Sonoma County Association of Retired Employees v. Sonoma County
Filing
96
ORDER by Judge Claudia WilkenGRANTING IN PART 77 MOTION TO DISMISS. (ndr, COURT STAFF) (Filed on 1/10/2014)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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SONOMA COUNTY ASS’N OF RETIRED
EMPLOYEES,
United States District Court
For the Northern District of California
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ORDER GRANTING IN
PART MOTION TO
DISMISS (Docket
No. 77)
Plaintiff,
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No. C 09-4432 CW
v.
SONOMA COUNTY,
Defendant.
________________________________/
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Defendant Sonoma County moves to dismiss the second amended
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complaint (2AC) for lack of subject matter jurisdiction and
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failure to state a claim.
Plaintiff Sonoma County Association of
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Retired Employees (SCARE) opposes the motion.
After considering
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the parties’ submissions and oral argument, the Court grants the
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motion in part and denies it in part.
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BACKGROUND
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The following facts are alleged in the 2AC.
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SCARE is a nonprofit mutual benefit corporation that
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“promotes and protects the welfare and interests of the retired
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employees of Sonoma County.”
Docket No. 75, 2AC ¶ 11.
Roughly
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fourteen hundred Sonoma County retirees currently claim membership
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in the organization.
Id. ¶ 12.
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The County has subsidized its retirees’ healthcare benefits
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since at least 1964.
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Id. ¶ 14.
In August 2008, the County’s
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Board of Supervisors enacted a resolution capping its healthcare
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benefit contributions at the flat amount of $500 per month for all
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retirees as well as for certain active employees.
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County planned to phase in this new cap over a five-year period
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beginning in June 2009.
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affected by the new cap, the County enacted a resolution in
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September 2008 providing active employees with an additional $600
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monthly cash allowance for healthcare costs.
Id. ¶¶ 33-34.
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Retirees were not provided the same benefit.
Thus, at the
Id.
Id. ¶ 32.
The
To assist active employees adversely
United States District Court
For the Northern District of California
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conclusion of the five-year phase-in period, active employees
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would be receiving $1,100 per month from the County in healthcare
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benefits while retirees would be receiving only $500 per month.
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SCARE brought this action in September 2009, alleging that
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the County’s new cap on healthcare benefit contributions would
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harm many retirees by forcing them to pay significantly higher
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healthcare premiums while living on a fixed income.
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complaint, SCARE asserted that the new cap constituted a breach of
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the County’s longstanding agreement to pay for its retirees’
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healthcare benefits costs in perpetuity.
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alternative theories to explain how and when the County entered
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into such an agreement.
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series of promises, dating back to at least 1964, to pay “all or
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substantially all” of the costs of healthcare benefits for its
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retirees and their dependents.
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County entered into a “tie agreement” in 1985 under which it
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promised to provide its retirees and their dependents with the
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same level of healthcare benefits that it provided to active
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management employees.
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
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binding promise to provide post-retirement healthcare benefits in
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perpetuity under either theory of contract formation.
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In May 2010, this Court granted, with leave to amend, the
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County’s motion to dismiss SCARE’s complaint.
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(Sonoma I).
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municipal governments could only create express contracts for
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public employment by means of an ordinance or resolution and SCARE
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had failed to identify in its complaint any such ordinances or
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resolutions promising healthcare benefits to retirees.
United States District Court
For the Northern District of California
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Docket No. 34
The Court explained that, under California law,
In July 2010, SCARE filed an amended complaint in which it
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sought to cure this deficiency by adding new factual allegations
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to support its claims.
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eight exhibits to its amended complaint which consisted of various
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resolutions, ordinances, and memoranda of understanding (MOUs)
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signed by County representatives.
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documents, taken together, established a binding promise by the
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County to provide healthcare benefits to all retirees in
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perpetuity.
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Docket No. 35.
SCARE also attached sixty-
According to SCARE, these
In November 2010, this Court once again dismissed SCARE’s
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complaint, this time without leave to amend.
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(Sonoma II).
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found that none of the new factual allegations or various
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resolutions, ordinances, and MOUs attached to the complaint
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supported SCARE’s claim that the County entered into a binding
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contract to provide post-retirement healthcare benefits in
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perpetuity.
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ordinances evidenced the County’s longstanding practice of paying
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all or substantially all of the costs of retirees’ healthcare
Docket No. 51
After reviewing the amended complaint, the Court
The Court explained that, while the resolutions and
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benefits, they did not contain an express promise that the County
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would continue to do so in perpetuity.
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noted, none of the attached resolutions or ordinances explicitly
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adopted the alleged 1985 “tie agreement” and none of the MOUs
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contained durational language suggesting that they were meant to
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confer rights in perpetuity.
