SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CLARA

PRESERVATION OF BENEFIT PLAN RETIREES ASSOCIATION, JOSEPH BASS, LAWRENCE JAY CASTELLANO, RICHARD COCO, LESLYE CORSIGLIA, HARRY FREITAS, LINDA HORWEDEL (THE BENEFICIARY OF DECEASED CITY RETIREE JOSEPH HORWEDEL), WILLIAM HUGHES, DANNY JORDAN, EVET LOEWEN, DAVID MAAS, BARRY NG, ANITA PHAGAN, GEORGE RIOS, GARY SCHOENNAUER, KEN TANASE, WAYNE TANDA, NONA TOBIN, RANDAL TURNER, STEVEN TURNER AND ROBERT WILSON,
Petitioners/Plaintiffs,

vs.

CITY OF SAN JOSÉ, BOARD OF ADMINISTRATION OF THE FEDERATED CITY EMPLOYEES’ RETIREMENT SYSTEM, DAVID SYKES, IN HIS OFFICIAL CAPACITY AS THE CITY MANAGER OF THE CITY OF SAN JOSÉ, AND DOES 1-50,

Respondents/Defendants.
Case No. 17-CV-312610

TENTATIVE RULING RE: DEMURRER TO AMENDED COMPLAINT/PETITION

The above-entitled matter comes on for hearing before the Honorable Thomas E. Kuhnle on Friday, February 8, 2019, at 9:00 a.m. in Department 5. The Court now issues its tentative ruling as follows:

I. Introduction

According to the allegations of the Verified First Amended Petition for Writ of Mandate and Complaint (“Amended Complaint”), petitioners/plaintiffs are 19 retired or soon-to-be-retired members of the City of San Jose’s retirement system , one spousal beneficiary of a deceased member , and the Preservation of Benefit Plan Retirees Association (collectively, “Petitioners”). (Amended Complaint, ¶ 1 & Ex. 1.) Petitioners allege that in 2014, the City of San Jose (the “City”), with the assistance of the City Manager , and the Board of Administration of the Federated City Employees’ Retirement System (the “Board”) (collectively, “Respondents”) unlawfully limited Petitioners’ promised retirement allowances through the belated application of Internal Revenue Code (“IRC”) section 415, subdivision (b). (Amended Complaint, ¶ 3.)

Petitioners allege the City created a retirement plan by adopting the 1975 Federated City Employees’ Retirement System (“FCERS” or “Retirement System”). (Amended Complaint, ¶ 5.) The Retirement System was intended by the City to qualify under the IRC as a tax-qualified retirement plan. (Amended Complaint, ¶ 5.)

In 1989, the City adopted Ordinance No. 23283, which amended the San Jose Municipal Code to add section 3.28.955 to provide that anyone becoming a member of the Retirement System on or after January 1, 1990 “shall be subject to the limitations set forth in Section 415 of the Internal Revenue Code,” but that any person who became a member prior to that date “shall be subject to the greater” of “the limitations set forth in Section 415 of the Internal Revenue Code” or “the accrued benefit of the member without regard to any benefit increases pursuant to any amendment of [the] System adopted after October 14, 1987.” (Amended Complaint, ¶ 64.) Despite the addition of this general reference to IRC section 415 (“IRC 415”) as a whole in 1989, no provision explicitly applying IRC 415, subdivision (b), was added until Ordinance No. 28885 was enacted in February 2011. (Amended Complaint, ¶¶ 62, 89.)

In 1996, IRC 415 was amended to add subdivision (m), which allows establishment of an “excess benefits fund” or “Qualified Excess Benefits Plan” from which an employer could pay amounts exceeding the limits of IRC 415, subdivision (b). (Amended Complaint, ¶ 67.)

Petitioners allege that despite these changes in federal and local law, the City took no action to limit Retirement System members’ pensions under the purported authority of IRC 415, subdivision (b), until 2014, and knowingly failed to establish an excess benefits fund under subdivision (m) to fulfill its contractually-vested retirement obligations. (Amended Complaint, ¶¶ 3, 77, 89.)
In the original pleading, filed on July 3, 2017, Petitioners set forth the following causes of action: (1) Unconstitutional Impairment or Breach of Contract; (2) Impairment by Terminating or Disregarding the Grand-Parented Status of Petitioners; (3) Impairment by Claiming to “Pick Up” Petitioners’ Contributions and Misclassifying Employee Contributions as “Picked Up” Employer Contributions; (4) Equitable Estoppel; (5) Promissory Estoppel; (6) Breach of Fiduciary Duty; and (7) Unconstitutional Bill of Attainder.

Respondents moved for judgment on the pleadings as to each cause of action set forth in the original pleading. In an order dated October 16, 2018, the Court denied the motion as to the first and second causes of action, as well as the sixth cause of action asserted by some Petitioners. The Court granted the motion with leave to amend as to the third, fourth, fifth, and seventh causes of action, as well as the sixth cause of action asserted by other Petitioners. In so ruling, the Court relied, in part, on Petitioners’ representation that they intended to dismiss the third cause of action without prejudice.

