Reidenbach v. City of Kalamazoo

• Decision Date: 26 February 2019
• Docket Number: No. 340863,340863
• Citation: 933 N.W.2d 335,327 Mich.App. 174
• Parties: William Mark REIDENBACH, Plaintiff-Appellant, v. CITY OF KALAMAZOO, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

327 Mich.App. 174

933 N.W.2d 335

William Mark REIDENBACH, Plaintiff-Appellant,

v.CITY OF KALAMAZOO, Defendant-Appellee.

No. 340863

Court of Appeals of Michigan.

Submitted February 6, 2019, at Lansing.

Decided February 26, 2019, at 9:10 a.m.

Carey, Kirk, Webster & Kihm, Kalamazoo (by Douglas G. Kirk ) for William M. Reidenbach.

Lennon, Miller, O’Connor & Bartosiewicz, PLC, Kalamazoo (by Christopher D. Morris ) for the city of Kalamazoo.

Before: Swartzle, P.J., and Markey and Ronayne Krause, JJ.

Ronayne Krause, J. Plaintiff, William Mark Reidenbach, appeals by leave granted the order of the Michigan Compensation Appellate Commission (MCAC) affirming its magistrate's rulings. Plaintiff is a retired public safety officer for defendant, the city of Kalamazoo (the City). Plaintiff is receiving both workers’ compensation benefits and a pension. The City pays the workers’ compensation benefits, and the City contributed part of the funding for plaintiff's pension.

Most of the facts in this matter were stipulated. At issue in this appeal is how the City may "coordinate" plaintiff’s workers’ compensation benefits with his pension, essentially a determination of how much money the City may deduct from plaintiff’s workers’ compensation benefits because it partially funded his pension. We affirm.

I. FACTUAL BACKGROUND

The City established a "defined benefit" pension plan in 1942, funded exclusively by contributions from employees, contributions from the City, and investment earnings. Plaintiff began working for the City in February 1992. Plaintiff's collective-bargaining unit exercised its right to be "exempt" from participation in Social Security. The City stopped making contributions to the pension fund in 1997 because the fund was deemed overfunded,¹ so the City was no longer legally required to contribute. Thereafter, the pension fund received only employee contributions and investment earnings. Over the course of his employment, plaintiff's gross contributions to the pension fund totaled $ 69,930.28, which represented approximately 20% of his pension benefits. During the same period, the City paid $ 10,773,767.00 into the fund, or approximately 28% of the fund's total contributions of $ 38,584,375.00. However, Magistrate Chris Slater found that the City provided approximately 53% of the total contributions to the fund over the course of the fund's existence since 1942.²

In December 2006, plaintiff suffered a work-related heart attack

. At that time, he was treated and returned to work; however, he continued to suffer heart problems. Consequently, he was eventually taken off work permanently. Plaintiff's last day of work was May 3, 2008. Pursuant to his union contract, plaintiff received one year of his full wages. Plaintiff then formally retired on April 1, 2009. Because plaintiff's retirement was a "duty disability retirement," he received service credit for 25 years of employment. The parties initially disputed whether plaintiff was entitled to workers’ compensation benefits. After four months, the City paid a "lump sum" for those months and proceeded to make weekly payments. Plaintiff's pension payments are $ 960.41 a week before taxes, and his uncoordinated workers’ compensation rate is $ 706.00 a week. Plaintiff is not required to pay state income tax or Federal Insurance Contributions Act (FICA)³ taxes on his pension; however, he is liable for federal income tax.

The City calculated that it should deduct $ 691.78 a week from plaintiff's workers’ compensation benefits. The City based that calculation on its conclusion that plaintiff had funded 18% of his pension benefits, so the City could "coordinate" 82% of the after-tax value of plaintiff's pension payments. The parties later agreed that the City made an arithmetic error and should have used 20% instead of 18%. Plaintiff contended that the City's coordination should be based on the 28% contribution to the fund it made during the term of plaintiff's employment. A trial was held before Magistrate David Merwin, who subsequently issued a lengthy opinion reciting what he aptly described as "extensive stipulations" by the parties. In relevant part, Merwin agreed that the City should only be permitted to coordinate 28% of the after-tax value of plaintiff's pension, which Merwin calculated to be $ 204.21.

The parties then appealed. The MCAC noted that plaintiff argued that the City should not be permitted to coordinate any benefits, and the City argued that it should be permitted to coordinate all the benefits. The MCAC found "absolutely no merit in the arguments that suggest that all or none of plaintiff's pension is coordinatable [sic]." It otherwise adopted many of Merwin's findings of fact and of law. The MCAC concluded, however, that Merwin had improperly calculated the after-tax amount of plaintiff's pension because the pension was not subject to FICA or state income taxes. It also concluded that Merwin improperly calculated the amount of coordination based on the City's contributions to the pension fund only during the term of plaintiff's employment, rather than the entirety of the City's contributions. It therefore remanded for recalculation of the amount of coordination to which the City was entitled.

