Sonoma County Association of Retired Employees v. Sonoma County

Filing 160

AMENDED ORDER GRANTING IN PART 77 MOTION TO DISMISS. Signed by Judge Claudia Wilken on 04/23/2015. (tmi, COURT STAFF) (Filed on 4/23/2015)

1

IN THE UNITED STATES DISTRICT COURT

2

FOR THE NORTHERN DISTRICT OF CALIFORNIA

3
4
5

SONOMA COUNTY ASS’N OF RETIRED
EMPLOYEES,

8
9

AMENDED ORDER
GRANTING IN PART
MOTION TO DISMISS
(Docket No. 77)

Plaintiff,

6
7

No. C 09-4432 CW

v.
SONOMA COUNTY,
Defendant.
________________________________/

10
United States District Court
For the Northern District of California

Defendant Sonoma County moves to dismiss the second amended
11
complaint (2AC) for lack of subject matter jurisdiction and
12
failure to state a claim.

Plaintiff Sonoma County Association of

13
Retired Employees (SCARE) opposes the motion.

After considering

14
the parties’ submissions and oral argument, the Court grants the
15
motion in part and denies it in part.
16
BACKGROUND
17
The following facts are alleged in the 2AC.
18
SCARE is a nonprofit mutual benefit corporation that
19
“promotes and protects the welfare and interests of the retired
20
employees of Sonoma County.”

Docket No. 75, 2AC ¶ 11.

Roughly

21
fourteen hundred Sonoma County retirees currently claim membership
22
in the organization.

Id. ¶ 12.

23
The County has subsidized its retirees’ healthcare benefits
24
since at least 1964.

Id. ¶ 14.

In August 2008, the County’s

25
Board of Supervisors enacted a resolution capping its healthcare
26
benefit contributions at the flat amount of $500 per month for all
27
retirees as well as for certain active employees.
28

Id. ¶ 32.

The

County planned to phase in this new cap over a five-year period

2

beginning in June 2009.

3

affected by the new cap, the County enacted a resolution in

4

September 2008 providing active employees with an additional $600

5

monthly cash allowance for healthcare costs.

Id. ¶¶ 33-34.

6

Retirees were not provided the same benefit.

Thus, at the

7

conclusion of the five-year phase-in period, active employees

8

would be receiving $1,100 per month from the County in healthcare

9

benefits while retirees would be receiving only $500 per month.

10
United States District Court
For the Northern District of California

1

SCARE brought this action in September 2009, alleging that

Id.

To assist active employees adversely

11

the County’s new cap on healthcare benefit contributions would

12

harm many retirees by forcing them to pay significantly higher

13

healthcare premiums while living on a fixed income.

14

complaint, SCARE asserted that the new cap constituted a breach of

15

the County’s longstanding agreement to pay for its retirees’

16

healthcare benefits costs in perpetuity.

17

alternative theories to explain how and when the County entered

18

into such an agreement.

19

series of promises, dating back to at least 1964, to pay “all or

20

substantially all” of the costs of healthcare benefits for its

21

retirees and their dependents.

22

County entered into a “tie agreement” in 1985 under which it

23

promised to provide its retirees and their dependents with the

24

same level of healthcare benefits that it provided to active

25

management employees.

26

binding promise to provide post-retirement healthcare benefits in

27

perpetuity under either theory of contract formation.

In its

SCARE offered two

First, it alleged that the County made a

Second, SCARE alleged that the

The County denied that it had made a

28
2

1

In May 2010, this Court granted, with leave to amend, the

2

County’s motion to dismiss SCARE’s complaint.

3

(Sonoma I).

4

municipal governments could only create express contracts for

5

public employment by means of an ordinance or resolution and SCARE

6

had failed to identify in its complaint any such ordinances or

7

resolutions promising healthcare benefits to retirees.

8
9

Docket No. 34

The Court explained that, under California law,

In July 2010, SCARE filed an amended complaint in which it
sought to cure this deficiency by adding new factual allegations

United States District Court
For the Northern District of California

10

to support its claims.

11

eight exhibits to its amended complaint which consisted of various

12

resolutions, ordinances, and memoranda of understanding (MOUs)

13

signed by County representatives.

14

documents, taken together, established a binding promise by the

15

County to provide healthcare benefits to all retirees in

16

perpetuity.

17

Docket No. 35.

