2017-00223756-CU-OE

Nancy Michaels vs. (CALPERS)

Nature of Proceeding: Hearing on Demurrer to Second Amended Complaint for Damages

Filed By: Perkell, Jennifer G.

Defendant California Public Employees Retirement System’s (CalPERS) demurrer to the second amended complaint (SAC) is DROPPED, and the action against CalPERS is STAYED pending disposition of the related writ action, Sacramento County Superior Court Case No. 2018-80002910 (“Writ Action”).

Background Procedure/Facts

This case follows Michaels’ promotion and subsequent demotion while employed by CalPERS. She alleges that, after working as a Staff Services Manager (SSM) I for several years, she was offered an out-of-class assignment with CalPERS as a Data Processing Manager (DPM) II. Michaels accepted the appointment and worked as a DPM II for a term that, after being extended once, ended in February 2015. After the appointment formally ended, however, she continued working as a DPM II and acquired additional duties, assignments and staff.

In February 2016, CalPERS asked Michaels to apply for permanent DPM II classification. She applied, but CalPERS informed her that she did not meet the minimum qualifications and asked her to submit additional information. She complied

with the request, and CalPERS subsequently determined that she was qualified.

CalPERS offered Michaels a DMP II position, and she accepted.

Michaels allegedly passed her probationary period as DPM II and was a permanent DPM II as of May 4, 2016. At various points, Michaels participated in certain investigations of, and hostile workplace proceedings against, her coworker and co-defendant herein Melinda Lorenz-Anderson (Lorenz-Anderson). Lorenz-Anderson then accessed Michaels’ confidential employment files at CalPERS, and information in the files was disseminated. CalPERS failed to investigate Lorenz-Anderson’s wrongful accessing of the employment files, failed to advise Michaels her information had been accessed, and failed to prevent further accessing and dissemination of the files.

At some point, the State Personnel Board (SPB) commenced a review of Michaels’ experience to qualify for appointment as a CalPERS DPM II. In April 2017, Michaels received from CalPERS an Initial Notification of Potential Unlawful Appointment. In 2017, CalPERS conducted its own subject matter expert (SME) review of Michaels’ appointment to DPM II and concluded that the Michaels possessed the necessary qualifications. Shortly thereafter, however, CalPERS notified Michaels that an Unlawful Appointment Final Decision had been made, and that her appointment as DMP II was invalid because she had not been eligible. The Final Decision noted the absence of evidence that Michaels had acted in anything other than good faith.

At one point when Michaels received news of the Final Decision from Chief Campbell of CalPERS HR, Campbell falsely claimed that Michaels had not completed her probationary period as DPM II. Furthermore, when Michaels raised the issue of the lost future earnings the Final Decision would cause her, Campbell responded that future earnings were not at issue because she understood Michaels was going to retire.

When Michaels received copies of her personnel files, certain documents evidencing the completion of her probation and her appointment to DPM II were missing.

Michaels filed an SPB appeal from the determination that her DPM II appointment was unlawful.

Michaels was demoted to the position of SSM I with CalPERS Health Plan Administration Division. The chief of the Division told Michaels he did not want her there, that she was not qualified, and that she should retire.

In its response to Michaels’ administrative appeal, CalPERS asserted that her appointment to DMP II became effective on May 5, 2016. Michaels alleges that she accepted the appointment on May 3, 2016. Michaels argues that the difference is important because her appointment was voided on May 4, 2017, and the law only provided a one-year period in which to void the appointment.

On March 8, 2018, SPB denied Michaels’ administrative appeal and found that the order voiding her appointment was timely because she was not appointed to DPM II until May 5, 2016–just less than one year before the appointment was voided.

Michaels’ SAC contains causes of action against CalPERS for “Violation of Statute,” age discrimination under the FEHA, invasion of privacy, negligence, intentional infliction of emotional distress (IIED) and negligent infliction of emotional distress

(NIED). CalPERS demurs on the ground that the allegations fail to state a valid cause of action. Michaels opposes.

Michaels filed the Writ Action to set aside the SPB’s order denying her administrative appeal. (See RJN, Exh. B.) The Writ Action contains a prayer for damages. The respondent is SPB, and CalPERS is named as the real party in interest. In the Writ Action, Michaels is challenging the determination that she had not completed a year of service in her DPM II position before the appointment was voided. She is not challenging the determination that she was unqualified for the appointment.

