Knudson v. City of Ellensburg

• Decision Date: 18 November 1987
• Docket Number: No. 85-3991,85-3991
• Citation: 832 F.2d 1142
• Parties: Sandra J. KNUDSON, Plaintiff-Appellant, v. CITY OF ELLENSBURG, Lawrence M. Loveless and Jane Doe Loveless, and the marital community composed thereof, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1142

832 F.2d 1142

Sandra J. KNUDSON, Plaintiff-Appellant, v. CITY OF ELLENSBURG, Lawrence M. Loveless and Jane Doe Loveless, and the marital community composed thereof, Defendants-Appellees.

No. 85-3991.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 8, 1987.

Decided Nov. 18, 1987.

Lawrence B. Linville and Michael Woerner, Seattle, Wash., for plaintiff-appellant.

Walter G. Meyer and David A. Thompson, Yakima, Wash., for defendants-appellees.

Appeal from the United States District Court for the Eastern District of Washington.

Before FARRIS, ALARCON and WIGGINS, Circuit Judges.

WIGGINS, Circuit Judge:

Sandra Knudson appeals a summary judgment in favor of the City of Ellensburg (City) and its Chief of Police Larry Loveless of her due process claims arising from the City's cancellation without a hearing of her disability medical benefit. The district court found Knudson lacked a property interest in the benefit and therefore had no right to due process. We reverse and remand.

BACKGROUND

Knudson began working as a police officer for the City in 1968. In 1975 she applied for and was awarded disability retirement under the Law Enforcement Officers' and Fire Fighters' Retirement System Act (LEOFF), Wash.Rev.Code Secs. 41.26.010 to -.921. In accordance with LEOFF, the State of Washington paid her a disability pension and the City paid for her medical expenses. In August 1981 she was convicted of a narcotics felony. After determining that the conviction would bar Knudson from further employment, the City discharged her from the police force effective May 1, 1982. Knudson notified the Civil Service Examiner that she did not intend to appeal her discharge. Without a hearing the City found that Knudson's status as a former member of the force relieved it of its duty to pay the medical benefit. The City then notified her that it would not pay for her medical expenses incurred after May 11, 1982. The State continues to pay the disability pension.

Knudson sued the City and Chief Loveless for equitable relief and damages under 42 U.S.C. Sec. 1983, alleging that the City's termination of her medical benefit without a prior hearing denied her of property without due process of law. On cross-motions for summary judgment the district court granted judgment for the City and Chief Loveless on the ground that Knudson had no protected property interest in the medical benefit. Knudson timely appeals.

JURISDICTION

We have jurisdiction of this appeal under 28 U.S.C. Sec. 1291 even though the court characterized the judgment as "without prejudice." See Ash v. Cvetkov, 739 F.2d 493, 496 (9th Cir.1984) (dismissal without prejudice is reviewable final judgment), cert. denied, 470 U.S. 1007, 105 S.Ct. 1368, 84 L.Ed.2d 387 (1985).

STANDARD OF REVIEW

We review a summary judgment de novo and will affirm only if, viewing the evidence in the light most favorable to the party opposing the motion, no genuine questions of fact exist and the district court correctly applied the substantive law. Ashton v. Cory, 780 F.2d 816, 818 (9th Cir.1986).

DISCUSSION

The Fourteenth Amendment's guarantee of procedural due process protects individuals from erroneous or unjustified deprivations of life, liberty, or property, and assures them that the government deals with them fairly. Carey v. Piphus, 435 U.S. 247, 259, 262, 98 S.Ct. 1042, 1050, 1051, 55 L.Ed.2d 252 (1978). In a procedural due process case we apply a two step analysis. We first determine whether a liberty or property interest exists entitling the individual to due process. Hewitt v. Grabicki, 794 F.2d 1373, 1380 (9th Cir.1986). If a protected interest exists we then employ a balancing test to determine what process is due. Id.

I. PROPERTY INTEREST

Knudson has a property interest in a government benefit only if she has a legitimate claim of entitlement to it. A mere abstract need or desire for it is not enough. Board of Regents v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 2709, 33 L.Ed.2d 548 (1972). While the underlying substantive interest is created by "existing rules or understandings that stem from an independent source such as state law," id.; accord Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532, 538, 105 S.Ct. 1487, 1491, 84 L.Ed.2d 494 (1985), federal constitutional law determines whether that interest constitutes "property" protected by the Knudson claims she is entitled to medical benefits under Wash.Rev.Code Sec. 41.26.150(1), which mandates a municipal employer to pay the medical expenses of "any active member, or any member hereafter retired, on account of ... disability." ¹ Section 41.26.150 is part of LEOFF, a "reserve system for the payment of death, disability, and retirement benefits to law enforcement officers and fire fighters." Id. Sec. 41.26.020. LEOFF sets standards for retirement both for years of service, id. Sec. 41.26.090, and for disability, id. Secs. 41.26.120 (work-related disability), 41.26.125 (non-work-related disability). Police officers eligible for a disability retirement receive a disability pension from the state until they recover from the disability or die, id. Sec. 41.26.130(1), (3), as well as payment of their medical expenses by their employer, id. Sec. 41.26.150.

