Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of San Diego County No. 37-2009-00086499- CU-PT-CTL, David B. Oberholtzer, Judge.
HALLER, J.
This appeal involves an ongoing dispute between the San Diego Police Officers Association (Association) and the City of San Diego (City) concerning the City's Deferred Retirement Option Plan (DROP). The parties filed cross actions in the superior court seeking rulings on whether police officer employees have vested pension rights in the DROP benefit and under what circumstances the City can modify or eliminate the benefit. After a hearing, the court denied the Association's request for a preliminary injunction, ordered the parties to meet and confer on the DROP issues, and deferred ruling on several substantive issues pending the outcome of the parties' meet and confer sessions. No final judgment was entered.
The Association appealed from the court's denial of its preliminary injunction motion and other interim rulings. We hold the court did not abuse its discretion in declining to issue a preliminary injunction. We dismiss the remaining portions of the appeal because the challenged interim rulings were not appealable and there is no recognized exception permitting review of the court's interlocutory order. Review is particularly inappropriate in this case because the trial court has not yet ruled on the substantive issues.
SUMMARY OF CONTENTIONS AND DETERMINATIONS
The City's DROP program allows police officers hired before July 2005 to elect to enhance their pension benefits during the last five years of their employment. In 2009, the City notified the Association that it intended to eliminate or modify the benefit. The Association opposed the proposed modifications, and argued the program was a vested right that could not be eliminated unless certain conditions were established. After the parties reached an impasse in the negotiations, the City adopted a resolution: (1) increasing the DROP eligibility age to age 55; and (2) stating the governing board of the retirement system was responsible for establishing interest rates on DROP accounts.
Both parties use emotional language to describe the DROP benefit, reflecting the controversial nature of the program. Pursuant to our judicial function, we ignore these characterizations and focus on the legal issues raised by the parties. The question whether the City's adoption of this program was a wise political or economic choice is not before us.
The City also filed an action in the superior court requesting the court to order the Association to meet and confer with the City regarding the City's proposal to eliminate DROP. The Association responded by filing a cross action, asking the court to enjoin the City from increasing the DROP entry age and from decreasing the interest rate on member DROP participation accounts. The Association also asked the court to grant declaratory relief on these issues and sought a preliminary injunction to maintain the status quo during the litigation.
After briefing and a hearing, the court issued an order containing rulings on some of the issues raised in the petitions. On the City's petition, the court: (1) ordered the parties to meet and confer on the City's proposed changes to DROP; and (2) reserved any ruling on the issue whether DROP is a vested benefit and the circumstances under which it can be modified. On the Association's petition, the court: (1) deferred any finding on the Association's declaratory relief claim; (2) denied the request for a writ of mandate; (3) denied "without prejudice" the motion for preliminary injunction preventing the City from increasing the DROP entry age to age 55; and (4) denied the motion for preliminary injunction to bar the adjustment of interest rates on DROP accounts.
The court did not enter a final judgment because the court had not ruled on all the issues and the court contemplated further proceedings after the parties held their meet and confer sessions. Without waiting for these further rulings or a final judgment, the Association appealed from the order.
For the reasons explained below, we hold the court properly denied the Association's preliminary injunction motion. With respect to the interest rate issue, we conclude the Association's contentions have no merit and preliminary relief was unwarranted. With respect to the age-eligibility increase, we determine the court did not abuse its discretion in concluding interim relief was unnecessary because the retirement board was not enforcing this modification until the proposal had been approved by the membership. (See San Diego City Charter, art. IX, § 143.1, subd. (a).)
All citations to the Charter are to article IX of the San Diego City Charter. For simplicity, we omit the word subdivision when referring to section 143.1, subd. (a) (§ 143.1(a)). All references to the Municipal Code are to the San Diego Municipal Code; citations to the Municipal Code are to Chapter 2, Article 4.
We dismiss the remaining portions of the appeal because the appeal is from portions of the order that are not appealable until there is a final judgment. We thus do not reach the parties' arguments pertaining to whether DROP is a vested right subject to modifications or elimination, and whether a member vote is required to adopt the changes to the DROP entry age. The parties may raise these issues on a timely appeal once the superior court has addressed the issues on the merits and issued a final judgment.
FACTUAL AND PROCEDURAL BACKGROUND
San Diego is a charter city. The City Charter provides for a public employee retirement system (San Diego City Employee Retirement System (SDCERS)) managed by a Board of Administration (the SDCERS Board). (Charter, §§ 141-148.1.) The SDCERS Board is an entity separate from the City, and "is a fiduciary charged with administering the City's pension fund in a fashion that preserves its long-term solvency; it must ensure that through actuarially sound contribution rates and prudent investment, principal is conserved, income is generated, and the fund is able to meet its ongoing disbursement obligations." (Lexin v. Superior Court (2010) 47 Cal.4th 1050, 1064; Charter, §§ 142, 144.)
The City Charter gives the San Diego City Council broad authority to enact ordinances governing the retirement system. (Charter, § 141.) But the Charter also limits this authority by requiring employee or electorate approval for certain actions. Of relevance here, Charter section 143.1(a), adopted in 1955, provides: "No ordinance amending the retirement system which affects the benefits of any employee under such retirement system shall be adopted without the approval of a majority vote of the members of said system." In 2006, Charter section 143.1(a) was amended to add that "No ordinance amending the retirement system which increases the benefits of any employee... shall be adopted without the approval of a majority of those qualified electors voting on the matter."
Under the Charter and Municipal Code, SDCERS is funded by contributions from both the City and its employees. (Charter, § 143; Mun. Code, § 24.0402.) Membership is compulsory, and employees are classified as either general or safety members. (Mun. Code, §§ 24.0104, subd. (a), 24.0401-24.0403.) The Association is the recognized bargaining agent for approximately 2, 000 City police officers, who are considered safety members of the City's retirement system. (Mun. Code, § 24.0103.) Generally, police officers with 20 years or more of service are entitled to retire at age 50, and police officers with 10 years or more of service are entitled to retire at age 55. (Charter, § 141.)
