18 Cal. App. 5th 340
Cal. Ct. App. 5th2017Background
- Eleven retired Salinas Unified High School District teachers received inflated CalSTRS defined‑benefit pensions because the District improperly coded sixth‑period pay as creditable compensation. An internal District memo (Aug. 18, 2005) raised the issue to the county office of education (MCOE); an outside audit delivered to CalSTRS reported the error in December 2008 and CalSTRS issued a final audit July 30, 2010.
- CalSTRS ordered corrections and sought reimbursement from the District; when the District did not comply, CalSTRS began reducing teachers’ monthly payments and recouping overpayments (effective April 1, 2012) and filed a Statement of Issues for administrative adjudication July 6, 2012.
- Teachers appealed administratively; the ALJ and CalSTRS Appeals Committee ruled for CalSTRS. Teachers then obtained a superior court writ reversing the administrative decision, holding CalSTRS’s claims and reductions time‑barred under Education Code §22008 and ordering restoration of benefits and reimbursement.
- On appeal the court addressed (1) whether the §22008(c) three‑year limitations period begins on actual discovery only or upon inquiry (constructive) notice; (2) what constitutes commencement of an “action” under §22008(a) for tolling/limitations purposes; and (3) whether continuous accrual applies to periodic pension payments.
- The court held (1) “discovery” under §22008(c) includes actual or inquiry notice (i.e., when the claimant discovered or with reasonable diligence should have discovered the incorrect payment), and August 18, 2005 (the Fellows memorandum to MCOE) provided inquiry notice; (2) an “action” under §22008(a) was commenced when CalSTRS filed its Statement of Issues on July 6, 2012 (not when it mailed the final audit or unilaterally reduced payments); and (3) the continuous accrual doctrine applies to periodic pension payments, so only payments older than three years before July 6, 2012 were barred. The judgment was reversed and remanded for further proceedings.
Issues
| Issue | Teachers' Argument | CalSTRS' Argument | Held |
|---|---|---|---|
| Meaning of “discovery” in §22008(c) (when 3‑yr period starts) | "Discovery" requires actual knowledge; statute should not be triggered by mere inquiries | "Discovery" includes inquiry notice — when claimant knows or should know with reasonable diligence | Court: "Discovery" includes actual or inquiry notice; inquiry notice via Fellows memorandum (Aug. 18, 2005) triggered accrual |
| What constitutes commencement of an “action” under §22008(a) | Action occurred when CalSTRS first took corrective steps (April 1, 2012 reductions) or when it mailed the final audit (July 30, 2010) | Action not commenced until formal initiation of administrative adjudication (Statement of Issues) | Court: filing Statement of Issues with OAH (July 6, 2012) commenced the action |
| Effect of CalSTRS reductions (April 1, 2012) on limitations | Reductions were "action" and thus should satisfy or be subject to limitations analysis; reductions barred if limitations ran | Reductions were administrative self‑help, not commencement of an action for statute‑of‑limitations purposes | Court: unilateral reductions were not commencement of an action under §22008(a) |
| Applicability of continuous accrual to pension overpayments | Teachers: continuous accrual inapplicable; claim to correct pension is single cause of action and time‑barred in full | CalSTRS: each periodic pension payment triggers a new limitations period; continuous accrual applies so only payments older than 3 years before July 6, 2012 are barred | Court: continuous accrual applies to periodic pension payments (Dryden rule); only payments due more than three years before July 6, 2012 are time‑barred |
Key Cases Cited
- Jolly v. Eli Lilly & Co., 44 Cal.3d 1103 (establishes inquiry‑notice formulation of the discovery rule)
- Norgart v. Upjohn Co., 21 Cal.4th 383 (discusses the discovery rule as postponing accrual until plaintiff discovers or should discover cause of action)
- Dryden v. Board of Pension Commrs., 6 Cal.2d 575 (periodic pension payments create continuing rights; accrual for each installment when due)
- Dillon v. Board of Pension Commrs., 18 Cal.2d 427 (distinguishes entitlement determinations from accrual of periodic installments)
- Aryeh v. Canon Business Solutions, Inc., 55 Cal.4th 1185 (explains continuous accrual doctrine for series of periodic wrongs)
- Deveny v. Entropin, Inc., 139 Cal.App.4th 408 (construes “discovery” language to include inquiry notice; declines to follow contrary securities case)
- Debro v. Los Angeles Raiders, 92 Cal.App.4th 940 (construed similar "discovery" language to include inquiry notice)
- Fukuda v. City of Angels, 20 Cal.4th 805 (standard of appellate review in administrative mandamus context)
- Strumsky v. San Diego County Employees Retirement Assn., 11 Cal.3d 28 (recognizes vested pension rights warranting independent judicial review)