Opinion
Aрpellants Joe Requa, Wendell G. Moen, Jay Davis, and Donna Ventura (hereafter collectively Retirees) all spent decades working at
In 2007, management and operation of Livermore was transferred from the University to a private consortium. On January 1, 2008, Retirees’ University-sponsored group health insurance was terminated, and the consortium assumed responsibility for providing Retirees’ health insurance benefits.
Retirees later brought an action for mandamus against the Regents, claiming that the elimination of their University-sponsored group health insurance benefits constituted an unconstitutional impairment of either an express or implied contract the Regents had formed with Retirees. Their petition also claimed the doctrines of promissory and equitable estoppel prohibited the termination of their University-sponsored group health insurance benefits. They further sought a declaratory judgment. After the Regents successfully demurred to Retirees’ original petition, they filed an amended pleading. The Regents again filed a demurrer, which the trial court sustained without leave to amend.
Retirees appeal from the resulting judgment. They contend their amended petition adequately pleaded causes of action for impairment of express and implied contract, as well as causes of action for promissory estoppel, equitable estoppel, and declaratory relief. We agree with Retirees with respect to all but their claim for impairment of express contract. We conclude their other claims should not have been resolved on demurrer. Accordingly, we affirm the judgment in part and reverse it in part.
Factual and Procedural Background
“In ruling on the demurrer, the trial court had to accept as true all material facts properly pleaded in [Retirees’] petition, disregarding only conclusions of law and allegations contrary to judicially noticed facts.” (Burt v. County of Orange (2004)
Livermore opened in 1952 as a branch of the University of California Radiation Laboratory. From 1952 until 2007, the University operated Livermore under a contract with the United States Department of Energy (DOE) or predecessor agencies of the federal government.
In 1961, the Regents adopted a resolution authorizing medical benefits for University employees and retirees. At the time the Regents first authorized retiree medical benefits, there was no policy or provision of state law, nor any provision of the Regents’ own policies, that prohibited or limited the Regents’ authority to offer such benefits. The Regents’ authorization did not include any provision permitting the Regents to terminate or eliminate these benefits, and the Regents did not reserve the authority to modify vested retirement benefits in a manner that was inconsistent with California law or to transfer the responsibility for providing a vested benefit to another entity.
After authorizing medical benefits, the University began telling employees they would receive health coverage while working and during retirement so long as they met eligibility requirements. For example, in 1979, the Regents published a booklet concerning UCRS. Under the heading “Health Insurance During Retirement,” the booklet stated, “You may continue your University-sponsored group health plan coverage for you and your family after you retire. In most cases the premiums will be the same as when you were employed, and you will continue to receive The Regents’ health plan contribution. The balance of the premium will be deducted from your monthly Retirement Income.” The following year, Livermore published a “Benefits Information Packet” summarizing its health insurance benefits. With regard to health insurance benefits during retirement, the document stated, “Cоverage can be continued as long as monthly income received from retirement system is large enough to cover employee contribution. Employer contribution continues during retirement.”
A 1984 UCRS booklet entitled “Your retirement plan coordinated with Social Security” explained that “[i]f the conditions shown in the box are met,
Livermore issued a publication entitled “Benefits” in 1988,
In 1990, Livermore’s benefits office distributed a document entitled “The Retiree Handbook.” On a page headed “Insurance” appeared the question, “How does retirement affect my insurance plans?” The response stated, “Whether a member of [the Public Employee Retirement System] or UCRP, your University group medical and dental plans may be continued when you retire, provided that you are enrolled at the time of retirement.”
