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Flethez v. San Bernardino County Employees Retirement Association

Supreme Court of California

March 2, 2017

LETICIA FLETHEZ, Plaintiff and Respondent,
v.
SAN BERNARDINO COUNTY EMPLOYEES RETIREMENT ASSOCIATION, Defendant and Appellant. 1212542

         Superior Court San Bernardino County, No. CIVDS 1212542, Ct.App. 4/1 D066959 David Cohn Judge

          Michael P. Calabrese; Arias & Lockwood and Christopher D. Lockwood for Defendant and Appellant.

          Nossman, Ashley K. Dunning, Michael V. Toumanoff and Catherine F. Ngo for Alameda County Employees' Retirement Association, Kern County Employees' Retirement Association, Los Angeles County Employees' Retirement Association, Marin County Employees' Retirement Association, Sacramento County Employees' Retirement Association, San Joaquin County Employees' Retirement Association, Tulare County Employees' Retirement Association and Ventura County Employees' Retirement Association as Amici Curiae on behalf of Defendant and Appellant.

          Reed Smith, Harvey L Leiderman and Jeffrey R. Rieger for California Public Employees' Retirement System as Amicus Curiae on behalf of Defendant and Appellant.

          Faunce, Singer & Oatman, Mark Ellis Singer, Edward L. Faunce and Larry J. Roberts for Plaintiff and Respondent.

          Law Offices of John Michael Jensen and John Michael Jensen as Amici Curiae on behalf of Plaintiff and Respondent.

          Cantil-Sakauye, C. J.

         In this action for a writ of mandamus, the superior court determined that San Bernardino County Employees Retirement Association (SBCERA) wrongfully denied Frank Flethez the correct starting date for his disability retirement allowance.[1] The court then awarded Flethez prejudgment interest under Civil Code section 3287, subdivision (a) (section 3287(a)) as part of his damages, to be retroactively calculated from the same starting date.[2] On appeal, SBCERA challenged only the calculation of the prejudgment interest award.

         The Court of Appeal agreed with SBCERA that the superior court had erred in its calculation of prejudgment interest and reversed the court's judgment to the extent it awarded section 3287(a) interest on all of Flethez's retroactive disability retirement benefits starting from the first date of those benefits - July 15, 2000. In doing so, the Court of Appeal expressly disagreed with the reasoning of Austin v. Bd. of Retirement (1989) 209 Cal.App.3d 1528 (Austin). We granted review to consider how prejudgment interest under section 3287(a) should be calculated when a retroactive award of service-connected disability retirement benefits under the County Employees Retirement Law of 1937 is ordered in an administrative mandamus proceeding.

         As we will explain, we agree with the Court of Appeal that the superior court erred in its award of prejudgment interest.

         I. BACKGROUND

         A. County Employee Service Disability Retirements

         Public employee retirement boards have plenary authority regarding, and fiduciary responsibility for, the administration of their retirement systems. (Cal. Const., art. XVI, § 17.) A county's retirement system is administered by a county retirement board, under the County Employees Retirement Law of 1937. (Gov. Code, § 31450 et seq. (hereafter the CERL).)

         County retirement systems formed under the CERL provide both service retirements based on age and years of service (Gov. Code, § 31670 et seq.) and disability retirements based on an employee becoming permanently incapacitated for the performance of his or her work duties. (Gov. Code, § 31720 et seq.)

         When the statutory requirements are met, an employee member of a county retirement system who is permanently incapacitated may separate from county service and receive either a service-related disability retirement and allowance, or a general disability retirement and allowance. (Gov. Code, § 31720.) An application for either type of disability retirement must be made “[1] while the member is in service, [2] within four months after his or her discontinuance of service, [3] within four months after the expiration of any period during which a presumption is extended beyond his or her discontinuance of service, or [4] while, from the date of discontinuance of service to the time of the application, he or she is continuously physically or mentally incapacitated to perform his or her duties.” (Gov. Code, § 31722.)

         Because a county retirement board is “required to administer the retirement system ‘in a manner to best provide benefits to the participants of the plan, ” (McIntyre v. Santa Barbara County Employees' Retirement System (2001) 91 Cal.App.4th 730, 734 (McIntyre); see also Cal. Const., art. XVI, § 17), it must “investigate[] applications and pay[] benefits only to those members who are eligible for them.” (McIntyre, at p. 734.) The board may require such proof as it deems necessary to determine the existence of a disability. (Gov. Code, § 31723.) “Permanent incapacity for the performance of duty shall in all cases be determined by the board.” (Gov. Code, § 31725.) The applicant bears the burden of proving his or her disability and that it is service related. (Masters v. San Bernardino County Employees Retirement Assn. (1995) 32 Cal.App.4th 30, 46; Rau v. Sacramento County Retirement Bd. (1966) 247 Cal.App.2d 234, 238.) “ ‘If the proof received, including any medical examination, shows to the satisfaction of the board that the member is permanently incapacitated, ' the board shall retire that member. (Gov. Code, § 31724, italics added.)” (Masters, at p. 46.) If the board is not satisfied that the member is permanently incapacitated according to the proof received, the request for disability retirement must be denied. (Gov. Code, § 31725.)

         Government Code section 31724 governs the timing of disability retirements and allowances. The statute provides that when a county retirement board is satisfied that the member is permanently incapacitated and grants the member a disability retirement, the retirement is “effective on the expiration date of any leave of absence with compensation to which [the member] shall become entitled... or effective on the occasion of the member's consent to retirement prior to the expiration of such leave of absence with compensation.” (Gov. Code, § 31724.) In the case of a member who has been granted or is entitled to sick leave, the statute provides that the retirement is not effective until the expiration of such leave with compensation, unless the member consents to an earlier date. (Ibid.)[1]

         Government Code section 31724 also states the general rule that the member's “disability retirement allowance shall be effective as of the date such application is filed with the [county retirement] board, but not earlier than the date following the last day for which [the member] received regular compensation.” (Italics added.) In other words, a retiree's disability retirement allowance will typically be effective on the latter of two dates: the actual application date or the date following the last day for which regular compensation was received after separation. However, “[w]hen it has been demonstrated to the satisfaction of the board that the filing of the member's application was delayed by administrative oversight or by inability to ascertain the permanency of the member's incapacity until after the date following the day for which the member last ...


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