SDCERS is a defined benefit plan, which provides a monthly payment upon retirement, calculated by multiplying years of service, final compensation (as defined in the Municipal Code), and a multiplier that varies according to retirement age. (See Mun. Code, § 24.0403, subd. (d) & Table 1; see Lexin v. Superior Court, supra, 47 Cal.4th at p. 1063.) In 1997, the city council added to this benefit by amending the Municipal Code to include the DROP program, which permits retirement-eligible employees to elect to accrue additional pension benefits for a maximum of five years before leaving City employment. (Mun. Code, § 24.1401, subd. (a).) Because the amendment affected employee retirement benefits, it required majority approval under Charter section 143.1(a). In April 1997, a vote was held; 3, 269 of the 9, 203 eligible members voted, and the measure passed with 97.31 percent of the votes cast.
As set forth in the Municipal Code, the DROP program permits a police officer employee who is eligible to retire under SDCERS rules to elect to defer retirement and continue working for five additional years. (Mun. Code, § 24.1402.) To participate, the employee must make several irrevocable decisions, including the designation of a specific time period to participate in DROP, not to exceed five years, and an agreement to leave City employment on or before the end of the employee's DROP participation period. (Mun. Code, § 24.1402, subd. (b).) During the five-year period, the City is required to pay the employee's pension benefits into a "DROP Participation Account" as if the employee had retired. (Mun. Code, § 24.1404, subd. (a).) The amounts in the DROP participation account earn an interest rate determined by the SDCERS Board. (Mun. Code, § 24.1404, subd. (c)(6).) The funds placed in each account are "fully vested." (Mun. Code, § 24.1404, subd. (b).) During those five years, the officer receives a full salary, but does not earn any additional service credit and the amount of the pension cannot increase based on any salary increases. At the end of the five-year period, the officer must retire, and then must select one of several options to receive his or her DROP account funds, including in a lump sum or as an annuity based on the employee's life expectancy. (Mun. Code, §§ 24.1402, subd. (b)(8), 24.1407, subd. (b).)
When the City adopted DROP in April 1997, it offered the program for a limited three-year trial period to determine if the program would be cost effective for the City. (See Mun. Code, § 24.1401, subd. (c).) The 1997 ordinance included in its statement of "Purpose and Intent" that if DROP became permanent three years later it "shall be treated the same as any other defined benefit of the Retirement System." (Boldface omitted.)
Five years later, in 2002, the City amended the Municipal Code to state the DROP program was offered as a "permanent benefit" effective April 1, 2000. (Mun. Code, § 24.1401, subd. (c).) As amended, the Municipal Code stated the DROP program was "created and offered to Members as an alternative method of benefit accrual" to add flexibility in the retirement system (Mun. Code, § 24.1401, subd. (a)), and was "intended to be cost neutral" (Mun. Code § 24.1401, subds. (b), (c)).
After its adoption, the DROP benefit was the subject of annual collective bargaining negotiations between the City and the Association. In each of the collective bargaining agreements (known as a Memorandum of Understanding or MOU) between 1998 and 2008 the parties reaffirmed DROP was an available retirement benefit under the Municipal Code sections. Each MOU also included a provision stating: "Interest will be credited to the Member's DROP account in the same manner and at the same rate that interest is credited to employee CERS accounts. The Member is 100% vested in the DROP from its inception."
The City and Association entered into several separate MOU agreements during this time period, including in 1998, 2003, 2007, and 2008.
Effective 2007, the City amended the Municipal Code to provide that members hired on or after July 2005 were not eligible to participate in DROP. (Mun. Code, § 24.1402.1.)
During the 2008 collective bargaining negotiations, the City stated it wanted to further eliminate or limit the DROP benefit for all police officers (who had not already elected DROP participation) because it was too expensive in light of the City's significant financial problems. The parties thereafter disagreed about whether the program was a "vested" benefit subject to "strict rules" before the City could modify the benefit. The 2008-2009 MOU identified this "strong" disagreement, and stated the City intended to institute litigation to determine whether DROP was a "vested" benefit, and "what, if any, conditions precedent exist" before DROP could be modified or eliminated.
However, the City did not seek judicial relief during the next year. Thus, during the 2009 collective bargaining negotiations, the City and the Association again participated in numerous sessions concerning their continued disagreement whether DROP was a vested benefit and the circumstances under which it could be legally modified or eliminated. During these meetings, the City presented facts showing that its budget deficit for fiscal year 2010 was estimated at $45-$60 million, and that to achieve necessary budgetary savings it was necessary to either eliminate DROP for all police officers who were not yet in DROP or to increase the eligible entry age to 55 years. The City believed the latter change "would likely generate the same savings as elimination of DROP." The Association's representatives responded that they were not authorized to agree to eliminate the DROP program because DROP was a vested benefit. But the Association "did agree to meet and confer over any modifications that may be required to achieve cost neutrality, and proposed an independent study." The City was initially unwilling to authorize this study.
After meeting more than 10 times between mid-January 2009 and early April 2009 to discuss these positions, the parties could not reach an agreement regarding the issues.
On April 1, 2009, the City filed a combined petition for writ of mandate and a complaint for declaratory relief in the superior court, seeking a "judicial determination of the parties' rights and responsibilities to bargain the City's proposal to eliminate DROP." The City requested an order compelling the Association to "meet and confer with the City." The City also sought a judicial declaration that "DROP is a term and condition of employment within the mandatory scope of bargaining, that [the Association] has a mandatory duty to meet and confer with the City, and the [Association's] failure to do so is a per se violation of its obligations under the... Meyers-Milias-Brown Act...." In its pleading, the City did not directly request the court to rule on the issue of whether DROP is a vested pension benefit, and instead sought only an order requiring the Association to meet and confer on the issues.
Shortly after filing this litigation, the City declared an impasse with the Association under the Meyers-Milias-Brown Act (MMBA). (See Gov. Code, § 3500.) One week later, on April 14, the city council held an impasse hearing and voted to impose the terms of the City's "Last Best and Final Offer." Of relevance here, the City's resolution (hereinafter referred to as the April 2009 resolution) adopted two changes/clarifications to the DROP program: (1) "a unit safety member must be age 55 or older... to participate in DROP"; and (2) "interest will be credited to the Member's DROP account at a rate determined by the SDCERS Board." These provisions were scheduled to take effect on July 1, 2009.
