Retired County Employees Sufficiently Alleged County's Implied Contract to Provide Healthcare Benefit in Perpetuity

The court of appeals affirmed in part and reversed in part a district court judgment. The court held that retired county employees made a sufficient showing of an implied contract to provide them a certain healthcare benefit in perpetuity to support their claim that the county breached that contract by reducing the benefit.

Retired employees Gaylan Harris and others sued the County of Orange after it restructured various benefits previously provided them. The retirees argued, among other things, that the restructuring violated an implied contract to provide them a monthly grant (the "grant benefit") to defray the cost of health care premiums.

The district court granted the county's motion to dismiss.  However, the court of appeals reversed in part, holding that the district court erred in dismissing the retirees' contractual claim.

In order to survive the county's motion to dismiss, the retirees' complaint needed to plausibly allege that the county (1) entered into a contract that included implied terms providing healthcare benefits to retirees that vested for perpetuity; and (2) created that contract by ordinance or resolution. The retirees made such a showing. They alleged the existence of annual memorandums of understanding (MOUs) establishing a right to the grant benefit. They further alleged that they "had an implied contractual right to receive the grant benefit…throughout their retirement." In support, they made specific allegations regarding the basis for this implied right, including allegations regarding the course of negotiations for the grant benefit. These allegations plausibly supported the conclusion that the county impliedly promised a lifetime benefit that could not be unilaterally eliminated or reduced. Among other things, they alleged the establishment of a long-term funding mechanism, including the commitment of a large sum of money.

This allegation undermined the county's contention that there was no promise to provide the grant benefit beyond the duration of any single one-year MOU. They further alleged that active employees were required to contribute 1% of their wages to fund the grant benefit, which allegation supported the notion that the parties intended the benefit to be available for employees throughout their retirements, rather than eliminated or reduced before employees could fully benefit from their earlier contributions. Because the county did not dispute that the annual MOUs were adopted by resolution of the county board of supervisors, the district court erred in dismissed the retirees' contract claim regarding the grant benefit.


Harris v. County of Orange, Septembner 7, 2018


Supreme Court finds City's Transfer from Electrical Enterprise Fund to General Fund Proper, and not a Tax, as City's Cost of Providing Electrical Utility did not Exceed Charges

The California Supreme Court reversed a court of appeal decision. The court held that municipal utility rates challenged as invalid taxes under Cal. Const. art. VIII C do not constitute taxes because they do not exceed the reasonable cost of providing the service.

The City of Redding operates an electric utility to provide electric service for residents and commercial businesses within the city. Each year, the city's budget includes a transfer from the utility's enterprise fund to the city's general fund to compensate the general fund for the costs of services that other city departments provide to the utility. In 2010, the city increased the rates charged to residents for electric service. Citizens for Fair REU Rates filed suit challenging the rate increase, arguing that the rates improperly included the cost of the transfer from the utility fund to the general fund. Citizens contended the transfer was simply a device to collect extra money from utility customers for the general fund, did not reflect the city's actual costs to provide services, and thus constituted an invalid tax under art. XIII C, which prohibits local governments from imposing, increasing, or extending any tax without voter approval. In 2011, Citizens again filed suit when the city council approved annual budgets incorporating the same transfer of funds.

The trial court consolidated the actions and entered judgment for the city. The court of appeal reversed, holding that the transfer of funds constituted an invalid tax.

The California Supreme Court reversed, holding that the budgetary transfer is not a tax. Excepted from art. XIII C's definition of tax is any charge imposed for a service or product that does not exceed the reasonable costs of providing it. At issue was not whether each cost in the utility's budget was reasonable, but, rather, whether the charge imposed on ratepayers exceeded the reasonable costs of providing the relevant service. Here, the undisputed evidence showed that the challenged rates were actually far less than the city's actual and reasonable cost to provide electric service. For 2010 to 2011, for example, projected rate revenues were $102.1 million. Actual projected expenses were $136.7 million, including the $6 million transfer challenged by Citizens, with the resulting shortfall to be covered using utility revenues from a variety of non-rate sources. Because the rate charged to utility customers did not exceed the actual cost of providing the service, the utility rates were not taxes for purposes of art. XIII C, and voter approval was not required. 

Citizens for Fair REU Rates v. City of Redding, August 27, 2018


Public Records Act Does Not Require Creation of New Records

The First Appellate District Court held that an agency may not be compelled under the California Public Records Act to manipulate the data in existing documents so as to create new documents.

