Pontiac Police & Fire Retiree Prefunded Grp. Health & Ins. Trust Bd. of Trs. v. City of Pontiac No. 2.

• Decision Date: 17 March 2015
• Docket Number: Docket No. 316680.
• Citation: 873 N.W.2d 783,309 Mich.App. 611
• Parties: PONTIAC POLICE AND FIRE RETIREE PREFUNDED GROUP HEALTH AND INSURANCE TRUST BOARD OF TRUSTEES v. City of PONTIAC NO. 2.
• Court: Court of Appeal of Michigan — District of US

309 Mich.App. 611

873 N.W.2d 783

PONTIAC POLICE AND FIRE RETIREE PREFUNDED GROUP HEALTH AND INSURANCE TRUST BOARD OF TRUSTEES

v.City of PONTIAC NO. 2.

Docket No. 316680.

Court of Appeals of Michigan.

Submitted July 15, 2014, at Detroit.

Decided March 17, 2015, at 9:10 a.m.

Sullivan, Ward, Asher & Patton, PC, Southfield (by Matthew I. Henzi ), for plaintiff.

Giarmarco, Mullins & Horton, PC, Troy (by Stephen J. Hitchcock and John C. Clark ), for defendant.

Before: MARKEY, P.J., and OWENS and FORT HOOD, JJ.

PER CURIAM.

Plaintiff Board of Trustees of the City of Pontiac Police and Fire Retiree Prefunded Group Health and Insurance Trust (board of trustees or trustees) appeals by right Oakland Circuit Judge Shalina D. Kumar's order granting defendant's motion for summary disposition under MCR 2.116(C)(5) (lack of standing), (C)(8) (failure to state a claim), and (C)(10) (no genuine issue of material fact). We affirm.

I. FACTS AND PROCEEDINGS

The Board of Trustees of the City of Pontiac Police and Fire Retirement System (retirement system trustees) and plaintiff trustees filed a complaint in circuit court asserting that defendant funded the City of Pontiac Police and Fire Retirement System, which provided retirement benefits to retired police and firefighters. Plaintiffs also asserted that defendant funded the City of Pontiac Police and Fire Retiree Prefunded Group Health and Insurance Plan (the trust), a tax-exempt voluntary employees' beneficiary association, 26 USC 501(c)(9), which provided health, optical, dental, and life-insurance benefits to police and firefighters who retired on or after August 22, 1996. The trust's board of trustees is composed of five members: the city's mayor, the city's finance director, a firefighter, a police officer, and a fifth trustee whom the other trustees would select and who could participate in the trust.¹

During the fiscal year ending June 30, 2012, the city's emergency manager (EM), Louis Schimmel, entered into termination collective bargaining agreements (CBAs) with the various police and firefighter unions. The EM acted under the authority of § 19(1)(k) of 2011 PA 4, MCL 141.1519(1) (k).² The city also contracted to receive police services from Oakland County effective August 1, 2011, and fire services from Waterford Township, effective February 1, 2012. As of April 24, 2012, the CBAs outlining benefits funded by the trust included the Police Supervisors Contract Termination Agreement, the Police Non–Command Contract Termination Agreement, the Fire Contract Termination Agreement, the Police Supervisors Collective Bargaining Agreement, the Police Non–Command Collective Bargaining Agreement, and the Fire Collective Bargaining Agreement. On April 25, 2012, the city's EM issued Executive Orders 206 and 207, which modified the healthcare benefits set forth in the various CBAs. The executive orders were identical, with Executive Order 206 applying to firefighter retirees and Executive Order 207 applying to police retirees. Executive Orders 206 and 207 took effect on July 1, 2012, and modified retirees' healthcare benefits by requiring pre-Medicare-aged retirees to enroll in a Humana PPO–08 Plan, limiting Medicare-aged retirees to a Medicare Advantage Plan G, eliminating defendant's reimbursement of retirees' Medicare Part B premium, and requiring pre-Medicare-aged retirees to pay the amount above the "hard cap" of 2011 PA 152 or pay 20 percent of annual rates, whichever is greater.

On August 29, 2012, a stipulated order of dismissal was entered as to the claim of the retirement system trustees because of Executive Order 224, which memorialized a settlement. On the same day, a stipulated order was entered authorizing plaintiff board of trustees³ to file an amended complaint alleging that the city improperly reduced retiree healthcare benefits through Executive Orders 206 and 207. Count I alleged a violation of Const. 1963, art. 9, § 24 ; Count II alleged that through Executive Order 225 the city improperly sought to amend the trust by eliminating its obligation to financially contribute to the trust,⁴ and Count III alleged a breach of contract claim. Plaintiff sought a declaratory ruling, an injunction, and monetary damages.

