975 F. Supp. 2d 1150
E.D. Cal.2013Background
- Plaintiffs filed a putative class action challenging reductions to the County’s retiree health subsidies; the Board historically funded subsidies from excess earnings of SCERS and later from other funding sources with annual determinations.
- The Board–retiree subsidy scheme began in 1980, with subsidies not guaranteed and subject to annual extension; over time subsidies were reduced or eliminated for retirees post-2007.
- Stringent governance: 1993 resolution changed funding source and allowed annual determinations; 2007 policy eliminated subsidies for those retiring after May 31, 2007.
- PERB proceedings found the County violated its duty to bargain with unions before changing retiree health subsidies; PERB ordered rescission and make-whole relief for those affected (unions’ members specifically).
- Subsequent Board policies since 1993 repeatedly stated subsidies are not vested entitlements; various internal memos, handbooks, and payroll inserts reiterated annual review and non-vested status.
- SCREA seeks to certify subclasses and pursue constitutional and equal protection claims premised on an implied contract to provide vested health benefits in perpetuity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether an implied contract to vest health benefits exists. | SCREA argues long-standing conduct and resolutions imply vested rights. | County contends no implied contract; subsidies are non-vested and annual, not guaranteed. | No implied vested contract; subsidies are annual, non-vested policy. |
| Whether PERB findings and union-related distinctions affect equal protection. | Non-union retirees are similarly situated with unionized retirees; PERB remedy violates equal protection. | Union/non-union groups are not similarly situated; rational basis supports distinctions. | Rational basis upheld; PERB remedy and union status do not violate equal protection. |
| Whether the County had a duty to bargain under MMBA for retiree health benefits. | Subsidy changes affected terms of employment and should have been bargained. | No bargained-for term creating vested subsidy; County could act unilaterally subject to PERB remedies. | No duty to bargain created a contractual entitlement; County could adjust subsidies. |
| Whether the evidence supports an express or implied contract claim under REAOC framework. | Evidence of MOUs, task force reports, and resolutions supports implied terms. | Evidence shows policy, not contract; REAOC requires explicit legislative language or durable contract.” | No viable implied contract; resolutions and policies do not create perpetual vested rights. |
Key Cases Cited
- Retired Employees Ass’n of Orange Cnty., Inc. v. County of Orange, 52 Cal.4th 1171 (Cal. 2011) (California Supreme Court on implied contracts for retiree health benefits; vesting requires clear legislative intent or explicit contract terms)
- Retired Emp. Ass’n of Orange Cnty. v. County of Orange, 663 F.3d 1292 (9th Cir. 2011) (remand to consider REAOC under California Supreme Court guidance; implications for implied rights)
- Harris v. County of Orange, 682 F.3d 1126 (9th Cir. 2012) (examines MOUs and durational clauses; limits implied perpetual rights unless express terms support.)
- Sonoma County Ass’n of Retired Employees v. Sonoma County, 708 F.3d 1109 (9th Cir. 2013) (pleading requirements for implied contracts in EBRD/health benefits context)