Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_06-cv-01451/USCOURTS-casd-3_06-cv-01451-5/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 IN PART

AND DENYING IN PART

DEFENDANT SDCERS’

MOTION TO DISMISS; AND 

(4) GRANTING DEFENDANT

KPMG’S MOTION TO

DISMISS

vs.

MICHAEL AGUIRRE, et al.,

Defendants.

On October 19, 2006, Plaintiffs, over 1600 individual police officers, filed their

Second Amended Complaint (“SAC”) against Defendants, alleging claims under 42

U.S.C. § 1983 and various state law claims. (Doc. No. 70.) On October 10, 2006,

Defendant City of San Diego (“City”) and the Individual Defendants filed a motion toa

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1

 Defendant City and the Individual Defendants filed their motion in response to the First Amended Complaint. During a telephonic hearing on October 24, 2006, these

Defendants requested that the Court deem their motion as responsive to Plaintiffs’ SAC.

Accordingly, the Court ordered that these Defendants’ motion to dismiss constituted

their response to the SAC. (Doc. No. 77.)

2Defendant Aguirre filed his motion in response to the First Amended Complaint. During a telephonic hearing on October 24, 2006, however, Aguirre requested that the Court deem his motion as responsive to Plaintiffs’ SAC. Accordingly, the Court ordered that Aguirre’s motion to dismiss constituted his response to the SAC. (Doc. No. 77.)

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dismiss, or in the alternative, to stay.1 (Doc. No. 62.). Defendant Michael Aguirre filed

a motion to dismiss on October 10, 2006.2

 (Doc. No. 65.) On November 3, 2006,

Defendant San Diego Employees’ Retirement System (“SDCERS”) filed a motion to

dismiss the SAC, or alternatively, to abate or dismiss proceedings pertaining to state

pension underfunding issues. (Doc. No. 86.) Finally, Defendant KPMG, LLP

(“KPMG”) filed a motion to dismiss the SAC on November 3, 2006. (Doc. No. 87.) 

On October 10, 2006, Defendant City and the Individual Defendants filed a

joinder to Defendant Aguirre’s motion to dismiss. (Doc. No. 62.) On the same date,

Defendant Aguirre filed a joinder in part to Defendant City and the Individual

Defendants’ motion to dismiss. (Doc. No. 68.) On October 27, 2006, SDCERS filed

a joinder in part to Defendant City and Individual Defendants’ motion to dismiss. (Doc.

No. 79.) On November 9, 2006, Defendant City and the Individual Defendants filed a

joinder in part in SDCERS’ motion to dismiss. (Doc. No. 90.)

 The Court heard oral argument on the various motions on December 4, 2006.

Christopher Nissen appeared on behalf of Plaintiffs. Peter Benzian appeared for

Defendant City and the Individual Defendants. Rodney Perlman and Donald McGrath

appeared for Defendant Aguirre. Matthew Mahoney appeared for Defendant SDCERS,

and Martha Gooding appeared for Defendant KPMG. After reviewing the papers and

hearing oral argument, the Court GRANTS 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 in part and DENIES

/ / / /

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in part Defendant SDCERS’s motion to dismiss; and GRANTS Defendant KPMG’s

motion to dismiss. 

Additionally, the Court GRANTS Plaintiffs 30 days from the date this Order is

stamped “Filed” to file a third amended complaint that addresses the deficiencies of the

pleading set forth below.

Background

The Court notes the related case filed on behalf of the San Diego Police Officers’

Association, SDPOA v. Aguirre, 05-CV-1581-H(POR). In that action, SDPOA sued

in its capacity as the recognized employee organization representing police officers

employed by the San Diego Police Department. SDPOA filed that case in August 2005,

and in the intervening months, the Court has ruled on numerous matters, including

several motions to dismiss. The same counsel filed the above-captioned case, Aaron

v. Aguirre, in the name of over 1,600 individual police officers. The operative

complaints contain similar allegations. Both complaints rely on extensive materials to

substantiate the allegations of misconduct in relation to the financial integrity of the

municipal pension fund. 

In brief, Plaintiffs in this case allege that the municipal pension fund is

“actuarially unsound” and that their vested retirement and compensation benefits have

been unlawfully eliminated or reduced. (See, e.g., SAC ¶¶ 17-26.) Plaintiffs further

allege that the City engaged in bad faith labor negotiations with the police officers’

union, SDPOA, in a scheme to take away vested retirement and healthcare benefits, and

that the City singled them out for retaliation. (See, e.g., id. ¶¶ 29-45.) Additionally,

Plaintiffs allege that Defendants manipulated pension funds and deprived them of

contributions. (See, e.g., id. ¶¶ 46-50.)

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

against Defendant Aguirre, the San Diego City Attorney; Defendant City of San Diego;

and SDCERS. The SAC also names individual employees and elected officers,

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3

The current City Council Defendants include Toni Atkins, Donna Frye, Ralph Inzunza, Jim Madaffer, Brian Maienschein, Scott Peters, Tony Young, and Michael Zucchet. (SAC ¶ 12.) Former City Council Defendants include Harry Mathis, Byron Wear, Christine Kehoe, George Stevens, Barbara Warden, Valerie Stallings, Judy McCarty, and Juan Vargas. (Id.) 

4

The 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. (SAC ¶ 13.) 

5 The Retirement Board Member Defendants include Lexin, Vattimo, Webster,

Ryan, and Herring, who are also named in their capacities as City Officials. (SAC ¶ 13 & 14.)

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including current and former members of the San Diego City Council,3 former officials

of the City of San Diego,4

 and former board members (or trustees) of SDCERS.5 Unlike

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

that the City of San Diego hired to perform audits. (Compl. ¶ 15.) Finally, the SAC

names Does one through 100 as Defendants. (Id. ¶ 16.) 

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

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

1996). 

“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.

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6

 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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Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). As noted, 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 (quoting

Southern Cross Overseas Agencies, Inc. v. Wah Kwong 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 claims6

 are barred by the two year statute of limitations. Plaintiffs

oppose on several grounds. 

In § 1983 actions, the court applies the same statute of limitations as the forum

state for 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,

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7Defendant City, Individual Defendants, and Aguirre in their motions to dismiss, and Plaintiffs in their responses, cite to the First Amended Complaint, as that was the operative complaint when they filed their papers. The SAC, however, is now the operative complaint. Nevertheless, the FAC and the SAC are identical except for allegations relating to KPMG.

8 In this section of their response, Plaintiffs omit reference to their Fourteenth Amendment Due Process claim. The Court assumes this was an oversight, as Defendants’ motion seeks to dismiss Plaintiffs’ due process claim on the same statute of limitations grounds.

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

Complaint must have accrued after July 18, 2004. 

1. First Amendment Retaliation

Defendants assert the statute of limitations argument as to Plaintiffs’ § 1983

claims that are premised on alleged underfunding of SDCERS caused by

implementation of MP1 in 1996 and MP2 in 2002. Plaintiffs’ First Amendment claim

alleges retaliatory conduct beginning in January of 2005 and, thus, is within the statute

of limitations. (See SAC7

 ¶¶ 29-39.) Therefore, the Court DENIES Defendants’

motion to dismiss based on statute of limitations as to Plaintiffs’ First Amendment

claim.

2. Contracts Clause, Takings Clause, Procedural Due Process, and

Conspiracy to Violate Civil Rights Claims

In their motion, Defendants argue that Plaintiffs’ representative, the SDPOA, as

well as SDPOA officials, were involved in the implementation of MP1 and MP2 and

were aware of those proposals’ impact upon SDCERS funding levels. Accordingly,

Defendants argue that the statute of limitations began to run before July 18, 2004,

making Plaintiffs’ claims time barred. Defendants also point to this Court’s reasoning

and ruling on motions to dismiss in SDPOA v. Aguirre in support. 

In opposition, Plaintiffs direct the Court to portions of the SAC in which they

allege that they were not aware of the danger to their benefits until 2005 when the

Mayor of San Diego’s public comments, as well as statements by the City’s labor

negotiator, brought the issues to Plaintiffs’ attention.8

 Further, Plaintiffs state that their

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§ 1983 claims do not rely solely on MP1 and MP2 as the basis for alleged deprivation

of rights.

a. MP1

Defendants argue that any claim for relief relating to MP1 is barred by the statute

of limitations. Although Plaintiffs state that they did not know at the time that

Defendants were scheming to underfund the pension plan until early 2005, (see SAC

¶ 51), they attach numerous exhibits to the SAC that demonstrate the contrary. 

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.)

The SDPOA was specifically involved in the meet and confer process that led 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 had knowledge of the implementation of MP1 at the time.

