865 F.3d 339 (6th Cir. 2017), 16-1768, Kaminski v. Coulter

Docket Nº:16-1768
Citation:865 F.3d 339
Opinion Judge:BOGGS, Circuit Judge.
Party Name:CHARLES N. KAMINSKI; LINCOLN PARK POLICE AND FIRE RETIREES ASSOCIATION, INC.; MICHAEL J. MOULIOS; LINCOLN PARK MUNICIPAL EMPLOYEES RETIREES ASSOCIATION, INC., Plaintiffs-Appellees, v. BRAD L. COULTER, et al., Defendants, R. KEVIN CLINTON; NICK KHOURI, Defendants-Appellants
Attorney:Joshua O. Booth, OFFICE OF THE MICHIGAN ATTORNEY GENERAL, Lansing, Michigan, for Appellants. Mark A Porter, MARK A. PORTER & ASSOCIATES P.L.L.C., Madison Heights, Michigan, for Appellees. Joshua O. Booth, Christina M. Grossi, OFFICE OF THE MICHIGAN ATTORNEY GENERAL, Lansing, Michigan, for Appella...
Judge Panel:Before: BOGGS, SILER, and MOORE, Circuit Judges. BOGGS, J., delivered the opinion of the court in which SILER, J., joined. MOORE, J., delivered a separate dissenting opinion. KAREN NELSON MOORE, Circuit Judge, dissenting.
Case Date:July 25, 2017
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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865 F.3d 339 (6th Cir. 2017)

CHARLES N. KAMINSKI; LINCOLN PARK POLICE AND FIRE RETIREES ASSOCIATION, INC.; MICHAEL J. MOULIOS; LINCOLN PARK MUNICIPAL EMPLOYEES RETIREES ASSOCIATION, INC., Plaintiffs-Appellees,

v.

BRAD L. COULTER, et al., Defendants,

R. KEVIN CLINTON; NICK KHOURI, Defendants-Appellants

No. 16-1768

United States Court of Appeals, Sixth Circuit

July 25, 2017

          Argued, March 8, 2017

Page 340

          Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 2:15-cv-12810--Gershwin A. Drain, District Judge.

         ARGUED:

         Joshua O. Booth, OFFICE OF THE MICHIGAN ATTORNEY GENERAL, Lansing, Michigan, for Appellants.

         Mark A Porter, MARK A. PORTER & ASSOCIATES P.L.L.C., Madison Heights, Michigan, for Appellees.

         ON BRIEF:

         Joshua O. Booth, Christina M. Grossi, OFFICE OF THE MICHIGAN ATTORNEY GENERAL, Lansing, Michigan, for Appellants.

         Mark A Porter, Jamil Akhtar, MARK A. PORTER & ASSOCIATES P.L.L.C., Madison Heights, Michigan, for Appellees.

         Before: BOGGS, SILER, and MOORE, Circuit Judges. BOGGS, J., delivered the opinion of the court in which SILER, J., joined. MOORE, J., delivered a separate dissenting opinion.

          OPINION

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          BOGGS, Circuit Judge.

          This is a complicated case about the scope of governmental immunity. The plaintiffs-appellees are retirees of the City of Lincoln Park. In 2014, the city's dire financial condition led Michigan officials to place the city under the purview of an Emergency Manager pursuant to the authority granted by P.A. 436.1 The Emergency Manager, with the approval of Michigan's then-Treasurer Kevin Clinton, issued ten orders that temporarily replaced Lincoln Park retiree health-care benefits with monthly stipends that retirees could use to purchase individual health-care coverage. Dissatisfied, some of the retirees brought suit in federal court under 42 U.S.C. § 1983, asserting that, inter alia, the orders violated their constitutional rights secured by the Contracts Clause, the Due Process Clause, and the Takings Clause. In their complaint, the plaintiffs-appellees named a host of city and state officials and government entities as defendants, including Michigan Treasurer Kevin Clinton, who was sued in both his individual and official capacities. As the litigation progressed, Nick Khouri became Treasurer of the State of Michigan and was subsequently substituted in Clinton's place in his official capacity.2 Both Clinton and Khouri filed motions to dismiss, arguing that qualified immunity and Eleventh Amendment immunity rendered them immune from suit. The district court disagreed, holding that neither immunity theory applied to their actions and that the suit could proceed. For the following reasons, we reverse.

         I

         A

         In August 2013, the City of Lincoln Park faced financial distress. Due to a combination

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of poor planning and an economic recession, the city found itself unable to meet many of its outstanding financial obligations. In response to this crisis, the Lincoln Park City Council voted to request that the State of Michigan perform a review of the city's financial condition pursuant to § 4(1)(a) of P.A. 436. The State commissioned Gabriel Roeder to perform the evaluation, and he found, among other deficiencies, that the city's retirement systems were insufficiently funded and that immediate steps needed to be taken in order to ensure that the city's assets were not depleted.

