In this appeal, we revisit the provisions of the Oakland City Charter that determine how retirement benefits are calculated for members of the Oakland Police and Fire Retirement System (PFRS). The Retired Oakland Police Officers Association, along with several PFRS members and beneficiaries (collectively, the Association), appeal from a judgment granting a peremptory writ of mandate and declaratory relief in favor of the City of Oakland (City). In the trial court, the City successfully argued that the Oakland Police and Fire Retirement Board (Board) had impermissibly included certain holiday premium pay and shift differential pay in the calculation of PFRS retirement benefits. The Board was ordered to correct its calculations for all future payments and to implement a plan for recovering past overpayments made to retirees.
PFRS was created in 1951 when separate police and fire retirement systems were merged pursuant to article XXVI of the Oakland City Charter (Charter). (Charter, art. XXVI, § 2600.) Only members of the Oakland Police Department (Department) or Oakland Fire Department hired prior to July 1, 1976, are eligible for coverage by PFRS.
PFRS is funded through a combination of member contributions (reportedly between 5 and 13 percent of each member paycheck), investment returns and additional monies supplied by the City "as may be necessary." (Charter, art. XXVI, §§ 2601, subd. (e), 2619.) Its governing Board consists of seven members, including representatives of the City, the Department, the fire department and the PFRS retirees, as well as a local life insurance executive, a banker and a community representative. (Id., § 2601.) Pursuant to the terms of the Charter, PFRS is managed and administered by the Board, which has "exclusive control of the administration and investment" of all PFRS funds. (Id., subd. (e).)
In a fixed pension system, benefits are paid to a retiree based on the compensation paid to that retiree for a defined period of time prior to retirement. (Kreeft v. City of Oakland (1998) 68 Cal.App.4th 46, 48, fn. 1 [80 Cal.Rptr.2d 137] (Kreeft), citing Dunham v. City of Berkeley (1970) 7 Cal.App.3d 508, 511, fn. 1 [86 Cal.Rptr. 569] (Dunham).) PFRS, in contrast, is a "fluctuating" system under which pension benefits paid to retired members increase or decrease over time as the compensation paid to active members of the Department similarly rises or falls. (Kreeft, supra, 68 Cal.App.4th at p. 48; see Dunham, supra, 7 Cal.App.3d at p. 511.) The primary purpose of a fluctuating pension plan such as PFRS "is to guarantee the pensioner a fairly constant standard of living despite inflation, and to maintain equality of position between the retired member and the person (or persons) currently holding the rank the pensioner attained before his retirement." (Kreeft, supra, 68 Cal.App.4th at p. 54.) Thus, a PFRS retiree receives benefits based on the compensation currently paid to active sworn personnel
Although the relevant provisions of the Charter with respect to the calculation of pension benefits based on "compensation attached to rank" have not changed over the years, the application of that Charter language in the context of holiday premium pay has not been similarly static. Indeed, there is a long and storied history to the holiday pay issue, involving multiple lawsuits, stipulated settlements, and numerous changes to the various memoranda of understanding (MOU's) governing the City's holiday compensation obligations with respect to active members of the Department. While the City attempts to limit the discussion in this case to the current MOU's provisions authorizing holiday pay, we find the history instructive and therefore summarize it here.
Before we begin, however, we note that discussion and analysis of the holiday pay issue has been clouded in the past by failure to define the terms "holiday pay" and "holiday premium pay" in a precise manner. For purposes of this opinion, we will use the two terms interchangeably to refer to that pay in excess of the regular or base pay to which a member of the Department may be entitled due to the occurrence of a holiday. Thus, holiday pay includes the extra compensation payable to a police officer who works on a holiday (over and above base pay), as well as the compensation due an officer who has a regular day off or takes vacation on a holiday and therefore does not work.
The question of whether holiday pay is "compensation attached to rank" for purposes of calculating PFRS retirement benefits was first addressed by
In the wake of Buck, the City reportedly tried to avoid the inclusion of holiday pay in PFRS retirement benefits by altering the holiday pay structure for active members of the Department. Specifically, the Department began giving active officers compensatory time off in lieu of actual holiday pay. In response to this change, lawsuits were filed and eventually the City was permanently enjoined from enforcing any "ordinance, resolution or directive which decreases or attempts to decrease the holiday pay ... received by Oakland police officers or firemen as `monthly compensation comprising
The City and the Oakland Police Officers' Association (OPOA) adopted the first MOU setting Department compensation in 1973 after the Doan decision. As part of the 1973 MOU, the City agreed not to appeal the decision in Doan and to comply with the terms of the permanent injunction, including the "computation of retirement benefits under the Buck Decision" with respect to holiday pay. In 1974, a more comprehensive MOU was adopted which designated 11 holidays and indicated that premium pay for holidays was to be "computed at the regular hourly base rate of pay for an employee's classification, rather than at the [overtime] rate of time and one-half." Thus, as in Buck, members of the Department received eight hours of holiday premium pay. Similar language was carried over into the 1975 MOU. During this timeframe, the extra eight hours of compensation received by members of the Department as holiday premium pay was included in the calculation of PFRS retirement benefits.
