Law in Question

Law in Question:

  1. Legislative History

Plaintiffs will offer the legislative history that includes:

  1. Permissive service credit. (26 U.S.C.A. § 415(n)(3).
  2. 1979 refund statute.
  3. 1984 refund statute. Policy Committee: Pub. Emp. Ret. & Soc. Sec. (1984).
  4. Refunds in 1991. unenacted and enacted legislation AB 1146 (1991). 1991.: AB 1146.
  5. “Present Value” Increases, “Cost Neutral”, Fund Increases, No Risk of Loss, No transfer to Employer. Bill Analyses of “Airtime”, AB 719, Enrolled Bill Report of AB 719, State and Consumer Services Agency (i.e. CalPERS), 9/25/03, page 4, Enrolled Bill Report of AB 719, State and Consumer Services Agency (i.e. CalPERS), 9/25/03, page 4.),Governor’s Office of Planning and Research, Enrolled Bill Report for AB 719, pages 1-2.
  6. “Present Value” Methodology. “Present value methodology” 2001 to the present, (Gov’t Code, §§21024, 21027and 21029).
  7. “Present Value” Investment, After 1991, Government Code sections 21024, 20127 and 21029 (statutes governing military time), section 20909 (statute governing ARSC), or sections 21006-21008, 21013, 21020.5, 21023.5 and 21030-21031 (statutes governing other types of PVC).
  8. Other Present Value Investments. Peace Corps service, (ii) uncompensated leaves of absence, and (iii) maternity/paternity leave. (Gov’t Code, §§21006-21008, 21013, 21020.5, 21023.5, 21025.5and 21030-21031.)
  9. Duty to Correct. CalPERS’ correction statute, Gov’t Code, §20164(b)(2).
  10. Fiduciary Duty to Inform. CalPERS’ duty to Inform adopting Hittle, In re Application of Smith, CalPERS’ Precedential Decision No. 99-01 (March 31, 1999).
  11. Tax Law that IDR Cannot Include Contributions. Internal Revenue Code Section 104(a) (1)and Section 1.104-1(b), Income Tax Regs.; Diem v. C.I.R., T.C. Summ.Op. 2006-121 (2006), July 31, 2006.)
  12. IDR rights. Gov’t Code, §§21406-21409and 21411- 21414, Gov’t Code, §§21151. 50% of last salary, as a tax-free tort recovery for the physical injury. (Gov’t Code. §§21411, et seq). IDR is funded by the employer and from contributions made in that safety job. (Gov’t Code, §21418).
  13. Other Legislation
  14. Duran Substantive Legal Issues To be Resolved First To See If Amenable to Class Treatment

Substantive Law is Amendable To Class Treatment. In Duran, Plaintiffs must show at the “threshold” that the substantive law is amenable to class treatment. (Duran at 29.) To meet this threshold, Plaintiffs show that the substantive law is amenable to class treatment below.

III.             Fiduciary Duties Legal Issues

Plaintiffs Will Prove that CalPERS is A Fiduciary. Plaintiffs will prove that CalPERS owed fiduciary duties to each class member. (California Constitution, art. XVI, §17; Hittle v. Santa Barbara Cnty. Empl. Retire. Assn. (1985) 39 C3d 374.)

Plaintiffs Will Prove that CalPERS Has a Fiduciary Duty to Disclose Before Contracting. Plaintiffs will prove that CalPERS owes Plaintiffs a mandatory duty to inform and provide timely and accurate information to its Members ((Hittle, supra, at 389-90; In re Application of Smith, CalPERS’ Precedential Decision No. 99-01 (March 31, 1999).

Marzec on Remittitur: Plaintiffs Will Prove that CalPERS Has a Fiduciary Duty of Good Faith: Duty to Deal Fairly and Act in Utmost Good Faith. Plaintiffs will prove that CalPERS is “charged with the fiduciary relationship described in Civil Code section 2228: ‘In all matters connected with his trust, a trustee is bound to act in the highest good faith toward his beneficiary, and may not obtain any advantage therein over the latter by the slightest misrepresentation, concealment, threat, or adverse pressure of any kind.'” (Hittle v. Santa Barbara County Employees Retirement Assn. (1985) 39 Cal.3d 374, 392–393, 216 Cal.Rptr. 733, 703 P.2d 73.) “This fiduciary relationship is judicially guarded by the application of Civil Code section 2235, which provides that ‘[a]ll transactions between a trustee and his beneficiary during the existence of the trust, or while the influence acquired by the trustee remains, by which he obtains any advantage from his beneficiary, are presumed to be entered into by the latter without sufficient consideration, and under undue influence.'” (Id. at p. 393, 216 Cal.Rptr. 733, 703 P.2d 73.) (Marzec, et al. v. CalPERS (2015) 236 Cal.App.4th 889, 915-16.)

Plaintiffs Will Prove that CalPERS Has a Fiduciary Duty of Loyalty. Plaintiffs will prove that CalPERS owes a duty of “undivided loyalty.” (White Mountains Reins. Co. of America v. Borton Petrini, LLP (2013) 221 Cal.App.4th 890, 902; see also Rest.3d, Agency, §§8.01-8.06.)

Plaintiffs Will Prove that CalPERS Has a Fiduciary Duty to Account and Correct. Plaintiffs will prove that CalPERS is required to account and correct. (Oakland Raiders v. National Football League (2005) 131 Cal.App.4th 621, 631.) (Gov’t Code, §§20178, 20225); (Gov’t Code, §§20160, 20164).

Marzec Citing Hittle: Plaintiffs Will Prove that CalPERS’ Breaches of Fiduciary Duty Are Undue Influence that Allow Rescission. CalPERS’ breaches of duties are considered undue influence sufficient to allow rescission. (Hittle, supra; Vasquez, supra. Marzec v. CalPERS, (2015) 236 CA4th 889, 914-916.)

Plaintiffs Will Prove CalPERS’ Nondisclosure by a Fiduciary. Plaintiffs will prove that CalPERS’ misrepresentation or nondisclosure means, “the reliance element is relaxed … to the extent we may presume reasonable reliance … absent direct evidence of a lack of reliance.” (Estate of Gump, supra; Toadter v. Bradshaw (1958) 164 CA 200..; Edmunds v. Valley Circle Estates (1993) 16 CA4th 1290, 1302.)[1]

 Plaintiffs Will Prove CalPERS Offered No Notice of Adversity or Warning. CalPERS has not produced a single document that provides “specific notice” of the risks or notice of CalPERS’ adversity.

Plaintiffs Will Prove CalPERS Did Not Disclose Open Adversity. Miller did not involve an “omission.”

Plaintiffs Will Prove that CalPERS Did Not Exercise Reasonable Diligence. Plaintiffs will prove that CalPERS did not exercise reasonable diligence to correct these problems which were known to CalPERS since at least 1991.

