TOD HIPSHER, Plaintiff and Appellant, v. LOS ANGELES COUNTY EMPLOYEES RETIREMENT ASSOCIATION et al., Defendants and Respondents, COUNTY OF LOS ANGELES, Real Party in Interest and Appellant.
B276486 (Los Angeles County Super. Ct. No. BS153372)
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT DIVISION FOUR
Filed 12/15/20
Opinion on remand from Supreme Court CERTIFIED FOR PUBLICATION
Joanne B. O‘Donnell (retired) and Robert H. O‘Brien, Judges.
APPEAL on remand from the California Supreme Court, from a judgment of the Superior Court of Los Angeles County, Joanne B. O‘Donnell (retired) and Robert H. O‘Brien, Judges. Affirmed as modified and remanded.
Xavier Becerra, Attorney General, Thomas S. Patterson, Assistant Attorney General, Benjamin M. Glickman, Supervising Deputy Attorney General, Anna T. Ferrari and Anthony P. O‘Brien, Deputy Attorneys General, for Defendant and Respondent State of California.
Liebert Cassidy Whitmore, Joung H. Yim and Steven M. Berliner for Real Party in Interest and Appellant County of Los Angeles.
SUMMARY
Shortly after plaintiff and appellant Tod Hipsher retired from the Los Angeles County Fire Department (LAFD), he was convicted of a federal felony for directing an offshore gambling operation. Defendant and respondent, Los Angeles County Employees Retirement Association (LACERA), subsequently reduced Hipsher‘s vested retirement benefits under the Public Employees’ Pension Reform Act of 2013 (
Hipsher challenged LACERA‘s forfeiture determination by a petition for writ of mandate and a complaint seeking declaratory relief. The trial court issued a peremptory writ of mandate directing the County to afford adequate due process protections before reducing Hipsher‘s retirement benefits, but found in favor of defendants on Hipsher’ claim for declaratory relief. On appeal, we determined that section 7522.72 is constitutionally sound, but that LACERA, not the County, bears the burden to afford Hipsher the requisite due process protections to determine whether his conviction falls within the scope of that statute. (See Hipsher v. Los Angeles County Employees Retirement Assn. (2018) 24 Cal.App.5th 740, 756, 762–767 (Hipsher I), vacated by Alameda County Deputy Sheriffs’ Assn. v. Alameda County Employees’ Retirement Assn. (2020) 9 Cal.5th 1032 (Alameda County).
This case is before us a second time after the California Supreme Court granted Hipsher‘s petition for review, deferred briefing and transferred the
After reviewing the matter, we conclude that Alameda County confirms our prior holding that section 7522.72‘s public purpose—to protect the pension system from abusive practices of faithless public employees and preserve public trust in government—justifies any concomitant diminution in Hipsher‘s pension rights. We also conclude anew that section 7522.72 need not provide a comparable advantage to offset disadvantages Hipsher may suffer as a result of Legislative changes to the public employee retirement system enacted decades after he began his employment. Such a requirement would be antithetical to the statute‘s purpose by unfairly enriching a malfeasant legacy employee for engaging in the very sort of abusive practices section 7522.72 is intended tо curb.
Further, in accordance with the portion of our prior decision—as to which Hipsher did not seek review by the California Supreme Court—we conclude that section 7522.72 is not an unconstitutional ex post facto law, and that Hipsher is entitled to appropriate administrative due process. Accordingly, we will modify the trial court‘s judgment and remand the matter with instructions for LACERA to provide Hipsher appropriate notice of its intent and the reasons for its initiation of forfeiture proceedings, and an opportunity to present his objection to LACERA‘s impartial decisionmaker whether he falls within the scope of section 7522.72. In all other respects, we affirm the judgment, as modified.
FACTUAL AND PROCEDURAL BACKGROUND
PEPRA‘s Enactment and Purpose
PEPRA became effective January 1, 2013. The Legislature enacted PEPRA, in part, to curb abusive public pension practices throughout the state. The provision of PEPRA at issue here is section 7522.72, which provides a mechanism requiring partial forfeiture of a public employee‘s retirement benefits following a conviction of a felony offense that occurred in the scope of performance of his or her official duties. Pertinent provisions of section 7522.72 in effect at the time of Hipsher‘s retirement, provided:
“(a) This section shall apply to a public employee first employed by a public employer or first elected or appointed to an office before January 1, 2013, and, on and after that date, Section 7522.70 shall not apply.
