Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_06-cv-01451/USCOURTS-casd-3_06-cv-01451-7/pdf.json

Nature of Suit Code: 440
Nature of Suit: Other Civil Rights
Cause of Action: 42:1983 Civil Rights Act

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

ERICA AARON, et al.,

Plaintiffs,

CASE NO. 06-CV-1451-H(POR)

ORDER:

(1) GRANTING IN PART

AND DENYING IN PART

DEFENDANT CITY OF SAN

DIEGO AND INDIVIDUAL

DEFENDANTS’ MOTION TO

DISMISS;

(2) GRANTING IN PART

AND DENYING IN PART

DEFENDANT MICHAEL

AGUIRRE’S MOTION TO

DISMISS;

(3) GRANTING DEFENDANT

SDCERS’ MOTION TO

DISMISS; AND 

(4) GRANTING DEFENDANT

KPMG’S MOTION TO

DISMISS

vs.

MICHAEL AGUIRRE, et al.,

Defendants.

On December 13, 2006, the Court granted in part and denied in part motions to

dismiss various claims from Plaintiffs’ Second Amended Complaint (“SAC”), and

granted Plaintiffs leave to amend to attempt to cure certain deficiencies. (Doc. No.

100.) On January 12, 2007, Plaintiffs, over 1600 individual police officers, filed their

Third Amended Complaint (“TAC”) against Defendants, alleging claims under 42

U.S.C. § 1983 and various state law claims. (Doc. No. 109.) On January 22, 2007,

Case 3:06-cv-01451-H-POR Document 134 Filed 03/08/07 Page 1 of 40
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Defendant KPMG, LLP (“KPMG”) filed a motion to dismiss the TAC. (Doc. No. 112.)

On January 29, 2007, Defendant Michael Aguirre filed a motion to dismiss the TAC.

(Doc. No. 115.) Defendant City of San Diego (“City”) and the Individual Defendants

filed a motion to dismiss the TAC on January 29, 2007. (Doc. No. 117.) Also on

January 29, 2007, Defendant San Diego City Employees’ Retirement System

(“SDCERS”) filed a motion to dismiss the TAC. (Doc. No. 118.)

On January 29, 2007, Defendant Aguirre filed a joinder to Defendant City and

the Individual Defendants’ motion to dismiss. (Doc. No. 115.) Similarly, on January

29, 2007, Defendant City and the Individual Defendants filed a joinder to the motions

to dismiss filed by Defendant Aguirre and Defendant SDCERS. (Doc. No. 117.) On

January 31, 2007, Defendant SDCERS filed a joinder to the motions to dismiss filed

by Defendant Aguirre and by Defendant City and the Individual Defendants. (Doc. No.

119.)

Plaintiffs filed a response in opposition to SDCERS’ motion on February 20,

2007. (Doc. No. 124.) Plaintiffs filed a response in opposition to Aguirre’s motion to

dismiss on February 20, 2007. (Doc. No. 125.) Plaintiffs filed a response in opposition

to the City and Individual Defendants’ motion to dismiss on February 20, 2007. (Doc.

No. 126.) Plaintiffs filed an amended response in opposition to KPMG’s motion to

dismiss on February 21, 2007. (Doc. No. 128.)

On February 26, 2007, Defendant Aguirre filed a reply in support of his motion

to dismiss. (Doc. No. 129.) KPMG filed a reply in support of its motion to dismiss on

February 26, 2007. (Doc. No. 130.) SDCERS filed a reply in support of its motion to

dismiss on February 26, 2007. (Doc. No. 131.) Also on February 26, 2007, the City

and Individual Defendants filed a reply in support of their motion to dismiss. (Doc.

No. 132.)

Pursuant to its discretion under Civil Local Rule 7.1(d)(1), the Court has

submitted the motions on the papers without oral argument. After reviewing the papers

and the pertinent portions of the record, and as explained below, the Court GRANTS

Case 3:06-cv-01451-H-POR Document 134 Filed 03/08/07 Page 2 of 40
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in part and DENIES in part Defendant City of San Diego and the Individual

Defendants’ motion to dismiss; GRANTS in part and DENIES in part Defendant

Aguirre’s motion to dismiss; GRANTS Defendant SDCERS’ motion to dismiss; and

GRANTS Defendant KPMG’s motion to dismiss. Further, as set forth below, the

Court grants in part leave to amend. Plaintiffs shall file any amended complaint within

30 days of the date of this order. 

Background

Plaintiffs are active and retired San Diego police officers employed at various

times by the City of San Diego. (TAC ¶ 2.) Plaintiffs allege systematic underfunding

of the municipal pension system, which has rendered the system actuarially unsound.

(Id. ¶ 15.) Plaintiffs’ lawsuit arises out of the underfunding of the pension fund, and

Plaintiffs allege that vested retirement and compensation benefits have been unlawfully

eliminated or reduced. (Id. ¶¶ 17-31.) Further, Plaintiffs allege that Defendants

conspired to cause the system to become actuarially unsound and subsequently

conspired to cover up their fraud and the City’s liability. (Id. ¶ 16.) 

Plaintiffs allege that the City engaged in bad faith labor negotiations with

Plaintiffs’ recognized employee organization, the San Diego Police Officers’

Association (“SDPOA”), as part of a scheme to take away vested retirement benefits

and compensation. (Id. ¶¶ 26-37.) The TAC alleges that various Defendants

manipulated pension funds for pet projects and personal gain, which led to the adoption

of plans to defer contributions to the pension fund by the City. (Id. ¶ 42.) According

to Plaintiffs, Defendant Aguirre conspired to facilitate a breakdown in the labor

negotiations through acts of inducement and retaliation. (Id. ¶ 46.) Further, the TAC

alleges that he has taken actions, and conspired to take actions, to reduce and take away

Plaintiffs’ pension benefits and compensation. (Id. ¶¶ 43-58.) Unlike the earlier suit

filed by the SDPOA, this action also names KMPG as a Defendant, the accounting firm

that the City hired to perform audits. (Id. ¶ 9.) Plaintiffs allege that KPMG

participated in a conspiracy to conceal the City’s wrongful conduct. (Id. ¶¶ 59-69.)

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1The current City Council Defendants include Toni Atkins, Donna Frye, Ralph

Inzunza, Jim Madaffer, Brian Maienschein, Scott Peters, Tony Young, and Michael

Zucchet. (TAC ¶ 6.) Former City Council Defendants include Harry Mathis, Byron

Wear, Christine Kehoe, George Stevens, Barbara Warden, Valerie Stallings, Judy

McCarty, and Juan Vargas. (Id.) 

2The City Official Defendants include Cathy Lexin, Mary Vattimo, Terri

Webster, Ed Ryan, Bruce Herring, Lamont Ewell, Michael Uberuaga, and Jack

McGrory, who served in executive positions, for example, as the City Manager or

Treasurer. (TAC ¶ 7.) 

3 The SDCERS Board Member Defendants include Lexin, Vattimo, Webster,

Ryan, and Herring, who are also named in their capacities as City Officials. (TAC ¶ 8.)

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The TAC also alleges that the City, Aguirre, City Council Defendants, and City

Official Defendants retaliated against Plaintiffs because they did not accept the City’s

last, best, final offer (“LBFO”) in labor negotiations. (Id. ¶¶ 70-75.) Plaintiffs allege

that the retaliation consisted of salary and benefit reductions and public criticism of the

SDPOA. (Id.) 

In the TAC, Plaintiffs bring federal civil rights claims as well as state law claims

against Defendant Aguirre, Defendant City, SDCERS, and KPMG. The TAC also

names individual employees and elected officers as Individual Defendants, including

current and former members of the San Diego City Council,1 former officials of the

City of San Diego,2 and former board members (or trustees) of SDCERS.3 Finally, the

TAC names Does 1 through 100 as Defendants. (Id. ¶ 10.) Plaintiffs attach several

reports and opinions to support the allegations in the TAC. 

Discussion

A. Legal Standard for Motion to Dismiss

“A complaint should not be dismissed under Rule 12(b)(6) ‘unless it appears

beyond doubt that the plaintiff can prove no set of facts in support of his claim which

would entitle him to relief.’” Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th

Cir. 1990) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). “Dismissal can be

based on the lack of a cognizable legal theory or the absence of sufficient facts alleged

under a cognizable legal theory.” Id. In ruling on a Rule 12(b)(6) motion, the facts in

the complaint are taken as true and construed in the light most favorable to the

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4

 Plaintiffs’ § 1983 claims include: Claim One (First Amendment Retaliation);

Claim Two (Contracts Clause Violations); Claim Three (Takings Clause Violations);

Claim Four (14th Amendment Procedural Due Process Violations); and Claim Five

(Conspiracy to Violate Civil Rights).

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nonmoving party. Cahill v. Liberty Mutual Ins. Co., 80 F.3d 336, 337-38 (9th Cir.

1996). Conclusory allegations of law, however, will not defeat a motion to dismiss for

failure to state a claim. See, e.g., Miranda v. Clark County, 279 F.3d 1102, 1106 (9th

Cir. 2002). 

“Generally, a district court may not consider any material beyond the pleadings

in ruling on a Rule 12(b)(6) motion.” Hal Roach Studios, Inc. v. Richard Feiner & Co.,

896 F.2d 1542, 1555 n.19 (9th Cir. 1990). The court may, however, consider the

contents of documents specifically referred to and incorporated into the complaint.

Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Plaintiffs’ complaint incorporates

several reports and opinions to support its allegations of wrongdoing.

In addition, a court ruling on a motion to dismiss may consider facts that are

subject to judicial notice. A district court may take judicial notice of matters of public

record, but cannot use this rule to take judicial notice of a fact that is subject to

“reasonable dispute” simply because it is contained within a pleading that has been

filed as a public record. Lee v. City of Los Angeles, 250 F.3d 668, 689-90 (9th Cir.

2001); Biagro W. Sales Inc. v. Helna Chemical Co., 160 F. Supp. 2d 1136, 1140-41

(E.D. Cal. 2001) (matters of public record include “pleadings, orders and other papers

filed with the court”). Similarly, a court may take judicial notice of the existence of a

court opinion, but not “‘the truth of the facts recited therein.’” Lee, 250 F.3d at 689

(quotingSouthern Cross Overseas Agencies,Inc. v.WahKwong Shipping Group, Ltd.,

181 F.3d 410, 426-27 (3d Cir. 1999)). 

B. Statute of Limitations as to § 1983 Claims

Defendant City, Individual Defendants, SDCERS, and Aguirre argue that

Plaintiffs’ § 1983 claims,4 other than the First Amendment retaliation claim, are barred

/ / / / 

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by the applicable two year statute of limitations as to claims premised on MP1.

