Filed 2/3/22 Kesterson v. Cal. Public Employees’ Retirement System CA2/2

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions 

not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has 

not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION TWO

MARY KESTERSON et al.,

Plaintiffs and Appellants,

v.

CALIFORNIA PUBLIC 

EMPLOYEES’ RETIREMENT 

SYSTEM et al.,

Defendants and 

Appellants.

 B304766

 (Los Angeles County

 Super. Ct. No. BC502628)

APPEAL from a judgment and orders of the Superior Court 

of Los Angeles County, David S. Cunningham, Judge. Affirmed

in part; reversed in part.

Law Offices of John Michael Jensen and John Michael 

Jensen for Plaintiffs and Appellants.

Reed Smith, Raymond A. Cardozo and Terence N. Hawley

for Defendants and Appellants.
2

Plaintiffs Mary Kesterson, Marcel Poché, Michael Gilmore, 

the Estate of Robert Seymore (by his personal representative), 

Gerald Dominguez, Jeffrey Walter, Brad Heinz, and James Steed 

(collectively plaintiffs) brought this case as a putative class action 

against California Public Employees’ Retirement System and its 

Board of Administration (CalPERS) in March 2013, alleging that 

plaintiffs and members of the putative class were owed interest 

and penalties based on a variety of different types of benefits that 

CalPERS allegedly withheld or paid late.

In April 2015, CalPERS initiated a formal rulemaking for 

adoption of a regulation that is now California Code of 

Regulations, title 2, section 555.5 (section 555.5). Section 555.5 

acknowledges that “‘participants’” “should receive appropriate 

interest when any payment owed to a participant from a defined 

benefit plan has been delayed beyond a reasonable 

administrative processing time.” (§ 555.5, subd. (a).) The 

regulation permits CalPERS a grace period of “45 calendar days 

after receipt of all information necessary to make the payment” 

before interest begins to accrue. (§ 555.5, subd. (c).) If the 

payment is not made within the appropriate time period, “the 

payment shall include seven percent per annum simple (noncompounding) interest.” (§ 555.5, subd. (d).) The regulation 

requires exhaustion of administrative remedies and mandates 

that any participant who claims interest under the regulation 

“must assert his or her claim for such interest in a writing 

received by the board within three years after the participant 

received the payment that the participant claims should have 

included interest, or else that claim is forever barred.” (§ 555.5, 

subd. (f).) CalPERS sought a stay of the litigation on the ground 

that the proposed regulation may have some impact on the 
3

litigation. Plaintiffs opposed the stay, arguing that the proposed 

regulation was unlawful and would not grant the relief that 

plaintiffs sought, among other things. The trial court denied the 

stay. CalPERS exercised its quasi-legislative discretion to enact 

section 555.5 in February 2016. It took effect on April 1, 2016. (2 

C.C.R. 555.5.)

On August 1, 2017, the trial court denied plaintiffs’ motion 

for class certification. Plaintiffs appealed the denial of class 

certification, asserting, among other things, that the passage of 

section 555.5 was “wrongful.” On April 24, 2019, this court 

affirmed the trial court’s decision denying class certification. 

(Kesterson v. California Public Employees’ Retirement System

(Apr. 24, 2019, B284977) [nonpub. opn.].)

Following the denial of class certification, CalPERS moved 

for judgment on the pleadings on the remaining individual 

claims. The trial court granted the motion on the ground that the 

individual plaintiffs failed to exhaust their administrative 

remedies.

Plaintiffs’ counsel then sought attorney fees under a Code 

of Civil Procedure section 1021.5 (section 1021.5) “catalyst” 

theory on the grounds that plaintiffs’ lawsuit was a catalyst for 

the passage of section 555.5 and the regulation accomplished 

many of the goals of the lawsuit. The trial court bifurcated the 

proceedings: first to determine whether plaintiffs were entitled 

to fees (entitlement phase), and then in a second proceeding the 

amount of any such fees (determination phase). In the 

entitlement phase, the trial court found that plaintiffs were the 

prevailing parties and were entitled to fees under a catalyst 

theory because they had obtained the primary relief that they 

sought. In the determination phase, the trial court limited 
4

plaintiffs’ fee award to reasonable hours spent before April 16, 

2015, when CalPERS notified plaintiffs of its proposed section 

555.5. The court awarded plaintiffs a total of $862,067.70 in fees. 

The court then awarded plaintiffs reasonable costs of $2,963.20, 

also limiting costs to the time period preceding the proposal of 

section 555.5.

CalPERS appeals from the postjudgment order granting 

plaintiffs an award of attorney fees under section 1021.5 on the 

ground that plaintiffs did not meet the criteria set forth in the 

statute for such an award. CalPERS also appeals the award of 

costs to plaintiffs on the ground that plaintiffs were not the 

prevailing parties in this litigation under Code of Civil Procedure 

section 1032.

Plaintiffs cross-appeal, arguing that the trial court wrongly 

limited both the attorney fee award and the cost award to 

reasonable hours spent before April 16, 2015. Plaintiffs further 

argue that the trial court erred in granting CalPERS’s motion for 

judgment on the pleadings.

We find that plaintiffs did not meet the criteria for an 

award of attorney fees under section 1021.5. We therefore 

reverse the award of attorney fees. We also find that plaintiffs 

did not meet the definition of prevailing party in Code of Civil 

Procedure section 1032 as a matter of law and accordingly 

reverse the cost award as well.

As to plaintiffs’ cross-appeal, the challenge to the amount of 

fees is moot considering our decision on CalPERS’s direct appeal. 

We further find that the trial court did not err in granting 

plaintiffs’ motion for judgment on the pleadings. That order and 

the judgment are affirmed.
5

FACTUAL BACKGROUND1

CalPERS is one of the country’s largest public pension 

funds and serves more than 1.8 million members in its

retirement system. CalPERS must verify the information it 

receives in order to safeguard against fraud and inadvertent 

overpayment. Thus applicants for benefits must timely provide 

certain information, and contracting agencies are required to 

report compensation and other data to CalPERS.

Applicants and agencies vary regarding their compliance, 

which sometimes results in errors and delays of benefits 

payments. Other issues may impact the timing of payments. In 

addition, payments sometimes have to be adjusted due to events 

such as court rulings, deaths, or additional compensation 

information received from employers. When a payment is 

deemed retroactive CalPERS generally will issue a lump-sum 

payment that aggregates amounts that accrued and matured on 

different dates. Since disputes occasionally arise between 

CalPERS and individual members, CalPERS has established an 

administrative hearing process to address such disputes, which 

may be followed by writ petitions or other proceedings against 

CalPERS.

Mary Kesterson

Earl Kesterson worked for the Beverly Hills Fire 

Department. Mr. Kesterson died in September 2011. His widow, 

Mary Kesterson, informed CalPERS of her husband’s death on or 

about September 22, 2011. On or about October 14, 2011, Mary 

1 This factual background, as well as portions of the 

procedural history, are largely taken from our previous opinion 

in this case. (Kesterson v. California Public Employees’ 

Retirement System, supra, B284977.)
6

Kesterson completed and returned a CalPERS Application for 

Retired Member/Payee Survivor Benefits form. CalPERS,

however, failed to pay her the one-time death benefits until 

April 12, 2012. CalPERS originally paid Mary Kesterson an 

extra penalty payment on April 16, 2012, then later wrote to her 

claiming it had miscalculated and would be sending her an 

additional penalty payment. When CalPERS provided her with 

the additional payment, Mary Kesterson refused to accept the 

payment on the ground that it was insufficient.

Hon. Marcel Poché (ret.)

Marcel Poché was an appellate justice on the First District 

Court of Appeal. He retired effective September 30, 2000. Two 

years later, then-Governor Gray Davis appointed Judge Poché to 

the position of Superior Court Judge on the Santa Clara Superior 

Court without adding years of service to his JRS pension. 

