CHW’s quarterly newsletter on public law topics is out. You can see it here.

This issue has articles on:

  • A landmark Court of Appeal decision reducing the number of votes required to adopt an initiative special tax;
  • A new statute governing redistricting after 2020 Census data are available next March; and,
  • A recent win for a public agency in a dispute with a utility about the cost to relocate utility lines to facilitate a public works project.

We also touch on the firm’s current webinar offerings. You can see that listing here.

Check it out!

Civil service commissions handle employee discharge appeals in most California counties and many cities. A recent case from the Second Appellate District, Deiro v.  Los Angeles County Civil Service Commission, clarified the jurisdiction of the Los Angeles County Civil Service Commission when an employee is both discharged and takes disability retirement.

The plaintiff in Diero was a deputy sheriff injured on duty in 2012. In 2015, he applied to LACERA for service-connected disability retirement. Shortly after his application was granted, but before his retirement began, the Sheriff’s Department discharged the deputy for bad conduct.  The deputy appealed to the Commission, but also began his disability retirement. Although the plaintiff had retired, overturning the discharge decision would have had a measurable impact on his retirement based on seniority credits and salary increases. After several years, the hearing officer proposed plaintiff’s discharge be reduced to a suspension. Just before the Commission adopted the recommendation, the Sheriff’s Department moved to dismiss because the Commission lacked jurisdiction over a retired deputy. The Commission agreed and dismissed the administrative appeal.

The Second Appellate District opinion focused primarily on three cases: Zuniga v. Los Angeles County Civil Service Com. (2006) 137 Cal.App.4th 1255, County of Los Angeles Dept. of Health Services v. Civil Service Com. of County of Los Angeles (Latham) (2009) 180 Cal.App.4th 391, and Hudson v. County of Los Angeles (2014) 232 Cal.App.4th 392Zuniga and Latham set a bright line rule, based on the Commission’s jurisdiction in the Los Angeles County Charter and Civil Service Rules, that when an employee retires during the pendency of a civil service appeal, her future status as an employee is by definition no longer at issue and the commission lacks jurisdiction to hear a wage claim brought by a former civil servant.

Plaintiff, however, argued that Hudson established a broad exception, that the Commission retains jurisdiction when an employee takes disability retirement while appealing his discharge.  The Second Appellate District disagreed.  Explaining the “egregious circumstances permeating” the Hudson case, the Court highlighted that the Hudson plaintiff had contested both her discharge and the finding of permanent disability, fought to return to work, and was ultimately successful. Conversely, there was no indication that the Diero plaintiff would return to work, and therefore no reason to deviate from the Zuniga/Latham rule.

Civil service commission jurisdictional requirements are unique, and may be broader or narrower than the jurisdiction of Los Angeles County. However, Diero affirms that jurisdictional issues should be addressed early before the civil service commission, to avoid lengthy and unnecessary administrative appeals.

 

The First District Court of Appeal recently ordered published its decision in Denny v. Arntz in which it ruled that statutory challenges to the sufficiency of ballot materials cannot be made post-election.  The ruling helpfully construes Elections Code section 16100 to exclude post-election challenges based on alleged flaws in the ballot question and voter information pamphlet.

Here, Denny filed a post-election challenge to Proposition A, which proposed a 30-year bond issuance of $425,000,000 to protect San Francisco’s waterfront, including the Embarcadero and associated seawall.  Voters approved the bond issuance by a resounding 82.5 percent.  Denny sought to overturn the results, claiming a myriad of faults with the ballot materials including, among others, that the voter’s digest and ballot question were not impartial and the ballot question did not conform to the format requirements of the Elections Code.  Denny alleged these faults amounted to “offense[s] against the elective franchise” within the meaning of Elections Code section 16100, subdivision (c).

The Court affirmed the trial court ruling sustaining San Francisco’s demurrer without leave to amend. Statutory challenges to the sufficiency of ballot materials must be pursued pre-election and filed during the 10-day public inspection window for the material at issue.  By contrast, section 16100 permits post-election challenges in limited situations, such as misconduct of a precinct board, illegal votes cast or bribery by a candidate, and only when such actions are demonstrated to have affected the election’s outcome.  Denny’s claims, which all rested on the ballot materials and voter guide, fell outside section 16100’s scope.