In 1976, the City and OPOA adopted an MOU increasing holiday premium pay from the straight time rate (eight hours) to a rate based on "time and one-half the regular base rate of pay for an employee's classification" (12 hours). The 1976 MOU, however, contained the following language impacting the calculation of PFRS retirement benefits: "City and [OPOA] agree that premium pay shall not be subject to retirement except for the straight time portion of holiday pay." Although the record does not contain MOU's covering the period from 1988 through 1994, it appears that similar limiting language continued from 1976 up through the 1995-1998 MOU. Based on the language of the MOU's, PFRS retirees only received credit for eight hours of holiday premium pay in the calculation of their retirement benefits from 1976 through 1996. In contrast, active members of the Department received 12 hours of holiday pay during this same period. At some point between 1986 and 1995, the number of paid holidays increased from 11 to 12.
Holiday premium pay was again the subject of litigation in 1996. (See Oakland Police & Fire Retirement Assn. v. City of Oakland (Super. Ct. Alameda County, 1996, No. 763859) (Arca II).) Arca II was a class action lawsuit filed on behalf of PFRS retirees and their beneficiaries challenging the MOU language that excluded retirees from receiving credit for the additional four hours of holiday pay that was being paid to active members of the Department. In that case, the City did not contest the holding in Buck, but
In accordance with Arca II and the related settlement agreement, the 1998-2001 MOU between the City and OPOA deleted the language limiting holiday pay for PFRS retirees, stating simply that premium pay for holidays would be "computed at time and one-half the regular base rate of pay for an employee's classification." Identical language appeared in the 2001-2006 MOU. In practice, however, the application of holiday premium pay to the various shifts worked by active members of the Department was becoming more complex. In 2000, the Department issued departmental general order 8 (DGO 8) interpreting the MOU provisions in light of these changes. Pursuant to DGO 8, a member who took holiday time off was paid at the straight time rate of eight or 10 hours, depending on the length of that member's usual shift. A member of the Department who worked on a holiday received regular base pay (of either eight or 10 hours) plus 1.5 times that base pay in holiday premium pay. When a holiday fell on a member's regular day off, that member was allotted 12 hours of holiday pay, regardless of whether he/she usually worked an eight or 10-hour shift. Finally, a member who was required to work on a holiday that was his/her regular day off was granted 12 hours in base pay, plus 1.5 times base pay in holiday premium pay. Thus, while all members were entitled to holiday pay for each holiday, the amount actually received on a particular holiday varied from eight to 18 hours, depending on scheduling and length of shift. During this same time period, PFRS retirees continued to receive credit for 12 hours of holiday pay for each holiday in accordance with the terms of Arca II.
Upon expiration of the 2001-2006 MOU, the City and OPOA reached an impasse in negotiations and thus the terms of the successor MOU were determined through an arbitration process conducted by arbitrator Barry Winograd. The resulting 2006-2010 MOU states expressly that it was entered
As a result of additional negotiations between the City and OPOA, the 2006-2010 MOU was subsequently extended into 2013. This amended and extended MOU temporarily changed the structure of holiday pay for active members of the Department. Specifically, for the 2009, 2010, and 2011 fiscal years, only seven of the regular holidays were paid in accordance with the customary policy established by the MOU. For the other six holidays, active members received no holiday pay for holidays that were not worked and "straight time pay" for holidays that were worked. Currently, holiday pay for active members of the Department is governed by the 2006-2013 MOU, which has been extended a second time into 2015. No additional changes have been made with respect to the provisions governing holiday premium pay except that, for the 2012, 2013, and 2014 fiscal years, active members are not entitled to any holiday pay for Admission Day. Members who work on Admission Day will still receive their regular base pay for that shift.
In contrast to holiday premium pay, the inclusion of shift differential pay in the calculation of PFRS retirement benefits is of fairly recent origin. Prior to the 2001-2006 MOU, active members of the Department in the patrol division received a type of premium pay called "line-up pay," which was 30 minutes of extra compensation for the organizational meeting that occurred prior to the beginning of a shift. The 1974 MOU (and all subsequent MOU's contained in the record through 1998) states that "[c]ompensation for ... Patrol Division line-up time shall be computed at the regular hourly base rate of pay for an employee's classification ...." The 1998-2001 MOU modified this arrangement for certain shifts, stating: "For members working the first and second watches, line-up shall be accomplished during the regular ten hour shift and such members shall not receive line-up pay. For members working the third watch and for members working a five day, eight hour schedule in Patrol, line up time shall be computed at the regular hourly base rate of pay for an employee's classification ...." Thereafter, in the
Although it eliminated line-up pay, the 2001-2006 MOU added shift differential pay as a form of premium pay "for certain hard-to-fill shifts on swing and night shift in order to encourage more experienced officers to take night shifts." Pursuant to both the 2001-2006 MOU and the 2006-2015 MOU, a member assigned to a work unit (other than traffic or vice/narcotics) "that requires a regular work schedule with late evening and/or early morning hours or to an assignment with a flexible hours schedule," may be eligible for shift differential pay of between 6.25 percent and 8.25 percent. In a letter sent to PFRS retirees dated March 27, 2002, the City indicated that shift differential pay at a rate of 7.25 percent (an agreed-upon composite rate) had replaced line-up pay and would be included in the calculation of retirement benefits as of April 1, 2002, for PFRS retirees who had previously received line-up pay.
