Michigan v. Michigan
| Decision Date | 14 January 2014 |
| Docket Number | Docket Nos. 313960,314065. |
| Citation | 846 N.W.2d 583,303 Mich.App. 651 |
| Court | Court of Appeal of Michigan — District of US |
| Parties | AFT MICHIGAN v. MICHIGAN. |
OPINION TEXT STARTS HERE
Mark Cousens, Southfield, for AFT Michigan and others.
White, Schneider, Young & Chiodni, PC, Okemos (by James A. White, Kathleen Corkin Boyle, and Timothy J. Dlugos), and Arthur R. Przybylowicz, for the Michigan Education Association.
Bill Schuette, Attorney General, Aaron D. Lindstrom, Solicitor General, Matthew Schneider, Chief Legal Counsel, and Frank J. Monticello, Joshua O. Booth, and Patrick M. Fitzgerald, Assistant Attorneys General, for the state of Michigan and others.
Before: SAAD, P.J., and KIRSTEN FRANK KELLY and GLEICHER, JJ.
Plaintiffs in these consolidated appeals, AFT Michigan et al. and the Michigan Education Association (the MEA) et al.,1 labor organizations representing public school employees, appeal of right the Court of Claims' orders dismissing their challenges to provisions of 2012 PA 300. 2012 PA 300, effective September 4, 2012, amended the Public School Employees Retirement Act (PSERA), MCL 38.1301 et seq., and altered future healthcare and retirement benefit plans available to public school employees for services performed after December 1, 2012. Finding no error warranting reversal, we affirm.
Pursuant to MCL 38.1359, MCL 38.1343g, and MCL 38.1384b, members of the Michigan Public School Employees' Retirement System (MPSERS) created under the PSERA were asked to make a choice in terms of their future pension benefits:
(1) Members of the “Basic Plan,” who historically contributed nothing to their pensions, would now be expected to contribute 4% of their compensation to their pensions. Those individuals hired between January 1990 and July 2010 and those former Basic Plan members who transferred into the Member Investment Plan (MIP) would increase their contribution to 7%. Members who opted into the Basic Plan and MIP Plan would maintain the current 1.5% pension multiplier.
(2) Members could maintain current contribution rates, freeze existing benefits at the 1.5% multiplier, and receive a 1.25% pension multiplier for future years of service.
(3) Members could freeze existing pension benefits and move into a defined contribution, 401(k)-style, plan with a flat 4% employer contribution for future service.
Additionally, under MCL 38.1343e and MCL 38.1391a members were asked to opt in or out of retiree healthcare benefits; members could either contribute 3% of their compensation to receive the future benefit, or they could choose to receive no retiree healthcare benefits at retirement. MCL 38.1391a(8) further provided that a member who opted into the retiree healthcare program, but ultimately did not meet the eligibility requirements (e.g., because of a failure to work the requisite number of years) would be refunded his or her contribution starting at age 60 over a period of 60 months.
In two separate actions, plaintiffs filed complaints alleging: breach of contract and diminishment of contract, unconstitutional diminishment of members' accrued financial benefits, denial of substantive due process, and unjust enrichment to the state. The Court of Claims consolidated the two cases and considered the parties' competing motions for summary disposition. The Court of Claims concluded:
As much as I would like to strike the section that deals with the state keeping the money on the health care and find that it's an unjust enrichment or a taking, ... [m]y problem is this, if it were the only choice I would strike it down. The problem is we have informed consent and there are a number of choices, so the legislature in putting together this law thought about that. It's very clear to me. They are giving choices and they are saying be careful, because if you leave early, for whatever reason, we're going to hang on to your money and you'll get it at the age of 60 as you retire and you'll get some money back on top of it but it's probably not going to be a lot of money because we're going to use it in the meantime. Now, I'm not happy about that and it's probably usury, but it's with that party's consent because they certainly have enough time, especially with the striking of the 52 days, to do the research, to do the math, to consult with an accountant, a financial planner, an advisor, and maybe not make that choice so the state doesn't have their money. On the other hand, if they're not a person who can save money, maybe that is the best choice for them.
As to the rest of the sections, again, there is this delineation between vested and non-vested benefits. It does not appear to me that the legislature is touching anything that is vested.
