SDCERS vs. City of San Diego and Aguirre, and Cross-complaint by Aguirre (Case CIG 841845)

Preliminary Hearing, August 23, 2005
Dept. 69, Judge Jeffrey Barton, 330 West Broadway

Observations on the first hearing regarding the control of SDCERS and legality of benefits by Patricia Karnes.

     Those present included Judith Italiano and Ann Smith from the MEA, Lori Chapin and Larry Grissom of SDCERS, Peter Preovolos and Steve Meyer from the SDCERS Board. Also: April Boling of the Pension Reform Committee, Nancy Acevedo and Patricia Karnes from SDREA. The seats were almost full as there were many others attending.

(Note: After the hearing, Lori Chapin explained that the Judge had issued his comments in written form and it was difficult, if not impossible, to follow the dialogues without those written comments. Copies were not shared with those attending. As he quickly went through the hearing, Judge Barton seemed to be re-writing his comments after listening to the clipped responses to his questions from SDCERS and the City. Even the news media reports varied in their understanding about what had happened at the hearing.
     For example: My impression was that Judge Barton said there will be a trial to decide the right of the City, or SDCERS, to be the lawyer of SDCERS, and also regarding the right of rollback of benefits. At the September 2005 SDCERS Board meeting, Lori Chapin said the Judge had made already decided that SDCERS had the right to be the lawyer of SDCERS, not just for this lawsuit. At the same September SDCERS Board meeting, Larry Grissom, SDCERS Administrator, said there wouldn't be a trial. But on August 24th, Kevin Christensen, of the Daily Transcript newspaper. interviewed McGrath, Executive Assistant City Attorney, who said a trial is not expected to begin until next year. And on August 24th, Jennifer Vigil, of the San Diego Union Tribune newspaper, reported the Judge agreed "to reconsider whether a receiver should be appointed to oversee all or part of the pension system.")

ATTORNEY REPRESENTATION:
     SDCERS was represented by Seltzer Caplan McMahon & Vitek with Mr. Leone the lead attorney.
     The City and Aguirre, were represented by Mr. McGrath, Executive Assistant City Attorney, who often held up large signs to Judge Barton as he stood behind three young women who did presentations by turn. Aguirre has asked Judge Barton for permission to represent this case in the future.

THE POSITIONS:
     CITY: At the moment SDCERS is a "scheme" to manage pensions and not a trust, etc. SDCERS can only appear through trustees and is not an entity to itself.
     SDCERS: SDCERS is a separate legal entity. The Board members installed in April 1, 2005, had no participation in MPI and MPII, etc.
     CITY: In general, the City Attorney is attorney for SDCERS.
     JUDGE: Only judging for this instant about who is in charge of SDCERS. (He may make a different permanent decision at a later time, but for the moment SDCERS may represent itself.) The City can't represent the pension beneficiaries in eliminating their benefits.
     CITY: Beneficiaries have competing interests. The City is looking at the long-term approach to assure benefits, vs. short term benefits. The City will re-draft, what it filed, to clarify about policy and responsibilities in their lawsuit. The City is seeking "discovery" to determine if receivership is a possibility in the future ("strike a prayer"). SDCERS and the City have a joint interest, not ownership or partnership. Both City and SDCERS have interest in the pension fund.
     SDCERS: City doesn't have an interest in the fund.
     CITY: City is required to contribute, that is an interest. City requests that  the "strike a prayer" for receivership remain due to underfunding and SDCERS is in danger and subject to receivership.
     JUDGE: Will study this further. His Honor said that he is not doing policy issues, but will only clear conflicts.
     CITY: The City needs more time to clean up paperwork.
     JUDGE: Both sides have until Sept. 30th to summit further motions. He denied SDCERS request to require Aguirre to cease comments or criticisms of SDCERS.
      Pension Board names were removed from Aguirre's countersuit. The next hearing will be scheduled after Sept 30th's deadline for amendments to filings from both sides.