Oral Assurances That Conflict with Written Policies and Statutory Requirements Held Insufficient to Support Injunctive Relief

• Posted on: Oct 9 2019

It is not uncommon for a client to claim that he/she had an agreement with another based on oral representations that were not memorialized in the writing between them. The question for practitioners and the courts is whether the oral assurances constitute a binding agreement. In LiTrenta v. Chappaqua Cent. Sch. Dist., 2019 N.Y. Slip Op. 51556(U) (Sup. Ct., Westchester County Oct. 4, 2019) (here), the Court answered the question in the negative.

LiTrenta involved an action to recover damages for breach of contract. Plaintiff, Marie LiTrenta (“Plaintiff” or “LiTrenta”), claimed that her employer, Defendant Chappaqua Central School District (“Defendant” or the “District”), owed her medical benefits pursuant to an oral agreement following her retirement as an administrator of the District.

LiTrenta began her employment with the District on August 1, 2000, as Assistant Superintendent for Curriculum and Technology. At the time, the District provided retirees with lifetime health benefits on the District’s group health plan. Pursuant to the District’s Handbook on Personnel Practices and Procedures (the “Handbook”), however, those benefits were available only to retirees with a minimum District service of five years.

On January 10, 2002, the then Superintendent of Schools, James F. Donovan (“Donovan”), issued a memo to the benefits clerk stating that Plaintiff was entitled to the administrator’s benefit package as a vested employee upon her retirement, which included medical, dental, vision, and life insurance as per the current administrator’s contract. Thereafter, Plaintiff advised Superintendent Donovan that she would be retiring effective February 2, 2003.

Although Plaintiff retired with less than five years of service, the District paid her medical benefits through 2019. In May 2019, Plaintiff was notified by the District that she was not eligible for health insurance through the school district and that such coverage would terminate after June 30, 2019. She was further advised that the District would no longer contribute to reimbursement of the cost of Medicare Part B. As a result, Plaintiff commenced the action for breach of contract.

Plaintiff sought a temporary restraining order to restrain Defendant from taking any action to terminate her current medical coverage which the Court granted on the record pending the resolution of a motion for a preliminary injunction. Thereafter, Plaintiff moved for a preliminary injunction to enjoin Defendant from taking any action to terminate her medical coverage. The Court held a preliminary injunction hearing on June 17, 2019.

Plaintiff testified that upon accepting employment with the District, the then Superintendent, Dr. Donald Parker (“Parker”), assured her that upon retirement, the District would pay her lifetime benefits for medical coverage. She testified that she would not have taken the position with the District without that assurance since she was eligible for lifetime medical benefits with her prior school district.

Plaintiff further testified that she retired from the District in 2003 to work in private schools in Miami and in Manhattan. According to Plaintiff, upon her retirement, she was assured by Superintendent Donovan that the District would provide her with lifetime medical benefits even though she had less than five years of service with the District.

Plaintiff admitted during the hearing that she was aware that for a school district to contract with an employee, the terms of the contract must be authorized by the district’s Board of Education.

John Chow (“Chow”) testified for the District. As the Assistant Superintendent for Business for the Chappaqua Central School District, Chow was responsible for the District’s finances, including salaries, benefits, and operations. Chow confirmed that under the Handbook, retirement benefits, such as continued medical coverage, were available to retirees who had at least five years of service with the District.

Chow also referenced the Board of Education meeting minutes of November 5, 2002, which reflected Plaintiff’s resignation for purpose of retiring as effective on February 2, 2003. Chow testified that he found no employment contract between the District and Plaintiff. Notably, Chow testified that there was nothing in the minutes from the November 5th meeting reflecting a decision by the Board of Education to waive the Handbook requirement of minimum service to the District in connection with Plaintiff’s retirement.

Chow further testified that Plaintiff was not a vested employee because she had less than five years of service with the District. Chow explained that the reason the Board of Education was unaware that Plaintiff received the medical benefits was because the budget it received only included a budget line for health insurance and all retirees and current employees were collectively on that one line represented by a dollar figure.

Following the hearing and post-hearing briefing, the Court denied the motion, holding that Plaintiff failed to satisfy the elements required to obtain a preliminary injunction – that is, a probability of success on the merits, danger of irreparable injury (i.e., injury for which money damages are insufficient) in the absence of an injunction and a balance of equities in its favor. Slip Op. at *3, citing Nobu Next Door, LLC v. Fine Arts Hous., Inc., 4 N.Y.3d 839 (2005); CPLR 6301.

