Judge: Joseph Lipner, Case: 19STCV34358, Date: 2023-09-21 Tentative Ruling

Case Number: 19STCV34358    Hearing Date: January 23, 2024    Dept: 72

SUPERIOR COURT OF CALIFORNIA

COUNTY OF LOS ANGELES

DEPARTMENT 72

TENTATIVE RULING

Defendant California Public Employees Retirement System (“CalPERS”) moves for judgment on the pleadings as to the fourth cause of action for declaratory judgment in the Second Amended Complaint (“SAC”) filed by Plaintiffs Ryan Lawrence, Alex Duncan, and Tyler Diamond (collectively, the “Individual Plaintiffs”), and Beverly Hills Police Officers’ Association (“BHPOA”) (collectively, “Plaintiffs”).

The Court CONTINUES CalPERS’s motion and STAYS this action pending the outcome of the Code of Civil Procedure, section 1094.5 Writ of Mandate proceedings initiated by Plaintiffs.  The Court sets a status conference re writ of mandate proceedings for August 14, 2024 at 8:30 a.m.

Background

The City of Beverley Hills (the “City”) contracts with CalPERS for the purpose of providing certain benefits, including retirement benefits, for its employees. The Individual Plaintiffs receive retirement benefits through this program.

The Individual Plaintiffs were employees of the City and were enrolled in the CalPERS retirement program pursuant to a Memorandum of Understanding (the “MOU”) governing their relationship with the City. The central issue in this case is the retirement formula the Individual Plaintiffs were enrolled in. In short, although the Individual Plaintiffs were enrolled in a "3% by 55 formula,” they contend that they actually should have been enrolled in a “3% by 50 formula” under the MOU.

Plaintiffs filed this action on September 26, 2019. The operative complaint is now the SAC. Plaintiffs filed the SAC against the City and CalPERS on February 24, 2020, raising claims for (1) breach of contract – Memorandum of Understanding; (2) breach of contract – Individual Employment Agreement; (3) petition for writ of mandate; and (4) declaratory relief.

On August 24, 2020, the Court transferred the third cause of action to the Writs and Receivers Department.

On December 17, 2020, Department 85 in the Writs and Receivers Department sustained the demurrer to the third cause of action for failure to exhaust administrative remedies, stating that Plaintiffs would need to seek relief from CalPERS.

On December 22, 2020, Plaintiffs requested that CalPERS change the retirement formula for the Individual Plaintiffs to the 3% at 50 formula. On February 2, 2021, CalPERS issued a determination that the Individual Plaintiffs were correctly enrolled in the 3% at 55 formula.

On October 5, 2021, the Court sustained CalPERS’s demurrer to the first and second causes of action against CalPERS without leave to amend. Therein, the Court found that the first cause of action was unfounded as against CalPERS because Plaintiffs conceded that CalPERS is not liable for breach of the MOU. The Court found that CalPERS could not be liable under the second cause of action because Plaintiffs had not entered into an employment agreement with CalPERS. The Court found that CalPERS was not otherwise a necessary party to either of those causes of action. The Court overruled the demurrer with respect to the fourth cause of action for declaratory relief, explaining that “the CalPERS board cannot determine the proper interpretation of the MOU between the City and [the Association]. That interpretation is left to this Court.” (October 5, 2021 Minute Order at p. 2.)

Meanwhile, Plaintiffs appealed CalPERS’s finding that the Individual Plaintiffs were properly enrolled in the 3% at 55 formula, and an administrative hearing (the “OAH Hearing”) was initiated with the OAH and was conducted on February 1, April 13, and April 22, 2022. (CalPERS RJN, Exh. 7 (“OAH Proposed Order”).) CalPERS, Plaintiffs, and the City participated in the OAH Hearing and were represented by counsel. (OAH Proposed Order at p. 2.) Plaintiffs presented documentary evidence and testimony and conducted oral and written arguments and cross-examination of witnesses. (OAH Proposed Order at pp. 2-3, 13-14.)

