Court Opinion

ID: 4682505
Source: CourtListenerOpinion
Date Created: 2021-04-29 19:02:50.86867+00
Date Added: 2024-06-11T08:04:08.889298
License: Public Domain

Filed 4/29/21 Marzec v. Cal. Public Employees’ Retirement System CA2/3

  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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(a). This opinion has
not been certified for publication or ordered published for purposes of rule 8.1115(a).

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                        SECOND APPELLATE DISTRICT

                                     DIVISION THREE

ROBERT MARZEC et al.,                                           B294383

      Plaintiffs and Appellants,                                Los Angeles County
                                                                Super. Ct. Nos.
      v.                                                        BC461887, BC480695
CALIFORNIA PUBLIC
EMPLOYEES’ RETIREMENT
SYSTEM et al.,

      Defendants and Respondents.

     APPEAL from an order of the Superior Court of Los
Angeles County, Maren E. Nelson, Judge. Affirmed.
     Law Offices of John Michael Jensen and John Michael
Jensen for Plaintiffs and Appellants.
     Steptoe & Johnson and Jason Levin for Defendants and
Respondents.
                          INTRODUCTION

      This appeal concerns “the calculation of retirement benefits
under the Public Employees’ Retirement Law (PERL),
Government Code section 20000 et seq.1 Plaintiffs are former
police officers and firefighters employed by local public agencies
that provide employee retirement benefits through California’s
Public Employees’ Retirement System (CalPERS). In order to
enhance their service retirement benefits, plaintiffs purchased
additional years of service credit through one of several optional
programs offered by CalPERS. Subsequently, each plaintiff was
disabled on the job and took an industrial disability retirement
before reaching service retirement age. As a result, CalPERS
pays each plaintiff a monthly disability retirement allowance of
50 percent of his or her final compensation. CalPERS does not,
however, pay plaintiffs any additional allowance as a result of
their purchase of additional years of service credit.” (Marzec v.
Public Employees’ Retirement System (2015) 236 Cal.App.4th 889,
895 (Marzec I).)
      Plaintiffs seek to rescind their purchase contracts on the
ground that CalPERS’s written disclosures did not adequately
apprise them of the risk that their purchased service credit would
not increase their retirement benefits should they become
disabled and argue that the trial court erred by denying their
motion to certify a class on that basis. We conclude substantial
evidence supports the court’s conclusion that plaintiffs did not
establish superiority of class treatment. We therefore affirm.

1   All undesignated statutory references are to the Government Code.

                                    2
                         BACKGROUND

      [Begin quoted material from Marzec I, supra, 236
      Cal.App.4th at pp. 896–900.]2

1.    CalPERS Retirement Benefits
      CalPERS is a unit of the Government Operations Agency
responsible for administering the retirement systems for the
State of California and “contracting agencies”—local public
agencies that have “elected to have all or part of [their]
employees become members of this system and that ha[ve]
contracted with [CalPERS] for that purpose.” (See §§ 20001,
20002, 20004, 20022, 20028.) All of the plaintiffs in this action
worked as police officers or firefighters for local public agencies
that enrolled their employees in CalPERS. (§ 20420.)
      The PERL authorizes retirement benefits to CalPERS
members. As relevant here, the PERL provides safety members
employed by local public agencies (“local safety members”) with
two distinct kinds of retirement benefits:
      (1) Service retirement benefit: If a member retires at or after
age 50, the member is eligible for a service pension to “equal
3 percent of his or her final compensation at retirement,
multiplied by the number of years of patrol service or local safety

2 Sections 1 through 6 of the background in this opinion quote sections
I through IV of the background in Marzec I, supra, 236 Cal.App.4th at
pp. 896–900. However, we have changed the roman numerals and
letters of the Marzec I headings to sequential numbers and have
changed the Marzec I heading italics to bold. Added or deleted material
appears in [[double brackets]]. All other alterations were made in
Marzec I.

                                  3
service subject to this section with which he or she is credited at
retirement.” (§ 21362.2.)
       (2) Industrial disability retirement benefit: If a member
retires before age 50 because of an industrial (job-related)
disability, he or she “shall receive a disability retirement
allowance of 50 percent of his or her final compensation.”
(§ 21413.)3 Alternatively, the disabled member may “waive[ ] the
right to retire for disability and elect[ ] to withdraw contributions
or to permit contributions to remain in the fund.” (§ 21153.)
2.    Right to Purchase Additional Service Credit
       At all relevant times, [[any]] CalPERS member who had
served with the United States Armed Forces [[was]] permitted to
receive credit for such service “in addition to his or her current
and prior service credit” by “contribut[ing] in a lump sum or by
installment payments … an amount equal to … the contributions
he or she would have made to this system for the period for which
current service credit is granted.” (§§ 21032, 21033; see §§ 21020,
21024.) Such purchased service credit is referred to as “military
service credit” (MSC).
       Between 2003 and 2012, CalPERS members with at least
five years of credited state service were permitted “to make
contributions … and receive not less than one year, nor more
than five years, in one-year increments, of additional retirement

3 Under section 21413, a member who retires for industrial disability
after age 50 (i.e., at the age at which the member qualifies for service
retirement) receives either a 50 percent disability retirement
allowance or his or her service retirement allowance, whichever is
greater. Because all plaintiffs retired before age 50, they were not
eligible for service retirement benefits.

