Los Angeles, CA 90064 (310)312-1100 Attorneys for ...interestclassaction.com/pdf/Plaintiffs' Opposition to CalPERS... · (1998)68 Cal.App.4th1084 7-8 Sanders v. City ofLos Angeles

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JOHN MICHAEL JENSEN, State Bar No. 176813LAW OFFICES OF JOHN MICHAEL JENSEN11500 West Olympic Blvd., Suite 550Los Angeles, CA 90064(310)312-1100

Attorneys for Plaintiffs Mary Kesterson,Hon. Marcel Poche (ret.), Michael Gilmore,The Estate ofRobert Seymore, GeraldDominguez, Jeffrey Walter, Brad Heinz,ChristopherCervelli and James Steed,individually and on behalfofa class ofothers similarly situated

OCT 29 20I3SherrI R. Carter, Executive Offic<

By: Deborah McWnney, Dep

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES

MARY KESTERSON, an individual;MARCEL POCHE, an individual; MICHAELGILMORE, an individual; THE ESTATE OFROBERT SEYMORE (by his PersonalRepresentative); GERALD DOMINGUEZ, anindividual; JEFFREY WALTER, anindividual; BRAD HEINZ, an individual;CHRISTOPHER CERVELLI, an individual;JAMES STEED, an individual; and on behalfofa class of others similarly situated.

Plaintiffs,

vs.

CALIFORNIA PUBLIC EMPLOYEES'

RETIREMENT SYSTEM (CalPERS),BOARD OF ADMINISTRATION OF

CALIFORNIA PUBLIC EMPLOYEES'

RETIREMENT SYSTEM,

Defendants.

Case No.: BC 502628

CLASS ACTION

(Assigned for all purposes to the Hon. JohnShepard Wiley, Department 311)

PLAINTIFFS' OPPOSITION TOCALPERS DEMURRER TO FIRSTAMENDED COMPLAINT

[REQUEST FOR JUDICIAL NOTICEAND EXHIBITS 1-6 FILEDCONCURRENTLY]

Date: November 15,2013Time: 9:00 amPlace: Department 311

Trial Date: None

Complaint Filed: March 8,2013

Plaintiffs hereby file their Opposition to CalPERS Demurrer to First Amended

Complaint.

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PLAINTIFFS' OPPOSITION TO CALPERS' DEMURRER TO FIRST AMENDED COMPLAINT

r/C/erklity

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TABLE OF CONTENTS

TABLE OF AUTHORITIES iii

INTRODUCTION 1

LAW AND ARGUMENT 3

L Legal Standard on Demurrer 3

11. Demurrer 3

IIL Law and FactsMeet Legal Standard, No Administrative ExhaustionRequired 3

rv. Vesting ofPension Benefits 4

V. Fully Matured 4

VL Duty to Pay 5

VII. Wrongful Withholding 5

VIII. Distinguishing the PERL from the Unemployment Insurance Code 5

IX. Interest on Underpaid or Delayed Benefits or Funds 5

X. Plaintiffs Have Plead Civil Code §3287(a) Damages 6

XI. Civil Code §§3287 (a) and 3289 Damages Can Only Be Awarded by a Court of Law...6

XII. Damages Resulting from Failure to Timely Pay 6

XIIL Actual Payment 6

XTV. NietherCalPERS Nor OAHHave Authority to Award CivilCode §3287(a) Damages...7

XV. No Available or Adequate Administrative Remedy: Excused, Futile, Inappropriate 8

XVI. No Exhaustion Required; CalPERS' Misstates FAC 10

XVII. Exhaustion Excused When Remedies Are Unavailable, Inadequate 10

XVin. Res Judicata, Collateral Estoppel Arising from Cervelli Matter 10

XLX. CalPERS Did Not Adopt Sarli Decision on Interest Legislators 10

XX. CalPERS' Administrative Process Cannot Adjudicate Class Actions 11

XXL Class Claims Are Legitimate 11

XXII. Precedential Decision Is Not Equivalent to Class Action 11

XXIIL Class Certification Issues 12

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XXIV. Statute of Limitations Issue

XXV. Penalty Benefits and Interest

XXVL Section 21499 Administrative Penalty Issues are Separate 14

XXVII.Penalty Benefit Issue Separate From Civil Code Interest 14

CONCLUSION 15

DECLARATION OFJOHN MICHAEL JENSEN 16

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TABLE OF AUTHORITIES

California Cases;

Aguilar v. Unemp. Ins. App. Bd

(1990) 223 Cal.App.3d 239 6,9

American Federation ofLabor v. Unemployment Ins. Appeals Bd.

