Filed 6/19/18
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
TOD HIPSHER, B276486
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BS153372)
v.
LOS ANGELES COUNTY
EMPLOYEES RETIREMENT
ASSOCIATION et al.,
Defendants and Respondents,
COUNTY OF LOS ANGELES,
Real Party in Interest and
Appellant.
APPEAL from a judgment of the Superior Court of Los
Angeles County, Robert H. O’Brien, Judge. Modified and
affirmed.
Rains Lucia Stern St. Phalle & Silver, Stephen H. Silver
and Jacob A. Kalinski for Plaintiff and Appellant, Tod Hipsher.
Steven M. Berliner, Joung H. Yim and Christopher S.
Frederick for Real Party in Interest and Appellant, County of Los
Angeles.
Steven P. Rice, Johanna M. Fontenot and Michel D.
Herrera for Defendant and Respondent, Los Angeles County
Employees Retirement Association.
Xavier Becerra, Attorney General, Thomas Patterson,
Assistant Attorney General, Constance L. LeLouis, Deputy
Attorney General and Anthony P. O’Brien, Deputy Attorney
General, for Defendant and Respondent, the State of California.
_____________________
The Public Employees’ Pension Reform Act of 2013 (Gov.
Code, § 7522 et seq. [PEPRA])1 was enacted, in part, to curb
abuses in public pensions systems throughout the state.
(Alameda County Deputy Sheriff’s Assn. v. Alameda County
Employees’ Retirement Assn. (2018) 19 Cal.App.5th 61, 75
(Alameda), review granted Mar. 28, 2018, S247095.) Section
7522.72 provides a mechanism whereby a public pensioner
forfeits a portion of his or her retirement benefits following a
conviction of a felony offense that occurred in the performance of
his or her official duties.2
1
All undesignated statutory references are to the
Government Code.
2 Section 7522.72 provides, in pertinent part: “(b)(1) If a
public employee is convicted by a state or federal trial court of
any felony under state or federal law for conduct arising out of or
in the performance of his or her official duties, in pursuit of the
office or appointment, or in connection with obtaining salary,
disability retirement, service retirement, or other benefits, he or
she shall forfeit all accrued rights and benefits in any public
2
Shortly after appellant Tod Hipsher retired from the Los
Angeles County Fire Department, he was convicted of a federal
felony for directing an offshore gambling operation (18 U.S.C.
§ 1955).3 Respondent, the Los Angeles County Employees
Retirement Association (LACERA), subsequently reduced
Hipsher’s vested retirement benefits based on the determination
by the County of Los Angeles (County) that his gambling conduct
was committed in the scope of his official duties (§ 7522.72).
Hipsher challenged LACERA’s forfeiture determination by a
retirement system in which he or she is a member to the extent
provided in subdivision (c) and shall not accrue further benefits
in that public retirement system, effective on the date of the
conviction. [¶] . . . [¶]
“(c)(1) A member shall forfeit all the rights and benefits
earned or accrued from the earliest date of the commission of any
felony described in subdivision (b) to the forfeiture date,
inclusive. The rights and benefits shall remain forfeited
notwithstanding any reduction in sentence or expungement of the
conviction following the date of the member’s conviction. Rights
and benefits attributable to service performed prior to the date of
the first commission of the felony for which the member was
convicted shall not be forfeited as a result of this section. [¶]. . .[¶]
“(d)(1) Any contributions to the public retirement system
made by the public employee described in subdivision (b) on or
after the earliest date of the commission of any felony described
in subdivision (b) shall be returned, without interest, to the
public employee upon the occurrence of a distribution event
unless otherwise ordered by a court or determined by the pension
administrator.” (§ 7522.72, subds. (b)-(d).)
3 Section1955 defines an illegal gambling business as an
operation which (1) violates state law, (2) involves five or more
persons, and (3) operated for a period in excess of thirty days, or
has a gross revenue of $2,000 in any single day.
3
petition for writ of mandate and a complaint seeking declaratory
relief. The trial court entered a mixed judgment. It issued a
peremptory writ of mandate directing the County to afford
adequate due process protections before reducing Hipsher’s
retirement benefits, while finding in favor of the defendants with
respect to Hipsher’s cause of action for declaratory relief.
Hipsher contends section 7522.72 is unconstitutional as
applied to him because it impaired his contractual right to his
vested pension, and is an unlawful ex post facto law. The County
disagrees and contends it owes Hipsher no additional due process
and is not bound by the trial court judgment because it was not
named as a respondent in the peremptory writ.
We conclude section 7522.72 is constitutionally sound, but
that LACERA, not the County, bears the burden to afford
Hipsher the requisite due process protections in determining
whether his conviction falls within the scope of the statute.
Accordingly, we modify the judgment to require the County to
provide the requisite due process, while affirming the remainder
of the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Hipsher was hired as a firefighter with the Los Angeles
Fire Department in 1983. Starting around 2001, he began
conducting an illegal gambling operation in Orange and Los
Angeles Counties, routing customer wages and profits through a
company based in Costa Rica. When bettors lost, Hipsher or his
associates collected the amounts due under the terms of the
wager. Unbeknownst to Hipsher, beginning in approximately
2011, he recruited undercover agents from the Department of
4
Homeland Security and the Orange County District Attorney’s
Office to collect unpaid or past due gambling debts.
In October 2013, the United States Attorney filed a one-
count information alleging Hipsher conducted, managed,
supervised, directed and owned an illegal gambling business. (18
U.S.C. § 1955.) Hipsher retired from the fire department less
than two months after the information was filed. He was
convicted, the following year, of the charged offense pursuant to
his guilty plea.
LACERA notified Hipsher that it was required to adjust his
retirement benefits pursuant to section 7522.72. According to the
letter, the Los Angeles County Department of Human Resources
determined that Hipsher’s conviction was job-related. This
determination was based on investigation reports from the
United States Department of Homeland Security.
According to these reports, Hipsher met with undercover
federal agents at a fire station located in Bell, California.
