Christiansen v. County of Douglas ( 2014 )

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serious crime victims who do not have the attachment remedy.
Similarly, there is no substantial difference between the public
employees subject to the remedy and those who commit many
other serious crimes yet retain their privilege from attachment.
Accordingly, the Legislature’s preferential treatment of the
favored groups and exclusion of others that are similar in cir-
cumstance runs afoul of the Constitution’s prohibition against
special legislation.
Affirmed.
Wright and Cassel, JJ., not participating.
Sam Christiansen, an individual, appellee and
cross-appellant, v. County of Douglas, a political
subdivision of the State of Nebraska, et al.,
appellants and cross-appellees.
Rich McShane, on behalf of himself and all similarly
situated persons, appellee and cross-appellant, v.
County of Douglas, a political subdivision
of the State of Nebraska, et al.,
appellants and cross-appellees.
___ N.W.2d ___
Filed July 18, 2014. Nos. S-13-689, S-13-691.
1. Jurisdiction: Appeal and Error. The question of jurisdiction is a question of
law, which an appellate court resolves independently of the trial court.
2. Equity: Appeal and Error. Although in many contexts the traditional dis-
tinctions between law and equity have been abolished, whether an action is
one in equity or one at law controls in determining an appellate court’s scope
of review.
3. Actions: Pleadings. Whether a particular action is one at law or in equity is
determined by the essential character of a cause of action and the remedy or relief
it seeks.
4. Injunction: Equity. An action for injunction sounds in equity.
5. Declaratory Judgments. An action for declaratory judgment is sui generis;
whether such action is to be treated as one at law or one in equity is to be deter-
mined by the nature of the dispute.
6. Equity: Appeal and Error. On appeal from an equity action, an appellate
court decides factual questions de novo on the record and, as to questions of
both fact and law, is obligated to reach a conclusion independent of the trial
court’s determination.
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7. Evidence: Appeal and Error. When credible evidence is in conflict on mate-
rial issues of fact, an appellate court considers and may give weight to the fact
the trial court observed the witnesses and accepted one version of the facts
over another.
8. Wages: Words and Phrases. Deferred compensation is defined as compensation
which is earned in exchange for services rendered.
9. Statutes: Words and Phrases. The word “may” when used in a statute will be
given its ordinary, permissive, and discretionary meaning unless it would mani-
festly defeat the statutory objective.
10. ____: ____. As a general rule, the word “shall” in a statute is considered manda-
tory and is inconsistent with the idea of discretion.
11. Equity: Estoppel. The doctrine of equitable estoppel applies where, as a result
of conduct of a party upon which another person has in good faith relied to his
detriment, the acting party is absolutely precluded, both at law and in equity,
from asserting rights which might have otherwise existed.
12. Political Subdivisions: Equity: Estoppel. Although the State and its political
subdivisions can be equitably estopped, the doctrine of equitable estoppel will not
be invoked against a governmental entity except under compelling circumstances
where right and justice so demand; in such cases, the doctrine is to be applied
with caution and only for the purpose of preventing manifest injustice.
13. Estoppel. Equitable estoppel does not create a new right or give a cause of
action; rather, it serves to protect rights already acquired.
14. Contracts: Ratification: Words and Phrases. Ratification is the acceptance of a
previously unauthorized contract.
15. Ratification: Agents. Ratification of an agent’s unauthorized acts may be made
by overt action or inferred from silence and inaction.
16. Contracts: Counties: Administrative Law. A county enters into contracts by a
majority vote of its board of commissioners.
17. Principal and Agent: Contracts: Ratification. A principal may ratify what he
could have authorized.
18. Principal and Agent: Ratification. Essential to a valid and effective ratification
of an unauthorized act is the principal’s complete knowledge of the unauthorized
act and all matters related to it.
19. Appeal and Error. An appellate court is not obligated to engage in an analysis
that is not necessary to adjudicate the case and controversy before it.
Appeals from the District Court for Douglas County: Gary
B. R andall, Judge. Affirmed in part, and in part reversed and
remanded with direction.
Donald W. Kleine, Douglas County Attorney, and Bernard J.
Monbouquette for appellant.
Joel Bacon, Gary L. Young, Jefferson Downing, and Thomas
P. McCarty, of Keating, O’Gara, Nedved & Peter, P.C., L.L.O.,
for appellees.
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Heavican, C.J., Wright, Connolly, Stephan, McCormack,
Miller-Lerman, and Cassel, JJ.
Cassel, J.
INTRODUCTION
For many years, a county’s retired employees paid the
same amount as active employees paid for health insurance
coverage. After the county began to charge retirees a different
and greater premium, they sued the county. We must decide
whether the retirees had a contractual right to the previous
practice and, if not, whether equitable estoppel or ratification
affords them relief. We conclude that there was no contract
and that the alternative doctrines provide no basis for relief.
