State asks 2nd District to repeal judge back pay ruling

LOS ANGELES — In a bid to undo a landmark ruling on judges' back pay, an attorney for the state told the 2nd District Court of Appeal on Friday that a trial judge wrongly interpreted the law to grant millions of dollars in overdue salary to California's 3,400 current and retired judicial officers.

During the hearing of about an hour, the three-justice panel directed most of its questions to the attorney for the state, seeking clarity about which agency determined judicial salary increases and how it is done.

California was in the middle of the most serious economic downturn in a generation when the state controller suspended judge salary increases from fiscal years 2008-2009 to 2013-14.

Following a lawsuit to recoup back pay plus interest, Los Angeles County Superior Court Judge Elihu M. Berle ruled the office didn't have the right to block increases mandated by law, awarding $35 million plus 10 percent interest to the certified class of present and former judges. Mallano v. Chiang, BC533770 (L.A. Super. Ct., filed Jan. 21, 2014).

During arguments, state Deputy Attorney General Jonathan E. Rich said accepting Berle's back pay award was "absurd" when as many as 97 percent of salaries of other state employees decreased by almost 13 percent as a result of mandatory furloughs during the recession during the late 2000s and early 2010s. Chang v. Mallano B272124 (Cal. App. 2nd Dist., filed Nov. 14, 2016).

Saving most of their questions for Rich, the panel pressed him as to what kind of duty the controller had to generate information about salary increases to comply with the statute.

Rich said there was no such duty. "To do so would be inconsistent with prior decisions," he said.

The judges' case was based on California Government Code 68203, which states that every year on July 1, the salary of each justice and judge shall be increased by multiplying their current salary and "the average percentage salary increase for the current fiscal year for California state employees."

The attorney for named plaintiff Robert M. Mallano, a retired appellate court justice, said the law clearly says those raises have to be paid every year.

Raoul D. Kennedy, of Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates, said it is the responsibility of the state controller to implement the increases, not the California Department of Human Resources. The raises are "the law of this state and are followed everywhere except this lawsuit," Kennedy said.

Following the trial court's decision, Gov. Jerry Brown signed a law lowering interest to less than 1 percent on all pending cases that were not final in an effort to scale back judicial pay.

Kennedy questioned the constitutionality of that amendment and asked the court for pre-judgment and post-judgment interest of 10 percent, arguing last year's legislative amendment doesn't affect the judgment in this case.

Also under consideration by the appellate court is Skadden's claim for about $660,000 in attorney fees. Mallano himself is owed about $18,000 from the case, but that is not enough to necessitate a denial of attorney fees, Kennedy said.

Rich said the controller had an obligation to wait for some reporting from the human resources department regarding the increase, such as a pay letter, which is required by statute in order to write checks.

No such letters were sent during the years in question, he said.

In response, Justice Laurie D. Zelon said, "The controller certainly has the power of inquiry."

Disagreeing, Rich said there has to be some formal mechanism. "To whom should the controller make that phone call to?" If the controller just called the human resources director, that would not produce increases for the judges, he added.

"How can the controller breach an administrative duty by not implementing salary increases that weren't reported to him?" said Rich.

Justice Brian M. Hoffstadt, posing a hypothetical, asked if the director of human resources had veto power. Rich responded, "We don't have a director who is acting on his face."

Berle, in his ruling, said the statute does not require a formal written report or specific communication by the Department of Human Resources to the controller.

He found judicial salaries and benefits are a "self-executing appropriation" with formulas that the state Legislature lacks discretion to change unless it amends the underlying statute. Berle could be part of the class, but presided over the case under the doctrine of necessity.

justin_kloczko@dailyjournal.com