Hipsher had requested the meeting to discuss ongoing debt
collections and obtain counterfeit merchandise for resale. The
undercover agents presented themselves as motorcycle gang
members. Hipsher gave them a tour of the fire station, allegedly
showing them the room where he conducted part of the operation.
The agents used covert audio and video recording devices during
their meetings with Hipsher.
LACERA made the following adjustments to Hipsher’s
benefits:
Expunging 12 years and nine months of service credits.
Expunging $97,060.77 in contributions and $48,183.7 in
interest from his retirement fund.
Reducing his retirement allowance from $6,843.14 to
5
$2,932.42.
Reducing the County’s health care premium subsidy
from 100 percent to 68 percent.
Voiding the Board of Retirement decision granting him a
service-connected disability retirement.
LACERA sent a letter to Hipsher’s attorney confirming
that there were no administrative remedies to challenge the
benefit adjustment determination.4 Hipsher filed a petition for
writ of mandate and complaint for declaratory relief. He alleged
that reduction of his vested retirement benefits constituted an
unconstitutional ex post facto application of section 7522.72,
violated the contract clause of the California Constitution, and
was invalid because there was no nexus between his crime and
the performance of his official duties.
The trial court requested supplemental briefing as to
whether Hipsher had a due process right to his original
retirement benefits and, if so, whether he was afforded sufficient
due process protections. In a lengthy statement of decision, the
court issued judgment in favor of the defendants with respect to
Hipsher’s contract and ex post facto claims, and in favor of
Hipsher with respect to the due process issue. As to the latter,
the court issued a peremptory writ of mandate directing
4 According to the County, it recently “implemented an
interim process consistent with the trial court’s ruling, whereby
the County provides notice to an employee and the right to
respond in writing, if the County has a reasonable basis to
believe that a conviction is job related and may result in pension
forfeiture. Such process is afforded to an employee prior to any
notification to LACERA.” Notwithstanding this interim
procedure, the County does not concede that any due process is
required.
6
LACERA to set aside the reduction in Hipsher’s pension benefits,
and return the difference between his full pension and the
allowance he received after the reduction. The court also ordered
the County to re-initiate proceedings under section 7522.72 in a
manner that affords Hipsher sufficient due process protections.5
Both Hipsher and the County filed timely notices of appeal.
DISCUSSION
We review questions regarding the constitutionality of a
statute de novo. (Vergara v. State of California (2016) 246
Cal.App.4th 619, 642.) “The ultimate questions of whether
vested contractual rights exist and whether impairments are
unconstitutional present questions of law subject to independent
review.” (Board of Administration v. Wilson (1997) 52
Cal.App.4th 1109, 1129.)
I
Hipsher contends section 7522.72 is unconstitutional as
applied to him because his vested contractual right to receive a
pension was not subject to reduction even if he was convicted of
a job-related crime.
A
The contract clause of the California Constitution
prohibits the state from enacting a law impairing the obligation
5 The trial court found the County “is free to devise
whatever procedures it decides will best and most efficiently
satisfy the requirements of due process”; however, these
procedures must include (1) notice of the impending forfeiture, (2)
an opportunity for the pensioner to submit evidence and refute
the proposed forfeiture before an impartial decision maker, and
(3) a written decision.
7
of contracts. (Cal. Const., art. I, § 9.) By this clause, the state’s
ability to modify its own contracts with other parties, or
contracts between other parties, is limited. (Valdes v. Cory
(1983) 139 Cal.App.3d 773, 783 (Valdes).
“[O]nce a public employee has accepted employment and
performed work for a public employer, the employee obtains
certain rights arising from the legislative provisions that
establish the terms of the employment relationship—rights that
are protected by the contract clause of the state Constitution
from elimination or repudiation by the state.” (White v. Davis
(2003) 30 Cal.4th 528, 566.)
Not every contractual impairment runs afoul of the
contracts clause. (Teachers’ Retirement Board v. Genest (2007)
154 Cal.App.4th 1012, 1026.) “‘The constitutional prohibition
against contract impairment does not exact a rigidly literal
fulfillment; rather, it demands that contracts be enforced
according to their “just and reasonable purport” . . . .’” (Allen v.
Board of Administration (1983) 34 Cal.3d 114, 119-120 (Allen).)
An appellant who claims the calculation of his retirement
benefits violates his vested contractual rights under the state
contract clause has the burden of “‘mak[ing] out a clear case,
free from all reasonable ambiguity,’ a constitutional violation
occurred. [Citation.]” (Deputy Sheriffs’ Assn. of San Diego
County v. County of San Diego (2015) 233 Cal.App.4th 573, 578.)
There is a strong presumption that statutory amendments
are constitutional. (See County of Sonoma v. State Energy
Resources Conservation etc. Com. (1985) 40 Cal.3d 361, 370.)
Any doubt as to the Legislature’s power to act should be
resolved in favor of the legislative action. (Alameda, supra, 19
Cal.App.5th at p. 90.) “The reason for the elevated burden on
8
plaintiffs raising a constitutional challenge under the contracts
clause is this. ‘“The state occupies a unique position in the field
of contract law because it is a sovereign power. This gives rise
to general principles which may limit whether an impairment
has [occurred] as a matter of constitutional law.”’” (Cal Fire
Local 2881 v. California Public Employees’ Retirement System
(2016) 7 Cal.App.5th 115, 124 (Cal Fire).)
Analysis of a contract-clause claim requires a two-step
process. First, the court assesses the nature and extent of any
contractual obligation. (Valdes, supra, 139 Cal.App.3d at p.
785.) Here, it is clear Hipsher had a vested contractual right to
certain retirement benefits. (See Kern v. City of Long Beach
(1947) 29 Cal.2d 848, 855-856 [employee earns the right to
pension after completing prescribed period of service] (Kern);
Betts v. Board of Administration of Public Employees’
Retirement System (1978) 21 Cal.3d 859, 863 [right to pension
benefits accrues upon acceptance of employment].)
