Hipsher v. L. A. Cnty. Emps. Ret. Ass'n

• Citation: 272 Cal.Rptr.3d 664,58 Cal.App.5th 671
• Decision Date: 15 December 2020
• Docket Number: B276486
• Court: California Court of Appeals Court of Appeals
• Parties: Tod HIPSHER, Plaintiff and Appellant, v. LOS ANGELES COUNTY EMPLOYEES RETIREMENT ASSOCIATION et al., Defendants and Respondents, County of Los Angeles, Real Party in Interest and Appellant.

58 Cal.App.5th 671

272 Cal.Rptr.3d 664

Tod HIPSHER, Plaintiff and Appellant,

v.LOS ANGELES COUNTY EMPLOYEES RETIREMENT ASSOCIATION et al., Defendants and Respondents,County of Los Angeles, Real Party in Interest and Appellant.

B276486

Court of Appeal, Second District, Division 4, California.

Filed December 15, 2020

Rains Lucia Stern St. Phalle & Silver, Stephen H. Silver and Jacob A. Kalinski for Plaintiff and Appellant, Tod Hipsher.

Xavier Becerra, Attorney General, Thomas S. Patterson, Assistant Attorney General, Benjamin M. Glickman, Supervising Deputy Attorney General, Anna T. Ferrari and Anthony P. O'Brien, Deputy Attorneys General, for Defendant and Respondent State of California.

Steven P. Rice, Michael D. Herrera and Johanna M. Fontenot for Defendant and Respondent Los Angeles County Employees Retirement Association.

Liebert Cassidy Whitmore, Joung H. Yim and Steven M. Berliner for Real Party in Interest and Appellant County of Los Angeles.

WILLHITE, Acting P. J.

SUMMARY

Shortly after plaintiff and appellant Tod Hipsher retired from the Los Angeles County Fire Department (LAFD), he was convicted of a federal felony for directing an offshore gambling operation. Defendant and respondent, Los Angeles County Employees Retirement Association (LACERA), subsequently reduced Hipsher's vested retirement benefits under the Public Employees’ Pension Reform Act of 2013 ( Gov. Code, § 7522 et seq.¹ (PEPRA)), based on a determination by defendant County of Los Angeles (County) that Hipsher's felonious conduct was committed in the scope of his official duties. Section 7522.72 of PEPRA, at issue here, provides a mechanism requiring that a public pensioner employed prior to PEPRA's effective date (commonly referred to as a "legacy employee") forfeit a portion of his or her retirement benefits following a conviction of a felony offense occurring in the performance of the pensioner's official public duties.

Hipsher challenged LACERA's forfeiture determination by a petition for writ of mandate and a complaint seeking declaratory relief. The trial court issued a peremptory writ of mandate directing the County to afford adequate due process protections before reducing Hipsher's retirement benefits, but found in favor of defendants on Hipsher’ claim for declaratory relief. On appeal, we determined that section 7522.72 is constitutionally sound, but that LACERA, not the County, bears the burden to afford Hipsher the requisite due process protections to determine whether his conviction falls within the scope of that statute. (See Hipsher v. Los Angeles County Employees Retirement Assn . (2018) 24 Cal.App.5th 740, 756, 762–767, 234 Cal.Rptr.3d 564 ( Hipsher I ), vacated by Alameda County Deputy Sheriffs' Assn. v. Alameda County Employees' Retirement Assn. (2020) 9 Cal.5th 1032, 266 Cal.Rptr.3d 381, 470 P.3d 85 ( Alameda County ).

This case is before us a second time after the California Supreme Court granted Hipsher's petition for review, deferred briefing and transferred the matter back to this court with directions to vacate our prior decision and reconsider the cause in light of its decision in Alameda County, supra, 9 Cal.5th 1032, 266 Cal.Rptr.3d 381, 470 P.3d 85. In Alameda County , the Court articulated a multi-step test for analyzing contract clause claims in the public employee pension context.

After reviewing the matter, we conclude that Alameda County confirms our prior holding that section 7522.72's public purpose—to protect the pension system from abusive practices of faithless public employees and preserve public trust in government—justifies any concomitant diminution in Hipsher's pension rights. We also conclude anew that section 7522.72 need not provide a comparable advantage to offset disadvantages Hipsher may suffer as a result of Legislative changes to the public employee retirement system enacted decades after he began his employment. Such a requirement would be antithetical to the statute's purpose by unfairly enriching a malfeasant legacy employee for engaging in the very sort of abusive practices section 7522.72 is intended to curb.