SCARE also attached sixty-

According to SCARE, these

In November 2010, this Court once again dismissed SCARE’s

18

complaint, this time without leave to amend.

19

(Sonoma II).

20

found that none of the new factual allegations or various

21

resolutions, ordinances, and MOUs attached to the complaint

22

supported SCARE’s claim that the County entered into a binding

23

contract to provide post-retirement healthcare benefits in

24

perpetuity.

25

ordinances evidenced the County’s longstanding practice of paying

26

all or substantially all of the costs of retirees’ healthcare

27

benefits, they did not contain an express promise that the County

28

would continue to do so in perpetuity.

Docket No. 51

After reviewing the amended complaint, the Court

The Court explained that, while the resolutions and

3

Furthermore, the Court

1

noted, none of the attached resolutions or ordinances explicitly

2

adopted the alleged 1985 “tie agreement” and none of the MOUs

3

contained durational language suggesting that they were meant to

4

confer rights in perpetuity.

5

identify a binding promise on which its contract claims were based

6

despite a second opportunity to do so, the Court dismissed its

7

complaint with prejudice.

8

month.

9

Thus, because SCARE had failed to

SCARE filed an appeal the following

While that appeal was pending, the California Supreme Court

United States District Court
For the Northern District of California

10

issued its opinion in Retired Employees Association of Orange

11

County, Inc. v. County of Orange, 52 Cal. 4th 1171 (2011) (REAOC

12

II).1

13

California law, a California county and its employees can form an

14

implied contract that confers vested rights to health benefits on

15

retired county employees.”

16

certified this question to the California Supreme Court in a case

17

where a county government sought to reduce its contributions to

18

its retired employees’ healthcare benefit plans.

19

Emps. Ass’n of Orange Cnty. Inc. v. County of Orange, 610 F.3d

20

1099 (9th Cir. 2010) (REAOC I).

21

Supreme Court answered the certified question by holding that “a

22

vested right to health benefits for retired county employees can

23

be implied under certain circumstances from a county ordinance or

24

resolution.”

That opinion addressed “[w]hether, as a matter of

Id. at 1176.

The Ninth Circuit had

See Retired

In REAOC II, the California

52 Cal. 4th at 1194.

25
26
27
28

1

This order refers to the opinions in both the REAOC and the
Sonoma lines of cases using the same case names employed by both the
parties and the Ninth Circuit in this action.

4

1

In February 2013, the Ninth Circuit vacated this Court’s

2

November 2010 order of dismissal.

3

F.3d 1109, 1119 (9th Cir. 2013) (Sonoma III).

4

of appeals agreed that SCARE’s first amended complaint failed to

5

state a claim, it held that SCARE should be granted leave to amend

6

in order to plead that, under REAOC II, the County made an implied

7

promise to provide post-retirement healthcare benefits.

8

Ninth Circuit explained, “The district court did not have the

9

benefit of REAOC II, but in light of its clarification that a

SCARE v. Sonoma County, 708
Although the court

Id.

The

United States District Court
For the Northern District of California

10

public entity in California can be bound by an implied term in a

11

written contract under specified circumstances, we cannot say that

12

the Association’s amendment of its complaint a second time would

13

be futile.”

14

proceedings consistent with REAOC II.”

15

Id.

It therefore remanded the action “for

SCARE filed its 2AC in May 2013.

Id.
It attached twenty-six new

16

resolutions to the 2AC and asserted that these resolutions --

17

along with the sixty-eight resolutions, ordinances, and MOUs

18

attached to its previous complaint -- evinced the “County’s clear

19

intent to bind itself to contracts with the Retirees to provide

20

post-retirement healthcare benefits.”

21

made a handful of minor changes to the text of its complaint, the

22

twenty-six newly added resolutions constituted the principal

23

substantive amendment to its earlier complaint.

24

2AC ¶ 19.

Although SCARE

In June 2013, the County filed the instant motion to dismiss.

25
26
27
28
5

1
2

DISCUSSION
I.

Subject Matter Jurisdiction

3

A.

4

Subject matter jurisdiction is a threshold issue which goes

Legal Standard

5

to the power of the court to hear the case.

6

matter jurisdiction must exist at the time the action is

7

commenced.

8

Equalization, 858 F.2d 1376, 1380 (9th Cir. 1988).

