john jensen - original filed - plaintiffs' opposition...john michael jensen, state bar no....

JOHN MICHAEL JENSEN, State Bar No. 176813LAW OFFICES OF JOHN MICHAEL JENSEN11500 West Olympic Blvd., Suite 550Los Angeles, CA 90064(310) 312-1100

Attorneys for Plaintiffs Jeffrey E. Andert,Neil MacLaren and Randy Slaughter,individually and on behalf of a class ofothers similarly situated

ORIGINAL FILED

NOV 7 2012

LOS ANGELES

SUPERIOR COURT

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF LOS ANGELES

JEFFREY E. ANDERT, an individual; NEILMacLAREN, an individual; and RANDYSLAUGHTER, an individual; and on behalfof a class of others similarly situated,

Plaintiffs,

VS.

CALIFORNIA PUBLIC EMPLOYEES'RETIREMENT SYSTEM (CalPERS),BOARD OF ADMINISTRATION OFCALIFORNIA PUBLIC EMPLOYEES'RETIREMENT SYSTEM,

Case No.: BC 480695

CLASS ACTION

(Assigned to the Hon. Anthony Mohr,Department 309, for all purposes)

PLAINTIFFS' OPPOSITION TODEFENDANT CALPERS' MOTION FORJUDGMENT ON THE PLEADINGS

Hearing Date: December 7, 2012Hearing Time:

9:00 am

Trial Date: NoneComplaint Filed: March 12, 2012

Defendants.

Plaintiffs hereby file their Opposition to CalPERS' Motion for Judgment on the

Pleadings. (Plaintiffs are filing a 30-page Opposition pursuant to agreement by the parties and

agreed to by the Court in the Order on Stipulation To Set Briefing Schedule on Defendants'

Motion for Judgment on the Pleadings filed herein on September 25, 2012.)

PLAINTIFFS' OPPOSITION TO DEFENDANT CALPERS'MOTION FOR JUDGMENT ON THE PLEADINGS

Page I

TABLE OF CONTENTS

TABLE OF AUTHORITIES

INTRODUCTION 1

FACTS 5

LAW AND ARGUMENT 8

I. Introduction 8

II. Interpretation of Pension and Disability Statutes 8

III. Military/Air Time: IDR Funding, CalPERS' Practice 9

IV. Argument: If Informed, Why Would Anyone Buy Before Age 50? 10

V. Contract Law and Arguments 13Disclosure Issues

14

A. Disclosure to Randy Slaughter Differs from the Marzec Disclosures 14

B. Technical Words: "'Service Credit' May Not Benefit You" 15

C. Specific Disclosures Required: Disclosure of New Terms in Insurance

Require Accuracy and Clarity 16

D. No Notice of Amendment/Limitation/Waiver of Vested IDR Benefits 17

E. Mistake in Service Credit Purchase Contracts; No Consent; Rescission 18

VI. Unconscionability 18

VII. Rescission 22

VIII. Insurance Contract Law 22

IX. "Delayed Accrual" Arguments 26

A. IDR and Purchase Contract Breaches and Loss of Military/Air Time Invest-

ments: Different Harms, Different Causations, Different Occurance Dates 27

B. "Delayed Accrual" Date 28

C. Need for Evidentiary Hearing on "Delayed Accrual" 28

CONCLUSION 28

EXHIBIT 1 (Exh. 14 to the Complaint)

EXHIBIT 2 (Exh. 2 to the Complaint)


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TABLE OF AUTHORITIES

California Cases:

A & M Produce Co. v. FMC Corp.

(1982) 135 Cal.App.3d 473 19-21

Allen v. City of Long Beach

(1955) 45 Ca1.2d 128 9

Bay Cities Paving & Grading, Inc. v Lawyers' Mut. Ins. Co.

(1993) 5 Ca1.4th 854 22-23

Burkett v. Continental Cas. Co.

(1969) 271 CaLApp.2d 360 24

California Comp. & Fire Co. v. Industrial Acc. Commin

(1965) 62 Ca1.2d 532 25-26

Carman v. Alvord

(1982) 31 Ca1.3d 318 8

Davis v. United Services Auto. Assn.

(1990) 223 CaLApp.3d 1322 16. 25

Delgado v. Heritage Life Ins. Co.

(1984) 157 Cal.App.3d 262 23-24

Delos v. Farmers Group, Inc.

(1979) 93 CaLApp.3d 642 16

Desai v. Farmers Ins. Exch.

(1996) 47 Ca1.App.4 th 1110 23

Essex Ins. Co. v. City of Bakersfield

(2007) 154 Cal.Appg 696, as modified (Aug. 27, 2007) and review denied,

(Oct. 31, 2007) 15, 25

Fields v. Blue Shield of Calif

(1985) 163 Cal.App.3d 570 25


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1

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California Cases (continued):

Frank v. Board of Administration

(1976) 56 Cal.App.3d 236 8

Graham v. Scissor-Tail, Inc.

(1981) 28 Ca1.3d 807 18-19,21

Haynes v. Farmers Ins. Exch.

(2004) 32 Ca1.4th 1198 24-25

Hervey v. Mercury Cas. Co.

(2010) 185 Cal.App.4 th 954 22

Independent Ass'n of Mailbox Center Owners, Inc. v. Superior Court

(2005) 133 Cal.App.4 th 396 14

Industrial Indem. Co. v. Industrial Acc. Comm 'n of Calif.

(1949) 34 Ca1.2d 500 25

Logan v. John Hancock Mut. Life Ins. Co.

(1974) 41 Cal.App.3d 988 23

Nissel v. Certain Underwriters at Lloyd's of London

(1998) 62 Cal.App.4th 1103 22

Oden v. Board of Administration

(1994) 23 Cal.App.4 th 194 8

Parrish v. Cingular Wireless, LLC

(2005) 129 Cal.App.4 th 601, as modified on denial of reh'g, (June 17, 2005) and review

filed (June 28, 2005) 20

Pasadena Police officers Assn. v. City of Pasadena 20

(1983) 147 Cal.App.3d 695 8-9

Perdue v. Crocker National Bank

(1985)38 Ca1.3d 913 18

Ponder v. Blue Cross of So. Calif.

(1983) 145 Cal.App.3d 709 22-23


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California Cases (continued):

Powerine Oil Co., Inc. v. Sup. Ct. (Central Nall Ins. Co of Omaha)

(2005) 37 Ca1.4 th 377 23-24

Russell v. Bankers Life Co.

(1975) 46 Cal.App.3d 405 24

State Farm Mut Auto. Ins. Co. v. Jacober

(1973) 10 Ca1.3d 193 25

Sylva v. Board of Supervisors

(1989) 208 Cal.App.3d 648 8

Symington v. City of Albany

(1971) 5 Ca1.3d 23 9

University of Judaism v. Transamerica Ins. Co.

(1976) 61 Cal.App.3d 937 25

Valdes v. Cory

(1983) 139 Cal.App.3d 773 9

Waller v. Truck Ins. Exch., Inc.

(1995) 11 Ca1.4 ffi 1 23

Zullo v. Superior Court

(2011) 197 Ca1.App.4th 477 14, 19

California Statutes:

Civil Code, §1636 13


Civil Code, ' 1641 13

Civil Code, §1644 4,13-15


Civil Code, §1670.5 19

Civil Code, §1670.5(a) 21

PLAINTIFFS OPPOSITION TO DEFENDANT CALPERS'MOTION FOR JUDGMENT ON THE PLEADINGS

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California Statutes (continued):

Civil Code, §1861 4, 15

Government Code, §§20000, et seq. 4

Government Code, §20808 8-9

Government Code, §20468 8



Government Code, §21418 5, 8-10


Insurance Code, §10270.3 26

Insurance Code, §10291.5(b)(1) 21

Insurance Code, §10321 26

Treatises:

Rest. 2d, Contracts, §208 21

West's Ann.Cal.Civ.Code, §1670 14


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INTRODUCTION

Alternate Theories of Recovery. From the beginning, Plaintiffs pled two alternative

theories of recovery in their Complaint:

The first sought to compel CalPERS to provide Plaintiffs with additional annuities under

Government Code section 21420 based on their investments in military/air time service credits. It

would have affirmed the purchase contracts. The Court ruled against the additional annuities in

the related case of Marzec v. CalPERS, LASC Case No. BC461887. Plaintiffs are not

challenging that ruling in this Opposition.'

The Court did not consider or rule on the alternative theories of recovery. The alternative

theories seek to prevent CalPERS from reducing Plaintiffs preexisting vested Industrial

Disability Retirement (IDR) benefits without Plaintiffs' knowledge or consent. (See, e.g.,

Complaint, 111f24, 265-266 and 394, among other places.) In effect, CalPERS argues that the

military/air time purchase contracts amended or limited the vested IDR rights, without

disclosure. Advertising "increases" in service retirement but effectively reducing current 1DR

coverage, the purchase contracts are unconscionable. As hidden amendments reducing existing

IDR insurance, the purchase contracts fail to clearly and conspicuously disclose the amended

IDR terms. No Plaintiffs would have reasonably agreed to reduce (or pay more for) their already

fully vested IDR, especially if they had been informed that they could simply wait and not suffer

a reduction. It also violates equal protection. The alternative theory seeks rescission of the

service credit purchase contracts and restitution of Plaintiffs' investment, with interest.

I CalPERS argues that this case is identical to Marzec and so that the Court shouldsimply grant its Motion for Judgment on the Pleadings and dismiss. Although the Court granteddemurrer in oral argument in Marzec, the issues presented there were not all inclusive. Plaintiffsincorporate and reiterate all causes of action in the Complaint and do not concede any fact orlegal issue, but to the extent the claims raised herein are identical to Marzec, Plaintiffsunderstand that the appellate court is the proper venue to challenge them and will not argue themagain here. Several important issues, however, including the undisclosed amendment to thevested IDR, the disclosures, etc., were not resolved in Marzec. Plaintiffs understand the Court ispreparing a detailed Order regarding its grant of CalPERS' Demurrer to First AmendedComplaint in Marzec. Statements in this Opposition concerning the Court's findings in Marzecare based on the transcript of the hearing.