While dispensing with Denny’s statutorily based challenge, the Court recognized that Owens v. County of Los Angeles permits post-election challenges if ballot materials are so misleading or inaccurate as to implicate voters’ due process rights.  But the standard of proof in such a claim is much higher, and Denny alleged no such due process claim.

For fellow election law practitioners, Denny is helpful in delimiting post-election challenges permitted by section 16100, subdivision (c), and reinforcing that statutory claims regarding ballot materials and voter guides must be made pre-election or not at all.

The Second Appellate District of the California Court of Appeal held that arbitration clauses are unenforceable in continuing care retirement community tenancy agreements.

Harris and four other residents (“Harris”) live in the University Village Thousand Oaks (UVTO) continuing care and retirement community. Residents of UVTO must sign a contract before moving in. Pursuant to the contract, residents pay various monthly fees for a residence, care, and services. The contracts include the right to live in a specified living unit. The monthly fee is based upon the type of unit. Additionally, UVTO contracts require tenants to agree to binding arbitration to resolve any claims or disputes related to UVTO.

Harris sued UVTO alleging that UVTO made false representations about facility security, future increases in monthly fees, and what charges monthly fees cover. The trial court ordered arbitration of Harris’ claims over their objections. At arbitration the arbitrator issued an award for UVTO on all causes of action. Harris filed a motion with the trial court to vacate the award arguing that arbitration clauses are not enforceable in tenancy agreements in retirement communities. The trial court denied their motion and Harris appealed.

California Civil Code Section 1953(a)(4) prohibits the waiver of procedural litigation rights, such as requiring mandatory arbitration, in any dwelling lease or rental agreement. The trial court ruled that continuing care retirement community tenancy agreements are not standard residential leases. Therefore, Section 1953(a)(4) did not apply and the arbitration language in UVTO’s contract was enforceable.

Section 1953(a) states “Any provision of a lease or rental agreement of a dwelling” that requires tenants to waive their rights to engage in litigation is unenforceable. The California Civil Code chapter that includes Section 1953 is located within California Civil Code Section 1940. Section 1940(a) specifies the chapter’s provisions apply to “all persons who hire dwelling units located within this state including tenants, lessees, boarders, lodgers, and others, however denominated.” Section 1940(c) defines “dwelling unit” to mean a structure or part of a structure that is used as a home, residence, or sleeping place. The appeals court found that the language regarding “boarders” and “lodgers” applies to the board and lodging provisions of continuing care contracts.

Accordingly, the Court found that the plain language of these California Civil Code provisions means that tenants of continuing care retirement communities are entitled to the same rights as tenants under more common residential leases. The Court remanded the case for trial on Harris’ original claims.

Damage claims under 42 U.S.C. § 1983 – and really any personal injury claims — are broken down into two categories: economic and noneconomic damages. Pain and suffering, mental anguish, and loss of consortium are commonly sought in large numbers as noneconomic damages to enhance a plaintiff’s out-of-pocket damages. Prior to 1986, a plaintiff could recover all of her economic and noneconomic damages from one party, even if she pursued multiple defendants. Proposition 51 — the California Fair Responsibility Act — changed that. Codified at Civil Code 1431.2, it imposes several liability for noneconomic damages, while still allowing joint liability for economic damages. Several liability means each defendant can pay noneconomic damages only in proportion to his or her own fault.

This past week, the California Supreme Court in B.B. v. County of Los Angeles unanimously ruled that intentional tortfeasors cannot use Proposition 51 to reduce their liability for noneconomic damages. Resolving a split among California’s appellate courts, the Court ruled that Civil Code section 1431.2, subdivision (a), “does not authorize a reduction in the liability of intentional tortfeasors for noneconomic damages based on the extent to which the negligence of other actors — including the plaintiffs, any codefendants, injured parties, and nonparties — contributed to the injuries in question.”