In the late 1990s, the Regents began inserting language into benefits books and publications stating that retiree medical benefits werе not vested and could be modified or eliminated at any time. The Regents distributed the University of California Retirement Handbook (Retirement Handbook) in 1998. That handbook explained that retiring employees electing “UCRP monthly retirement income . . . may be eligible to continue . . . UC medical and/or dental coverage if’ they met certain eligibility criteria. It also stated, “Health and welfare benefits are not accrued or vested benefit entitlements. UC’s contribution toward the monthly cost of the coverage is determined by UC and may change or stop altogether, subject to the state of California’s annual budget appropriation.” In small print on the inside back cover of the 1998 handbook, the following language appeared: “What is written here does not constitute a guarantee of plan coverage or benefits—particular rules and eligibility requirements must be met before benefits can be received. The
In approximately December 2000, the Regents published a University of California Retirement Plan Election Handbook. Regarding “UC-Sponsored Health and Welfare Coverage,” this handbook stated, “Generally, if you are eligible to continue coverage and you elect monthly retirement income, you may continue the same coverage.” It also explained that retirees can change their medical and/or dental plans after they retire “during Open Enrоllment, which is usually held each November.” The handbook also included the following language: “UC reserves the right to determine new premiums and employer contributions at any time. Health and welfare benefits are subject to legislative appropriation and are not accrued or vested benefit entitlements.”
At all relevant times, Retirees met the eligibility requirements for University-sponsored group health plan coverage. They retired between 1996 and 2006 (see fn. 1, ante) after decades of service to Livermore, where they had remained in significant part because they would receive University-sponsored group health plan coverage when they retired.
Between the 1960s and 2007, the Regents provided the same medical benefits to active and retired employees who had worked at Livermore as they provided to other active and retired University employees. Until late 2007 or early 2008, the Regents treated Livermore retirees in the samе manner as other University retirees. The Regents provided Retirees with the promised medical benefits from their retirement until 2008.
In 2007, the DOE did not renew its contract with the Regents to manage Livermore, contracting instead with a newly created private consortium known as Lawrence Livermore National Security (LLNS).
LLNS has provided coverage that is more expensive than, and inferior to, the health benefits formerly provided by UCRP. In addition, Retirees have been removed from the University-wide risk pool comprised of both active and retired employees and are segregated into a smaller, older, and more infirm group, which will cause the cost of their coverage to increase more rapidly compared to other University retirees.
On August 11, 2010, Retirees filed their original petition for writ of mandate against the Regents in Alameda County Superior Court. The petition alleged causes of аction for impairment of contract, promissory estoppel, and declaratory relief. The Regents filed a demurrer, which the trial court sustained with leave to amend.
On January 24, 2011, Retirees filed a first amended petition for writ of mandate (FAP). It alleged causes of action for impairment of implied contract, impairment of express contract, promissory estoppel, equitable estoppel, and declaratory relief. The contract counts alleged that the Regents’ termination of Retirees’ vested rights to University-sponsored group health insurance coverage violated the contract clause of the California Constitution. (Cal. Const., art. I, § 9.) Attached to the FAP were excerpts from benefit handbooks the University had distributed to employees between 1979 and 2000. The Regents again responded by demurrer, and on May 26, 2011, the trial court sustained the Regents’ demurrer without leave to amend.
The trial court cited three reasons for dismissing Retirees’ contract counts. First, it found that none of the language in the benefit handbooks cited by Retirees was “sufficient to create either an express or implied contract upon which to base a cause of action for impairment of contract.” Instead, it found that “the statements are replete with conditional language.” The trial court also noted that “as early as 1990, some 20 years before the Petition was filed,” the Regents had included language in the benefits booklets and handouts “clearly stating that retiree medical benefits were not vested and
Second, the trial court also ruled that Retirees had failed “to provide any statutory or legislative authorization which would allоw such a promise to be binding” on the Regents. Absent such statutory or legislative authority, even if a promise had been made to Retirees, “such a promise would not constitute [a] binding contract against [the Regents], a public entity.” The court found that Retirees had “identified no minutes, formal resolution or standing order issued by [the Regents] conferring on [Retirees] retirement medical benefits of a certain type in perpetuity.”
Third, the trial court held that Retirees’ allegations that retiree medical benefits are vested rights created via implied contract were unsupported by case law. It concluded that “California courts have been clear in holding that absent clear intent on the part of the public entity, a long-term financial commitment for retiree medical benefits cannot-be implied.”