Petitioners filed the Amended Complaint on November 9, 2018, which sets forth the following causes of action against each of the respondents: (1) Unconstitutional Impairment or Breach of Contract; (2) Impairment by Terminating or Disregarding the Grand-Parented Status of Petitioners (3) Equitable Estoppel; (4) Promissory Estoppel; and (5) Breach of Fiduciary Duty. They chose not to amend the former third and seventh causes of action.

Respondents demur to each cause of action on the ground of failure to state facts sufficient to constitute a cause of action. They filed a request for judicial notice in support.

II. Legal Standard

A defendant may demur to a pleading on the ground it fails to state facts sufficient to constitute a cause of action. (Code Civ. Proc., § 430.10, subd. (e).) A demurrer on that statutory ground tests whether the plaintiff alleges each ultimate fact essential to the cause of action asserted. (C.A. v. William S. Hart Union High School Dist. (2012) 53 Cal.4th 861, 873.)
For the purpose of a demurrer, a court considers the allegations on the face of the pleading. (Code Civ. Proc., § 430.30, subd. (a).) A court accepts the factual allegations as true and gives them a reasonable, contextual interpretation. (Sisemore v. Master Financial, Inc. (2007) 151 Cal.App.4th 1386, 1396-97.)

A court may also consider matters subject to judicial notice. (Code Civ. Proc., § 430.30, subd. (a).) For example, a court may consider inconsistent allegations from a prior pleading that are subject to judicial notice under the sham pleading doctrine. (Owens v. Kings Supermarket (1988) 198 Cal.App.3d 379, 383-84.) “[W]here a party files an amended complaint and seeks to avoid the defects of a prior complaint either by omitting the facts that rendered the complaint defective or by pleading facts inconsistent with the allegations of prior pleadings . . . the policy against sham pleading permits the court to take judicial notice of the prior pleadings and requires that the pleader explain the inconsistency.” (Id. at p. 384.) If the pleader cannot explain the inconsistency, a “court may disregard the inconsistent allegations and read into the amended complaint the allegations of the superseded complaint.” (Ibid.)

III. Respondents’ Request for Judicial Notice

Respondents request judicial notice of the following:

(1) The City Charter, in effect as of May 1965, as amended through November 2016;

(2) City Ordinance No. 17739, adopted on May 28, 1975;

(3) The 2017 Supplement for Chapter 3.28, et seq. of the City Municipal Code which contains the 1975 Federated City Employees’ Retirement Plan;

(4) City Council Resolution No. 76158; and

(5) The summary of allegations in the original complaint prepared for the convenience of the Court.

The Court may take judicial notice of the Charter, City Ordinance No. 17739, City Council Resolution No. 76158, and the 2017 supplement pursuant to Evidence Code sections 451, subdivision (a), and 452, subdivision (b). (Edgerly v. City of Oakland (2012) 211 Cal.App.4th 1191, 1194, fn. 1.) Although the Court may also take judicial notice of court records (Evid. Code, § 452, subd. (d)), the summary of allegations in the original complaint is not a court record. It is a compilation prepared by counsel for the convenience of the Court that may be considered as the equivalent of a trial aid only. Accordingly, Respondents’ request for judicial notice is GRANTED IN PART and DENIED IN PART.

IV. Merits of Demurrer

Respondents argue the demurrer to the second cause of action for impairment, the third and fourth causes of action for equitable and promissory estoppel, and the fifth cause of action for breach of fiduciary duty must be sustained because Petitioners failed to timely present a claim under the Government Claims Act before commencing their suit. This issue is discussed first. Respondents also advance several additional arguments about the sufficiency of each claim, which the Court addresses second. In addition, Respondents argue the Preservation of Benefit Plan Retirees Association (the “Retirees Association”) lacks standing to assert any claims, which the Court addresses third.

A. Government Claims Act

Generally, no suit for money or damages may be brought against a public entity until a written claim has been presented to the public entity and it is either acted upon or deemed rejected. (Gov. Code, §§ 905, 945.4.) The parties dispute whether: (1) this requirement applies in the first instance; (2) any statutory exception applies; and (3) Petitioners timely presented a claim.
1. Applicability of the Claim Presentation Requirement

Petitioners allege and argue in opposition to the demurrer that the claim presentation requirement set forth in the Government Claims Act is inapplicable because they seek injunctive, declaratory, and mandamus relief in addition to damages. (Amended Complaint, ¶ 81; Opp. at p. 5:4-9.)

As an initial matter, Petitioners’ position is based on the implicit premise that courts look to the “case” or entire pleading as a whole to determine whether the claim presentation requirement applies. (Opp. at pp. 6:4, 7:2, 7:10.) This premise is not supported by the law.

In City of Stockton v. Superior Court (2007) 42 Cal.4th 730, the California Supreme Court held breach of contract claims are not excepted from the definition of claims for money or damages within the meaning of the Government Claims Act. (City of Stockton, supra, 42 Cal.4th at p. 734.) The opinion discusses the applicability of the claim presentation requirement to particular causes of action. (Id. at pp. 737-39; see also Nasrawi v. Buck Consultants, LLC (2014) 231 Cal.App.4th 328, 338.) Indeed, Government Code section 945.4 addresses whether a plaintiff may proceed “on a cause of action….” Thus, courts consider whether each claim asserted—not the case or pleading as a whole—is subject to the claim presentation requirement.

