Cahoon v. Shelton, 2011 U.S. App. LEXIS 15034

Thirty-three Warwick retirees challenged the City’s 2003 decision to stop full reimbursement of medical expenses after retirement, alleging statutory, ultra vires, equity, and due process violations.
Disability pensioners had previously received 100% medical expense reimbursement, funded through the City’s health insurance plus excess medical expense reimbursements.
Rhode Island law provides a two-sentence IOD statute: Sentence 1 for actively employed disabled workers and Sentence 2 for those placed on a disability pension after retirement.
The district court held that Sentence 1 does not apply to retirees and that Sentence 2 is overridden by Warwick’s pension/health plan and local ordinances/CBAs.
The district court granted summary judgment on most estoppel claims, with Gordon and Kraczkowski later prevailing at bench trial on specific estoppel promises.
On appeal, the First Circuit affirmed the district court, holding that the IOD statute’s two sentences do not create a blanket post-retirement entitlement and that the City’s retirement scheme governs medical benefits; ultra vires and due process challenges failed, while Gordon and Kraczkowski were entitled to estoppel relief.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does Sentence 1 of §45-19-1(a) create post-retirement reimbursement rights?	Cahoons argue Sentence 1 applies during incapacity and retroactively to retirement.	Shelton/City argue Sentence 1 applies only to active employees; retirees fall under Sentence 2.	No post-retirement entitlement under Sentence 1.
Does Sentence 2 require full reimbursement for disabled retirees' medical expenses post-retirement?	Sentence 2 guarantees full medical-expense reimbursement after disability retirement.	Sentence 2 is superseded by specific municipal retirement schemes; it is a gap-filler.	Sentence 2 does not override the City’s retirement system; no blanket entitlement.
Are the City’s actions ultra vires, and can estoppel shield them from change?	City’s continued reimbursement for years was within municipal authority and estops reversal.	Initial practice was ultra vires and estoppel cannot apply against a governmental entity for ultra vires acts.	Ultra vires; general estoppel fails; Gordon/Kraczkowski narrowly succeed on specific estoppel promises.
Does due process require a hearing before halting reimbursement?	A hearing was required before ending reimbursements that affect property interests.	No property interest exists in continued reimbursement beyond statutory/constitutional protections; no hearing required.	No due process violation; no constitutionally protected property interest in continuation.

Hagenberg v. Avedisian, 879 A.2d 436 (R.I.2005) (retired officer with disability pension not entitled to §45-19-1 benefits)
Elliott v. Town of Warren, 818 A.2d 652 (R.I.2003) (disability pension precludes §45-19-1 recovery)
St. Germain v. City of Pawtucket, 382 A.2d 180 (R.I.1978) (specific retirement benefits prevail over general §45-19-1)
Brissette v. Potter, 560 A.2d 324 (R.I.1989) (distinguishes salary vs. medical expense components of IOD)
Webster v. Perrotta, 774 A.2d 68 (R.I.2001) (plain-language interpretation; overall statutory purpose)