Plaintiffs oppose.

In § 1983 actions, the court applies the forum state’s statute of limitations

applicable to personal injury claims. Wilson v. Garcia, 471 U.S. 261, 275 (1985). In

California, the statute of limitations for a personal injury claim is two years. See Cal.

Code Civ. Proc. § 335.1. The accrual of a § 1983 claim is a question of federal law.

Knox v. Davis, 260 F.3d 1009, 1013 (9th Cir. 2001). Under federal law, a § 1983

claim accrues “when the plaintiff knows or has reason to know of the injury which is

the basis of the action.” Id. (quoting TwoRivers v. Lewis, 174 F.3d 987, 991 (9th Cir.

1999)). Plaintiffs filed this action on July 18, 2006. (See Doc. No. 1.) Therefore,

under the applicable two year statute of limitations, any claims in the Third Amended

Complaint must have accrued after July 18, 2004.

In their motion, Defendants point out that the Court already dismissed Plaintiffs’

claims based on MP1 and did not allow leave to amend. Further, Defendants argue that

Plaintiffs’ amended allegations in the TAC do not salvage the time barred claims.

Defendants argue that Plaintiffs’ representative, the SDPOA, and SDPOA officials

were involved in the implementation of MP1 and were aware of those proposals’ effect

upon SDCERS funding levels. Further, Defendants argue that SDCERS board

members warned of the consequences of MP1, and they state that information

regarding the funding crisis has been publicly available since at least 2002.

Accordingly, Defendants argue that the statute of limitations began to run before July

18, 2004, making Plaintiffs’ claims time barred. In response, Plaintiffs argue that

Defendants fail to identify a specific underfunding date following MP1 to commence

the limitations period. Further, they argue that the date they should have known of the

injury is a question of fact, and they assert the continuing violation theory. Next,

without discussion, they assert that the complaint alleges fraudulent concealment.

Finally, Plaintiffs assert, again without explanation, that Defendants are estopped from

asserting statute of limitations as a defense because of an earlier ruling in state court.

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In the TAC, Plaintiffs include allegations purportedly tolling the statute of

limitations as to MP1. (TAC ¶¶ 103-11.) According to Plaintiffs, SDCERS, along with

the SDCERS board, the City, City Council Defendants, and City Official Defendants,

concealed the detrimental effect of MP1 by adopting MP2, which put off the City’s

required balloon payment. (Id. ¶¶ 105-06.) Plaintiffs allege that they did not learn of

the damage caused by MP1 until they became aware of the grand scheme of Defendants

in early 2005. (Id. ¶ 107.) Further, Plaintiffs allege that rank and file police officers

did not become aware of the dangers of MP1 until 2005, even if insiders knew of the

consequences earlier. (Id. ¶ 106.) 

Manager’s Proposal 1, or MP1, was implemented in 1996 and contained

provisions granting additional retirement benefits while reducing annual funding

percentages. (See, e.g, id., Ex. K at 14; Ex. G at 9.) MP1 also contained a provision

requiring the City to make a balloon payment if the ratio of fund assets to liabilities fell

below 82.3 percent. (Id., Ex. K at 14.) When MP1 was implemented, the plan was

more than 90% funded. (Id.) After a downturn in the market, however, the funding

ratio dropped to 77.3% in Fiscal Year 2002. (Id.)

As indicated in the Court’s order regarding motions to dismiss the SAC,

although Plaintiffs state that they did not know that Defendants were scheming to

underfund the pension plan until early 2005, (see id. ¶ 107), numerous exhibits

Plaintiffs attach to the TAC demonstrate the contrary. Plaintiffs’ representative, the

SDPOA, was involved in the meet and confer process leading to the implementation

of MP1. (Id., Ex. J at 10, 25.) In March 1996, the City Council held a closed session

for labor negotiations with three of the City’s four unions, including the SDPOA,

regarding MP1. (Id. at 10.) Additionally, Garry Collins, president of the SDPOA,

signed off on MP1 in June 1996. (See id. at 28.) Because Plaintiffs’ union and the

union officials representing Plaintiffs were informed and involved in the meet and

confer process regarding MP1, and because union officials approved MP1, Plaintiffs

knew of the implementation of MP1 at the time. Moreover, a pension board member

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who voted against MP1 warned of the risk MP1 posed to the financial stability of

SDCERS at a workshop regarding MP1 held on June 11, 1996. (Id. at 37-44.)

Specifically, the board member raised concerns about transferring the costs to the next

generation, whether there were any standards regarding funding levels available to

fiduciaries, and whether the board had a fiduciary duty to assess the City’s financial

ability to pay for the new benefits. (Id. at 37-39.) Further, a public hearing held on

June 21, 1996 regarding MP1 addressed whether the pension board needed to

determine if the City would be able to meet its obligations under MP1. (Id. at 44.)

Even assuming, as Plaintiffs allege, that the consequences of MP1 and MP2 came to

light in 2002, that date is still several years prior to the relevant statutory limitations

period.

Finally, Plaintiffs provide no discussion regarding their fraudulent concealment

and estoppel arguments, and the Court already rejected the estoppel argument in its

ruling on motions to dismiss the SAC. Accordingly, the Court rejects these arguments.

In sum, the Court concludes that MP1, implemented in 1996, is too remote in

time and clearly outside the statute of limitations period. Plaintiffs knew or should

have known of the alleged effect of MP1 prior to July 18, 2004. Accordingly, the

Court GRANTS Defendants’ motion on this ground, and any claims concerning the

implementation of MP1 in 1996 are barred by the statute of limitations.

For the same reasons, and as indicated in the Court’s previous order regarding

motions to dismiss the SAC, the Court GRANTS Defendants’ motion to dismiss as to

the former members of the San Diego City Council and the former city manager whose

terms expired by 2002. Any alleged acts by these former City Council members were

based on the implementation of MP1 and their acts are barred by the statute of

limitations. These Defendants include Mathis, Wear, Kehoe, Stevens, Warden,

Stallings, McCarty, Vargas and former city manager McGrory.

The Court declines to allow Plaintiffs further attempts to amend regarding MP1.

See, e.g., Royal Ins. Co. of Am. v. Sw. Marine, 194 F.3d 1009, 1016-17 & n.9 (9th Cir.

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5

In their reply, the City and Individual Defendants argue that they are entitled

to absolute legislative immunity and qualified immunity on Plaintiffs’ remaining

§ 1983 claims. However, Defendants did not assert these arguments in their motion.

Further, in the order on motions to dismiss the SAC, the Court denied these

Defendants’ motions to dismiss on absolute immunity grounds and denied their motion

to dismiss the remaining § 1983 claims on qualified immunity grounds. 

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1999) (when denying leave to amend, court may consider late attempts to add new

theories, futility of amendment, and prior attempts to cure deficiencies). 

C. Qualified Immunity as to First Amendment Claims

In the order on motions to dismiss the SAC, the Court granted Defendants’

motions to dismiss Plaintiffs’ First Amendment retaliation claims on qualified

immunity grounds, but granted Plaintiffs leave to amend.5 With regard to the TAC, the

Individual Defendants and Aguirre argue that they are entitled to qualified immunity

as to Plaintiffs’ § 1983 First Amendment retaliation claims. In support, Defendants

argue that the Court should find, as it did with regard to the SAC, that Plaintiffs’

amended allegations are insufficient to overcome qualified immunity. Plaintiffs

oppose.

Under the doctrine of qualified immunity, “government officials performing

discretionary functions generally are shielded from liability for civil damages insofar

as their conduct does not violate clearly established statutory or constitutional rights

of which a reasonable person would have known.” Harlow v. Fitzgerald, 457 U.S. 800,

818 (1982). To establish qualified immunity, a court must first determine whether

“[t]aken in the light most favorable to the party asserting the injury, do the facts alleged

show the officer’s conduct violated a constitutional right?” Saucier v. Katz, 533 U.S

194, 201 (2001). If a violation of a constitutional right is established, the next question

is “whether the right was clearly established.” Id. That is, “whether it would be clear

to a reasonable officer that his conduct was lawful in the situation he confronted.” Id.

at 202. The United States Supreme Court has noted that a ruling on immunity should

be made early in the proceedings. Id. at 200. When there are disputed issues of

material fact, however, a jury must resolve the factual disputes. Ortega v. O’Connor,

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146 F.3d 1149, 1154 (9th Cir. 1998); Act Up!/Portland v. Bagley, 988 F.2d 868, 873

(9th Cir. 1993). 

The First Amendment of the United States Constitution provides: “Congress

shall make no law . . . abridging the freedom of speech.” Regarding the right to

association, “[o]ne of the foundations of our society is the right of individuals to

combine with other persons in pursuit of a common goal by lawful means.” Lyng v.

Int’l Union, 485 U.S. 360, 366 (1988). The right to association extends to unions as

well as the unions’ members and organizers. Allen v. Medrano, 416 U.S. 802, 819 n.13

(1974). The right to association encompasses the right of public employees to

associate and speak freely and petition openly. Smith v. Arkansas State Highway

Employees, Local 1315, 441 U.S. 463, 464-65 (1979). 

In a First Amendment retaliation claim, a plaintiff must show: “(1) he was

subjected to an adverse employment action . . . , (2) he engaged in speech that was

constitutionally protected because it touched on a matter of public concern and (3) the

protected expression was a substantial motivating factor for the adverse action.” Ulrich

v. City and County of San Francisco, 308 F.3d 968, 976 (9th Cir. 2002) (citations

omitted).

In the TAC, Plaintiffs allege that other labor organizations agreed to new

memoranda of understanding with Defendant City, while the SDPOA went to impasse.

