City of South Lake Tahoe Retirees Association v. City of South Lake Tahoe

MOTION for TEMPORARY RESTRAINING ORDER

E.D. Cal.May 22, 2017

R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S NOTICE OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST; APPLICATION FOR EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 1 Joseph W. Rose, State Bar No. 232261 Mehran Tahoori, State Bar No. 283313 ROSE LAW, APC 11335 Gold Express Drive, Suite 135 Gold River, California 95670 Telephone: (916) 273-1260 Facsimile: (916) 290-0148 Email: legalteam@joeroselaw.com Attorneys for Plaintiff CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION, Plaintiff, v. CITY OF SOUTH LAKE TAHOE, Defendant. Case No.: Case No.: 2:15-CV-02502-KJM-CKD PLAINTIFF CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION’S NOTICE OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST; APPLICATION FOR EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST [Fed. Rules Civ. Proc 65(b)] Date: TBD Time: TBD Courtroom: 3 Judge: Hon. Kimberly J. Mueller Complaint Filed: December 1, 2015 Trial Date: May 14, 2018 TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that at a time to be determined by the Court in Courtroom 3 of the above-entitled court, at 501 I Street, 15th Floor, Sacramento, California, 95814, Plaintiff City of South Lake Tahoe Retirees Association (CSTLRA), will and hereby does move this Court ex parte for a Temporary Restraining Order and Order to Show Cause Re: Preliminary Injunction against Defendant City of South Lake Tahoe and its public officers: 1. Enjoining and restraining the City and its public officers from spending down the City’s approximate $6.6 million Retiree Health Savings Plan Trust Fund to fund its “Optional Opt-Out Election of Post-Employment Medical Plan;” and Case 2:15-cv-02502-KJM-CKD Document 42 Filed 05/22/17 Page 1 of 5 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S NOTICE OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST; APPLICATION FOR EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 2 2. Enjoining and restraining the City and its public officers from spending down the balance of the City’s Retiree Health Savings Plan Trust Fund to pay the California Public Employees Retirement System (CalPERS) for active employee pension costs; and 3. Imposing a constructive trust upon the City’s Retiree Health Savings Plan Trust Fund restricting its use to payments for medical benefits under the City’s plan for the benefit of all eligible retirees (rather than fund settlement payments on a first-come, first-served basis) during the pendency of this action. CSLTRA respectfully requests the Court issue an Order to Show Cause why a preliminary injunction should not be granted directing the City of South Lake Tahoe to appear before this Court, on a date and time specified by the Court, to show cause why the City and its public officers should not, during the pendency of this action, be enjoined and restrained as described above. The grounds for this ex parte Application are summarized below and explained in the accompanying memorandum of points and authorities. SUMMARY OF GROUNDS FOR APPLICATION CSLTRA has sued challenging certain changes by the City of South Lake Tahoe to its retired employee health benefit program, and seeking to restore the status quo as of December 31, 2014. As the parties await the Court’s ruling on the City’s motion to dismiss CSLTRA’s First Amended Complaint, the City recently announced a strategy to deplete its entire $6.6 million Retiree Health Savings Plan Trust Fund, also sometimes called the Other Post-Employment Benefits (OPEB) Trust Fund, which has been designated for payment of medical benefits for retirees. Through this action, the City seeks to use Trust Funds to extract waivers, settlements, and relinquishments of rights from certain retirees “on a first-come, first-served basis,” deliberately and seriously harming the City’s prospective ability to honor its promises of vested benefits to retirees. This is a thinly veiled effort to render the judgment in this action ineffectual. Alternatively, the City stated on May 16, 2017, an intention to use these Trust Funds to pay CalPERS pension costs unrelated to retiree health benefits. In 2008, the City established a segregated fiduciary trust known as the Retiree Health Savings Plan Trust Fund or the Other Post-Employment Benefits (OPEB) Trust Fund. Since 2008, the City has added funds from its general fund to the Trust Fund based upon actuarial valuations of the City’s annual Case 2:15-cv-02502-KJM-CKD Document 42 Filed 05/22/17 Page 2 of 5 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S NOTICE OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST; APPLICATION FOR EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 3 required contribution for retiree health benefits. The Trust Fund’s purpose is restricted to paying for ongoing retiree medical benefits under the City’s medical plan. As of February 2017, the City publicly announced its fund balance for the OPEB Trust Fund was approximately $6.6 million. At a City Council meeting on February 7, 2017, the City Manager recommended the City Council adopt a resolution to spend down and “clean out” the entire balance of the Trust Fund by offering to certain retirees an irrevocable election to receive a one-time cash payment, “opting out” of the City’s medical plan. To receive the one-time “opt-out” payment, retirees must sign and submit to the City by 5:00 p.m. on May 31, 2017, a form “waiving any future rights to City medical coverage and City contributions to medical coverage … and [agreeing] to settle, release, discharge and waive any and all claims against the City related to retiree medical coverage from the City.” If the City has insufficient funds in the OPEB Trust Fund to make all necessary one-time cash payments under submitted irrevocable “opt-out” elections, the elections will be made on a “on a first-come, first-served basis, and the City may elect to terminate the option at any time and at its sole discretion.” The City Council adopted this resolution. At a City Council meeting on May 16, 2017, the City’s management staff announced any funds remaining in the OPEB Trust Fund after purchasing irrevocable opt-outs, waivers, settlement, and releases, would likely be paid to CalPERS to be applied to the City’s pension costs to assure the balance of the Trust Fund is brought to zero. CSLTRA and its members will suffer immediate and irreparable injury, loss, or damage if the City is not immediately enjoined and restrained during the pendency of this action from spending down the entire balance of the OPEB Trust Fund to purchase irrevocable opt-outs, waivers, settlements, and releases from some retirees on a first-come, first-serve basis. NOTIFICATION City Council meeting, CSLTRA through its undersigned counsel provided the City with notice of its intention to seek a Temporary Restraining Order and Order to Show Cause Re: Preliminary Injunction as set forth in the Declaration of Joseph W. Rose, filed to support this Application. Notice of CSLTRA’s ex parte Application was provided to the City on May 17, 2017, by email, fax, and letter. /// Case 2:15-cv-02502-KJM-CKD Document 42 Filed 05/22/17 Page 3 of 5 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S NOTICE OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST; APPLICATION FOR EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 4 Notice was provided to: Nira Feeley Doherty, Esq. Burke, Williams & Sorensen, LLP 1901 Harrison Street, Suite 900 Oakland, CA 94612-3597 Tel.: (510) 273-8780 Fax: (510) 839-9104 ndoherty@bwslaw.com Tom Watson, Esq. City Attorney City of South Lake Tahoe 1901 Airport Rd., Ste. 300 South Lake Tahoe, CA 96150 Tel. (530) 542-6046 Fax: (530) 542-6173 twatson@cityofslt.us This ex parte Application is based on this Notice of Application and Application, the accompanying Memorandum of Points and Authorities, the Declaration of Joseph W. Rose, and the Request for Judicial Notice, filed concurrently, all other papers and records on file in this action, and such further evidence and argument as requested by or presented during the hearing on this Application. Dated: May 22, 2017 ROSE LAW, A PROF. CORP. By: /s/ Joseph W. Rose Joseph W. Rose Attorneys for Plaintiff CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION Case 2:15-cv-02502-KJM-CKD Document 42 Filed 05/22/17 Page 4 of 5 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S NOTICE OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST; APPLICATION FOR EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST I PROOF OF SERVICE I, the undersigned, am employed in the County of Sacramento, State of California. I am over the age of 18 and not a party to the within action; am employed with the law offices of Rose Law, A Professional Corporation, and my business address is 11335 Gold Express Drive, Suite 135, Gold River, CA 95670. On May 22, 2017, I served the foregoing document entitled PLAINTIFF’S NOTICE OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER, PRELIMINARY INJUNCTION, AND CONSTRUCTIVE TRUST; APPLICATION FOR EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER, PRELIMINARY INJUNCTION, AND CONSTRUCTIVE TRUST on all the appearing and/or interested parties in this action by placing the original a true copy thereof enclosed in sealed envelope(s) addressed as follows: Nira Feeley Doherty, Esq. Burke, Williams & Sorensen, LLP 1901 Harrison Street, Suite 900 Oakland, CA 94612-3597 Tel.: (510) 273-8780 Fax: (510) 839-9104 ndoherty@bwslaw.com Tom Watson, Esq. City Attorney City of South Lake Tahoe 1901 Airport Rd., Ste. 300 South Lake Tahoe, CA 96150 Tel. (530) 542-6046 Fax: (530) 542-6173 twatson@cityofslt.us [by MAIL] I am readily familiar with the firm's practice of collection and processing correspondence for mailing. Under that practice it would be deposited with the U.S. Postal Service on that same day with postage thereon fully prepaid at Sacramento, California in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postage cancellation date or postage meter date is more than one day after date of deposit for mailing this affidavit.  [by ELECTRONIC SUBMISSION] - I served the above listed document(s) described via the United States District Court’s Electronic Filing Program on the designated recipients via electronic transmission through the CM/ECF system on the Court’s website. The Court’s CM/ECF system will generate a Notice of Electronic Filing (NEF) to the filing party, the assigned judge, and any registered users in the case. The NEF will constitute service of the document(s). Registration as a CM/ECF user constitutes consent to electronic service through the court’s transmission facilities.  [by EMAIL] I served the above listed document(s) via email in accordance with the firm's practice to the email addresses listed above.  FEDERAL - I declare that I am employed in the office of a member of the bar of this Court at whose direction the service was made. Executed May 22, 2017, at Gold River, California. Monique Buelna By: /s Monique Buelna Printed Name Signature Case 2:15-cv-02502-KJM-CKD Document 42 Filed 05/22/17 Page 5 of 5 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST i Joseph W. Rose, State Bar No. 232261 Mehran Tahoori, State Bar No. 283313 ROSE LAW, APC 11335 Gold Express Drive, Suite 135 Gold River, California 95670 Telephone: (916) 273-1260 Facsimile: (916) 290-0148 Email: legalteam@joeroselaw.com Attorneys for Plaintiff CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION, Plaintiff, v. CITY OF SOUTH LAKE TAHOE, Defendant. Case No.: Case No.: 2:15-CV-02502-KJM-CKD PLAINTIFF CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST [Fed. Rules Civ. Proc 65(b)] Date: TBD Time: TBD Courtroom: 3 Judge: Hon. Kimberly J. Mueller Complaint Filed: December 1, 2015 Trial Date: May 14, 2018 /// /// /// Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 1 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST ii TABLE OF CONTENTS I. INTRODUCTION .................................................................................................................. 1 II. SUMMARY OF RELEVANT FACTS .................................................................................. 2 A. The City intends to “clean out” its $6.6 million Retiree Health Savings Plan Trust Fund to purchase irrevocable “opt-outs,” waivers, releases, and settlements from some retirees on a “first-come, first-served basis” ................................................................... 3 B. Historical summary of vested retiree health benefits ........................................................4 C. There are three groups of retirees with vested retiree health benefits ...............................4 D. Until January 1, 2015, there was only one City medical plan for everyone ......................6 E. The City determined to eliminate the “problem” of retirees with vested benefits receiving the same medical plan as actives to pay for new raises and benefits ............... 7 F. The City Council and City staff apparently knew the medical plan reductions would work a financial hardship on current retirees ................................................................. 11 G. The City charges retirees more than actives for access to better “optional” plans ..........11 III. LEGAL AUTHORITIES AND ARGUMENT .................................................................... 12 A. The City Council and City officials owe a fiduciary duty not to waste Retiree Health Savings Plan Trust Fund money paying out individual settlements ............................... 13 B. “Cleaning out” the Retiree Health Savings Plant Trust Fund by making “first come, first-served” settlement payments is a form of voluntary disablement ....................... 14 C. Using Retiree Health Savings Plan Trust Fund money to make settlement payments to retirees who are first in time to relinquish their rights is an unconstitutional taking ..... 15 D. If not enjoined during the pendency of this action, the City’s latest strategy will cause irreparable harm to CSLTRA and its members ............................................................. 16 E. The balance of the hardships tips sharply in favor of CSLTRA .....................................16 F. Imposition of a constructive trust is a proper provisional remedy ..................................16 IV. CONCLUSION .....................................................................................................................17 Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 2 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST iii TABLE OF AUTHORITIES CASES Alliance for the Wild Rockies v. Cottrell 632 F.3d 1127 (9th Cir.2011) ................................................................................................... 12 Am. Trucking Assns. V. City of Los Angeles 559 F.3d 1046 (9th Cir. 2009) .................................................................................................. 12 White Mountain Apache Tribe v. State of Arizona 649 F.2d 1274 (9th Cir. 1981) .................................................................................................. 12 Chicago, B. & Q.R. Co. v. Chicago (1897) 166 U.S. 226 166 U.S. 226 (1897) ................................................................................................................. 15 City of Oakland v. Oakland Police and Fire Retirement System 224 Cal.App.4th 210 (2014) (mod. on denial of reh’g 3/26/2016) ..................................... 13-14 City of Pleasanton v. Board of Administration 211 Cal.App.4th 522 (2012) ..................................................................................................... 13 Duarte v. California State Teachers' Retirement System 232 Cal.App.4th 370 (2014) ..................................................................................................... 13 Eastern Enterprises v. Apfel 524 U.S. 498 (1998) ................................................................................................................. 15 Estrada v. Garcia 132 Cal.App.2d 545 (1955) ...................................................................................................... 16 Harris Trust & Sav. Bank v. Salomon Smith Barney, Inc. 530 U.S. 238 (2000) ................................................................................................................. 16 Heckman v Ahmanson 168 Cal. App.3d 119 (1985) ..................................................................................................... 17 Loretto v. Teleprompter Manhattan CATV Corp. 458 U.S. 419 (1982) ................................................................................................................. 15 S.E.C. v. Vassallo 2012 WL 1868559 (E.D. Cal., May 22, 2012, No. CIV. S-09-0665 LKK/D) ........................ 16 United States v. Security Industrial Bank 459 U.S. 70 (1982) ................................................................................................................... 15 Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 3 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST iv TABLE OF AUTHORITIES (CONT’D) CONSTITUTIONAL PROVISIONS Constitution of the State of California Art XVI, § 17 ........................................................................................................... 13-14 RULES OF COURT Federal Rules of Civil Procedure 65(a) .............................................................................................................................. 17 65(b) ..................................................................................................................... passim. Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 4 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 1 MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION Plaintiff City of South Lake Tahoe Retirees Association (CSLTRA) is a non-profit mutual benefit corporation comprising and representing approximately 100 retirees and their beneficiaries across all departments and bargaining units (Decl. Wm. Gieg, ¶¶ 1-8). This action commenced with CSLTRA’s June 29, 2015, filing of a Government Tort Claim with the City, which the City denied on July 29, 2015, followed by filing a complaint in this Court on December 2, 2015. (Doc. 1; Decl. Wm. Gieg, ¶ 1.) CSLTRA’s First Amended Complaint (FAC) was filed on August 5, 2016. (Doc 29.) CSLTRA’s FAC challenges the City’s January 1, 2015, change to the retirees’ health plan as a breach of contract (FAC, ¶¶ 36-37), a breach of promise (Id., ¶¶ 38-40), a violation of the retirees’ federal and State constitutional due process rights (Id., ¶¶ 41-47), and an unconstitutional impairment of contract (Id., ¶¶ 48-51). The FAC seeks equitable remedies to restore the status quo as of December 31, 2014, plus attorneys’ fees and costs (Id., p. 12). The FAC seeks no money damages. (Id., ¶ 35.) As the parties await the Court’s ruling on the City’s motion to dismiss the FAC, heard December 2, 2016, the City has devised a new tack to strip retirees of their vested retiree health benefits by simultaneously claiming a financial inability to pay for while deliberately planning to drain the trust fund established exclusively to pay for those benefits. The City recently announced it will exhaust its entire $6.6 million Retiree Health Savings Plan Trust Fund down to zero after May 31, 2017, to pay some retirees “on a first-come, first-served basis” up to $100,000 each to irrevocably waive and forever “settle” and “release” their right to future retiree health benefits. The City may also use Trust Fund money to pay CalPERS for unrelated pension costs. If allowed, there will be no money remaining in the Trust Fund to pay for health benefits for remaining retirees who either don’t irrevocably waive, settle, and release their right to retiree health benefits, or submit their waiver and release forms too late in time before City officials draw the Trust Fund balance down to zero. Willfully depleting the entire corpus of the Retiree Health Savings Plan Trust Fund to pay some retirees who are first-in-line individual settlement payments of up to $100,000 each is a breach by City officials of their fiduciary duties to all the beneficiaries of the Trust Fund. Remaining funds are likely to Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 5 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 2 be withdrawn from the Trust Fund and instead paid to CalPERS. Relevant to CSLTRA’s breach of contract and breach of promise theories, this is also a form of voluntary disablement by the City because it would worsen the City’s unfunded actuarial accrued liability for retiree healthcare, intentionally