Requa v. The Regents of the
of California
Filed 12/31/12
Requa v. The Regents of the University of California CA1/5
California Rules of Court, rule 8.1115(a), prohibits
courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for
publication or ordered published for purposes of rule 8.1115
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FIVE
A132778
(
Super.
Appellants Joe Requa, Wendell G.
Moen, Jay Davis, and Donna Ventura (hereafter collectively Retirees) all spent
decades working at the Lawrence Livermore National Laboratory (Livermore). During their employment there, Livermore was
operated by the University of California (the University or UC), a state agency governed by the Regents of
the University of California (the Regents). After
retiring from Livermore, Retirees all received University-sponsored group health insurance
benefits.
In 2007, management and operation of
Livermore was transferred from the University to a private consortium. On January 1, 2008, Retirees’ University-sponsored group health insurance was
terminated, and the consortium assumed responsibility for providing Retirees’
health insurance benefits.
Retirees later brought an
claiming that the elimination of their University-sponsored group health
insurance benefits constituted an unconstitutional impairment of either an
express or implied contract the Regents had formed with Retirees. Their petition also claimed the
estoppel prohibited the termination of their University-sponsored group health
insurance benefits. They further sought
a declaratory judgment. After the
Regents successfully demurred to Retirees’ original petition, they filed an
amended pleading. The Regents again
filed a demurrer, which the trial court sustained without leave to amend.
Retirees appeal from the resulting
judgment. They contend their amended
petition adequately pleaded causes of action for impairment of express and
implied contract, as well as causes of action for promissory estoppel,
equitable estoppel, and declaratory relief.
We agree with Retirees with respect to all but their claim for
impairment of express contract. We
conclude their other claims should not have been resolved on demurrer. Accordingly, we affirm the judgment in part
and reverse it in part.
Factual
and Procedural Background
“In ruling on the demurrer, the
trial court had to accept as true all material facts properly pleaded in
[Retirees’] petition, disregarding only conclusions of law and allegations contrary
to judicially noticed facts.†(
On appeal, we must do the same, and we therefore set out below the
material allegations of the Retirees’ first amended petition for writ of
mandate. (Id. at pp. 277, 279.)
Livermore opened in
1952 as a branch of the University of California Radiation
Laboratory. From 1952 until 2007, the University operated
Livermore under a contract with the United States Department of Energy (DOE)
or predecessor agencies of the federal government.
Retirees are all former employees of
the University. All of them spent
decades working at Livermore.
title="">[1] During that time, Retirees were regular
employees of the University, and while the Regents managed Livermore, they
treated University employees who worked there in the same manner as other
University employees. Livermore employees
were entitled to the same benefits and were subject to the same terms and
conditions of work and personnel policies as other University employees. By virtue of their employment at Livermore, Retirees
became members of the University of California Retirement System (UCRS), which
later became known as the University of California Retirement Plan (UCRP).
In 1961, the Regents adopted a
resolution authorizing medical benefits for University employees and
retirees. At the time the Regents first
authorized retiree medical benefits, there was no policy or provision of state
law, nor any provision of the Regents’ own policies, that prohibited or limited
the Regents’ authority to offer such benefits.
The Regents’ authorization did not include any provision permitting the
Regents to terminate or eliminate these benefits, and the Regents did not
reserve the authority to modify vested retirement benefits in a manner that was
inconsistent with California law or to transfer the responsibility for providing a vested
benefit to another entity.
After authorizing medical benefits,
the University began telling employees they would receive health coverage while
working and during retirement so long as they met eligibility
requirements. For example, in 1979, the
Regents published a booklet concerning UCRS.
Under the heading “Health Insurance During Retirement,†the booklet
stated, “You may continue your University-sponsored group health plan coverage
for you and your family after you retire.
In most cases the premiums will be the same as when you were employed,
and you will continue to receive The Regents’ health plan contribution. The balance of the premium will be deducted
from your monthly Retirement Income.â€
The following year, Livermore published a “Benefits Information Packet†summarizing its health
insurance benefits. With regard to
health insurance benefits during retirement, the document stated, “Coverage can
be continued as long as monthly income received from retirement system is large
enough to cover employee contribution.
Employer contribution continues during retirement.â€
A 1984 UCRS booklet entitled “
Security†explained that “[i]f the conditions shown in the box are met,
UC-sponsored health and dental plan coverage can be continued for yourself and
enrolled family members when UCRS monthly benefits are paid. The University’s monthly contribution for
your plan premiums also continues, in the same amount as for active employees,
if the conditions are met.†The only
“condition[] in the box†for receiving continued health and dental coverage
during retirement was that “UCRS benefits must start within four months after your employment ends.â€
Livermore issued a
publication entitled Benefits in
1988,
in which it said “benefit plans make up a large part of your compensation†and
“are like your other paycheck[.]†The
publication also stated, “When you retire you can keep your health, dental and
legal plan coverages; [Livermore’s] contributions to the health and dental plans continue, provided
you retire within four months of separating from [Livermore].†Benefits
told employees the publication was a “general overview of your personal and
family benefit plans. You shouldn’t
consider it a promise or guarantee of plan coverage or benefits. You have to meet eligibility rules for
coverage and qualification rules to receive benefits.â€
In 1990, Livermore’s benefits
office distributed a document entitled The
Retiree Handbook. On a page headed
“Insurance†appeared the question, “How does retirement affect my insurance
plans?†The response stated, “Whether a
member of [the Public Employee Retirement System] or UCRP, your University
group medical and dental plans may be continued when you retire,
of retirement.â€
In the late 1990s, the Regents began
inserting language into benefits books and publications stating that retiree
medical benefits were not vested and could be modified or eliminated at any
time. The Regents distributed the
in 1998. That handbook explained that
retiring employees electing “UCRP monthly retirement income . . . may
be eligible to continue . . . UC medical and/or dental coverage ifâ€
they met certain eligibility criteria.