Moreover, a pension board member 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,

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a public hearing held on June 21, 1996 regarding MP1 addressed whether the pension

board needed to determine whether the City would be able to meet its obligations under

MP1. (Id. at 44.) In addition, the Court concludes that MP1, implemented in 1996, is

too remote in time and clearly outside the statute of limitations period. 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, 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.

b. MP2

Similarly, Defendants argue that Plaintiffs were involved in the implementation

of MP2 and were aware of its effect upon SDCERS funding levels. Therefore,

Defendants argue that the statute of limitations began to run prior to July 18, 2004, and,

thus, Plaintiffs’ claims based upon MP2 are time barred. In particular, Defendants

argue that the directors of the SDPOA were aware of the risks presented by MP2.

Further, Defendants argue that the documents Plaintiffs attached to the SAC show that

implementation of MP2 was a critical component of the City’s labor negotiations

involving SDPOA. Further, Defendants point out that SDPOA’s treasurer attended

SDCERS board meetings leading up to the enactment of MP2 during which individuals

warned of the dangers MP2 posed to the soundness of SDCERS. In response, Plaintiffs

state that the facts surrounding the underfunding problems with MP2 are disputed.

Further, they direct the Court to a portion of the SAC in which they state that they were

not aware of the dangers to their benefits until 2005.

MP2 was entered into by the City Council on November 18, 2002. (See, e.g., id.,

Ex. G at 11.) In part, MP2 was implemented to avoid the cash infusion to the pension

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system established in MP1, which, as mentioned above, required the city to make up the

shortfall if the funded ratio went below 82.3%. (See, e.g., id., Ex. K at 14.) Under

MP2, the parties agreed to additional and retroactive benefits without a corresponding

increase in contributions. MP2 added substantial liabilities to the pension fund. (Id.)

Defendants argue that Plaintiffs’ union was involved in the meet and confer

process with the City concerning MP2. (See SAC, Ex. K at 18.) Although the

document attached to the SAC referenced by Defendants states that MP2 was discussed

“[i]n the meet and confer process with the labor union,” (id.), the facts surrounding the

underfunding problems with MP2 are disputed. Similarly, although Defendants point

to a document indicating that SDPOA’s treasurer attended many SDCERS board

meetings, the facts are in dispute regarding Plaintiffs’ knowledge. For example, the

SAC alleges that Plaintiff did not learn about the danger to the soundness of the pension

system until early 2005, and that they did not learn of associated funding dangers until

mid 2005. (Id. ¶ 51.) Further, the SAC alleges that Defendants met in closed sessions

to divert funds used for the pension for “pet projects” and personal gain. (Id. ¶ 27.) 

In ruling on a motion to dismiss, the Court must take the allegations in the SAC

as true. See North Star Int’l, 720 F.2d at 581. Based on the allegations of conflict of

interest, self dealing, and violation of various laws, and based upon factual disputes and

uncertainty as to timing, the Court DENIES Defendants’ motion to dismiss any causes

of action relating to MP2 on statute of limitations grounds. 

c. Press Coverage of SDCERS Financial Status

Defendants also argue that the troubled financial status of SDCERS was a widely

known public issue before July 2004 due to overwhelming publicity regarding SDCERS

underfunding. While Defendants acknowledge this Court’s ruling in SDPOA v.

Aguirre declining to find that newspaper articles demonstrated as a matter of law that

the statute of limitations barred any causes of action relating to MP2, they argue that the

additional publicity between August 2003 and July 18, 2004 requires a different result

in this case. Plaintiffs make several arguments in response. First, they claim that

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underfunding by itself is not the liability trigger, as they argue that underfunding alone

did not make SDCERS actuarially unsound. Accordingly, Plaintiffs assert that

Defendants would have to show that each Plaintiff had actual or constructive knowledge

that SDCERS was actuarially unsound. Further, Plaintiffs argue that none of the news

reports indicate the funding ratio for SDCERS at any point in time, and they do not

explain what percentage would constitute actuarial unsoundness. Rather, Plaintiffs

asset that the articles simply provide dollar amounts without context. Finally, Plaintiffs

argue that Defendants’ argument based upon press coverage is premature at the motion

to dismiss stage. 

In ruling on a motion to dismiss pursuant to Federal Rule of Civil Procedure

12(b)(6), if “matters outside the pleading are presented to and not excluded by the court,

the motion shall be treated as one for summary judgment and disposed of as provided

in Rule 56, and all parties shall be given reasonable opportunity to present all material

made pertinent to such a motion by Rule 56.” Fed. R. Civ. P. 12(b); see also United

States v. Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). A court may consider certain

materials such as documents attached to the complaint, documents incorporated by

reference in the complaint or matters of judicial notice without converting the motion

to dismiss to a motion for summary judgment. Ritchie, 342 F.3d at 908. Courts may

only take judicial notice of facts that are “not subject to reasonable dispute.” Fed. R.

Evid. 201(b). These facts must either be “generally known within the territorial

jurisdiction of the trial court,” or “capable of accurate and ready determination by resort

to sources whose accuracy cannot reasonably be questioned.” Id. In Pharmacare v.

Caremark, the court stated that newspaper articles submitted by the parties would

convert the motion into one for summary judgment. 965 F. Supp. 1411, 1417 n.9 (D.

Haw. 1996). 

Even though Defendants attempt to distinguish the situation in this case from that

in SDPOA v. Aguirre by highlighting the additional news coverage of the pension crisis

between August 2003 and July 2004, at the motion to dismiss stage the Court concludes

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that consideration of newspaper articles does not establish as a matter of law that the

causes of action relating to MP2 are barred by the statute of limitations. Accordingly,

the Court DENIES Defendants’ motion to dismiss on statute of limitations grounds

based upon press coverage. Defendants may renew their statute of limitations defense

in a motion for summary judgment where the Court determines whether there are

disputed issues of material facts.

d. Plaintiffs’ Estoppel Theory

Defendants contend that Plaintiffs’ theory that Defendants should be estopped

from asserting the statute of limitations, which Plaintiffs assert in the SAC, is

inapplicable. (See SAC ¶ 9.) According to the SAC, a state court ruled in favor of

Aguirre and the City in a related action, finding that their cross complaint sufficiently

alleged tolling due to a conspiracy to conceal wrongdoing relating to MP1 and MP2.

(Id.) Thus, Plaintiffs assert that, because Aguirre and the City’s position in that case is

inconsistent with the position they took in SDPOA v. Aguirre, the City should be

estopped from arguing that tolling does not apply as to MP1 and MP2 in this case. 

“Judicial estoppel is an equitable doctrine that precludes a party from gaining an

advantage by asserting one position, and then later seeking an advantage by taking a

clearly inconsistent position.” Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778,

782 (9th Cir. 2001) (citing Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597,

600-01 (9th Cir. 1996) and Russell v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990)). The

Supreme Court has set forth three factors courts may consider in determining whether

to apply judical estoppel: (1) whether the party’s position is clearly inconsistent with

its earlier position; (2) whether the party has been successful in persuading a court to

accept the party’s earlier position; and (3) whether the party seeking to assert an

inconsistent position would derive an unfair advantage or impose an unfair detriment

on the opposing party if not estopped. New Hampshire v. Maine, 532 U.S. 742, 750-51

(2001). “An inconsistent factual or legal position is a threshold requirement” for

judicial estoppel to apply. United States v. Lence, 466 F.3d 721, 726 (9th Cir. 2006).

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The Ninth Circuit has declined to apply the doctrine where a party’s two positions were

not necessarily inconsistent. See, e.g., Yanez v. United States, 989 F.2d 323, 327 (9th

Cir. 1993).

Here, Plaintiffs argue that Defendants took the position in the earlier state court

suit that the statute of limitations was tolled due to conspiracy to conceal wrongdoing,

while in their present motion Defendants argue that Plaintiffs’ concealment allegations

do not toll the statute of limitations. Defendants, on the other hand, argue that their

position in the state case concerns the ongoing and continuing payment of allegedly

unlawful benefits. Defendants assert that their position in this case is not inconsistent,

arguing that Plaintiffs do not challenge the legality of benefits, but instead challenge

discrete acts of underfunding. Because the Defendants’ positions are not “clearly

inconsistent,” the Court declines to apply judicial estoppel. New Hampshire, 532 U.S.

at 750. 

In sum, the Court GRANTS Defendant City of San Diego, Individual

Defendants, Defendants SDCERS, and Aguirre’s motion to dismiss on statute of

limitations grounds as to MP1 on the Contracts Clause, Takings Clause, 14th

Amendment Due Process Clause, and Conspiracy to Violate Civil Rights causes of

action. The Court also 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. These Defendants include Mathis, Wear, Kehoe, Stevens, Warden,

Stallings, McCarty, Vargas and former city manager McGrory. The Court DENIES

Defendants’ motion to dismiss any federal causes of action based on MP2. The Court

also DENIES Defendants’ motion to dismiss based on statute of limitations as to the

First Amendment claim because MP1 and MP2 are not relevant to that claim.

