City of South Lake Tahoe Retirees Association v. City of South Lake Tahoe

Filing 52

ORDER signed by District Judge Kimberly J. Mueller on 6/26/2017 DENYING 32 Motion to Dismiss in its entirety; ORDERING the City of South Lake Tahoe file an Answer to the plaintiff's 29 First Amended Complaint within fourteen (14) days. (Michel, G.)

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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 12 CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION, Plaintiff, 13 ORDER v. 14 15 No. 2:15-cv-02502-KJM-CKD CITY OF SOUTH LAKE TAHOE, Defendant. 16 17 A retirees association is suing a city for injunctive and declaratory relief for the 18 19 allegedly unlawful changes the city made to the retirees’ health benefits in 2015. The city’s 20 second motion to dismiss is before the court. Mot., ECF No. 32. The association opposes. 21 Opp’n, ECF No. 36. On December 2, 2016, the court heard the motion. Mins., ECF No. 38. As 22 explained below, the court DENIES the city’s motion to dismiss. 23 ///// 24 ///// 25 ///// 26 27 28 1 1 2 I. BACKGROUND A. Factual Allegations 3 Plaintiff City of South Lake Tahoe Retirees Association (the “Association”) is a 4 nonprofit California corporation comprising approximately 160 public employee retirees of the 5 City. First Am. Compl., ECF No. 29, ¶ 4 (“FAC”). The Association represents and advocates for 6 retirees regarding “retiree hospitalization, medical, pharmaceutical, dental, vision, and retirement 7 benefits” and communicates information to and from its members regarding the City of South 8 Lake Tahoe’s (“the City”) vested post-employment health benefits. Id. 9 Plaintiff’s claims derive from changes the City made to retiree health benefits 10 through adoption of a January 1, 2015 City Council Resolution (“the Resolution”). Id. ¶ 12. The 11 Association alleges that by adopting the Resolution, the City violated the collective bargaining 12 agreements it reached with retiree labor organizations. Id. ¶ 22. Through these agreements, or 13 Memorandums of Understanding (“MOUs”), retirees were guaranteed the right to continue 14 membership in the City’s health care plan. Id. ¶ 10. The MOUs establish that “[retirees] will 15 receive the same level of benefits [the City] provide[s] for active employees,” and “[retirees] may 16 elect to continue the same medical and dental coverage as active employees . . . .” Id. ¶ 18. The 17 MOUs memorialize a uniform “vesting schedule” for the health benefits of both active employees 18 and retirees, and provide “no maximum duration on this coverage.” Id. ¶¶ 11, 17. The City 19 allegedly agreed to allow the retirees to “continue these benefits for as long as [the City’s] plan 20 continues and [the retirees] continue payment of [their] monthly premiums in a timely manner.” 21 Id. ¶ 17 22 The Association alleges the retirees fully performed all MOU preconditions for 23 their rights in the retirement health benefits program to vest, yet the Resolution affords retirees “a 24 much lower level of coverage than they were contractually promised.” Id. ¶¶ 21, 23. The 25 Resolution allegedly treats the active employees more favorably than retirees, assigns the retirees 26 to the lowest coverage level, and removes retirees entirely from the City’s dental plan unless they 27 pay the premium. Id. ¶¶ 23, 25, 26. The negotiations leading to the Resolution’s adoption also 28 allegedly included only labor organizations for active employees, not retirees. Id. ¶ 29. 2 1 B. 2 Initial Complaint and First Motion to Dismiss The Association filed an initial complaint in December 2015, contending the 3 City’s unilateral changes to retirees’ health benefits violate various MOUs and violate the 4 retirees’ due process rights. Compl., ECF No. 1. 5 The Association brought seven claims: (1) Breach of contract; (2) promissory 6 estoppel; (3) federal due process violations; (4) state due process violations; (5) impairment of 7 contract under the U.S. Constitution; (6) impairment of contract under the state constitution; and 8 (7) violations of the California Pension Protection Act. Id. ¶¶ 35-52. The initial complaint 9 sought injunctive relief to restore the pre-Resolution status quo, declaratory relief, and monetary 10 damages. Id. at 12. 