On October 28, 2021, a panel from the U.S. Court of Appeals for the Ninth Circuit put an end to a longstanding dispute between Orange County and a class of retired County employees over whether the retirees had an implied vested right to a retiree medical benefit. On December 9, the Court denied plaintiffs’ Petition for Rehearing and Rehearing En Banc.
The case—Harris v. County of Orange, 9th Cir. Case No. 19-56387—began back in early 2009, when a class of retirees filed suit alleging that the County breached its contractual obligations and deprived them of vested health benefits by restructuring the method through which the County assisted retired employees in defraying the cost of their health insurance. The retirees took the position that they had a vested right to these benefits even though the retiree medical plan establishing the benefits expressly provided that it did not create any vested right to benefits and even though the memoranda of understanding permitting them to participate in the plan were of limited duration and expired on their own terms by a specific date. After multiple dismissals on the pleadings that were partially affirmed by the Ninth Circuit, the district court granted summary judgment in the County’s favor on the remaining issue in the case.
The Ninth Circuit affirmed in a 2-1 panel decision in the County’s favor. The panel concluded that the anti-vesting language of the retiree medical plan (which was adopted by resolution passed by the County Board of Supervisors contemporaneously with the memoranda of understanding) and the limited duration of the operative memoranda of understanding showed that the County did not intend to create a vested right to the health benefit. Moreover, the panel rejected the retirees’ argument that the health benefit at issue should nonetheless be treated as deferred compensation (similar to a pension) protected by the contract clauses of the state and federal constitutions regardless of the County’s intent. As the panel explained, “[t]o permit Plaintiffs’ claims of an implied vested right to the Grant Benefit to proceed when County law requires a contrary result would effectively blindside the County with an unanticipated and unbudgeted obligation.”
A copy of the opinion may be found here.