However, JRS and CalPERS deducted eight percent from his 

earnings as a judge for 10 years. Judge Poché resigned on 

August 13, 2012, and requested a refund of the $133,573.26 in 

contributions since 2002. On October 30, 2014, JRS returned the 

$133,573.26 without interest. Judge Poché’s representative has 

acknowledged that CalPERS would owe interest only from the 

time he demanded a refund after his second retirement and that 

there is some discretion on the part of CalPERS as to how to 

handle that unusual situation.

Michael Gilmore

Michael Gilmore was a police officer in the Beverly Hills 

Police Department. In December 2005 he filed for industrial 

disability retirement (IDR). In October 2009, he was notified 

that he had been approved for IDR effective December 27, 2008. 

During the first two years of his retirement CalPERS paid him 
7

varying amounts. In April 2012 CalPERS determined his proper 

pension amount and sent a retroactive lump-sum adjustment of 

$36,000, with no interest. Gilmore admits that there was certain 

information that the City of Beverly Hills failed to report to 

CalPERS delaying his benefit calculation, and it was his 

employer’s responsibility to rectify the situation.

Estate of Robert Seymore

Robert Seymore, a former BART police officer, died of selfinflicted injuries. Robert Seymore was named as an individual in 

the original complaint, although he was already deceased at the 

time. Plaintiffs’ first amended complaint (FAC) indicated 

generally that Seymore was represented by the personal 

representative for his three minor children. Plaintiffs’ counsel 

later named this personal representative as Christine Seymore 

Shell, who serves as guardian to the children. These procedural 

issues raised questions of timeliness and standing.

Seymore filed for IDR in February or March 2011. His 

employer determined him to be industrially disabled on 

March 21, 2011. CalPERS allegedly underpaid him until October 

2012 and did not pay interest. Again, CalPERS disputes whether 

Seymore’s employer caused or contributed to the underpayment. 

Shell believes that Seymore is owed money for service credit 

based on his prior service in the United States Armed Forces. 

These claims were disputed by CalPERS and were the subject of 

a separate pending class action against CalPERS. If such claims 

are successful Seymore’s estate may have a separate claim for 

unpaid interest.

Gerald Dominguez

Gerald Dominguez was a BART police officer until August

2012, when he filed for IDR. Dominguez asserts that although 
8

his disability eligibility was established in August 2012, 

CalPERS failed to timely pay him the entirety of his benefits and 

instead wrongly withheld funds. He received a one-time, lumpsum retroactive payment on April 1, 2013, covering the period 

from the date of his retirement on August 6, 2012, through 

April 1, 2013. The total payment was $55,200, of which 

approximately $35,200 was repaid to BART because BART had 

paid him advanced disability pension payments during the time 

that he waited for his CalPERS pension to begin. Thus, the 

amount of interest owed to Dominguez is in dispute.

Jeffrey Walter

Jeffery Walter was formerly a city attorney for the City of 

Cotati, who had made several attempts to become a member of 

CalPERS. His efforts were contested, and he filed an 

administrative appeal over his eligibility for CalPERS 

membership. In July 2008, Walter deposited approximately 

$469,000 with CalPERS. He claimed that CalPERS “induced” 

him to deposit the money, then later changed its position. Walter 

was informed in June 2009 that he was not eligible for 

membership. Walter did not demand or request that CalPERS 

return the money because he believed that CalPERS’s

determination that he was not eligible for membership was 

incorrect and wanted to continue to appeal that decision. Walter 

eventually decided to settle and forgo the appeal for personal 

reasons. CalPERS returned the full amount Walter deposited in 

December 2011, without interest.

Brad Heinz

Brad Heinz worked as an attorney for the State of 

California for approximately 10 years. He filed for service 

retirement on May 21, 2012. He initially received a service 
9

retirement but later amended his application seeking a disability 

retirement on May 30, 2012. On April 25, 2013, CalPERS 

determined that Heinz was eligible for disability and approved 

his disability retirement effective May 31, 2012. However, 

CalPERS failed to pay the full disability allowance for six 

months. Instead, CalPERS paid only a portion of his pension 

allowance until November 1, 2013, when it paid a lump sum for 

the six months the pension was underpaid. CalPERS paid no 

interest on the delayed disability payments.

Heinz initiated separate administrative proceedings 

regarding nonpayment, delayed payment or underpayment of 

medical benefits. His claims in this class action relate to interest 

on the late payments at issue in those other proceedings.

James Steed

James Steed qualified for IDR in 2010. He became involved 

in litigation with his family over the split of community property 

funds. Steed claims that CalPERS wrongfully withheld funds 

while the dispute was pending, and because the funds were 

withheld, CalPERS owes him interest for the period it held the 

funds. Although Steed ultimately lost the case and it was 

determined that he was not entitled to the funds, Steed claimed 

that CalPERS still owed him interest on approximately $819 he 

received on remand. CalPERS took the position that the money 

it owed Steed was offset by money Steed owed to CalPERS. 

Steed took the position that he no longer owed CalPERS any 

money because he declared bankruptcy. CalPERS disputed that 

claim.
10

PROCEDURAL HISTORY

The complaint

On March 8, 2013, plaintiffs, individually and on behalf of a 

class of others similarly situated, filed this action for violation of 

statutory duties; interest; damages; breach of contract; equitable 

relief; injunctive relief; accounting; constitutional impairment of 

contract; and attorneys’ fees.2 The FAC was filed on 

September 16, 2013.3

General allegations

The FAC alleged that plaintiffs “are enrollees, 

beneficiaries, and other individuals . . . who seek the payment of 

interest on funds, monies, benefits, or contributions . . . that are 

or were on deposit with, administered by, held by, delayed, or 

wrongfully withheld” by CalPERS. Such interest was allegedly 

due pursuant to “Civil Code, Constitution, case law, and statute,” 

including Civil Code sections 1955, 3281, 3287 and 3289, and the 

California Constitution, “including Art. XV, § 1-17 [sic] and Art. 

XVI, § 17(A),” various provisions of the Government Code and 

interest provisions in the California Code of Regulations.

Class allegations

The proposed class was defined as follows:

2 Initially the class representatives were Mary Kesterson, 

Michael Gilmore, Robert Seymore, and Jeffrey Walter.

3 The FAC named as class representatives Mary Kesterson, 

Marcel Poché, Michael Gilmore, the Estate of Robert Seymore, 

Gerald Dominguez, Jeffrey Walter, Brad Heinz, Christopher 

Cervelli, and James Steed. The court sustained without leave to 

amend CalPERS’s general demurrer to the claim for interest by 

Christopher Cervelli, who is not a party to this appeal.
11

“All individuals who had or have funds, credits, 

monies, benefits, contributions, or assets (hereafter 

‘funds’) that are or were on deposit with, held by, 

entrusted to, or under the control of CalPERS, 

including during which time CalPERS failed to 

timely pay the funds (or refund the contributions) 

and failed to accrue, credit or pay interest on said 

funds.

“The above defined class includes but is not 

limited to CalPERS enrollees who have or had funds 

on deposit with, held by, entrusted to, or under the 

control of CalPERS, including during which time 

CalPERS failed to timely pay the funds and failed to 

accrue, credit or pay interest on said funds, including 

for the period where payment of funds is wrongfully 

delayed, unpaid or held, (including those CalPERS 

enrollees who received lump sum or accumulated 

funds, benefits or payments from CalPERS) and upon 

the return, refund, or payment of said funds, 

CalPERS has refused and/or failed to pay, increase, 

accrue interest on those funds to the recipient.

“The above defined class includes but is not 

limited to beneficiaries of CalPERS enrollees who

have or had funds on deposit with, held by, entrusted 

to, or under the control of CalPERS, including during 

which time CalPERS failed to timely pay the funds 

and failed to accrue, credit or pay interest on said 

funds, including for the period where payment of 

funds is wrongfully delayed, unpaid or held, 

(including those beneficiaries of CalPERS enrollees 

who received lump sum or accumulated funds, 

benefits or payments from CalPERS) and upon the 

return, refund, or payment of said funds, CalPERS 

has refused and/or failed to pay, increase, accrue 

interest on those funds to the recipient.
12

“The above defined class includes but is not 

limited to, individuals who are not enrolled in 

CalPERS who have or had funds on deposit with, 

held by, entrusted to, or under the control of 

CalPERS, including during which time CalPERS 

failed to timely pay the funds and failed to accrue, 

credit or pay interest on said funds, including for the 

period where payment of funds is wrongfully delayed, 

unpaid or held, (including those who received lump 

sum or accumulated funds, benefits, return of 

contributions, or other payments from CalPERS) and 

upon the return, refund, or payment of said funds, 

CalPERS has refused and/or failed to pay, increase, 

accrue interest on those funds to the recipient.