“(b)(1) If a public employee is convicted by a state or federal trial court of any felony under state or federal law for conduct arising out of or in the performance of his or her official duties, . . . he or she shall forfeit all accrued rights and benefits in any public retirement system in which he or she is a member to the extent provided in subdivision (c) and shall not accrue further benefits in that public retirement system, effective on the date of the conviction. [¶] . . . [¶] “(c)(1) A public employee shall forfeit all the retirement benefits earned or accrued from the earliest date of the commission of any felony described in subdivision (b) to the forfeiture date, inclusive. The retirement benefits shall remain forfeited notwithstanding any reduction in sentence or expungement of the conviction following the date of the public employee‘s conviction. Retirement benefits attributable to service performed prior to the date of the first commission of the felony for which the public employee was convicted shall not be forfeited as a result of this section. [¶] . . . [¶]
“(d)(1) Any contributions to the public retirement system made by the public employee described in subdivision (b) on or after the earliest date of the commission of any felony described in subdivision (b) shall be returned, without interest, to the public employee upon the occurrence of a distribution event.” (Stats. 2012, ch. 296, § 15.)2
This appeal is among several actions that have challenged provisions of PEPRA arguing that it impairs employees’ vested rights in violation of the contract clause of the California Constitution.3 The California Supreme Court has rejected similar challenges, concluding the challenged provisions of PEPRA are consistent with the contract clause. (See Alameda County, supra, 9 Cal.5th 1032, and Cal Fire, supra, 6 Cal.5th 965.)
Hipsher was employed by the LAFD from 1983 to early 2013. Beginning in 2001 and continuing for at least 12 years, Hipsher ran an illegal international gambling business routing customers, wagers and profits through a company in Costa Rica. Hipsher was alleged to have run the illegal gambling enterprise out of his LAFD office while performing his official duties, using resources of his public employer. In 2013, following an undercover operation by the Department of Homeland Security, a federal indictment was filed against Hipsher alleging charges of owning and directing an illegal offshore gambling operation, a felony. (
Trial and Appellate Court Proceedings
Hipsher filed the instant petition for writ of mandate challenging LACERA‘s forfeiture determination and a complaint seeking declaratory relief.5 He challenged the constitutionality of section 7522.72 under the contract clause of the California Constitution, alleged that reduction of his vested retirement benefits constituted an unconstitutional ex post facto application of section 7522.72, and claimed the reduction was invalid because there was no nexus between his crime and the performance of his official duties. (Hipsher I, supra, 24 Cal.App.5th at p. 750.) The trial court issued judgment in favor of LACERA and the State as to Hipsher‘s contract and ex post facto claims. (Ibid.) In addition, after requesting and reviewing supplemental briefing as “to whether Hipsher had a due process right to his original retirement benefits and, if so, whether he [had been] afforded sufficient due process protections,” the court issued a peremptory writ of mandate directing LACERA to set aside the reduction in Hipsher‘s pension benefits and return the difference between his full pension and his allowance after the reduction. The trial court also ordered the County to reinitiate administrative proceedings under section 7522.72 in a manner that would afford Hipsher sufficient due process protections. (Ibid.) Hipsher and the County each filed an appeal.
The California Supreme Court granted Hipsher‘s petition for review and held the case pending its decision in Alameda County. On September 23, 2020, the Supreme Court transferred this matter back to this Court “with directions to vacate [our] decision [in Hipsher I] and to reconsider the cause in light of [Alameda County].”7
Hipsher‘s appeal raise two principal contentions based on his understanding of Alameda County: Section 7522.72 is unconstitutional as applied to him because the statutory modifications bear no material relation to the theory of a pension system and its successful operation, and also impair his vested right to receive retirement benefits without being accompanied by an offset of comparable advantage. Second, Hipsher maintains this Court cannot apply a “condition subsequent” analysis to save section 7522.72, as neither Alameda County nor any precedent holds that a felony conviction stemming from a pensioner‘s public service may be considered a condition subsequent permitting forfeiture of vested retirement benefits. We address Hipsher‘s contentions in reverse order. First, however, we turn to the decision in Alameda County, supra, 9 Cal.5th 1032.
I. The Supreme Court‘s Decision in Alameda County
After granting Hipsher‘s petition for review, the Supreme Court vacated our decision in Hipsher I, and returned this action to us with directions to reconsider the matter in light of its decision in Alameda County.
In Alameda County, the Court considered whether PEPRA‘s statutory amendments to the County Employees Retirement Law of 1937 (CERL; § 31450 et seq.) impaired employees’ vested rights in violation of the contract clause of the California Constitution. (
- Determining the effect of the modification: A court first must consider whether the statutory modification of public employee pension rights “impose[s] an economic disadvantage on affected employees,” relative to the preexisting pension plan and, if so, whether the disadvantages are offset by comparable new advantages. (Alameda County, supra, 9 Cal.5th at p. 1082.)
