City of Pontiac Retired Emps. Ass'n v. Schimmel, No. 12–2087.

CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)
Writing for the CourtGWIN
Citation726 F.3d 767
PartiesCITY OF PONTIAC RETIRED EMPLOYEES ASSOCIATION; Delmer Anderson; Thomas Hunter; Henry C. Shoemaker; Yvette Talley; Debra Woods; John Claya, Plaintiffs–Appellants, v. Louis SCHIMMEL, Individually and in his capacity as Emergency Manager of the City of Pontiac; Cathy Square, Individually and in her official capacity as the Director of Human Resources and Labor Relations for the City of Pontiac; City of Pontiac, Defendants–Appellees.
Decision Date08 November 2013
Docket NumberNo. 12–2087.

726 F.3d 767

CITY OF PONTIAC RETIRED EMPLOYEES ASSOCIATION; Delmer Anderson; Thomas Hunter; Henry C. Shoemaker; Yvette Talley; Debra Woods; John Claya, Plaintiffs–Appellants,
v.
Louis SCHIMMEL, Individually and in his capacity as Emergency Manager of the City of Pontiac; Cathy Square, Individually and in her official capacity as the Director of Human Resources and Labor Relations for the City of Pontiac; City of Pontiac, Defendants–Appellees.

No. 12–2087.

United States Court of Appeals,
Sixth Circuit.

Argued: Jan. 15, 2013.
Decided and Filed: Aug. 9, 2013.

Rehearing En Banc Granted, Opinion Vacated Nov. 8, 2013.


[726 F.3d 768]


ARGUED:Alec Scott Gibbs, Law Office of Gregory T. Gibbs, Flint, Michigan, for Appellants.
Stephen J. Hitchcock, Giarmarco, Mullins & Horton, P.C., Troy, Michigan, for Appellees. ON BRIEF:Alec Scott Gibbs, Gregory Thomas Gibbs, Law Office of Gregory T. Gibbs, Flint, Michigan, for Appellants.

[726 F.3d 769]

Stephen J. Hitchcock, Giarmarco, Mullins & Horton, P.C., Troy, Michigan, for Appellees.

Before: COLE and GRIFFIN, Circuit Judges; GWIN, District Judge.
*

GWIN, D.J., delivered the opinion of the court, in which COLE, J., joined.
GRIFFIN, J. (pp. 779–89), delivered a separate dissenting opinion.

OPINION

GWIN, District Judge.

Like many Michigan municipalities, the City of Pontiac has experienced significant economic difficulties, especially since the 2008 financial collapse. To address Pontiac's problems, Michigan's Governor appointed Louis Schimmel as Pontiac's emergency manager. Acting under Public Act 4, Michigan's then-existing emergency manager law, Schimmel modified the collective bargaining agreements of Pontiac's retired employees. He also modified severance benefits, including pension benefits, that Pontiac had given to other retirees not covered by collective bargaining agreements. In this case, those retired employees challenge the emergency manager's power to reduce their retirement benefits.

The retired employees say that Schimmel and Pontiac violated their federal constitutional rights, including rights given under the Contracts Clause, the Due Process Clause, and the Bankruptcy Clause. The retired employees do not specifically argue that Schimmel violated Michigan's Constitution when he changed their pension rights. But, the Michigan Legislature may have violated the Michigan Constitution when it passed Public Act 4. In addition, Michigan voters rejected Public Act 4 by referendum, and this rejection may have rendered Schimmel's actions void.

Despite the parties' inadequate briefing of these state-law issues, we decline to decide the case on federal constitutional grounds. Because state law could provide an alternative basis for deciding this case, we VACATE and REMAND to the district court to conduct additional fact-finding and consider these state-law issues. Specifically, did two-thirds of both houses of the Michigan Legislature vote to make Public Act 4 immediately effective? And, since Michigan voters rejected Public Act 4 in a referendum, do the acts taken under the rejected law have any power? Because similar issues face many Michigan municipalities, we ask the district court to expedite consideration of the remanded case.