Turning to the substance of this issue, the parties dispute the fundamental nature of the relief sought and, in turn, whether the claim presentation requirement applies. Because the statutory requirement applies to claims for money or damages, it necessarily does not apply to actions for nonpecuniary relief, including injunctive, declaratory, and mandamus relief. (Canova v. Trustees of Imperial Irrigation Dist. Employee Pension Plan (2007) 150 Cal.App.4th 1487, 1493.) But like Petitioners, plaintiffs frequently seek both monetary and nonmonetary relief and attempt to plead artfully around the claim presentation requirement by styling their claims as claims for nonmonetary relief. (See id. at pp. 1493-94.)

To determine the true nature of a claim, courts look to its “primary purpose,” which is the primary remedy for which the claim is asserted. (Canova, supra, 150 Cal.App.4th at p. 1493.) At one end of the spectrum are claims like the one considered in Nasrawi, in which a public employee sued the board of his retirement plan for breach of fiduciary duty and sought damages as well as “‘such other and further relief as the court deems proper.’ [Citation.]” (Nasrawi, supra, 231 Cal.App.4th at pp. 332, 336.) The court held the claim was for money or damages because the employee “expressly requested ‘damages’ and ‘recovery . . . paid to [the] trust fund’ but did not expressly request any equitable relief, including an injunction.” (Id. at pp. 338-39.)

Similarly, in Lozada a police officer alleged his employer violated his rights under the Public Safety Officers’ Procedural Bill of Rights Act (“POBRA”), California’s Fair Employment and Housing Act, and the California Constitution following an incident in which he discharged his firearm at an oncoming vehicle to defend himself. (Lozada v. City and County of San Francisco (2006) 145 Cal.App.4th 1139, 1146-48.) The court concluded his POBRA claim was a claim for money or damages because he primarily sought monetary relief—back pay, front pay, general damages, punitive damages, and civil penalties—that was not merely incidental to the injunctive and declaratory relief he also requested. (Id. at pp. 1146-48, 1168-74, discussing Gatto v. County of Sonoma (2002) 98 Cal.App.4th 744.)

Nasrawi and Lozada establish that when a plaintiff expressly requests damages, his or her claims are subject to the claim presentation requirement even though he or she also seeks injunctive or declaratory relief. But the requirement does not just apply to claims expressly denominated as claims for “damages” or “money damages.” (Sparks v. Kern County Bd. of Supervisors (2009) 173 Cal.App.4th 794, 798 & fn. 3.) Presentation of a claim is required before pursuing a claim for “money or damages.” (Id. at p. 798, fn. 3, original italics.) The requirement applies to “all forms of monetary demands.” (Ibid., citing City of Stockton, supra, 42 Cal.4th at p. 739.)

In one case, For example, the court held that compliance with the Government Claims Act is required prior to the commencement of a mandamus action in which even incidental damages are sought. (TrafficSchoolOnline, Inc. v. Clarke (2003) 112 Cal.App.4th 736, 740-42.)

In Canova, the court identified the standard for evaluating mixed claims for mandamus and monetary relief as follows: “[w]here the primary purpose of a mandamus action is monetary relief, the mandatory requirements of the [Government] Claims Act apply.” (Canova, supra, 150 Cal.App.4th at p. 1493.) “In contrast, mandamus actions seeking to compel performance of a mandatory duty, statutory duty or ministerial act may not be subject to the [Government] Claims Act if they do not seek money or damages.” (Ibid., citing County of Sacramento v. Lackner (1979) 97 Cal.App.3d 576, 587 [“An action in traditional mandamus, which seeks an order compelling an official to perform a mandatory duty, is not an action against the state for money, even though the result compels the public official to release money wrongfully detained.”].)

In Canova, public employees alleged their employer unconstitutionally terminated their fixed benefit retirement plan and the board of their retirement plant incorrectly credited their retirement accounts when it rolled accrued benefits into a new defined contribution plan. (Canova, supra, 150 Cal.App.4th at pp. 1490-93.) They commenced an action for mandamus relief or, alternatively, breach of contract. (Id. at p. 1492.)

With respect to the employees’ claim that the board incorrectly credited their accounts, the court explained that, “[a]lthough the operative complaint does not directly ask for money or damages, it seeks a transfer of additional funds into the Contribution Plan accounts of each plaintiff [which] is a form of monetary relief that would fully compensate Plaintiffs for Defendants’ alleged improper modifications and render any equitable relief superfluous.” (Canova, supra, 150 Cal.App.4th at p. 1498.) It held the plaintiffs’ “claim was one for breach of contract and they cannot avoid the government claim filing requirement by recasting it as one for mandamus.” (Ibid.) As for the employees’ claim that their employer unconstitutionally terminated the fixed benefit plan and replaced it with a defined contribution plan, the court concluded their claim was fundamentally a claim for mandamus relief even though successful prosecution of that claim would ultimately result in money being transferred into their accounts. (Canova, supra, 150 Cal.App.4th at pp. 1497-98.) Based on these conclusions, the court determined that the trial court improperly granted summary judgment as to the plaintiffs’ entire action. (Canova, supra, 150 Cal.App.4th at pp. 1498-99.)