It also stated, “Health and welfare benefits are not accrued or vested
benefit entitlements. UC’s contribution
toward the monthly cost of the coverage is determined by UC and may change or
stop altogether, subject to the state of California’s
annual budget appropriation.†In small
print on the inside back cover of the 1998 handbook, the following language
appeared: “What is written here does not
constitute a guarantee of plan coverage or benefits—particular rules and
eligibility requirements must be met before benefits can be received. The University of California intends to
continue the benefits described here indefinitely; however, the benefits of all
employees, annuitants, and plan beneficiaries are subject to change or
termination at the time of contract renewal or at any other time by the
University or other governing authorities.
The University also reserves the right to determine new premiums and
employer contributions at any time.
Health and welfare benefits are subject to legislative appropriation and
are not accrued or vested benefit entitlements.â€
In approximately December 2000, the
Regents published a University of
California Retirement Plan Election Handbook. Regarding “UC-Sponsored Health and Welfare
Coverage,†this handbook stated, “Generally, if you are eligible to continue
coverage and you elect monthly retirement income, you may continue the same
coverage.†It also explained that
retirees can change their medical and/or dental plans after they retire “during
Open Enrollment, which is usually held each November.†The handbook also included the following
language: “UC reserves the right to
determine new premiums and employer contributions at any time. Health and welfare benefits are subject to
legislative appropriation and are not accrued or vested benefit entitlements.â€
At all relevant times, Retirees met
the eligibility requirements for University-sponsored group health plan
coverage. They retired between 1996 and
2006 (see fn. 1, ante) after decades
of service to Livermore, where they had remained in significant part because
they would receive University-sponsored group health plan coverage when they
retired.
Between the 1960s and 2007, the
Regents provided the same medical benefits to active and retired employees who
had worked at Livermore as they provided to other active and retired University
employees. Until late 2007 or early
2008, the Regents treated Livermore retirees in the same manner as other
University retirees. The Regents
provided Retirees with the promised medical benefits from their retirement
until 2008.
In 2007, the DOE did not renew its
contract with the Regents to manage Livermore, contracting instead with a newly
created private consortium known as Lawrence Livermore National Security
(LLNS).
terminated Retiree’s health coverage under the University plan and shifted
responsibility for providing retiree medical benefits for Livermore retirees to
LLNS. At that time, the University
assured Livermore retirees that they would continue to receive substantially
equivalent medical benefits from LLNS.
In August 2008, Requa advised the
University’s acting general counsel that he believed the Regents had acted
unlawfully by terminating University-provided medical benefits and shifting
that responsibility to LLNS. While the
University did not respond directly to Requa’s concerns, counsel for LLNS
responded by e-mail on September 16, 2008, stating that “medical costs for
[Livermore] retirees have always been paid for by [the] operating costs of
[Livermore]†and that “coverage could change or be terminated at any
time.†Counsel for LLNS also said DOE
had determined “that [Livermore] employees who retired from UC would no longer
be included in the UC retiree pool for coverage purposes†and that in the
future benefits “may not be equivalent to those offered by the University.â€
LLNS has provided coverage that is
more expensive than, and inferior to, the health benefits formerly provided by
UCRP. In addition, Retirees have been
removed from the University-wide risk pool comprised of both active and retired
employees and are segregated into a smaller, older, and more infirm group,
which will cause the cost of their coverage to increase more rapidly compared
to other University retirees.
On August 11, 2010, Retirees
filed their original petition for writ of mandate against the Regents in
Alameda County Superior Court. The
petition alleged causes of action for impairment of contract, promissory
estoppel, and declaratory relief. The
Regents filed a demurrer, which the trial court sustained with leave to amend.
On January 24, 2011, Retirees
filed a first amended petition for writ of mandate (FAP). It alleged causes of action for impairment of
implied contract, impairment of express contract, promissory estoppel,
equitable estoppel, and declaratory relief.
The contract counts alleged that the Regents’ termination of Retirees’
vested rights to University-sponsored group health insurance coverage violated
the contract clause of the California Constitution. (Cal. Const., art. I, § 9.) Attached to the FAP were excerpts from
benefit handbooks the University had distributed to employees between 1979 and
2000. The Regents again responded by
demurrer, and on May 26, 2011, the trial court sustained the Regents’
demurrer without leave to amend.
The trial court cited three reasons
for dismissing Retirees’ contract counts.