and seriously frustrating the City’s financial ability to meet these future obligations. Regarding CSLTRA’s constitutional arguments, this amounts to an impermissible government taking of property. If not enjoined, the City’s latest strategy will cause irreparable harm to CSLTRA and its members. CSLTRA now moves ex parte for a Temporary Restraining Order (Fed. Rule Civ. Proc. 65(b)) and Order to Show Cause Re: Preliminary Injunction against Defendant City of South Lake Tahoe and its public officers: 1. Enjoining and restraining the City and its public officers from spending down the City’s approximate $6.6 million Retiree Health Savings Plan Trust Fund to fund its “Optional Opt-Out Election of Post-Employment Medical Plan;” and 2. Enjoining and restraining the City and its public officers from spending down the balance of the City’s Retiree Health Savings Plan Trust Fund to pay the California Public Employees Retirement System (CalPERS) for active employee pension costs; and 3. Imposing a constructive trust upon the City’s Retiree Health Savings Plan Trust Fund restricting its use to payments for medical benefits under the City’s plan for the benefit of all eligible retirees (rather than fund settlement payments on a first-come, first-served basis) during the pendency of this action. CSLTRA respectfully requests the Court issue an Order to Show Cause why a preliminary injunction should not be granted directing the City of South Lake Tahoe to appear before this Court, on a date and time specified by the Court, to show cause why the City and its public officers should not, during the pendency of this action, be enjoined and restrained as described above. II. SUMMARY OF RELEVANT FACTS In 2008, the City established a segregated fiduciary trust fund known as the Retiree Health Savings Plan Trust Fund, also sometimes called the Other Post-Employment Benefits (OPEB) Trust Fund. Since 2008, the City administered the Trust Fund and made contributions based upon actuarial valuations of the City’s annual required contribution to meet its OPEB liabilities. (Decl. Rose, ¶ 15, Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 6 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 3 Ex. 5, ¶ 13; Ex. 3, p. 100.) Establishment, funding, and administration of the Trust Fund is conducted under Government Accounting Standards Board Statement 45 (GASB 45). With respect to administration of such Trust Funds, GASB imposes fiduciary duties on fund administrators, and requires trust funds be held in trust for the exclusive benefit of plan members and their beneficiaries. (Decl. Rose, ¶ 15, Ex. 5, p. 1, ¶ 5 to p. 2, . ¶ 1.) In its 2016 Comprehensive Annual Financial Report (CAFR), the City reported a Trust Fund balance of $6,377,888 as of September 30, 2016. (Decl. Rose, ¶ 13, Ex. 3, p. 50.) On February 7, 2017, City Manager Kerry stated the Trust Fund has grown to approximately $6.6 million since publication of the 2016 CAFR. The City describes the Trust Fund in its 2016 CAFR as being a “fiduciary fund” subject to separate accounting from the government-wide financial statements because of its one special purpose: “This fund accounts for accumulation of resources to be used for retirement healthcare benefits.” (Decl. Rose, ¶ 13, Ex. 3, p. 49.) The Trust Fund is not supposed to be used as consideration paid to individual “opt-outs,” waivers, and settlements, releases, or withdrawn to pay other obligations such as CalPERS pension costs. (Id.) The City made annual required contributions to the Trust Fund of $1,538,981 in year 2014, $1,344,035 in year 2015, and $1,392,902 in year 2016, according to the 2016 CAFR. (Decl. Rose, ¶ 13, Ex. 3, p. 100.) A. The City intends to “clean out” its $6.6 million Retiree Health Savings Plan Trust Fund to purchase irrevocable “opt-outs,” waivers, releases, and settlements from some retirees on a “first-come, first-served basis” At a City Council meeting on February 7, 2017, City Manager Nancy Kerry recommended the City Council adopt a resolution to spend down and “clean out” the entire balance of the Trust Fund by offering to certain retirees an irrevocable election to receive a one-time cash payment “opting out” of retiree health benefits. (Req. Jud. Not., ¶ 1; video time stamp 2:03:51.) City Manager Kerry explained the Trust Fund is distinct from the City’s general fund. (Id.) City Manager Kerry explicitly mentioned this pending lawsuit during her presentation to the City Council justifying her recommendation for adoption of the resolution. (Req. Jud. Not., ¶ 1; video time stamp 1:59:57) During her presentation, City Manager Kerry lamented health benefits plans for active employees cannot be improved because doing so would require a like increase to retiree health benefits, and the annual required contributions to the Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 7 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 4 Trust Fund. (Req. Jud. Not., ¶ 1; video time stamp 2:00:40.) To receive these one-time “opt-out” settlement payments, retirees must sign and submit to the City by 5:00 p.m. on May 31, 2017, a form “waiving any future rights to City medical coverage and City contributions to medical coverage … and [agreeing] to settle, release, discharge and waive any and all claims against the City related to retiree medical coverage from the City.” (Decl. Rose, ¶ 8, Ex. 2, p. 13.) If the City has insufficient funds in the Trust Fund to make all necessary one-time cash payments under submitted irrevocable “opt-out” waivers, the waiver payments will be made on a “on a first-come, first- served basis, and the City may elect to terminate the option at any time and at its sole discretion.” (Decl. Rose, ¶ 8, Exhibit 2, p. 13.) The City Council adopted this resolution. (Req. Jud. Not., ) The City intends to begin “cleaning out” its Trust Fund by making settlement payments to retirees “on a first-come, first-served basis” after the May 31, 2017, deadline for retirees to submit the waiver forms. At a City Council meeting on May 16, 2017, the City’s management staff announced any funds remaining in the Trust Fund after purchasing irrevocable opt-outs, waivers, settlement, and releases, would probably be paid to CalPERS instead of used for retiree health benefits. (Decl. Rose, ¶ 16, Ex. 6, p. 17, ¶ 4.) B. Historical summary of vested retiree health benefits The City is self-insured for employee and retiree medical benefits. (Doc 36-1, 36-4, Attach. 7, RETIREES_00033, ¶ 1.) The City has six active represented employee groups or “bargaining units” (Id., RETIREES_00152) plus unrepresented management and non-management employees. (Id., Attach. 3, RETIREES_00068–00079; Doc 36-5, RETIREES_00146.) In October 2014, the City reported it employed 137 active employees ranging in tenure from one to thirty years of service. (Doc. 36-5, RETIREES_00153 – RETIREES_00158.) C. There are three groups of retirees with vested retiree health benefits Beginning in around 1988, the City promised employees a City-paid health premium subsidy for themselves and their spouses according to a vesting schedule based on years of public service. Until around 1993, the vested retiree and spousal health subsidy was 50% for employees with over ten years of public service and 25% for employees with fewer the ten years of public service. (Doc 36-5, Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 8 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 5 RETIREES_00015, ¶ 5, RETIREES_00132.) Employees under the 50% and 75% vesting schedule having spousal coverage comprise the first group: (Doc 36-18, RETIREES_01154, depicted; see also, Doc 36-19, RETIREES_01191.) Around 1992-93, the City altered the vesting schedule to allow for an even greater retiree health subsidy up to 100% for retiree and spousal coverage with 25 years of public service. (Doc 36-20, RETIREES_01154; Doc 36-21, RETIREES_01229; Docs 32-1, 32-8, p. 30, Ex. 8, p. 4.) Employees under the 1992-93 vesting schedule having spousal coverage comprise the second group: (Doc 36-20, RETIREES_01273 depicted; see also, Id., Doc 36-21, RETIREES_01229, Doc 36-29, RETIREES_01319, Doc 32-8, p. 30.) Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 9 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 6 Beginning in around 2001-02, the City promised employees hired after that time the City-paid retiree health subsidy for the retirees only, but not their spouses, under the same vesting schedule. (Doc 36-5, RETIREES_00133; Doc 36-29, RETIREES_01319, Doc 32-8, p. 30; Doc 32-9, p. 4.) Employees hired after 2001-02, but before January 1, 2008, having no spousal coverage comprise the third group. Thereafter, the City improved the vesting schedule for existing City employees to add 5% increments for each additional year of public service beyond fifteen. (Doc 36-22, RETIREES_00678; Doc 36-23, RETIREES_00635; Doc 32-8, p. 30, Doc 32-9, p. 4.) Whether employees had vested retiree spousal coverage under the improved vesting schedule depended upon whether they were hired before or after the 2001-02 timeframe, but before January 1, 2008: (Doc 36-22, RETIREES_00678 depicted.) Finally, the City eliminated vested retiree health subsidies for employees hired after January 1, 2008, instead providing contributions to individual Retiree Health Savings Accounts (RHSAs) for those employees. (See Doc 32-8, p. 31; Doc 32-9, pp. 5-6.) At this time, the City established and began funding its segregated “fiduciary” Retiree Health Savings Plan Trust Fund to meet its acknowledged commitments for retiree health benefits to employees hired before January 1, 2008. (Decl. Rose ¶ 13; Ex., 3, p. 49.) D. Until January 1, 2015, there was only one City medical plan for everyone From at least 1988 until January 1, 2015, there was always one self-insured City health plan for all active employees and retirees. (Doc 36-12, Doc 36-13, Doc 36-14.) The City’s promise was to provide Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 10 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 7 retirees “the same medical and dental coverage as active employees” with “no maximum duration on this coverage…for as long as [the City’s] plan continues…” (Doc 36-17, RETIREES_00001, ¶ 2-3l; Doc 36- 21, RETIREES_01229.) The City promised retirees the “same level of benefits as we provide for active employees” for any “benefit premiums or benefit policies”: If you choose to