Plaintiffs Will Prove Materiality. Plaintiffs will prove that the risk of loss, IDR offset, risk of no increases, and transfer to employers are objectively material. Materiality is an objective, not a subjective, element. (See, e.g., Vasquez, cited in Low v. Trump University, LLC (S.D. Cal., Nov. 15, 2016, No. 310CV00940GPCWVG) 2016 WL 6732110, at *2; Massachusetts Mutual, supra; In re Steroid Hormone Produce Cases (2010) 181 CA4th 145, 157.)

  1. Contract Legal Issues

No Formation. Plaintiffs Will Prove that A Contract and Consent Was Required. Plaintiffs will prove that CalPERS needed to gain Plaintiffs’ consent to all of the material terms of the contract. (American Employers Group, Inc. (2007) 154 CA4th 836; Elyaoudayan v. Hoffman (2003) 104 CA4th 1421.) In later seeking a “no refunds” waiver after the fact, CalPERS acknowledged needing Plaintiffs’ consent. The PERL applies only by contract even to contracting agencies.

Plaintiffs Will Prove that No Contract Formed. Plaintiffs will prove that no contract formed because there never was a meeting of the minds on all material points. (American Employers Group, Inc. v. Employment Development Dept. (2007) 154 CA4th 836; Elyoudayan v. Hoffman (2003) 104 CA4th 1421; Civ. Code, §1580.)

Plaintiffs Will Prove That the Parties Did Not Agree on the Same Object. Plaintiffs did not consent to material terms, including as Plaintiffs and CalPERS did not agree to the same thing in the same sense. (Chalmak v. H.J. Lucas Masonry, Inc. (1976) 55 CA3d 124, 127.)

Plaintiffs Will Prove No Consent and No Formation. Plaintiffs will prove that in the terms’ ordinary and popular sense, there was no disclosure of loss, no refunds, IDR offset etc. (Civ. Code, §§ 16441645). Plaintiffs will prove that CalPERS’ ambiguous language like “present value” must be interpreted to mean increases as the promisee understood it (Civ. Code, § 1649). Badie v. Bank of America, 67 Cal. App. 4th 779, 79 (1st Dist. 1998).

Plaintiffs Will Prove that Plaintiffs Did Not and Could Not Consent to Material Adverse Terms That Were Undisclosed. Plaintiffs will prove that before contracting, CalPERS did not inform Plaintiffs so Plaintiffs did not agree, and did not consent to the material terms of risk, loss, risk of no increases, no refund, IDR offset, transfer to CalPERS or the employer, and other material terms, that are expressly contrary to “increases” and “present value.”

Plaintiffs Will Prove No Objective Agreement on No Refunds. Plaintiffs will prove that objective terms of agreement or objective expressions of intent did not include a risk of loss or “no refunds.” (Winograd v. American Broadcasting Co. (1998) 68 CA4th 624,  as modified, (Jan. 7, 1999).

Plaintiffs Will Prove That There Was No Agreement and No Consent on the Object of the Investment Contract. Plaintiffs will prove that the objective language of the contract indicated that the investment provided increases. (Civ. Code, §1595.) Now CalPERS says that they bought “service credit” that CalPERS changed into normal contributions that were lost on IDR and did not necessarily provide increases, and that there are no refunds after IDR. CalPERS did not disclose those terms. But if increases or refunds are impossible as CalPERS argues, or so vaguely expressed, the entire contract is void and restitution should be provided, with interest. (Civ. Code, §1598.)

Plaintiffs Will Prove That Because There is No Mutual Consent, Rescission is Appropriate. If there is no consent, rescission is appropriate. (Civ. Code, §1566.)

Plaintiffs Will Prove That If Increases Were Not Allowed on IDR, Contract is Void. Plaintiffs will prove that consent has but a single object of providing “present value” increases, but increases were not possible on IDR, and were vaguely expressed as to be wholly unascertainable, such that the entire contract is void. (Civ. Code, §1598.)

Plaintiffs Will Prove Rescission Based on Duress, Menace, And Undue Influence. Plaintiffs will prove that Plaintiffs’ apparent consent was not real as it was obtained through duress, menace, fraud, undue influence, or mistake (Civil Code, §1567)

Plaintiffs Will Prove it An Adhesion Contract. Plaintiffs will prove that CalPERS’ standardized forms were adhesion contract that CalPERS, as the party of superior bargaining strength, imposed and drafted. (Perdue v. Crocker National Bank (1985) 38 C3d 913; Poublon v. C.H. Robinson Company (9th Cir. 2017) 846 F.3d. 1251.)

Plaintiffs Will Prove that CalPERS Used Ambiguous or Nonstandard Terms. Plaintiffs will prove that CalPERS used terms “present value”, “increases”, “service credit”, “contributions”, “considering” and other terms in an ambiguous or nonstandard way across the class.

Plaintiffs Will Prove CalPERS Communicated the Same or Similar Material Misrepresentations Actually Across the Class. Plaintiffs will prove that CalPERS distributed the same material misrepresentations to each member of a class, and therefore an inference of reliance arises as to the entire class.” (Mirkin v. Wasserman (1993) 5 C4th 1082, 1095, citing Vasquez.) ”

  1. Class Action Legal Issues

Plaintiffs Will Prove It Is Appropriate to Have Class Action. Plaintiffs will prove that the undisclosed information was material. (Massachusetts Mutual Life Ins. Co. v. Superior Court (2002) 97 CA4th 1282.)

Plaintiffs Will Prove That Plaintiffs Are Entitled to a Presumption of Reliance. Plaintiffs will prove that “[a]ctual reliance can be proved on a class-wide basis because each class member has read or heard the same misrepresentations.…” (Ibid.) Plaintiffs will prove that reliance is presumed because (a) the false representations were made to each putative class member (which by definition occurs when each receives essentially the same form documents), and (b) each putative member’s acts were consistent with reliance upon the representations. (Vasquez, supra; Occidental Land, supra; Massachusetts Mutual, supra.)

Plaintiffs Will Prove Their Acts Were Consistent. Plaintiffs will prove that their acts of taking out instalment payments, investing large sums of money, rolling over their 457 retirement funds, and mortgaging their homes was consistent with a belief in increases and no risk of loss.

Plaintiffs Will Prove That CalPERS Cannot Inquire Into Individual Reliance and That Individual Reliance is Irrelevant. Plaintiffs will prove that consent that each class member is not required to separately prove justifiable reliance, especially about material facts, so that Is not an individual issue and cannot defeat certification (Occidental Land, Inc. v. Sup. Ct., In and For County of Orange (1975) 52 CA3d 373, vacated sub nom; Occidental Land, supra.)

Plaintiffs Will Prove Plaintiffs’ Subjective Understanding is Not Relevant. Plaintiffs will prove that Plaintiffs’ subjective understanding of the standardized form contracts and other related documents is irrelevant, including as the objective language controls. (Marzec, et al. v. CalPERS (2015) 236 Cal.App.4th 889, 914-916).

Plaintiffs Will Prove That Reliance is Presumed and the Burden Shifts to CalPERS to Provide Information that Communicated Correct Terms Before Contracting. Plaintiffs will prove that the presumption of reliance is more than the simple shifting of the burden of proof to facilitate the determination of a particular action.