(TAC ¶ 70.) According to Plaintiffs, Defendant City only imposed a salary reduction

against the SDPOA’s DROP employees. (Id.) Plaintiffs allege that Defendant City,

City Council Defendants, City Official Defendants, and Aguirre singled out the

SDPOA for not accepting the City’s final offer. (Id. ¶ 71.) The TAC alleges that

LBFO and DROP Plaintiffs were singled out and suffered retaliation because they

engaged in protected speech by casting individual union votes against a collectively

bargained contract. (Id. ¶ 72.) The TAC alleges that all Plaintiffs suffered retaliation

in the form of pay reduction or benefit reduction through the unilateral imposition of

the 2005 LBFO. Further, Plaintiffs assert that the 2005 LBFO constituted retaliation

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against both the LBFO Plaintiffs and DROP Plaintiffs because it imposed wages, hours,

and working conditions less favorable than those enjoyed previously. (Id. ¶ 73.)

Plaintiffs also assert that Defendants retaliated against LBFO and DROP Plaintiffs by

publicly criticizing the SDPOA. (Id. ¶ 74.) Finally, Plaintiffs allege that Defendants

retaliated against Plaintiffs by taking at least $100 from the take home pay of each

Plaintiff pursuant to the 2005 LBFO. (Id. ¶ 75.) 

Looking at these allegations, Plaintiffs have not sufficiently remedied the

deficiencies indicated by the Court in its order on the motions to dismiss the SAC.

While Plaintiffs allege that the individual members engaged in protected speech by

associating with the SDPOA and by casting union votes, the connection between the

alleged retaliation and each individual Plaintiff’s exercise of protected speech, as

opposed to that of the SDPOA, is still too attenuated. Plaintiffs have not sufficiently

alleged facts indicating that these individual Defendants singled out and punished

individual members of the SDPOA for engaging in protected speech. Because the TAC

does not sufficiently allege that any individual Defendants took actions that a

reasonable official could have believed constituted a violation of each Plaintiff’s First

Amendment rights, the individual Defendants are entitled to qualified immunityagainst

Plaintiffs’ retaliation claim. Accordingly, after fully considering the issue, the Court

GRANTS the Individual Defendants and Aguirre’s motion to dismiss the First

Amendment Retaliation claim on qualified immunity grounds. The Court will permit

another attempt to amend, but Plaintiffs should remedy the deficiencies noted in this

order. See, e.g., Royal Ins. Co. of Am., 194 F.3d at 1016-17 & n.9 (when denying

leave to amend, court may consider late attempts to add new theories, futility of

amendment, and prior attempts to cure deficiencies). 

D. California Tort Claims Act

The City, Individual Defendants, and Aguirre argue that Plaintiffs’ state law

claims are barred because Plaintiffs failed to comply with the procedural requirements

of the California Tort Claims Act (“CTCA”). See Cal. Gov’t Code § 900 et seq. The

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Court has already addressed these arguments in its recent order regarding Plaintiffs’

compliance with the CTCA. (Doc. No. 120.) Accordingly, the Court DENIES

Defendants’ motion to dismiss the state law claims on this ground.

E. Violation of Public Policy Under California Government Code § 3502

The City and Individual Defendants, joined by Aguirre and SDCERS, move to

dismiss Plaintiffs’ eighth claim, in which they allege a public policy violation under the

Meyers-Milias-Brown Act (“MMB Act”), Cal. Gov’t Code § 3502. As they argued

with regard to the SAC, Defendants contend that this statute does not create a private

cause of action. Similarly, Aguirre, joined by the City, Individual Defendants, and

SDCERS, also moves to dismiss this claim. He argues that, because the Court did not

base its previous dismissal on insufficient pleading, but rather found that Plaintiffs had

not established that the statute provides for a private right of action, and because the

Court did not provide Plaintiffs with leave to amend, the Court should again dismiss

this claim. Plaintiffs oppose, arguing that their claim is not for violation of the MMB

Act, but for violation of the public policy embodied in the MMB Act.

Where, as here, a statute does not explicitly provide for a private action, the

proponent must show that the legislature intended to create such a right. See, e.g.,

Agricultural Ins. Co. v. Super. Ct., 70 Cal. App. 4th 385, 399-400 (1999). Moreover,

“when neither the language nor the history of a statute indicates an intent to create a

new private right to sue, a party contending for judicial recognition of such a right

bears a heavy, perhaps insurmountable, burden of persuasion.” Crusader Ins. Co. v.

Scottsdale Ins. Co., 54 Cal. App. 4th 121, 133 (1997). 

The MMB Act provides that employees shall have the right to form, join, and

participate in the activities of an employee organization. Looking at the Act, the

legislature set forth a statutory and administrative scheme to apply to labor relations

with state and local government employees. See, e.g., Glendale City Employees’

Ass’n, Inc. v. City of Glendale, 15 Cal. 3d 328, 336 (1975) (“The Legislature designed

the [MMB Act] for the purpose of resolving labor disputes.”). Further, employees may

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remedy violations of the MMB Act by either bringing an unfair labor practice charge

with the Public Employment Relations Board, see Cal. Gov’t Code §§ 3541.3(i) &

3541.5, or by bringing an action for writ of mandate in state court, depending on the

type of public employee involved. See, e.g., Coachella Valley Mosquito and Vector

Control Dist. v. Cal. Pub. Employment Relations Bd., 35 Cal. 4th 1072, 1077 (2005).

Accordingly, as the Court found in its previous order, Plaintiffs have not met their

“heavy burden” of establishing such a right of action based upon a public policy

violation. See Crusader Ins. Co., 54 Cal. App. 4th at 133.

 Moreover, the cases to which Plaintiffs direct the Court do not support a tort

action based on violation of public policy set forth in the MMB Act. For example, in

Castillo v. Friedman, the court examined a statute setting forth the duty of care a

landlord owes to tenants in conducting an eviction. 197 Cal. App. 3d Supp. 6, 14-16

(Cal. App. Dep’t Super. Ct. 1987). In finding that a tenant could bring a tort action

based on violation of the statute, the court determined that this statute belonged to a

category of statutes creating a duty or standard of conduct, “the breach of which, where

it causes injury, gives rise to liability in tort.” Id. at 14. Examining the legislative

intent, the court held, “[s]uch a tenant is a member of the class for whose benefit the

ordinance was enacted, and implication of a private remedy is clearly consistent with

the purposes of the ordinance.” Id. at 16. The California Court of Appeal has indicated

that the Restatement (Second) of Torts provides the appropriate rule in determining

whether a statute setting forth a duty of care gives rise to a civil remedy for a violation:

When a legislative provision protects a class of persons by proscribing or

requiring certain conduct but does not provide a civil remedy for the

violation, the court may, if it determines that the remedy is appropriate in

furtherance of the purpose of the legislation and needed to assure the

effectiveness of the provision, accord to an injured member of the class

a right of action, using a suitable existing tort action or a new cause of

action analogous to an existing tort action.

Middlesex Ins. Co. v. Mann, 124 Cal. App. 3d 558, 570 (1981) (quoting Restatement

(Second) of Torts § 874A).

/ / / /

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The MMB Act is not similar to the statute setting forth a standard of care in

Castillo, and it does not meet the test set forth in Mann. Rather, as discussed above,

employees already have at their disposal means for remedying violations of the MMB

Act. Creating a tort remedy for violations of the act is not appropriate and is not

required to fulfill the policy behind the statute. Finally, Plaintiffs cite to several

unpublished district court opinions in which the courts simply mention, without

discussion, that the plaintiffs were bringing claims for violating public policy. These

cases do not lend support to Plaintiffs’ position.

 In sum, the Court GRANTS Defendants’ motion to dismiss Plaintiffs’ Eighth

claim for relief. Because the dismissal is not based upon inadequate pleading, the

Court declines to allow leave to amend, as amendment would be futile. See, e.g., Royal

Ins. Co. of Am., 194 F.3d at 1016-17 & n.9 (when denying leave to amend, court may

consider late attempts to add new theories, futility of amendment, and prior attempts

to cure deficiencies).

F. Brown Act, California Government Code § 54950 et seq.

In their Ninth claim, Plaintiffs allege that Aguirre, the City, Council Members,

City Officials, and Doe Defendants violated the Brown Act, Cal. Gov’t Code § 54950

et seq., when they held closed session meetings. (TAC ¶¶ 32-41, 165-70.) The City,

Individual Defendants, and Aguirre move to dismiss this claim, and Plaintiffs oppose.

“The purpose of the Brown Act is to facilitate public participation in local

government decisions and to curb misuse of democratic process by secret legislation

by public bodies.” Boyle v. City of Redondo Beach, 70 Cal. App. 4th 1109, 1116

(1999). The Brown Act requires that local legislative bodies hold “open meetings.”

Id. California Government Code § 54962 provides, “[e]xcept as expressly authorized

by this chapter . . . no closed session may be held by any legislative body of any local

agency.” Cal. Gov’t Code § 54962. The Brown Act is not limited to gatherings at

which action is taken by the legislative body, but “deliberative gatherings” are also

included. 216 Sutter Bay Assocs. v. County of Sutter, 58 Cal. App. 4th 860, 876

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(1997) (citations omitted). “Deliberation in this context connotes not only collective

decisionmaking, but also ‘the collective acquisition and exchange of facts preliminary

to the ultimate decision.’” Id. at 877 (quoting Sacramento Newspaper Guild v.

Sacramento County Bd. of Supervisors, 263 Cal. App. 2d 41, 47-48 (1968)). “To

prevent evasion of the Brown Act, a series of private meetings (known as serial

meetings) by which a majority of the members of a legislative body commit themselves

to a decision concerning public business or engage in collective deliberation on public

business would violate the open meeting requirement.” Id. 

Nevertheless, exceptions exist to the prohibition against closed sessions

articulated in § 54962, so long as the closed session items are described in accordance

with § 54954.5. Section 54957.6, also known as the “labor negotiations exception,”

provides that the legislative body of a local agency “may hold closed sessions with the

local agency’s designated representatives regarding the salaries, salary schedules, or

compensation paid in the form of fringe benefits of its represented . . . employees, and,

for represented employees, any other matter within the statutorily provided scope of

representation.” Id. § 54957.6(a). Before these closed sessions, however, “the

legislative body of the local agency shall hold an open and public session in which it

identifies its designated representatives.” Id. In addition, a closed session may include

discussion regarding any agency’s available funds and funding priorities. Id. Another

exception provides that a closed session may be held to consider “the purchase or sale

of particular, specific pension fund investments.” Id. § 54956.81. Further, a closed

session may be held concerning a conference with legal counsel regarding existing and

anticipated litigation. Id. § 54956.9.

