Serafino v. Hamtramck, City of
Filing
51
OPINION and ORDER Granting Defendants' 36 Motion for Summary Judgment and Denying Plaintiffs' 35 Motion for Partial Summary Judgment. Signed by District Judge Linda V. Parker. (RLou)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
CRAIG SERAFINO, WALTER TRIPP, and
MICHAEL J. SZYMANSKI, on behalf of
a putative class of similarly situated individuals,
Plaintiffs,
Civil Case No. 14-14112
Honorable Linda V. Parker
v.
CITY OF HAMTRAMCK and CATHY SQUARE,
Defendants.
________________________________________/
OPINION AND ORDER GRANTING DEFENDANTS’ MOTION FOR
SUMMARY JUDGMENT AND DENYING PLAINTIFFS’ MOTION FOR
PARTIAL SUMMARY JUDGMENT
On October 24, 2014, Plaintiffs, retired City of Hamtramck public safety
officers, filed this putative class action lawsuit against Defendants City of
Hamtramck (“City”) and Cathy Square (“Square”) (collectively “Defendants”).1
Michigan Governor Rick Snyder appointed Square to serve as the City’s
Emergency Manager on July 1, 2013, due to the City’s financial crisis. Plaintiffs
assert that Defendants breached contracts and violated Plaintiffs rights under the
Plaintiffs filed a motion for class certification early in the litigation, which the
Court denied without prejudice on March 23, 2016. (ECF No. 46.) The Court
concluded that fairness and judicial economy dictated that the issue of class
certification should be addressed only after the Court resolves the parties’ crossmotions for summary judgment, which had been filed while the motion for class
certification was pending.
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United States Constitution when they made changes to Plaintiffs’ retiree health
insurance benefits in order to reduce the City’s expenses. Specifically, in an
Amended Complaint filed November 12, 2014, Plaintiffs assert the following
claims against Defendants: (I) violation of the Contracts Clause, U.S. Const. Art. I,
Sec. 10, cl. 1; (II) violation of the procedural Due Process Clause, U.S. Const.
Amen. V; (III) violation of the Takings Clause, U.S. Const. Amen. V; (IV)
violation of Section 903 of the United States Bankruptcy Code, 11 U.S.C. § 903,
and the Supremacy Clause, U.S. Const. art. VI, cl. 2; and (V) breach of contract.
Plaintiffs bring their constitutional claims against Defendants pursuant to 28
U.S.C. § 1983.
Presently before the Court are the parties’ cross-motions for summary
judgment, filed November 19, 2015.2 (ECF No. 35, 36.) The motions have been
fully briefed. Finding the facts and legal arguments sufficiently presented in the
parties’ briefs, the Court is dispensing with oral argument pursuant to Eastern
District of Michigan Local Rule 7.1(f). For the reasons that follow, the Court is
granting Defendants’ motion and denying Plaintiffs’ motion.
Plaintiffs label their motion as one for “partial” summary judgment because,
although they contend they are entitled to summary judgment with respect to all of
their claims, they acknowledge that a separate hearing on damages is necessary if
they prevail. (See ECF No. 35 at Pg ID 450.)
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2
I.
Summary Judgment Standard
Summary judgment pursuant to Federal Rule of Civil Procedure 56 is
appropriate “if the movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). The central inquiry is “whether the evidence presents a sufficient
disagreement to require submission to a jury or whether it is so one-sided that one
party must prevail as a matter of law.” Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 251-52 (1986). After adequate time for discovery and upon motion, Rule 56
mandates summary judgment against a party who fails to establish the existence of
an element essential to that party’s case and on which that party bears the burden
of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).
The movant has the initial burden of showing “the absence of a genuine
issue of material fact.” Id. at 323. Once the movant meets this burden, the
“nonmoving party must come forward with specific facts showing that there is a
genuine issue for trial.” Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 587 (1986) (internal quotation marks and citation omitted). To
demonstrate a genuine issue, the nonmoving party must present sufficient evidence
upon which a jury could reasonably find for that party; a “scintilla of evidence” is
insufficient. See Liberty Lobby, 477 U.S. at 252.
“A party asserting that a fact cannot be or is genuinely disputed” must
designate specifically the materials in the record supporting the assertion,
“including depositions, documents, electronically stored information, affidavits or
declarations, stipulations, admissions, interrogatory answers, or other materials.”
