California Supreme Court Issues Orders in Four Remaining Cases Challenging Legality of PEPRA

Nossaman LLP

On September 23, 2020, the California Supreme Court issued orders in each of the four cases it had accepted for review but deferred pending its resolution of Alameda County Deputy Sheriff's Association, et al. v. Alameda County Employees' Retirement Association, et al. (State Of California) (Alameda) 

On July 30, 2020, the Court issued its decision in Alameda (2020) 9 Cal.5th 1032 (“Alameda decision”). Information on the Alameda decision and its analysis of the California Rule and Public Retirement System Governance is available in a previous Nossaman eAlert. The Court has now decided to dismiss two of the petitions for review and to remand the other two cases back to the courts of appeal.      

The first order the state Supreme Court issued on September 23 applies to the First Appellate District’s decision in Marin Assn. of Public Employees v. Marin County Employees’ Retirement Assn. (2016) 2 Cal.App.5th 674 (“MAPE”). The Court dismissed the appellants’ petition for review in light of the Alameda decision. This order means that MAPE’s ruling that affirmed the Marin County Superior Court’s dismissal of plaintiffs’ challenge to the Board of Retirement of Marin County Employees’ Retirement Association’s implementation of the Public Employees’ Pension Reform Act of 2013 (“PEPRA”) stands. Information about MAPE is available in our eAlert from August 2016.

The second order the state Supreme Court issued on September 23 applies to another First Appellate District decision, McGlynn, et al. v. State of California (2018) 21 Cal.App.5th 548 (“McGlynn”). The Court also dismissed its petition for review of this case in light of the Alameda decision. This order means that McGlynn’s ruling that estoppel provided no basis upon which to exempt judges who were appointed to the bench as of January 1, 2013 from PEPRA stands. Information about McGlynn is available in our eAlert from March 2018.

The final two orders the state Supreme Court issued on September 23 both involve challenges to the constitutionality of felony forfeiture provisions of PEPRA. 

As to one of those orders, the Court transferred Hipsher v. Los Angeles County Employees Retirement Assn. (2018) 24 Cal. App. 5th 740 (“Hipsher”) back to the Second Appellate District, Division Four, with “directions to vacate its decision and to reconsider the cause in light of [the Alameda decision].” Information about Hipsher is available in our eAlert from June 2018.

With respect to the second of those orders, the Court transferred Wilmot v. Contra Costa County Employees’ Retirement Association (2018) 29 Cal. App. 5th 846 (“Wilmot”) back to the First Appellate District, Division Two, with “directions to vacate its decision and to reconsider the cause in light of [the Alameda decision].” The Court further specifically ordered, however, “In doing so, the court is directed to address and resolve petitioner's claim under the contract clause of the California Constitution.”

These final two orders make it clear that we have not yet heard the last word on the California Rule from our courts. The constitutional question presented in both Hipsher and Wilmot is whether the California legislature’s felony forfeiture statute enacted in 2012, which expanded the scope of pension forfeiture laws to individuals to whom they did not previously apply and to felonies that were not previously covered, passes muster under the state constitution’s Contracts Clause. The analysis, reaffirmed in the Alameda decision based on Allen I, considers whether the legislative purpose of the statutory changes was constitutionally permissible. That is, a court is to assess whether such changes “bear some material relation to the theory … and successful operation” of a public retirement system and, if so, whether providing comparable advantages to the affected members (those who had not yet retired as of January 1, 2013 who forfeit all or a portion of their retirement allowance after conviction of a felony on the job) would undermine the permissible purpose of the statute. That constitutional question is now left to both the Second Appellate District and First Appellate District to resolve in light of the Alameda decision, subject of course to potential further state Supreme Court review. The more than seven-year saga of post-PEPRA litigation thus continues.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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