Marin fiscal watchdogs troubled by pension lawyer’s CalPERS gig

March 21--The hiring of the Marin County Employees' Retirement Association's general counsel as external fiduciary counsel to the California Public Employees' Retirement System has some Marin deficit hawks crying foul.

Ashley Dunning and a team from her firm, San Francisco-based Nossaman LLP, were selected by the CalPERS board when it met last Wednesday.

"Why was this done now?" asks Jody Morales of Lucas Valley, founder of Citizens for Sustainable Pension Plans. "I tend to be very suspicious that they hired her in order to assure that their interests will be protected during this Supreme Court hearing."

The Supreme Court hearing is an appeal by the Marin Association of Public Employees International Union 1021 and the Marin County Fire Department Firefighters Association of a decision by the 1st District Court of Appeal in San Francisco in August 2016.

The unions are appealing a lower court's decision that has placed in jeopardy the so-called "California rule," which decreed that the pension formulas of public workers could be increased but not decreased during their working years.

Dunning was interviewed by the CalPERS board on Wednesday about her work in this case and her position on the California rule. It's Dunning's response to those questions that concerns Morales.

"I believe very strongly in the California rule," Dunning told the board.

"My goal is not to impair the California rule at all," Dunning said, "I can't speak for the MCERA (Marin County Employees' Retirement Association) board on this point that would be inappropriate, but the MCERA board has always taken the position on this that we are not seeking to impair vested rights."

Dunning went into some detail about the origins of the case. She explained that it originated when Marin unions challenged MCERA's enforcement of the California Public Employees' Pension Reform Act (AB 340) and AB 197, both of which were signed into law in September 2012.

MCERA responded to these new laws by excluding standby pay, administrative response pay, callback pay and cash payments for waiving health insurance from the calculation of members' final compensation.

The unions then sued, asserting that the value of these benefits had been a factor in determining the wage and benefit packages offered to their members through collective bargaining.

When Marin Superior Court Judge Roy Chernus ruled against the unions, they appealed. The 1st District Court of Appeal, however, not only ruled in favor of MCERA but went further.

In its ruling, the Court of Appeal wrote, "While a public employee does have a 'vested right' to a pension, that right is only to a 'reasonable' pension -- not an immutable entitlement to the most optimal formula of calculating the pension. And the Legislature may, prior to the employee's retirement, alter the formula, thereby reducing the anticipated pension. So long as the Legislature's modifications do not deprive the employee of a 'reasonable' pension, there is no constitutional violation."

During her interview on Wednesday, Dunning said the Court of Appeal went well beyond anything that MCERA had been asserting.

"The retirement board's position is not that this is about vested rights, really," Dunning said. "The retirement board's position is there was not a vested right originally to have stand-by pay included."

Morales said, "I think Ms. Dunning's representation of MCERA has been excellent to date, but her 'strong support' of the California rule goes against some of the broader findings of the Appeals Court. Those findings, which question the so-called California rule, would allow government entities the ability to adjust prospective pensions in order to bring stability to cities and counties throughout the state."

Dunning could not be reached Monday for comment.

Asked about Dunning's comments to the CalPERS board, Jeff Wickman, MCERA's retirement administrator, said, "I think she made it clear she was speaking on her own behalf."

Wickman echoed Dunning's comment that MCERA never intended to challenge vested rights protected by the California rule.

"We argued that we had to implement AB 340 and AB 197; it contained clarifications to what is 'compensation earnable.' That is what we did," Wickman said. "The plaintiffs challenged that as a violation of vested rights. The Court of Appeals has taken that farther in their decision. We're defending the case that we presented."

Before choosing Dunning and Nossaman, the CalPERS board also interviewed attorney Alan Cabral and his team from Los Angeles-based Seybarth Shaw LLP.

Asked initially by CalPERS board member Rob Feckner to explain the position that he and his firm takes on the California Rule, Cabral hedged.

"With the pending litigation, the jury is literally out on what is going to happen with the California rule," Cabral said. "I don't know that the firm has a specific position on that."

Later, however, under close questioning by CalPERS board member Richard Costigan, Cabral said, "I do not support the California Rule."

CalPERS board member Joseph John Jelincic, one of two board members who voted against hiring Dunning, said, "We've got two firms in front of us, and I quite frankly don't find either acceptable. One flat-out says we don't support the California rule; and the other says well we didn't mean to attack the California Rule, but we won and we aren't going to let the victory go."

Jelincic said, "The California Rule is very, very, very important to the people that we represent and have a responsibility to."

There is no timeline yet for when the Supreme Court will take up the MCERA case; court watchers said the court might be waiting to hear it together with a consolidation of suits filed by labor unions in Contra Costa, Merced and Alameda counties that challenged anti-spiking provisions adopted by retirement boards in those counties. It is currently being appealed.

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