continue your health benefits, you will receive the same level of benefits that we provide for active employees. Any changes that are made to active employee benefit premiums or benefit policies while you continue coverage as a retiree will result in an automatic corresponding change in your retiree benefits, effective on the date of such policy amendment. (Doc 36-17, RETIREES_00003, ¶ 2, bold added.) With these promises, the City also published its uniform vesting schedule in a form memorandum to all City retirees upon their retirement, explaining their vested benefits. (Doc 36-17, RETIREES_0001.) In 2005, the City’s medical plan had an individual maximum yearly deductible of $250 and a family maximum yearly deductible of $500, for preferred providers. Deductibles for non-preferred providers were double these amounts. (Doc 36-12, RETIREES_00784.) Individual and family maximum per year out-of-pocket expenses were $1,000 and $2,000, respectively. (Ibid.) These sums remained constant in 2009. (Doc 36-13, RETIREES_00872.) In 2011, the City proposed to increase individual and family yearly deductibles for preferred providers to $750 and $2,250, respectively, to increase the yearly deductibles for non-preferred providers by double those sums, and to increase the calendar year out-of-pocket individual and family maximums for preferred providers to $4,000 and $12,000, respectively. These changes were to impact all active employees and retirees equally, under “one plan for all.” (Doc 36-14, RETIREES_00517.) E. The City determined to eliminate the “problem” of retirees with vested benefits receiving the same medical plan as actives to pay for new raises and benefits Effective January 1, 2015, the City changed its medical plan by moving from “one plan for all” to a multi-tiered plan. (Doc 36-15, Doc 36-16.) The lowest tier, Plan A, is the cheapest, provides the lowest level of benefits, and, the City states, minimally complies with the Patient Protection and Affordable Care Act (ACA), but has a high deductible of $5,500 per person and $11,000 per family, per year – increasing deductibles for individual retirees by 733% and for retirees and their spouses by 488%. Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 11 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 8 (Doc 36-28.) Plans B and C are more expensive and provide better benefits with lower deductibles. Annual deductibles for Plan C are $1,250 and $2,500 for individuals and families, respectively, which is roughly comparable to deductibles in the City’s plan before January 1, 2015. (Ibid.) The City also eliminated its premium subsidy for dental insurance. The City changed the retiree medical plan to reduce plan expenses and make those funds available “to provide wage increases and other improved compensation benefits” to active employees. (Doc 36-4, Attachments 1-6, RETIREES_00039, ¶ 5, RETIREES_00054, ¶ 5, RETIREES_00069, ¶ 5, RETIREES_00081, ¶ 5, RETIREES_00090, ¶ 5, RETIREES_00100, ¶ 5.) City staff reasoned, “Employees are deserving of raises,” and “…increases in salaries would need to come from a correlated reduction in expenses.” (Doc 36-5, RETIREES_00159.) City staff concluded the vested benefit commitment made to retirees was a problem: “One of the problems stems from Agreements providing for ‘same plan’ for Actives as Retirees.” (Doc 36-5, RETIREES_00131, bold added.) In 2014, City staff made a PowerPoint presentation relating to the City’s Fiscal Year 2014-15 budget, and identified three groups or classes of retirees: 1. Pre-2001, “All Employees and Retirees have same coverage, same plan, all eligible” (Doc 36-5, RETIREES_00132); 2. 2001-2007, “active employees agreed to eliminate coverage for retiree spouses, but future employees only…” (Doc 36-5, RETIREES_00133); and 3. Post-2008, “Active employees completely eliminated retiree benefits for all future employees.” (Doc 36-5, RETIREES_00134.) In this FY 2014-15 presentation, City staff opined the “unequal” vesting of City-paid health premium subsidies for these three groups of retirees was a “major flaw in [the] plan.” (Doc 36-5, RETIREES_00135.) The City stated its goal in changing the medical plan was “eliminating the ‘08, ‘01 rules” for vesting of retiree health benefits. (Doc 36-5, RETIREES_00139.) The City conceded, “Funding for changes to increase wages and optional benefits [for active employees], has been derived from changes to Medical Plans, elimination of Retiree Medical Benefits and contributions…” (Doc 36-5, RETIREES_00145.) Using the cost savings derived from medical plan changes and cutting vested retiree medical Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 12 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 9 benefits and contributions, the City then funneled more money exclusively to new benefit programs for active employees to subsidize active employees’ buy-up into Plans B or C, and as compensation to offset additional health benefit costs. (FAC, ¶¶ 23.). No such subsidy, added compensation, or new benefit program was given to retirees. During a special meeting of the City Council on October 10, 2014, City Manager Nancy Kerry publicly reported active employees’ wages had been “flat or reduced” for five years. (Doc 36-3, Doc 36- 4, RETIREES_00113, ¶ 4.) Ms. Kerry reported active employees were “deserving of wage increases” but reductions in “unsustainable health care benefits, including medical dental and vision, etc.” would be necessary to provide funds for wage increases for active employees. (Ibid.) Ms. Kerry stated that the “most important element” of the plan to reduce medical benefits for new wage increases and other benefit programs for active employees is it would not require “additional taxes from the taxpayers.” (Doc 36-4, RETIREES_00123, ¶ 2.) In her October 1, 2014, budget message to the City Council, City Manager Kerry described the changes a “rendezvous with destiny.” (Doc 36-4, Attach. 7, RETIREES_00015.) Ms. Kerry advocated for elimination of the “2001 and 2007 decisions” regarding vested retiree health benefits because, in her view, “Healthcare plan benefits for employees should not be as imbalanced as one group having 100% benefit and another group having zero (0%) benefit both performing similar jobs.” (Doc 36-4, Attach. 7, RETIREES_00017, ¶ 3.) Ms. Kerry described the City’s good faith negotiations with the active employees who stood to benefit financially from these changes (Doc 36-4, Attach. 7, RETIREES_00017, ¶ 5, RETIREES_00018, ¶ 6), but mentioned nothing about any negotiations with the three groups of retirees with vested health benefits and who are also stakeholders. Ms. Kerry wrote, “The City has had one medical/health benefit plan for many years. Medical coverage and health benefits are not suitable to a one-size-fits-all approach.” (Doc 36-4, Attach. 7 RETIREES_00033, ¶ 4.) At the October 10, 2014 special meeting, the City Council resolved the reduction in the City’s actuarial liabilities realized from reducing and eliminating retiree medical benefits beginning January 1, 2015, would “sufficiently fund the wage and benefit changes” for active employees. (Doc 36-4, Attachments 1-6, RETIREES_00334, ¶ 3, RETIREES_00057, ¶ 3, RETIREES_00072, ¶ 3, RETIREES_00083, ¶ 8, RETIREES_00102, ¶ 8.) Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 13 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 10 At this special meeting, the City agreed to make pre-tax contributions into an Internal Revenue Code (IRC) Section 125 Cafeteria Plan to subsidize active employees’ “buy-up” into higher tier medical plans, funding these contributions with savings from the retiree health benefit cuts: • For each administrative and confidential employee, $5,500 paid over three years (Decl. Alessi, Ex. 1, p. 8, § 2.9); • For each police officer, $1,500 per year (Doc 32-3, p. 4, § 3.13); • For each non-sworn police employee, $1,200 per year (Doc 36-3, CSLT 00006, § 2.14); • For each firefighter, $1,800 per year (Doc 32-5, p. 3, § 2.11); and • For each managerial and non-managerial unrepresented employee and the elected City Clerk, $5,500 paid over three years (Doc 36-9, CSLT00198, § 9); The City also agreed to provide cash bonuses to active employees for agreeing to change the medical plan into tiers, funding the bonuses with savings from the retiree health benefit reductions: • For each administrative and confidential employee, $5,500 paid over three years (Doc 32-2, p. 7, § 2.9); and • For each general and public works employee, $5,500 paid over three years either as a cash bonus or in IRC Section 125 contributions (Doc 32-4, p. 18, § 2.12; Doc 36-6, RETIREES_00168, § 9). The City also agreed to provide to all non-sworn police employees, general and public works employees, firefighters, police supervisors, non-managerial and managerial unrepresented employees, and the elected City Clerk up to $1,500 per employee, per year in matching tax deferred contributions to a “personal retirement investment account.” (Doc 32-4, p. 22, § 2.18(B); Doc 32-5, p. 15, §12.5(B); Decl. Rose, Doc 36-2, RETIREES_00074, § 11; Ex. E, RETIREES_00253 § 11; Doc 36-10, RETIRES_00337, § 9.) The City also agreed to pay all active employees between $3,000 and $4,000 cash to opt-out of City medical plan coverage, to award across-the-board wage increases to all active employees of between 7.5% and 12% over three years, and to pay a transitional retirement health benefit plan into a Retirement Health Savings Account (RHSA) for employees who retired by December 31, 2018, ranging between $1,000 and $12,000. (Doc 32-2, pp. 6, 16, 18, §§ 2.7, 4.2.2, 4.3, Doc 32-3, pp. 2, 4-5, 13, §§ 3.3, 41., Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 14 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 11 14.1, Doc 32-4, pp. 17, 30, 32-35, §§ 2.10, 4.2.2, 4.3.2-4.3.3, Doc 32-5, pp. 2, 4-5, 14, §§ 2.6, 3.1, 15.1; Doc 36-4, RETIREES_00116-00117, Attach. 1, RETIREES_00044, § 10, Attach. 