The lower court sustained the demurrer to the promissory estoppel cause of action because it found Retirees had alleged no clear аnd unambiguous promise to lifetime retiree medical benefits. As to equitable estoppel, the court found that the Retirees could not allege the Regents “knew that retirement medical benefits were not vested rights and were subject to modification and elimination, yet never communicated such information to [Retirees].” Finally, because the cause of action for declaratory relief was derivative of the other four causes of action, the trial court sustained the demurrer to that cause of action as well.
Judgment was entered on June 8, 2011, and Retirees filed a notice of appeal on July 29, 2011.
Discussion
Retirees claim the superior court improperly sustained the Regents’ demurrer to the FAR They argue they have adequately pleaded claims for breach of either an express or implied contract. For that argument, Retirees rely heavily on our state Supreme Court’s recent decision in Retired Employees Assn. of Orange County, Inc. v. County of Orange (2011)
The Regents defend the superior court’s decision on a number of grounds, arguing principally that Retirees have not overcome the general presumption that a public employer’s statutory scheme is not intended to create private contractual rights. According to the Regents, courts may impose implied contractual obligations on a public employer only where the relevant legislative body clearly evinces an intent to create an implied contract. Here, the Regents contend, Retirees have identified no documents that clearly evince such an intent.
We will first discuss our standard of review, an issue about which the parties initially disagreed in their briefs. We will then turn to an examination of the Retired Employees decision before addressing the merits of the parties’ arguments.
I. Standard of Review
“Just as the trial court, an appellate court reviewing a judgment entered after a demurrer has been sustained without leave to amend assumes the truth of all properly pleaded material facts unless contradicted by judicially noticed matters. [Citation.] The appellate court determines whether, reading the petition as a whole and giving it a reasonable interpretation, the pleading states facts sufficient to state a cause of action or a reasonable possibility exists that any defects can be cured by amеndment. [Citations.] If the answer to either question is yes, then the trial court erred in making its ruling. [Citation.]” (Burt v. County of Orange, supra,
In performing our review, we are mindful that “[i]t is not the ordinary function of a demurrer to test the truth of the plaintiff’s allegations or the accuracy with which he describes the defendant’s conduct. A demurrer tests only the legal sufficiency of the pleading.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983)
In reviewing the superior court’s order sustaining the demurrer, “we examine the complaint de novo to determine whether it alleges facts sufficient to state a cause of action under any legal theory . . . .”
II. The Supreme Court’s Decision in Retired Employees
One of the reasons the trial court gave for sustaining the Regents’ demurrer was that there could be no implied contract for retiree medical benefits. Since judgment was entered in this case, however, the California Supreme Court has disagreed. In Retired Employees, supra,
The holding in Retired Employees came in response to a certified question from the United States Court of Appeals for the Ninth Circuit. (Retired Employees, supra, 52 Cal.4th at pp. 1176, 1178, 1194.) The underlying federal litigation arose out of a suit brought by REAOC (the Retired Employees Association of Orange County, Inc.), an organization of retired Orange County employees, against Orange County (County). (Id. at p. 1177.) In 1966, County had begun to offer group medical insurance to its retired employees. It initially calculated the premiums for active and retired employees separately, but in 1985, County began to combine active and retired employees into a single unified pool for purposes of calculating health insurance premiums. (Ibid.) “The singlе unified pool . . . had the effect of subsidizing health insurance for retirees, in that it lowered retiree premiums below their actual costs, while raising active employee premiums above their actual costs.” For budgetary reasons, in 2007, County passed a resolution splitting the pool of active and retired employees. (Ibid.)
REAOC sued County, seeking an injunction prohibiting the county from splitting the pool of active and retired employees. (Retired Employees, supra,
In the California Supreme Court, County argued “(1) that a county government and its employees cannot form an implied contract; (2) that even if implied contracts are cognizable in the public employment context, such contracts cannot create vested rights; and (3) that even if vested contractual rights for county employees may be implied, such rights cannot include health benefits.” (Retired Employees, supra,
Retired Employees held that a county may be bound by the terms of an implied contract so long as there is no legislative prohibition against such arrangements, such as a statute or ordinance.
The court in Retired Employees also held that vested contractual rights may be implied from legislation in certain circumstances; vesting is simply a matter of the parties’ intent. (Retired Employees, supra,
Having summarized the holdings in Retired Employees, we now apply its analysis to the case before us.