- Determining whether the government‘s articulated purpose for the modification justifies any resulting impairment of pension rights: Assuming the disadvantages are not offset, the court must determine whether the government‘s articulated purpose for making the change is “sufficient, for constitutional purposes, to justify any impairment of pension rights.” (Alameda County, supra, 9 Cal.5th at p. 1082Alameda County, supra, 9 Cal.5th at p. 1082, quoting Allen I, supra, 45 Cal.2d at p. 131.) Such changes can survive contract clause scrutiny so long as the changes “‘bear some material relation to the theory of a pension system and its successful operation.‘” (Ibid., quoting Allen I, 45 Cal.2d at p. 131.)
- Determining whether a comparable advantage would undermine or be inconsistent with the purpose of the modification: Assuming the change was made for a constitutionally permissible purpose, it “will be upheld under the contract clause only if providing comparable advantages would undermine, or would otherwise be inconsistent with, the modification‘s constitutionally permissible purpose.” (Alameda County, supra, 9 Cal.5th at p. 1093.)
The Supreme Court held that PEPRA‘s modifications, which excluded from the definition of “compensation earnable” items of compensation that
The Supreme Court found that changes to the definition of “compensation earnable” modified the law governing pensions under CERL, and those modifications disadvantaged legacy employees without providing any new advantages. (Id. at p. 1054.) Nevertheless, the Court determined that the purpose of the amendment—to prevent pension spiking and bring the definition of compensation earnable more closely to align with the pension system‘s underlying theory of what constitutes pensionable compensation—was constitutionally permissible. (Ibid.)
Further, the Supreme Court clarified that, under the specific facts of that case, the amendment to CERL did not require the provision of a comparable new advantage to offset modifications because doing so “would perpetuate the unwarranted advantages provided by these loopholes.” (Alameda County, supra, 9 Cal.5th at p. 1054.) Under the circumstances, the provision of comparable new advantages to offset PEPRA‘s modifications to what constitutes compensation earnable would be “wholly inconsistent” with the Legislature‘s purpose. It would effectively restore advantages the Legislature had determined were improper, were unintended, and should not have been available for county employees to include in the calculation of their pensionable compensation in the first place. (Id. at p. 1102.)
II. Alameda County Does Not Disturb This Court‘s Conclusion That Hipsher‘s Vested Pension Benefits May Be Impaired by a Condition Subsequent
Previously, we observed that “[a] public employee‘s vested retirement benefits can be defeated upon the occurrence of a ‘condition subsequent.“’ (Hipsher I, supra, 24 Cal.App.5th at p. 752, citing Kern v. City of Long Beach (1947) 29 Cal.2d 848, 853 (Kern).) We concluded that Hipsher‘s conviction for running an illegal gambling enterprise for over 12 years using public resources and in the course of his official duties constituted a condition subsequent permitting forfeiture of vested pension rights for the corresponding time period. (Hipsher I, at pp. 752, 754; see also Allen v. Board of Administration (1983) 34 Cal.3d 114, 124 (Allen II) [“‘Laws which restrict a party to those gains reasonably to be expected from the contract are not subject to attack under the Contract Clause, notwithstanding that they technically alter an obligation of a contract‘“].)
Alameda County did not address the effect of a condition subsequent on the definition or components of compensation earned. However, Alameda County did acknowledge the long-held rule that even where an employee‘s vested pension rights are at stake, the “‘employee does not have a right to any fixed or definite benefits,‘” and “‘the amount, terms, and conditions of the benefits may be altered.‘” (Alameda County, supra, 9 Cal.5th at p. 1100, quoting Kern, supra, 29 Cal.2d at p. 855; see also Miller v. State of California (1977) 18 Cal.3d 808, 816 (Miller), quoting Kern, supra, 29 Cal.2d at pp. 854–855 [“Although vested prior to the time when the obligation to pay matures, рension rights are not immutable. . . . [T]he government entity providing the pension may make reasonable modifications and changes in the pension system. This flexibility is necessary ‘to permit adjustments in accord with changing conditions and at the same time maintain the integrity of the system and carry out its beneficent policy.‘“] The decision in Alameda County did not disturb our conclusion that Hipsher‘s pension rights may properly be modified as a result of the condition subsequent of the commission of a job-related felony.