9

court is presumed to lack subject matter jurisdiction until the

Morongo Band of Mission Indians v. Cal. State Bd. of

10
United States District Court
For the Northern District of California

Federal subject

contrary affirmatively appears.

11

A federal

Tribes, 873 F.2d 1221, 1225 (9th Cir. 1989).

Stock W., Inc. v. Confederated

12

Dismissal is appropriate under Rule 12(b)(1) when the

13

district court lacks subject matter jurisdiction over the claim.

14

Fed. R. Civ. P. 12(b)(1).

15

attack the sufficiency of the pleadings to establish federal

16

jurisdiction, or allege an actual lack of jurisdiction which

17

exists despite the formal sufficiency of the complaint.

18

Publ’g Co. v. Gen. Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th

19

Cir. 1979); Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir.

20

1987).

A Rule 12(b)(1) motion may either

Thornhill

21

B.

22

The County contends that the Court lacks subject matter

Associational Standing

23

jurisdiction over this action because SCARE has failed to

24

establish that it has standing to bring suit on behalf of its

25

members.

2

26
27
28

2

Although the County failed to raise this issue previously, both
in its prior motions and on appeal, this failure does not bar its
standing argument here because a “litigant generally may raise a court’s

6

1

The standing requirement derives from Article III, section 2

2

of the United States Constitution, which “confines the judicial

3

power of federal courts to deciding actual ‘Cases’ or

4

‘Controversies.’”

5

(2013) (quoting U.S. Const. art III, § 2).

6

seeking to bring suit on behalf of its members must establish that

7

it has “associational standing” by showing that “(1) at least one

8

of its members would have standing to sue in his own right,

9

(2) the interests the suit seeks to vindicate are germane to the

Hollingsworth v. Perry, 133 S. Ct. 2652, 2661
An organization

United States District Court
For the Northern District of California

10

organization’s purpose, and (3) neither the claim asserted nor the

11

relief requested requires the participation of individual members

12

in the lawsuit.”

13

F.3d 1100, 1105-06 (9th Cir. 2006) (citing United Food &

14

Commercial Workers Union Local 751 v. Brown Group, Inc., 517 U.S.

15

544, 553 (1996)).

16

directly from Article III, “the third prong of the associational

17

standing test is best seen as focusing on [] matters of

18

administrative convenience and efficiency, not on elements of a

19

case or controversy within the meaning of the Constitution.”

20

United Food, 517 U.S. at 557.

21

Fleck & Associates, Inc. v. City of Phoenix, 471

While the first two prongs of this test arise

Here, the County contends that SCARE has failed to meet the

22

third prong of this test because it seeks monetary damages rather

23

than purely injunctive or declaratory relief.

24

County, these damages claims will ultimately necessitate the

25

participation of SCARE’s individual members in this lawsuit.

26

support, the County cites a handful of cases where district courts

According to the

For

27
28

lack of subject-matter jurisdiction at any time.”
U.S. 443, 455 (2004).

7

Kontrick v. Ryan, 540

1

have refused to allow organizations to bring certain claims for

2

monetary relief on behalf of their individual members.

3

SEIU, Local 721 v. County of Riverside, 2011 WL 1599610, at *11

4

(C.D. Cal.) (“Thus, because Plaintiff seeks damages here,

5

associational standing is precluded insofar as Plaintiff alleges

6

monetary damages.”).

7

Circuit has recognized that organizations seeking only injunctive

8

or declaratory relief typically face a lower bar to associational

9

standing than organizations seeking damages.

See, e.g.,

It also points to cases where the Ninth

See, e.g.,

United States District Court
For the Northern District of California

10

Associated Gen. Contractors of Am. v. Metro. Water Dist. of S.

11

Cal., 159 F.3d 1178, 1181 (9th Cir. 1998) (“[T]here can be little

12

doubt that the claims raised by [the plaintiff] do not require the

13

participation of individual members in this action.

14

Individualized proof from the members is not needed where, as

15

here, declaratory and injunctive relief is sought rather than

16

monetary damages.”).

17

None of these cases establishes a rigid rule precluding

18

associational standing in all cases where organizations seek to

19

bring damages claims on behalf of their individual members.

20

Indeed, in United Food, the Supreme Court unanimously held that

21

the third prong of the associational standing test did not bar a

22

union from asserting damages claims on behalf of its members under

23

the Worker Adjustment and Retraining Notification Act.