Here, Petitioners’ second, third, fourth, and fifth causes of action fall on the same end of the spectrum as Nasrawi and Lozada. In the fifth cause of action for breach of fiduciary duty, Petitioners identify the actionable breaches as (among other things) the past underpayments of their retirement benefits. (Amended Complaint, ¶ 206.) In their prayer for relief, they seek “damages . . . calculated as the difference between the benefit allowances provided by Respondents since January 1, 2014, and the benefit allowance which Respondents owe to Petitioners as promised. . . .” (Amended Complaint at p. 113:13-16.) In other words, Petitioners seek damages to compensate them for and in the amount that was previously withheld. Although Petitioners’ prayer includes other types of relief, including equitable relief, Petitioners focus retrospectively on underpayments and damages as compensation. Courts have held the claim presentation requirement applies to claims for breach of fiduciary duty for which damages are sought. (Nasrawi, supra, 231 Cal.App.4th at pp. 339-40; see also Meister v. Mensinger (2014) 230 Cal.App.4th 381, 396-97.)

Petitioners also seek damages in connection with the third and fourth causes of action for equitable and promissory estoppel in which they describe their injuries as “monetary.” (Amended Complaint, ¶¶ 177-82, 190.) Similarly, in the second cause of action, which appears to be a fraud or estoppel-type claim, Petitioners allege they would have made other decisions about their retirement benefits had they known the City would later refuse to apply the exemption from IRC 415, subdivision (b), for employees meeting certain criteria. (Amended Complaint, ¶ 159.) Although Petitioners do not clearly and explicitly identify what relief they seek in connection with this claim, it is reasonable to infer from this allegation and the reference to their general prayer for relief that they seek damages in connection with this claim. Finally, each Petitioner seeks damages in excess of $10,000 in the claim presented to the City. (Amended Complaint, Ex. 10, Att. A at p. 34; see, e.g., Gatto, supra, 98 Cal.App.4th at pp. 762-63 [claim presented and operative pleading reflected that damages were not subsidiary to the claim for injunctive relief].)
For these reasons, the second, third, fourth, and fifth causes of action constitute claims for money or damages within the meaning of the Government Claims Act.

Petitioners’ opposition does not squarely address these points. Petitioners insist the damages they seek are minimal and/or incidental to the other types of relief they seek, but do not clearly explain why. While their characterization might be accurate with respect to the first cause of action for mandamus relief, which does resemble the claim addressed in Canova, that cause of action is not at issue.

As for the claims that are actually at issue, the allegations do not reflect the damages sought are merely incidental to nonmonetary relief. Contrary to what Petitioners assert (Opp. at p. 8, fn. 15), the claims at issue do not resemble those considered in Cuviello, namely claims to enjoin a municipality’s unlawful restriction of citizens’ ability to protest for which punitive damages were sought incident to and for the purpose of deterring future violations. (Cuviello v. City of Stockton (E.D.Cal. Jan. 26, 2009, No. 07-CV-1625-LKK) 2009 WL 9156144.)

For the reasons stated above, the second, third, fourth, and fifth causes of action qualify as claims for money or damages within the meaning of the Government Claims Act.

2. Applicability of a Statutory Exception

Petitioners argue that, even if the Government Claims Act applies, their claims come within the statutory exception for “[a]pplications or claims for money or benefits under any public retirement or pension system” codified at Government Code section 905, subdivision (f). Respondents dispute this point.

The statutory exceptions to the claim presentation requirement in Government Code section 905 are strictly construed. (Nasrawi, supra, 231 Cal.App.4th at p. 339.) Only claims for money due under the terms of an existing pension system come within the exception. (Ibid., citing Canova, supra, 150 Cal.App.4th at p. 1497.) Claims for tortious wrongdoing do not. (Nasrawi, supra, 231 Cal.App.4th at p. 339.)

For example, in Dalton v. East Bay Municipal Utility District (1993) 18 Cal.App.4th 1566, the plaintiffs alleged an increase in the retirement benefit formula unaccompanied by a commensurate increase in the employee-contribution rate resulted in an unequal subsidy of some employees’ retirement benefits at the expense of other employees. The plaintiffs sued the board of their retirement plan for breach of fiduciary duty and violation of their right to equal protection under article I, section 7 of the California Constitution. (Dalton, supra, 18 Cal.App.4th at pp. 1569-70.) They sought an “award of money or benefits among other things.” (Id. at p. 1570.) The court held that by alleging unfair treatment and seeking to change the past administrative decisions the plaintiffs were “basically alleging tortious wrongdoing by defendants” as compared to “seek[ing] money due to them under the terms of the existing pension system. . . .” (Id. at p. 1574.) Another court subsequently relied on Dalton in determining that plaintiffs seeking to invalidate a rate change and equity adjustment made to their retirement plan were not merely seeking money due under an existing pension system and, thus, could not rely on the statutory exception. (Canova, supra, 150 Cal.App.4th at p. 1497.)

These cases support the proposition that when a plaintiff challenges a decision about the terms of a retirement plan, including a decision about rates and benefit formulas that ultimately impact the amount of money disbursed to a retiree, the statutory exception does not apply.

