Victory in Fresno for Vested Retiree Health Benefits

On March 5, 2010, in the Fresno County Superior Court, the Honorable Donald R. Franson, Jr., Judge, issued a decision granting the Petition for Writ of Mandate filed by the Fresno Unified Retirees Association (FURA), on behalf of a District-wide class of 3,500 retirees, against the Fresno Unified School District, thereby confirming and enforcing the District’s Promise of district-paid, lifetime retiree health benefits.

The hearing, coming five years and five months after Fresno retirees first contacted our office for assistance, was attended by more than 200 retirees, and interested retiree groups from other districts, who packed the courtroom and another next door. For the first time the District had a single management representative in court for the hearing. FURA members have attended the many court hearings in large numbers, reflecting their intense interest in the case.

It was not anticipated by FURA that a decision would be issued on March 5. But in an unexpected and dramatic conclusion to the parties’ lengthy oral argument, the judge read a decision which holds that the Fresno retirees were the beneficiaries of an express contract which promised that the District would provide them with retiree health benefits without charge (no premiums, fees, assessments) following retirement, for those who served the requisite years and met other conditions.

The District imposed premiums and fees on retirees in 2006, retroactive to 2005, in violation of this Promise, and has thus far collected roughly $850,000 each year from its retiree class members.

The litigation battle involved numerous legal disputes. Eventually, the District’s procedural defenses to the case proceeding were rejected, and the class of retirees was “certified” during 2009. FURA filed its Motion for a Peremptory Writ of Mandate on August 31, 2009.

FURA’s Motion filled three completely full boxes, and included declarations and testimony from about 55 witnesses, including 3 former superintendents, 2 former District chief negotiators, District recruiters, District risk managers, District human resources personnel, several union leaders and negotiators, and other employees. Altogether, FURA estimates that at least 20,000 pages of evidence was submitted, including about a 1,000 pages of nearly verbatim negotiation notes from the 1976-1977 negotiations.

We also filed copies of more than 50 collective bargaining agreements, and hundreds of other exhibits. These exhibits included recruitment literature, retirement forms, letters, negotiation newsletters and handbills, auditor reports, health pamphlets and even the recording of an early retiree recruitment meeting. Four former superintendents, the District’s two chief negotiators over a 30 year span, the teachers’ union chief negotiators for 25 years, other district and union negotiators, a district director of “risk management,” a district CFO, district recruiters, those conducting new employee orientations and those conducting retiree exit interviews were among our witnesses for whom we submitted evidence.

We argued that the District made a promise of lifetime, fully-paid retirement health benefits (no premiums or fees). More than 45 of the documents referred to the lifetime benefits, and many of these had been sent by the District to hundreds or thousands of its employees. We proved that employees accepted lower wages in exchange for these lifetime benefits. We offered proof that “district-paid” was understood by management and union negotiators to mean “fully paid,” and “no charges” for premiums or fees. One particularly notable piece of evidence was a tape-recording, made by a hearing-impaired prospective retiree, of a district manager informing prospective retirees that the benefit was fully-paid by the district, for life, and that was “all” they needed to know. The District deposed 15 of our witnesses during the summer, who consistently re-affirmed the District’s promise, and FURA introduced much of that testimony as well.

The District responded with their Opposition on November 23, 2010. The District’s Opposition raised approximately 10 defenses. The retirees filed their Reply on January 19, 2010, countering each of the District’s defenses.

The hearing on March 5 was the culmination of this process. In his decision, Judge Franson stated his conclusions, including that the District made an express promise in its contracts and policies to provide these benefits without monthly premium contributions or administrative fees. The Judge referenced the contracts and other evidence he relied on, particularly the evidence of the former superintendents, District managers, District negotiators, and recruiters. His decision essentially holds that the District had made a vested promise, which it impaired when it imposed premiums. He cited the Terry case, saying it was still good law. The Judge also held that independent of the agreements, the District was estopped from now charging premiums or fees.

During its closing argument, the District advanced several entirely new defenses, but these did not affect the outcome, and FURA successfully refuted each.

The District argued that nothing prevented it from enacting a “fee,” for retirees to “pre-fund” the future cost of their benefits. Retirees countered that the Promise of the district was fully understood to mean that the retirees did not pay for their benefit after retirement (as opposed to co-pays and deductibles); and that they had expressed this by using numerous words such as district-paid, fully paid, at no charge, at district expense and so on. Retirees argued that the term “administrative fee” was newly created by the District and not part of the parties’ vocabulary in 1976-1977 when the Plan was initiated, and that in the District’s view it apparently could charge any type or amount of fee it wanted, such as a “convenience fee” under its new theory, although the plain intent of the Plan was that the benefit was to be fully paid. Retirees accused the District of playing wordgames by advancing this new theory at the last minute.

The District argued that it never promised “fully paid benefits,” then cited a consultant’s study from 20 years ago as proof. However, as the Judge commented, that study indicated the benefits were to be fully paid.

The District argued that nothing prevented it from vindictively jacking up deductibles to $10,000 a year, or cutting health care services to the bone, if it could no longer charge retirees premiums. Retirees countered that this case was not about deductibles, that any increase in deductibles had to be bargained, that an evisceration of a Promise by increasing deductibles would also be illegal. The Judge agreed this case was not about deductibles. Retirees also countered that restricting benefit coverage would be like refusing to treat someone with a modern medical development and “bleeding them” to treat an infection. Thus, this District’s argument that it could “cut services” also fell flat.