24

at 558.

25

other contexts in which a statute, federal rule, or accepted

26

common-law practice permits one person to sue on behalf of

27

another, even where damages are sought.”

28

added).

517 U.S.

The Court specifically highlighted a “wide variety of

Id. at 557 (emphasis

The Court therefore concluded that the third prong of the
8

1

associational standing test does not create a strict

2

constitutional prohibition on claims for monetary relief but,

3

rather, addresses prudential concerns such as “administrative

4

convenience and efficiency.”

5

Id.

The County has not adequately explained how the participation

6

of SCARE’s individual members in this suit would threaten

7

administrative convenience or efficiency here.

8

any of SCARE’s individual members would have to participate in

9

this litigation at all -- and it remains unclear whether they

To the extent that

United States District Court
For the Northern District of California

10

would -- their participation would likely be quite limited given

11

that SCARE’s claims are based almost entirely on local ordinances

12

and resolutions, each of which applies to a broad swath of

13

retirees.

14

SCARE is not sufficient to defeat associational standing.

15

e.g., Alliance for Open Soc’y Int’l, Inc. v. U.S. Agency for Int’l

16

Dev., 651 F.3d 218, 230 (2d Cir. 2011) (“‘The fact that a limited

17

amount of individuated proof may be necessary does not in itself

18

preclude associational standing.’” (emphasis added; citations

19

omitted)), aff’d, 133 S. Ct. 2321 (2013); Pa. Psychiatric Soc. v.

20

Green Spring Health Servs., Inc., 280 F.3d 278, 286 (3d Cir. 2002)

21

(“If the Pennsylvania Psychiatric Society can establish these

22

claims with limited individual participation, it would satisfy the

23

requirements for associational standing.” (emphasis added));

24

Retired Chicago Police Ass’n v. City of Chicago, 7 F.3d 584, 603

25

(7th Cir. 1993) (RCPA) (“We can discern no indication . . . that

26

the Supreme Court intended to limit representational standing to

27

cases in which it would not be necessary to take any evidence from

28

individual members of an association.”).

The potential limited participation by some members of

9

See,

1

In any event, the relief that SCARE seeks here is primarily
declarative and injunctive in nature.

3

for a judicial declaration that the County owes its retirees

4

certain healthcare benefits and an injunction directing the County

5

to provide those benefits.

6

result in monetary gains for SCARE’s individual members, it is

7

still sufficient to support associational standing.

8

a case similar to this one, another court in this district found

9

that an association of retired Contra Costa County employees had

10
United States District Court
For the Northern District of California

2

associational standing to bring claims for breach of an implied

11

promise to pay healthcare benefits, reasoning that the relief the

12

organization sought was essentially declaratory and injunctive in

13

nature.

14

Costa Cnty., 944 F. Supp. 2d 799, 805-06 (N.D. Cal. 2013)

15

(rejecting the defendant’s argument that “the resolution of [the

16

association]’s claims requires individualized factual inquiries

17

and the participation of individual retirees”).

18

retiree organization alleged that Contra Costa County had

19

“promised the retirees that they would receive retiree health care

20

benefits for themselves and their dependents if they met certain

21

criteria, and that the County would pay for 80% or more of the

22

costs of these benefits for at least one plan for the lifetime of

23

the retirees.”

24

retirees’ benefits at a flat dollar amount, the organization

25

brought suit seeking “injunctive and declaratory relief that would

26

require the County to fulfill its obligations under the 80%

27

promise.”

28

to satisfy the third prong of the associational standing test.

In its complaint, it asks

While this relief would ultimately

Recently, in

Retiree Support Grp. of Contra Costa Cnty. v. Contra

Id. at 801.

Id. at 802.

There, the

When the county sought to cap the

The court found that this was sufficient

10

1

Id. at 806 (“Because RSG seeks declaratory and injunctive relief,

2

the third factor also is satisfied.”).

3

The Seventh Circuit relied on similar reasoning in RCPA,

4

finding that an association of retired police officers who wanted

5

to prevent the City of Chicago from altering their health plan had

6

associational standing.

7

retirees stood to benefit financially if the association prevailed

8

in the suit, the court nevertheless treated the association’s

9

claims as claims for declaratory and injunctive relief.