                                    4
service credit in the retirement system.” (§ 20909, subd. (a).) To
receive such credit, members were required to contribute “an
amount equal to the increase in employer liability, using the
payrate and other factors affecting liability on the date of the
request for costing of the service credit.” (§ 21052.) This
purchased service credit is referred to as “additional retirement
service credit” (ARSC) or “airtime.”
3.    Plaintiffs’ Purchases of Additional Service Credit and
      Subsequent Industrial Disability Retirements
       Each of the plaintiffs purchased additional service credit
and subsequently took industrial disability retirement before age
50, as follows:
       Plaintiff Robert Marzec worked as a police officer for the
Stockton Police Department for approximately 17 years. In 2004,
he elected to purchase four years of MSC based on his previous
service with the United States Marines by making a lump sum
payment of $23,709. In August 2010, after suffering a job-related
injury, Marzec took an industrial disability retirement and began
receiving industrial retirement benefits of 50 percent of his final
compensation.
       Plaintiff Rachel Healy worked as a police officer for the
Stockton Police Department for approximately nine years. In
2005, she elected to purchase five years of ARSC by making a
lump sum payment of $31,360, and rolling over an additional
$46,000 from a deferred compensation account. After she suffered
a job-related injury, Healy took an industrial retirement effective
September 2009 and began receiving industrial retirement
benefits of 50 percent of her final compensation.
       Plaintiff Benjamin Esparza worked as a firefighter for the
Monrovia Fire Department for approximately 25 years. In 2005,

                                 5
he elected to purchase five years of ARSC by rolling over $76,436
from his deferred compensation plan. He was injured on the job
and took an industrial disability retirement in August 2009. At
that time, he began receiving industrial retirement benefits of
50 percent of his final compensation.
       Plaintiff Jeffrey Andert worked as a police officer for the
Alhambra Police Department for six years. In 2004, he elected to
purchase four years of MSC through biweekly installment
payments of $269.90, for a total of $77,190 in principal and
interest. Andert was injured on the job in 2006, and in 2007 he
asked for, and received, permission to suspend his installment
payments. Andert took an industrial disability retirement in May
2008 and began receiving industrial retirement benefits of
50 percent of his final compensation. In August 2008, he
permanently suspended all further installment payments.
       Plaintiff Neil MacLaren was a firefighter for the Roseville
Fire Department for more than 21 years. In 2005, MacLaren
elected to purchase two years of ARSC by rolling over $29,977
from his retirement account. MacLaren was injured on the job
and took an industrial disability retirement in 2009, at which
time he began receiving industrial disability benefits of
50 percent of his final compensation.
       Plaintiff Randy Slaughter was a police officer for the
Newport Beach Police Department for approximately 17 years. In
2001, Slaughter elected to purchase four years of MSC by making
monthly installment payments of $6,977 and a lump sum
payment of $44,652. Slaughter took an industrial disability
retirement in 2004, at which time he began receiving industrial
retirement benefits of 50 percent of his final compensation.

                                6
       [[Plaintiff Henry Brown was a corrections officer for the
Department of Corrections and Rehabilitation for approximately
13 years. In 2006, he elected to purchase three years of MSC
through monthly installment payments of $413.53, for a total of
$59,848.32 in principal and interest. Brown also elected to
purchase five years of ARSC through monthly installment
payments of $688.56, for a total of $99,152.64 in principal and
interest. Brown was injured on the job in 2012, and took an
industrial disability retirement in July 2013, at which time he
began receiving industrial retirement benefits of 50 percent of his
final compensation. In October 2013, he elected to cancel all
further installment payments.]]
       Because each of the plaintiffs retired before age 50, none
received a service retirement benefit, and none received any
additional retirement benefits as a result of his or her purchase
of MSC or ARSC.
4.    The Present Actions
       Marzec, Healy, and Esparza filed an action on May 18,
2011 (the Marzec action), and filed the [[…]] first amended class
action complaint on February 28, 2012. Andert, MacLaren, and
Slaughter filed a similar class action complaint (the Andert
action) on March 12, 2012. Both actions asserted that plaintiffs
were entitled, in addition to their industrial disability retirement
allowances (sometimes referred to as “IDR”), to additional
retirement benefits associated with their purchases of MSC or
ARSC. The actions asserted that neither the PERL nor plaintiffs’
purchase contracts authorized CalPERS to “seize” plaintiffs’
MSC/ARSC investments as a condition of receiving disability
benefits, that CalPERS did not adequately advise plaintiffs of
this risk of seizure before they invested in MSC or ARSC, and

