Lexin v. City of San Diego
166 Cal. Rptr. 3d 335
Cal. Ct. App.2013Background
- In 2002 the San Diego City Council proposed MP2 to amend the City Manager's Proposal for pension funding; board approval was sought to avoid a large ‘balloon’ payment that would have strained the City budget.
- Because the SDCERS board members worried about litigation risk, the City adopted Resolution R-297335 (Nov. 18, 2002) broadly indemnifying current and future retirement board members "against all expenses... actually and reasonably incurred... in connection with any claim or lawsuit arising from any act or omission in the scope" of their duties.
- In 2005 the San Diego County District Attorney charged the board members with felony violations of Gov. Code §1090 based on their approval of MP2; the board members tendered defense to the City but the Council failed to authorize a defense by the necessary vote, forcing the members to retain outside counsel.
- The board members previously obtained civil-defense costs under the resolution against the then-City Attorney’s civil suits; in Lexin (47 Cal.4th 1050) the California Supreme Court later held most board members were not disqualified under §1090, and criminal charges were dismissed.
- The board members sued the City for declaratory relief, seeking enforcement of R-297335 to recover criminal defense costs; the trial court granted summary judgment to the board members and entered awards of attorney fees and costs.
- The City appealed, arguing the resolution did not cover criminal proceedings and that Gov. Code §995.8 precluded payment because the City never made the findings §995.8(b) requires (that defense is in the City’s best interests and employees acted in good faith, without malice, and in apparent public interest).
Issues
| Issue | Plaintiffs' Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Resolution R-297335 requires the City to pay criminal defense costs | Resolution’s broad language (“any claim or lawsuit”) includes criminal actions; resolution protects board members from all litigation risks stemming from MP2 | Resolution was intended for civil litigation only; it did not reflect the deliberation required before providing criminal defense | Resolution covers criminal actions; plain language and purpose show no criminal exclusion |
| Whether Gov. Code §995.8 bars enforcement of an advance contractual indemnity for criminal defense | By adopting R-297335 and later refusing retroactive rescission (and by ratifying practice in R-301414), the City effectively satisfied §995.8 or cannot arbitrarily deny defense after promising indemnity | §995.8 requires a post-charge determination that defense is in the public interest and findings (or at least deliberation) before providing criminal defense; contractual promises cannot bypass statute | Court held §995.8 does not prevent enforcement here; alternatively, board members met §995.8(b) criteria and City offered no counterevidence |
| Allocation of burden when resolution exists but City refuses to pay | Having adopted a broad indemnity, the City cannot arbitrarily deny defense; burden shifts to City to show §995.8(b) factors are unmet | The City says the board members bear the burden to show the City made required §995.8 findings | Court treated board members as having met their prima facie case and, because City submitted no countervailing evidence, affirmed judgment; Court also reasoned City bears burden to justify denial once it promised indemnity |
| Applicability of City of Bell precedent (limiting enforceability of advance criminal-defense promises) | Resolution here is distinguishable: City solicited MP2, City was not a victim, resolution was specific and later ratified; Bell is inapplicable | Bell holds contractual advance promises to provide criminal defense cannot be enforced because §995.8 requires case-by-case determinations after charges | Bell found distinguishable on facts and procedure; court affirmed judgment despite acknowledging Bell’s holding, because factual differences and city ratification supported enforcement |
Key Cases Cited
- Lexin v. Superior Court, 47 Cal.4th 1050 (2010) (Supreme Court decision that most SDCERS board members were not disqualified under Gov. Code §1090)
- Torres v. City of San Diego, 154 Cal.App.4th 214 (2007) (appellate opinion addressing City indemnity resolution and recovery of civil defense costs)
- City of Bell v. Superior Court, 220 Cal.App.4th 236 (2013) (held §995.8 limits enforcement of advance contractual promises to provide criminal defense)
- D'Amato v. Superior Court, 167 Cal.App.4th 861 (2008) (discusses criminal liability under §1097 and that good-faith belief is not a defense)
- Los Angeles Police Protective League v. City of Los Angeles, 27 Cal.App.4th 168 (1994) (contrast between civil-defense obligation and discretionary criminal-defense provision under §995.8)
- BreakZone Billiards v. City of Torrance, 81 Cal.App.4th 1205 (2000) (background on §1090 self-dealing prohibition)
Disposition: Judgment affirmed; respondents awarded costs on appeal.