7 F.3d at 602-03.

Even though the

Id. at

United States District Court
For the Northern District of California

10

603 (“Declaratory, injunctive, or other prospective relief will

11

usually inure to the benefit of the members actually injured and

12

thus individualized proof of damages is often unnecessary.”).

13

court expressly rejected the city’s argument that the association

14

failed to meet the third prong of the associational standing test.

15

Id. (“Here, the issue is whether the City made certain binding

16

representations with respect to its health care funding

17

obligations.

18

member of the [retired police officers’ association] establish

19

that he was the recipient of a misrepresentation by the City or

20

the Police Fund.”).

21

The

Recovery would not require that each and every

Analogous logic governs here.

Accordingly, SCARE has plead sufficient facts to establish

22

that it has standing to sue on behalf of its individual members.

23

The County’s motion to dismiss for lack of subject matter

24

jurisdiction must therefore be denied.

25

II.

Failure to State a Claim

26

A.

27

A complaint must contain a “short and plain statement of the

28

Legal Standard

claim showing that the pleader is entitled to relief.”
11

Fed. R.

1

Civ. P. 8(a).

2

state a claim, dismissal is appropriate only when the complaint

3

does not give the defendant fair notice of a legally cognizable

4

claim and the grounds on which it rests.

5

Twombly, 550 U.S. 544, 555 (2007).

6

complaint is sufficient to state a claim, the court will take all

7

material allegations as true and construe them in the light most

8

favorable to the plaintiff.

9

896, 898 (9th Cir. 1986).

On a motion under Rule 12(b)(6) for failure to

Bell Atl. Corp. v.

In considering whether the

NL Indus., Inc. v. Kaplan, 792 F.2d

However, this principle is inapplicable

United States District Court
For the Northern District of California

10

to legal conclusions; “threadbare recitals of the elements of a

11

cause of action, supported by mere conclusory statements,” are not

12

taken as true.

13

(citing Twombly, 550 U.S. at 555).

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

14

B.

15

As noted above, SCARE has sought to cure its prior pleading

16

deficiencies by attaching twenty-six new resolutions to its 2AC.

17

The County contends that these resolutions do not plausibly

18

suggest that it entered into any binding contracts containing an

19

implied promise to provide its employees with post-retirement

20

healthcare benefits in perpetuity.

21

merit discussion here.

22

Sufficiency of New Board Resolutions

It raises three arguments that

First, the County points to a 1992 ordinance requiring that

23

any promise of payment to a County employee be made with the

24

“express prior authorization” of the Board of Supervisors.

25

According to the County, this ordinance precludes SCARE from

26

asserting any contract claims based on the existence of an implied

27

promise in any resolutions or MOUs adopted after 1992.

28

the County asserts that the newly added resolutions only govern
12

Second,

1

the rights of retirees who were represented by a union and,

2

therefore, do not provide any contractual rights to non-union

3

retirees.

4

resolutions only date back as far as 1990.

5

argues, they do not create a contractual right to healthcare

6

benefits for any retirees who retired before that date.

7

these arguments is addressed in turn.

8
9

Third and finally, the County notes that the new

1.

As such, the County

Each of

1992 Ordinance

In REAOC II, the California Supreme Court explained that “a

United States District Court
For the Northern District of California

10

county may be bound by an implied contract under California law if

11

there is no legislative prohibition against such arrangements,

12

such as a statute or ordinance.”

13

added).

14

enacted in January 1992, provides just such a prohibition on

15

implied contracts.

16

ordinance, which provides,

17
18
19
20
21
22
23
24

52 Cal. 4th at 1176 (emphasis

The County contends that Ordinance No. 4478, which was

It specifically cites section 2 of the

Any purportedly binding promise or
representation made by any officer, employee
or agent of the County of Sonoma, including
other public agencies governed in whole or in
part by the Board of Supervisors, that would
require the payment of money, performance of
service, transfer of any property, real or
personal, or the giving of any other thing of
value of the County of Sonoma, or other public
agencies governed in whole or in part by the
Board of Supervisors, where the making of the
promise or the representation did not have the
express authorization of the Board of
Supervisors is, unless otherwise provided by
law, unenforceable and void.

25
26
27
28
13

1

Docket No. 78, Def.’s Req. Judicial Notice (RJN), Ex. 1A, at 1

2

(emphasis added).3

3

“express authorization” requirement precludes SCARE from asserting

4

any claims against it based on an implied contract term.