Further, in accordance with the portion of our prior decision—as to which Hipsher did not seek review by the California Supreme Court—we conclude that section 7522.72 is not an unconstitutional ex post facto law, and that Hipsher is entitled to appropriate administrative due process. Accordingly, we will modify the trial court's judgment and remand the matter with instructions for LACERA to provide Hipsher appropriate notice of its intent and the reasons for its initiation of forfeiture proceedings, and an opportunity to present his objection to LACERA's impartial decisionmaker whether he falls within the scope of section 7522.72. In all other respects, we affirm the judgment, as modified.

FACTUAL AND PROCEDURAL BACKGROUND

PEPRA's Enactment and Purpose

PEPRA became effective January 1, 2013. The Legislature enacted PEPRA, in part, to curb abusive public pension practices throughout the state. The provision of PEPRA at issue here is section 7522.72, which provides a mechanism requiring partial forfeiture of a public employee's retirement benefits following a conviction of a felony offense that occurred in the scope of performance of his or her official duties. Pertinent provisions of section 7522.72 in effect at the time of Hipsher's retirement, provided:

"(a) This section shall apply to a public employee first employed by a public employer or first elected or appointed to an office before January 1, 2013, and, on and after that date, Section 7522.70 shall not apply.

"(b)(1) If a public employee is convicted by a state or federal trial court of any felony under state or federal law for conduct arising out of or in the performance of his or her official duties, ... he or she shall forfeit all accrued rights and benefits in any public retirement system in which he or she is a member to the extent provided in subdivision (c) and shall not accrue further benefits in that public retirement system, effective on the date of the conviction. [¶] ... [¶]

"(c)(1) A public employee shall forfeit all the retirement benefits earned or accrued from the earliest date of the commission of any felony described in subdivision (b) to the forfeiture date, inclusive. The retirement benefits shall remain forfeited notwithstanding any reduction in sentence or expungement of the conviction following the date of the public employee's conviction. Retirement benefits attributable to service performed prior to the date of the first commission of the felony for which the public employee was convicted shall not be forfeited as a result of this section. [¶] ... [¶]

"(d)(1) Any contributions to the public retirement system made by the public employee described in subdivision (b) on or after the earliest date of the commission of any felony described in subdivision (b) shall be returned, without interest, to the public employee upon the occurrence of a distribution event." (Stats. 2012, ch. 296, § 15.)²

This appeal is among several actions that have challenged provisions of PEPRA arguing that it impairs employees’ vested rights in violation of the contract clause of the California Constitution.³ The California Supreme Court has rejected similar challenges, concluding the challenged provisions of PEPRA are consistent with the contract clause. (See Alameda County, supra , 9 Cal.5th 1032, 266 Cal.Rptr.3d 381, 470 P.3d 85, and Cal Fire, supra, 6 Cal.5th 965, 244 Cal.Rptr.3d 149, 435 P.3d 433.)

Hipsher's Public Employment, Felony Conviction and Pension Reduction

Hipsher was employed by the LAFD from 1983 to early 2013. Beginning in 2001 and continuing for at least 12 years, Hipsher ran an illegal international gambling business routing customers, wagers and profits through a company in Costa Rica. Hipsher was alleged to have run the illegal gambling enterprise out of his LAFD office while performing his official duties, using resources of his public employer. In 2013, following an undercover operation by the Department of Homeland Security, a federal indictment was filed against Hipsher alleging charges of owning and directing an illegal offshore gambling operation, a felony. ( 18 U.S.C. § 1955.) Two months after his indictment, Hipsher retired from the LAFD. Hipsher pled guilty of the charged offense and was convicted in 2014. Following Hipsher's conviction, LACERA reduced Hipsher's annual pension benefits under section 7522.72 from approximately $82,000 to about $35,000, retroactive to April 2001 through December 2013, based on his job-related felony conviction.⁴ (See Hipsher I, supra, 24 Cal.App.5th at pp. 749–750, 234 Cal.Rptr.3d 564.)

Trial and Appellate Court Proceedings

Hipsher filed the instant petition for writ of mandate challenging LACERA's forfeiture determination and a complaint seeking declaratory relief.⁵ He challenged the constitutionality of section 7522.72 under the contract clause of the California Constitution, alleged that reduction of his vested retirement benefits constituted an unconstitutional ex post facto application of section 7522.72, and claimed the reduction was invalid because there was no nexus between his crime and the performance of his official duties. ( Hipsher I, supra , 24 Cal.App.5th at p. 750, 234 Cal.Rptr.3d 564.) The trial court issued judgment in favor of LACERA and the State as to Hipsher's contract and ex post facto claims. ( Ibid. ) In addition, after requesting and reviewing supplemental briefing as "to whether Hipsher had a due process right to his original retirement benefits and, if so, whether he [had been] afforded sufficient due process protections," the court issued a peremptory writ of mandate directing LACERA to set aside the reduction in Hipsher's pension benefits and return the difference between his full pension and his allowance after the reduction. The trial court also ordered the County to reinitiate administrative proceedings under section 7522.72 in a manner that...