First, it found that none of the language in the benefit handbooks cited
by Retirees was “sufficient to create either an express or implied contract
upon which to base a cause of action for impairment of contract.†Instead, it found that “the statements are
replete with conditional language[.]â€
The trial court also noted that “as early as 1990, some 20 years before
the Petition was filed,†the Regents had included language in the benefits
booklets and handouts “clearly stating that retiree medical benefits were not
vested and could be modified or eliminated at any time.†Furthermore, the Regents had inserted
“reservation of rights language†in the retirement information materials
distributed after 1990, and the trial court found that statements made after
1990 “are indisputably not express contractual promises.â€
Second, the trial court also ruled
that Retirees had failed “to provide any statutory or legislative authorization
which would allow such a promise to be binding†on the Regents. Absent such statutory or legislative
authority, even if a promise had been made to Retirees, “such a promise would
not constitute [a] binding contract against [the Regents], a public
entity.†The court found that Retirees
had “identified no minutes, formal resolution or standing order issued by [the
Regents] conferring on [Retirees] retirement medical benefits of a certain type
in perpetuity.â€
Third, the trial court held that
Retirees’ allegations that retiree medical benefits are vested rights created
via implied contract were unsupported by case law. It concluded that “California courts have
been clear in holding that absent clear intent on the part of the public
entity, a long-term financial commitment for retiree medical benefits cannot be
implied.â€
The lower court sustained the
demurrer to the promissory estoppel cause of action because it found Retirees
had alleged no clear and unambiguous promise to lifetime retiree medical
benefits. As to equitable estoppel, the
court found that the Retirees could not allege the Regents “knew that
retirement medical benefits were not vested rights and were subject to
modification and elimination, yet never communicated such information to
[Retirees].†Finally, because the cause
of action for declaratory relief was derivative of the other four causes of
action, the trial court sustained the demurrer to that cause of action as well.
Judgment was entered on June 8,
2011, and Retirees filed a notice of appeal on July 29, 2011.
Discussion
Retirees claim the superior court
improperly sustained the Regents’ demurrer to the FAP. They argue they have adequately pleaded
claims for breach of either an express or implied contract. For that argument, Retirees rely heavily on
our state Supreme Court’s recent decision in Retired Employees Assn. of Orange County, Inc. v. County of Orange
(2011) 52 Cal.4th 1171 (Retired Employees),
a decision we will discuss in some detail below. Retirees also claim the FAP is sufficient to
plead claims for promissory and equitable estoppel.
The Regents defend the superior
court’s decision on a number of grounds, arguing principally that Retirees have
not overcome the general presumption that a public employer’s statutory scheme
is not intended to create private contractual rights. According to the Regents, courts may impose
implied contractual obligations on a
public employer only where the relevant legislative body clearly evinces an
intent to create an implied contract.
Here, the Regents contend, Retirees have identified no documents that
clearly evince such an intent.
name="_ftnref5" title="">[5] They further argue Retirees have not overcome
the presumption against the formation of a vested right to health insurance
benefits. The Regents also assert that
Retirees have failed to allege facts sufficient to make out their claims for
promissory and equitable estoppel.
Finally, the Regents argue we should affirm the judgment on the
alternative ground that Retirees’ claims are barred by the statute of
limitations and the doctrine of laches.
We will first discuss our standard
of review, an issue about which the parties
initially disagreed in their briefs.
We will then turn to an examination of the Retired Employees decision before addressing the merits of the
parties’ arguments.
I. Standard of Review
“Just as the trial court, an
appellate court reviewing a judgment entered after a demurrer has been
sustained without leave to amend assumes the truth of all properly pleaded
material facts unless contradicted by judicially noticed matters. [Citation.]
The appellate court determines whether, reading the petition as a whole
and giving it a reasonable interpretation, the pleading states facts sufficient
to state a cause of action or a reasonable possibility exists that any defects
can be cured by amendment.
[Citation.] If the answer to
either question is yes, then the trial court erred in making its ruling. [Citation.]â€
(Burt v. County of Orange, supra,
120 Cal.App.4th at p. 279.)
In performing our review, we are
mindful that “[i]t is not the ordinary function of a demurrer to test the truth
of the plaintiff’s allegations or the accuracy with which he describes the
defendant’s conduct. A demurrer tests
only the legal sufficiency of the pleading.â€
(Committee On Children’s
Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213.) In considering the merits of a demurrer, “the
facts alleged in the pleading are deemed to be true, however improbable they
may be. [Citation.]†(Del E.
Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593,
604.) Thus, when reviewing the propriety
of a judgment sustaining a demurrer, the question of the plaintiffs’ or
petitioners’ “ability to prove . . . allegations, or the possible
difficulty in making such proof does not concern the reviewing court[.]†(Alcorn
v. Anbro Engineering, Inc. (1970) 2 Cal.3d 493, 496.)
In reviewing the superior court’s
order sustaining the demurrer, “we examine the complaint de novo to determine
whether it alleges facts sufficient to state a cause of action under any legal
theory[.]â€
v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.) While our focus is on the pleadings,
“[r]elevant matters that are properly the subject of judicial notice may be
treated as having been pled.†(
(2002) 100 Cal.App.4th 736, 742.) Even
if the trial court has not ruled on a party’s request for judicial notice, we
may ourselves take judicial notice of appropriate matters.
Manufactured Homes, Inc. v. Liebert (2008) 162 Cal.App.4th 68, 82-83,
fn. 8.) If the allegations of the
complaint or petition conflict with attached exhibits, we give preference to
the exhibits. (See id. at p. 83.) If the
exhibits are ambiguous but can be construed as the plaintiffs or petitioners suggest,
then we must accept their construction.
(Ibid.) Similarly, we must accept the plaintiffs’ or
petitioners’ allegations regarding the construction of an ambiguous contract,
“[s]o long as the pleading does not place a clearly erroneous construction upon
the provisions of the contract[.]†(
Development Co. (1986) 181 Cal.App.3d 122, 128.)
II. The Supreme Court’s
Decision in Retired Employees
One of the reasons the trial court
gave for sustaining the Regents’ demurrer was that there could be no implied
contract for retiree medical benefits.