Thus, we affirm the district court’s summary judgment deny-
ing the contract claim and reverse the court’s decree granting
injunctive relief, damages, and attorney fees, on the alterna-
tive grounds.
BACKGROUND
The Douglas County Board of Commissioners (Board) is
the governing body of Douglas County, Nebraska (County).
Only the Board can enter into contractual agreements on the
County’s behalf.
Health Insurance
The Board has the responsibility and authority to determine
who participates in the Douglas County health insurance plan
(Plan) and the premiums to be paid by participants. Each
year, the Board votes on a resolution to set premium rates for
the Plan.
In December 1974, the Board passed a resolution which
allowed employees of the County who retired between the ages
of 55 and 65 to participate in the Plan until attaining age 65.
This resolution applied only to employees who were qualified
to participate in the County’s pension plan. The December
1974 resolution did not specify the amount of premiums to
be charged annually or promise that the amount would be the
same as that charged to active employees.
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Since that time, retired employees have paid the same pre-
miums to participate in the Plan as active employees. Each
year when the Board voted on a resolution to set premium
rates, the resolution did not draw any distinction between
active employees and retired employees; rather, the resolution
merely referred to “employees.”
Increased Charges
to R etirees
In 2008 and 2009, the County was in a fiscal crisis. The
County considered numerous alternatives to respond to rising
costs in health insurance. One alternative was requiring retired
employees to pay a different rate for health insurance than that
paid by active employees. Other options included eliminating
the “Rule of 75,” which is an early retirement option; raising
deductibles; raising copayments; establishing a wellness pro-
gram; and raising premiums for all employees.
In September 2009, the Board voted unanimously to adopt
resolution No. 596, which changed the amount retired employ-
ees paid toward premiums for the Plan in order to “ade-
quately address the significantly increased health care costs
impacting Douglas County’s health insurance budget, and the
Government and Accounting Standards Board . . . rules relat-
ing to the unfunded liability of employer health insurance for
retirees.” The resolution provided that the change would be
effective January 1, 2010.
Resolution No. 596 set a rate for participating retired
employees that was higher than the rate paid by active
employees. For retired employees who had employee-only
coverage, the change meant that they were required to pay
25 percent of the total premium, whereas an active employee
had to pay only 7 percent. As a result, in fiscal year 2010,
a retired employee’s premium was $1,001.04 more per year.
For retired employees who had dependents, the change
meant they were required to pay 35 percent of the total pre-
mium, compared to the 15 percent an active employee was
required to pay. Depending upon the number of dependents
a retired employee had, the change resulted in the retired
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e
­ mployee’s paying $2,040.36 to $2,750.04 more per year than
an active employee.
Litigation
Shortly before the change was to take effect, Sam
Christiansen, a retired employee of the County under age 65
who participated in the Plan, filed a complaint against the
County and each commissioner of the Board, seeking injunc-
tive and declaratory relief. Later, Rich McShane, also a retired
employee of the County under age 65 who participated in
the Plan, filed a similar complaint “on behalf of himself and
all similarly situated persons.” He identified the class as “all
retired employees who are participants in the [Plan], who have
retired prior to January 1, 2010, and who are not 65 years of
age prior to January 1, 2010.” We refer to the plaintiffs in these
actions collectively as “the retirees.”
The retirees sought an order temporarily and permanently
enjoining the County and each commissioner of the Board
from implementing resolution No. 596 and any change in the
manner of assessing health care premiums. They also sought
attorney fees as permitted by 42 U.S.C. § 1988(b) (2012), a
declaration of the rights of the retirees under the U.S. and
Nebraska Constitutions, and any monetary losses suffered.
The district court later consolidated the cases and certified
the class. The court stated that commonality was established
by the fact that all employees of the County received informa-
tion regarding premiums to be paid for participation in the Plan
postemployment. Thus, the court stated, the claims of all class
members would be based on the same legal theory of breach
of contract.
Partial Summary
Judgment
Upon the County’s motion, the district court granted a par-
tial summary judgment. The court determined that health insur-
ance did not qualify as deferred compensation. Accordingly,
the court ruled that the County’s practice of treating retired
employees the same as active employees for purposes of set-
ting health insurance premiums did not create contractual rights
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protected by the Contracts Clauses of the U.S. Constitution1
and the Nebraska Constitution.2
The district court denied the motion for summary judgment
as to whether applying the doctrines of ratification or estoppel
to the County’s practice gave rise to a contractual obligation.
Evidence at Trial
Kathy Goodman, the County’s pension and insurance coor-
dinator since 1997, had the obligation to inform employees
about their retirement benefits. She understood that employees
relied upon this information and that it was important for the
information to be accurate. She also understood that the Board
had the sole authority to determine the premiums for participa-
tion in the Plan each year.
Several commissioners acknowledged that employees were
not going to approach the commissioners in order to ascertain
the employees’ retirement benefits. Similarly, the commis-
sioners did not expect employees to look through old Board
resolutions. These commissioners testified that it was reason-
able for employees to rely on Goodman and on the documents
produced by Goodman and the human resources department.
