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Chisom v. Board of Retirement of County of Fresno Employees' Retirement Association

California Court of Appeals, Fifth District

July 16, 2013

GERALDINE CHISOM et al., Plaintiffs and Appellants,

APPEAL from a judgment of the Superior Court of Fresno County. No. 10CECG02372 Sharon Elizabeth Mettler, Judge. (Retired judge of the Kern Super. Ct. assigned by the Chief Justice pursuant to art. VI, § 6 of the Cal. Const.)

Thomas J. Tusan and Russell D. Cook for Plaintiffs and Appellants.

Reed Smith, Harvey L. Leiderman and Jeffrey R. Rieger for Defendants and Respondents Board of Retirement of County of Fresno Employees’ Retirement Association and Fresno County Employees’ Retirement Association.

Lozano Smith, Gregory A. Wedner and Scott G. Cross for Defendants and Respondents County of Fresno, Clovis Veterans Memorial District, Fresno Mosquito & Vector Control District and Superior Court of California for the County of Fresno.


Kane, J.

Appellants are retired public employees and members of the Fresno County Employees’ Retirement Association (FCERA). From 2001 to 2009, if a member of FCERA qualified for a non-service-connected disability retirement, the amount of his or her monthly retirement allowance was calculated based on an “enhanced” benefits formula that exceeded the formula provided in the statutes governing such matters as found in the County Employees Retirement Law of 1937 (Gov. Code, § 31450 et seq. (CERL)).[1] The rationale for using the enhanced benefits formula was an interoffice letter by the chief deputy county counsel stating that, in his opinion, a 2000 settlement agreement (the settlement agreement), which resolved certain claims against the County of Fresno (the County), FCERA, and others, relating to retirement benefits, was intended to include an enhancement of disability retirement benefits. The letter advised that disability retirement allowances should be increased according to a formula attached to the letter. FCERA followed that advice, even though the settlement agreement had enhanced only “service” retirement benefits and was silent as to disability retirement benefits. In 2009, the governing board of FCERA, known as the board of retirement (the Board), reexamined the issue and concluded that it had been erroneously using the enhanced benefits formula to calculate non-service-connected disability retirement, and it voted to discontinue that practice. Appellants then filed the present action against the Board, FCERA, the County, and other plan sponsors (collectively respondents), to require them to resume the use of the enhanced benefits formula. Respondents demurred. After allowing several opportunities to amend, the trial court sustained respondents’ demurrer to appellants’ third amended petition without leave to amend on the ground that, as a matter of law, the settlement agreement did not include the enhanced benefits formula for disability retirement. Appellants appeal from the resulting judgment, arguing that under the recent Supreme Court case of Retired Employees Assn. of Orange County, Inc. v. County of Orange (2011) 52 Cal.4th 1171 (Retired Employees), the enhanced benefits formula for disability retirement was arguably an implied term of the settlement agreement. We disagree and will affirm the judgment of the trial court.


CERL—The Statutory Backdrop

FCERA is a public retirement trust that exists to administer benefits for active and retired public employees in Fresno County. It operates under the provisions of CERL. (Stillman v. Board of Retirement of Fresno County Employees’ Retirement Assn. (2011) 198 Cal.App.4th 1355, 1360.) Upon satisfying age and service requirements, members of a county retirement system governed by CERL (such as FCERA) qualify to receive a service retirement allowance. A member’s service retirement allowance is determined under one of the statutory formulas set forth in CERL (e.g., § 31676.14), upon adoption thereof by a county’s board of supervisors.

When a member of FCERA is incapacitated due to a disability, he or she may be entitled to receive a disability retirement allowance from FCERA. (See § 31720 et seq.) If the disability was not in the course of or caused by the member’s employment, the member may be entitled to what is called a “non-service-connected” disability retirement allowance. (See §§ 31726 [general members], 31726.5 [“safety” members].) If a member qualifies for a non-service-connected disability retirement, the monthly allowance is calculated under a formula that appears in the applicable section of CERL. (See §§ 31727 [general members], 31727.2 [“safety” members].) A separate statutory formula is used for service-connected disability. (§ 31727.4.) Service connected-disability is not at issue in this case.

The Ventura Decision and Its Aftermath

As noted, appellants contend that monthly retirement allowances paid by FCERA for non-service-connected disabilities must be calculated under an enhanced benefits formula that is greater than the CERL formula. Appellants argue they acquired such rights as an implied term of the settlement agreement. Before we discuss the settlement agreement itself, it is necessary as background to briefly note the Supreme Court decision of Ventura County Deputy Sheriffs’ Assn. v. Board of Retirement (1997) 16 Cal.4th 483 (Ventura), since that decision was the basis for the class action claims that were settled in the settlement agreement.

