California Supreme Court Hears Pension Trustees' Case
November 9, 2009

The California Supreme Court last week heard a case that may be of great significance for trustees on pension boards in California. The case, Lexin v. Superior Court, arose out of a decision by the San Diego Employees’ Retirement System (SDCERS) board of administration to approve an increase in pension benefits for city employees and at the same time allow the pension fund to be underfunded. The San Diego County district attorney brought criminal proceedings against certain members of the board, alleging a violation of Government Code section 1090. The questions to be decided in the case is whether the petitioners’ service on the Board of the San Diego Retirement System, as it related to an increase in pension benefits for members of the system, violate the conflict of interest provisions of Government Code section 1090, and subject them to criminal prosecution, or did the non-interest exemption of Government Code section 1091.5?

In an earlier hearing, the Court of Appeals held that the salary exception to section 1090 did not apply where public employees were participating in decisions that affected the department in which they were employed, because employees in those departments were members of the bargaining unit negotiating with the city and as a result, would receive the increased pension benefits. The ruling, if stands, means that the prosecution of the pension board trustees could move forward.

At Wednesday’s hearing, the justices seemed skeptical of the prosecution’s arguments. According to the San Diego Union-Tribune, Justice Carol Corrigan was troubled by the fact that both key elements in the case — underfunding and better benefits — came from and were pushed by the city. She said the circumstances were “novel” but not of the board members' making. Additionally, some justices also said that because state laws require public employees to sit on these boards, interpreting the law as prosecutors wish would lead to employees being unable to serve and would run counter to the purpose of laws that mandate employee participation.

NCPERS, along with a number of California pension systems and labor groups, filed amicus curiae briefs in support of the pension board trustees. The California Supreme Court is expected to rule on the case within 90 days.