In the case, L.A. County sheriffs used deadly force against Darren Burley, an African American. The officers suspected Burley was under the influence of drugs, and he resisted arrest for assaulting a woman. During the struggle, Deputy David Aviles pressed one knee into the center of Burley’s back, and another onto the back of his head. The jury found Aviles committed battery by using unreasonable force against Burley. Ultimately, the jury found decedent 40% responsible, Deputy Aviles 20% responsible, and the remaining deputies negligent and collectively 40% responsible. The trial court later entered judgment against Aviles for the entire amount of noneconomic damages — $8 million, even though the jury found Aviles only 20% at fault — because he committed an intentional tort.

The Second District Court of Appeal reversed, ordering the judgment against Aviles reduced to his proportional fault. It relied on the language of Civil Code section 1431.2, which provides in relevant part: “In any action for personal injury, property damage, or wrongful death, based upon principles of comparative fault, the liability of each defendant for noneconomic damages shall be several only and shall not be joint. Each defendant shall be liable only for the amount of noneconomic damages allocated to that defendant in direct proportion to that defendant’s percentage of fault, and a separate judgment shall be rendered against that defendant for that amount.” The Court of Appeal applied the statute to intentional tortfeasors, allowing them to reduce their liability based on the negligent acts of others. The Second District expressly rejected a contrary holding by the Fourth District in Thomas v. Duggins Construction Co., Inc.

The Supreme Court reversed. In the opinion authored by Justice Chin, the Court ruled the statute’s application to cases decided “under principles of comparative fault” includes negligence and strict product liability, but not intentional torts. Detailing the common law pre-Proposition 51 and Code of Civil Procedure § 875, the Court concluded the law uniformly held that reduced liability under principles of comparative fault is not available to intentional tortfeasors. And relying on Thomas, the law post-Proposition 51 was no different. The Court rejected arguments this was inconsistent with Proposition 51’s language and created unfair results, as argued by amici curiae the Association of Southern California Defense Counsel and the Association of Defense Counsel of Northern California and Nevada. Instead, it held “[t]he preceding discussion demonstrates that California principles of comparative fault have never required or authorized the reduction of an intentional tortfeasor’s liability based on the acts of others,” and that section 1431.2, subdivision (a) just incorporates these principles of comparative fault. The Court found no inequity with treating intentional tortfeasors differently from negligent or strictly liable tortfeasors with respect to the doctrines of contributory negligence and contribution. Burley’s family may now recover the full amount of their noneconomic damages — it is not reduced by the proportion of fault attributed to Burley.

With last week’s decision, plaintiffs will be even more incentivized to press their State law claims against individual officers to seek the gamut of noneconomic damages. Those found guilty of an intentional tort cannot shift liability to negligent actors — they are instead on the hook for the full amount of noneconomic damages.

Justice Chin referenced in the opinion the “deeply troubling and difficult issues involving race and the use of police force,” but noted the opinion was limited to the scope of section 1431.2. The ruling, thus, “does not turn on either the decedent’s race or the fact that a law enforcement officer, rather than a civilian, committed the intentional tort.” In his concurrence, Justice Liu hit these issues head-on, addressing the history of civil rights laws, his critique of the federal qualified immunity doctrine, and calling for relief for “citizens who continue to bear the cruel weight of racism’s stubborn legacy.” In his words, “[a] wrongful death judgment with substantial damages is one way of affirming the worth and dignity of Darren Burley’s life, and I join today’s opinion. But the racial dimensions of this case should not escape our notice.” Justice Liu’s point-by-point analysis of the current civil rights legal landscape is certainly a call for action, and may well result in a Legislative response, whether in development of additional remedies, addressing shortcomings in the law as Justice Liu sees it, or stronger legislative oversight of police. These are all evolving issues, and we will continue to keep you updated on developments.

The First Appellate District of the California Court of Appeal held that local rent control laws can apply to individual rooms rented in a single-family home.