In the TAC, Plaintiffs allege that closed session meetings leading to the

implementation of the 2005 LBFO violated the Brown Act. (TAC ¶ 38-41, 53-55.)

Plaintiffs allege that Aguirre and the City Council Defendants met in closed session on

or after December 7, 2004. (Id. ¶ 53.) Further, Plaintiffs allege that Aguirre met with

the City Council Defendants and City Official Defendants. (Id. ¶ 54.) Plaintiffs allege

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that these closed session meetings were convened illegally and that one of the City

Attorney’s reports identifies the illegal closed meetings. (Id. ¶ 55.) Noting the labor

negotiation exception in § 54957.6(a), Plaintiffs allege that this exception does not

apply to the meetings among Defendants including Defendant Aguirre because he was

never properly designated as a labor negotiator on behalf of the City for collective

bargaining. (Id. ¶ 38.) Viewing the allegations in the light most favorable to Plaintiffs,

they have alleged a claim for violation of the Brown Act by the City Council

Defendants. 

Nevertheless, the Brown Act does not regulate the conduct of persons other than

members of the legislative body of local agencies. See Wolfe v. City of Fremont, 144

Cal. App. 4th 533, 551-52 (2006). In Wolfe, the California Court of Appeal examined

the history and text of the Brown Act and explained that the statute focused on the

conduct of legislators. Id. at 551. Accordingly, the court affirmed the dismissal of

claims against the city manager and police chief under the Brown Act. Additionally,

the court explained, “in the absence of statutory authority, we reject the argument that

we should recognize a civil cause of action for aiding and abetting a Brown Act

violation. Given the purpose of the act, there is simply no need for such a claim.” Id.

at 552. Therefore, the Brown Act claims against the City Officials and Aguirre fail,

and the Court DISMISSES the claims against these Defendants without leave to

amend. See, e.g., Royal Ins. Co. of Am., 194 F.3d at 1016-17 & n.9 (when denying

leave to amend, court may consider futility of amendment). Moreover, because they

left the City Council prior to the 2005 negotiations, the Court DISMISSES the Brown

Act claims against Defendants Mathis, Wear, Kehoe, Stevens, Warden, Stallings,

McCarty, and Vargas without leave to amend. See, e.g., id. The Court DENIES

Defendants’ motion to dismiss as to the remaining City Council Defendants.

G. Conversion of Trust and Conversion

In Plaintiffs’ Twelfth claim, they allege conversion of trust against the City,

Council Members, SDCERS, SDCERS Board Members, and Doe Defendants. The

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City, Individual Defendants, and SDCERS all seek to dismiss these claims. In

Plaintiffs’ Thirteenth claim, they allege conversion against the City, Aguirre, Council

Members, Officials, SDCERS, SDCERS board members, and Doe Defendants. The

City, Individual Defendants, Aguirre, and SDCERS move to dismiss the conversion

claim.

“Conversion is the wrongful exercise of dominion over the property of another.”

Farmers Ins. Exchange v. Zerin, 53 Cal. App. 4th 445, 451 (1997). Conversion

contains three elements: (1) plaintiff’s ownership or right of possession of the property

at the time of conversion; (2) the defendant’s conversion by a wrongful act or

disposition of property rights; and (3) damages. See, e.g., AmerUS Life Ins. Co. v.

Bank of Am, N.A., 143 Cal. App. 4th 631, 642 n.4 (2006) (quoting Oakdale Village

Group v. Fong, 43 Cal. App. 4th 539, 543-44 (1996)). “It is not necessary that there

be a manual taking of the property; it is only necessary to show an assumption of

control or ownership over the property, or that the alleged converter has applied the

property to his own use.” Id. (quoting Fong, 43 Cal. App. 4th at 544). “Where plaintiff

neither has title to the property alleged to have been converted, nor possession thereof,

he cannot maintain an action for conversion.” Fischer v. Machado, 50 Cal. App. 4th

1069, 1072 (1996). Money can be subject to a claim of conversion if it is specifically

identified. Id. at 452. If money is not specifically identified, then the proper action is

in contract or for debt. Baxter v. King, 81 Cal. App. 192, 194 (1927). A party need not

demonstrate absolute ownership over the property, it need only show that it is “entitled

to immediate possession at the time of conversion.” Farmers Ins. Exchange, 53 Cal.

App. 4th at 452 (citation omitted). A mere contractual right to payment is not enough.

Id.

Additionally, a cause of action for conversion of trust requires a fiduciary

relationship. See Strasburg v. Odyssey Group, Inc., 51 Cal. App. 4th 906, 916-17

(1996) (conversion of trust funds); Bennett v. Hibernia, 47 Cal.2d 540, 561 (1956)

(conversion of trust property). A fiduciary relationship exists between a trustee who

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administers a pension plan and its beneficiaries. Masters v. San Bernardino County

Employees Ret. Assn., 32 Cal. App. 4th at 30, 43-45 (1995).

As they did with regard to the SAC, the City and Individual Defendants argue

that the Court should dismiss these claims because most Plaintiffs are active officers

and are not currently entitled to any pension benefits or retiree medical benefits. 

Aguirre, joined by the City and Individual Defendants, contends that Plaintiffs cannot

plead a cause of action for conversion. Moreover, regarding the DROP Plaintiffs, the

City and Individual Defendants contend that these Plaintiffs have received all of the

benefits due to them. Thus, these Defendants argue that, at most, Plaintiffs have a

contractual right to payment in the future, which is insufficient to state a claim for

conversion or conversion of trust.

In the TAC, Plaintiffs allege:

Defendant City, City Council Defendants, City Official Defendants and

Defendant Aguirre retaliated against each and every individually [sic]

Plaintiff by illegally taking at least $100 from the take-home pay of each

and every Plaintiff pursuant to the illegal 2005 LBFO. Each and every

time the City issued Plaintiffs a paycheck subsequent to the

implementation of the terms of the 2005 LBFO, the City unlawfully

retaliated against each Plaintiff by depriving them of their rightful wages,

benefits, and employment rights in existence prior to the 2005 LBFO.

(TAC ¶ 75.) Viewing the allegations in the TAC in the light most favorable to

Plaintiffs, they have stated a claim for conversion, as they allege that Defendant City,

City Council Defendants, City Official Defendants, and Defendant Aguirre converted

money from Plaintiffs’ paychecks for their own use.

Additionally, with regard to the conversion of trust claim, the TAC alleges that

the City is a fiduciary to Plaintiffs because it has a Constitutional responsibility to fund

the pension system in an actuarially sound manner for the sole benefit of Plaintiffs.

(See id. ¶ 188.) Viewing the allegations in the light most favorable to Plaintiffs, they

have stated a claim for conversion of trust against the City and City Council

Defendants.

/ / / /

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SDCERS, joined by the Individual Defendants, argues that Plaintiffs have failed

to allege that SDCERS has improperly exercised dominion over property to which

Plaintiffs had an immediate right of possession. In the conversion of trust claim,

Plaintiffs allege that Defendants breached their fiduciary duty by allowing Defendant

City to divert funds for unlawful uses. (TAC ¶ 185.) Further, Plaintiffs allege that

SDCERS refused to enforce the City’s obligation to fund the pension system. (Id. ¶

186.) With regard to the conversion claim, Plaintiffs’ allegations focus on the acts of

the City, City Council Defendants, City Official Defendants, and Aguirre. (Id. ¶¶ 75,

192.) Viewing the allegations in the TAC in the light most favorable to Plaintiffs, they

have failed to allege that SDCERS or SDCERS Board Defendants assumed control or

ownership over property to which Plaintiffs had an immediate right to possession or

that it applied Plaintiffs’ property to its own use. See AmerUS Life Ins. Co., 143 Cal.

App. 4th at 642 n.4 (quoting Fong, 43 Cal. App. 4th at 544). In ruling on motions to

dismiss the SAC, the Court ruled that, to the extent Plaintiffs attempted to construe

their conversion claims against SDCERS as being based on knowing receipt of stolen

property, those claims failed. In the TAC, in the conversion of trust claim, Plaintiffs

allege that SDCERS knew or should have known that it received stolen funds and that

SDCERS looked the other way when the City gave it stolen funds. (TAC ¶ 187.)

Taking these allegations as true for purposes of a motion to dismiss, Plaintiffs still do

not allege that SDCERS or SDCERS Board Members converted any money for their

own use or deprived Plaintiffs of that money. Indeed, Plaintiffs do not allege that

SDCERS used any contributions from the City for anything other than for the benefit

of SDCERS’ members. Accordingly, Plaintiffs’ conversion claims against SDCERS

and SDCERS Board Defendants fail. 

In sum, the Court DENIES Aguirre’s motion to dismiss the conversion claim.

The Court GRANTS SDCERS’ and SDCERS Board Members’ motions to dismiss the

conversion and conversion of trust claims with prejudice. Further, the Court DENIES

the City and remaining Individual Defendants’ motions to dismiss the conversion and

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conversion of trust claims. Finally, the Court declines to allow further attempts to

amend. See, e.g., Royal Ins. Co. of Am., 194 F.3d at 1016-17 & n.9 (when denying

leave to amend, court may consider late attempts to add new theories, futility of

amendment, and prior attempts to cure deficiencies). 

H. Fraud

In their Fourteenth claim, Plaintiffs bring an action for fraud against the City,

Council Members, City Officials, and Doe Defendants. The City and Individual

Defendants, joined by Aguirre, move to dismiss this claim, arguing that Plaintiffs have

failed to plead fraud adequately. Plaintiffs oppose.

Under California law, a plaintiff must plead: “(1) misrepresentation (false

representation, concealment, or nondisclosure); (2) knowledge of falsity (scienter); (3)

intent to induce reliance; (4) justifiable reliance; and (5) resulting damages.” Okun v.

Morton, 203 Cal. App. 3d 805, 828 (1988). A defendant must fully understand the

nature of the charge. Stansfield v. Starkey, 220 Cal. App. 3d 59, 73 (1990). Plaintiff

must allege “how, when, where, to whom, and by what means the representations were

tendered.” Id. (citation omitted). Additionally, under Rule 9 of the Federal Rules of

Civil Procedure, a claim of fraud “shall be stated with particularity.” Fed. R. Civ. P.

