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Kelly v. Board of Community Health

Court of Appeals of Georgia, First Division

October 30, 2019

KELLY et al.
v.
BOARD OF COMMUNITY HEALTH et al.

          BARNES, P. J., MILLER, P.J and HODGES, J.

          Hodges, Judge.

         This class action arose in response to reductions made in December 2011by the Board of Community Health to the State Health Benefit Plan (SHBP)'s retiree health insurance subsidy. After plaintiff retirees brought an action seeking class certification as well as monetary and injunctive relief, the trial court granted a motion to dismiss filed by the Board of Community Health and its individual members ("defendants") on grounds including that plaintiffs' claims were barred by sovereign immunity. On appeal, plaintiffs argue that the trial court erred because the Board's previous resolution granting them a subsidy amounted to a written contract which could not be revoked without causing them financial harm and violating their equal protection rights, and for which mandamus is a proper remedy. We find no error and affirm.

         On appeal from the grant of a motion to dismiss, "all pleadings are to be construed most favorably to the party who filed them, and all doubts regarding such pleadings must be resolved in the filing party's favor." (Footnote omitted.) Cleveland v. MidFirst Bank, 335 Ga.App. 465, 465 (781 S.E.2d 577) (2016). "If within the framework of the complaint, evidence may be introduced which will sustain a grant of relief to the plaintiff, the complaint is sufficient." (Footnote omitted.) Id. at 465-466.

         Although we thus view the record in favor of plaintiffs, the relevant facts are not in dispute. Before December 8, 2011, retirees were entitled to a so-called "Annuitant Basic Subsidy Policy" that provided a 75% subsidy for an annuitant with at least 10 years of service. After a study determined that the Department of Community Health would not be able to sustain the subsidy at this level without endangering the financial health of the SHBP, the Board adopted a resolution on December 8, 2011, that under its new "Annuitant Years of Service Subsidy Policy," those retirees "who did not have five [y]ears of [s]ervice on January 1, 2012," would receive a subsidy of 15% for 10 years of service, increasing with each year of additional service to a maximum of 75% for 30 years of service. The Board noted that its announcement of the new policy "does not constitute a promise or contract of any kind" and that "[a]ny subsidy policy adopted by the Board may be changed at any time by Board resolution[] and does not constitute a contract or promise of any amount of subsidy." As a result of this change, plaintiffs, who had the minimum ten years of service at the time of their retirement but less than five years of active service as of January 1, 2012, receive a much lower annuitant subsidy than other retirees with the same number of years of service. In December 2016 and February 2017, the Commissioner notified SHBP members of these changes.

         Plaintiffs brought their action for breach of contract and mandamus relief in December 2017 and later amended the complaint to include three counts against Board members in their individual capacities as well as constitutional claims for equal protection and 42 U.S.C. § 1983. Defendants moved to dismiss the complaint as amended, which the trial court granted on the ground that sovereign immunity barred plaintiffs' claims and that they had failed to state a claim for mandamus relief. This appeal followed.

         1. Ex contractu waiver of sovereign immunity.

         Plaintiffs first assert that the trial court erred when it concluded that they had not established a waiver of sovereign immunity under the ex contractu provision of the Georgia Constitution. We disagree.

         In our recent decision in Boyd v. Neal, 350 Ga.App. 274 (828 S.E.2d 650) (2019), we summarized the law governing claims of contractual waivers of sovereign immunity as follows:

The Georgia Constitution provides broad sovereign immunity for the State: "Except as specifically provided in this Paragraph, sovereign immunity extends to the state and all of its departments and agencies. The sovereign immunity of the state and its departments and agencies can only be waived by an Act of the General Assembly which specifically provides that sovereign immunity is thereby waived and the extent of such waiver." Ga. Const. of 1983, Art. I, Sec. II, Par. IX (e). But sovereign immunity is waived in limited circumstances, and specifically, for contract actions, sovereign immunity is waived: "as to any action ex contractu for the breach of any written contract now existing or hereafter entered into by the state or its departments and agencies." Ga. Const. Art. I, § II, ¶ IX (c). See also OCGA § 50-21-1 (a) ("The defense of sovereign immunity is waived as to any action ex contractu for the breach of any written contract . . . entered into by the state, department and agencies of the state, and state authorities.").
Our Supreme Court has recently explained the relationship between common law rules of contract and what constitutes a written contract sufficient to waive sovereign immunity: "General rules of contract law that might otherwise support a claim for breach of contract damages between private parties . . . will not support a claim against the state or one of its agencies if the contract is not in writing so as to trigger the waiver of sovereign immunity." Ga. Dept. of Labor v. RTT Assoc., Inc., 299 Ga. 78, 82 (2) (786 S.E.2d 840) (2016). Thus, a party may not recover for breach of contract against the State based on an implied contract, on a theory of quantum meruit, or by the parties' course of conduct even if a document exists supplying the material terms of the alleged contract. Id. at 82-83 (2).

Boyd, 350 Ga.App. at 277 (1). Finally, in order to establish a waiver of sovereign immunity under the ex contractu provision, a claimant "has the burden of showing that the contract sought to be enforced is in writing and contains all of the terms necessary to constitute a valid contract." (Citations omitted.) Ga. Dept. of Community Health v. Data Inquiry, LLC, 313 Ga.App. 683, 685 (1) (722 S.E.2d 403) (2012).

         The regulatory scheme under which the SHBP operates includes Ga. Comp. R. & Regs. r. 111-4-1-.10, [1] which provides in relevant part:

(1) Creation of Benefit Schedule. The Board is authorized to establish benefit schedules for Options to be included in a health benefit plan for eligible persons as defined in Georgia law. Benefit schedules shall ...

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