Each year, after the Board set a rate structure for the
Plan, Goodman provided rate sheets to employees during open
enrollment. Before adoption of resolution No. 596, the rate
sheets did not draw a distinction between retired and active
employees; they merely listed the premiums for “employees.”
The retirees concluded this meant there was no difference
between active employees and retired employees with regard
to the cost of insurance.
Before an employee retired, Goodman provided the
employee with a letter regarding retirement benefits. Before
adoption of resolution No. 596, the letter stated that “[a]s an
early retiree you will continue to be eligible for our group
insurance plans until you become Medicare-eligible at age
65.” This language was phrased as a representation about
what would happen in the future until an employee turned age
1
U.S. Const. art. I, § 10.
2
Neb. Const. art. I, § 16.
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65. The letter stated that premiums were subject to change
with the upcoming year’s renewal increases, but it did not
state that retired employees would be treated differently than
active employees.
In 2000, Goodman began conducting seminars on retirement
benefits. She held the seminars at each of the County’s depart-
ments and offered an open session for all employees. Most
employees attended the seminars.
In connection with the seminars, Goodman created and
distributed a document entitled “Douglas County Employees’
Retirement Trust Fund” (Retirement Handout) to help
employees understand their future retirement benefits. The
Retirement Handout contained a list of frequently asked ques-
tions, including the following concerning health insurance:
“Would the medical insurance premium be the same?” and
“Upon retirement, are you still considered an employee as
far as benefits?” Goodman included the questions because
they were asked “about 90 percent of the time from employ-
ees.” The Retirement Handout contained the following answer
in part under the heading “Medical/Dental/Life Benefits as
a Retiree”:
You are still considered an employee of Douglas
County with regard to the benefit package. As an early
retiree, you can continue under the medical, dental and
life plan for yourself and your eligible dependents until
age sixty-five (65) when you become Medicare eligible.
You will have the benefits as an active employee for the
premiums, changes, and Open Enrollment.
Goodman obtained approval for the Retirement Handout.
According to Goodman, “[a]dministration” and the Douglas
County Pension Committee approved it. Goodman believed
that she presented a copy of the Retirement Handout to all of
the commissioners, because they are the “governing body” and
she “would present [to them] anything that is going to come
from my office that has any affect [sic] on any of the ben-
efit information.”
Goodman continued to make the Retirement Handout
available to employees after the seminars. The County also
made the Retirement Handout available upon request to all
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of its employees until January 1, 2010, when the language
was changed. The payroll coordinator at the Douglas County
Health Center distributed the Retirement Handout to approxi-
mately 400 employees who were eligible for retirement in
2000 and also continued to make it available for employees
at the health center who “needed to look at how the insurance
was figured.”
Three commissioners and the human resources director testi-
fied to the effect that the language was phrased as a promise
about how employees would be treated in the future, after they
retired. The retirees understood the language to mean that after
retirement and until age 65, they would pay the same premi-
ums as an active employee. But Goodman testified that she
was referring to the present time when making a representa-
tion about the share of premiums to be paid by a retiree. The
County’s chief administrative officer testified that she spoke
at two seminars in 2000 and that she told the attendees there
was no guarantee that benefits would be provided to them
upon retirement. No one asked her whether the premiums
would always be the same cost. Her understanding of writ-
ten representations about the share of premiums to be paid by
retired employees was that they spoke to the present time only,
because the premiums could change every year and there was
nothing in the union contracts or in the pay plan in regard to
postemployment benefits.
On approximately November 1, 2007, the Douglas County
Pension Committee posted a Web site containing a “Frequently
Asked Questions” page. The page included the following ques-
tion, which dealt with health insurance for retirees: “Would
the medical insurance premium be the same?” The answer
was: “Current eligible retirees can continue under the Douglas
County benefit plan at the same monthly rate as active employ-
ees until age 65. Payments are sent directly to the benefit office
by the first of each month.” This question was included because
it was asked 90 percent of the time by employees considering
retirement. Prior to being posted, each page of the proposed
Web site was reviewed by the pension committee. The pension
committee included a commissioner, the chief administrative
officer, the human resources director, and the County’s fiscal
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director. No one objected to the content. The Web site was
removed after the Board approved resolution No. 596.
Evidence was adduced regarding oral representations con-
cerning a retired employee’s participation in the Plan. During
employee orientations at the health center, employees often
asked about their ability to participate in the Plan postretire-
ment for the same premiums as active employees, and the
payroll coordinators told them they would be able to do so
until age 65. One class member testified that before retire-
ment, he began “crunching numbers” to see how feasible it
was for him to retire. He specifically asked Goodman about
insurance, and he testified that she confirmed he would “get
to continue paying for County health insurance as if [he] were
still working” until he reached age 65. Several other retirees
testified similarly.
