FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
RETIRED EMPLOYEES ASSOCIATION OF No. 09-56026
ORANGE COUNTY, INC., D.C. No.
Plaintiff-Appellant, 8:07-cv-01301-
v. AG-MLG
COUNTY OF ORANGE, ORDER
Defendant-Appellee. CERTIFYING A
QUESTION TO
THE SUPREME
COURT OF
CALIFORNIA
Filed June 29, 2010
Before: Stephen S. Trott and William A. Fletcher,
Circuit Judges, and James C. Mahan,* District Judge.
ORDER
We respectfully ask the California Supreme Court to exer-
cise its discretion to accept and decide the certified question
below. This case is withdrawn from submission, and further
proceedings in this court are stayed pending final action by
the California Supreme Court. The parties shall notify the
Clerk of this Court within one week after the California
Supreme Court accepts or rejects certification, and again
within one week if that Court renders an opinion.
*The Honorable James C. Mahan, United States District Judge for the
District of Nevada, sitting by designation.
9357
9358 RETIRED EMPLOYEES v. COUNTY OF ORANGE
The panel retains jurisdiction over further proceedings.
I. Question Certified
Pursuant to Rule 8.548 of the California Rules of Court, a
panel of the United States Court of Appeals for the Ninth Cir-
cuit, before which this appeal is pending, requests that the
Supreme Court of California answer the following question:
Whether, as a matter of California law, a California
county and its employees can form an implied con-
tract that confers vested rights to health benefits on
retired county employees.
Defendant-Appellee in this case contends that decisions of the
Supreme Court of California and the California Courts of
Appeal support a conclusion that an implied contract to which
a county is one party cannot confer such vested rights.
Plaintiff-Appellant contends the contrary.
We understand that the Supreme Court of California may
reformulate our question, and we agree to accept and follow
the court’s decision. To aid the Supreme Court in deciding
whether to accept the certification, we provide the following
background.
II. Background
The Retired Employees Association of Orange County, Inc.
(“REAOC”) brought this suit against the County of Orange
(“the County”) on behalf of approximately 4,600 retirees for-
merly employed by the County. REAOC challenges the
County’s change to the structure of its health benefits under
which the County began to split the pool of active and retired
employees for purposes of setting premiums. The County
began making healthcare plans available to retirees in 1966.
Prior to 1984, the County determined premiums separately for
active and retired employees. In 1984, the County began pool-
RETIRED EMPLOYEES v. COUNTY OF ORANGE 9359
ing active and retired employees for purposes of determining
their premiums.
The pooling of active and retired employees had the effect
of subsidizing retiree health benefits because it lowered
retiree premiums below actual expenses while raising active
employee premiums above actual expenses. Retired employ-
ees, as a group, are more expensive to insure than active
employees and normally would pay higher premiums. Retired
employees pay the majority of their own premiums. The
County pays a large portion of the premiums for active
employees and therefore paid the majority of this subsidy for
retirees. The rest of the subsidy was paid for by active
employees through their raised premiums. The County pooled
active and retired employees without interruption from 1985
through 2007.
Due to budgetary concerns, the Board passed a resolution
in 2007 splitting the pool of active and retired employees,
effective January 1, 2008. Before passing the resolution, the
County negotiated changes to health benefits with labor
unions. The County did not negotiate with REAOC or other
retirees.
REAOC filed suit against the County in the Central District
of California on November 5, 2007. REAOC sought an
injunction prohibiting the County from splitting the pool of
active and retired employees. It alleged, inter alia, that the
County’s action constituted an impairment of contract in vio-
lation of the United States Constitution and the California
Constitution. REAOC argued that the County’s longstanding
and consistent practice of pooling active and retired employ-
ees, along with its representations to employees regarding this
pooling, created an implied contract to continue the pooling
practice for employees who retired before January 1, 2008.
The district court held that, as a matter of law, the County
cannot be liable for any obligation that it did not enter through
9360 RETIRED EMPLOYEES v. COUNTY OF ORANGE
explicit Board resolution. It wrote, “California courts have
refused to find public entities contractually obligated to pro-
vide specified retirement benefits like those Plaintiff seeks in
the absence of explicit legislative or statutory authority.”
