McGlynn v. State

• Decision Date: 20 March 2018
• Docket Number: A146855
• Citation: 230 Cal.Rptr.3d 470,21 Cal.App.5th 548
• Court: California Court of Appeals Court of Appeals
• Parties: Matthew C. MCGLYNN et al., Plaintiffs and Appellants, v. STATE of California et al., Defendants and Respondents.

21 Cal.App.5th 548

230 Cal.Rptr.3d 470

Matthew C. MCGLYNN et al., Plaintiffs and Appellants,

v.STATE of California et al., Defendants and Respondents.

A146855

Court of Appeal, First District, Division 1, California.

Filed March 20, 2018

Beeson, Taylor & Bodine, APC, Teague P. Paterson and Costantin Kerestenzis for Plaintiffs and Appellants.

Leonard Carder, LLP, Arthur Wei-Wei Liou, as Amicus Curiae on behalf of Plaintiffs and Appellants.

Kamala D. Harris, Attorney General, Douglas J. Woods, Assistant Attorney General, Tamar Pachter and Peter H. Chang, Deputy Attorneys; Sloan Sakai Yeung & Wong LLP, Timothy G. Yeung, for Defendants and Respondents.

Banke, J.

INTRODUCTION

In this mandamus proceeding, six judges who were elected to the superior court in mid-term elections in 2012, but who did not take office until January 7, 2013, maintain they are entitled to benefits under the Judges' Retirement System II (JRS II)¹ as in effect at the time they were elected, rather than at the time they assumed office. This is a matter of considerable importance to these judges because, on January 1, 2013, JRS II became subject to the provisions of the California Public Employees' Pension Reform Act of 2013 (PEPRA),² which amended virtually all state employee retirement systems to begin addressing the state's enormous unfunded pension liability and returning these systems to actuarially sound footing. Among other things, PEPRA increases employee contributions, provides for fluctuating contribution rates based on market performance and actuarial projections, and bases the amount of monthly pension payments on an employee's final three years of compensation, rather than on only the final year.

We conclude, as did the trial court, that the judges did not obtain a vested right in JRS II benefits as judges-elect, but rather obtained a vested right to retirement benefits only upon taking office, after PEPRA went into effect. We also conclude PEPRA's provisions pertaining to fluctuating pension contributions do not violate the non-diminution clause of the California Constitution ( Cal. Const., art. III, § 4 ), nor do they impermissibly delegate legislative authority over judicial compensation ( Cal. Const., art. VI, § 19 ). We therefore affirm the judgment.³

BACKGROUND

The petitioning judges were elected to superior court judgeships in June and July of 2012. However, the terms of their offices did not commence, and they did not begin to draw a state salary, until January 7, 2013. ( Cal. Const., art. VI, § 16, subd. (c) ["Terms of judges of superior courts are six years beginning the Monday after January 1 following their election."].) Other judges were appointed to office during 2012. Unlike appellants, they assumed office on or before December 31, 2012, and the parties do not dispute that their retirement benefits are governed by pre-PEPRA JRS II.⁴ There is an additional, third group of judges—those who were elected during 2012, but who held public employment at the time and, thus, were already members of a public retirement system. Their retirement benefits are also governed by pre-PEPRA JRS II.

Between the time appellants were elected and the time they assumed their judicial offices, the Legislature passed, and the Governor signed into law, PEPRA, which became effective on January 1, 2013.

Appellants aver that prior to taking office, and in choosing to give up their private law practices and go into public service, they relied on representations by the state about JRS II. For example, after being elected but before assuming office, they were advised by state personnel about the provisions of pre-PEPRA JRS II—which include an 8 percent contribution rate and a monthly pension benefit based on the final year of salary—and were given a JRS II pamphlet. In fact, they allege state personnel expressly represented that "[u]pon PEPRA's passage and following its effective date," the pre-PEPRA provisions of JRS II would nevertheless continue to govern their retirement. And, for more than a year after they assumed office, until March 2014, the state treated the judges as within pre-PEPRA JRS II.

The state then did an about-face and notified appellants they were subject to PEPRA's less favorable provisions. As a result, the judges' take home pay in 2014 was reduced by 7.25 percent due to additional contributions to the retirement system (making their total contribution 15.25 percent of their salary) and was reduced by a further (unspecified) amount in 2015 due to an increased contribution rate. Appellants allege they "are now subject to a fluctuating and increasing—as opposed to [a] guaranteed—rate of contribution towards their pension benefits." The judges will also receive lower monthly pension payments, as under post-PEPRA JRS II, the amount will be based on the average of their final three years of compensation, rather than their final year.