C. Absolute Legislative Immunity

The City Council Defendants, joined by Aguirre, argue that they are entitled to

absolute legislative immunity, and thus, the Court must dismiss Plaintiffs’ § 1983 

/ / / /

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claims against them. Plaintiffs oppose, arguing that these Defendants have not met their

burden of establishing absolute immunity. 

Local legislators are absolutely immune from suit under § 1983 for their

legislative activities. Bogan v. Scott-Harris, 523 U.S. 44, 49 (1998). Immunity attaches

to all actions taken “in the sphere of legitimate legislative activity.” Id. at 54. Whether

an act is legislative depends on the nature of the act, rather than the motive or the intent

of the official. Id. The burden of establishing absolute immunity is on the party

asserting it. Kaahumanu v. County of Maui, 315 F.3d 1215, 1220 (9th Cir. 2003). 

 The Ninth Circuit requires courts to consider the following factors in determining

whether an action is legislative: (1) “whether the act involves ad hoc decisionmaking,

or the formulation of policy”; (2) “whether the act applies to a few individuals, or to the

public at large”; (3) “whether the act is formally legislative in character”; and (4)

“whether it bears all the hallmarks of traditional legislation.” Id. Legislators cannot

claim immunity for illegal acts, however. Bruce v. Riddle, 631 F.2d 272, 279 (4th Cir.

1980). The Supreme Court has not “hesitated to sustain the rights of private individuals

when it found Congress was acting outside its legislative role.” Tenney v. Brandhove,

341 U.S. 367, 377 (1951). 

According to the SAC, each natural person Defendant acted in a manner that

constituted “ad hoc decision making and illegitimate legislative activity for the purpose

of diverting retirement system contributions and funds, depriving, eliminating or

reducing retirement system benefits, which benefits applied to a distinct group instead

of to the public at large, and which were not formally legislative in character and/or

taken through traditional legislative acts.” (SAC ¶ 54.) While Defendants argue that

the alleged acts were not ad hoc decision making, that the decisions affected a wide

range of persons, that the decisions were formally legislative in nature, and that the acts

bore hallmarks of legislation, the Court must accept the allegations in the complaint as

true for purposes of ruling on a motion to dismiss. Accordingly, based on these

allegations, the Court DENIES the City Council Member Defendants and Aguirre’s

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motion to dismiss based on absolute legislative immunity. Defendants may raise their

claim for absolute legislative immunity at a later stage of the proceeding.

D. Absolute Immunity as to Aguirre

Defendant Aguirre, joined by the City and Individual Defendants, argues that he

should be entitled to absolute immunity. Plaintiffs rely on this Court’s ruling in

SDPOA v. Aguirre and ask the Court to deny Aguirre’s motion on this ground. 

Defendant Aguirre has not clarified why he is entitled to absolute immunity on

the § 1983 claims. He cites to cases examining judicial and/or prosecutorial immunity.

See, e.g., Imbler v. Pachtman, 424 U.S. 409, 431 (1976) (a prosecuting attorney was

absolutely immune when he acted within the scope of his duties when initiating and

prosecuting a criminal case). In Ashelman v. Pope, however, the court stated that

prosecutorial immunity is not absolute if a prosecutor acts outside his authority.

793 F.2d 1072, 1077 (9th Cir. 1986). The court looks to “the nature and/or function of

the prosecutor’s activity.” Id. If a prosecutor is performing investigative or

administrative acts, the prosecutor is not entitled to absolute immunity, but may be

subject to qualified immunity. Broam v. Bogan, 320 F.3d 1023, 1028 (9th Cir. 2003).

The SAC asserts that Aguirre was acting outside the scope of his duties when he

attempted to negotiate with union leaders. (SAC ¶¶ 32, 34.) In taking the allegations

in the SAC as true, the Court DENIES Defendant Aguirre’s motion to dismiss based

on absolute immunity. See North Star Int’l, 720 F.2d at 581. 

E. Qualified Immunity

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

immunity from Plaintiffs’ § 1983 claims. In support, Defendants state that Plaintiffs’

allegations are insufficient to overcome qualified immunity. Plaintiffs oppose, relying

primarily on this Court’s reasoning in ruling on motions to dismiss in SDPOA v.

Aguirre.

“[G]overnment officials performing discretionary functions generally are

shielded from liability for civil damages insofar as their conduct does not violate clearly

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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, 146 F.3d 1149, 1154 (9th

Cir. 1998); Act Up!/Portland v. Bagley, 988 F.2d 868, 873 (9th Cir. 1993).

 1. Freedom of Association

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 its 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 “that (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).

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Plaintiffs allege that the City singled out Plaintiffs for not accepting the City’s

offer by not including salary reduction for DROP employees in offers made to other

labor organizations with which Defendants were negotiating. (SAC ¶¶ 35, 36.)

Plaintiffs allege that “Defendant City only imposed the ‘corresponding’ salary reduction

against the SDPOA’s DROP-employees.” (Id. ¶ 35.) Further, the SAC alleges: “In

unilaterally implementing the changes, Defendants did not give a corresponding

increase in benefits to LBFO-Plaintiffs or DROP-Plaintiffs in response to the detriment

imposed. All changes decreasing vested retirement benefits or decreasing pay by an

amount ‘corresponding’ to the additional SDCERS contributions without a

corresponding increase in benefits were illegal, unconstitutional and invalid. Wrongful

conduct also serves as First Amendment Retaliation.” (Id. ¶ 39.) According to the

SAC, this “singling out, along with Defendant Aguirre’s subsequent comments that

undermined and interfered with the SDPOA’s union activities with its members . . .

punished these Plaintiffs for lawful affiliation and/or exercise of free speech with the

SDPOA, and interfered with, restrained and/or chilled the exercise of their rights to join

and/or engage in collective labor activities.” (Id. ¶ 40.)

The SAC also alleges that on January 14, 2005, Defendant Aguirre, acting under

color of authority of the City of San Diego, held a meeting at which “he offered the

Union leaders $650 million” that “would be ‘left on the bargaining table’” if “the

unions agreed to support Defendant Aguirre with respect to his labor agreement

proposals to reduce vested retirement benefits.” (Id. ¶¶ 33, 34.) According to the SAC,

when SDPOA rejected the offer, the acts of retaliation began. (See, e.g., id. ¶¶ 35-40.)

Looking at these allegations, the Court concludes that the alleged connection to

the individual Plaintiffs is too attenuated. Further, some of the attachments to the SAC

appear to be inconsistent with some of the allegations. While the Court found similar

allegations sufficient to state a claim against the SDPOA in SDPOA v. Aguirre, it is

unclear here how Defendants allegedly retaliated against the individual Plaintiffs.

Accordingly, the Court finds that Plaintiffs have failed to allege sufficiently a First

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Amendment Retaliation claim. Accordingly, the Court GRANTS Defendants’ motion

to dismiss the First Amendment Retaliation on qualified immunity grounds, but

GRANTS Plaintiffs leave to amend. 

2. Contracts Clause, Article I, § 10

a. Violation of a Constitutional Right

Article I, section 10, clause 1 of the United States Constitution states, “[n]o State

shall . . . pass any . . . Law impairing the Obligation of Contracts.” U.S. Const. art I, §

10, cl. 1. To comply with the Contracts Clause, impairments of state contractual

obligations must be “reasonable and necessary to serve an important public purpose.”

United States Trust Co. v. New Jersey, 431 U.S. 1, 25 (1977). As the Ninth Circuit has

observed, “the [contract clause’s] prohibition is not an absolute one and is not to be read

with literal exactness like a mathematical formula.” State of Nevada’s Employees

Ass’n. Inc. v. Keating, 903 F.2d 1223, 1226 (9th Cir. 1990) (quoting United States

Trust Co. v. New Jersey, 431 U.S. 1, 21 (1977)). Relatedly, California law is clear that

pension benefits can be modified to insure the integrity of the entire system. Allen v.

City of Long Beach, 45 Cal. 2d 128, 131 (1955); Wisely v. City of San Diego, 188 Cal.

App. 2d 482, 486-87 (1961). The extent of modification is subject to a

“reasonableness” standard, but this is an intensely factual question that cannot be

determined in a vacuum. Carmen v. Alvord, 31 Cal.3d 318, 325 (1982) (substantially

similar terms); Kern v. City of Long Beach, 29 Cal. 2d 848, 854-56 (1947). 

