In re Retirement Cases

• Decision Date: 11 July 2003
• Docket Number: Nos. A097568, A097692, A097701, A097705, A097744, A097924, A098686.,s. A097568, A097692, A097701, A097705, A097744, A097924, A098686.
• Citation: 110 Cal.App.4th 426,1 Cal.Rptr.3d 790
• Court: California Court of Appeals Court of Appeals
• Parties: In re RETIREMENT CASES. [Eight coordinated cases.<SMALL><SUP>*</SUP></SMALL>].

1 Cal.Rptr.3d 790

110 Cal.App.4th 426

In re RETIREMENT CASES. [Eight coordinated cases.^*].

Nos. A097568, A097692, A097701, A097705, A097744, A097924, A098686.

Court of Appeal, First District, Division 2.

July 11, 2003.

Rehearing Denied August 11, 2003.

Review Denied October 15, 2003.

Silver, Hadden & Silver, Stephen H. Silver, Santa Monica, for Plaintiffs and Appellants (plan members).

Davis, Cowell & Bowe, Philip Paul Bowe, W. David Holsberry, San Francisco, for Plaintiff and Appellant Los Angeles

County Professional Peace Officers' Association et al (LACERA members).

Steefel, Levitt & Weiss, Harvey L. Leiderman, Ashley K. Dunning, San Francisco, for Board of Retirement of the Orange County Employees' Retirement System as Amicus Curiae on behalf of Plaintiffs and Appellants (plan members).

Thomas F. Casey III, County Counsel (San Mateo), Brenda B. Carlson, Deputy County Counsel, for Defendants and Appellants (Retirement Boards).

Morrison & Foerster, Michael V. Toumanoff, Los Angeles, for Defendant and Respondent Board of Retirement of the Los Angeles County Employees' Retirement System (LACERA Board).

Jones, Day, Reavis & Pogue, Elwood Lui, Scott D. Bertzyk, Eugenia Castruccio Salamon, Los Angeles, for Real Parties in Interest and Appellants (Counties).

Jones, Day, Reavis & Pogue, Elwood Lui, Scott D. Bertzyk, Eugenia Castruccio Salamon; Lloyd W. Pellman, County Counsel (Los Angeles), Raymond G. Fortner, Deputy County Counsel, Roger M. Whitby, Deputy County County, for Real Party in Interest and Appellant County of Los Angeles.

LAMBDEN, J.

The counties involved in these consolidated appeals maintain employee retirement plans under the County Employees Retirement Law of 1937 (CERL) as codified in 1947. (Gov.Code, § 31450 et seq.)¹ The retirement boards in these counties are required to determine whether items of remuneration paid to employees qualify as "compensation" under section 31460 and "compensation earnable" pursuant to section 31461, and therefore must be included as part of a retiring employee's "final compensation" (§ 31462 or § 31462.1) for purposes of calculating the amount of a pension.

Prior to 1997, many, if not all, of the 20 retirement boards operating under CERL calculated employees' pension benefits according to the holding in Guelfi v. Marin County Employees' Retirement Assn. (1983) 145 Cal.App.3d 297, 193 Cal.Rptr. 343 (Guelfi). The Guelfi court held that an item of "compensation" under CERL must be received by all employees in the applicable grade or class of position for it to be a mandatory part of a retiring employee's "compensation earnable" and "final compensation" on which an employee's pension is based. (Id. at pp. 303-307, 193 Cal.Rptr. 343.) Fourteen years later, our Supreme Court, in Ventura County Deputy Sheriffs' Assn. v. Board of Retirement (1997) 16 Cal.4th 483, 66 Cal.Rptr.2d 304, 940 P.2d 891 (Ventura), overruled Guelfi's interpretation of "compensation earnable," holding that "items of `compensation' paid in cash, even if not earned by all employees in the same grade or class, must be included in the `compensation earnable' and `final compensation' on which an employee's pension is based." (Ventura, supra, at p. 487, 66 Cal.Rptr.2d 304, 940 P.2d 891.)

The Ventura court declined to consider whether its decision should have retroactive application, which now is one of the questions before us. After numerous counties and retirement boards refused to apply the Ventura holding retroactively, Randall E. Francis, a retired county employee, filed a petition for writ of mandamus (Code Civ. Proc, § 1085) on behalf of himself and other members of his class against the Board of Retirement of the Stanislaus County Employees' Retirement Association, with the County of Stanislaus as real party in interest, alleging that Ventura must be applied retroactively; that arrears contributions or interest collected cannot, among other things, be from members not benefiting from retroactive relief; and that cash-outs of unused leave upon separation from service, employer's payments for insurance premiums, and employer's payments to the retirement fund must be included in the calculations of "final compensation" for retirement benefits under CERL. Numerous similar petitions were filed across the state; the cases were coordinated pursuant to Code of Civil Procedure section 404 et seq. and California Rules of Court, rule 1500 et seq.