Jonathan Owens owns a single-family home in Oakland. He rents out three of the bedrooms in this home to separate tenants on a month-to-month basis, terminable upon 60 days’ notice. Each tenant has their own private room, and the common areas of the house are shared between the tenants and Owens.

One of the tenants filed a petition with the Oakland Residential Rent and Relocation Board alleging that her housing became uninhabitable due to disruptive construction work in the house. She also alleged that Owens retaliated against her by terminating her lease when she complained about the construction work. Owens argued that the Board has no jurisdiction over the matter because under state law his single-family home is exempt from local rent control regulations. The Board found otherwise and determined that he had transformed his single-family home into a multi-unit building, and therefore the Board’s rent control regulations were applicable.

Under California’s Costa-Hawkins Rental Housing Act (Civil Code Section 1954.5 et seq.), local jurisdictions have the authority to enact rent control under certain conditions. However, under the Act single-family homes are generally exempt from local rent control. Owens sued the Board arguing that because his property is a single-family home the local Board has no jurisdiction. The trial court found otherwise, and Owens appealed.

Civil Code Section 1954.52 exempts single-family homes from local rent control because single-family homes are generally single units, “alienable and separate” from title to any other dwelling unit (Civil Code Section 1954.52(3)(A)). Rent control under the Act generally only applies to multi-unit structures. But the Appeals Court held that because Owens chose to rent out rooms separately to multiple people, he transformed his single unit dwelling into a multi-unit dwelling.

The Appeals Court noted that a dwelling unit is not necessarily the entire property to which an owner holds title, instead it is an area inhabited by someone to the exclusion of others. Citing the trial court, the Appeals Court noted that the relevant dwelling unit is not the house as a whole, but each of the rooms he rented out to tenants. Therefore, the Appeals Court agreed with the trial court and held that the individual rooms that Owens rented out to individual tenants are not exempt from the Board’s rent control and jurisdiction over the matter.

The American Civil Liberties Union has sued the City of Pomona for improperly training its police officers on the new legal standard for justifiable use of deadly force enacted by 2019’s Assembly Bill 392. AB 392, which was sponsored by the ACLU, changed the standard for use of deadly force in California, now codified in Penal Code section 835a.

According to the ACLU’s complaint, Pomona, relying on advice from Lexipol and the Peace Officers Research Association of California, incorrectly instructed its officers that AB 392 did not meaningfully change the use of deadly force standard. Lexipol is a private company that drafts policies for many police agencies in California, and the Peace Officers Research Association is a law enforcement lobby. The ACLU argues these private special interests successfully and improperly influenced Pomona’s use of force policy such that it misstates the law as amended by AB 392. At bottom, though, this lawsuit is an attempt to determine whether AB 392 really did raise the threshold for use of deadly force.

The “reasonable officer” standard in place before AB 392 was developed in case law stemming from Graham v. Connor. The United States Supreme Court derived the standard from the Fourth Amendment’s guarantee of freedom from unreasonable seizures of the person. According to the Supreme Court, “Determining whether the force used to effect a particular seizure is ‘reasonable’ under the Fourth Amendment requires a careful balancing of ‘ “the nature and quality of the intrusion on the individual’s Fourth Amendment interests” ’ against the countervailing governmental interests at stake.” “Reasonableness” is “not capable of precise definition or mechanical application.” Instead, it “requires careful attention to the facts and circumstances of each particular case.” Most importantly, “The ‘reasonableness’ of a particular use of force must be judged from the perspective of a reasonable officer on the scene, rather than with the 20/20 vision of hindsight.”

The authors of AB 392 clearly intended to include the “reasonable officer” standard. However, the ACLU, relying on Senate Rules Committee statements, asserts it was AB 392’s intent to “exceed the standards articulated and set forth by the U.S. Supreme Court in Graham and” Tennessee v. Garner. The ACLU’s own argument in favor of AB 392’s passage states the bill “will replace the lax standard currently set by California law and the U.S. Constitution that police officers can use deadly force whenever ‘reasonable,’ and replace it with a more stringent standard that appropriately authorizes police officers to use deadly force only when necessary to defend against an imminent threat of death or serious bodily injury.”