Second, if the rights at issue are vested, the court inquires
into “the scope of the Legislature’s power to modify” the
contractual right. (Valdes, supra, 139 Cal.App.3d at p. 785.)
Legislative deference is broad, as even “a substantial
[contractual] impairment may be constitutional if it is
‘reasonable and necessary to serve an important public purpose.’
[Citation.]” (Id. at p. 790.) Here, section 7522.72 serves the
important public purpose of ensuring the integrity of public
pension systems. (See Alameda, supra, 19 Cal.App.5th at p. 75.)
A public employee’s vested retirement benefits can be
defeated upon the occurrence of a “condition subsequent.”
(Kern, supra, 29 Cal.2d at p. 853; Betts v. Board of
Administration of Public Employees’ Retirement System, supra,
9
21 Cal.3d at p. 863; Dickey v. Retirement Board (1976) 16 Cal.3d
745, 749.) Kern provided one example of a “condition
subsequent”—lawful termination of employment before
completion of the period of service—but did not define the term.
(Kern, supra, 29 Cal.2d at p. 853.) We conclude a felony
criminal conviction stemming from the pensioner’s public
service constitutes a condition subsequent, thus permitting a
limited forfeiture of vested retirement benefits under section
7522.72.6
6 Other states have reached a similar conclusion under
pension forfeiture laws similar to section 7522.72. (E.g.,
Hopkins v. Oklahoma Public Employees Retirement System
(10th Cir. 1998) 150 F.3d 1155, 1162 [right to pension benefits
contingent upon public employee’s “duty of honorable service”];
Kerner v. State Employees’ Retirement System (1978) 72 Ill.2d
507, 514-515 [Illinois pension forfeiture law, following felony
conviction, does not violate state’s contract clause]; Masse v.
Board of Trustees (1981) 87 N.J. 252, 256 [state legislature
“must have intended honorable performance as a component of
creditable service”]; Hames v. City of Miami Firefighters’ and
Police Officers’ Trust (2008) 980 So.2d 1112, 1114 [“In Florida, a
retired police officer forfeits all rights to receive public
retirement benefits in excess of his or her accumulated
contributions if the officer ‘is convicted of a specified offense
committed prior to retirement”’]; Steigerwalt v. City of St.
Petersburg (1975) 316 So.2d 554, 556 [upholding pension law
requiring sanctions against retired employee who commits
misconduct]; Booth v. Sims (1994) 193 W.Va. 323, 338 [“If an
employee engages in misconduct during his or her public
service, he or she may forfeit rights to collect a pension later”];
Bassett v. Pekin Police Pension Board (2005) 362 Ill.App.3d 235
[police officer convicted of felony forfeits right to pension
benefits, but is entitled to refund of pension contributions].)
10
The opinion of the Florida Supreme Court is particularly
persuasive on this point: “Sanctions are commonly imposed to
assure the faithful and honest discharge of the duties of the
[public] employee. What these sanctions should be, in the case
of public employees, is peculiarly a function of the Legislature.
It involves the exercise of the law-making power. This is, of
course, not an unbridled power, but it is a power that should be
interfered with by the judicial branch only when it is exercised
in such an unreasonable, arbitrary and capricious manner,
bearing no relation whatever to the valid objects of the
Legislation, as to be violative of some specific constitutional
provision such as equal protection or due process.” (Steigerwalt
v. City of St. Petersburg, supra, 316 So.2d at p. 556.)
Relying on Allen, supra, 34 Cal.3d 114, Hipsher contends
LACERA is prohibited from modifying his pension benefits, no
matter the malfeasance, without providing a “comparable new
advantage.” We disagree.
Allen considered whether pension payments to retired
legislators could be reduced pursuant to new statutory and
constitutional language. (Allen, supra, 34 Cal.3d at pp. 118-
119.) The Supreme Court reversed the trial court’s conclusion
that this violated the contract clauses of the state and federal
constitutions. (Id. at pp. 117, 125.) But the court noted, in
dicta, that with respect to active employees, any modification of
a vested pension rights must (1) be reasonable, (2) bear a
material relation to the theory and successful operation of a
pension system, and (3) be accompanied by a “comparable new
advantage.” (Id. at p. 120.) The court also observed that the
scope of power is even more restrictive as to retired employees.
(Ibid.)
11
However, subsequent case law has held that the term
“must” permeating the Allen opinion was “[not] intended to be
given the literal and inflexible meaning attributed to it.” (Marin
Assn. of Public Employees v. Marin County Employees’
Retirement Assn. (2016) 2 Cal.App.5th 674, 698 (Marin).)
Indeed, if Allen intended “must” to have a literal meaning, the
retirees in that case would have prevailed on appeal, but they
did not. (Id. at p. 699.) Thus, a modification of vested pension
rights need not invariably be accompanied by a comparable new
advantage. Indeed, it would be anomalous to suggest that the
Legislature must reward an employee for conviction of a job-
related felony by providing a new comparable advantage in the
context of a section 7522.72 forfeiture.
Assuming Hipsher operated the gambling enterprise
during the course of his official duties, such conduct
constituted a condition subsequent permitting forfeiture of
certain service credits pursuant to section 7522.72. There is a
strong presumption that section 7522.72 is constitutional. (See
California Housing Finance Agency v. Patitucci (1978) 22 Cal.3d
171, 175.) Hipsher fails to make out a clear case, free from
reasonable ambiguity, that any contract clause violation
occurred. (Deputy Sheriffs’ Assn.of San Diego County v. County
of San Diego, supra, 233 Cal.App.4th at p. 578.)
B
In MacIntyre v. Retirement Board of City and County of
San Francisco (1941) 42 Cal.App.2d 734 (MacIntyre), the
petitioners (police lieutenants) applied for retirement after
satisfying all of the prerequisites of their retirement plans.
Three days later, a complaint against each of the petitioners
was submitted to the Board of Police Commissioners alleging
12
conduct unbecoming an officer, insubordination and
disobedience of orders. (Ibid.) The Board found them “guilty”
and dismissed them from the department. (Id. at p. 735.)