Since judgment was entered in this case, however, the California Supreme
Court has disagreed. In
1171, the court held that “under California law, a vested right to health
benefits for retired county employees can be implied under certain
circumstances from a county ordinance or resolution.†(Id.
at p. 1194.)
The holding in Retired Employees came in response to a certified question from the
United States Court of Appeals for the Ninth Circuit. (Retired
Employees, supra, 52 Cal.4th at pp. 1176, 1178, 1194.) The underlying federal litigation arose out
of a suit brought by REAOC, an organization of retired Orange County employees,
against Orange County (County). (
medical insurance to its retired employees.
It initially calculated the premiums for active and retired employees separately,
but in 1985, County began to combine active and retired employees into a
single, unified pool for purposes of calculating health insurance
premiums. (Ibid.) “The single unified
pool . . . had the effect of subsidizing health insurance for
retirees, in that it lowered retiree premiums below their actual costs, while
raising active employee premiums above their actual costs.†For budgetary reasons, in 2007, County passed
a resolution splitting the pool of active and retired employees. (Ibid.)
REAOC sued County, seeking an
injunction prohibiting the county from splitting the pool of active and retired
employees. (Retired Employees, supra, 52 Cal.4th at p. 1177.) “REAOC conceded that the express provisions of the various memoranda of understanding
. . . and the Orange County Board of Supervisors (Board) resolutions
were silent as to the duration of the unified pool. But REAOC nonetheless alleged that County’s
action constituted an impairment of contract in violation of the federal and
state Constitutions, in that County’s long-standing and consistent practice of
pooling active and retired employees, along with County’s representations to
employees regarding a unified pool, created an implied contractual right to a continuation of the single unified
pool for employees who retired before January 1, 2008.†(Id.
at pp. 1177-1178.) Among other
things, REAOC relied on representations contained in booklets County
distributed to active employees describing health benefits available in
retirement. (Id. at p. 1178.) After
the federal district court granted summary judgment to County, REAOC appealed
to the Ninth Circuit, which then asked the California Supreme Court to decide
whether an implied contract to which a county is a party could confer vested
rights to health benefits. (
In the California Supreme Court,
County argued “(1) that a county government and its employees cannot form an
implied contract; (2) that even if implied contracts are cognizable in the
public employment context, such contracts cannot create vested rights; and (3)
that even if vested contractual rights for county employees may be implied,
such rights cannot include health benefits.â€
(Retired Employees, supra, 52
Cal.4th at p. 1179.) Our Supreme
Court rejected each of these arguments.
(Id. at
pp. 1179-1193.) Most significant
for our purposes is the court’s discussion of the first issue—how implied
contracts may be formed in public employment.
Retired
Employees held that a county may be bound by the terms of an implied
contract so long as there is no legislative prohibition against such
arrangements, such as a statute or ordinance.
Employees, supra, 52 Cal.4th at p. 1176, citing Youngman v. Nevada Irrigation Dist. (1969) 70 Cal.2d 240, 246 (
sensitive to the fact that the principal function of governmental bodies is to
make laws that establish policy, not to make contracts. (Retired
Employees, supra, 52 Cal.4th at p. 1185.) “ ‘Thus, it is presumed that a statutory
scheme is not intended to create private contractual or vested rights and a
person who asserts the creation of a contract with the state has the burden of
overcoming that presumption.’
[Citation.]†(
issue, the court concluded generally “that legislation in California may be
said to create contractual rights when the statutory language or circumstances
accompanying its passage ‘clearly “. . . evince a legislative intent
to create private rights of a contractual nature enforceable against the [governmental
body].†’ [Citations.] Although the intent to make a contract must
be clear, our case law does not inexorably require that the intent be express. [Citation.]
A contractual right can be implied from legislation in appropriate
circumstances. [Citation.]†(Id.
at p. 1187.) Thus, while we must
“ ‘proceed cautiously both in identifying a contract within the language
of a . . . statute and in defining the contours of any contractual
obligation[,]’ . . . [t]he requirement of a ‘clear showing’ that
legislation was intended to create the asserted contractual obligation
[citation] should ensure that neither the governing body nor the public will be
blindsided by unexpected obligations.†(
The court in Retired Employees also held that vested contractual rights may be
implied from legislation in certain circumstances; vesting is simply a matter
of the parties’ intent. (
p. 1189.) Thus, public employee
benefits may become vested by implication in appropriate circumstances. (Id.
at p. 1190.) “However, as with any
contractual obligation that would bind one party for a period extending far
beyond the term of the contract of employment, implied rights to vested
benefits should not be inferred without a clear basis in the contract or
convincing extrinsic evidence.†(
Having summarized the holdings in
analysis to the case before us.
III.
Action for Breach of an Implied Contract.
Retirees contend that under
obligation to provide lifetime retiree medical benefits to them on the same
terms as other University retirees may be implied from the authorization of
those benefits in 1961, the uninterrupted provision of those benefits for more
than 50 years, and from the University’s publications assuring employees they
would receive health benefits in retirement so long as they met certain
eligibility requirements.
name="_ftnref9" title="">[9] They contend the lower court erred in finding
Retirees had identified no minutes, formal resolution or standing order from
the Regents conferring on Retirees retirement medical benefits in
perpetuity. Having reviewed the allegations
of the FAP and the matters properly subject to judicial notice, we conclude
Retirees are correct.