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identify a binding promise on which its contract claims were based
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despite a second opportunity to do so, the Court dismissed its
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complaint with prejudice.
United States District Court
For the Northern District of California
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Furthermore, the Court
Thus, because SCARE had failed to
SCARE filed an appeal the following
month.
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While that appeal was pending, the California Supreme Court
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issued its opinion in Retired Employees Association of Orange
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County, Inc. v. County of Orange, 52 Cal. 4th 1171 (2011) (REAOC
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II).1
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California law, a California county and its employees can form an
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implied contract that confers vested rights to health benefits on
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retired county employees.”
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certified this question to the California Supreme Court in a case
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where a county government sought to reduce its contributions to
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its retired employees’ healthcare benefit plans.
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Emps. Ass’n of Orange Cnty. Inc. v. County of Orange, 610 F.3d
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1099 (9th Cir. 2010) (REAOC I).
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Supreme Court answered the certified question by holding that “a
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vested right to health benefits for retired county employees can
That opinion addressed “[w]hether, as a matter of
Id. at 1176.
The Ninth Circuit had
See Retired
In REAOC II, the California
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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.
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be implied under certain circumstances from a county ordinance or
2
resolution.”
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52 Cal. 4th at 1194.
In February 2013, the Ninth Circuit vacated this Court’s
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November 2010 order of dismissal.
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F.3d 1109, 1119 (9th Cir. 2013) (Sonoma III).
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of appeals agreed that SCARE’s first amended complaint failed to
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state a claim, it held that SCARE should be granted leave to amend
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in order to plead that, under REAOC II, the County made an implied
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promise to provide post-retirement healthcare benefits.
SCARE v. Sonoma County, 708
Although the court
Id.
The
United States District Court
For the Northern District of California
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Ninth Circuit explained, “The district court did not have the
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benefit of REAOC II, but in light of its clarification that a
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public entity in California can be bound by an implied term in a
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written contract under specified circumstances, we cannot say that
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the Association’s amendment of its complaint a second time would
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be futile.”
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proceedings consistent with REAOC II.”
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Id.
It therefore remanded the action “for
SCARE filed its 2AC in May 2013.
Id.
It attached twenty-six new
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resolutions to the 2AC and asserted that these resolutions --
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along with the sixty-eight resolutions, ordinances, and MOUs
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attached to its previous complaint -- evinced the “County’s clear
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intent to bind itself to contracts with the Retirees to provide
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post-retirement healthcare benefits.”
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made a handful of minor changes to the text of its complaint, the
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twenty-six newly added resolutions constituted the principal
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substantive amendment to its earlier complaint.
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2AC ¶ 19.
Although SCARE
In June 2013, the County filed the instant motion to dismiss.
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DISCUSSION
I.
Subject Matter Jurisdiction
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A.
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Subject matter jurisdiction is a threshold issue which goes
Legal Standard
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to the power of the court to hear the case.
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matter jurisdiction must exist at the time the action is
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commenced.
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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
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Dismissal is appropriate under Rule 12(b)(1) when the
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district court lacks subject matter jurisdiction over the claim.
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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
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exists despite the formal sufficiency of the complaint.
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Publ’g Co. v. Gen. Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th
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Cir. 1979); Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir.
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1987).
A Rule 12(b)(1) motion may either
Thornhill
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B.
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The County contends that the Court lacks subject matter
Associational Standing
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jurisdiction over this action because SCARE has failed to
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establish that it has standing to bring suit on behalf of its
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members.
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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
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1
The standing requirement derives from Article III, section 2
2
of the United States Constitution, which “confines the judicial
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power of federal courts to deciding actual ‘Cases’ or
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‘Controversies.’”
5
(2013) (quoting U.S. Const. art III, § 2).
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seeking to bring suit on behalf of its members must establish that
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it has “associational standing” by showing that “(1) at least one
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of its members would have standing to sue in his own right,
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(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
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in the lawsuit.”
13
F.3d 1100, 1105-06 (9th Cir. 2006) (citing United Food &
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Commercial Workers Union Local 751 v. Brown Group, Inc., 517 U.S.
15
544, 553 (1996)).
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directly from Article III, “the third prong of the associational
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standing test is best seen as focusing on [] matters of
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administrative convenience and efficiency, not on elements of a
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case or controversy within the meaning of the Constitution.”
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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
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third prong of this test because it seeks monetary damages rather
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than purely injunctive or declaratory relief.
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County, these damages claims will ultimately necessitate the
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participation of SCARE’s individual members in this lawsuit.
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support, the County cites a handful of cases where district courts
According to the
For
27
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lack of subject-matter jurisdiction at any time.”
U.S. 443, 455 (2004).
7
Kontrick v. Ryan, 540
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have refused to allow organizations to bring certain claims for
2
monetary relief on behalf of their individual members.