On February 13, 2013, the city moved for summary disposition under MCR 2.116(C)(5), (C)(8), and (C)(10). In its supporting brief the city argued that plaintiff trustees lacked standing to sue for a certain level of healthcare benefits because it was not responsible for the level of retirees' healthcare benefits. Rather, the city argued, the board of trustees was only responsible for ensuring compliance with the Internal Revenue Code, managing and investing trust funds, and providing health, optical, dental, and life-insurance benefits to police and firefighters who retired on or after August 22, 1996, as required by the various CBAs. The city also argued that Count I was meritless because of our Supreme Court's holding in Studier v. Mich. Pub. Sch. Employees Retirement Bd., 472 Mich. 642, 698 N.W.2d 350 (2005), that healthcare benefits are not protected by Const. 1963, art. 9, § 24, and that Count III was meritless because the emergency manager had the authority under 2011 PA 4 to unilaterally modify collective bargaining agreements.

On May 22, 2013, the trial court entered its opinion and order granting defendant's motion for summary disposition. The trial court first concluded that the trustees had standing:

Pursuant to the language of the Trust Agreement, Plaintiff is responsible for ensuring the Trust's compliance with the Internal Revenue Code, as well as investing, managing, and controlling the Trust's assets. In addition, Plaintiff has the "right and duty to enforce ... the performance of all obligations provided in th[e] Trust." As Plaintiff is the entity responsible for the Trust's assets and required to enforce each obligation set forth in the Trust, Plaintiff has standing to bring the instant lawsuit.

The trial court then concluded that Count I was meritless because healthcare benefits are not protected by Const. 1963, art. 9, § 24. The trial court also concluded that Count III was meritless because the emergency manager validly amended the various CBAs pursuant to the authority granted by 2011 PA 4.

II. STANDARD OF REVIEW

Although the trial court did not identify under which subrule it granted summary disposition, we review the trial court's decision under the standard applicable to MCR 2.116(C)(10)"because the trial court's consideration went beyond the parties' pleadings." Kosmalski v. St. John's Lutheran Church, 261 Mich.App. 56, 59, 680 N.W.2d 50 (2004). We review de novo a trial court's decision regarding a motion for summary disposition under MCR 2.116(C)(10), which tests the factual sufficiency of a claim.

Corley v. Detroit Bd. of Ed., 470 Mich. 274, 277–278, 681 N.W.2d 342 (2004). In deciding the motion, the trial court must view the substantively admissible evidence submitted up to the time of the motion in a light most favorable to the party opposing the motion. Maiden v. Rozwood, 461 Mich. 109, 120–121, 597 N.W.2d 817 (1999). Summary disposition may be granted "if there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law." West v. Gen. Motors Corp., 469 Mich. 177, 183, 665 N.W.2d 468 (2003). "A genuine issue of material fact exists when the record, giving the benefit of reasonable doubt to the opposing party, leaves open an issue upon which reasonable minds might differ." Id.

III. ANALYSIS

A. STANDING

The city first argues that plaintiff board of trustees lacks standing to maintain the instant action. In particular, the city notes that the trustees have specific and limited duties under the trust agreement. The trust agreement limits the duties of the board of trustees to carrying out the purposes of the trust, maintaining the trust's tax-exempt status under the Internal Revenue Code, and investing, managing, and controlling the trust's assets. While the purpose of the trust is to provide group insurance benefits for police and firefighter retirees, the nature and extent of those benefits is determined by the pertinent CBAs between the city and the various police and firefighter unions. The city also argues that nothing in the trust agreement establishes that the board of trustees has any role in determining the extent of the benefits afforded the retirees, and the trustees are expressly "bound by the terms of [the] Trust Agreement and any applicable Collective Bargaining Agreements between the City and the collective bargaining associations...." Consequently, the city argues, the board of trustees has no more interest in the level of retiree health insurance benefits than any other citizen does, and under the doctrine of standing, the board of trustees is not a proper party to assert the claims made in this lawsuit.

Initially, we must decide whether the city's standing argument is properly before the Court. An appellee who has taken no cross-appeal may nevertheless argue that a judgment in its favor be affirmed for reasons that were rejected by the lower court. Middlebrooks v. Wayne Co., 446 Mich. 151, 166 n. 41, 521 N.W.2d 774 (1994). But the city did not raise the issue of standing in its answer to the original complaint or in its answer to the amended complaint. This Court has viewed a claim that a plaintiff lacks standing as a motion under MCR 2.116(C)(5), i.e., that the plaintiff lacks the legal capacity to sue. See Glen Lake–Crystal River Watershed Riparians v. Glen Lake Ass'n, 264 Mich.App. 523, 528, 695 N.W.2d 508 (2004). Further, to preserve a motion under subrule (C)(5), a party must raise the issue in its "first responsive pleading or in a motion filed prior to that pleading." Id., citing MCR 2.116(D)(2). Here, the city did not do so; it raised the issue in its motion for summary disposition that was filed after it had filed its answer to plaintiff's amended complaint. While the...