5

interpretation of the ordinance is not persuasive.

6

The County argues that, under REAOC II, this

This

Section 1 of Ordinance No. 4478 outlines the Board of

7

Supervisors’ purpose in adopting the ordinance.

8

section, the Board adopted the ordinance in furtherance of a

9

general policy “that the decision to obligate public funds and

According to that

United States District Court
For the Northern District of California

10

property should be made openly and publicly in accordance with the

11

requirements of the Ralph M. Brown Act, unless otherwise

12

authorized by law.”

13

legislative intent suggests that the central purpose of the

14

“express authorization” requirement is to ensure that all of the

15

County’s payment obligations are approved by the Board in an open

16

and public setting.

17

prevent any “officer, employee or agent of the County” from

18

binding the County to any contract without the public’s knowledge

19

and without the Board’s approval.

Def.’s RJN, Ex. 1A, at 1.

This statement of

Put differently, the ordinance is supposed to

20

Nothing in the ordinance, however, suggests that the Board

21

also intended to require that every “promise or representation”

22

made by the County be conveyed in “express” terms.

23

text of the ordinance itself suggests that it is the Board’s

24

authorization of County contracts that must be “express” -- not

Rather, the

25
26
27
28

3

The County’s request for judicial notice of the text of this
ordinance is granted. The ordinance is codified at section 1-11 of the
Sonoma County Code of Ordinances, which is available online at:
http://library.municode.com/HTML/16331/level1/CH1GEPR.html#CH1GEPR_S111OBPUFUPR (last visited Jan. 3, 2014).

14

1

the terms of every contract it approves.

2

sought to preclude implied terms from being read into any contract

3

involving “the payment of money, performance of service, transfer

4

of any property, real or personal, or the giving of any other

5

thing of value of the County of Sonoma,” it would raise the cost

6

of contracting with the County considerably.

7

what the Board intended when it adopted Ordinance No. 4478.

8

Accordingly, the County’s proposed construction of the ordinance

9

as a broad prohibition against implied contract terms is not

Indeed, if the Board

This was not likely

United States District Court
For the Northern District of California

10

tenable.

11

claims against the County based on implied promises or

12

representations, as long as those promises or representations were

13

approved by the Board in an open and public setting by means of an

14

ordinance or resolution.

15
16

The ordinance does not bar SCARE from asserting contract

2.

Non-Union Retirees

In Sonoma III, the Ninth Circuit set forth a two-part test

17

that SCARE must satisfy here to state a valid claim for breach of

18

contract.

19

dismiss, [SCARE]’s complaint must plausibly allege that the

20

County: (1) entered into a contract that included implied terms

21

providing healthcare benefits to retirees that vested for

22

perpetuity; and (2) created that contract by ordinance or

23

resolution.”

24

1185-86).

25

SCARE’s prior complaint -- specifically, those in which the County

26

agreed to “make contributions toward a health plan premium for

27

retirees hired after 1990” -- satisfied the first part of this

28

test because they plausibly contained an implied promise to

It explained that, “in order to survive a motion to

708 F.3d at 1115 (citing REAOC II, 52 Cal. 4th at

The court held that some of the MOUs attached to

15

1

provide post-retirement healthcare benefits in perpetuity.

2

1116 (“The MOUs submitted with the amended complaint support the

3

Association’s allegation that the MOUs promised healthcare

4

benefits.”).

5

part of the test because it did not identify any specific

6

ordinances or resolutions that plausibly ratified these MOUs.4

7

Id. at 1117 (“Given REAOC II’s focus on the statutory requirement

8

that compensation of county employees must be addressed in an

9

ordinance or resolution, the complaint’s passing references to

Id. at

However, the complaint failed to satisfy the second

United States District Court
For the Northern District of California

10

Board ratification are an insufficient basis for a court to infer

11

that the County enacted a resolution or ordinance that ratified

12

the relevant MOUs.” (citations omitted)).

13

The twenty-six resolutions that SCARE has added to its 2AC

14

solve this problem because they contain language expressly

15

adopting the MOUs highlighted in the Ninth Circuit’s opinion.

16

2AC, Exs. 69-94.

17

scope because they only govern agreements between the County and

18

local unions; the MOUs do not promise any benefits to the County’s

19

non-union employees.