                                 7
that through its administration of disability and MSC/ARSC
benefits, CalPERS treated plaintiffs differently than other
similarly situated CalPERS members.
       Plaintiffs [[alleged]] that CalPERS’s failure to pay
additional retirement benefits or to return the MSC or ARSC
investments gave rise to 12 causes of action: (1) breach of
statutory duties; (2) breach of contract; (3) rescission/restitution;
(4) breach of fiduciary duties; (5) denial of equal protection;
(6) denial of due process; (7) equitable relief; (8) declaratory relief;
(9) accounting; (10) constitutional impairment of contract;
(11) estoppel; and (12) other relief, including attorney fees.
5.    CalPERS’s Demurrer in the Marzec Action
       CalPERS demurred to the first amended complaint in the
Marzec action. In a detailed written opinion, the trial court
sustained the demurrer without leave to amend. Although the
court said that plaintiffs’ situation is “certainly sympathetic,” it
concluded that none of plaintiffs’ causes of action stated a claim
for relief. The court entered a judgment of dismissal, and
plaintiffs timely appealed.
6.    CalPERS’s Motion for Judgment on the Pleadings in
      the Andert Action
      CalPERS filed a motion for judgment on the pleadings in
the Andert action. The motion asserted that plaintiffs’ claims
were functionally identical to those in the Marzec case, and
therefore the court should grant judgment on the pleadings for
the same reasons it sustained the demurrer in Marzec.
      The trial court granted the motion for judgment on the
pleadings. Plaintiffs timely appealed, and this court ordered the
Marzec and Andert appeals consolidated.

                                   8
      [End quoted material from Marzec I, supra, 236
      Cal.App.4th at pp. 896–900.]

7.    Marzec I
       On appeal, a different panel of this court affirmed in part.
We concluded that “neither the PERL nor plaintiffs’ contracts
entitle plaintiffs to the additional retirement benefits they seek,
and thus the [first] cause[ ] of action for breach of statutory duty
and [the second cause of action for] breach of contract fail as a
matter of law. Plaintiffs’ causes of action for constitutional torts
also fail[ed] because, as a matter of law, CalPERS’s
interpretation of the applicable statutory provisions [did] not
deny plaintiffs due process or equal protection of law,” as alleged
in the fifth and sixth causes of action, and did not “effect an
unconstitutional impairment of contract,” as alleged in the 10th
cause of action. (Marzec I, supra, 236 Cal.App.4th at p. 896; see
id. at pp. 901–912, 916–920.) Because plaintiffs did not challenge
the trial court’s ruling as to the seventh, eighth, ninth, 11th, or
12th causes of action, Marzec I did not address them.4 (Id. at
p. 920.)
       Nevertheless, Marzec I reversed as to the third cause of
action, for rescission, and the fourth cause of action, for breach of
fiduciary duty. Plaintiffs alleged that CalPERS failed to disclose
that they could lose the value of their purchased service credit if
they became disabled at work—a disclosure that, they alleged,
CalPERS, as a fiduciary, was required to make. (Marzec I, supra,
236 Cal.App.4th at pp. 913–916.)

4Those causes of action were for equitable relief, declaratory relief,
accounting, estoppel, and other relief, including attorney’s fees.

                                    9
       As to the third cause of action, the opinion explained, the
“trial court sustained the demurrer because it concluded that the
contract language … was adequate to put plaintiffs on notice that
if they took a disability retirement, they might not benefit from
their purchase of” service credit. (Marzec I, supra, 236
Cal.App.4th at p. 914.) But plaintiffs’ cause of action for
rescission did not “depend on the language of the contracts, but
on the totality of CalPERS’s disclosures to its members. Plaintiffs
assert[ed] that as a result of those disclosures, their consent to
the contracts was induced by mistake of fact and law, fraud, and
undue influence, and enforcement of the contracts would be
contrary to public policy.” (Id. at pp. 914–915, italics added.)
Because the court was required to accept those allegations as
true, it should have overruled the demurrer as to this cause of
action. Similarly, as to the fourth cause of action, Marzec I held
that “there appear to be factual disputes about what CalPERS
disclosed or what representations were made. … Thus, the breach
of fiduciary duty claim should not have been disposed of at the
demurrer stage.” (Id. at p. 916.)
8.    Third Amended Complaint and Demurrer
       Upon remand, the Marzec and Andert actions were
consolidated, and plaintiffs filed a second amended class-action
complaint, which alleged causes of action for (1) breach of
fiduciary duties, (2) rescission, and (3) other relief, including
attorney’s fees. After additional discovery, plaintiffs filed the
operative third amended class-action complaint, which added
Henry Brown as a plaintiff.
       CalPERS demurred to the first cause of action, for breach
of fiduciary duty, on statutory immunity grounds, an issue
Marzec I did not consider. CalPERS also argued that plaintiffs, in

