AFT Mich. v. State, Docket Nos. 303702

• Decision Date: 07 June 2016
• Docket Number: Docket Nos. 303702,303704,303706.
• Parties: AFT MICHIGAN v. STATE OF MICHIGAN (ON REMAND).
• Court: Court of Appeal of Michigan — District of US

315 Mich.App. 602

893 N.W.2d 90

AFT MICHIGAN

v.STATE OF MICHIGAN (ON REMAND).

Docket Nos. 303702

303704

303706.

Court of Appeals of Michigan.

Submitted July 23, 2015, at Lansing.

Decided June 7, 2016, at 9:10 a.m.

Bill Schuette, Attorney General, Aaron D. Lindstrom, Solicitor General, Matthew Schneider, Chief Legal Counsel, and Patrick M. Fitzgerald, Assistant Attorney General, for the state defendants.

Mark H. Cousens, Southfield for AFT Michigan and others.

Miller Cohen, PLC, Detroit (by Bruce Miller, Keith D. Flynn, and Robert D. Fetter ), for Timothy Johnson, Janet Heslet, Ricky A. Mack, and Denise Zieja.

White, Schneider, Young & Chiodini, PC, Okemos (by James A. White, Kathleen C. Boyle, and Timothy J. Dlugos ), and Michael M. Shoudy, Okemos for Deborah McMillan, Thomas Brenner, Theresa Dudley, Katherine Daniels, and Corey Cramb.

Before: SHAPIRO, P.J., and SAAD and BECKERING, JJ.

ON REMAND

SHAPIRO, P.J.

On May 19, 2010, the Legislature enacted 2010 PA 75, significantly revising the Public School Employees Retirement Act (PERA), MCL 38.1301 et seq. In particular, Section 43e of 2010 PA 75 required all current public school employees to contribute 3% of their salaries to the Michigan Public School Employees' Retirement System (MPSERS).¹ THESE CONTRIBUTIONs, which were classified as "employer contributions" to a nonvesting retiree health benefit program, constituted a mandatory deduction from the employees' contracted-for compensation with their respective employers. 2010 PA 75, § 43e. Plaintiffs brought suit, challenging the constitutionality of 2010 PA 75. The trial court held that the statute violated plaintiffs' rights under both the Takings Clauses and the Due Process Clauses of the federal and state Constitutions, but held that it did not violate the constitutional provisions barring the impairment of contracts by the state.

The parties appealed in this Court. In AFT Mich. v. Michigan, 297 Mich.App. 597, 616, 621, 627, 825 N.W.2d 595 (2012) (AFT Mich. I ), vacated AFT Mich. v. Michigan, 498 Mich. 851, 864 N.W.2d 555 (2015), we held that that 2010 PA 75 was unconstitutional because it (1) impaired employment contracts between public school employees and employer school districts in violation of the Contracts Clauses of the state and federal Constitutions, Const. 1963, art. 1, § 10 and U.S. Const. art. I, § 10; (2) effected a taking without just compensation in violation of the Takings Clauses of the state and federal Constitutions, Const. 1963, art. 10, § 2 and U.S. Const. Ams. V and XIV; and (3) violated the guarantees of substantive due process in the state and federal Constitutions, Const. 1963, art. 1, § 17 and U.S. Const. Am. XIV, § 1. On September 27, 2012, defendants sought leave to appeal in the Michigan Supreme Court, which took no action on the application for nearly two years. During that time, and in response to this Court's decision in AFT Mich. I, the Legislature enacted 2012 PA 300, which further modified PERA. See AFT Mich. v. Michigan, 497 Mich. 197, 205, 866 N.W.2d 782 (2015) ( AFT Mich. II ). The 2012 act did not repeal MCL 38.1343e, but it added provisions substantially altering that section's scope and effect. First, it permitted employees hired before September 4, 2012, to opt out of the retiree healthcare system as of the first day of the pay period that would begin on or after February 1, 2013. MCL 38.1391a(5). Employees that opted out would, as of that date, no longer be subject to the challenged mandatory 3% reduction and would not receive any health insurance coverage premium from the retirement system. MCL 38.1391a (1) and (5). Second, the 2012 act significantly reduced benefits to those who elected to remain in the retiree healthcare system. See MCL 38.1391. Third, it provided for a separate retirement allowance for public school employees hired before September 4, 2012, who elected to pay contributions and remain in the system, but later failed to qualify for retiree healthcare benefits. MCL 38.1391a(8). In other words, it provided a refund mechanism that allowed employees who paid in, but did not ultimately qualify for benefits, to receive a refund on their contributions. Finally, the 2012 act eliminated retirement health benefits under the retirement system for all new employees hired after September 4, 2012. MCL 38.1391a(1).

