recover their costs.
SEGAL,
J.
We concur:
PERLUSS,
P. J.
WOODS,
J.
name="_ftn1" title="">[1] The City states in its brief that it refers to WPERP
and the Board “collectively . . . in the singular as WPERP unless
otherwise specified.†We will do the
same.
name="_ftn2" title="">[2] “Because this matter comes to us on demurrer, we take
the facts from [the] complaint, the allegations of which are deemed true for
the limited purpose of determining whether [WPERP] has stated a viable cause of
action†against the City. (
Cal.4th 880, 885; Bank of America Corp.
v. Superior Court (2011) 198 Cal.App.4th 862, 870.) We also deem true facts contained in the
exhibits attached to the first amended complaint (Brakke v. Economic Concepts, Inc. (2013) 213 Cal.App.4th 761,
767-768) and those subject to judicial notice (Coker v. JP Morgan Chase Bank, N.A. (2013) 218 Cal.App.4th 1, 6,
fn. 2, petn. for review pending, petn. filed Sept. 4, 2013, time for grant or
denial of review extended to Dec. 3, 2013; Ulta Salon, Cosmetics
& Fragrance, Inc. v. Travelers Property Casualty Co. of America (2011) 197 Cal.App.4th 424, 431).
