A California court upheld a significant attorney fee award in a case involving the California Public Employees’ Retirement System (CalPERS). The court's decision, issued on October 29, 2026, confirmed that two retirees, Huasha Liu and Sandeepa Maheshwari, are entitled to nearly $3 million in attorney fees after successfully challenging CalPERS's pension calculation methods. This ruling affects thousands of public employees who rely on CalPERS for their retirement benefits.

The case, Liu v. Board of Administration of CalPERS (B341221), centers around the definition of "bonus" in pension calculations. Liu and Maheshwari argued that merit pay should be included in their final compensation, which CalPERS had previously excluded. The court’s ruling not only awarded attorney fees but also clarified pension rights for many other employees.

Background

The California Public Employees’ Retirement Law (PERL) governs CalPERS, which provides pension benefits to state employees and employees of local public agencies. The law defines how an employee's pension is calculated, including their final compensation, which consists of base salary and special compensation.

In this case, the Southern California Association of Governments (SCAG) had a merit pay policy that included merit increases based on employee evaluations. Initially, CalPERS accepted this policy but later reversed its position, stating that certain merit payments did not qualify as special compensation under California regulations. This reversal significantly reduced Liu's and Maheshwari's retirement benefits.

Liu filed an administrative appeal after CalPERS denied her claim to include merit pay in her pension calculations. An administrative law judge upheld CalPERS's decision, prompting Liu to take the matter to court. In September 2019, she filed a petition seeking a writ of administrative mandate to challenge CalPERS's ruling. After extensive litigation, including class action claims, the trial court found in favor of Liu and ordered CalPERS to include merit pay in pension calculations.

The Ruling

The California Court of Appeal affirmed the trial court's order awarding Liu and Maheshwari $2,989,269.75 in attorney fees. The court ruled that the plaintiffs were entitled to these fees under California Code of Civil Procedure section 1021.5, which allows for attorney fees when a lawsuit enforces an important right affecting the public interest.

The court stated, "The litigation conferred a significant benefit on a large class of persons because the court’s ruling clarified the pension rights of government employees in nearly 3000 public agencies that contract with CalPERS."

The court noted that the trial court had correctly applied a three-prong test to determine the entitlement to attorney fees, concluding that the case benefited a large group of CalPERS members and addressed an important public interest.

Impact

This ruling has significant implications for CalPERS and its members. By clarifying the definition of "bonus" in the context of pension calculations, the court's decision ensures that many public employees will receive fair evaluations of their retirement benefits. The ruling could potentially affect thousands of CalPERS members across nearly 3,000 public agencies.

Additionally, the court's affirmation of the attorney fee award sets a precedent for future cases involving public employee pensions. It establishes that successful litigation to clarify pension rights can result in substantial attorney fees, encouraging other employees to challenge potentially unfair pension practices.

What’s Next

CalPERS has the option to appeal this ruling, but details regarding any pending appeals were not available in the court filing. The outcome of this case may influence similar cases in the future as public employees seek to ensure their pension rights are upheld.