“The above defined class includes but is not 

limited to individuals who have earned a vested right 

to funds, benefits, allowances, credits, or payments 

from CalPERS, where interest is owed, but CalPERS 

failed to timely pay the funds and does not add or pay 

an increase or addition for interest.

“The above defined class includes but is not 

limited to participants to whom CalPERS failed to 

timely pay funds, or delayed payments in excess of 45 

days, making CalPERS liable for ‘penalties,’ 

including pursuant to Government Code section 

21499.”

Allegations regarding exhaustion requirement

Plaintiffs alleged that they were not required to exhaust 

their administrative remedies because the administrative remedy 

was “inadequate and unavailable.” Among other things plaintiffs 

alleged that “CalPERS has adopted the APA [(Administrative 

Procedures Act)] which fails to provide the due process 

protections required in a class action where absent parties are 
13

represented. CalPERS and the APA have no authority, process, 

or procedures for dealing with class actions.”

Prayer for relief

In their prayer for relief, plaintiffs sought:

1. A finding that CalPERS has (i) violated plaintiffs’ 

statutory and constitutional rights, (ii) violated statutory duties 

to plaintiffs, (iii) failed to correctly interpret the statutes for 

plaintiffs’ benefit, (iv) failed to comport with the California 

constitution and Civil Code, (v) failed to timely pay benefits and 

correctly credit and pay interest;

2. An award of interest to plaintiffs pursuant to the 

highest applicable interest provision;

3. An award or correct awards of statutory and other 

penalties;

4. Alternatively, an award of damages, consequential 

damages, or other relief in the amount to make plaintiffs whole;

5. Alternatively, a lump sum sufficient to make plaintiffs 

whole;

6. Alternatively, an order of contract damages, 

consequential damages, or any other relief in an amount to make 

plaintiffs whole;

7. Prospective relief, including requiring CalPERS to 

provide members, beneficiaries and other persons similarly 

situated with interest in the future;

8. An accounting of all monies that plaintiffs and class 

members and their employers have paid into or contributed to 

CalPERS;

9. A constructive trust of all monies associated with unpaid 

interest that plaintiffs and the class members have paid into;
14

10. An award of attorney fees under contract, as a percent 

of the recovery, the substantial benefit, common fund, private 

attorney general or other theory;

11. An award of attorney fees from plaintiffs as the class 

members prorated, as provided under contract, as a percent of 

the recovery, the substantial benefit, common fund, private 

attorney general or other theory;

12. An award of costs and other relief as appropriate; and

13. An award of any and all extraordinary, additional and 

further relief the court may deem proper.

Public records act request

In 2013, pursuant to the Public Records Act (Gov. Code, 

§ 6250 et seq.) plaintiffs requested that CalPERS provide data on 

payments made by CalPERS since 2000, including information on 

service retirements, returns of contributions, deaths, and “other 

benefits.” As CalPERS does not normally keep data in the form 

requested, it spent hundreds of staff hours attempting to comply

with these requests. Ultimately it produced voluminous 

spreadsheets. The included information varied between the types 

of benefits.

The data fields in the electronic business records included: 

(1) the retirement date, (2) the payee name, (3) the amount of 

payment, (4) the payment date, (5) the benefit type, (6) the payee 

type, (7) the payment type, and (8) other details.

For death benefits, data fields included: (1) the payee 

name, (2) the deceased name, (3) death date, (4) date that death 

was reported, (5) “Last Doc Received” date, (6) the date payment 

was released, (7) the warrant issue date, (8) payment type, (9) 

amount of payment, (10) the penalty interest under Government 

Code section 21499, and (11) other details.
15

Payments are listed as “ongoing,” “one-time,” “retroactive,” 

“additional,” or “lump-sum.”

CalPERS explained that it provided as much responsive 

information as it could to plaintiffs’ Public Records Act request. 

However the request sought millions of documents that would 

have included a substantial amount of confidential information 

about CalPERS’s members. Counsel met and conferred 

regarding the essential information, and ultimately prepared two 

charts: one regarding death payments and one regarding 

nondeath payments. Certain of the named class representatives 

do not appear in the charts for various reasons, including the 

date of those individuals’ payments.

The Public Records Act request did not seek information 

regarding when payments accrued or “matured.”4 Further 

CalPERS would not have been able to provide such information 

without reviewing individual files, which would have been unduly 

burdensome. Plaintiffs’ counsel subsequently requested 

additional information regarding accrual of benefits. CalPERS’s

counsel explained that it was unable to provide such additional 

information without tremendous burden and expense. CalPERS 

did not believe it was required to engage in such a task under the 

Public Records Act.

4 The accrual date is the date that CalPERS received all of 

the information necessary to calculate each retirement benefit. 

The “retirement date” in the charts is simply the effective 

retirement date within the meaning of Government Code section 

21252. That date does not necessarily coincide with the date that 

the member submitted a retirement application or when 

CalPERS received all information necessary to calculate the 

retirement benefit.
16

CalPERS’s demurrer

In October 2013, CalPERS filed a demurrer to plaintiffs’ 

FAC on the ground that plaintiffs failed to exhaust their 

administrative remedies. The trial court overruled the demurrer 

on the ground that plaintiffs had filed a class action, and the 

administrative remedies available did not provide for class relief. 

The trial court concluded, “The board of administration lacks 

jurisdiction to hear class claims. If Plaintiffs have alleged a class 

action, then they need not allege exhaustion of administrative 

remedies.” The trial court determined that for pleading purposes 

plaintiffs’ class allegations were sufficient.

CalPERS’s proposal of section 555.5 and request for stay of 

litigation

In April 2015, the CalPERS board initiated a formal 

rulemaking proposal for adoption of section 555.5. The 

regulation established procedures governing interest payments 

on certain benefits. (§ 555.5.) In June 2015, CalPERS requested 

a stay of this litigation on the ground that the proposed 

regulation could affect the case. In support of its motion to stay 

the litigation CalPERS stated, “If the Board adopts the proposed 

regulation in its current form, there is no doubt that the 

regulation will have a significant impact on both the conduct of 

this action and the remedies the Court might fashion, if any.”

Plaintiffs opposed the stay. Among other things, plaintiffs 

argued that proposed section 555.5 “is inconsistent with the Civil 

Code as it wrongly attempts to grant CalPERS additional 

‘reasonable administrative processing time’ after the benefits 

have matured and become payable.” Plaintiffs also argued in a 

heading captioned “Regulation 555.5 Will Not Grant the Relief 

Sought by the Putative Class” that they would be severely 
17

prejudiced by a stay because “[a]pproximately 25% of the 

proposed class claims accrued and vested at a time beyond the 

potential 3-year reach of the proposed regulation.” Further, 

certain categories of class members fell outside of the coverage of 

section 555.5. Plaintiffs claimed that the proposed regulation 

was an attempt to “settle around” the court’s authority, deny the 

class claims, retain property unlawfully, and severely prejudice 

the putative class.

The trial court denied the stay.

Class certification proceedings

Plaintiffs filed their motion for class certification on 

June 15, 2015, including a memorandum of points and 

authorities and supporting declarations. CalPERS filed its 

opposition to plaintiffs’ motion for class certification on 

January 11, 2017. On March 29, 2017, plaintiffs filed their reply 

to CalPERS’s opposition.

