Tuesday, Oct. 17, 2006 | The city of San Diego’s major pension lawsuit is not an open-and-shut case, but rather a unique dispute involving complex legal issues that have never clashed in a court of law before, a Superior Court judge said Monday.
In a final ruling that Judge Jeffrey Barton issued to address the last pre-trial motions remaining in the sprawling case between the city, its employees and its retirement system, the judge said he has not come across a prior decision that pitted the legal theories that each side has put forward.
“No one has cited, and there does not appear to be significant information by reference to legislative history to resolve this contract,” the judge wrote. He continued, “Regarding the legal analysis, the court finds the dispute is not as simple or clear as argued by either side.”
The judge’s thoughts on the case’s complexity foreshadow a lengthy trial that is slated to begin Oct. 25. Many have predicted that the case’s intricacies could force appeals to higher courts that could take years.
“Litigation is slow. It’s a marathon,” Aguirre said Monday.
Monday’s ruling dealt a blow to the employee groups who sought to avoid a trial by asking the judge to unilaterally dismiss the case before trial. Aguirre had made a similar request earlier this year, asking Barton to decide the case in the city’s favor before trial. Similarly, Barton quashed that attempt in July.
On Monday, the judge said he couldn’t expedite a ruling because numerous factual disputes remain to be worked out during trial. He said: “the analysis is legally complex and fact dependent.”
The judge also resisted attempts to severely limit the amount of benefits Aguirre can challenge at trial, deciding that both the 1996 and 2002 deals will be on the table come trial time. A 2000 legal settlement that boosted employee benefits has complicated Aguirre’s challenge.
Barton remained skeptical to the city’s claims that it can push aside the 2000 settlement and attack the 1996 benefits, but he said the issue must be hammered out during trial.
“The City’s position in support is weak,” the judge wrote. He added: “However, the court cannot resolve these issues at this stage of the litigation” because of other factual issues to be worked out.
The trial will focus on deals the city struck with the San Diego City Employees’ Retirement System in 1996 and 2002, when the city was allowed to shortchange its pension system while, at the same time, dispensing pension boosts to its employees.
The city attorney contends that the deals violated the state’s conflict-of-interest laws because city employees – serving as retirement trustees – approved the 1996 and 2002 deals. The employees received increased benefits, Aguirre argues, in exchange for allowing the city to skirt its annual pension bills.
In July 2005, Aguirre filed suit to roll back the benefits that were linked to the 1996 and 2002 agreements. He estimates that the city can knock $500 million off its current $1.4 billion pension deficit if his lawsuit prevails.
Employee unions argue that the 2000 legal settlement – known as Corbett – essentially solidified the benefits that were granted up to that point. Therefore, employees argue, only the 2002 benefit package is in play.
Such a determination would significantly lower the stakes of the case from about $500 million to about $40 million.
Aguirre claims the 7-percent boost provided under the legal settlement can simply be removed from the equation, allowing the 1996 benefit boosts to be attacked. Under that scenario, about $450 million in contested benefits would remain up for attack.
Council President Scott Peters has cited the Corbett settlement as one reason he believes it is foolhardy to pursue the case. If only the 2002 benefits can be challenged, he questions whether the case is worth the legal costs and contention with employees.
The judge said Monday that the major issue he has to grapple with is whether retirement benefits can be rolled back even if the city attorney is successful in proving the conflict-of-interest allegations.
Aguirre argues that any violation of state Government Code 1090 would void the contract in question. Therefore, the 1996 and 2002 the benefits offered in the 1996 and 2002 deals should be wiped away, he claims.
On the contrary, employees argue that a competing labor law protects the pension benefits from ever being wiped away.
The judge said he could be the first to mull this type of dispute.
“No case cited by the parties even deals with a clash between Government Code section 1090 and the municipal legislation created to establish vested pension benefits. The use of section 1090 under these facts and circumstances for relief sought by the City is unique,” Barton wrote.
Additionally, Barton concluded that the pension fund has rightly been continuing to pay employee pension benefits while the legal dispute has worked its way through the courts. The city attorney and Councilwoman Donna Frye have advocated ceasing to acknowledge the contested benefits until the case is decided.
“The judgment today makes it very clear. It says ‘follow the law’ and the law right now says to pay those benefits,” said SDCERS attorney Michael Leone.
Aguirre said he will appeal that portion of Barton’s ruling, but if upheld, SDCERS will not play as big a role in the case, which is shaping up to become primarily a showdown over workers’ benefits. SDCERS is not actively defending those benefits, and its last remaining issue in the case appears to be its request that the city pay for the pension enhancements it granted over the past decade.
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