17 F.4th 849
9th Cir.2021Background
- In 1993 Orange County and OCERS agreed to set aside ~$50 million (ARBA) to seed a retiree medical Grant Benefit; the County adopted a Retiree Medical Plan by Board resolution that stated the Plan "does not create any vested right" and could be amended or terminated.
- The Grant Benefit (1993–2007) paid retirees a monthly, fixed-dollar stipend based on years of service; it was funded by ARBA investment earnings and a mandatory 1% payroll contribution (with cash rebate if employee left before eligibility).
- The County and multiple unions memorialized Grant Benefit terms in year-limited MOUs; many MOUs conditioned Grant implementation on adoption of the County Plan.
- Beginning in the 2000s the County restructured retiree medical benefits and reduced the Grant; retirees sued for breach of contract and constitutional impairment of vested rights.
- Procedural posture: Ninth Circuit previously reversed dismissal of implied-contract claims (Harris IV). On remand the County moved for summary judgment; the district court granted it, and the Ninth Circuit (majority) affirmed; Judge Forrest concurred in part and dissented in part (would reverse as to pre-Plan MOUs).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an implied, vested contractual right to the Grant Benefit was created | Harris: MOUs and surrounding circumstances imply a vested, perpetual Grant | County: Retiree Medical Plan (adopted by resolution) forbids vesting; MOUs were limited-duration and conditioned on Plan; no vesting | Court: No implied vested right; summary judgment for County (no material fact on intent to vest) |
| Whether the Retiree Medical Plan (with anti-vesting language) is incorporated into the MOUs | Harris: Plan was not negotiated or disclosed and thus cannot negate implied MOU terms | County: Plan became governing county law by resolution and is incorporated into MOUs (many MOUs explicitly required Plan implementation) | Court (majority): Plan’s anti-vesting term controls; MOUs adopted after Plan effective date incorporate it; majority treats pre-Plan MOUs as reflecting intent to incorporate too; Judge Forrest would not apply Plan to pre-Plan MOUs and would remand those claims |
| Whether the Plan was unilaterally imposed without collective bargaining (void under MMBA) | Harris: County unilaterally imposed anti-vesting term without bargaining; Plan invalid | County: Unions had notice/opportunity, MOUs required union entry to implement Plan, unions waived bargaining by not timely invoking MMBA; three-year limitations bar some challenges | Court: Plan was not void for lack of bargaining; unions had opportunity and/or waived rights; limitations/waiver defeat the challenge |
| Whether the Grant Benefit is deferred compensation that vests like a pension | Harris: Grant is deferred compensation earned by service and thus constitutionally protected | County: Grant is an optional, forfeitable subsidy (not fixed salary); retirees had to enroll/pay to receive benefit | Court: Benefit is not deferred compensation; it is an optional, forfeitable subsidy (California Fire reasoning) |
Key Cases Cited
- Retired Emps. Ass’n of Orange Cnty., Inc. v. Cnty. of Orange, 52 Cal.4th 1171 (2011) (framework for implying contractual rights from legislation/resolutions)
- Harris v. County of Orange, 902 F.3d 1061 (9th Cir. 2018) (prior panel decision reversing dismissal of implied-contract claims)
- California Fire Local 2881 v. Cal. Pub. Emps. Ret. Sys., 6 Cal.5th 965 (2019) (distinguishes deferred compensation from optional employee benefits)
- M & G Polymers USA, LLC v. Tackett, 574 U.S. 427 (2015) (ordinary contract principles govern whether retiree benefits vest when MOUs are time-limited)
- Pilimai v. Farmers Ins. Exch. Co., 39 Cal.4th 133 (2006) (applicable laws extant when a contract is made are presumed incorporated)
- San Bernardino Pub. Emps. Assn. v. City of Fontana, 67 Cal.App.4th 1215 (1998) (limited-duration MOUs do not create legitimate expectation of perpetual benefits)
- Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099 (9th Cir. 2000) (moving party on summary judgment must show nonmoving lacks evidence of essential element)