Blue v. Los Angeles Unified School District (1994) 26 Cal.App.4th Supp. 12, cited by Petitioners, supports rather than contradicts this proposition. In Blue, a widower sued an insurer that refused to pay life insurance benefits his wife obtained through her employer. (Blue, supra, 26 Cal.App.4th Supp. at p. 13.) The reviewing court determined the widower was not required to comply with the claim presentation requirement based on the exception set forth in Government Code section 905, subdivision (f). (Id. at pp. 14-15.) In reaching this conclusion, the court reasoned that the widower asserted a “routine” claim for nonpayment of benefits. (Ibid.) Here, Petitioners’ claims are not “routine.” Petitioners challenge the legality of legislative action taken with respect to the amount of their benefits, particularly the decision to enforce the limitation in IRC 415, subdivision (b), and to refrain from paying excess benefits out of an excess benefit fund under IRC 415, subdivision (m).

Petitioners attempt to distinguish Baillargeon v. Department of Water & Power (1977) 69 Cal.App.3d 670 and Nasrawi—analogous cases in which the exception was held to be inapplicable—on the basis those cases did not involve “pension benefits under any public retirement or pension system and instead were for other claimed outside benefits.” (Opp. at p. 9:5-6.) Petitioners’ assertion is inaccurate. (Baillargeon, supra, 69 Cal.App.3d at p. 675; Nasrawi, supra, 231 Cal.App.4th at p. 332.) Thus, those cases are not distinguishable for the reason Petitioners articulate.

In conclusion, the Court finds the second, third, fourth, and fifth causes of action are outside the scope of the statutory exception set forth in Government Code, section 905, subdivision (f). As a result, the Court must consider whether Petitioners allege compliance with the claim presentation requirement.

3. Compliance with the Claim Presentation Requirement

Respondents argue the allegations in the pleading show noncompliance with the claim presentation requirement because all of the Petitioners failed to present a claim to the Board, and 18 of Petitioners untimely presented a claim to the City.

Respondents argue and Petitioners do not dispute that a plaintiff must present a claim to the proper entity to satisfy the claim presentation requirement. (DiCampli-Mintz v. County of Santa Clara (2012) 55 Cal.4th 983, 992-93, 997.) An undelivered or misdirected claim does not satisfy the statutory requirement. (Id. at pp. 992-93.) Here, Petitioners solely allege they presented a claim to the City. (Amended Complaint, ¶ 81.) They do not allege they complied with the claim presentation requirement with respect to the Board. Petitioners do not address this point in their opposition. Accordingly, Petitioners’ claims as asserted against the Board are subject to demurrer for failure to comply with the Government Claims Act.

With respect to the City, the parties dispute the timeliness of the claim presented. Petitioners presented a claim to the City on November 30, 2016. (Amended Complaint, ¶ 81.) The City rejected the claim on January 11, 2017. (Amended Complaint, ¶ 82.) Respondents assert 18 of Petitioners presented this claim too late because their claims accrued on or before April 8, 2014, at which time they knew the limitation under IRC 415, subdivision (b) applied. (See, e.g., Amended Complaint, ¶¶ 100(c), 101(c), 102(h), 104(b), 105(e), 106(b), 107(b), 108(e), 109(e), 110(b), 111(c).)
An administrative claim “for personal injury and property damage must be presented within six months after accrual; all other claims must be presented within a year.” (City of Stockton, supra, 42 Cal.4th at p. 738, citing Gov. Code, § 911.2.) The parties do not dispute that Petitioners must have presented their claim within a year under these circumstances.

“For the purpose of computing the time limits prescribed by Sections 911.2, 911.4, 945.6, and 946.6, the date of the accrual of a cause of action to which a claim relates is the date upon which the cause of action would be deemed to have accrued within the meaning of the statute of limitations which would be applicable thereto if there were no requirement that a claim be presented to and be acted upon by the public entity before an action could be commenced thereon.” (Gov. Code, § 901.) In other words, “to calculate the claim presentation deadline, [a court] must determine the date the cause of action accrued under the applicable statute of limitations.” (City of Pasadena v. Super. Ct. (2017) 12 Cal.App.5th 1340, 1347.)

Petitioners assert that the Court should apply the principle of continuous accrual to determine when their claims accrued. They argue each new monthly underpayment of the promised pension constituted a new and separate injury, such that the claim was timely presented within a year of one of the underpaid pension installments.

It is true that “[t]he right to receive periodic payments under a pension is a continuing one [citation], and any time limitation upon the right to sue for each installment necessarily commences to run from the time when that instalment actually falls due.” (Dillon v. Bd. of Pension Comrs. of City of Los Angeles (1941) 18 Cal.2d 427, 430.) But as the Court previously explained, that general rule does not apply to an action to establish a right to benefits as distinct from an action to recover an already established pension benefit that was not paid. (Ibid.; accord Baillargeon, supra, 69 Cal.App.3d at p. 684.)

Unlike in Dillon, Petitioners’ status as members, and thus their general right to some benefits, is not at issue. Rather, Petitioners seek to establish entitlement to a certain level of benefits. Nevertheless, as in Dillon, Petitioners’ claims still concern entitlement to benefits even though the precise nature of the dispute over their entitlement to benefits differs slightly. Additionally, Petitioners also allege Respondents failed to provide them with information about their retirement benefits. (Amended Complaint, ¶¶ 200, 203, 206.) Accordingly, as in Dillon, Petitioners claims are not based on nonpayment of benefits to which they are indisputably entitled under the terms of the retirement plan.

