Courts try to apply state Supreme Court precedent in pension suits

By Laura Hautala

For retired computer scientist Joe Requa, getting transferred off the University of California health plan felt like a broken promise. Requa, who worked at the UC-run Lawrence Livermore National Laboratory for 34 years, says he expected to stay on the insurance plan for the rest of his life. But when a private contractor took over the lab in 2007, the UC Regents took its lab retirees out of their general pool of insured workers. Requa's new health plan required higher employee contributions. "They're going sky high as we get older," Requa said.As a lawsuit over the change goes before the 1st District Court of Appeal today, the justices could be the ones to decide whether any such promise was made. The court will consider whether the retired workers sufficiently allege a contract violation by the regents. Joe Requa v. The Regents of the University of California, Al32778 (Cal. App. 1st Dist., Jul. 29, 2011).

The stakes are high for both sides, as public entities try to lower their unfunded liabilities and retirees fight for what they see as deferred payment for their public service.

"The issue then is whether these employees have a right to those benefits," said A. Thomas Sinclair, a sole practitioner who is working on the appeal for Requa and the three other retirees on the case.

Requa is not the only former public employee to ask the courts to decide whether retirement perks like health insurance and pensions are set in stone. Cases in Sonoma and Contra Costa counties are currently in limbo, and the city of Redding's employee union recently won its case asking for restored health care benefits.

The landscape around these cases shifted with a 2011 state Supreme Court decision granting health benefits to retired public employees of Orange County. Those retirees found themselves moved out of the larger pool of insured workers and sued to have the previous coverage restored. Retired Employees Assn. of Orange County v. County of Orange, 52 Cal.4th 1171 (2011).

'When they were handed over and over again these booklets that say when you retire you will participate in the UC medical benefits, that was a promise.' - Ernest J. Galvan

The case found its way to the 9th U.S. Circuit Court of Appeals, where the court decided it needed input from the state Supreme Court on state contract law. The Supreme Court remanded the case to the trial court, finding the retirees had the facts necessary to go forward with the case. Yet attorneys on both sides of the issue claimed the decision as a victory.

At issue is whether the actions of legislative bodies - be they county boards of supervisors or the UC Regents - sometimes constitute contractual promises.

The regents, represented by Joseph M. Quinn, Dorothy S. Liu and Sarah D. Mott of Hanson Bridgett LLP in San Francisco, have argued they neither passed a resolution nor made a promise to provide the UC health care benefits indefinitely.

"We appreciate the long and dedicated service of our employees," said Brooke Converse, a spokeswoman for the UC Regents. But the regents agree with the Superior Court's decision to dismiss the retirees' lawsuit. "We're pleased that the judge acknowledged transfer of retiree medical benefits to the new contractor," Converse said.

But lawyers for the retirees, headed by Dov M. Grunschlag of Carter, Carter, Fries & Grunschlag, plan to argue today that the Regents intended to provide health care for the appellants when they crafted a nearly 60-year-old resolution setting forth employee health care.

To make their point, Sinclair said they'll point to evidence that the Regents looked into the cost of providing retiree health care and then directed the university system's president to look at appropriate insurance for retirees. Attorneys for the retirees also intend to point out that lab employee booklets repeatedly told workers they could stay on the plan after retirement.

Ernest J. Galvan of Rosen Bien Galvan & Grunfeld LLP, who argued the Orange County case in front of the state Supreme Court, said the UC Regents would like to construe the Orange County decision as very narrowly defining how public entities enter into contractual agreements.

But under his interpretation of the decision, Galvan said the lab retirees can adequately prove that the Regents intended to provide the benefits as part of retirement.

"When they were handed over and over again these booklets that say when you retire you will participate in the UC medical benefits, that was a promise," Galvan said.