Plaintiffs Will Prove That CalPERS Did Not Provide Notice And Cannot Defeat Presumption of Reliance. Plaintiff prove that to defeat the presumption of reliance, CalPERS must prove that CalPERS provided some material information to all class members before contracting that advised them of the material terms. (Evid.Code, §605; Edmunds v. Valley Circle, supra, at 1302; see also In re Tobacco II Cases (2009) 46 C4th 298, 327 [plaintiff need not demonstrate individualized reliance on specific misrepresentations to satisfy the reliance requirement]; Williams v. Gerber Products, 552 F.3d 934, 938 (9th Cir. 2008) Kumar v. Kumar v. Salov North America Corp (N.D. Cal, July 15, 2016, No. 14-CV-2411-YGR), 2016 WL 3844334, at *4.)

Plaintiffs will prove that CalPERS did not distribute information about the risk of loss, IDR transfer, no refunds, or other terms prior to contracting.

Plaintiffs Will Prove That Rescission is a Remedy Available on Class Action, Especially in a Fiduciary Context. Plaintiffs will prove that class actions for rescission of standardized adhesion contracts that omit or misrepresent material terms are authorized. (Vasquez v. Superior Court (1971) 4 C3d 800; accord, Richmond v. Dart Industries, Inc. (1981) 29 C3d 462.), Occidental Land, Inc. v. Sup. Ct. (1976) 18 C3d 355, and Massachusetts Mutual Life Ins. Co. v. Sup. Ct. (2002) 97 CA4th 1282.)

Plaintiffs Will Prove That the Amount of Restitution, Interest, and Damages on Rescission is Readily Established From CalPERS’ Records On a Class-Wide Basis with Individual Determinations Needed. Plaintiffs will prove that the amount of restitution after rescission with interest is readily available form CalPERS’ records. Through partial discovery, Plaintiffs ascertained the identity of at least 177 safety officers who similarly suffered total losses of approximately $11,250,000 from 2003 to 2014, without including interest. CalPERS provided them no advantage, no increase, and no benefit from the optional investment. CalPERS also used the same practice and policy to cause at least another 70 officers to suffer partial losses of $6,900,000 from 2003 to 2014, without including interest. Partial rescission is available for these incremental contracts. See infra. Plaintiffs seek interest too.

  1. Rescission Legal Issues

Plaintiffs Will Prove that Partial Rescission is Available. Plaintiffs will prove that since the contract is apportioned by increases or time, partial rescission is available as this is a severable or divisible contract. (IMO Development Corp. v. Dow Corning Corp. (1982) 135 CA3d 451; Howell v. Courtesy Chevrolet, Inc. (1971) 16 CA3d 391.) Plaintiffs will prove that Plaintiffs who suffered partial losses can rescind the contracts for that part of the investment that they receive no increase for. (Simmons v. Cali Institute of Tech (1949) 34 C2d 264.)

Plaintiffs Will Prove that There was a Mistake of Law. Plaintiffs will prove that CalPERS represented that it lawfully could provide increases without a risk of loss but withheld that it knew before contracting that the law may not provide for increases on IDR. CalPERS wrote a waiver for the first time to those who still had unpaid installments, adding new terms in a 2-page waiver after the fact:…”Government Code 21039 is clear in stating that the payments are suspended on a prospective basis meaning there will be no refund of payments that were made prior to this election. …. I understand there will be no refund of payments already made…” and then request that Andert and Brown sign away their rights to refund. The existence of the waiver used only after the fact shows the legal mistake. The existence of a form waiver that CalPERS first used after the injured Plaintiffs retired with IDR shows that CalPERS knew that the original contract did not include all material terms and was defective. The existence of the waiver shows that CalPERS was aware of Plaintiffs’ legal and factual mistake and lack of consent at the time of the original contract, and tried to fix it piecemeal after the fact in CalPERS’ favor. The waiver establishes the grounds for legal mistake and rescission across the class. A misapprehension of the law by class members that there were refunds on IDR and increases, and that CalPERS was aware of the Plaintiffs misapprehension at the time of contracting, but which CalPERS did not rectify before contracting.” (Civ. Code, §1578.)

Plaintiffs Will Prove That Rescission of Waiver for Suspending Installment is Appropriate. Plaintiffs will prove that the “no refunds” term in the waiver cannot be inserted after the fact. Lacking consideration and consent, the waiver cannot retroactively impose contract terms. Especially as CalPERS is a fiduciary and sole provider of the IDR, an after the fact waiver is unconscionable, without consent,[2] and rescindable.

Plaintiffs Will Prove That CalPERS Cannot Inquire Into Motive, and Motive for Choosing Rescission is Irrelevant. Plaintiffs will prove that class members’ motive in choosing rescission is irrelevant (Conlin v. Osborn (1911) 161 C 659; Siegel v. Lewis (1946) 74 CA2d 86.)

Plaintiffs Will Prove That Individual Inquiries are Not Relevant and Rescission is a Legal Claim, with No Balancing of Equities..Rescission is a statutory and legal remedy. It is not personal and not an equitable action. No balancing is required. (4 Witkin, Cal.Proc. 5th (2008), Pleading, 541, p. 668.)

Plaintiffs Will Prove There Was No Waiver of a Right to Rescind. Plaintiffs will prove that there was no waiver of a right to rescind. Each rescinded promptly after knowledge of the right to rescind. Any delay was caused or generated by CalPERS’ acts or omission.

Plaintiffs Will Prove the Contract is Unconscionable. Plaintiffs will prove that the loss provision does not fall within the reasonable expectations of a contract with a fiduciary to provide “present value” increases.” Plaintiffs are unduly oppressed and the contracts are “unconscionable.” Both the terms of the contract and the situation of the subscribing party are relevant to a determination of enforceability. (Therma-Coustics Manufacturing, Inc. v. Borden, Inc. (1985) 167 CA3d 282.)

VII.          Delayed Discovery and Delayed Accrual Legal Issues

Plaintiffs Will Prove Delayed Accrual: Mistake and Rescission In a Fiduciary Relationship. Plaintiffs will prove delayed accrual and discovery across the class from reliance, failure to disclose, mistake, omission, misrepresentation, adversity, rescission, et al in a fiduciary context.[3] (See United States Liability Ins. Co. v. Haidinger-Hayes, Inc. (1070) 1 C3d 586, 598; Hobart v. Hobart Estate Co. (1985) 26 C2d 412, 439-440; April Enterprises, Inc. v. KTTV (1983) 147 CA3d 805.)

Plaintiffs Will Prove Delayed Accrual For the Claims Arising out of Mistake, Breach of Fiduciary Duty, Fraud. Plaintiffs will prove delayed accrual regarding or arising from mistake, fiduciary duties, and other grounds, such that they are entitled to delay the discovery and accrual of the claims.