                                10
the third amended complaint, had reframed this cause of action
to encompass their previously-dismissed claim that CalPERS had
breached its statutory duties. (See Marzec I, supra, 236
Cal.App.4th at p. 909 [trial court properly sustained demurrer to
cause of action for breach of statutory duty].) As such, the claim
was barred by law of the case.
      In a memorandum decision, the trial court sustained the
demurrer to the first cause of action without leave to amend. 5
9.    Class Certification Proceedings
       Plaintiffs moved for class certification on the rescission
cause of action. The court denied the motion by detailed written
opinion.
       First, the court held that the class was not ascertainable by
objective standards. Plaintiffs had sought to certify a class for a
period “from 1991 onward,” but those dates conflicted with the
third amended complaint, which recognized that the class period
could only reach back to March 24, 2010—one year from the date
of the first Government Claims Act filing. Not only did the class
period extend too far into the past, the court noted, but it also
extended into the future. The court also found it difficult to
determine how to identify who purchased service credit
“pursuant to CalPERS standardized forms and publications.”

5 Plaintiffs attempt to challenge that ruling—at great length—in this
appeal by bootstrapping arguments about the demurrer into their
claims concerning the later class certification ruling. Because the
demurrer order is not appealable, we do not address those arguments.
(See In re Baycol Cases I & II (2011) 51 Cal.4th 751, 760–761 [order
sustaining demurrer without leave to amend as to individual and class
claims not immediately appealable as to the class claims under the
“death knell” doctrine].)

                                 11
       Second, the court found the class was sufficiently
numerous.
       Third, the court held that there was not a well-defined
community of interest, primarily because individual questions
predominated over common questions. In particular,
notwithstanding CalPERS’s status as plaintiffs’ fiduciary,
individual issues predominated because CalPERS had the right
to rebut the presumption of reliance and had demonstrated how
it might do so. In addition, the court was concerned that in light
of the number of people who spoke to CalPERS about their
retirement, oral disclosures varied across the class. The court
also noted that there would be individual inquiries concerning
CalPERS’s statute of limitations defense. And, although the
proposed class representatives had typical claims, and some
might be adequate to represent the class, the court had concerns
about the adequacy of class counsel.
       Finally, the court held that plaintiffs had not demonstrated
superiority of class treatment. The individual issues rendered the
case unmanageable, and plaintiffs had presented no reasonable
trial plan to address that issue. Further, because the proposed
class members had spent an average of $83,000 on service credit,
they had a strong incentive to pursue their claims individually.6
       Plaintiffs filed a timely notice of appeal.

6This number appears to have been based on CalPERS’s estimate of
the named-plaintiffs’ average investment. Plaintiffs estimate that the
average member of the proposed class “lost” approximately $41,459
plus interest.

                                  12
                        CONTENTIONS

      Plaintiffs argue that the court’s conclusions were not
supported by substantial evidence, that the court erred by failing
to resolve the merits of their materiality and reliance claims, and
that the court erred by ignoring their alternative theories of
rescission.

                          DISCUSSION

1.    Legal Principles and Standard of Review
       “The party advocating class treatment must demonstrate
the existence of an ascertainable and sufficiently numerous class,
a well-defined community of interest, and substantial benefits
from certification that render proceeding as a class superior to
the alternatives. [Citations.] ‘In turn, the “community of interest
requirement embodies three factors: (1) predominant common
questions of law or fact; (2) class representatives with claims or
defenses typical of the class; and (3) class representatives who
can adequately represent the class.” ’ [Citation.]” (Brinker
Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1021
(Brinker).)
       “The ‘ultimate question’ the element of predominance
presents is whether ‘the issues which may be jointly tried, when
compared with those requiring separate adjudication, are so
numerous or substantial that the maintenance of a class action
would be advantageous to the judicial process and to the
litigants.’ [Citations.] The answer hinges on ‘whether the theory
of recovery advanced by the proponents of certification is, as an
analytical matter, likely to prove amenable to class treatment.’
[Citation.] … ‘As a general rule if the defendant’s liability can be
determined by facts common to all members of the class, a class

                                 13
will be certified even if the members must individually prove
their damages.’ [Citations.]” (Brinker, supra, 53 Cal.4th at
pp. 1021–1022.)
       The presence of individual issues does not render class
certification inappropriate, therefore, as long as those issues can
be managed fairly and efficiently. (Duran v. U.S. Bank National
Assn. (2014) 59 Cal.4th 1, 28–29 (Duran).) But manageability is
critical. Thus, to establish that class treatment is superior to the
alternatives, the party seeking class certification must submit a
trial plan that adequately demonstrates how individual issues
will be handled. (Id. at pp. 31–32.)
       “On review of a class certification order, an appellate
court’s inquiry is narrowly circumscribed. ‘The decision to certify
a class rests squarely within the discretion of the trial court, and
we afford that decision great deference on appeal, reversing only
for a manifest abuse of discretion: “Because trial courts are
ideally situated to evaluate the efficiencies and practicalities of
permitting group action, they are afforded great discretion in
granting or denying certification.” [Citation.] A certification order
generally will not be disturbed unless (1) it is unsupported by
substantial evidence, (2) it rests upon improper criteria, or (3) it
rests on erroneous legal assumptions. [Citations.]’ [Citations.]”
(Brinker, supra, 53 Cal.4th at p. 1022.) “Accordingly, we must
examine the trial court’s reasons for denying class certification.
‘Any valid pertinent reason stated will be sufficient to uphold the
order.’ [Citation.]” (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th
429, 436.)
2.    Theories of Rescission
     A party may rescind a contract and seek restitution if
consent to the contract was given based on mistake of law or fact;

