Vallejo Police Officers Ass'n v. City of Vallejo

• Citation: 223 Cal.Rptr.3d 280,15 Cal.App.5th 601
• Decision Date: 22 August 2017
• Docket Number: A144987
• Court: California Court of Appeals Court of Appeals
• Parties: VALLEJO POLICE OFFICERS ASSOCIATION, Plaintiff and Appellant, v. CITY OF VALLEJO, Defendant and Respondent.

15 Cal.App.5th 601

223 Cal.Rptr.3d 280

VALLEJO POLICE OFFICERS ASSOCIATION, Plaintiff and Appellant,

v.CITY OF VALLEJO, Defendant and Respondent.

A144987

Court of Appeal, First District, Division 2, California.

Filed August 22, 2017

Mastagni Holstedt, David E. Mastagni, Isaac S. Stevens, Tashayla D. Billington, Sacramento, for Appellant

Rosen Bien Galvan & Grunfeld LLP, Ernest Galvan, Margot Mendelson, Jenny S. Yelin, San Francisco, for Amici Curiae Los Angeles Retired Fire & Police Association, Inc., Retired Employees Association of Orange County, Sacramento Area Firefighters, International Association of Firefighters, Local 522, AFL-CIO, Palo Alto Firefighters, International Association Of Firefighters, Local 1319, AFL-CIO, Sacramento Police Officers' Association, Los Angeles Airport Peace Officers' Association, Sacramento County Deputy Sheriff's Association, San Mateo County Deputy Sheriff's Association

Messing Adam & Jasmine LLP, San Francisco, Gregg McLean, Adam Gary M. Messing for Amicus Curiae Coalition of Public Safety Labor Associations

Renne Sloan Holtzman Sakai LLP, Erich W. Shiners, Sacramento, Jonathan V. Holtzman, Charles D. Sakai, San Francisco, for Respondent

Liebert Cassidy Whitmore, Steven M. Berliner, Los Angeles, Michael D. Youril, Fresno, for Amicus Curiae League of California Cities

Miller, J.The Vallejo Police Officers Association (VPOA) petitioned the superior court for a writ of mandate alleging that the City of Vallejo (City) engaged in bad-faith bargaining in violation of state law and then unilaterally imposed contract terms that impaired VPOA members' vested rights to retiree medical benefits that covered insurance premiums up to the full cost of a Kaiser health plan. The superior court denied the petition, concluding that VPOA had not shown its members had a vested right to the full Kaiser premium and that the City had not bargained in bad faith; the court therefore declined to order the City to start new contract negotiations or to reinstate retirement medical benefits at the level previously provided to VPOA members. We will affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Faced with ever-increasing employee and retiree costs that led to operating deficits and the depletion of its general fund reserves, the City filed a petition for bankruptcy relief in May 2008. At that time, under its existing labor agreement with the VPOA, the City paid the full premium cost for retirees and employees of any medical plan offered through the California Public Employees' Retirement System (CalPERS or PERS) Health Plan Services Division. The City likewise paid the full premium for other City retirees. By virtue of offering medical benefits through CalPERS, the City is subject to PEMHCA (the Public Employees' Medical and Hospital Care Act; Gov. Code, § 22750 et seq. ), which governs the CalPERS health benefit system. (See Bernard v. City of Oakland (2012) 202 Cal.App.4th 1553, 1557, 1559-1560, 136 Cal.Rptr.3d 578 [providing an overview of PEMHCA].) PEMHCA establishes a minimum level of employer contribution toward medical premiums, and generally requires the employer to contribute the same amount for employees and retirees. ( Gov. Code, § 22892, subds. (b) & (c).)

In June 2008, the City filed a motion seeking approval from the bankruptcy court to reject its agreements with the VPOA and three other unions, and while the motion was pending, the City negotiated with the VPOA to modify the VPOA labor agreement. In late January 2009, before the scheduled hearing on the motion, the VPOA and the City reached agreement on a new contract (the January 2009 Supplemental Agreement, or 2009 Agreement), and the City voluntarily dismissed the bankruptcy court motion to reject as to the VPOA. ( In re City of Vallejo, CA (E.D. Cal. 2010) 432 B.R. 262, 265-266.)

A. Health Insurance Provisions in the 2009 Agreement

A central issue in this case is how to interpret the 2009 Agreement, under which health insurance benefits were reduced from full coverage for any CalPERS plan to coverage capped at 100 percent of the rate for coverage through Kaiser. The 2009 Agreement includes the following provisions for health insurance:

"[6.] A. Health Insurance^{[1 ]}

"1. The City shall provide to all eligible employees, retiree-annuitants, and dependents, the PERS Health Benefits Program subject to the following restrictions.