11 The City moved to dismiss for lack of standing, failure to exhaust administrative 12 remedies, and failure to join necessary parties. ECF No. 8 at 1. The court granted the motion 13 only as to associational standing, giving leave to amend. Order, July 26, 2016 (“Prior Order”), 14 ECF No. 23. 15 C. 16 Amended Complaint and Second Motion to Dismiss On August 15, 2016, the Association filed an amended complaint repeating six of 17 the initial claims, but dropping the seventh claim for violations of the California Pension 18 Protection Act, and seeking the same injunctive and declaratory relief, but expressly renouncing 19 monetary damages. FAC ¶¶ 9-11, 32-35. On September 6, 2016, the City again moved to 20 dismiss for lack of associational standing and failure to state a claim. Mot. at 1. 21 II. 22 ASSOCIATIONAL STANDING The City first attacks the Association’s standing to sue on behalf of its members. 23 Id. at 1-4. The burden is on the Association to establish subject matter jurisdiction, of which 24 standing is a component. Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th 25 Cir. 2010) (citing Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994)). “Standing 26 addresses whether the plaintiff is the proper party to bring the matter to the court for 27 adjudication.” Id. (citations omitted). An association has standing to sue on its members’ behalf 28 when (1) its members would have standing to sue in their own right, (2) the interest the 3 1 association is vindicating relates to its purpose, and (3) neither the asserted claim nor the 2 requested relief require individual member participation. Hunt v. Wash. Apple Advertising 3 Comm’n, 432 U.S. 333, 342 (1977) (citation omitted). 4 In its prior dismissal order, the court found the Association here met the first two 5 Hunt factors, but not the third. See Prior Order 6-8. The court held “[the Association] does not 6 pass muster under the third factor of Hunt . . . because the damages it seeks are ‘not common to 7 the entire membership, nor shared by all in equal degree.’” Id. at 7 (quoting Warth v. Seldin, 422 8 U.S. 490, 515 (1975)). Associational standing was not satisfied because the claimed injuries 9 appeared particularized to each member, which would have required extensive individual 10 participation to assess each member’s damages based on date of hire, years of service and 11 bargaining unit. Id. The Association had relied on cases in which plaintiffs had sought only 12 declaratory and injunctive relief, which the court thus found distinguishable. See, e.g., Prior 13 Order 7 (distinguishing RSG v. Contra Costa Cnty., 944 F. Supp. 2d 799 (N. D. Cal. 2013)). 14 After amendment, the Association’s operative complaint expressly renounces damages. Yet the 15 City still contends the case will require individualized member participation such that 16 associational standing is improper under Hunt’s third factor. Mot. at 5. 17 18 A. Hunt’s Third Factor Hunt’s third factor assesses how much individual member participation a case 19 requires. Instead of imposing a bright line constitutional test, the required inquiry “focus[es] on 20 matters of administrative convenience and efficiency” and assesses the practicality and benefit of 21 awarding relief at the associational rather than the individual level. United Food & Commercial 22 Workers Union Local 751 v. Brown Group, Inc., 517 U.S. 544-45, 555 (1996); see also Cent. 23 Delta Water Agency v. United States, 306 F.3d 938, 951 n.9 (9th Cir. 2002) (noting that unlike the 24 first two Hunt factors, “the third factor is ‘merely prudential,’ and designed to promote efficiency 25 in adjudication”). Associational standing is more appropriate where “there is complete identity 26 between the interests of the consortium and those of its member[s] . . . and the necessary proof 27 could be presented ‘in a group context,’” N.Y. State Club Ass’n, Inc. v. City of N.Y., 487 U.S. 1, 28 10 n.4 (1988) (quoting Hunt, 432 U.S. at 344), or where “the challenge raises a pure question of 4 1 law that is not specific to individual members.” Ass’n of Christian Sch. Int’l v. Stearns, 678 F. 2 Supp. 2d 980, 985 (C.D. Cal. 2008), aff’d 362 Fed. Appx. 640 (9th Cir. 2010). Associational 3 standing is less appropriate where the claims or relief are specific to individual members. See 4 Warth, 422 U.S. at 515. 