To determine whether a state law that involves the contractual obligations of a

public entity violates the Contract Clause, the court must determine (1) whether the

state law creates contractual obligations; (2) whether the state law substantially impairs

the State’s contractual obligations; and (3) whether the impairment was reasonable and

necessary to serve an important public purpose. Id. 

i. Whether a State Law Creates Contractual Obligations

The Court must first determine whether there is a contract between the state and

the employee for the benefits. “Federal law, not [state] law, controls whether the state

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statutes at issue create contractual rights protected by the contracts clause.” Keating,

903 F.2d at 1227. In Keating, the Ninth Circuit followed the reasoning of the Nevada

Supreme Court and held that non-vested employees have contractual rights in pension

plans “subject to reasonable modification in order to keep the system flexible to meet

changing conditions, and to maintain the actuarial soundness of the system.” Id.

(quoting Public Employees’ Retirement Bd. v. Washoe County, 96 Nev. 718, 722

(1980)). Similarly, the California courts have explained that “[r]easonable

modifications are often necessary in order that the pension system may be kept flexible,

to permit adjustments in accord with changing conditions and to maintain the integrity

of the system in order to carry out its beneficent purpose.” Wisely, 188 Cal. App. 2d

at 485-86. At oral argument, Plaintiffs requested that the Court take judicial notice of

a proposed report of investigation by the Securities and Exchange Commission related

to bond offerings by the City of San Diego. Defendants objected, noting that the

document was only a proposed version and that the SEC had recently entered an order

in the same matter. See In re City of San Diego, California, Order Instituting Ceaseand-Desist Proceedings, Making Findings, and Imposing a Cease-and-Desist Order

Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the Securities

Exchange Act of 1934, Securities Act Release No. 8751, Exchange Act Release No.

54745, 2006 WL 3298665 (November 14, 2006). Defendants asked the Court to take

judicial notice of the SEC’s cease and desist order. The Court takes judicial notice of

the order and notes that the SEC detailed the serious funding problems with the pension

system. 

Plaintiffs allege in the SAC that the San Diego “City Charter, Municipal Code,

successive-MOUs, separate employment agreements and/or other laws, rules and/or

regulations” created rights in pension benefits. (SAC ¶ 17.) In addition, according to

the SAC, employees of the DROP program enter into an agreement with terms vested

at the time of contract with the City. (Id. ¶¶ 24-25.) Thus, Plaintiffs allege that the City

Charter, municipal codes, and various other agreements, laws, and regulations have

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created contractual rights in the pension plan. See Wisely, 188 Cal. App. 2d at 485. In

ruling on a motion to dismiss, the Court must take the factual allegations in the SAC as

true and construe those allegations in favor of the nonmoving party. See North Star

Int’l, 720 F.2d at 581. Based on this standard, the Court concludes that Plaintiffs have

alleged contractual rights in their pension plans.

 ii. Whether the State Law Substantially Impairs the State’s

Contractual Obligations

In the SAC, Plaintiffs allege that the City has failed to fund the retirement system,

diverted health care funds, and in general has unlawfully deprived, eliminated or

reduced retirement benefits promised to Plaintiffs. (See, e.g., SAC ¶¶ 26, 28, 41-43.)

Plaintiffs also allege that the Individual Defendants and Aguirre met in closed sessions

to plan and carry out a strategy to reduce the City’s unfunded pension liability by

imposing changes unlawfully. (Id. ¶¶ 28, 32, 37-39.) The documents Plaintiffs attach

to the complaint, however, indicate that Aguirre has sought to make changes to the

pension system through legal proceedings. Plaintiffs also allege that the Individual

Defendants and Aguirre met in closed sessions to plan to reduce the unfunded liability

and illegally transferred administration of retiree healthcare benefits from SDCERS to

the City, acting through Council Members and Officials. (Id. ¶ 41-42.) In sum,

although attached documents appear inconsistent with some of the allegations, this is

better suited for resolution at the summary judgment stage, and the Court finds that

Plaintiffs have alleged sufficiently that the state law substantially impairs contractual

obligations. 

iii. Whether the Impairment was Reasonable and Necessary

to Serve an Important Public Purpose

Plaintiffs allege that the impairment was neither reasonable nor necessary to

serve an important public purpose. Plaintiffs allege that Defendants did not provide

Plaintiffs with a corresponding benefit in response to detriments imposed. (SAC ¶ 39.)

Further, the SAC alleges that Defendants retaliated against Plaintiffs for failing to

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9 As discussed above, while the Court concluded that Plaintiffs sufficiently alleged retaliation against the SDPOA in SDPOA v. Aguirre, it is unclear how

Defendants allegedly retaliated against the individual Plaintiffs. 

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accept the City’s final offer during labor negotiations.9 (Id. ¶ 35-40.) The SAC also

alleges that the Individual Defendants and Aguirre conspired with the City to eliminate

and/or reduce retirement benefits. (Id. ¶ 38.) Although, as the court stated in Wisely,

modifications of a pension system are permissible “to permit adjustments in accord with

changing conditions and to maintain the integrity of the system,” see Wisely, 188 Cal.

App. 2d at 485, the Court must take the factual allegations in the SAC as true and

construe those allegations in favor of the nonmoving party. See North Star Int’l, 720

F.2d at 581. Thus, the Court concludes that Plaintiffs have alleged facts showing a

violation of the Contracts Clause against Defendants. 

b. Whether the Right Was Clearly Established

Next, the Court must determine whether “the law at the time of the alleged

constitutional violation was clearly established.” Serrano v. Francis, 345 F.3d 1071,

1080 (9th Cir. 2003). At this time, it is not clear whether it was clearly established that

the alleged acts of Defendants in allegedly underfunding the pension and in attempting

to reduce the unfunded liability of the pension were violations of the Contracts Clause.

See, e.g., Wisely, 188 Cal. App. 2d at 485. Accordingly, the Court DENIES

Defendants’ motion to dismiss the Contracts Clause claim based on qualified immunity.

3. Takings Clause under the Fifth Amendment

a. Violation of a Constitutional Right

The Fifth Amendment to the Constitution states, “private property [shall not] be

taken for public use, without just compensation.” To state a claim under this clause, “a

plaintiff must first demonstrate that he possesses a ‘property interest’ that is

constitutionally protected.” Gammoh v. City of La Habra, 395 F.3d 1114, 1122 (9th

Cir. 2005) (citation omitted). A property interest is more than a unilateral expectation,

it is “a legitimate claim of entitlement.” Bd. of Regents v. Roth, 408 U.S. 564, 577

(1972). An entitlement is defined by independent sources such as state law, statutes,

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ordinances, regulations, or express and implied contracts. Id. at 577-78; Lucero v. Hart,

915 F.2d 1367, 1370 (9th Cir. 1990).

Plaintiffs allege in the SAC that the San Diego “City Charter, Municipal Code,

successive-MOUs, separate employment agreements and/or other laws, rules and/or

regulations” created rights in pension benefits. (SAC ¶ 17.) Plaintiffs allege that they

have rights in their pensions vested at time of their employment agreement with the

City. (Id. ¶ 17, 37.) Although the Court has noted that modifications to a pension

system are permissible to maintain the integrity of the system, nevertheless, the SAC

alleges that Defendants have unlawfully deprived, eliminated and/or reduced retirement

benefits and failed to fund the retirement fund as promised to Plaintiffs. (See, e.g., id.

¶¶ 17-18, 26-28, 31-32.) Plaintiffs also allege that the Individual Defendants and

Aguirre met in closed sessions to plan and carry out a strategy to reduce the City’s

unfunded pension liability by imposing unlawful changes. (Id. ¶¶ 28, 32, 37-39.)

Further, Plaintiffs allege that the Individual Defendants and Aguirre met in closed

sessions to plan to reduce the unfunded liability and illegally transferred administration

of retiree healthcare benefits from SDCERS to the City, acting through Council

Members and Officials. (Id. ¶ 41-42.)

Based on these allegations, Plaintiffs have alleged a claim of entitlement to their

vested pension benefits through the San Diego City Charter, ordinances, municipal

codes, and in the MOUs and employment agreements. See Bd. of Regents, 408 U.S.

at 577-78. Therefore, Plaintiffs have sufficiently alleged a violation under the Takings

Clause.

b. Whether the Right Was Clearly Established

At this time, it is not clear whether it was clearly established that the alleged acts

of Defendants in failing to fund the pension and in attempting to reduce the unfunded

liability of the pension were violations of the Takings Clause. Accordingly, the Court

DENIES Defendants’ motion to dismiss the Takings Clause claims based on qualified

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immunity.10 Defendants are free to raise qualified immunity at the summary judgment

stage. 