                                 14
if consent was obtained through fraud, undue influence, duress,
or menace; if there is a failure of consideration; or if the contract
is unconscionable or violates public policy. (Civ. Code, § 1689,
subd. (b).) The remedy of rescission extinguishes a contract and
restores the parties to their former positions by requiring them to
return whatever consideration they have received. (Civ. Code,
§§ 1688, 1691, subd. (b).) Here, plaintiffs alleged rescission under
all of these theories. We conclude, however, that only their claim
of constructive fraud is properly before us.
      2.1.   Forfeiture
        In Marzec I, we cautioned plaintiffs that “as the parties
challenging the trial court’s determination, it is plaintiffs’ burden
‘to affirmatively demonstrate error.’ [Citation.] To do so, plaintiffs
must do more than draw our attention to asserted errors in the
trial court’s reasoning … .” (Marzec I, supra, 236 Cal.App.4th at
p. 902; see also id. at p. 901 [“Plaintiffs’ failure to identify clearly
the statutory basis for their claim appears to be an intentional
choice, not an oversight.”].) In this appeal, although plaintiffs
complain that both the trial court and respondents failed to
address their theories of rescission based on mistake, undue
influence, duress, menace, unconscionability, violation of public
policy, and frustration of purpose, they do not develop those
claims.
        For example, plaintiffs spend just one sentence arguing
that the court erred by failing to address their claim that a
rescission class should have been certified under a theory of lack
of consent: “A class for rescission based on lack of consent should
have been certified. (Civ. Code, § 1578; Harris v. Rudin, Richman
& Appel (2002) 95 Cal.App.4th 1332, 1339.)” Their citations do
not help matters. Harris involves a client seeking to rescind a

                                  15
contract with his lawyer based on an amendment to the Probate
Code. The pin cite lists the elements of mistake of law, which is
defined in Civil Code section 1578.
       Plaintiffs’ argument about frustration of purpose is even
more opaque: “CalPERS frustrates reasonable expectations of
increased retirement allowances. (Habitat Trust for Wildlife, Inc.
v. City of Rancho Cucamonga (2009) 175 Cal.App.4th 1306,
1337.)” The import of this contention and the relevance of Habitat
Trust to this lawsuit are unclear.7
       As such, plaintiffs have forfeited those arguments on
appeal, and we decline to address them. (See Benach v. County of
Los Angeles (2007) 149 Cal.App.4th 836, 852 [plaintiff’s failure to
develop claim with reasoned legal argument and supporting
authority forfeits the issue].)
      2.2.   Marzec I bars plaintiffs’ claim that there was a
             failure of consideration.
       We also decline to address plaintiffs’ contention that the
court should have certified a class for rescission based on a
failure of consideration. (Civ. Code, § 1689, subd. (b)(2), (4), (5).)
Plaintiffs argue that they “paid for (estimated) increased
allowances [citation], but received no increases, due to the fault of
CalPERS. [Citation.]” But we rejected that argument in Marzec I.
As we explained then, the “contractual language does not support
this construction. The offer letters told plaintiffs they were
eligible to purchase ‘additional service credit,’ and that if they
elected to do so, ‘this service will be credited to your retirement

7 Not only did plaintiffs fail to develop an appellate argument about
frustration of purpose, they also failed to allege that theory in the third
amended complaint.

                                    16
account as shown below … .’ … CalPERS’s offer, therefore, was
not for a guaranteed future income stream, as plaintiffs seem to
suggest, but rather for ‘additional service credit’ associated with a
particular employer …, employment category …, and retirement
formula … .” (Marzec I, supra, 236 Cal.App.4th at p. 912, italics
omitted.) Put another way, plaintiffs contracted for additional
service credit, not increases. We are bound by that interpretation
in this appeal. (See Kowis v. Howard (1992) 3 Cal.4th 888 [law of
the case].)8
       Accordingly, we turn to plaintiffs’ claim that a class should
have been certified under a constructive fraud theory of
rescission. (Civ. Code, § 1573.)
      2.3.   Constructive Fraud
       “There is no dispute that CalPERS is a fiduciary. As such it
is ‘charged with the fiduciary relationship described in Civil Code
section 2228: “In all matters connected with his trust, a trustee is
bound to act in the highest good faith toward his beneficiary, and
may not obtain any advantage therein over the latter by the
slightest misrepresentation, concealment, threat, or adverse
pressure of any kind.” ’ [Citation.]” (Marzec I, supra, 236
Cal.App.4th at p. 915–916.) “A fiduciary must tell its principal of
all information it possesses that is material to the principal’s
interests. [Citations.] A fiduciary’s failure to share material

8 To the extent plaintiffs argue that consideration failed because they
did not receive the service credit they were entitled to, they have
forfeited that claim by failing to develop it. (See In re Marriage of
Falcone & Fyke (2008) 164 Cal.App.4th 814, 830 [absence of cogent
legal argument or citation to authority forfeits the contention; “[w]e are
not bound to develop appellants’ arguments for them”].) And, in any
event, it appears that plaintiffs also failed to raise that issue below.