Plaintiffs Will Prove Delayed Accrual and No Statute of Limitations. Although Plaintiffs filed a government claims form prior to instituting action, Plaintiffs are not limited in the scope of the class to those time periods. There is no relevant statute of limitations when CalPERS owes money to a member. (Government Code, §§20160, 20164.) No statute of limitations applies to fiduciaries’ errors, especially undisclosed errors. Plaintiffs were not put on notice and did not know that CalPERS failed to inform. Plaintiffs are entitled to rely on CalPERS and the presumption of reliance benefits all of the class unless CalPERS can prove that it informed Plaintiffs that it was adverse or the contracts were rescindable. There is no evidence that CalPERS ever informed anyone about the loss or no refunds until after already injured.

The failure to inform is an error or omission by a fiduciary that was not disclosed. CalPERS owes lifetime substantive duties to inform and correctly pay the benefits, which are substantive duties. (City of Oakland v. PERS (2002) 95 Cal.App.4th 29.)

VIII.       Common Facts

Plaintiffs will prove that common facts predominate and that any individualized issues and CalPERS’ defenses are manageable as described below.

Trial Evidence – Documentation, Spreadsheets, Limited Number of Witnesses, Evidence Code Section 776 Examination. Plaintiffs propose to introduce documents, and the testimony of less than fifteen (15) witnesses including at most five (5) CalPERS’ current and former employees and representatives, including PMK (persons most knowledgeable) deponents, the 7 class representatives and Tim Healy, expert witnesses, and a small number of other witnesses in live testimony and including pursuant to Evidence Code section 776 and/or prior deposition testimony. (Code Civ. Proc., §2025.620)

However, the testimony is not extensive and not time consuming, and will focus on authenticating the documents, CalPERS’ standardized policy, practice or custom of informing individuals by written materials, CalPERS’ standardized policy, practice or custom of contracting on standardized forms, CalPERS’ policy, practice or custom to pay no refunds and pay no increases when an individual retired with IDR.

Testimony of Class Representatives and Class Members. Named Plaintiffs will testify as described in the concurrently filed Declarations. As the events are largely undisputed and backed up by CalPERS’ records, the testimony will be efficient.

Plaintiffs will offer the testimony of the class representatives live to the extent in dispute including by offering testimony of Plaintiffs Robert Marzec, Rachel Healy, Benjamin Esparza, Jeffrey Andert, Neil MacLaren, Randy Slaughter, Henry Brown, Timonthy Healy (husband of Plaintiff Rachel Healy), and other percipient and expert witnesses, proof through CalPERS’ records, the testimony of CalPER’ employees.

  1. Common Facts of CalPERS’ Standard Practice and Forms

Plaintiffs Will Prove that CalPERS Was the Sole Source of Official Iinformation. Plaintiffs will prove the CalPERS was the sole source of official information on CalPERS’ issues.

Plaintiffs Will Prove CalPERS’ Standardized Policy, Practice, and Use of Standardized Forms.CalPERS exclusively used standardized forms contracts. No substantive oral communications were used. CalPERS’ employees told class members to use and sign the forms contracts.

Plaintiffs Will Prove That CalPERS Used the Written Contract as the Means of Communication. CalPERS advertises through only one channel, its written publications. No other correct information was provided or disclosed by CalPERS before contracting.

Plaintiffs Will Prove That CalPERS Did Not Offer In-Person Communication. Plaintiffs will prove that CalPERS had a policy or practice of referring inquiries to the official booklet and did not provide advice to individual before contracting for airtime military or other present value investments. Plaintiffs will also prove that CalPERS did not refer inquiries to any other agency other than CalPERS.

Plaintiff Will Prove that CalPERS Made No Other Substantive Communications Plaintiffs will prove that CalPERS made no other substantive communications about these risks across the class, other than the standardized form communications.

Plaintiff Will Prove That There Was No Alternative Way that CalPERS Disclosed the Issues. Plaintiffs will prove that CalPERS made no alternative communications about these risks across the class, other than the standardized publications. The Declarations say that CalPERS required the use of the forms.

Plaintiffs Will Prove Plaintiffs Did Not Have Access to All the information Necessary Before Contracting. Before contracting, none of the Plaintiffs or class members had CalPERS’ assessment of no refunds available. CalPERS only disclosed the no refunds policy after the fact in its attempt to get a waiver of refunds form Plaintiffs.

  1. Common Facts of CalPERS’ Misrepresentations and Omission Communicated Across the Class

Plaintiffs Will Prove That CalPERS Used Standard Practice and Policy Forms Across the Class. Plaintiffs will prove that CalPERS followed the same policies, procedures, and processes for investing in military/airtime. As a policy, custom, and practice, CalPERS used standardized communications publications, and nonnegotiable forms to inform class member their rights and obligations, including regarding contributions to service and industrial disability retirement (IDR).

Plaintiffs Will Prove That CalPERS’ Standardized Representations and Standardized Documents Contained the Same or Similar or Identical Material Misrepresentation and Omissions and Were Communicated Across the Class. Plaintiffs will show that the same or similar material omission, misrepresentations have actually been communicated to each member of a class.

Plaintiffs Will Prove it An Adhesion Contract. Plaintiffs will prove that CalPERS’ standardized forms were adhesion contractd that CalPERS, as the party of superior bargaining strength imposed and drafted. (Perdue v. Crocker National Bank (1985) 38 C3d 913; Poublon v. C.H. Robinson Company (9th Cir. 2017) 846 F.3d. 1251.)

Plaintiffs Will Prove That the Language in the Contract Was Ambiguous. Plaintiffs will show that CalPERS used ambiguous terms or terms that were used contrary to common understanding such as “present value,” “service credit,” “increases,” “may not benefit,” “considering” and other terms. (United Multiple Listing Sesrvice, Inc. v. Bernstein (1982) 134 CA3d 486.)

Plaintiffs Will Prove the Misrepresented or Omitted Terms were Material. The contracts and publications attached to the declaration show that material false representations were made to all members of the putative class.

Plaintiffs Will Prove There Was No Objective Agreement on No Refunds. Plaintiffs will prove that the objective manifestations of agreement or objective expressions of intent would lead a reasonable person to believe increase without risks of loss, and that it did not disclose a risk of no refunds, or any IDR offset. (Winograd v. American Broadcasting Co. (1998) 68 CA4th 624,  as modified, (Jan. 7, 1999).

Plaintiffs Will Prove the Signature and the Steps Indicate Plaintiffs Read the Contracts. Plaintiffs will prove that CalPERS required each investor to read material before requesting additional material in sequential steps and then required each investor to sign a standardized form before completing the sales transaction and the contract contain the omissions misrepresentations and inadequate disclosures. (Occidental Land, Inc. v. Superior Court (1976) 18 Cal.3d 355, 361.)

Plaintiffs Will Prove Risk of Loss and No Refunds was Material. Plaintiffs will prove that materiality is an objective, not a subjective, element. (See, e.g.Vasquez v. Superior Court (1971) 484 P.2d 964.)

  1. Common Proof of Lack of Consent to Loss, Risk, No Refunds, Transfer to Employer, Adverse Terms

Plaintiffs Will Prove that Consent is Required. Since this was an optional investment of Plaintiffs’ private outside monies, Plaintiffs will prove that consent was required to the material terms of the deal.