Page

This Opposition focuses on the second theory of recovery, delayed accrual, and other

unaddressed issues. CalPERS 1 Motion fails to overcome the Complaint and causes of action.

Forcing Plaintiffs to Pay Extra for IDR Rights. From the first day on their dangerous

jobs, Plaintiffs were fully vested and insured against industrial disability by CalPERS and the

employers. If Plaintiffs had been injured, CalPERS and the employer were obligated to pay an

IDR in full. Contracting to buy "increases" in their future service retirement, Plaintiffs inquired

about investing in military/air time from CalPERS. Before and at the time of contracting for the

military/air time, CalPERS did not disclose for those Plaintiffs who bought before age 50 or had

not yet attained 16% years of service, the military/air time investments were immediately

available to fund the existing IDR. The contracts did not disclose this IDR reduction. The

disclosures in the purchase contracts do not mention IDR at all. Plaintiffs who bought "early" did

not know that signing the purchase contract immediately reduced their IDR benefit. CalPERS di

not disclose that after age 50 with 16 2/3 years, a Plaintiff has no IDR liability and no risk of loss.

With respect to the total circumstances surrounding the transactions by "early"

purchasers, CalPERS disclosed at most half the important facts: that the military /air time

investment might potentially "not benefit" the buyer in the future. CalPERS failed to disclose the

other half: that the vested IDR benefit was immediately amended and reduced, such that

Plaintiffs would be on the hook for more of their IDR cost. CalPERS failed to disclose that

Plaintiffs could avoid these risks and reductions entirely by simply waiting to purchase the

air/military time until after age 50 with 16% years of service credit.2

Failing to give notice of the counter-intuitive effect of the purchase contract for "early"

buyers, CalPERS' disclosure did not warn Plaintiffs that they were also partially coinsuring their

own disability. Without notice, Plaintiffs reasonably expected that their vested IDR coverage

2 Disabled safety retirees that have reached retirement age and have total service creditthat would give them benefits beyond the 50% IDR allowance (more than 16% years for safetyemployees retiring under a "3% @ 50" pension formula) can take a "service retirement payable'disability allowance". The first 50% of their final compensation is paid as a tax-free IDRallowance, and any benefits in excess of that 50% (based on service credit that exceeds the 50%allowance) are paid as a taxable service allowance. Waiting to age 50 with 16% years of servicecredit ensures they will get full benefit for the air/military time purchased.

PLAINTIFFS` OPPOSMON TO DEFENDANT CALPERS'MOTION FOR JUDGMENT ON THE PLEADINGS

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would remain unchanged before and after signing the service credit purchases. Contracting to

pay the full cost of increases to their future service retirement, Plaintiffs reasonably expected to

not use their personal funds to assume a higher risk/share of the employer's existing IDR

liability. There are no clear and conspicuous "exclusionary" terms disclosing an amendment or

reduction of the IDR coverage.

Instead of acting as a risk-spreading hedge mechanism to prevent individual catastrophic

loss, CalPERS essentially designed the purchase contracts to concentrate and multiply the loss on

Plaintiffs who buy "early", forcing an unfair share of injury onto the weakest injured party (who

had sought insurance, not risk). Procedurally, CalPERS took advantage of its dual roles as sole

provider of disability and service retirements, to write the purchase contracts to benefit itself and

the employers disproportionately, and secretly relieve itself of some of its existing liability.

Plaintiffs were not compensated for assuming this risk (or the reduction in IDR benefits)

because they (i) were already fully invested in IDR and (ii) had paid the full employer and

employee liabilities for the additional service credit. No facts or law suggest a reduction in IDR

was actuarially correct or necessary. CalPERS simply seeks a windfall, without disclosure, from

disabled firefighters and police officers.

Different Issues in Marzec and Andert. The Andert Complaint presents (1) new and

different issues (especially regarding disclosure and disability insurance) either (2) not present in

the Marzec ruling; 3 and/or (3) core issues that remain to be decided. Newly presented facts

include the different disclosures that are even more deficient than those in Marzec. Andert also

addresses the issue of delayed accrual

Among other things, the Court ruled in Marzec that CalPERS' disclosures in the service

3 To the extent the Andert, Slaughter et al claims are identical to those decided in theexpected Marzec ruling, Plaintiffs understand that the Appellate court is the proper venue tochallenge the Marzec Demurrer ruling. Plaintiffs in Andert assert all causes of action, but try toavoid redundancy so it will not argue them again here. In this Opposition with a varied focus,Plaintiffs incorporate and reiterate all cause of action in the Complaint and do not concede anyfact or legal issue. Statements in this Opposition concerning the Court's findings in Marzec arebased on the transcript of the hearing. Several important issues, including the undisclosedamendment to the vested IDR, the disclosures, etc. were not resolved in Marzec.


Page 3

credit purchase contracts provided sufficient notice of the risk of future, potential loss of the

additional service credits and the investments. The contracts disclose that "the service credit may

not benefit you". The term "service credit" is statutory and technical, given a special meaning.

(Civil Code, §§1644, 1861.) Under the Public Employees' Retirement Law ("PERL",

Government Code, §§20000, et seq.), the term "service credit" has no relationship to IDR.

IDR is calculated and paid independently of "service credit", "years of service", or age.

The disclosure about service credit is totally irrelevant to IDR. In other words, the disclosure that

"service credit may not benefit you" cannot put Plaintiffs on notice about any changes in IDR.

Different Losses. Loss of the purchased service credit is different and separate from the

loss arising from the reduction in the vested IDR. The nature and timing of the damage shows

they are different and independent.

The immediate reduction in the IDR benefit (as a result of buying military/air time before

age 50) occurred automatically on signing the purchase contract. 4 The purchase contract shifts a

share of CalPERS' existing disability risk onto the Plaintiff In effect, CalPERS becomes a

partially insured party, rather than insurer. CalPERS has recourse to the Plaintiffs service credit

investment to pay a part of the disability costs if Plaintiff becomes disabled below age 50.5

All safety members under age 50 who bought military/air time suffered an undisclosed

reallocation of the IDR insurance risk and cost. CalPERS put the investments of all buyers under

50 at risk. On the other hand, the actual loss of the investment or service credit only occurred to

some buyers: those members who were disabled under age 50 with less than 16% years of

service. The actual loss of the service credit (or seizure of the investment) occurred at the time of

disability determination, subsequent to purchase, and only to buyers who were disabled earlier

4 Under CalPERS arguments, Plaintiffs had an immediate right to IDR and only a futurecontingent expectation of a service retirement.

The amount of the immediate IDR loss could be expressed as the actuarial expectationthat a Plaintiff would be injured between the time of his or her service credit purchase and thetime that the member became fully eligible to benefit from the service credit purchase under aservice retirement (age 50 with 16% years), multiplied by the amount of the investment.


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than age 50 and with less than 16% years of service credit.° Many military/air time buyers who

bought under age 50 subsequently vested in service retirement and did not suffer an investment

loss.

Service Credit Purchase Contracts Are Unconscionable. The purchase contract

reallocates the costs and risks of IDR in an unreasonable, counter-intuitive, or unexpected

manner. Clearly, there was no incentive for Plaintiffs to pay more for the IDR benefit that they

were already entitled to. The terms of the IDR amendment were hidden, contrary to Plaintiffs'

purpose in contracting, and unreasonable. Plaintiffs did not even learn of this shift in risk and

cost until litigation began. The purchase contracts are unconscionable.

The IDR amendment also fails for lack or want of consideration, as Plaintiffs received no

additional IDR benefit even though they paid or risked more.

The purchase contracts are subject to rescission. For example, Plaintiffs did not

contemplate that the "early" purchase of optional service credit would cause them to pay an

increased share (both the employee's share and the employer's share) of the IDR. No facts put the

Plaintiffs on notice that they were paying more for their IDR. It was simply a mistake.

Complaint Survives CalPERS' Motion, The Andert Complaint alleges contract,

constitutional, and other causes of action that survive the Motion for Judgment on the Pleadings.

The purchase contracts are unconscionable, and are subject to rescission with restitution. The

PERL as applied and the contracts violate equal protection.

FACTS

For Plaintiffs, CalPERS is the sole mandatory provider of both industrial disability

insurance and service retirements.

Plaintiffs worked in safety jobs as fire fighters and police officers. They vested in IDR in

their first day on the job. (Government Code, §21418.) There are no age or service requirements

6 Applying an analogy to life and disability insurance in the private sector, Plaintiffs weralready fully insured for disability. The Plaintiffs sought to buy a separate life insurance annuityfrom the same company. There is no disclosed offset between the two policies. But the insurancecompany secretly reduces the scope of the disability coverage simply because the Plaintiff hasinvested in the life insurance annuity.


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for IDR. (Id.) The employers' full IDR liability for each employee was established at the

employees first day of employment, because the IDR was fully payable even if an employee was

disabled on the first day of the job. The IDR is not voluntary and cannot be unselected.

Some plaintiffs may have been provided IDR information. !DR is an important benefit

that members rely on. CalPERS does not indicate that the service credit purchases may be used

to fund IDR. The IDR material does not indicate that service credit purchases may increase the

members' cost or liability to pay IDR.

IDR provides 50% of salary as a retirement pension. The IDR is first paid from the

"normal contributions" made in the specific job, with all additional costs borne by the employer.

Plaintiffs were not yet 50 years of age and had not yet reached 16% years of service credi

when they inquired into military/air time.

