Gaylan Harris v. County of Orange ( 2021 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
GAYLAN HARRIS, on behalf of No. 19-56387
himself and others similarly situated,
Plaintiff-Appellant, D.C. No.
8:09-cv-00098-
v. AG-MLG
COUNTY OF ORANGE,
Defendant-Appellee. OPINION
Appeal from the United States District Court
for the Central District of California
Andrew J. Guilford, District Judge, Presiding
Argued and Submitted November 18, 2020
Pasadena, California
Filed October 28, 2021
Before: Johnnie B. Rawlinson and Danielle J. Forrest,
Circuit Judges, and Morrison C. England, Jr.,*
District Judge.
Opinion by Judge Rawlinson;
Partial Concurrence and Partial Dissent by Judge Forrest
*
The Honorable Morrison C. England, Jr., United States District
Judge for the Eastern District of California, sitting by designation.
2 HARRIS V. COUNTY OF ORANGE
SUMMARY**
Civil Rights
The panel affirmed the district court’s summary judgment
in favor of the County of Orange in an action alleging that the
County breached its contractual obligations to retired County
employees and deprived them of vested health benefits by
restructuring the method through which the County assisted
retired employees in defraying the cost of their health
insurance.
In January 1993, the County and the Orange County
Employee Retirement System (OCERS) entered into a
Memorandum of Understanding (MOU) which allowed the
County to access surplus investment earnings controlled by
OCERS and which deposited a portion of the surplus into an
Additional Retirement Benefit Account (ARBA) to pay for
health insurance of present and future County retirees. In
April 1993, the County adopted the Retiree Medical Plan,
funded by investment earnings from the ARBA account and
mandatory employee deductions. The Retiree Medical Plan
explicitly provided that the Plan did not create any vested
rights to benefits. Contemporaneous with or after adoption of
the Retiree Medical Plan, labor unions entered into MOUs
with the County providing that the County would administer
a Retiree Medical Insurance Plan and retirees would receive
a Retiree Medical Insurance Grant.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
HARRIS V. COUNTY OF ORANGE 3
From 1993 through 2007, retired employees received a
monthly grant (the Grant Benefit) to defray the cost of health
care premiums. Beginning in 2004, the County negotiated
with its labor unions to restructure the retiree medical
program, which was underfunded. Ultimately, the County
approved an agreement with the labor unions that reduced
benefits for retirees.
Plaintiffs brought suit asserting, among other things, that
the 1993 MOUs demonstrated an intent by the County to
create an implied vested right to the Grant Benefit, and that
the County breached the MOUs by reducing the Grant
Benefit. Noting that the April 6, 1993, Retiree Medical Plan
explicitly provided that the Plan did not create any vested
right to benefits, the panel held that plaintiffs’ claim to an
implied vested right to the Grant Benefit was foreclosed; the
prescribed law of Orange County set forth in the Retiree
Medical Plan was at variance with such a right. Accordingly,
the panel held that plaintiffs failed to raise a material issue of
fact regarding the County’s intent to create an implied vested
right to the grant provided by the County to defray the cost of
health insurance.
The panel rejected plaintiffs’ assertion that this courts
prior decision in Harris v. County of Orange (Harris IV), 902
F.3d 1061 (9th Cir. 2018), compelled a different result. The
panel held that at the summary judgment stage, the County
provided evidence that the Retiree Medical Plan was adopted
by resolution and therefore became governing law with
respect to Grant Benefits. As existing County law, the
Retiree Medical Plan became part of the MOUs. The panel
further held that the MOUs, as acknowledged by plaintiffs,
were of limited duration and expired on their own terms by a
specific date. Absent express language providing that the
4 HARRIS V. COUNTY OF ORANGE
Grant Benefits vested, the right to the benefits expired when
the MOUs expired. As to the MOUs in existence prior to
adoption of the Grants Benefits, they clearly reflected an
intention to incorporate the provisions of the Retiree Medical
Plan into the MOUs.
The panel held that the Retiree Medical Plan was not
unilaterally imposed on the unions and their employees
without collective bargaining because the unions had the
option to reject the plan or to negotiate different terms.
Instead, the unions executed MOUs adopting the Retiree
Medical Plan. Finally, the panel rejected the assertion that
the Grant Benefit was deferred compensation, and vested
upon retirement, similar to pension benefits. Applying the
reasoning in California Fire Local 2881 v. Cal. Pub. Emps.
Ret. Sys., 6 Cal. 5th 965 (2019), the panel held that the Grant
Benefit was an optional benefit rather than fixed
compensation.
Concurring in part and dissenting in part, Judge Forrest
agreed with the majority that the County’s MOUs entered
into with its employees’ unions after its Retiree Medical Plan
went into effect were deemed to have incorporated the terms
of the Plan by operation of law. She also agreed that this
court’s decision in Harris IV did not foreclose that result.
Judge Forrest disagreed, however, with the majority’s
conclusion that the Plan’s terms were incorporated by
operation of law into the MOUs that the County entered into
before the Plan went into effect. Regarding the pre-Plan
MOUs, California law gave plaintiffs a viable basis to assert
an implied vested right to the Grant Benefit at issue. Thus, to
prevail on its motion for summary judgment, the County
needed to demonstrate—without relying on the Plan’s anti-
vesting term—that plaintiffs lacked any evidence proving that
HARRIS V. COUNTY OF ORANGE 5
the pre-Plan MOUs created an implied vested right. Because
the County did not do this, Judge Forrest would reverse the
district court’s grant of summary judgment on the grounds
that there were material questions of fact concerning whether
the Grant Benefit provided in those pre-Plan MOUs was
vested.
COUNSEL
Michael P. Brown (argued), Gordon Tilden Thomas Cordell
LLP, Seattle, Washington, for Plaintiff-Appellant.
Arthur A. Hartinger (argued), Ian T. Long, and Ryan
McGinley-Stempel, Renne Public Law Group, San Francisco,
California, for Defendant-Appellee.
Michael A. Conger, Law Office of Michael A. Conger,
Rancho Santa Fe, California, for Amicus Curiae California
Retired County Employees Association.
6 HARRIS V. COUNTY OF ORANGE
OPINION
RAWLINSON, Circuit Judge:
Appellants-Plaintiffs Gaylan Harris, Jerry Jahn, and
James McConnell seek to reverse the district court’s order
granting summary judgment in favor of Appellee-Defendant
Orange County on their claim that the County breached its
contractual obligations to retired County employees, and
deprived them of vested health benefits, by restructuring the
method through which the County assisted retired employees
in defraying the cost of their health insurance. Because
Plaintiffs failed to raise a material issue of fact regarding the
County’s intent to create an implied vested right to the grant
provided by the County to defray the cost of health insurance,
we affirm.
I. BACKGROUND
In 1966, the County began offering group medical
insurance to its retired employees, separate from that offered
to its active employees. County retirees received a monthly
grant to cover a small portion of the premiums, but this
program was discontinued in 1978. In 1985, the County
combined active and retired employees into a single unified
pool, which effectively established a health insurance subsidy
for retirees by lowering their premiums while raising active
employee premiums (Retiree Premium Subsidy). From 1993
through 2007, retired employees also received a monthly
grant (the Grant Benefit) to defray the cost of health care
premiums.