And as to the brochures, here's the problem. I have made rulings against the state for exactly this. Treasury, for example, puts out these advisories about how our tax code is going to change and how people should pay taxes and they've come in here on cases saying that a business did not follow these advisory tax rules and they have charged people with additional taxes because they didn't follow this advisory rule. And I've said, well, this is only advisory, it's not in the tax code yet so, state, you can't have your way and the taxpayer wins. Because there's also disclaimers there.
And I find the same ruling here. There are pamphlets that the state puts out about here's how your pension is going to work and there's disclaimers on it. It's really only advisory in nature about how-here's how your retirement works. I don't believe that a pamphlet can be part of a contract. I think it's nice that it's out there. I think it helps, but unless it is attached to the contract, it's got everybody's signatures, and it's made part of the black and white contract, it's not part of the contract. So I am finding that as informative as those pamphlets are, they're not part of the contract. It's consistent with other rulings that I've made that I have been upheld on.
And so I think what the state has done with Public Act 300 of 2012 is left intact the retirement system with what's been vested and they are making members make elections on unvested pieces. So with the exception of the 52 days, I'm leaving the rest intact.2
Plaintiffs now appeal as of right,3 challenging four separate provisions of 2012 PA 300:
(1) MCL 38.1343e, which requires a 3% contribution toward retiree healthcare.
(2) MCL 38.1343g, which requires a 4% contribution to the pension plan for a member to remain in the Basic Plan.
(3) MCL 38.1384b, which reduces the multiplier used in calculating pension benefits for those individuals who opt out of making the contributions required under MCL 38.1343g.
(4) MCL 38.1391a(8), which provides the mechanism for refunding contributions to individuals who opt into the retiree healthcare plan but ultimately fail to qualify to receive those benefits.
We review de novo a trial court's decision on a motion for summary disposition. Maiden v. Rozwood, 461 Mich. 109, 118, 597 N.W.2d 817 (1999). Whether a contract exists is a question of law that this Court reviews de novo. Kloian v. Domino's Pizza, LLC, 273 Mich.App. 449, 452, 733 N.W.2d 766 (2006). Finally, the question whether 2012 PA 300 violates the Constitution is a question of law that is reviewed de novo. In re Williams, 286 Mich.App. 253, 271, 779 N.W.2d 286 (2009).
Plaintiffs argue that 2012 PA 300 unconstitutionally impairs existing contractual obligations concerning pension and retiree healthcare benefits in violation of both the federal and state Constitutions. We disagree.
In relevant part, the United States Constitution provides, “No State shall ... pass any ... Law impairing the Obligation of Contracts....” U.S. Const., art. I, § 10, cl. 1. And Michigan's 1963 Constitution states, in relevant part that “[n]o bill of attainder, ex post facto law or law impairing the obligation of contract shall be enacted.” Const. 1963, art. 1, § 10. We have recently set forth the process for determining whether a statute violates these constitutional clauses:
Currently, whether a state statute violates the Contract Clause is determined by reference to a three-step inquiry.... First, courts must determine whether the state law has operated as a substantial impairment of a contractual relationship. If it constitutes a substantial impairment, the court must look at whether the justification for the state law is based on a significant and legitimate public purpose. If a legitimate public purpose can be identified, the court looks at whether the adjustment of the rights and responsibilities of contracting parties [is based] upon reasonable conditions and [is] of a character appropriate to the public purpose justifying [the legislation's] adoption. With respect to this third inquiry, [as] is customary in reviewing economic and social regulation, ... courts properly defer to legislative judgment as to the necessity and reasonableness of a particular measure unless the state is one of the contracting parties. [Wells Fargo Bank, NA v. Cherryland Mall Ltd. Partnership, 300 Mich.App. 361, 373–374, 835 N.W.2d 593 (2013) (citations and quotation marks omitted; alterations in original).]
1. MEMBER HANDBOOKS AND BROCHURES
The AFT and its affiliated labor organizations (AFT) argue that the various pamphlets, handbooks, and informative brochures published by the state evidence a contract between the state and the members of MPSERS, under which the state agreed that a 1.5% multiplier would be used to calculate pension benefits. Alternatively, AFT argues that there is an “implied in law” contract.
“A party claiming a breach of contract must establish by a preponderance of the evidence (1) that there was a contract, (2) that the other party breached the contract and, (3) that the party asserting breach of contract suffered damages as a...
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