Plaintiffs investigated the purchase of air or military time, and received contracts and

other materials from CalPERS. The purchase contract executed by named Plaintiff Randy

Slaughter and others included the disclosure in Exh. 14 to the Complaint. The purchase contrac t

executed by named Plaintiff Jeffrey Andert and others included the disclosure in Exh. 2 to the

Complaint. There are likely many other disclosures received by different class members.

Two different disclosures are referred to in this Complaint: the Slaughter disclosure

and the Andert disclosure'. (Copies are attached hereto as Exh. 1 [the Slaughter disclosure] and

Exh. 2 [the Andert disclosure] for the Court's convenience.) The disclosure given to Slaughter

at the time he purchased his prior military time stated:

For DISABILITY RETIREMENTS or SAFETY MEMBERS if you wouldlike an estimate of the cost benefit for this service credit, please contact CalPERSat P.O. Box 942717, Sacramento, CA 94229-2717.

(Complaint, Exh. 14 ("Slaughter Disclosure".)

7 The Slaughter disclosure was included in a military time purchase agreement that likelypredates the Andert disclosure. There are likely additional disclosures for other military/air timeor optional service credit purchases. The language in paragraph of the Andert disclosure is thesame as the Marzec disclosure, however the other pages and disclosures in other service creditpurchase contract may differ.


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The Slaughter disclosure does not even hint at a possible loss or risk reallocation.

Failure to provide notice is sufficient to overcome CalPERS' Motion.

The Slaughter disclosure is substantially different than that given to the other Andert

Plaintiffs:

If you are considering a DISABILITY RETIREMENT, this additional servicecredit may not benefit you. You may request a retirement estimate with andwithout this additional service credit by submitting a CalPERS RetirementEstimate Request Form (MSD 470) along with a copy of this cover letter or usethe Retirement Planning Calculator on our website at Iittp://wvvw.calpers.ca.gov .If you need additional information or retirement counseling, please contactCalPERS at (888) 225-7377.

(Complaint, Exh. 2 ("Andert Disclosure".)

The Ant/en disclosure does not disclose CalPERS' hidden amendment to vested IDR

contract rights. Both disclosures seem to indicate that the IDR rights will remain the same.

Plaintiffs reviewed the information contained in the disclosures each received. They were

unaware that the CalPERS was amending the IDR contract.

At the time of purchase of the optional military/air time, Plaintiffs vested solely in IDR.

Service retirement was merely a potentiality at that time.

CalPERS construes the PERL so that the air/military time investments are "normal

contributions" in the job (and for the benefit of the employer) that the purchaser holds at the time

of employment. CalPERS argues that all "normal contributions" deposited in the job can be used

to fund the IDR benefits.

But the purchase contracts did not disclose that the investment funds could be used to pay

a part of Plaintiffs' vested IDR benefits or that the DR rights were being amended.

The Plaintiffs deposited the funds to enhance their service retirements. Factually, they

were disabled on the job before they were 50 years old or had 16% years of service credit, and

before vesting service retirement. IDR was the only benefit that they had vested in.

Plaintiffs performed as required. CalPERS failed to fully perform. CalPERS failed to

return the monies paid that arose from the alteration of Plaintiffs' vested IDR contract rights.


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LAW AND ARGUMENT

I. Introduction

CalPERS relies on the "service credit" purchase agreements as a vehicle to make

Plaintiffs pay more for their IDR benefits than they otherwise would have to pay. But the service

purchase agreements do not disclose that the IDR right is being amended or that Plaintiffs

assume a risk to fund a higher share of their IDR.

H. Interpretation of Pension and Disability Statutes

"Courts 'must consider the consequences that might flow from a particular construction

and should construe the statute so as to promote rather than defeat the statute's purpose and

policy.' (Sylva v. Board of Supervisors (1989) 208 Cal.App.3d 648, 654 [256 Cal.Rptr. 138].)"

(Oden v. Board of Administration (1994) 23 Cal.App.4th 194, 208-209.)

Purpose of Disability Statutes in the PEFtL. "Besides affording subsistence, a disability

allowance ...provides a means to replace incapacitated employees 'without hardship or prejudice'

to them. (§ 20001.)" (Frank v. Board of Administration (1976) 56 Cal.App.3d 236, 245.) The

responsibility and liability of the employer to pay contributions to fund the IDR payment is

undisputed. (Government Code, §§20808, 21418.)

Terms of IDR Vesting. "'By entering public service, an employee obtains a vested

contractual right to earn a pension on terms substantially equivalent to those then offered by the

employer. [Citations.] On the employee's retirement after he has unfilled pension conditions an

immediate obligation arises to pay benefits earned.' [Citation omitted.] (Pasadena Police officers

Assn. v. City of Pasadena (1983) 147 Cal.App.3d 695, 701.) Plaintiffs vested in their 50% IDR

entitlement on the first day of the safety job.

In respect to retirement benefits, the Supreme Court notes that employers' contributions

to CalPERS "are in the nature of insurance premiums (§ 20456) [now 20468]; during the contrac

term they represent the employer's ongoing share of the actuarial equivalent of amounts

necessary to find current and future benefits due covered employees. (See, e.g., Government

Code, §§20564, 20750, et seq.) [now 20577]" (Carman v. Alvord (1982) 31 Ca1.3d 318, 325.)

Employers had a duty to fully fund the IDR during each period of employment. Employers and


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CalPERS had no reasonable expectation that Plaintiffs would fund any portion of their IDR with

their permissive service credit investments.

No Waiver of IDR Benefit. Plaintiffs never waived their vested right to 50% IDR. They

especially did not consent to CalPERS' (i) reduction of the IDR; (ii) reallocation of the risk, or

(iii) seizure of the military/air time investments. In essence, CalPERS assumes that Plaintiffs

agreed to waive their statutory IDR rights and then agreed to offset their 50% IDR with their

investments, even though there was no disclosure or informed waiver. 8 Rather than double

dipping, Plaintiffs are being doubled charged, providing the retirement system and the employer

with an undeserved windfall.

No Offsetting Advantage to Employee for Increased IDR Cost. Raising a current

employee's contribution to IDR without any corresponding increase in benefits is an

unconstitutional impairment of his/her vested contract rights. (Valdes v. Cory (1983) 139

Cal.App.3d 773, 784, citing to Allen v. City of Long Beach (1955) 45 Ca1.2d 128, 131.)

"[C]hanges detrimental to the employee must be offset by comparable new advantages."

(Pasadena Police officers Assn., supra, at 703.) Here Plaintiffs received no advantage.

The system's and the employers liability for 1DR should not change as a result of

Plaintiffs buying military/air time because (i) IDR fully vests on first employment and (ii) there

are no age or service requirements for IDR. The employers' full IDR liability was established at

the employees' first hiring, prior to the military/air time purchase. CalPERS cannot offset

Plaintiffs' already vested IDR, or seize the investment. CalPERS should not charge Plaintiffs a

share of the employers' unfunded liability or other unrelated costs.9

III. Military/Air Time: [DR Funding, CalPERS' Practice

CalPERS finds IDR with certain "normal contributions". All remaining IDR costs are

paid by the employer where the injury occurred. (Government Code, §§20808, 21418.)

8 As a practical matter, CalPERS seeks "directly or indirectly" to charge the member ahigher cost for disability. See generally Symington v. City of Albany (1971) 5 Ca1.3d 23.

9 In the service credit purchase agreements, CalPERS can only charge members forcosts related to the increased service and annuity benefit being purchased.


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CalPERS says that the PERL states that a member's 1DR allowance "shall be derived

from his or her accumulated normal contributions and the contributions of his or her employer"

(quoting from Government Code section 21418). CalPERS includes the military/air time

investments as "normal contributions" under Section 21053. CalPERS considers the military/air

time investment to be "normal contributions" in the job at time of purchase.

Fundamentally, CalPERS ignores that not all "normal contributions" are used to fund

IDR. I ° CalPERS fails to mention it has also established a practice where an 1DR is funded only

with the "normal contributions" made in the specific employment where the injury occurred."

IV. Argument: If Informed, Why Would Anyone Buy Before Age 50?

As police officers and firefighters, Plaintiffs were fully vested in their IDR rights before

they bought air/military time. 1DR was the only benefit that Plaintiffs ever fully vested in.

Plaintiffs hoped to vest in service retirements in the future, but in the meantime they did

not agree to pay more for their existing IDR safety net. Holding tens of thousands of dollars

outside the retirement fund, Plaintiffs invested in military/air time believing CalPERS' promise

of an increase in their future retirement benefit. For many, this was the bulk of their independent

retirement funds.

What risk was disclosed at the time of contracting under the circumstances? The

disclosure indicated that the purchase of service credit "may not benefit" them if they planned on

taking a disability retirement. But clearly when buying service credit, they were not planning on

taking a disability. Plaintiffs knew that they had already vested in the IDR. So what was

CalPERS' "offer" in those circumstances?

io In Marzec, Plaintiffs never contended that CalPERS has no authority to apply any"normal contributions" to a member's IDR allowance. Rather, Plaintiffs contend that CalPERSexceeds its authority by reaching beyond the "normal contributions" made in the job where theM—member was disabled to illegally seize the military/air time investments which were not madin connection with the member's job and employer. In Andert, CalPERS failed to disclose thematerial fact that Plaintiffs were additionally funding their IDR because they purchasedmilitary/air time before "service retirement" vested.

CalPERS' practice provides the employee with an annuity above the 1DR for theemployee's "normal contributions" made in a prior employment, even if the "normalcontributions" were made in the same safety category.


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Plaintiffs could reasonably expect that their IDR would remain the same. There was no

expectation that their existing IDR would be funded by Plaintiffs' outside retirement funds. There

was no disclosure that they were assuming some of the disability risks associated with CalPERS

or to the employer that injured them. No police officer would reasonably volunteer personal

funds to insure CalPERS against himself. The premise is ridiculous. No firefighter would

volunteer to pay more for his or her already vested employer-required disability insurance. A gift

to the government is incredulous. No safety officer would knowingly volunteer to reduce his

IDR coverage, especially if a reasonable, "free" alternative (i.e. waiting) was readily available.