3, RETIREES_00075, § 11, Doc 36-25, CSLT00005, CSLT00007, CSLT00018, §§ 2.3, 3.1, 15.1.) These new raises and benefit plans for active employees were funded by savings from cutting vested retiree health benefits. The health plan savings were apportioned to active employees for new raises and benefits but none to retirees. (Doc 36-5, RETIREES_00146; FAC ¶ 23.) F. The City Council and City staff apparently knew the medical plan reductions would work a financial hardship on current retirees Apparently knowing the medical plan reductions and eliminations would work a financial hardship on the current retirees hired before January 1, 2008, having vested health benefits, City staff reported, “City Council has requested staff investigate potential of subsidy for lower income retirees based on family income and years of service; which will require agreements.” (Doc 36-5, RETIREES_00150.) No such subsidy has occurred. G. The City charges retirees more than actives for access to better “optional” plans The City permits active employees and retirees to “buy-up” by paying more for access to higher- tiered plans with benefit coverages, but now charges retirees more than actives for the same coverage under those better plans even as it subsidizes the active employees: PLAN B Single Two Party Family Active Employees $614.05 $1,228.11 $1,737.77 Retirees $847.40 $1,694.79 $2,398.12 PLAN C Single Two Party Family Active Employees $700.24 $1,400.49 $1,981.68 Retirees $966.34 $1,932.68 $2,734.72 PLAN D Single Two Party Family Active Employees $797.35 $1,594.69 $2,256.50 Retirees $1,100.34 $2,200.68 $3,113.97 Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 15 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 12 (Cf., Doc 36-15, Doc 36-16, Doc 36-26, Doc 36-27, Doc 36-28.) In making these changes, the City has failed to fulfill its promises to retirees to provide the “same level of benefits as we provide for active employees” for any “benefit premiums or benefit policies” under the applicable vesting schedules. (Doc 36-17.) During the City Council meeting on February 7, 2017, City Manager Kerry lamented medical benefit improvements for active employees are not affordable because retirees’ benefits must be improved in kind. (Req. Jud. Not., ¶ 1, video time stamp 2:00:40.) To help persuade the City Council to “clean out” the $6.6 million Retiree Health Savings Plan Trust Fund, Kerry argued, “As I will explain in a minute, as long as we are tied to the retirees it is going to be a bit of a difficulty for us.” (Req. Jud. Not., ¶ 1, video time stamp 1:46:21.) Kerry continued, “We negotiate with employees but the cost of medical care must be doubled because whatever we give employees has to go to retirees in terms of medical insurance.” (Req. Jud. Not. ¶ 1, video time stamp 2:00:40.) During the City Council meeting on May 16, 2017, City Manager Kerry informed the City Council that City staff intends to use remaining Retiree Health Savings Plan Trust Fund money (after paying the retirees who “opt out”) to pay down CalPERS for pension liabilities. (Decl. Rose, ¶ 16, Ex. 6, p. 16, ¶ 4.) III. LEGAL AUTHORITIES AND ARGUMENT The traditional equitable criteria for granting preliminary or temporary injunctive relief are: (1) a strong likelihood of success on the merits; (2) the possibility of irreparable injury to the plaintiff if the preliminary relief is not granted; (3) a balance of hardships favoring the plaintiff; and (4) advancement of the public interest. (See Alliance for the Wild Rockies v. Cottrell (9th Cir. 2011) 632 F.3d 1127, 1135; see also Am. Trucking Assns. V. City of Los Angeles (9th Cir. 2009) 559 F.3d 1046, 1052.) In the Ninth Circuit, the moving party may meet its burden by demonstrating either: (1) a combination of probable success on the merits and the possibility of irreparable injury; or (2) that serious questions are raised and the balance of hardships tips sharply in its favor. (See White Mountain Apache Tribe v. State of Arizona (9th Cir. 1981) 649 F.2d 1274, 1285.) CSLTRA satisfies both the traditional equitable criteria and the Ninth Circuit criteria for granting preliminary or temporary injunctive relief. Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 16 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 13 A. The City Council and City officials owe a fiduciary duty not to waste Retiree Health Savings Plan Trust Fund money paying out individual settlements According to the City’s independent auditor, the Retiree Health Savings Plan Trust Fund is a “fiduciary” fund, distinct from the City’s general fund, to be used for a solitary purpose: “retirement healthcare benefits.” (Decl. Rose, ¶ 9, Ex. 3, p. 49.) Ms. Doherty readily concedes the truth of this fact in her May 22, 2017, letter. (Decl. Rose, ¶ 17, Ex. 7, ¶ 2 [“We agree that the approximately $6.6 million in Other Post-Employment Benefits (OPEB) City funds is to be used for retiree medical insurance.”].) The City’s establishment, administration, and funding of this Trust Fund, together with the City Council resolution’s serial adoption of successive resolutions over many decades granting the vested retiree health benefits described in the labor agreements, constituted a system for retirement health benefits. City officials are effectively custodians of these funds for the benefit of all retirees eligible for retiree health benefits. The California Constitution describes the fiduciary nature of the relationship between the government overseers of public pension or retirement benefits, on the one hand, and the retirees and their beneficiaries, on the other hand. Article XVI, section 17, of the California Constitution provides that the retirement board of a public pension or retirement system are fiduciaries and must “administer the system in a manner that will assure prompt delivery of benefits and related services to the participants and their beneficiaries.” (Id., subd. (a).) Subdivision (a) of section 17 provides: “The assets of a public pension or retirement system are trust funds and shall be held for the exclusive purposes of providing benefits to participants in the pension or retirement system and their beneficiaries and defraying reasonable expenses of administering the system.” (Cal. Const., art. XVI, § 17.) The constitutional obligations of a public retirement board have been interpreted to include a duty to “ensure the rights of members and retirees to their full, earned benefits.” (City of Pleasanton v. Board of Administration (2012) 211 Cal.App.4th 522, 544.) Such obligations do not permit the payment of benefits not otherwise authorized. (Duarte v. California State Teachers' Retirement System (2014) 232 Cal.App.4th 370, 385.) Article XVI, section 17, of the California Constitution has been applied to the pension provisions of a city charter, holding retired city employees have “a contractual right, protected by constitutional guarantees, in a pension,” and such benefits “may not be changed to [that employee’s] detriment.” (City of Oakland v. Oakland Police and Fire Retirement System (2014) 224 Cal.App.4th 210, 226–27, as Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 17 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 14 modified on denial of reh'g (Mar. 26, 2014).) Under article XVI of the California Constitution, “the duty of a public retirement board to its participants and their beneficiaries shall take precedence over any other duty, including minimizing employer contributions and defraying administrative costs.” (City of Oakland, supra, citing Cal. Const., art. XVI, § 17, subd. (b); internal quotations omitted.) Insofar as the City Council administers its system for retiree health benefits, it functions in a fiduciary capacity to the eligible retirees as the de facto retirement board for that system. Staff guidance by the Government Accounting Standards Board is in accord: Notwithstanding the possibility of individual variations in plan structure, for an OPEB plan to be considered a qualifying trust, or equivalent arrangement, it is essential that the plan structure and the manner in which assets are held, invested, and disbursed should be compatible with holding and managing plan assets, not as assets of the employer, but in trust for the exclusive benefit of plan members and their beneficiaries—and with the specific criteria of irrevocability of contributions, dedication of the plan assets (including income from the investment of plan assets) to paying benefits in accordance with the substantive plan, and legal protection of the plan assets from creditors stated in paragraph 4 of Statement 43. Moreover, for this purpose it is essential that any and all entities or persons involved in the functions of the OPEB plan carry out their respective fiduciary roles and responsibilities accordingly. (Decl. Rose, ¶ 15, Ex. 5, p. 1, ¶ 5 to p. 2, ¶ 1, bold and underlining added.) B. “Cleaning out” the Retiree Health Savings Plan Trust Fund by making “first come, first- served” settlement payments is a form of voluntary disablement Under one of the most well established common law principles of contracts, voluntary disablement is the intentional act of a party to a contract rendering a contractual obligation prospectively impossible to perform. The doctrine of voluntary disablement has been historically applied to every kind of contract at common law to excuse the other party’s performance, and justify a demand by the non- breaching party for assurances of performance. Excusing performance is of no comfort here because the retirees here have already fully performed all their contractual obligations to the City through their many years of faithful public service earning the vested retirement health benefits to which they are now entitled. A major justification by the City for imposing the January 1, 2015, changes to retiree health benefits was the magnitude of the City’s unfunded actuarial accrued liability for retiree healthcare, and Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 18 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 15 the desire to shift its annual required contribution to other uses, such as active employee pay raises. In a May 2015 article for Western City magazine authored by City Manager Kerry, Ms. Kerry boasted “the city’s OPEB liability has been reduced by 73 percent as a result of these changes.” (Decl. Rose, ¶ 14, Ex. 4, ¶ 6.) Naturally, wiping out the entire corpus of the Retiree Health Savings Plan Trust Fund to pay individual settlements to some retirees on a first-come, first served basis, and to pay remaining trust funds to CalPERS, would increase the City’s unfunded actuarial accrued liability for retiree healthcare, exacerbating the City’s stated funding problem, making the City’s prospective performance nearly impossible, and frustrating any eventual judgment in this