ANNE BROOME et al.,
A160591
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FIVE
June 27, 2022
Alameda County Super. Ct. No. RG14744056; CERTIFIED FOR PUBLICATION
Anne Broome and William Gurtner (Plaintiffs), retired employees of the University of California (University), sued the University’s governing body, the Board of Regents (Regents), for breach of contract, promissory estoppel, and related claims, alleging Regents violated an obligation to provide them with certain pension benefits. The trial court issued judgment in favor of Regents and Plaintiffs appeal. We affirm.
FACTUAL BACKGROUND
The 1999 Resolution
The University of California Retirement Plan (UCRP or Plan) is a defined benefit plan “subject to federal tax laws in the administration of benefits accruing to its members.” In January and February 1999, the University’s President (President) addressed the Regents’ Committee on Finance regarding two federal tax law limitations on benefits that could be paid by the Plan. The limitation relevant here imposed, for employees hired after a certain date, a “maximum compensation amount that can be used for retirement calculations”—at that time, $160,000—such that employees earning more than the maximum “cannot receive benefits based on the full compensation that UCRP would otherwise use for benefit calculations.”1 The President reported the limitations “are a significant deterrent tо recruitment and retention of faculty, staff, administrators, scientists, and engineers.”
The President recommended that, “[t]o remain competitive in the recruitment and retention of employees,” the University should take advantage of recent amendments to the Internal Revenue Code making it possible for public institutions to “mitigate” the limitations. As to the maximum compensation limitation, the University could “amend[] UCRP to add a provision to
Accordingly, the President proposed, and the Finance Committee approved for presentation to the full Regents, a resolution approving the establishment of benefit restoration plans. At the Regents’ February 1999 meeting, Regents adopted the following resolution (hereafter, the 1999 Resolution):
“A. Approval be granted to establish plans, effective January 1, 2000, to restore to University of California faculty and staff, including Department of Energy Laboratories scientists and engineers, the University of California Retirement Plan (UCRP) benefits eаrned but denied due to Internal Revenue Code limitations.
“B. These UCRP benefits also be provided to affected UCRP members who retired before the effective date of the restoration plans.
“C. Implementation of the restoration plans be delegated to the President, with the concurrence of the Chair[] of the Board and the Chair[] of the Committee on Finance.”2
Appendix E
Following Regents’ approval of the 1999 Resolution, the President’s Office drafted a Plan amendment, referred to as Appendix E, to restore the benefits impacted by the maximum compensation limit. Appendix E was a 16-page document with detailed provisions about calculation of the benefit, form of the benefit, benefits for members who are reappointed after retirement, and disability and preretirement survivor benefits. Appendix E provided for Regents’ unlimited right to amend or terminate Appendix E, and the right of the President, with the concurrence of the Chairs, to add or delete employees from Appendix E’s list of members. Appendix E provided, “no person, including any Appendix E Member, has any ‘vested rights’ under state or federal law in any benefits that may be provided for under this Appendix E,” with the exception of those members who are “employee[s] of the University upon or after attainment of age 60” and identified by Appendix E as a member.
In June 1999, the University submitted Appendix E to the IRS for approval. In December 1999, the IRS put a hold on the determination pursuant to a moratorium on certain kinds of requests for approval.
The President’s office, in addition to drafting Appendix E, developed a plan to restore benefits impacted by the other federal tax law limitation addressed by the 1999 Resolution (ante, fn. 1). This plan did not require IRS approval. In February 2000, the President submitted the plan to the Chairs for their review, the Chairs approved the plan, and it was subsеquently implemented.
In January 2007, the IRS moratorium on certain kinds of requests for approval ended. In November 2007, the IRS approved Appendix E.
In late 2008, the Chairs, along with the President, decided not to implement Appendix E or any other version of a restoration plan for benefits reduced by the maximum compensation limitation.
On March 29, 2012, Regents rescinded the 1999 Resolution’s authorization of a restoration plan for benefits reduced by the maximum compensation limitation.