On February 24, 2010, the City and the Association appeared before the Board to discuss the temporary reduction in holidays implemented by the 2006-2013 MOU for active members of the Department. Specifically, pursuant to the terms of the MOU, the chief of police was required to designate six holidays for each of fiscal years 2009-2010, 2010-2011, and 2011-2012 that would be unpaid. The City argued before the Board that this temporary reduction should be reflected in the calculation of PFRS retirement benefits for the years affected.
The Association, in contrast, argued that no reduction was required. Specifically, it contended that the 2006-2013 MOU contained conflicting provisions with respect to the number of designated holidays because the Winograd Decision — which was attached and incorporated into the extended MOU — stated that the number of holidays was "status quo," while the three-year reduction in the number of holidays was contained in the revised
Thereafter, in October 2010, the City informed the Board by letter that PFRS retirees were being overpaid for holidays under the current MOU because they were receiving credit for holiday premium pay at the rate of time and one-half, rather than straight time holiday pay. The City indicated that it intended to exclude the holiday premium pay from retiree benefits as of January 1, 2011, and requested the Board's assistance in determining how best to recover past overpayments. After the Board responded challenging the City's authority to alter the benefits payable to PFRS retirees on a unilateral basis, the City agreed to delay any benefit reduction pending a hearing on the matter before the Board.
Proceedings before the Board with respect to the holiday premium pay issue were held on November 17, 2010, and January 26, 2011. At those hearings, the City argued that the 2006-2010 MOU altered the way that active members of the Department are compensated for holidays by making a distinction between members who work on the holiday (and receive holiday premium pay at a rate of time and one-half) and members who do not work on the holiday (and receive holiday premium pay at a straight time rate). The City claimed that pension benefits should only reflect straight time pay for holidays because retirees, by definition, do not work.
The Association, unsurprisingly, disagreed with the City's analysis. After recounting the extensive history of the holiday pay issue summarized above, it noted that police departments must be adequately staffed around the clock for public safety reasons. Consequently, unlike most other employees, police officers work on holidays as a matter of course and the extra pay associated
The Board continued the matter so that it could receive and consider an opinion from its attorney on the holiday pay issue. In a letter dated February 16, 2011, the Board's counsel opined that the holiday pay language in the 2006-2010 MOU did not constitute a change, but was instead merely a clarification of long-standing practice. Counsel further stated that — even if a change in compensation for active members had occurred — it was irrelevant since the Buck case had concluded that the extra compensation paid to active police officers for actually working a holiday constitutes "compensation attached to rank" for retirement purposes despite the fact that retirees, obviously, do not work on holidays. Finally, the Board's attorney noted that treating holiday premium pay earned for working a holiday as "compensation attached to rank" is consistent with the underlying purposes of a fluctuating pension system like PFRS: Since active police officers routinely work holidays and historically have received holiday premium pay for such work, including this extra compensation in the calculation of PFRS benefits would maintain equality of position between active and retired members of the Department. After considering all of the information before it, the Board concluded that no overpayment to PFRS retirees had occurred.
As stated above, the new benefit of shift differential pay was made available to active members of the Department as part of the 2001-2006 MOU. However, no hearings were ever held before the Board with respect to the inclusion of shift differential pay as part of "compensation attached to rank." Rather, shift differential pay was included in the calculation of benefits for those retirees who had previously received line-up pay in accordance with the City's letter of March 27, 2002.
On June 14, 2011, the City filed a petition for writ of mandate and complaint for declaratory relief against PFRS and the Board in Alameda County Superior Court. In its papers, the City claimed that the Board was overcompensating PFRS retirees in four specific ways: (1) by paying retirees at an excessive rate for holidays; (2) by paying retirees for too many holidays; (3) by including shift differential pay in the calculation of retiree benefits; and (4) by paying retirees who retired above the rank of captain at
PFRS and the Board filed their answer on August 1, 2011, disputing all of the City's overpayment claims. On August 24, 2011, the trial court granted the Association leave to intervene, and on August 29, 2011, the Association filed its complaint in intervention, joining PFRS and the Board in contesting the City's allegations. Evidence and argument were provided to the trial court largely in the form of declarations and briefing, although the trial court did hold oral argument on May 2, 2012, and June 1, 2012, in connection with the publication of its tentative decision.
On August 10, 2012, the trial court issued its order granting the City's petition for a writ of mandate and adjudicating the City's request for declaratory relief in the City's favor. The trial court's conclusions were based largely on its analysis of the First District's opinion in Kreeft, supra, 68 Cal.App.4th 46, which considered the Charter provision involving "`compensation attached to the rank'" in the context of certain overtime pay authorized by the federal Fair Labor Standards Act of 1938 (FLSA; 29 U.S.C. § 201 et seq.). Based on its reading of Kreeft, the trial court held that holiday pay at the rate of time and one-half payable to active members of the Department for working on holidays was not "`compensation attached to the rank'" for purposes of calculating PFRS retirement benefits. Rather, PFRS retirees were entitled to credit only for the straight time holiday pay authorized for active members regardless of whether a holiday is actually worked. The trial court further determined, based on the express language of the 2006-2013 MOU, that PFRS retirees should only have been credited for seven holidays during the three fiscal years (2009-2010, 2010-2011, and 2011-2012) in which active members of the Department received similarly reduced holiday pay. With respect to shift differential pay, the trial court resolved that such pay was also not "`compensation attached to the rank'" and should not be used in calculating PFRS benefits. The trial court ordered prospective relief and directed the Board to collect any overpayments, subject to the applicable statute of limitations. Judgment was entered on September 7, 2012, and this timely appeal followed.