action. C. Using Retiree Health Savings Plan Trust Fund money to make settlement payments to retirees who are first in time to relinquish their rights is an unconstitutional taking The usual taking occurs when the government physically acquires property for itself. (See, e.g., Chicago, B. & Q.R. Co. v. Chicago (1897) 166 U.S. 226.) A regulatory taking may occur when property is not appropriated by the government but is transferred to other parties. (Eastern Enterprises v. Apfel (1998) 524 U.S. 498, 543; see, e.g., United States v. Security Industrial Bank (1982) 459 U.S. 70, 78 [“[O]ur cases show that takings analysis is not necessarily limited to outright acquisitions by the government for itself”]; Loretto v. Teleprompter Manhattan CATV Corp. (1982) 458 U.S. 419 [transfer of physical space from landlords to cable companies].) The City Council’s resolution approving the “Optional Opt-Out Election of Post-Employment Medical Plan” is a thinly veiled scheme to transfer the entire corpus of the Retiree Health Savings Plan Trust Fund away from eligible retirees to buy waivers and settlements from the only earliest retirees to submit “opt-out” forms. Retirees and other beneficiaries of the Trust Fund who receive no such payments either because they refuse to waive, relinquish, and settle their vested retiree health benefits, or because they did not submit their waiver forms quick enough, will be forever deprived of those funds retirement healthcare benefits. There is no valid consideration for the opt-out settlement payments made on a first- come, first-served basis because the City has a pre-existing legal duty to use the Trust Funds for the benefit of retirees to pay for retiree health benefits. The planned payment to CalPERS of Trust Fund money is likewise an impermissible use of the funds. /// Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 19 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 16 D. If not enjoined during the pendency of this action, the City’s latest strategy will cause irreparable harm to CSLTRA and its members Any remedies ultimately fashioned or final judgment in this action will be meaningless if the City is allowed to “clean out” the segregated fiduciary Trust Fund it has established, funded, and administered to meet its financial obligations for retirement healthcare benefits. By spending $6.6 million after May 31, 2017, for settlement payments, the City is greatly compromising its financial condition and its prospective ability to provide retiree healthcare benefits to retirees. The harm threatened is irreparable because once the City makes these payments from the Trust Fund to individual retirees and/or to CalPERS, it will be virtually impossible to claw back all those payments. E. The balance of the hardships tips sharply in favor of CSLTRA The City can offer no rational explanation why it must rush now to deplete the Retiree Health Savings Plan Trust Fund while this action is pending, and while the rights of the parties remain contested. CSLTRA and its members will be seriously and irretrievably harmed if the Trust Fund retirees rely upon to pay their retiree health benefits is emptied for an impermissible purpose. F. Imposition of a constructive trust is a proper provisional remedy Constructive trust is a form of remedy that is “flexibly fashioned in equity to provide relief where a balancing of interests in the context of a particular case seems to call for it.” It is a creature of the common law, rather than any federal statute. (S.E.C. v. Vassallo (E.D. Cal., May 22, 2012, No. CIV. S- 09-0665 LKK/D) 2012 WL 1868559, at *2.) At common law, where property has been obtained by fraud, a court in equity “has jurisdiction to reach the property either in the hands of the original wrong-doer, or in the hands of any subsequent holder” and to convey that property to “the one who is truly and equitably entitled to the same.” (Id., at *3, citing Harris Trust & Sav. Bank v. Salomon Smith Barney, Inc., (2000) 530 U.S. 238, 251.) A wrongful act in this context justifying a constructive trust includes “fraud, accident, mistake, undue influence, the violation of a trust, or another wrongful act.” (Cal. Civ. Code § 2224.) A “wrongful act” need not amount to fraud or misrepresentation, and includes unjust enrichment. (Estrada v. Garcia (1955) 132 Cal.App.2d 545, 552.) The retirees and beneficiaries are equitably entitled to the funds in the Retiree Health Savings Plan Trust Fund for payment of their retiree health benefits. An injunction restraining the disposal of money, i.e. the imposition of a constructive trust, is proper because the City’s conduct threatens the Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 20 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 17 disposal of the Trust Fund during litigation, thereby rendering the judgment ineffectual. (See Heckman v Ahmanson (1985) 168 Cal. App.3d 119, 136.) IV. CONCLUSION For the reasons explained, CSLTRA requests the Court issue a temporary restraining order and impose a constructive trust, as prayed for in the Application and Proposed Order, until such time as CSLTRA’s forthcoming motion for preliminary injunction under Federal Rules of Civil Procedure 65(a) can be heard by the Court. Dated: May 22, 2017 ROSE LAW, A PROF. CORP. By: /s/ Joseph W. Rose Joseph W. Rose Attorneys for Plaintiff CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 21 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD PLAINTIFF’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST v PROOF OF SERVICE I, the undersigned, am employed in the County of Sacramento, State of California. I am over the age of 18 and not a party to the within action; am employed with the law offices of Rose Law, A Professional Corporation, and my business address is 11335 Gold Express Drive, Suite 135, Gold River, CA 95670. On May 22, 2017, I served the foregoing document entitled PLAINTIFF CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION’S MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF EX PARTE APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST on all the appearing and/or interested parties in this action by placing the original a true copy thereof enclosed in sealed envelope(s) addressed as follows: Nira Feeley Doherty, Esq. Burke, Williams & Sorensen, LLP 1901 Harrison Street, Suite 900 Oakland, CA 94612-3597 Tel.: (510) 273-8780 Fax: (510) 839-9104 ndoherty@bwslaw.com Tom Watson, Esq. City Attorney City of South Lake Tahoe 1901 Airport Rd., Ste. 300 South Lake Tahoe, CA 96150 Tel. (530) 542-6046 Fax: (530) 542-6173 twatson@cityofslt.us [by MAIL] I am readily familiar with the firm's practice of collection and processing correspondence for mailing. Under that practice it would be deposited with the U.S. Postal Service on that same day with postage thereon fully prepaid at Sacramento, California in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postage cancellation date or postage meter date is more than one day after date of deposit for mailing this affidavit.  [by ELECTRONIC SUBMISSION] - I served the above listed document(s) described via the United States District Court’s Electronic Filing Program on the designated recipients via electronic transmission through the CM/ECF system on the Court’s website. The Court’s CM/ECF system will generate a Notice of Electronic Filing (NEF) to the filing party, the assigned judge, and any registered users in the case. The NEF will constitute service of the document(s). Registration as a CM/ECF user constitutes consent to electronic service through the court’s transmission facilities.  [by EMAIL] I served the above listed document(s) via email in accordance with the firm's practice to the email addresses listed above.  FEDERAL - I declare that I am employed in the office of a member of the bar of this Court at whose direction the service was made. Executed May 22, 2017, at Gold River, California. Monique Buelna By: /s/ Monique Buelna Printed Name Signature Case 2:15-cv-02502-KJM-CKD Document 42-1 Filed 05/22/17 Page 22 of 22 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD DECLARATION OF WILIAM GIEG IN SUPPORT OF APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 1 Joseph W. Rose, State Bar No. 232261 Mehran Tahoori, State Bar No. 283313 ROSE LAW, APC 11335 Gold Express Drive, Suite 135 Gold River, California 95670 Telephone: (916) 273-1260 Facsimile: (916) 290-0148 Email: legalteam@joeroselaw.com Attorneys for Plaintiff CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION, Plaintiff, v. CITY OF SOUTH LAKE TAHOE, Defendant. Case No.: Case No.: 2:15-CV-02502-KJM-CKD DECLARATION OF WILLIAM GIEG IN SUPPORT OF APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST [Fed. Rules Civ. Proc 65(b); Local Rule 65-231] Date: TBD Time: TBD Courtroom: 3 Judge: Hon. Kimberly J. Mueller Complaint Filed: December 1, 2015 Trial Date: May 14, 2018 I, William Gieg, declare: 1. I am the president of the City of South Lake Tahoe Retirees Association (CSLTRA). CSLTRA is the plaintiff in this action and the applicant for this temporary restraining order. CSLTRA first instituted this lawsuit on December 1, 2015. 2. CSLTRA is a non-profit mutual benefit corporation duly organized and validly existing under the laws of the State of California (entity number C3831477). 3. CSLTRA represents the interests of all City of South Lake Tahoe retirees and their beneficiaries regarding issues including retiree hospitalization, medical, pharmaceutical, dental, vision, and retirement benefits. Case 2:15-cv-02502-KJM-CKD Document 42-3 Filed 05/22/17 Page 1 of 3 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD DECLARATION OF WILIAM GIEG IN SUPPORT OF APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST 2 4. CSLTRA currently has approximately 100 financially supporting members, and other members who participate in CSLTRA activities but whom are unable to make direct financial contributions. 5. CSLTRA’s officers and directors are volunteers working in the interest of CSLTRA and for the mutual benefit of its members, City retirees, and their beneficiaries. 6. CSLTRA’s purposes include advocating for the interests of its members with respect their vested post-employment City benefits, communicating with City management, active City employees, and other organizations of active and retired public servants regarding post-employment benefits, and distributing and collecting information relating to vested post-employment benefits to and from its members. 