20

resolutions and ordinances attached to its 2AC show that the

21

County made similar promises to non-union employees, see Docket

22

No. 81, Pl.’s Opp. at 9-10, the Ninth Circuit’s opinion in Sonoma

23

III precludes this argument.

See

However, the MOUs themselves are limited in

Although SCARE argues that the other

Citing the standard set forth in

24
25
26
27
28

4

This distinguishes the present case from Contra Costa, 944 F.
Supp. 2d at 804, which SCARE cites for support. In that case, the court
applied the two-part test set forth in Sonoma III and specifically
concluded that the plaintiff’s complaint “meets both of these
requirements.” Id.

16

1

REAOC II to satisfy the second part of the test outlined above,

2

the Sonoma III court explained that

3

the County’s resolutions and ordinances may
create a contract if the text and the
circumstances of their passage “clearly
evince” an intent to grant vested benefits, or
if they “contain[] an unambiguous element of
exchange of consideration by a private party
for consideration offered by the state.” In
the alternative, the County’s intent to make a
contract by legislation “is clearly shown”
when a resolution or ordinance ratifies or
approves the contract.

4
5
6
7
8
9

But here the amended complaint does not
plausibly allege either alternative.

United States District Court
For the Northern District of California

10
11

708 F.3d at 1117 (citing REAOC II, 52 Cal. 4th at 1186-87).

12

court noted that SCARE’s complaint was not “sufficient to

13

establish that the resolutions, ordinances, and MOUs were the

14

product of a bargained-for exchange of consideration.”

15

addition, it found that SCARE “did not allege that the Board

16

ratified the MOUs by resolution or ordinance” and failed to

17

“submit copies of any such resolutions or ordinances with the

18

amended complaint.”

19

court did not err in concluding that the amended complaint failed

20

to state a cause of action on this issue.”

Id.

Id.

The

In

Accordingly, it held that the “district

Id.

21

In light of the Ninth Circuit’s conclusion that SCARE’s

22

earlier complaint -- including the attachments thereto -- was not

23

sufficient to state a claim, SCARE cannot now rely on the

24

resolutions and ordinances attached to that complaint to establish

25

the contractual rights of non-union employees.

5

Thus, while SCARE

26
5

27
28

At oral argument, SCARE emphasized that the Ninth Circuit’s
opinion in this case “doesn’t draw any distinctions between union and
nonunion employees.” Docket No. 93, July 11, 2013 Hrg. Tr. 7:14-:16.
The Ninth Circuit, however, had no reason to draw such distinctions

17

1

may proceed on its claims based on the alleged contractual rights

2

of the union employees identified in the MOUs, it may not proceed

3

on any claims based on the alleged contractual rights of non-union

4

employees.

5
6

3.

Employees Retired Before 1990

The County argues that SCARE has failed to demonstrate that a

7

contractual right to healthcare benefits exists for employees who

8

retired prior to 1990.

9

went into effect in 1990.

The earliest MOU enacted by resolution
SCARE's complaint asserts that retirees

United States District Court
For the Northern District of California

10

performed services as employees in exchange for the County's

11

promise to pay their benefits after retirement.

12

that, under this theory, there is no bargained for exchange of

13

consideration to support a contract claim for the pre-1990

14

retirees, because they did not work after the resolution went into

15

effect.

16

claim for retirees who worked under the post-1989 MOUs.

17

SCARE may not proceed on any claims based on the alleged

18

contractual rights of employees who retired before 1990.

The Court agrees.

The County argues

SCARE has only plausibly stated a
Thus,

19

Because SCARE has not added any new resolutions to its 2AC

20

that were enacted before 1990, its theory of contract formation

21

based on the alleged 1985 “tie agreement” must be rejected.

22

Sonoma III made clear that, in order to state a valid claim based

23

on an implied contract to provide healthcare benefits, SCARE would

24
25
26
27
28

because, as noted above, SCARE’s complaint failed to meet the threshold
requirement of identifying a resolution or ordinance adopting the
relevant MOUs. In short, the court had no reason to delineate the
precise scope of the MOUs because SCARE did not adequately allege that
the Board actually adopted those MOUs. In any event, the Ninth
Circuit’s failure to distinguish between union and non-union employees
does not provide grounds for ignoring the plain language of the MOUs,
which is directed unequivocally at union employees.

18

1

have to amend its complaint to identify a specific ordinance or

2

resolution creating that contract.