The trial court properly determined that ordinary mandamus pursuant to section 1085 of the Code of Civil Procedure is the appropriate procedural mechanism for resolving the dispute in this case. (Kreeft, supra, 68 Cal.App.4th at pp. 52-53.) "In reviewing a trial court's judgment on a petition for writ of ordinary mandate, we apply the substantial evidence test to the trial court's factual findings. However, we exercise our independent judgment on legal issues, such as the interpretation of statutory retirement provisions." (Id. at p. 53; see Lindelli v. Town of San Anselmo (2003) 111 Cal.App.4th 1099, 1104 [4 Cal.Rptr.3d 453] (Lindelli).) Similar standards apply when we consider whether a determination is proper in an action for declaratory relief. (Carson Citizens for Reform v. Kawagoe (2009) 178 Cal.App.4th 357, 366 [100 Cal.Rptr.3d 358] [review of declaratory relief is generally for abuse of discretion; however, when facts are undisputed and issue is one of statutory interpretation, independent judgment/de novo review appropriate].)
As stated above, the trial court in this case determined that the time-and-one-half holiday pay which active members of the Department receive for working on holidays is not "compensation attached to rank" for purposes of the calculation of PFRS retirement benefits. Relying on the First District's decision in Kreeft, the trial court concluded that PFRS retirees should only be credited with straight time premium pay for holidays. The Association challenges the trial court's holiday pay ruling on a number of grounds. It asserts, for instance, that prior court decisions by the First District in Buck and by the Alameda County Superior Court in Arca II are res judicata, barring the City from relitigating the issue of holiday pay. The trial court summarily dismissed the doctrine of res judicata, remarking simply that Buck and Arca II concerned retiree rights when compensation for active members of the Department was "set by different MOUs." We, in contrast, find the doctrine dispositive.
Whether two lawsuits are based on the same cause of action is determined in California by reference to the primary right theory. (Mycogen, supra, 28 Cal.4th at p. 904.) Under this theory, a "cause of action" is comprised of a primary right possessed by the plaintiff, a corresponding duty imposed upon the defendant, and a wrong done by the defendant which is a breach of such primary right and duty. (Balasubramanian v. San Diego Community College Dist. (2000) 80 Cal.App.4th 977, 991 [95 Cal.Rptr.2d 837] (Balasubramanian).) The primary right is the plaintiff's right to be free of the particular injury, regardless of the legal theory on which liability is premised or the remedy which is sought. (Mycogen, supra, 28 Cal.4th at p. 904; accord, Estate of Dido (2011) 198 Cal.App.4th 791, 801 [130 Cal.Rptr.3d 279].) Thus, it is the harm suffered that is the significant factor in defining the primary right at issue. (Alpha Mechanical, supra, 133 Cal.App.4th at p. 1327;
Of course, we do not mean to imply that the City is forever bound by the mandate of Buck, regardless of current circumstances. That is clearly not the law. Rather, as the First District has summarized: "The theory of estoppel by judgment or res judicata ... extends only to the facts in issue as they existed at the time the judgment was rendered and does not prevent a reexamination of the same questions between the same parties where in the interim the facts have changed or new facts have occurred which may alter the legal rights of the parties. When other facts or conditions intervene before a second suit, furnishing a new basis for the claims and defenses of the respective parties, the issues are no longer the same and the former judgment cannot be pleaded in bar of the second action ...." (American Broadcasting Cos. v. Walter Reade-Sterling, Inc. (1974) 43 Cal.App.3d 401, 408 [117 Cal.Rptr. 617].) Thus, for example, in California Employment Stabilization Com. v. Matcovich (1946) 74 Cal.App.2d 398, 399-401 [168 P.2d 702], the court considered whether the operator of a "`taxi dance hall'" and his "taxi dancers" had an employment relationship sufficient to trigger the payment of unemployment contributions. The owner enforced numerous rules as to when and how the dancers could work and paid the dancers a percentage of the house earnings based on the services they performed. Under these facts, the court concluded that an employment relationship existed. (Id. at pp. 400-402, 404.) However, a previous judgment, covering a different period of time, had concluded exactly the opposite — that the taxi dancers were not in the employ of the owner. The appellant argued that this prior decision was res judicata as to the status of the taxi dancers. (Id. at p. 401.) In addressing the issue, the court noted that, during the time period covered by the prior case, no written
In the present case, in contrast, the City has failed to make any showing that a material change in circumstances has occurred since Buck with respect to the holiday pay issue which would justify its relitigation. As stated above, neither the change in the underlying document providing the holiday pay benefit, nor the fact that the current MOU expressly discusses holiday pay for members who do not work holidays is a material change justifying relitigation. Further, the City's specious argument — that retirees should not be compensated for working on holidays because they currently do not work — misses the point entirely and, regardless, has been true since Buck was decided. The appropriate inquiry is not whether retirees no longer work, but rather how active members are compensated for holiday work and whether this has changed significantly since Buck. The evidence presented in the trial court on this issue was clear and essentially uncontested by the City: PFRS members regularly worked holidays when they were active and, in fact, made contributions to PFRS based on the premium pay they received for holiday work. Moreover, active members of the Department currently work most holidays that fall during their regular work schedule and earn premium pay for doing so. Thus, holiday staffing and compensation practices have been consistent since Buck. Indeed, this common experience for police officers has been memorialized in a number of cases that have considered the holiday pay issue. (City of Fremont v. Board of Administration (1989) 214 Cal.App.3d 1026, 1031 [263 Cal.Rptr. 164] ["`[b]eing subject to working on holidays as regular work days is normal for police officers ...'"]; see Rose v. City of Hayward (1981) 126 Cal.App.3d 926, 941 [179 Cal.Rptr. 287] [citing City of Hayward's administrative rule that all police officers are regularly required to work on legal holidays].) Since the City has not pointed to any meaningful change in the holiday work patterns of Department members, it is not entitled, at this point, to reopen the issue of holiday pay.