Plaintiffs Will Prove That No Contract Formed.Plaintiffs will prove that no contract formed because there never was a meeting of the minds on all material points. (American Employers Group, Inc. v. Employment Development Dept. (2007) 154 CA4th 836; Elyoudayan v. Hoffman (2003) 104 CA4th 1421; Civ. Code, §1580.)

Plaintiffs Will Prove Rescission Based on No Consent. Plaintiffs assert that no agreement on the material and essential terms was ever reached, the parties lacked contractual intent, and thus no contract formed between Plaintiffs and CalPERS. If no consent, rescission is appropriate. (Civil Code, §1566.) Plaintiffs’ apparent consent was not real as it was obtained through duress, menace, fraud, undue influence, or mistake (Civil Code, §1567)

Plaintiffs Will Prove That There Was No Agreement and No Consent on the Object of the Investment Contract. Plaintiffs will prove that the objective language of the contract indcated that the investment provided increases and that they were not informed of and did not consent to a risk or loss or no refunds. (Civ. Code, §1595.) Now CalPERS says that they bought “service credit” that it changed into normal contributions that were lost on IDR and did not necessarily provide increases and that there are no refunds after IDR. CalPERS did not disclose those terms. But if increases or refunds are impossible as CalPERS argues, or so vaguely expressed, the entire contract is void and restitution should be provided, with interest. (Civ. Code, §1598.) If no consent, rescission is appropriate. (Civ. Code, §1566.)

Plaintiffs Will Prove No Consent and No Formation. Plaintiffs will prove that in the terms’ ordinary and popular sense, there was no disclosure or loss, no refunds, IDR offset etc. (Civ. Code, §§16441645). Plaintiffs will prove that CalPERS’ ambiguous language like “present value” must be interpreted to mean increases as the promisee understood it (Civ. Code, § 1649). (Badie v. Bank of America (1998) 67 CA4th 779.)

Plaintiffs Will Prove that Plaintiffs Did Not and Could No Consent to Material Adverse Terms That Were Undisclosed. Plaintiffs will testify the contracts did not disclose so they were not informed of, did not agree, and did not consent to the undisclosed material terms of risk, loss, risk of no increases, no refund, IDR offset, transfer to CalPERS or the employer, and other material terms, that are expressly contrary to “increases” and “present value.”

Plaintiffs Will Prove Plaintiffs’ Subjective Understanding is Not Relevant. Plaintiffs’ subjective understanding of the standardized form contracts and other related documents is irrelevant, including as the objective language controls. (Marzec, et al. v. CalPERS (2015) 236 Cal.App.4th 889, 914-916).

XII.          Common Facts of Lack of Disclosure

Plaintiffs Will Prove that CalPERS’ Breaches of Fiduciary Duty of Loyalty and Good Faith Proximately Caused Damages to Plaintiffs, Allows Rescission. Plaintiffs will prove that CalPERS’ breach of the duty to act fairly and in good faith caused Plaintiffs’ damages, Plaintiffs will prove that CalPERS took adverse positions, took advantage, failed to disclose, transferred funds, took the money, and benefitted itself without Plaintiffs’ consent. CalPERS’ averse position and advantage make the contract voidable. (Hittle, supra.) Plaintiffs did not bear the risk.

Plaintiffs Will Prove that CalPERS Breached its Fiduciary Duties to Disclose. Plaintiffs will prove that CalPERS breached its fiduciary duties including when it took advantage, acted adverse, took Plaintiffs money, used it to fund the IDR or offset the employer, failed to adequately inform, and omitted material terms in the contracts, publications and other written materials. (Vasquez, supra; Occidental Land, Inc., supra; Massachusetts Mutual Life, supra; Estate of Gump (1991) 1 CA4th 582; Mirkin v. Wasserman (1993) 5 C4th 1082; Caro v. Proctor & Gamble Co. (1993) 18 CA4th 644.)

Instead of informing Plaintiffs, it sought a waiver after the fact. CalPERS’ breaches of duties are considered undue influence sufficient to allow rescission. (Hittle, supra; Vasquez, supra. Marzec v. CalPERS, (2015) 236 CA4th 889, 914-916.)

Plaintiffs Will Prove that CalPERS Breached its Duty to Disclose, Caused Damages Plaintiffs will prove that CalPERS breached this duty by failing to disclose material facts, including that Plaintiffs could (i) lose all or part of their investment; (ii) contribute more to their IDR or other retirement benefits than the 5% to 9% of his or her earnings from salary; (iii) be forced to contribute their private funds to offset their employers’ existing IDR or other account or liability; (iv) the change in the source and percentage of funding of their defined benefit; (v) that the Military/ARSC/PVC was not “present value” and “cost neutral”; (vi) that losses were risked; (vii) that more funds were provided; and (vi) related unknown effects.

Plaintiffs will prove that CalPERS has not produced a document class wide before contracting that provides “specific notice” of the material terms before contracting or that shows a lack of reliance. No evidence shows that Plaintiffs were informed that CalPERS turned adverse against them before contracting.

Breaches of Fiduciary Duty to Account, Proximately Causing Damages to Plaintiffs. Plaintiffs will prove that CalPERS breached it duty to account when some of the money was transferred or accounted for to benefit anyone other than solely Plaintiffs, failed to price the Military/ARSC/PVC investment as based on “present value” increases and failed to pay the increases, or the refund and failed to inform or otherwise correct that error

CalPERS Breached Harmed Plaintiffs. Plaintiffs will prove that CalPERS’ breach of its fiduciary and other duties proximately and directly caused Plaintiffs damages and detriment, the loss of their investments, an IDR or other offset, attorney fees, costs, and other losses or detriments, including as reliance is presumed

Rescission Arising From Breach of Fiduciary Duties. Plaintiffs across the class are entitled to rescission based on CalPERS’ breach of fiduciary duties. See Hittle supra.

XIII.       Common Facts Entitling Class to Rescission

Rescission. Plaintiffs will prove that material misrepresentations were made across the class and all class members are entitled to a presumption of reliance. Plaintiffs invested to get “increases” in their future defined benefits, but Plaintiffs obtained something substantially different from that which each Plaintiff was led to expect. (Civil Code, §§1688,et seq., including §1689(b)(7).)

Plaintiffs Will Prove Mistake. Plaintiffs will prove that Plaintiffs were uninformed and mistaken about (1) the risk of loss of the investment; (2) the IDR offset; (3) an undisclosed change in the source of funding of their defined benefits; (4) increase in their IDR contributions in amount and in source; (5) loss of funds or other reduction if they suffered an IDR; and (6) related other mistakes identified in the Complaint, and points and authorities and declarations.

Plaintiffs Will Prove Their Mistake Was Not Caused by the Neglect of a Legal Duty on the part of the Plaintiffs, but due to CalPERS’ acts or omissions.