On August 1, 2017, a hearing on the motion for class 

certification and related motions was held. The same day the 

court issued its “Amended and final ruling” denying plaintiffs’ 

motion for class certification and for an evidentiary hearing. The 

court ruled that the size of the class was uncertain. While 

plaintiffs claimed it was “in excess of 100,000,” CalPERS claimed 

it was approximately two million. The court also found that 

plaintiffs’ trial plan was inadequate.

On September 11, 2017, plaintiffs filed their notice of 

appeal from the order denying class certification. In the appeal 

on the class certification issue plaintiffs asked this court to ignore 

section 555.5 on the grounds that the formulation and passage of 

section 555.5 was wrongful. Because plaintiffs failed to 

articulate any clear argument as to how it was illegal or 
18

improper, or cite any legal authority as support for their position, 

we declined to address the issue.

On April 24, 2019, this court affirmed the denial of class 

certification.

CalPERS’ motion for judgment on the pleadings

On August 30, 2019, CalPERS filed a motion for judgment 

on the pleadings asserting that the trial court had no jurisdiction 

to hear the named plaintiffs’ claims because they failed to 

exhaust their administrative remedies. CalPERS pointed out 

that its demurrer had been overruled on the grounds that 

CalPERS lacked jurisdiction to hear class actions. CalPERS 

further pointed out that it has an administrative hearing process 

through which a member may seek funds. This administrative 

process was always available to plaintiffs. After the denial of 

class certification was affirmed on appeal, plaintiffs could no 

longer rely on their class allegations to avoid their obligations to 

exhaust their administrative remedies. CalPERS argued that 

plaintiffs had acknowledged CalPERS’s constitutional and 

statutory authority over the plaintiffs’ claims and that CalPERS 

had, in prior cases, awarded Civil Code interest.

Plaintiffs opposed CalPERS’s motion on the grounds that 

(1) CalPERS lacked authority to resolve plaintiffs’ claims; (2) 

plaintiffs’ claims were outside CalPERS’s jurisdiction; and (3) it 

would be futile to participate in the administrative process due to 

the three-year statute of limitations found in section 555.5. The 

trial court was not persuaded by any of plaintiffs’ arguments. 

The court noted that CalPERS “clearly ha[s] administrative 

authority and jurisdiction to resolve Plaintiffs’ claims.” The court 

rejected plaintiffs’ claims that exhaustion was futile, stating, 

“[t]he existence of the statute of limitations does not necessarily 
19

render Plaintiffs’ administrative claims futile. As Plaintiffs 

contend, given the history of this case there may be meritorious 

arguments for tolling the statute of limitations.” CalPERS 

argued that the motion should be granted without leave to 

amend, and at oral argument plaintiffs’ counsel conceded that 

dismissal without leave to amend was proper, as “failure to 

exhaust is a jurisdictional bar.” The trial court granted 

CalPERS’s motion for judgment on the pleadings without leave to 

amend.5

Plaintiffs’ motion for attorney fees—entitlement phase

On September 4, 2019, plaintiffs filed their “Motion for 

Costs and Attorney Fees Under Code of Civil Procedure Section 

1021.5—Entitlement Phase.” Plaintiffs argued that “[b]y their 

suit and years of meritorious litigation, Plaintiffs forced CalPERS 

to clarify and account for when payments were wrongfully 

withheld, when payments were late and when interest was 

required; forced CalPERS to revamp its computer system to make 

sure it was paying on time; and then made CalPERS pay interest 

when it was late. Plaintiffs also persuaded the CalPERS Board 

to make significant improvements in the regulation as proposed, 

further benefiting the putative class.” Plaintiffs argued that to 

be successful, they need not personally benefit from their success. 

Plaintiffs acknowledged that section 555.5 “did not provide the 

full relief that Plaintiffs sought,” but claimed they were the 

prevailing parties because they “vindicated the principle upon 

5 Although the court’s tentative ruling indicated that the 

court would grant plaintiffs leave to amend, the court was 

persuaded by the parties at oral argument that dismissal without 

leave to amend was proper. The court indicated it would “modify 

[the] tentative” accordingly.
20

which they brought the suit and achieve[d] many of their 

litigation objectives.” 

On September 13, 2019, CalPERS filed its opposition to 

plaintiffs’ motion. CalPERS argued that plaintiffs were not the 

prevailing parties, as they did not achieve the primary relief they 

sought. CalPERS further argued that plaintiffs’ claims lacked 

merit, their settlement efforts were insufficient, and to allow 

attorney fees would encourage wasteful litigation, among other 

things. On September 19, 2019, plaintiffs filed a reply.

Following the September 26, 2019 hearing, the trial court 

adopted its tentative ruling in favor of plaintiffs on the motion for 

attorney fees. The court reasoned that plaintiffs were the 

successful party because “their litigation was the catalyst for 

[CalPERS’s] change in behavior.” The trial court explained that 

the chronology of events raised an inference that plaintiffs’ 

litigation was the catalyst for CalPERS’s “change in behavior.” 

The trial court acknowledged that due to the motion for judgment 

on the pleadings, the merits of plaintiffs’ claims were never 

determined. However, the court pointed to statements in 

CalPERS’s motion to stay as acknowledgement that plaintiffs’ 

claims had merit. The court also found that plaintiffs had proven 

the other elements necessary for a catalyst fee claim. As to the 

third element, whether the necessity and financial burden of 

private enforcement transcended the litigant’s personal interest 

in the litigation, the trial court stated, “[b]ecause there was no 

monetary recovery, the Court need not address this third and 

final prong under Section 1021.5.”

Plaintiffs’ motion for attorney fees—determination phase

On November 12, 2019, plaintiffs filed their “Notice and 

Motion for Costs and Attorney Fees Under Code of Civil 
21

Procedure Section 1021.5—Determination Phase.” Plaintiffs 

attached detailed billing records and sought $625 per hour for 

attorney time and $200 per hour of paralegal time for the period 

January 8, 2012, through September 26, 2019. The lodestar 

calculation for the combined time was $3,065,365. Plaintiffs 

sought an enhancement of 2.0 of the lodestar for a total award of 

$6,130,730.

CalPERS opposed the fee demand and offered the analysis 

of a fee expert who opined that the billing records were 

inadequate, inflated, improper and otherwise excessive.

Prior to the January 6, 2020 hearing, the trial court issued 

a tentative ruling, noting that “[a]lthough the Court previously 

held that Plaintiffs’ efforts were the ‘catalyst’ for the enactment 

of Regulation 555.5, the Court finds that Plaintiffs’ unsuccessful 

litigation after April 16, 2015 demonstrates that such hours were 

not reasonably expended.” Because section 555.5 was proposed 

on April 16, 2015, “litigation after April 16, 2015 . . . appears to 

have been almost entirely unsuccessful for Plaintiffs.” The trial 

court pointed out the contradiction in plaintiffs’ theory that they 

were entitled to attorney fees for the entirety of the litigation:

“However, Plaintiffs cannot have it both ways. 

If they claim ‘success’ as a ‘catalyst’ for Regulation 

555.5, they cannot claim that their unsuccessful postApril 16, 2015 litigation is reasonably related to any 

such ‘success.’ Given that the only cognizable success 

in this action was the enactment of Regulation 555.5, 

Plaintiffs[] are entitled only to reasonable hours 

spent before April 16, 2015. Seeking fees for postApril 16, 2015 litigation undermines Plaintiffs’ 

entitlement to fees under the catalyst theory. In 

other words, either (i) Plaintiffs are entitled to fees as 

the catalyst for Regulation 555.5, or (ii) Plaintiffs are 
22

not entitled to any fees at all if they believe that 

continued litigation was necessary because 

Regulation 555.5 did not provide them their primary 

litigation objective.”

Accordingly, the trial court deducted “2,676.78” hours of 

attorney time and “1,408.70” hours of paralegal time. The court 

also deducted time for excessive, block and vague billing, as well 

as other billing irregularities, and reduced the attorney hourly 

rate to $475 per hour. The court arrived at a lodestar figure of

$574,711.80 and applied a 1.5 multiplier for a total award of 

$862,067.70.