PROCEDURAL BACKGROUND
In 2014, Plaintiffs sued Regents on behalf of themselves and similarly situated Plan members who retired between January 1, 2000, and March 29, 2012. Plaintiffs alleged claims for impairment of contract, promissory estoppel, equitable estoppel, breach of fiduciary duty, breach of contract, breach of the covenant of good faith, and declaratory relief. Judgment on the pleadings was granted for Regents as to the equitable estoppel claim, class certification was denied as to the promissory estoppel claim, and a class was certified as to the remaining claims.
Regents filed a motion for summary judgment/adjudication, which the trial court granted except as to Plaintiffs’ claims for promissory estoppel and declaratory relief.3 Following a bench trial on Plaintiffs’ individual promissory estoppel claims, the trial court issued a statement of decision finding against Plaintiffs on those claims as well as their derivative declaratory judgment claims. Judgment issued for Regents.
DISCUSSION
I. Breach of Contract
Plaintiffs challenge the trial court’s ruling granting summary adjudication for Regents on Plaintiffs’ contract claim. Plaintiffs contend the 1999 Resolution created enforceable contractual rights.
A. Legal Background
“ ‘[T]he terms and conditions of public emрloyment, unlike those of private employment, generally are established by statute or other comparable enactment (e.g., charter provision or ordinance) rather than by contract.’ [Citation.] For this reason, public employees have generally been held to possess no constitutionally protected rights in the terms and conditions of their employment.” (Cal Fire Local 2881 v. California Public Employees’ Retirement System (2019) 6 Cal.5th 965, 977, fn. omitted (Cal Fire).) It is a “fundamental principle that the terms and conditions of public employment, to the extent those terms and conditions derive from legislative enactments, arе not generally protected by the contract clause from repeal or revision at the discretion of the legislative body.”4 (Id. at p. 978.)
There are “two exceptions to the general rule permitting legislative modification of statutory terms and conditions of public employment. The first, applicable to statutorily created employment rights generally, affords the protection of the contract clause to statutory terms and conditions of public employment when the statute or ordinance establishing the benefit and the circumstances of its enactment clearly evince a legislаtive intent to create contractual rights. The second exception, which this court has historically extended primarily to pension rights, protects certain benefits of public employment by implication, even in the absence of a clear manifestation of legislative intent.” (Cal Fire, supra, 6 Cal.5th at pp. 978–979.)
Under the first exception, “ ‘[a]lthough the intent to make a contract must be clear, our case law does not inexorably require that the intent be express. [Citation.] . . . Where, for example, the legislation is itself the ratification or approval of a contract, the intent to make a contract is clеarly shown.’ ” (Cal Fire, supra, 6 Cal.5th at p. 980.) Cal Fire discussed such a case, Retired Employees Assn. of Orange County, Inc. v. County of Orange (2011) 52 Cal.4th 1171 (Retired Employees), in which a county “had entered into a series of express contracts with its employees, in the form of MOUs, relating to their terms and conditions of employment,” and “[e]ach of these MOUs had been ratified by a resolution of the board of supervisors.” (Cal Fire, at p. 980.) As Cal Fire explained, “it was critical to Retired Employees’ holding that the legislative enactment on which the implied contractual rights were premised was a resolution approving an express contract of employment.” (Id. at p. 981.)
In Cal Fire itself, public employees challenged the repeal of a statute granting them the opportunity to purchase rеtirement service credit and thereby receive pension benefits calculated on the basis of more public employment time than they actually worked.5 (Cal Fire, supra, 6 Cal.5th at p. 970.) In contrast with the county’s contract ratification in Retired Employees, “Nothing of the sort occurred in connection with the opportunity to purchase [retirement service] credit. The Legislature did not engage in any sort of negotiation with the public employees covered by [the statute], let alone ratify an express or implied contract reflecting its terms. The Legislature simply enacted a statute granting the opportunity to purchase [such] credit. . . . [S]uch statutes, which announce a policy rаther than create a contract, ‘ “are inherently subject to revision and repeal.” ’ ” (Cal Fire, at p. 981.)
