Opinion ID: 1459865
Heading Depth: 1
Heading Rank: 5

Heading: Enactment of MP2

Text: Association claims that its members had a contractual right to an actuarially sound pension plan, so that the enactment of MP2 and the resulting underfunding of the pension fund was an impermissible impairment of that contractual right. Hence Association brought a Contracts Clause claim, a Takings Clause claim and a conspiracy claim on that premise. In response Appellees contend that there is no federal constitutional right under the Contracts Clause to an actuarially sound pension system. They also argue that whether or not that is so, the district court's grant of summary judgment as to Association's underfunding claims should be affirmed because those claims are precluded by McGuigan v. City of San Diego, No. D050291, 2008 WL 4358551 (Cal. Ct.App. Sept.25, 2008). Because we find McGuigan to be dispositive of Association's underfunding claims, we eschew consideration of the litigants' constitutional dispute. City and Individual Defendants maintain that the release terms contained in the settlement and final judgment approved in McGuigan bar Association's current claims against them. Although they made the same argument in the district court, that court's opinion correctly found that the settlement agreement and final decision in McGuigan were not final for claim preclusion purposes [5] because they were then on appeal. City and Individual Defendants maintained in their brief before us that although the McGuigan action might ultimately preclude recovery by Association, the agreement and judgment there were not yet final for that purpose. Instead they claimed that the January 16, 2003 judgment in Gleason v. San Diego City Employees' Retirement System, No. G1C803779 (Cal.Super.Ct.) also precluded Association's present action. [6] After the parties had submitted their appellate briefs but before we heard oral argument, the California Court of Appeal affirmed the settlement agreement and judgment in McGuigan. After oral argument we requested and the parties submitted supplemental briefing on the effect of the Court of Appeal's McGuigan decision. Association did not file a petition for review by the California Supreme Court within the prescribed time limits, so that the McGuigan judgment became final on November 25, 2008. We now turn to the effect of that final judgment on Association's claims. For that purpose we must follow California's preclusion rules ( Noel v. Hall, 341 F.3d 1148, 1166 (9th Cir.2003)). Under California's claim preclusion doctrine a valid, final judgment on the merits precludes parties or their privies from relitigating the same `cause of action' in a subsequent suit ( Le Parc Cmty. Ass'n v. Workers' Comp. Appeals Bd., 110 Cal. App.4th 1161, 2 Cal.Rptr.3d 408, 415 (2003)). Thus three requirements have to be met: (1) the second lawsuit must involve the same cause of action as the first one, (2) there must have been a final judgment on the merits in the first lawsuit and (3) the party to be precluded must itself have been a party, or in privity with a party, to that first lawsuit. Because Association itself was a party in McGuigan and because that judgment has now become final, the only remaining question is whether this case involves the same cause of action as McGuigan. Le Parc Cmty. Ass'n, id. continues its claim preclusion analysis in these terms: California law defines a cause of action for purposes of the res judicata doctrine by analyzing the primary right at stake. That concept is indivisible: the violation of a single primary right gives rise to but a single cause of action ( Crowley v. Katleman, 8 Cal.4th 666, 34 Cal.Rptr.2d 386, 881 P.2d 1083, 1090 (1994)). As Eichman v. Fotomat Corp., 147 Cal.App.3d 1170, 197 Cal.Rptr. 612, 614 (1983) further explains: [I]f two actions involve the same injury to the plaintiff and the same wrong by the defendant then the same primary right is at stake even if in the second suit the plaintiff pleads different theories of recovery, seeks different forms of relief and/or adds new facts supporting recovery. But the primary right brush cannot be wielded too carelessly ( Branson v. Sun-Diamond Growers of Cal., 24 Cal.App.4th 327, 29 Cal.Rptr.2d 314, 322 (1994)): On the other hand, different primary rights may be violated by the same wrongful conduct. What is critical to the analysis is the harm suffered; that the same facts are involved in both suits is not conclusive ( Agarwal v. Johnson, 25 Cal.3d 932, 160 Cal.Rptr.141, 603 P.2d 58, 72 (1970)). In McGuigan a retired city employee sued City on a representative basis alleging various violations and theories regarding City's pension underfunding. That lawsuit eventuated in a settlement agreement, binding