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Court News Ohio

City of Cincinnati Can Reduce Retirees’ Health Benefits, Appeals Court Rules

Retired employees of the city of Cincinnati who had their health benefits reduced are not entitled to have them reinstated by court order, the First District Court of Appeals ruled this week.

In a unanimous opinion that was not assigned to one specific judge (per curiam), a three-member panel upheld a decision by the Hamilton County Court of Common Pleas. The panel turned away all five of the legal arguments the retirees made in their appeal of a lawsuit that went to trial in 2011.

The Cincinnati Retirement System was established by city ordinance in 1931 and currently serves about 5,000 retirees, disability retirees, and survivors. Medical benefits were added to the system much later.

In 2009, facing financial difficulties the Cincinnati City Council enacted legislative changes to the health care benefits that added a $200 deductible and increased out-of-pocket caps on certain expenses effective January 1, 2010. A group of retirees affected by the changes filed a class-action lawsuit in the Hamilton County Court of Common Pleas. The trial court ruled in favor of the city.

That decision was upheld by the First District this week in an opinion that recognized that the city retirement office had led the retirees to believe that their health care benefits could not be altered, but nonetheless found that city was not legally obligated to maintain retirees’ health benefits at a specific level.

In dismissing one of the retirees’ arguments, the court wrote: “We are not unsympathetic to the plaintiffs-appellants’ position. The information about the so-called permanence of the retirees’ healthcare benefits was, in this record, shown to be repeatedly, clearly, and fully disseminated by city employees in the city’s retirement office. And the city’s leaders and city mangers— those same city leaders and managers who had worked with these retirees on a daily basis—did nothing to correct the plaintiffs-appellants’ misconception about the unalterability of their healthcare benefits.”

However, the three-judge panel found that these apparent promises by city employees did not obligate the City of Cincinnati to maintain the benefits because the legal doctrine cited by retirees is inapplicable against a political subdivision when it is engaged in government functions.

The court also dismissed the retirees’ other arguments, finding that the retirees did not have a vested right to the healthcare benefits, that the city did not violate a contractual obligation to the retirees, that the decision did not violate due process, that it was not an unlawful taking, and that it was not a breach of fiduciary duty by the city.

With regard to the last argument, the retirees had tried to establish that the city had intentionally underfunded the retirement system.

The court wrote: “the record does not support the plaintiffs-appellants’ contention that the city’s budget decisions amounted to a breach of a duty to the retirees.”

The three members of the panel were J. Howard Sundermann, Sylvia Sieve Hendon, and Patrick F. Fischer.

Gamel v. Cincinnati, 2012-Ohio-5153
Opinion: http://sc.ohio.gov/rod/docs/pdf/1/2012/2012-ohio-5152.pdf
Civil Appeal From: Hamilton County Court of Common Pleas
Date of Judgment Entry on Appeal: November 7, 2012

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