United States District Court, E.D. California
City of South Lake Tahoe Retirees Association (CSLTRA) filed
this action on December 1, 2015, against defendant City of
South Lake Tahoe (the City), seeking declaratory and
injunctive relief, and compensatory damages with respect to
changes made to the health benefits for current and retired
public servants of the City. The case is now before the court
on the City’s motion to dismiss based on Federal Rules
of Civil Procedure 12(b)(1), (6) and (7). Mot., ECF No. 8.
CSLTRA opposed, Opp’n, ECF No. 11, and the City
replied. Reply, ECF No. 19. On May 18, 2016, the court held a
hearing on the motion; Nira Doherty and Tom Watson appeared
for the City. There was no appearance on behalf of plaintiff.
Subsequently, plaintiff requested another hearing due to its
counsel’s calendaring mistake. ECF No. 21. The court
denied the request and the matter was submitted. ECF No. 22.
explained below, the court GRANTS defendant’s motion to
dismiss in part, with leave to amend, and DENIES in part.
is a nonprofit California corporation comprising and
representing approximately 160 public employee retirees of
the City on issues including “retiree hospitalization,
medical, pharmaceutical, dental, vision, and retirement
benefits.” Compl. ¶ 4. CSLTRA’s purposes
include advocating for the interests of its members regarding
their vested post-employment City benefits, communicating
with relevant parties regarding retirees’
post-employment benefits and distributing and collecting
information relating to vested post-employment benefits to
and from its members. Id.
and its members and directors engaged in research, study,
outreach and communication with the City regarding changes to
retiree health benefits adopted by the City Council through a
city resolution, which went into effect on January 1, 2015
29, 2015, CLSTRA’s counsel served a Government Tort
Claim, under California Code § 900 et seq., on
the City, City Council and City Manager. Id. ¶
8; Ex. A, ECF No. 12. On July 29, 2015, the City, through the
City Attorney, denied liability and the claim, exhausting
plaintiff’s remedies. Ex. B, ECF No. 12.
various collective bargaining agreements, known as
Memorandums of Understanding (MOUs), between the labor
organizations representing the retirees during their
employment and the City, the retirees were contractually
guaranteed the right to continue membership in the
City’s health care plan. Compl. ¶ 10. CLSTRA
alleges that each MOU promises that “[c]overage shall
continue indefinitely, however, the City health plan shall
become a secondary plan to all components of Medicare at the
time the retiree is eligible for the Medicare program.”
Id. ¶ 13.
has been one medical/dental plan for all employees and
retirees since 1988, id. ¶ 12, although
pre-1993 vesting schedules varied by bargaining unit.
Id. ¶ 10. Before 1993, under the vesting
schedules specified in the different MOUs, which were adopted
by corresponding city resolutions, the City subsidized a
portion of the retirees’ health insurance premiums at
active employee medical plan rates. Id. The vesting
schedules reflect an escalating premium subsidy correlating
to the retirees’ dates of hire and years of public
service with the City. Id.
in 1993, the City and the active employee associations
adopted a uniform vesting schedule for retiree healthcare
benefits for all bargaining units. Id. ¶ 11.
Under the current vesting schedule for employees hired prior
to 2008, a retiree with twenty-five (25) years of City
service is entitled to “maintain membership in the City
medical/dental” health plan with a 100 percent
City-paid premium. Id. A retiree with twenty (20)
years of service may maintain membership in the plan with 75
percent of the premium paid by the City, plus an additional 5
percent paid for each additional year of service.
Id. A retiree with fifteen (15) years of service is
entitled to a 50 percent City-paid premium, plus an
additional 5 percent per additional year of service.
Id. A retiree with ten (10) years of service is
entitled to 25 percent City-paid medical and dental coverage,
with an additional 5 percent paid by the City for each
additional year of service. Id.
retiree health benefit program was duly bargained for as part
of the collective bargaining process governed by
California’s Meyers-Milias-Brown Act (MMBA), California
Government Code sections 3500-3511. Id. ¶ 15.
Once the MOUs were adopted by the City Council, the City and
its officials had a duty to adhere to the terms of the MOUs.
City stated in writing there was “no maximum duration
on this coverage; you may continue these benefits for as long
as our plan continues and you continue payment of your
monthly premiums in a timely manner.” Id.
¶ 17. The City also stated in writing to retirees that,
“you will receive the same level of benefits [which] we
provide for active employees.” Retirees were told,
“you may elect to continue the same medical and dental
coverage as active employees . . . .” Id.
City did not reserve the right to terminate, eliminate,
reduce, or modify these retiree benefits. Id. ¶
19. The City did not reserve the right to alter the benefits
to retirees or provide different health coverage to retirees
than to active employees. Id.
the retirees’ employment and retirement, they have
fully performed all obligations under the respective MOUs
earning the right to the vested and continuing health
benefits provided under the MOUs. Id. ¶ 21. The
retirees have met all obligations and preconditions to
maturation and vesting of their rights in the retirement
health benefits program. Id.
on January 1, 2015, the active employee health plan was
changed to a “tiered plan, ” in which the active
employees choose a level of coverage and the City compensates
them through cash subsidies if they choose higher tiers of
coverage. Id. ¶ 23. Retirees, however, were
assigned to the lowest level of coverage, and were not given
the option of choosing a higher level of coverage with their
vested City contributions. Id. The new plan
significantly reduces the retirees’ health plan
coverage and raises costs to retirees. Id.
starting on January 1, 2015, retirees were removed from the
City’s dental plan unless they paid the premium.
Id. ¶ 25.
passing the Resolution, the City negotiated these changes
with labor organizations representing active employees, but
not the retirees. Id. ¶ 29.
29, 2015, CSLTRA served notice of its claim on the City, the
City Council and the City Manager. Id. ¶ 8. On
July 29, 2015, the City, through the City Attorney, denied
liability and the claim. Id.
complaint, CSLTRA seeks preliminary and permanent injunctions
prohibiting the City from implementing the changes to retiree
medical benefits adopted in the Resolution; a mandatory
injunction requiring the City to restore the vested retiree
health benefit program to the status quo as of December 31,
2014; a judicial declaration under 28 U.S.C. § 2201 that
retirees have a vested property interest in the health
benefit program and that each Medicare-eligible retiree will
maintain City-paid supplemental coverage for any plan he or
she chooses for the rest of that person’s life and the
lives of eligible dependents; monetary damages to compensate
retirees for additional medical/dental insurance costs and
premiums expended because of the Resolution; attorney’s
fees under California Civil Code section 1021.5, California
Government Code sections 800 and 31536, 42 U.S.C. § 1983
and other relevant statutes; and costs of suit incurred.