CalPERS may argue that the firefighters and police officers were buying "early" (i.e.

before age 50 and 16% years of service) to secure the benefit of CalPERS 7.5% investment

returns. CalPERS may argue that Plaintiffs took a gamble that they might get disabled.

There are two principal flaws in CalPERS I "gamble" argument. First, it presupposes that

the Plaintiff is informed of sufficient facts to know that he or she is taking a risk and gambling. It

presupposes that the Plaintiff received full and complete disclosure in clear and conspicuous

terms to understand the risks and costs. If the real risks are not clearly disclosed, the buyer does

not intend to gamble. He makes a mistake based on bad information. The mistake voids consent.

It is an unconscionable contract.

CalPERS had duties to clearly disclose the "deal" terms. Without CalPERS providing the

required information that only CalPERS could provide (i.e., even basic information like the

immediate IDR reduction, etc,), how could a member know or calculate the attendant risk or

costs? Plaintiffs did not realize that they were reducing their IDR to coinsure their own disability.

Second, what was the anticipated benefit of the Nhamble., The "upside" was a potential

return of 7.5% in interest per year for the time before age 50. After age 50 with 16% years of

service, each buyer received the same 7.5% return without any risk. So the anticipated benefit of

buying early was a few years of increased interest, likely higher than market interest.

However, there was no substantial "upside" to buying "early" if the associated risks and

costs were known. For each additional year of higher interest in the years before the Plaintiff

turns age 50, the Plaintiff bore real substantial undisclosed risks: an immediate reduction in the


Page II

IDR benefit, an assumption of risk to coinsure yourself against disability, a release of some of

2 the employer or CalPERS' IDR liability, and a disclosed risk of potential future "no benefit".

3 When considering the associated "risk" of buying "early", the return is likely negative.

4 If Plaintiffs had been informed properly, no reasonable person would have bought the

5 optional service credit "early" because they received little or no "risk adjusted" commensurate

6 benefit.

7 Instead of acting as a risk-spreading hedge mechanism to prevent individual catastrophic

8 loss, CalPERS essentially designed the "purchase contracts" to concentrate and multiply the loss

9 on Plaintiffs who buy "early", forcing an unfair share of the injury onto the weakest injured party

10 (who had sought and was entitled to insurance, not additional risk). In the hidden terms of the

11 purchase contract, CalPERS amended the vested IDR policy to add financial injury to Plaintiffs

12 physical injury, providing less coverage than before, a parody of the concept of insurance.

13 An important undisclosed issue was that CalPERS and the employers secretly positioned

14 themselves to gain (at Plaintiffs' expense) from the service credit purchase agreements if

15 Plaintiffs were disabled before 50. In the amended IDR terms of the purchase contracts,

16 CalPERS had "changed sides" to transfer a disproportionate share of the investment monies to its

17 benefit, without disclosure, if the safety Plaintiff was industrially disabled before age 50.

18 Essentially, CalPERS took advantage of its dual roles as sole provider of disability

19 insurance and service retirement (two separate systems), to benefit itself disproportionately at the

20 expense of early purchasers of military/air time. CalPERS was purporting to sell service credit,

21 but the terms were structured to insure CalPERS against having to pay the full cost of Plaintiffs

22 already vested disability coverage. CalPERS had become adverse, but CalPERS did not disclose

23 that the trust fund and the employers were not acting as fiduciaries or in the members' best

24 interest. CalPERS did not disclose that the amended "disability" term for "early" buyers of the

25 military/air time purchase contract disproportionately transferred Plaintiffs outside money to

26 itself and the employers, contrary to the reasonable expectation of the safety officers, and in a

27 counter-intuitive fashion.

28 Plaintiffs were not on "inquiry" notice about the IDR reduction because it was impossible


Page 12

to deduce a logical connection between the purchase of service credits and the reduction of

IDR. I2 At the time of contracting, Plaintiffs could not understand the complex accountings or

counter-intuitive result that CalPERS argues for. CalPERS only subsequently disclosed it, by

implication, in litigation significantly after these events occurred.

Plaintiffs invested because CalPERS did not disclose the facts. If Plaintiffs knew that

they could wait until age 50 and suffer no reduction in IDR, no one would volunteer to risk a

great deal of their retirement funds , especially with no "risk adjusted" "upside" gain.

The Court found in Marzec that CalPERS' disclosures warned Plaintiffs that they might

"not benefit" from their air/military time investment funds. There is a significant, qualitative

difference between (i) telling Plaintiffs they might not benefit from their service credit

investments and (ii) informing them that by purchasing the service credit, they had thereby

amended, limited or waived their vested 1DR rights. This issue was never ruled on in Marzec.

And CalPERS completely avoids the issue in its Motion.

V. Contract Law and Arguments

CalPERS must satisfy basic contract law.

"A contract must be so interpreted as to give effect to the mutual intention of theparties as it existed at the time of contracting." (Civil Code, §I636.)

"The language of a contract is to govern its interpretation, if the language is clearand explicit and does not involve an absurdity." (Civil Code, §1638.)

"The whole of a contract is to be taken together, so as to give effect to every part,if reasonably practicable, each clause helping to interpret the other." (Civil Code,§1641.)

"The words of a contract are to be understood in their ordinary and popular sense,rather than according to their strict legal meaning; unless used by the parties in a

12 iThis s especially true when the Plaintiff was only vested in the IDR. It is even truerwhen Plaintiffs could avoid the reduction in IDR by waiting until vested in service retirement.Because one can receive an IDR and a service retirement in conjunction, they are not mutuallyexclusive. In other words, a loss in the service credit does not mean a reduction in the IDR. TheIDR is the more fundamental benefit. Since "service retirement payable disability allowance"means a retiree receives both a 50% IDR and an additional service pension based on the portionof the allowance above 50%, there is clearly no mutual exclusion.


Page 13

technical sense or unless a special meaning is given to them by usage, in whichcase the latter must be followed." (Civil Code, §1644.)

The purchase contracts are contracts of adhesion that allocate the risks of !DR in an

unreasonable or unexpected manner. (West's Ann.CalCiv.Code, §1670; Zullo v. Superior

Court (2011) 197 Cal.App.4 th 477.) Foundational contract law holds that any material change

made to Plaintiffs' vested IDR contract rights required knowing consent by Plaintiffs.

The purchase contracts are unconscionable, requiring the Court to inquire beyond th

face of the contract into its commercial setting, purpose and effect at the time entered into. (Se

Independent Ass'n of Mailbox Center Owners, Inc. v. Superior Court (2005) 133 Cal.App.4t

396.)

VI. Disclosure Issues

Vested IDR rights guarantee a pension of 50% of a member's highest salary. They also

guarantee members will receive the IDR without contributing any additional personal funds

beyond the member contributions." If CalPERS wished to increase the cost of IDR to members,

it was obligated to (i) notify those members of the increase and (ii) obtain their knowing consent

to this amendment to their vested IDR coverage.

A. Disclosure to Randy Slaughter Differs from the Marzec Disclosures

The disclosures in this case are different than those in Marzec. Specifically, the

disclosure given to named Plaintiff Randy Slaughter at the time he purchased his prior military

time stated:

For DISABILITY RETIREMENTS or SAFETY MEMBERS if you wouldlike an estimate of the cost benefit for this service credit, please contact CalPERSat P.O. Box 942717, Sacramento, CA 94229-2717.

(Complaint, Exh. 14 ("Slaughter Disclosure"))

The Slaughter disclosure fails to mention either disability retirement or warn that the

13 Some safety members pay their own payroll contributions, others have thesecontributions "picked up" and paid by their employers pursuant to collective bargainingagreements.


Page 14

purchase "may not benefit you". The Slaughter disclosure does not even hint at a possible loss.

On signing, the purchase contract immediately amended the Plaintiffs' existing IDR rights. The

contracts do not disclose the IDR amendment would increase their liability and cost.

There is no disclosure sufficient to put Plaintiffs on "inquiry notice" or other notice.

The Andert disclosure (similar to the disclosure in Marzec) is woefully deficient, never

disclosing CalPERS' amendment of Plaintiffs' vested IDR contract rights. The Andert

disclosure does not alert a buyer that his or her existing IDR rights will be reduced or costs

increased. Disclosing a potential future detriment, the Andert disclosure stated:

If you are considering a DISABILITY RETIREMENT, this additional servicecredit may not benefit you. You may request a retirement estimate with andwithout this additional service credit by submitting a CalPERS RetirementEstimate Request Form (MSD 470) along with a copy of this cover letter or usethe Retirement Planning Calculator on our website at http://wvvw.calpers.ca.gov .If you need additional information or retirement counseling, please contactCalPERS at (888) 225-7377.

(Complaint, Ex. 2 ("Ander! Disclosure").)

Neither the Andert nor the Slaughter disclosure is conspicuous, plain and clear to

support an exclusion or limitation of vested IDR coverage upon signing. Plaintiffs reasonably

expect IDR coverage without paying additional private funds.

B. Technical Words: "'Service Credit' May Not Benefit You"

CalPERS uses the term "service credit" in a technical statutory form. When interpreting

a contract provision, a court must give its terms their ordinary and popular sense, unless used

by the parties in a technical sense or a special meaning is given to them by usage. (Essex Ins.

Co. v. City of Bakersfield (2007) 154 Cal.App.4th 696, as modified, (Aug. 27, 2007) and review

denied, (Oct. 31, 2007).) If words are used by the parties in a technical sense, or a special

meaning is given to them by usage, that meaning should be followed. (Civil Code, §§ 1644,

1861.)

IDR is not based on "service credit", age, or years of service. "Service credit" has no

relationship to IDR. IDR is not paid or increased by service credit. IDR cannot be reduced

because a recipient has less service credit. In other words, the disclosure about service credit is


Page IS

totally irrelevant to IDR. The disclosure about "service credit may not benefit you" does not

put Plaintiffs on notice about any changes in IDR.

