Gaylan Harris v. County of Orange

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.