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

United States District Court, E.D. California

June 26, 2017



         A retirees association is suing a city for injunctive and declaratory relief for the allegedly unlawful changes the city made to the retirees' health benefits in 2015. The city's second motion to dismiss is before the court. Mot., ECF No. 32. The association opposes. Opp'n, ECF No. 36. On December 2, 2016, the court heard the motion. Mins., ECF No. 38. As explained below, the court DENIES the city's motion to dismiss.

         I. BACKGROUND

         A. Factual Allegations

         Plaintiff City of South Lake Tahoe Retirees Association (the “Association”) is a nonprofit California corporation comprising approximately 160 public employee retirees of the City. First Am. Compl., ECF No. 29, ¶ 4 (“FAC”). The Association represents and advocates for retirees regarding “retiree hospitalization, medical, pharmaceutical, dental, vision, and retirement benefits” and communicates information to and from its members regarding the City of South Lake Tahoe's (“the City”) vested post-employment health benefits. Id.

         Plaintiff's claims derive from changes the City made to retiree health benefits through adoption of a January 1, 2015 City Council Resolution (“the Resolution”). Id. ¶ 12. The Association alleges that by adopting the Resolution, the City violated the collective bargaining agreements it reached with retiree labor organizations. Id. ¶ 22. Through these agreements, or Memorandums of Understanding (“MOUs”), retirees were guaranteed the right to continue membership in the City's health care plan. Id. ¶ 10. The MOUs establish that “[retirees] will receive the same level of benefits [the City] provide[s] for active employees, ” and “[retirees] may elect to continue the same medical and dental coverage as active employees . . . .” Id. ¶ 18. The MOUs memorialize a uniform “vesting schedule” for the health benefits of both active employees and retirees, and provide “no maximum duration on this coverage.” Id. ¶¶ 11, 17. The City allegedly agreed to allow the retirees to “continue these benefits for as long as [the City's] plan continues and [the retirees] continue payment of [their] monthly premiums in a timely manner.” Id. ¶ 17

         The Association alleges the retirees fully performed all MOU preconditions for their rights in the retirement health benefits program to vest, yet the Resolution affords retirees “a much lower level of coverage than they were contractually promised.” Id. ¶¶ 21, 23. The Resolution allegedly treats the active employees more favorably than retirees, assigns the retirees to the lowest coverage level, and removes retirees entirely from the City's dental plan unless they pay the premium. Id. ¶¶ 23, 25, 26. The negotiations leading to the Resolution's adoption also allegedly included only labor organizations for active employees, not retirees. Id. ¶ 29.

         B. Initial Complaint and First Motion to Dismiss

         The Association filed an initial complaint in December 2015, contending the City's unilateral changes to retirees' health benefits violate various MOUs and violate the retirees' due process rights. Compl., ECF No. 1.

         The Association brought seven claims: (1) Breach of contract; (2) promissory estoppel; (3) federal due process violations; (4) state due process violations; (5) impairment of contract under the U.S. Constitution; (6) impairment of contract under the state constitution; and (7) violations of the California Pension Protection Act. Id. ¶¶ 35-52. The initial complaint sought injunctive relief to restore the pre-Resolution status quo, declaratory relief, and monetary damages. Id. at 12.

         The City moved to dismiss for lack of standing, failure to exhaust administrative remedies, and failure to join necessary parties. ECF No. 8 at 1. The court granted the motion only as to associational standing, giving leave to amend. Order, July 26, 2016 (“Prior Order”), ECF No. 23.

         C. Amended Complaint and Second Motion to Dismiss

         On August 15, 2016, the Association filed an amended complaint repeating six of the initial claims, but dropping the seventh claim for violations of the California Pension Protection Act, and seeking the same injunctive and declaratory relief, but expressly renouncing monetary damages. FAC ¶¶ 9-11, 32-35. On September 6, 2016, the City again moved to dismiss for lack of associational standing and failure to state a claim. Mot. at 1.


         The City first attacks the Association's standing to sue on behalf of its members. Id. at 1-4. The burden is on the Association to establish subject matter jurisdiction, of which standing is a component. Chandler v. State Farm Mut. Auto. Ins. Co., 598 F.3d 1115, 1122 (9th Cir. 2010) (citing Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994)). “Standing addresses whether the plaintiff is the proper party to bring the matter to the court for adjudication.” Id. (citations omitted). An association has standing to sue on its members' behalf when (1) its members would have standing to sue in their own right, (2) the interest the association is vindicating relates to its purpose, ...

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