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Diquisto v. County of Santa Clara

January 22, 2010


(Santa Clara County Super. Ct. No. CV020671). Honorable James C. Emerson.

The opinion of the court was delivered by: McAdams, J.

See Concurring and Dissenting Opinion


This litigation arose at the crossroads of public labor bargaining and the electoral initiative process. In early 2004, three unions sponsored a local ballot initiative to mandate binding arbitration as a means of resolving labor disputes with their employer, Santa Clara County. The County opposed the initiative. During the same time period, the County engaged in labor negotiations with the unions, which included discussions aimed at their agreement not to support the initiative.

As taxpayers, the plaintiffs sued the County, its Board of Supervisors, and two county officials, asserting that the County improperly spent public funds for partisan electoral purposes by bargaining for the unions' non-support of the initiative measure. The plaintiffs later added claims based on a supervisor's e-mail concerning the initiative. After extensive pretrial proceedings, the matter ended in a bench trial, with the court finding for the defendants.

On appeal, the plaintiffs renew their arguments that the County impermissibly used public funds for campaigning, both at the bargaining table and through the e-mail. On behalf of itself and the other defendants, the County defends the judgment against both arguments.

As we explain, the trial court's determinations are supported by the evidence and the law. We therefore affirm the judgment.

Introduction: Legal Background

To provide context for our discussion of the facts and the parties' contentions, we begin by briefly summarizing the legal principles at play here.

Limits on the Expenditure of Public Funds

As the California Supreme Court recently reaffirmed, "in the absence of clear and unmistakable language specifically authorizing a public entity to expend funds for campaign activities or materials, the entity lacks authority to make such expenditures." (Vargas v. City of Salinas (2009) 46 Cal.4th 1, 24 (Vargas).) This limitation on the expenditure of public funds for campaigning has been recognized in a long line of California Supreme Court decisions, including the leading case of Stanson v. Mott (1976) 17 Cal.3d 206, 217 (Stanson).

The Relevant Public Employment Statute

Various statutes govern public employment. (Coachella Valley Mosquito & Vector Control Dist. v. California Public Employment Relations Bd. (2005) 35 Cal.4th 1072, 1084-1086 (Coachella Valley).) At issue here is the Meyers-Milias-Brown Act (MMBA), codified at Government Code sections 3500-3511.*fn1 The MMBA "governs collective bargaining and employer-employee relations for most California local public entities, including cities, counties, and special districts." (Coachella Valley, at p. 1077.) It "requires public agencies to meet and confer in good faith with representatives of recognized employee organizations regarding wages, hours, and other terms and conditions of employment." (County of Sonoma v. Superior Court (2009) 173 Cal.App.4th 322, 329-330, citing § 3505.) "If these meetings produce an agreement, the representatives of the parties must jointly prepare a written memorandum of understanding (MOU)." (Id. at p. 330, citing § 3505.1.) The MOU must then be approved by the agency's governing body. (Ibid.)

Binding Interest Arbitration

"Interest arbitration involves an agreement between an employer and a union to submit disagreements about the proposed content of a new labor contract to an arbitrator or arbitration panel." (City of Fresno v. People ex rel. Fresno Firefighters (1999) 71 Cal.App.4th 82, 96 (Fresno); see also, e.g., County of Sonoma v. Superior Court, supra, 173 Cal.App.4th at pp. 341-342.)


The plaintiffs and appellants are John DiQuisto, Mildred Evans, and Rosemary Knox (collectively, plaintiffs). They are taxpayers and residents of the County of Santa Clara. The defendants and respondents are the County of Santa Clara, its Board of Supervisors, and two of its officials, chief administrative officer Peter Kutras, Jr. and chief labor negotiator Luke Leung (collectively, the County).

The Ballot Initiative: Measure C

In early 2004, three Santa Clara County public sector labor unions agreed to sponsor a local initiative measure on the November 2004 ballot. The three sponsoring unions were the Registered Nurses' Professional Association (RNPA), the Correctional Peace Officers' Association (CPOA), and the Government Attorneys' Association (GAA).

The initiative's purpose was to amend the County's charter by adding a provision for binding interest arbitration as a means of resolving labor disputes between the three sponsoring unions and the County.

On April 2, 2004, plaintiff Rosemary Knox, in her capacity as president of RNPA, filed a notice of intent to circulate a petition to qualify the measure for the ballot. The measure's proponents began gathering signatures three weeks later, on April 23, 2004.

On June 4, 2004, representatives of the three sponsoring unions met with County Supervisor Donald Gage, and with Kutras, Leung, and other County representatives, to discuss the initiative. The unions "discussed binding interest arbitration and . . . shared with [the County] that [the measure] would go forward" while "reaching out to see if there was some language that would be acceptable for both sides." No agreement was reached.

On June 23, 2004, the initiative qualified for the November ballot, identified as Measure C. On August 3, 2004, the County's Board of Supervisors adopted a resolution to submit Measure C to the voters.

