Harper Woods Retirees Ass'n v. City of Harper Woods

• Decision Date: 01 October 2015
• Docket Number: Docket No. 318450.
• Citation: 879 N.W.2d 897,312 Mich.App. 500
• Parties: HARPER WOODS RETIREES ASSOCIATION v. CITY OF HARPER WOODS.
• Court: Court of Appeal of Michigan — District of US

312 Mich.App. 500

879 N.W.2d 897

HARPER WOODS RETIREES ASSOCIATION

v.CITY OF HARPER WOODS.

Docket No. 318450.

Court of Appeals of Michigan.

Submitted Feb. 4, 2015, at Detroit.

Decided Oct. 1, 2015, at 9:00 a.m.

Mark A. Porter & Associates (by Mark A. Porter) for plaintiffs.

Bellanca LaBarge PC (by Sharon A. DeWaele, Saint Clair Shores) for defendant.

Before: FORT HOOD, P.J., and JANSEN and GADOLA, JJ.

GADOLA

, J.

Plaintiffs appeal as of right from the trial court's order granting defendant's motion for summary disposition under MCR 2.116(C)(8)

(failure to state a claim) and MCR 2.116(C)(10) (no genuine issue of material fact). We reverse and remand for further proceedings consistent with this opinion.

I. FACTS

The Harper Woods Retirees Association (HWRA) is a nonprofit corporation composed of individuals who were once employed by defendant, and who retired between the 1980s and early 2000s. The individually named plaintiffs are retirees who hold the following positions within the HWRA: Jeffrey Manor, president; James Manor, treasurer; Judith DeKeyser, secretary; and Donald Kuczborski, trustee. According to plaintiffs' complaint, members of the HWRA obtained vested healthcare benefits through multiple collective bargaining agreements (CBAs) and personal contracts with defendant. These agreements identified specific health insurance plans, riders, and prescription drug co-pays available to retirees.¹ Plaintiffs alleged that retirees previously received Blue Cross–Blue Shield of Michigan (BCBS–M) “ Traditional,” “Master Medical,” or “Community Blue–1” insurance plans, which guaranteed either no deductibles for treatment or “first dollar” deductibles of approximately $10 for office visits. Plaintiffs also claimed that some of their original health plans had a $2 deductible for generic prescriptions and a $5 deductible for name brand prescriptions.

On April 12, 2012, defendant announced plans to unilaterally alter its retirees' healthcare coverage. According to plaintiffs' complaint, defendant sought to move retirees under the age of 65 into a BCBS–M “Community Blue–2” insurance plan, and retirees over the age of 65 into a BCBS–M “Medicare Advantage, Mid–Option” insurance plan. Plaintiffs alleged that the new plans “would include co-pays and deductibles amounting to $1,000.00 to $1,500.00 per year, per retiree” and would require retirees who previously paid $2 and $5 co-pays for their prescriptions to pay $5 for generic prescriptions and $20 for name brand prescriptions.

In June 2012, individual retirees established the HWRA to oppose defendant's proposed changes. However, following two meetings between defendant and the HWRA, defendant maintained that its retiree healthcare benefits expired at the term end of the relevant CBAs, giving defendant the discretion to alter retiree health insurance coverage. On July 9, 2012, the city council approved defendant's alterations, and on August 1, 2012, the changes became effective.

In October 2012, plaintiffs filed a complaint alleging breach of contract including violation of the Contract Clauses of the United States Constitution. Plaintiffs sought a declaration that defendant breached its contracts, an injunction against further alteration of retiree benefits, and an order returning to retirees their previous health insurance coverage. Plaintiffs also sought class certification for the 88 members of the HWRA. The trial court initially refused to certify the membership of the HWRA as a class. However, following a motion hearing on June 28, 2013, the court instructed plaintiffs to reintroduce their motion for class certification, and instructed defendant to bring a motion for summary disposition on the question of whether a municipality may unilaterally alter the healthcare benefits of its retired employees.

At a hearing in September 2013, the court addressed both motions. First, the court granted plaintiffs' motion for class certification in part, defining the certified class to include all of defendant's employees who (1) were covered by a CBA at the time of retirement, or (2) had a personal contract with defendant at the time of retirement. However, the trial court did not identify the specific persons included in the class certification. Next, addressing defendant's motion for summary disposition, the court relied on the holding of the United States Court of Appeals for the Sixth Circuit in Reese v. CNH America LLC, 694 F.3d 681 (C.A.6, 2012)

to conclude as a matter of law that employers may unilaterally alter retirees' health insurance coverage provided in a CBA if the alterations are reasonable. Because plaintiffs had not challenged the reasonableness of defendant's health insurance alterations, the trial court granted defendant's motion.