At the hearing the court questioned plaintiffs’ counsel,

noting that the $6 million figure “kind of jumped out given what 

was actually recovered. It—you hate to see cases that begin to 

look like they’re driven exclusively and primarily because of the 

attorneys’ fees.” Plaintiffs’ attorney pointed out that there were 

seven years of litigation involved. He further noted that the 

regulation was not formally adopted until February 2016. 

Plaintiffs’ counsel asked the court to reconsider the period from 

July 2019 through September 2019 as part of a “fees-on-fees” 

request. CalPERS’s attorney argued that plaintiffs should get no 

fees at all, as plaintiffs’ counsel “did everything he could to 

torpedo the regulation.” CalPERS pointed out that plaintiffs’ 

attorney “submitted voluminous objections . . . to 555.5 and 

pretty much every aspect of it.” CalPERS argued that instead of 

pressuring CalPERS to enact section 555.5, the record showed

that plainitffs’ attorney “wanted CalPERS and the board to tank 

555.5 so he could proceed with the class action lawsuits.” 

Ultimately, the court adopted its tentative decision without 

change.
23

Motion to tax/strike costs

On November 12, 2019, CalPERS filed its motion to strike 

or tax costs. On November 25, 2019, plaintiffs filed their 

opposition. The reply was filed on December 5, 2019. The matter 

was heard on January 6, 2020. CalPERS argued that plaintiffs 

were not entitled to costs because they were not the prevailing 

party. The trial court disagreed, finding that plaintiffs achieved 

nonmonetary relief through the passage of section 555.5. 

However, the court agreed that plaintiffs were not entitled to any 

costs after April 16, 2015. Thus, CalPERS’ motion to tax/strike 

costs was granted in part and denied in part. The court awarded 

plaintiffs costs in the amount of $2,963.20.

Notices of appeal

On March 3, 2020, CalPERS filed its notice of appeal from 

the judgment and all orders, including the rulings on fees and 

costs. On March 10, 2020, plaintiffs cross-appealed.

DISCUSSION

CalPERS challenges the award of attorney fees to plaintiffs 

under the catalyst theory. CalPERS argues that the trial court 

applied the wrong criteria in granting the award and erroneously 

awarded fees although plaintiffs did not obtain the primary relief 

they sought in the litigation. CalPERS argues that reversal of 

the fee award also warrants reversal of the costs award. Finally 

CalPERS argues that if this court upholds any portion of the 

award, the fee multiplier should be reversed.

In their cross-appeal, plaintiffs argue that the trial court 

erred in finding that the hours billed after April 16, 2015, were 

not reasonably expended and in reducing the lodestar amount. 

Plaintiffs also challenge the elimination of costs after April 16, 
24

2015. Finally plaintiffs challenge the trial court’s decision 

granting CalPERS’s motion for judgment on the pleadings.

We address each appeal separately.

I. CalPERS’s appeal

A. Section 1021.5

Section 1021.5 states, in part:

“Upon motion, a court may award attorneys’ fees to a 

successful party against one or more opposing parties 

in any action which has resulted in the enforcement 

of an important right affecting the public interest if: 

(a) a significant benefit, whether pecuniary or 

nonpecuniary, has been conferred on the general 

public or a large class of persons, (b) the necessity 

and financial burden of private enforcement, or of 

enforcement by one public entity against another 

public entity, are such as to make the award 

appropriate, and (c) such fees should not in the 

interest of justice be paid out of the recovery, if any.”

The statute “‘“rests upon the recognition that privately 

initiated lawsuits are often essential to the effectuation of the 

fundamental public policies embodied in constitutional or 

statutory provisions, and that, without some mechanism 

authorizing the award of attorney fees, private actions to enforce 

such important public policies will as a practical matter 

frequently be infeasible.”’” (Graham v. DaimlerChrysler Corp. 

(2004) 34 Cal.4th 553, 565 (Graham).) “‘[T]he fundamental 

objective of the doctrine is to encourage suits enforcing important 

public policies by providing substantial attorney fees to successful 

litigants in such cases.’” (Ibid.)

In order to obtain attorney fees pursuant to section 1021.5, 

“a party seeking an award . . . must first be determined to be ‘a 

successful party.’” (Coalition for a Sustainable Future in Yucaipa 
25

v. City of Yucaipa (2015) 238 Cal.App.4th 513, 521 (Yucaipa).) 

Thus, a “necessary prerequisite to recovery under the statute is 

the status of the prevailing party.” (Ibid.)

In order to effectuate the purposes of the statute, courts 

have taken “a broad, pragmatic view of what constitutes a 

‘successful party.’” (Graham, supra, 34 Cal.4th at p. 565.) “It is 

not necessary for a plaintiff to achieve a favorable final judgment 

to qualify for attorney fees so long as the plaintiff’s actions were 

the catalyst for the defendant’s actions, but there must be some 

relief to which the plaintiff’s actions are causally connected.” 

(Yucaipa, supra, 238 Cal.App.4th at p. 521.) “‘In determining 

whether a plaintiff is a successful party for purposes of section 

1021.5, “[t]he critical fact is the impact of the action, not the 

manner of its resolution.”’” (Graham, supra, at p. 566.) Attorney 

fees may be proper “‘whenever an action results in relief for the 

plaintiff, whether the relief is obtained through a “voluntary”

change in the defendant’s conduct, through a settlement, or 

otherwise.” (Id. at pp. 566-567.)

Thus the term “successful party,” as used in section 1021.5, 

means “the party to litigation that achieves its objectives.” 

(Graham, supra, 34 Cal.4th at p. 571.) In other words, “‘if a party 

reaches the “sought-after destination,” then the party “prevails” 

regardless of the “route taken.”’” (Ibid.) An award of attorney 

fees thus may be appropriate “if the defendant changes its 

behavior substantially because of, and in the manner sought by, 

the litigation.” (Yucaipa, supra, 238 Cal.App.4th at p. 521.) “At 

the very least, a plaintiff must establish ‘“the precise factual/legal 

condition that [it] sought to change or affect”’ as a prerequisite for 

establishing the catalytic effect of its lawsuit.” (Graham, supra, 

at p. 576.) The catalyst theory is intended to save judicial 
26

resources, “‘by encouraging “plaintiffs to discontinue litigation 

after receiving through the defendant’s acquiescence the remedy 

initially sought.”’” (Id. at p. 573.)

Once deemed a “successful party,” the party must establish 

several other criteria. A party is entitled to attorney fees under 

section 1021.5 if the party establishes that “(1) the lawsuit was a 

catalyst motivating the defendants to provide the primary relief 

sought; (2) the lawsuit had merit and achieved its catalytic effect 

by threat of victory, not by dint of nuisance and threat of expense;

and (3) the plaintiffs reasonably attempted to settle the litigation 

prior to filing the lawsuit.” (Yucaipa, supra, 238 Cal.App.4th at

p. 521.)

If a plaintiff establishes the foundational elements 

described above, a court must then analyze the remaining 

statutory criteria. The court must consider whether: “(1) 

plaintiffs’ action ‘has resulted in the enforcement of an important 

right affecting the public interest,’ (2) ‘a significant benefit, 

whether pecuniary or nonpecuniary has been conferred on the 

general public or a large class of persons’ and (3) ‘the necessity 

and financial burden of private enforcement are such as to make 

the award appropriate.’ ” (Woodland Hills Residents Assn., Inc. 

v. City Council (1979) 23 Cal.3d 917, 934-935.) Only where the 

action has produced a monetary recovery, a court should consider 

whether “‘such fees should not in the interest of justice be paid 

out of the recovery.’” (Id. at pp. 934-935.)

B. Standard of review

Generally, we review the trial court’s determination of 

whether a party has met the statutory requirements for an award 

of attorney fees for abuse of discretion. (California Public 

Records Research, Inc. v. County of Yolo (2016) 4 Cal.App.5th
27

150, 190-191 (Yolo).) However “[t]he trial court does not have 

discretion to award attorneys’ fees unless the statutory criteria 

have been met as a matter of law.” (Id. at p. 192.)