9(b). 

Looking at the TAC, Plaintiffs have failed to remedy the deficiencies noted by

the Court in its order on motions to dismiss the SAC. Specifically, Plaintiffs fail to

allege fraud with particularity. For example, Plaintiffs allege: “During labor

negotiations that lead [sic] to the adoption of the 2003-2005 MOU, the City’s labor

negotiator represented to LBFO-Plaintiffs’ employee representatives from the SDPOA

that the City agreed to pick-up 10% of the contributions those Plaintiffs were required

to make to SDCERS in lieu of paying those Plaintiffs a wage increase.” (TAC ¶ 196.)

Plaintiffs also allege: “In reliance upon these representations, the SDPOA presented

LBFO-Plaintiffs with the City’s pick-up offer instead of a salary increase, which was

agreed upon. . . . Defendants knew these representations to be false and untrue when

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they were made to the SDPOA’s leadership by the City’s labor negotiator.” (Id. ¶ 197.)

The TAC fails, however, to state with particularity when these representations were

allegedly made and the content of some of the representations. Further, Plaintiffs fail

to allege sufficient facts to support their position that Defendants knew these

representations were false. Indeed, the allegations in the TAC are nearly identical to

those the Court found insufficient in the SAC.

In sum, the allegations to which Plaintiffs direct the Court fail to specify

sufficiently “how, when, where, to whom, and by what means the representations were

tendered.” See Stansfield, 220 Cal. App. 3d at 73. Accordingly, the Court GRANTS

Defendants’ motion to dismiss as to fraud, but will grant 30 days leave to amend.

Plaintiffs must cure the deficiencies in any amended complaint. See, e.g., Royal Ins.

Co. of Am., 194 F.3d at 1016-17 & n.9 (when denying leave to amend, court may

consider late attempts to add new theories, futility of amendment, and prior attempts

to cure deficiencies). 

I. Breach of Contract 

In their Fifteenth claim, Plaintiffs bring a breach of contract action against

Defendant City and SDCERS. In its order on motions to dismiss the SAC, the Court

denied the City’s motion to dismiss the breach of contract claim, but granted SDCERS’

motion to dismiss with leave to amend. Defendant SDCERS, joined in part by the City

and Individual Defendants, moves to dismiss this claim, again arguing that Plaintiffs

have failed to allege specific contracts between Plaintiffs and SDCERS that SDCERS

has breached. Plaintiffs oppose.

In a breach of contract claim, a plaintiff must allege (1) a contract, (2) plaintiff’s

performance, (3) defendant’s breach, and (4) damages. McDonald v. John P. Scripps

Newspaper, 210 Cal. App. 3d 100, 104 (1989). A third-party beneficiary, who is not

a signatory to a contract, may sue for breach of contract if the contract was made for

his or her direct benefit. Tyler v. Cuomo, 236 F.3d 1124, 1135 (9th Cir. 2000). 

/ / / /

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As they did in the SAC, Plaintiffs allege that SDCERS breached several

agreements. In allegations identical to those in the SAC, Plaintiffs allege that the 

aforementioned conduct of the City and SDCERS constitutes a breach of

multi-party agreements with Plaintiffs and contracts for which they are

third-party beneficiaries, including but not limited to successive MOUs,

the City Charter and Municipal Code, the retirement system trust

documents, agreements between the City and SDCERS delaying full

funding of the City’s obligations to the retirement system, and Section

218 agreements.

(TAC ¶ 202.) Looking at the alleged sources of contract rights in the TAC, Plaintiffs

have not alleged a contract between Plaintiffs and SDCERS that SDCERS has

breached. Similarly, Plaintiffs do not allege a contract between SDCERS and another

party under which Plaintiffs may bring suit as third party beneficiaries. 

1. Successive MOUs

Concerning the memoranda of understanding, Plaintiffs do not allege that

SDCERS was a party to any of these agreements. For example, with regard to the latest

MOU, Plaintiffs allege that “[t]he last memorandum of understanding in effect between

SDPOA and the City was from July 1, 2003 through June 30, 2005 (“MOU”), and

contained an internal grievance procedure that has at all relevant times been inadequate

and futile.” (Id. ¶ 22.) Thus, because Plaintiffs allege that the MOUs were between

the SDPOA and the City, they cannot form a basis for a breach of contract action

against SDCERS. See, e.g., Gold v. Gibbons, 178 Cal. App. 2d 517, 519 (1960)

(“Breach of contract cannot be made the basis of an action for damages against

defendants who did not execute it and who did nothing to assume its obligations.”).

2. The City Charter and Municipal Code

Plaintiffs provide few allegations regarding how these pieces of legislation create

enforceable contract rights between each Plaintiff and SDCERS. In the TAC, Plaintiffs

allege:

Defendant Aguirre admits, “SDCERS operates as a trust under California

law.” Defendant Aguirre also admits, “there is no ‘trust’ document

beyond the Municipal Code sections that discuss the SDCERS fund.”

SDCERS entered into a contract with each Plaintiff upon commencement

of employment by each Plaintiff. Under that trust document contract,

SDCERS is required to perform by managing and administering the fund

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for the sole and exclusive benefit of Plaintiffs and other SDCERS

members and beneficiaries. Plaintiffs are required to perform by carrying

outtheir employment responsibilities with the City and contributing funds

to the system. By nature of the trust relationship, SDCERS is Plaintiffs’

fiduciary.

(TAC ¶ 50.) Nowhere in the TAC, however, do Plaintiffs identify provisions of the

City Charter and Municipal Code that SDCERS has allegedly breached. Thus, as

indicated in its order on motions to dismiss the SAC, Plaintiffs have failed to allege

sufficiently a contract claim based on these legislative acts.

As a general rule, a statutory scheme does not create contractual rights. See, e.g.,

Walsh v. Bd. of Admin., 4 Cal. App. 4th 682, 697 (1992) (“Thus, it is presumed that

a statutory scheme is not intended to create private contractual or vested rights and a

person who asserts the creation of a contract with the state has the burden of

overcoming that presumption.”). Under California law, however, the courts have

indicated “a strong preference for construing governmental pension laws as creating

contractual rights for the payment of benefits.” Id. at 698. In Board of Administration

v. Wilson, the California Court of Appeal examined whether legislative changes to a

statutorily created pension system for state workers amounted to an unconstitutional

impairment of contract. Bd. of Admin. v. Wilson, 52 Cal. App. 4th 1109 (1997). The

retirement system board brought a mandamus action against the governor challenging

the legislative changes, arguing that the enactments violated the state and federal

prohibitions on impairment of contract. Id. at 1117-18. The court concluded that state

employees had a contractual right to an actuarially sound retirement system and

determined that the alterations amounted to unconstitutional impairments of contract.

Id. at 1131-44. The court did not examine whether a legislatively created pension

system could form the basis for a breach of contract action, however, and it did not

examine whether pension statutes could create enforceable contract rights between the

pension system itself and employees. Accordingly, the cases to which Plaintiffs direct

the Court do not support a breach of contract claim against SDCERS. Further, to the

extent Plaintiffs seek to hold SDCERS liable for breach of contract solely because it

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is the only entity capable of providing an actuarially sounds pension system, they have

not explained how this comports with the requirement under California law that

“[b]reach of contract cannot be made the basis of an action for damages against

defendants who did not execute it and who did nothing to assume its obligations.”

Gold v. Gibbons, 178 Cal. App. 2d 517, 519 (1960). 

3. Retirement System Trust Documents

Next, the TAC references retirement system trust documents as a source of

agreements allegedly breached by SDCERS. (See TAC ¶ 202.) As in the SAC,

however, Plaintiffs do not specify particular provisions of trust documents, and in fact,

they do not identify which trust documents SDCERS has allegedly breached.

Accordingly, Plaintiffs’ vague reference to retirement system trust documents are

insufficient to state a breach of contract claim against SDCERS.

4. Agreements between the City and SDCERS Delaying Full Funding of

the City’s Obligations

Plaintiffs also allege that SDCERS has breached “agreements between the City

and SDCERS delaying full funding of the City’s obligations.” (Id.) Plaintiffs have not

explained to which agreements this allegation refers. Accordingly, this allegation fails

to state a claim for breach of contract against SDCERS. 

5. Section 218 Agreements

Plaintiffs also list Section 218 agreements as a source of contract rights. (Id.)

Plaintiffs allege that, in 1981, the municipal workers of the City voted to replace Social

Security benefits in return for the City providing medical benefits to retirees. (Id. ¶ 80.)

According to Plaintiffs, the City, state, and federal government entered into an

agreement, pursuant to Section 218 of the Social Security Act, 42 U.S.C. § 418, to

replace Social Security benefits in return for the City providing Retiree Medical

Benefits for which contributions would be administered by SDCERS. (Id.) Plaintiffs

attach to the TAC a copy of the Section 218 agreement, which is signed by the City and

the State of California. (Id., Ex. S.) Because neither Plaintiffs nor SDCERS are parties

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to the Section 218 agreement, however, Plaintiffs cannot state a breach of contract

claim against SDCERS based on this agreement. See Gold, 178 Cal. App. 2d at

519 (“Breach of contract cannot be made the basis of an action for damages against

defendants who did not execute it and who did nothing to assume its obligations.”). 

6. Plaintiffs’ Claims as Third Party Beneficiaries

Finally, Plaintiffs allege that they are third party beneficiaries to agreements

between the City and SDCERS. (See, e.g., TAC ¶ 202.) As noted above, however,

Plaintiffs have not directed the Court to any agreements to which SDCERS is a party.

Accordingly, Plaintiffs cannot state a claim for breach of contract against SDCERS as

third party beneficiaries. Further, Plaintiffs have not provided any legal support for

their argument that the California Constitution creates a contract between the City and

SDCERS enforceable by Plaintiffs. Finally, as noted above, to the extent Plaintiffs

seek to hold SDCERS liable for breach of contract because it is the only entity capable

of providing an actuarially sounds pension system, they have not explained how this

comports with the requirement under California law that “[b]reach of contract cannot

be made the basis of an action for damages against defendants who did not execute it

and who did nothing to assume its obligations.” Gold, 178 Cal. App. 2d at 519.