4. Conspiracy under 42 U.S.C. § 1983

a. Violation of a Constitutional Right

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). The

heightened pleading is met if a plaintiff 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.”).

The SAC alleges that Defendants have unlawfully deprived, eliminated and/or

reduced retirement benefits and used those funds to fulfill other financial obligations.

(See, e.g., SAC ¶¶ 26-28, 100, 104.) Further, the SAC alleges that each Individual

Defendant and Defendant Aguirre met in closed sessions to plan and effectuate a plan

to use pension funds for pet projects and other self interests. (Id. ¶¶ 27-28.) Plaintiffs

also contend that the Individual Defendants and Aguirre met in closed session to create

a strategy to reduce the City’s unfunded pension liability by imposing unlawful

changes. (Id. ¶ 28, 32.) The SAC also alleges that the City and Individual Defendants

concealed the underfunding. (Id. ¶ 26, 28.) Further, the SAC alleges that Aguirre was

involved in the conspiracy. (Id. ¶ 32, 34.) Plaintiffs also allege that all Defendants 

/ / / /

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entered into agreements and to eliminate and/or reduce vested retirement benefits owed

to SDPOA members. (See, e.g., id. ¶¶ 27-28, 31-32.) 

As to Defendant Aguirre, as the Court noted above, several of the attachments

to the complaint appear inconsistent with the allegations in the SAC, particularly the

conspiracy allegations concerning Aguirre. Further, the Court has noted that

modifications to the pension system are allowed under certain circumstances to

maintain the integrity of the system. Accordingly, the Court finds that Plaintiffs have

failed to allege sufficiently that Aguirre conspired to violate Plaintiffs’ constitutional

rights under 42 U.S.C. § 1983. As to the other Defendants, however, Plaintiffs have

alleged “which defendants conspired, how they conspired and how the conspiracy led

to a deprivation of [their] constitutional rights . . . .” See Harris, 126 F.3d at 1196. The

Court concludes that the SAC has sufficiently alleged a conspiracy to violate

constitutional rights as to the Individual Defendants under § 1983. 

b. Whether the Right Was Clearly Established

At this time, it is unclear whether the alleged acts violated clearly established

law. Accordingly, the Court GRANTS Defendant Aguirre’s motion to dismiss the

conspiracy claim based on qualified immunity, but GRANTS Plaintiffs leave to amend.

The Court DENIES the Individual Defendants’ motion to dismiss the conspiracy claim

based on qualified immunity. The parties may renew the qualified immunity issue at

the summary judgment stage.

F. Immunity under Cal. Gov’t Code § 820.2

Individual Defendants and Aguirre argue that they are immune from the state law

claims under California Government Code § 820.2. Plaintiffs oppose. 

California Government Code section 820.2 provides: “a public employee is not

liable for an injury resulting from his act or omission where the act or omission was the

result of the exercise of the discretion vested in him, whether or not such discretion be

abused.” Cal. Gov’t Code § 820.2. This immunity applies to “basic policy decisions”

or “planning” decisions, but does not apply to “operational” levels of decision making.

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H & M Assocs. v. City of El Centro, 109 Cal. App. 3d 399 406-07 (1980); Masters v.

San Bernardino County Employees Retirement Ass’n, 32 Cal. App. 4th 30, 46 (1995);

Johnson v. State, 69 Cal. 2d 782, 794 (1968) (decision whether to parole youth

authority ward is discretionary and immune but failure to warn foster parents of ward’s

violent tendencies is not). If a public official is acting outside the scope of his duties,

the immunity does not apply. See Kemmerer v. County of Fresno, 200 Cal. App. 3d

1426, 1436-37 (1998). 

In addition, California Government Code § 814 provides: “[n]othing in this part

affects liability based on contract or the right to obtain relief other than money or

damages against a public entity or public employee.” Cal. Gov’t Code § 814.

California courts have held that governmental immunity does not apply to a breach of

contract claim. Roe v. State of California, 94 Cal. App. 4th 64, 69 (2001); UniversalBy-Products, Inc. v. City of Modesto, 43 Cal. App. 3d 145. 153 (1974). 

Defendants are members of the City Council, members of SDCERS’ board, City

Officials, and the City Attorney. They contend that Plaintiffs’ claims are based on acts

that were the result of the exercise of their discretion because they involved basic policy

decisions regarding the City’s budget, the funding of SDCERS, and the City’s labor

negotiations. In response, Plaintiffs note that this complaint relies on identical facts to

those alleged in SDPOA v. Aguirre, and in that case the Court denied a similar motion.

At this early stage of the proceedings, and because of the minimal analysis

directed toward this issue, the Court is unable to determine, without discovery, whether

the underlying allegations making up the state law claims were based on “basic policy”

decisions or were “operational” levels of decision making. Moreover, Defendants have

not demonstrated why the result in this case should differ from that in SDPOA v.

Aguirre. Therefore, the parties may renew this issue on a motion for summary

judgment. Accordingly, the Court DENIES the Individual Defendants and Aguirre’s

motion to dismiss based on immunity under Cal. Gov’t Code § 820.2.

/ / / /

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G. 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. In

response, Plaintiffs argue that their claims are exempt from the CTCA’s requirements,

that they complied with the requirements, and that fairness and justice require the Court

to allow Plaintiffs’ state claims to survive.

As a general rule, prior to filing suit for money damages against a governmental

agency, the CTCA requires claimants to present a formal claim to the government

entity. Id. § 945.4; Dalton v. East Bay Utility Dist., 18 Cal. App. 4th 1566, 1571 (Cal.

Ct. App. 1993). The CTCA exempts several types of claims from these requirements,

however. Under Cal. Gov’t Code § 905(c), “[c]laims by public employees for fees,

salaries, wages, mileage or other expenses and allowances” are exempt. Similarly,

“claims for money or benefits under any public retirement or pension system” are

exempt. Id. § 905(f). 

Plaintiffs argue that their claims fall within these two exemptions, and, thus, they

were not required to present formal claims. Looking at the cases interpreting these

provisions, however, California courts have strictly construed the exemption provisions,

and Plaintiffs’ claims do not fall within these exemptions. In Dalton, the court found

that the plaintiffs’ claims, including breach of fiduciary duty and denial of equal

protection claims arising out of the defendants’ actions related to a retirement system,

were barred because plaintiffs failed to comply with the CTCA. 18 Cal. App. 4th at

1574. Examining the text and legislative history of the exemption provisions, the court

determined that the exemptions were created to address “nontortious claims ‘for which

some other adequate claims procedure has already been devised or for which the

procedural protections of the Tort Claims Act is believed to be unnecessary.’” Id.

(quoting Cal. Government Tort Liability Practice (Cont. Ed. Bar 1992) § 6.24 pp.

651-52)). Accordingly, the court ruled that, because the plaintiffs “d[id] not seek

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money due to them under the terms of the existing pension system,” but instead

“claim[ed] defendants treated them unfairly in administering the system and [sought]

to change the 1989 administrative decisions,” the plaintiffs were required to file a claim.

Id. Because they had not filed a claim, the court ruled that their suit was barred.

Similarly, other cases make clear that the exemption provisions were meant to

address routine claims, such as unpaid wage and benefits claims. See, e.g., Blue v. Los

Angeles Unified Sch. Dist., 31 Cal. Rptr. 2d 923, 925 (Cal. Ct. App. 1994) (claim for

life insurance benefits routine, and thus, fit within § 905(f)); Loehr v. Ventura County

Cmty. Coll. Dist., 147 Cal. App. 3d 1071, 1080 (Cal. Ct. App. 1983) (“[W]e construe

section 905, subdivision (c) as exempting from the act claims for salaries and wages

which have been earned but not paid. Earned but unpaid salary or wages are vested

property rights, claims for which may not be properly characterized as actions for

monetary damages. Similarly, the exemption specified in section 905, subdivision (f)

must be limited to benefits earned during the course of employment.” (internal citations

omitted)).

Plaintiffs do not allege routine unpaid wage and benefits claims here, but instead

make claims more similar to those in Dalton. Like the plaintiffs in Dalton, Plaintiffs

allege that Defendants unlawfully administered and altered the pension system.

Accordingly, Plaintiffs’ claims do not fit the statutory exemptions, and Plaintiffs were

required to formally submit their claims before filing suit.

Looking at the claims Plaintiffs filed, the Court finds that Plaintiffs adequately

presented their claims to the City. Plaintiffs filed two claims on September 16, 2005.11

One claim was on behalf of individual members of SDPOA, while the other was on

behalf of retired members of SDPOA. (See Plaintiffs’ Request for Judicial Notice, Exs.