I. Background
A. Michigan's Emergency Manager Laws

Emergency Manager Louis Schimmel (the “Emergency Manager”) changed contractual and pension commitments under Public Act 4. Public Act 4 is not Michigan's first law governing emergency managers, but it is the first legislation that allowed emergency managers to break collective bargaining agreements and to ignore retirement commitments. Mich. Comp. Laws §§ 141.1501–1531 (rejected by referendum 2012). In 1990, the Michigan Legislature enacted a predecessor to Public Act 4, the Local Government Fiscal Responsibility Act (“Public Act 72”). Mich. Comp. Laws § 141.1519(1)(j) (2005). Public Act 72 established a procedure for Michigan's Governor to appoint emergency managers, and gave those emergency managers the power to address local governments' financial crises. But Public Act 72 did not give emergency managers the power

[726 F.3d 770]

to modify collective bargaining agreements or pension rights. Critics of Public Act 72 complained that it did not give emergency managers the powers sometimes necessary to address municipalities' structural budget problems, especially financial problems flowing from pension commitments. Critics called for a new law, and Public Act 4 was born.

In March 2011, Michigan's Governor signed Public Act 4 into law. § 141.1503. Unlike Public Act 72, Public Act 4 gave emergency managers the power to temporarily reject, modify, or terminate existing collective bargaining agreements. Id. at §§ 141.1519(1)(k), (k)(iv). Public Act 4 also repealed Public Act 72. Id. at § 141.1503 (enacting § 1).

As we discuss, Michigan's Constitution purposely makes it difficult for laws to take immediate effect. Generally, laws do not become effective until ninety days after the end of the legislative session in which they are passed. Mich. Const. art. IV, § 27. However, this general rule does not apply if two-thirds of each house in the Legislature vote to make the law take immediate effect. Id. Public Act 4 passed by only a narrow margin. Nevertheless, the Michigan Legislature claims that two-thirds of its members voted to make Public Act 4 become immediately effective.

Michigan also has a voter rejection procedure that allows citizen-initiated rejection of Michigan legislation. In response to Public Act 4, critics collected enough signatures to have Michigan citizens vote on whether Public Act 4 should be rejected.1 On November 6, 2012, Michigan voters rejected Public Act 4 by a fifty-two percent to forty-eight percent margin. Michigan's citizens cancelled Public Act 4.

Apparently unaffected that voters had just rejected Public Act 4, the Michigan Legislature enacted, and the Michigan Governor signed, Public Act 436. Public Act 436 largely reenacted the provisions of Public Act 4, the law that Michigan citizens had just revoked. In enacting Public Act 436, the Michigan Legislature included a minor appropriation provision, apparently to stop Michigan voters from putting Public Act 436 to a referendum.2Mich. Comp. Laws §§ 141.1574, 1575.

B. City of Pontiac

In March 2009, Michigan's Governor appointed Schimmel as Pontiac's emergency manager under Public Act 72, Michigan's then-controlling emergency manager law. Although Schimmel has managed Pontiac for a number of years, Pontiac continues to struggle. Currently, Pontiac's liabilities to the benefit plans of its employees is its greatest expense, totaling $302 million.

With the passage of Public Act 4 and for the first time, Michigan gave emergency managers the power to change collective bargaining agreements and the power to stop pension benefits. In December 2011, the Emergency Manager modified Pontiac's collective bargaining agreements to shift a large portion of the city's benefits obligations onto its employees.3 Among

[726 F.3d 771]

the changes, Pontiac cancelled disability, vision, and hearing coverage; increased annual deductibles; and cut pensions. This case resulted.

C. Procedural History

In June 2012, the City of Pontiac Retired Employees Association and a group of retired employees (collectively the “Retired Employees”) filed this putative class action. They alleged several federal claims, including the unconstitutional impairment of contract, preemption under federal bankruptcy law, and deprivation of a property interest without due process of law. With the complaint, the Retired Employees filed a motion for a temporary restraining order (“TRO”) and a motion for a preliminary injunction to stop certain Emergency Manager orders from taking effect. In July 2012, the district court denied the TRO motion and denied the motion for a preliminary injunction. The Retired Employees appealed.

II. Law and Analysis

As became clear during oral argument, both parties ask this Court to reach the substantive merits of their dispute. But doing so requires us to resolve important federal constitutional issues, which are closer questions than the dissent suggests. Unlike the district court here, another Michigan federal district granted injunctive relief when faced with similar federal questions.4 Against this backdrop, the better course of action asks the district court to see if state-law issues could avoid the need to rule on the federal claims. Because state law could provide an alternative basis for deciding this case, the more prudent approach is to allow the district court to conduct additional fact-finding and to consider the state-law issues.