Based on all of these circumstances, the Kreeft court held that the FLSA overtime pay at issue was not "compensation attached to the ... rank" because it was not incident to the rank held, but was rather a function of the actual hours a firefighter worked during each pay period and was therefore "attached" to an individual firefighter's schedule. (Kreeft, supra, 68 Cal.App.4th at pp. 49, 55, 61.) To be "`attached to the rank" the court opined, "the employee must be entitled to the compensation by virtue of the rank, and not his individual efforts over and above what are required to obtain the rank." (Id. at pp. 57-58.) The court went on to distinguish the circumstances in Kreeft from other "`variable'" cases in which some members of the same rank received a benefit while others did not. (Kreeft, supra, 68 Cal.App.4th at pp. 58-61; see, e.g., Dunham, supra, 7 Cal.App.3d at pp. 511-516 [salary increase based on longevity and training requirements]; Estes v. City of Richmond (1967) 249 Cal.App.2d 538, 541, 546 [57 Cal.Rptr. 536] ["hazardous duty pay" for completing one "tour of duty" each month]; Abbott v. City of Los Angeles (1960) 178 Cal.App.2d 204, 213-215 [3 Cal.Rptr. 127] [longevity and merit pay].) In those cases, the variability was limited to whether an employee did or did not qualify for the benefit, and there was evidence that the retirees, while working, had performed the services that would have entitled them to the extra compensation. (Kreeft, supra, 68 Cal.App.4th at p. 60.) Kreeft, in contrast, involved a situation where there was not only
We view Kreeft as a commonsense application of the Charter provisions to particular facts rather than as a significant departure from existing precedent. Certainly, there is nothing in the statutory analysis engaged in by the Kreeft court that could not have been argued to the First District in Buck. For instance, it could easily have been urged that working on a holiday was based on individual effort and scheduling rather than rank. (Cf. Kreeft, supra, 68 Cal.App.4th at pp. 57-58.) A "`prior judgment is res judicata on matters which were raised or could have been raised, on matters litigated or litigable.'" (Kronkright v. Gardner (1973) 31 Cal.App.3d 214, 217 [107 Cal.Rptr. 270], quoting Sutphin v. Speik (1940) 15 Cal.2d 195, 202 [99 P.2d 652].) "Were the rule otherwise, litigation finally would end only when a party ran out of counsel whose knowledge and imagination could conceive of different theories of relief based upon the same factual background." (Kronkright v. Gardner, supra, 31 Cal.App.3d at p. 216.) Thus, the analysis set forth in Kreeft does not, itself, provide a basis for revisiting the issue of holiday pay.
In sum, the City's claim in this case constitutes the same cause of action as that previously decided against the City in Buck. Further, there are no intervening changes in facts or law that would justify a reexamination of the same issue between the same parties. Thus, the City is barred by the doctrine of res judicata from relitigating the issue of holiday premium pay.
The Association does not, in this appeal, contest the merits of the trial court's determination that shift differential pay is not "compensation attached to rank" for purposes of calculating PFRS retirement benefits. Rather, it cites two procedural grounds as the bases for its conclusion that the trial court's decision with respect to shift differential pay was improper. First, the Association argues that the trial court was barred from considering the question of shift differential pay because the City did not exhaust the available administrative remedies with respect to that issue. Second, the Association contends that the trial court decision with respect to shift differential pay was improperly premised upon inadmissible extra-record evidence. We address each assertion in turn.
Article XXVI, section 2603 of the Charter provides in relevant part: "The Board may and in disputed matters shall hold public hearings in all proceedings pertaining to retirement and to the granting of retirement allowances, pensions, and death benefits. Notice of the time and place of such hearing shall be given in writing to the member or dependents affected thereby .... The member or dependents affected thereby shall be entitled to appear personally at said hearing and to have counsel." It is undisputed that the City did not request a hearing before the Board in accordance with section 2603 on the propriety of including shift differential pay in the calculation of PFRS retirement benefits as "compensation attached to rank." The Association contends that such a hearing was an administrative prerequisite to litigation and, since the City failed to exhaust the available administrative remedies with respect to shift differential pay, its claim should not be considered. The City, in contrast, argues that section 2603 merely creates a claims procedure for PFRS members and is therefore inapplicable to disputes between the City and the Board.