Oral representations concerning the premiums to be paid by
a retired employee were also made during negotiations of labor
contracts. During the 1990’s, Christiansen, who was president
of one of the labor unions, was involved in negotiations with
the County. He testified that the negotiator for the County and
the chief administrative officer said that retired employees
would be able to continue to participate in the Plan and that
the premiums would be the same as that of an active employee.
While negotiating, Christiansen met with commissioners and
discussed health insurance. He testified:
They knew that the insurance would be the same, the
premium would be the same and that people were going
to retire earlier. They also understood that that was going
to be an added liability to the County and were con-
cerned, but they certainly were willing to continue with
the health benefits.
While health insurance and pensions were discussed during
negotiations, the terms were never set forth in the contracts,
but “[i]t was assured that those benefits would not change.”
Gary Kratina, a class member who also served on the union’s
negotiating team, heard at least two representatives of the
County make the same representation.
Testimony was adduced that representations about postre-
tirement participation in the Plan were used to recruit new
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employees. McShane was involved in recruiting new employ-
ees for the sheriff’s department, and based on materials he was
provided, he told prospects that upon retirement, they would be
able to participate in the Plan, and that retired employees were
paying the same rate as active employees. Kratina testified
that when he was hired in 1975, a commissioner at that time
told him employees “would have insurance, and the insurance
would be the same always as the employees up to age 65.”
Kratina heard multiple sheriffs and captains and the chief dep-
uty sheriff tell new employees, as a “recruiting element,” that
upon retirement they would be able to participate in the Plan
and “would have the same payments as you would as a regular
employee.” He testified that this was said “over and over” to
recruit new employees and was included in “written literature”
distributed to recruits.
The retirees viewed the representations as part of the
compensation package they were receiving in exchange for
the work they were performing. Several retirees testified it
was important to them to know that when they retired, they
would be treated the same as active employees with regard to
health insurance.
Commissioner Mike Boyle, who had been a commissioner
since 1997, characterized the Plan as a form of compensation
to County employees. He felt that the County had promised its
employees that they would be able to participate in the Plan
for the same premiums as active employees and that this prom-
ise was something that the Board renewed each year when it
voted on premiums. He testified that while a commissioner, he
had spoken to 25 to 30 active employees and told them that
upon retirement, they would be able to participate in the Plan
for the same premiums as an active employee. He testified that
he had seen the Retirement Handout “for quite a long time, for
years, I believe.”
Commissioner Kyle Hutchings testified that retired employ-
ees were allowed to participate in the Plan as a benefit of
employment and not as deferred compensation. He character-
ized it as a gratuity because he did not feel that the County
had a requirement to provide that insurance to retired employ-
ees. Hutchings was unaware of communications of any type
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that the County made to its employees telling them that upon
retirement, they would be able to continue in the Plan at the
same monthly premium rates as active employees. Although
a member of the pension committee, Hutchings testified that
he first became aware of the content of the “Frequently Asked
Questions” page on the pension committee Web site sometime
after adoption of resolution No. 596.
Commissioner Clare Duda, who had been a commissioner
for 20 years, testified that because retired employees are not
covered by any union contract, they could participate in the
Plan at the pleasure of the Board and at the rates set by
the Board. Duda recalled discussions with Christiansen and
other members of the union in the late 1990’s about the need
for health insurance coverage of younger retired employees.
Duda testified that the Board wanted to include them in the
Plan, but that the Board “would never have represented that
it would be at the same rate.” Prior to the vote on resolution
No. 596, Duda had never visited the pension committee Web
site and had not attended any seminars or read any document
prepared by Goodman concerning health insurance costs for
retired employees. He testified that he first saw the Retirement
Handout shortly before trial and that he was confused when he
testified in his deposition that he reviewed it annually.
Commissioner Mary Ann Borgeson testified that the Board
prepared a budget every year and talked about continuing to
provide the health insurance benefit to retired employees. She
recalled negotiations with Christiansen and his fellow union
members, but denied stating that retired employees would
always be able to participate in the Plan at the same cost as
active employees.
Commissioner Marc Kraft testified that at the time resolu-
tion No. 596 was adopted, he had no knowledge of any repre-
sentations made by Goodman to County employees about the
amount of health insurance premiums they would have to pay
in order to participate in the Plan during retirement. He never
read any handouts prepared by her that contained anything
dealing with health insurance for retired employees, nor did he
attend any seminars that she presented. He never read the pen-
sion committee Web site. Prior to September 2009, Kraft was
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unaware that health insurance was offered to retired employ-
ees. Similarly, Commissioner Pam Tusa testified that she “had
no understanding” about the ability of retired employees under
age 65 to participate in the Plan.
Commissioner Chris Rodgers testified that in 2009, he was
aware that retired employees under the age of 65 were allowed
to participate in the Plan but was not aware of any repre-
sentations made by the County’s representatives, including
Goodman, to employees about the amount of premiums they
would pay during retirement. He never attended a seminar
in which retirement benefits were discussed and never read
documentation of any type that mentioned health insurance for
retired employees. He did not read the pension committee Web
site while a commissioner.