In sum, the Court GRANTS SDCERS motion to dismiss the breach of contract

claim against it. Further, because Plaintiffs have had several opportunities to amend

this claim, but still rely on the same alleged sources for the contractual rights as stated

in the SAC, the Court declines to allow leave to amend. See, e.g., Royal Ins. Co. of

Am., 194 F.3d at 1016-17 & n.9 (when denying leave to amend, court may consider

late attempts to add new theories, futility of amendment, and prior attempts to cure

deficiencies). 

J. Interference with Contractual Relations

In their Sixteenth claim, Plaintiffs bring an action for interference with

contractual relations against the City, Aguirre, Council members, City Officials, 

/ / / /

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SDCERS,SDCERS Board Members, KPMG, and the Doe Defendants. All Defendants

move to dismiss this claim. Plaintiffs oppose.

To state a claim for interference with contractual relations, a plaintiff must show

“(1) the existence of a valid contract between the plaintiff and a third party; (2) the

defendant’s knowledge of this contract; (3) the defendant’s intentional acts designed

to induce a breach or disruption of the contractual relationship; (4) actual breach or

disruption of the contractual relationship; and (5) resulting damages.” Sole Energy,

Co. v. Petrominerals Corp., 128 Cal. App. 4th 212, 237-38 (2005). In an action for

inducing a breach of contract, an action may not be brought against a party to the

contract. Dryden v. Tri-Valley Growers, 65 Cal. App. 3d 990, 999 (1977). If such an

action is brought, it is in essence a breach of contract claim. Id. 

Defendant City, Individual Defendants, SDCERS, and KPMG contend that the

TAC fails to identify the contracts with which they allegedly interfered and fails to

specify which Defendants are the contracting parties. Further, Defendants highlight

that Plaintiffs’ allegations in the TAC are virtually identical to those held insufficient

in the SAC. Plaintiffs oppose. 

Examining the TAC, other than adding a claim against Defendant Aguirre, the

allegations are the same as those in the SAC. (Compare TAC ¶ 205 with SAC ¶ 155.)

In the TAC, Plaintiffs allege: 

Defendant Aguirre, Defendant City, City Council Defendants, City

Official Defendants, SDCERS, SDCERS Board Defendants, KPMG and

Does were aware Plaintiffs are parties to or beneficiaries of the contracts

and multi-party agreements alleged above, and Defendants’

aforementioned conduct intentionally and purposefully interfered with

these contracts, third-party beneficiary rights and multi-party agreements.

(TAC ¶ 205.) With regard to Aguirre, Plaintiffs additionally allege that he interfered

with the SDPOA’s membership agreements, the 2003-2005 MOU between the SDPOA

and the City, and the trust agreement with SDCERS. (Id. ¶ 48.) Further, Plaintiffs

allege that he impaired the City’s contractual obligations to Plaintiffs. (Id. ¶ 35.)

/ / / /

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6 As previously noted in the order on motions to dismiss the SAC,

undifferentiated pleading against multiple defendants is improper. See, e.g., In re

Sagent Tech., Inc., 278 F. Supp. 2d 1079, 1094 (N.D. Cal. 2003) (“[T]he complaint

fails to state a claim because plaintiffs do not indicate which individual defendant or

defendants were responsible for which alleged wrongful act. Plaintiffs plead no facts

showing how defendants that joined the board in late 2000 or in 2001 could be

responsible for events that occurred in 1999, or how defendants that left Sagent in 2000

could have any connection with actions taken, or not taken, in 2001.”); Gauvin v.

Trombatore, 682 F. Supp. 1067, 1071 (N.D. Cal. 1988) (lumping together multiple

defendants in one broad allegation fails to satisfy notice requirement of Fed. R. Civ.

P. 8(a)(2)).

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As before, other than in the allegations relating to Aguirre, Plaintiffs do not

specify the particular contracts with which Defendants allegedly interfered. Further,

Plaintiffs do not correlate allegedly wrongful conduct on the part of particular

Defendants to interference with particular contracts. Moreover, Plaintiffs do not allege

that any particular Defendant proximately caused any particular contractual disruption.

Instead, Plaintiffs improperly group all Defendants together in their interference with

contractual relations claim.6 (Id. ¶ 205.) Accordingly, Plaintiffs have failed to plead

sufficiently the elements of a claim for interference with contractual relations against

Defendants. Moreover, as noted in the Court’s order regarding motions to dismiss the

SAC, Plaintiffs’ allegations do not provide a short and plain statement of the claim

sufficient to provide each Defendant with fair notice of Plaintiffs’ claim and the

grounds on which the claim is based. See, e.g., Leatherman v. Tarrant County

Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 168 (1993). Accordingly,

the Court DISMISSES Plaintiffs’ Interference with Contractual Relations claim as to

all Defendants. Additionally, because the Court has previously provided Plaintiffs with

an opportunity to amend this claim, and because Plaintiffs failed to make substantive

changes to the claim in the TAC, the Court declines to allow leave to amend. See, e.g.,

Royal Ins. Co. of Am., 194 F.3d at 1016-17 & n.9 (when denying leave to amend, court

may consider late attempts to add new theories, futility of amendment, and prior

attempts to cure deficiencies).

/ / / /

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K. First Amendment Retaliation as to Aguirre

Aguirre, joined by the City and Individual Defendants, argues that the TAC does

not state a First Amendment Retaliation claim against him. As discussed above,

however, the Court dismisses the First Amendment claim against Aguirre on qualified

immunity grounds. 

L. Conspiracy

To state a claim for conspiracy under § 1983, a plaintiff must allege an

agreement or meeting of the minds to violate constitutional rights. See, e.g.,

Mendocino Envtl. Ctr. v. Mendocino County, 192 F.3d 1283, 1301 (9th Cir. 1999). 

The defendants must have intended to accomplish, by some concerted action, an

unlawful objective for the purpose of harming another, which results in damage. Id.

To be liable, each participant need not know the exact details of the plan, but must at

least share in the common objective of the plan. Id. (citing United Steelworkers of

America v. Phelps Dodge Corp., 865 F.2d 1539, 1540 (9th Cir. 1989)). To state a claim

for a conspiracy to violate one’s constitutional rights under § 1983, a “plaintiff must

state specific facts to support the existence of the claimed conspiracy.” Burns v.

County of King, 883 F.2d 819, 821 (9th Cir. 1989). A plaintiff meets this heightened

pleading standard if she alleges “which defendants conspired, how they conspired and

how the conspiracy led to a deprivation of his constitutional rights . . . .” Harris v.

Roderick, 126 F.3d 1189, 1196 (9th Cir. 1997). The Ninth Circuit has recently

reiterated that a plaintiff must plead “specific facts” to support a conspiracy allegation.

Olsen v. Idaho Bd. of Medicine, 363 F.3d 916, 929 (9th Cir. 2004); see also Jones v.

Tozzi, 2006 WL 2472752, *13 n.6 (E.D. Cal. Aug. 24, 2006) (“The heightened

pleading standard as applied to conspiracy cases does appear to still be good law in the

Ninth Circuit.”).

1. Conspiracy as to Aguirre

Aguirre, joined by the City and Individual Defendants, argues that the TAC

demonstrates that, as a matter of law, there is no single conspiracy involving Aguirre

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and the other Defendants. Further, Aguirre argues that Plaintiffs cannot plead a cover

up conspiracy involving Aguirre and other Defendants. Accordingly, Aguirre moves

to dismiss Plaintiffs’ claim against him for conspiracy to violate civil rights under 42

U.S.C. § 1983. Plaintiffs oppose.

As previously indicated in the order on motions to dismiss the SAC, the

documents Plaintiffs attach to the TAC are inconsistent with conspiracy allegations as

to Aguirre. Moreover, allegations in certain parts of the TAC are inconsistent with

allegations in other portions of the pleading. As in the SAC, Plaintiffs again allege in

the TAC: “As City Attorney, Defendant Aguirre admits that Defendant City, City

Council Defendants, City Official Defendants, SDCERS Board Defendants, and

SDCERS conspired to commit and indeed committed numerous breaches of fiduciary

duties, as set forth in various writings posted by Defendant Aguirre[.]” (TAC ¶ 43.)

Plaintiffs incorporate by reference and attach to the TAC several writings by the City

Attorney relating to the pension crisis. (Id. Exs. F-J, & L.) These documents indicate

that Aguirre has brought to light the facts and circumstances leading up to the pension

crisis. Also in the documents, Aguirre connects individuals to alleged misconduct

giving rise to the pension crisis. In line with these documents, Plaintiffs allege:

Defendant Aguirre has acknowledged that one of the primary factors that

caused the retirement system financial crisis is the conduct of the

individual Defendants who used retirement system funds . . . to fulfill

otherfinancial obligations. Defendant Aguirre also acknowledges that the

UAAL has been aggravated by those individual Defendants’ use of the

“waterfall provision” . . . to improperly divert funds for purposes

unrelated to the retirement system.

(Id. ¶ 44.) Further, Plaintiffs allege: “The City Attorney’s reports, as referenced, admit

that there was a conspiracy among various individual Defendants who have committed

numerous breaches of fiduciary duty, fraud, and concealment.” (Id. ¶ 45.) 

In these portions of the TAC, Plaintiffs rely on, and make allegations consistent

with, the attached documents prepared by the City Attorney. Nevertheless, even

though they rely on his reports of investigations into the pension crisis as the factual

basis for many of their allegations, Plaintiffs allege that Aguirre conspired with these

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same Defendants. (Id. ¶¶ 45, 46, 51-57.) Further, Plaintiffs allege that the conspiracy,

which began as a conspiracy to cause the pension system to be actuarially unsound,

eventually morphed into a scheme to cover up the City’s financial condition. (Id. ¶ 16.)

Plaintiffs allege that “KPMG and the other defendants have conspired to willfully

conceal the City’s wrongful, fraudulent, and illegal conduct.” (Id. ¶ 69.) Contrary to

a scheme involving both Aguirre and KPMG, however, Plaintiffs’ allegations include

quotes from Aguirre in which he criticizes KPMG, stating that “KPMG has absolutely

no further excuse to allow them further delay,” and that KPMG “breached its

fundamental duty to the city of San Diego.” (Id. ¶ 62.)