Plaintiffs Will Prove that Plaintiffs Were Misinformed and Had An Unconscious Ignorance or Forgetfulness of a fact past or present, material to the contract.

Plaintiffs Will Prove They Were Misinformed and Had Belief in the Present Existence of a Thing Material to the contract, which does not exist, or in the past existence of such a thing, which has not existed. (Civ. Code, §1577.) Plaintiffs invested based on CalPERS’ representations that lawfully could provide “present value” increases, even on disability or IDR.

Plaintiffs Offer Proof of CalPERS’ Duress Menace, Fraud, Undue Influence. Plaintiffs will prove Plaintiffs’ mistake across the class arising from for duress, menace, fraud, undue influence, caused by CalPERS.

Plaintiffs Will Prove Mistake of Law. Plaintiffs will prove that Plaintiffs were entitled to a presumption of reliance on CalPERS and that CalPERS would provide for “present value” increases for their investment.

Since CalPERS stopped providing refunds on IDR in 1984, CalPERS knew or should have known that refunds were not provided and then specifically inform the investor of that material term. Since at the latest 1991, CalPERS knew or should have known that it needed to adequately inform safety officers about the risk or loss and risk of no refund if the safety officer retired with IDR, especially as CalPERS was promoting the investments as “present value” increases in future monies. Therefore either both parties had a mutual mistake of law, or Plaintiffs made a mistake of law that CalPERS was aware of and should have rectified, especially by informing Plaintiffs before contracting.

Based on CalPERS’ omission and misrepresentations, Plaintiffs are presumed to have relied and have misunderstood or misunderstood the law at the time of contracting for military/airtime regarding no refunds, no increase, IDR offset, transfer to employer, and other omission, misrepresentations, or mistakes of law identified in the Third Amended Complaint, and points and authorities and declarations, but CalPERS knew the “correct” law but did not rectify the other party’s misunderstanding before contracting (Civil Code, §1578.) and instead in an unconscionable, after-the-fact, waiver first disclosed the “no refunds” and risk of loss, et al.

In addition, Plaintiffs offer proof that Plaintiffs were not informed and were misinformed by CalPERS and therefore mistaken (through no fault of their own) regarding other material terms including that (i) the investments in service credit were treated as “normal contributions” in the job at the time of purchase; (ii) that CalPERS assumes the monetary value can be lost on IDR when the “service credit” is not counted without informing the class member before; (iii) that the investment funds would be available to fund the IDR or to offset the employer’s IDR costs; (iv) that the investment could be lost; (v) that the IDR funding could be changed; (vi) that the defined IDR benefit would be funded from sources other than their earnings; and (vii) other mistakes,

Plaintiffs satisfy both “prongs” of the mistake of law statute.

Either both parties had a mutual mistake of law, or Plaintiffs made a mistake of law that CalPERS was aware of and should have rectified, especially by informing Plaintiffs before contracting. Plaintiffs satisfy both “prong” of the mistake of law statute.

Proof of the Element of Causation or Presumption of Reliance. To the extent causation or presumption of reliance is involved, reliance can be presumed under Vasquez et al, and if not presumed, Plaintiffs will prove that reliance can be inferred from the records, from statistical analysis (infra), or otherwise testimony can be elicited.

Plaintiffs Will Prove That They Are Entitled to Rescission Based on Failure of Consideration. Plaintiffs will prove that Plaintiffs have received no value from their investment. The consideration for the Plaintiffs’ obligation fails, in whole or in part, through the fault of CalPERS, the other party to the contract. (Civil Code, §1689(b)(2).) The consideration for the Plaintiffs’ obligation became entirely void from any cause. (Civil Code, §1689(b)(3).) The consideration for the Plaintiffs’ obligation fails in a material respect from any cause before it is rendered. (Civil Code, §1689(b)(4).)

Plaintiffs Will Prove No Consideration and Consideration Failed. Plaintiffs will prove that Plaintiffs were already entitled to the 50% IDR before contracting. They did not receive any increase. The contracts provide them no good consideration. (Civ. Code, §1605.)

Plaintiffs Will Prove They Are Entitled to Rescission For Lack of Consideration.  Plaintiffs will prove that Civil Code §1689 allows rescission. Since service credit is not counted in IDR, the service credit purchase becomes entirely void. CalPERS’ consideration also fails as each class member fails to receive a commensurate benefit for their investment. Some receive no benefit at all. Plaintiffs receive no consideration or nothing new from the contract. They receive only the 50% IDR that they were already entitled to before contracting. They contracted for increases, without any known risk of loss. To say that they received “service credit” of no value to them also means that they received no value or consideration. § 1688-1689 of the Civil Code.

XIV.       Plaintiffs Will Prove That Rescission Across the Class is Appropriate

Plaintiffs Will Prove that Plaintiffs are Allowed to Rescind Across the Class. Plaintiffs will prove up that the class is entitled to rescission of standardized adhesion contracts that omit or misrepresent material terms.

CalPERS’ representation that the investment were priced at present value and would provide increases was false, the “no refunds” and loss terms were omitted, and CalPERS concealed the fact that it knew that it would not give refunds before contracting in part to induce plaintiffs to purchase their investment, while waiting with a waiver of refunds after the fact in order to suspend the future installments. Although the amount of the increase was estimated, CalPERS’ “present value” or no-risk contract must be construed to mean that CalPERS’ “present value” or no-risk estimated increase reflected an honest estimate of the actual increase that safety members would receive instead, as alleged, that CalPERS’ higher estimated increase were calculated to deceive or deceived potential investors while withholding the information that the increases were not guaranteed, that the money could be lost and that there were “no refunds”. Indeed, the plaintiffs invested for “present value” or no-risk increases and paid the full principal of the investment, but CalPERS apparently tried to sell them “service credit” that it at some point turned into normal contributions without notice, which it would use fund and offset something different, the existing IDR allowance, and then transfer the money to itself or to the employers benefit without providing an increase to Plaintiff. Thus, the standardized forms contract used across the class supports the allegation that CalPERS failed to disclose material terms, offered false “present value” or no-risk estimated increases and did not disclose the risk of loss or “no refunds”. Especially as CalPERS knew of this inadequate disclosure and created a much longer, much more detailed waiver of “refunds” as part of a deceptive suspension of future installment for those already on IDR. A question whether CalPERS fraudulently represented, misrepresented, the estimated increases and omitted terms of loss and no refunds in the contract at the time plaintiffs invested remains an issue common to the class. (Occidental Land, Inc. v. Superior Court (1976) 18 Cal.3d 355, 361–62.)

CalPERS’ arguments that even if the alleged written misrepresentations were made to each investor, a class suit is not appropriate because at trial each plaintiff will be required to separately prove justifiable reliance is without merit. The “present value” or no-risk increase in pension, risk of loss, and no refunds are manifestly material factors in the investment. An inference of reliance arises across the class if material false representations were made to persons whose acts thereafter were consistent with reliance upon the representation. That principle controls the present case. Because the investments made by plaintiffs were acts consistent with their reliance on “increases”, justifiable reliance may be established on a common basis. (Occidental Land, Inc. v. Superior Court (1976) 18 Cal.3d 355, 363.)