As of January 1, 2010, there were 250 to 275 retirees par-
ticipating in the health insurance plan. At that time, between
1,850 and 2,300 active full-time employees were eligible for
the benefit. If the County spread costs equally across all par-
ticipants, the increase in premium costs for the retirees would
not have been as significant. Although the retirees knew that
insurance costs would increase incrementally every year, the
amounts were not “staggering.” McShane testified that subject-
ing the active employees to a substantial increase in premium
rates would cause an “uproar.” The payroll coordinator testified
that “the employees would be raising Cain” if the County had
attempted to raise active employees’ rates to the same level it
raised them for the retirees.
District Court Order
and Judgment
On March 8, 2013, the district court entered an order fol-
lowing trial. The court found that equitable estoppel barred the
County from denying the existence of a contractual obligation
to treat retired employees under age 65 the same as active
employees for the purpose of setting health insurance premi-
ums. The court also stated that “[a]lthough there is likely suffi-
cient evidence to find a contractual obligation arose via ratifi-
cation, the Court will only make the finding that the Board had
sufficient knowledge for ratification given all of the evidence
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supporting [the retirees’] equitable estoppel claim.” Having
found the existence of a contractual obligation, the court deter-
mined that resolution No. 596 violated the Contracts Clauses
of the U.S. and Nebraska Constitutions because it constituted
a substantial impairment on the contractual obligation. In find-
ing that the County’s actions were not a legitimate exercise of
sovereign powers, the court noted that there was no evidence
that the disadvantages to the retirees were offset by any new
comparable advantages and that other options were available
to achieve the same amount of cost savings.
The district court subsequently entered a permanent injunc-
tion, enjoining the County from treating the retirees differently
than active employees in determining the amount of premiums
to be paid for participation in the Plan. It ordered the County
to repay over $1 million in premiums. Because the court found
liability under 42 U.S.C. § 1983 (2012) for the violation of
the Contracts Clauses, it awarded $178,703.94 in attorney fees
pursuant to 42 U.S.C. § 1988.
The County timely appealed, and the retirees filed a cross-
appeal. Pursuant to statutory authority, we granted the County’s
petition to bypass the Nebraska Court of Appeals.3
ASSIGNMENTS OF ERROR
The County assigns that the district court erred in (1) exer-
cising jurisdiction even though the retirees failed to comply
with the county claims statute, (2) finding sufficient evidence
of equitable estoppel to create a binding legal contract con-
cerning the amount of health insurance premiums the retirees
would pay after retirement, (3) finding that the Board ratified
certain representations by County employees concerning the
amount of premiums retirees would pay in order to participate
in the Plan after retirement, (4) finding that various representa-
tions concerning health insurance premiums created a vested
contractual obligation of the County to its retirees, (5) finding
that resolution No. 596 violated the Contracts Clauses of the
U.S. and Nebraska Constitutions, (6) finding that the resolu-
tion impaired the County’s obligation to its retirees and was a
3
See Neb. Rev. Stat. § 24-1106(2) (Reissue 2008).
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violation of the Contracts Clauses, and (7) finding commonal-
ity and certifying a class.
On cross-appeal, the retirees assign that the district court
erred in (1) granting summary judgment to the County on the
retirees’ claim that a contractual obligation arose under Halpin
v. Nebraska State Patrolmen’s Retirement System,4 (2) failing
to find a contract arose under Halpin, and (3) failing to rule
that a contract arose via ratification.
STANDARD OF REVIEW
[1] The question of jurisdiction is a question of law, which
an appellate court resolves independently of the trial court.5
[2-5] Although in many contexts the traditional distinc-
tions between law and equity have been abolished, whether an
action is one in equity or one at law controls in determining an
appellate court’s scope of review.6 Whether a particular action
is one at law or in equity is determined by the essential char-
acter of a cause of action and the remedy or relief it seeks.7
The retirees claimed violations of the Contracts Clauses of the
U.S. and Nebraska Constitutions. They sought injunctive relief
and declaratory relief, as well as monetary damages incident
to such relief. An action for injunction sounds in equity.8 An
action for declaratory judgment is sui generis; whether such
action is to be treated as one at law or one in equity is to be
determined by the nature of the dispute.9
[6,7] Although the retirees’ actions had elements of both
an action in equity and one at law, we conclude that the pri-
mary objective was equitable relief, not monetary damages.
On appeal from an equity action, an appellate court decides
factual questions de novo on the record and, as to questions
4
Halpin v. Nebraska State Patrolmen’s Retirement System, 211 Neb. 892,
320 N.W.2d 910 (1982).
5
In re Estate of McKillip, 284 Neb. 367, 820 N.W.2d 868 (2012).
