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Friday, Sept. 29, 2006 | With the city of San Diego’s main pension lawsuit nudging closer to trial, a judge said during a Thursday hearing that he continued to grapple with one of the case’s key points: whether the city can void employee pension benefits because of conflict-of-interest charges.
With just a few remaining legal hurdles that will likely be cleared up next week, the city of San Diego’s main pension lawsuit appears ready to begin trial next month. However, Judge Jeffrey Barton continued with preliminary hearings Thursday. There, he heard arguments from the city, its employees and its retirement system over his tentative opinion, issued last week, that would allow the case to trial – but with less at stake. If the case proceeds, a trial would likely begin Oct. 18.
City Attorney Mike Aguirre contends that the pension deals struck in 1996 and 2002 are void because several retirement trustees benefited directly from their votes to approve the deals. As such, he argues, the benefit boosts given to employees in the deal are null.
The workers argue that, even if a conflict of interest is found, the benefits are prevented from being taken away by federal labor law and the Constitution.
“In my research, I have not found any case that addresses these two public policies,” Barton said.
Municipal Employees Association attorney Ann Smith said in court Thursday that she expected an appeal to a higher court no matter who prevails in Superior Court. Earlier this week, the local firefighters union announced that its parent organization, the 275,000-member International Association of Fire Fighters, will financially back the pension dispute all the way to the Supreme Court if it it’s necessary.
Aguirre, whose challenge is an attempt to chop the city’s $1.4 billion pension deficit by as much as $500 million, conceded that “the remedy side of this will be extremely complex, no question about it.”
Before the case proceeds, Barton will decide whether to maintain or change the tentative ruling he issued last week.
If the tentative ruling is confirmed, Aguirre could only be able to contest about $40 million of the $500 million worth of employee pension benefits that he seeks to wipe away. The city attorney believes he could still go after $450 million of the benefits if the tentative ruling stands.
In addition, the judge’s provisional opinion rebuffs the attempts of employees and the San Diego City Employees’ Retirement System to throw the case out before it hits trial.
Barton was also scheduled to weigh Council President Scott Peters’ motion to kick Aguirre off the case, alleging he did not have the authority to file it. However, Peters withdrew his attempt Monday.
The judge is expected to make a final decision on whether the case proceeds and the value of the benefits next week.
The tentative ruling states that a 2000 court settlement, known as Corbett, bound the city to pay a certain level of benefits that are protected from Aguirre’s challenge.
“These benefits cannot now be set aside, as this would invalidate the Corbett judgment,” Barton wrote in his tentative opinion.
But Aguirre and the union attorneys disagree on the value of the Corbett settlement.
Aguirre claims the ruling would simply slice out the 10-percent boost afforded by the settlement and leave both the 1996 and 2002 deals open to challenge. Others say the ruling would protect the 1996 deal and only leave the 2002 deal on the table.
The employees and the retirement system have tried to convince the judge that there was no conflict of interest at all because the retirement board only voted on the city’s pension bills in 1996 and 2002, not the benefits. They said that the city should be held liable for those decisions and that the case should be dismissed.
SDCERS attorney Michael Leone said the city should change the benefit levels through standard labor negotiations if it no longer agrees that its employees deserve them.
“The city attorney is trying to get you to do the city’s job,” Leone told the judge. He added, “If the city in its legislative prerogative wishes to change the law, the SDCERS will follow that law.”
Attorneys in the case will meet with Barton on Friday to discuss the scheduling of a trial if the judge rules that the case can proceed.