III. Retirees Have Adequately Pleaded a Cause of Action for Breach of an Implied Contract.
Retirees contend that under Retired Employees, the University’s obligation to provide lifetime retiree medical benefits to them on the same terms as other University retirees may be implied from the authorization of those benefits in 1961, the uninterrupted provision of those benefits for more than 50 years, and from the University’s publications assuring employees they would receive health benefits in retirement so long as they met certain eligibility requirements.
Retirees alleged that the Regents first authorized medical benefits for Livermore retirees in the 1960s. This authorization was alleged to have been given “in accordance with policies and procedures used by the Regents in the ordinary course of their business and in the proper exercise of their powers.” Retirees also alleged that the Regents did not reserve any right to terminate, eliminate, or modify these benefits in a manner that was not consistent with the legal authority of California public agencies to modify vested retirement benefits, nor did the Regents reserve the right to transfer the responsibility for providing this benefit to another entity. According to the FAP, the Regents also did not reserve any right to exclude Livermore retirees from coveragе under University-sponsored group health coverage or to treat those retirees differently from other University employees and retirees. Retirees claimed that from the 1960s until 2007, the Regents have provided retiree medical benefits without interruption.
In addition to the allegations of the FAP, Retirees properly sought judicial notice of an October 23,1961 resolution by the Regents. (See Flournoy, supra,
Thus, the essential allegations of Retirees’ claim of implied contract were that the Regents аuthorized University-sponsored group health insurance coverage for retirees, and then during Retirees’ employment at Livermore, the Regents—through various benefit booklets and handbooks published by their authorized representatives—offered to provide Retirees with University-sponsored group health plan coverage when they retired. (See Hunter v. Sparling (1948)
“In pleading a cause of action on an agreement implied from conduct, only the facts from which the promise is implied must be alleged.” (Youngman, supra, 70 Cal.2d at pp. 246-247.) The foregoing allegations suffice to plead a cause of action based on an implied contract. (See California Teachers Assn. v. Cory (1984)
IV. The Regents’ Arguments in Support of the Trial Court’s Order Are Unpersuasive.
The Regents offer a number of arguments in support of the trial court’s ruling. For the most part, these arguments are not directed to the sufficiency of the allegatiоns of the FAP, but rather are based almost entirely on matters outside of the operative pleading. As such, they have limited force given the procedural posture of this case, which requires us to accept the truth of Retirees’ allegations and restricts our review to those allegations and matters that are properly subject to judicial notice.
A. Retirees Are Not Required to Prove Their Case to Overcome a Demurrer.
The Regents first argue Retirees have “provided no documents that clearly evince” an intent on the Regents’ part to provide lifetime retiree health benefits.
B. The FAP Sufficiently Alleges the Regents Have Authorized Retiree Health Benefits.
The Regents next claim they have not delegated their authority to contract with employees for lifetime retiree health benefits, nor have they passed legislation granting such benefits.
The Regents contend there is no document or “regental action” limiting their ability to provide different benefits to Livermore retirees than to other University retirees. In the court below, however, Retirees offered a 1971 benefits booklet stating, “The complete provisions of the UCRS are set forth in the Standing Order of The Regents relating tо the University of California Retirement System. All informational booklets are subject in every respect to the Standing Order, and where any differences may occur, the Standing Order shall govern.” If it can be located, the terms of the standing order to which this booklet refers might define the Regents’ authority with respect to retiree health benefits. Obviously, this is a matter that must await further factual development, but it demonstrates this issue cannot properly be resolved on demurrer. Moreover, the Regents’ argument seems to contradict the FAP, which alleges that after authorizing the benefits at issue, the Regents reserved no right to modify or eliminate them or to treat Livermore retirees differently from other University retirees.
D. Retirees’ Interpretation of the Benefits Booklets Is Not Clearly Erroneous.
The Regents next contend that the benefits booklets and handbooks attached to the FAP contain no promise of lifetime retiree health benefits. In fact, the Regents read the language of these materials as showing an intent not to create vested rights. Like the trial court, they rely on language in the booklets stating that employees’ health benefits “may continue” or “can be continued” in retirement. The Regents and the trial court view this as conditional language that cannot create a vested right to University-sponsored health benefits in retirement.