6
State ex rel. Wagner v. Amwest Surety Ins. Co., 274 Neb. 121, 738 N.W.2d
813 (2007).
7
Id.
8
Obermiller v. Baasch, 284 Neb. 542, 823 N.W.2d 162 (2012).
9
Vlach v. Vlach, 286 Neb. 141, 835 N.W.2d 72 (2013).
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of both fact and law, is obligated to reach a conclusion inde-
pendent of the trial court’s determination.10 But when credible
evidence is in conflict on material issues of fact, an appellate
court considers and may give weight to the fact the trial court
observed the witnesses and accepted one version of the facts
over another.11
ANALYSIS
Noncompliance With County
Claims Statute
We first address the County’s jurisdictional argument. The
County contends that the district court lacked jurisdiction over
this matter because the retirees filed their complaints with the
court and not with the county board as required by the county
claims statute.12 The county claims statute provides, in per-
tinent part, that “[a]ll claims against a county shall be filed
with the county clerk within ninety days from the time when
any materials or labor, which form the basis of the claims,
have been furnished or performed . . . .”13 The purported con-
tract at issue in this case concerns health insurance benefits.
Compliance with § 23-135 was not required. We conclude
that the district court properly exercised jurisdiction over
the matter.
Contract Under Halpin
Before addressing the County’s other assignments of error,
we consider the retirees’ claim on cross-appeal that the dis-
trict court erred in failing to find a contract arose under
Halpin14 and in granting summary judgment to the County
on that claim. The retirees argue that postretirement health
insurance is a form of deferred benefit subject to Halpin and
that the County’s long practice of providing the retirees with
10
See United States Cold Storage v. City of La Vista, 285 Neb. 579, 831
N.W.2d 23 (2013).
11
See id.
12
See Neb. Rev. Stat. § 23-135 (Reissue 2012).
13
§ 23-135(1).
14
Halpin, supra note 4.
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CHRISTIANSEN v. COUNTY OF DOUGLAS 579
Cite as 288 Neb. 564
health insurance benefits gave rise to a contractual obliga-
tion. The retirees assert that under Halpin, when an employee
relies upon an administrative pattern and practice regarding a
deferred benefit to the employee’s detriment and to the benefit
of the employer, the employee has expectations protected by
contract law.
Halpin involved a case decided under the Contracts Clause
of the U.S. Constitution. For 10 years, the computation of a
retiring patrolman’s final average monthly salary included a
lump-sum payment received for accumulated but unused vaca-
tion and sick leave. Effective January 4, 1979, that lump-sum
payment was excluded. A retired member of the patrol brought
a class action suit seeking a declaratory judgment that the final
average monthly salary of a retiring patrolman should include
the lump-sum payment. The trial court determined that the
lump-sum payment should not be included in the final average
monthly salary because the administrative policy of including
such payments did not create contractual rights. On appeal,
we reversed. We recognized that employee pensions were not
gratuities, but, rather, were deferred compensation for serv­
ices rendered. We stated that employees’ rights with regard
to their pensions were contractual in nature. Thus, we found
that the change in calculating pension annuities resulted in an
unconstitutional impairment of the retiring members’ contrac-
tual rights.
[8] More recently, we considered whether an employee had
a contractual right to a long-term disability policy for purposes
of the Contracts Clause. In Livingston v. Metropolitan Util.
Dist.,15 a disabled employee relied upon Halpin in arguing
that his contractual rights were interfered with when the por-
tion of long-term disability coverage that provided for lifetime
benefits was eliminated. We considered whether the long-term
disability policy was akin to a pension or deferred compensa-
tion such that the disabled employee had a contractual right
for purposes of the Contracts Clause. We reasoned that it did
not meet the definition of deferred compensation, i.e., it was
15
Livingston v. Metropolitan Util. Dist., 269 Neb. 301, 692 N.W.2d 475
(2005).
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580 288 NEBRASKA REPORTS
not “compensation which is earned in exchange for services
rendered.”16 We noted that enrollment in the plan was purely
voluntary and that the accrual of coverage depended upon the
payment of premiums and the occurrence of an injury rather
than on the rendering of services. And because the policy was
not a pension or deferred compensation, we concluded that the
employee had no contractual right in the policy for purposes of
the Contracts Clause.
In Livingston, we disapproved an earlier case to the extent
that it was inconsistent. We stated that Omer v. Tagg17 “appears
to hold, with little analysis, that health insurance is akin to
deferred compensation.”18 In Omer, a retired patrolman sued
after being told that he was ineligible to participate in the
State’s group insurance program. When hired, the patrolman
was told by the superintendent of the patrol or one of his des-
ignees that upon retirement, the patrolman would be allowed
to continue to participate in the group health insurance upon
payment of the premium. We stated in Omer that the State’s
position that benefits were a gratuity was rejected in Halpin
and that “promises made at the time of employment were for
compensation to be enjoyed at retirement and constituted a
contract enforceable against the State.”19 Because this reason-
ing, as it pertains to health insurance, was inconsistent with our
opinion in Livingston, it was disapproved.