Retirees alleged that the Regents
first authorized medical benefits for Livermore retirees in the 1960s. This authorization was alleged to have been
given “in accordance with policies and procedures used by the Regents in the
ordinary course of their business and in the proper exercise of their
powers.†Retirees also alleged that the
Regents did not reserve any right to terminate, eliminate, or modify these
benefits in a manner that was not consistent with the legal authority of
California public agencies to modify vested retirement benefits, nor did the
Regents reserve the right to transfer the responsibility for providing this
benefit to another entity. According to
the FAP, the Regents also did not reserve any right to exclude Livermore
retirees from coverage under University-sponsored group health coverage or to
treat those retirees differently from other University employees and
retirees. Retirees claimed that from the
1960s until 2007, the Regents have provided retiree medical benefits without
interruption.
title="">[10]
In addition to the allegations of
the FAP, Retirees properly sought judicial notice of an October 23, 1961
resolution by the Regents. (See
p. 233, fn. 10.) In that
resolution, the Regents authorized the President of the University, in
connection with the University’s “Employee Health and Life Insurance Program,â€
“to approve for continued payroll deductions and health insurance subsidy those
existing plans which are willing to amend their benefits to provide equal benefits to retired employees.†(Italics added.) Retirees allege that for more than 50 years
after issuing this resolution, the Regents provided University retirees the
same medical benefits they provided to University employees.
Thus, the essential allegations of
Retirees’ claim of implied contract were that the Regents authorized
University-sponsored group health insurance coverage for retirees, and then
during Retirees’ employment at Livermore, the Regents—through various benefit
booklets and handbooks published by their authorized representatives—offered to
provide Retirees with University-sponsored group health plan coverage when they
retired. (See Hunter v. Sparling (1948) 87 Cal.App.2d 711, 721-722 [enforceable
promise to pay pension benefits inferred from personnel policies];
California (2007) 156 Cal.App.4th 809, 828-833 [University’s promise on its
web site and in catalogues not to raise certain fees held to be an implied
contract].) Retirees allegedly accepted
this offer through working at Livermore and continuing to provide services over
time, and they claim they remained there because of the promise they would have
University-sponsored group health plan coverage in retirement. (See Hannon
Engineering, Inc. v. Reim (1981) 126 Cal.App.3d 415, 425 [pension plan
offered by employer and impliedly accepted by employee by remaining in
employment constitutes a contract, whether plan is public or private; continued
employment is consideration for promise to pay pension].) The booklets and handbooks informed
University employees that they could continue their University-sponsored group
health insurance coverage after they retired, provided they met certain
eligibility criteria. Retirees alleged
that they met these criteria at all relevant times.
“In pleading a cause of action on an
agreement implied from conduct, only the facts from which the promise is
implied must be alleged.†(
pp. 246-247.) The foregoing
allegations suffice to plead a cause of action based on an implied
contract. (See California Teachers Assn. v. Cory (1984) 155 Cal.App.3d 494,
504-505.)
IV. The Regents’ Arguments
in Support of the Trial Court’s Order Are Unpersuasive.
The Regents offer a number of
arguments in support of the trial court’s ruling. For the most part, these arguments are not
directed to the sufficiency of the allegations of the FAP, but rather are based
almost entirely on matters outside of the operative pleading. As such, they have limited force given the
procedural posture of this case, which requires us to accept the truth of
Retirees’ allegations and restricts our review to those allegations and matters
that are properly subject to judicial
notice.
A. Retirees Are Not
Required to Prove Their Case to Overcome a Demurrer.
The Regents first argue Retirees
have “provided no documents that clearly evince†an intent on the Regents’ part
to provide lifetime retiree health benefits.
because we are reviewing the trial court’s ruling on a demurrer, and we must
therefore assume the truth of all of the allegations of the FAP. (Burt
v. County of Orange, supra, 120 Cal.App.4th at p. 279.) To prevail on appeal, Retirees are not
required to show they already possess the evidence that will prove their
case. The only question before us is
whether the allegations of the FAP
are sufficient to state a cause of action under any legal theory. (McCall
v. PacifiCare of Cal., Inc., supra, 25 Cal.4th at p. 415.)
B.
Have Authorized Retiree Health Benefits.
The Regents next claim they have not
delegated their authority to contract with employees for lifetime retiree
health benefits, nor have they passed legislation granting such benefits.
employee compensation and benefits fall within their constitutional grant of
authority. (In re Work Uniform Cases (2005) 133 Cal.App.4th 328, 344.) But they misread the FAP when they contend it
alleges that the contract was created only by statements made by the Regents
and their authorized representatives.
The FAP alleges the retiree health benefits were properly authorized by
the Regents themselves. As we read the
pleading, Retirees allege that this express authorization, the later statements
of the Regents and their authorized representatives, and the uninterrupted
provision of University-sponsored group health benefits from Retirees’
retirement dates through 2007, create an implied contract to provide Retirees
with University-sponsored group health benefits throughout the period of their
retirement. In Retired Employees, the California Supreme Court held that very
similar allegations were sufficient to state a claim for breach of implied
contract. (Retired Employees, supra, 52 Cal.4th at pp. 1177-1178, 1183,
1187 [County’s removal of retired employees from unified medical insurance pool
alleged to have impaired contract because of County’s longstanding practice of
pooling active and retired employees and County’s representations to employees
regarding unified pool].)
C.
Authority Can Only Be Determined After Discovery.
The Regents contend there is no
document or regental action limiting their ability to provide different
benefits to Livermore retirees than to other University retirees. In the court below, however, Retirees offered
a 1971 benefits booklet stating, “The complete provisions of the UCRS are set
forth in the Standing Order of The Regents relating to the University of
California Retirement System. All
informational booklets are subject in every respect to the Standing Order, and
where any differences may occur, the Standing Order shall govern.†If it can be located, the terms of the
Standing Order to which this booklet refers might define the Regents’ authority
with respect to retiree health benefits.