The trial court ruled that the Ventura decision should be applied retroactively; that the retirement boards did have discretion to collect arrears and that their discretion included the ability to collect arrears beyond the three-year statute of limitations period (Code Civ. Proc, § 338, subd. (d)); and that CERL did not mandate that various items of remuneration that did not involve cash payments to employees had to be included in the calculations of "final compensation" for retirement benefits. Three counties² (collectively, counties) appeal from those portions of the judgments applying Ventura retroactively and giving the retirement boards discretion to collect arrears. Two boards of retirement³ (collectively, retirement boards) appeal from those portions of the judgments regarding retroactivity. Numerous individual plan members suing on behalf of themselves and others and associations⁴ (collectively, plan members) appeal from those portions of the judgments regarding collections of arrears and the exclusion of items of remuneration from the calculation of retirement benefits under CERL.

We conclude that the trial court's rulings were correct, and affirm.

BACKGROUND

Counties maintain employee retirement plans under CERL. (§ 31450 et seq.) CERL requires retirement boards to determine whether the remuneration paid in cash qualifies as "compensation" under section 31460 and "compensation earnable" pursuant to section 31461, and therefore must be included as part of a retiring employee's "final compensation" (§ 31462 or 31462.1) for purposes of calculating the amount of a pension.

Prior to 1997, many, if not all, of the 20 retirement boards interpreted "compensation earnable" under CERL in accordance with the holding in Guelfi, supra, 145 Cal. App.3d 297, 193 Cal.Rptr. 343. The Guelfi court held that payments received for overtime, uniform allowance, and educational incentive pay did not satisfy the requirements for "compensation earnable." (Id. at p. 307, 193 Cal.Rptr. 343.) It determined that an item of "compensation" must be received by all employees in the applicable grade or class of position for it to be a mandatory part of a retiring employee's "compensation earnable" and "final compensation" on which an employee's pension is based. (Id. at pp. 303-307, 193 Cal.Rptr. 343.)

Fourteen years after the Court of Appeal had decided Guelfi, the California Supreme Court, in Ventura, supra, 16 Cal.4th 483, 66 Cal.Rptr.2d 304, 940 P.2d 891, considered the meaning of "compensation" and "compensation earnable" under CERL. It overruled Guelfi's interpretation of "compensation earnable" by holding that "items of `compensation' paid in cash, even if not earned by all employees in the same grade or class, must be included in the `compensation earnable' and `final compensation' on which an employee's pension is based." (Ventura, supra, at p. 487, 66 Cal.Rptr.2d 304, 940 P.2d 891.)

Retirement boards began to include a variety of cash payments in their computations for "compensation earnable" that they had not included earlier, but they restricted these modified calculations to "compensation" earned on or after October 1, 1997, the date the Supreme Court declined to rehear Ventura, supra, 16 Cal.4th 483, 66 Cal.Rptr.2d 304, 940 P.2d 891. (Ventura was filed on August 14, 1997.) They did not modify their calculations to include a variety of cash payments in "compensation earnable" if plan members had earned the "compensation" prior to October 1, 1997.

Plan members throughout the state who did not have their "compensation earnable" modified to comply with Ventura, because their "final compensation" was based on compensation earned prior to October 1, 1997, filed writs of mandate. They contended that certain cash premiums should not have been excluded from their "final compensation" and that the holding of Ventura should apply retroactively. The actions by plan members were coordinated under Code of Civil Procedure section 404 et seq.⁵ on December 21, 1998. The court recommended that the coordinated proceedings be assigned to the San Francisco County Superior Court because the City and County of San Francisco did not operate under CERL. It also ordered "that the reviewing court having appellate jurisdiction [of the coordinated actions] is the Court of Appeal for the First Appellate District."

On January 19, 1999, the Honorable Stuart R. Pollak, sitting in San Francisco, was assigned as coordination trial judge. Liaison counsel were designated to represent counties, retirement boards, and plan members. Most of the coordinated cases also were converted to class actions.

At the coordinated trial,⁶ the court first considered whether CERL mandates inclusion of certain employment benefits in the calculation of retirement benefits. Plan members requested that the following items be included:

cash-outs by employees of unused leave upon separation from service, insurance-related payments made by the employer, and employer payments of mandatory employee retirement contributions that are paid by the employer directly to the retirement plan. The court concluded that none of these was required to be included in the formula for calculating pension benefits.

The superior court next considered the question of retroactivity, determining that the general rule of applying judicial decisions retroactively (Newman v. Emerson Radio Corp. (1989) 48 Cal.3d 973, 978-979, 258 Cal.Rptr. 592, 772 P.2d 1059 (Newman )) should govern here. The superior court explained: "A decision that is...