Petitioners’ opposition does not identify any reason the Court should deviate from its previous holding. For example, Petitioners do not suggest the Court should reach a contrary conclusion based on new allegations in the amended pleading. Instead, they essentially argue that the distinction drawn in Dillon regarding the types of claims that are subject to continuous accrual should be disregarded. (Opp. at pp. 12:14-13:14.) This argument is not persuasive because Dillon is still good law, and courts continue to distinguish between claims to establish a right to benefits as compared to claims to recover an established pension benefit that was not paid. (See Baxter v. State Teachers’ Retirement System (2017) 18 Cal.App.5th 340, 381-82, discussing Dillon, supra, 18 Cal.2d at pp. 429-32 and Carrick v. City and County of San Francisco (1962) 202 Cal.App.2d 402, 402-04.)

For example, in Baxter, the court considered whether overpayments of pension benefits resulting from a miscalculation could be recouped by a retirement plan. (Baxter, supra, 18 Cal.App.5th at p. 347.) It concluded, based in part on statutory language applicable to the particular retirement plan involved, that some of the recent overpayments could be recouped based on the principle of continuous accrual. (Id. at pp. 378-82.) In applying the general rule announced in Dryden and distinguishing Dillon and Carrick, the court focused on the fact that the overpayments resulted from a miscalculation. (Ibid.) Baxter, thus, demonstrates that the nature of a claim arising from the payment or nonpayment of pension benefits is still material to the determination of whether the claim is subject to continuous accrual. Here, there is a dispute over entitlement to benefits; Petitioners do not merely seek to recoup benefits indisputably payable under the terms of the retirement plan but withheld due to a clerical error. They challenge the City’s legislative actions and seek to change the terms of the plan. Thus, Baxter does not support the conclusion that Petitioners’ claims are subject to continuous accrual.

For these reasons, there is no basis to deviate from the previous holding that the claims at issue are not subject to continuous accrual.

Next, Respondents seem to argue that the discovery rule applies to Petitioners’ claims and inquiry notice triggered the running of the statute of limitations. Courts have held inquiry notice is sufficient to trigger the running of the statute of limitations for a claim for breach of fiduciary duty. (WA Southwest 2, LLC v. First American Title Insurance Co. (2015) 240 Cal.App.4th 148, 156-57.) Additionally, courts have held inquiry notice can trigger the running of the statute of limitations in actions to recover overpayments or underpayments of pension benefits. (See, e.g., Baxter, supra, 18 Cal.App.5th at p. 358.) Accordingly, and in the absence of any argument from Petitioners, the Court applies the discovery rule and determines the date of accrual based on the standard of inquiry notice.

Inquiry notice arises when a party “has notice or information of circumstances to put a reasonable person on inquiry. . . .” (Baxter, supra, 18 Cal.App.5th at p. 368 [internal quotation marks and citations omitted].) He or she “need not be aware of the specific ‘facts’ necessary to establish the claim. . . .” (Ibid.) Rather, once there is “a suspicion of wrongdoing, and therefore an incentive to sue,” the party must decide whether to sue. (Ibid.) “So long as a suspicion exists, it is clear that the [party] must go find the facts [and] cannot wait for the facts to find [him or her].” (Ibid.)

For the reasons Respondents articulate, the allegations in the Amended Complaint show 18 of Petitioners—those identified in footnote 12—had inquiry notice sufficient to trigger the running of the statute of limitations in 2014. Petitioners allege a letter from April 8, 2014, informed them that their benefits “will be” adjusted in accordance with the limitation in IRC 415, subdivision (b). (Amended Complaint, ¶ 21.) Nearly all of the 18 Petitioners received this letter. Additionally, those that allege they learned of the imposition of the limitation through other means allege they found out even earlier—between January and March 2014. (See Amended Complaint, ¶¶ 97(a), 113(b).)

Although Respondents also assert that Petitioners eliminated many allegations reflecting they had even more knowledge, which allegations they state should be read into the pleading under the sham pleading doctrine, it is unnecessary to consider the prior allegations to determine Petitioners had inquiry notice. Here, as in Baxter, the allegations in the Amended Complaint reflect 18 of Petitioners had sufficient information to put them on notice that there was a potential problem with their benefits which thereby triggered the running of the statute of limitations. (Baxter, supra, 18 Cal.App.5th at p. 368.)

In opposition, Petitioners rely on a conclusory footnote in which they accuse Respondents of “mak[ing] too much” of the letter sent in April 2014. (Opp. at p. 2:31-34.) Petitioners do not present any legal argument or reasoned explanation to support the conclusion that the facts alleged do not reflect 18 of them had inquiry notice in 2014. They do not argue their amendment of the pleading justifies a conclusion different from that reached by the Court previously. Furthermore, it is unclear how they could make such an argument given it appears they primarily omitted allegations demonstrating they had additional knowledge.

For these reasons, the Court concludes the 18 Petitioners’ claims, with the exception of the first claim asserted in the pleading, accrued in 2014. It follows that the subset of Petitioners identified in footnote 12 untimely presented their claim in 2016 more than a year after their claims accrued.