On January 5, 1993, the County and the Orange County
Employee Retirement System (OCERS) entered into a
HARRIS V. COUNTY OF ORANGE 7
Memorandum of Understanding (MOU) to allow the County
to access $125,844,140.00 in surplus investment earnings
controlled by the OCERS. The remaining $50,387,937.00
was deposited into an Additional Retirement Benefit Account
(ARBA), exclusively for “paying towards health insurance
for present and future retirees of the County.” This MOU,
referred to as the ARBA Agreement, required at least three
labor unions to agree to enter into a retiree medical plan
before the agreement would take effect.
On April 6, 1993, the County adopted the Retiree Medical
Plan by resolution of the County Board of Supervisors. In
order for an employee to be eligible for benefits under the
Retiree Medical Plan, the employee’s union was required to
enter into an MOU with the County providing for coverage of
the employee’s work unit. In addition, the Retiree Medical
Plan explicitly provided that the “Plan does not create any
vested rights to the benefits provided hereunder on the part of
any Employee, Retiree or any other person.” The County’s
intent in approving the Grant Benefit was to induce
employees to retire early, thereby reducing the County’s
workforce. The Retiree Medical Plan was funded by a
mandatory contribution from active employees of 1% of their
gross monthly wages, as well as investment earnings from the
ARBA account. Active Employees also received a 1%
increase in salary, which covered their required contribution
In addition, any employee who left County employment
before becoming eligible for a Grant Benefit would receive
a lump sum cash rebate of his 1% salary contribution.
Contemporaneous with or after adoption of the Retiree
Medical Plan, all of the unions entered into MOUs with the
County providing that the “County shall administer a Retiree
Medical Insurance Grant Plan” and retirees “shall receive a
Retiree Medical Insurance Grant.”
8 HARRIS V. COUNTY OF ORANGE
Beginning in 2004, the County negotiated with its labor
unions to restructure the retiree medical program, which was
underfunded. Ultimately, the County approved an agreement
with the labor unions that reduced benefits for retirees.
Retirees maintain that the County’s decision to reduce the
Grant Benefit increased their health care costs significantly.
Plaintiffs filed a class action complaint on behalf of
County retirees alleging that the County breached its
contractual obligations to retirees by reducing the Grant
Benefit. See Harris v. Cty. of Orange, 902 F.3d 1061,
1064–65 (9th Cir. 2018) (referred to by the parties as
“Harris IV”). “In 2011, the district court granted the
County’s motion for judgment on the pleadings,” and we
reversed and remanded. Id. at 1065 (discussing Harris v. Cty.
of Orange (Harris I), 682 F.3d 1126, 1134 (9th Cir. 2012)).
On remand, Plaintiffs filed a Second Amended Complaint,
and the district court granted the County’s motion to dismiss.
See Harris IV, 902 F.3d at 1065. Plaintiffs filed a Third
Amended Complaint, again alleging that the County breached
its contractual obligations to Retirees by reducing the Grant
Benefit. The district court dismissed the Third Amended
Complaint with prejudice. Id. at 1066. Plaintiffs timely
appealed and we reversed the district court “insofar as it
dismissed [Plaintiffs’ implied] contract claims regarding the
Grant Benefit.”1 Id. at 1066–67, 1076.
The County subsequently moved for summary judgment
on Plaintiffs’ breach of contract claim. The district court
granted the County’s motion on the basis that Plaintiffs failed
to raise a material issue of fact regarding the County’s intent
1
For a more detailed discussion of the procedural history of this case
and related cases, see Harris IV, 902 F.3d at 1064–76.
HARRIS V. COUNTY OF ORANGE 9
to create an implied vested right to the Grant Benefit.
Plaintiffs filed a timely appeal of the district court’s judgment
and we exercise our jurisdiction pursuant to 28 U.S.C.
§ 1291.
II. STANDARD OF REVIEW
When reviewing the grant of summary judgment, we
review “the evidence in the light most favorable to [Plaintiffs]
as the nonmoving part[ies]” and “review de novo whether any
genuine issue of material fact exists and whether the district
court correctly applied the relevant substantive law.” Retired
Emps. Ass’n of Orange Cnty., Inc. v. Cnty. of Orange
(REAOC V ), 742 F.3d 1137, 1141–42 (9th Cir. 2014)
(citation omitted).
III. DISCUSSION
Plaintiffs argue that because the 1993 MOUs
demonstrated an intent by the County to create an implied
vested right to the Grant Benefit, the County breached the
MOUs by reducing the Grant Benefit. In Retired Emps. Ass’n
of Orange Cnty., Inc. v. Cnty. of Orange (REAOC III),
52 Cal. 4th 1171, 1194 (2011), the California Supreme Court,
in response to our certified question, concluded that “[u]nder
California law, contractual rights may be implied from
legislative enactments under limited circumstances.” The
Court explained, however, that a plaintiff bears a “heavy
burden” to overcome the presumption that the legislature did
not intend to create vested rights. Id. at 1185, 1190 (citations
omitted). Evidence of a vested right implied by ordinance or
resolution must be “unmistakable” and creation of such a
right will only be found “when the statutory language or
circumstances accompanying its passage clearly evince a
10 HARRIS V. COUNTY OF ORANGE
legislative intent to create private rights of a contractual
nature enforceable against the governmental body.” Id.
at 1187 (citation, alterations and internal quotation marks
omitted). Importantly, “the law does not recognize implied
contract terms that are at variance with the terms of the
contract as expressly agreed or as prescribed by statute” or
law. Id. at 1181 (emphasis added) citing Shoemaker v.
Myers, 52 Cal. 3d 1, 23–24 (1990) (holding that “no
employee has a vested contractual right . . . beyond the time
or contrary to the terms and conditions fixed by law”) (other
citation omitted); see also Miller v. State of California,
18 Cal. 3d 808, 813 (1977) (in bank) (same).
Plaintiffs’ claim to an implied vested right to the Grant
Benefit is foreclosed because the prescribed law of Orange
County is at variance with such a right. On April 6, 1993, the
County adopted the Retiree Medical Plan by resolution of the
County Board of Supervisors. See REAOC III, 52 Cal. 4th
1184 (explaining that, under Cal. Gov’t Code 25300, the
“appointment and conditions of employment of county
employees” may be fixed “by resolution”). Section 1.3 of the
Retiree Medical Plan states: “This Plan does not create any
vested right to the benefits provided hereunder on the part of
any Employee, Retiree or any other person.” This section
also states: “As provided by Sections [5.4 and 5.5],2 this Plan
may be amended or terminated at any time, in full or in part,
by the County in its sole discretion.” Sections 5.4 and 5.5
subject that discretion “to the terms of any Memorandum of
Understanding with an Employee Organization.”
2
This section refers to “Sections 6.4 and 6.5.” The Retiree Medical
Plan, however, does not have a section 6.4 or 6.5. Section 5.4 governs
termination and section 5.5 governs amendments.
HARRIS V. COUNTY OF ORANGE 11
As the governing law of Orange County prohibited Grant
Benefits from vesting, Plaintiffs’ claim of an implied vested
right to those benefits is unavailing. Plaintiffs argue,
however, that such a result is inconsistent with our prior
decision in Harris IV. In Harris IV, however, we credited as
true Plaintiffs’ allegation in their complaint that “there is no
indication that [Retiree Medical Plan’s] contents were ever
discussed with or disclosed to the unions during the
negotiations that led to the adoption of those agreements,”
902 F.3d at 1069 n.5, which would necessarily mean that
there was also no allegation in the complaint that the Retiree
Medical Plan was adopted by County resolution and had
therefore become applicable law. See Pilimai v. Farmers Ins.