This Court upheld 2012 PA 300 against a constitutional challenge, reasoning that the voluntary nature of the contributions and the refund mechanism served to remedy the constitutional defects identified in AFT Mich. I. AFT Mich. v. Michigan, 303 Mich.App. 651, 673, 676, 676–679, 846 N.W.2d 583 (2014). The Supreme Court affirmed. AFT Mich. II, 497 Mich. at 249–250, 866 N.W.2d 782.

Shortly after its affirmance in AFT Mich. II, the Supreme Court vacated our opinion in AFT Mich. I and remanded it to this Court

for reconsideration in light of the enactment of 2012 PA 300 and this Court's decision in [AFT Mich. II ]. On remand, the Court of Appeals shall consider what issues presented in these cases have been superseded by the enactment of 2012 PA 300 and this Court's decision upholding that Act, and it shall only address any outstanding issues the parties may raise regarding 2010 PA 75 that were not superseded or otherwise rendered moot by that enactment and decision. [AFT Mich., 498 Mich. 851, 864 N.W.2d 555 (2015).]

Per the Supreme Court's direction, we have considered whether the adoption of 2012 PA 300 or the Supreme Court's decision in AFT II renders moot any of the challenges to 2010 PA 75 or supersedes any of the constitutional analysis we employed in our earlier review of that act. We conclude that neither the legislative amendments nor the Supreme Court's decision supersedes or renders moot any of the issues raised in AFT Mich. I as to the mandatory wage reductions made during the period 2010 PA 75—but not 2012 PA 300—was in effect (hereinafter "the mandatory wage reduction period" or "the mandatory period"). We also conclude that neither the passage of 2012 PA 300 nor the Supreme Court's decision in AFT Mich. II requires that we alter the analysis we employed in our now-vacated decision in AFT Mich. I as to the constitutionality of 2010 PA 75 as it existed during the mandatory wage reduction period. The compulsory collection of 3% of employee wages during that period was unconstitutional. Accordingly, we remand this matter to the trial court with the direction to return the subject funds, with interest, to the relevant employees.

I. MOOTNESS

The enactment of 2012 PA 300 and our Supreme Court's decision in AFT Mich. II upholding that act do not render moot the issues raised in the present cases.

This Court generally does not address moot questions or declare legal principles that have no practical effect in a case. An issue is moot if an event has occurred that renders it impossible for the court to grant relief. An issue is also moot when a judgment, if entered, cannot for any reason have a practical legal effect on the existing controversy. [In re Pollack Trust, 309 Mich.App. 125, 154, 867 N.W.2d 884 (2015) (quotation marks and citations omitted).]

It is undisputed that during the mandatory period, 3% of public school employees' contracted-for wages were withheld by their employers. Those wages, totaling more than $550 million, are being held in escrow pending a final determination in this case. The parties agree that if 2010 PA 75, as it applied during the mandatory period, is found to be constitutional, then the funds held in escrow will be provided to the state, but that if it is found to be unconstitutional, then the escrowed funds will be returned to the employees who earned them. Because determination of the constitutional questions before us will have a practical legal effect on the disposition of the escrowed funds, the issues raised in these cases are not moot.

We must also determine whether the enactment of 2012 PA 300 and the decision in AFT II require that we alter the analysis in our now-vacated opinion regarding the constitutionality of 2010 PA 75 as applied during the mandatory period. In our earlier opinion, we concluded that mandated confiscation of employee wages as employer contributions to a system in which a right to benefits could never vest² violated several constitutional guarantees. With the enactment of 2012 PA 300, however, all future contributions became voluntary, not mandatory. Unlike the sums withheld during the mandatory period, all the monies paid from employee wages into the retirement health system were thereafter paid voluntarily; no employee was or could be legally compelled to financially invest in a system in which the intended fruits were not "accrued financial benefits." See Studier v. Mich. Pub. Sch. Employees' Retirement Bd., 472 Mich. 642, 658–659, 698 N.W.2d 350 (2005). The question before us now is whether the change from mandatory to voluntary contributions set forth in 2012 PA 300 retroactively rendered constitutional the reduction of wages during the mandatory period.

As with any question of statutory interpretation and application, we begin with the language of the statute.

Lash v. Traverse City, 479 Mich. 180, 187, 735 N.W.2d 628 (2007). The language of 2012 PA 300, as the state concedes, contains no retroactivity provision and makes no reference to the funds collected during the mandatory period. "Nothing will be read into a clear statute that is not within the manifest intention of the Legislature as derived from the language of the statute itself." Thomason v. Contour Fabricators, Inc., 255 Mich.App. 121, 124–125, 662 N.W.2d 51 (2003). Accordingly, we may not read the 2012 amendments as retroactive nor as governing funds collected before the application of 2012 PA 300.

The state correctly points out that if the escrowed funds are turned over to the state, the funds would be subject to the refund mechanism of 2012 PA 300 for those employees who ultimately do not qualify for retirement healthcare benefits. Speci...