4. Conclusion

In conclusion, the second, third, fourth, and fifth causes of action are claims for money or damages within the meaning of the Government Claims Act that do not come within the statutory exception in Government Code section 905, subdivision (f). Petitioners allege facts affirmatively showing they presented an untimely claim to the City. Thus, they fail to allege compliance with the claim presentation requirement with respect to the Board and, for the Petitioners identified in footnote 12, with respect to the City.

B. Additional Arguments

Respondents advance a number of additional arguments. First, Respondents argue the Court should sustain the demurrer to the first and second causes of action “to the extent they seek money damages.” Next, Respondents argue the Board and City Manager are not proper parties with respect to the first cause of action. Then, Respondents assert the second cause of action is not a properly pleaded breach of contract claim. Respondents also argue Petitioners’ estoppel claims are duplicative of their breach of contract claim, and that the promissory estoppel claim as asserted against the Board is defective. Finally, they argue the Board, the City, and the City Manager neither owed, nor breached, any fiduciary duty.

In opposition, Petitioners argue Respondents waived all arguments other than their argument based on the Government Claims Act because they could have raised them in connection with their previous motion for judgment on the pleadings.

Under Code of Civil Procedure section 430.41, subdivision (b), “[a] party demurring to a pleading that has been amended after a demurrer to an earlier version of the pleading was sustained shall not demur to any portion of the amended complaint [ ] on grounds that could have been raised by demurrer to the earlier version of the complaint. . . .” Motions for judgment on the pleadings are subject to the very same limitation. (Code Civ. Proc., § 439, subd. (b).)

By enacting these statutes, the Legislature intended to require “moving parties to assert in their initial motion [ ] all viable arguments.” (Sen. Com. on Judiciary, Rep. on Assem. Bill No. 644 (2017-2018 Reg. Sess.) July 11, 2017.) “Any valid argument not initially asserted will be forfeited in a subsequent motion . . . [to] streamline [ ] the process by avoiding piecemeal motion practice.” (Ibid.)

But as Respondents point out, these statutes do not address the circumstances here in which a defendant first moves for judgment on the pleadings and later demurs to an amended complaint. Additionally, no published opinion addresses these particular circumstances. Therefore, it appears the following question is an issue of first impression: Does a party demurring to a pleading amended after a court grants a motion for judgment on the pleadings as to an earlier version of that pleading forfeit arguments that could have been raised in the previous motion? For the reasons that follow, the Court answers this question in the affirmative.

When courts interpret statutes, they strive to give effect to the legislative purpose of the statute, including by reading statutory language in the context of the statutory scheme as a whole. (United Riggers & Erectors, Inc. v. Coast Iron & Steel Co. (2018) 4 Cal.5th 1082, 1090.) The Legislature added Code of Civil Procedure section 430.41 to improve judicial efficiency and ensure repetitive pleading challenges did not unduly consume the resources of both the parties and the judiciary. (Assem. Com. on Judiciary, Rep. on Sen. Bill No. 383 (2015-2016 Reg. Sess.) July 14, 2015; Sen. Com. on Judiciary, Rep. on Sen. Bill No. 383 (2015-2016 Reg. Sess.) May 11, 2015.) Based on the success of the statute, the Legislature then added Code of Civil Procedure section 439 “to extend the benefits of the system created by [Code of Civil Procedure section 430.41] . . . [by applying] nearly identical meet-and-confer requirements and procedures to . . . motions for judgment on the pleadings.” (Sen. Com. on Judiciary, Rep. on Assem. Bill No. 644 (2017-2018 Reg. Sess.) July 11, 2017.)

The Legislature’s adoption of the same requirements and procedures for both demurrers and motions for judgment on the pleadings is unsurprising. As Petitioners articulate, a motion for judgment on the pleadings is the functional equivalent of a demurrer. (Fire Insurance Exchange v. Super. Ct. (2004) 116 Cal.App.4th 446, 452.) Courts treat them identically. (Gabaldon v. United Farm Workers Organizing Committee (1973) 35 Cal.App.3d 757, 759.) The Legislature intended to treat them identically as well. (Sen. Com. on Judiciary, Rep. on Assem. Bill No. 644 (2017-2018 Reg. Sess.) July 11, 2017.)

When read as part of this cohesive statutory scheme to streamline pleading challenges, Code of Civil Procedure sections 430.41 and 439 support the conclusion that a defendant may not challenge a pleading in a piecemeal fashion irrespective of the procedural vehicle used. Thus, the Court concludes: a party demurring to a pleading amended after a motion for judgment on the pleadings was granted forfeits arguments that could have been raised in the earlier motion.

None of Respondents’ additional arguments address new allegations in the pleading or a change in Petitioners’ legal theory. Respondents offer no justification for why they could not have raised these arguments in their previous motion. Respondents could and should have raised their additional arguments sooner.

With that said, a party ordinarily does not waive the right to raise a lack of standing. (Color-Vue, Inc., supra, 44 Cal.App.4th at p. 1604.) “Indeed, lack of standing to sue can be raised at any time, even for the first time on appeal.” (Ibid.) Accordingly, irrespective of Code of Civil Procedure sections 430.41 and 439, Respondents did not waive their standing argument.
In conclusion, Respondents forfeit all arguments except for those pertaining to the Government Claims Act and standing.

