Local 101 of the Am. Fed'n of State v. Brown
| Decision Date | 11 September 2015 |
| Docket Number | Case No. 14-cv-05640-BLF |
| Court | U.S. District Court — Northern District of California |
| Parties | LOCAL 101 OF THE AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES, Plaintiff, v. EDMUND G. BROWN, et al., Defendants. |
[Re: ECF 35]
Plaintiff Local 101 of the American Federation of State, County, and Municipal Employees ("Plaintiff") is a labor union whose members include employees of the Santa Clara Valley Water District ("the District"). At issue in this lawsuit is a collective bargaining agreement between Plaintiff and the District for the period January 1, 2012 through December 31, 2014 ("the CBA"). Plaintiff claims that the CBA was impaired by California's enactment of the Public Employees' Pension Reform Act of 2013 ("PEPRA" or "the Act"), Cal. Gov't Code § 7522 et seq. Plaintiff brings suit against the State of California and related entities and individuals under the Contract Clause of the United States Constitution. Defendants move to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), asserting that the complaint fails to state a claim and is barred by the Eleventh Amendment.
The Court has considered the parties' briefing and the relevant legal authorities.1 For the reasons discussed below, the motion is GRANTED IN PART, WITHOUT LEAVE TO AMEND, AND DENIED IN PART.
Plaintiff and the District have a longstanding relationship under which they have entered into successive collective bargaining agreements.2 Compl. ¶¶ 22-23. Under the terms of those agreements, District employees participate in the California Public Employees Retirement System ("CalPERS"). Id. ¶¶ 31-32. The District and CalPERS also have a longstanding contractual relationship under which the District participates in CalPERS and the District's employees are members of CalPERS. See District-CalPERS Contract, Defs.' RJN Exh. 1, ECF 36-1.
In 2011, the parties began negotiating a collective bargaining agreement for the period 2012 through 2014. Compl. ¶¶ 23, 33. A key negotiating point was pension benefits for new employees. Id. ¶¶ 33. The parties ultimately entered into the CBA at issue in this case. Two provisions of the CBA are relevant here. The first provision states that:
The District will continue to participate in the Public Employees' Retirement System (PERS) with benefits as currently provided at the 2.5% @ 55 Formula Benefit Level for employees hired prior to January 1, 2012. Employees hired January 1, 2012 or thereafter, will participate in the Public Employees' Retirement System (PERS) with benefits provided in the contract with PERS at the 2% @ 60 formula Benefit Level.
CBA Art. 6, Section 1.A, ECF 36-2. The second provision states that:
Employees will reimburse the District 3.0% of the employer's Annual Required Contribution (ARC) of the 2.5% @ 55 Formula Benefit Level through direct payroll deductions. Employees will pay the full 8% of the PERS employee (member) contribution. Employees hired under the 2.0% @ 60 Formula Benefit Level will reimburse the District 3.0% of the employer's annual required contribution. Employees will pay the full 7.0% of the PERS employee (member) contribution. These deductions will be pre-tax.
California's Public Employees' Retirement Law ("PERL") "establishes a retirement system for certain state and local government employees." California Ass'n of Prof'l Scientists v.Schwarzenegger ("CAPS"), 137 Cal. App. 4th 371, 376 (2006). At the time the CBA was negotiated, PERL placed no limits on local agencies' authorization to negotiate the defined benefit formulas3 used to calculate their employees' pension benefits. After the CBA took effect, PERL was amended by PEPRA to limit the defined benefit formulas available to new members4 of all state and local government retirement plans. See Cal. Gov't Code §§ 20004 , 7522.15; Deputy Sheriffs' Ass'n of San Diego Cnty. v. Cnty. of San Diego, 233 Cal. App. 4th 573, 577 (2015). PEPRA became effective on January 1, 2013. See Cal. Gov't Code § 7522.02(a)(1).5
As relevant here, PEPRA requires that public employers and public retirement systems offer new members only the defined benefit formulas established pursuant to § 7522.20. Cal. Gov't Code § 7522.15. Section 7522.20 sets forth a table of defined benefit formulas that are less favorable than the 2%-at-60 formula provided to new hires under the CBA. See Cal. Gov't Code § 7522.20(a). For example, while the CBA provides that new hires receive benefits under a 2%-at-60 formula, see CBA Art. 6, Section 1.A, ECF 36-2, PEPRA provides that new members receive benefits under a 2%-at-62 formula, see Cal. Gov't Code § 7522.20(a). CalPERS has applied the negotiated 2%-at-60 formula benefit level to District employees hired before PEPRA's effective date of January 1, 2013, but it has applied the formulas set forth in PEPRA to District employees who became new members of the retirement system on or after January 1, 2013 irrespective ofcontrary provisions in the CBA. Id. ¶¶ 43, 65-66.