C. Plaintiffs were not successful parties in the 

litigation

“The term ‘successful party,’ as ordinarily understood, 

means the party to litigation that achieves its objectives.” 

(Graham, supra, 34 Cal.4th at p. 571.) In order to be considered 

successful parties under section 1021.5, parties to the litigation 

must establish that they achieved “the primary relief sought.” 

(Marine Forests Society v. California Coastal Comm. (2008) 160 

Cal.App.4th 867, 878 (Marine).) The trial court determined that 

plaintiffs were successful parties because their primary goal was 

“to make [CalPERS] pay interest on unreasonably delayed benefit 

payments.” The court reasoned that after section 555.5 was 

passed, CalPERS paid such interest. The court did not specify to 

whom such interest was paid. As set forth below, we conclude 

that none of the parties to this litigation achieved the primary 

objective of this lawsuit—financial compensation.

1. Parties to the litigation

In answering the question of whether the plaintiffs were 

successful parties, we must first identify the parties to this 

litigation. (Graham, supra, 34 Cal.4th at p. 571 [“The term 

‘successful party,’ as ordinarily understood, means the party to 

litigation that achieves its objectives.”].)

The named plaintiffs, none of whom received compensation 

as a result of this litigation, are unquestionably parties to the 

litigation.

Unnamed members of the proposed class cannot be 

considered parties to this litigation particularly where, as here, 
28

class certification was denied.6 (Williams v. U.S. Bancorp 

Investments, Inc. (2020) 50 Cal.App.5th 111, 121 [“[T]he 

‘definition of the term “party” can on no account be stretched so 

far as to cover a person . . . , whom the plaintiff in a lawsuit was 

denied leave to represent.’”], quoting Smith v. Bayer Corp. (2011) 

564 U.S. 299, 313; Savaglio v. Wal-Mart Stores, Inc. (2007) 149 

Cal.App.4th 588, 603 [reversing § 1021.5 attorney fee award to 

party that successfully brought motion to unseal records on the

grounds that “allowing a member of the public to file a motion to 

unseal records . . . does not transform that member of the public 

into a party to the lawsuit”].) Relief provided to unspecified third 

parties, who are not parties to the litigation, does not render the 

plaintiffs “successful parties” under section 1021.5. (Marine, 

supra, 160 Cal.App.4th at p. 873 [§ 1021.5 is “‘“not a reward for 

litigants motivated by their own interests who coincidentally 

serve the public”’”].)

Further, it is unclear how many members of the putative 

class have been paid interest pursuant to section 555.5. In his 

declaration in support of his motion for attorney fees and costs, 

plaintiffs’ counsel declared that “[f]rom the regulation’s 

enactment in February 2016 to early in 2019, CalPERS paid over 

$575,000 in interest to over 16,700 members” under section 

555.5. However, plaintiffs’ counsel does not indicate how many of 

those members of CalPERS were part of the putative class. The 

class was largely defined as a group of people who had already 

been injured as of September 16, 2013, by CalPERS’s failure to 

6 We sought, and received, supplemental briefing from the 

parties on the question of whether members of the putative class 

should be considered “parties” to this litigation for the purposes 

of the “successful party” analysis.
29

pay interest. Plaintiffs’ counsel admitted, in opposing CalPERS’s 

motion to stay, that “[a]pproximately 25% of the proposed class 

claims accrued and vested at a time beyond the potential 3-year 

reach of the proposed regulation.” Therefore, even if the putative 

class members could be considered parties to the litigation, there 

is insufficient information to determine how many, if any, have 

been successful in actually receiving interest payments pursuant 

to section 555.5.

While we must limit our consideration of the “successful 

party” analysis to the named plaintiffs, as discussed below, even 

if we were to consider the putative class members as parties to 

the litigation, they could not be considered successful in 

achieving their objectives.

2. Primary goal of the litigation

The generic goal of “mak[ing] [CalPERS] pay interest on 

unreasonably delayed benefit payments” was not the “primary 

goal” of this lawsuit. Plaintiffs admit that CalPERS had 

previously been paying such interest in certain cases, although 

perhaps not in a uniform way.7 Instead, plaintiffs sought to 

compel CalPERS to pay certain individuals to whom such 

interest payments were owed.

In determining the primary goal of litigation we look to the 

allegations in the complaint. (Marine, supra, 160 Cal.App.4th at

p. 878.) In the FAC plaintiffs alleged that they were “enrollees, 

beneficiaries, and other individuals” who were seeking “the 

payment of interest on funds, monies, benefits, or 

7 In granting CalPERS’s motion for judgment on the 

pleadings, the trial court noted that “Plaintiffs . . . allege that 

[CalPERS] ha[s] awarded other claimants interest in their 

administrative appeals.”
30

contributions . . . that are or were on deposit with, administered 

by, held by, delayed, or wrongfully withheld” by CalPERS. In 

other words, the lawsuit was comprised of specific individuals 

with funds in the CalPERS system who sought payment of 

interest on those specific funds. Plaintiffs were not seeking a 

generic regulation setting the parameters regarding the payment 

of interest. Instead, they sought interest they believed was owed 

to them.

The prayer for relief illustrates this primary goal. Of the 

nine main goals plaintiffs sought (excluding prayers for attorney 

fees and costs), the first six requested adverse findings and 

monetary relief, which the lawsuit did not achieve:

First the lawsuit sought a finding that CalPERS had 

violated statutory and Constitutional duties owed to them. 

Plaintiffs did not achieve this goal, as none of the individual 

plaintiffs’ rights were adjudicated, and the class was not certified. 

There was no finding that CalPERS had committed a violation of 

any law.

Second the plaintiffs sought an award of interest pursuant 

to the highest interest provision applicable. The named plaintiffs 

did not receive any monetary award, and it is unclear how many, 

if any, of the putative class members did so.

Third plaintiffs sought an award of “statutory or other 

penalties.” They did not receive such an award, nor is there any 

evidence that any putative class member did so.

Fourth plaintiffs sought an award of “damages, 

consequential damages, or other relief” in the amount to make 

them whole. They did not receive such an award, nor is there 

any evidence that any putative class member did so.
31

Fifth plaintiffs sought a “lump sum sufficient to make 

Plaintiffs whole for any prior period of unpaid interest.” They did 

not receive such an award, nor is there any evidence that any 

putative class member did so.

Sixth plaintiffs sought an alternative award of “contract 

damages, consequential damages, or other relief in the amount to 

make Plaintiffs whole.” They did not receive such an award, nor 

is there any evidence that any putative class member did so.

Plaintiffs also sought an accounting and a constructive 

trust, neither of which they succeeded in obtaining.

None of the named parties to this litigation was paid 

interest as a result of section 555.5. Plaintiffs have admitted that 

due to the three-year statute of limitations contained in section 

555.5, the named plaintiffs are ineligible to receive interest under 

the regulation. Nor did they receive any damages, penalties or 

other compensation. In short, the named plaintiffs did not 

achieve their primary objective, which was the payment to them 

of money.

The single request that plaintiffs arguably achieved was 

their request that the court “[p]rovide prospective relief, 

including requiring CalPERS to provide Members, beneficiaries 

and other persons similarly situated with interest in the future.” 

Section 555.5 provides a uniform standard for the payment of 

interest in the future. However it cannot be said that such 

prospective relief was the primary goal of the litigation. As 

shown by the numerous requests for monetary compensation in 

the form of interest, damages, and other relief, the primary goal 

of the litigation was payment of money to the parties. Any 

arguable prospective relief obtained under plaintiffs’ prayer 
32

request did not benefit any party to this litigation. (Graham, 

supra, 34 Cal.4th at p. 571.)

In sum, none of the named plaintiffs qualifies for relief 

under section 555.5, as it contains a three-year statute of 

limitations. Nor is it clear how many class members achieved 

relief under section 555.5. The parties cannot be said to have 

achieved their primary goal—payment of interest or other 

compensation to them.

3. Section 555.5 did not grant the relief sought by 

plaintiffs or the proposed class

No party to this litigation achieved the lawsuit’s primary

goal of financial recovery. However even if we were to consider 

the unnamed putative class members as parties to this litigation 

and consider the request for prospective relief as the lawsuit’s 

primary goal, section 555.5 did not achieve that goal.

