U.S. court backs state in Medford benefits case

Former city employees in Medford have no constitutional right to health insurance coverage if they retire early, despite an obligation under state law, a federal appeals court has ruled.

The 9th U.S. Circuit Court of Appeals said Wednesday that state law requiring Oregon cities to make health coverage available "to the extent possible" does not create a property interest in those benefits.

The 14th Amendment of the U.S. Constitution protects against taking property without due process of law, but the 9th Circuit said it did not apply in this case.

The federal ruling followed an Oregon Supreme Court decision last February that the city of Medford must provide health benefits to retired workers unless the city showed it was not possible.

Both rulings resulted from a lawsuit over whether the city was obligated to provide health insurance to cover the gap between early retirement and age 65.

Former City Attorney Ron Doyle, who resigned in 2005, and three other former employees, Robert Deuel, Benedict Miller and Charles Steinberg, sued the city claiming they were entitled to a health insurance plan to bridge that gap.

In February, an Oregon Supreme Court ruling determined the city of Medford is obligated to provide health benefits to its retirees, but only under certain circumstances.

On Sept. 4, 2009, Jackson County Circuit Court Judge Mark Schiveley wrote in an opinion that the former city employees should have been covered by a bridge health insurance plan until they reached age 65.

The case has bounced back and forth between state and federal courts since 2006, with the 9th Circuit at one point asking the Oregon Supreme Court to clarify state law on those benefits.

The Oregon Supreme Court said in its February ruling that a city is obligated to provide coverage under state law. However, the court also ruled the city could be excused depending on the circumstances, including whether Medford can afford the coverage.

The 9th Circuit noted that local governments have "functional discretion" over whether it will be possible to offer health insurance to retirees because they can decide "what services they offer, what contractual obligations they undertake and what taxes they levy on their citizens."

Doyle's lawsuit has created plenty of public controversy between the former city attorney and city officials. Doyle told the City Council during a public meeting that it should fire City Manager Mike Dyal or accept his resignation, alleging Dyal knowingly broke state law and a city resolution about retiree coverage. Doyle revealed portions of a conversation he had with Dyal in 2001, stating his client was the city and not Dyal, and that he was obligated to inform them of Dyal's actions.

The city of Medford filed a complaint against Doyle with the Oregon State Bar in 2006 after Doyle filed his class-action lawsuit against the city. The city's complaint asked the board to investigate Doyle's actions during his employment as city attorney, citing nine possible violations.

The state bar found Doyle had committed no ethical violations, but reprimanded him for being unprofessional during a council meeting. The bar stated Doyle violated attorney-client privilege when he spoke to the City Council about Dyal, and Doyle received a letter of admonition in 2007.

Dyal remains the city's manager.

The city is also dealing with a separate ongoing class-action suit that has similar legal arguments, filed in 2006 in U.S. District Court in Medford by Joseph Bova of the Public Works Department and Marlene Scudder of the Medford Police Department.

The courts are treating the two cases differently because Doyle was already retired when he filed the legal action, while Bova was still employed with the city.

Bova, who still works under contract with the city, is arguing that Medford is legally obligated to provide bridge health insurance to retired employees until they reach age 65.

Nearly 100 of the city's 105 management employees say they don't want any part of Bova's class-action suit, fearing it could raise health costs and extend benefits to retired workers, said Doug Detling, director of human resources. Detling based his findings on a petition sent out to the 105 employees in this category working for the city.

Detling said these employees worry that they will have to pay an additional $200 a month in insurance premiums if they can't block the suit.

In a resolution passed last week, the City Council agreed to contribute $20,000 to pay for attorney's fees to find a way for management staff to help scuttle their inclusion in Bova's class-action suit.

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