         In February 2014, Michigan Governor Rick Snyder appointed a financial-review team to examine the city's financial condition in greater detail. After reviewing the Roeder evaluation and meeting with various Lincoln Park officials and representatives, the financial-review team concluded that a local-government emergency existed in Lincoln Park and that the appointment of an Emergency Manager was necessary for the city to avoid municipal bankruptcy.

         Pursuant to the review team's recommendation, Governor Snyder appointed Brad Coulter as Emergency Manager for the City of Lincoln Park on July 3, 2014. In his first report to the Michigan Treasurer, Coulter noted substantial problems with the funding for the city's retirement system. Of particular concern were both the city's general pension fund, which was financed at 22% of its current and future obligations, and the city's pension fund for police and fire department retirees, which was financed at 31% of its current and future obligations. Despite the fact that the city spent 40% of its budget contributing to these pension plans, both plans were projected to be fully depleted within ten to fifteen years. In order to cure this funding deficiency, Coulter proposed temporarily modifying the city's collective-bargaining agreements. Under his proposal, retiree health-care benefits would be replaced with a monthly stipend that could be used to purchase individual health-care coverage. Coulter estimated that his proposal would save the city $3.2 million per year, which could then be used to re-fund the pension system. Coulter submitted his proposal to the city's retirees, but they rejected his plan.

         Coulter then submitted his proposal to Michigan State Treasurer (" Treasurer" ) Clinton. Under Michigan law, an Emergency Manager can modify an existing collective-bargaining agreement with the approval of the Treasurer if good-faith negotiations between the city and the represented parties fail and if the Treasurer finds that certain statutorily enumerated conditions are met. See Mich. Comp. Laws § 141.1552(1)(k). Specifically, the Treasurer must find that (1) a financial emergency in the local government " has created a circumstance in which it is reasonable and necessary for the state to intercede to serve a legitimate and public purpose" ; (2) the modification of the agreement is reasonable and necessary to deal with a generalized economic problem; (3) the modification is " directly related to and designed to address the financial emergency for the benefit of the public as a whole" ; and (4) the modification is temporary and does not target specific classes of employees. Id. § 141.1552(1)(k)(i)-(iv). In a letter dated April 10, 2015, Treasurer Clinton found that these statutory conditions had been met and that Coulter could proceed with his proposal.

         On April 22, 2015, Coulter issued ten orders consistent with the proposal that he sent to Treasurer Clinton. The orders terminated " the sections of all Collective Bargaining Agreements . . . regarding retiree health care and Medicare Part B reimbursement" for Lincoln Park retirees and

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replaced the eliminated benefits with a monthly stipend that ranged from $150 to $425 per month. In addition, because the orders eliminated Medicare Part B reimbursement, retirees over 65 years of age were required to begin paying individually into a Medicare Part B program.

         B

         Soon after these orders became effective, many of the affected retirees filed suit in federal court under 42 U.S.C. § 1983. The complaint named several defendants, including Emergency Manager Coulter, Treasurer Clinton, and various other retirement boards and entities. Of relevance to this appeal, Treasurer Clinton was sued in both his official and individual capacities for his role in the modification of the plaintiffs' health-care benefits. The complaint alleged numerous violations of the plaintiffs' constitutional rights, including violations of the Contracts Clause, the First Amendment, the Takings Clause, and the Due Process Clause. For relief, the complaint requested class certification for all of the affected plaintiffs, a declaratory judgment that Coulter's orders were unconstitutional, an injunction requiring the defendants to reinstate the health-care benefits outlined in the collective-bargaining agreements, attorney's fees, and to be otherwise " made whole."

         After the complaint was filed, Treasurer Clinton was succeeded in office by Treasurer Nick Khouri. Pursuant to the Federal Rules of Civil Procedure, Khouri was automatically substituted in Clinton's place insofar as the complaint named Treasurer Clinton in his official capacity. See Fed.R.Civ.P. 25(d). Although this extinguished the claims against Clinton in his official capacity, he still remained a party to the suit in his individual capacity.

         Both Clinton and Khouri filed motions to dismiss the claims against them, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. They each argued that the plaintiffs' claims were substantively meritless, but they also raised various immunity defenses. Clinton argued that he was entitled to qualified immunity because, even if the modification of Lincoln Park's collective bargaining agreements amounted to a violation of the plaintiffs' constitutional rights, those rights were not " clearly established" at the time that the violation occurred. ...

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