On appeal, petitioners contended their rights to a pension
vested upon the filing of their retirement application and could
not be defeated by their subsequent dismissal. (MacIntyre,
supra, 42 Cal.App.2d at p. 735.) The Court of Appeal disagreed,
concluding, “[i]t is assumed that upon acceptance of a position
as an officer or employee of a governmental agency, an
appointee will perform his duties conscientiously and faithfully.”
(Ibid.) Moreover, “[i]t is never contemplated that an officer or
employee guilty of conduct warranting dismissal should
continue in office or be permitted to receive other emoluments
offered as an inducement to honesty and efficiency. The right to
a pension is not indefeasible, and an employee, though
otherwise entitled thereto, may not be guilty of misconduct in
his position and maintain his rights notwithstanding such
dereliction of duty.” (Ibid.)
MacIntyre provides helpful guidance as to whether a
public employee is categorically entitled to a full pension,
regardless of misconduct, but it did not consider the
constitutionality of the petitioner’s retirement deprivation.
Hipsher urges us to apply the reasoning in Skaggs v. City
of Los Angeles (1954) 43 Cal.2d 497. In Skaggs, the plaintiff, a
police officer, was arrested for suspicion of bribery. (Id. at
p. 499.) The chief of police relieved him from duty and filed
charges of conduct unbecoming an officer. (Ibid.) Plaintiff was
dismissed after he was convicted of bribery, but the Court of
Appeal ultimately reversed the conviction. (Ibid.) Plaintiff then
sought reinstatement to the force, but he was unsuccessful.
13
(Ibid.) The pension board subsequently denied his application
for a service pension. (Ibid.)
Distinguishing MacIntyre, supra, 42 Cal.App.2d 734, the
Supreme Court held that plaintiff’s removal from office could
not result in the forfeiture of his pension benefits because it was
“not pursuant to any charter provision or specific legislation of
any nature whatsoever but is merely a refusal of the pension
board to grant plaintiff’s application for retirement on pension.”
(Skaggs v. City of Los Angeles, supra, 43 Cal.2d at p. 503.)
Skaggs does not apply to this case because the reduction to
Hipsher’s retirement benefits was executed pursuant to the
legislative mandate in section 7522.72, not LACERA’s unilateral
refusal to pay his full pension.
Hipsher also contends his benefit forfeiture is barred by
Kern, supra, 29 Cal.2d 848 and Wallace v. City of Fresno
(1954) 42 Cal.2d 180 (Wallace). We disagree.
In Kern, the petitioner requested retirement after
completing 20 years of service as a firefighter. (Kern, supra, 29
Cal.2d at p. 850.) The city amended its charter to eliminate
pensions altogether for members who, like petitioner, were not
already eligible for retirement. (Ibid.) The Court of Appeal
concluded (1) a public employee’s vested contractual right to a
pension “is not rigidly fixed by the specific terms of the
legislation in effect during any particular period in which he
serves,” (2) the employee does not have a right to any fixed or
definite benefits, but only to a “substantial or reasonable
pension,” and (3) the city violated its contractual obligations by
enacting legislation that completely repealed petitioner’s vested
right to a pension. (Id. at pp. 855–856.)
Hipsher’s case is distinguishable from Kern for several
14
reasons. The issue in Kern was whether the pensioner’s
retirement benefits already had vested when the city eliminated
pensions altogether. It is undisputed that Hipsher’s benefits
were fully vested when he retired in 2013, an event that took
place before he pled guilty to the federal offense. Moreover, the
repeal of the pension benefits in Kern did not stem from any
misconduct, whereas Hipsher’s case involves an alleged job-
related felony. Finally, unlike the city in Kern, LACERA did not
completely eliminate Hipsher’s benefits; instead, it preserved
the benefits attributable to service performed prior to the date of
the first commission of his offense. (§ 7522.72, subd. (c)(1).)
In Wallace, a retired former police chief was convicted of
preparing a fraudulent income tax return. (Wallace, supra, 42
Cal.2d at p. 181.) City ordinances gave the pension board
discretion to terminate a retiree’s pension following a conviction
for a felony or a crime involving moral turpitude. (Id. at p. 182.)
The pension board ordered the termination of Wallace’s
retirement benefits. (Id. at p. 181.) Citing Kern, the Supreme
Court held the ordinances were invalid because they did not
constitute a “reasonable modification” to Wallace’s vested
pension. (Id. at p. 185.) In reaching this conclusion, Wallace
noted that “termination of all pension rights upon conviction of
a felony after retirement does not appear to have any material
relation to the theory of the pension system or to its successful
operation.” (Ibid.)
Hipsher’s case is different. In Wallace, the ordinance
applied to any felony that occurred after the pensioner’s
retirement; section 7522.72 is limited to felonious conduct
during the scope of the pensioner’s official duties. (§ 7522.72,
subd. (b)(1).) Moreover, section 7522.72 forfeitures are material
15
to the successful operation of public pension funds.
(See Alameda, supra, 19 Cal.App.5th at p. 75 [PEPRA was
enacted to help curb abuses in public pension systems].) Section
7522.72 also does not eliminate all of the pensioner’s vested
pension rights like the ordinances in Wallace; rather, it forfeits
the benefits accrued from the earliest date of the commission of
a qualifying felony offense. (§ 7522.72, subd. (c)(1).)
Application of the forfeiture procedures under section
7522.72 was not unconstitutional as applied to Hipsher.
II
Hipsher asserts the forfeiture provision in section 7522.72
violates the ex post facto clause of the California Constitution.
We disagree.
The state is barred from enacting ex post facto laws
under both the federal and California Constitutions. (U.S.
Const., art. I, § 10, cl. 1; Cal. Const., art. I, § 9.) The ex post
facto clause prohibits laws which “retroactively alter the
definition of crimes or increase the punishment for criminal
acts.” (Collins v. Youngblood (1990) 497 U.S. 37, 43.)7 The
clause “ensures that individuals have ‘fair warning’ about the
effect of criminal statutes,” and “‘restrict governmental power by
restraining arbitrary and potentially vindictive legislation.’