Fed. R. Civ. P. 56(c)(1). The court must accept as true the non-movant’s evidence
and draw “all justifiable inferences” in the non-movant's favor. See Liberty Lobby,
477 U.S. at 255.
Courts evaluate cross motions for summary judgment under the same
standard. La Quinta Corp. v. Heartland Props., LLC, 603 F.3d 327, 335 (6th Cir.
2010) (citing Beck v. City of Cleveland, 390 F.3d 912, 917 (6th Cir. 2004)). When
faced with cross- motions for summary judgment, each motion is examined on its
own merits. Id.
II.
Factual and Procedural Background
The City’s police officers and firefighters are represented by one of three
unions, which have negotiated collective bargaining agreements (“CBAs”) with the
City throughout the years. (See, e.g., ECF No. 35, Ex. 1.) The CBAs typically are
effective for a four-year period. (Id.) The CBAs address the terms and condition
of employment, including pension benefits and healthcare benefits for retirees.
(Id.)
4
In 2010, Plaintiff Michael J. Szymanski (“Szymanksi”) retired from the
City’s Police Department under a CBA between the City and the Hamtramck
Fraternal Order of Police (“FOP CBA”). (ECF No. 36, Ex. 12 at 15-16; Ex. 13;
see also Ex. 9 ¶ 4.) The cover page and Article XXI of the FOP CBA identify the
contract’s duration as “July 1, 2007 through June 30, 2011.” (ECF No. 36, Ex. 13
at Pg ID 1024, 1070.) With respect to retiree healthcare, the FOP CBA provides in
relevant part the following for retirements effective July 1, 1986:
The City shall pay in full for the cost of medical, hospital and
surgical insurance (as more fully described in Section 7(a) above) for
employees and eligible members of employees’ families who retire on
or after July 1, 1986 until that retired employee attains the age of
sixty-five (65) or is eligible for [M]edicare or [M]edicaid. . . .
(ECF No. 36, Ex. 13 at Pg ID 1040.) Section 7(a) of the FOP CBA addresses
medical, hospital, and insurance coverage for active City employees:
The City shall provide fully paid medical, hospital and surgical
insurance for all employees covered under this contract and eligible
members of an employee’s family. The City shall provide continuous
medical, hospital and surgical insurance coverage equivalent to or
better than Michigan Blue Cross and Michigan Blue Shield MVFC-2
coverage with a Master Medical Plan supplemented together with the
prescription drug rider.
(Id. at Pg ID 1037.)
Article XI of the FOP CBA is titled “PENSIONS AND RETIREMENTS[.]”
(Id. at Pg ID 1051.) The first section of Article XI, labelled “Pension Program[,]”
states in part: “Current bargaining unit personnel shall appropriately be subject to
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and entitled to a pension and retirement as provided for herein.” (Id.) The
remaining section within Article XI, titled “Municipal Employees Retirement
System (MERS)[,]” discusses pension benefit coverage under Michigan’s MERS
statute and its amendments, Michigan Compiled Laws § 38.1501 et seq. (Id.) No
form of retiree welfare benefits are discussed in Article XI. (Id. at 1051-1053.)
In 2011, Plaintiffs Walter Trip (“Trip”) and Craig Serafino (“Serafino”)
retired from the City’s Police Department under a CBA between the City and the
Hamtramck Police Ranking Officer Association (“Association CBA”). (ECF No.
9 ¶¶ 2, 3; ECF No. 36, Ex. 12 at 16, Ex. 14 at 17; Ex. 16.) The cover page and
Article XX of the Association CBA provide that the duration of the contract is July
1, 2007 to June 30, 2011. (ECF No. 16 at Pg ID 1094, 1114.)
The Association CBA provides full coverage for the cost of hospitalization
for retirees, but does not address retiree medical or surgical insurance:
The city shall pay in full for the cost of hospitalization for
employees and their families for persons who retire on or after July 1,
1977 until that retired employee attains the age of sixty-five (65) or is
eligible for Medicare or Medicaid . . .
(Id. at Pg ID 1101.) For employees retiring after July 1, 1990, the Association
CBA does require the City to “provide and pay, the full cost of supplemental
insurance to Medicare, which is equivalent or superior to that offered by and
through Blue Cross/Blue Shield of Michigan.” (Id.)