C. Specific Disclosures Required: Disclosure of New Terms in Insurance

Require Accuracy and Clarity

The law requires notice of the specific reduction in coverage; a general admonition to

read the policy for changes is insufficient. (Davis v. United Services Auto. Assn. (1990) 223

Cal.App.3d 1322, 1332 [notice sent with renewal of policy inadequate].) The notice of reduced

coverage must be unambiguous; must be conspicuous, plain and clear. (Davis v. United Services

Auto. Assn., supra, at 1332-1333.)

Where the new coverage is offered as a substitute to an existing coverage at the option of

the insured, the new coverage cost and benefits must be unambiguous and accurately set forth.

(Delos v. Farmers Group, Inc. (1979) 93 Cal.App.3d 642, 665-666.)

It is particularly unconscionable that CalPERS construes the hidden reduction (i.e.

"exclusion") terms in a way that provides no additional or new IDR benefit to Plaintiffs but

immediately reduces CalPERS' costs and effectively partially insures itself (CalPERS and

employers) against paying the full cost of the disability that was previously assumed by

CalPERS (and the employer).

No Consideration For Amending IDR. If Plaintiffs were giving up any previously

vested rights, this also required appropriate consideration. No consideration was provided for

the 1DR amendment.

Formal Amendment Required. Further, any amendment to insurance (which is

essentially how IDR protection operates) requires an explicit amendment to the insurance

contract, agreed to by the insured.

CalPERS' Construction of PERL Still Provides Plaintiffs with Rescission. Even

assuming arguendo CalPERS construction of the PERL in Marzec, Plaintiffs are still entitled

to rescission and restitution:

• Assume arguendo that the PERL permits CalPERS to consider the military/air

time investments to be credited as "normal contributions" in the safety positions held by


Page 16

Plaintiffs at the time of purchase (rather than prior military service or "air time").

• Assume arguendo that a member who bought military/air time is later injured

and goes out on IDR, the PERL allows CalPERS to transfer the "normal contributions"

to the member's employer to be used to offset the cost of an IDR allowance.

• Assume arguendo that CalPERS' disclosures that service credit "may not

benefit you" is sufficient warning to Plaintiffs that they may receive no additional

benefit for the enormous personal funds they have invested in military/air time, if they

take IDR.

Then CalPERS would have a clear legal obligation to disclose and inform Plaintiffs that

they are assuming increased liability for their disability costs and that the purchase contracts

immediately reduced their vested IDR rights. The purchase contracts were voluntary elections

by Plaintiffs. Plaintiffs thought that they paid only the whole cost of future increases in their

service retirements. CalPERS' failure to timely and adequately inform voids consent, creates a

material mistake, and allows rescission and restitution of the purchase contracts.

D. No Notice of Amendment/Limitation/Waiver of Vested IDR Benefits

The Court found in Marzec that CalPERS' disclosures warned Plaintiffs that they might

"not benefit" from their air/military time investment funds. There is a significant, qualitative

difference between (i) telling Plaintiffs they might not benefit from their service credit

investments and (ii) informing them that by purchasing the service credit, they had thereby

amended, limited or waived their vested IDR rights. This issue was never ruled on in Marzec.

And CalPERS completely avoids the issue in its Motion.

CalPERS has contractual, statutory, and fiduciary duties to disclose material

information to Plaintiffs (i) before they bought military/air time, (ii) before amending or

waiving their existing IDR coverage, and (iii) before they had contracted to pay significantly

higher amounts for the IDR coverage they were already vested in.

If Plaintiffs had been informed properly, no reasonable person would have bought the

optional service credit "early" because they received little or no commensurate benefit, paid

more for an existing benefit, (and also undertook a significant risk of "total" loss of investment).


Page 17

Plaintiffs were not gambling, because there was no "upside", no enticement, no advantag

to buying "early" (if the associated risks and costs were known). There was only a downside, an

undisclosed downside, of risk of total loss and an immediate reduction of the IDR and an

insurance risk.

No logical connection can be deduced from not benefitting from "service credits" and

somehow being informed that you have undertaken an immediate reduction in your vested IDR

rights, and increased your liability.

The offsets, increased liability and costs to Plaintiffs, or (potential, real, or future) losses

were not actuarially or otherwise assumed by Plaintiffs, under the law or facts of the case.

E. Mistake in Service Credit Purchase Contracts; No Consent; Rescission

CalPERS and Plaintiffs suffered from mistake at the time of making the service credit

purchase agreements. It was a mistake of law and fact. If CalPERS had provided adequate

warnings, it is likely that the vast majority of Plaintiffs would have delayed buying military/air

time until age 50. CalPERS likely had a fiduciary duty to advise members to delay their

military/air time purchase until they reached retirement age and had earned sufficient service

credit through employment to ensure they would obtain the full benefit of the additional

purchased service credit. The mistake voids consent and provide grounds for rescission.

VII. Unconscionability

There are two alternative analyses for determining whether the service credit purchase

contract will be unenforceable because it is unconscionable. (Perdue v. Crocker National Bank

(1985) 38 Ca1,3d 913, 925, fn. 9.) "Both [analytical] pathways should lead to the same result."

(Id .)

Graham v. Scissor-Tall, Inc. The first model set out in Graham v. Scissor-Tail, Inc.

(1981) 28 Ca1.3d 807 asks initially whether the contract is one of adhesion. (Graham v. Scissor-

Tail, supra, at 819.) Since the voluntary purchase contract was offered by CalPERS without

opportunities to negotiate, it is an adhesion contract. Since the required IDR benefit was offered

by CalPERS without the ability to negotiate, it too is a contact of adhesion.

Although both adhesive contracts are still fully enforceable, the inquiry then turns to


Page 18

whether enforcement of the 1DR amendment (in the purchase contract) requiring Plaintiffs to

assume an increased liability or an increased share of their IDR should be denied. First,

enforcement will be denied if the contract or provision falls outside the reasonable expectations

of the weaker party. (Id. At 820.) Plaintiffs contracted for additional service credit. The 1DR

reduction provision lies outside the expectation of the Plaintiffs. Plaintiffs clearly did not expect

that they would be funding their own IDRs with their outside retirement money. Clearly it also

shows that the change in IDR is unexpected and outside reasonable expectations.

A contractual term is substantively suspect as unconscionable if, viewed at the time the

contract was formed, it allocates the risks in an unreasonable or unexpected manner. (Civil Code,

§1670.5; Zullo v. Superior Court, supra.)

Second, enforcement will be denied even if it does fall within the reasonable expectations

of the parties, but it is unduly oppressive or unconscionable. (Graham v. Scissor-Tail, supra, at

820.) The 1DR offset and the loss of the investment were also unduly oppressive and

unconscionable. Shifting a share of the disability risk onto Plaintiffs who buy "early", CalPERS

uses the purchase agreements as hidden "reverse disability insurance" to CalPERS' benefit. It is

oppressive and unconscionable.

A & M Produce Co. v. FMC Corp. The alternative analytical model was set out in A &

M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473 where the appellate court found that

establishment of unconscionability has both a procedural and a substantive component.

The procedural component shows how Plaintiffs were oppressed and surprised. (Ibid.)

Oppression results where there is no real negotiation of contract terms because of unequal

bargaining power. (Ibid.) As the sole provider of IDR benefits and service retirement as well as

service credit purchases, CalPERS has unequal bargaining power over Plaintiffs. There was no

negotiation or bargaining. "'Surprise' involves the extent to which the supposedly agreed-upon

terms of the bargain are hidden in a prolix printed form drafted by the party seeking to enforce

the disputed terms." (Ibid.) Plaintiffs sought "increases" in their retirement allowances. The

reduction and amendment to the IDR terms were not mentioned at all, not agreed to, and not

considered. No disclosure of increased IDR liability or cost is provided or implied.


Page 19

The substantive component of unconscionability looks to whether the contract allocates

the risks of the bargain in an objectively unreasonable or unexpected manner. (Id., at 487.)

Plaintiffs were already fully entitled to and vested in IDR. Plaintiffs bought military/air time

before vesting in service retirements. Although purporting to provide additional service credits,

the purchase contracts reduce existing IDR benefits. As Plaintiff becomes responsible for

increased IDR liability, the military/air time purchase contract allocates the risks of the IDR in

objectively unreasonable and unexpected manner. The IDR amendments grossly and singularly

benefit CalPERS and the employers at the buyers' specific and dramatic expense.

The lack of mutuality is a basis for finding substantive unconscionability in a contract.

(Parrish v. Cingular Wireless, LLC (2005) 129 Cal.App.4 th 601, as modified on denial of reh'g,

(June 17, 2005) and review filed (June 28, 2005).) Plaintiffs get no increased IDR benefit, yet

pay thousands of dollars that CalPERS uses to offset CalPERS' already existing IDR liability.

To be unenforceable, there must be both substantive and procedural unconscionability,

though there may be an inverse relation between the two elements. (A & M Produce, supra.)

No Disclosure of Reduction in [DR Benefits, Increase in IDR Costs. Plaintiffs are

safety employees with a long term relationship to CalPERS, who transferred part of their life

savings in trust to CalPERS in response to promises of increases in their retirement benefits. The

purchase agreement which they signed included a preprinted form containing a disclosure clause

in a multipage preprinted document that was not subject to negotiation. None of the preprinted

clauses had been modified in any manner, which suggests that they were nonnegotiable. In these

circumstances, it is indisputable that the contract was one of adhesion. The "not benefit you"

disclosure was ambiguous in its language and effect, but set apart by the use of boldface type.