We adhere to the reasoning expressed in Livingston. The
Plan in the instant case is not a pension or deferred compensa-
tion. An employee’s participation in the Plan was purely volun-
tary, and obtaining coverage under the Plan was not contingent
upon the rendering of services, but, rather, required the pay-
ment of premiums.
[9,10] Nebraska statutes differentiate between plans for
health insurance for county employees and plans for retirement.
A statute concerning employee benefit plans for a political
16
Id. at 307, 692 N.W.2d at 480.
17
Omer v. Tagg, 235 Neb. 527, 455 N.W.2d 815 (1990).
18
Livingston, supra note 15, 269 Neb. at 308, 692 N.W.2d at 481.
19
See Omer, supra note 17, 235 Neb. at 530, 455 N.W.2d at 817.
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CHRISTIANSEN v. COUNTY OF DOUGLAS 581
Cite as 288 Neb. 564
subdivision, such as a county, requires only that the political
subdivision “may” establish benefit plans for its employees
which will provide medical coverage.20 The word “may” when
used in a statute will be given its ordinary, permissive, and
discretionary meaning unless it would manifestly defeat the
statutory objective.21 On the other hand, a county’s retirement
system “shall be composed of all persons who are or were
employed by member counties and who maintain an account
balance with the retirement system,”22 and “[a]ll permanent
full-time employees shall begin participation in the retirement
system upon employment . . . .”23 As a general rule, the word
“shall” in a statute is considered mandatory and is inconsistent
with the idea of discretion.24 Members of the retirement system
are vested after 3 years of participation.25 There is no similar
statutory vesting in a health insurance plan.
Because the Plan is not a pension or deferred compensa-
tion, the retirees had no contractual right to participate in the
Plan for the same premiums paid by active employees. As
we concluded in Livingston, no analysis under the Contracts
Clause is necessary. The district court did not err in determin-
ing that the County’s practice of allowing retirees to partici-
pate in the Plan for the same premiums as active employees
did not create contractual rights protected by the Contracts
Clause and in granting summary judgment to the County on
that claim.
Equitable Estoppel
We next consider whether the district court erred in finding
that equitable estoppel prohibited the County from increasing
the premiums to be paid by the retirees above those paid by
active employees. The County argues that equitable estoppel
20
See Neb. Rev. Stat. § 13-1614 (Reissue 2012).
21
Conley v. Brazer, 278 Neb. 508, 772 N.W.2d 545 (2009).
22
See Neb. Rev. Stat. § 23-2306(1) (Supp. 2013).
23
§ 23-2306(2)(a).
24
Burns v. Nielsen, 273 Neb. 724, 732 N.W.2d 640 (2007).
25
See Neb. Rev. Stat. § 23-2319(3) (Supp. 2013).
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582 288 NEBRASKA REPORTS
cannot apply to create a contractual obligation to treat the retir-
ees the same as regular active employees. We agree.
[11,12] The doctrine of equitable estoppel applies where,
as a result of conduct of a party upon which another person
has in good faith relied to his detriment, the acting party is
absolutely precluded, both at law and in equity, from assert-
ing rights which might have otherwise existed.26 Although the
State and its political subdivisions can be equitably estopped,
the doctrine of equitable estoppel will not be invoked against
a governmental entity except under compelling circumstances
where right and justice so demand; in such cases, the doctrine
is to be applied with caution and only for the purpose of pre-
venting manifest injustice.27
[13] Equitable estoppel cannot create a contractual obliga-
tion where one does not otherwise exist. We have already con-
cluded that the retirees had no contractual right to participate
in the Plan at the same premiums as active employees. Here,
the district court used estoppel to create a vested obligation
on the part of the County. Equitable estoppel does not create a
new right or give a cause of action; rather, it serves to protect
rights already acquired.28 It may be urged for protection of a
right, but it can never create a right.29
Because the retirees had no contractual right to pay the
same premiums as active employees, we conclude that the
district court erred in using estoppel to create such a contrac-
tual obligation. Accordingly, we reverse the district court’s
judgment finding a contractual obligation based upon equi-
table estoppel.
Ratification
[14,15] We next consider whether a contractual obliga-
tion arose via ratification. Ratification is the acceptance of a
26
Burns, supra note 24.
27
See Berrington Corp. v. State, 277 Neb. 765, 765 N.W.2d 448 (2009).
28
Commerce Sav. Scottsbluff v. F.H. Schafer Elev., 231 Neb. 288, 436
N.W.2d 151 (1989).
29
See id.