In Ventura, the Supreme Court engaged in extensive statutory analysis of certain sections of CERL to interpret the meaning of “‘compensation’” and “‘compensation earnable’” in order to ascertain what must be included in an employee’s “‘final compensation’” for purposes of calculating his or her retirement pension under CERL. (Ventura, supra, 16 Cal.4th at pp. 487-505.) The Supreme Court held that in addition to an employee’s base salary, other forms of cash remuneration (excluding overtime) had to be included in calculating his or her final compensation for purposes of a CERL retirement pension, such as educational pay, bilingual pay, payments in lieu of accrued vacation time, uniform maintenance allowances, etc. (Ibid.) In so holding, the Supreme Court disapproved a longstanding Court of Appeal decision upon which Ventura County, among many other counties, had relied in making actuarial calculations. (Id. at pp. 505-507.) The Supreme Court concluded its opinion in Ventura with the following remedial directives: “There may be unanticipated costs to Ventura County if the pensions of the individual plaintiffs and the employees the association represents must be recalculated and adjusted upward. If so, to comply with the financial provisions of CERL [citation] and accommodate future increases, the county may have to make a supplemental appropriation and adjust the future annual appropriation for its contribution to the pension fund to cover the increase in future retiree pensions that results from inclusion of additional items of ‘compensation’ in ‘compensation earnable.’” (Id. at p. 507.)

In the aftermath of Ventura, a number of class action lawsuits were filed in various counties, alleging noncompliance with Ventura in the computation of retirement benefits and seeking to make the Ventura decision retroactive. Several such class action lawsuits were filed in Fresno County Superior Court against FCERA and/or the County, which cases were consolidated and coordinated to San Francisco County Superior Court. These cases were (and are) collectively referred to as Ventura II litigation. The parties to the Fresno County Ventura II litigation reached a final settlement pursuant to a settlement agreement that is described below.

The Settlement Agreement

The settlement of the Fresno County Ventura II litigation entailed two consecutive settlement agreements, the first of which was executed in July-August 2000 (the first agreement), but it was short-lived. The first agreement provided, among other things, that “[a]ll parties agree to an enhanced formula for service retirement benefits for both general and safety members” in accordance with an attachment thereto. It also required the parties “to cooperate in facilitating the passage of enabling amendment of [CERL] necessary to provide the enhanced formula.” A notice was sent to all class members to advise them of the terms of the settlement, and San Francisco County Superior Court approved the class action settlement. However, when the proposed enabling legislation was vetoed by the Governor, it rendered the first agreement null and void.

In October 2000, the parties negotiated and executed a second settlement agreement that was later approved by San Francisco Superior Court. This became the operative settlement agreement between the parties and is referred to herein as the settlement agreement. Section 6 of the settlement agreement provided that “[a]ll parties agree that the County Board of Supervisors will (1) adopt by resolution the service retirement formula for general members provided by … section 31676.14, to be effective January 1, 2001; … [and] (2) adopt a resolution provided by section 31678.2 (effective January 1, 2001) to make the section 31676.14 formula retroactive for all service credit earned by employees retiring on or after January 1, 2001.” Section 6 further provided that only class members retiring on or after January 1, 2001, would be entitled to the benefits provided in section 6. Additionally, in section 7 of the settlement agreement, the parties agreed “to cooperate in facilitating passage of an enabling amendment of [CERL] to provide an enhanced formula for service retirement benefits equal to ‘two and one half percent at age 55’ … for general members and ‘two and one half percent at age 50’ … for safety members. [¶] … [U]pon the effective date of such amendment, benefits for employees retiring on and after January 1, 2001 shall be provided under that enhanced formula rather than as provided in section 6.”[2] Persons who retired before January 1, 2001, would not be entitled to the benefits indicated in sections 6 or 7, but would receive an increase of “$15.00 per month service benefit for each full year of service subject to a maximum of 30 years service, i.e., a maximum of $450.” As with the first agreement, the settlement agreement expressly mentioned and enhanced only “service” retirement benefits; it was completely silent as to disability retirement.

By its terms, the settlement agreement purported to be a compromise that was meant to fully resolve and settle all of the Fresno County Ventura II lawsuits and all issues between the parties therein, and it included mutual waivers and releases, along with a promise to forbear from any future lawsuit or claim relating to the scope of the Ventura Supreme Court opinion or to the items of compensation to be included for purposes of CERL. Not only was the settlement agreement intended to settle “all issues ...

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