Section 555.5 did not create a new legal obligation that 

CalPERS pay interest on unreasonably delayed payments. As set 

forth above, it appears that historically CalPERS had been 

paying interest in certain cases. In the FAC plaintiffs listed four 

Civil Code sections, two constitutional provisions, nine 

Government Code sections, three regulations, and made reference 

to case law, as well as other statutes, regulations, and common 

law, under which CalPERS was “expressly and implicitly 

required to add, accrue, credit or award . . . interest.” Section 

555.5 did not create a new legal requirement that CalPERS pay 

interest, but set forth the conditions under which CalPERS will 

pay such interest—including requiring that CalPERS receive “all 

information necessary to make the payment” and allowing 
33

CalPERS a 45-day grace period. (§ 555.5, subd. (c).)8 As the trial 

court recognized in denying class certification, “[d]etermining 

when a benefit plan (like CalPERS) must pay prejudgment 

interest to a benefit claimant can be intricate.” Section 555.5 

acknowledged CalPERS’s obligation to pay interest and set the 

guidelines under which it will pay such interest going forward.

Plaintiffs’ opposition to section 555.5 and refusal to end the 

litigation when section 555.5 was proposed show that the passage 

of section 555.5 did not provide plaintiffs “the remedy [they] 

initially sought.” (Marine, supra, 160 Cal.App.4th at p. 877.) As 

CalPERS points out, plaintiffs opposed the regulation, arguing

that the regulation was outside of the “lawmaking authority 

delegated to CalPERS by the Legislature.” They further argued 

that the regulation “is inconsistent with CalPERS’ constitutional 

and statutory duties to promptly administer the system and pay 

benefits.” Plaintiffs specifically argued that the proposed 

regulation would “[n]ot [g]rant the [r]elief [s]ought by the 

[p]utative [c]lass,” and indeed would “[s]everely [p]rejudice” the 

existing plaintiffs because “approximately 25% of the proposed 

class claims accrued and vested at a time beyond the potential 3-

year reach of the proposed regulation.” (Boldface and 

underscoring omitted.)

8 These requirements contradict Plaintiffs’ contention that 

“CalPERS cannot have a legitimate reason to delay payment 

more than 45 days from the date on which [they] contend[] it 

matured.” Plaintiffs later conceded in the class certification 

proceedings that “the possibility exists that some members may 

have caused a delay of more than 45 days.” This problem was 

one of the trial court’s cited reasons for denial of class 

certification.
34

A primary purpose of the catalyst rule is to save judicial 

resources by “‘encouraging “plaintiffs to discontinue litigation 

after receiving through the defendant’s acquiescence the remedy 

initially sought.”’” (Graham, supra, 34 Cal.4th at p. 573.) 

Instead of saving judicial resources by ending the litigation at the 

time section 555.5 was proposed or passed into law, plaintiffs 

continued to litigate. They opposed CalPERS’s motion to stay the 

litigation, claiming that the proposed regulation did not grant the 

relief they were seeking. They continued to litigate over four 

more years, through class certification and CalPERS’s motion for 

judgment on the pleadings, which was granted in 

September 2019. As the trial court correctly pointed out, 

“[p]laintiffs cannot have it both ways.” “In other words, either (i) 

Plaintiffs are entitled to fees as the catalyst for Regulation 555.5, 

or (ii) Plaintiffs are not entitled to any fees at all if they believe 

that continued litigation was necessary because Regulation 555.5 

did not provide them their primary litigation objective.” 

Plaintiffs’ insistence that section 555.5 did not provide them the 

relief they sought, and their refusal to stay the matter, weigh 

against them in the “successful party” analysis under section 

1021.5.9

9 As explained in Skaff v. Rio Nido Roadhouse (2020) 55 

Cal.App.5th 522, 540, it is not clear that the catalyst theory 

should ever apply when a matter is litigated to final judgment. 

Unlike “the mooted claim at issue in Graham,” the merits of the 

Skaff matter were “thoroughly litigated to a final judgment.” 

(Ibid.) Because no judicial efficiency was achieved, the Skaff 

court noted that the catalyst theory may not have been properly 

invoked. (Ibid.) The Skaff court reversed the award of catalyst 

fees on the ground that the plaintiff had not established his 
35

Considering all of the circumstances, the plaintiffs did not 

achieve the primary relief sought. What they sought was 

payment, whether it be interest, damages, penalties, or some 

other form of compensation. Plaintiffs did not achieve “‘“the 

precise factual/legal condition that [they] sought to change or 

affect.”’” (Graham, supra, 34 Cal.4th at p. 576.) Thus, they 

cannot be considered “successful part[ies]” under section 1021.5. 

The statute is inapplicable, and the trial court had no discretion 

to award attorney fees under the statute.10 (Yolo, supra, 4

Cal.App.5th 150, 192.)

D. Merit analysis under section 1021.5

We briefly address Graham’s requirement that in order to 

prevail under section 1021.5, the plaintiffs must establish that 

their achievement came about “‘by threat of victory, not by dint of 

nuisance and threat of expense.’” (Graham, supra, 34 Cal.4th at

entitlement to relief and therefore could not be deemed the 

prevailing party. (Ibid.)

10 We reject both plaintiffs’ argument and the trial court’s 

position, that CalPERS’s “revamp[ing] [of] its computer system to 

make sure it was paying on time” was a primary goal of this 

litigation. Plaintiffs did not seek a revamping of CalPERS’s 

computer systems as an objective of their litigation. Thus such 

action cannot be viewed as the primary relief sought by plaintiffs’ 

complaint. (See Marine, supra, 160 Cal.App.4th 867, 880 [“[T]he 

Legislature’s amendment of section 30312 cannot be viewed as 

the primary relief sought by Marine Forests’s complaint, which 

was aimed at preventing the removal of its artificial reef.”].) We 

do not look to every incidental benefit that may have arisen out of 

a lawsuit, but look to determine whether the plaintiff has 

achieved “‘“the precise factual/legal condition that [it] sought to 

change or affect.”’” (Graham, supra, 34 Cal.4th at p. 576.)
36

p. 575.) The trial court acknowledged that due to the denial of 

class certification, the merits of plaintiffs’ claims were never 

addressed by any court. However the trial court stated its 

position that statements in CalPERS’s motion to stay were an 

acknowledgement that plaintiffs’ claims had merit. The court 

quoted the following from CalPERS’s motion to stay:

“In this action, Plaintiffs contend that members and 

beneficiaries of the defined benefit plans that the 

Board administers should be paid interest when 

payments owed to them are wrongfully withheld due 

to unreasonable delay. The Board agrees.”

(Underscoring added by the trial court.)

The trial court appeared to rely on this statement as a 

concession that the plaintiffs’ claims were meritorious.11 

However there is a difference between a general 

acknowledgement that individuals should be paid interest under 

certain circumstances and an acknowledgement that the 

plaintiffs’ claims in this case were meritorious.

We note that CalPERS challenged plaintiffs’ claims on the 

ground that they failed to exhaust their administrative remedies 

at every opportunity. Because plaintiffs had not exhausted their 

administrative remedies, CalPERS had reason to anticipate 

victory on plaintiffs’ individual claims. Failure to exhaust 

administrative remedies is a “jurisdictional prerequisite to resort 

to the courts.” (Abelleira v. District Court of Appeal (1941) 17 

Cal.2d 280, 293.) CalPERS filed a demurrer early in the 

11 The trial court also quoted CalPERS’s motion as stating, “If 

the Board adopts the proposed regulation in its current form, 

there is no doubt that the regulation will have a significant 

impact on both the conduct of this action and the remedies the 

Court might fashion, if any.”
37

litigation, which was overruled only because the matter was a 

purported class action. CalPERS vigorously opposed class 

certification and when it was denied filed a successful motion for 

judgment on the pleadings on the grounds that the plaintiffs had 

failed to exhaust their administrative remedies. In short, the 

named plaintiffs brought cases that were fatally flawed. Despite 

CalPERS’s acknowledgement that it should pay interest in 

certain circumstances, CalPERS had no reason to believe the 

plaintiffs in this case presented a threat of victory.