The trial court ruled that the City had no exhaustion requirement. Agreeing with the City's characterization of Charter article XXVI, section 2603 as a claims procedure for members, the trial court concluded that "[t]he Board's hearing process is not designed to address disputes between the City and the Board regarding the System's obligations to retirees and the City's resulting
Thus, for instance, in City of Coachella, supra, 210 Cal.App.3d at pages 1281-1283, the local airport land use commission appealed from the grant of a writ of mandate in favor of the City of Coachella which voided the commission's Thermal Airport Land Use Plan (TALUP). The commission argued that the city had failed to exhaust the available administrative remedies, which included the public hearings held by the commission incident to the adoption of the TALUP and a commission regulation requiring it to schedule a meeting "`to consider matters relevant to its duties and responsibilities when requested by ... a local planning agency ....'" (210 Cal.App.3d at pp. 1287-1288.) Citing Rosenfield, the appellate court concluded that exhaustion was not required. (City of Coachella, supra, 210 Cal.App.3d at p. 1287.) Specifically, the court determined that the public hearing process did not constitute an adequate administrative remedy because the "public hearings held by the [c]ommission with regard to the adoption of the TALUP did not require that the [c]ommission do anything in response to submissions or testimony received by it incident to those hearings." (Ibid.) Similarly, the commission's meeting requirement also failed to establish an adequate administrative remedy: "While it is true that this rule does contain a mandatory provision requiring the scheduling of meetings, it is also true that the rule does not mandate that anything be done as a result of such meetings.
The First District has consistently endorsed the approach announced in Rosenfield and applied in City of Coachella. (See, e.g., Unfair Fire, supra, 136 Cal.App.3d at pp. 1429-1430 [ordinance allowing appeal to city council contesting the city's creation of a fire suppression district insufficient to create adequate administrative remedy where "nebulous" procedure does not state how the appeal should be taken, whether there will be a hearing, when the matter will be heard, what evidence may be presented or the standard for reconsideration of the council's initial decision]; Lindelli, supra, 111 Cal.App.4th at pp. 1105-1106 [opportunity to participate in a public hearing not an adequate administrative remedy where city council "not required to do anything in response to their participation"]; Martino v. Concord Community Hospital Dist. (1965) 233 Cal.App.2d 51, 57 [43 Cal.Rptr. 255] (Martino) [no adequate administrative remedy for a physician whose application for appointment to hospital medical staff was "deferred" where hospital bylaws provide only that appeal will be "considered" and fail to set forth "any procedure for the hearing or determination of the appeal"].) Applied to the facts of this case, these precedents compel the conclusion that article XXVI, section 2603 of the Charter does not supply an "adequate" administrative remedy for the City. Exhaustion of administrative remedies was therefore not required.
For instance, as in City of Coachella and Lindelli, the public hearing requirement contained in Charter article XXVI, section 2603 does not require the Board to do anything in response to the submissions or testimony received by it at the hearing. Thus, the procedure does not provide for the acceptance, evaluation and resolution of disputes. (See Rosenfield, supra, 65 Cal.2d at p. 566.) Further, as in Unfair Fire and Martino, the Charter contains no clearly defined procedures for the conduct of a hearing involving the City. (Rosenfield, supra, 65 Cal.2d at p. 566.) Specifically, there are no procedures regarding how to request a hearing, no timelines for when such a hearing will be held or concluded, and no standards for decision making. Simply put, even if section 2603 creates an available administrative remedy for the City, it is inadequate to trigger a mandatory exhaustion requirement. The cases cited by the Association and the Board in which exhaustion was required are distinguishable as involving challenges brought in the context of comprehensive regulatory schemes and do not change our analysis. (Cf. Newhall County, supra, 161 Cal.App.4th at pp. 1489-1490 [appellant required to raise its concerns about water supply assessment with lead agency as part of comprehensive CEQA (California Environmental Quality Act; Pub. Resources Code, § 21000 et seq.) process before seeking judicial intervention]; Chavez v. Civil Service Com. (1978) 86 Cal.App.3d 324, 328-331 [150 Cal.Rptr. 197] [single sentence dismissing challenge under Rosenfield; charter provisions at issue in
Having passed the exhaustion hurdle, we must now decide whether the trial court's determination with respect to shift differential pay must nevertheless be overturned because the trial court impermissibly considered extra-record evidence in reaching its decision. Specifically — in response to an express request by the trial court — the City submitted significant additional evidence, including an analysis of payroll records, supporting its argument that shift differential pay is not "compensation attached to the rank" under Kreeft. Citing Western States Petroleum Assn. v. Superior Court (1995) 9 Cal.4th 559, 574 [38 Cal.Rptr.2d 139, 888 P.2d 1268] (Western States), the Association urges that in mandamus proceedings challenging quasi-legislative administrative decisions, the trial court is strictly limited to the administrative record, and thus consideration of this additional evidence was error. Under the facts of this case, however, the Association's argument is easily dismissed.
Based on its analysis of the holiday pay and shift differential pay issues before it, the trial court determined that PFRS retirement benefits had been calculated improperly in a number of ways, leading to overpayments to PFRS retirees. The court further concluded that the City had not waived its right to collect these overpayments by failing vigorously to press the matter. Rather, the trial court opined that the retirees had no right to retain benefits paid to them improperly and directed the Board to "develop and implement a plan to collect the overpayments."
The Association argues that the trial court erred by mandating the recovery of overpayments made to PFRS retirees. Specifically, the Association contends that any retroactive application of the decision should be barred by the equitable doctrines of estoppel and laches, by the statute of limitations, and/or by the hardship exception to retroactivity. Alternatively, the Association claims that the matter should have been remanded to the Board so that it could consider the Association's equitable claims and defenses in the first instance. With respect to the rate of holiday premium pay, we have concluded that PFRS benefits were appropriately calculated in accordance with Buck, and thus no repayment is required. We will therefore consider the Association's arguments in the context of the two other types of overpayments that remain at issue.