In sum, Plaintiffs’ conspiracy allegations as to Aguirre are inconsistent with the

documents they attach to the complaint and upon which they rely for many of their

conspiracy allegations. Further, their allegations regarding Aguirre taking part in a

conspiracy with KPMG to conceal the City’s financial condition are inconsistent with

other allegations included in the TAC. Accordingly, the Court concludes that Plaintiffs

have failed to state a claim for conspiracy to violate civil rights against Aguirre. Thus,

the Court GRANTS Defendant Aguirre’s motion to dismiss on this ground, but will

allow one more opportunity to amend this claim to cure the deficiencies of the TAC.

See, e.g., Royal Ins. Co. of Am., 194 F.3d at 1016-17 & n.9 (when denying leave to

amend, court may consider late attempts to add new theories, futility of amendment,

and prior attempts to cure deficiencies). 

2. Conspiracy as to SDCERS

SDCERS, joined by the City and Individual Defendants, argues that the SAC

fails to plead facts sufficient to state a conspiracy claim against SDCERS. Plaintiffs

oppose.

Looking at the SAC, Plaintiffs have again failed to meet the heightened pleading

standard regarding conspiracy against SDCERS. In the TAC, Plaintiffs allege:

“Unless otherwise indicated, each Defendant conspired, committed, ordered, directed,

supervised, allowed, planned, ratified, concealed, organized, acted in concert with, or

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otherwise participated in one or more of the unlawful acts alleged in this complaint.”

(TAC ¶ 93.) Further, the TAC alleges:

Defendants entered into agreements and conspired to eliminate and/or

reduce retirement benefits, including reducing the various vested

retirement benefits owed to Plaintiffs. Such conspiracy took place, and

continues in effect for the purpose of seeking to reduce and/or eliminate

retirement benefits owed to Plaintiffs, to use retirement system monies to

fund other obligations or for self-dealing or personal gain, to avoid

making legally mandated funding contributions, to facilitate the City’s

economic gain and the political gain of one or more of the individual

Defendants, to cover up the breach of fiduciary duty of SDCERS Board

Defendants who participated in the City’s under-funding schemes and to

conceal this initial conspiracy by refusing to release complete and

accurate financial audits for the years beginning with 2003.

(Id. ¶ 94.) As in the SAC, Plaintiffs do not clarify with which Defendants SDCERS has

allegedly conspired. Further, Plaintiffs have not alleged when SDCERS entered into

any conspiratorial agreements, how it entered into the conspiracy, and how it

participated in the conspiracy. The vague and conclusive allegations in the TAC as to

SDCERS are insufficient to state a conspiracy claim. Accordingly, the Court

GRANTS SDCERS’ motion to dismiss on this ground, but the Court will allow leave

to amend to cure the deficiencies in the TAC. See, e.g., Royal Ins. Co. of Am., 194

F.3d at 1016-17 & n.9 (when denying leave to amend, court may consider late attempts

to add new theories, futility of amendment, and prior attempts to cure deficiencies).

M. Section 1983 Claims as to KPMG

To maintain a § 1983 civil rights action, a plaintiff must allege: “(1) that the

conduct complained of was committed by a person acting under color of state law; and

(2) that the conduct deprived the plaintiff of a constitutional right.” Balistreri, 901 F.2d

at 699. Additionally, where the defendant is a private entity, a plaintiff must allege

“that there is such a ‘close nexus between the State and the challenged action’ that

seemingly private behavior ‘may be fairly treated as that of the State itself.’”

Brentwood Acad. v. Tenn. Secondary Sch. Athletic Ass’n, 531 U.S. 288, 295 (2001)

(quoting Jackson v. Metro. Edison Co., 419 U.S. 345, 349 (1974)). The Ninth Circuit

has recognized several approaches to conducting the state action determination.

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7

 Plaintiffs bring two § 1983 claims against KPMG in the TAC: (1) violation of

the Contracts Clause, art. I, § 10; and (2) conspiracy to violate civil rights. In their

response in opposition to KPMG’s motion, however, Plaintiffs argue that they have

alleged facts sufficient to state a cause of action against KPMG for violating Plaintiffs’

procedural due process rights. In the TAC, Plaintiffs do not allege a procedural due

process claim against KPMG. (See TAC ¶¶ 141-48.) In any event, as discussed, the

Court dismisses Plaintiffs’ § 1983 claims against KPMG because Plaintiffs have not

alleged that KPMG is a state actor.

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George v. Pacific-CSC Work Furlough, 91 F.3d 1227, 1230 (9th Cir. 1996); see also

Lee v. Katz, 276 F.3d 550, 554 (9th Cir. 2002) (in light of Brentwood Academy, noting

that satisfaction of one approach may be sufficient to find state action, absent

countervailing considerations). First, a private entity’s action may constitute state

action where the action is traditionally and exclusively performed by the State. Id.

Second, under the nexus approach, state action may be found where the state is

extremely connected to the challenged action. Id. at 1230-31. Third, under the joint

action approach, private actors can be state actors if they willfully participate in joint

action with the state. Id. at 1231. Finally, under the state compulsion approach, a

private entity acts as the state when some state law or custom requires a certain course

of action. Id. at 1232. With all of the approaches, identifying the challenged action is

important, as an entity may be a state actor for some purposes, but not for others. See,

e.g, Lee, 276 F.3d at 555 n.5 (citing George, 91 F.3d at 1250).

KPMG argues that, because it is a private entity, Plaintiffs’ § 1983 claims against

it7 must fail, as Plaintiffs have not alleged sufficiently that it engaged in any state

action. Further, KPMG argues that, because Plaintiffs have failed to materially amend

the allegations against it, the Court should dismiss the claims as it did with regard to

those in the SAC. In response, Plaintiffs make several arguments. First, Plaintiffs state

that KPMG is performing a public function, as the City is required to perform the

auditing services it delegated to KPMG. Further, Plaintiffs argue that the question of

whether KPMG is performing a public function is a question of fact. Second, Plaintiffs

maintain that KPMG should be considered a state actor because it meets the joint action

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test described above. Third, Plaintiffs contend that they have alleged a civil rights

conspiracy involving KPMG.

Under the public function analysis, Plaintiffs have not alleged, and the cases to

which they cite do not hold, that the auditing and accounting services at issue are

functions traditionally and exclusively performed by the State. Cf. Lee, 276 F.3d at

554 (regulating speech in public forum is both traditional and exclusive public

function). Instead, the TAC and documents Plaintiffs attach to the complaint indicate

that KPMG was hired to perform an independent audit of financial statements. In

support of their contention, Plaintiffs cite portions of the San Diego City Charter

requiring the City to conduct auditing duties. (See, e.g., TAC ¶¶ 66-67.) Most of these

references, however, relate to internal auditing and accounting functions. (See id. ¶ 66

(citing San Diego City Charter, art. VII, §§ 89 & 112).) Further, Plaintiffs cite to a

sentence from art. VII, § 111 of the City Charter to support their argument that KPMG

is performing a public function: “Each year the Council shall provide that an audit

shall be made of all accounts and books of all the Departments of the City” (See id.

¶ 66.) The next sentence of § 111, however, which Plaintiffs omit from the TAC,

states: “Such audit shall be made by independent auditors who are in no way

connected with the City.” San Diego City Charter, art. VII, § 111. Further, Plaintiffs

allege elsewhere in the TAC, as well as in the exhibits attached to the pleading, that

KPMG was engaged as an outside auditor. (See, e.g., TAC ¶¶ 5, 60, 67 (purpose and

scope of audit); Ex. X at 12-15 (KPMG retained as outside auditor).) In short, as with

regard to the SAC, because Plaintiffs have failed to explain why the auditing and

accounting services at issue are those traditionally and exclusively performed by the

state, they have failed to allege that KPMG is a state actor under the public function

test.

Under the joint action approach, as in the SAC, Plaintiffs have not alleged in the

TAC that “the state has ‘so far insinuated itself into a position of interdependence with

[the private entity] that it must be recognized as a joint participant in the challenged

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activity.’” Gorenc v. Salt River Project Agric. Improvement & Power Dist., 869 F.2d

503, 506 (9th Cir. 1989) (citing Burton v. Wilmington Parking Auth., 365 U.S. 715,

725 (1961)). In support, Plaintiffs state that the agents and representatives of the City

currently under investigation or indictment are benefitting from KPMG’s delay in

issuing its audit. Further, Plaintiffs contend that the City is benefitting as well because

it will have to indemnify the individuals as to damages resulting from their

performance of employment duties for the City. Contrary to Plaintiffs’ arguments,

however, the TAC alleges that City officials have complained about the timing of the

KPMG audit. (See, e.g., TAC ¶¶ 62-64.) Further, as noted above, the exhibits

Plaintiffs attach to the complaint indicate that the City hired KPMG to perform an

independent audit of financial statements. Finally, although Plaintiffs cite to one of

this Court’s orders regarding allegations as to the City in San Diego Police Officers’

Association v. Aguirre, those rulings are not germane to the issue of whether KPMG

is a state actor for purposes of stating a claim under § 1983.

Plaintiffs also assert that conspiracy allegations in the TAC demonstrate that

KPMG was a joint participant with the City, and thus, should be considered a state

actor. As with regard to the SAC, however, these conspiracy allegations do not detail

actions by KPMG, and even assuming they sufficiently allege a conspiracy involving

some Defendants, they do not connect KPMG to the allegations making up Plaintiffs’

constitutional violations. Further, as just noted, rulings by this Court as to the

sufficiency of conspiracy allegations against the City in San Diego Police Officers’

Association v. Aguirre have little relevance to the question of KPMG’s status as a state

actor.

Finally, Plaintiffs do not argue that KPMG is a state actor under the nexus or

coercion tests. Accordingly, under any of the approaches described above, Plaintiffs

have not alleged a relationship between the challenged funding actions and KPMG, let

alone such a close connection that “seemingly private behavior ‘may be fairly treated

as that of the State itself.’” Brentwood Academy, 531 U.S. at 295. Taking the

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allegations as true for purposes of this motion to dismiss, they fall short of showing the

close relationship necessary to consider KMPG a state actor for purposes of § 1983

liability. Therefore, the Court DISMISSES Plaintiffs’ § 1983 claim against KPMG

based upon alleged violations of the Contracts Clause without leave to amend. See,

e.g., Royal Ins. Co. of Am., 194 F.3d at 1016-17 & n.9 (when denying leave to amend,

court may consider late attempts to add new theories, futility of amendment, and prior

attempts to cure deficiencies).