(1996) 13 CaU" 1017 7-8

Benson v. City ofLos Angeles

(1963) 60 Cal.2d355 6

California TeachersAss'n v. GoverningBd. ofSalinas CityElementarySchoolDist.

(2010)187 Cal.App.4"'81 10

California Water Impact Network v. Newhall County Water Dist.

(2008) 161 Cal.App.4'̂ 1464 10

Campos V. Anderson

(1997) 57 Cal.App.4* 784 7

Carr v. Fire Commission ofCityand County ofSan Francisco

(1938)30CaLApp.2d 208 4

Casserly v. City ofOakland

(1936)6Cal.2d64 4

CountyofOrange v. Assoc. ofOrange CountyDeputySheriffs

(2011) 192Cal.App.4th 21 4

DuBois V. Workers' Comp. Appeals Bd.

(1993)5Cal.4th382 14

Farmers Ins. Exchange v. Superior Court

(1992)2Cal.4'̂ 377,391 9

French v. Cook

(1916)173 Cal. 126 4

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California Cases (continued);

Goldfarb v. Civil Service Com.

(1990) 225 Cal.App.3d 633 5, 8

Grier v. Kizer

(1990) 219 Cal.App.3d 422 10

Haines v. Commercial Mortgage Co.

(1927) 200 Gal. 609 14

Hardin Oldsmobile v. New Motor Vehicle Bd.

(1997) 52 CalApp '̂" 585 7

In re Retirement Cases

(2003) 110 Cal.App.4th 426 11

Kaiser Foundation Health Plan, Inc. v. Zingale

(2002) 99 Cal.App.4"' 1018 7

Kinney v. Sacramento City Emp. Retirement System

(1947) 77 CaI.App.2d 779 4

Lance Camper Manufacturing Corp. v. Republic Indemnity Co.

(1996) 44Cal.App.4"" 194 7

Lopez V. Civil Service Com.

(1991) 232 Cal.App.3d 307 10-11

Mass V. Board ofEducation

(1964)61 Cal.2d612 5-6

Packer v. Bd ofRetirement ofLos Angeles County Peace Officers' Retir. Sys

(1950)35 Cal.2d212 4

Palacin v. Allstate Ins. Co.

(2004) 119 Cal-App^"^ 855 3

Pearson v. Los Angeles County

(1957) 49 Cal.2d 523 4

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California Cases (continued);

People V. American Contractors Indem. Co.

(2004) 33 Cal.4"' 653 - 2

People V. Beaumont Inv., Ltd.

(2003) 111 Cal.App.4'̂ 102 9

Olson V. Cory

(1983)35 Cal.3d 390 1,6

Rose V. City ofHayward

(1981) 126 Cal.App.3d926 2,11-12,14-15

San Diego CountyDeputySheriffsAssn. v. San Diego CountySheriffs Dept.

(1998) 68 Cal.App.4th 1084 7-8

Sanders v. City ofLos Angeles

(1970)3Cal.3d252 6

Skaggs V. City ofLos Angeles

(1954) 43 Cal.2d497 4

Strathvale Holdings v. E.B.H.

(2005) 126 Cal.App.4th 1241 2

Tripp V. Swoap

(1976) 17Cal.3d 671 6,9

Vero V. Sacramento City Emp. Retirement Sys

(1940)41 Cal.App.2d482 4

Westbrookv. Fairchild

(1992) 7 Cal.App.4'̂ 889 14

WesternStates Petroleum Ass'n v. Department ofHealth Services

(2002) 99 CaI.App.4"'999 7

Westly V. California Public Employees' Retirement System Ed. ofAdministration

(2003) 105 Cal-App^"^ 1095 4

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Cases (Other Jurisdictions);

Ross V. Old Republic Ins. Co,

(Colo. App. 2006) 134 P.3d 505 5

Statutes;

Civil Code, §§1912, e/ seq 14

Civil Code, ^19X62 14

Civil Code, §3283 6

Civil Code, §3287 1,5-7,9-10

Civil Code, §3289 1,6

Government Code, §§13400, et seq 11

Government Code, §11425.60(b) 12

Government Code, §11523 13


Government Code, §21499 1,13-15

Government Code, §§21553-54 11

Government Code, §§21631, seq 11


Labor Code, §4650(d) 14

Labor Code, §5814 14

Constitutions;