On September 12, 2022, the administrative law judge (“ALJ”) issued a proposed order. (OAH Proposed Order at p. 26.) That order was subsequently adopted by the CalPERS Board of Administration. (CalPERS RJN, Exh. 8 at p. 3.) The ALJ explicitly rejected the Court’s determination (and CalPERS’s position at the OAH Hearing) that it could not consider the terms of the MOU, determining that it had the power under PERL to determine the meaning of the MOU. (OAH Proposed Order at pp. 18-19.) As explained by the ALJ, “jurisdiction is established to determine (1) whether PERS and City acted in compliance with Government Code 20475 and (2) whether City committed any error in applying the 3% at 55 retirement formula to [Plaintiffs] under Government Code sections 20475 and 20160. The ALJ must consider the language of the 2011 MOU to make these determinations. The potential impact of the AU's findings outside of this proceeding is not determinative of the resolution of the issues here. However, the AU's authority is limited to claims based on the PERL; no other claims have been considered.” (OAH Proposed Order at p. 19 [emphasis added].)

On May 11, 2023, the Court granted summary adjudication for the City on the first, second, and fourth causes of action and, as a result, granted the City summary judgment as to the entire action. The Court found that the first cause of action was barred by collateral estoppel as a result of the OAH Hearing. In reaching that conclusion, the Court found that the OAH Hearing addressed the issue of whether the Individual Plaintiffs were correctly classified in the 3% at 55 formula under the MOU and was a final judgment on the merits by an administrative agency acting in a quasi-judicial capacity. The Court found that summary adjudication for the City was appropriate on the fourth cause of action because summary adjudication had been granted on the first two claims, removing any basis for declaratory judgment that Plaintiffs were entitled to be enrolled in the 3% by 50 formula pursuant to either the MOA (first cause of action) or individual employment agreements (second cause of action).

On June 23, 2023, Plaintiffs filed a Writ of Mandate pursuant to Code of Civil Procedure, section 1094.5 requesting a review of the OAH decision (the “Writ Proceedings”). (CalPERS RJN, Exh. 11.) Plaintiffs requested to set aside the decision and categorize the Individual Plaintiffs in the 3% at 50 formula. The Writ Proceedings are now scheduled for a Trial Setting Conference on February 8, 2024, where the date of the hearing will likely be determined.

CalPERS filed the instant motion on July 3, 2023. Plaintiffs filed an opposition and CalPERS filed a reply.

The Court held an initial hearing on this motion on September 21, 2023. The Court heard argument on (1) CalPERS’s argument that Plaintiffs’ action is barred by collateral estoppel following the OAH decision; (2) CalPERS’s argument that Plaintiffs had failed to exhaust administrative remedies; and (3) CalPERS’s argument that the fourth cause of action fails because the Court dismissed the first and second causes of action against CalPERS. Following the hearing, the Court ordered the parties to file additional briefing on the status of the Writ Proceedings and the issue of collateral estoppel. The Court also determined that a motion for judgment on the pleadings was the proper vehicle by which to bring CalPERS’s arguments here.

Requests for Judicial Notice

The Court grants the parties’ requests for judicial notice.

Legal Standard

It is well established in California that either prior to trial, but after the time to answer or demur has passed, or at the trial, the plaintiff or the defendant may move for judgment on the pleadings and that the appropriate ground for such a motion is the same as that arguable by general demurrer, namely, the failure to state a cause of action or defense. (Dobbins v. Hardister (1966) 242 Cal.App.2d 787, 791; See also Sofias v. Bank of America (1985) 172 Cal.App.3d 583, 586 [The non-statutory motion for judgment on the pleadings can be made at any time, even during trial, since the grounds for a general demurrer are never waived.], see also Code Civ. Proc., §438(f).)  

A motion for judgment on the pleadings performs the same function as a general demurrer, and hence attacks only defects disclosed on the face of the pleadings or by matters that can be judicially noticed. (See, e.g., Weil & Brown, Cal. Practice Guide: Civil Procedure Before Trial (TRG 1998) §§ 7:275, 7:322; Lance Camper Manufacturing Corp. v. Republic Indemnity Co. (1996) 44 Cal.App.4th 194, 198.) Presentation of extrinsic evidence is therefore not proper on a motion for judgment on the pleadings. (Id.; Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999.) Both a demurrer and a motion for judgment on the pleadings accept as true all material factual allegations of the challenged pleading, unless contrary to law or to facts of which a court may take judicial notice. (Mechanical Contractors Assn. v. Greater Bay Area Assn. (1998) 66 Cal.App.4th 672, 677; Edwards v. Centex Real Estate Corp, (1997) 53 Cal.App.4th 15, 27.) 

