Sonoma Cnty. Ass'n of Retired Emp. v. Sonoma Cnty.

“[U]nder California law, a vested right to health benefits for retired county employees can be implied under certain circumstances from a county ordinance or resolution.”

Plaintiff, Sonoma County Association of Retired Employees (“SCARE”) sued defendant, Sonoma County (“County”), when the County decided to stop providing SCARE retirees with healthcare benefits in perpetuity. The district court dismissed plaintiff’s original complaint, with leave to amend. The court found SCARE failed to put forth any evidence of an express contract between the parties as the court held was required by California law. Meanwhile, a similar issue was certified in a question to the California Supreme Court (“REAOC II”). SCARE filed its amended complaint while REAOC II was pending. The district court held SCARE’s amended complaint still lacked any evidence of an express agreement concerning the disputed healthcare benefits, and dismissed the complaint with prejudice. While SCARE’s current appeal was pending REAOC II was issued holding 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.” The Ninth Circuit held the district court had not erred by dismissing SCARE’s amended complaint but, considering the holding in REAOC II, held the court had erred by dismissing SCARE’s complaint with prejudice. The Court remanded the case to determine whether there was an implied contract between the parties and whether the County had created that contract by ordinance or resolution. The Court noted that SCARE’s amended complaint substantially alleged that the County had implicitly bound itself but that the complaint would need to be amended a third time to “plausibly” allege the contract was created by the County in an ordinance or resolution. The Court further held that SCARE had not waived its right to raise an implied contract claim and that certain recent Ninth Circuit precedent did not preclude the use of an implied contract claim in this case. VACATED and REMANDED.