B & C.) Both claim forms included allegations related to underfunding of pensions, 

/ / / /

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breach of fiduciary duty, and related allegations. The Court finds that these two claims

were sufficient to notify the City of Plaintiffs’ claims in this suit. 

On January 12, 2006, the City issued letters denying each claim and providing

notice that, pursuant to Government Code § 945.6, suit must be brought within six

months of the date the letters were personally delivered or placed in the mail. (See id.,

Exs. D & E.) As Defendants point out, however, Plaintiffs did not file this suit until

July 18, 2006, more than six months after the letters. In response, Plaintiffs do not

argue that their suit is timely, and they do not direct the Court to any authority excusing

late filing. Instead, Plaintiffs point out that they made an additional claim on August

14, 2006. That claim, however, was made after initiation of this suit on July 18, 2006,

and thus it could not serve to give notice pursuant to the CTCA. Additionally, Plaintiffs

state that their filing of SDPOA v. Aguirre in August of 2005, in combination with the

claims noted above, amounts to substantial compliance with the CTCA. Plaintiffs do

not, however, direct the Court to any authority indicating that substantial compliance

with the CTCA is sufficient. Accordingly, the Court GRANTS the City, Individual

Defendants, and Aguirre’s motion to dismiss the state law claims under the CTCA. See,

e.g., Cal. Gov’t Code § 950.2; id. Law Revision Comm’n Cmts. to 1965 Amd. (“This

amendment makes it clear that suit against a public employee or former employee is

barred when a suit against the entity is barred (1) by failure to present any claim at all

or (2) by presenting a claim that is insufficient, too late or for any other reason

inadequate to support an action against the employing public entity.”).

Finally, Plaintiffs may be able to articulate better why their claims fit into any

exemptions or exceptions to the CTCA’s requirements, or they may be able to articulate

why some form of tolling applies here. Accordingly, the Court dismisses the state law

claims without prejudice.

H. Sixth, Seventh, and Eighth Claims for Violation of Public Policy

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

dismiss Plaintiffs’ claims for relief based on violations of public policy. Plaintiffs bring

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three claims based upon public policy violations: Sixth Claim based on California

Constitution, Art. I, §§ 7, 9 and Art. XI, § 5; Seventh Claim based on California

Constitution Art. XVI, § 17 (California Pension Protection Act); and Eighth Claim

based on Cal. Gov’t Code § 3502 (Meyers-Milias-Brown Act).

1. California Constitution

Defendants argue that, although California law recognizes a claim for violations

of some provisions of the California Constitution, very few violations give rise to an

implied private right of action. The California Supreme Court has held that a violation

of Article I, § 7(a) of the California Constitution does not create a private right of action

for money damages. Katzberg v. Regents of the Univ. of Cal., 29 Cal. 4th 300, 329

(2002). Defendants argue that the holding in Katzberg applies equally to Article I, §

9 (Contracts Clause), Article XI, § 5 (relating to city charters), and Article 16, § 17 (the

Pension Protection Act of 1992). Therefore, Defendants argue that Katzberg precludes

any recovery for damages for public policy violations under the California Constitution.

In response, Plaintiffs contend that their sixth, seventh, and eighth claims for relief

should survive to the extent they seek declaratory and injunctive relief. 

In the SAC, Plaintiffs seek monetary damages under these public policy violation

causes of action, but they also seek declaratory and injunctive relief. Accordingly, the

Court GRANTS the motion to dismiss as to the claims for monetary damages and

DENIES the motion to dismiss as to claims for declaratory and injunctive relief on this

ground.

2. Meyers-Milias-Brown Act, Cal. Gov’t Code § 3502

In their Eighth claim, Plaintiffs allege a cause of action under Cal. Gov’t Code

§ 3502, the Meyers-Milias-Brown Act (“MMB Act”), which provides that employees

shall have the right to form, join, and participate in the activities of an employee

organization. Defendants argue that the legislature did not indicate an intent to create

a private right of action under the statute, and thus, Plaintiffs cannot assert a claim for

relief under the statute.

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Where 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). Looking at the MMB 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 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). Because Plaintiffs

have not directed the Court to any legal authority supporting a private right of action

under the MMB Act, they 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. Accordingly, the Court GRANTS Defendants’ motion to dismiss

Plaintiffs’ Eighth claim for relief.

I. Brown Act, Cal. Gov’t 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 the closed session meetings alleged in the SAC. The City,

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

arguing that they have pleaded sufficiently a cause of action under the Brown Act.

/ / / /

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“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. 

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”

allows a closed session regarding “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.”

Cal. Gov’t Code § 54957.6(a). 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.

The only specific meeting Plaintiffs allege is a January 14, 2005 meeting between

Aguirre and various union officials. (See SAC ¶ 29.) Defendants contend that because

the Brown Act only applies to legislative bodies, and because the City Attorney is not

a legislative body, this claim must fail. Plaintiffs have not addressed this argument in

their response. Absent any legal authority that a City Attorney is considered a

“legislative body,” the Court GRANTS Defendants’ motion to dismiss regarding this

meeting. 

Plaintiffs also allege that “Defendants, at various times . . . continued meeting in

‘closed sessions’ to plan and effectuate the continued use of the Public Pension Funds

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for ‘pet projects’ and personal gain,” but they do not specify any other meetings. (Id.

¶ 27.) Further, Plaintiffs state in conclusory fashion that these other meetings did not

fit into any Brown Act exceptions. (See, e.g., id. ¶ 121 (“No other exemption under the

Brown Act applies because, for example and among other reasons, none of the alleged

closed sessions pertained to the purchase or sale of a retirement fund nor were they

conducted as conferences regarding litigation under California Government Code §§

54957.81, 54956.9.”).) Even accepting the allegations in the SAC as true, Plaintiffs’

vague allegations do not adequately state a claim under the Brown Act, as Defendants

cannot determine which meetings allegedly violated the Brown Act, which parties were

allegedly involved, and whether any exceptions to the prohibition on closed meetings

apply. Accordingly, the Court DISMISSES Plaintiffs’ Ninth claim with leave to

amend.

J. Conversion and Conversion of Trust

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

Council Members, SDCERS, Trustees, and Doe Defendants. In Plaintiffs’ Thirteenth

claim, they allege conversion against the same Defendants. The City, Individual

Defendants, and SDCERS all seek to dismiss these claims. Plaintiffs oppose.

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

The elements of a conversion are the plaintiff’s ownership or right to possession of the

property at the time of the conversion; the defendant’s conversion by a wrongful act or

disposition of property rights; and damages.” Farmers Ins. Exchange v. Zerin, 53 Cal.

App. 4th 445, 451 (1997). “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

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time of conversion.” Farmers Ins. Exchange, 53 Cal. App. 4th at 452 (citation omitted).

A mere contractual right to payment is not enough. Id. In addition, a suit to recover

personal property cannot be maintained if is not in the possession of defendant at the

beginning of the suit. Faulkner v. First Nat’l Bank, 130 Cal. 258, 260 (1900).

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

relationship exists between a trustee who administers a pension plan and its

beneficiaries. Masters, 32 Cal. App. 4th at 43-45.

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. Further, as to the DROP Plaintiffs, the City

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

due to them. At most, they argue that Plaintiffs have a contractual right to payment in

the future, which is insufficient to give rise to a cause of action for conversion or

conversion of trust. Plaintiffs do not address Defendants’ arguments, but simply note

that the Court granted a motion to dismiss on similar grounds in SDPOA v. Aguirre.

Further, Plaintiffs ask the Court for leave to amend should it grant Defendants’ motion.

Similarly, SDCERS, joined by the Individual Defendants, argues that Plaintiffs

have failed to plead sufficiently their conversion and conversion of trust claims against

SDCERS. In particular, SDCERS argues that Plaintiffs have failed to allege that

SDCERS converted to its own use or exercised dominion over the money or property

of Plaintiffs. Rather, according to SDCERS, Plaintiffs’ allegations focus on actions of

the City and Individual Defendants. In response, Plaintiffs argue that SDCERS’

liability is premised on its knowingly having received stolen money from the City that

the City unlawfully took from Plaintiffs. Plaintiffs do not, however, direct the Court

to allegations in the SAC stating that SDCERS converted Plaintiffs’ property or money.

(See, e.g., SAC ¶¶ 137-138, 142.) Further, to the extent Plaintiffs attempt to construe

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their claim as one based on receipt of stolen property, the SAC does not contain such

allegations.

In sum, the Court GRANTS Defendants’ motions to dismiss the conversion and

conversion of trust claims, but allows Plaintiffs leave to amend.

