Home|Blog | Legal Update: The Aguirre-Inspired Pension Litigation Finally Ends With City Dismissing Its Appeal

Legal Update: The Aguirre-Inspired Pension Litigation Finally Ends With City Dismissing Its Appeal

Remember back to 2005 when City Attorney Michael J. Aguirre’s wild-eyed press conferences dominated local news and he rolled out accusations and lawsuits like so many tortillas at the Old Town Mexican Café? His “signature” legal battle on behalf of the City was, of course, his lawsuit against SDCERS seeking to have the Court declare the pension benefit improvements which took effect in 1997 and in 2002 “unlawful and unenforceable,” with the result that pension benefits would be rolled back to the pre-1997 level. Instead of a pension allowance for General Members calculated under the 2.5% at age 55 formula, the roll-back would have gutted benefits by imposing the old formula of 1.48% at age 55.

MEA fought back. My firm intervened in Aguirre’s case on behalf of all MEA-represented employees and served as lead counsel in protecting the promised pension benefits which MEA had negotiated in good faith through a series of MOUs. Attorneys for the Firefighters, AFSCME Local 127, and a group of unrepresented employees (who had pooled their individual resources to fund representation), also joined ranks in the legal battle.

Throughout 2006, the Court battle and Judge Jeffrey Barton’s rulings became the subject of regular news accounts. There were motion battles and discovery disputes. When rulings went against him, Aguirre typically filed an extraordinary writ with the Court of Appeal trying to get a reversal. Trial began on October 29, 2006, with the courtroom cameras rolling, and ended with Judge Barton’s Statement of Decision handed down on December 14, 2006. As Aguirre later lamented, this decision “gutted” his case and he sought to reverse it by filing a writ with the 4th District Court of Appeal and, when that Court rebuffed him, by asking the California Supreme Court to step in and review the matter. No luck.

Judge Barton’s Statement of Decision represented a tremendous victory for MEA and the other Intervenors on key issues but it did not entirely end the case. MEA and the other Intervenors pressed forward to do just that and achieved a case-ending ruling in August 2007, followed by an entry of judgment dismissing the City’s pension roll-back claims in September 2007. Aguirre filed an appeal which was fully briefed by all parties before the Court of Appeal dismissed the appeal as premature because other claims remained pending in the trial court and the requisite “one final judgment” in the case was lacking. After the remaining claims between the City and SDCERS ended in a decision in the City’s favor, and Intervenors’ Complaints in Intervention had been dismissed (because Judge Barton’s ruling dismissing the City’s claims rendered them moot), a truly “final” judgment was entered in December 2010. On cue, the City filed an appeal of the judgment dismissing its pension roll-back claims and the appellate process began anew.

On June 20, 2011, the City dismissed its appeal and, in exchange, MEA and Intervenors agreed not to ask Judge Barton to exercise his discretion in awarding attorneys’ fees.

Nearly five years after it began, this litigation is now over and the pension benefits being attacked have been definitively preserved.

The Never-Ending Story Goes On With New Chapters

Not that long ago, we all thought that the Aguirre-inspired pension litigation was the biggest and worst challenge MEA-represented employees could ever face. We were wrong, of course. It was just the beginning . . . more challenges have come in court, at the bargaining table, and at the ballot box.

“Substantially Equal Contribution” Litigation. While Aguirre’s far-flung theories for rolling back pensions have bitten the dust, City Attorney Jan Goldsmith has some theories of his own. Last year he filed suit to ask the Court to impose one-half of all SDCERS’ investment and other “experience” losses on those active City employees who happen to be on the payroll whenever the market tanks and big investment losses are incurred – as recently occurred, for example, in 2008-2009 due to the massive recession. Under Goldsmith’s theory, employees’ paychecks would take huge hits when these losses occur (as much as $4,000 annually) – making it impossible for any employee to shoulder the economic burden. Indeed, Goldsmith admits that this would be the case but he has a more sinister “solution” as follows: (1) Step One – impose an impossible economic burden on current employees by winning this “substantially equal contribution” lawsuit; and (2) Step Two – when employees are forced to leave City employment because they cannot afford to pay thousands of dollars in extra pension contributions every year until the losses are paid off, the City will offer them the “opportunity” to be relieved of the economic burden and keep their jobs by forfeiting their pensions and accepting a 401(k) plan replacement.

Again, MEA has taken up this fight. I am in Court on behalf of all MEA-represented employees to oppose Goldsmith’s theory which would not only bust the budget of every City employee and his/her family, but would likely decimate the City’s workforce. In fact, seeming to recognize this grim reality, Mayor Sanders recently told employees in the Water Department during a public presentation that “this (investment loss case) was Goldsmith’s idea and he doesn’t support it.” Politics . . .

Purchase of Service Credits. In 2010, SDCERS lost the litigation battle with the City over its pricing of service credits during the “window period.” Aguirre had initiated this legal action in November 2007 and won it in the trial court before Goldsmith took office. The Court of Appeal upheld the trial court’s ruling in the City’s favor and many City employees, both active and retired, are left with the disastrous consequences despite the City’s active support of the “window period” pricing when it was voted on by the SDCERS Board (including the City’s own three Board Members) and for years thereafter. Litigation plans will soon be taking shape in response.

Retiree Medical Benefits. With another long litigation battle looming, MEA recently reached an agreement with the City related to retiree medical benefits. As you know from your recent ratification process, this agreement represents a compromise on all sides of this hot-button issue. However, MEA’s Negotiating Team accomplished its objective to preserve a decent, even if diminished, retiree medical benefit rather than leave thousands of MEA-represented employees with the drastically-reduced benefit the City was ready to impose while MEA embarked on years of litigation to try to reverse that outcome.

2012 Ballot Initiative. As you likely know by now, a so-called “pension reform” ballot initiative is slated for 2012 with far-reaching consequences. It will come before voters in the midst of a crowded and contentious mayoral race with many candidates trying to out-do their opponents by attacking your pension again and again. Despite its clear adverse impact on your benefits, the City denies any obligation to “meet and confer” with MEA over the contents of this ballot initiative. Why? Because the Mayor contends he was acting as a “private citizen,” not as the City’s elected Mayor, when he and Councilmembers Faulconer and DeMaio were directly involved in “negotiating” with each other and various citizen groups over the scope and text of the ballot measure before announcing their support for it. Politics . . . You will hear much more about it in the coming months. Be assured that MEA will be fighting this ballot measure on legal grounds and at the ballot box. Get ready to flex your own political muscle on this one.

Looking back, it is clear that having a strong union ready and able to take on these daunting legal battles, has made a big difference for MEA-represented employees. Looking ahead . . . it is equally clear that there is, as yet, no end in sight to these challenges. Never take your union for granted. With your continued active support, MEA will have the resources and the staying power to keep fighting and pushing back whenever and wherever necessary. When it comes to the courtroom, I will be there with you and for you as long as it takes.