                                   17
information with the principal is constructive fraud, a term of art
obviating actual fraudulent intent.” (Michel v. Moore &
Associates, Inc. (2007) 156 Cal.App.4th 756, 762.)
      Here, as the court below explained, plaintiffs’ “theory of
recovery is that the written disclosures made at the time of
contracting did not adequately disclose the risk of loss and that
they would not have purchased the credits had they been so
informed, entitling them to rescind.” To prove constructive fraud,
plaintiffs must establish that CalPERS misled them by failing to
provide them with complete and accurate information about a
material fact, and the failure caused them harm. (Civ. Code,
§ 1573; see CACI No. 4111.)
3.    Individual Issues Concerning Reliance and Materiality
       As the court distilled it, plaintiffs’ “essential allegation is
that [they] were entitled to and are presumed to have or did rely
on CalPERS’[s] written representations, and that the
representations did not adequately disclose the risk that
investment money could be lost or transferred if they were
injured.” They “argue that because they have a fiduciary
relationship with CalPERS[,] they may show reliance by the use
of an evidentiary ‘presumption.’ Alternatively, they argue that
reliance may be shown by the use of a statistical sample.”
       Reliance is a necessary element of a claim for constructive
fraud. (Younan v. Equifax Inc. (1980) 111 Cal.App.3d 498, 516,
fn. 14.) In the class action context, an inference of reliance arises
as to the entire class “when the same material
misrepresentations have actually been communicated to each
member of a class.” (Mirkin v. Wasserman (1993) 5 Cal.4th 1082,
1095, italics omitted.) One predicate requirement to drawing this
inference is a showing that the representation made was

                                  18
material. (Ibid.; see also Engalla v. Permanente Medical Group,
Inc. (1997) 15 Cal.4th 951, 977 [“a presumption, or at least an
inference, of reliance arises wherever there is a showing that a
misrepresentation was material”]; Occidental Land, Inc. v.
Superior Court of Orange County (1976) 18 Cal.3d 355, 363
[inference arises “if a material false representation was made to
persons whose acts thereafter were consistent with reliance upon
the representation”]; Vasquez v. Superior Court (1971) 4 Cal.3d
800, 814 [inference arises “if the trial court finds material
misrepresentations were made to the class members”].)
        “ ‘A misrepresentation of fact is material if it induced the
plaintiff to alter his position to his detriment. [Citation.] Stated
in terms of reliance, materiality means that without the
misrepresentation, the plaintiff would not have acted as he did.
[Citation.]’ ” (Lacher v. Superior Court (1991) 230 Cal.App.3d
1038, 1049.) In a typical fraud case, the plaintiff must show that
he “ ‘ “actually relied upon the misrepresentation; i.e., that the
representation was ‘an immediate cause of his conduct which
alters his legal relations,’ and that without such representation,
‘he would not, in all reasonable probability, have entered into the
contract or other transaction.’ ...” [Citation.]’ [Citation.]” (Ibid.)
        Because constructive fraud arises from a fiduciary
relationship, however, there is a presumption of reasonable
reliance. (Edmunds v. Valley Circle Estates (1993) 16 Cal.App.4th
1290, 1301–1302.) Nevertheless, a defendant may rebut the
presumption by proving with substantial evidence that the
plaintiff did not reasonably rely on the misleading information or
omission because the misrepresentation was immaterial—that is,
consent would have been given and the contract entered into

                                 19
notwithstanding the misrepresentation. (Ibid.; Tyler v. Children’s
Home Society (1994) 29 Cal.App.4th 511, 529.)
       For purposes of its analysis, the court in this case assumed
that CalPERS had a fiduciary relationship with the proposed
class members. It agreed with plaintiffs that a rebuttable
presumption of reliance arises when a fiduciary makes a material
misrepresentation. And it appeared to accept that such a
presumption exists in this case: “when a [safety member] is
deciding to purchase additional credits, the member is entitled to
an adequate disclosure of the risk.”
       But the court also acknowledged that CalPERS was
“entitled to rebut the presumption by showing Plaintiffs and the
class of persons they seek to represent would have acted no
differently had they known all the facts. The theory of this
litigation is that class members acted as they did because they
were not provided full disclosure of the risk. Consequently, if it
can be shown that some class members would have purchased
credits even if adequately informed of the risk, reliance cannot be
established on a class-wide basis.”
       CalPERS Deputy Chief Actuary Randall J. Dziubek offered
several reasons safety members might want to purchase service
credit notwithstanding the risk of loss should they become
disabled. First, CalPERS offered an excellent investment return.
The price of service credit depended on each member’s expected
age at retirement and life expectancy. CalPERS would then set a
price providing a fixed rate of return. The current rate of return
is 7.0 percent. Between 2012 and 2016, however, it was 7.5
percent, and before that, it was 7.75 percent. By contrast, since
2004, Treasury rates have varied between 1.5 percent and 5.25
percent.