[Citation.]” (Landgraf v. USI Film Products (1994) 511 U.S.
244, 266-267, fn. omitted.)
The prohibition against ex post facto legislation applies
almost exclusively to criminal statutes but, in limited
circumstances, it can apply to civil legislation. (Roman Catholic
7 The federal and state ex post facto clauses are interpreted
identically. (People v. Helms (1997) 15 Cal.4th 608, 614.)
16
Bishop of Oakland v. Superior Court (2005) 128 Cal.App.4th
1155, 1162.) “Despite the Legislature’s clear intent to establish
civil, not criminal proceedings, we will find an ex post facto
violation if the statutory scheme is so punitive in purpose or
effect that it negates the Legislature’s intentions. This requires
the ‘clearest proof,’ however.” (Id. at p. 1170.) Thus, the fact
that a statute is labeled as civil is not dispositive. (Id. at p.
1162.)
“Whether a statutory scheme is civil or criminal under the
ex post facto doctrine is first of all a question of statutory
construction. We consider the statute’s text and structure to
determine the legislative objective. If we conclude that the
statute as applied retroactively was intended to punish, then
our inquiry is over and we will find an ex post facto violation.
[Citation.]” (Roman Catholic Bishop of Oakland v. Superior
Court, supra, 128 Cal.App.4th at p. 1169.)
Section 7522.72 is a civil statute, and Hipsher concedes
the Legislature did not intend it to be criminal in nature. He
contends, however, that the purpose and effect of
section 7522.72 are so punitive that it must be considered
punishment. He is mistaken.
The purpose of PEPRA was, in part, “‘to reset overly
generous and unsustainable pension formulas for both current
and future workers.’” (Marin, supra, 2 Cal.App.5th at pp. 681-
682, quoting Little Hoover Com., Public Pensions for Retirement
Security (Feb. 2011), p. 53.) Stated another way, PEPRA was
enacted “in an attempt to curb what were seen as pervasive
abuses in public pension systems throughout
California, . . .” (Alameda, supra, 19 Cal.App.5th at p. 75.)
“Only the ‘clearest proof’ will suffice to override the
17
Legislature’s stated intent and render a nominally civil statute
penal for ex post facto purposes. [Citation.]” (21st Century
Insurance Co. v. Superior Court (2005) 127 Cal.App.4th 1351,
1362.) In making this determination, courts consider the
following seven factors: (1) whether the sanction involves an
affirmative disability or restraint, (2) whether it has historically
been regarded as a punishment, (3) whether it comes into play
only on a finding of scienter, (4) whether its operation will
promote the traditional aims of punishment—retribution and
deterrence, (5) whether the behavior to which it applies is
already a crime, (6) whether there is a rational alternative
purpose, and (7) whether it appears excessive in relation to the
alternative purpose assigned. (Kennedy v. Mendoza-Martinez
(1963) 372 U.S. 144, 168-169 (Mendoza-Martinez).) These
factors represent “‘useful guideposts,’” but are “‘neither
exhaustive nor dispositive.’” (Smith v. Doe (2003) 538 U.S. 84,
97.)
The forfeiture in section 7522.72 satisfies the fifth factor
because it applies to behavior which is already a crime. The
fourth factor is arguably satisfied because the forfeiture will
promote the traditional aims of punishment—retribution and
deterrence. The remaining factors are not satisfied.
Regarding the first factor, the loss of retirement benefits
does not constitute an “affirmative disability or restraint”. “The
paradigmatic restraint is imprisonment. [Citation.]” (21st
Century Insurance Co. v. Superior Court, supra, 127 Cal.App.4th
at p. 1364.) Unlike imprisonment or similar restraints on
liberty, civil penalties such as a forfeiture of retirement benefits
do not constitute an “affirmative disability or restraint.” (See
ibid.)
18
Turning to the second factor, a reduction in retirement
benefits is not historically regarded as punishment in a penal
sense. (See e.g., United States v. Ursery (1996) 518 U.S. 267,
270-271 [civil forfeitures do not constitute punishment];
MacLean v. State Board of Retirement (2000) 432 Mass. 339,
351-352 [revocation of pension benefits following a job-related
conviction is not criminal punishment]; Doherty v. Retirement
Board of Medford (1997) 425 Mass. 130, 136-137 [forfeiture of
retirement benefits following a job-related conviction does not
render statute “so punitive as to overcome its restitutionary
purpose”].) Moreover, Hipsher’s first claim of error is that
section 7522.72 violates the contracts clause.
With respect to the third factor, scienter is not required
because section 7522.72 applies to a conviction for “any felony”
arising out of the performance of his or her official duties.
(§ 7522.72, subd. (b).)
As to the sixth factor, one of the purposes underlying
PEPRA was to curb pension abuse and ensure adequate funding
of the system as a whole. (See Alameda, supra, 19 Cal.App.5th
at p. 75.) Preserving the pension system by curbing abuses is a
rational, nonpunitive purpose.
Turning to the seventh factor, the pension reduction
effected by section 7522.72 is not excessive in relation to the
alternative purpose assigned. The forfeiture is limited to the
period during which the pensioner committed the job-related
felony. (§ 7522.72, subd. (c)(1).) Moreover, any contributions to
the fund made by the pensioner are returned “upon the
19
occurrence of a distribution event.”8 (§ 7522.72, subd. (d)(1).)
The forfeiture in section 7522.72 is proportional to the
wrongdoing.
We conclude the Mendoza-Martinez factors do not override
the legislative intent underlying PEPRA. Hipsher fails to
demonstrate his case falls within the “limited circumstances” in
which the ex post facto clause applies to civil legislation.