PEPRA made the additional modification to require that employees contribute at least 50% of the "normal costs" of the plan of retirement benefits, with "[e]qual sharing of normal costs between public employers and public employees" being the standard. Cal. Gov't Code § 7522.30(a). However, if the terms of a collective bargaining agreement in effect on January 1, 2013 would be impaired by PEPRA's contribution provisions, those provisions do not apply until the collective bargaining agreement expires. Cal. Gov't Code § 7522.30(f). In the present case, the CBA requires employees to pay more than 50% of the normal cost rate, specifically, 3% of the District's contribution. CBA Art. 6, Section 1.B, ECF 36-2. Because that aspect of the CBA would be impaired by application of PEPRA's conflicting provisions, and the CBA was in effect on January 1, 2013, CalPERS has applied the CBA's additional 3% employee contribution requirement throughout the term of the CBA. Compl. ¶ 67.
Plaintiff instituted a grievance against the District under the CBA's grievance and arbitration procedures. Compl. ¶¶ 68-70. The arbitrator determined that the District had breached the CBA by failing to provide the level of pension benefits required thereunder. Id. ¶¶ 75-79. Plaintiff sought to confirm the arbitration award against the District in the Santa Clara County Superior Court and named the CalPERS Board of Administration ("CalPERS Board") as an indispensable party to that action. Id. ¶¶ 80-82. The superior court dismissed the CalPERS Board on the ground that it was not a party to the underlying arbitration, confirmed the arbitration award against the District, and entered judgment on May 12, 2014. Id. ¶¶ 83-84. The District sought to comply with the superior court's judgment by requesting that CalPERS honor the judgment and the terms of the CBA. Id. ¶ 86. CalPERS declined, stating that it would continue to comply with PEPRA. Id. ¶ 87.
On December 29, 2014, Plaintiff filed the present action, asserting that California's enactment of PEPRA substantially impaired the CBA in violation of the Contract Clause of the United States Constitution. The complaint names as defendants Edmund G. Brown, Jr., in hisofficial capacity as the Governor of the State of California; several members of the CalPERS Board, in their official capacities; Anne Stausboll, in her official capacity as Chief Executive Officer of CalPERS; the State of California; and CalPERS. The complaint also names the District as an indispensable party/party in interest. Plaintiff asserts claims for: (1) declaratory judgment and injunctive relief against all defendants under 28 U.S.C. §§ 2201-2201 and the Contract Clause; and (2) declaratory judgment and injunctive relief against the individual defendants under 42 U.S.C. § 1983 and the Contract Clause. In its prayer, Plaintiff requests a declaratory judgment that PEPRA unconstitutionally impaired the CBA; a permanent injunction prohibiting Defendants and those in concert with them from applying PEPRA in a manner that impairs the CBA; an award of fees and costs, including costs awardable under 42 U.S.C. § 1988(b); and such other relief as the Court deems just and proper.
The District has answered the complaint. All other Defendants move to dismiss.
"A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted 'tests the legal sufficiency of a claim.'" Conservation Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts as true all well-pled factual allegations and construes them in the light most favorable to the plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the Court need not "accept as true allegations that contradict matters properly subject to judicial notice" or "allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences." In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (internal quotation marks and citations omitted). While a complaint need not contain detailed factual allegations, it "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.
Defendants move to dismiss the complaint on the grounds that it fails to state a cognizable claim under the Contract Clause and is barred by the Eleventh...
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