APPEAL from a judgment of the Superior Court of Sacramento County, Lloyd G. Connelly, Judge. Reversed with directions. (Super. Ct. No. 34-2008-00009484).
The opinion of the court was delivered by: Butz, J.
CERTIFIED FOR PUBLICATION
This case arises out of a turf battle between the Sacramento County Superintendent of Schools and the governing board of a lame-duck school district, which was on the verge of absorption into a new, larger district.
Defendants and appellants Sacramento County Office of Education (SCOE) and County Superintendent of Schools David W. Gordon (Gordon; collectively, SCOE) appeal from a judgment granting a writ of mandate commanding Gordon to process payroll requests pursuant to a transition plan adopted by the outgoing board of the Grant Joint Union High School District (GJUHSD or District), a plan that awarded severance buyout packages to several District administrative employees, including plaintiffs and respondents Joan Polster, John Raymond, Patricia Paulsen, and Jacques S. Whitfield, who were petitioners in the trial court (collectively, petitioners).
The dispositive issues are whether Superintendent Gordon's refusal to approve payroll warrants to carry out the transition plan was a proper exercise of his authority under Education Code section 42127.6, subdivision (j)*fn1 (section 42127.6(j) or subdivision (j)) and, if so, whether he abused his discretion in exercising that authority. We conclude that Gordon had such authority and that he did not abuse his discretion in exercising it. Accordingly, we shall reverse the judgment granting petitioners' writ of mandate.
FACTUAL AND PROCEDURAL BACKGROUND
By virtue of the passage of "Measure B" in 2007, Sacramento County voters approved the unification of GJUHSD and three smaller elementary school districts into one district. Effective July 1, 2008, the merger would result in a new, larger district known as Twin Rivers Unified School District (TRUSD or Twin Rivers).
After the measure passed, Bruce Mangerich, fiscal and policy advisor to the District's governing board (the Board), determined that as a result of the merger, some GJUHSD administrators with vested employment rights would be entitled to one or two years' compensation at their current salary levels regardless of whether they were retained by Twin Rivers. In order to avoid a perceived "redundant administrative staff at the central office level," Mangerich devised what became the "Central Office Management Reduction Plan" (COMRP).
Under the COMRP, the District would offer severance payments of 18 months of salary to administrative employees who had contractual rights to at least two years worth of additional employment as of June 30, 2008, in return for early termination of their contracts. Those who had a statutory right to continued employment for at least one year with tenure would be offered severance payments of 12 months of salary. Mangerich figured that acceptance of these packages would save the District $1.5 to $2 million.
The GJUHSD board adopted the COMRP at a meeting held on December 19, 2007. Following its adoption, Superintendent Gordon raised concerns about the legal propriety of the plan and how it was presented to the Board. As a consequence, on March 5, 2008, the Board adopted a resolution rescinding the COMRP and directing Mangerich to adopt a new plan that addressed the effect of the impending merger on GJUHSD administrative staff and the needs of the new Twin Rivers district.
Mangerich met with administrators of the nascent TRUSD, who told him that in their opinion the severance payments were excessive and that they believed the decision whether to offer severance packages should be left to the new district.
Undaunted, Mangerich formulated a revised plan, which came to be known as the "Central Office Transition Plan" (COTP). The COTP retained all the same severance payment provisions as the COMRP, but contained additional provisions giving TRUSD officials more flexibility with respect to employment of GJUHSD administrators in contemplation of the July 1, 2008 start date. The Board passed a resolution adopting the COTP at its meeting on March 19, 2008 (all further unspecified calendar dates are to that year).
On March 25, the Board sent a request to Superintendent Gordon for "[s]pecial [p]ayroll [r]uns" to implement the COTP. By letter dated March 28, Gordon replied that, due to the "almost one-for-one similarities" between the COTP and its predecessor COMRP, his office was conducting a "review and/or audit" under Education Code sections 1241.5 and 42636 to investigate possible illegal fiscal practices that might result from implementing the COTP. Gordon had four specific areas of concern: (1) there may have been an ethical conflict of interest in the development of the plan under Government Code section 1090 or other conflict of interest laws; (2) the payouts may exceed the limits on buyouts prescribed in Government Code section 53260; (3) the buyouts may constitute an illegal gift of public funds; and (4) the severance packages may not result in any net savings to TRUSD, especially since Gordon had information that TRUSD intended to employ all the affected administrators at their current salary level. The letter advised that Gordon would report his findings at the Board's next regular meeting within 45 days of completing the review, but that pursuant to Education Code sections 1241.5 and 42636, his office would not authorize the payroll runs until the investigation was completed.
By letter dated April 16, the Board's counsel formally requested that Gordon honor the payroll warrants necessary to implement the COTP. The letter asserted that the Board had fully cooperated with Gordon's investigation; that none of the concerns expressed in his March 28 letter had merit; and that he had a mandatory duty to approve the Board's request for funds.
On April 22, in furtherance of his investigation, Gordon's office conducted interviews with several of the key persons involved in the creation of the COTP.
On April 25, after an acrimonious exchange of letters between counsel for Gordon and counsel for the GJUHSD administrators who had accepted the buyout packages,*fn2 four plan beneficiaries and the Board filed this petition for writ of mandate under Code of Civil Procedure section 1085, seeking to compel Gordon and the SCOE to approve the payroll warrants.
The petition alleged that 10 administrative members of the GJUHSD had accepted severance packages under the terms of the COTP in return for their resignations effective on June 30; that Gordon had refused to process the payroll runs, under the pretense of conducting an investigation; that none of the concerns Gordon had about the propriety of the COTP had merit; that Gordon and the SCOE had no right to substitute their judgment for that of the governing board; and that Gordon's office had a mandatory duty to process the Board's requests for warrants to carry out the COTP buyout plan. The petition also alleged that the Board had authorized payments to implement the plan, that GJUHSD had sufficient funds to pay the warrants, and that the continued refusal by Gordon and the SCOE to approve the warrants was "an abuse of discretion."