5 Put another way, “[w]hen the claims require an ‘ad hoc factual inquiry’ for each 6 member represented by the association, the organization does not have associational standing.” 7 Stearns, 678 F. Supp. 2d at 986 (quoting Rent Stabilization Ass’n of City of N.Y. v. Dinkins, 5 8 F.3d 591, 596 (2d Cir. 1993)). Regardless of what relief the association seeks, as-applied 9 constitutional challenges are inherently ill suited to association-level litigation. See id. at 982-86 10 (denying associational standing in as-applied declaratory relief action against University for 11 allegedly unconstitutional course-approval methods); Stearns362 Fed. Appx. at 645 (explaining 12 “plaintiffs’ as-applied claims and the relief they seek, although equitable in nature, both require 13 ‘individualized proof’ specific to each rejected course and the school that offered it.”); see also 14 Dinkins, 5 F.3d at 592-93 (denying associational standing to landlords’ as-applied takings 15 challenges). 16 Outside the limited “as-applied” context, courts consistently uphold associational 17 standing in declaratory and injunctive relief cases. See Warth, 422 U.S. at 515 (associational 18 standing depends “in substantial measure on the nature of the relief sought”); Assoc. Gen. 19 Contractors of Am. v. Metro. Water Dist. of S. Cal., 159 F.3d 1178, 1181 (9th Cir. 1988) 20 (“Individualized proof from the members is not needed where, as here, declaratory and injunctive 21 relief is sought rather than monetary damages.”) (citation omitted); cf. SEIU, Local 721 v. Cnty. 22 of Riverside, 2011 WL 1599610, at *11 (C.D. Cal. 2011) (finding, because individual damage 23 award calculations would require significant individual participation, “associational standing is 24 precluded insofar as Plaintiff alleges monetary damages.”). 25 The recognition of associational standing in declaratory and injunctive relief cases 26 persists even where some individual participation is necessary. For example, the Seventh Circuit 27 has held an association of retired police officers seeking to prevent their city from altering the 28 retirees’ health plan had associational standing: In rejecting the city’s focus on potential 5 1 individual participation, the court explained “[w]e can discern no indication . . . that the Supreme 2 Court intended to limit representational standing to cases in which it would not be necessary to 3 take any evidence from individual members of an association.” RCPA v. Chicago, 7 F.3d 584, 4 602 (7th Cir. 1993). The court went on to state, “the issue is whether the [c]ity made certain 5 binding representations with respect to its health care funding obligations. Recovery would not 6 require that each and every [association member] establish that he was the recipient of a 7 misrepresentation by the City . . .” 603. 8 Other courts to address the issue agree that Hunt’s third factor does not preclude 9 the existence of associational standing in declaratory or injunctive relief cases in which limited 10 individual member participation is necessary. See Alliance for Open Soc’y Int’l, Inc. v. U.S. 11 Agency for Int’l Dev., 651 F.3d 218, 230 (2d Cir. 2011) (“‘The fact that a limited amount of 12 individualized proof may be necessary does not in itself preclude associational standing.’”) 