on Association's members as members of the plaintiff class, [7] which specifies the release terms: [E]ach member of the Settlement Class. . . hereby release, discharge and dismiss with prejudice City, from any and all claims or causes of action that arise from the facts alleged in the . . . Those claims are: (a) that City violated former Charter section 143; (b) City violated former Municipal Code section 24.081; (c) that City's past practice of paying an employer contribution less than that recommended by the actuary employed by SDCERS [8] rendered the pension fund actuarially unsound and thereby impaired the beneficiaries' contractual right to an actuarially sound pension fund; (d) for declaratory relief that City underfunded the SDCERS pension system and must pay additional amounts, plus interest, to rectify such underfunding; and (e) for a peremptory writ of mandate directing City to pay SDCERS the amount of City's shortfall in employer contributions from 1996-2006 (collectively the Pension Underfunding Claims). In its final judgment the trial court said this as to the release (emphasis added): The release does not extend to any claims other than the claims or causes of action set forth in the Plaintiffs' Second Amended Complaint, and, specifically, the release does not extend to claims arising out of: (1) City's alleged failure to fund the pick-up portion of the employee retirement contribution, (ii) City's alleged underfunding of retiree health benefits, (iii) any conspiracy by the SDCERS actuary with City to understate City's employer contribution to SDCERS, or (iv) claims not otherwise released or waived by the Settlement Agreement; provided, however, released claims would include damage claims under 42 U.S.C. section 1983 or any state, federal or common law to the extent that they are based upon the City's failure to pay the amount annually determined by the SDCERS actuary and approved by the SDCERS Board from 1996 to 2006 . . . Association maintains that language does not release the underfunding claims it has brought in this action. It argues that the McGuigan action involved allegations that City failed to fund the retirement system at the fixed rate agreed to in the MP1 and MP2 agreements, while in this action Association contends that the underlying funding system created by MP2 was itself unlawful. City and Individual Defendants, on the other hand, urge that the settlement agreement releases all federal Section 1983 claims arising from the adoption of MP2, so that all of Association's Section 1983 claims related to the pension underfunding, including its Contracts Clause claim, Takings Clause claim and any conspiracy claim, are precluded. Association's position is premised on a distinction without a difference. Although its claims in this action literally focus on the enactment of MP2 and the funding levels it created, rather than on the question of City's compliance with those levels, they are nevertheless unquestionably based upon City's failure to pay the amount annually determined by the SDCERS actuary and approved by the SDCERS Board from 1996 to 2006. Whether that failure is framed in terms of not having funded Retirement System at the rate established by MP2 or in terms of the enactment of MP2 as such, the alleged violation is the same: the level at which payments were made to Retirement System is claimed to have been impermissibly lower than that determined by the Retirement System actuary. For just those reasons, the claims that Association asserts in this action against City are precluded by the McGuigan settlement's release. As to Individual Defendants, the fact that they were not defendants in the first action does not prevent them from asserting the defense of claim preclusion here ( Brinton v. Bankers Pension Servs., Inc., 76 Cal.App.4th 550, 90 Cal.Rptr.2d 469, 473-74 (1999)). Association's claims here allege the same injury to Association (the financial insecurity of Retirement System) and the same wrong by City (the failure to fund Retirement System on an actuarially sound basis) as those asserted in the McGuigan action. Because Association's claims against Individual Defendants thus involve the same cause of action as those in McGuigan, they too are barred by the doctrine of claim preclusion. [9] Without those claims, all that remains is Association's request that we declare there is a federally recognized contractual right to an actuarially sound pension system. But with no live case or controversy before us, there is no call for such declaratory relief ( In re Burrell, 415 F.3d 994, 998 (9th Cir.2005)). Hence any of Association's remaining claims as to the enactment of MP2 and its alleged underfunding of the pension system are moot ( id. ).