III
The County contends the trial court erred by issuing the
writ of mandate because (1) Hipsher was not owed any
additional due process prior to the reduction to his retirement
benefits, (2) any additional due process, if owed, must be
provided by LACERA, and (3) the County was not named as a
respondent in the writ.9
LACERA asserts the writ was erroneously issued because
(1) it had a ministerial duty to adjust Hipsher’s retirement
benefits once the County provided notice of Hipsher’s job-related
felony conviction, (2) the Legislature did not intend due process
other than the process in the underlying criminal proceeding
itself, and (3) the County should provide any additional process
owed to Hipsher.
8 “Distribution
event” includes separation from
employment, death, or retirement. (§ 7522.72, subd. (d)(3).)
9 The caption page of the peremptory writ names LACERA
as the respondent and the County as a real party in interest;
however, the text of the writ itself names both LACERA and the
County as respondents. This contention is moot in light of our
disposition regarding the County’s second argument.
20
A. Standard of Review
When reviewing a trial court’s ruling on a writ of mandate,
“‘“the appellate court is ordinarily confined to an inquiry as to
whether the findings and judgment of the trial court are
supported by substantial, credible and competent evidence. This
limitation, however, does not apply to resolution of questions of
law where the facts are undisputed. In such cases, as in other
instances involving matters of law, the appellate court is not
bound by the trial court’s decision, but may make its own
determination.’” [Citations.]” (Alameda, supra, 19 Cal.App.5th
at pp. 89–90.)
B. The Reduction to Hipsher’s Vested Pension Implicated His Due
Process Rights
A person may not be deprived of life, liberty or property
without due process of law. (U.S. Const., 14th Amend.; Cal.
Const., art. I, § 7, subd. (a).) The due process clause protects an
individual’s liberty interest in freedom from arbitrary
adjudicative procedures. (People v. Ramirez (1979) 25 Cal.3d
260, 264, 268.) The requirements of due process extend to
administrative adjudications. (Today’s Fresh Start, Inc. v. Los
Angeles County Office of Education (2013) 57 Cal.4th 197, 214.)
The threshold question is whether Hipsher’s retirement
benefits are a property interest encompassed within Fourteenth
Amendment protection. We conclude that they are.
The refusal to pay a public retiree’s vested benefits is an
act under color of state law. (See Thorning v. Hollister School
Dist. (1992) 11 Cal.App.4th 1598, 1610.) The deprivation of a
public employee’s vested pension invokes a property right, “‘the
taking of which would be a denial of Due Process.’” (Ibid.;
accord, Pearson v. Los Angeles County (1957) 49 Cal.2d 523,
21
532.) As articulated by the Supreme Court of the United States,
“[t]he Fourteenth Amendment’s procedural protection of
property is a safeguard of the security of interests that a person
has already acquired in specific benefits.” (Board of Regents of
State Colleges v. Roth (1972) 408 U.S. 564, 576.)
These decisions make clear that some form of due process
is required before the state may reduce a pensioner’s vested
retirement benefits. To allow otherwise would invite the kind of
arbitrary and capricious conduct the due process clause seeks to
avoid. (See Nebbia v. New York (1934) 291 U.S. 502, 525.)
C. What Process is Required?
A public employee who commits a job-related felony “shall
forfeit” all benefits, other than their own contributions, earned
from the earliest date of the commission of a qualifying felony.
(§ 7522.72, subds. (b)(1), (c)(1).) However, section 7522.72 does
not provide a mechanism for the pensioner to challenge an
adverse decision.
When protected interests are implicated, as they are in
this case, we must decide what procedures are required to
satisfy due process. (Murden v. County of Sacramento (1984)
160 Cal.App.3d 302, 307.) The answer is evident when the
conviction, on its face, necessarily stems from a public
employee’s performance of official duties. (E.g., Pen. Code,
§§ 424 [embezzlement of public funds]; 68 [receipt of bribe by
public officer]; 425 [negligent handling of public moneys]; 86
[receipt of bribe by legislator]; § 93 [receipt of bribe by judicial
officer]; § 118.1 [false statement in criminal report by peace
22
officer]; 289.6, subd. (i) [sexual activity with confined adult by
public employee with prior conviction].)10
The criminal proceeding leading to conviction of a crime
that per se involves the public employee’s official duties and
which therefore, as a matter of law, subjects the employee to
benefit forfeiture under section 7522.72, necessarily satisfies
any due process concerns. “In such cases there is no real
necessity to examine the facts, resolve any conflicts in the
evidence, and exercise any judgment with respect thereto,
[because] the only question is a legal one, i.e., whether the
[person] was convicted of a crime of the character specified in
the statute [Citations.] In these cases due process is satisfied
because the [person] had his day in court when he was put to
trial for and convicted of the commission of such crime.
[Citation.]” (Slaughter v. Edwards (1970) 11 Cal.App.3d 285,
294.)
1. Hipsher Was Deprived of Due Process
The issue is more complex when the crime does not
necessarily arise from the scope of the pensioner’s public duties.
(See e.g., Slaughter v. Edwards, supra, 11 Cal.App.3d at p. 294
[in cases where the conviction itself is not dispositive, an
independent examination is required].) That is the case before
us. Hipsher’s crime for operating an illegal gambling business
(18 U.S.C. § 1955) did not, on its face, involve the performance of
his official duties. Nor does the statement of facts set forth in
Hipsher’s plea agreement reference where he conducted the
gambling operation. He admitted the gambling violation but did
10 This is by no means an exhaustive list of qualifying
crimes.
23
not admit that it occurred in the performance of his public
employment.
In determining that Hipsher’s conviction was job-related,
and therefore qualified as a basis for forfeiture under section
7522.72, the County Human Resources manager relied on
Homeland Security reports prepared as part of the investigation
of Hipsher’s federal criminal case.11 It appears Hipsher was not
notified of this review. The County then sent a referral letter to
LACERA indicating Hipsher’s conviction was related to his job.
Hipsher was not sent a copy of that letter.
LACERA automatically reduced Hipsher’s retirement
benefits upon receiving the referral letter. The letter notes that
“[s]ince the law requires the felony to be job related, the County
Department of Human Resources (DHR) is responsible for
making a determination that the felony is job-
related.”