Plaintiffs Will Prove the Elements of Rescission and That They are Entitled to Rescind. Plaintiffs across the class establish the following facts to obtain rescission of a contract

  • (1) each safety officer was entitled to full information about the risks from CalPERS before contracting and could not take into account the risk of loss that was not disclosed so necessarily made a mistake regarding a basic assumption of receiving “present value” increases upon the class member made the contract;
  • (2) the mistake about the not knowing and not being able to take into consideration the risk of loss on IDR and “no refunds” has a material effect upon the agreed exchange of performances that is adverse to the class member;
  • (3) the safety member investing in “present value” or no-risk increases is a mistaken party does not bear the risk of loss on IDR or “no refunds” because the class member is already entitled to fiduciary duties of full information and already fully entitled to the 50% IDR before investing the mistake; and
  • (4) the effect of the mistake is to make the class member lose his investment, pay for a share of IDR that he or she would not otherwise have to pay and loss the increase and value of their money, such that enforcement of the contract would be unconscionable.
  1. Common Facts About Delayed Discovery And Delayed Accrual, Mistake, Misrepresentations, Nondisclosure in Fiduciary Context

Plaintiffs Will Prove Delayed Accrual: Mistake and Rescission In a Fiduciary Relationship. Plaintiffs will prove that Plaintiffs assert mistake and rescission in a fiduciary context, and discovery and accrual rules may be governed by the delayed discovery and delayed accrual rule when the defendant owed fiduciary duties to the plaintiff.[4] (See United States Liability Ins. Co. v. Haidinger–Hayes, Inc. (1970) 1 Cal.3d 586, 598; Hobart v. Hobart Estate Co. (1985) 26 Cal.2d 412, 439-40; April Enterprises, Inc. v. KTTV, supra.)

XVI.       Common Facts in Class Action: Plaintiffs Will Prove Class is Ascertainable:

Class definition is Clear. The class which Plaintiffs seek to represent is compose of and defined as follows: All persons (and their beneficiaries or successors in interest) who are or once were employed as a state safety Member, local safety Member, or in a job covered for the potentiality of industrial disability retirement (“IDR”) under a system, plan, or fund administered by the California Public Employees’ Retirement System (“CalPERS”), who deposited or will deposit funds (or had or will have their employer or others deposit funds on their behalf) associated with (i) “Military Service Credit”, including pursuant to Government Code, §§21024, 20127 and 21029 and equivalent, predecessor, or successor statutes, (ii) “Additional Retirement Service Credit” (“ARSC”), including pursuant to Government Code, §20909, or (iii) or other Present Value Service Credit (“PVC”), including pursuant to Government Code, §§21006-21008, 21013, 21020.5, 21023.5, 21025.5 and 21030-21031 and equivalent, predecessor or successor statutes, (collectively referred to as “Military/ARSC/PVC”) with CalPERS pursuant to CalPERS’ standardized forms or publications, and who later were retired with IDR (including “service retirement payable” IDR), whether before, at or after age 50, and who (1) receive or will receive no benefit associated with funds deposited for Military/ARSC/PVC, or (2) receive or will receive no increased allowance associated with funds deposited for Military/ARSC/PVC, or (3) do not receive or will not receive full value for funds deposited for Military/ARSC/PVC, or (4) do not receive a proportionate increase in their retirement allowance commensurate with the estimated increases represented by CalPERS at the time of “contracting” for incremental amounts of Military/ARSC/PVC; or (5) had or will have their Military/ARSC/PVC funds transferred to benefit their employer, CalPERS, or others, or (6) had or will have their Military/ARSC/PVC funds transferred to offset the cost of IDR and/or other defined benefits or accounts, or (7) had or will have their Military/ARSC/PVC funds transferred to reduce CalPERS’ or the employers’ cost associated with IDR and/or other defined benefits.

Plaintiffs Will Prove CalPERS Already Responded with Information on Class Members. Through partial discovery, Plaintiffs ascertained the identity of at least 137 safety officers who similarly suffered total losses of approximately $11,250,000 from 2003 to 2014, without including interest. CalPERS provided them no advantage, no increase, and no benefit from the optional investment. CalPERS also used the same practice and policy to cause at least another 70 officers to suffer partial losses of $6,900,000 from 2003 to 2014, without including interest See concurrently filed information under a protective order

Plaintiffs Will Prove that Common Legal and Factual Issues Predominate Over Any Individual Issues. Plaintiffs will prove that common questions of law predominant and involve (1) the scope of CalPERS’ fiduciary duties, (2) the adequacy of the contract language (3)whether CalPERS breached its fiduciary duties, (4) was there a legal mistake, including about “no refunds”, (5) the purpose of the contract; (6), whether “no refunds” was a term in the original contract, (7) what is “present value”, (8) whether Plaintiffs received consideration, (9) is CalPERS required to gain consent of material terms, (10) does the existence of a waiver of “no refunds” after the fact indicate that CalPERS knew the original contract did not contain the term “no refunds” and (11) other legal question. The common question of fact predominate and include (1) did Plaintiffs sign the contract; (2) retire on IDR; (3) receive an increase; (4) and other facts most of which are not in issue, or resolved by documents.

Plaintiffs Will Prove that Named Plaintiffs’ Claims Are Typical of Those of the Putative Class Members. Plaintiffs will prove that each named Plaintiff’s interest and claim is similar to those of the other class members. (See Daniels v. Centennial Group, Inc. (1993) 16 CA4th 467, 473; B.W.I. Custom Kitchen v. Owens-Illinois (1987) 191 CA3d 1341, 1347.) See Duran.)

Plaintiffs Will Prove That Named Plaintiffs Will Fairly and Adequately Represent the Class. Plaintiffs will prove that each named Plaintiff does “not have a conflict of interest antagonistic to the other class members. (McGhee v. Bank of Am. (1976) 60 CA3d 442, 450;.) Plaintiff’s attorney is experienced in pension related class action litigation, and qualified to prosecute this action.

 

(1) Breach of Fiduciary Duties and (2) Rescission

CalPERS is a fiduciary to Plaintiffs. As used herein, CalPERS refers collectively to the California Public Employees’ Retirement System and to its Board of Administration. CalPERS is a trust/trustee that owes general and specific mandatory fiduciary duties to Plaintiffs and all CalPERS Members and beneficiaries, collectively and individually, pursuant to the California Constitution, statute, case law (such as Hittle v. Santa Barbara Cnty. Employees Ret. Assn. (1985) 39 Cal.3d 374), CalPERS precedential decision, and other legislative or quasi-legislative enactments. CalPERS is the sole pension provider and sole pension administrator of service retirement and industrial disability retirement to Plaintiffs. CalPERS is the sole official information source about these benefits.

CalPERS, its Board, and employees (collectively CalPERS) have mandatory fiduciary duties, including to place its Members’ interest before any other duty. (Cal. Const., art XVI, §17; Gov’t Code, §20151.) Mandatory fiduciary duties include duties of loyalty, of good faith and fair dealing, to account, to inform, to not take advantage, and other duties.