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SEIU, Local 721 v. County of Riverside, 2011 WL 1599610, at *11
4
(C.D. Cal.) (“Thus, because Plaintiff seeks damages here,
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associational standing is precluded insofar as Plaintiff alleges
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monetary damages.”).
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Circuit has recognized that organizations seeking only injunctive
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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
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Associated Gen. Contractors of Am. v. Metro. Water Dist. of S.
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Cal., 159 F.3d 1178, 1181 (9th Cir. 1998) (“[T]here can be little
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doubt that the claims raised by [the plaintiff] do not require the
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participation of individual members in this action.
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Individualized proof from the members is not needed where, as
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here, declaratory and injunctive relief is sought rather than
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monetary damages.”).
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None of these cases establishes a rigid rule precluding
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associational standing in all cases where organizations seek to
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bring damages claims on behalf of their individual members.
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Indeed, in United Food, the Supreme Court unanimously held that
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the third prong of the associational standing test did not bar a
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union from asserting damages claims on behalf of its members under
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the Worker Adjustment and Retraining Notification Act.
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at 558.
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other contexts in which a statute, federal rule, or accepted
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common-law practice permits one person to sue on behalf of
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another, even where damages are sought.”
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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
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associational standing test does not create a strict
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constitutional prohibition on claims for monetary relief but,
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rather, addresses prudential concerns such as “administrative
4
convenience and efficiency.”
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Id.
The County has not adequately explained how the participation
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of SCARE’s individual members in this suit would threaten
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administrative convenience or efficiency here.
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any of SCARE’s individual members would have to participate in
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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
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that SCARE’s claims are based almost entirely on local ordinances
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and resolutions, each of which applies to a broad swath of
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retirees.
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SCARE is not sufficient to defeat associational standing.
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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
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amount of individuated proof may be necessary does not in itself
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preclude associational standing.’” (emphasis added; citations
19
omitted)), aff’d, 133 S. Ct. 2321 (2013); Pa. Psychiatric Soc. v.
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Green Spring Health Servs., Inc., 280 F.3d 278, 286 (3d Cir. 2002)
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(“If the Pennsylvania Psychiatric Society can establish these
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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
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(7th Cir. 1993) (RCPA) (“We can discern no indication . . . that
26
the Supreme Court intended to limit representational standing to
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cases in which it would not be necessary to take any evidence from
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individual members of an association.”).
The potential limited participation by some members of
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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
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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
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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”).
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retiree organization alleged that Contra Costa County had
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“promised the retirees that they would receive retiree health care
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benefits for themselves and their dependents if they met certain
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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
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the retirees.”
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retirees’ benefits at a flat dollar amount, the organization
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brought suit seeking “injunctive and declaratory relief that would
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require the County to fulfill its obligations under the 80%
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promise.”
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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.
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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.
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II.
Failure to State a Claim
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A.
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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 were hired before that date.
7
of these arguments is addressed in turn.
8
9
Third and finally, the County notes that the new
1.
As such, the County
Each
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
3.
6
Retirees Hired Before 1990
The MOUs attached to SCARE’s 2AC are not only limited insofar
7
as they only apply to union employees; they are also limited
8
insofar as they only apply to employees hired after 1990.
9
The MOUs adopted by the twenty-six newly added resolutions
United States District Court
For the Northern District of California
10
date back to 1989, at the earliest, and govern the rights of
11
various union employees hired after 1990.
12
Aug. 1989 Agreement Between Service Employees International Union,
13
Local 707, and the County of Sonoma, at 64 (“For any employee who
14
is newly hired or rehired by the County or any other agency
15
covered by this Memorandum after January 1, 1990, [these
16
healthcare] benefit[s] shall only be available upon the employee’s
17
retirement under the following circumstances. . . .” (emphasis
18
added)).
19
that these were the only County retirees who plausibly have a
20
contractual right to the healthcare benefits at issue in this
21
suit.
22
provide “that the County will make contributions toward a health
23
plan premium for retirees hired after 1990 who have worked for the
See, e.g., 2AC, Ex. 38,
In Sonoma III, the Ninth Circuit expressly recognized
The court noted that the MOUs attached to SCARE’s complaint
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
County for at least ten years, and have contributed to the
2
County’s retirement system for the same length of time.”
3
at 1116 (emphasis added).
4
708 F.3d
Given this time limitation in the MOUs, SCARE’s complaint
does not plausibly allege that the County impliedly promised to
6
provide healthcare benefits in perpetuity to retirees who were
7
hired before 1990.
8
resolutions and ordinances attached to its complaint show that the
9
County made implied promises to provide benefits to retirees hired
10
United States District Court
For the Northern District of California
5
before 1990, SCARE cannot rely on these resolutions and ordinances
11
because the Ninth Circuit has already found them insufficient, as
12
explained above.