Richard Sander and the First Amendment Coalition filed a petition for writ of mandate seeking to obtain information from the State Bar of California's bar admissions database. Specifically, they sought records for all applicants to the California Bar Examination from 1972 to 2008 in the following categories: race or ethnicity, law school, transfer status, year of law school graduation, law school and undergraduate GPA, LSAT scores, and performance on the bar examination. Petitioners proposed four protocols for recoding the original data in the records into new values (1) to protect the applicants anonymity and (2) to convert the data into the various categories needed by petitioners for their research.

The trial court upheld the State Bar's denial of petitioners' request.

The court of appeal affirmed, holding that petitioners' request was beyond the purview of the CPRA because it would compel the State Bar to create new records. The court found it well established under California law and guiding federal precedent under the Freedom of Information Act (FOIA) that, while the CPRA requires public agencies to provide access to their existing records, it does not require them to create new records to satisfy a request. At issue here was not the mere redaction of records to protect anonymity, but, rather, the replacement of redacted data with new data, through a series of complex data manipulations. Each of the four protocols proposed by petitioners would require the State Bar to recode its original data into new values. The trial court properly found that the State Bar could not be compelled to create a new record by changing the substantive content of its existing records or replacing existing data with new data.

Sander v. State Bar of California, August 27, 2018


Lowest Responsible Bidder Awarded Bid Preparation Costs

The Fourth Appellate District affirmed a judgment. The court held that the lowest responsible bidder on a public works contract was entitled to its bid preparation costs after the contract was awarded to a different bidder.
West Coast Air Conditioning Company, Inc. was among the bidders on a public works contract by the California Department of Corrections and Rehabilitation (CDCR). CDCR awarded the contract to Hensel Phelps Construction Co. (HP). West Coast filed a petition for writ of mandate challenging that award and seeking to enjoin CDCR from awarding the contract to HP. West Coast alleged myriad defects in HP's bid. In its prayer for relief, West Coast requested general damages in an amount sufficient to reimburse it for its bid preparation costs and interest.
The trial court  rendered judgment in favor of West Coast, finding HP's bid to be illegal and unresponsive as a matter of law. The court issued an injunction barring HP from performing any further work on the project, and awarded West Coast its bid preparation costs of $250,000. The court nonetheless declined to order CDCR to award West Coast the contract for the remaining work, despite having previously found that West Coast was the lowest responsible bidder and should have been awarded the contract. CDCR appealed the award of bid preparation costs.
The court of appeal affirmed, holding that the trial court properly exercised its broad equitable authority when it awarded West Coast its bid preparation costs under a promissory estoppel theory. First, there was overwhelming evidence to support the trial court's finding that West Coast's bid was responsive. Further, that West Coast had already obtained relief in the form of a permanent injunction did not preclude an award of bid preparation costs. The issuance of a permanent injunction in favor of West Coast, the lowest responsible bidder, without either an award of the public works contract to it or an award of damages equal to its bid preparation costs, would result in an inadequate remedy. West Coast prepared its bid and incurred $250,000 in costs in reliance on CDCR's representation that the contract would be awarded to the lowest responsible bidder, which turned out not to be the case.

West Coast Air Conditioning Company v. California Department of Corrections and Rehabilitation, March 20, 2018


Employer's Payments to a Union Vacation Trust Fund on an Employee's Behalf Not Reportable Wages

Steven Mora sued former employer Webcor Construction, L.P. for violating Labor Code §226(a) by failing to list the hours and hourly rate associated with a payment described as "Union Vacation" on Mora's wage statements. It was undisputed the amounts in question were payments to a union vacation trust fund authorized by the Labor Management Relations Act of 1947 (LMRA), also known as the Taft--Hartley Act.
The trial court sustained Webcor's demurrer without leave to amend.
The court of appeal affirmed, holding that the payments were not within the scope of §226(a). Section 226(a) requires employers to provide employees wage statements itemizing, among other things, all wages earned, including the hours worked and applicable rates of pay. The statute is highly detailed, containing nine separate categories that must be included on wage statements. None of these categories, however, references payments to an employee benefit trust fund. Further, these payments, unlike payments of accrued vacation pay, were not payments owed to Mora. Rather they were payments owed to the trust fund. Although Mora had some expectation of benefits from the trust fund, he did not allege an entitlement to receive the entirety of the payments made by Webcor on his behalf. The payments thus could not be deemed wages owed to Mora. Section 226(a) did not apply.

Mora v. Webcor Construction, LLP, First DCA, February 6, 2018.