Under the MMBA, if after meeting and conferring in good faith, an impasse has been reached and the applicable impasse procedures have been exhausted, the employer may declare an impasse and implement its "last, best, and final offer" without submitting the dispute to arbitration. (Gov. Code, § 3505.4; see generally County of Sonoma v. Superior Court (2009) 173 Cal.App.4th 322, 329-330.)
On June 1, 2009, the Association filed a cross petition for a writ of mandate, declaratory relief, and injunctive relief. In the petition, the Association sought "to invalidate the City's attempt to increase the DROP entry age to age 55, " and to prevent the City "from reducing the promised interest rate" on DROP participation accounts. The Association claimed that under applicable law, DROP is a "vested pension benefit" that can be changed only under certain circumstances, including if disadvantages resulting from the change are "accompanied by... comparable new advantages." The Association relied on a line of California Supreme Court decisions holding that public employee pension rights are vested obligations protected by the federal and state Constitutions, but that public employers may make changes to these vested rights if the changes are reasonable. (See Betts v. Board of Administration (1978) 21 Cal.3d 859, 864 (Betts); Allen v. City of Long Beach (1955) 45 Cal.2d 128, 131 (Allen). Under the Allen-Betts test, "[t]o be sustained as reasonable, alterations of employees' pension rights must bear some material relation to the theory of a pension system and its successful operation, and changes in a pension plan which result in disadvantage to employees should be accompanied by comparable new advantages." (Allen, supra, 45 Cal.2d at p. 131; Betts, supra, 21 Cal.3d at p. 864;see Carman v. Alvord (1982) 31 Cal.3d 318, 325; Miller v. State of California (1977) 18 Cal.3d 808, 816; County of Orange v. Association of Orange County Deputy Sheriffs (2011) 192 Cal.App.4th 21, 41 (County of Orange).)
On the same date, the Association moved for a preliminary injunction to prohibit the City from implementing the challenged portions of the April 2009 resolution. The Association argued there was a likelihood of prevailing on the merits because: (1) DROP benefits were vested and there was no showing the City offered "comparable new pension advantages" when it increased the eligibility age and changed the prior interest rate provision; and (2) the City could not implement the April 2009 resolution because the changes to the DROP program required a vote of the members under Charter section 143.1(a).
The Association also argued the officers would suffer irreparable harm without the requested preliminary relief. In support, the Association submitted declarations of seven police officers, each of whom stated that if the City increased the eligibility age to 55, he or she will "join DROP before June 30, 2009, earlier than I otherwise would have, " and therefore the change would cause the officer to "retire sooner than I otherwise would have." The Association also submitted declarations of nine other police officers who were already DROP participants, each of whom essentially stated that because the interest rate would be lowered on their DROP accounts, "I will be retiring by June 30, 2009, earlier than I otherwise would."
The City opposed the Association's lawsuit and motion for preliminary injunction, arguing that DROP is a "term[ ] and condition[ ] of employment" and not a "vested pension right." The City further argued that the entry age and interest rate provisions were "statutory rights" subject to modification and relied on San Diego Police Officers Assn. v. San Diego City Employees' Retirement System (9th Cir. 2009) 568 F.3d 725, in which the Ninth Circuit held police officers did not have a vested right to a particular salary level during their DROP participation period. (Id. at pp. 737-739.) With respect to interest rates, the City maintained the SDCERS Board had the sole authority to determine interest rates on DROP accounts.
The City also argued a Charter section 143.1(a) vote on the April 2009 resolution was unnecessary because: (1) DROP was never lawfully enacted in 1997 because a majority of the total membership did not approve the program; and (2) the changes adopted in the April 2009 resolution did not "affect" a "benefit" of the retirement system. The City also requested additional time to conduct further discovery on the section 143.1(a) issue.
On June 25, 2009, the court held a hearing. At the hearing, the City's counsel urged the court to order the parties "back to the [bargaining] table so we can negotiate things." Counsel said the Charter section 143.1(a) issues were not "ripe" and that if the court ordered the parties "back to the table, " the parties would "hopefully [reach] some kind of mutually acceptable resolution." The City's counsel emphasized that: "We haven't briefed that particular issue [the section 143.1(a) issue] in connection with these proceedings because our initial task was to get the preliminary ruling that... the parties had an obligation to meet and confer regarding the elimination [of DROP]." The City's counsel also twice repeated that the purpose of the City's writ petition was merely to "get the parties to the table."
The Association's counsel countered that the Association had always agreed that DROP is a subject of collective bargaining, but the difference between the parties was whether the City could unilaterally eliminate the DROP program, or whether a "two-step" Allen/Betts analysis applies to the City's proposed elimination of, or modifications to, DROP. The court responded that it intended to order the parties back to the bargaining table, and this order would "eliminate[ ] the problem" because one "of the issues to be discussed during the meet and confer is whether the elimination of DROP or the changing the DROP is a Betts issue."
On the Association's preliminary injunction motion with respect to the eligibility-age change, the court stated the request was "premature." The court explained that the record showed the SDCERS Board is the entity solely responsible for implementing the DROP program, and the Board has taken the position that it will not enforce the April 2009 resolution's eligibility-age change until the members had voted and approved this change under Charter section 143.1(a). City's counsel agreed that the issue was "moot for the time being" and that the City will "respect" the DROP applications accepted by the SDCERS Board and that it considered the Board's acceptance of a DROP application "final" for purposes of the election (even if the employee was under age 55). The City's counsel thus stated that there is "nothing to enjoin" at this point because the 55 age change was not being implemented. The Association's counsel did not dispute these representations, and the court indicated the parties could reassert the issue if circumstances change.
With respect to the City's adoption of the interest rate provision, the court said the preliminary injunction was unwarranted because "the [SDCERS] Board has the authority and the power to change the interest rates, as proposed. And they're not parties here, and [I] don't know what I would do to prevent that, even if I wanted to."
Several months later, the court issued an order, entitled "ORDER AFTER HEARING." The order states in relevant part:
"In making this order, the court finds DROP is in the nature of 'wages, hours and other terms and conditions of employment' under the Meyers-Milias-Brown Act..., but, pending a more complete record, has reserved any finding on whether to apply [the Allen/Betts] advantages/disadvantages analysis, and, if so, how to apply it.