Exch. Co., 39 Cal. 4th 133, 138 (2006) (establishing that
“parties are presumed to know and to have had in mind all
applicable laws extant when an agreement is made”).
At the summary judgment stage, however, the County
provided evidence that the Retiree Medical Plan was adopted
by resolution and therefore became governing law with
respect to Grant Benefits. As existing County law, the
Retiree Medical Plan became part of the MOUs “just as if . . .
expressly referred to and incorporated” into the MOUs. Id.As existing law expressly provided that Grant Benefits did
not vest, Plaintiffs are foreclosed from arguing that the MOUs
contained a contradictory implied term. Of course if the
MOU adopted by County resolution contained an express
contradictory term, that express term would control. See
REAOC III, 52 Cal. 4th 1185 (clarifying that county law
encompasses “Board resolutions, including those resolutions
approving or ratifying MOUs”) (citation omitted). Plaintiffs
do not address this point, but continue to assert that vesting is
implied in the MOUs. However, that conclusory assertion is
not sufficient to raise a genuine issue of material fact, as is
12 HARRIS V. COUNTY OF ORANGE
required to survive a summary judgment motion. See Arpin
v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 922 (9th
Cir. 2001) (holding that “conclusory allegations unsupported
by factual data are insufficient to defeat [a] summary
judgment motion”) (citation omitted).
Significantly, the MOUs themselves demonstrate that the
parties did not intend the Grant Benefit to vest. The MOU
used as an example by Plaintiffs provides: “This
Memorandum of Understanding sets forth the terms of
agreement [between the parties] for the period beginning
July 23, 1993 through June 23, 1994.” In M & G Polymers
USA, LLC v. Tackett, 574 U.S. 427, 441–42 (2015), the
United States Supreme Court declared: “contractual
obligations will cease, in the ordinary course, upon
termination of the bargaining agreement” (citation omitted).
“[W]hen a contract is silent as to the duration of retiree
benefits, a court may not infer that the parties intended those
benefits to vest for life.” Id. at 442. Similarly, in San
Bernardino Pub. Emps. Assn. v. City of Fontana, 67 Cal.
App. 4th 1215, 1223 (1998), the California Court of Appeal
held that where “agreements, as implemented through
previous MOUs, were of fixed duration, . . . the employees
had no legitimate expectation that the . . . benefits would
continue unless they were renegotiated as part of a new . . .
agreement.” The court reasoned that the “benefits at issue
could not have become permanently and irrevocably vested
as a matter of contract law, because the benefits were earned
on a year-to-year basis under previous MOUs that expired
under their own terms.” Id. at 1224. “Once the MOUs
expired under their own terms, the employees had . . . no
vested right . . .” Id. at 1223.
HARRIS V. COUNTY OF ORANGE 13
Here, the MOUs, as acknowledged by Plaintiffs, were of
limited duration and expired on their own terms by a specific
date. Plaintiffs point to language in the MOUs that eligible
retirees “‘shall receive’ the promised benefits.” However, the
MOUs are silent with respect to how long this promise may
be enforced. See M & G Polymers, 574 U.S. at 432–33
(rejecting argument that an agreement providing retirees
would “‘receive a full Company contribution towards the cost
of health care benefits’ . . . had created a vested right to such
benefits”) (alteration omitted). Absent express language
providing that the Grant Benefit vests, the right to the benefit
expired when the MOU expired.3
The dissent concedes that MOUs adopted after the Retiree
Medical Plan became effective do not include an implied
vested right to the Grant Benefit, due to the Plans’ anti-
vesting provisions. The dissent, however, insists that for
MOUs adopted before the effective date of the Retiree
Medical Plan, “the possibility that the pre-Plan MOUs created
a vested right to the Grant Benefit still exists.”
Concurring/Dissenting Opinion, p. 34. This argument
misapprehends the facts and the law.4
3
Plaintiffs also argue that the district court erred in granting summary
judgment on their theory that the County breached its commitment to use
$50 million set aside in the ARBA account to only fund retiree medical
insurance benefits. This argument is foreclosed for the same reason as the
vesting argument. The Retiree Medical Plan includes no such continuing
commitment. In addition, as Plaintiffs concede, they were not parties to
the contract containing this commitment.
4
As a preliminary matter, we note that a “possibility” of a factual
occurrence is not sufficient to survive summary judgment. See Matushita
Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)
(explaining that a showing of “metaphysical doubt” is insufficient to
survive summary judgment).
14 HARRIS V. COUNTY OF ORANGE
First and foremost, the dissent does not dispute factually
that the MOUs were of limited duration and did not specify
how long eligible retirees “shall receive” the promised Grant
Benefit. Accordingly, under California law, we may not infer
that the parties intended that the Grant Benefit vest for life.
See San Bernardino Pub. Emps., 67 Cal. App. 4th at 1223.
The dissent’s position also relies on the mistaken
assumption that the Grant Benefit was deferred
compensation. See id. As discussed in greater detail below,
the Grant Benefits were optional benefits rather than fixed
compensation. See California Fire Local 2881 v. Cal. Pub.
Emps. Ret. Sys., 6 Cal. 5th 965, 981–82 (2019).
More importantly, the MOUs in existence prior to
adoption of the Grant Benefits clearly reflected an intention
to incorporate the provisions of the Retiree Medical Plan into
the MOUs. These MOUs expressly provided that their Grant
Benefit provisions would not become effective until the
County’s Retiree Medical Plan was adopted. See e.g., April
1993 MOU Amendment–Peace Officer and Supervising
Peace Officer Units (1993 Peace Officer MOU Amendment)5
(“The provisions set forth in this [Retiree Medical Benefit]
Section shall not be implemented unless the Board of
Supervisors adopts a Retiree Medical Program to be applied
to the employees of the County of Orange.”)
Virtually identical language was used for subsequent
MOUs. Because these provisions required that the Retiree
5
The 1992 MOU mentioned by the dissent never governed Plaintiffs’
Grant Benefits. The Retiree Medical Benefit Section in that MOU was
supplanted by the 1993 Peace Officer MOU Amendment before the
Retiree Medical Plan became effective.
HARRIS V. COUNTY OF ORANGE 15
Medical Plan be “implemented” before retirees would be
entitled to the Grant Benefit, none of these sections provided
the employees with any rights to the Grant Benefit before the
non-vesting language in the Retiree Medical Plan became
fixed by law. Plaintiffs simply cannot establish that implied
vested rights to the Grant Benefit were created before the
Retiree Medical Plan’s anti-vesting provisions went into
effect, because the Plan’s implementation was a prerequisite
to Plaintiffs’ right to the Grant Benefit. See Vallejo Police
Officers Assn. v. City of Vallejo, 15 Cal. App. 5th 601, 612
(2017) (explaining that “implied terms cannot be at variance
with the terms of the contract as expressly agreed”) (citations
and internal quotation marks omitted).