Cal. Const., art. 15, §1 13

Treatises:

65A Cal. Jur. 3d, Work Injury Compensation, §678 14

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PLAINTIFFS* OPPOSITION TO CALPERS' DEMURRER TO FIRST AMENDED COMPLAINT

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INTRODUCTION

As proposed representatives ofaclass action, Plaintiffs fully vested in their pension

benefit during employment. The property interest fully matured at retirement or before it became

payable. The payments fell due on identifiable dates in ascertainable amounts. CalPERS was

required to timely and fully paythe funds.

CalPERS delayed paying or underpaid the f\mds.' CalPERS earned interest on Plaintiffs'

retained fimds. Later CalPERS paid Plaintiffs a lump sum amount that aggregated past due

payments but failed to pay interest.

The payment ofthe lump sum (or a return ofprincipal) is not a decision giving rise to an

entitlement to benefits in the first instance. Instead, it is an acknowledgement that funds were

wrongfully withheld, and, thus, interest should be paid on the underpaid or withheld monies.

{Civil Code, §3287; Olson v. Cory (1983) 35 Cal.3d 390,402.)

Plaintiffs advanced various theories of recovery (as required). Many overlap. Plaintiffs

are entitled to the highest interest rate payable. Only Civil Code interest will fully make Plaintiffs

whole. The Civil Code requires 7% or 10%. The Public Employees Retirement Law ("PERL")

provides at most 6% interest. {Government Code Section 21499 penalties are separate benefits,

not "interest". See infra.) Since only one interest rate will beprovided, the "lesser included

interest provisions" inthe PERL are duplicative ornot essential to the extent that this Court

awards interest under the Civil Code^ Plaintiffs canproceed solely on the Civil Code.

CalPERS' Demurrer asserts that Plaintiffs failed to exhaust available administrative

remedies. However, Plaintiffs pled that the administrative process was excused, inadequate or

unavailable. Firstly, CalPERS has disclaimed tiie authority or jurisdiction to award interest under

the Civil Code, including Sections 3287 and 3289. In adopting the Proposed Decision in Cervelli

{FAC, Exhibit 10), CalPERS explicitly disclaimed jurisdiction to award Civil Code interest.

CalPERS is barred by collateral estoppel and resjudicata (and law ofthe case) from changing its

' CalPERS often delayed full payment more than 45 days, a period the Legislaturerecognizes is wrongful and penalized. {Government Code, §21499.)

^Theconstitutional and PERL interest provisions generally indicate a legislative intent torequire CalPERS to timely paybenefits and to credit interest.

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decision. No administrative exhaustion is required on Civil Code claims.^ In effect, CalPERS

seeks a demurrer to exhaust an administrative process that (it admits) does not exist.

Plaintiffs havebeen through jurisdictionalgaming before. Chris Cervelli presented claims

for Civil Code interest in CalPERS' administrative process. {RJN, Exhibit 2.) The ALJ ruled

CalPERS had nojurisdiction or authority to award CivilCode interest. CalPERS adopted the

Proposed Decision denying its jurisdiction over Civil Code interest claims. {FAC, Exhibit 10.)

CalPERS misunderstands that lack ofjurisdiction in its most fundamental or strict sense

means an entire absence ofpower to hear or determine the case, an absence ofauthorityover the

subject matter or the parties. {People v. American Contractors Indent. Co. (2004) 33 Cal.4th

653.) When a court lacks jurisdiction in a fundamental sense, any judgment or order it issues is

void. (Strathvale Holdings v. E.B.H. (2005) 126 CaI.App.4th 1241.) CalPERS cannot (i) require

Cervelli to file a writ to challenge CalPERS' lack ofjurisdiction and (ii) cannot bar Cervelli from

being a Plaintiff inthis case."* Cervelli timely and appropriately joined this proposed class action.

As CalPERSadmits it lacksjurisdiction to hear the CivilCode interest claims, none of

the Plaintiffs' (including Walter's and Cervelli's) interest claims had to be presented or exhausted

in CalPERS' administrative process. Instead, the Plaintiffs' (including Cervelli's and Walter's)

claims for interest are timely presented in the First Amended Complaint.