C. Standing

Respondents argue the Retirees Association lacks standing to assert each of the claims in the Amended Complaint because resolution of the claims requires the individual participation of each member. They also state the Retirees Association only has standing to sue in a representative capacity. In opposition, Petitioners conclude the Retirees Association has standing because the “rules of associational standing apply” without addressing Respondents’ argument and explaining why they conclude the criteria are satisfied. (Opp. at p. 20:16-25.)

In California, “[e]very action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.” (Code Civ. Proc., § 367.) “This means the plaintiff must possess a substantive right or standing to prosecute an action.” (GameStop, Inc. v. Super. Ct. (2018) 26 Cal.App.5th 502, 510.) Both parties quote the rule that: “An association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.” (San Francisco Apartment Assn. v. City and County of San Francisco (2016) 3 Cal.App.5th 463, 472 [internal quotation marks and citations omitted].)

Respondents also cite National Solar Equipment Owners’ Association v. Grumman Corporation (“National Solar”) (1991) 235 Cal.App.3d 1273, in which the court discussed the distinct standard set forth in Code of Civil Procedure section 382. That statute establishes “courts should fashion some collective remedy where individual losses may not be great enough to warrant separate actions.” (National Solar, supra, 235 Cal.App.3d at pp. 1280-81.) This is distinct from “the basic notion that a party must be aggrieved in order to sue.” (Id. at p. 1281, citing Code Civ. Proc., § 367.) And so, despite framing its argument as an argument about standing, Respondents appear to be raising an additional issue or conflating these distinct standards.

In relevant part, Code of Civil Procedure section 382 states: “when the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court, one or more may sue or defend for the benefit of all.” In Salton City Area Property Owners Association v. M. Penn Phillips Co. (“Salton City”) (1977) 75 Cal.App.3d 184, the court explained that this “statutory authorization for representative or class suits is based on the doctrine of virtual representation and is an exception to the general rule of compulsory joinder of all interested parties.” “The doctrine of virtual representation rests on considerations of necessity and paramount convenience and was adopted to prevent a failure of justice.” (Id. at p. 189.) To summarize, Code of Civil Procedure section 382 establishes—separate and distinct from standing—when an action may proceed through a representative and in the absence of all interested parties.

Under Code of Civil Procedure section 382, “[t]he two requirements that must be satisfied for a representative action are an ascertainable class and a well-defined community of interest in the questions of law and fact involved affecting the parties to be represented.” (Market Lofts Community Assn. v. 9th Street Market Lofts, LLC (2014) 222 Cal.App.4th 924, 933.) Respondents do not argue these requirements are not satisfied here. Rather, they state the Retirement Association is not asserting claims as a representative of absent members. Respondents are correct that the Retirement Association solely purports to represent the individual petitioners named here and does not purport to represent any absent members. (Amended Complaint, ¶ 1.) Nevertheless, this statement does not support the conclusion that the Retirees Association lacks standing as distinct from whether it may proceed as a representative under Code of Civil Procedure section 382.

Applying the correct standard for associational standing quoted by both parties, it is undisputed that the third, fourth, and fifth causes of action will require the participation of individual members of the Retirees Association. With that said, Respondents do not explicitly address the first and second causes of action. Additionally, they state the Retirees Association only lacks standing in part, which suggests their demurrer is not directed to the entirety of the first and second causes of action. For these reasons, the Court concludes that the Retirees Association lacks standing to assert the third, fourth, and fifth causes of action. The first and second causes of action, however, are not susceptible to this argument.

D. Conclusion

In consideration of Respondents’ arguments concerning the claim presentation requirement and standing, which were not forfeited, the Court rules as follows:

1. The demurrer to the first cause of action is OVERRULED.

2. The demurrer to the second cause of action is:

a. SUSTAINED to the extent the claim is asserted against the Board;

b. OVERRULED to the extent the claim is asserted against the City Manager;

c. SUSTAINED to the extent the claim is asserted against the City by the 18 Petitioners identified in footnote 12; and

d. OVERRULED to the extent the claim is asserted against the City by the Retirees Association, Loewen, and Tobin.

3. The demurrer to the third, fourth, and fifth causes of action is:

a. SUSTAINED to the extent the claims are asserted by Petitioners (all of them) against the Board;

b. SUSTAINED to the extent the claims are asserted by the Retirees Association against the City and the City Manager;

c. OVERRULED to the extent the claims are asserted by the individual petitioners (all of the petitioners except for the Retirees Association) against the City Manager;

d. SUSTAINED to the extent the claims are asserted by the 18 Petitioners in footnote 12 against the City; and

e. OVERRULED to the extent the claims are asserted by Loewen and Tobin against the City.

Leave to amend the second, third, fourth, and fifth causes of action is DENIED because Petitioners have already had an opportunity to cure the primary pleading defect and do not articulate how they could amend the pleading to state a viable claim if given another opportunity to do so. (See Goodman v. Kennedy (1976) 18 Cal.3d 335, 349.)

The Court will prepare the final order if this tentative ruling is not contested.