The motion may be made only after one of the following conditions has occurred: (1) If the moving party is a plaintiff, and the defendant has already filed his or her answer to the complaint and the time for the plaintiff to demur to the answer has expired; (2) If the moving party is a defendant, and the defendant has already filed his or her answer to the complaint and the time for the defendant to demur to the complaint has expired. (Code Civ. Proc., § 438(f).) The motion provided for in Code of Civil Procedure section 438 may be made even though either of the following conditions exist:  (1) The moving party has already demurred to the complaint or answer, as the case may be, on the same grounds as is the basis for the motion provided for in this section and the demurrer has been overruled, provided that there has been a material change in applicable case law or statute since the ruling on the demurrer; (2) The moving party did not demur to the complaint or answer, as the case may be, on the same grounds as is the basis for the motion provided for in this section. (Code Civ. Proc., § 438(g).) No motion may be made pursuant to Code of Civil Procedure section 438 if a pretrial conference order has been entered pursuant to Code of Civil Procedure section 575, or within 30 days of the date the action is initially set for trial, whichever is later, unless the court otherwise permits. (Code Civ. Proc., § 438(e).) 

Discussion

          The Court has already sustained CalPERS’s demurrer as to Plaintiffs’ claims against CalPERS for breach of the MOU and breach of alleged individual employment agreements. The Court declined to dismiss Plaintiffs’ declaratory relief claim against CalPERS at the time because the issue of the MOU’s applicability to the City was yet to be determined. On summary judgment, the Court determined that the ALJ’s finding that the City had not violated the MOU was preclusive, and therefore dismissed the first, second, and fourth causes of action against the City. Thus, the issue of the MOU’s applicability to the City has been determined.

Collateral Estoppel

Plaintiffs argue that the application of collateral estoppel to the ALJ’s findings on the MOU is improper.

“As generally understood, ‘[t]he doctrine of res judicata gives certain conclusive effect to a former judgment in subsequent litigation involving the same controversy.’ [Citation.] The doctrine ‘has a double aspect.’ [Citation.] ‘In its primary aspect,’ commonly known as claim preclusion, it ‘operates as a bar to the maintenance of a second suit between the same parties on the same cause of action. [Citation.]’ [Citation.] ‘In its secondary aspect,’ commonly known as collateral estoppel, ‘[t]he prior judgment ... “operates” ’ in ‘a second suit ... based on a different cause of action ... “as an estoppel or conclusive adjudication as to such issues in the second action as were actually litigated and determined in the first action.” [Citation.]’ [Citation.] ‘The prerequisite elements for applying the doctrine to either an entire cause of action or one or more issues are the same: (1) A claim or issue raised in the present action is identical to a claim or issue litigated in a prior proceeding; (2) the prior proceeding resulted in a final judgment on the merits; and (3) the party against whom the doctrine is being asserted was a party or in privity with a party to the prior proceeding. [Citations.]’” (Boeken v. Philip Morris USA, Inc. (2010) 48 Cal.4th 788, 797.)

Plaintiffs argue that the ALJ could not have resolved their claims in the SAC because the ALJ only considered Plaintiffs’ statutory claims, and not on their contract claims. However, as discussed above, collateral estoppel can apply to individual issues, in the form of issue preclusion, in addition to entire claims. In evaluating Plaintiffs’ statutory claims, the ALJ necessarily considered the meaning of the MOU terms when determining that PERS properly applied the MOU to put Plaintiffs in the 3% at 55 formula. Thus, while the ALJ could not make a determination on Plaintiffs’ contract claims writ-large, the interpretations which the ALJ did reach as a necessary part of evaluating Plaintiffs’ statutory claims has the ability to be preclusive, as explained in the Court’s summary judgment minute order.

There is no dispute that the exact same parties present here were represented at the OAH Hearing. However, because an appeal of the OAH decision is pending in the Writ Proceedings, the parties agree that the OAH decision is not yet final for the purposes of collateral estoppel.

CalPERS requests that the Court stay this action pending the resolution of the Writ Proceedings. “Trial courts generally have the inherent power to stay proceedings in the interests of justice and to promote judicial efficiency.” (Freiberg v. City of Mission Viejo (1995) 33 Cal.App.4th 1484, 1489 citing Walker v. Superior Court (1991) 53 Cal.3d 257, 266, 279.) Given the already tortured history of this case, the Court concludes that such a stay would be in the interest of judicial efficiency. The Court therefore stays this action and continues CalPERS’s motion pending the outcome of the Writ Proceedings.