Plaintiffs additionally pled that exhaustion ofadministrative remedies was excused or

unavailable because under current judicial precedent, no class action and no unrepresented party

claims are allowed to be heard in CalPERS' administrative process. (See Rose v. City of

Hayward.) Whetherthere is a precedential decision index or not, CalPERS is still forbidden from

litigating and resolving the claims of unrepresented parties in its APA administrative process.

^The FAC clearly pleads that exhaustion ofadministrative remedies is excused, futile, orinappropriate. See pages 14-15 regarding Kesterson, page 22 regarding Cervelli, and pages 34-39regarding ''AdministrativeRemedyis Inadequate, Unavailable, Excused, and Futile."

^CalPERS presents a "Where's Waldo" ofjurisdiction: CalPERS argues that the otherPlaintiffs have to file in CalPERS administrative process to seek interest. Since CalPERS has nojurisdiction, the Plaintiffs will then have to file a writ to supposedly challengethis void order.Since the ruling is itself void, there is nothing to file a writ over. The claims were never ruled onin the administrative process.

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In otherwords. Plaintiffs' classclaims for interest are properly before this Court. No

administrative exhaustion is required. Class claims and interest claims under the Civil Code must

both be litigated in this Court.

Lastly, CalPERS ignores thatcommon questions of law and fact greatly predominate.

Asserting what is ineffect a premature class certification motion, CalPERS' Demurrer ignores

that Plaintiffs adequately pled that: (i) Plaintiffs vested in benefits payable at ascertainable dates;

(2) CalPERS has a duty to timely paythem; (3) CalPERS did not timely pay thebenefits; (4)

CalPERS wrongly withheld die benefit; (5) CalPERS earned interest, or otherwise is required to

pay Plaintiffs interest; (6) CalPERS accumulated andpaid Plaintiffs an aggregated or lump sum

of previously due, delayed, or underpaid amounts; (7) CalPERS didnot pay interest. Plaintiffs

have alleged sufficient legal grounds to overcome a Demurrer,

The Section21499 penalty benefitclaims, and CalPERS' attemptto resolve Kesterson's

individual claims without providing benefits to the class,are addressed in greaterdetail infra.

LAW AND ARGUMENT

I. Legal Standard on Demurrer. In considering a demurrer, courts must "assume the truth

of all properly pleaded facts, as well as facts inferred fi*om the pleadings, andgive the complaint

a reasonable interpretation by reading it as a wholeandall its parts in theircontext." (Palacin v.

Allstate Ins. Co., infra, at 861.) Courts must also considermatters that are properlyjudicially

noticed.

II. Law and Facts Meet Legal Standards No Administrative Exhaustion Required.

Plaintiffs havepled that theyestablished eligibility andvested in rights to the ftmds priorto the

timethatpayment wasdue. Payment wasdue in specific ascertainable amounts on specific times.

Plaintiffs pled that CalPERS wrongfully withheld the funds. Plaintiffs pled that CalPERS paid

them inadequate or no interest. Plaintiffs pled that CalPERS has adoptedthe position that it has

no authority or jurisdiction to award CivilCode interestor damages. {FAC, Exhibit 10..)

Plaintiffs properlypled that CalPERS earned interest or returns. {FAC, Exhibit 1.)

in. Vesting of Pension Benefits. Eligibility Established. A public employee's pension

constitutes an element of compensationand a vested contractual right to pension benefitsaccrues

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Upon acceptance ofemployment. {County ofOrange v. Assoc. ofOrange County Deputy Sheriffs

(2011) 192 Cal.App.4th 21.) Plaintiffs become entitled to apension when they fulfill the terms of

the employment orother contract. {Skaggs v. City ofLos Angeles (1954) 43 Cal.2d 497, 503.)

Plaintiffs acquires a vested contractual right that arises before the happening ofthe contingency

that makes apension payable.^ {Pearson v. Los Angeles County (1957) 49 Cal.2d 523.^ Plaintiffsfully vested in a right to timely payment.

IV. Fully Matured. Plaintiffsestablished the amountand timing ofthe entitlementprior to

the time thefimds were due. Nocontingency within the employee's control was unresolved at the

time offirst payment. When the Plaintiffsatisfies the language ofthe statute, a duty to grant the

pension exists. {French v. Cook (1916) 173 Cal. 126; Kinney v. Sacramento City Emp.