The SCOE and Gordon demurred to the petition, asserting that it contained numerous technical and procedural defects. The demurrer was eventually heard in conjunction with the trial on the petition.
On June 16, eleven days before trial on the petition was held, Gordon sent a letter to the Board announcing that, pursuant to subdivisions (e)(2) and (j) of section 42127.6, he was staying the COTP and rescinding the requests for payroll warrants to implement the plan, on the ground that the COTP was "inconsistent with [TRUSD's] ability to meet its obligations for next fiscal year." We shall hereinafter refer to the June 16 letter as the "stay letter."
The case was tried before the Honorable Lloyd G. Connolly on June 27. Judge Connolly overruled the demurrer and rejected Gordon's*fn3 assertion that the stay letter rendered the petition moot, ruling that the propriety of the stay letter was raised as an affirmative defense and was therefore subject to the court's adjudication.
The court then ruled in favor of the petitioners. In pertinent part, the judgment states: "[T]he court determined that Superintendent Gordon had abused his discretion under Education Code section 42363 in refusing, after investigation, to process warrants requested by GJUHSD to fund severance payments for certain central office administrative staff pursuant to the Central Office Transition Plan (`COTP') adopted by GJUHSD's Board." The court went on to find that Gordon "failed to produce substantial evidence" that the COTP was improperly adopted, was based on a conflict of interest, was an illegal gift of public funds, "or was otherwise not legally authorized." The court rejected Gordon's claim that his action was proper under section 42127.6(j), because he did not comply with the procedural prerequisites set forth elsewhere in the statute pertaining to findings of fiscal distress.
The peremptory writ commands Gordon to "revoke and annul" the stay letter and to approve the special salary runs necessary to implement the COTP. SCOE and Gordon then filed this appeal.
After this appeal was filed, GJUHSD ceased to exist as a legal entity. Its successor, real party in interest and respondent Twin Rivers, has filed a joinder in appellants' opening brief and advised this court that it supports reversal of the judgment below.
I. The Case Was Not Moot and the Demurrer Was Properly Overruled
As noted previously, this controversy arose when County Superintendent of Schools Gordon refused to approve requests for payroll checks to administrative employees in order to implement the COTP severance packages, which had been adopted by GJUHSD's governing board. When the petition for writ of mandate was filed, Gordon claimed he was reviewing the payment orders pursuant to his authority to investigate "possible illegal fiscal practices," under sections 42636 and 1241.5.
In their petition, petitioners alleged that Gordon's concerns were without foundation, that he had a clear, mandatory duty to approve the payroll warrants, and that his continued refusal to do so was an abuse of discretion.
Gordon filed a demurrer to the petition on a number of grounds, including that the petition was premature because his investigation into the propriety of the orders was not yet complete; Gordon claimed he could not be guilty of abuse of discretion since he had not yet exercised his discretion to approve or disapprove the payroll warrants.
Several weeks later, Gordon issued the stay letter, in which he notified GJUHSD's board of his decision to halt implementation of the COTP and rescind the requests for payroll warrants.
At the trial, which was held 11 days after the stay letter was issued, Gordon's counsel urged that the petition had become moot because Gordon had completed his investigation and had made his decision to rescind the transition plan. Counsel urged that in order to obtain review of the latter decision, petitioners had to "file a different action."
Judge Connolly overruled the demurrer, ruling that the petition was not moot and that the stay letter was properly before the court in ruling on the petition.
Gordon now contends that the petition was mooted by the stay letter and that Judge Connolly erred by "granting affirmative relief based on actions that occurred after the petition was filed," essentially repeating the same arguments advanced in the trial court. The claim lacks merit.
The ultimate legal issue raised by the petition was whether Superintendent Gordon abused his discretion in refusing to approve the payroll warrants necessary to carry out the COTP. Petitioners claimed Gordon had a mandatory duty to approve the warrants, and Gordon denied it. Gordon's initial argument that the suit was premature because he was still investigating and had not yet exercised discretion itself became moot when he issued the stay letter. No longer was Gordon "investigating"; he now had made the decision that the checks would not issue and the COTP would not be implemented. Thus, whatever state of affairs existed prior thereto, the issuance of the stay letter constituted an exercise of the same discretion that petitioners had alleged was abused.
Although Gordon's legal justification for his actions changed during the course of the proceeding,*fn4 far from rendering the petition moot, the stay letter brought the legal issue--whether Gordon had a ministerial duty to approve the payroll requests--to fruition as a controversy ripe for adjudication. (See 3 Witkin, Cal. Procedure (5th ed. 2008) Actions, § 33, p. 101 (Witkin) [case is not moot where substantial issue remains to be decided]; cf. Honan v. Title Ins. & Trust Co. (1935) 9 Cal.App.2d 675, 678 [although some facts stated in the complaint were mooted by subsequent events, dismissal for mootness not appropriate where other alleged facts state a claim for relief].)
Furthermore, as the trial court pointed out, it was Gordon himself who placed the stay letter before the court by raising it in his pleadings as a defense. Gordon's amended answer alleges, as an affirmative defense, that "on June 16, 2008, Superintendent Gordon exercised his rights under Education Code section 42127.6(j) to stay the COTP and rescind the requests for special payroll runs." Having raised the contents of the stay letter as an affirmative defense to the petition, Gordon was not permitted to turn around and claim the same letter mooted the entire action. (See 4 Witkin, Cal. Procedure, supra, Pleading, § 454, p. 587 [parties are bound by admissions in their pleadings]; see also ...