Obviously, this is a matter that must await further factual development,
but it demonstrates this issue cannot properly be resolved on demurrer. Moreover, the Regents’ argument seems to
contradict the FAP, which alleges that after authorizing the benefits at issue,
the Regents reserved no right to modify or eliminate them or to treat Livermore
retirees differently from other University retirees.
D. Retirees’
Interpretation of the Benefits Booklets Is Not Clearly Erroneous.
The Regents next contend that the
benefits booklets and handbooks attached to the FAP contain no promise of
lifetime retiree health benefits. In
fact, the Regents read the language of these materials as showing an intent not
to create vested rights. Like the trial
court, they rely on language in the booklets stating that employees’ health
benefits “may continue†or “can be continued†in retirement. The Regents and the trial court view this as
conditional language that cannot create a vested right to University-sponsored
health benefits in retirement.
But as Retirees point out, these
booklets contain language that could be read as implying a commitment to
provide these benefits throughout
retirement, rather than for an unspecified shorter period during retirement. For
example, a 1980 benefit publication states that during retirement, health
insurance “[c]overage can be continued as
long as monthly income received from retirement system is large enough to cover
employee contribution.†(Italics
added.) A 1990 publication informed
Livermore employees that “your University group medical and dental plans may be
continued when you retire, provided that
you are enrolled at the time of retirement.†It also contemplated that retirees would be
able to participate in the annual open enrollment period, which suggests that
the provision of retiree group health insurance benefits would be ongoing. With regard to open enrollment, the
University’s 1998 Retirement Handbook
states, “UC will send you information each
year explaining your options.â€
(Italics added.) These
publications might reasonably be construed as promising Retirees continuing
University-sponsored group health insurance so long as they met the stated
eligibility criteria and that such coverage would continue throughout the
entire period of their retirement.
Since, it appears the FAP “does not place a clearly erroneous
construction upon the provisions of the [alleged] contract, in passing upon the
sufficiency of the [petition], we must accept as correct [Retirees’]
allegations as to the meaning of the agreement.†(Marina
Tenants Assn. v. Deauville Marina Development Co., supra, 181 Cal.App.3d at
p. 128.) Retirees’ interpretation
may ultimately prove invalid, but it was improper for the trial court to
resolve the issue against them based solely on the FAP and the attached
materials. (See Aragon-Haas v. Family Security Ins. Services, Inc. (1991) 231
Cal.App.3d 232, 239.)
F. The Reservation of
Rights Language in the Benefits Booklets Is Ambiguous.
The Regents also rely on reservation
of rights language appearing in benefits booklets as demonstrating the
University’s intent not to create
vested rights. We do not find this
language as unequivocal as the Regents do.
The Regents cite a 1988 Livermore publication entitled
publication “gives a general overview of your personal and family benefit
plans. You shouldn’t consider it a
promise or guarantee of plan coverage or benefits.†But the very next sentence states, “You have
to meet eligibility rules for coverage and qualification rules to receive
benefits.†Read together, the two
statements may simply mean that benefits are contingent upon meeting
eligibility requirements, not that the benefits are not vested retirement
rights.
Similarly, the 1998
welfare benefits are not accrued or vested benefit entitlements.†It also goes on to say that “UC’s
contribution toward the monthly cost of the coverage is determined by UC and
may change or stop altogether, subject to the state of California’s annual
budget appropriation.†As Retirees
suggest, this language might be read to mean that the University may change or
eliminate its contribution toward the cost of coverage, if the state’s budget
appropriation so required. Indeed, a
2000 UCRP publication explains that “[h]ealth and welfare benefits are subject
to legislative appropriation and are not accrued or vested benefit
entitlements.†The Regents do not claim,
however, that Retirees’ University-sponsored health insurance coverage was
terminated because of the state’s budgetary appropriation.
In a related argument, the Regents
note that the booklets use the words “lifetime,†“for the rest of your life,â€
or “for life†when referring to retirement income. Since no such language appears in connection
with retiree health insurance benefits, the Regents ask us to infer that such
benefits are not guaranteed for life. We
are unwilling to make such an inference as a matter of law, because other
provisions of the booklets upon which the Regents rely are arguably in conflict
with this reading. For example, the
Regents cite a May 1979 UCRS publication entitled UCRS and Social Security, which uses the phrase “[l]ifetime
retirement income.†But under the
heading “Vesting,†that same publication states, “After you have five years of
UCRS service credit, or when you are age 62, you have a non-forfeitable
(vested) right to a retirement benefit that is based on both your own
argument what effect, if any, this language might have on Retirees’ claims, and
they offered differing interpretations.
As a court reviewing a demurrer ruling, however, we can express no
definitive view as to the meaning of this language. Nevertheless, it provides further support for
our conclusion that it cannot be said as a matter of law that Retirees have
failed to plead the existence of an implied contract.
F. The
Allegations of the FAP Are Deemed True, Even if Retirees Have Not Yet
Discovered “Source Documents.â€
The Regents repeat their argument
that Retirees have failed to overcome the presumption that legislative acts do
not give rise to an implied contract for vested benefits. (See Retired
Employees, supra, 52 Cal.4th at p. 1186.) They claim that because Retirees have not identified
any “source documents that could support their conclusory contentions of an
implied contract[,] [t]he allegations . . . are not deemed true on
demurrer.†In essence, the Regents argue
that because Retirees have not produced the evidence that will prove their
case, we need not accept the truth of the allegations in the FAP. The cases the Regents cite in support of this
rather extraordinary argument do not come close to supporting it.
