Court Nixes Challenge of Reduced Pension Funding

     (CN) – The 9th Circuit shot down a class action challenging a 2005 San Diego ordinance that reduced the city’s contributions to its employee pension fund, saying many of the claims had been settled in a similar case.

     The San Diego Police Officers Association sued on behalf of city workers, claiming the ordinance violated their contractual right to a stable pension plan. The lawsuit alleged conspiracy and violations of the contracts and takings clauses of the U.S. Constitution.
     The San Diego City Council passed the ordinance to break an impasse in negotiations between the association and the city. The city had wanted to offset losses to the retirement fund by seeking to reduce its obligations, but the association wouldn’t budge.
     The council voted to adopt the city’s final proposal to reduce members’ salaries or reduce the portion of employee contributions picked up by the city.
     The city argued that the same underfunding claims had been raised and settled in McGuigan v. City of San Diego. In that suit, a retired city employee, on behalf of the association and other city workers, sued the city over its alleged underfunding of the city pension plan. The plaintiffs agreed to release the city from all claims in exchange for the city’s promise to make up for its shortfall in employer contributions.
     The officers association argued that the present case differs from McGuigan, because the former case involved allegations that the city failed to fund the retirement system at an agreed-upon fixed rate, while the present suit challenges the underlying funding system itself.
     But the Pasadena-based court backed the city’s stance that all underfunding claims are precluded by the settlement.
     “Without those claims, all that remains is Association’s request that we declare there is a federally recognized contractual right to an actuarially sound pension system,” wrote Senior U.S. District Judge Milton Shadur, who was designated to sit on the appellate panel. “But with no live case or controversy before us, there is no call for such declaratory relief.”
     The court then turned to the issue of attorneys’ fees. The district court deemed the defendants the “prevailing party,” but rejected their request for attorneys’ fees. The parties cross-appealed for fees, each claiming it was the prevailing party.
     The three-judge panel scoffed at the association’s attempt to paint the district court order as a victory.
     “Association seeks to emulate the alchemists in the Middle Ages in its effort to transmute the base metal of its total loss on the merits into the gold of ‘prevailing party’ status,” Judge Shadur wrote. “That just won’t work.”
     The panel then reversed the “unexplained denial” of attorneys’ fees to the city and its retirement system, which were clearly the prevailing party, according to Shadur.

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