Tuesday, February 17, 2015
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Court of Appeal Declines to Block CalPERS From Cutting Former Vernon Official’s Pension
By a MetNews Staff Writer
The man who was once the highest-paid municipal official in the state, even though the city he worked for had barely more than 100 residents, Friday lost a court bid to prevent the California Public Employees’ Retirement System from cutting his pension by nearly 80 percent.
Div. Seven upheld a Los Angeles Superior Court judge’s rulings that former Vernon City Administrator Bruce Malkenhorst Sr. failed to exhaust administrative remedies, and that he cannot sue CalPERS in Los Angeles based on claims that are essentially identical to those he raised in an unsuccessful Orange Superior Court action.
The ruling does not prevent Malkenhorst from pursuing a pending administrative appeal, or a separate lawsuit against the city.
Malkenhorst, who reportedly made as much as $911,000 a year working for Vernon—the Orange County Register reported that he was “city manager, finance director, redevelopment director, city clerk, city treasurer, and head of the municipal light and power operation – all pretty much at the same time”—retired in 2005 with 30 years’ service.
Based on the figures reported to CalPERS by the city, including a 25 percent “longevity payment” that CalPERS originally determined was not pensionable salary before reversing itself, Malkenhorst’s final salary for pension purposes was calculated at more than $44,000 a month and he was given a pension of more than $40,000 a month.
In 2011, Malkenhorst pled no contest to having misappropriated $60,000 in public funds to make political contributions and play golf, among other things. He was placed on probation for three years and ordered to pay back the money, as well as to pay $10,000 in fines.
CalPERS subsequently reviewed his pension, and informed him that his pension was “erroneously calculated at the time of your retirement because it included reported pay amounts that are not authorized by the [Public Employees Retirement Law],” essentially as a result of his being paid for serving in multiple positions. The correct amount, the agency determined, was less than $10,000 monthly.
Malkenhorst—who lives in Huntington Beach and who described the CalPERS decision as “elder abuse” in an interview with the Orange County Register—sued CalPERS in both Orange and Los Angeles superior courts. He also took an administrative appeal, which is still pending.
He has argued—among other things—that Vernon’s status as a charter city precludes CalPERS from questioning how it paid its officials, that the decision to reduce his benefits was untimely, and that the agency was bound by its prior decision in his favor.
The Orange action—filed in August 2012, while CalPERS was still conducting its review—was dismissed for failure to exhaust administrative remedies, a decision that the Fourth District Court of Appeal affirmed in April of last year. The Los Angeles action was filed while the Orange action was still pending, and was dismissed in March 2013.
Retired Los Angeles Superior Court Judge Robert O’Brien, sitting on assignment, sustained CalPERS demurrer on three separate grounds—failure to exhaust administrative remedies, “exclusive concurrent jurisdiction,” and failure to join Vernon as an indispensable party. (Malkenhorst has sued the city separately, contending that if his pension is cut from the higher amount, Vernon should be held contractually liable for the difference.)
Los Angeles Superior Court Judge Gail Ruderman Feuer, sitting on assignment in Div. Seven, concluded in an unpublished opinion Friday that O’Brien was correct as to the conclusive issue of exhaustion.
She rejected the plaintiff’s claim that he needs relief from the courts because the issues he is raising cannot be adjudicated in an administrative appeal.
“Malkenhorst’s argument ignores the fact that the central issue in this case is one of statutory law—whether his pension under the PERL properly includes the longevity pay and pay for work done other than as City Administrator—issues properly addressed in the first instance through the administrative procedure under the PERL,” she wrote. “CalPERS has the expertise necessary both to address Malkenhorst’s pension issues under the PERL and to determine whether its 2012 recalculation of Malkenhorst’s pension is barred by its action in 2006….”
The case is Malkenhorst v. California Public Employees’ Retirement System, B247676.
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