Broome v. Regents of the Univ. of Cal.

80 Cal.App.5th 375

295 Cal.Rptr.3d 649

Anne BROOME et al., Plaintiffs and Appellants,

v.The REGENTS OF the UNIVERSITY OF CALIFORNIA, Defendant and Respondent.

A160591

Court of Appeal, First District, Division 5, California.

Filed June 27, 2022

Keller Rohrback LLP, Jeffrey Lewis, Oakland, and Rachel E. Morowitz ; Law Office of Geoffrey V. White, Geoffrey V. White, San Francisco; Stember Cohn & Davidson-Welling, LLC Maureen Davidson-Welling and Vincent J. Mersich for Plaintiffs and Appellants.

Orrick, Herrington & Sutcliffe LLP, William D. Berry, San Francisco, Joseph C. Liburt, Menlo Park, Eric A. Shumsky, and Lauren A. Weber for Defendant and Respondent.

SIMONS, J.

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 to 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 restore benefits that may be lost due to [the limitation], using existing UCRP assets. Providing restoration of benefits through UCRP is contingent upon IRS approval." Regents were advised that the cost of this amendment "will not have a material effect on the Plan assets or liabilities."

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 earned 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.

Subsequent Events

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 subsequently 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.

"The trial court's ruling on a motion for summary adjudication, like that on a motion for summary judgment, is subject to this court's independent review." ( Serri v. Santa Clara University (2014) 226 Cal.App.4th 830, 858, 172 Cal.Rptr.3d 732.) "In undertaking our independent review, we apply the same three-step analysis used by the trial court. First, we identify the issues framed by the pleadings. Second, we determine whether the moving party has established facts justifying judgment in its favor. Finally, in most cases, if the moving party has carried its initial burden, we decide whether the opposing party has demonstrated the existence of a triable issue of material fact. [Citation.] [¶] In performing our review, we view the evidence in a light favorable to the losing party ..., liberally construing [the losing party's] evidentiary submission while strictly scrutinizing the moving party's own showing and resolving any evidentiary doubts or ambiguities in the losing party's favor." ( Id. at pp. 858–859, 172 Cal.Rptr.3d 732.)

A. Legal Background

" ‘[T]he terms and conditions of public employment, 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., 244 Cal.Rptr.3d 149, 435 P.3d 433 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, are not generally protected by the contract clause from repeal or revision at the discretion of the legislative body."⁴ ( Id. at p. 978, 244 Cal.Rptr.3d 149, 435 P.3d 433.)

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 legislative 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, 244 Cal.Rptr.3d 149, 435 P.3d 433.)

B. Clear Intent to Create Contractual Rights

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 clearly shown.’ " ( Cal Fire, supra, 6 Cal.5th at p. 980, 244...