[¶]... [¶]
"Let a writ of mandamus issue from this court commanding... Association to meet and confer in good faith with the [City] at a mutually agreeable date to take place no later than January 8, 2010, regarding terms and conditions of employment, including but not necessarily limited to the City's proposal to modify or eliminate [DROP].
"IT IS FURTHER ORDERED: [¶] The [Association's] Cross-Petition for a writ of mandamus is denied; [¶] The [Association's] petition for a preliminary injunction preventing the City from increasing the DROP entry age from age 50 to age 55 is denied, without prejudice; [¶] The [Association's] petition for a preliminary injunction to bar adjustment to DROP interest rates is denied; [¶]... [¶] The court makes no findings regarding [the Association's] Cross-Petitions for declaratory relief. [¶]... [¶] The court retains jurisdiction for enforcement and such other and further issues as may be presented." (Italics added.)
Although neither party asked for a statement of decision, the court on its own motion prepared a lengthy document entitled "Findings After Hearing." In these findings, the court reiterated that it was ordering the parties to meet and confer in good faith "regarding terms and conditions of employment, including... (1) the City's proposal to modify or eliminate [DROP], and (2) the application, if any, of the holding in Allen v. City of Long Beach, 45 Cal.2d 128 (1955) [regarding the comparative advantages/disadvantages analysis] on the City's proposed changes." The court also observed: "Does Allen v. City of Long Beach place a limit on a municipality's power to impose a pension plan with fewer advantages as part of its last, best and final offer? This court cannot resolve that issue now, but it remains the crocodile in the bathtub."
In this written statement, the court made numerous additional observations and reached various preliminary conclusions pertaining to the issues raised by the parties. In so doing, the court rejected the City's argument that DROP was never lawfully adopted because Charter section 143.1(a) requires approval of a majority of the entire Membership, rather than of the voting Members. The court found the argument was without merit because the "court looks to the Ordinance as written, not the process of its adoption."
DISCUSSION
I. Appealability
The one final judgment rule is a long-established " 'fundamental principle of appellate practice' " in California. (In re Baycol Cases I & II (2011) 51 Cal.4th 751, 756 (Baycol); Griset v. Fair Political Practices Com. (2001) 25 Cal.4th 688, 697 (Griset).) The rule "prohibits review of intermediate rulings by appeal until final resolution of the case." (Griset, supra, 25 Cal.4th at p. 697.) The rule has "deep common law and statutory roots" and is supported by "substantial policy considerations, " including that " ' "piecemeal disposition... would be oppressive and costly" ' " and the need to "ensure[ ] a complete record for the reviewing court." (Baycol, supra, at p. 756.) Thus, although there are statutory and judicially-created exceptions to the one final judgment rule, an exception " 'should not be allowed unless clearly mandated.' " (Id. at p. 757, italics added.)
Further, because the "existence of an appealable judgment is a jurisdictional prerequisite to an appeal[, ] [a] reviewing court must raise the issue on its own initiative whenever a doubt exists as to whether the trial court has entered a final judgment or other order or judgment made appealable by [statute]." (Jennings v. Marralle (1994) 8 Cal.4th 121, 126; Harrington-Wisely v. State of California (2007) 156 Cal.App.4th 1488, 1494; First Security Bank of Cal. v. Paquet (2002) 98 Cal.App.4th 468, 472.)
In this case, the court included numerous rulings in its "ORDER AFTER HEARING, " but did not enter a final judgment. In its appellate brief, the Association recognized the lack of a final judgment, but argues the court's rulings are nonetheless appealable because: (1) a specific statutory exception applies to an order denying a preliminary injunction; and (2) nothing "material" was left for the court's determination on the parties' petitions.
We agree the portion of the order denying the Association's motion for preliminary injunction is appealable. Code of Civil Procedure section 904.1, subdivision (a)(6) provides that an "appeal... may be taken from... an order refusing to grant... an injunction." It is well settled that this exception includes an order denying a motion for a preliminary injunction. (See Right Site Coalition v. Los Angeles Unified School Dist. (2008) 160 Cal.App.4th 336, 338, fn. 1; Department of Fish & Game v. Anderson-Cottonwood Irrigation Dist. (1992) 8 Cal.App.4th 1554, 1560.) However, as explained in Section III below, the remainder of the court's rulings are not appealable because they do not fall within any recognized exception to the one final judgment rule.
The City's failure to object to the appealability of the court's order does not affect our conclusion on this issue. In its briefs, the City referred to the court's order as "a final judgment" and did not address the appealability issue. However, "issues of appealability cannot be resolved on the basis of concessions of issues of law by the parties involved. Instead, [a reviewing court] must look past the parties' admissions to determine whether, as a matter of law, the judgment is final." (First Security Bank of Cal. v. Paquet, supra, 98 Cal.App.4th at p. 474; accord City of Gardena v. Rikuo Corp. (2011) 192 Cal.App.4th 595, 599, fn. 3.)
II. Denial of Association's Motion for Preliminary Injunction
A. Review Standards
The purpose of a preliminary injunction is to preserve the status quo pending a determination on the merits of the action. (Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 528; O'Connell v. Superior Court (2006) 141 Cal.App.4th 1452, 1472.) A trial court must evaluate two interrelated factors when determining whether to grant a preliminary injunction motion. (White v. Davis (2003) 30 Cal.4th 528, 554.) "The first is the likelihood that the plaintiff will prevail on the merits at trial. The second is the interim harm that the plaintiff is likely to sustain if the injunction were denied as compared to the harm that the defendant is likely to suffer if the preliminary injunction were issued." (IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 69-70; Davenport v. Blue Cross of California (1997) 52 Cal.App.4th 435, 446.)
The moving party has the burden to present evidence to support these elements. (White v. Davis, supra, 30 Cal.4th at p. 554; O'Connell v. Superior Court, supra, 141 Cal.App.4th at p. 1481.) A trial court has broad discretion in ruling on the motion. (Cohen v. Board of Supervisors (1985) 40 Cal.3d 277, 286.) The determination will not be reversed on appeal absent a showing of a manifest abuse of discretion, i.e., when the court has exceeded the bounds of reason or contravened the uncontradicted evidence. (Ibid.; see Continental Baking Co. v. Katz, supra, 68 Cal.2d at p. 527.)