13 (citation omitted); Pa. Psychiatric Soc. v. Green Spring Health Servs., Inc., 280 F.3d 278, 286 (3d 14 Cir. 2002) (“If the Pennsylvania Psychiatric Society can establish these claims 15 with limited individual participation, it would satisfy the requirements for associational 16 standing.”); cf. Rocky Mountain Farmers Union v. Corey, No. 1:09-CV-2234-LJO-BAM, 2017 17 WL 2619130, at *7 (E.D. Cal. June 16, 2017) (denying associational standing where, although 18 plaintiffs characterized their relief as injunctive and declaratory, it required essentially the same 19 level of individual participation as a damages claim) Of particular relevance to this case, in 20 SCARE v. Sonoma Cnty., 2015 WL 1870841 (N.D. Cal. 2015), an association alleged Sonoma 21 County’s new cap on healthcare benefit contributions forced retirees into much higher healthcare 22 premiums in breach of the county’s longstanding agreement to pay their benefits in perpetuity. 23 Id. at *1. The court found associational standing adhered, and explained “[member] participation 24 would likely be quite limited given that [the association’s] claims are based almost entirely on 25 local ordinances and resolutions, each of which applies to a broad swath of retirees.” Id. at *4. 26 Thus, “the potential limited participation by some members . . . [wa]s not sufficient to defeat 27 associational standing.” Id. 28 6 1 Together, these cases stand for the proposition that associational standing is 2 present under Hunt’s third factor if the claims and relief do not require significant individual 3 member participation. 4 5 B. Discussion In its prior order, as noted, the court denied associational standing after applying 6 Hunt’s third factor, because the damages the Association sought varied significantly between 7 retirees based on their different dates of hire, years of service and bargaining units. Prior Order 7. 8 Also as noted, the Association now seeks only injunctive and declaratory relief. FAC ¶ 35. The 9 Association’s denunciation of monetary damages aligns this case squarely with the precedents 10 that consistently acknowledge associational standing in analogous circumstances. The 11 Association does not raise an as-applied constitutional challenge and therefore escapes the 12 rationale for dismissal in both Dinkins, 5 F.3d at 592–93 and Stearns, 678 F. Supp. 2d at 985–86. 13 Beyond the as-applied context, the City has identified no authority for denying standing under 14 Hunt’s third factor in declaratory and injunctive relief cases, and at hearing the City’s counsel 15 conceded he knew of none. 16 The court finds plaintiff’s pleadings establish associational standing. Hunt’s third 17 factor focuses on the practicality and judicial economy of adjudicating certain issues at the 18 associational, rather than individual, level. UFCW, 517 U.S. at 545. Where, as here, the 19 Association seeks only injunctive and declaratory relief and brings claims based on retirees’ 20 interests as a group, rather than individual as-applied challenges, there is no prudential 21 justification weighing against a finding of standing. The City has not explained how the potential 22 for some individual participation threatens administrative convenience or efficiency. The 23 differing health care vesting schedules based on retirees’ dates of hire and years of service has 24 little bearing on the ultimate claims and injuries at issue here. 25 To the contrary, the Association’s claims involve questions that apply to all 26 members and are well-suited to association-level resolution. The complaint requests a declaration 27 that the retirees have a vested right in continued health care despite individual benefit variations, 28 that the City violated the retirees’ due process rights by excluding them from the negotiation 7 1 process, and that the City-retiree agreements did not permit this unilateral benefit alteration. FAC 2 ¶¶ 22, 23, 26, 29, 42. Although individual member participation may be necessary to ascertain 3 which contracts the City violated, if it did violate, that potential does not preclude standing under 4 Hunt. RCPA, 7 F.3d at 603; Alliance, 651 F.3d at 230; Psychiatric Soc., 280 F.3d 278, 286; 5 SCARE, 2015 WL 1870841, at *1. The Association meets all three Hunt factors. The court 6 DENIES the City’s motion to dismiss for lack of associational standing. 7 III. FAILURE TO STATE A CLAIM 8 9 10 The City also moves to dismiss the Association’s complaint under Rule 12(b)(6), arguing the MOUs from which the Association’s claims derive do not promise what the Association alleges they promise. Mot. at 1. 