We conclude that the County’s exclusive reliance on the
Homeland Security investigation reports did not provide
Hipsher notice and an opportunity to be heard as to whether his
conviction qualifies as a job-related felony offense under section
7522.72.
“In administrative proceedings, the requisites of due
process will vary according to the competing interests at issue,
so long as basic requirements of notice and hearing are satisfied.
[Citations.]” (Rupf v. Yan (2000) 85 Cal.App.4th 411, 428-429.)
At a minimum, Hipsher was entitled to written notice
reasonably calculated to apprise him of the pendency of the
11 Homeland Security reports, like police reports, are not
part of the record of conviction. (Cf. Draeger v. Reed (1999) 69
Cal.App.4th 1511, 1523.)
24
section 7522.72 action, and the right to present his objections
before an impartial decision maker. (Bergeron v. Department of
Health Services (1999) 71 Cal.App.4th 17, 24 [due process
requires opportunity to present objections]; Haas v. County of
San Bernardino (2002) 27 Cal.4th 1017, 1025 [due process
requires the adjudicator to be impartial].) “‘A formal hearing,
with full rights of confrontation and cross-examination is not
necessarily required. [Citation.]’” (Bergeron, at p. 23.) Indeed,
the County now affords this model of process to pensioners who
may be subject to forfeiture pursuant to section 7522.72.12
2. Hipsher was Prejudiced by the Denial of Due Process
The County contends that even assuming Hipsher was
entitled to some form of additional due process, he was not
prejudiced by any deficiency in process. Generally, a party is
not deprived of due process in an administrative proceeding
unless the deficiency in process resulted in prejudice. (See
Hinrich v. County of Orange (2004) 125 Cal.App.4th 921, 928
[procedural due process violations assessed for harmlessness].)
In this case, insofar as the record shows, prejudice is
evident because (1) Hipsher’s conviction does not, on its face,
satisfy the forfeiture provisions of section 7522.72, (2) the
verified petition for writ of mandate rejected the notion that his
conviction arose out of the performance of his official duties, (3)
information contained in the Homeland Security reports is not
part of the record of conviction, and (4) Hipsher was not given
notice or an opportunity to contest the allegation that his felony
conviction was job-related.
We conclude Hipsher was prejudicially denied his
constitutionally protected due process rights. At a minimum,
12 See footnote 4, ante.
25
Hipsher was entitled to notice of the proposed forfeiture under
section 7522.72, along with an opportunity to contest his
eligibility for forfeiture before an impartial decision maker. The
remaining issue is which public entity is required to adjudicate
these rights.
D. Section 7522.72 is Ambiguous as to Which Agency is Tasked
with Determining Whether the Offense is Job-Related
The final question is whether the County or LACERA is
obligated to afford the required due process. The trial court
found the County was obliged to do so because it is “the
governmental entity that made the decision that ultimately
deprived Petitioner of his property.” We disagree.
The judiciary’s role in construing a statute is to ascertain
the intent of the Legislature so as to effectuate the purpose of
the law. (Merced Irrigation District v. Superior Court (2017)
7 Cal.App.5th 916, 924 (Merced).) To this end, courts start with
the words of the statute, giving them their usual and ordinary
meaning. (Ibid.)
Section 7522.72 requires the prosecuting agency, within
60 days after a qualifying conviction, to notify the public
employer who employed the employee at the time of the
commission of the felony of (1) the date of conviction, and (2) the
date of the first known commission of the felony. (§ 7522.72,
subd. (e)(1).) In turn, the public employer is required to notify
the public retirement system of the employee’s qualifying
conviction within 90 days of the conviction. (§ 7522.72, subd.
(f).) Section 7522.72 does not address which entity determines
whether the pensioner’s conviction was connected to
his or her official duties.
“When statutory language is susceptible to more than one
26
reasonable interpretation, courts must (1) select the
construction that comports most closely with the apparent
intent of the Legislature, with a view to promoting rather than
defeating the general purpose of the statute and (2) avoid an
interpretation that would lead to absurd consequences.
[Citation.]” (Merced, supra, 7 Cal.App.5th at p. 925.) One
difficulty in ascertaining the intent of the Legislature is that, in
many cases, the Legislature “‘“had no real intention, one way or
another, on the point in question; that if they had, they would
have made their meaning clear . . . .”’’ [Citation.]” (Ibid.)
This difficulty is present here because nothing in the text
or legislative history of section 7522.72 contemplated that the
pensioner’s conviction would not, on its face, arise out of the
performance of his or her official duties. Given that section
7522.72 is ambiguous, “[w]e must select the construction that
comports most closely with the apparent intent of the
Legislature, with a view to promoting rather than defeating the
general purpose of the statute, and avoid an interpretation that
would lead to absurd consequences. [Citation.]” (People v.
Jenkins (1995) 10 Cal.4th 234, 246.)
E. LACERA Shall Afford the Requisite Due Process
LACERA contends “it is reasonable to conclude that the
Legislature intended that the employer make the ultimate
determination whether the elements under Section 7522.72
[have] been satisfied and to report this information to the
retirement system.” In essence, LACERA asserts it had a
ministerial duty to initiate forfeiture proceedings once the
County reported Hipsher’s job-related conviction, pursuant to its
duty set forth in section 7522.72, subdivision (f).
The California Constitution provides that the retirement
27
board of each public pension holds the “sole and exclusive
responsibility” to administer the system. (Cal. Const. art. XVI,
§ 17, subd. (a).) To this effect, “LACERA’s Board of Retirement
[citation] is charged with the responsibility of ascertaining the
eligibility for and paying pension benefits to eligible
employees . . . .” (Weber v. Board of Retirement of Los Angeles
County Retirement Association (1998) 62 Cal.App.4th 1440,
1442.)
Indeed, once a person has separated from his or her public
employment, the County’s Civil Service Commission “has no
further jurisdiction except in the limited situations specified in
the governing constitutional charter or statutory provisions.”