One version (the Ander( disclosure) purported to disclose that the service credit would not

benefit the buyer if planning a disability. There is no explicit disclosure of a reduction in vested

disability benefits, or an increase in disability liability as a result of signing the purchase

contract. It does not disclose the increase in IDR risks or costs. Disclosing the reduction in the

IDR benefit would alert Plaintiffs to wait to buy the optional service credit until age 50 or 16%

years of service.


Page 20

Analyzed in A & AI Produce terms, this reallocation of the IDR costs and liability for

"early" buyers of service credit bears upon the substantive element of unconscionability. The

contract reallocates existing IDR liability and costs secretly and heavily against the member.

Without disclosure, CalPERS is able to obtain a reinsurance or coinsurance or "reverse disability

insurance" to its benefit, increasing the liability of already insured Plaintiffs in a particularly

unreasonable amount, especially in light of the greater bargaining power of CalPERS and

CalPERS' reluctance to disclose even the mechanics of "normal contributions" accounting. (A &

M Produce, supra, at 487.)

The reallocation of IDR risk in the service credit purchase agreement is both (i) beyond

the reasonable expectation of the buyer (in Graham v. Scissor—Tail terms) and (ii) substantively

and procedurally unconscionable (under the A & M Produce analysis), so the result is the same.

The service credit purchase agreements are unconscionable and should not be enforced. The

contracts should be rescinded with restitution.

CalPERS is the mandatory, sole provider of IDR and service retirements. There are no

reasonable alternatives. There are no other market alternatives. There is no meaningful choice.

The Graham court held "that the 'oppression' factor of the procedural element of

unconscionability may be defeated, if the complaining party has a meaningfitl choice of

reasonably available alternative sources of supply from which to obtain the desired goods and

services free of the terms claimed to be unconscionable." (Graham Y Scissor-Tail, supra, at

772.)

Disclosure in Disability Insurance. A special statute provides that the Insurance

Commissioner "shall not approve" a disability insurance policy form if its provisions are

"unintelligible, uncertain, ambiguous or likely to mislead...." (Insurance Code, § 10291.5(6)(1).

Remedies for Unconscionability. Rest. 2d, Contracts, §208 reads as follows:

"If a contract or term thereof is unconscionable at the time the contract is made acourt may refuse to enforce the contract, or may enforce the remainder of thecontract without the unconscionable term, or may so limit the application of anyunconscionable term as to avoid any unconscionable result."


Page 21

(Civil Code, §1670.5(a).)

VIII. Rescission

CalPERS' failure to disclose the amendment (i) breached the service credit purchase

agreement; (ii) breached the pre-existing IDR promises; and (iii) allows rescission of the

purchase agreements. Rescission of the service credit purchase agreement could not affect the

actuarial soundness of the pension system because Plaintiffs were already fully vested in IDR

before purchase. As Plaintiffs were fully vested, the employer and system should be charged

with responsibility for paying the vested IDR benefit, as it arose on first employment. As far as

restitution of the amount of the service credit purchase, Plaintiffs funded the entire cost of the

military/air time so no amount was payable or due from the pension system or employer.

Restitution of the monies with interest will simply keep the equities intact and the system sound.

Allowing CalPERS to keep the Plaintiffs investment will result in an unfair windfall to

CalPERS, the employers and the system.

IX. Insurance Contract Law

The service credit purchase agreement and the increase in IDR responsibility are an

insurance contract or amendment because they varied the respective costs, liabilities, or

responsibilities of Plaintiffs and CalPERS with regard to providing disability coverage. The

agreements, amendment, and policies did not disclose sufficient information to be enforceable.I4

What Constitutes "Conspicuous, Plain and Clear". To be enforceable, a policy

provision limiting coverage otherwise reasonably expected under the policy must be so drafted

that a reasonable purchaser of insurance would have both noticed it and understood it. (Ponder v.

Blue Cross of So. Calif (1983) 145 Cal.App.3d 709, 719; Hervey v. Mercury Cas. Co. (2010)

185 Cal.App.4th 954, 966 [offset and reimbursement provisions prominently displayed].)

Ambiguity. An insurance policy provision is ambiguous when it is capable of two or

more constructions, both of which are reasonable." (Bay Cities Paving & Grading, Inc. v.

Disclosure are required "in context with regard to its attendant function, [regarding]the circumstances of the case in which the claim arises and 'common sense.' " (Nissel v. CertainUnderwriters at Lloyd's of London (1998) 62 Cal.App.4 th 1103, 1111-1112, emphasis added.)


Page 22

Lawyers' Mut. Ins. Co. (1993) 5 Ca1.4 th 854, 867, emphasis added, internal quotes omitted.) "A

word that an insured cannot understand is a word of doubtful meaning and ambiguous." (Ponder

v. Blue Cross of So. Cal(, supra, at 724, internal quotes omitted.) The language that "service

credit may not benefit you" is ambiguous and capable of many reasonable constructions, but

none is relevant to IDR. If ambiguous, it does not put Plaintiff on sufficient notice of the terms.

Unexpected Coverage Limitations. "In the case of standardized insurance contracts,

exceptions and limitations on coverage that the insured could reasonably expect, must be called

to his attention, clearly and plainly, before the exclusions will be interpreted to relieve the

insurer of liability or performance." (Logan v. John Hancock Mitt Life Ins. Co. (1974) 41

Cal.App.3d 988, 995, emphasis in original. CalPERS did not call the increases in IDR liability as

a result of the purchase contract to Plaintiffs' attention at all.

"Objectively Reasonable Expectations of Insured" Rule. If the terms have no "plain

meaning", then the policy must be constructed in accordance with the insured's "objectively

reasonable expectations." "A court may look to the parties' reasonable expectations to reinforce

its conclusion regarding the meaning of language it found to be unambiguous." (Waller v. Truck

Ins. Exch., Inc. (1995) 11 Ca1.4 th 1,27-28; Pawerine Oil Co., Inc. v. Sup. Ct. (Central Nat'l Ins.

Co. of Omaha) (2005) 37 Ca1.4 1" 377, 404.1Y 5 The objectively reasonable expectation of the

insured was that they would not be liable for or fund any additional part of their own IDR. The

15 In Desai v. Farmers Ins. Exch. (1996) 47 Cal.App.4th 1110, insured paid extrapremiums for a "Value Protection Clause" under his homeowners insurance policy in whichInsurance Co. "guaranteed" to meet "replacement cost" requirements. When a loss occurredexceeding policy limits, Insurance Co. refused to pay more than the policy limits. Insured wasentitled to the full replacement cost because "an objectively reasonable insured layperson wouldbelieve the policy guaranteed replacement coverage, regardless of what the purported policylimits were." (Desai, at 1118.) In Delgado v. Heritage Life Ins. Co. (1984) 157 Cal.App.3d 262,Delgado claimed disability from injuries suffered before his disability insurance took effect. Thepolicy covered disability from "bodily injury ... occurring while this policy was in force." But italso excluded any "physical condition" for which medical care was recommended within 6months before the policy took effect. This exclusion created an ambiguity because Delgado'sinjuries were suffered more than 6 months before the policy was issued: "An insured reading thepolicy as a layman might reasonably conclude that 'bodily injury' ... is synonymous with'physical condition.' " (Delgado, at 272.)


Page 23

objectively reasonable interpretation of the insured was that the investments would be returned to

Plaintiffs if they did not properly fund a benefit under law. Under law, the investments (i) did not

fund an increase in the service retirement benefit and (ii) could not fund the 1DR so (iii) they

must be returned to Plaintiffs (as the purchase contracts fail as a mistake to provide the benefits

intended). The investments cannot simply be gifted to CalPERS.

Exclusions and Limitations Strictly Construed. Conversely, exclusions and limitations

on coverage in an insurance policy are "strictly construed against the insurer and liberally

interpreted in favor of the insured." (Delgado v. Heritage Life Ins. Co., supra, at 271,) A

"coordination provision" reducing disability income benefits are usually construed liberally in

favor of the insured. (Russell v. Bankers LUC Co. (1975) 46 Cal.App.3d 405, 412; Burkett v.

Continental Cas. Co. (1969) 271 Cal.App.2d 360, 363.) CalPERS' hidden limitation and

exclusion of IDR liability should be strictly construed against CalPERS or voided.

"Contra—Insurer" Rule. If the previous rule fails to resolve the ambiguity or

uncertainty, it is to be resolved against the insurer as the drafter of the policy. "[A]mbiguities are

generally construed against the party who caused the uncertainty to exist (i.e., the insurer) in

order to protect the insured's reasonable expectation of coverage." (This is the so-called "contra-

insurer rule.")(Powerine Oil Co., Inc., supra at 391; see also Civil Code, §1654.) The purchase

agreement should be construed to prevent an IDR reduction and allow restitution.

"Conspicuous, Plain and Clear Limitations on Coverage" Rule. The final "general

rule" of policy interpretation is that exclusions and limitations on coverage, to be enforceable,

must be "conspicuous, plain and clear." Thus, even if the language used has a "plain meaning"

(Rule #1) and the insured's "reasonable expectation of coverage" can be ascertained (Rule #2), an

exclusion or limitation must be sufficiently conspicuous and plain in terms of its placement and

appearance that "it will attract the reader's attention." (Haynes v. Farmers Ins. Exch. (2004) 32

Ca1.4th 1198, 1204.) The disclosure and IDR amendment were not plain and conspicuous.

Renewal Policies Reducing Existing Coverage. As a matter of public policy, insurers

are required to provide clear, conspicuous notice in an expected place of any reduction in

coverage on renewal of existing policies (e.g., automobile, health insurance, residential property


Page 24

insurance). Absent such notice, the insured's failure to read the renewal policy and note the

reduced coverage may be excused and the reduction held ineffective. (Davis v. United Services

Auto. Ass'n (1990) 223 Cal.App.3d 1322, 1332.) 16 CalPERS attempts to use the intervening

purchase agreement as an amendment or renewal of the IDR coverage, but with changed terms.