First, the Court held that Plaintiff failed to demonstrate a likelihood of success on her breach of contract claim. Under the Handbook, lifetime medical benefits were funded by the District for certain employees with a minimum district service requirement of five years. To obtain such benefits with less than the required minimum, an employee needed a waiver of the requirement from the Board of Education. “The plaintiff has not presented any contract with the Board of Education waiving the five-year requirement,” observed the Court. Slip Op. at *4. The Court explained that the minutes of the July 11, 2000, Board of Education meeting, when Plaintiff was hired, were devoid of any resolution by the Board approving a waiver of the five-year minimum service requirement for Plaintiff to receive lifetime benefits. Id. Similarly devoid of such a waiver was the July 13, 2000 letter from Superintendent Parker wherein he advised Plaintiff that the Board accepted his recommendation for her employment. Id.

The Court explained that pursuant to the Education Law, only a board of education is vested with the power to enter into employment contracts and, therefore, issue a waiver. Id., citing Kight v. Wyandanch Union Free Sch. Dist., 84 A.D.2d 749 (2d Dept. 1981); Education Law, § 1709[16]). “Thus,” said the Court, “the plaintiff’s reliance on Superintendent Parker’s oral assurance upon her hiring that she would be provided with lifetime medical benefits and the January 2002 internal correspondence from Superintendent Donovan to the benefits clerk that plaintiff is entitled to the administrator’s benefit package upon her retirement as a vested employee, i.e. an employee with at least five years of service, does not avail plaintiff of entitlement to a preliminary injunction.” Id.

The Court explained that “[t]he superintendents did not have the power or authority to enter into any contract with the plaintiff to waive the five-year employment requirement for lifetime medical benefits.” Id. Since “[n]either the verbal assurance of the superintendent nor the correspondence came from the Board of Education,” there could be no enforceable contract. Id. Simply stated, “[t]here has been no evidence submitted nor testimony elicited at the hearing establishing that the District’s Board of Education waived the five-years of service requirement so that plaintiff would be entitled to lifetime health insurance.” Id.

The Court rejected Plaintiff’s argument that the Board ratified the oral assurances by paying the benefits since she retired in 2003. The Court found “no evidence … that the Board of Education knew that plaintiff was being treated as vested even though she had less than five years of service with the District.…” Id.

Finally, the Court held that Plaintiff “failed to allege damages of a noneconomic nature and therefore, [did] not demonstrate[ ] irreparable injury.” Id., citing DiFabio v. Omnipoint Communications, Inc., 66 A.D.3d 635 (2d Dept. 2009).

Takeaway

“It is well settled that unless an employment is for a specified period, it is presumed to be an employment at will, and that, ‘absent a constitutionally impermissible purpose, a statutory proscription, or an express limitation in the individual contract of employment, an employer’s right at any time to terminate an employment at will remains unimpaired.’” Collins v. Hoselton Datsun, Inc., 120 A.D.2d 952, 952 (4th Dept. 1986), quoting Murphy v. American Home Prods. Corp., 58 N.Y.2d 293, 305 (1983); see also Lobosco v. NY Tel. Co./Nynex, 96 N.Y.2d 312, 316 (2001). New York “does not recognize the tort of wrongful discharge” upon which an employee at will may base a cause of action.  Id.

Nevertheless, New York courts have held that provisions in an employee handbook or policy manual may constitute an employment contract on which a breach of contract action may be based. Lobosco, 96 N.Y.2d at 316 citing Weiner v. McGraw-Hill, Inc., 57 N.Y.2d 458 (1982). In LiTrenta, though not explicitly stated, the Court found that the Handbook constituted a binding contract between the parties. As such, it spoke to the issue of lifetime healthcare benefits and the requirements necessary to receive such benefits. Since Plaintiff could not demonstrate a waiver of those requirements (e.g., minimum service of five years to the District), she could not demonstrate a breach of the Handbook. Thus, Plaintiff’s reliance on the assurances of those without the statutory authority to make them simply was not enough to support her claim.

Tagged with: Breach of Contract, Commercial Litigation, Employee At Will, Employee Handbook, Oral Assurances