B. Preliminary Injunction Regarding Interest Rates on DROP Accounts
The Association contends the court erred in denying its motion for a preliminary injunction to enjoin enforcement of the April 2009 resolution pertaining to interest rates on DROP participation accounts.
1. Relevant Background
Since the DROP program's inception in 1997, the Municipal Code has stated the SDCERS Board is the entity that determines the interest rate on DROP participation accounts. (See Mun. Code, §§ 24.1404, subd. (c)(6), 24.0901, 24.0902, 24.0904.) Under the relevant Municipal Code provisions, the Board, acting in a fiduciary capacity, must adopt "the mortality, service and other tables and interest rates it deems proper" and the"Board's decisions on matters covered by this section are conclusive, if arrived at in good faith...." (Mun. Code, §§ 24.0902, italics added.)
Although the Municipal Code gives the SDCERS Board the sole authority to establish interest rates on DROP participation accounts, in each MOU applicable between 1997 and 2009, the City and Association agreed to the following provision regarding interest rates on these accounts: "Interest will be credited to the Member's DROP account in the same manner and at the same rate that interest is credited to employee CERS accounts."
The second sentence of this provision stated: "The Member is 100% vested in the DROP from its inception." However, the rule that a member is vested in amounts previously placed in a DROP participation account was not modified by the April 2009 resolution. (See Mun. Code, § 24.1404, subd. (b).) Thus, to properly focus the issue, we omit reference to this sentence when discussing the specific contention before us relating to a modification regarding the interest rate determination.
During the 2009 collective bargaining negotiations, the City proposed to delete this provision, and instead adopt the following provision: "Effective July 1, 2009, interest will be credited to the Member's DROP account at a rate determined by the SDCERS Board." The Association refused to agree to this change, and the City thereafter adopted this provision in the April 2009 resolution.
The SDCERS Board later substantially lowered the interest rates on DROP participation accounts. The interest rate had been 8 percent each year from 1998 through 2008. The Board lowered this rate to 7.75 percent effective January 1, 2009, and then lowered the interest rate to 3.54 percent effective July 1, 2009.
In its writ petition and claim for declaratory relief, the Association challenged this interest rate reduction. The challenge concerned only the City's actions because SDCERS Board was not named as a party in the action. In moving for a preliminary injunction on these claims, the Association argued it was likely to prevail on the merits because DROP participants had a "vested right" to a certain interest rate based on each prior MOU and based on certain written conditions to participation in the program. The Association also argued the new lower interest rate would cause substantial and immediate harm to DROP participants. In support, the Association produced declarations of several police officers who were DROP participants, each of whom stated that a decrease in interest rates would mean that they would make the decision to retire immediately.
In denying the motion, the court noted that because the SDCERS Board has sole authority to establish the interest rates and SDCERS was not a party to the action, any injunctive relief would be ineffective to address any perceived harm.
As explained below, we conclude the court did not err in denying the preliminary injunction because the undisputed evidence shows that the Association would not prevail on the merits on this claim.
2. Analysis
To prevail on its claim that the City could not lawfully adopt the interest rate provision in the April 2009 resolution, the Association was required to show the members had a protected right to the specific interest rate calculation set forth in the prior MOU's. There is no legal basis for reaching this conclusion.
First, at all relevant times, the Municipal Code stated that the SDCERS Board, acting in its fiduciary capacity, has the authority to establish and modify interest rates on DROP participation accounts. (See Mun. Code, §§ 24.1404, subd. (c)(6), 24.0901, 24.0902, 24.0904.) Under these provisions, City employees do not have a right to a particular interest rate on these accounts. (See International Assn. of Firefighters v. City of San Diego (1983) 34 Cal.3d 292, 303 [firefighter employees have no vested rights to a specific contribution rate because change "is implicit in the operation of City's system and is expressly authorized by that system"].)
Similarly, the prior MOU's did not create a vested right to a particular interest rate or interest rate calculation in the DROP participation accounts. Although the parties had previously agreed to tie the rate to the CERS account interest rate, these MOU provisions, by their terms, applied only for a limited time period. Thus, these provisions did not give the members the right to continue this calculation indefinitely. (See San Bernardino Public Employees Assn. v. City of Fontana (1998) 67 Cal.App.4th 1215, 1223.) The fact that terms and conditions are set forth in a collective bargaining agreement does not transform those terms and conditions into vested contractual rights beyond the effective MOU period. (Id. at pp. 1223-1224.)
In its reply brief, the Association suggests the MOU interest rate provision applied beyond the term of the MOU, relying on Alday v. Raytheon Co. (9th Cir. 2010) 620 F.3d 1219 (Alday).) This reliance is misplaced. In Alday, the court confirmed the general rule that contractual obligations in a collective bargaining agreement " 'cease... upon termination of the bargaining agreement.' " (Id. at p. 1223.) The court noted there are exceptions to this general rule and these exceptions " 'are determined by contract interpretation.' " (Ibid.) Specifically, the Alday court identified two exceptions. First, rights " 'accrued or vested under the agreement will, as a general rule, survive termination of the agreement.' " (Ibid.) Second, benefits will continue if the " 'collective-bargaining agreement provides in explicit terms that [those] benefits continue after the agreement's expiration....' " (Ibid.)
Neither exception applies here. There was no right to a particular interest rate or a particular method of calculating the interest rate separate and apart from the rights stated in the collective bargaining agreement. The Municipal Code provides that a member is entitled to interest on his or her DROP participation account, but the Code does not establish a fixed rate of interest and instead refers to interest "as determined by [the SDCERS Board] through rules and regulations." (Mun. Code, § 24.1404, subd. (c)(6).) Additionally, there is no language in any of the MOU's stating that the rights under the interest rate provision would extend beyond the term of the MOU. Thus, this case is unlike Alday, in which the collective bargaining agreement "explicitly provided that the [right at issue] would continue after the [collective bargaining agreement's] expiration." (Alday, supra, 630 F.3d at p. 1223.)