As noted earlier, the Association did not contest on appeal the trial court's underlying conclusion that shift differential pay is not "compensation attached to rank," and therefore the propriety of that decision is not before us. However, the Association does argue that any past overpayments made to PFRS retirees due to the improper inclusion of shift differential pay in their benefit calculation should not be recoverable. We believe these shift differential overpayments are best analyzed under theories of equitable estoppel.
Arguing that it raises factual questions, the Association contends that the issue of equitable estoppel should be considered first by the Board. However, where the facts are undisputed, whether equitable estoppel applies is a question of law. (Golden Gate, supra, 165 Cal.App.4th at p. 257.) Moreover, where the issues require a weighing of policy concerns, they too present a question of law. (Ibid.) In the present case, the record contains undisputed facts sufficient to inform our determination regarding the applicability of equitable estoppel to the shift differential overpayments.
The record reflects, for instance, that certain PFRS retirees received retirement benefits based on line-up pay since the 1984 judicial determination in Arca I that line-up pay was "compensation attached to rank." Further, it is clear that shift differential pay was instituted for active members of the Department as part of the 2001-2006 MOU, the same MOU that abolished line-up pay for active members. It is also undisputed that, on March 27, 2002, the City sent a letter to PFRS retirees asserting in a definitive fashion that shift differential pay had "replaced" line-up pay and would be included in the calculation of retirement benefits as of April 1, 2002, for PFRS retirees who had previously received line-up pay. The City was clearly aware (as it had been litigating the matter for decades) that only "compensation attached to rank" is properly included in the calculation of PFRS benefits. However, the City never asked the Board to determine whether shift differential pay was appropriately characterized as "compensation attached to rank." Nor is there any indication in the record that the City disputed the inclusion of shift differential pay in PFRS retirement allowances until it filed this action in July 2011. Thus, for almost a decade, the City actively asserted that shift differential pay should be treated as "compensation attached to rank," and the Board had knowledge of, and acquiesced in, the City's characterization.
Further, the City manifestly intended that its careless representation regarding shift differential pay would be acted upon by the PFRS retirees to whom it was directed, and the retirees had the right to believe that this was the City's intent. In addition, the retirees were unaware that the City's advice was
The City contends, however, that estoppel is improper in this case because it would enlarge the statutory power of the Board. Specifically, according to the City, invoking estoppel under these facts would require the Board to act in violation of the Charter. We do not find this argument compelling. Undoubtedly, there is a line of cases holding that estoppel cannot lie to contravene any statutory limitation on an agency's authority. (See Longshore, supra, 25 Cal.3d at p. 28 ["no court has expressly invoked principles of estoppel to contravene directly any statutory or constitutional limitations"]; City of Pleasanton v. Board of Administration (2012) 211 Cal.App.4th 522, 542-543 [149 Cal.Rptr.3d 729] [estoppel barred as matter of law where PERS statute precludes treatment of standby pay as pensionable compensation]; Medina v. Board of Retirement (2003) 112 Cal.App.4th 864, 869-871 [5 Cal.Rptr.3d 634] [estoppel not available because retirement board lacked authority to classify as safety members employees who do not meet the statutory definition]; Fleice v. Chualar Union Elementary School Dist. (1988) 206 Cal.App.3d 886, 893 [254 Cal.Rptr. 54] [estoppel cannot expand a public agency's powers]; Crumpler, supra, 32 Cal.App.3d at p. 584 [not a case where invoking estoppel would enlarge the statutory power of the board].) Indeed, were we dealing with the prospective application of estoppel on these facts, we might well find this authority controlling, as prospective application of estoppel would require the Board to calculate retirement allowances using an item of compensation that has been judicially determined not to be "compensation attached to rank," in contravention of the express dictates of the Charter. (See Charter, art. XXVI, §§ 2607, 2608, 2610.) Under such circumstances, the Board could be deemed to "`utterly [lack] the power to
Here, however, we are dealing with the treatment of overpayments by the Board, an area in which we believe the Board has some discretion. As we have emphasized, pursuant to the terms of both the California Constitution and the Charter, the Board has "plenary authority and fiduciary responsibility for investment of moneys and administration of" PFRS. (Cal. Const., art. XVI, § 17; see id., § 17, subd. (a) ["[t]he retirement board of a public pension or retirement system shall have the sole and exclusive fiduciary responsibility over the assets of the public pension or retirement system"]; Charter, art. XXVI, § 2601, subd. (e) [the Board is responsible for the management and administration of PFRS and has "exclusive control of the administration and investment" of all PFRS funds].) This includes the periodic actuarial valuation of the system based on the "mortality, service, and compensation experience of the members and beneficiaries" as well as on the amount of interest being earned. (Charter, art. XXVI, § 2602, subd. (b).) At the conclusion of this multifaceted analysis, the Board may adjust interest rates, mortality and service tables, and member and City rates of contribution in accordance with the terms of the Charter to ensure the actuarial health of the system. (Charter, art. XXVI, § 2602, subd. (b); see In re Retirement Cases, supra, 110 Cal.App.4th at p. 459 ["`[a]ctuarial methodology is designed to address and consider unforeseen events on a regular basis so as to ensure the financial integrity of the retirement system,'" quoting the trial court].) In making the many complex adjustments required for system administration, the discretion of the Board is circumscribed by section 17 of article XVI of the California Constitution, which mandates that public retirement boards "discharge their duties with respect to the system solely in the interest of, and for the exclusive purposes of providing benefits to, participants and their beneficiaries, minimizing employer contributions thereto, and defraying reasonable expenses of administering the system." (Cal. Const., art. XVI, § 17, subd. (b).) Further, "[a] retirement board's duty to its participants and their beneficiaries shall take precedence over any other duty." (Ibid.) Since the Charter does not contain any express provisions regarding the collection of improper payments from retirees, any such overpayments must be analyzed under these general grants of Board authority. (Cf. Gov. Code, § 20160 [specific statute setting standards for the correction of payment errors under PERS].)