"It is a longstanding general principle applicable to insurance policies that an insurance

company is bound by a greater coverage in an earlier policy when a renewal policy is issued but

the insured is not notified of the specific reduction in coverage." (Fields v. Blue Shield of Calif

(1985) 163 Cal.App.3d 570, 578; see also Industrial Indem. Co. v. Industrial Acc. Comm in of

Calif (1949) 34 Ca1.2d 500, 506 . The attempt to increase Plaintiffs' IDR liability as a result of

signing the purchase agreement must fail. CalPERS is responsible for the 50%1DR without

offset, and the purchase contracts are void in total. Restitution is appropriate.

Exclusionary Language in Insurance Contracts. As explained by the Supreme Court,

lain insurer cannot escape its basic duty to insure by means of an exclusionary clause that is

unclear ... The burden rests on the insurer to phrase exceptions in clear and unmistakable

language ... The exclusionary clause must be conspicuous, plain and clear." (State Farm Mut.

Auto. Ins. Co. v. facober (1973) 10 Ca1.3d 193, 201-202, emphasis added; Haynes v. Farmers

Ins. Exch., supra, at 1204; Essex Ins. Co. v. City of Bakersfield, supra, at 705.)

Forfeitures Disfavored. Even if an exclusion or limitation on coverage is "clear and

conspicuous," forfeitures on technical grounds that bear no substantial relationship to the

insurer's risk are disfavored. (University of Judaism v. Transamerica Ins. Co. (1976) 61

Cal.App.3d 937, 942; see also California Comp. & Fire Co. v. Industrial Acc. Comm'n (1965) 62

16 Davis' original "all-risk" homeowners insurance policy covered earth movementcaused by contractor negligence. Upon renewal, it contained an exclusion for contractornegligence. Accompanying the renewal was a document entitled "Important Notice" mentioning"reductions in coverage." But the notice was ambiguous because this exclusion appeared in thepolicy under the heading "Clarification of Coverage": "By including these exclusions in the'Clarification' section rather than in the 'Reduction' section, (Insurer)failed to put the notice ofthe new exclusions in the expected place." As a result, the exclusion was ineffective and the losswas covered under the original "all-risk" policy. (Davis v. United Services Auto. Ass'n, supra, at1333, emphasis and parentheses added.)


Page 25

Ca1.2d 532, 535 [Partners A, B and C did business as "South Bay Insulation Co." Their workers'

compensation policy clearly excluded liability arising out of operations conducted with anyone

else. D became a partner in "South Bay Insulation Co." without the insurer's knowledge. The

exclusion did not apply: "(B)ecause the risk of the insurer is not increased, the entity contracting

for insurance retains the same form, and the membership remains essentially the same, there can

be no justification for avoiding the insurance."].)

Insurance Statutes. After issuance, a disability policy shall not be amended, changed,

limited, altered, or restricted by any means other than rider upon a separate piece of paper.

(Insurance Code, §10321.) Amendment of a disability policy after issuance to coordinate

insurance or disability benefits shall be disclosed to the participant prior to enrollment in the

plan. (Insurance Code §10270.3.) The purchase contract fails an IDR amendment.

X. "Delayed Accrual" Arguments

Independently, Plaintiffs assert that the accrual of their causes of action was delayed.

After being retired on disability, Plaintiffs received their 50% IDR. CalPERS never informed

Plaintiffs of any IDR reduction, transfer of their military/air time investments to offset or fund

IDR, or other disclosure or accountings of their contributions. Plaintiffs discovered the harm

only after Cal PERS explained in the pleadings filed in the related case of Yost v. CalPERS,

LASC Case No. BC444842, that the contributions were transferred to CalPERS or the

employer to pay for their IDR. Prior to that time, Plaintiffs could not discover and were not put

on inquiry notice that they paid more for their IDR. The reduction in IDR is a separate

undisclosed, undiscovered wrong that is subject to a different discovery period, a different

accrual period and a different statute of limitations. Plaintiffs assert that they did not learn—

and could not have learned—that CalPERS charged them higher IDR costs or liabilities or

unilaterally breached their vested 1DR rights until long after it occurred. In any case, Plaintiffs

first learned of the IDR issue less than a year before they filed government claims with the

California Victim Compensation and Government Claims Board ("VCGCB"), making their

VCGCB claims timely.


Page 26

A. IDR and Purchase Contract Breaches and Loss of Military/Air Time

Investments: Different Harms, Different Causations, Different Occurrence

Dates

CalPERS argues that Plaintiffs filed their VCGCB claims more than a year after

receiving their first IDR checks. (Motion, 4:18-5:2.) It claims Plaintiffs would have realized

they had been harmed as soon as they saw that their checks were for only for 50% of their final

compensation and should have filed VCGCB claims within a year of that first check. (Ibid.)

But receipt of a 50% IDR check would not provide notice of the fact that CalPERS had

breached Plaintiffs' vested IDR rights because the IDR payment was 50%. No IDR reduction,

offset, or accounting was disclosed. At most, the first check would have told Plaintiffs that they

were paid 50% IDR. It would not have told them that they were also being forced to assume

greater liability or costs for their own IDR pensions.

Loss of the value of Plaintiffs' investment is a different cause of action and a different

core set of facts than the claim for breach of vested IDR rights and benefits. CalPERS tries to

conflate all of this into a single harm, with a single causation, occurring at a single point in

time. But CalPERS has harmed Plaintiffs in several ways at several times in several different

cause of action. Each is quite different and independent.

First, the reduction of the IDR rights occurred at the time each Plaintiff signed his or

her service credit purchase contract. The legal liability arose immediately, but was hidden by

CalPERS until far after the physical injury occurred. CalPERS' seizure of the investment funds,

on the other hand, may have occurred at the time of the disability determination or when

CalPERS issued a Plaintiff his or her first IDR check. CalPERS argues that the disability and

service systems are different, but here CalPERS argues that all of the damage arises from one

single event (which CalPERS seems to identify as the disability determination).

Second, the cause of the IDR reduction was CalPERS' unilateral, secret amendment to

existing and vested IDR rights. The loss of military/air time investment funds was caused, on

the other hand, by a safety employee's disability before age 50 or 16 2/3 years of service.


Page 27

B. "Delayed Accrual" Date

Plaintiffs have asserted that the very earliest they learned of the reasons behind the loss

of their military/air time investment was October 15, 2010, when CalPERS filed its Demurrer

in the related case of Yost v. CalPERS, LASC Case No. BC444842 . For the first time,

CalPERS disclosed that it considered military/air time to be service in the safety position that

members were in at the time of purchase, and therefore "normal contributions" that can fund an

IDR. On the other hand, CalPERS has never acknowledged that the service credit purchase

contracts operate as amendments or waivers of Plaintiffs' existing and vested IDR rights, which

force Plaintiffs to assume the risk of paying a greater share of their vested IDR benefit.

Even if one were to use October 15, 2010, as the implicit disclosure date of CalPERS'

breach of the IDR contract rights, Plaintiffs all filed VCGCB claims within less than a year of

that date, making their claims timely.

C. Need for Evidentiary Hearing on "Delayed Accrual"

CalPERS did not contest that Plaintiffs in Marzec presented VCGCB claims within the

one-year presentment period. Plaintiffs raised "delayed accrual" in Marzec to protect other

members of the class, but the case never progressed to class certification. The "delayed

accrual" issues were never considered before the Court. The Court granted CalPERS'

Demurrer without consideration of "delayed accrual".

In Andert, the issue of "delayed accrual" cannot properly be resolved via CalPERS'

Motion. An evidentiary hearing is required. Like a Demurrer, a Motion for Judgment of the

Pleadings presumes that all facts pled in the Complaint are true. Plaintiffs have properly pled

every cause of action. Plaintiffs request an evidentiary hearing on "delayed accrual".

CONCLUSION

Attempting to rely on ii/farzec without considering that the issues were pled in two

alternatives, CalPERS ignores that the air/military service credit purchase contracts secretly

amended or limited Plaintiffs' existing and vested IDR rights. The unconscionable purchase

contracts force Plaintiffs without disclosure to assume greater IDR risks and to pay considerably

more for their IDR allowances than similarly situated co-workers. The secret amendment of the


Page 28

vested IDR benefits is inappropriate, is mistaken, and voids Plaintiffs' consent. Plaintiffs seek

rescission of the service credit purchase contracts and restitution of their investment. Because

alternative theories run through and support every one of Plaintiffs' causes of action, CalPERS

has failed to meet its burden. Its Motion must fail:

First Cause of Action for Breach of Statutory Duties: CalPERS has breached its

statutory duties under the PERL to pay Plaintiffs the vested IDR benefits they are entitled to

without limitation, offset or the payment of additional personal funds. CalPERS failed to disc os

the hidden term adverse to members, in violation of its statutory fiduciary duties.

Second Cause of Action for Breach of Contract: Through mistake and failure to

disclose, CalPERS has breached the purchase contract and IDR rights by imposing hidden terms

in the military/air time purchase contract. The unconscionable contracts require Plaintiffs to

assume liabilities and costs for IDR without notice, consent or amendment.

Third Cause of Action for Rescission, Restitution: CalPERS forced unconscionable

adhesive service credit purchase contracts on Plaintiffs, secretly incorporating terms which

amend, limit or waive Plaintiffs' existing, vested IDR rights. Those and related violations grant

Plaintiffs the right to rescission of the purchase contracts and restitution of their investment

funds, plus statutory interest.

Fourth Cause of Action for Breach of Fiduciary Duties: CalPERS bears

constitutionally and statutorily imposed fiduciary duties to put the interests of its members first,

above the interests of the pension system and the employers. By assuming adverse interest,

CalPERS has violated those fiduciary duties by inducing members to sign service credit purchase

agreements containing hidden, inequitable terms which shift the burden of paying for IDR

benefits from CalPERS and/or the employers onto the Plaintiffs.