The County opposed Measure C. Acting through its Board of Supervisors, the County placed two counter-measures on the ballot, identified as Measures A and B.

In October 2004, County Supervisor Blanca Alvarado directed the dissemination of an e-mail to approximately 1,500 individuals, encouraging the recipients to educate themselves about the three initiative measures and attaching a copy of a newspaper editorial urging a "no" vote on Measure C and a "yes" vote on Measures A and B.

In November 2004, Measure C was defeated at the polls, as were Measures A and B.

Contract Negotiations

In 2003 and 2004, the County was engaged in contract negotiations with a number of its employee unions. The aim of the negotiations was to reach agreement with each union for a labor contract.

Negotiations with the Deputy Sheriffs' Association

One of the unions negotiating with the County was the Deputy Sheriffs' Association (DSA). Those negotiations began in 2003; the then-current contract was set to expire in 2004.

One of the "main goals" for the DSA in its negotiations was to secure the County's agreement to "benchmarking" with the San Jose Police Department. With benchmarking, DSA members "would just basically be piggybacked with the San Jose Police Department, so whatever raise they would get [DSA] would subsequently get when [its] contract came due." Although the County seemed resistant to the idea of benchmarking at first, its position softened once the possibility of a longer contract was broached.

On April 1, 2004, the DSA and the County reached a tentative agreement, which included both pay raises and a benchmarking provision. After tentative agreement on those economic issues, the DSA offered the County a "side letter" stating that the DSA would not support the binding interest arbitration initiative. The side letter was "totally" the union negotiator's idea, who "freely" offered it to the County. The union negotiator was aware that the County was "hostile" to the arbitration initiative. The County negotiator was "a bit startled" at the offer but "essentially said, yeah, well, sure."

Both the DSA general membership and the County later ratified the agreement, including the side letter.

Negotiations with the Correctional Peace Officers' Association

In the spring of 2004, the County was also negotiating with the CPOA. The CPOA's contract had expired years before, and the negotiations for a new contract had been underway for some time.

On March 29, 2004, a meeting took place that included county executives Kutras and Leung and CPOA officers Everett Fitzgerald and William Calabrese. As union president, "Fitzgerald wanted the County to enhance its economic offer." At that point, the CPOA was "demanding from the County a 30 percent wage increase over a period of a little over three years," while the County had offered a raise of 18 percent over five and a half years. Fitzgerald "was having difficulty with his rank and file" and he wanted the County "to put more money on the table." Fitzgerald "raised discussions about the binding interest arbitration measure, being asked whether CPOA was going to be in it or not." Fitzgerald indicated that "in order for [CPOA] to stay out of it [he had] to see more money." But according to Kutras, the County was not "going to put more money on the table." The following day, March 30, 2004, the CPOA joined the coalition supporting the arbitration initiative.

The County offered package proposals to the CPOA on April 7th and again on April 12th. Both proposals offered raises much lower than the 30 percent requested by the CPOA, and both included provisions that prohibited the CPOA from initiating or supporting a ballot measure for binding interest arbitration.

The CPOA rejected the April 2004 proposals. In September 2004, the County withdrew its request for nonsupport of the binding interest arbitration initiative. The parties finally reached agreement for a three-year contract starting in June 2005.

Negotiations with the Registered Nurses' Professional Association

In the spring of 2004, the County was also negotiating with the RNPA. The RNPA contract was set to expire in November 2004.

On March 30, 2004, there was a meeting of union and county representatives. The County offered the RNPA a two-year contract extension with a wage increase of four percent over two years. There was no mention of the binding interest arbitration initiative.

On April 1, 2004, RNPA representative Knox and county representative Louis Chiaramonte spoke by telephone. Knox expressed her concern that nurses' salaries stay "within the industry standards." She mentioned a recent contract negotiated by Stanford nurses giving them raises totaling 12 percent in the first two years of their three-year contract. Knox suggested a two-year contract extension for the RNPA with raises of six percent each year. After the telephone conversation, Chiaramonte "did a quick salary comparison to see what the community had for wage increases."

On April 7, 2004, county representative Chiaramonte presented the RNPA with a written proposal for a two-year contract extension with raises (wage increases and "alignments") totaling six percent in the first year and six percent in the second year. When presenting the proposal, Chiaramonte characterized it as incomplete, since "a component involving binding interest arbitration [was] to follow." A draft version of that component was reflected in a handwritten document, which Chiaramonte read aloud; it prohibited the RNPA and its leaders from initiating or supporting a ballot measure for binding interest arbitration. As described by Chiaramonte in trial testimony: "That aspect was pretty much a conceptual discussion and at that time I had advised the association I didn't have anything that was finalized, it was still in draft form, and that I'd be giving it back to them at a later date."

On April 8, 2004, the County formally extended the proposal made the day before, including both the same schedule of raises and a separate, typewritten agreement for nonsupport of the binding interest arbitration initiative.

The RNPA rejected the County's April 8th proposal. The parties finally reached agreement on a successor contract approximately a year later, in April 2005. The successor contract did not include any provision concerning binding interest arbitration.