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Like the FOP CBA, the Association CBA contains an article entitled
“PENSIONS AND RETIREMENTS.” (Id. at Pg ID 1106.) This article discusses
MERS pension benefits. (Id. at Pg ID 1106-1107.) It does not address any other
retiree benefits. (Id.)
The Blue Cross Blue Shield MVFC-2 plan provided to City safety workers
under the FOP CBA and Association CBA did not require participants to pay
deductibles and required no or very few co-pays.3 (ECF No. 35, Ex. 25 ¶ 4.) At
some point in time, the City switched to a different plan with deductibles of $1,250
for single coverage and $2,500 for family coverage. (Id. ¶ 5.) At the same time,
the City started funding Health Savings Accounts (“HSAs”) which covered the
additional out-of-pocket expenses for active employees and retirees. (Id.)
Sometime after 2011, the City changed the health insurance plan to one requiring
even higher deductibles; however, the City simultaneously increased the amount it
contributed to the HSAs. (Id. ¶ 6.) In 2012, the City switched to Blue Cross Blue
Shield’s Simply Blue PPO HSA. (ECF No. 35, Ex. 3.) This plan had increased
deductibles of $2,000 for single coverage and $4,000 for two person and family
coverage. (Id.) When the City switched to this plan, it again increased its
contributions to the HSAs. (ECF No. 35, Ex. 25 ¶ 6.)
The Association CBA provides health insurance coverage under this plan to
active employees and their families. As reflected above, there is no language in
the Association CBA requiring the City to provide this coverage, or any general
health insurance coverage, to retirees. (ECF No. 36, Ex. 16 at Pg ID 1100.)
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3
On April 17, 2013, a State of Michigan financial review team was appointed
to review the City’s financial condition. (ECF No. 36, Ex. 1.) The review team
found that the City had delayed making $2.2 million in required pension
contributions in order to manage cash flow, its pension plan had an unfunded
actuarial accrued liability of $42.5 million, and its General Operating Fund was
operating at a $3.3 million deficit. (Id., Ex. 2 at Pg ID 910-911.) The review team
concluded that, in accordance with Michigan’s Local Financial Stability and
Choice Act (“Act”), Mich. Comp. Laws §§ 141.1541-.1575, a local government
emergency existed and the appointment of an Emergency Manager under the Act
was needed to avoid municipal bankruptcy. (Id.) Governor Rick Snyder appointed
Square as the City’s Emergency Manager on July 1, 2013.
In late 2013, Square recommended, among other measures to improve the
City’s financial condition, temporarily reducing benefits for City retirees and post65 retirees. (ECF No. 36, Ex. 3.) Square sought the City Council’s concurrence in
these reductions, which the council gave on December 17, 2013. (Id., Ex. 5.) In
the meantime, on December 9, 2013, Square petitioned the State Treasurer to
temporarily modify the healthcare benefits provided for several of the City’s
bargaining units, which included Plaintiffs. (Id., Ex. 6.) The State Treasurer
approved the temporary changes on January 27, 2014. (Id., Ex. 8.)
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After receiving approval from the City Council and State Treasurer, Square
enacted Executive Order S-008. (Id., Ex. 9.) The Order was executed pursuant to
Section 12 of the Act, which grants emergency managers the authority to “make,
approve, or disapprove any appropriation, contract, expenditure, or loan” and to
“modify, or terminate 1 or more terms and conditions of an existing collective
bargaining agreement.” Mich. Comp. Laws § 141.1552(g), (j), (k). Executive
Order S-008 made several changes to existing retiree healthcare: (1) it moved
retirees to a higher deductible plan; (2) it moved prescription drug coverage to a
different tiered structure, whereby generic drugs maintain the existing co-pay
amount but non-generic drugs require a higher copay; and (3) it cancelled the
City’s contributions to HSAs and Health Reimbursement Arrangements. (ECF No.
36, Ex. 9.) These changes went into effect on March 1, 2014. (Id.)
III.
Applicable Law and Analysis
Plaintiffs’ claims in this lawsuit are dependent on whether the relevant
CBAs guaranteed them vested retiree healthcare benefits. The agreements, by their
terms, expired in 2011. Therefore, unless Plaintiffs’ welfare benefits vested and
thereby continued beyond the duration of the agreements, there was no contract to
breach or impair, no property right to take, nor any debt with which to interfere.