K. Fraud

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

Council Members, and Officials. The City and Individual Defendants 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). The Court notes that 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 SAC, Plaintiffs have failed to state their claim with sufficient

particularity. For example, Plaintiffs allege: “During labor negotiations that lead to the

adoption of the 2003-2005 MOU, the City’s labor negotiator represented to LBFOPlaintiffs’ 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.” (SAC ¶ 146.) Plaintiffs also point to a general

allegation that Defendants “continued meeting in closed session . . . [which] caused

Defendants’ failure to comply with legally mandated funding requirements

regarding . . . City’s Pick-up.” (Id. ¶ 28.) Plaintiffs fail, however, to state with

particularity when these representations were allegedly made, the content of some of

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the representations, and they fail to allege sufficient facts to support their position that

Defendants knew these representations were false.

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 with leave to amend. 

L. Breach of Contract

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

Defendant City and SDCERS. Defendant City and SDCERS move to dismiss.

Plaintiffs oppose, arguing that their allegations are sufficient.

In a breach of contract claim, 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). 

1. Breach of Contract as to City

The SAC alleges that “ in exchange for their services to the City, Plaintiffs were

promised and are otherwise guaranteed and vested with the right to the retirement

benefits set forth in the City Charter, Municipal Code, successive-MOUs, separate

employment agreements and/or other laws, rules and/or regulations.” (SAC ¶¶ 13, 158.)

The SAC maintains that, according to an MOU between the City and SDPOA, the City

was required to make contributions into the retirement fund. (Id. ¶¶ 19-25.) The SAC

also states that certain members of the SDPOA who enrolled in the DROP program

entered into a contract of employment with the City. (Id. ¶¶ 22-25.) Further, Plaintiffs

assert that in 1981 there was an agreement between the City, state, and federal

government, 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 

/ / / /

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Benefits for which contributions would be administered by SDCERS. (Id. ¶ 43.) MP2

was an agreement between the City and SDCERS. (Id. ¶ 27, Ex. G at 2.) 

These allegations specify contracts the City allegedly breached. Therefore, the

Court DENIES the City’s motion to dismiss on this ground.

2. Breach of Contract as to SDCERS

SDCERS, joined in part by the City and in part by the Individual Defendants,

moves to dismiss the breach of contract claim, arguing that Plaintiffs have failed to

allege specific contracts between Plaintiffs and SDCERS that SDCERS has breached.

Plaintiffs oppose, arguing that SDCERS is a party to Plaintiffs’ employment contracts

as a matter of law.

While Plaintiffs present legal theories regarding liability, looking at the

allegations concerning SDCERS in the SAC, Plaintiffs have failed to allege sufficiently

the contracts to which SDCERS was a party and the contracts SDCERS allegedly

breached. Other than MP2, which attachments to the SAC indicate was an agreement

between the City and SDCERS, (see id.), the SAC does not identify the contracts to

which SDCERS was allegedly a party. Further, to the extent Plaintiffs seek to hold

SDCERS liable for breach of contract solely because it is the only entity capable of

providing an actuarially sounds pension, 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).

Therefore, the Court GRANTS SDCERS’ motion to dismiss the breach of contract

claim, but GRANTS Plaintiffs leave to amend.

M. Interference with Contractual Relations

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

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12 Additionally, the Court notes that 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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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

Second Amended Complaint fails to identify the contracts interfered with and fails to

specify which Defendants are the contracting parties. Plaintiffs oppose. 

Looking at the SAC, Plaintiffs only allegation states: “Defendants City, Counsel

[sic] Members, Officials, SDCERS, Trustees, 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.” (SAC ¶

155.) Plaintiffs do not specify the particular contracts with which Defendants allegedly

interfered. Moreover, Plaintiffs do not correlate allegedly wrongful conduct on the part

of particular Defendants to particular contracts. Further, Plaintiffs do not allege that

any particular Defendant proximately caused any particular contractual disruption.

Rather, Plaintiffs lump all Defendants together.12

In sum, 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,

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the Court DISMISSES Plaintiffs’ Interference with Contractual Relations claim with

leave to amend.

N. First Amendment Retaliation as to Aguirre

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

not state a First Amendment Retaliation claim against Aguirre. As discussed

previously, it is unclear how Aguirre allegedly retaliated against the individual

Plaintiffs. Further, as indicated above, some of the attachments to the SAC appear

inconsistent with the allegations in the SAC. Accordingly, the Court GRANTS

Aguirre’s motion to dismiss the First Amendment Retaliation claim, but GRANTS

Plaintiffs leave to amend. 

O. Conspiracy 

1. Conspiracy as to Aguirre

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

not state a conspiracy between Aguirre and the other Defendants. Further, Aguirre

argues that the allegations demonstrate no single conspiracy. In support, Aguirre argues

that exhibits attached to the complaint prove that he has expended substantial time and

energy bringing to the public facts related to the pension fund crisis. As discussed

above, several of the attachments appear inconsistent with the conspiracy allegations

as to Aguirre. 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 GRANTS Plaintiffs leave

to amend.

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, largely relying on this Court’s ruling in SDPOA v. Aguirre.

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

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conspiracy.” Burns v. County of King, 883 F.2d 819, 821 (9th Cir. 1989). The

heightened pleading is met if plaintiff 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.”).

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

standard regarding a conspiracy claim against SDCERS. While Plaintiffs point to this

Court’s ruling on SDCERS’ motion to dismiss in SDPOA v. Aguirre, the allegations

in the present case do not contain sufficient detail of SDCERS’ role in the alleged

conspiracy. For example, Plaintiffs have not alleged when SDCERS entered into the

conspiracy, how it entered into the conspiracy, and how it participated in the

conspiracy. Thus, the general allegations to which Plaintiffs direct the Court do not

make out a claim for conspiracy. (See, e.g., SAC ¶¶ 26-27, 41-42, 58.) Accordingly,

the Court GRANTS SDCERS’ motion to dismiss on this ground with leave to amend.

P. 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 Academy 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. George

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13 In their papers and at oral argument, Plaintiffs also complain that they do not have access to the City’s audited financial reports for 2003. By the time of the amended complaint, the Court anticipates the release of the audited 2003 financial reports.

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

Katz, 276 F.3d 550, 554 (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

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

In response, Plaintiffs make several arguments.13 First, Plaintiffs state that KPMG is

performing a public function, as the City is required to perform the auditing services it

delegated to KPMG. Second, Plaintiffs maintain that KPMG should be considered a

state actor because it meets the joint action test described above. Examining the SAC,

Plaintiffs have not alleged facts indicating that KPMG’s actions should be treated as

state action. 

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

cite do not hold, that auditing and accounting services 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 documents

Plaintiffs attached to the complaint indicate that KPMG was hired to perform an

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independent audit of financial statements. Plaintiffs do not explain how an independent

audit of financial statements constitutes state action. 

Under the joint action approach, contrary to their contention, Plaintiffs have not

alleged 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 activity.’” Gorenc v. Salt River Project Agric. Improvement & Power Dist.,

869 F.2d 503, 506 (9th Cir. 1989) (citing Burton v. Wilmington Parking Authority, 365

U.S. 715, 725 (1961)). Instead, as just noted, the exhibits Plaintiffs attach to the

complaint indicate that the City hired KPMG to perform an independent audit of

financial statements. In their opposition, Plaintiffs argue that several of the conspiracy

allegations in the SAC demonstrate that KPMG was a joint participant with the City,

and thus, should be considered a state actor. (SAC ¶¶ 26-28, 100.) These conspiracy

allegations do not detail actions by KPMG, however, and even assuming they

sufficiently allege a conspiracy, they do not connect KPMG to the allegations making

up Plaintiffs’ Contracts Clause, Takings Clause, and 14th Amendment due process

violations. Finally, pointing to the general rule that a co-conspirator may be held liable

for injuries caused by the conspiracy even before he became a member of the

conspiracy, Plaintiffs argue that this principle and the conspiracy allegations in the SAC

are sufficient to allege that KPMG is a state actor under the joint action approach. See,

e.g., de Vries v. Brumback, 53 Cal. 2d 643, 648 (1960) (setting forth California law on

conspiracy). While a person may be held civilly liable for previous acts committed by

others under conspiracy law, that general rule of law does not address the crucial issue

here, whether actions by a private entity may be considered those of the state for

purposes of liability under § 1983. Thus, Plaintiffs have not alleged that KPMG should

be considered a state actor under the joint action analysis.