The Association alternatively suggests the officers were entitled to the prior 8 or 7.75 percent interest rate because this above-market rate was a material factor in the employee's decision to become a DROP participant. However, the Association does not cite any evidence supporting this contention. Moreover, even if there was evidence that a police officer relied on a particular interest rate to make the decision to elect DROP participation, this reliance would not be reasonable. The Municipal Code provides the SDCERS Board with broad discretion to determine an appropriate interest rate and to change those rates. (See Mun. Code, §§ 24.1404, subd. (c)(6), 24.0901, 24.0902.) These provisions negate any reasonable expectation that the interest rate would remain unchanged. Because the prior MOU agreements were applicable only during a finite time period, it is not reasonable for an officer to have believed the prior MOU interest rate calculation provision would continue indefinitely.
In this regard, we find unavailing the Association's reliance on the contract that DROP participants are required to sign when electing to enter into the DROP program. In the contract, each member initialed numerous conditions to his or her election to participate in DROP. One of those conditions is: "I understand that if benefits are improved or otherwise changed after I enter DROP, through meet and confer or any other process, I will not be eligible for any of these benefit improvements or changes." On appeal, the Association argues this language "means... that pension 'benefits' - including [interest rates on DROP accounts] - are not subject to change through the 'meet and confer' process or 'any other' process, such as impasse procedure."
The contractual provision plainly states that a member is not entitled to additional benefits if the City (through collective bargaining or otherwise) improves the benefits after the Member has elected to enter DROP. Under any reasonable interpretation, this statement does not prohibit the City from adopting a resolution that reiterates the rule already contained in the Municipal Code - that the Board had the authority, in its role as fiduciary, to select the interest rate on DROP participation accounts.
The Association additionally argues the prior MOU rule requiring that the DROP participation account interest rate be "tied to [the] SDCERS' actuarial rate of return" should remain because the rule is "both (1) fair and (2) very valuable." However, the fact that the Association may believe a provision in a prior MOU was "fair" and provided its members with a valuable monetary benefit does not mean that the City was required to continue this benefit beyond the effective date of the MOU.
To the extent the Association argues the City could not adopt the interest rate portion of the April 2009 resolution without a member vote, the argument is without merit. Charter section 143.1(a) requires a member vote only for an "ordinance amending the retirement system." The rule adopted in the April 2009 resolution that the Board has the authority to determine applicable interest rate did not "amend" the retirement system; instead it merely confirmed the Municipal Code provisions that the SDCERS Board is the responsible entity for selecting the interest rate. No vote was required for this portion of the resolution to become effective.
We also reject the Association's challenges to the lower interest rate adopted by the SDCERS Board. Under its discretionary authority, the SDCERS Board substantially lowered the interest rate to 3.54 percent from the prior 7.75 and 8 percent rates. Because this rate decision was made by the SDCERS Board and the SDCERS Board is not a party in this action, its rate decision cannot be challenged in this action.
The Association nonetheless seeks to hold the City responsible for the lowered interest rate based on a January 22, 2009 letter written by Mayor Jerry Sanders to the SDCERS plan administrator. In the letter, Mayor Sanders urged the SDCERS Board to consider lowering the DROP participation account interest rate. Mayor Sanders discussed the City's budget problems and requested SDCERS to "reconsider its past practice of paying DROP participants interest at the actuarial assumed rate of return and to set the rate at a level that more accurately reflects the risk free, short-term nature of the DROP account."
There was nothing improper in this letter. The Mayor was entitled to request the SDCERS to lower the interest rate based on budgetary concerns and public policy issues. The SDCERS Board was not obligated to grant this request, but had the discretion and authority to do so. The Association's suggestion that the City's conduct in requesting the SDCERS Board to consider a lower rate was "immoral, unlawful and unconstitutional" is groundless.
We conclude the court properly denied the Association's preliminary injunction motion with respect to the interest rate issue. Further, because the lack of merit on this claim is " 'clear' " and there are no factual issues requiring resolution on the issue, our determination is on the merits and is binding on the parties in this case. (See North Coast Coalition v. Woods (1980) 110 Cal.App.3d 800, 805; accord Wilkinson v. Times Mirror Corp. (1989) 215 Cal.App.3d 1034, 1040.)
C. Preliminary Injunction Regarding Change in DROP Eligibility Age
The Association additionally challenges the court's denial of a preliminary injunction regarding the City's increasing the DROP eligibility age to 55 years.
1. Relevant Background
Since the City adopted DROP in 1997, the Municipal Code has provided that "Any Member who is eligible for a service retirement is eligible to participate in DROP." (Mun. Code, § 24.1402, subd. (a).) Generally, police officers are eligible to retire at age 50 with 20 years of service credit, and at age 55 with 10 years of service credit. (Charter, § 141.) In the April 2009 resolution, the City approved a change to the DROP eligibility age, providing that officers may not elect to enter DROP until age 55, even if he or she is otherwise eligible to retire at age 50.
In its pleadings, the Association alleged this resolution was invalid because: (1) the right to elect DROP at age 50 was a vested benefit that could not be changed without a showing of "comparable new advantages"; and (2) under Charter section 143.1(a), the amendment to the Municipal Code required a vote of the members before it could be adopted. In response, the City argued (1) the right to elect DROP at age 50 was not a vested pension benefit and instead was a "term and condition" of employment; and (2) no Charter section 143.1(a) vote was required because: (a) DROP was never lawfully enacted in 1997 because a majority of the membership did not vote in the 1997 member election; and (b) the change in the eligibility age did not require a Charter section 143.1(a) vote because entry age was not a retirement "benefit."
In its preliminary injunction motion, the Association argued the officers would suffer substantial harm without immediate relief based on the declarations of seven police officers who stated that if the age-eligibility increase becomes effective on July 1, 2009, they will be forced to retire immediately to obtain the maximum DROP benefits.
In response, the City maintained there was no need for interim relief because it was not likely the Association would prevail on the merits of the claim and because the SDCERS Board was not enforcing the DROP age-eligibility increase. With respect to the latter ground, it was undisputed that the SDCERS Board had the sole authority to receive and accept DROP applications; the SDCERS Board was taking the position that it would not enforce the DROP age-eligibility change until there was a Charter section 143.1(a) vote; the SDCERS Board was thus continuing to accept DROP elections from police officers who were eligible to retire even if they were younger than 55 years of age; and the City would "respect" the SDCERS Board's decisions on these under-age-55 applications and considered those decisions to be "final."