After noting that REAOC relied on an implied contract with
the County, the court concluded that “the County is not con-
tractually obligated to provide retirees the pooling benefit
throughout their lifetimes.” Having found no contractual obli-
gation, the court concluded that all of REAOC’s claims fail.
REAOC timely appealed.
III. Explanation of Certification
REAOC argues that the County’s revocation of the pooling
arrangement that had prevailed from 1985 through 2007 vio-
lates the prohibition on the impairment of the obligation of
contracts contained in both the United States Constitution and
the California Constitution. See U.S. Const., art. I, § 10, cl 1;
Cal. Const., art. I, § 9. Courts apply the same analysis to
claims brought under the Contracts Clause of the United
States Constitution and the California Constitution. See Cam-
panelli v. Allstate Life Ins. Co., 322 F.3d 1086, 1097 (9th Cir.
2003). To assert a successful claim for a Contract Clause vio-
lation, REAOC must establish that the County entered into an
enforceable contract giving retirees a right to the pooling sub-
sidy and that the County substantially impaired that right. See
San Diego Police Officers’ Ass’n v. San Diego City Employ-
ees’ Retirement System, 568 F.3d 725, 736-37 (9th Cir. 2009).
“Laws that substantially impair state or local contractual obli-
gations are nevertheless valid if they are reasonable and nec-
essary to serve an important public purpose.” Id. (quotation
omitted).
For purposes of Contract Clause analysis, “federal courts
look to state law to determine the existence of a contract.” Id.
In light of the conflicting contentions of the parties, and in
light of the great practical importance of the question, we do
RETIRED EMPLOYEES v. COUNTY OF ORANGE 9361
not think that it is appropriate to substitute our judgment on
this issue of state law for the judgment of the California
Supreme Court. Accordingly, we feel that the California’s
highest court is the most appropriate forum to address the
issue.
IV. Administrative Information
Counsel for the parties are as follows:
For Plaintiff-Appellant Retired Employees Associa-
tion of Orange County, Inc.:
Michael Patrick Brown
Moscone, Emblidge, & Quadra, LLP
220 Montgomery Street, Suite 2100
San Francisco, CA 94109
(415) 362-3599
Rachel Sater
Moscone, Emblidge, & Quadra, LLP
220 Montgomery Street, Suite 2100
San Francisco, CA 94109
(415) 362-3599
Scott Emblidge
Moscone, Emblidge, & Quadra, LLP
220 Montgomery Street, Suite 2100
San Francisco, CA 94109
(415) 362-3599
For Defendant-Appellee County of Orange:
Nicholas S. Chrisos
9362 RETIRED EMPLOYEES v. COUNTY OF ORANGE
Office of County Counsel
333 W. Santa Ana Blvd., Suite 407
Santa Ana, CA 92702-1379
(714) 834-3300
Arthur Anthony Hartinger
Meyers Nave Riback Silver & Wilson
555 12th Street, Suite 1500
Oakland, CA 94607
(510) 808-2000
Teri L. Maksoudian
Office of County Counsel
333 W. Santa Ana Blvd., Suite 407
Santa Ana, CA 92702-1379
(714) 834-3300
Neelam Naidu
Meyers Nave Riback Silver & Wilson
555 12th Street, Suite 1500
Oakland, CA 94607
(510) 808-2158
Jennifer L. Nock
Meyers Nave Riback Silver & Wilson
555 12th Street, Suite 1500
Oakland, CA 94607
(510) 808-2000
For Amicus Curiae California Retired County
Employees Association, et al.:
Robert J. Bezemek
Law Offices of Robert J. Bezemek
RETIRED EMPLOYEES v. COUNTY OF ORANGE 9363
The Latham Square Building
1611 Telegraph Avenue, Suite 936
Oakland, CA 94612
(510) 763-5690
For Amicus Curiae League of California Cities, et
al.:
Jonathan V. Holtzman
Renne Sloan Holtzman Sakai LLP
350 Sansome Street, Suite 300
San Francisco, CA 94104
(415) 678-3800
If the Supreme Court of California accepts this request,
Appellants should be deemed the petitioners.
The Clerk shall file this order and ten copies, along with all
briefs in this appeal, with the Supreme Court of California;
provide certificates of service to the parties; and provide addi-
tional record materials if so requested by the Supreme Court
of California. See Cal. R. Ct. 8.548(c), (d).
IT IS SO ORDERED.