Retirement System (1947) 77 Cal.App.2d 779.) For purposes ofdisability ordeath pensions, the

right topayment accrues on the happening ofan event. {Carr v. Fire Commission ofCity and

County ofSan Francisco (1938) 30 Cal.App.2d 208.) The amount ofthe pension isfixed at the

timeof retirement or thehappening of any other contingency onwhich it is made payable.

Plaintiffs should not bepenalized when CalPERS fails toprocess the information or timely pay.

V. Duty to Pay. CalPERS hada duty to timelyand fully pay the vestedbenefit. Pursuant to

Article XVI, section 17(a), of the California Constitution, CalPERS and its board "shall... have

sole and exclusive responsibility to administer the system in a manner that will assure prompt

delivery ofbenefits" toparticipants. {Westly v. California Public Employees' Retirement System

Bd. ofAdministration (2003) 105 Cal.App.4th 1095, 1110, italics in original.)

^Moreover, where a public employee becomes entitled toa pension after serving theaggregate time required by the statute, his orher subsequent removal from employment cannotoperate to forfeit apreviously earned pension, unless the employee specifically renounces thepension right. {Skaggs v. CityofLosAngeles, supra.)

^The time ofvesting of the employee's pension rights isa matter separate and distinctfrom the time ofvesting ofthe rights of those entitled toa pension onthe employee's death.{Casserly v. City ofOakland (1936) 6 Cal.2d 64.) The spouse orchild ofapublic employee doesnot acquire a vested interest in a pension until it becomes payable tothe spouse orchild. Itbecomes completely vested on the happening ofthe contingency, and may not be impaired bysubsequent action ofthe public body. {Packer v. Bd ofRetirement ofLos Angeles County PeaceOfficers'Retir. Sys (1950) 35 Cal.2d 212; Vero v. Sacramento City Emp. Retirement Sys (1940)41 Cal.App.2d482.)

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VI. Wrongful Withholding. CalPERS had an obligation to fully pay. CalPERS failed to pay

the fully vested matured benefit or fund when due. Wrongful withholding requires showing of

failure to pay or to deliver money when obligated to do so. {Ross v. Old Republic Ins. Co. (Colo.

App. 2006) 134 P.3d 505, 512.)

VII. Distinguishing the PERL from the Unemployment Insurance Code. CalPERS hasan

underlying financial obligation to Plaintiffs. Under the PERL, benefits vest during employment

and mature on the filing ofaretirement application. Unlike under the administrative scheme of

the Unemployment Insurance Code, Plaintiffs are already eligible for benefits at the time offirst

payment. In this case, CalPERS recognized that Plaintiffs were initially entitled to abenefit, but

wrongfully underpaid or withheld funds from Plaintiffs. CalPERS later paid higher benefits and

accumulated oraggregated the prior underpayments into a lump sum orother transfer.

VIII. Interest on Underpaid or Deiaved Benefits or Funds. Under Section 3287(a), a person

is entitled to interest when herecovers damages and theright vested ona certain day. (Goldfarb

V. Civil Service Com. (1990) 225 Cal.App.3d 633.) Goldfarb relied heavily on Mass v. Board of

Education (1964) 61 Cal.2d 612 at 625:

The Civil Code requires vesting, however, only inorder to fix with sufficientcertainty the time when the obligation accrues sothat interest should not beawardedon an amountbefore it is due. Each salary payment in the instant caseaccrued on a date certain. Unless thesuspension [i.e. underpayment] itselfcan besustainedand the board thusrelievedofany obligation whatsoever, thesalarypayments became vested asofthe dates they accrued. Ifplaintiffhad not beenwrongfiilly suspended [i.e. underpaid], he would have obtained the benefit ofthemoneys paid asofthose dates; he has thus lost the natural growth and productivityof the withheld salaryin the form of interest. (Italicsadded.)

Analogously to Goldfarb^ Plaintiffs are entitled to interest on each installment ofpension

from the date it was due. {Goldfarb, supra, at 636.)

^InGoldfarb, the government agency attempted todistinguish Mass by arguing the Massplaintiffobtained acourt order for reinstatement and backpay plus interest in contrast to theGoldfarb plaintiffwho sought a court order for only interest. Goldfarb rejected the argumentbecause it could discern noreason to deny interest onbackpay when the demotion was reversedinan administrative proceeding rather than ina later mandamus court proceeding. In otherwords, the Plaintiffs were entitled to interest without regard toprocedural or venue issues.