7. CSLTRA members include retired employees from across all City departments and bargaining units. 8. CSLTRA and its members and directors have engaged in research, study, outreach and communication with the City regarding changes to retiree health benefits made by the City. 9. CSLTRA members, as retired public servants of the City and their beneficiaries, depend on the vested health benefits program promised during their respective employment terms and provided by the City after retirement, and have significant interest in those benefits and any changes made to them. 10. CSLTRA and its members are beneficially interested in ensuring the City does not waste or intentionally deplete money held in trust for the sole purpose of paying for future retiree health benefits. CSLTRA’s members will suffer substantial injury if the City wastes or intentionally depletes funds on deposit in the Retiree Health Savings Plan Trust Fund. I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct. Executed on May 22, 2017, at South Lake Tahoe, California. /s/ William Gieg, as authorized on May 22, 2017 William Gieg Case 2:15-cv-02502-KJM-CKD Document 42-3 Filed 05/22/17 Page 2 of 3 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD DECLARATION OF WILIAM GIEG IN SUPPORT OF APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST I PROOF OF SERVICE I, the undersigned, am employed in the County of Sacramento, State of California. I am over the age of 18 and not a party to the within action; am employed with the law offices of Rose Law, A Professional Corporation, and my business address is 11335 Gold Express Drive, Suite 135, Gold River, CA 95670. On May 22, 2017, I served the foregoing document entitled DECLARATION OF WILLIAM GIEG IN SUPPORT OF APPLICATION FOR TEMPORARY RESTRAINING ORDER AND CONSTRUCTIVE TRUST on all the appearing and/or interested parties in this action by placing the original a true copy thereof enclosed in sealed envelope(s) addressed as follows: Nira Feeley Doherty, Esq. Burke, Williams & Sorensen, LLP 1901 Harrison Street, Suite 900 Oakland, CA 94612-3597 Tel.: (510) 273-8780 Fax: (510) 839-9104 ndoherty@bwslaw.com Tom Watson, Esq. City Attorney City of South Lake Tahoe 1901 Airport Rd., Ste. 300 South Lake Tahoe, CA 96150 Tel. (530) 542-6046 Fax: (530) 542-6173 twatson@cityofslt.us [by MAIL] I am readily familiar with the firm's practice of collection and processing correspondence for mailing. Under that practice it would be deposited with the U.S. Postal Service on that same day with postage thereon fully prepaid at Sacramento, California in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postage cancellation date or postage meter date is more than one day after date of deposit for mailing this affidavit.  [by ELECTRONIC SUBMISSION] - I served the above listed document(s) described via the United States District Court’s Electronic Filing Program on the designated recipients via electronic transmission through the CM/ECF system on the Court’s website. The Court’s CM/ECF system will generate a Notice of Electronic Filing (NEF) to the filing party, the assigned judge, and any registered users in the case. The NEF will constitute service of the document(s). Registration as a CM/ECF user constitutes consent to electronic service through the court’s transmission facilities.  [by EMAIL] I served the above listed document(s) via email in accordance with the firm's practice to the email addresses listed above.  FEDERAL - I declare that I am employed in the office of a member of the bar of this Court at whose direction the service was made. Executed May 22, 2017, at Gold River, California. Monique Buelna By: /s Monique Buelna Printed Name Signature Case 2:15-cv-02502-KJM-CKD Document 42-3 Filed 05/22/17 Page 3 of 3 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION’S REQUEST FOR JUDICIAL NOTICE 1 Joseph W. Rose, State Bar No. 232261 Mehran Tahoori, State Bar No. 283313 ROSE LAW, APC 11335 Gold Express Drive, Suite 135 Gold River, California 95670 Telephone: (916) 273-1260 Facsimile: (916) 290-0148 Email: legalteam@joeroselaw.com Attorneys for Plaintiff CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION, Plaintiff, v. CITY OF SOUTH LAKE TAHOE, Defendant. Case No.: Case No.: 2:15-CV-02502-KJM-CKD CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION’S REQUEST FOR JUDICIAL NOTICE [FRE 201(b)] Date: TBD Time: TBD Courtroom: 3 Judge: Hon. Kimberly J. Mueller Complaint Filed: December 1, 2015 Trial Date: May 14, 2018 The City of South Lake Tahoe Retirees Association (CSLTRA) requests the Court take judicial notice under Federal Rules of Evidence, Rule 201 of the following adjudicative facts, which are either generally known within the trial court’s territorial jurisdiction, or can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned. 1. Exhibit 2 attached to the concurrently filed Declaration of Joseph W. Rose, which is a true and correct copy of the staff report, resolution, and waiver form presented at the South Lake Tahoe City Council meeting on February 7, 2017. Exhibit 2 is published on the City’s Internet website at the following link: http://slt.granicus.com/MetaViewer.php?view_id=6&clip_id=841&meta_id=82692 2. The video of the City of South Lake Tahoe City Council meeting on February 7, 2017, Case 2:15-cv-02502-KJM-CKD Document 42-4 Filed 05/22/17 Page 1 of 4 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION’S REQUEST FOR JUDICIAL NOTICE 2 which is published on the City’s Internet website and available for viewing at the following link: http://slt.granicus.com/MediaPlayer.php?view_id=6&clip_id=841. The relevant portions of the video are between time stamps 1:27:00 and 2:11:24. 3. The video of the City of South Lake Tahoe City Council meeting on April 18, 2017, which is published on the City’s Internet website and available for viewing at the following link: http://slt.granicus.com/MediaPlayer.php?view_id=6&clip_id=847. he relevant portions of the video begin at video time stamp 1:38:00. 4. Exhibit 3 attached to the concurrently filed Declaration of Joseph W. Rose, which is a true and correct copy of the City of South Lake Tahoe’s 2016 Comprehensive Annual Financial Report. Exhibit 3 is published on the City’s Internet website at the following link: http://www.cityofslt.us/DocumentCenter/View/7635. 5. Exhibit 4 attached to the concurrently filed Declaration of Joseph W. Rose, which is a true and correct copy of a May 2015 article published by the League of California Cities in its monthly magazine entitled Western City, which was authored by City Manager Nancy Kerry. Exhibit 4 is published on the League of California Cities’ Internet website at the following link: http://www.westerncity.com/Western-City/May-2015/Reducing-Unfunded-Liabilities-for-Other-Post- Employment-Benefits/ 6. Exhibit 5 attached to the concurrently filed Declaration of Joseph W. Rose, which is a true and correct copy of a publication of the Government Accounting Standards Board (GASB) guidance on Qualifying OPEB Plan Trusts and Fiduciary Responsibilities. Exhibit 5 is published on the GASB Internet website at the following link: http://www.gasb.org/cs/ContentServer?c=Document_C&pagename=GASB%2FDocument_C%2FGAS BDocumentPage&cid=1175804850553 7. Exhibit 6 attached to the concurrently filed Declaration of Joseph W. Rose, which is a true and correct copy of City Manager Kerry’s Five Year Financial Forecast staff report from the City Council meeting on May 16, 2017. Exhibit 5 is published on the City’s website at http://slt.granicus.com/MetaViewer.php?view_id=6&clip_id=852&meta_id=83712 /// Case 2:15-cv-02502-KJM-CKD Document 42-4 Filed 05/22/17 Page 2 of 4 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION’S REQUEST FOR JUDICIAL NOTICE 3 Dated: May 22, 2017 ROSE LAW, A PROF. CORP. By: /s/ Joseph W. Rose Joseph W. Rose Attorneys for Plaintiff CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION Case 2:15-cv-02502-KJM-CKD Document 42-4 Filed 05/22/17 Page 3 of 4 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION’S REQUEST FOR JUDICIAL NOTICE i PROOF OF SERVICE I, the undersigned, am employed in the County of Sacramento, State of California. I am over the age of 18 and not a party to the within action; am employed with the law offices of Rose Law, A Professional Corporation, and my business address is 11335 Gold Express Drive, Suite 135, Gold River, CA 95670. On May 22, 2017, I served the foregoing document entitled CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION’S REQUEST FOR JUDICIAL NOTICE on all the appearing and/or interested parties in this action by placing the original a true copy thereof enclosed in sealed envelope(s) addressed as follows: Nira Feeley Doherty, Esq. Burke, Williams & Sorensen, LLP 1901 Harrison Street, Suite 900 Oakland, CA 94612-3597 Tel.: (510) 273-8780 Fax: (510) 839-9104 ndoherty@bwslaw.com Tom Watson, Esq. City Attorney City of South Lake Tahoe 1901 Airport Rd., Ste. 300 South Lake Tahoe, CA 96150 Tel. (530) 542-6046 Fax: (530) 542-6173 twatson@cityofslt.us [by MAIL] I am readily familiar with the firm's practice of collection and processing correspondence for mailing. Under that practice it would be deposited with the U.S. Postal Service on that same day with postage thereon fully prepaid at Sacramento, California in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postage cancellation date or postage meter date is more than one day after date of deposit for mailing this affidavit.  [by ELECTRONIC SUBMISSION] - I served the above listed document(s) described via the United States District Court’s Electronic Filing Program on the designated recipients via electronic transmission through the CM/ECF system on the Court’s website. The Court’s CM/ECF system will generate a Notice of Electronic Filing (NEF) to the filing party, the assigned judge, and any registered users in the case. The NEF will constitute service of the document(s). Registration as a CM/ECF user constitutes consent to electronic service through the court’s transmission facilities.  [by EMAIL] I served the above listed document(s) via email in accordance with the firm's practice to the email addresses listed above.  