After considering these arguments, the court denied "without prejudice" the request for preliminary injunction on the age-eligibility issue. (Italics added.) At the hearing, the court explained there was no need for a preliminary injunction because the SDCERS Board was not enforcing the April 2009 resolution regarding this age-eligibility issue. The trial court further indicated that if there is any change in the Board's position, the parties could bring the issue to the court's attention, stating the court was "retain[ing] jurisdiction over all these issues.... Not everything's been decided...."
2. Analysis
In contending the court abused its discretion in denying the preliminary injunction on the DROP age-eligibility issue, the Association focuses on the merits of its "vested pension" arguments and the evidence showing seven officers intended to retire early if the age-eligibility increase was enforced.
However, we need not reach these arguments because the record supports the court's conclusion a preliminary injunction was unnecessary because the resolution increasing the eligibility age was not being enforced. Because the purpose of a preliminary injunction is to preserve the status quo, and the evidence showed there would be no change to the status quo, the court acted within its discretion in denying the relief. Although generally a court is required to consider both elements (likelihood of success on the merits and relative hardships) in deciding whether to issue a preliminary injunction (see Right Site Coalition v. Los Angeles Unified School Dist., supra, 160 Cal.App.4th at pp. 341-344), where, as here, the status quo will continue without any judicial action, a court does not abuse its discretion in determining a preliminary injunction is unwarranted.
In reaching this conclusion, we reject the City's alternate theory that the Association did not establish a likelihood of prevailing because DROP was never lawfully adopted. In 1997, the DROP program was approved by a majority of the members who voted, but only about 35 percent of all members voted. In the proceedings below, the City argued that Charter section 143.1(a) requires approval of a "majority vote of the members, " and interpreted this phrase to mean approval must be by a majority of all the members. The Association responded that the SDCERS Board has long interpreted Charter section 143.1(a) as requiring a majority of the voting members and argued that this interpretation is supported by case law (see Lake County Sheriff's Merit Board v. Buncich (Ind. 2007) 869 N.E.2d 482, 485-486). In its written findings, the court found the City's argument to be without merit regardless of the proper interpretation of Charter section 143.1(a). The court reasoned that the City could not prevail on a challenge to DROP's adoption in 1997 because the "City Council codified the memorandum of understanding, and the [DROP] became part of the Municipal Code."
Although the trial court's determination on this issue was not necessary to its decision, both parties and an amicus have briefed the issue on appeal. We agree it is appropriate to address the contention at this time because the resolution of the issue is solely one of law and it would be wasteful to permit the parties to engage in any further litigation over this contention.
We agree with the court's conclusion. Even assuming Charter section 143.1(a) could be interpreted to require approval of a majority of "all" members, this requirement cannot now be used to invalidate the DROP program. Five years after the 1997 vote, the city council voted to make the program "permanent" and has reaffirmed the validity of the program in four MOU's. In each post-1997 MOU, the City specifically agreed that DROP is an established benefit that "provides an alternative form of benefit accrual" for affected City employees. The city council then ratified and approved each MOU. Thus, even assuming the 1997 vote was flawed, the City's affirmative actions after 1997 remedied any such errors and preclude it from disavowing the current Municipal Code provisions at this late date. The factual information about the 1997 vote was fully available to the City and to the public. If the City had wanted to challenge the 1997 vote, it had many years to do so. By affirmatively amending the Municipal Code to state that "DROP [is] a permanent benefit effective April 1, 2000, " the City cannot now prevail on an argument that DROP was never validly adopted.
III. Challenges to the Court's Rulings on Parties' Writ Petitions
In addition to challenging the preliminary injunction rulings, the Association challenges the portions of the court's ORDER AFTER HEARING in which the court stated it was granting the City's petition for writ of mandate and denying the Association's petition for writ of mandate. Specifically, the Association argues these rulings were in error because police officers have a vested right to certain benefits in the DROP program, and the City cannot eliminate or modify those rights without providing a comparative advantage under the Allen/Betts line of cases. As explained below, we conclude these contentions are not properly before us because there was no final judgment and the court never ruled on these issues.
A. Orders on Writ Petitions Not Appealable
Unlike an order denying a preliminary injunction that is expressly made appealable by statute, an order granting or denying a writ of mandate is generally not appealable unless the record affirmatively shows the order disposes of all matters in the case. (Nerhan v. Stinson Beach County Water Dist. (1994) 27 Cal.App.4th 536, 538-540; see Griset, supra, 25 Cal.4th at p. 697; Morehart v. County of Santa Barbara (1994) 7 Cal.4th 725, 743-744.) "A judgment [or order] that disposes of fewer than all of the causes of action framed by the pleadings... is necessarily 'interlocutory'... and not yet final, as to any parties between whom another cause of action remains pending." (Morehart, supra, 7 Cal.4th at p. 741.) Thus, a judgment resolving the issues raised in a complaint, but not the issues in the cross-complaint, is not a final judgment. (See American Alternative Energy Partners II v. Windridge, Inc. (1996) 42 Cal.App.4th 551, 556-557.) " '[W]here anything further in the nature of judicial action on the part of the court is essential to a final determination of the rights of the parties, the decree is interlocutory.' " (Griset, supra, 25 Cal.4th at p. 698; see City of Gardena v. Rikuo Corp., supra, 192 Cal.App.4th at p. 603 ["an appeal lies only from a final judgment that terminates the trial court proceedings by completely disposing of the matter in controversy"].)
The Association recognizes that the court's ORDER AFTER HEARING was not a final judgment, but argues the order is nonetheless appealable because the court ruled on the parties' writ petitions and "reserved nothing material for future adjudication." The Association emphasizes that " ' "[i]t is not the form of the decree but the substance and effect of the adjudication which is determinative." ' "
We agree the substance, rather than the form, of the order controls the issue whether an order is appealable. (Griset, supra, 25 Cal.4th at p. 698; City of Gardena v. Rikuo Corp., supra, 192 Cal.App.4th at p. 601.) We further recognize the court stated it was granting certain relief on the City's writ petition and denying the Association's writ petition. However, the substance of the court's order makes clear the matter is not final. The court expressly reserved ruling on certain issues, and the record shows that not only were the reserved issues "material, " they are the critical issues raised in this case and on appeal.