Moreover, the Regents have conceded
they authorized retiree group health insurance benefits. If, as the Regents claim, such benefits can
only be authorized by “regental action,†then it would seem to follow that a
“source document†authorizing those benefits must exist. Retirees have already identified one such
source document—the October 23, 1961 resolution. And while it appears the Regents may not keep
their own copies of such documents, this does not preclude the possibility that
discovery may yield others bearing on the subject matter of this suit.
V.
for Promissory Estoppel.
The trial court sustained the
Regents’ demurrer to Retirees’ cause of action for promissory estoppel because
it concluded the doctrine cannot be applied against the government where doing
so would nullify a policy adopted for the benefit of the public. The trial court did not, however, explain
exactly what policy would be nullified.
It also concluded Retirees could not allege that the interests of
justice clearly require the application of promissory estoppel in this case,
nor could they allege any exceptional, peculiar, and compelling circumstances
justifying application of the doctrine.
We conclude the trial court erred.
“The elements of promissory estoppel
are: (1) a clear promise, (2) reliance,
(3) substantial detriment, and (4) damages[.]â€
(Poway Royal Mobilehome Owners
Assn. v. City of Poway (2007) 149 Cal.App.4th 1460, 1471.) The FAP alleges that the Regents authorized
health benefits for retired employees and then, through both representations,
conduct, and established practice, promised Retirees they would continue to
receive University-sponsored group health coverage throughout their
retirement. Because health benefits are
uniquely important to Retirees’ well-being in retirement, Retirees allegedly
relied on this promise by remaining in employment at Livermore for their entire
careers, rather than seeking employment in the private sector, where retiree
medical benefits are not always available.
The substantial detriment to Retirees is that their health coverage now
costs more than it did before; they are part of an older, more infirm risk
pool; and their benefits are not substantially equivalent to those provided to
other University retirees. The damages
to Retirees allegedly arise not only from the currently increased costs of
their health care but also from their transfer to a different risk pool, which
will cause the cost of their coverage to rise more rapidly than that of other
University retirees and will diminish their bargaining power with health care
providers.
At the pleading stage, these
allegations are sufficient to state a claim for promissory estoppel. We have already concluded Retirees have
sufficiently alleged an implied contract, thus the requirement of a clear promise
is satisfied. Contrary to the Regents’
contention, the promise would not be fulfilled by the provision of
University-sponsored group health plan coverage until 2007, as Retirees allege
that the promise was to provide those benefits throughout the entire period of
their retirement.
The Regents also contend that
application of promissory estoppel would defeat public policy. We are unable to evaluate this argument,
because their brief does not identify the public policy to which they refer,
and it provides no authority for the claim that the unidentified public policy
would be defeated. We are not required
to develop parties’ arguments for them, and we may disregard contentions
unsupported by citation of authority. (
164 Cal.App.4th 814, 830; Regents of
University of California v. Sheily (2004) 122 Cal.App.4th 824, 826-827,
fn. 1.)
In a separate paragraph, the Regents
argue it is against public policy “to divest The Regents of its [
and upon what grounds to create vested rights for employees.†This argument completely misses the point of
Retirees’ suit. The FAP alleges it was
create certain vested rights for their employees, and Retirees are suing to
vindicate those rights. Retirees make no
claim that would divest the Regents of the authority to create those
rights. The parties disagree about
whether those rights were created, not about which body has the authority to
create them in the first instance.
VI. The FAP Adequately
Alleges a Cause of Action for Equitable Estoppel.
The trial court ruled Retirees’
claim for equitable estoppel was inherently flawed because the FAP alleged that
in 1998, the Regents began inserting language in benefits books and
publications claiming that retiree medical benefits were not vested and could
be modified at any time. It found that
the Regents had communicated to Retirees that retirement medical benefits were
not vested rights beginning at least 20 years prior to the filing of this
action. The Regents urge us to uphold
the dismissal of this claim because the FAP admits there was no attempt to
deceive employees as to the actual facts.
We disagree.
Initially, we note that the
existence of equitable estoppel is generally a question of fact. (Driscoll
v. City of Los Angeles (1967) 67 Cal.2d 297, 305.) Thus, making findings on the question of
equitable estoppel is generally inappropriate at the demurrer stage. (Ard v.
County of Contra Costa (2001) 93 Cal.App.4th 339, 347.) Moreover, the trial court and the Regents
rely on language first inserted in benefits booklets long after each of the
Retirees had begun employment at Livermore.
Requa, for example, had been a Livermore employee for 33 years before the
University began to claim retiree health benefits were not vested rights. And despite the insertion of that language,
the FAP alleges—and the Regents do not deny—that Retirees in fact received
University-sponsored group health insurance benefits until January 1,
2008.
As the California Supreme Court has
explained, “[t]he cases which have applied estoppel to the narrow area of
public employee pensions, have emphasized the unique importance of pension
rights to an employee’s well-being, and have frequently arisen after employees
were induced to accept and maintain employment on the basis of expectations
fostered by widespread, long-continuing misrepresentations by their
employers. In each of these instances
the potential injustice to employees . . . clearly outweighed any
adverse effects on established public policy.â€
(Longshore v. County of Ventura
(1979) 25 Cal.3d 14, 28.) In light of
these principles, we conclude the FAP adequately states a claim for equitable
estoppel, and it was therefore error for the trial court to sustain the
Regents’ demurrer to that count.