The judges filed a verified petition for writ of mandate on behalf of themselves and those similarly situated to compel the State of California, the Judicial Council, the CalPERS Board of Administration, and the state's Comptroller (collectively respondents) to include them within pre-PEPRA JRS II. The judges additionally alleged respondents are subject to promissory and equitable estoppel.

The trial court sustained respondents' demurrer, deeming it dispositive that appellants' terms of office and their actual employment began on January 7, 2013. Their "statutory entitlement to pension benefits therefore began" after PEPRA was operative and not in 2012, when they were elected to, but had not yet been sworn into, their offices. "Accordingly," said the trial court, "PEPRA does not unconstitutionally impair their pension rights. Similarly, PEPRA does not violate the constitutional prohibition on lowering judicial salary during a judge's term of office...." The court also rejected the judges' assertions that PEPRA unconstitutionally violates their right to equal protection and delegates to CalPERS the Legislature's authority to set judicial pay. The court concluded estoppel could not apply because the state respondents could not be compelled to act beyond their authority, which they would do if they treated appellants as within pre-PEPRA JRS II.

DISCUSSION

Appellants are Subject to PEPRA

The Judicial Retirement System and PEPRA

In 1994, the Legislature made major changes to the then existing judicial retirement system, known as JRS I. (Cf. Gov. Code, §§ 75000 et seq., 75500 et seq. )⁵ These changes included significant contribution increases, lower monthly retirement benefits, the elimination of the option to retire before 20 years of service with a correlative reduction in pension benefits, and the elimination of an economic incentive to defer retirement and work several additional years. ( §§ 75521, 75522, 75601, 75602 ; see Warner v. Public Employees' Retirement System (2015) 239 Cal.App.4th 659, 667, 190 Cal.Rptr.3d 870.) Accordingly, under this more recently enacted retirement system, known as JRS II, judges receive significantly reduced retirement benefits than were provided under JRS I. ( Id. at p. 667, 190 Cal.Rptr.3d 870.)

JRS II expressly described the judges to which it applied as follows: " ‘Judge’ means a justice of the Supreme Court or of a court of appeal, or a judge of a superior court, municipal court, or justice court who is first elected or appointed to judicial office on or after November 9, 1994," which was the day following the 1994 general election. (§ 75502, subd. (a).) Accordingly, judges "elected or appointed" before November 9, 1994, were grandfathered into, and continued to receive, the more favorable benefits of JRS I. (§§ 75502, subd. (a), 75000, 75500.)

Under JRS II, the "period of time a judge receive[s] a salary and ma[kes] contributions to the system by reason of holding office as a judge" is known as the judge's "service." (§ 75502, subd. (c).) The state and counties, as applicable, deduct 8 percent from a judge's salary and deposit that amount in the JRS II retirement fund. ( §§ 75601, 75602.) After attaining either 20 years of service and 65 years of age, or five years of service and 70 years of age, a "judge is eligible to retire" and receive a monthly pension payment based on the judge's salary during his or her final year in office and length of service. (§§ 75502, subd. (d), 75522, subd. (a).)

In 2012, nearly two decades after the enactment of JRS II, the California Legislature passed a comprehensive bill making significant changes to nearly all public retirement systems, including to JRS II. ( §§ 7522 et seq., 75500 et seq. ) Effective January 1, 2013, PEPRA affects public employees who are "new members" of their retirement systems. (§§ 7522.02, subd. (b), 7522.04, subd. (f)(1), 7522.30, 7522.32.) A new "member" includes "[a]n individual who becomes a member of any public retirement system for the first time on or after January 1, 2013, and who was not a member of any other public retirement system prior to that date." (§ 7522.04, subd. (f)(1).)

Among other things, under PEPRA, a new "member" must pay half of the "normal cost" of pension benefits (§§ 7522.30, subd. (a), 7522.04, subd. (g) [defining "[n]ormal cost"] ), and the amount of a member's monthly pension benefit depends on his or her highest average pay over the final three years of employment (§ 7522.32).

Under the Statutory Language, Appellants are Subject to PEPRA

Appellants point out that they come within the parameters of JRS II—that is, they were "first elected or appointed to judicial office on or after November 9, 1994." (§ 75502, subd. (a).) They do, indeed. But that does not mean they are not affected by the amendments to JRS II made by PEPRA.

As set forth above, PEPRA took effect on January 1, 2013—six days before appellants assumed their judicial offices. By its own terms, the Act applies to any "[n]ew member," meaning an "individual who becomes a member of any public retirement system for the first time on or...