Our decision was premised on settled precedent that pension rights are subject to conditions designed to assure that public employees faithfully and honestly discharge their duties. (Hipsher I, supra, 24 Cal.App.5th at pp. 751–752, citing Kern, supra, 29 Cal.2d at p. 853; see also Betts v. Board of Administration (1978) 21 Cal.3d 859, 863 [“the employee‘s eligibility for benefits can, of course, be defeated ‘upon the occurrence of a condition subsequent‘“]; Dickey v. Retirement Board (1976) 16 Cal.3d 745, 750, fn. 3 [“‘The right to a pension is a vested right; the amount of the pension may not always be ascertained until the last contingency has occurred‘“].) As we explained, “‘[i]t is assumed that upon acceptance of a position as an officer or employee of a government agency, an appointee will perform his duties conscientiously and faithfully.‘” (Hipsher I, at p. 754, quoting MacIntyre v. Retirement Board of S.F. (1941) 42 Cal.App.2d 734, 735 (MacIntyre).) In California, as elsewhere, the fundamental requirement of “faithful sеrvice” lies at the core of a pension system. (See Kern, at p. 852 [“‘[Pension annuities] are in effect pay withheld to induce long-continued and faithful services‘“], quoting Giannettino v. McGoldrick (1946) 295 N.Y. 208, 212.) The concept of “faithful service” defines the parameters of the reasonable and substantial pension to which Hipsher is entitled. (Miller, supra, 18 Cal.3d at p. 816; Wallace v. City of Fresno (1954) 42 Cal.2d 180, 183.) Because section 7522.72‘s limited forfeiture of service credit merely “restrict[s] a party to those gains reasonably to be expected from the contract,” the statute is “‘not subject to attack under the Contract Clause.‘” (Allen II, supra, 34 Cal.3d at p. 124, citing El Paso v. Simmons (1965) 379 U.S. 497, 515.)
III. Under the Alameda County Test, Modifications Effected by Section 7522.72 Need Not Provide Hipsher a Comparable Advantage and Do Not Unconstitutionally Impair His Vested Pension Rights
Although the statutory amendment at issue in Alameda County differs from the felony forfeiture provision at issue here, application of its legal framework to Hipsher‘s contract clause claim supports our conclusion that section 7522.72 does not unconstitutionally impair Hipsher‘s pension rights. Section 7522.72‘s felony forfeiture provision serves the important purpose of ensuring the integrity of the public pension system from abusive practices and the related purpose of preserving public trust in government. Applying the test of Alameda County to these facts supports a conclusion that section 7522.72 need not рrovide Hipsher a comparable advantage to offset the diminution in his pension benefits. Indeed, the provision of such a benefit would be antithetical to section 7522.72‘s public purpose, allowing a public employee unfair enrichment for engaging in the very sort of abusive conduct the statute aims to curb. Accordingly, on these facts, we conclude PEPRA‘s pension forfeiture provision for legacy employees is consistent with the contract clause.
A. The Legislative Purpose of Section 7522.72 to Protect the Integrity of Public Pension Systems Justifies the Resulting Impairment of Hipsher‘s Pension Rights
The first step in the Alameda County test is satisfied here because the statutory modification effected by section 7522.72 causes an economic disadvantage to a legacy employee which is not offset by any new advantage. The second step requires that we consider whether the Legislature‘s articulated purpose for the change is “sufficient, for constitutional purposes, to justify any impairment of pension rights.” (Alameda County, supra, 9 Cal.5th at p. 1082.) The California Rule has long “‘permit[ted] adjustments in accord with changing conditions‘” to “‘maintain the integrity of the system. [Citations.]‘” (Id. at p. 1077.) However, to withstand constitutional scrutiny, modification of pension rights must “‘bear some material relation to the thеory of a pension system and its successful operation.‘” (Id. at p. 1077, quoting Allen I, supra, 45 Cal.2d at p. 131.)
In Alameda County, the Supreme Court had “no difficulty” finding that the challenged statutory modification bore a material relation to operation of the CERL pension system. (Id. at p. 1095.) The modification effected by section 34161 excluded certain types of special
Here, as before, we conclude that “section 7522.72 forfeitures are material to the successful operation of public pension funds.” (Hipsher I, supra, 24 Cal.App.5th at p. 756.) Public employee pension systems exist to induce and reward faithful public service. (See, e.g., Kern, supra, 29 Cal.2d at p. 852, quoting Giannettino v. McGoldrick, supra, 295 N.Y. at p. 212 [“‘[Pension annuities] are in effect pay withheld to induce long-continued and faithful services‘“]; Carman v. Alvord (1982) 31 Cal.3d 318, 325, fn. 4 [explaining that pensions are an important government obligation to “help induce faithful public service“]; Douglas v. Pension Board of City of Sacramento (1925) 75 Cal.App. 335, 340 [“The hope held out for future additional reward or compensation for [public officers‘] public services . . . is conducive to uniform faithfulness and efficiency in discharging the duties which their offices or employments have exacted“]; MacIntyre, supra, 42 Cal.App.2d at p. 735 [“It is assumed that upon acceptance of a position as an officer or employee of a governmental agency, an appointee will perform his duties conscientiously and faithfully“]; see also Analysis of Assembly Committee on Public Employees, Retirement and Social Security of Assem. Bill No. 340 [passed as part of PEPRA adding the pension forfeiture provision, section 7522.72], May 4, 2011, Comments, p. 3 [“California‘s public pension systems were established to provide retirement security for those who give their lives to public service“].)