It is quite possible these policy statements will matter little to the appellate judges who determine how the word “necessary” should be interpreted. The plain text of the statute controls, and it reflects the legislature’s intent to maintain the “reasonable officer” standard throughout the statute.  For example, the law states that “it is the intent of the Legislature that peace officers use deadly force only when necessary in defense of human life. In determining whether deadly force is necessary, officers shall evaluate each situation in light of the particular circumstances of each case, and shall use other available resources and techniques if reasonably safe and feasible to an objectively reasonable officer.” The law also states that “a peace officer is justified in using deadly force upon another person only when the officer reasonably believes, based on the totality of the circumstances, that such force is necessary … [t]o defend against an imminent threat of death or serious bodily injury to the officer or to another person” or to apprehend a fleeing felon “if the officer reasonably believes that the person will cause death or serious bodily injury to another unless immediately apprehended.”

Yet the Legislature did add the word “necessary” to the statute. The “reasonable officer” standard persists, but in the context of “necessary” force. The court must now interpret this statutory language in its totality. Until then, the more immediate question is how closely a police department’s use of force policy aligns with the standard in Penal Code section 835a. A policy that does not track the new standard may be susceptible to challenge.

We can expect the ACLU to continue to advocate its interpretation of the law to the courts and to the public. We will continue to monitor this lawsuit, so stay tuned!

In Pimentel v. City of Los Angeles, the Ninth Circuit found the Eighth Amendment’s Excessive Fines Clause applies to Los Angeles’ parking fines. Following Timbs v. Indiana, a recent SCOTUS decision that applied the excessive fine clause against the states, Pimentel extends the Eighth Amendment’s prohibition on excessive fines to routine municipal fines. The Court upheld a decision that a $63 parking fine was not grossly disproportionate to the offense of parking too long. Pimentel leaves open the possibility that a person could plead financial hardship on a case-by-case basis.

In a concurring opinion, Judge Bennet argues the Eighth Amendment should not apply to parking fines at all. He argues “Cities that meter on-street parking may … be acting in a similar capacity as the owner of a private parking garage” and therefore, like a private landlord, “may freely choose what rate it charges for parking, holdover and late fees included.” He worries “the potential for federal court litigation is endless,” and applying the Eighth Amendment to parking violations “trivializes” constitutional rights litigation. But because the parties did not dispute whether the Eighth Amendment applied, Judge Bennet concurred.

More challenges to various municipal fines are sure to follow.

Ben Franklin famously said: “When the well is dry, we know the worth of water.” Today’s Supreme Court decision in Wilde v. Dunsmuir is an important win for public utilities and local governments promising stability in local finance. [Disclosure: I argued the case for five local government associations.]

Specifically, it holds that water rates are not subject to referendum and, on the logic of the case, neither are other utility fees.

The decision is narrow, but significant. It holds that the referendum power created by article II, section 9 of California’s Constitution does not extend to “statutes providing for tax levies,” defining the latter term broadly to include most government revenues and not limiting it to “tax levies … for usual current expenses of the State.” That latter phrase limits “appropriations” but not “taxes.” It does not matter whether a government revenue measure funds a service (like water) that private parties also provide. It matters only that the service is an essential part of government’s operations. Water rates and other utility charges must still comply with the voter- and property-owner-approval processes of Proposition 218, and they remain subject to the initiative power, but not to referendum. This will help stabilize public finance, allow revenue bonds to issue without the risk of referendum repeal and, once bonds have issued, allow the contracts clauses of the State and federal Constitutions to protect rates from initiative repeal to the extent necessary to honor the debt.

This quote is the heart of the case: “Article II, section 9’s exemptions from referendum reflect a recognition that in certain areas, legislators must be permitted to act expediently, without the delays and uncertainty that accompany the referendum process.”