FEDERAL - I declare that I am employed in the office of a member of the bar of this Court at whose direction the service was made. Executed May 22, 2017, at Gold River, California. Monique Buelna By: /s Monique Buelna Printed Name Signature Case 2:15-cv-02502-KJM-CKD Document 42-4 Filed 05/22/17 Page 4 of 4 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD [PROPOSED] TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE 1 Joseph W. Rose, State Bar No. 232261 Mehran Tahoori, State Bar No. 283313 ROSE LAW, APC 11335 Gold Express Drive, Suite 135 Gold River, California 95670 Telephone: (916) 273-1260 Facsimile: (916) 290-0148 Email: legalteam@joeroselaw.com Attorneys for Plaintiff CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA CITY OF SOUTH LAKE TAHOE RETIREES ASSOCIATION, Plaintiff, v. CITY OF SOUTH LAKE TAHOE, Defendant. Case No.: Case No.: 2:15-CV-02502-KJM-CKD [PROPOSED] TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE [Fed. Rules Civ. Proc 65(b)] Date: TBD Time: TBD Courtroom: 3 Judge: Hon. Kimberly J. Mueller Complaint Filed: December 1, 2015 Trial Date: May 14, 2018 The ex parte application of Plaintiff City of South Lake Tahoe Retirees Association (CSLTRA) for a temporary restraining order was submitted on May 22, 2017. Upon review of CSLTRA’s First Amended Complaint, Application, memorandum of points and authorities in support thereof, the declarations and exhibits attached thereto, all other papers submitted by CSLTRA, and the arguments of counsel and/or parties, it appears to the satisfaction of the Court that this a proper case for granting an order to show cause why a preliminary injunction should not issue and to issue an interim Temporary Restraining Order (“TRO”). It further appears that unless the TRO prayed for is granted, irreparable injury will likely result to CSLTRA and its members. Good cause appearing therefore, the Court hereby orders as follows: Case 2:15-cv-02502-KJM-CKD Document 42-5 Filed 05/22/17 Page 1 of 4 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD [PROPOSED] TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE 2 IT IS HEREBY ORDERED that CSLTRA’s ex parte application for a temporary restraining order is GRANTED. The City of South Lake Tahoe and its agents, representatives, and all persons acting in concert or participating with the City is/are temporarily restrained and enjoined from: 1. Spending down the City’s approximate $6.6 million Retiree Health Savings Plan Trust Fund to fund its “Optional Opt-Out Election of Post-Employment Medical Plan;” and 2. Spending down the balance of the City’s Retiree Health Savings Plan Trust Fund to pay the California Public Employees Retirement System (CalPERS); and 3. Making any other payments from the City’s Retiree Health Savings Plan Trust Fund for purposes not directly connected to retiree health benefits. IT IS FURTHER ORDERED that the City of South Lake Tahoe appear either personally or by counsel in Courtroom 3 of this Court located at 501 I Street, Sacramento, California, on ______________, 2017 at _________ a.m./p.m., or as soon thereafter as the matter may be heard, to show cause, if any, as to why 1. The City and its agents, representatives, and all persons acting in concert or participating with it should not be enjoined and restrained during the pendency of this action from engaging in, committing, or performing directly or indirectly any of the following acts: a. Spending down the City’s approximate $6.6 million Retiree Health Savings Plan Trust Fund to fund its “Optional Opt-Out Election of Post-Employment Medical Plan;” and b. Spending down the balance of the City’s Retiree Health Savings Plan Trust Fund to pay the California Public Employees Retirement System (CalPERS) for pension costs; and c. Using Retiree Health Savings Plan Trust Fund money for purposes not directly connected to retiree health benefits; and 2. The Court should not impose a constructive trust upon the City’s Retiree Health Savings Plan Trust Fund restricting its use to payments for payment of retiree health benefits during the pendency of this action. /// Case 2:15-cv-02502-KJM-CKD Document 42-5 Filed 05/22/17 Page 2 of 4 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD [PROPOSED] TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE 3 IT IS FURTHER ORDERED THAT: 1. This order to show cause and temporary restraining order and all of CSLTRA’s ex parte papers including memorandum of points and authorities and declarations shall be served on the City of South Lake Tahoe or their counsel no later than ___________________, 2017 by overnight mail/e- service/personal service. Proof of such service shall be filed with the Court at least ____ court days prior to the hearing; 2. Any opposition to the order to show cause shall be filed and served on CSLTRA’s counsel by e-service no later than ________________, 2017; 3. Any reply papers to the opposition shall be filed and served on the City of South Lake Tahoe or their counsel by e-service no later than _______________, 2017; 4. CSLTRA shall not be required to post a security bond. [Alternative: 4. In order to maintain this temporary restraining order in effect, CSLTRA shall post a security bond or cashier’s check in the amount of ______________________________________ dollars ($______________) as security which the court deems proper for the payment of such cost and damages as may be suffered by any party which is found to be wrongfully restrained. Such bond shall be posted by _________ a.m/p.m. on _________, 2017.] 5. Pursuant to Fed. R. Civ. P. 65(b), on two days’ notice to CSLTRA, the City of South Lake Tahoe may appear and move to dissolve or modify the order. IT IS SO ORDERED. Dated: _____________________ __________________________________ Hon. Kimberly J. Mueller United States District Court Case 2:15-cv-02502-KJM-CKD Document 42-5 Filed 05/22/17 Page 3 of 4 R O S E L A W , A P C 11 33 5 G O LD E X P R E S S D R IV E , S U IT E 1 35 G O LD R IV E R , C A LI F O R N IA 9 56 70 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2:15-CV- 02502-KJM- CKD [PROPOSED] TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE I PROOF OF SERVICE I, the undersigned, am employed in the County of Sacramento, State of California. I am over the age of 18 and not a party to the within action; am employed with the law offices of Rose Law, A Professional Corporation, and my business address is 11335 Gold Express Drive, Suite 135, Gold River, CA 95670. On May 22, 2017, I served the foregoing document entitled [PROPOSED] TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE on all the appearing and/or interested parties in this action by placing the original a true copy thereof enclosed in sealed envelope(s) addressed as follows: Nira Feeley Doherty, Esq. Burke, Williams & Sorensen, LLP 1901 Harrison Street, Suite 900 Oakland, CA 94612-3597 Tel.: (510) 273-8780 Fax: (510) 839-9104 ndoherty@bwslaw.com Tom Watson, Esq. City Attorney City of South Lake Tahoe 1901 Airport Rd., Ste. 300 South Lake Tahoe, CA 96150 Tel. (530) 542-6046 Fax: (530) 542-6173 twatson@cityofslt.us [by MAIL] I am readily familiar with the firm's practice of collection and processing correspondence for mailing. Under that practice it would be deposited with the U.S. Postal Service on that same day with postage thereon fully prepaid at Sacramento, California in the ordinary course of business. I am aware that on motion of the party served, service is presumed invalid if postage cancellation date or postage meter date is more than one day after date of deposit for mailing this affidavit.  [by ELECTRONIC SUBMISSION] - I served the above listed document(s) described via the United States District Court’s Electronic Filing Program on the designated recipients via electronic transmission through the CM/ECF system on the Court’s website. The Court’s CM/ECF system will generate a Notice of Electronic Filing (NEF) to the filing party, the assigned judge, and any registered users in the case. The NEF will constitute service of the document(s). Registration as a CM/ECF user constitutes consent to electronic service through the court’s transmission facilities.  [by EMAIL] I served the above listed document(s) via email in accordance with the firm's practice to the email addresses listed above.  FEDERAL - I declare that I am employed in the office of a member of the bar of this Court at whose direction the service was made. Executed May 22, 2017, at Gold River, California. Monique Buelna By: /s Monique Buelna Printed Name Signature Case 2:15-cv-02502-KJM-CKD Document 42-5 Filed 05/22/17 Page 4 of 4 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA TEMPORARY RESTRAINING ORDER (TRO) CHECKLIST NOTE: When filing a Motion for a TRO with the court, you must choose Motion for TRO. You must complete this document and attach is to your motion as an attachment in CM/ECF. If you have questions, please call the CM/ECF Help Desk at 1-866-884-5525 (Sacramento) or 1-866-884-5444 (Fresno). (A) Check one. Filing party is represented by counsel G Filing party is acting in pro se G (B) Has there been actual notice, or a sufficient showing of efforts to provide notice to the affected party? See Local Rule 65-231 and FRCP 65(b). Did applicant discuss alternatives to a TRO hearing? Did applicant ask opponent to stipulate to a TRO? Opposing Party: Telephone No.: (C) Has there been undue delay in bringing a TRO? Could this have been brought earlier? Yes: G No: G Case 2:15-cv-02502-KJM-CKD Document 42-6 Filed 05/22/17 Page 1 of 2 TRO Checklist - Page 2 (D) What is the irreparable injury? Why the need for an expedited hearing? (E) Documents to be filed and (unless impossible) served on affected parties/counsel: G (1) Complaint G (2) Motion for TRO G (3) Brief on all legal issued presented by the motion G (4) Affidavit detailing notice, or efforts to effect notice, or showing why it should not be given G (5) Affidavit in support of existence of irreparable harm G (6) Proposed order with provision for bond G (7) Proposed order with blanks for fixing: G Time and date of hearing for motion for preliminary injunction G Date for filing responsive papers G Amount of bond, if any G Date and hour of issuance G (8) For TROs requested ex parte, proposed order shall notify affected parties they can apply to the court for modification/dissolution on 2 days notice or such shorter notice as the court may allow. See Local Rule 65-231 and FRCP 65(b) Case 2:15-cv-02502-KJM-CKD Document 42-6 Filed 05/22/17 Page 2 of 2