Thursday, January 31, 2013

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C.A. Allows Livermore Retirees to Sue for Health Benefits

By JACKIE FUCHS, Staff Writer

Four retirees may proceed with their suit against the University of California for termination of their university sponsored health insurance benefits, the First District Court of Appeal has held. A three-judge panel said that Alameda Superior Court Judge Frank Roesch erred when he sustained the UC’s demurrer without leave to amend, saying that the plaintiffs had alleged sufficient facts, which if true, would support claims for breach of an implied contract, declaratory relief, and promissory and equitable estoppel.

Plaintiffs Joe Requa, Wendell G. Moen, Jay Davis, and Donna Ventura each worked for decades at the Lawrence Livermore National Laboratory. During their employment there, Livermore was operated by the UC. By virtue of their employment at Livermore, the retirees became members of the University of California Retirement System, which later became known as the University of California Retirement Plan.

In 1961, the regents adopted a resolution authorizing medical benefits for university employees and retirees. The authorization did not include any provision permitting the regents to terminate or eliminate these benefits, or to modify vested retirement benefits or transfer the responsibility for providing a vested benefit to another entity.

Benefits Authorized

After authorizing medical benefits, the university began telling employees they would receive health coverage both while they were working and during retirement so long as they met eligibility requirements. In the late 1990s, however, the regents began inserting language into benefits books and publications stating that retiree medical benefits were not vested and could be modified or eliminated at any time.

After retiring from Livermore, the plaintiffs all continued to receive university-sponsored group health insurance benefits in the same manner as other university retirees until Jan. 1, 2008, when the management and operation of Livermore was transferred from the university to a private consortium. The plaintiffs’ university-sponsored group health insurance was terminated and the consortium assumed responsibility for providing the plaintiffs’ health insurance benefits. The plaintiffs brought an action for mandamus against the UC, 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 plaintiffs, and that under the doctrines of promissory and equitable estoppel the termination of their university-sponsored group health insurance benefits was prohibited.

Demurrers Sustained

Roesch sustained the demurrers, saying there could be no implied contract for retiree medical benefits. Roesch’s decision was made, however, before the California Supreme Court decided Retired Employees Assn. of Orange County, Inc. v. County of Orange (2011) 52 Cal.4th 1171. In that case the high court held that a county may be bound by the terms of an implied contract to provide retiree benefits so long as there is no legislative prohibition against such arrangements. Although the intent to make a contract must be clear, it need not be express, but can be implied from legislation in appropriate circumstances.

On appeal from an order sustaining a demurrer, the panel noted that it was required to assume the truth of all of the allegations of the writ. To prevail, the plaintiffs were not required to show they already possess the evidence that will prove their case, but only that the allegations of the writ were sufficient to state a cause of action under some legal theory. In support of their claim for breach of implied contract, the plaintiffs offered a 1971 benefits booklet which said that the complete provisions of the retirement systems were set forth in the Standing Order of the regents, an order which had not been located as of the date of the panel’s decision. Presiding Justice Barbara Jones said that the possible existence of an order that might define the regents’ authority with respect to retiree health demonstrates the issue cannot properly be resolved on demurrer, because the benefits booklets contained language that could be read, as the plaintiffs claimed, as implying a commitment to provide these benefits throughout retirement, rather than for an unspecified shorter period. Although the plaintiffs’ interpretation may ultimately prove invalid, Jones said, it was improper for the trial court to resolve the issue against them at the pleading stage. The plaintiffs’ allegations that they relied on the promise of health insurance during retirement by remaining in employment at Livermore for their entire careers, rather than seeking employment in the private sector—where retiree medical benefits are not always available—were sufficient to state a claim for promissory estoppel, Jones concluded.

And as the existence of equitable estoppel is generally a question of fact, findings on such a cause of action are generally inappropriate at the demurrer stage, Jones said, especially where, as here, the regents were relying on language first inserted in benefits booklets long after each of the plaintiffs had begun employment at Livermore. Requa, for example, had been a Livermore employee for 33 years before the university began to claim that retiree health benefits were not vested rights. The panel also rejected the university’s claims that the plaintiffs’ suit was not timely filed, saying that even if the justices were to assume, contrary to plaintiffs’ allegations, that the statements in the 1988 and 1998 booklets were sufficient to advise plaintiffs that health benefits were not vested benefit entitlements, the regents “did not breach this promise merely by announcing [they] would no longer honor it.” While such a repudiation might constitute an anticipatory breach, giving the retirees the option of suing immediately, it did not accelerate the accrual of a cause of action for limitations purposes; the plaintiffs could still wait to file their suit until the regents had failed to render the allegedly promised performance. Accepting as true the allegations of the petition, the panel said that the plaintiffs’ action was thus filed within the three-year period of the statute of limitations.

Save for the plaintiffs’ claim for impairment of express contract, the demurrer was overruled.

Justices Mark Simons and Terence Bruiniers concurred in the opinion.

The case is Requa v, Regents of University of California; 13 S.O.S. 457.