Retirement Board Must Provide Pensioner with Due Process to Determine Whether Felony Conviction Arose Out of Performance of Official Duties

Category: Client Update
Date: Aug 7, 2018 10:24 AM

Government Code section 7522.72 of the Public Employees’ Pension Reform Act (“PEPRA”) states that a public pensioner forfeits a portion of retirement benefits if the pensioner is convicted of a criminal felony that occurred in the performance of the pensioner’s official duties.  The California Court of Appeal upheld the constitutionality of this law and decided that the applicable retirement board must provide appropriate due process.

Tod Hipsher was a firefighter for the Los Angeles County Fire Department (“County”).   Hipsher conducted an illegal gambling operation while employed at the County.  After federal authorities charged Hipsher with managing the illegal operation, Hipsher retired.  Hipsher was ultimately convicted of a felony related to the gambling operation. 

The Los Angeles County Employees Retirement Association (“LACERA”) sent Hipsher a letter stating that it was required to reduce his retirement benefits under section 7522.72.  The letter stated that the County Human Resources Department had determined that Hipsher’s felony conviction arose out of Hipsher’s performance of his official duties.  Human Resources relied on investigation reports from federal authorities which stated that Hipsher met with undercover agents at a fire station where Hipsher allegedly showed them a room where he conducted his gambling operations.  LACERA reduced Hipsher’s retirement benefits and sent Hipsher’s attorney a second letter stating there were no administrative remedies available to challenge the benefits reduction.  Hipsher sued LACERA, naming the County a real party in interest, claiming that section 7522.72 was unconstitutional, and challenging the determination that his felony conviction related to his performance of his official duties.

The Court of Appeal ruled that section 7522.72 is not unconstitutional. The Court of Appeal noted that although Hipsher’s right to pension benefits was vested at the time of LACERA’s determination, a felony criminal conviction arising from the pensioner’s public service constitutes a valid justification for “limited forfeiture of vested retirement benefits under section 7522.72,” and the County was not required to provide Hipsher a comparable benefit to replace what was forfeited.  Thus, the Court of Appeal denied Hipsher’s request to invalidate this section of PEPRA.

Next, the Court of Appeal found that LACERA, in its capacity as the retirement board, was required to provide Hipsher with additional due process protections in determining whether the misconduct underlying his felony conviction arose out of the performance of his official duties.  The Court of Appeal noted that a pensioner has a protected interest in his/her retirement benefits, but that section 7522.72 does not establish a mechanism by which a pensioner can challenge a determination that a felony conviction arises from the pensioner’s job duties.  At a minimum, Hipsher had the due process rights to “written notice reasonably calculated to apprise him of the pendency of the section 7522.72 action,” and to “contest his eligibility for forfeiture before an impartial decision maker.” The Court found that LACERA, rather than the County, should provide such due process because the California Constitution provides that a public pension retirement board “holds the ‘sole and exclusive responsibility’ to administer the system”.  The Court of Appeal, therefore, reversed the trial court finding that the County, as Hipsher’s employer, was responsible for providing this additional process.

Hipsher v. Los Angeles County Retirement Association, 24 Cal.App.5th 740 (2018)

Note:

LCW attorneys and public retirement experts Steven M. Berliner, Joung H. Yim, Christopher Frederick and Jennifer Rosner successfully represented the County of Los Angeles in this matter during both the superior court and appellate proceedings.  Agencies are encouraged to contact LCW’s retirement experts with questions regarding this or other public retirement issues.

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