On remand, as noted earlier in this opinion, Magistrate Slater determined that over the course of the pension fund's existence, the City had contributed approximately 53% of the total contributions. However, Slater noted that there was no evidence in the record regarding contributions before 1974, and in the absence of any such evidence, the City's "contributions for those years must be deemed zero." Slater arrived at a similar after-tax value for plaintiff's pension, but he added back in the amount of FICA and state income tax that plaintiff did not pay. He concluded that the City was entitled to coordinate 53% of that final amount, which Slater calculated to be $ 447.13. On appeal, the MCAC again rejected arguments from plaintiff that no coordination should be permitted and from the City that no workers’ compensation benefits should be paid. The MCAC concluded that Slater had not erred by refusing to reopen the record to take additional evidence and that Slater had properly "performed the appropriate calculations in this matter as directed by the Commission." The MCAC adopted Slater's calculations as its own and affirmed Slater's decision. We granted plaintiff leave to appeal.

II. SUMMARY OF ISSUES PRESENTED

We note initially that both parties have asked us to reverse the decision of the MCAC. The City is not permitted to do so under the present procedural posture of this matter. Plaintiff and the City each independently sought leave to appeal the decision of the MCAC in separate applications. In the instant appeal, this Court granted plaintiff's application as to three of the issues plaintiff requested. Reidenbach v. Kalamazoo , unpublished order of the Court of Appeals, entered April 13, 2018 (Docket No. 340863). At the same time, this Court denied the City's application "for lack of merit in the grounds presented." Reidenbach v. Kalamazoo , unpublished order of the Court of Appeals, entered April 13, 2018 (Docket No. 340867). Consequently, the City is only an appellee, not an appellant. "[A]n appellee that has not sought to cross appeal cannot obtain a decision more favorable than was rendered by the lower tribunal." Ass'n of Businesses Advocating Tariff Equity v. Pub. Serv. Comm. , 192 Mich. App. 19, 24, 480 N.W.2d 585 (1991).

We emphasize that the City was not without a remedy. An appellee is absolutely entitled to file a cross-appeal by virtue of being an appellee, even an appellee in an appeal by leave granted. See MCR 7.207(A)(1) ; Costa v. Community Emergency Med. Servs., Inc. , 263 Mich. App. 572, 583-584, 689 N.W.2d 712 (2004). Notwithstanding this Court's denial of the City's application for leave in Docket No. 340867, the City remained entitled to file a cross-appeal in this docket number, which would have permitted the City to assert arguments in support of greater relief than affirmance. The City elected not to do so. We will therefore only entertain the City's arguments to the extent they can be construed as advancing an alternative basis to affirm.⁴

Consequently, there are three issues before us. First, we must determine how the amount of coordination to which the City is entitled should be calculated. Second, we must determine how the after-tax value of plaintiff's pension benefit should be calculated. And third, we must decide whether the City is entitled to coordinate the pension and workers’ compensation benefits for the five-month period during which it made no benefit payments. The MCAC did not decide the last issue, but plaintiff properly raised all these issues below and pursues them on appeal, so they are preserved for our review. Polkton Charter Twp. v. Pellegrom , 265 Mich. App. 88, 95, 693 N.W.2d 170 (2005).

III. SUMMARY OF APPLICABLE LAW

In 1981, the Legislature enacted MCL 418.354, "which provides for the coordination of wage-loss benefits" and was intended "to prevent duplicate wage-loss payments while maintaining suitable wage-loss benefits."

Drouillard v. Stroh Brewery Co. , 449 Mich. 293, 299-300, 536 N.W.2d 530 (1995). The legislative history of MCL 418.354 unambiguously displays a concern with the avoidance of double compensation. See id . at 300 n. 1, 536 N.W.2d 530. Specifically, MCL 418.354 allows "coordination of workers' compensation benefits with employer-funded pension plan payments." Romein v. Gen. Motors Corp. , 436 Mich. 515, 521, 462 N.W.2d 555 (1990), aff'd sub nom Gen. Motors Corp. v. Romein , 503 U.S. 181, 112 S.Ct. 1105, 117 L.Ed.2d 328 (1992). "Coordination" means that an employer paying workers’ compensation obligations may set off a "portion of certain other benefits, such as pensions and social security payments, also received by the employee and financed by the employer." Franks v. White Pine Copper Div. ,...