As such, the first issue the Court must resolve is whether the relevant agreements
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conferred vested health insurance benefits on retirees. If the answer is “no,” there
are no other issues for the Court to resolve.
The Michigan courts have found the United States Supreme Court’s decision
in M & G Polymers USA, LLC v. Tackett, 574 U.S. --, 135 S. Ct. 926 (2015),
“consistent with Michigan’s contract jurisprudence regarding CBAs, which applies
with equal force in both public and private sectors.” Harper Woods Retirees Ass’n
v. City of Harper Woods, 879 N.W.2d 897, 904-05 (Mich. Ct. App. 2015); see also
Arbuckle v. Gen. Motors LLC, -- N.W.2d --, 499 Mich. 521 (2016). In Tackett, the
Supreme Court overruled the long-standing presumption adopted by the Sixth
Circuit Court of Appeals in UAW v. Yard-Man, Inc., 716 F.2d 1476 (1983), that
retiree benefits provided in a CBA are guaranteed for the lifetime of any employee
who retires under the CBA. Tackett, 135 S. Ct. at 930. The Tackett Court
reiterated “the traditional principle that courts should not construe ambiguous
writings to create lifetime promises.” Id. at 936.
In Tackett, the Supreme Court instructed courts to interpret CBAs
“according to ordinary principles of contract law.” Id. at 933. The Tackett Court
criticized the Sixth Circuit Court of Appeals for “fail[ing] to consider the
traditional principle that ‘contractual obligations will cease, in the ordinary course,
upon termination of the bargaining agreement.’ ” Id. at 937 (quoting Litton Fin.
Printing Div., Litton Business Sys., Inc. v. NLRB, 501 U.S. 190, 207 (1991)). The
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Court further criticized the court of appeals for “refus[ing] to apply general
durational clauses to provisions governing retiree benefits.” Id. at 936. These
general durational clauses, the Sixth Circuit subsequently has instructed, should be
considered “in deciding how long a company has committed to provide healthcare
benefits to retirees.” Gallo v. Moen, Inc., 813 F.3d 265, 268 (2016).
The Supreme Court did not rule out the possibility in Tackett that a CBA
may provide vested welfare benefits for retirees. As the Court explained:
That principle [that contractual obligations will cease, in the ordinary
course, when the CBA terminates] does not preclude a conclusion that
the parties intended to vest lifetime benefits for retirees. Indeed, we
have already recognized that “a collective-bargaining agreement
[may] provid[e] in explicit terms that certain benefits continue after
the agreement’s expiration.”
135 S. Ct. at 937 (quoting Litton, 501 U.S. at 207) (brackets added in Tackett).
Nevertheless, the Court stated that “when a contract is silent as to the duration of
retiree benefits, a court may not infer that the parties intended those benefits to vest
for life.” Id.
The Sixth Circuit has held that, even where an intent to vest healthcare
benefits for retirees is found in the relevant CBA, the employer may modify those
benefits if the parties to the agreement “did not perceive the [CBA] as establishing
fixed, unalterable benefits.” Reese v. CNH America LLC, 694 F.3d 681, 684 (6th
Cir. 2012). In that instance, an employer “could make ‘reasonable’ changes to the
healthcare plan covering eligible retirees.” Id. The Reese court described
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“reasonable” alterations as those that are “ ‘reasonably commensurate’ with the old
plan,” those that “are ‘reasonable in light of changes in health care’ ”, and those
that “are ‘roughly consistent with the kinds of benefits provided to current
employees.” Id. at 685 (internal quotation marks and citation omitted). The court
provided a non-exhaustive list of questions a court should ask when assessing the
reasonableness of the employer’s changes to vested retiree health insurance
benefits. Id.
Here, Plaintiffs assert several points in support of their contention that their
retiree healthcare benefits vested.4 First, Plaintiffs point to the provision in the
CBAs requiring the City to pay the full cost of health insurance for retirees until
the retired employee attains sixty-five years of age. (ECF No. 35 at Pg ID 477.)
Plaintiffs further point to the promise in the CBAs that retirees will receive
coverage under the same healthcare plan as active employees, and the CBAs’
statement that coverage for active employees shall be “continuous[.]” (Id.)
