650 F. App'x 576
10th Cir.2016Background
- Plaintiffs Kathryn Romstad and Margarethe Bench were employees of Memorial Hospital System (MHS), which was city‑owned and participated in Colorado’s PERA defined‑benefit plan.
- On October 1, 2012 the City leased MHS operations to UC Health (a nonprofit); Plaintiffs became UC Health employees and their PERA membership ceased without an employee vote.
- Plaintiffs received an MHS employee handbook (which described PERA participation as mandatory) and a PERA Summary describing PERA and its statutory administration.
- Plaintiffs sued the City asserting (1) breach of contract (based on the handbook/PERA summary or Colo. Rev. Stat. § 24‑51‑313) and (2) a § 1983 due process claim for deprivation of a property interest in continued PERA participation.
- The district court dismissed under Rule 12(b)(6); the Tenth Circuit affirmed, concluding Plaintiffs failed to plausibly allege a contract or a constitutionally protected property interest to support a due process claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the handbook/PERA summary created an enforceable contract to continued PERA membership | Handbook and PERA summary promised mandatory PERA participation and thus created contractual rights | Handbook contains a clear, conspicuous disclaimer and descriptive language only, so no intent to be bound | No contract: documents were descriptive and handbook disclaimed contractual effect |
| Whether Colo. Rev. Stat. § 24‑51‑313 created a contractual right to an employee vote or to continued PERA membership | § 313 governs employer disaffiliation and requires a 65% employee vote before termination of affiliation | § 313 does not apply to a public hospital leased to a nonprofit; § 311 specifically governs hospital transfers and controls | § 313 inapplicable here; § 311 governs public hospital transfers, so § 313 created no contract |
| Whether Plaintiffs possessed a protected property interest in continuing PERA membership | Statute or employment materials gave a legitimate entitlement to continued PERA membership; deprivation occurred without the § 313 vote | No statutory entitlement alleged under § 311 (three conditions not met); handbook/summary create no entitlement | No protected property interest; Plaintiffs failed to plead facts showing an entitlement to continued membership |
| Whether injunctive relief claim survives independent of substantive claims | Plaintiffs sought injunction to restore PERA membership | Injunction is a remedy, not a standalone cause of action; no underlying right pleaded | Dismissed; injunction unavailable because no underlying viable claim |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard for plausibility)
- Albers v. Bd. of Cty. Comm’rs of Jefferson Cty., Colo., 771 F.3d 697 (10th Cir. 2014) (standard of review for Rule 12(b)(6))
- Evenson v. Colo. Farm Bureau Mut. Ins. Co., 879 P.2d 402 (Colo. App. 1993) (handbook creates contract only if employer manifested intent to be bound)
- Jaynes v. Centura Health Corp., 148 P.3d 241 (Colo. App. 2006) (clear handbook disclaimer precludes implied contract)
- W. Distrib. Co. v. Diodosio, 841 P.2d 1053 (Colo. 1992) (elements of breach of contract)
- Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532 (procedural due process analysis for property interests)
- Town of Castle Rock v. Gonzales, 545 U.S. 748 (property‑interest entitlement must arise from independent source such as state law)
- Johnson v. Riddle, 305 F.3d 1107 (federal courts must predict how highest state court would interpret state law)