The corollary to that principle—vested pension rights of employees who fail to provide faithful service and abuse their public positions by engaging in criminal conduct in the course of their duties may be subject to modification—is also well-established. “‘Sanctions are commonly imposed to assure the faithful and honest discharge of the duties of the [public] employee.‘” (Hipsher I, supra, 24 Cal.App.5th at p. 753, quoting Steigerwalt v. City of St. Petersburg (1975) 316 So.2d 554, 556]; see also id. at pp. 752–753, fn. 6 [citing decisions in other states with pension forfeiture laws similar to section 7522.72].) This principle also
Further, section 7522.72 is temperate and narrowly tailored, and bears a material relationship to the theory of the pension system to reward faithful public service. (Alameda County, supra, 9 Cal.5th at p. 1082.) The requirement of partial forfeiture is triggered only by felonious conduct committed in the scope of a pensioner‘s public employment (§ 7522.72, subd. (b)(1)) and limited to service time from the date the criminal conduct began. (§ 7522.72, subds. (b)(1), (c)(1).) The retirement system also must restore to the affected employee all contributions he or she made during the period of the commission of felonious conduct. (Id., subd. (d)(1).)
To permit an employee who committed such an abuse to draw a full pension during retirement would do nothing to disincentivize the very abuse the pension system is intended to curb and would erode public trust. (See Little Hoover Report, p. 39 [describing pension forfeiture for criminal misconduct as an issue of “fairness” to taxpayers and pension recipients].) PEPRA‘s legislative history acknowledges that, “abusive practices engaged in by a few individual[s] . . . put retirement benefits at risk for the vast majority of honest, hard-working public servants.” (May 4, 2011, Bill Analysis of Assem. Bill No. 340, Comments, p. 4.) Alameda County supports our continuing conclusion that “section 7522.72 forfeitures are material to the successful operation of public pension funds,” and “serve[] the important public purpose of ensuring the integrity of public pension systems.” (Hipsher I, supra, 24 Cal.App.5th at pp. 752, 756.) We see no principled distinction between the result in Alameda County, which disallowed public employees from taking advantage of statutory lоopholes artificially to spike compensation used as a basis to calculate future retirement benefits, and the limited forfeiture of section 7522.72, which disallows a public employee who has committed a job-related felony from collecting a pension meant to reward his public service.
We reject Hipsher‘s claim that the requirements of Alameda County are not satisfied because section 7522.72 is concerned only with considerations external to the operation of the pension system. (See Alameda County, supra, 9 Cal.5th at p. 1098.) Our Supreme Court has long recognized that public benefits are not immutable. “Although vested prior to the time when the obligation to pay matures, pension rights are not immutable. For example, the government entity providing the pension may make reasonable modifications and changes in the pension system. This flexibility is necessary ‘to permit adjustments in accord with changing conditions and at the same time maintain the integrity of the system and carry out its beneficent policy.‘” (Miller, supra, 18 Cal.3d at p. 816, quoting Kern, supra, 29 Cal.2d at pp. 854–855.) Employees have no right to a fixed or definite pension benefit, only to a substantial, reasonable pension. (Alameda County, supra, 9 Cal.5th at p. 1078.) In Alameda County the definition of what sorts of pay could form the basis for “compensation earnable” was critical to the calculation of pension benefits and the successful oрeration of the public pension system. Accordingly, the constitutionally permissible purpose of the statutory change in Alameda County was intended to end the exploitation of loopholes created by ambiguities in statutory language that defined various types of “compensation” and allowed employees to spike pension benefits. (Id. at p. 1102 [“PEPRA‘s amendment compels uniformity on the issues it addresses, guaranteeing that compensation earnable will be implemented consistently with the Legislature‘s intent in each CERL county“]) As explained above, we discern no principled distinction between the misconduct in Alameda County, and the use by Hipsher of government resources intended for the performance of public service, but instead devoted to the commission of unlawful job-related crime at the same time he continued to accrue pension benefits. In both cases, the public employee has gained a benefit to which he was not lawfully entitled, and which would not have accrued to a faithful public servant. The partial forfeiture required by section 7522.72 bears a material relation to the successful operation of public pension funds, and serves the purposes of PEPRA, which was enacted to curb the abuse of public pension systems. (See ibid.)
