Court Opinion

ID: 6118274
Source: CourtListenerOpinion
Date Created: 2022-02-03 20:02:18.230395+00
Date Added: 2024-06-11T08:22:26.972507
License: Public Domain

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   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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not been certified for publication or ordered published for purposes of rule 8.1115.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.,                                     B304766

         Plaintiffs and Appellants,                        (Los Angeles County
                                                           Super. Ct. No. BC502628)
         v.

CALIFORNIA PUBLIC
EMPLOYEES’ RETIREMENT
SYSTEM et al.,

     Defendants and
Appellants.

      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.
       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 (non-
compounding) 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

                                  2
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

                                3
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.

                                 4
                   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.)

                                5
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

                                6
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 self-
inflicted 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

                                7
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, lump-
sum 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

                                8
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.

                                 9
                   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.

                                 10
      “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.

                          11
            “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

                               12
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;

                                13
       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.

                                14
      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.

                               15
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

                                 16
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

                                 17
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

                                18
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.

                                19
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

                                 20
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 post-
       April 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 post-
       April 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

                                 21
      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.

                                22
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,

                                23
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

                                 24
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

                                 25
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

                                26
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,

                               27
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.

                                28
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.”

                                  29
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.

                                 30
       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

                                31
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

                                32
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.

                                 33
        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

                                 34
       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.)

                                35
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.”

                                36
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

                                 37
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

                                38
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.

                                 39
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).

                                40
            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

                                41
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.

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