But as Retirees point out, these booklets contain language that could be read as implying a commitment to provide these benefits throughout retirement, rather than for an unspecified shorter period during retirement. For example, a 1980 benefit publication states that during retirement, health insurance “[c] overage can be continued as long as monthly income received from retirement system is large enough to cover employee contribution.” (Italics added.) A 1990 publication informed Livermore employees that “your University group medical and dental plans may be continued when you retire, provided that you are enrolled at the time of retirement.” It also contemplated that retirees would be able to participate in the annual open enrollment period, which suggests that the provision of retiree group health insurance benefits would be ongoing. With regard to open enrollment, the University’s 1998 Retirement Handbook states, “UC will send you information each year
E. The Reservation of Rights Language in the Benefits Booklets Is Ambiguous.
The Regents also rely on reservation of rights language appearing in benefits booklets as demonstrating the University’s intent not to create vested rights. We do not find this language as unequivocal as the Regents do. The Regents cite a 1988 Livermore publication entitled “Benefits” which states that the publication “gives a general overview of your personal and family benefit plans. You shouldn’t consider it a promise or guarantee of plan coverage or benefits.” But the very next sentence states, “You have to meet eligibility rules for coverage and qualification rules to receive benefits.” Read together, the two statements may simply mean that benefits are contingent upon meeting eligibility requirements, not that the benefits are not vested retirement rights.
Similarly, the 1998 Retirement Handbook says, “Health and welfare benefits are not accrued or vested benefit entitlements.” It also goes on to say that “UC’s contribution toward the monthly cost of the coverage is determined by UC and may change or stop altogether, subject to the state of California’s annual budget appropriation.” As Retirees suggest, this language might be read to mean that the University may change or eliminate its contribution toward the cost of coverage, if the state’s budget appropriation so required. Indeed, a 2000 UCRP publication explains that “[hjealth and welfare benefits are subject to legislative appropriation and are not accrued or vested benefit entitlements.” The Regents do not claim, however, that Retirees’ University-sponsored health insurance coverage was terminated because of the state’s budgetary appropriation.
In a related argument, the Regents note that the booklets use the words “lifetime,” “for the rest of your life,” or “for life” when referring to
F. The Allegations of the FAP Are Deemed True, Even if Retirees Have Not Yet Discovered “Source Documents. ”
The Regents repeat their argument that Retirees have failed to overcome the presumption that legislative acts do not give rise to an implied contract for vested benefits. (See Retired Employees, supra,
Moreover, the Regents have conceded they authorized retiree group health insurance benefits. If, as the Regents claim, such benefits can only be authorized by “regental action,” then it would seem to follow that a “source document” authorizing those benefits must exist. Retirees have already identified one such source document—the October 23, 1961 resolution. And while it appears the Regents may not keep their own copies of such
V.-VII
Disposition
The judgment is affirmed to the extent it dismissed Retirees’ claim for impairment of express contract. In all other respects, the judgment is reversed. Retirees shall recover their costs on appeal. (Cal. Rules of Court, rule 8.278(a)(3).)
Simons, J., and Bruiniers, J., concurred.
Notes
Requa was first hired by the University in 1961, but left in 1963 to continue his education. He returned and began working at Livermore in 1965, where he worked continuously until his retirement in 1999. Moen began working at Livermore in 1963 and retired in 2000. Davis began working at Livermore in 1971 and retired in 2002. Ventura began working at Livermore in 1974 and retired in 2006. During their employment at Livermore, Moen, Davis, and Ventura had no breaks in University service.
Although this publication was issued by Livermore, it explained that the benefits outlined in it were “governed entirely by the terms of retirement plan provisions, University of California Group Insurance Regulations and group health/insurance plan contracts, and applicable state and federal laws.”
The consortium was formed by the University, Bechtel National, Babcock and Wilcox, and other entities.