B. The Purpose of Section 7522.72 Would Be Undermined if a Public Employee Required to Forfeit a Portion of His Pension Benefits as a Result of a Conviction for a Job-Related Felony is Entitled to a Comparable Advantage
Hipsher argues that even if section 7522.72 bears a material relationship to the theory underlying a pension system, he should nevertheless be provided a comparable new advantage, such as an opportunity to show that, notwithstanding his job-related felony conviction,
he satisfactorily performed his job duties without public detriment, and should be permitted to collect his full pension benefits. We reject Hipsher‘s assertion that section 7522.72 may only be sustained under the contract clause if it provides a corresponding new advantage to offset the partial forfeiture of pension benefits. As we explained previously, “it would be anomalous to suggest that the Legislature must
As applied to the facts of this case,
Thus, regardless whether Hipsher remained available to fight fires, he devoted publicly funded time (which should have been devoted to his LAFD duties) and used government resources (LAFD equipment and/or workspace) to further felonious activity, in violation of public policy. Partial forfeiture under
In other words, the public pension system rewards employees for their years of faithful, conscientious performance of public duties. When a legacy employee fails to devote his full time and effort to his job duties, and uses public resources in the commission of a job-related felony, provision of full retirement benеfits to that employee notwithstanding the criminal conduct
To paraphrase Alameda County, it would be anomalous, at best, to hold that the Constitution requires current employees be provided an equivalent advantage to mitigate the effect of their job-related felonious conduct. (Alameda County, supra, 9 Cal.5th at p. 1102.) Requiring the provision of “comparable advantages would be wholly inconsistent with the Legislature‘s purpose by restoring in some form advantages that, in the view of the Legislature, should not have been available to county employees in the first place.” (Ibid.; see also Hipsher I, supra, 24 Cal.App.5th at p. 754 [“it would be anomalous to suggest that the Legislature must reward an employee for conviction of a job-related felony by providing a new comparable advantage in the context of a section 7522.72 forfeiture“].) Because a requirement to provide comparable advantages under these circumstances would significantly undermine the Legislature‘s constitutionally permissible purpose underlying
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III. Section 7522.72 Does Not Violate the Ex Post Facto Clause of the California Constitution12
Hipsher asserts the forfeiture provision in
The state is barred from enacting ex post facto laws under both the federal and California Constitutions. (
The prohibition against ex post facto legislation applies almost exclusively to criminal statutes but, in limited circumstances, it can apply to civil legislation. (Roman Catholic Bishop of Oakland v. Superior Court (2005) 128 Cal.App.4th 1155, 1162.) “Despite the Legislature‘s clear intent to establish civil, not criminal proceedings, we will find an ex post facto
violation if the statutory scheme is so punitive in purpose or effect that it negates the Legislature‘s intentions. This requires the ‘clearest proof,’ however.” (Id. at p. 1170.) Thus, the fact that a statute is labeled as civil is not dispositive. (Id. at p. 1162.)
“Whether a statutory scheme is civil or criminal under the ex post facto doctrine is first of all a question of statutory construction. We consider the statute‘s text and structure to determine the legislative objective. If we conclude that the statute as applied retroactively was intended to punish, then our inquiry is over and we will find an ex post facto violation. [Citation.]” (Roman Catholic Bishop of Oakland v. Superior Court, supra, 128 Cal.App.4th at p. 1169.)
The purpose of PEPRA was, in part, to regulate what were seen as pervasive abuses in public pension systems, that is, “to reset overly generous and unsustainable pension formulas for both current and future workers.” (Little Hoover Com., Public Pensions for Retirement Security (Feb. 2011), p. 53.) “Only the ‘clearest proof’ will suffice to override the Legislature‘s stated intent and render a nominally civil statute penal for ex post facto purposes. [Citation.]” (21st Century Ins. Co. v. Superior Court (2005) 127 Cal.App.4th 1351, 1362.) In making this determination, courts consider the following seven factors: (1) whether the sanction involves an affirmative disability or restraint, (2) whether it has historically been regarded as a punishment, (3) whether it comes into play only on a finding of scienter, (4) whether its operation will promote the
The forfeiture in
Regarding the first factor, the loss of retirement benefits does not constitute an “affirmative disability or restraint. The paradigmatic restraint is imprisonment. [Citation.]” (21st Century Insurance Co. v. Superior Court, supra, 127 Cal.App.4th at p. 1364.) Unlike imprisonment or similar restraints on liberty, civil penalties such as a forfeiture of retirement benefits do not constitute an affirmative disability or restraint. (See ibid.)
Turning to the second factor, a reduction in retirement benefits is not historically regarded as punishment in a penal sense. (See, e.g., United States v. Ursery (1996) 518 U.S. 267, 270–271 [civil forfeitures do not constitute punishment]; MacLean v. State Bd. of Retirement (2000) 432 Mass. 339, 351–352 [revocation of pension benefits following a job-related conviction is not criminal punishment]; Doherty v. Retirement Bd. of Medford (1997) 425 Mass. 130, 136–137 [forfeiture of retirement benefits following a job-related conviction does not render statute “so punitive as to overcome its restitutionary purpose“].) Moreover, Hipsher‘s first claim of error is that
With respect to the third factor, scienter is not required because
As to the sixth factor, one of the purposes underlying PEPRA, as we have noted, was to curb pension abuse and ensure adequate funding of the system as a whole. Preserving the pension system by curbing abuses is a rational, nonpunitive purpose.