In June 2004, plaintiffs filed a verified complaint, which asserted causes of action for: (1) unlawful waste of public funds; (2) unlawful restriction of political activities; (3) declaratory relief; and (4) writ relief. The complaint includes allegations concerning the County's bargaining with the Deputy Sheriffs' Association, the Registered Nurses' Professional Association, and the Correctional Peace Officers' Association.*fn2 As relevant to this appeal, the complaint accuses the County of "interfering in the electoral process through the unauthorized expenditure of public funds and public resources to fund a series of wage and compensation and benefit increases for County employees represented by the DSA, the CPOA, [and the] RNPA, . . . as a quid pro quo for an agreement not to support the qualification or passage" of the arbitration initiative, Measure C.

In July 2004, the County answered the complaint. It interposed six affirmative defenses, including lack of standing and failure to state a cause of action.

Pretrial Proceedings

When plaintiffs filed their complaint in June 2004, they also applied for a preliminary injunction. Opposition and reply papers were submitted. Plaintiffs later sought permission to submit additional evidence based on the October 2004 e-mail by Supervisor Alvarado. Thereafter, on October 26, 2004, the trial court granted plaintiffs' application for a preliminary injunction. The County then petitioned this court for a writ. We stayed the injunction and requested opposition. Plaintiffs opposed the issuance of a writ, and the County replied. Ultimately, we denied the County's writ petition in May 2007.

In December 2005, the County moved for judgment on the pleadings. Plaintiffs opposed the motion, and the court denied it in March 2006.

In June 2006, a complaint in intervention was filed by the Public Employees Relations Board (PERB). PERB and plaintiffs filed cross- motions against each other for judgment on the pleadings. In September 2006, the court granted plaintiffs' motion, denied PERB's motion, and dismissed PERB as a party.

In October 2006, the County filed a motion for summary judgment. Plaintiffs opposed the motion, and the court denied it in March 2007.


The matter was tried to the court in late May and early June 2007. After pretrial motions and opening arguments, both sides presented testimonial and documentary evidence.

Among plaintiffs' witnesses were union members and officers, including Calabrese and Fitzgerald of the CPOA, Knox of the RNPA, and David Notari and Joseph Charvez of the DSA. Under Evidence Code section 776, plaintiffs called Kristina Cunningham, chief of staff for County Supervisor Blanca Alvarado, as well as county officials Kutras and Leung. The defense witnesses included a union negotiator for the DSA, Ronald Yank, and three county employees who had negotiated with the RNPA and the DSA, Chiaramonte, Kenneth Phillips and Brian McKenna. Defendants also presented two expert witnesses, Arthur Agnos, former state assembly member and former San Francisco mayor, and William Gould, Stanford University law professor and former chair of the National Labor Relations Board. The parties' documentary evidence included the County's April 2004 proposals to the CPOA and the RNPA, the April 2004 side letter agreement with the DSA, and the October 2004 e-mail sent by Supervisor Alvarado.

Following the presentation of evidence by both sides, the court requested "closing argument in written form." The parties complied, submitting written arguments in June 2007.

Thereafter, in late June 2007, the court considered plaintiffs' application to reopen the record, in order to submit evidence of their standing as taxpayers. After granting plaintiffs' request, the court stated: "The matter remains submitted. And the Court will continue to work on its decision in this matter."

In July 2007, the court filed its statement of decision, ruling in the County's favor as to all causes of action. As relevant here, the court determined (1) the County did not improperly use public funds for partisan electoral purposes in its bargaining with the unions, and (2) the e-mail sent by Supervisor Alvarado was not an illegal use of public resources for campaign activity.


Judgment for defendants was entered in September 2007. An amended judgment was entered the following month.


In November 2007, plaintiffs brought this timely appeal. Plaintiffs seek reversal, based on their contentions that both the County's bargaining activity and Supervisor Alvarado's e-mail constitute illegal expenditures of public funds. The County defends the judgment.


We analyze plaintiffs' appellate contentions in turn, first addressing their claims concerning the contract negotiations and then turning to their arguments about the e-mail. As to each, we first set forth the governing legal principles. Next we summarize the relevant facts, as determined by the trial court. Then we apply the law to the facts.

I. The County's Bargaining Conduct

A. Legal Principles

1. The Stanson Rule

Under the Stanson rule, "at least in the absence of clear and explicit legislative authorization, a public agency may not expend public funds to promote a partisan position in an election campaign." (Stanson, supra, 17 Cal.3d at pp. 209-210.) That prohibition does not apply to informational or educational expenditures, however. (Id. at p. 221.)

Stanson was a taxpayer suit against the Director of the California Department of Parks and Recreation, which alleged the department's improper expenditure of more than $5,000 of public funds to promote the passage of a ballot proposition for a recreational bond. (Stanson, supra, 17 Cal.3d at p. 209.) The trial court sustained the defendant's demurrer and ...

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