Along the way, Justice Kreuger, writing for a unanimous Court, made a number of other points worth noting:

  • The Howard Jarvis Taxpayers Association, among the proponents of Proposition 218, circulated an annotation of the initiative during the 1996 campaign. Public lawyers and taxpayer advocates have often cited it in arguments as to the meaning of the measure. But Wilde holds (in footnote 3) that this annotation is not authority to construe Proposition 218. It rejected Dunsmuir’s request for notice of the annotation as irrelevant but, significantly, cites with approval (i) a case holding the motive of initiative drafters is irrelevant to construing initiatives — it is the motives of voters that matter and (ii) Mission Springs Water District v. Verjil, which also held the HJTA annotation irrelevant because it was not in the ballot books voters received. The annotation will be a much less useful tool than previously.
  • The definition of “tax” — and by implications, the other definitions of Propositions 218 and 26 — do not apply to other constitutional provisions and specifically do not apply to the referendum provision of article II, section 9.
  • 1978’s Proposition 13 does not revise the entire field of tax law, and by implication, neither do 1996’s Proposition 218 and 2010’s Proposition 26. Therefore, they will be construed to avoid implied repeal of other constitutional provisions and earlier statutes.
  • Rossi v. San Francisco (a 1995 SCOCA decision) had uphold a San Francisco charter provision (that became a rule of Proposition 62 and Proposition 218) requiring voter approval of taxes concluding it did not require prohibited referenda on taxes. It was arguably inconsistent with Geiger v. Board of Supervisors (a 1957 SCOCA case) protecting local government revenues from referenda. The Court read Rossi narrowly, as about the initiative power only. This can be read as part of a larger trend of the current SCOCA resuscitating precedents from the era before the 1986 recall of 3 justices (which swung our courts to the right) and reading narrowly precedents from the intervening, conservative era.
  • The rationale of the exception from the referendum power for taxes is to avoid “interference with the administration of [government’s] fiscal powers and policies” and this explains the conclusion to include all government revenue measures which fund essential services within the “taxes” protected from referendum and not just those within the narrower, modern definition of that term provided by Propositions 218 and 26.
  • The Court noted that the rule protecting revenues that fund essential services from referendum “is related to, but distinct from, the rule we articulated and applied in Simpson v. Hite.” Simpson holds that one cannot use the initiative to challenge government actions which constitute essential government functions (there, siting a courthouse). Simpson has not often been cited in recent years because it reflects less judicial deference to the initiative power than is the current standard. This opinion recasts Simpson as holding that the initiative power cannot affect legislative acts that State legislation delegates to local government officials — not to their voters. This has the effect of conflating Simpson with Committee of Seven Thousand, a 1988 SCOCA case. That can be viewed as pro-direct democracy or as restating Simpson on a stronger, more modern footing. It might also reflect the current Court’s slightly greater willingness to review initiatives and referenda than were earlier courts. On that, time will tell.
  • In what is plainly dicta (i.e., not a precedential holding) the Court comments on how Dunsmuir might have responded to an adverse referendum result: “Perhaps the City could simply default to its prior rates while it restarts the process of ‘study[ing], plan[ning], and implement[ing] a new water rate master plan.” This may be helpful when an agency loses its rates to an initiative repeal or reduction and needs to do something to get money in the door while it makes new rates.
  • Water service is an essential government function, some other things are not, and the Court does not tell us much about how to draw the line. This rejects reasoning of the Court of Appeal’s decision in this case, which held that water service was not “essential.”
  • The Court expressly rejects a 1980 case which rejected an initiative change to Lompoc’s power rates. This is further support for the rule that ratemaking is legislation which exposes it to the initiative, but also provides for protective litigation rules, like the litigation-on-the-record rule of Western States Petroleum Association v. Superior Court.
  • The Court cites the California Municipal Law Handbook as authority. That is written and annually updated by a committee of the City Attorneys Department of the League of California Cities and published by Continuing Education of the Bar. [Disclosure: I edit the public finance chapter of the Handbook].

All in all, a helpful case for local governments, holders of their bonds, and those who depend on their services.

The California Supreme Court handed a major victory to former Governor Jerry Brown and California’s governments in a pension reform case today. [Disclosure: I wrote an amicus curiae brief for the League of California Cities in the case.]