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IX. Plaintiffs Have Pled Civil Code 83287(a) Damages. Plaintiffs have pled entitlement to

interest damages pursuant to various legal authorities, including Civil Code section 3287 and thePERL. Plaintiffs seek the highest rate ofinterest rate under the Constitution, the Civil Code, the

PERL, and other authority. Plaintiffs acknowledge that they are not entitled to double recovery

of interest under several different statutes.

Civil Code section 3287 provides 7%. For contracts. Civil Code section 3289 provides

10%. The PERL requires CalPERS to credit interest at 6%. Therefore, Plaintiffs would be

entitled to the higher interest allowed, which is provided under the Civil Code.

X. Civil Code S83287(a) and 3289 Damages Can Only Be Awarded bv a CourtofLaw.

Civil Code sections 3287(a) and 3289 apply to judicial actions. This is made clear by the fact that

Section 3287 is found in Division 1,Part 4, Title 2, Chapter 2 of the Civil Code under "Damages

as Interest", and the term "damages" isdefined inChapter 1, "Damages in General", where

Section 3283 describes them as damages awarded "in ajudicial proceeding". Under the statute,

courts have awarded prejudgment interest following successful judicial action, including

mandamus, and including wrongfully w/YMeW benefits. (See Tripp v. Swoap (1976) 17 Cal.3d

671,681, and Aguilar v. Unemp. Ins. App. Bd. (1990) 223 Cal.App.3d 239,246.) CalPERS also

breached contracts with Plaintiffs entitling themto interest under Section 3289.

XI. Damages Resulting from Failure toTimely Pay. Plaintiffs were damaged by CalPERS'

failure to timely pay the fimds in full. Amounts recoverable as wrongfully withheld payments of

salary or pensions are damages within the meaning of these provisions. {Sanders v. City ofLos

Angeles (1970) 3Cal.3d 252,262-263; Benson v. City ofLos Angeles (1963) 60 Cal.2d 355,

365-366; Tripp v. Swoap, supra, at 681-683.) Interest is recoverable on each salary or pension

payment fi'om the date it fell due. {Mass v. Board ofEducation, supra, at 624-625; Olson v.

Cory, supra, at 402.)

XII. Actual Payment. CalPERS later paid the benefits in fijll. When CalPERS subsequently

reverses the initial lower payment and pays an accumulation ofthe underpaid benefit, CalPERS

effectively determines that the employee's vested property interests were underpaid and

wrongfiilly withheld. The payment of the lump sum is not adecision giving rise to entitlement to

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benefits inthe first instance. Instead, it is a recognition that the pension was wrongfully withheld,

and, thus, interest should be paid on the underpaid monies.® {Civil Code, §3287; San Diego

County Deputy Sheriffs Assn. v. San Diego County Sheriffs Dept. (1998) 68 Cal.App.4th 1084.)

XIII. Neither CalPERS Nor OAH Have Authority to Award Civil Code S3287(a) Damages

CalPERS and the OAH havedeclinedauthority to awardprejudgment or postjudgement

interest inanadministrative process. Typically, courts of law have such authority. (American

Federation ofLabor v. Unemployment Ins. Appeals Bd. {"AFL") (1996) 13 Cal.4''' 1017, 1023.)Administrative agencies have only the powers conferred on them, either expressly orby

implication. CalPERS is governed by the PERL. {Government Code, §20002.) The powers of

public agencies are derived from the statutes that create them and define their functions. {Kaiser

Foundation Health Plan, Inc. v. Zingale (2002) 99 Cal.App.4''' 1018.) An administrative agency

cannot enlarge orexceed the scope ofauthority that has been statutorily delegated to it{Western

States Petroleum Ass'n v. Department ofHealth Services (2002) 99 Cal.App.4'̂ 999.)Accordingly, an agency's adjudicative jurisdiction must be pursuant to legislative authorization

{Hardin Oldsmohile v. New Motor Vehicle Bd. (1997) 52 Cal.App.4"' 585; Lance CamperManufacturing Corp. v. Republic Indemnity Co. (1996) 44 Cal.App.4''' 194), which must beconveyed expressly and unequivocally {Campos v. Anderson (1997) 57 Cal.App.4'̂ 784).

Because CalPERS (and the OAH) have no authority to award interest under the Civil

Code, the administrative process offers no possibility ofsatisfying, oreven adjudicating, such

claims. CalPERS affirmatively recognized its lack ofsuch authority when it adopted the

Proposed Decision in the Cervelli matter where the ALJ found that "this administrative matter is

not the proper forum for resolution of this issue." {FAC, Exhibit 10.)