13
of its claims based on the alleged contractual rights of non-union
14
employees, it cannot proceed on any claims based on the alleged
15
contractual rights of retirees hired before 1990.
16
retirees who can plausibly claim an implied contractual right to
17
receive healthcare benefits in perpetuity under the 2AC are those
18
who were both hired after 1990 and members of the unions
19
identified in the MOUs adopted by the Board of Supervisors.
Although SCARE contends that the other
Accordingly, just as SCARE cannot proceed on any
The only
20
Because SCARE has not added any new resolutions to its 2AC
21
that were enacted before 1990, its theory of contract formation
22
based on the alleged 1985 “tie agreement” must be rejected.
23
Sonoma III made clear that, in order to state a valid claim based
24
on an implied contract to provide healthcare benefits, SCARE would
25
have to amend its complaint to identify a specific ordinance or
26
resolution creating that contract.
27
to do so here with respect to the alleged “tie agreement.”
28
19
708 F.3d at 1115.
It failed
1
2
4.
The County’s Remaining Arguments
The County’s remaining arguments focus on SCARE’s promissory
3
estoppel claims and are largely derivative of its assertion that
4
SCARE has failed to establish the existence of an enforceable
5
contract to provide post-retirement healthcare benefits.
6
essence, the County contends that SCARE’s failure to identify a
7
binding implied promise to provide healthcare benefits in
8
perpetuity dooms its promissory estoppel claims in addition to its
9
contract claims.
In
Because the Court concludes, however, that SCARE
United States District Court
For the Northern District of California
10
has adequately alleged the existence of such a promise with
11
respect to union retirees hired after 1990, the County’s arguments
12
with respect to SCARE’s promissory estoppel claims must be
13
rejected with respect to those retirees.
14
The County also contends that the anti-vesting language of
15
section 31692 of the California Government Code bars SCARE’s
16
contract-based claims.
17
of an ordinance or resolution pursuant to Section 31691 shall give
18
no vested right to any member or retired member,6 and the board of
19
supervisors or the governing body of the district may amend or
20
repeal the ordinance or resolution at any time.”
21
§ 31692.
22
supervisors
23
That provision states that the “adoption
Cal. Gov’t Code.
Section 31691 provides that a county board of
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
24
25
26
27
6
28
In this context, “member” means any county employee participating
in an insurance plan.
20
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
Cal. Gov’t Code § 31691(a).
These provisions do not bar SCARE’s
4
claims here because, as both REAOC II and Contra Costa explained,
5
“the ‘precise relationship’ between the services mentioned in
6
section 31691 and retiree health benefits is unclear.”
Contra
7
Costa, 944 F. Supp. 2d at 805 (citing REAOC II, 52 Cal. 4th at
8
1191).
This is one of the main reasons why neither of these
9
courts considered section 31692 to be a bar to the retirees’
10
United States District Court
For the Northern District of California
contract claims in those cases.
Id.; REAOC II, 52 Cal. 4th at
11
1194 (concluding, after examining section 31692, that “a vested
12
right to health benefits for retired county employees can be
13
implied under certain circumstances from a county ordinance or
14
resolution”).
The County does not attempt to distinguish either
15
of these cases in its briefs.
Thus, “the County’s argument that
16
[the association]’s claims are barred by Section 31692 is
17
unavailing.”
Contra Costa, 944 F. Supp. 2d at 805.
18
CONCLUSION
19
For the reasons set forth above, Defendant’s motion to
20
dismiss (Docket No. 77) is GRANTED in part and DENIED in part.
21
Plaintiff may proceed on all of its claims based on promises that
22
are allegedly implied in the MOUs that the Board of Supervisors
23
ratified in the resolutions attached as Exhibits 69 through 94 of
24
the 2AC.
Plaintiff may not, however, proceed on any claims based
25
on promises that were allegedly implied in the other resolutions
26
and ordinances attached to its 2AC.
This includes any claims
27
based on the alleged 1985 “tie agreement.”
28
21
1
2
3
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
4
order.
5
Plaintiff shall file its dispositive motion 224 days after
6
Defendant files its answer.
7
and any cross-motion, contained in a single twenty-five page
8
brief, twenty-eight days thereafter.
9
reply fourteen days after Defendant files its cross-motion and
Pursuant to the parties’ stipulation, Docket No. 94,
Defendant shall file its opposition
Plaintiff shall file its
United States District Court
For the Northern District of California
10
opposition.
11
fourteen days after Plaintiff files its reply.
12
Defendant shall file its reply to any cross-motion
IT IS SO ORDERED.
13
14
15
Dated:
1/10/2014
CLAUDIA WILKEN
United States District Judge
16
17
18
19
20
21
22
23
24
25
26
27
28
22
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