                Fourteenth Amendment, Memphis Light, Gas, & Water Div. v. Craft, 436 U.S. 1, 9, 98 S.Ct. 1554, 1560, 56 L.Ed.2d 30 (1978);  San Bernardino Physicians' Servs.  Medical Group v. County of San Bernardino, 825 F.2d 1404, 1408-09 (9th Cir.1987).  Not every state entitlement rises to the level of a constitutionally protected property interest.    See, e.g., San Bernardino Physicians' Servs., 825 F.2d at 1409 (corporation's contract to provide physicians' services not protected by the Due Process Clause).  Disability retirement benefits, however, have been accorded federal constitutional protection.    Ostlund v. Bobb, 825 F.2d 1371, 1373 (9th Cir.1987);  see also Mathews v. Eldridge, 424 U.S. 319, 332, 96 S.Ct. 893, 901, 47 L.Ed.2d 18 (1976) (social security disability benefits).  Knudson thus has a property interest in the disability medical benefit protected by the Fourteenth Amendment if she has a legitimate claim of entitlement in the benefit under state law
                

The City maintains that Knudson has no legitimate claim to the benefit because it is conditioned on her employment and she is no longer employed. The City also argues that Knudson forfeited the benefit by committing a felony. Knudson contends that her medical benefit is a component of her LEOFF disability retirement package. Once vested, she argues, the benefit cannot be canceled until she is no longer disabled. No Washington case has considered this state law issue, which we review de novo. In re McLinn, 739 F.2d 1395, 1397 (9th Cir.1984) (en banc).

The unambiguous language of section 41.26.150 undercuts the City's view that Knudson's right to the medical benefit is contingent upon her employment. Any "active member, or any member hereafter retired, on account of service, sickness or disability" qualifies for the benefit. Wash.Rev.Code Sec. 41.26.150. An active police officer's receipt of the medical benefit is plainly contingent upon employment; the right to the benefit ceases upon termination from work. No such restriction exists however on a retiree 's eligibility for the benefit. The retirement medical benefit is contingent not on active employment but on past service, sickness, or disability. The entitlement may later be lost if the disability retiree refuses to submit to a medical exam, id. Sec. 41.26.150(1), or is no longer disabled, id.; see id. Sec. 41.26.140(1) (disability board to determine whether disability retiree remains disabled), but the statute does not condition the retiree's continuing entitlement on current or future employment. ²

Furthermore, restricting the disability medical benefit to those retirees eligible to return to work would contravene the purposes of LEOFF: to provide disability and retirement benefits to police and firefighters. Id. Sec. 41.26.020. Police who paid into the LEOFF retirement system and retired due to disability legitimately expect to be paid their disability medical costs--especially those costs related to their disability--until they recover. Their right to receive the benefit when the conditions of eligibility have been met is akin to an insured's right to payment of medical expenses pursuant to a medical insurance policy.

The City argues, however, that Knudson is not qualified for the medical benefit due to her work discharge because section 41.26.150 requires the recipient be an "active or retired member" and LEOFF's general definition of "member" is a "person who is serving on a full time, fully compensated basis" as a police officer. Wash.Rev.Code Sec. 41.26.030(3), (8). Acceptance of the City's reading would lead to the untenable conclusion that all retirees, even those on regular retirement, fail to qualify for the medical benefit. Retirees are not serving "full time." See Webster's Third New International Dictionary 919 (full-time defined as "employed for or working the amount of time considered customary or standard"). Nor are they paid on a "fully compensated basis"; their pension is only a portion of their average salary at the time of their retirement. See, e.g., Wash.Rev.Code Sec. 41.26.130(1) (disability pension limited to sixty percent of salary). Knudson was an active member of the police force when she retired due to disability. She accordingly qualifies for the medical benefit as a "retired member" under the plain language of section 41.26.150.

The Washington Supreme Court has held that a disabled police officer discharged for misconduct may not be denied his vested LEOFF disability pension. State ex rel. Johnson v. Funkhouser, 52 Wash.2d 370, 325 P.2d 297 (1958). Since the only statutory condition for receipt of the disability pension is the occurrence of disability, the right to the pension vests at the time of...