In addition, Plaintiffs contend that because the County
unilaterally drafted and imposed the anti-vesting provisions
in the Retiree Medical Plan without engaging in collective
bargaining, the plan is void. First, any claim that the Retiree
Medical Plan is void based on a failure to bargain is barred
under the three-year statute of limitations.6 See Coachella
Valley Mosquito & Vector Control Dist. v. Cal. Pub. Emp’t
Rels. Bd., 35 Cal. 4th 1072, 1077 (2005) (clarifying that
actions asserting a claim of the failure to bargain prior to
July 1, 2001, are subject to a three-year statute of limitations
from the date of the occurrence of the unfair practice).
6
If the Retiree Medical Plan were void due to a failure to bargain,
there would be no Grant Benefit at all. As already set forth, an effective
plan was a prerequisite to Plaintiffs’ right to the Grant Benefit under the
MOUs. If the Plan was void, it was never effective, and Plaintiffs were
never entitled to a Grant Benefit. See Vernon Fire Fighters v. City of
Vernon, 107 Cal. App. 3d 802, 828 (1980).
16 HARRIS V. COUNTY OF ORANGE
The record reflects that the Retiree Medical Plan was not
unilaterally imposed on the unions without collective
bargaining. Section 3.1.3 of the Retiree Medical Plan
explicitly provides that “an Employee who is in a unit
represented by an Employee Organization shall be eligible for
coverage in the Plan under section 3.1.1 or 3.1.2 [the sections
providing the Grant Benefit] only if such Employee
Organization enters into a Memorandum of Understanding
with the County providing for such coverage for the members
of that unit.” In other words, the Retiree Medical Plan only
became effective as to retirees upon each union negotiating
and entering into an MOU with the County. Accordingly, the
Retiree Medical Plan was not unilaterally imposed on the
unions and their employees, because the unions had the
option to reject the plan or to negotiate different terms.
Instead, unions executed MOUs adopting the Retiree Medical
Plan.
Contrary to Plaintiffs’ assertion, this process was fully
consistent with the Meyers–Milias–Brown Act (MMBA). In
Mendocino Cnty. Emps. Assn. v. Cnty. of Mendocino, 3 Cal.
App. 4th 1472, 1477–78 (1992) the California Court of
Appeal explained that the “MMBA requires a public agency
to ‘meet and confer’ with recognized employee organizations
on wages, hours, and the other terms and conditions of
employment.” “Once an agreement is reached, the parties
jointly prepare a written memorandum of understanding,
which is then submitted to the governing body for approval.”
Id. “Once approved, the memorandum of understanding
becomes a binding agreement.” Id. at 1478 (citation omitted).
The MMBA requires that government entities notify
unions of any proposed “resolution related to matters within
the scope of representation.” Id. (citation omitted). The
HARRIS V. COUNTY OF ORANGE 17
government entity must also provide unions an “opportunity
to meet with the governing body.” Id. (citation omitted); see
also Boling v. Pub. Emp’t Rels. Bd., 5 Cal. 5th 898, 918
(2018) (interpreting the MMBA to require “reasonable
advance notice and an opportunity to bargain before reaching
a firm decision to establish or change a policy within the
scope of the representation”) (citations and emphasis
omitted). The County complied with this notice requirement
when adopting the Retiree Medical Plan by resolution,
because the Retiree Medical Plan proposed changes to retiree
benefits that unions were free to accept or reject.
Additionally, Item #51 on the County’s meeting agenda
confirmed that prior to adoption, the “Retiree Medical Plan
ha[d] been discussed and negotiated with all other employee
organizations.” Indeed, Plaintiffs confirmed their awareness
that the Retiree Medical Plan was “passed by legislation.”
See El Dorado Cnty. Deputy Sheriff’s Assn. v. Cnty. of El
Dorado, 244 Cal. App. 4th 950, 956 (2016) (holding that
when a “union official with authority to act has actual notice
of the intended change, together with adequate time to decide
whether to demand negotiation before a final decision is
made, the union will be deemed to have received adequate
notice”) (citations omitted). A union’s failure to assert
bargaining rights after being notified of proposed changes to
employment terms “constitutes waiver.” Id.Plaintiffs’ position is further weakened by the fact that the
unions failed to engage in bargaining activities after receiving
notice of benefit changes. Under the MMBA as interpreted
by California courts, the unions waived any right to bargain
by failing to assert their bargaining rights after they received
notice of the adopted Retiree Medical Plan containing the
non-vesting provision. See id. Contrary to Plaintiffs’
argument, because the unions had actual notice of the Retiree
18 HARRIS V. COUNTY OF ORANGE
Medical Plan and its proposed terms, the unions, not the
County, had the obligation to raise the issue of bargaining
over the terms of the plan. See Stockton Police Officers’
Assn. v. City of Stockton, 206 Cal. App. 3d 62, 67 (1988)
(holding that once the government “has fully discharged its
statutory duty to give notice of a proposed change,” the union
must timely “invoke the meet and confer requirement” and
the failure to do so “constitutes a waiver of that right”).
Because the unions failed to “invoke the meet and confer
requirement,” the term adopted by resolution that barred
vesting of the Grant Benefit became part of the MOUs “just
as if [it was] expressly referred to and incorporated” into the
MOUs. Pilimai, 39 Cal. 4th at 138; see also Stockton Police,
206 Cal. App. 3d at 66 (clarifying that, after giving proper
notice, a government agency is not required to “meet and
confer” absent a request from the union).
With respect to the MOUs executed before the County
adopted the Retiree Medical Plan, the law and the record do
not support Plaintiffs’ contention that the Retiree Medical
Plan was unilaterally imposed on the unions without
collective bargaining. In County of Fresno v. Fresno Deputy
Sheriff’s Ass’n., 51 Cal. App. 5th 282, 298 (2020), the
California Court of Appeal held that when the terms of an
MOU “grant[ed] the county [the] authority to reassign
employees, the association made a clear and unmistakable
waiver of its right to renegotiate the grounds on which the
county was permitted to reassign its employees, and the
procedures for doing so.” The court reasoned that “when the
action of the employer that is being challenged is directly
addressed in the MOU, the parties are bound by the terms of
the written agreement.” Id. at 297.
HARRIS V. COUNTY OF ORANGE 19
As explained, each of the MOUs expressly granted the
County the right to “implement a Retiree Medical Insurance
Grant plan for employees who have retired from County
services and who meet the eligibility requirements set forth
. . . below,” without limiting the County’s power in any way.
The respective unions agreed to incorporate the future
provisions of the Retiree Medical Plan into each of the
MOUs. Plaintiffs cannot challenge the resulting Plan,
because the MOUs did not purport to limit the County’s
power to implement a plan. Rather, the MOUs definitively
acknowledged the County’s right to implement the Retiree
Medical Plan. Accordingly, Plaintiffs’ contention of a failure
to negotiate the terms of the Retiree Medical Plan is without
merit.
Finally, both Plaintiffs and the dissent rely upon
California Fire to posit that the Grant Benefit is deferred
compensation, and vests upon retirement, similar to pension
benefits. In California Fire, the California Supreme Court
explained that “terms and conditions of public employment
are ordinarily considered to be statutory rather than
contractual.” 6 Cal. 5th at 970. However, contractual
protection may arise: “(1) when the statute or ordinance
establishing a benefit of employment and the circumstances
of its enactment clearly evince an intent by the relevant
legislative body to create contractual rights or, (2) when, even
in the absence of a manifest legislative intent to create such
rights, contractual rights are implied as a result of the nature
of the employment benefit, as is the case with pension rights.”