The court did note that the question of whether an implied contract can be formed to confer vested rights to medical benefits for retirees had been certified for review by this state’s Supreme Court. (See Retired Employees, Orange County v. County of Orange (9th Cir. 2010)
The Regents argue only that Retirees’ allegations do not satisfy the threshold requirement of pleаding the existence of an express or implied contract. They do not separately contend that if we find such a contract has been pleaded, their actions nevertheless do not constitute an unconstitutional impairment of the contract. (See Cal. Const., art. I, § 9.)
At oral argument, the Regents* counsel conceded that the trial court’s ruling on the demurrer is subject to our independent review. Although the Regents’ opening brief had contended we should review the order sustaining the demurrer only for substantial evidence, counsel acknowledged that this contention was erroneous. Counsel further conceded that the statement in the Regents’ opening brief that the trial court had made factual findings was likewise incorrect. Indeed, if this statement were true, that itself would be grounds for reversing the ruling in favor of the Regents. (See Fuhrman v. California Satellite Systems (1986)
Both Retirees and the Regents requested judicial notice of certain documents in the court below. For reasons not apparent from the record, the trial court did not rule on these requests. Retirees sought judicial notice of resolutions and minutes of the Regents dating from 1958 to 1961 and dealing with group life and health insurance and welfare benefits, as well as historical versions of University benefits booklets. These materials were proper subjects of judicial notice, and we may consider them on appeal. (See California State Employees’ Assn. v. Flournoy (1973)
In this court, the Regents also seek judicial notice of historical versions of benefits booklets. These may be judicially noticed, and we therefore grant the request with respect to exhibits G through M, attached to the Regents’ May 29, 2012 request for judicial notice. (Flournoy, supra,
We deny the Regents’ request for judicial notice with respect to exhibits B through F, which are copies of bylaws, minutes, and standing orders of the Regents. While such materials may
The Regents cite no statute or other legislative enactment that would prohibit them from being bound by the terms of an implied contract, and they do not argue that they may not be so bound.
Retirees do not explicitly argue the existence of an express contract. They claim in a footnote that “the Regents’ authorization, together with repeated written assurances made over many decades, could form the basis of an express contract.” (First italics added.) Claiming these facts could form the basis of an express contract is not the same as claiming that they do. Moreover, we may dеcline to consider arguments raised only in footnotes. (Sabi v. Sterling (2010)
In the court below, the Regents agreed “[t]here is no dispute that The Regents authorized, and the University sponsored, medical insurance coverage for [Livermore] retirees until 2007.” Thus, to the extent the Regents claim the FAP fails sufficiently to allege that they authorized or sponsored the claimed retiree medical benefits from the time of authorization until 2007, their admission has cured any deficiency in Retirees’ pleading. (See Mohlmann v. City of Burbank (1986)
The trial court appears to have agreed with this argument, finding that Retirees “conсede in Paragraph 65 [of the FAP] . . . that despite searching, they have no resolutions issued by [the Regents] authorizing retiree medical benefits.” In fact, however, the cited paragraph says only that Retirees have sought such resolutions from the Regents but the Regents had not yet provided them. The trial court also did not mention that Retirees had located the 1961 resolution authorizing retiree health benefits.
The Regents assert that their standing orders do not grant the president of the University authority over the operation or administration of “[agreements for the provision of employee group insurance benefits.” In support of this argument, they requested judicial notice of Regents Standing Order 100.4(dd) (Feb. 18, 2011), a request we have denied. We note nevertheless that whatever this 2011 standing order may mean, it would tell us only what the current authority of the president of the University is. It says nothing about what the president’s authority may have been at the times relevant to Retirees’ action. The president’s authority may or may not have been so limited under earlier versions of the standing orders.
In response to appellant Requa’s public records act request, the Regents’ managing counsel wrote that the University “does not maintain historical versions of the Standing Orders.” But the fact that the Regents do not keep copies of these standing orders does not mean no copies exist. Nor does it mean that the content of such orders could not be shown using other methods of proof.
Although they do not explain the citation, the Regents seem to rely on a statement in Searcy v. Hemet Unified School Dist. (1986)
See footnote, ante, page 213.