3

to do so here with respect to the alleged 1985 “tie agreement.”

708 F.3d at 1115.

It failed

4

4.

5

The County’s remaining arguments focus on SCARE’s promissory

The County’s Remaining Arguments

6

estoppel claims and are largely derivative of its assertion that

7

SCARE has failed to establish the existence of an enforceable

8

contract to provide post-retirement healthcare benefits.

9

essence, the County contends that SCARE’s failure to identify a

In

United States District Court
For the Northern District of California

10

binding implied promise to provide healthcare benefits in

11

perpetuity dooms its promissory estoppel claims in addition to its

12

contract claims.

13

has adequately alleged the existence of such a promise with

14

respect to union retirees hired after 1990, the County’s arguments

15

with respect to SCARE’s promissory estoppel claims must be

16

rejected with respect to those retirees.

17

Because the Court concludes, however, that SCARE

The County also contends that the anti-vesting language of

18

section 31692 of the California Government Code bars SCARE’s

19

contract-based claims.

20

of an ordinance or resolution pursuant to Section 31691 shall give

21

no vested right to any member or retired member,6 and the board of

22

supervisors or the governing body of the district may amend or

23

repeal the ordinance or resolution at any time.”

24

§ 31692.

25

supervisors

That provision states that the “adoption

Cal. Gov’t Code.

Section 31691 provides that a county board of

26
27
6

28

In this context, “member” means any county employee participating
in an insurance plan.

19

may provide for the contribution by the county or
district from its funds and not from the
retirement fund, toward the payment of all or a
portion of the premiums on a policy or certificate
of life insurance or disability insurance issued
by an admitted insurer, or toward the payment of
all or part of the consideration for any hospital
service or medical service corporation . . .
contract, or for any combination thereof, for the
benefit of any member heretofore or hereafter
retired or his or her dependents.

1
2
3
4
5
6
7

Cal. Gov’t Code § 31691(a).

8

claims here because, as both REAOC II and Contra Costa explained,

9

“the ‘precise relationship’ between the services mentioned in

These provisions do not bar SCARE’s

United States District Court
For the Northern District of California

10

section 31691 and retiree health benefits is unclear.”

11

Costa, 944 F. Supp. 2d at 805 (citing REAOC II, 52 Cal. 4th at

12

1191).

13

courts considered section 31692 to be a bar to the retirees’

14

contract claims in those cases.

15

1194 (concluding, after examining section 31692, that “a vested

16

right to health benefits for retired county employees can be

17

implied under certain circumstances from a county ordinance or

18

resolution”).

19

of these cases in its briefs.

20

[the association]’s claims are barred by Section 31692 is

21

unavailing.”

This is one of the main reasons why neither of these

22
23

Contra

Id.; REAOC II, 52 Cal. 4th at

The County does not attempt to distinguish either
Thus, “the County’s argument that

Contra Costa, 944 F. Supp. 2d at 805.
CONCLUSION

For the reasons set forth above, Defendant’s motion to

24

dismiss (Docket No. 77) is GRANTED in part and DENIED in part.

25

Plaintiff may proceed on all of its claims based on promises that

26

are allegedly implied in the MOUs that the Board of Supervisors

27

ratified in the resolutions attached as Exhibits 69 through 94 of

28

the 2AC.

Plaintiff may not, however, proceed on any claims based
20

1

on promises that were allegedly implied in the other MOUs attached

2

to its 2AC.

3

“tie agreement.”

4
5
6

This includes any claims based on the alleged 1985

Defendant’s motion to file a statement of recent decision
(Docket No. 87) is GRANTED.
Defendant shall file its answer within fourteen days of this

7

order.

8

Plaintiff shall file its dispositive motion 224 days after

9

Defendant files its answer.

Pursuant to the parties’ stipulation, Docket No. 94,

Defendant shall file its opposition

United States District Court
For the Northern District of California

10

and any cross-motion, contained in a single twenty-five page

11

brief, twenty-eight days thereafter.

12

reply fourteen days after Defendant files its cross-motion and

13

opposition.

14

fourteen days after Plaintiff files its reply.

15

Plaintiff shall file its

Defendant shall file its reply to any cross-motion

IT IS SO ORDERED.

16
17
18

Dated: 04/23/2015

CLAUDIA WILKEN
United States District Judge

19
20
21
22
23
24
25
26
27
28
21