Appeals court remands decision in Salinas United High School District retirement benefits case

By Angela Underwood | Dec 20, 2017

SAN JOSE, Calif. (Legal Newsline) – The 6th Appellate District Court of Appeal of California has reversed a trial court's ruling regarding the overpayment of 11 teachers' retirement benefits.

SAN JOSE, Calif. (Legal Newsline) – The 6th Appellate District Court of Appeal of California has reversed a trial court's ruling regarding the overpayment of 11 teachers' retirement benefits.

On Dec. 12, justices Brian Walsh, Franklin Elia and Eugene Premo reversed the judgment in favor of 11 retired teachers from Salinas Unified High School District who fought to keep their overpaid retirement benefits that dated back to 1999.

The case is William Baxter, et al. vs. California State Teachers' Retirement System. The Monterey County Superior Court ruled that CalSTRS's claims against the teachers were time-barred and that the organization "was further barred from reducing teachers' future monthly benefits," the court ruled.

Though all the parties agree that the district erred in a years-long miscalculation of benefits, the teachers did not agree on the statute of limitations, which they claim bars CalSTRS from recouping past overpayment and reduction of future monthly benefits.  

According to the ruling, a 1999 collective bargaining agreement between the district and the teachers’ union based on teachers who elected to work an extra period in a school day was formed.

However, in 2005, after three teachers retired, the Monterey County Office of Education (MCOE) was informed by a district employee that overpayment to teachers who worked the extra period was being paid out, which was confirmed in 2008.  

By 2010, CalSTRS demanded the district show its forgiveness financially by repaying the amount it incorrectly calculated over the years, but the CalSTRS audit was appealed by the teachers and the district.

Before the 2012 administrative hearing, CalSTRS started reducing teachers’ prearranged payments and in 2013 and an administrative law judge (ALJ) rejected the teachers and district's statue of limitations appeal, agreeing with CalSTRS the teachers were overpaid in the past and future monthly benefits should be abridged to correct amount and deductions should be made for past overpayment.

Fighting back, the teachers brought a petition for peremptory writ of administrative mandamus demanding CalSTRS continue paying them the original amounts.  

“The trial court found that CalSTRS was barred by the applicable statute of limitations from either recouping previous overpayments or reducing future payments to reflect the allegedly correct amount of monthly benefits,” according to the appeal.

Considering the Education Code provision 22008 and three-year statute of limitations applicable for CalSTRS to bring an action to recoup, the court of appeals considered “discovery of the incorrect payment,” concluding “contrary to the trial court’s decision, that ‘discovery’ means the date CalSTRS actually discovered, or in the exercise of reasonable diligence should have discovered, the incorrect payment,” according to the ruling.

“We hold that Aug. 18, 2005, the date of the district’s memorandum to the MCOE, was the correct accrual date of the statute of limitations here because the memorandum gave CalSTRS (through its ostensible agent, MCOE) inquiry notice of the overpayment issue,” according to ruling, adding “contrary to the trial court’s decision, the action was commenced on July 6, 2012, when CalSTRS filed the statement of issues to initiate the administrative proceeding.”

“The trial court incorrectly concluded that Cal STRS's action to rectify the error for all monthly payments, past and future, was time barred. ... Therefore, only payments due more than three years prior to CalSTRS’s commencement of the action on July 6, 2012, were subject to teachers’ statute of limitations defense,” according to the appeal, adding the judgment was reversed and remanded.  

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