Finally, we also reject the City's argument that failure to mandate the return of overpayments in this case is somehow a "gift of public funds" in contravention of section 6 of Article XVI of the California Constitution. Our conclusion in this regard does not, as the parties argue, hinge on whether the constitutional ban on such gifts applies to charter cities such as the City. (See Tevis v. City & County of San Francisco (1954) 43 Cal.2d 190, 197 [272 P.2d 757].) Rather, we find dispositive the character of the funds at issue. The
We find, then, that, in the present case, all of the requisite elements justifying estoppel are present. Moreover, application of the doctrine to these facts is not barred by any of the arguments advanced by the City. We therefore conclude that the City and the Board are estopped from requiring PFRS retirees to repay any retirement benefits based on the improper inclusion of shift differential pay as "compensation attached to rank."
We turn lastly to the overpayments generated in connection with the temporary reduction in the number of designated holidays for the 2009, 2010, and 2011 fiscal years. As discussed above, the 2006-2013 MOU briefly changed the structure of holiday pay for active members of the Department. Specifically, for the 2009, 2010, and 2011 fiscal years, only seven of the regular 13 holidays were paid in accordance with the customary policy established by the MOU. For the other six holidays, active members received no holiday pay for holidays that were not worked and "straight time pay" for holidays that were worked. Although the total holiday compensation paid to active members of the Department was clearly reduced during this timeframe, the Board continued to calculate retirement benefits for PFRS retirees as if this temporary reduction had not occurred. Based on the plain language of the Charter and the 2006-2013 MOU, the trial court held that the reduction in holiday pay experienced by active members should have been reflected in PFRS benefits for the years in question. Specifically, retirees, during the relevant timeframe, should only have been credited with seven holidays, rather than 12.
We do not see any grounds for estoppel based on the facts relevant to the temporary holiday reduction. The record reflects that the City negotiated an extension to the 2006-2010 MOU effective in July 2009 which extended its term to June 30, 2013, and added the language effecting the temporary reduction in holidays here at issue. In January 2010, a Board agenda item disclosed the City's position that the number of holidays credited to retirees should be reduced from 12 to seven for fiscal years 2009, 2010, and 2011 based on the provisions of the extended MOU. On February 24, 2010, the City appeared before the Board and argued this position. The Board, however, determined on that same date that the temporary reduction in the number of paid holidays for active members of the Department would not be reflected in retiree benefits. The City then challenged this decision in the instant action, filed on June 14, 2011. Clearly, this is not a situation where the City has intentionally led others to believe a particular circumstance to be true and to rely upon such belief to their detriment. (Killian v. City and County of San Francisco, supra, 77 Cal.App.3d at p. 13.) The City has never counseled retirees that they are not bound by the temporary reduction in
Under the present circumstances, any delay by the City in bringing this action does not appear to have been unreasonable. The improper payments at issue occurred between July 2009 and June 2012. Although it waited 16 months after the Board refused to reduce pension benefits based on the temporary reduction in holidays, the City commenced this action in June 2011, less than two years after the earliest date any improper payments were made and well within any applicable statute of limitations asserted by the parties. (See Code Civ. Proc., § 338, subd. (a) [three-year statute of limitations for a liability created by statute]; id., § 338, subd. (d) [three-year statute of limitations for mistake].) While it is true that the defense of laches may be invoked even though the lapse of time is less than the applicable period of limitations where "the unjustified delay has operated to the injury of another..." (Holt v. County of Monterey (1982) 128 Cal.App.3d 797, 801 [180 Cal.Rptr. 514]), any delay in this case has not significantly injured PFRS retirees. Rather, the improper payments were not substantial and were time limited by the terms of the MOU. Moreover, these proceedings have already been pending for 32 months. Thus, even if the City had commenced this litigation immediately after the Board's adverse decision in February 2010, it seems likely that final resolution of the overpayment issue would still have occurred after all of the disputed payments had already been made. Given these facts, the equities do not support a laches finding.
The judgment and writ of mandate are vacated, and the matter is remanded to the trial court to fashion new relief consistent with this opinion. Each party to bear its own costs.
Rivera, J., and Humes, J., concurred.
"`Compensation'" is defined by Charter article XXVI, section 2607 to mean "the monthly remuneration payable in cash, by the City, without deduction, for time during which the individual receiving such remuneration is a member of the Police or Fire Department, but excluding remuneration paid for overtime ...."
