By Argen Duncan: PNT senior writer
The New Mexico Supreme Court has sent a breach of contract lawsuit against the city of Portales back to District Court for a jury trial.
The lawsuit alleges that without approval, Portales City Manager Debi Lee canceled retiree health benefits stipulated by a personnel ordinance.
City representatives said the city continued to provide insurance but stopped paying part of the retirees’ premium, which upheld anti-donation laws and didn’t violate any contract.
The unanimous Supreme Court ruling came Wednesday and overturned a state Court of Appeals ruling in a case filed in District Court in October 2005.
“It didn’t rule in anybody’s favor,” said City Attorney Stephen Doerr.
The decision only required the case to go back to District Court to start over, he said.
Eric Dixon, attorney for the 14 city retirees who filed the suit, said he expected the trial to happen next year. He said the Supreme Court ruling was a huge victory for public employees in New Mexico.
Lee said it wasn’t good news for the city.
In 1994, Dixon said, the city adopted a personnel ordinance allowing retirees to have insurance through the city. In August 2005, he said, Lee removed the health insurance benefits based on legal advice.
Lee said the city was paying the required amount for retiree health insurance through a state program, and some retirees were getting reimbursements from the city for a portion of the premium they were supposed to pay.
After auditors brought the matter to Lee’s attention, she said, she received a legal opinion that paying for benefits and part of the retiree premium violated the state constitution’s anti-donation clause.
Lee also said the city couldn’t afford to pay both its portion and part of the premium.
“We don’t think providing retiree health care benefits and paid retiree premiums is fair to all employees,” she said.
Doerr said the city was arguing that a personnel ordinance wasn’t a contract and even if it was, the same ordinance says the city council can change the rules.
Dixon said the retirees were paying 75 percent of their health insurance costs after the decision. They are seeking reimbursement for those expenses and damages.
According to a news release from Dixon, the Supreme Court decision said retirees can rely on terms-of-employment contracts, including implied contracts based on provisions in personnel manuals and other representations.
Dixon said the retirees tried to resolve the issue and then filed suit in District Court in Portales. The city counted with a motion saying there were no disputed provable facts between the parties and the city was entitled to a judgment.
District Judge Robert Orlik agreed, which meant the case was thrown out, Dixon said.
“He said there wasn’t any contract as a matter of law,” Dixon continued.
The Court of Appeals upheld the district ruling with a 2-1 vote.
When the retirees took the matter to the state Supreme Court, the court ruled that there were provable facts in dispute and the matter should go to trial, Dixon said.