Lauderdale v. Eugene Water and Elec. Bd.

• Decision Date: 30 January 2008
• Docket Number: A128046.,160320319.
• Citation: 177 P.3d 13,217 Or. App. 551
• Parties: Lawrence A. LAUDERDALE, George B. Partridge, Robert H. Carter, Tom Johnson, Melba E. Stephens, Sheri Marie Lewis, and Ralph Hendrickson, Plaintiffs-Respondents, Cross-Appellants, v. EUGENE WATER AND ELECTRIC BOARD and City of Eugene, Defendants-Appellants, Cross-Respondents.
• Court: Oregon Court of Appeals

177 P.3d 13

217 Or. App. 551

Lawrence A. LAUDERDALE, George B. Partridge, Robert H. Carter, Tom Johnson, Melba E. Stephens, Sheri Marie Lewis, and Ralph Hendrickson, Plaintiffs-Respondents, Cross-Appellants, v. EUGENE WATER AND ELECTRIC BOARD and City of Eugene, Defendants-Appellants, Cross-Respondents.

160320319.

A128046.

Court of Appeals of Oregon.

Argued and Submitted July 3, 2007.

Decided January 30, 2008.

William F. Gary, Eugene, argued the cause for appellants-cross-respondents. With him on the opening brief were Susan D. Marmaduke, Caroline R. Guest, Portland, C. Robert Steringer, and Harrang Long Gary Rudnick P.C. With them on the reply brief was Sharon A. Rudnik.

Joel S. DeVore, Eugene, argued the cause for respondents-cross-appellants. On the opening brief were Martha L. Walters and Walters Chanti & Zennaché, P.C. On the reply brief were Joel S. DeVore and Luvaas Cobb.

Before LANDAU, Presiding Judge, and SCHUMAN and SERCOMBE, Judges.

SCHUMAN, J.

In 1990, 2003, and 2004, the Eugene Water and Electric Board (EWEB) increased the amount that it required its retired employees to contribute to the cost of their company-sponsored retiree health care benefits and that current employees would have to contribute for those benefits when they retired.¹ Shortly after the last increase plaintiffs—five retired employees, the widow of a retired employee, and a then-current employee anticipating retirement—brought this action, alleging that the increase in cost amounted to a breach of contract and seeking specific performance of the original, pre-1990, agreement. The trial court agreed with plaintiffs that EWEB breached its contract and ordered EWEB to provide two of the plaintiffs with retirement health care benefits at the cost established in 1972 (that is, before any increase) and to provide the other plaintiffs with benefits at the cost established in 1990. EWEB appeals from the trial court's judgment on the ground that it never made an enforceable promise not to raise the cost of retiree health care benefits and that, in fact, it expressly reserved the right to do so. Plaintiffs cross-appeal, contending that the trial court should have ordered reestablishment of the 1972 costs for all of them, not just two. We affirm on appeal and cross-appeal.

The following facts are based on the trial court's express and implicit findings, which, we conclude, are supported by the evidence.² In 1956, EWEB began providing employees who had worked for the company for ten years or more with the same benefits after retirement that active employees received. Those benefits were offered at no cost for the retired employee and a nominal cost for dependents. In 1972, EWEB froze the cost of dependent coverage at $7.80 per month for dependents under age 65 and $3.00 per month for dependents age 65 or over, maintaining free coverage for retired employees themselves. (For convenience, we refer henceforth to benefits at that cost as "1972 retiree health care benefits.") Beginning in 1975, EWEB abandoned the ten-year requirement and promised its employees that they would continue to receive the same coverage upon retirement that active employees received, at 1972 prices, regardless of years of service. EWEB used this promise to recruit and retain employees.

No significant changes occurred for 14 years. Then, in 1989, EWEB announced that it was planning to revise the retiree benefit, plan and informed employees and retirees that it had the right to modify or terminate retiree health care benefits, notwithstanding the earlier assurances to the contrary. The announcement was not well received by employees or retirees. In response to that negative reaction, EWEB formed a benefit project team consisting of active employees and retirees to address the dispute and seek a solution. Although the retirees and employees expressed "strong preference for no changes in their current contribution rates," they were informed that "a `no change' option would not be acceptable" to EWER.