The circumstances surrounding the 1999 Resolution are akin to those in Cal Fire, and entirely unlike those in Retired Employees. The 1999 Resolution did not ratify a contract or follow negotiations with public employees. Indeed, there is less evidence of an intent to create contractual rights than in Cal Fire because the 1999 Resolution did not even implement any employee benefits; instead, it simply granted “[a]pproval . . . to establish plans” (italics added), belying any clear intent to create contractual rights by virtue of the 1999 Resolution alone.
Moreover, by its own terms, the 1999 Resolution delegаted a future implementation to the President, “with the concurrence of” the Chairs.
C. Implied Contractual Rights
“[A] contractual right to receive pension benefits is implied, despite their statutory foundation, because they constitute a form of deferred compensation. . . . [A] public employee ‘is not fully compensated upon receiving . . . salary payments because, in addition, [the employee] has then earned certain pension benefits, the payment of which is to be made at a future date. While payment of these benefits is deferred, and is subject to the condition that the employee continue to serve for the period required by the stаtute, the mere fact that performance is in whole or in part dependent upon certain contingencies does not prevent a contract from arising, and the employing governmental body may not deny or impair the contingent liability any more than it can refuse to make the salary payments which are immediately due.’ [Citation.] Given their character as deferred compensation, the receipt of legislatively established pension benefits is protected by the contract clause, even in the absence of a manifest legislative intent to create contractuаl rights.” (Cal Fire, supra, 6 Cal.5th at pp. 984–985.) “[T]he receipt of pension benefits is granted constitutional protection because the benefits constitute a portion of the compensation awarded by the government to its employees, paid not at the time the services are performed but at a later time.” (Id. at p. 985.)7
Various cases illustrate this principle. In Kern v. City of Long Beach (1947) 29 Cal.2d 848 (Kern), when the petitioner began city employment, the city charter provided for pensions under specified terms. (Id. at p. 850.) The Supreme Court held the petitioner had an implied contractual right to this benefit such that the city could not, shortly before the petitioner completed the required years of servicе, eliminate pensions as to all employees not then eligible for retirement. (Id. at pp. 850, 856.) In Olson v. Cory (1980) 27 Cal.3d 532 (Olson), a state statute provided for annual full
In Kern, Olson, and Requa, the benefit promised by the public employer was in effect during the employee’s employment. In contrast, the 1999 Resolution did not itself implement restoration benefits—indeed, it did not even specify the terms of such benefits such that the parties could determine with precision any contractual obligation. Although Appendix E did provide such specifics, neither Appendix E nor any other version of a restoration benefit plan for the maximum compensation limit ever took effect.8
Accordingly, unlike the employees in the above cases, Plaintiffs never earned restoration benefits through their employment. (Cf. Fry v. City of Los Angeles (2016) 245 Cal.App.4th 539, 550 [“ ‘ “By entering public service an employee obtains a vested contractual right to earn a pension on terms substantially equivalent to those then offered by the employer.” ’ ” (Italics added)].)