As an initial matter, the Association CBA contains absolutely no promise of
health insurance coverage-- as opposed to the cost of hospitalization-- for any
In support of their vesting arguments, Plaintiffs refer to language in CBAs
preceding the agreements under which they retired. The CBAs in effect when
Plaintiffs retired, however, are the relevant contracts for deciding whether they
were promised vested healthcare benefits in retirement. Thus for Plaintiffs
Serafino and Tripp, the Court must evaluate the language in the Association CBA
effective July 1, 2007 to June 30, 2011, and for Plaintiff Szymanski, the Court
must focus on the language in the FOP CBA effective for the same dates.
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4
retiree, much less a retiree up to age sixty-five. With respect to the FOP CBA, the
Sixth Circuit in Gallo did not find a promise to pay benefits until a specific age
indicative of an intent to vest. See Gallo, 813 F.3d at 267, 274. The Gallo court
also found the use of the word “continuous” not indicative of an intent to vest
benefits. Id. at 269-70. As the court explained:
When a specific provision of the CBA does not include an end date,
we refer to the general durational clause to determine that provision’s
termination. Litton Fin. Printing Div. v. NLRB, 501 U.S. 190, 207,
111 S. Ct. 2215, 115 L.Ed.2d 177 (1991). Absent a longer time limit
in the context of a specific provision, the general durational clause
supplies a final phrase to every term in the CBA: “until this agreement
ends.” See id.; see also Tackett, 135 S. Ct. at 936. Reading the
healthcare provisions in conjunction with the general durational clause
gives meaning to the phrases “[c]ontinued,” “will be provided,” “will
be covered,” and the like. These terms guarantee benefits until the
agreement expires, nothing more. See UAW v. Skinner Engine Co.,
188 F.3d 130, 141 (3d Cir. 1999); Senn v. United Dominion Indus.,
Inc., 951 F.2d 06, 8016 (7th Cir. 1992).
Gallo, 813 F.3d at 269 (emphasis and brackets in original). Thus, as the Seventh
and Eighth Circuits have found, even a promise of coverage “until your death”
provides retirees with lifetime healthcare coverage only during the effective period
of the CBA under which they retired, absent other vesting language. Crown Cork
& Seal Co. v. Int’l Assoc. of Machinists and Aerospace Workers, 501 F.3d 912,
918 (8th Cir. 2007); Cherry v. Auburn Gear, Inc., 441 F.3d 476, 482-83 (7th Cir.
2006).
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In support of their vesting argument, Plaintiffs next point to language in the
agreements promising “[f]ull benefits when the member or vested former member
has attained 25 years of service, regardless of age.” (See ECF No. 25 at Pg ID
477.) Plaintiffs are quoting a portion of a provision found in Article XI of the
CBAs. In the Association CBA, the full provision reads:
(c) Employees who retire on or after June 30, 1997 shall receive, in
addition to 1(a), (b) above, the following MERS benefit enhancement
“Full benefits when the member or vested member has attained 25
years of service regardless of age and B-4 benefit program retirement
allowance pursuant to Section 16 PA 427, 1984 (MCLA 38.1516a).”
(ECF No. 36, Ex. 16 at Pg ID 1106-07.) Similarly, in the FOP CBA, the full
provision reads:
(d) Employees who retire on or after June 30, 1997, shall receive, in
addition to 3(a)(1) above,[5] the following MERS benefit
enhancements:
(1) Full benefits when the member or vested member has attained 25
years or service, regardless of age.
(ECF No. 36, Ex. 13 at Pg ID 1052.) Plaintiffs maintain that “[f]ull benefits” in
these provisions means full pension and retiree healthcare. (ECF No. 35 at Pg ID
477.) Plaintiffs therefore contend the CBAs tie eligibility for retiree healthcare to
eligibility for a pension. (Id.)
There is no “3(a)(1) above” in this CBA. The reference appears to have been
carried over from earlier CBAs, where 3(a)(1) provided the same language as
Section 2(a) of the FOP CBA effective July 1, 2007 through June 30, 2011. (See,
e.g., ECF No. 35, Ex. 1 at Pg ID 535-36, 547-48, 577.)
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5
Plaintiffs fail to identify any language in the CBAs suggesting that the
reference to “[f]ull benefits” in the above provisions was intended to include
retiree healthcare. To the contrary, the agreements’ plain language strongly
indicates that the term refers to pension benefits, only. These provisions are
included in an article of the CBA in which no benefits, other than pension benefits
under MERS, are discussed. (Id.; Ex. 13 at Pg ID 1051-52.) The statute
referenced in Article XI of the Association CBA and FOP CBA-- Michigan’s
Municipal Employees Retirement Act of 1984-- does not provide for retiree
welfare benefits, such as healthcare. See Mich. Comp. Laws §§ 38.1501-.1558.
