Retiree Health Benefits – Act V – Doyle v. City of Medford

In Doyle et al v. City of Medford (A147497 May 15, 2013), the Oregon Court of Appeals has written the latest chapter in the ongoing litigation regarding whether ORS 243.303(2) requires cities to provide health care insurance coverage to retired employees. Background – ORS 243.303(2) and the Duty to Provide Coverage to Retirees

ORS 243.303(2) requires cities that make health care insurance available to their officers and employees to make that same coverage available for any retired employee of the city, his or her spouse and his or her dependent children “insofar as and to the extent possible.”  The statute permits cities to “prescribe reasonable terms and conditions of eligibility and coverage” and permits cities to elect to pay all, some or none of the cost of making such coverage available.

The City of Medford provided health care insurance to some of its employees under a contract with the Oregon Teamster Employer Trust.  Under the contracted policy, retiring employees who were previously covered could not elect to continue health care coverage after retirement.  Several retired employees sued claiming that the City violated ORS 243.303(2) by failing to make health care coverage available to them in a case that has gone through the federal district court, the United States Ninth Circuit Court of Appeals, the Oregon Supreme Court, the Jackson County Circuit Court and now the Oregon Court of Appeals.

When the Oregon Supreme Court issued its decision, 347 Or 564 (2010), the Court held that “[w]hether a local government has complied with ORS 243.303(2) will depend on whether it has made health insurance coverage available to retirees ‘insofar as and to the extent  possible,’ in light of all the facts.”  The Court further explained that “[t]he responsibility to demonstrate that it was not possible, under the statutory standard, to make coverage available to retirees rests with the local government, and we emphasize that the local government cannot make that showing, as the city attempts to here, by pointing solely to the fact that its chosen provider does not offer retiree health insurance coverage.”

After the Supreme Court’s decision, the case eventually made its way to the Jackson County District Court, where the plaintiffs were awarded monetary damages for the City’s violation of ORS 243.303(2) as well as breach of contract and age discrimination claims.

The Decision

The Court of Appeals reversed the circuit court’s decision and dismissed all of the plaintiffs’ claims for damages.  The Court dismissed the age discrimination and breach of contract claims on procedural grounds and dismissed plaintiffs' claim that the City violated ORS 243.303(2) on the basis that the statute does not provide a private right of action for monetary damages.

The issue before the Court of Appeals on the claim of a statutory violation was whether the City’s failure to comply with the duty imposed upon it by ORS 243.303(2) gave rise to liability for monetary damages that could be enforced privately by the retired employees.  Because the statute does not expressly provide a right for retired employees to sue for monetary damages, the Court of Appeals analyzed whether the legislature intended to provide for such a right.  The Court of Appeals concluded that the legislature never contemplated such a right as there were “no textual or contextual clues from which [the court could] infer that the legislature contemplated the possibility of a private right of action or civil liability for the failure of a municipality to make available to its retirees the same insurance coverage that it provides to its employees.”  In part, the Court reached its decision because “the degree of flexibility and discretion accorded to the local government is inconsistent with an intention that the statute be enforceable through a private action for damages.”

The Impact

As we complete this latest chapter in the saga of ORS 243.303(2), cities must remain aware that the statute places an affirmative obligation on them to make health care coverage available to their retired employees “insofar as and to the extent possible.”  In addition, cities who choose not to follow this obligation will shoulder the burden of demonstrating that it was not possible to make such coverage available to retired employees.  The good news, however, is that future litigation claiming a violation of this statute may not include demands for monetary penalties unless the law is amended by the Legislature or the Oregon Supreme Court reverses the decision of the Court of Appeals.