Fifth Cause of Action for Denial of Equal Protection: By breaching the purchase

agreements, secretly, amending Plaintiffs' vested IDR rights and unfairly using its dual position

as disability and service retirement provider to force Plaintiffs to use personal funds to pay or

risk more for vested IDR benefits than others similarly situated. CalPERS has denied equal

protection of the laws to Plaintiffs by discriminating against them to pay more for IDR coverage

PLAINTIFFS'IFFS' OPPOSITION TO DEFENDANT CALPERS'MOTION FOR JUDGMENT ON THE PLEADINGS

Page 29

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than similarly situated co-workers who never purchase military/air time.

Sixth Cause of Action for Due Process Violations: CalPERS has denied or reduced the

amount or value of Plaintiffs' vested disability allowance and other rights without due process of

law. The PERL statutes are defective as failing to give proper notice of their effect.

Tenth Cause of Action for Constitutional Impairment of Contract: CalPERS secret

inclusion of terms in the service contract purchase agreements which have amended, reduced or

offset Plaintiffs' vested IDR benefits have significantly impaired Plaintiffs existing IDR contract

rights in violation of the contract clauses of the federal and state constitutions.

Seventh, Eighth, Ninth, Eleventh and Twelfth Causes of Action for Equitable and

Declaratory Relief, Accounting, Attorney's Fees and Other Relief: Based on the foregoing

causes of action, Plaintiffs assert their rights to equitable relief, to declaratory relief concerning

their vested contract rights, to an accounting of the monies CalPERS has wrongly required

Plaintiffs to pay for their own IDR benefits, to attorney's fees imposed against CalPERS for its

egregious conduct and refusal to expeditiously resolve the issues in dispute herein, and for other

relief as the Court may deem proper.

In considering a request for judgment on the pleadings, the Court must assume that any

unchallenged facts, allegations and causes of action are true, deny CalPERS' Motion and permit

the lawsuit to go forward. If necessary, Plaintiffs should be granted leave to amend.

Dated: November 7, 2012


Page 30

EXHI IT 1

Exhibit 14 to the Complaint

CalPERS

Member Services DivisionP.O. Scot 942704Sacra/refit°, CA 94229-2704Telecommunications Device for the Deaf— (918)328-3240(800)352-2238, FAX (918)558-4019

Reply to Section 833Refer to No.

January 4, 2031

Randolph SlaughterMONNIIIIMP

Dear Randolph Slaughter

You may now, or prior to retirement, elect to (=tribute and receive credit In the California PublicEmployees' Retirement System (CalPERS) for yourPublic Agency Military.

This election would add 3.967 year(s) of service credit to your retirement account as shown below:

Employer CategoryNewport Beach City Of

Safety

The amount due, if paid in full, is S47 894.86. Payment may also be made by payroll deductions. If youelect to contribute by payroll deductions, the minimum payment would be $183.63 for 390 bi-weeklypayments. This payment schedule includes interest through the completion of payments at the rate of6%. If your election is received after February 23, 2001, additional interest may be added.

if you elect to contribute by payroll deductions and a balance Is remaining at the time of your retirementyou may complete the payment by having equivalent monthly deductions taken from your retirementallowance on an after tax basis. CALPEFtS will authorize such deductions unless you notify usotherwise.

If you elect this serisice credit, your UNMODIFIED SERVICE RETIREMENTALLOWANCE could beincreased by approximately $506.04 per month if you retire at age 50. (NOTE: This amount is ONLYan ESTIMATE based on your current payrate; whereas, your actual —retirement allowance will be basedon average CalPERS compensation at the time of retirement)

For SAFETY MEMBERS, keep In mind that the percentage of retirement allowance to which you will beentitled under the Safety formula is limited to a percentage of your average CalPERS compensation atthe time of retirement.

For DISABILITY RETIREMENTS or SAFETY MEMBERS, if you would like an estimate of the costbenefit for this service credit, please contact Ca1PERs at P.O. Box 942717, Sacramento, CA 94229-2711.

California Public Employees' Retirement SystemLincoln Plaza • 400 P Street - Sacramento, CA 95814

— RS000086

EXHIBIT 2

Exhibit 2 to the Complaint

MEMESR INFORMATIONDate: 08128/2004SSN: =elSIrthdate: OINe

-Employer: -

City of AlhambraMonthly Payrate (Including anyspecial compensation reportedby /our employer):

$5,413.00

COST INFORMATIONService Credit Type: Public Agency MilitaryLump Sum Cost 451,176.37

ESTIMATED MONTHLYPENSION INCREASE:

$640.58 If you refine at Age SO'

uear Jeffrey Anaert

CalPERS has received confirmation of your intent to purchase your Public Agency Military. Upon furtherreview of your request, it has been determined that you are eligible to purchase this additional service creditAttached are the following forms for your review and/or response:

• Explanation of Payment Options (Attachment 1)• Installment Payment Guidelines (Attachment 2a & 2b)• Choose your Installment Payment (Attachment 3)• Election to Purchase Service Credit (MEM-8) (Attachment 4)• Rollover information and Certification Forms (Attachment 5a - 5d)

If elected, this service will be credited to your retirement account as shown below.

Employer Name Retirement Formula Category Year(s) ofServiceCredit

City of Alhambra 3% g Acta 50 (PA Safely) Local Police 4.000Total Service 4.000

HOW THE COST WAS CALCULATED

The cost to purchase this service credit is calculated using a "present value" method, which is based on yourhighest monthly full-time pay rate and an average of any special compensation (i.e., uniform allowance,holiday pay, longevity pay, etc) reported to CalPERS by your employer during the last 38 months. Thisprovides us the best estimate of the potential future Final Compensation figure that may be used atretirement for calculattng jour retirement benefit We look at the projected retirement benefit increase youmay receive from this additional service credit (at retirement, disability, death, or other termination fromemployment). Then, we convert that to a lump sum cost in today's dollars.

Determining the increase to your future benefits involves a number of actuarial assumptions, includingprojected age at retirement, life expectancy, and the probability that some may never receive a serviceretirement benefit but instead become disabled, die, or terminate their CalPERS membership. Theseprobabilities are the same assumptions used to ensure all our benefits are adequately funded.

kAernber Serv{ces Division, P.O. Box 942704, Sacramento. CA 94229-2704re!ecornmuncallons Dev[ce for the Deaf -(916) 326-3240; (888) 225-7377

The. actuarial tables used in this process are updated as needed due to existing benefit changes, newbenefiLtmandated by law, changes in retirement assumptions to reflect our current best estimate ofretirement patterns, or other actuarial factors. NOTE: The actuarial tables are scheduled to changeDecernber 30, 2004, and may affect the cost of this benefit. The best location to receive the mostcurrent information on the actuarial assumptions is on our website at www.calpers.ca .crov.

Remember, your election to purchase service credit is irrevocable. Once your election purchase isprocessed, any future changes to these assumption factors will not affect the cost of your service creditpurchase.

ESTIMATED MONTHLY PENSION INCREASB

The estimated monthly pension increase information was calculated using the monthly payrate shown abovebased upon the highest monthly retirement pension option. This amount is only an ESTIMATE* whereas,. . . . "" •

For SAFETY MEMBERS purchasing additional safety service, keep in mind that the percentage ofretirement allowance to which you will be entitled under the Safety formula is limited to a percentage ofyour average CalPERS compensation at the time of retirement. The estimated monthly pension increaseshown above takes your current posted service and benefit cap into consideration.

* If you are considering a DISABILITY RETIREMENT, this additional service credit may not benefit you.Please request a retirement estimate with and without this additional service credit by submitting aCalPERS Retirement Allowance Estimate Request Form (MSD 470) along with a copy of this cover letter.If you need additional information or retirement counseling, please contact CalPERS at (888) 225-7377.

NEXT STEP:

• If you are not interested in purchasing the additional service credit at this time, no response is needed.You may request to purchase this service anytime prior to your retirement date.

• If you wish to purchase the additional service credit, please complete, sign and retum the enclosedElection to Purchase Service Credit form to the address shown above. The Election to Purchase ServiceCredit form is irrevocable and must be returned within 30 days.

If the Election to Purchase Service Credit form is not received within 30 days, this cost(s) could berecalculated.

If you wish to use a plan-to-plan transfer or rollover funds to pay for this service credit purchase, thecertification forms and check must be received with your Election to Purchase Service Credit form. If you areretired or pending retirement, the rollover must be completed within 90 days of your retirement date.

You may obtain additional information on all programs administered by CalPERS by visiting our website atht tp : //www. ca ipers ca . goy. This site includes a retirement planning calculator, which can provide youwith an estimate of your monthly retirement benefit.

If you have any questions, please contact us at (888) 225-7377.

Member Services Division, P.O. Box 942704, Sacramento, CA 94229-2704ralecommunications Device for the Deaf - (916)326-3240: (888) 225-7377

0-‘

PROOF OF SERVICE

I am a resident of the State of California, over the age of eighteen years, and not a party

to the within action. My business address is 11500 West Olympic Blvd., Ste. 550, Los Angeles,

CA 90064.

On November 7. 2012, I served the following document by the method indicated below:

PLAINTIFFS' OPPOSITION TO DEFENDANT CALPERS'

MOTION FOR JUDGMENT ON THE PLEADINGS

Said document was served by facsimile, by email, and by placing the document listed

above in a sealed envelope and consigning it to Federal Express overnight mail for delivery to

the address set forth below.

Edward GregoryJason LevinJennifer MorrowSheri CheungSteptoe & Johnson LLP633 West Fifth St., Suite 700Los Angeles, CA 90071Facsimile: (213) 439-9599

I declare under penalty of perjury under the laws of the State of California that the above

is true and correct. Executed on November 7, 2012, at Los Angeles, California.

Griselda Montes de Oca


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john jensen - original filed - plaintiffs' opposition...john michael jensen, state bar no....

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