VII. Retirees’ Claims Are Not
Barred by the Statute of Limitations or Laches.
The Regents contend Retirees’ action
is barred by the two-year statute of limitations contained in Code of Civil
Procedure section 339, which governs actions brought “upon a contract,
obligation or liability not founded upon an instrument of writing[.]†They also
make a perfunctory argument that the action is barred by the equitable doctrine
of laches. We disagree on both counts.
A. Retirees’ Action Was
Filed Within the Three-Year Statute of Limitations.
With regard to the statute of
limitations, the Regents argue Retirees’ claims accrued either in March 1988 or
August 1998 when the University issued benefit booklets claiming that health
benefits were not vested benefit entitlements.
Alternatively, the Regents argue Retirees’ claims accrued when the
administration of their medical benefits was transferred to LLNS on January 1,
2008. Thus, Retirees’ action, first filed
on August 11, 2010, is barred by the statute.
First, we disagree with the Regents
that the applicable statute of limitations is contained in Code of Civil
Procedure section 339. It has long
been established that pension benefits are liabilities created by statute, and
thus suits on such liabilities are subject to the three-year limitations period
of Code of Civil Procedure section 338, subdivision 1. (E.g., Hermanson
v. Board of Pension Commrs. (1933) 219 Cal. 622, 624-625.)
Second, the right to receive
periodic pension benefits is a continuing one, and the time limitation on the
right to sue for each installment begins to run when that installment falls
due. (Abbott v. City of Los Angeles (1958) 50 Cal.2d 438, 462.) Thus, even if Retirees could have brought
suit after issuance of the 1988 or 1998 benefits booklets, their failure to do
so would not bar them from obtaining either declaratory relief with respect to
future benefit payments or a monetary judgment for, inter alia, the difference (for three years prior to the filing of
this action) between the cost of University-sponsored group health coverage and
the cost of the coverage provided by LLNS.
(Id. at pp. 463-464.)
Third, “a breach of contract
ordinarily occurs upon the promisor’s failure
to render the promised performance.
Therefore, to pinpoint the time of an alleged breach for purposes of the
statute of limitations, it is necessary to establish what it was the defendant
promised to do . . . and when
its conduct diverged from that promise.â€
(McCaskey v. California State
Automobile Assn. (2010) 189 Cal.App.4th 947, 958.) In this case, the alleged promise was that
Retirees would continue to receive University-sponsored group health insurance
benefits in retirement, so long as they met eligibility requirements. Even if we were to assume, contrary to
Retirees’ allegations, that the statements in the 1988 and 1998 booklets were
sufficient to advise Retirees that health benefits were not vested benefit
entitlements, the Regents “did not breach this promise merely by announcing
[they] would no longer honor it.†(
“[S]uch a repudiation may constitute an anticipatory breach, giving the aggrieved promisee the
But it does not accelerate the accrual of a cause of action for
limitations purposes; the promisee remains entitled to wait until performance
is due and the promisor has failed to perform, i.e., to do the thing
promised.†(Ibid.)
Here, even if we were to assume the
reservations in the 1988 and 1998 booklets constituted anticipatory breaches of
the implied contract—a question we need not and do not decide—Retirees could
still wait to file their suit until the Regents had failed to render the
promised performance. The Regents are
alleged to have terminated University-sponsored coverage for Retirees on
January 1, 2008. Accepting as true
the allegations of the FAP, Retirees’ action was thus timely filed in August
2010.
B.
Were Prejudiced by Retirees’ Claimed Delay in Bringing Suit.
The Regents’ cursory laches argument
merits little attention. The sole case
the Regents cite in support of their argument is Corcoran v. City of Los Angeles (1955) 136 Cal.App.2d 839 (
out below, was disapproved by Conti v.
Board of Civil Service Commissioners (1969) 1 Cal.3d 351, 362 (
makes clear, “laches requires unreasonable delay plus either acquiescence in
the act about which plaintiff complains or prejudice to the defendant resulting
from the delay.†(Conti, supra, 1 Cal.3d at p. 359, fns. omitted.) Prejudice is never presumed, and the
existence of laches is generally a question of fact to be determined by the
trial court in light of the circumstances of the case. (Board
of Administration v. Wilson (1997) 52 Cal.App.4th 1109, 1126.) Far from demonstrating prejudice, the
Regents’ brief is completely silent on the issue. We therefore reject their unsupported defense
of laches.
title="">[15]
Disposition
The judgment is affirmed to the
extent it dismissed Retirees’ claim for impairment of express contract. In all other respects, the judgment is
reversed. Retirees shall recover their
costs on appeal. (Cal. Rules of Court,
rule 8.278(a)(3).)
_________________________
Jones,
P.J.
We concur:
_________________________
Simons, J.
_________________________
Bruiniers, J.
name="_ftn1" title="">[1] Requa was first hired by the University in 1961, but left in 1963
to continue his education. He returned
and began working at Livermore in 1965, where he worked continuously until his
retirement in 1999. Moen began working
at Livermore in 1963 and retired in 2000.
Davis began working at Livermore in 1971 and retired in 2002. Ventura began working at Livermore in 1974
and retired in 2006. During their
employment at Livermore, Moen, Davis, and Ventura had no breaks in University
service.
name="_ftn2" title="">[2] Although this publication was issued by Livermore, it explained
that the benefits outlined in it were “governed entirely by the terms of
retirement plan provisions, University of California Group Insurance
Regulations and group health/insurance plan contracts, and applicable state and
federal laws.â€