(Zuniga v. Los Angeles County Civil Service Commission (2006)
137 Cal.App.4th 1255, 1260.) Section 7522.72 does not
expressly include any such provision; thus, in imposing a
reporting duty on the County, the statute does not disregard the
established rule that the retirement board of a public pension—
here, LACERA—has the obligation to determine eligibility or
ineligibility for pensions.
Subdivision (f) requires the public employer to notify the
retirement system of the employee’s qualifying conviction
“within 90 days of the conviction.” (§ 7522.72, subd. (f).) Were
the County responsible for providing the necessary due process
then, within 90 days of the conviction, it would have to (1)
discover the conviction, (2) comb through the criminal records
(which often span thousands of pages) to determine whether it
qualifies as a job-related felony, (3) provide notice to the
pensioner, (4) determine the earliest date of commission, (5) give
the employee an opportunity to contest the County’s
preliminary finding, (6) render a decision, and (7) perhaps
28
provide additional layers of administrative review.13 Requiring
this entire process to be completed within 90 days would
produce an unworkable procedure. We are bound to interpret
statutes so as to avoid “unworkable” results. (Los Angeles
Unified School District v. Garcia (2013) 58 Cal.4th 175, 194.)
Section 7522.72 also provides that “[t]he operation of this
section is not dependent upon the performance of the
[employer’s] notification obligations specified in this
subdivision.” (§ 7522.72, subd. (f), emphasis added.) It appears
“this section” means all of section 7522.72, and is not limited to
the public employer’s reporting obligations. (See People v. Neely
(2004) 124 Cal.App.4th 1258, 1262 [reference to “this section” of
a statute means the entire statute].) Contrary to LACERA’s
interpretation, the forfeiture obligation in section 7522.72 is
independent of the employer’s reporting obligations.
Our conclusion is further supported by Danser v.
California Public Employees’ Retirement System (2015) 240
Cal.App.4th 885 (Danser). There, a judge was convicted of
conspiring to obstruct justice while serving as a superior court
judge. (Id. at p. 887.) The judge retired from office after the
conviction but before sentencing. (Id. at p. 888.) The court later
reduced the felony to a misdemeanor, terminated probation and
dismissed the charges. (Id. at p. 887.) California’s Public
Employees’ Retirement System subsequently determined that
the judge had been convicted of a felony offense in the course
13 “Forexample, if the administrative proceeding includes a
right to appeal an allegedly improper action, a plaintiff must
generally pursue that administrative appeal in order to exhaust
his or her administrative remedies.” (Clews Land & Livestock,
LLC v. City of San Diego (2017) 19 Cal.App.5th 161, 184.)
29
and scope of his judicial duties, and therefore was subject to
benefit forfeiture under section 75526.14 (Id. at p. 888.)
The judge unsuccessfully challenged the forfeiture
determination by a petition for writ of mandate. (Danser, supra,
240 Cal.App.4th at p. 888.) Pertinent here, the judge argued on
appeal that the retirement system lacked jurisdiction to
interpret criminal laws in order to determine whether forfeiture
was appropriate. (Id. at p. 891.) The Court of Appeal held
“CALPERS acted within its authority in interpreting the
[applicable] retirement law” because it is charged with
administering the retirement system, and “is responsible for
determining the right of a public pension system member to
receive benefits. [Citation.]” (Ibid.) Danser supports our
conclusion that the retirement board is the adjudicatory entity
with authority to determine whether forfeiture of Hipsher’s
retirement benefits was warranted.
Finally, LACERA contends that “requiring the retirement
system to provide due process is not workable” because “review
by the retirement system would place the retirement system in
the unseemly position of determining the propriety of decisions
expressly given by the Legislature to the prosecutor and the
employer.” This argument misstates the prosecutors’ and
employers’ obligation under section 7522.72, which is merely to
report the conviction.
14 Section 75526 provides that a judge who is convicted of a
crime committed while holding judicial office, that is punishable
as a felony, and which either involves moral turpitude under that
law or was committed in the course and scope of performing the
judge’s duties, forfeits any retirement benefits beyond the
amount of his or her contributions to the system.
30
(§ 7522.72, subds. (e) & (f).)
Further, LACERA has not shown that providing due
process is “not workable.” In fact, LACERA has an existing
mechanism for administrative appeals “when an individual
disagrees with LACERA’s decision on matters related to his or
her . . . retirement benefits, . . .” (LACERA Website,
Administrative Appeal Procedure, [as of June 8, 2018].)15 This procedure includes
three levels of review, culminating in an appeal to the Board of
Retirement, placement on the Board’s agenda, and a written
decision from LACERA’s Legal Office. (Ibid.) In any event, the
fact that providing constitutional due process is burdensome
does not excuse the failure to provide it.
Based on the foregoing, we conclude LACERA is obligated
to afford Hipsher due process protections in accordance with its
existing administrative appeal procedures, and consistent with
this opinion.
DISPOSITION
The judgment is modified to reflect that LACERA, not the
County, shall afford the requisite due process. This process
shall conform with LACERA’s existing administrative
15 On May 3, 2018, the County filed a request for judicial
notice of LACERA’s administrative appeal process. The County’s
request for judicial notice is granted. (Evid. Code, §§ 459
[permitting judicial notice of any matter specified in Evidence
Code section 452], 452, subd. (h) [permitting judicial notice of
“[f]acts and propositions that are not reasonably subject to
dispute and are capable of immediate and accurate determination
by resort to sources of reasonably indisputable accuracy”].)
31
procedures and, at a minimum, provide Hipsher (1) notice of
LACERA’s intent to initiate forfeiture proceedings, and the
reasons therefor, and (2) an opportunity to present his
objections, before LACERA’s impartial decision maker,
regarding whether he falls within the scope of section 7522.72.
The judgment is affirmed as modified. Each party shall bear its
own costs on appeal. (Cal. Rules of Court, rule 8.278(a)(3).)
CERTIFIED FOR PUBLICATION
EPSTEIN, P. J.
We concur:
WILLHITE, J.
MANELLA, J.
32