                                20
       Second, people who purchased service credit tended to
retire earlier than their non-purchasing coworkers. Indeed, at
least two named plaintiffs in this case bought credit for that very
reason. Third, it was a terrific deal. Although service-credit
purchases were intended to be cost-neutral, an internal review of
the program found that because people who purchased service
credit retired earlier than expected, safety members paid on
average 19 percent less for service credit than was needed to
achieve cost neutrality.
       When weighed against these benefits, service members
may have also chosen to invest because they underestimated the
subjective risk that they would become disabled before age 50.
Indeed, several named plaintiffs noted that they saw the contract
language warning that the purchase might not benefit them if
they took disability retirement but didn’t think the warning
applied to them because they weren’t planning to become
disabled. Others couldn’t say for sure whether they would have
chosen to purchase service credit if the risks had been clearer.
       CalPERS was entitled to present individual evidence of
these issues to rebut the presumption of reliance. Ultimately,
however, we need not determine whether those individual
questions predominate over common questions in this case
because plaintiffs failed to meet their burden of demonstrating
how they would manage those issues, and therefore, failed to
establish that class treatment would be the superior method of
resolving their dispute.
4.    Plaintiffs failed to establish the superiority of a class
      action.
      “Because a class should not be certified unless ‘substantial
benefits accrue both to litigants and the courts’ [citation], the

                                21
question arises as to whether a class action would be superior to
individual lawsuits [citations].” (Basurco v. 21st Century
Insurance Co. (2003) 108 Cal.App.4th 110, 120.) That is, “even if
questions of law or fact predominate, the lack of superiority
provides an alternative ground to deny class certification.” (Ibid.)
       In considering whether to certify a class, manageability of
individual issues is just as important as the existence of common
questions.9 (Duran, supra, 59 Cal.4th at p. 29; id. at pp. 32–33
[“While common issues among class members” may be “sufficient
to satisfy the predominance prong for certification, the trial
court” must also “determine that these individual issues [can] be
effectively managed in the ensuing litigation.”].) Critically, a
class-action plaintiff cannot foreclose litigation of relevant
defenses even if they turn on individual questions. (Id. at p. 34.)
Here, as discussed, CalPERS indicated its intent to rebut the
presumption of reliance by presenting evidence that any
omissions or misrepresentations were immaterial to individual
class members. That is, CalPERS would show that safety
members would have purchased service credit even if they had
known about the risk of losing their money if they became
disabled. Accordingly, to establish that a class action would be
superior to individual lawsuits, plaintiffs needed to craft a trial
plan that explained how they would manage those questions.
       Instead, plaintiffs’ trial plan wishes the problem away by
insisting that CalPERS has no legitimate individual arguments.
For example: “Many or all of CalPERS’[s] asserted defenses and

9Plaintiffs spend only a paragraph challenging the court’s
manageability finding. We nevertheless exercise our discretion to
address this issue.

                                  22
assertions of individualized matter are without legal or factual
merit, and should be closely scrutinized and briefed. CalPERS’[s]
potential claims of individualized issues such as differences in
each Plaintiff’s subjective intent, subjective understanding, prior
injuries, or work situation are irrelevant under law … .” Later,
plaintiffs write that each of CalPERS’s “representations was a
material term that was not adequately disclosed. Although if
there is no presumption of reliance, it could be that, some think
that one or more of those terms was implied or disclosed.
However, CalPERS’[s] failure to disclose any one of those
material terms is sufficient to breach its fiduciary duty, cause
legal mistake, no consent, and be sufficient grounds for
rescission, [s]o there is no concern over the gradations of
liability.” Overall, the trial plan demonstrates little
understanding about the issues likely to be disputed and provides
no explanation for how those issues will be handled.10

10 The plan acknowledges only a “small number of potential
individualized issues and defenses that are potentially not resolved by
the legal issues, for example if a class member did not sign
standardized forms … .” Then, 43 pages later, plaintiffs again point to
a form-signing problem as the sole legitimate individual issue when
they write, “Other than if a class member did not sign the
standardized forms, which would be CalPERS’[s] defense to prove from
its own records as an exception to its standard practice, there are few
or no relevant factual issues related to liability or CalPERS’[s]
defenses that would be individualized prior to or at the time of
contracting. See Duran. If CalPERS can prove that CalPERS allowed
an individual to invest in the investment without signing a
standardized form contract, then those defenses and individuals can be
dealt with separately. If CalPERS comes forward with a list of
individuals that did not sign the contracts, then these issues can be
heard separately, on an individual or subclass basis after trial on the
common issues.”