CalPERS also owes Plaintiffs mandatory duties to adequately and fully inform, especially about elections to benefits and contracts. (Hittle v. Santa Barbara Cnty. Employees Ret. Assn. (1985) 39 Cal.3d 374, 389-90.) CalPERS owes Plaintiffs a mandatory duty to provide timely and accurateinformation to its Members (In re Application of Smith, CalPERS’ Precedential Decision No. 99-01 (March 31, 1999) [“The duty to inform and deal fairly with members also requires that the information conveyed be complete and unambiguous”].)

CalPERS also has mandatory duties in the statutes authorizing and pricing Military/ARSC/PVC (as described below at paragraph 199) to correctly and fairly deal in good faith, including to calculate, implement, and account for the “present value”, “cost neutral” funds. Specifically, CalPERS may cause the Members to pay the full cost of the increased future income stream, but no more. CalPERS and the employers cannot receive any advantage or offset. Retaining any excess funding is a breach of various fiduciary duties.

CalPERS’ Breach of Its Fiduciary Duties

CalPERS breaches a range of fiduciary duties including, inter alia, (i) transferring risk onto Plaintiff, including risk associated with loss of value of the investment upon being disabled; (ii) failing to disclose that it will pay no or only a partial additional “increase” for Military/ARSC/PVC if a safety Member retires with IDR; (iii) dividing its loyalty such that some of the Plaintiffs’ Military/ARSC/PVC contributions do not benefit Plaintiffs but instead benefit CalPERS or the employers or others; (iv) failing to calculate the investment so that it is cost neutral and is “present value”; (v) failing to calculate the investment so that there is no offset; (vi) failing to provide commensurate increases for all investments; (vii) failing to provide “specific notice” of safety Members’ rights; (viii) entering into standardized transactions on non-negotiable form contracts by which CalPERS, the Board, or the employers obtains an advantage, including by insufficient consideration or undue influence; (ix) not providing due process or notice; (x) failing to act in good faith and deal fairly, including as CalPERS sold secretly risky or speculative Military/ARSC/PVC investments to Plaintiffs who CalPERS knew remained performing risky safety work but with an increased risk of financial loss associated with disability; and (xi) in other ways described in this Third Amended Complaint.

CalPERS violates the “cost neutrality” and “present value” pricing that CalPERS represented to Plaintiffs it would employ to determine the cost of Plaintiffs’ investments, as well as Section 1.104-1(b) of the Income Tax Regs. and “permissive service credit” rules. Including under the presumption of reliance, Plaintiffs did not assent to and did not know of the risk, the change in the pricing of the investments, or the occurrence of the transfers or offsets.

Sometime at or subsequent to contracting for Military/ARSC/PVC, CalPERS changed the financial terms so that it was no longer “cost neutral” or “present value” (and sought contributions for “defined benefits” beyond the 5% to 9% of salary represented). CalPERS has never disclosed this change in material terms, and never sought or obtained Plaintiffs’ assent, agreement, or waiver.

CalPERS also breached its fiduciary duties of loyalty, good faith and fair dealing, to account, and other duties enumerated below when it failed to act in the interest of Members, failed to fully disclose, acted adverse, and sought advantage for CalPERS or the employer.

After a Plaintiff retired with IDR, CalPERS caused all or part of Plaintiffs’ investment to be used for purposes other than providing incremental increases to Plaintiffs, including as undisclosed subsidy of CalPERS, the employer or others, without notice.

CalPERS breached its fiduciary duties, including that it did not adequately disclose (i) at the time of Plaintiffs’ inquiry about Military/ARSC/PVC; (ii) at the time Plaintiffs signed the Military/ARSC/PVC Election contracts; (iii) before the IDR determination; (iv) at the IDR determination; (v) after the IDR determination; and (vi) up to the present.

CalPERS omitted material terms in the Military/ARSC/PVC contracts, publications and other written materials. Vasquez, supraOccidental Land, Inc., supraMassachusetts Mutual Life, supraEstate of Gump, supraMirkin v. Wasserman (1993) 5 Cal.4th 1082; and Caro v. Proctor & Gamble Co. (1993) 18 Cal.App.4th 644 support Plaintiffs.

CalPERS did not exercise reasonable diligence to correct these problems which were known to CalPERS since at least 1991.

Rescission With Restitution And Interest. In the alternative to breach of fiduciary duties, each Plaintiff also has the right to rescind the Military/ARSC/PVC “contracts”.

When Plaintiffs signed CalPERS’ standardized non-negotiable form contract, Plaintiffs were presumed to rely and/or actually relied on CalPERS and its representations. Plaintiffs did not agree or consent to the hidden undisclosed material terms. Including based on the presumption of reliance, each Plaintiff suffers mistake, lack of consideration, “constructive fraud” and the other issues described herein underlying rescission. Each Plaintiff has the right to restitution of the monies that do not provide proportionate increases, with interest from the date of deposit and such other relief as will make them whole.

As CalPERS used non-negotiable form contracts and publications to inform and to transact with all safety members for Military/ARSC/PVC, breach of fiduciary duty and rescission are available across the class. (Vasquez, supraOccidental Land, Inc., supraHittle, supra.)

To the present, CalPERS has not given notice to Plaintiffs of a seizure, forfeiture, transfer, IDR or other offset, or a loss of the Military/ARSC/PVC investment money. There was no notice, no forfeiture hearing and no due process.

The form “contracts” and the contracting process were substantively and procedurally unconscionable, including as CalPERS is a fiduciary which was and is the sole provider of service and IDR retirements, and it omitted material terms, represented inconsistent terms, and changed the funding of the IDR and/or other benefits. Plaintiffs were oppressed and surprised.

 

 

   [1] A fiduciary’s failure to share material fact constitutes “constructive fraud,” and eliminates the need to prove actual fraudulent intent. (Michel v. Palos Verdes Network Group, Inc.(2007) 156 CA4th 756, 762.)

    [2]  The waiver itself is misleading as it was supposedly a request to suspend future installments, but the language of CalPERS’ waiver also sought something very different, an agreement to deny “refunds” of prior paid money.

   [3] CalPERS is a fiduciary. It is unreasonable to expect Plaintiffs to continually monitor whether CalPERS is performing some act inconsistent with terms in a contract. …the discovery rule applies to breaches which are committed in secret and, and where the harm will not be reasonably discoverable until a future time.” (April Enterprises, Inc. v. KTTV, supra, at 832.)

   [4]  When the defendant is a fiduciary, courts have found it was unreasonable to expect “that a contracting party in such situations has a duty to continually monitor whether the other party is performing some act inconsistent with one of many possible terms in a contract. … Specifically, we hold the discovery rule may be applied to breaches which can be, and are, committed in secret and, moreover, where the harm flowing from those breaches will not be reasonably discoverable by plaintiffs until a future time.” (April Enterprises, Inc. v. KTTV, supra, at 832.)