To show equal protections violation. Plaintiffs provided a prior "Interim Orders" that

CalPERS was required to award interest, including under the Civil Code. (FAC, Exhibit 14.)

8 CalPERS only paid the lump sum because the payments had previously vested. Itcannot make a gift offunds. Ifthe funds had not been wrongfully withheld, Plaintiffs would haveobtained the benefit ofthe monies paid as ofthose dates; they have "thus lost the natural growthand productivity ofthe withheld salary in the form ofinterest". {San Diego County DeputySheriffsAssn., supra, at 1087.)

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PLAINTIFFS' OPPOSITION TOCALPERS' DEMURRER TO FIRST AMENDED COMPLAINT

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However, based oninformation and belief, CalPERS settled the case and the Interim Orders was

never formally adopted byCalPERS. {Declaration John Michael Jensen, 1|22-25.)

XIV. No Available or Adequate Administrative Remedy: Excused, Futile. Inappropriate

An agency's authority is not coextensive with acourt's. An agency's authority is limited

by the scope of the statutory scheme giving rise to the particular agency's powers.

AFL evaluated an administrative scheme in which claimants could not argue thattheir benefits werewrongfully withheld until the administrative process wascompleted; "[u]ntil then, no wrongful withholding ofbenefits ordelay attributableto the administrative process occurs." {AFL, supra, 13 Cal.4th atp. 1037.) Onlythe entity charged with subsequently reviewing thatdecision—^the superior courtina mandamus action—may then award interest for the delayed disbursement ifthe court determines the benefits were wrongfiilly withheld. Goldfarb, however,evaluated an administrative scheme in which the wrongful action and withholdingofpayment was the triggering event for commencing the administrative reviewprocess. {San Diego County Deputy Sheriffs Assn., supra, at 1095.)

Under a CalPERS administrative process interpreting the PERL, the function of CalPERS

oran ALJ is to calculate the pension benefits. Pension benefits are not calculated based on

wrongdoing ordelay. Because CalPERS (and the OAH) have adopted a ruling that they have no

jurisdiction, power orauthority to award interest under the Civil Code, Plaintiffs' Civil Code

mterest claims cannot be considered in the administrative process. {FAC, Exhibit 10.)In

Cervelli, CalPERSadoptedthe Proposed Decision stating:

"Respondent Cervelli argues that in the event the service credit purchased by himisexpunged, CalPERS should made [sic] payment ofinterest on any partialrefund, ordamages asprescribed inthe Civil Code. Respondent cited no legalauthority that would give an administrative law judge authority to determine sucha remedy. Notwithstanding the factual findings above, this administrative matterisnotthe properforumfor resolution ofthis issue" (Exhibit 10 tothe FirstAmended Complaint ("FAC"), Legal Conclusion No. 6, italics added.)

CalPERS adopted the position that the ALJ has no authority toaward Civil Code interest

and the administrative process isnot the proper forum orjurisdiction to bring claims for interest

under the Civil Code? {FAC, Exhibit 10.) Inaddition, because CalPERS disclaimed jurisdiction

' CalPERS is incorrect when it says Cervelli's claims are time-barred because hefailed tofile a Petitionfor Writ ofAdministrative Mandamus challenging CalPERS' decision. No Petitionwas required because CalPERS and the OAH disclaimed jurisdiction over all matters related tointerest, so there was no administrative finding to appeal.

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PLAINTIFFS' OPPOSITION TO CALPERS'DEMURRER TO FIRST AMENDED COMPLAINT

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over the interest matter, no writ ofadministrative mandamus was required because effectively

the interest question was never heard in the Cervelli administrative process. (No writ was taken)Instead, the statute oflimitations on the Civil Code interest claim accrued at the time that

CalPERS adopted the Proposed Decision. Cervelli timely joined (as amatter of law) in aclassmember's government claims filing less than 6months later. Cervelli is an appropriate classrepresentative in this action.