Id.The California Supreme Court in California Fire
nevertheless expressly reaffirmed the rule that implied
contract terms cannot contradict terms prohibited by law. See
20 HARRIS V. COUNTY OF ORANGE
id. (“Where the relationship is governed by contract, a
county may be bound by . . . implied terms of a written
contract, as long as there is no statutory prohibition against
such an agreement”) (citation omitted, emphasis in the
original). This rule, however, was simply part of “the
broader principle that the law does not recognize implied
contract terms that are at variance with the terms of the
contract as expressly agreed or as prescribed by statute.”
REAOC III, 52 Cal. 4th at 1181 (citations and internal
quotation marks omitted). The Court in California Fire did
not apply this “broader principle” because no contrary
statutory or contractual provision was asserted. This case is
different. Here, the Retiree Medical Plan, which governs the
Grant Benefit and was adopted by County Resolution,
expressly declares that the “Plan does not create any vested
right to the benefits provided hereunder.” The Retiree
Medical Plan, with this anti-vesting provision, became part of
the MOUs by force of law and/or was expressly incorporated
into the MOUs.
Even without an express anti-vesting provision, the
California Supreme Court in California Fire, rejected
the plaintiffs’ claim that the benefit at issue was deferred
compensation that could create an implied vested right. See
6 Cal. 5th at 987. The Court explained that the “opportunity
to purchase ARS [additional retirement service] credit was
not different in form from a variety of other optional benefits
offered to public employees in connection with their work”
that are not viewed as deferred compensation. Id. The Court
continued that “[i]n addition to their salary or hourly pay, it
is not unusual for public employees to be offered the
opportunity to purchase different types of health insurance
benefits from a variety of providers,” but concluded: “We
HARRIS V. COUNTY OF ORANGE 21
have never suggested that this type of benefit is entitled to
protection under the contract clause.” Id.The Retiree Medical Plan and the MOUs likewise do not
provide insurance benefits, which in the absence of the non-
vesting provision established by resolution found in this case,
might be viewed as deferred compensation. Instead, they
provide the opportunity for employees to purchase health
insurance at a reduced cost due to the Grant Benefit. Unlike
deferred compensation, which is earned by merely accepting
employment, access to the health benefit required the
employee to choose to pay his portion of the health insurance
premium. In fact, the MOUs expressly provide that a retiree
will “forfeit any right” to the Grant Benefit if the retiree “fails
to enroll,” “terminate[s] coverage,” or “fail[s] to make
necessary payments.” In addition, the employee for a myriad
of reasons could elect to decline the enrollment opportunity,
and thereby forego any entitlement to the Grant Benefit. Just
as in California Fire, “[i]f not taken advantage of, the
opportunity” to purchase health insurance at a reduced rate
was subject to expiration or termination. Id. at 986–87; see
also San Bernardino Pub. Emps. Assn., 67 Cal. App. 4th
at 1224 (reasoning that the benefits could not have become
vested when the MOUs providing those benefits “expired
under their own terms”). The dissent’s conclusion that the
Grant Benefit may be vested simply cannot be reconciled
with the MOUs’ express provisions that the Grant Benefit
may be forfeited. See REAOC III, 52 Cal. 4th at 1189 n.3
(explaining that a “benefit is deemed ‘vested’ when the
employee acquires an irrevocable interest in the benefit”). As
the court concluded in California Fire, there is simply “no
basis” in this record for determining “that the opportunity to
purchase [health insurance at a reduced rate] was granted as
deferred compensation.” 6 Cal. 5th at 987.
22 HARRIS V. COUNTY OF ORANGE
The Court in California Fire continued to recognize the
“well settled [rule] that public employees have no vested right
in any particular measure of compensation or benefits, and
that these may be modified or reduced by the proper statutory
authority.” Id. at 977 (citation omitted). For that reason, the
California Supreme Court has advised that “[a] court charged
with deciding whether private contractual rights should be
implied from legislation . . . should proceed cautiously both
in identifying a contract within the language of a statute and
in defining the contours of any contractual obligation.”
REAOC III, 52 Cal. 4th at 1188 (citation, alteration, and
internal quotation marks omitted). The Court explained:
“[I]t is presumed that a statutory scheme is not intended to
create . . . vested rights and a person who asserts the creation
of a contract with the state has the burden of overcoming that
presumption.”7 Id. at 1186 (citation omitted). This
“requirement of a ‘clear showing’ that legislation was
intended to create the asserted contractual obligation . . .
should ensure that neither the governing body nor the public
will be blindsided by unexpected obligations.” Id. at
1188–89 (citation omitted).
IV. CONCLUSION
To permit Plaintiffs’ claims of an implied vested right to
the Grant Benefit to proceed when County law requires a
contrary result would effectively blindside the County with an
unanticipated and unbudgeted obligation. See id. at 1189.
Plaintiffs cannot raise a material issue of fact regarding their
7
The dissent mistakenly contends, without citation to any authority,
that the County could not rely on the anti-vesting provision to demonstrate
the absence of evidence creating an implied right. Concurring/Dissenting
Opinion, p. 23. Not even the Plaintiffs reach that far.
HARRIS V. COUNTY OF ORANGE 23
asserted vested right when that right was squarely foreclosed
in the enactment creating those rights. The district court
properly granted summary judgment in favor of the County.
AFFIRMED.
FORREST, Circuit Judge, concurring in part, dissenting in
part.
I agree with the majority that Defendant-Appellee Orange
County’s (County) Memoranda of Understanding (MOUs)
entered into with its employees’ unions after its Retiree
Medical Plan (Plan) went into effect are deemed to have
incorporated the terms of the Plan by operation of law. I also
agree that our decision in Harris v. County of Orange (Harris
IV), 902 F.3d 1061 (9th Cir. 2018), does not foreclose that
result. I disagree, however, that the Plan’s terms are
incorporated by operation of law into the MOUs that the
County entered into before the Plan went into effect.
Regarding the pre-Plan MOUs, California law gives the
Plaintiffs-Appellants (Retirees) a viable basis to assert an
implied vested right to the Grant Benefit at issue. Thus, to
prevail on its motion for summary judgment, the County
needed to demonstrate—without relying on the Plan’s anti-
vesting term—that Retirees lack any evidence proving that
the pre-Plan MOUs created an implied vested right. Because
the County did not do this, I would reverse and remand for
further proceedings on the claims based on MOUs that
became effective before the Plan.
24 HARRIS V. COUNTY OF ORANGE
I. BACKGROUND1
A.
In the early 1990s, the Orange County Retirement System
(OCERS) developed a surplus of approximately $200 million
in investment returns from employees’ pension contributions.
At that time, “[t]here was an ongoing dispute . . . among the
County, OCERS and the [u]nions over who was entitled to
[the] surplus funds . . . . The County contended that the funds
belonged to it, while the [u]nions argued that it belonged to
the employees.” Eventually, the parties reached a deal
wherein the County received $150 million of the surplus
funds for its general spending purposes; in exchange,
approximately $50 million would be used as “seed” money to
fund a new “grant” benefit program to help retirees pay the
cost of health insurance (Grant Benefit). Because the County
received $150 million, the deal relieved the County’s general
budgetary concerns, placated the unions, and “encourage[d]
reduction in the County work force by offering early
retirement incentives.”