A. Constitutional Avoidance

Under the doctrine of constitutional avoidance, we avoid constitutional determinations when a case can be resolved on other grounds. See Ashwander v. TVA, 297 U.S. 288, 347, 56 S.Ct. 466, 80 L.Ed. 688 (1936) (Brandeis, J., concurring) (“It is not the habit of the court to decide questions of a constitutional nature unless absolutely necessary to a decision of the case.”) (internal citation and quotation marks omitted); see also Muller Optical Co. v. EEOC, 743 F.2d 380, 386 (6th Cir.1984) (“The duty to avoid decisions of constitutional questions ... [is] based upon the general policy of judicial restraint.”). When a case can be resolved on state constitutional grounds, we should decide the state issue so as to avoid rendering a decision under the Federal Constitution. See Siler v. Louisville & Nashville R.R. Co., 213 U.S. 175, 191, 29 S.Ct. 451, 53 L.Ed. 753 (1909) (“This court has the same right, and can, if it deem it proper, decide the local questions only, and omit to decide the federal questions, or decide them adversely to the party claiming their benefit.”) (citations omitted).

The dissent would decide the Retired Employees' contracts clause and due process claims. But these federal constitutional issues are closer questions than the dissent suggests. If the Michigan Legislature...

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9 practice notes
  • Okrie v. State, Docket No. 319550.
    • United States
    • Court of Appeal of Michigan (US)
    • 19 August 2014
    ...was reached.27 Plaintiff's argument is meritless.28 Plaintiff thereafter relies on City of Pontiac Retired Employees Ass'n v. Schimmel, 726 F.3d 767 (C.A.6, 2013), in which a panel of the Sixth Circuit addressed the immediate effect of a bill regarding emergency managers and remanded to the......
  • In re City of Detroit, No. 13–53846.
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan
    • 20 December 2013
    ...vacated pending rehearing en banc the decision on which the RDPMA heavily relies. City of Pontiac Retired Employees Assoc. v. Schimmel, 726 F.3d 767 (6th Cir.2013). Accordingly, the Court concludes that P.A. 436 is not unconstitutional as a violation of the right to referendum in article II......
  • In re City of Detroit, No. 13–53846.
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan
    • 5 December 2013
    ...vacated pending rehearing en banc the decision on which the RDPMA heavily relies. City of Pontiac Retired Employees Assoc. v. Schimmel, 726 F.3d 767 (6th Cir.2013). Accordingly, the Court concludes that P.A. 436 is not unconstitutional as a violation of the right to referendum in article II......
  • Toth v. Callaghan, Case No. 12–CV–11700.
    • United States
    • United States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
    • 5 February 2014
    ...There is no operative Sixth Circuit decision so holding. The panel decision in City of Pontiac Retired Employees Association v. Schimmel, 726 F.3d 767 (6th Cir.2013), did so hold. Id. at 771 (“When a case can be resolved on state constitutional grounds, we should decide the state issue so a......
  • Request a trial to view additional results
9 cases
  • Okrie v. State, Docket No. 319550.
    • United States
    • Court of Appeal of Michigan (US)
    • 19 August 2014
    ...was reached.27 Plaintiff's argument is meritless.28 Plaintiff thereafter relies on City of Pontiac Retired Employees Ass'n v. Schimmel, 726 F.3d 767 (C.A.6, 2013), in which a panel of the Sixth Circuit addressed the immediate effect of a bill regarding emergency managers and remanded to the......
  • In re City of Detroit, No. 13–53846.
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan
    • 20 December 2013
    ...vacated pending rehearing en banc the decision on which the RDPMA heavily relies. City of Pontiac Retired Employees Assoc. v. Schimmel, 726 F.3d 767 (6th Cir.2013). Accordingly, the Court concludes that P.A. 436 is not unconstitutional as a violation of the right to referendum in article II......
  • In re City of Detroit, No. 13–53846.
    • United States
    • United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan
    • 5 December 2013
    ...vacated pending rehearing en banc the decision on which the RDPMA heavily relies. City of Pontiac Retired Employees Assoc. v. Schimmel, 726 F.3d 767 (6th Cir.2013). Accordingly, the Court concludes that P.A. 436 is not unconstitutional as a violation of the right to referendum in article II......
  • Toth v. Callaghan, Case No. 12–CV–11700.
    • United States
    • United States District Courts. 6th Circuit. United States District Court (Eastern District of Michigan)
    • 5 February 2014
    ...There is no operative Sixth Circuit decision so holding. The panel decision in City of Pontiac Retired Employees Association v. Schimmel, 726 F.3d 767 (6th Cir.2013), did so hold. Id. at 771 (“When a case can be resolved on state constitutional grounds, we should decide the state issue so a......
  • Request a trial to view additional results

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