This morning, the California Supreme Court issued its long-awaited decision in Alameda County Deputy Sheriffs' Association v. Alameda County Employees' Retirement Association. The 90-page opinion maintains the California Rule but found that the changes to PEPRA at issue in this case were constitutional:

With respect to the merits of plaintiffs' constitutional claim, however, we hold that the challenged provisions added by PEPRA meet contract clause requirements. They were enacted for the constitutionally permissible purpose of closing loopholes and preventing abuse of the pension system in a manner consistent with CERL's preexisting structure. Further, it would defeat this proper objective to interpret the California Rule to require county pension plans either to maintain these loopholes for existing employees or to provide comparable new pension benefits that would perpetuate the unwarranted advantages provided by these loopholes.

The Court also rejected plaintiffs' claims that prior settlement agreements that were inconsistent with PEPRA could be relied upon by the plaintiffs and therefore claims of equitable estoppel were also rejected.

But the California Rule survives ... for now.

The State, at least implicitly, and amicus curiae California Business Roundtable, explicitly, urge us to use this decision as an occasion to reexamine and revise the California Rule, arguing that the rule constitutes an improper interpretation of the contract clause and bad public policy. Because we conclude that PEPRA's amendment of CERL did not violate the contract clause under a proper application of the California Rule, however, we have no jurisprudential reason to undertake a fundamental reexamination of the rule. The test announced in Allen I, as explained and applied here, remains the law of California.

Notwithstanding the Court's statement that the California Rule survives, it has clearly taken some heavy blows in this case.

This is a long and complex opinion. We will provide an updated summary soon.

If you have any questions about this alert, please contact Gregg Adam in our San Francisco office.