"This is not acase where plaintiffbypassed an available administrative procedure. No

such procedure existed. In the absence of an available administrative remedy, the exhaustiondoctrine does not apply." {People v. Beaumont Inv., Ltd. (2003) 111 Cal.App.4 102,124, citing

for authority to Farmers Ins. Exchange v. Superior Court (1992) 2Cal.4^^ 377, 391.)On the other hand, CalPERS delays wrongly withheld vested benefits. Plamtiffs' pension

benefits vest during employment, mature at retirement or other contingency,'® and aPlaintiffspension benefits become payable immediately. As matters of law, there is no eligibilitydetermination, no inherent delays in the system. Because like welfare benefits, pension benefits

..are amonetary obligation ofthe state subject to determination by reference tofixed payment schedules and become due when an applicant has establishedeligibility, the court found they accrue interest under Civil Code section 3287.(Tripp V. Swoap, supra, 17 Cal.3d at pp. 682-683.) Like Mass, the holding inTripp V. Swoap has been relied upon in anumber of contexts to support an awardofinterest. (Aguilar v. Unemployment Ins, Appeals Bd, supra, at 243.)

As the Plaintiffs' rights to fiill payments vested when each Plaintiffestablished the facts

entitling him or her to the benefits, an interest award for the delay the agency caused bywrongfully withholding benefits is appropriate. {Tripp v. Swoap, supra, at 684.) Interest wasrecoverable because (1) pension benefits are an established monetary obligation; (2) the right to

payment vested once the claimant established eligibility; and (3) the claimant could enforce theobligation by acourt action. Aguilar v. Unemployment Ins. Appeals Bd, supra at 241.) With orwithout amandamus action, "under Tripp v. Swoap the superior court was empowered to order

the agency to pay interest." {Aguilar v. Unemployed Ins. Appeals Bd., supra, at p. 246, fh. 4.)

CalPERS owes Plaintiffs a financial obligation prior tofull maturation, including asCalPERS received contributions during employment.

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XV. No Exhaustion Required; CalPERS Misstates FAC. CalPERS* Demurrer asserts that

Plaintiffs have failed to plead that they exhausted their administrative remedies. However,

Plaintiffs' FAC pled that CalPERS (and the OAH have no authority to award prejudgment or post

udgment damages interest pursuant to Civil Code section 3287(a). {FAC, 1|122,34:17-21,1|137,37:10-12 and 1|144(e), 39:18-21.) CalPERS has admitted as much. {FAC, Exh. 10.)

XVI. Exhaustion Excused When Remedies Are Unavailable. Inadequate. The rule

requuing exhaustion ofadministrative remedies does not apply where an administrative remedyis unavailable or inadequate. {California Teachers Ass'n v. Governing Bd ofSalinas CityElementary School Dist (2010) 187 Cal.App.4^ California Water Impact Network v. Newhall

County Water Dist. (2008) 161 Cal.App.4^ 1464.)XVII. Res Judicata. Collateral Estoppel Arising from Cervelli Matter. For purposes of

resolving the issues on demurrer, CalPERS has already ruled it cannot award Civil Code interestill the administrative process. Resjudicata and collateral estoppel bar CalPERS from changmg

the position it took when adopting the Proposed Decision in Cervelli's case. Even ifthere werean available administrative process (which there is not), only one class member needs to exhaust.

Cervelli "exhausted" and discovered no jurisdiction arose. An exhaustion requirement was also

void. Additional presentation is futile. {Grier v. Kizer (1990) 219 Cal.App.3d 422,430-431[exhaustion of remedies excused when pursuit of administrative claim would be futile].)For purposes ofexhaustion ofadministrative remedies, Cervelli has shown that an appealthrough the CalPERS administrative process would not allow any other class members to beentitled to Civil Code interest. {Lopez v. Civil Service Com. (1991) 232 Cal.App.3d 307, 313.)

VVTTT. CalPERS DidNotAdoptSarli Decision on Interest to Legislators. Based on

information and belief, CalPERS did not formally adopt the proposed decision to award interest

to legislators. {Jensen Declaration.) Plaintiffs included Exhibit 14 to the FAC to demonstrate anequal protection violation where CalPERS paid interest to certain powerful legislators. This waspursuant to asettlement, not an administrative finding. Although the ALJ ruled that CalPERSowed interest to legislators who had portions of their pension allowances delayed, on informationand belief CalPERS did not formally adopt the OAH Order and instead reached a settlement.

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Documents

Los Angeles, CA 90064 (310)312-1100 Attorneys for ...interestclassaction.com/pdf/Plaintiffs' Opposition to CalPERS... · (1998)68 Cal.App.4th1084 7-8 Sanders v. City ofLos Angeles