Turning to the seventh factor, the pension reduction effected by
We conclude the Mendoza-Martinez factors do not override the legislative intent underlying PEPRA. Hipsher fails to demonstrate his case falls within the “limited circumstances” in which the ex post facto clause applies to civil legislation.
V. Hipsher Has Suffered a Prejudicial Denial of Due Process
The County contends the trial court erred by issuing the writ of mandate because (1) Hipsher was not owed any additional due process prior to the reduction to his retirement benefits, (2) any additional due process, if owed, must be provided by LACERA, and (3) the County was not named as a
respondent in the writ.15 LACERA asserts the writ was erroneously issued because (1) it had a ministerial duty to adjust Hipsher‘s retirement benefits once the County provided notice of Hipsher‘s job-related felony conviction, (2) the Legislature did not intend due process other than the process in the underlying criminal proceeding itself, and (3) the County should provide any additional process owed to Hipsher.
A. Standard of Review
When reviewing a trial court‘s ruling on a writ of mandate, “‘the appellate court is ordinarily confined to an inquiry as to whether the findings and judgment of the trial court are supported by substantial, credible and competent evidence. This limitation, however, does not apply to resolution of questions of law where the facts are undisputed. In such cases, as in other instances involving matters of law, the appellate court is not bound by the trial court‘s decision, but may make its own determination. [Citation.]‘” (Pacific Gas & Electric Co. v. Department of Water Resources (2003) 112 Cal.App.4th 477, 491.)
B. The Reduction to Hipsher‘s Vested Pension Implicated His Due Process Rights
A person may not be deprived of life, liberty or property without due process of law. (
from arbitrary adjudicative procedures. (People v. Ramirez (1979) 25 Cal.3d 260, 264, 268.) The requirements of due process extend to administrative adjudications. (Today‘s Fresh Start, Inc. v. Los Angeles County Office of Education (2013) 57 Cal.4th 197, 214.)
The threshold question is whether Hipsher‘s retirement benefits are a property interest encompassed within Fourteenth Amendment protection. We conclude that they are.
The refusal to pay a public retiree‘s vested benefits is an act under color of state law. (See Thorning v. Hollister School Dist. (1992) 11 Cal.App.4th 1598, 1610.) The deprivation of a public employee‘s vested pension invokes a property right, “‘the taking of which would be a denial of Due Process.‘” (Ibid.; accord, Pearson v. County of Los Angeles (1957) 49 Cal.2d 523, 532.) As articulated by the Supreme Court of the United States, “[t]he Fourteenth Amendment‘s procedural protection of property is a safeguard of the security of interests that a person has already acquired in specific benefits.” (Board of Regents of State Colleges v. Roth (1972) 408 U.S. 564, 576, fn. 7.)
These decisions make clear that some form of due process is required before the state may reduce a pensioner‘s vested retirement benefits. To allow otherwise would invite the kind of arbitrary and capricious conduct the due process clause seeks to avoid. (See Nebbia v. People of New York (1934) 291 U.S. 502, 525.)
C. What Process is Required?
A public employee who commits a job-related felony “shall forfeit” all benefits, other than their own contributions, earned from the earliest date of the commission of a qualifying felony. (
The criminal proceeding leading to conviction of a crime that per se involves the public employee‘s official duties and which therefore, as a matter of law, subjects the employee to benefit forfeiture under
1. Hipsher Was Deprived of Due Process
The issue is more complex when the crime does not necessarily arise from the scope of the pensioner‘s public duties. (See, e.g., Slaughter v.
Edwards, supra, 11 Cal.App.3d at p. 294 [in cases where the conviction itself is not dispositive, an independent examination is required].) That is the case before us. Hipsher‘s crime for operating an illegal gambling business (
In determining that Hipsher‘s conviction was job-related, and therefore qualified as a basis for forfeiture under
LACERA automatically reduced Hipsher‘s retirement benefits upon receiving the referral letter. The letter notes that “[s]ince the law requires the felony to be job related, the County Department of Human Resources (DHR) is responsible for making a determination that the felony is job related.”
“In administrative proceedings, the requisites of due process will vary according to the competing interests at issue, so long as basic requirements of notice and hearing are satisfied. [Citations.]” (Rupf v. Yan (2000) 85 Cal.App.4th 411, 428–429.) At a minimum, Hipsher was entitled to written notice reasonably calculated to apprise him of the pendency of the
2. Hipsher was Prejudiced by the Denial of Due Process
The County contends that even assuming Hipsher was entitled to some form of additional due process, he was not prejudiced by any deficiency in process. Generally, a party is not deprived of due process in an administrative proceeding unless the deficiency in process resulted in prejudice. (See Hinrichs v. County of Orange (2004) 125 Cal.App.4th 921, 928 [procedural due process violations assessed for harmlessness].)