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CHRISTIANSEN v. COUNTY OF DOUGLAS 583
Cite as 288 Neb. 564
previously unauthorized contract.30 Ratification of an agent’s
unauthorized acts may be made by overt action or inferred
from silence and inaction.31
Both parties fault the district court’s determination regard-
ing ratification. The court found that the Board had sufficient
knowledge to ratify the representations made, but the court
declined to specifically find a contractual obligation through
ratification. The retirees argue that the court erred in failing to
expressly rule that a contractual obligation arose through rati-
fication. The County, on the other hand, argues that the court
erred in concluding that the Board ratified previous representa-
tions concerning premiums to be paid by retirees.
[16,17] A county enters into contracts by a majority vote of
its board of commissioners.32 For purposes of this opinion, we
assume, without deciding, that the County had the power to
contract for health insurance for the retirees. A principal may
ratify what he could have authorized.33 Here, ratification of a
contractual obligation could only occur by the act of a majority
of the commissioners.
[18] But ratification by a majority of the Board is not sup-
ported by the evidence. Essential to a valid and effective
ratification of an unauthorized act is the principal’s complete
knowledge of the unauthorized act and all matters related to
it.34 Thus, in order for there to have been a ratification of the
representations concerning the premiums to be paid by retired
employees participating in the Plan, a majority of the com-
missioners would have needed to know of them. But only one
commissioner testified that he was aware of representations
that retired employees would be treated as active employees
for purposes of health insurance until age 65. A majority of
the commissioners had not read the Retirement Handout and,
30
Brook Valley Ltd. Part. v. Mutual of Omaha Bank, 285 Neb. 157, 825
N.W.2d 779 (2013).
31
Id.
32
See Neb. Rev. Stat. §§ 23-103 and 23-104(6) (Reissue 2012).
33
Millett v. Miller, 135 Neb. 123, 280 N.W. 442 (1938).
34
Western Fertilizer v. BRG, 228 Neb. 776, 424 N.W.2d 588 (1988).
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584 288 NEBRASKA REPORTS
thus, did not know of the representation contained therein. In
a recent case involving a limited partnership, we stated that
even if a majority of the limited partners had ratified the acts,
there could be no ratification where the partnership agreements
required consent of all of the limited partners.35 Similarly,
the Board could not create a contractual obligation through
ratification when a majority of the commissioners did not even
know of the representations.
The district court imputed knowledge to the commissioners.
The court recognized that four commissioners testified they
had not read Goodman’s handouts or attended the retirement
seminars, but the court stated that such inaction did not insu-
late the commissioners from knowledge. The court relied on
Baxter v. National Mtg. Loan Co.,36 where we stated:
“[T]he principal cannot be justified in wilfully closing his
eyes to knowledge. He cannot remain ignorant where he
can do so only through intentional obtuseness. He can-
not refuse to follow leads, where his failure to do so can
only be explained upon the theory that he preferred not
to know what an investigation would have disclosed. He
cannot shut his eyes where he knows that irregularities
have occurred. In such a case, he will either be charged
with knowledge, or with a voluntary ratification with all
the knowledge which he cared to have.”
We decline to impute knowledge of the representations
to the commissioners under the facts of this case. Evidence
established that the commissioners receive many documents to
review and that it is up to each commissioner to decide what
to read in performing his or her duties. While information was
available to them that employees were being informed they
would pay the same premiums as active employees to partici-
pate in the Plan postemployment, there was no evidence that
the commissioners knew irregularities were occurring or that
they intentionally chose not to learn of the representations.
Because the commissioners had no actual knowledge of these
35
See Brook Valley Ltd. Part., supra note 30.
36
Baxter v. National Mtg. Loan Co., 128 Neb. 537, 558-59, 259 N.W. 630,
640 (1935).
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CHRISTIANSEN v. COUNTY OF DOUGLAS 585
Cite as 288 Neb. 564
representations before they passed the resolution at issue, the
district court erred in finding that the Board had sufficient
knowledge to ratify the representations. We conclude that no
contractual obligation arose via ratification. Although the court
imputed knowledge to the Board, it appears to have declined
to grant relief on the basis of ratification. Understanding the
court’s order to deny relief on that ground, we affirm its judg-
ment on that issue.
R emaining Assignments
of Error
[19] We have determined that the retirees did not have a con-
tractual right in the Plan for purposes of the Contracts Clauses
and that no contractual obligations arose under the theories of
equitable estoppel or ratification. Because the district court’s
judgment must be reversed, we do not consider the County’s
other assignments of error. An appellate court is not obligated
to engage in an analysis that is not necessary to adjudicate the
case and controversy before it.37
CONCLUSION
We conclude that the district court properly rejected the
retirees’ claim that a contractual obligation arose under Halpin
and that the court did not err in declining to grant relief on
the basis of ratification. We reverse the court’s determination
that equitable estoppel created a contractual obligation, and
we remand the cause with direction to enter judgment for the
County on the retirees’ claims.
Affirmed in part, and in part reversed
and remanded with direction.
37
Hall v. County of Lancaster, 287 Neb. 969, 846 N.W.2d 107 (2014).