Further, section 555.5 did not address plaintiffs’ claims. 

Plaintiffs admitted the regulation excluded many of the putative 

class members, as well as all of the named plaintiffs. It set a 

three-year statute of limitations on claims, which meant that it 

did not apply to these plaintiffs. It seems that if CalPERS feared 

that plaintiffs had meritorious claims, CalPERS would have 

included such claims in its proposed relief.

This analysis is not necessary to our decision to reverse the 

award of attorney fees under section 1021.5. However a more 

thorough analysis of the merits of plaintiffs’ claims was 

warranted under the circumstances of this case.

E. The cost award must also be reversed

Code of Civil Procedure section 1032 allows the prevailing 

party to recover its costs. The trial court determined that 

plaintiffs were the prevailing parties to this litigation under the 

catalyst theory. The court therefore awarded plaintiffs their 

costs of litigation under Code of Civil Procedure section 1032, 

subdivision (a). The trial court noted that Code of Civil 

Procedure section 1032, subdivision (a)(4) gives a court discretion 

to determine prevailing party status where “any party recovers 

other than monetary relief and in situations other than as 
38

specified.” The trial court determined that in the context of this 

case CalPERS’s enactment of section 555.5 constituted 

nonmonetary relief, such that plaintiffs should be granted 

prevailing party status.

As set forth above, we disagree with the trial court’s 

primary determination that plaintiffs were the prevailing parties 

in this litigation. Plaintiffs did not achieve their primary 

objectives. They were denied class certification, and achieved no 

financial award. Further, they opposed section 555.5 because it 

did not provide them with the relief they desired. Under the 

circumstances, section 555.5 cannot be described as nonmonetary 

relief to the plaintiffs.

Plaintiffs were not the prevailing party under Code of Civil 

Procedure section 1032 as a matter of law.

F. Conclusion

The trial court’s order awarding section 1021.5 attorney 

fees to plaintiffs and its order awarding costs to plaintiffs are 

reversed.

II. Plaintiffs’ cross-appeal12

A. Applicable law and standard of review

A motion for judgment on the pleadings may be made by a 

defendant on the grounds that (1) the court lacks jurisdiction over 

12 Because we have determined that attorney fees were not 

properly awarded under section 1021.5 as a matter of law, we 

decline to address the portion of plaintiffs’ cross-appeal that 

challenges the trial court’s decision to cut off attorney fees as of 

April 16, 2015, and other ways in which the trial court curtailed 

plaintiffs’ fee request. Further, because we have determined that 

costs were not properly awarded to plaintiffs under Code of Civil 

Procedure section 1032, we also decline to address plaintiffs’ 

argument that the trial court improperly reduced its request for 
39

one or more causes of action; or (2) the complaint fails to state 

facts sufficient to constitute a cause of action against the 

defendant. (Code Civ. Proc., § 438, subd. (c)(1)(B).) “The grounds 

for motion . . . shall appear on the face of the challenged pleading 

or from any matter of which the court is required to take judicial 

notice.” (Code Civ. Proc., § 438, subd. (d).)

“‘A motion for judgment on the pleadings is equivalent to a 

demurrer and is governed by the same de novo standard of 

review.’” (People ex rel. Harris v. Pac Anchor Transportation, Inc. 

(2014) 59 Cal.4th 772, 777.) “‘All properly pleaded, material facts 

are deemed true, but not contentions, deductions, or conclusions 

of fact or law . . . .’” (Ibid.)

B. Plaintiffs have failed to establish error

1. The trial court’s decision

The trial court held that plaintiffs’ failure to plead 

exhaustion of administrative remedies was grounds for judgment 

on the pleadings in CalPERS’s favor. The parties did not dispute 

that in the FAC plaintiffs alleged that seven of the eight named 

plaintiffs did not exhaust their administrative remedies before 

filing this action with the court.13

On September 10, 2014, the trial court overruled 

CalPERS’s demurrer to the FAC on the ground that CalPERS’s 

administrative process did not provide for class relief. The trial 

costs. We limit our analysis of plaintiffs’ cross-appeal to the issue 

of whether the trial court properly granted CalPERS’s motion for 

judgment on the pleadings.

13 Only plaintiff Christopher Cervelli was alleged to have 

exhausted his administrative remedies. Cervelli was dismissed 

from the matter after the trial court sustained CalPERS’s 

demurrer to his claims.
40

court rejected plaintiffs’ arguments that (1) CalPERS lacked 

authority to resolve plaintiffs’ claims, (2) plaintiffs’ claims are 

outside CalPERS’s jurisdiction, and (3) it would be futile to 

participate in the administrative process. Specifically, the trial 

court held that the existence of the three-year statute of 

limitations found in section 555.5 “does not necessarily render 

Plaintiffs’ administrative claims futile.” Given the history of the 

case, the court noted, “there may be meritorious arguments for 

tolling the statute of limitations.” Regardless of whether or not 

such tolling arguments would be successful, the court agreed that 

it lacked jurisdiction to rule on the merits of plaintiffs’ claims 

absent prior exhaustion of their administrative remedies.

2. Plaintiffs’ appeal is forfeited

Plaintiffs’ appeal of this issue consists of two paragraphs, 

neither of which cite any legal authority supporting their 

position. Plaintiffs assert that the court’s ruling required 

plaintiffs to exhaust administrative remedies “that would provide 

no relief largely because of the 3-year SOL, and caused them to 

lose the advantage of tolling from their superior court filing and 

the right to interest under Civil Code §3287.” Plaintiffs fail to 

fully develop this argument and fail to cite supporting relevant 

California legal authority. Under the circumstances, their 

argument is forfeited. (Los Angeles Unified School District v. 

Torres Construction Corp. (2020) 57 Cal.App.5th 480, 488-489). 

“‘We may and do “disregard conclusory arguments that are not 

supported by pertinent legal authority or fail to disclose the 

reasoning by which the appellant reached the conclusions he 

wants us to adopt.”’” (Id. at p. 496).
41

3. The trial court did not err in granting the 

motion for judgment on the pleadings

Although plaintiffs have forfeited this argument, we note 

that the trial court’s decision reveals no error. As plaintiffs 

implicitly acknowledge, exhaustion of administrative remedies is 

a prerequisite to filing in the courts. (Fiscus v. Department of 

Alcoholic Beverage Control (1957) 155 Cal.App.2d 234, 236.) And 

although plaintiffs have not cited any legal authority on the topic,

the trial court noted that a futility doctrine does exist. “Failure 

to exhaust administrative remedies is excused if it is clear that 

exhaustion would be futile. [Citation.] Similarly, it is improper 

to invoke the primary jurisdiction of an administrative agency if 

it is clear that further proceedings within that agency would be 

futile.” (Jonathan Neil & Assoc., Inc. v. Jones (2004) 33 Cal.4th

917, 936 (Jonathan Neil).)

The futility exception is narrowly applied, however. “The 

futility exception requires that the party invoking the exception 

‘can positively state that the [agency] has declared what its 

ruling will be on a particular case.’” (Jonathan Neil, supra, 33 

Cal.4th at p. 936.) There is no evidence in this case that 

CalPERS has declared what its ruling will be on any of the 

named plaintiffs’ individual claims. As the trial court pointed 

out, plaintiffs’ potentially meritorious claims for tolling the 

statute should be made in the first instance through CalPERS’s 

administrative process.

DISPOSITION

The postjudgment order awarding plaintiffs attorney fees 

under section 1021.5 and the postjudgment order awarding 

plaintiffs costs under Code of Civil Procedure section 1032 are 
42

reversed. CalPERS’s motion for judgment on the pleadings and 

ensuing judgment are affirmed. Each side is to bear its own 

costs.

________________________

CHAVEZ, J.

We concur:

________________________

LUI, P. J.

________________________

HOFFSTADT, J.