The District argued that a writ of mandate could not be granted because the District had “discretion” to charge fees, since the only promise it made was that of “no premiums.” Again, retirees proved in innumerable exhibits that the Promise was to provide a plan at “no charge” after retirement, a fully-paid plan, which prevents the district from charging “fees” to retirees.

Finally, the District argued it should have “flexibility” to impose charges on retirees after they retired. This argument essentially rejected nearly 100 years of precedent protecting deferred compensation and the legitimate expectations of retirees. While public employers can, in extremely limited situations, impose changes in vested rights on a temporary basis, out of a proven fiscal necessity, such changes merely defer a promise during an unexpected emergency. Here, the money taken from retirees is less than one tenth of one percent of the District’s annual budget, and the District neither sought to nor proved the extreme, dire necessity allowing the temporary deferral of a vested benefit.

It should be noted that retirees do not get their benefits “for free.” Retirees pay the same co-pays and deductibles as are paidby active employees. In addition, retirees who are Medicare- eligible are required to join Medicare, and once they do, they pay Medicare premiums, with the District providing only a Medicare- supplement plan. In addition, in 2006 the District restricted the benefit significantly for future retirees, and eliminated it almost totally for new hires.

In his decision the Judge ordered the District to reinstate that benefit, and make retirees whole for premiums and fees that they have paid, plus interest. A hearing on costs and legal fees will take place in the future.

FURA’s success in this case is resulted from not only the strength of its case, but also to the collective action of the Fresno Unified retirees in coming together to form an effective, committed organization, which located thousands of documents that provided invaluable evidence of the Promise, to the testimony of scores of witnesses, to the selfless commitment and assistance of FURA’s founders and leaders, to the hundreds of retirees and others who gave countless hours of their time and information, to retiree groups and others throughout California who came to FURA’s aid with financial and other support, and to the commitment of numerous people in our office or who worked withus on some or all parts of the case, and others. This brief note barely scratches the surface in describing the efforts undertaken by everyone over the last five years and five months.

The retirees case was very strong, with an especially powerful factual record confirming the promised benefits. FURA’s evidence included scores of documents which had been issued by the District over a period of 30 years, and which inducted retirees’ reliance on the promise. Most retirees worked about 30 years for the District, and altogether the 3, 500 retirees in the class served upwards of 100,000 years of public service for the Fresno School District and the students of Fresno.

This case was about the sanctity of contracts, and the retirees’ enforcement of a fundamental principle of law, one the Founding Fathers fought for when they created this country: that contracts should be enforced, and not impaired by governmental action. FURA is very pleased the retirees’ rights have been enforced.

The Judge directed that a formal written Statement of Decision be prepared, and that process will take several weeks. It is not known if the District plans to appeal the decision.

Dated: March 10, 2010

By Robert J. Bezemek, FURA Legal Counsel

FURA 2 Group

This class action law suit only included those FUSD retirees who retired on or before April 17, 2006. FURA has received numerous inquiries from FUSD retirees who retired after that date. If you know of someone who retired after April 17, 2006, and wants to be included in a new FURA group seeking to have their district-paid, lifetime retiree health benefits restored, please contact FURA member:

Cathy Franzell

Email: cathyfranzell@yahoo.com

Telephone: 559.298.4606

 

Victory in Retiree Case

Message from FURA President Carole Sarkisian-Bonard

Dear Fellow Retiree and FURA member:

Thank you for your courage, your generosity, your tenacity over the past 5 1/2 years of litigation. As you know, on March 5, 2010, Fresno County Superior Judge issued a decision granting a win for FURA over FUSD and confirming and enforcing the District’s promise of district-paid, lifetime retiree health benefits.

Gratitude also must be expressed to members of the FURA Steering Committee who served as named plaintiffs in this case. They volunteered years of their lives and endured legal wrangling as well.

Where does FURA begin to congratulate and thank our lead attorney Robert J. Bezemek and his fine staff including attorneys, David Conway, John Varga, Patty Lim, para legal Esta Grill and so many others of the firm? Bob was brilliant in court from the inception of this case when FURA contacted him in November of 2004 to last Friday’s oral arguments and victory.

Litigation is not for the weak of heart and is long and expensive. FURA is grateful for the generosity of so many of our members. However, there remain many who have not contributed at all. This is your chance to stand up and continue our fight. This process is costly and the expenses are many, especially if the District decides to appeal this case. Remember that your donation

is deductible for the California Franchise Tax Board but not deductible on your federal returns. Our FURA treasurer, Barbara Thomas, often refers to a Church picnic: some bring a hot dish, some only a fork and some only an appetite. It is my hope that all who have benefitted from the generosity of so many will now make an effort to contribute whatever is possible – be it an extra fork or a pot roast, every bit is appreciated. Send your check to:

Fresno Unified Retirees’ Association
P.O. Box 1717
Clovis, CA 93613

If you have not contributed to the legal defense fund (remember: all FURA donations only go towards our newsletters and our legal defense fund) please do so today. Don’t let others carry the burden while you reap the benefit of our dedication, our labor, our contributions and lifetime premium free retiree health benefits.

Thank you again to the FURA members who made a difference. It was David vs. Goliath and ultimately, like David, with right on our side, FURA emerged victorious. Thank you for your emails and your telephone calls of good wishes. FURA’s mission is to preserve and protect our vested retiree health benefits. The mission remains.

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