B.
The County and the unions set forth the terms of the
Grant Benefit in collective bargaining agreements called
MOUs. By County ordinance, the Orange County Board of
Supervisors (Board) was required to adopt the MOUs by
resolution. See Orange County Code, tit. 1, div. 3, art. 1, § 1-
3-2. On December 1, 1992, the Board adopted the first MOU.
1
Because this appeal concerns a decision on the County’s motion for
summary judgment, the facts are recounted in the light most favorable to
Retirees. Frudden v. Pilling, 877 F.3d 821, 828 (9th Cir. 2017).
HARRIS V. COUNTY OF ORANGE 25
Three more MOUs were adopted on April 6, 1993, and
several more were adopted between May and September
1993. All the MOUs contained expiration dates.
The MOUs provide that retirees “shall receive” a monthly
stipend to defray the cost of insurance premiums. They also
state that the Grant Benefit would be partially funded by a
mandatory 1% payroll contribution from gross wages of all
active employees2 and would confer a 1% salary increase.
The parties agreed to calculate the monthly Grant Benefit by
multiplying employees’ years of service upon retirement by
a fixed dollar amount. The parties set the multiplier at $10
and agreed that it would increase every year by up to 5% to
adjust for inflation. Those leaving County employment before
they were eligible for the Grant Benefit would receive a cash
rebate of their 1% payroll contribution. The County also
provided a 1% salary increase for its active employees.
C.
On April 6, 1993—the same day the Board adopted three
MOUs—the Board adopted the Plan. The Plan, which did not
become effective until August 1, 1993, set forth the terms of
the Grant Benefit. Section 1.3 of the Plan states that “the
County, by establishing and maintaining this Plan, does not
give any Employee, Retiree or any other person any legal or
equitable right against the County” or “any vested right to the
benefits provided hereunder.” Sections 5.4 and 5.5 reserve to
the County the right to amend or terminate the plan “in its
2
According to Retirees, the Grant Benefit was also funded by
$50 million of OCERS’s surplus funds and a percentage of future
investment earnings thereon and a one-time contribution of $6 million
from the County.
26 HARRIS V. COUNTY OF ORANGE
sole discretion” but “subject to the terms of any [MOU]” with
a labor union. Three former County directors testified that the
anti-vesting provisions were not negotiated with the unions.
Moreover, an attorney representing several of the unions
during the relevant period testified that he never saw the Plan
Document during the bargaining process.3
D.
The County provided the Grant Benefit for approximately
fourteen years. In 2000, the County experienced dramatic
funding shortages, and in 2008, the County and the unions
agreed to restructure its retiree health benefit program in two
ways. First, the County would no longer subsidize health
insurance premiums by “pooling” active and retired
employees—a benefit referred to as the Retiree Premium
Subsidy. Second, the County and the unions agreed to
decrease the Grant Benefit by 50% and cut the inflation cap
from 5% to 3% after retirees became eligible for Medicare at
65 years old. In exchange for these concessions, the County
eliminated the 1% payroll contribution and gave significant
pay raises to active employees. The County applied these
benefit reductions to both active employees and retirees.
3
As evidence that the Plan was negotiated with the unions, the
majority points to Section 3.1.3 of the Plan. Maj. Op. at 16. But
Section 3.1.3 simply states that employees are eligible to receive the Grant
Benefit only if their union entered into a MOU with the County. The
majority does not explain how this language shows that the Plan terms,
including the anti-vesting provision, were negotiated with the unions
before the Plan was adopted.
HARRIS V. COUNTY OF ORANGE 27
E.
Three retired County employees filed this class action on
behalf of thousands of retired County employees. Retirees
alleged that the County’s benefit restructuring breached its
contractual obligations in violation of the United States and
California constitutions. After the district court granted the
County’s motion for judgment on the pleadings, Retirees
appealed, and we reversed and remanded so that Retirees
could “amend their [c]omplaint to set out specifically the
terms of those MOUs on which their claim is predicated.”
Harris v. Cnty. of Orange (Harris II), 682 F.3d 1126, 1135
(9th Cir. 2012).
On remand, Retirees filed a Second Amended Complaint,
alleging that the Retiree Premium Subsidy was an implied
term in the MOUs and that the County had contracted to
provide the Grant Benefit in perpetuity, as shown in the
express terms of the MOUs and by “circumstances
accompanying” their adoption. Retirees attached to their
complaint the Board’s resolution adopting an MOU on
August 3, 1993, as an “exemplar” of the agreements reached
between the County and its main labor union each year
between 1993 and 2007. The district court dismissed
Retirees’ claims relating to the Grant Benefit with prejudice.
After some procedural twists and turns, Retirees filed a Third
Amended Complaint, reasserting all claims, which the district
court also dismissed with prejudice.
In our second review of this case, we affirmed the district
court’s dismissal of the claims related to the Retiree Premium
Subsidy. Harris IV, 902 F.3d at 1066. But we reversed the
district court’s dismissal of Retirees’ claims related to the
Grant Benefit, concluding that Retirees had sufficiently
28 HARRIS V. COUNTY OF ORANGE
alleged that the County “entered into a contract that included
implied terms providing healthcare benefits to retirees that
vested for perpetuity.” Id. at 1069 (citation omitted). We
further explained in Harris IV:
Retirees’ contract claims are premised on the
express and implied terms of the MOUs, not
the [Plan], a separate document. Unlike the
MOUs, which were the product of collective
bargaining, the [Plan] was unilaterally created
by the County. Retirees maintain that “[t]he
1993 Plan [],” including its anti-vesting
provision, “was not incorporated into or
referenced in the binding contracts between
the County and the unions, and there is no
indication that its contents were ever
discussed with or disclosed to the unions
during the negotiations that led to the
adoption of those agreements.” The simple
existence of the anti-vesting clause, therefore,
provides no basis for holding Retirees’
implied contract claims implausible as a
matter of law.
Id. at 1069 n.5. In reaching this decision, we reviewed not
only Retirees’ complaint and the attached August 3, 1993,
Board resolution adopting an MOU with its main labor union,
Id. at 1063, but we also took judicial notice of the County’s
Plan and the Board’s resolution adopting the Plan.4 See id.
4
Following our first remand in 2011, the district court took judicial
notice of these two documents. In the Harris IV appeal, the County
discussed the Plan in its briefing, Ans. Br. at 10, 28–30, 902 F.3d at 1061
(No. 13-56061), and included it in its Excerpts of Record, id. Suppl.
HARRIS V. COUNTY OF ORANGE 29
at 1069 n.5; see also Khoja v. Orexigen Therapeutics, Inc.,
899 F.3d 988, 999 (9th Cir. 2018) (“[A] court may take
judicial notice of matters of public record without converting
a motion to dismiss into a motion for summary judgment.”
(citation omitted)).
Following our second remand, the district court bifurcated
discovery into liability and damages phases. The County
moved for summary judgment on liability. The district court
granted the County’s motion, holding that Retirees had not
made a “clear showing” that the Board had an “unmistakable”
intent to provide the Grant Benefit in perpetuity. The district
court explained that the County’s Plan included anti-vesting
language, which “confirm[ed] the Board’s intent that the
Grant [would] not vest.” The district court further found that
Retirees’ evidence did not create a triable fact and was
“insufficient to meet [Retirees’] burden at the summary
judgment level.” Retirees timely appeal.