11 A. 12 Legal Standard Under Federal Rule of Civil Procedure 12(b)(6) a party may move to dismiss a 13 complaint for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 14 12(b)(6). A court may dismiss “based on the lack of cognizable legal theory or the absence of 15 sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 16 F.2d 696, 699 (9th Cir. 1990). 17 Although a complaint need only contain a short and plain statement of the claim 18 showing entitlement to relief, that statement must be “plausible on its face.’” Ashcroft v. Iqbal, 19 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). See 20 also Fed. R. Civ. P. 8(a)(2). A complaint must include something more than “an unadorned, the- 21 defendant-unlawfully-harmed-me accusation” or “‘labels and conclusions’ or ‘a formulaic 22 recitation of the elements of a cause of action.’” Iqbal, 556 U.S. at 67 (quoting Twombly, 550 23 U.S. at 555). Whether Rule 12(b)(6) dismissal is warranted is a “context-specific task that 24 requires the reviewing court to draw on its judicial experience and common sense.” Twombly, 25 550 U.S. at 679. Ultimately, the inquiry focuses on the interplay between the complaint’s factual 26 allegations and the dispositive issues of law. See Hishon v. King & Spalding, 467 U.S. 69, 73 27 (1984). 28 ///// 8 1 In making this context-specific evaluation, the court construes the complaint in the 2 plaintiff’s favor and accepts its factual allegations as true. Erickson v. Pardus, 551 U.S. 89, 93- 3 94 (2007). But this rule does not apply to “a legal conclusion couched as a factual allegation,” 4 Papasan v. Allain, 478 U.S. 265, 286 (1986), to “allegations that contradict matters properly 5 subject to judicial notice,” or to material attached to or incorporated by reference into the 6 complaint, Sprewell v. Golden State Warriors, 266 F.3d 979, 988-89 (9th Cir. 2001). 7 B. 8 Discussion The City argues judicially-noticeable facts show at least eight specific MOUs from 9 which the Associations’ claims derive contain language contradicting the complaint. Mot. at 9.1 10 The City argues these MOU do not say “coverage shall continue indefinitely.” Id. The City does 11 not rebut the Association’s contention that three of the eight MOUs were executed after the 12 Resolution went into effect and are thus irrelevant. Opp’n at 14 (citing Rose Decl. Exs. A-I, ECF 13 No. 36-1); see generally Reply, ECF No. 37. As to the remaining five MOUs, several contain the 14 language the City claims is missing. See Decl. Alessi, Ex. 5 at 16-17 (“coverage shall continue 15 indefinitely”), Ex. 6 at 5 (same), Ex. 7 at 29-30 (same) & Ex. 8 at 4 (same). 16 Regardless, the City’s dismissal argument is premature: The relevant inquiry calls 17 for contract-by-contract language comparisons and details beyond the realm of notice pleading. 18 See Iqbal, 556 U.S. at 678 (“To survive a motion to dismiss, a complaint must contain sufficient 19 factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”) (quoting 20 Twombly, 550 U.S. at 570)). The City’s citation of factual inconsistencies when comparing the 21 amended complaint and eight MOUs, even if correct, would not warrant dismissal with regard to 22 the multitude of additional MOUs on which the complaint is based. As the Association notes, the 23 eight MOUs to which the City points are only a “sliver” of the eighty plus contracts that appear 24 will surface during discovery. Opp’n at 15. The complaint states a cognizable claim for relief. 25 26 27 28 1 The court grants defendant’s unopposed requests to take judicial notice of the eight MOUs contained in exhibits 1 through 8, ECF No. 29, under Federal Rule of Evidence 201(b). 9 1 2 3 IV. CONCLUSION The court DENIES the City’s motion to dismiss in its entirety. The City’s Answer to the Association’s amended complaint is due within fourteen calendar days of this order. 4 IT IS SO ORDERED. 5 This order resolves ECF No. 32. 6 DATED: June 26, 2017. 7 8 UNITED STATES DISTRICT JUDGE 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 10

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