In this case, insofar as the record shows, prejudice is evident because (1) Hipsher‘s conviction does not, on its face, satisfy the forfeiture provisions of
D. Section 7522.72 is Ambiguous as to Which Agency is Tasked with Determining Whether the Offense is Job-Related
The final question is whether the County or LACERA is obligated to afford the required due process. The trial court found the County was obliged to do so because it is “the governmental entity that made the decision that ultimately deprived Petitioner of his property.” We disagree.
The judiciary‘s role in construing a statute is to ascertain the intent of the Legislature so as to effectuate the purpose of the law. (Merced Irrigation Dist. v. Superior Court (2017) 7 Cal.App.5th 916, 924 (Merced).) To this end, courts start with the words of the statute, giving them their usual and ordinary meaning. (Ibid.)
“When statutory language is susceptible to more than one reasonable interpretation, courts must (1) select the construction that comports most closely with the apparent intent of the Legislature, with a view to promoting rather than defeating the general purpose of the statute and (2) avoid an interpretation that would lead to absurd consequences. [Citation.]” (Merced, supra, 7 Cal.App.5th at p. 925.) One difficulty in ascertaining the intent of the Legislature is that, in many cases, the Legislature “‘“‘had no real intention, one way or another, on the point in question; that if they had, they would have made their meaning clear . . . .‘“’ [Citation.]” (Ibid.)
This difficulty is present here because nothing in the text or legislative history of
E. LACERA Shall Afford the Requisite Due Process
LACERA contends “it is reasonable to conclude that the Legislature intended that the employer make the ultimate determination whether the еlements under
The California Constitution provides that the retirement board of each public pension holds the “sole and exclusive fiduciary responsibility” to administer the system. (
Indeed, once a person has separated from his or her public employment, the County‘s Civil Service Commission “has no further jurisdiction except in the limited situations specified in the governing constitutional charter or statutory provisions.” (Zuniga v. Los Angeles County Civil Service Com. (2006) 137 Cal.App.4th 1255, 1260.)
Our conclusion is further supported by Danser v. Public Employees’ Retirement System (2015) 240 Cal.App.4th 885 (Danser). There, a judge was convicted of conspiring to obstruct justice while serving as a superior court judge. (Id. at p. 887.) The judge retired from office after the conviction but before sentencing. (Id. at p. 888.) The court later reduced the felony to a misdemeanor, terminated probatiоn and dismissed the charges. (Id. at p. 887.) California‘s Public Employees’ Retirement System subsequently
determined that the judge had been convicted of a felony offense in the course and scope of his judicial duties, and therefore was subject to benefit forfeiture under
The judge unsuccessfully challenged the forfeiture determination by a petition for writ of mandate. (Danser, supra, 240 Cal.App.4th at p. 888.) Pertinent here, the judge argued on appeal that the retirement system lacked jurisdiction to interpret criminal laws in order to determine whether forfeiture was appropriate. (Id. at p. 891.) The Court of Appeal held “CALPERS acted within its authority in interpreting the [applicable] retirement law” because it is charged with administering the retirement system, and “is responsible for determining the right of a public pension system member to receive benefits. [Citation.]” (Ibid.) Danser supports our conclusion that the
Finally, LACERA contends that “requiring the retirement system to provide due process is not workable” because “review by the retirement system would place the retirement system in the unseemly position of determining the propriety of decisions expressly given by the Legislature to the prosecutor and the employer.” This argument misstates the prosecutors’ and employers’ obligation under
Further, LACERA has not shown that providing due process is “not workable.” In fact, LACERA has an existing mechanism for administrative appeals “when an individual disagrees with LACERA‘s decision on matters related to his or her . . . retirement benefits.” (LACERA Website, Administrative Appeal Procedure, <https://www.lacera.com/benefits/administrative_appeal_procedure.html> [as of Dec. 15, 2020].) This procedure includes three levels of review, culminating in an appeal to the Board of Retirement, placement on the Board‘s agenda, and a written decision from LACERA‘s Legal Office. (Ibid.) In any event, the fact that providing constitutional due process is burdensome does not excuse the failure to provide it.
Based on the foregoing, we conclude LACERA is obligated to afford Hipsher due process protections in accordance with its existing administrative appeal procedures, and consistent with this opinion.
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DISPOSITION
The judgment is modified to reflect that LACERA, not the County, shall afford the requisite due process. This process shall conform with LACERA‘s existing administrative procedures and, at a minimum, provide Hipsher (1) notice of LACERA‘s intent to initiate forfeiture proceedings, and the reаsons therefor, and (2) an opportunity to present his objections before LACERA‘s impartial decision maker, regarding whether he falls within the scope of
CERTIFIED FOR PUBLICATION
WILLHITE, Acting P. J.
We concur:
COLLINS, J.
CURREY J.