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Christiansen v. County of Douglas

Supreme Court of Nebraska

July 18, 2014

SAM CHRISTIANSEN, AN INDIVIDUAL, APPELLEE AND CROSS-APPELLANT,
v.
COUNTY OF DOUGLAS, A POLITICAL SUBDIVISION OF THE STATE OF NEBRASKA, ET AL., APPELLANTS AND CROSS-APPELLEES. RICH MCSHANE, ON BEHALF OF HIMSELF AND ALL SIMILARLY SITUATED PERSONS, APPELLEE AND CROSS-APPELLANT,
v.
COUNTY OF DOUGLAS, A POLITICAL SUBDIVISION OF THE STATE OF NEBRASKA, ET AL., APPELLANTS AND CROSS-APPELLEES

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Appeals from the District Court for Douglas County: GARY B. RANDALL, Judge.

AFFIRMED IN PART, AND IN PART REVERSED AND REMANDED WITH DIRECTION.

Donald W. Kleine, Douglas County Attorney, and Bernard J. Monbouquette for appellant.

Joel Bacon, Gary L. Young, Jefferson Downing, and Thomas P. McCarty, of Keating, O'Gara, Nedved & Peter, P.C., L.L.O., for appellees.

HEAVICAN, C.J., WRIGHT, CONNOLLY, STEPHAN, MCCORMACK, MILLER-LERMAN, and CASSEL, JJ.

OPINION

Page 497

[288 Neb. 566] Cassel, J.

INTRODUCTION

For many years, a county's retired employees paid the same amount as active employees paid for health insurance coverage. After the county began to charge retirees a different and greater premium, they sued the county. We must decide whether the retirees had a contractual right to the previous practice and, if not, whether equitable estoppel or ratification affords them relief. We conclude that there was no contract and that the alternative doctrines provide no basis for relief. Thus, we affirm the district court's summary judgment denying the contract claim and reverse the court's decree granting injunctive relief, damages, and attorney fees, on the alternative grounds.

BACKGROUND

The Douglas County Board of Commissioners (Board) is the governing body of Douglas County, Nebraska (County). Only the Board can enter into contractual agreements on the County's behalf.

Health Insurance

The Board has the responsibility and authority to determine who participates in the Douglas County health insurance plan (Plan) and the premiums to be paid by participants. Each year, the Board votes on a resolution to set premium rates for the Plan.

In December 1974, the Board passed a resolution which allowed employees of the County who retired between the ages of 55 and 65 to participate in the Plan until attaining age 65. This resolution applied only to employees who were qualified to participate in the County's pension plan. The December 1974 resolution did not specify the amount of premiums to be charged annually or promise that the amount would be the same as that charged to active employees.

[288 Neb. 567] Since that time, retired employees have paid the same premiums to participate in the Plan as active employees. Each year when the Board voted on a resolution to set premium rates, the resolution did not draw any distinction between active employees and retired employees; rather, the resolution merely referred to " employees."

Increased Charges to Retirees

In 2008 and 2009, the County was in a fiscal crisis. The County considered numerous alternatives to respond to rising costs in health insurance. One alternative was requiring retired employees to pay a different rate for health insurance than that paid by active employees. Other options included eliminating the " Rule of 75," which is an early retirement option; raising deductibles; raising copayments; establishing a wellness program; and raising premiums for all employees.

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In September 2009, the Board voted unanimously to adopt resolution No. 596, which changed the amount retired employees paid toward premiums for the Plan in order to " adequately address the significantly increased health care costs impacting Douglas County's health insurance budget, and the Government and Accounting Standards Board . . . rules relating to the unfunded liability of employer health insurance for retirees." The resolution provided that the change would be effective January 1, 2010.

Resolution No. 596 set a rate for participating retired employees that was higher than the rate paid by active employees. For retired employees who had employee-only coverage, the change meant that they were required to pay 25 percent of the total premium, whereas an active employee had to pay only 7 percent. As a result, in fiscal year 2010, a retired employee's premium was $1,001.04 more per year. For retired employees who had dependents, the change meant they were required to pay 35 percent of the total premium, compared to the 15 percent an active employee was required to pay. Depending upon the number of dependents a retired employee had, the change resulted in the retired [288 Neb. 568] employee's paying $2,040.36 to $2,750.04 more per year than an active employee.

Litigation

Shortly before the change was to take effect, Sam Christiansen, a retired employee of the County under age 65 who participated in the Plan, filed a complaint against the County and each commissioner of the Board, seeking injunctive and declaratory relief. Later, Rich McShane, also a retired employee of the County under age 65 who participated in the Plan, filed a similar complaint " on behalf of himself and all similarly situated persons." He identified the class as " all retired employees who are participants in the [Plan], who have retired prior to January 1, 2010, and who are not 65 years of age prior to January 1, 2010." We refer to the plaintiffs in these actions collectively as " the retirees."

The retirees sought an order temporarily and permanently enjoining the County and each commissioner of the Board from implementing resolution No. 596 and any change in the manner of assessing health care premiums. They also sought attorney fees as permitted by 42 U.S.C. § 1988(b) (2012), a declaration of the rights of the retirees under the U.S. and Nebraska Constitutions, and any monetary losses suffered.

The district court later consolidated the cases and certified the class. The court stated that commonality was established by the fact that all employees of the County received information regarding premiums to be paid for participation in the Plan postemployment. Thus, the court stated, the claims of all class members would be based on the same legal theory of breach of contract.

Partial Summary Judgment

Upon the County's motion, the district court granted a partial summary judgment. The court determined that health insurance did not qualify as deferred compensation. Accordingly, the court ruled that the County's practice of treating retired employees the same as active employees for purposes of setting health insurance premiums did not create contractual rights [288 Neb. 569] protected by the Contracts Clauses of the U.S. Constitution [1] and the Nebraska Constitution.[2]

The district court denied the motion for summary judgment as to whether applying the doctrines of ratification or estoppel to

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the County's practice gave rise to a ...


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