Duluth retirees' health-care lawsuit goes to Minnesota Supreme Court

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The next round of the ongoing legal battle between the city of Duluth and a group of retired municipal employees will take place at a prominent venue: the Minnesota Supreme Court.

The highest court in the state has agreed to hear the case on May 2, according to Duluth City Attorney Gunnar Johnson, who provided an update to the City Council on Monday night.

A group of three city retirees sued Duluth in May 2008, claiming the city did not have authority to change the health benefits it provided to them at the date of their retirements. Their complaint has proceeded as a class-action lawsuit on behalf of about 800 former city employees and about 400 to 600 dependents.

The city of Duluth prevailed in the first bout of the legal tussle in October 2009, when District Court Judge Kenneth Sandvik ruled in its favor.

Duluth took the position that it is required by contract only to provide retirees with the same type of insurance coverage that current employees receive. Prior to adopting this approach, the city faced the costly administrative headache of overseeing about 100 different plans for former employees who retired at different times.

The switch also left retirees with less comprehensive coverage, which is, of course, cheaper to provide.

The streamlined system is expected to save the city about $2 million this year and even more over the long haul. Mayor Don Ness said that maintaining the old insurance system would have saddled the city with an unfunded liability of about $351 million in 30 years. In contrast, he said the simplified system should reduce that liability to a projected $146 million — a savings of about $205 million.

After Sandvik’s ruling, the retirees took their case to the Minnesota Court of Appeals, but that court largely upheld Sandvik’s decision in September 2010. Now, the retirees have taken their appeal to the Minnesota Supreme Court.

After successfully defending its position before two lower courts, Johnson said he remains confident the city will prevail in front of the Supreme Court as well.

Don Bye, the retirees’ attorney in the case, could not be reached for comment late Monday night.

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