This case challenged the 2013 pension reforms, the “California Public Employees’ Pension Reform Act of 2013” known as “PEPRA.” The plaintiff unions argued the “California Rule” forbade the Legislature to amend the County Employees Retirement Law of 1937 (“CERL” or “the 1937 Act”)  to reduce pension benefits without providing an offsetting benefit. Jerry Brown and the California Business Roundtable used the case to try to overturn the California Rule entirely. In a cautious, incremental decision, the Chief Justice wrote for a unanimous court (with a brief concurrence by Justice Cuéllar) ruling as follows:

The California Rule survives, but has this new limitation: the Legislature can make changes to pension benefits which are net negative to employees provided that:

  • They serve a proper purpose that is consistent with the theory of a pension system;
  • They are reasonable;
  • It is not possible to provide offsetting benefits to employees without disserving the legislative purpose.

The crux of the case is this: “The Legislature must have the authority, discretion, and flexibility to address such [pension-spiking] problems without being required to, in effect, extend the life of the loopholes and the opportunities for abuse for the duration of the careers of current employees by providing comparable advantages.”  In short, loophole fixing is okay if a court concludes that is what the Legislature is doing and that it acted reasonably. This will likely mean that every new pension change that is not net-neutral to employees will be litigated, as only a court can confirm these standards are met.

The Court could have ruled more narrowly — just construing the 1937 Act on the basis that the Legislature does not have its own finances at stake under that law as it does under the PERS statute — an argument Lili Wyckoff and I made in an amicus brief for the League of California Cities. It could also have reasoned that PEPRA did not really change anything (as some other amici argued), but the Court chose a broader path. So, this case is good law for CalPERS and not just for 1937 Act pension systems. The Court could have relied only on statutory grounds, or on federal grounds, but decided to reach the state constitutional issue and to rely on state constitutional grounds alone (defeating any petition for cert. to the U.S. Supreme Court).

It could have ruled more broadly, too. The Court expressly rejected the argument that a pension change that affects only accruals to existing employees after the date of the change does not raise a contracts clause issue. Governor Brown and the California Business Roundtable made this unsuccessful argument to overturn the California Rule. So, the California Rule is alive and well, it just has a significant, new limitation.

A few aspects of the decision will affect other areas of public law practice:

  • The case reminds us that government agencies do not have power to make contracts that exceed their statutory (or constitutional) authority, so contracts are construed to imply terms needed to make them lawful. Here, settlement agreements after the 1997 Ventura County Deputy Sheriffs’ Assn. v. Board of Retirement case that promised certain pension benefits are read to include the implied term that those benefits would be provided only so long as they were authorized by statute. Among the cases cited on this point is the land use case public lawyers are familiar with: Trancas Property Owners Assn v. City of Malibu. This aspect of the opinion is also nice authority for the rule that a public agency cannot contract away its police power or other constitutional or statutory authority. The Court also cites Civil Code section 1643, which adopts the canon of construction which prefers readings which make a statute constitutional or a regulation consistent with statute.
  • Litigants cannot estop government (i.e., prevent it from changing a legal position) easily and, given the implied term just noted, estoppel was not shown in this case. Judicial approval of the post-Ventura settlement agreements does not change estoppel analysis.
  • Footnote 4 of the opinion has a useful reminder that “vested right” has at least three meanings — a vested right to some kind of pension after 5 years of public service, a vested right under contracts clause analysis to a particular benefit (say, retiree medical benefits), and vested rights as used in land use law.
  • The plaintiff unions argued their members had paid pension contributions based on calculations which assumed some of the benefits that have now been taken away. In a footnote (18) the Court suggested — but did not decide — that this might entitle them to a refund of premiums. That suggests a whole lot of litigation to come if the issues are not settled.
  • The Court reserves the question “whether the Legislature’s clarification of ambiguous statutory language would avoid contact clause scrutiny.”
  • Reasonable pension expectations vest whether they are rooted in statute or judicial decisions, although prompt legislative disagreement with a judicial construction of a statute is given weight.

Again, a nice win for local government and a big day in California’s law of pensions!