The court ruled on CalPERS’ prior demurrer. After CalPERS filed this demurrer, however, the court requested supplemental briefing on the question whether some or all of the case should be stayed or stricken given the related Writ Action. In the case at bench, Michaels seeks damages based on CalPERS’ alleged role in voiding her appointment to DPM II. The order voiding the appointment, which the SPB subsequently affirmed, is the subject of the Writ Action. The rule of exhaustion appears to require Michaels to seek writ review of the SPB’s order before seeking damages in this case based on her removal from the DPM II position. (See Johnson v. City of Loma Linda (2000) 24 Cal.4th 61, 69-70.)

Discussion

In its supplemental brief, CalPERS appears to argue that, until and unless the SPB’s order adverse to Michaels is reversed, Michaels is collaterally estopped to seek relief on a theory she was wrongfully removed from her DPM II position. CalPERS also contends that Michaels’ failure to challenge by writ petition SPB’s finding that she was unqualified for her DPM II appointment has some preclusive effect in this case. Nonetheless, CalPERS asks the court not to stay this action and instead to rule on the demurrer. According to CalPERS, even if a disposition in the Writ Action could impact the scope of issues for decision in this case, the demurrer should be sustained for unrelated reasons. CalPERS’ lead argument on demurrer is that, when it voided Michaels’ appointment, it acted solely pursuant to SPB’s directions. To advance this argument, CalPERS relies heavily on the truth of facts tendered in official records, of which CalPERS seeks judicial notice.

For her part, Michaels likewise asks the court not to strike or stay this action against CalPERS while the Writ Action is pending. She asserts that the Writ Action is limited to the question whether she was entitled to retain her DPM II appointment because she completed one year of service in good faith, whereas the instant case encompasses that issue as well as others.

The court does not strike any of Michaels’ causes of action.

The court, however, in its inherent authority to control its docket, stays the action against CalPERS so that the Writ Action may be resolved first. (Frieberg v. City of Mission Viejo (1995) 33 Cal.App.4th 1484, 1489 [“Trial courts generally have the inherent power to stay proceedings in the interests of justice and to promote judicial efficiency.”].)

In deciding to stay the entire action against CalPERS, the court has considered whether to allow Michaels’ privacy claims to proceed. These claims appear in Michaels’ third cause of action for invasion of privacy as well as her fourth through

sixth causes of action for negligence, IIED and NIED. Michaels alleges that each of these claims entitles her to damages associated with her demotion from DPM II. (See SAC, ¶¶ 165, 178, 188, 195.) Because the viability of such damages turns in the first instance on the outcome of the Writ Action, Michaels’ privacy claims should be stayed along with her other claims against CalPERS.

Disposition

The demurrer is dropped from calendar, and the action against CalPERS is stayed pending disposition of the Writ Action.

Once the Writ Action has reached disposition, counsel shall meet and confer about the impact the disposition has on this case, including whether the disposition warrants a stipulation that Michaels may file a third amended complaint. Michaels shall promptly request the dismissal of any cause(s) of action she may wish to abandon. If CalPERS wishes to place its demurrer to the SAC back on calendar, then it may obtain a new date from the law and motion division’s filing clerk. If the demurrer is placed on calendar, the parties are invited to brief the effect, if any, the decision in the Writ Action has on the demurrer.

Nothing in this ruling is intended as an opinion about the merits of the Writ Action.

The minute order is effective immediately. No formal order pursuant to CRC 3.1312 or further notice is required.

Item 7 2017-00223756-CU-OE

Nancy Michaels vs. (CALPERS)

Nature of Proceeding: Hearing on Demurrer to Second Amended Complaint for Damages

Filed By: Perkell, Jennifer G.

The demurrer is DROPPED from calendar, and the action against Defendant Lorenz-Anderson is STAYED pending disposition of the related writ action, Sacramento County Superior Court Case No. 2018-80002910 (“Writ Action”). As discussed more fully in the concurrent order staying the action against Co-Defendant CalPERS, Plaintiff Michaels’ privacy claims tender damages the viability of which should be addressed in the Writ Action in the first instance.

Once the Writ Action has reached disposition, counsel shall meet and confer about the impact the disposition has on this case, including whether the disposition warrants a stipulation that Michaels may file a third amended complaint. Michaels shall promptly request the dismissal of any cause(s) of action she may wish to abandon. If Lorenz-Anderson wishes to place her demurrer to the SAC back on calendar, then she may obtain a new date from the law and motion division’s filing clerk. If the demurrer is placed on calendar, the parties are invited to brief the effect, if any, the decision in the Writ Action has on the demurrer.

Nothing in this ruling is intended as an opinion about the merits of the Writ Action.

The minute order is effective immediately. No formal order pursuant to CRC 3.1312 or further notice is required.