II. DISCUSSION
We review the district court’s grant of summary judgment
de novo. Frudden, 877 F.3d at 828. “Summary judgment is
appropriate when, viewing the evidence in the light most
favorable to the non-movant, there is no genuine issue of
material fact and the movant is entitled to judgment as a
matter of law.” Id. As relevant here, to prevail on its motion,
Excerpts of Record at 32–56. The County explained that the Plan “was
first adopted in April 1993, when the Board, by Resolution No. 93-369,
approved the [Plan] providing for the Grant” and argued that the Board’s
“[l]egislation” adopting the Plan Document “clearly evinced the [Board’s]
legislative intent not to create vested rights.” Id. Ans. Br. at 10, 28–30.
When the Harris IV panel addressed this argument in footnote 5 of its
decision, it also took judicial notice of the Plan documents.
30 HARRIS V. COUNTY OF ORANGE
the County “must . . . show that the [Retirees] do[] not have
enough evidence of an essential element to carry [their]
ultimate burden of persuasion at trial.” Nissan Fire & Marine
Ins. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000).
A.
The Contracts Clauses of the United States and California
constitutions, U.S. Const. art. 1, § 10, Cal. Const. art. 1, § 9,
prohibit the “enactment of laws effecting a substantial
impairment of contracts.” California Fire Loc. 2881 v. Cal.
Pub. Emps.’ Ret. Sys., 6 Cal.5th 965 (2019) (internal
quotation marks and citation omitted). In California, public
employment benefits are usually established by statute or
county ordinance, not contract. See Cal. Const. art. XI, § 1,
subdiv. (b); Cal. Gov’t Code § 25300. For this reason, local
governments generally can modify or reduce their employees’
benefits without implicating any contract rights or triggering
Contract Clause concerns. California Fire, 6 Cal.5th at 977.
However, where “agreements of employment between the
state and public employees have been adopted by governing
bodies, such agreements are binding and constitutionally
protected.” Retired Emps. Ass’n of Orange Cnty. v. Cnty. of
Orange (REAOC III), 52 Cal. 4th 1171, 1186, (2011) (citation
omitted).
There are two exceptions to the general rule permitting
legislative modification of statutory public employment terms
and conditions. The first exception applies where the “statute
or ordinance establishing the benefit and the circumstances of
its enactment clearly evince a legislative intent to create
contractual rights.” California Fire, 6 Cal.5th at 970; see
REAOC III, 52 Cal. 4th at 1187 (“Where, for example the
legislation is itself the ratification or approval of a contract,
HARRIS V. COUNTY OF ORANGE 31
the intent to make a contract is clearly shown.”). If a local
government creates contract rights, the protection of the
Contract Clause applies. California Fire, 6 Cal.5th at 978–79.
The second exception protects employees’ vested rights to
deferred compensation “even in the absence of a clear
manifestation of legislative intent.” Id. at 979.5 Deferred
compensation is the “payment of salary which has been
earned.” Id. at 984 (citation omitted). A constitutionally
protected, vested right to deferred compensation may be
implied where a public employee has rendered services in
exchange for compensation “paid not at the time the services
are performed but at a later time.” Id. at 985. A deferred
compensation agreement is further evidenced by a benefit that
“flow[s] directly from a public employee’s service” where the
magnitude of the benefit is “roughly proportional to the time
of that service.” Id. at 986.
B.
“As a general rule, all applicable laws in existence when
an agreement is made, which laws the parties are presumed
to know and to have had in mind, necessarily enter into the
contract and form a part of it, without any stipulation to that
effect, as if they were expressly referred to and incorporated.”
Swenson v. File, 3 Cal. 3d 389, 393 (1970) (in bank) (internal
quotation marks and citation omitted). Here, the Plan became
5
Because California Fire held that the Contracts Clause protects
deferred compensation “even in the absence of a clear manifestation of
legislative intent,” 6 Cal.5th at 979, the majority misstates California law
when it says that creation of a vested right can “only be found ‘when the
statutory language or circumstances accompanying its passage clearly
evince a legislative intent to create private rights of a contractual nature
enforceable against the governmental body.’” Maj. Op. at 9–10 (emphasis
added) (quoting REAOC III, 52 Cal. 4th at 1187).
32 HARRIS V. COUNTY OF ORANGE
Orange County law on August 1, 1993—the Plan’s stated
effective date.6 See Cal. Gov’t Code § 25300; Orange County
Code, tit. 1, div. 3, art. 1, § 1-3-2; see also City of Monte
Sereno v. Padgett, 58 Cal. Rptr. 3d 218, 223 (Cal. Ct. App.
2007) (holding that municipal ordinances apply prospectively
from their effective date “unless a different intention is
clearly expressed or implied”). There is no indication that the
County clearly intended the Plan to apply before its stated
effective date. See Padgett, 58 Cal. Rptr. 3d at 223. Thus, by
operation of law, the MOUs that were adopted after the
Plan’s effective date of August 1, 1993, incorporated the
Plan’s terms, except to the extent the MOUs included express
terms contrary to the Plan terms. See REAOC III, 52 Cal. 4th
at 1185 (“[A] court must look to Board resolutions, including
those resolutions approving or ratifying MOU[]s to determine
the parties’ contractual rights and obligations.” (citation
omitted)).
The parties agree that the MOUs do not expressly provide
that the Grant Benefit was vested and must be provided in
perpetuity—Retirees contend this was an implied promise.
But, as the majority holds, relying on an implied term is
unavailing after the Plan’s express anti-vesting term obtained
the force of law. See id. at 1181 (“[T]he law does not
recognize implied contract terms that are at variance with the
terms of a contract as expressly agreed or as prescribed by
statute.” (citation omitted)). For this reason, I concur that the
district court’s grant of summary judgment to the County as
to claims based on the MOUs adopted after August 1, 1993,
must be affirmed.
6
The majority references the date the Plan was adopted by the
Board—April 6, 1993—without discussing that the Plan expressly states
it did not become effective until August 1, 1993. See Maj. Op. at 10.
HARRIS V. COUNTY OF ORANGE 33
Retirees suggest that Harris IV prevents us from
concluding that the Plan’s anti-vesting provision invalidates
their implied contract claim to a vested right in the Grant
Benefit. While it is true that Harris IV held that the “Retirees’
contract claims are premised on the express and implied
terms of the MOUs, not the Retiree Medical Plan, a separate
document,” 902 F.3d at 1069 n.5, this holding does not
foreclose us from applying the incorporation-of-existing-law
rule in the present case. To say that the MOUs govern the
parties’ contractual relationship is not to say that the MOUs
exist independent from or are exempt from governing law.
Moreover, Harris IV was premised on our conclusion that the
Plan was not negotiated, unlike the MOUs. Id. But the Plan
has the force of law regardless of whether it was negotiated.
It is not inconsistent to hold both that the MOUs govern the
parties’ contractual relationship and that the MOUs are
deemed to have incorporated existing law, including the Plan,
under general rules of contract formation. Stated another way,
by applying the incorporation-of-existing-law rule, we are not
supplanting the MOUs in violation of the parties’ negotiations
or our decision in Harris IV. We are recognizing the import
of the Plan under California law as it relates to the parties’
post-Plan contracting activities.
