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Contra Costa Retirees May Have Benefits Case

SAN FRANCISCO (CN) - A northern California county cannot avert claims over its alleged attempt to stop providing retirees with health care, a federal judge ruled.

The Retiree Support Group of Contra Costa County sufficiently alleged that a contract existed in which Contra Costa County agreed to pay 80 percent of health care benefits to retirees and their dependents associated with at least one plan for the lifetime of the retirees, according to the ruling.

In a February 2012 complaint, the support group said its workers "gave up wage increases and other employment benefits in order to receive [the] health care benefits," but that the county capped contributions at a flat dollar amount in 2010 and said it would pass on the increased cost of health care to the retirees.

U.S. District Judge Jeffrey White dismissed the original complaint in July 2012, finding that the allegations failed to establish the existence of a contract.

The groups amended fared better Wednesday with U.S. District Judge Jon Tigar, finding that the group may able to show that county memorandums or resolutions "clearly evince an intent" to grant vested retiree benefits.

"The California Supreme Court held that a resolution or ordinance may contain implied terms created vested rights to retiree health benefits," Tigar wrote.

In Retired Employees Association of Orange County Inc. v. County of Orange, or REAOC, the court held that vested rights can be implied if there is a "clear basis in the contract or convincing extrinsic evidence," according to the ruling.

In considering how REAOC applied to nearly identical claims in a separate case, the 9th Circuit said a complaint could survive dismissal if it "plausibly allege[s] that the county: (1) entered into a contract that included implied terms providing healthcare benefits to retirees that vested for perpetuity; and (2) created that contract by ordinance or resolution."

Here the retirees satisfied both requirements by "alleging that the county explicitly promised health care benefits to the retirees in ratified [memorandums of understanding] and board resolutions, and by alleging that the ratified [memorandums] and resolutions included implied terms containing the 80% promise," Tigar wrote.

They cited specific memorandums and resolutions in which the county "agreed to provide retiree health benefits to eligible retirees," and they pointed to "testimony of former labor negotiators and county officials who participated in the negotiations of the [memorandums of understanding] and resolutions, various statements by members of the Board of Supervisors and county officials, pension materials and booklets, [and] the county's longstanding practices," according to the ruling.

These allegations "are sufficient to raise the reasonable inference that the county intended to contractually bind itself to provide to the retirees lifetime health care benefits in accordance with the 80% promise," Tigar added.

As to the second requirement, the retirees adequately alleged that the 80% promise "was the result of a bargained-for exchange of considerations," the court found.

Contra Costa also did not point to any authority that required a claim for breach of an implied term in a ratified memorandum of understanding or resolution "be dismissed as a matter of law at the pleading stage on the basis that the [memorandum of understanding] or resolution at issue contains a durational clause."

Here, the support group "has pled sufficient facts to raise the reasonable inference that the county made the 80% promise," Tigar added.

Contra Costa also furthermore did not show that the anti-vesting provisions in California Government Code Section 31692 bar the claims.

The section provides that "the adoption of an ordinance or resolution pursuant to Section 31691 shall give no vested right to any member or retired member, and the board of supervisors or the governing body of the district may amend or repeal the ordinance or resolution at any time," according to the ruling.

Section 31691 authorizes a county board of supervisors to provide, by ordinance or resolution, for the county to contribute to premiums for life or disability insurance or toward the payment "of all or part of the consideration for any hospital service or medical service corporation ... for the benefit of any member heretofore or hereafter retired or his or her dependents. At least one of these plans shall include free choice of surgeon or physician."

Tigar noted, however, that the "precise relationship" between the services detailed in the codes "is unclear because another section of the California Government Code, namely Section 52301, authorizes counties to provide 'health and welfare benefits' to retired employees, and such benefits are not subject to the restrictions of Section 31692. Because the county has not presented evidence or authority that the court may consider on a motion to dismiss showing that the benefits at issue are governed by Section 31692 and not by Section 53201, the county's argument that [the retiree support group's] claims are barred by Section 31692 is unavailing."

Associational standing is also proper at this juncture since the group's members would have standing to sue in their own right, according to the ruling.

In this same vein, the group seeks to protect interests that are germane to its purpose. Additionally neither the claim asserted nor the relief requested requires the participation of individual members, Tigar concluded.

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