In sum, under any of the approaches described above, Plaintiffs have not alleged

a relationship between the challenged actions and KPMG, let alone such a close

connection that “seemingly private behavior ‘may be fairly treated as that of the State

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itself.’” Brentwood Academy, 531 U.S. at 295. Each of Plaintiffs’ § 1983 claims

relates to alleged underfunding of pensions and the City’s compensation decisions in

2005 and 2006. (See, e.g., SAC ¶¶ 78, 82, 85, 89, 92, 93, 100, & 104.) As to KPMG,

however, Plaintiffs do not allege KPMG had any involvement with any of the funding

decisions before it was hired by the City, and they do not allege that KPMG was

involved in any way with compensation decisions in 2005 and 2006. (See, e.g., id. ¶¶

26-28 (underfunding allegations) & ¶¶ 29-49 (compensation decisions).) Instead,

Plaintiffs allege that KPMG acted in concert with the City in concealing information.

(See, e.g., id. ¶ 15.) Taking these 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, as Plaintiffs have not established any nexus

between the challenged funding actions and KPMG. Cf. Lee, 276 F.3d at 555 n.5

(identifying challenged action important in analysis).

Although Plaintiffs include additional allegations in their § 1983 claim based on

due process violations, they do not connect those allegations to KPMG. For example,

Plaintiffs allege that Defendants violated Plaintiffs’ due process rights when they acted

in unlawful closed door sessions to decide to underfund the retirement fund, when they

failed to follow proper procedure to meet and confer before modifying wages and

benefits, and when they failed to follow the Public Safety Officers Bill of Rights in

reducing pay of certain Plaintiffs. (Id. ¶¶ 92, 93.) Plaintiffs do not, however, allege that

KPMG was involved in any of these actions. 

Thus, Plaintiffs have not alleged facts indicating that KPMG should be

considered a state actor for purposes of § 1983 liability. Therefore, the Court

DISMISSES Plaintiffs’ § 1983 claims against KPMG based upon alleged violations of

the Contracts Clause, Takings Clause, and the 14th Amendment Due Process Clause.

The Court GRANTS Plaintiffs leave to amend.

Regarding Plaintiffs’ § 1983 conspiracy claim against KPMG, private parties

may be held liable under § 1983 for conspiracy to violate civil rights “if they willfully

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participate in joint action with state officials to deprive others of constitutional rights.”

United Steelworkers of America v. Phelps Dodge Corp., 865 F.2d 1539, 1540 (9th Cir.

1989). 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. v. Mendocino County, 192

F.32d 1283, 1301 (9th Cir. 1999) (quoting Phelps Dodge). 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. In

response, Plaintiffs direct the Court to the allegation that KPMG and the city conspired

to conceal wrongdoing and to their general conspiracy allegations against the City,

Aguirre, and other Defendants. (SAC ¶¶ 15, 26-28, 100.) Primarily, however,

Plaintiffs 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. In fact, Plaintiffs only

specific allegations regarding KPMG’s misconduct state that KPMG acted in concert

with the City to conceal the City’s financial information and that it took concerted

action with the City to interfere with pension rights by concealing information and

workpapers. (Id. ¶ 15.) In sum, other than in conclusory language, Plaintiffs have not

alleged material facts demonstrating any “meeting of the minds to violate constitutional

rights” against KPMG. Accordingly, the Court DISMISSES Plaintiffs’ § 1983

conspiracy claim against KPMG with leave to amend.

/ / / /

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Q. 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. Plaintiffs

oppose.

In their claim for declaratory relief, Plaintiffs ask the Court to enter declaratory

judgment on eighteen separate alleged controversies. (See SAC ¶ 159.1.) 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. ¶ 159.1(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. ¶ 159.1(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 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. ¶ 159.1(k).) Even

assuming this broad request sets forth an actual controversy, see 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. (FAC ¶ 159.1(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. 

/ / / /

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14 The Court notes that, in Lexin, et al. v. Superior Court of San Diego County, S147143 (November 29, 2006), the California Supreme Court directed the Court of Appeal to enter an order requiring the Superior Court to show cause why the relief requested in the petition, concerning whether pension benefits are part of an official’s salary, should not be granted. The Court of Appeal entered an order to show cause on

December 8, 2006. Lexin, et al. v. The People, D049251 (December 8, 2006).

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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 with leave to amend.

R. Stay under Leyva v. Certified Grocers of California

Relying on the Ninth Circuit’s decision in Leyva v. Certified Grocers of

California, 593 F.2d 857 (9th Cir. 1979), Defendants City of San Diego, Individual

Defendants, Aguirre, and SDCERS ask the Court to stay Plaintiffs’ pension

underfunding claims in favor of the pending civil and criminal actions14 pending in state

court. In opposition, Plaintiffs state that they cannot determine which causes of action

Defendants seek to stay, and that in any event, Plaintiffs oppose a stay because the other

pending state court cases do not seek to protect the rights of Plaintiffs. 

The Court has discretion to stay an action under Leyva. Id. at 863. A court may

stay an action “pending resolution of independent proceedings which bear upon the

case” if “it is efficient for its own docket and the fairest court for the parties.” Id. The

rule applies to proceedings that are judicial, administrative, or arbitral in character. Id.

The Court has given considerable thought as to whether a stay is appropriate in

this case. The Court concludes that it would not be efficient and fair to the parties to

stay the action at this time, and it declines to exercise its discretion to stay the case

under Leyva. Nevertheless, Defendants may raise this issue again at a later date.

S. Stay or Dismissal Under Colorado River Water Conservation Dist. v. United

States

SDCERS, joined by the City and Individual Defendants, asks the Court to stay

or dismiss the pension underfunding claims under the Colorado River doctrine. In 

/ / / /

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support, SDCERS contends that the consolidated cases before Judge Jeffrey Barton in

state court are focused on the same pension underfunding issues.

In Colorado River Water Conservation District v. United States, the Supreme

Court noted that, in exceptional situations, a district court may stay or dismiss a federal

suit due to the presence of a concurrent state proceeding for reasons of “wise judicial

administration.” 424 U.S. 800, 817-18 (1976). Further highlighting the exceptional

nature of dismissal for these reasons, the Court stated that the circumstances justifying

dismissal on these grounds are “considerably more limited than the circumstances

appropriate for abstention.” Id. at 818. The Court noted several factors for district

courts to consider: (1) whether a state or federal court has first exercised jurisdiction

over property; (2) inconvenience of the federal forum; (3) desirability of avoiding

piecemeal litigation; and (4) the order in which jurisdiction was obtained by the two

courts. Id.; see also 40235 Washington St. Corp. v. W.C. Lusardi, 976 F.2d 587, 588

(9th Cir. 1992). In a subsequent case, the Supreme Court added two additional factors

to the analysis: (5) whether federal or state law controls the decision on the merits; and

(6) whether the state court can adequately protect the rights of the parties. Moses H.

Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 27 (1983); see also W.C.

Lusardi, 976 F.2d at 588. “These factors are to be applied in a pragmatic and flexible

way, as part of a balancing process rather than as a ‘mechanical checklist.’” American

Int'l Underwriters, (Phillipines), Inc. v. Continental Ins. Co., 843 F.2d 1253, 1257 (9th

Cir.1988) (quoting Moses Cone, 460 U.S. at 16).

Examining the posture of this case, the Court declines to stay or dismiss the case

under the Colorado River doctrine at this time. The Court anticipates that Judge Barton

will be ruling on certain related issues in the near future. The effect of those rulings on

this action is unclear at this time. Further, this case also involves causes of action under

federal law not asserted in the state court actions, and federal law controls some of the

issues in this case. As the Ninth Circuit has observed, “conflicting results, piecemeal

litigation, and some duplication of judicial effort is the unavoidable price of preserving

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access to the federal relief which section 1983 ensures.” Tovar v. Billmeyer, 609 F.2d

1291, 1293 (9th Cir. 1979). Importantly, “a district court may enter a Colorado River

stay order only if it has ‘full confidence’ that the parallel state proceeding will end the

litigation.” Intel Corp. v. Advanced Micro Devices, Inc., 12 F.3d 908, 913 (9th Cir.

1993) (citing Gulfstream Aerospace Corp. v. Mayacamas Corp., 485 U.S. 271, 277

(1988)). At this stage, the Court declines to enter a stay under Colorado River.

Defendants may renew their arguments at a later date.

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 and DENIES in part Defendant Michael Aguirre’s motion to dismiss;

GRANTS in part and DENIES in part Defendant SDCERS’s motion to dismiss; and

GRANTS Defendant KPMG’s motion to dismiss. Additionally, the Court GRANTS

Plaintiffs 30 days from the date this Order is stamped “Filed” to file a third amended

complaint that addresses the deficiencies of the pleading set forth above.

IT IS SO ORDERED.

DATED: December 13, 2006

MARILYN L. HUFF, District Judge

UNITED STATES DISTRICT COURT

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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 100 Filed 12/13/06 Page 47 of 47