C.
The incorporation-of-preexisting-law rule does not apply
to the MOUs adopted before the Plan went into effect,
however, because the Plan was not an “applicable law[] in
existence” when those MOUs were adopted. See Swenson,
3 Cal. 3d at 373. Again, as explained in REAOC III, “[w]here
the [public employment] relationship is governed by contract,
a county may be bound by an implied contract (or by implied
34 HARRIS V. COUNTY OF ORANGE
terms of a written contract), as long as there is no statutory
prohibition against such agreement.” 52 Cal. 4th at 1183.
The majority argues this is incorrect because the pre-Plan
MOUs “reflected an intention to incorporate the . . . Plan” and
did not become effective until after the Plan was adopted.
Maj. Op. at 14. While the MOUs anticipated that the County
would adopt a Retiree Medical Program and provided that the
Grant Benefit would not be “implemented” before such
program was adopted, the contracting parties nonetheless
created and defined the terms of the Grant Benefit before the
Plan was effective such that it cannot be said the Plan was “in
existence” when the agreements memorialized in the pre-Plan
MOUs were made. Swenson, 3 Cal. 3d at 393. Thus, in my
view, the possibility that the pre-Plan MOUs created a vested
right to the Grant Benefit still exists. The majority further
asserts that the expiration dates in the MOUs prevent this
court from inferring an intent by the parties to create vested
rights. Maj. Op. at 13. That may be, but the expiration dates
do not themselves foreclose the possibility of finding implied
intent to create vested rights based upon ordinary contract-
interpretation principles. See M & G Polymers USA, LLC v.
Tackett, 574 U.S. 427, 435 (2015) (holding “ordinary
principles of contract law” control in determining the
contracting parties’ intent, not judicial inferences).
As such, for the MOUs that went into effect before
August 1, 1993, the question is whether the County
demonstrated, as a matter of law, that the Retirees cannot
prove there was an implied agreement creating a vested right
to the Grant Benefit or terms establishing that this benefit is
properly considered deferred compensation. See Nissan Fire
& Marine Ins., 210 F.3d at 1102. In my view, the answer is
no. The record shows that the County’s active employees
HARRIS V. COUNTY OF ORANGE 35
rendered services in exchange for “a monthly fixed-dollar
stipend,” that was “paid not at the time the services [were]
performed but [upon retirement].” California Fire, 6 Cal.5th
at 985. The MOUs’ terms regarding the funding and
calculation of this Grant Benefit suggest that the County
agreed to provide this stipend as deferred compensation. Cf.
Cal. Tchrs. Ass’n v. Cory, 202 Cal. Rptr. 611, 618 (Cal. Ct.
App. 1984) (finding an implied “promise of funding in
exchange for the valuable services rendered by the [public
employees]”). The Grant Benefit was funded in part by a
mandatory 1% payroll contribution from all active
employees. The parties expressly agreed that the stipend
would be
calculated by multiplying each employee’s
years of service upon retirement by a fixed
dollar amount that was set at $10 in 1993 and
increased by up to 5% each year to adjust for
insurance premium inflation. For employees
who left County employment before
becoming eligible for the fixed dollar stipend,
the 1993 Grant Program provided for a one-
time “lump-sum” cash-out, which was 1% of
final hourly pay rate multiplied by the hours
paid since the Program’s adoption.
For example, a public employee who worked for ten years
would be entitled to a $100 monthly stipend during
retirement—i.e., $10 per month x 10 years of service = $100
per month. The benefit, therefore, “flow[ed] directly from
[the] public employee’s service, and [its] magnitude [was]
roughly proportional to the time of that service.” California
Fire, 6 Cal.5th at 986.
36 HARRIS V. COUNTY OF ORANGE
The County did not produce evidence negating Retirees’
deferred-compensation claim, nor did it show that Retirees
failed to produce evidence to support such claim. “To succeed
on a grant of summary judgment, the moving party must
demonstrate that there is “no genuine issue of material fact.”
Frudden, 877 F.3d at 828. True, as the majority points out,
Retirees bear the ultimate burden of persuasion at trial. But as
the moving party at summary judgment, the County needed
to demonstrate that Retirees lack any evidence to establish
their claim. They did not. The County, therefore, is not
entitled to summary judgment on Retirees’ deferred-
compensation claim as to the pre-Plan MOUs. See Nissan
Fire & Marine Ins., 210 F.3d at 1102.
The majority errs in rejecting Retirees’ claim as a matter
of law based on its comparison of the Grant Benefit to the
benefit analyzed in California Fire. In California Fire, the
California Supreme Court analyzed a statute that eliminated
“the opportunity for public employees to purchase additional
retirement service [ARS] credit.” California Fire, 6 Cal.5th
at 970. The court noted that the statute “did not alter the
rights of employees who had already purchased such credit.”
Id. (emphasis added). In holding that the ARS benefit was not
deferred compensation, the California Supreme Court
compared the opportunity to purchase ARS credit with other
non-vesting benefits including “the opportunity to purchase
different types of health insurance benefits from a variety of
providers; to purchase life and long-term disability insurance;
and to create a flexible spending account, by which certain
medical and child care expenses can be paid with pre-tax
income.” Id. at 987.
The majority reasons that, just like the benefit in
California Fire, the Grant Benefit merely “provide[s] the
HARRIS V. COUNTY OF ORANGE 37
opportunity for employees to purchase health insurance at a
reduced cost” because “access to the health benefit required
the employee to choose to pay his portion of the health
insurance premium” or forego the benefit. Maj. Op. at 21. But
it is undisputed that the Grant Benefit involves “a monthly
fixed-dollar stipend” based on the retirees’ years of service to
defray health care costs for those already enrolled in County-
offered health plans. As such, the Grant Benefit does not
merely confer an opportunity to purchase health insurance.
Moreover, in California Fire, the government’s modification
of the benefit was prospective; it did not affect those who had
previously purchased ARS credit. 6 Cal.5th at 970. The
opposite is true here. The restructuring of the Grant Benefit
reduced the stipend for retirees who had already paid their
funding contribution and earned the stipend through their
employment service. “Just as each month of public service
earn[ed] [the County’s] employee[s] a month’s cash
compensation, it also earn[ed] [employees] a slightly greater
[monthly stipend] upon retirement.” Id. at 986. The County’s
changes therefore apply retroactively—they reduce the
amount of the stipend that had been “literally[] earned by an
employees’ work.” Id. Accordingly, the employees’
opportunity to purchase ARS credit in California Fire is not
the same as the Grant Benefit earned by Retirees in this case.
III. CONCLUSION
I agree that the County is entitled to summary judgment
as to Retirees’ claims based on the MOUs adopted after the
Plan’s August 1, 1993, effective date because the terms of the
Plan were incorporated into those MOUs by operation of law.
However, as to claims based on the MOUs adopted before the
Plan’s effective date, I would reverse the district court’s grant
of summary judgment because there are material questions of
38 HARRIS V. COUNTY OF ORANGE
fact concerning whether the Grant Benefit provided in those
pre-Plan MOUs was vested. Therefore, I respectfully concur
in part and dissent in part.