"2. Effective January 1, 2010 and there after [sic], the City's direct PEMHCA contribution of medical premiums for employees and eligible dependents shall be the full premium cost of the chosen medical plan offered through PERS Health Plan Services Division, not to exceed the Kaiser Bay Area / Sacramento Area rate for each level of participation—single, single plus one dependent, single plus two or more dependents. For example, if the Kaiser family rate is $1000/month and an employee with family coverage chooses a plan costing $1500/month, the City will pay $1,000 (the Kaiser premium) and the employee will pay $500 (the difference between the selected plan and the Kaiser premium) each month.

"3. For employees hired on or before February 1, 2009, the City will contribute the same amount towards eligible retiree-annuitants' PEMHCA medical premiums as it contributes towards the PEMHCA medical premiums for current VPOA bargaining unit employees. For example, if the City's direct PEMHCA contribution is capped at the Kaiser Bay Area / Sacramento Area rate for each level of participation, the City will pay up to that same amount for eligible retirees at each level of participation. [ (Italics added.) ]

"4. With respect to retiree-annuitants hired on or after February 1, 2009, any benefit in excess of the PEMHCA statutory minimum will require ten (10) years of City of Vallejo service. Any employee hired before such date shall not be subject to the vesting requirement. This vesting requirement shall not apply to any employee who is granted a disability retirement. The benefit once vested will be the same as for retiree-annuitants hired before February 1, 2009 (the same as the amount of the City's PEMHCA contribution for current VPOA bargaining unit employees)."

The parties disagree about how to interpret paragraph 6.A.3, which concerns medical premiums for retirees who were hired before February 1, 2009. The City argues that paragraph 6.A.3 requires it to provide a retiree the same direct PEMHCA contribution it provides to an active employee. The VPOA argues that paragraph 6.A.3 requires the City to provide a retiree full premium coverage, up to 100 percent of the rate for coverage through Kaiser. Apparently, the parties' disagreement did not come to light until the time came to negotiate a replacement agreement, perhaps because both interpretations led to the same result while the 2009 Agreement was in effect: the total amount for medical premiums paid to an active employee was the full premium for the plan that the active employee selected, capped at the amount charged by Kaiser for coverage at the particular level of coverage (the Kaiser rate), and that amount was paid as a direct PEMHCA contribution. Accordingly, the retirement medical benefit during the term of the 2009 Agreement, for current employees and for existing retirees, was the full premium for the selected plan, capped at the Kaiser rate.

Under the 2009 Agreement, employees hired on or after February 1, 2009, are subject to a "vesting requirement" of 10 years of service with the City, pursuant to paragraph 6.A.4. Once that requirement is met, those new employees are entitled to retirement benefits in the amount provided to retirees who were hired before February 1, 2009.

The 2009 Agreement extended the VPOA's labor contract with the City to June 30, 2012 "and from year-to-year thereafter, unless either part[y] shall have given written notice to the other of its desire to amend or terminate the Agreement not less than six (6) months prior to June 30, 2012, or any subsequent anniversary date of the Agreement."

The City exited bankruptcy in 2011.

B. Replacing the 2009 Agreement

Starting in June 2012, and continuing through December 6, 2013, representatives of the City and the VPOA had discussions and negotiations about a labor agreement to supersede the 2009 Agreement. From the beginning of the discussions, the City's negotiators told the VPOA that the City's top priority was to reduce its liability for retiree medical costs, and that the City would be seeking agreements with all its unions to reduce the City's retiree medical premium contribution to $300 per month. The reduction would be consistent with the "General Fund Five-Year Business Plan," which the City issued in November 2010 in the course of the bankruptcy, and which included "[r]retiree health cost projections" that assumed the City would be able to "negotiate and implement a $300 per month city-paid retiree health benefit for current and future retirees." The VPOA maintained that "each member hired prior to the effective date of an agreement, including retired members, maintains a vested right to his/her retirement medical benefit," and that therefore current employees and retirees had a vested right to retiree medical benefits capped at the Kaiser rate, as reflected in the 2009 Agreement.

After months of discussions and negotiations, the City declared impasse in September 2013 and gave its "last, best, and final offer" to the VPOA.² In October 2013, the VPOA filed a petition in the superior court for writ of mandate, declaratory relief and injunctive relief, alleging that the City was not bargaining in good faith and was therefore violating the Meyers-Milias-Brown Act (MMBA; Gov. Code, § 3500 et seq. ).³ The VPOA sought a declaration that its members had "a vested constitutional right to a defined retirement medical benefit that provides [them] an amount necessary to pay the entire cost of the member's retirement medical premium up to the cost of the [Kaiser rate]." The City filed a demurrer, which was set for hearing in ...