The new plan, drafted in consultation with the benefit project team, created three tiers of retirees. All three tiers' members continued to receive the same coverage as active employees; the new plan changed only the cost of that coverage. Tier I consisted of retirees who had turned 65 before January 1, 1990. Those retirees would continue to receive 1972 retiree health care benefits. Tier II consisted of retirees under age 65 on January 1, 1990, and employees who would retire between January 1, 1990 and December 31, 1993. In retirement, Tier II members would continue to receive health care benefits at no cost to themselves, but they would pay $29 per month, instead of $7.80 or $3.00, to cover their dependents. Tier III consisted of employees retiring after January 1, 1994. When they retired, they would pay between 100 percent and 25 percent of their health care premium based on the number of years they had worked for EWEB, until they reached 65, at which time they would be terminated from EWEB's benefit plan entirely. No EWEB employee legally challenged the 1990 modifications before this action was filed in 2004.

Plaintiff Lauderdale and plaintiff Stephens's husband retired from EWEB and turned 65 before 1990. Therefore, they were in Tier I and were not affected by the 1990 modification. Plaintiff Partridge retired before 1990, but did not turn 65 until after January 1, 1990, so he was in Tier IL Plaintiff Carter was also in Tier II because he retired in 1993. He made the decision to retire at that time in reliance on written documents issued by EWEB informing employees that they would be able to lock in the health care benefits given to Tier II retirees if they retired before 1994. Plaintiffs Johnson and Lewis retired after 1994, and plaintiff Hendrickson was still employed by EWEB at the time of trial, so all three were in Tier III. The following table may clarify the various tiers and plaintiffs' positions in them:

                Tier Criteria for Membership Plaintiff Members Benefits under 1900 plan
                I     Retired at age 65 or Older before  Lauderdale (retired 1983) Stephens        Coverage equal to active employees
                      1/1/1990                           (husband retired 1988)                    cost at 1972 level
                II    Retired younger than 65 before     Carter (retired 1993) Partridge (retired  Coverage equal to active employees
                      1/1/1990 OR retired between        tired 1982; not yet 65 on 1/1/1990)       free for retiree; $29 per month
                      1/1/1990 and 12/31/1993                                                      for dependents
                III   Retired after 1/1/1994             Lewis (retired 2000) Johnson (retired     Until age 65: coverage equal to active
                                                         2003) Hendrickson (not yet                employees, cost linked to years
                                                         retired)                                  of service; after 65, no coverage
                

For approximately 18 years, EWEB implemented the 1990 plan and continued to provide employees with the retirement health care benefits that the plan established. During that period, Tier II and III plaintiffs paid the increased costs without protest (Tier I plaintiffs' costs did not increase under the 1990 plan). In 2003, however, and once again in 2004, EWEB made changes to the retiree health care plan that either significantly increased the cost to retirees (including Tier I) or, also contrary to alleged earlier promises, did not provide the same coverage that active employees received.³ In response to these changes, plaintiffs initiated, this action seeking a declaration that EWEB had breached its contract with plaintiffs; a judgment requiring EWEB specifically to perform its contract obligations; an injunction requiring EWEB to provide retiree health care benefits equal to the benefits received by its active employees at the cost promised to plaintiffs prior to 1990; and damages based on the charges EWEB imposed on plaintiffs for their health care benefits in excess of the amount that plaintiffs should have been required to pay under EWEB's original promise.

EWEB, in response, argued that it never promised plaintiffs that they would receive 1972 retiree health care benefits identical in coverage to active employees'; that, to the extent that such promises were made, they were not made by anybody with authority to do so; and that the statute of frauds rendered them unenforceable in any event. Further, EWEB contended, they were also unenforceable because they were negated by EWEB's written reservation of rights to modify or revoke retiree benefits. Therefore, according to. EWEB, the increases in 1990 and thereafter did not breach any contract. Further, even if the 1990 modification breached a contract, nonetheless, as to plaintiffs who had continued working after the 1990 modification or, if retired, had accepted the modification by paying the new premiums, any claims that those plaintiffs had to benefits promised before that time were extinguished because the 1990 modification constituted an accord and satisfaction.

EWEB filed a motion for judgment of dismissal pursuant to ORCP 54 B(2) at the close of plaintiffs' evidence and a motion for directed verdict pursuant to ORCP 60 at the close of all evidence. The trial court denied both motions. Instead, the court ruled that, before 1990, EWER repeatedly promised to provide plaintiffs with lifetime 1972 retiree health care benefits that were equal in coverage to active employees% that the statute of frauds did not render the promises unenforceable; that the promises were made by EWEB employees with authority to do so and approved by the EWEB board; that plaintiffs accepted the promised benefit package and acquired a vested right to it when they began or continued working for EWEB; and that, in the time between the inauguration of the benefit plan and 1990, EWEB did not make any "direct, affirmative, or meaningful representation" to...