                                  23
       Plaintiffs offered that if the court were to find “there is no
presumption or reliance that controls,” they “reserve the rights to
admit statistical evidence, a statistical analysis and expert
testimony, and challenge CalPERS’[s] expert testimony into the
record, and therefore have offered this Trial Plan.” Duran
cautions, however, that “when a trial plan incorporates
representative testimony and random sampling, a preliminary
assessment should be done to determine the level of variability in
the class.” (Duran, supra, 59 Cal.4th at p. 33; see also id. at p. 31
[“a statistical plan for managing individual issues must be
conducted with sufficient rigor”].) Here, however, plaintiffs’ trial
plan includes no expert declarations or statistical data. It
provides no information about how sampling would occur or what
a sufficient sample population would be.11 Instead, it insists—at
length but with no supporting detail—that its analysis would
satisfy Duran.
       Moreover, as the court noted, many class members had
received oral disclosures to supplement what they received in
writing. “Plaintiffs suggest that sampling would be adequate to
establish what employees were told in these conversations and to
establish their reliance (or lack thereof). Plaintiffs tender no
expert opinion in this regard. Their counsel’s opinion that such a
sample could be created is without any foundation. [Citation.]
Further, the statistical plan appears to be nothing more than a
series of individual questions to individual class members.” (See
Duran, supra, 59 Cal.4th at p. 40 [“If a defense depends upon

11The trial plan simply asserts that the “overall population … is fairly
uniform and standardized regarding the characteristics that are
relevant for purposes of determining any relevant factual issues in this
case.”

                                  24
questions individual to each class member, the statistical model
must be designed to accommodate these case-specific
deviations.”].)
       Even without accounting for defense evidence or individual
questions, however, the trial plan failed to accomplish the basics.
As the court explained, plaintiffs’ “trial plan, which is over 50
pages in length, does not present a clear game plan. Rather, like
the [class certification] motion itself, it contains many legal
arguments but little in the way of factual analysis as to how the
various claims can be proved on a class-wide basis.” For example,
the plan states that “Plaintiffs will prove that Plaintiffs’ apparent
consent was not real as it was obtained through duress, menace,
fraud, undue influence, or mistake.” Later, plaintiffs assert that
they will “prove delayed accrual and discovery across the class
from reliance, failure to disclose, mistake, omission,
misrepresentation, adversity, rescission, et al in a fiduciary
context.” In the paragraphs and pages that follow, however, they
never explain how they plan to achieve this.
       In sum, the court in this case found that the individual
issues “in this case render it unmanageable. No reasoned trial
plan to handle this problem is proposed to cure this.” Substantial
evidence supports this conclusion and, therefore, plaintiffs did
not show that a class action would be superior to individual
lawsuits.
5.    The court was not required to resolve the merits of
      materiality.
       Plaintiffs argue at length that the court’s order denying
class certification is fundamentally flawed because the court did
not first resolve the merits of the materiality issue. We disagree.

                                 25
       “Presented with a class certification motion, a trial court
must examine the plaintiff’s theory of recovery, assess the nature
of the legal and factual disputes likely to be presented, and decide
whether individual or common issues predominate. To the extent
the propriety of certification depends upon disputed threshold
legal or factual questions, a court may, and indeed must, resolve
them.” (Brinker, supra, 53 Cal.4th at p. 1025.) But “a court
generally should eschew resolution of such issues unless
necessary.” (Ibid.)
       In particular, “whether an element may be established
collectively or only individually, plaintiff by plaintiff, can turn on
the precise nature of the element and require resolution of
disputed legal or factual issues affecting the merits.” (Brinker,
supra, 53 Cal.4th at p. 1024.) But such inquiries are
circumscribed—and if possible, resolution of the merits of a claim
should be postponed until after class certification is decided,
“with the court assuming for purposes of the certification motion
that any claims have merit.” (Id. at p. 1023.)
       As discussed above, the court here assumed that that
plaintiffs benefitted from presumptions of materiality and
reliance in this case. The court was not required to determine
whether CalPERS would be successful in rebutting those
presumptions—only that CalPERS had demonstrated how it
might do so.12

12To the extent plaintiffs’ argument is that CalPERS is not entitled to
rebut these presumptions as a legal matter, they have presented no
authority to support that contention, and our research has revealed
none.

                                  26
                           DISPOSITION

       The order denying class certification is affirmed. CalPERS
shall recover its costs on appeal.

    NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

                                                 LAVIN, Acting P.J.
WE CONCUR:

       EGERTON, J.

       ADAMS, J.*

*Judge of the Los Angeles Superior Court, assigned by the Chief
Justice pursuant to article VI, section 6 of the California Constitution.

                                   27