First, the court did not rule on the Association's separate claim for declaratory relief asserted in its petition. Instead, the court stated it "makes no findings" on the declaratory relief claim, and declined to reach the substantive issues necessary to rule on the claim, including: (1) whether an officer's DROP eligibility age was a vested benefit; (2) under what circumstances changes could be made even if the benefit was vested; and (3) whether a Charter section 143.1(a) vote was required before the eligibility age change could be implemented. Because a ruling on the declaratory relief claim was necessary for a final determination of the parties rights, the ORDER AFTER HEARING did not serve as a final adjudication of the parties' claims. Although the parties could have stipulated to a dismissal with prejudice of the remaining claims if the parties believed there were no remaining issues of substance to be decided, the parties (each of which was represented by experienced counsel) took no action to do so.
Second, the court ordered the parties to meet and confer on the City's proposal to modify or eliminate the DROP program and expressly "reserved any finding on whether to apply [the Allen-Betts] advantages/disadvantages analysis, and, if so, how to apply it." (Italics added.) This issue was the central disputed matter in the Association's petition, and was clearly material to the parties' claims and to the contentions raised on appeal. (See Betts, supra, 21 Cal.3d at p. 864; Allen, supra, 45 Cal.2d at p. 131; Miller, supra, 18 Cal.3d at p. 816.) In reserving this issue, the court did not reach a final determination on the disputed claims.
The Association alternatively contends the court's rulings are appealable because under Code of Civil Procedure section 906, a "reviewing court may review the... decision and any intermediate ruling, proceeding, order or decision which involves the merits or necessarily affects the judgment or order appealed from or which substantially affects the rights of a party...." (Code Civ. Proc., § 906.)
Under this code section, a court may review intermediate rulings leading to an appealable judgment or order, including an order denying or granting preliminary relief. (Code Civ. Proc., § 906; see County of Los Angeles v. City of Los Angeles (1999) 76 Cal.App.4th 1025, 1028-1029.) Thus, procedural rulings and collateral orders affecting the appealable order are generally appealable. (County of Los Angeles, supra, 76 Cal.App.4th at p. 1028[amount of injunction bond reviewable on appeal from preliminary injunction order].) However, this rule has no applicability here because the court's rulings on the writ petitions were not "intermediate" to the court's rulings on the preliminary injunction motion. (Code Civ. Proc., § 906.) They were separate, and independent from, the order denying the preliminary injunction. (See Muao v. Grosvenor Properties, Ltd. (2002) 99 Cal.App.4th 1085, 1989.) A court order denying a preliminary injunction does not mean other interim rulings are appealable merely because they have some relationship to issues raised in the preliminary injunction motion. Otherwise, the narrow exception for preliminary injunction review would trigger a full-scale review in every appeal. We do not read Code of Civil Procedure section 906 as intending such a result.
B. Court Did Not Rule on Merits of Parties' Contentions
Even assuming we could identify a valid exception to the one final judgment rule, an equally fundamental bar to our review is that the court did not rule on the substantive issues. Both parties have devoted most of their appellate briefs to discussing: (1) whether the DROP program is a vested right; (2) whether the entry age is a vested right; and (3) whether Charter section 143.1(a) requires a vote on the entry age issue. However, the court explicitly declined to rule on these issues, and instead ordered the parties to meet and confer on these matters before the court ruled on the issues.
The Association contends the court erred in failing to decide the core issues raised in the parties' petitions pertaining to whether DROP is a vested pension benefit and the extent to which the City may modify or eliminate the program. We agree that the court should have reached these issues. The record makes clear that an essential reason the parties filed their petitions in the superior court was because the parties could not agree on the legal issues during their meet and confer sessions. But the remedy for the court's failure to rule is a remand to allow the court to consider these issues, and not for this court to address the issues as if it had original jurisdiction. As a Court of Appeal, our task is to determine whether the court erred in reaching its determinations; it is not to evaluate the parties' claims before the court has ruled on the issues.
To the extent the parties request that we reach the legal issues on this appeal because they are purely legal questions, we cannot do so. First, there is no final judgment and no applicable valid exception to the one final judgment rule. Because the court necessarily contemplated further proceedings after the parties engaged in further meet and confer negotiations, our rulings would be premature. As the California Supreme Court recently admonished, " 'exceptions to the one final judgment rule should not be allowed unless clearly mandated.' " (Baycol, supra, 751 Cal.4th at p. 757, italics added.)
Moreover, the issues involving whether police officers have a vested right in the DROP program and the scope of the City's rights to modify the program involve potential factual issues and inquiry into the reasonableness of the proposed changes to the program. (See generally Board of Administration v. Wilson (1997) 52 Cal.App.4th 1109, 1129-1130.) For example, even assuming the Association is correct in asserting that DROP can be considered a pension benefit in which police officers have vested rights, vested "pension rights are not immutable." (Miller v. State of California, supra, 18 Cal.3d at p. 816; see County of Orange, supra, 192 Cal.App.4th at p. 41.) Thus, the courts have recognized that a public employer may make modifications in a pension program if the modifications are reasonable (Betts, supra, 21 Cal.3d at p. 864; Allen, supra, 45 Cal.2d at p. 131), or if they involve collateral aspects of the pension rights, such as rights to a one-time early retirement incentive or bonus (see, e.g., Creighton v. Regents of University of California (1997) 58 Cal.App.4th 237, 242-246; see also Palaske v. City of Long Beach (1949) 93 Cal.App.2d 120, 132). It would not be appropriate for this court to opine on these issues without a full record and without a final ruling from the trial court.
DISPOSITION
The court's order denying the Association's motion for preliminary injunction is affirmed. We dismiss the Association's appeal from the remainder of the court's order. The parties are to bear their own costs on appeal.
WE CONCUR: McCONNELL, P.J., HUFFMAN, J.