Grand Junction employees 'out of luck' in challenging city's retiree health plan, appeals court rules

The immunity granted to government entities under state law bars a class action lawsuit against Grand Junction for the city's alleged malfeasance in administering a health insurance program for retired employees, Colorado's second-highest court ruled on Thursday.

A trial judge previously found no evidence the city denied health benefits to any eligible retiree, but also determined the Colorado Governmental Immunity Act foreclosed the claims of unjust enrichment and breach of contract. The Grand Junction Peace Officers' Association had attempted to sue on behalf of 1,300 city employees who contributed to the retiree health plan since its inception in 1998.

The goal of the program was to provide health insurance for employees who retired before they reached Medicare eligibility, were at least 50 years old and had worked for at least 15 years for Grand Junction. For a time, municipal workers who enrolled with the city's health insurance were required to contribute a portion of their paychecks to the plan.

Over time, the city realized the program was unsustainable. It twice transferred money into the plan and made adjustments to benefits and eligibility. Eventually, the police union sued on behalf of all affected employees, accusing Grand Junction of fraudulent misrepresentation and theft.

In a series of orders, Mesa County District Court Judge Valerie Robison determined the Colorado Governmental Immunity Act blocked many of the plaintiffs' claims over the retiree health plan. She added it was evident that the program was never set up to provide defined benefits to its contributors.

"The evidence presented by the City clearly established that there has never been an eligible retiring employee who was denied premium payments under the RHP," Robison wrote. "In fact, the undisputed evidence showed that, rather than being enriched by Plaintiffs' member's biweekly contributions to the RHP, the City has expended money and resources on the RHP."

The union appealed to the Court of Appeals, arguing the city represented for years that it would provide a benefit to employees who paid into the program, and now it had changed the terms.

"Under the facts of this case, does the plaintiff have any legal recourse?" asked Judge Lino S. Linpinsky de Orlov during oral arguments last month.

"No," responded attorney Ashley Hernandez-Schlagel for the city.

"They're just out of luck?" Lipinsky continued.

"I think that the CGIA is deliberate in these types of claims, and the legislature has made it clear about what kind of liability the city and city employees can have," said Hernandez-Schlagel.

In its Aug. 8 opinion, the three-judge panel for the Court of Appeals agreed with Robison that the union's allegations were — or could be viewed as — liability claims prohibited by governmental immunity, or were otherwise time-barred.

The panel also addressed for the first time whether Robison incorrectly proceeded to analyze governmental immunity before she determined whether to formally approve the lawsuit's class action status. The panel offered no opinion about whether approving the class first would have been proper, but it agreed Robison acted reasonably by holding off until she ruled on the immunity issue.

"A court that devoted time and effort to determining the appropriateness of class certification, only to conclude later in the proceedings that it lacked subject matter jurisdiction because the plaintiff's claims were barred under the CGIA," explained Lipinsky, "would have expended judicial resources — and the parties would also have expended their resources — unnecessarily."

The panel did, however, direct Robison to clarify whether she dismissed the union's claim solely requesting an accounting of the contributions paid and benefits due to city employees.

The case is Grand Junction Peace Officers' Association v. City of Grand Junction et al.