236 Cal. App. 4th 889
Cal. Ct. App.2015Background
- Plaintiffs are former safety members (police/fire) who purchased MSC or ARSC through CalPERS.
- Each plaintiff retired before age 50 due to an industrial disability and began receiving a 50% IDR.
- CalPERS does not pay any additional retirement benefits based on MSC/ARSC purchases.
- Plaintiffs sued CalPERS for breach of statutory duty, breach of contract, rescission, breach of fiduciary duty, equal protection, due process, and other relief.
- Trial court sustained demurrers/motion for judgment on pleadings; the judgments were appealed and consolidated on appeal.
- Court reverses on rescission and breach of fiduciary duty; confirms demurrer on statutory duty and contract; addresses class-definition issues in the nonpublished portion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 21420 entitles IDR retirees to an annuity from MSC/ARSC | Marzec argues MSC/ARSC are ordinary contributions triggering 21420. | CalPERS contends MSC/ARSC are not “categories of membership.” | 21420 does not apply; MSC/ARSC are not categories of membership. |
| Whether contracts promised a guaranteed post-purchase benefit increase | Plaintiffs claim offer letters promised increased benefits. | Defendants argue letters only offered additional service credit, with estimates, not guarantees. | No contract-based promise of guaranteed increases; demurrer upheld. |
| Whether rescission is stated based on disclosures and consent | Plaintiffs allege consent induced by misrepresentation/fraud/undue influence. | Disclosures were adequate; rescission not warranted. | Rescission claim should survive demurrer. |
| Whether CalPERS breached fiduciary duty by disclosure failures | CalPERS failed to disclose risks of losing MSC/ARSC value. | Disclosures were sufficient; fiduciary duty not breached. | Demurrer as to breach of fiduciary duty should have been overruled. |
| Whether equal protection was violated by treatment of MSC/ARSC purchasers | Disability retirees with MSC/ARSC are treated worse than others. | Groups are not similarly situated for the challenged treatment. | No equal protection violation; disparate treatment justified by service credit totals. |
Key Cases Cited
- Lehto v. City of Oxnard, 171 Cal.App.3d 285 (Cal. Ct. App. 1985) (plaintiff must identify statutory provisions allegedly violated)
- Bernard v. City of Oakland, 202 Cal.App.4th 1553 (Cal. Ct. App. 2012) (administrative construction given deference)
- Harris v. PAC Anchor Transportation, Inc., 59 Cal.4th 772 (Cal. 2014) (demurrer standard; facts deemed true for review of legal sufficiency)
- Miller v. State of California, 18 Cal.3d 808 (Cal. 1977) (pension rights may be modified; vested rights subject to conditions and contingencies)
- People v. Lawrence, 24 Cal.4th 219 (Cal. 2000) (interpretation of statutory language in context)