Plaintiffs appealed as of right in this Court the trial court's summary disposition order. On appeal, plaintiffs argued that the lower court erred by granting defendant's motion for summary disposition, and that it failed to provide proper notice to class members after certifying the case as a class action. We held oral argument on the matter on February 4, 2015. Shortly thereafter, we issued an order remanding the case for the limited purpose of identifying the members of the certified class and providing them notice in compliance with MCR 3.501(C)

.²

Harper Woods Retirees Ass'n v. City of Harper Woods, unpublished order of the Court of Appeals, entered February 13, 2015 (Docket No. 318450). In July 2015, the trial court submitted an order on remand certifying the class and identifying the class members. Now that the members of the class have been identified, we address plaintiffs' remaining arguments on appeal.

II. STANDARD OF REVIEW

We review de novo a trial court's decision on a motion for summary disposition. Cuddington v. United Health Servs., Inc., 298 Mich.App. 264, 270, 826 N.W.2d 519 (2012)

. Defendant moved for summary disposition under both MCR 2.116(C)(8) and MCR 2.116(C)(10), and the trial court did not specify under which rule it decided the motion. However, because the court decided defendant's motion on purely legal grounds without referring to evidence outside the pleadings, we review the motion under MCR 2.116(C)(8).³

Spiek v. Dep't. of Transp.,

456 Mich. 331, 338, 572 N.W.2d 201 (1998) ; see also MCR 2.116(G)(5). “A motion under MCR 2.116(C)(8) tests the legal sufficiency of the complaint.” Maiden v. Rozwood, 461 Mich. 109, 119, 597 N.W.2d 817 (1999). When reviewing the motion, courts must accept as true all well-pleaded factual allegations within the complaint. Wade v. Dep't. of Corrections, 439 Mich. 158, 162–163, 483 N.W.2d 26 (1992). A decision granting a motion under MCR 2.116(C)(8) is proper if the claims alleged are “so clearly unenforceable as a matter of law that no factual development could possibly justify recovery.” Id. at 163, 483 N.W.2d 26. We review de novo questions regarding the interpretation of a contract. In re Smith Trust, 274 Mich.App. 283, 285, 731 N.W.2d 810 (2007), aff'd 480 Mich. 19, 745 N.W.2d 754 (2008).

III. DISCUSSION

Plaintiffs first argue that the trial court erred by granting defendant's motion for summary disposition after concluding that under Reese, 694 F.3d 681

, defendant could unilaterally modify any health insurance benefits provided to retirees under its CBAs or personal contracts, regardless whether the rights had vested, as long as the modifications were reasonable. We agree.

In Michigan, “[t]he foundational principle of our contract jurisprudence is that parties must be able to rely on their agreements[, and this] applies no less strongly to collective bargaining agreements....”

Macomb Co. v. AFSCME Council 25 Locals 411 & 893, 494 Mich. 65, 80, 833 N.W.2d 225 (2013)

. “A collective bargaining agreement, like any other contract, is the product of informed understanding and mutual assent.” Port Huron Ed. Ass'n v. Port Huron Area Sch. Dist., 452 Mich. 309, 327, 550 N.W.2d 228 (1996). When contractual language is unambiguous, courts must interpret and enforce the language as written because an unambiguous contract reflects, as a matter of law, the parties' intent. Hastings Mut. Ins. Co. v. Safety King, Inc., 286 Mich.App. 287, 292, 778 N.W.2d 275 (2009). “[T]he principle of freedom to contract does not permit a party unilaterally to alter [an] original contract.” Quality Prod. & Concepts Co. v. Nagel Precision, Inc., 469 Mich. 362, 364, 666 N.W.2d 251 (2003). Rather, when the alteration of a provision in a CBA “affects vested rights already accrued[, the change] may give rise to a cause of action in contract.” Dumas v. Auto Club Ins. Ass'n, 437 Mich. 521, 530, 473 N.W.2d 652 (1991) (involving a change in compensation policy for work already preformed).

The trial court erred by concluding as a matter of law that defendant could unilaterally alter the health insurance benefits provided under its CBAs and personal contracts. Generally, unilateral alteration of contracts is prohibited because “mutuality is the centerpiece to waiving or modifying a contract....” Quality Prod., 469 Mich. at 364, 666 N.W.2d 251

.⁴ The trial court also erred by holding that the reasonableness of defendant's proposed alterations, in light of the city's alleged financial crisis, was a proper basis on which to permit or refuse enforcement of the contractual provisions at issue. In Michigan, “[a] mere judicial assessment of ‘reasonableness' is an invalid basis on which to refuse to enforce contractual provisions.” Rory v. Continental Ins. Co., 473 Mich. 457, 470, 703 N.W.2d 23 (2005)

. Further, rising medical insurance costs and the city's financial situation are irrelevant to the inquiry because the fact that a contractual obligation “proved to be more onerous ... than anticipated is no defense.” Johnston v. Miller, 326 Mich. 682, 696, 40 N.W.2d 770 (1950).

By ruling that defendant could unilaterally alter any of its retirees' healthcare benefits as a matter of law, the trial court found the Sixth Circuit's ...