Regarding Plaintiffs’ § 1983 conspiracy claim against KPMG, as discussed

above, to state a claim for a conspiracy to violate one’s constitutional rights under

§ 1983, a “plaintiff must state specific facts to support the existence of the claimed

conspiracy.” Burns, 883 F.2d at 821; Olsen, 363 F.3d at 929. To meet this standard,

a plaintiff must allege “which defendants conspired, how they conspired and how the

conspiracy led to a deprivation of his constitutional rights . . . .” Harris, 126 F.3d at

1196. Private parties may be held liable under § 1983 for conspiracy to violate civil

rights “if they willfully participate in joint action with state officials to deprive others

of constitutional rights.” Phelps Dodge Corp., 865 F.2d at 1540. In addition to the

general pleading requirements for conspiracy claims,to allege sufficiently a conspiracy

between state actors and a private party, a plaintiff must demonstrate “an agreement or

meeting of the minds to violate constitutional rights.” Id. at 1540-41 (quotations

omitted); Mendocino Envtl. Ctr., 192 F.32d at 1301(quoting Phelps Dodge Corp.). To

be liable, “each participant in the conspiracy need not know the exact details of the

plan, but each participant must at least share the common objective of the conspiracy.”

Phelps Dodge, 865 F.2d at 1541.

KPMG argues that the Court should dismiss the § 1983 conspiracy claim because

Plaintiffs have failed to meet the heightened pleading requirement for conspiracy.

Further, KPMG argues that Plaintiffs’ additional allegations in the TAC demonstrate

that Plaintiffs’ conspiracy claim against KPMG must fail. Plaintiffs oppose, arguing

that they have stated a claim and largely relying on this Court’s rulings as to the

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sufficiency of conspiracy allegations against the City in San Diego Police Officers’

Association v. Aguirre. 

Looking at the allegations in the TAC, Plaintiffs have failed to set forth a

conspiracy claim against KPMG. As in the SAC, Plaintiffs allege that KPMG and the

City conspired to conceal the City’s “true assets, liabilities, misrepresentations, fraud

and misconduct.” (TAC ¶ 9; see also id. ¶ 69.) Plaintiffs do not plead any facts to

support this assertion, however. Similarly, Plaintiffs allege that KPMG and the City

had a “meeting of the minds,” (id. ¶ 69), but they do not allege any facts indicating an

agreement to delay issuance of the audit report. Rather, the allegations Plaintiffs have

added in the TAC demonstrate the opposite. Plaintiffs allege that City officials have

criticized KPMG for delaying the audit report, not that they have agreed to the delay.

(See, e.g., id. at 61-62.) Further, Plaintiffs include allegations in which Defendant

Aguirre states that KPMG has “breached its fundamental duty to the City of San

Diego.” (Id. ¶ 62 (emphasis omitted).) In short, Plaintiffs do not allege any meeting of

the minds to violate constitutional rights. Likewise, Plaintiffs have not alleged that

KPMG delayed the audit report for the purpose of violating Plaintiffs’ constitutional

rights. See Mendocino Envtl. Ctr., 192 F.3d at 1301. 

Finally, as they did with regard to the SAC, Plaintiffs again largely rely on this

Court’s ruling denying the City’s motion to dismiss the conspiracy claims in SDPOA

v. Aguirre. KPMG is not a party in that case, and more importantly, the allegations

against the City in that case are different than the allegations against KPMG here. As

discussed above, Plaintiffs’ allegations do not connect KPMG to any of the alleged

underfunding actions and compensation decisions. Other than in conclusory language,

Plaintiffs have not alleged material facts demonstrating any “meeting of the minds to

violate constitutional rights” against KPMG. See Mendocino Envtl. Ctr., 192 F.32d

at 1301. Accordingly, the Court DISMISSES Plaintiffs’ § 1983 conspiracy claim

against KPMG.

/ / / /

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In sum, the Court DISMISSES Plaintiffs’ § 1983 claims against KPMG, but the

Court will allow Plaintiffs a further attempt to amend as to the conspiracy claim.

Plaintiffs, however, must cure the deficiencies in an amended complaint. See, e.g.,

Royal Ins. Co. of Am., 194 F.3d at 1016-17 & n.9 (when denying leave to amend, court

may consider late attempts to add new theories, futility of amendment, and prior

attempts to cure deficiencies).

N. Declaratory Relief as to KPMG

KPMG argues that the Court should dismiss any claims for declaratory relief

against it because none of the allegations have anything to do with KPMG. Further,

they highlight that the TAC contains the same allegations as those the Court found

insufficient in the SAC. Plaintiffs oppose, arguing that the declaratory relief is

necessary and that the Court found similar allegations sufficient to state a claim against

the City.

In their claim for declaratory relief, Plaintiffs again ask the Court to enter

declaratory judgment on various alleged controversies. (See TAC ¶ 209.1.) Most of

the requests relate to actions by the City, and thus, do not involve KPMG.

Nevertheless, in three of their requests, Plaintiffs seek declaratory judgment against

“Defendants,” generally. (Id. ¶ 209.1(b), (k) & (r).) Looking at those three requests,

however, Plaintiffs do not allege that KPMG had any involvement with the disputes.

First, Plaintiffs request a determination whether any Defendant breached a

fiduciary duty owed to Plaintiffs by allowing retirement fund contribution to be

deferred, delayed, or diverted. (Id. ¶ 209.1(b).) Plaintiffs do not, however, allege that

KPMG owed such a fiduciary duty to Plaintiffs or how any of KPMG’s actions related

to any funding decisions. Second, Plaintiffs again ask the Court to determine whether

any Defendant owed fiduciary duties and to whom those duties were owed, to

determine the contours of any such duties, and to determine to what extent any

breaches of fiduciary duties damaged the financial soundness of the retirement fund.

(Id. ¶ 209.1(k).) Even assuming this broad request sets forth an actual controversy, see

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28 U.S.C. § 2201(a), Plaintiffs do not allege KPMG owed Plaintiffs any fiduciary

duties, and they do not allege how any of KPMG’s activities related to damaging the

financial soundness of the retirement fund. Third, Plaintiffs ask the Court to determine

whether the City or other Defendants violated the Brown Act. (TAC ¶ 209.1(r).) As

discussed above, the Brown Act, Cal. Gov. Code § 54950 et seq., generally requires

local government bodies to conduct meetings in public. Plaintiffs do not allege,

however, that KPMG is subject to the Brown Act or that it somehow violated the act.

Thus, Plaintiffs provide no basis for this claim for declaratory relief against KPMG.

In sum, Plaintiffs have failed to allege facts sufficient to state a claim for

declaratory relief against KPMG. Accordingly, the Court DISMISSES Plaintiffs’

claims for declaratory relief against KPMG. Further, given that Plaintiffs did not make

any substantive changes to this claim in the TAC, the Court declines to allow leave to

amend. See, e.g., Royal Ins. Co. of Am., 194 F.3d at 1016-17 & n.9 (when denying

leave to amend, court may consider late attempts to add new theories, futility of

amendment, and prior attempts to cure deficiencies).

O. KPMG’s Request for Attorneys’ Fees

In their motion, KPMG requests that the Court award KPMG its attorneys’ fees

pursuant to 42 U.S.C. § 1988 and 28 U.S.C. § 1927. 

In an action brought under 42 U.S.C. § 1983, “the court, in its discretion, may

allow the prevailing party . . . a reasonable attorney’s fee as part of the costs[.]” 42

U.S.C. § 1988(b). While a prevailing defendant may recover fees from a plaintiff under

§ 1988, the court must find that the plaintiff’s lawsuit was frivolous, unreasonable, or

without foundation. See Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421

(1978) (interpreting Title VII); Hughes v. Rowe, 449 U.S. 5, 14-15 (1980) (applying

Christiansburg standard to fee request under § 1988 and stating that, for defendant to

recover fees, plaintiff’s action must be groundless or without foundation).

Under 28 U.S.C. § 1927:

Any attorney or other person admitted to conduct cases in any court of the

United States or any Territory thereof who so multiplies the proceedings

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in any case unreasonably and vexatiously may be required by the court to

satisfy personally the excess costs, expenses, and attorneys' fees

reasonably incurred because of such conduct.

An award under § 1927 requires a showing of bad faith. See, e.g., Wages v. IRS, 915

F.2d 1230, 1235 (9th Cir. 1990) (awarding fees under § 1927 where plaintiff attempted

to file amended complaint without material alterations from the one already dismissed

and where plaintiff continually moved for alterations in district court’s original

judgment).

The Court declines to impose an award of attorneys’ fees under either provision.

The Court does not find any bad faith or vexatious conduct on the part of Plaintiffs.

Further, the Court does not find that Plaintiffs’ allegations against KPMG are frivolous.

Conclusion

For the reasons stated above, the Court GRANTS in part and DENIES in part

Defendant City of San Diego and the Individual Defendants’ motion to dismiss;

GRANTS in part andDENIES in part Defendant Michael Aguirre’s motion to dismiss;

GRANTS Defendant SDCERS’ motion to dismiss; andGRANTS Defendant KPMG’s

motion to dismiss. Further, the Court grants in part Plaintiffs leave to amend as noted

in this order within 30 days of the date of this order.

IT IS SO ORDERED.

DATED: 

 

 MARILYN L. HUFF, District Judge

UNITED STATES DISTRICT COURT

March 8, 2007

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Copies To:

Gregory Peterson

Christopher Nissen

Castle, Petersen & Krause, LLP

4675 MacArthur Court, Suite 1250

Newport Beach, CA 92660

Peter Benzian

Latham & Watkins

600 West Broadway, Suite 1800

San Diego, CA 

Rodney Perlman

Wehner & Perlman

1919 Santa Monica Blvd, Suite 210

Santa Monica, CA 90404

Reginald Vitek

Matthew Mahoney

Seltzer Caplan, McMahon & Vitek

750 B Street, Suite 2100

San Diego, CA 92101

Robert Gooding

Martha Gooding

Stephen Cook

Howrey, LLP

2020 Main Street, Suite 1000

Irvine, CA 92614

Case 3:06-cv-01451-H-POR Document 134 Filed 03/08/07 Page 40 of 40