Plaintiffs argue the 1999 Resolution constituted an offer to provide restoration benefits in the future, which Plaintiffs accepted by their continued employment. Even so assuming, the 1999 Resolution expressly provided implementation of the benefits was conditioned on an event that nevеr occurred: the Chairs’ concurrence in an implementation plan proposed by the President. Plaintiffs point to extrinsic evidence they contend shows that the only condition of the 1999 Resolution’s offer of restoration benefits was IRS
In addition, Plaintiffs argue extrinsic evidence shows the concurrence provision was included solely to avoid the appearance of a conflict of interest because the President would be eligible for restoration benefits, and the Chairs had no discretion to refuse their concurrence for any other reason. Plaintiffs’ evidence, construed in their favor, does not so demonstrate.11
Plaintiffs rely on comments recorded in the January 1999 Finance Committee minutes but, as Regents note, the commеnts related to an entirely different agenda item. Plaintiffs also point to statements by non-members of Regents about their understanding of the concurrence requirement: (1) the Director of Retirement Planning at the time the 1999 Resolution was passed averred that, based on “discussions in my Department at that time,” she understood “the concurrence was designed to avoid any appearance of conflict of interest”; and (2) the President from 2003 to mid-2008 averred that he did not understand the language “to mean that I had discretion to determine whether or not the [restoration benefit plan] should be implemented” but insteаd “was a logical step to address a potential conflict of interest.” These statements, even if admissible, are insufficient. “The subjective understandings of individuals, as well as understandings communicated outside the approval process, are not admissible as evidence of the [public employer’s] intent.” (Vallejo Police Officers Assn. v. City of Vallejo (2017) 15 Cal.App.5th 601, 617 (Vallejo Police Officers).)12 We note that, even if the
“ ‘[I]mplied rights to vestеd benefits should not be inferred without a clear basis in the contract or convincing extrinsic evidence.’ ” (Retired Employees, supra, 52 Cal.4th at p. 1191; see also Chisom v. Board of Retirement of Fresno County Employees’ Retirement Assn. (2013) 218 Cal.App.4th 400, 414 [“ ‘[I]n order to prevent the governing body and the public from being “blindsided by unexpected obligations,” the asserted contractual obligation must be clearly shown.’ ”].) Plaintiffs’ evidence, construed in their favor, does not clearly show Regents intended to create contractual rights to restoration benefits even if the Chairs never concurred in a restoration benefit implementation plan.13 Regents have demonstrated Plaintiffs cannot establish breach of contract.14
II. Promissory Estoppel
In the trial court’s statement of decision following trial on Plaintiffs’ individual promissory estoppel claims, the court found, “Reliance on the Regents’ vote on the 1999 Resolution is insufficient for promissory estoppel” because it is “not a clear and unambiguous promise . . . .”15 The court also
“The elements of a promissory estoppel claim are ‘(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by [that party’s] reliance.’ ” (US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th 887, 901.) “To be enforceable, a promise need only be ‘ “definite enough that a court can determine the scope of the duty[,] and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages.” ’ [Citation.] It is only where ‘ “a supposed ‘contract’ does not provide a basis for determining what obligations the parties have agreed to, and hencе does not make possible a determination of whether those agreed obligations have been breached, [that] there is no contract.” ’ ” (Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031, 1045 (Garcia).)
Plaintiffs do not dispute that the 1999 Resolution alone is insufficient, but argue that Appendix E “embodied the definite scope of the obligations” under the 1999 Resolution, such that the “1999 Resolution and Appendix E had become enforceable after the sole condition of IRS approval had been satisfied.” Plaintiffs’ claim fails. The 1999 Resolution expressly conditioned the implementation of benefits on the Chairs’ concurrence in an implementation plan propоsed by the President.16 Regardless of whether the concurrence was required for the decision to implement or how to implement, it is undisputed that the Chairs never concurred in Appendix E or any other implementation plan. Therefore, the condition set forth in the 1999 Resolution did not occur.17
The judgment is affirmed. Respondent shall recover its costs on appeal.
We concur.
SIMONS, J.
JACKSON, P. J.
BURNS, J.
(A160591)
Broome et al. v. Regents of the University of California (A160591)
Trial Judge: Hon. Michael M. Markman
Trial Court: Alameda County Superior Court
Attorneys:
Keller Rohrback LLP, Jeffrey Lewis and Rachel E. Morowitz; Law Office of Geoffrey V. White, Geoffrey V. White; Stember Cohn & Davidson-Welling, LLC Maureen Davidson-Welling and Vincent J. Mersich for Plaintiffs and Appellants.
Orrick, Herrington & Sutсliffe LLP, William D. Berry, Joseph C. Liburt, Eric A. Shumsky, and Lauren A. Weber for Defendant and Respondent.