There in fact is no language in the relevant agreements tying pension and
retiree health insurance benefits. Compare Yolton v. El Paso Tennessee Pipeline
Co., 435 F.3d 571, 583 (6th Cir. 2006) (evaluating the following CBA language
and concluding that it ties eligibility for retiree healthcare benefits and pension
benefits: “ ‘Employees who retire under the J.I. Case Pension Plan for Hourly Paid
Employees, or their surviving spouses eligible to receive a spouse’s pension under
the provisions of that plan, will be eligible for the benefits described in this section
[i.e., retiree health insurance].’ ”) In any event, while the Sixth Circuit once found
an intent to vest retiree healthcare based on language tying eligibility for those
benefits to eligibility for a pension, the Tackett Court “rejected this kind of ‘tying’
analysis as a relic of a misdirected frame of reference, calling it one of many Yard15
Man inferences that was ‘inconsistent with ordinary principles of contract law.’ ”
Gallo, 813 F.3d at 272 (quoting Tackett, 135 S. Ct. at 937).
Nevertheless, Plaintiffs also contend that an intent to vest can be found in
the absence of a durational provision for retiree health insurance benefits, where
other provisions contain specific durational clauses. (ECF No. 35 at Pg ID 479.)
Specifically, Plaintiffs point to the provision for health insurance coverage
following layoff, for which the CBAs provide continued coverage “until the next
premium period.” (Id.) In Tackett, however, the Supreme Court expressly rejected
the inference Plaintiffs ask this Court to make: that the absence of a specific
durational clause for retiree healthcare benefits, in the face of specific limitations
elsewhere, reflects an intent to vest those benefits. See Tackett, 135 S. Ct. at 936.
Instead, the Tackett Court advised that when a specific provision of the CBA
does not include an end date, a court must refer to the general durational clause to
determine that provision’s termination. Id. Addressing the Sixth Circuit “refus[al]
to apply general durational clauses to provisions governing retiree benefits” and its
decisions “requiring a contract to include a specific durational clause for retiree
health care benefits to prevent vesting[,]” the Supreme Court stated in Tackett that
“[t]hese decisions distort the text of the agreement and conflict with the principle
of contract law that the written agreement is presumed to encompass the whole
agreement of the parties.” Id. In short, the absence of a durational clause with
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respect to retiree health insurance-- even in the face of a durational clause for other
benefits-- no longer suggests an intent that the duration of retiree health insurance
is the life of the retiree. Instead, it suggests that the parties intended the contract’s
general durational clause to apply. See Gallo, 813 F.3d at 271-72 (“The CBA’s
general durational clauses provide a baseline or default rule, a point at which the
agreements expire absent more specific limits relevant to a particular term. In the
absence of specific language in the retiree healthcare provisions, the general
durational clause controls.”).
Plaintiffs next turn to extrinsic evidence to show that the parties intended to
vest retiree healthcare benefits. (ECF No. 35 at Pg ID 480-83.) However, if there
is no ambiguity in the CBAs after applying traditional canons of contract
interpretation, there is no basis to examine extrinsic evidence. Gallo, 813 F.3d at
273-74 (citing Witmer v. Acument Global Techs., Inc., 694 F.3d 774, 778 (6th Cir.
2012)); see also Tackett, 135 S. Ct. at 938 (Ginsburg, J., concurring) (“When the
intent of the parties is unambiguously expressed in the contract, that expression
controls, and the court’s inquiry should proceed no further.”). There is nothing in
the FOP CBA or Association CBA suggesting an intent to extend retiree health
insurance benefits beyond the term of those agreements.6 As such, the traditional
As indicated earlier, in the Association CBA, there is absolutely no promise for
retiree healthcare benefits, other than hospitalization coverage.
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6
principle applies that “ ‘contractual obligations will cease, in the ordinary course,
upon termination of the bargaining agreement.’ ”
Plaintiffs argue that the Sixth Circuit’s prior decisions regarding emergency
managers’ changes to retiree healthcare demand a different conclusion. (ECF No.
35 at Pg ID 474-75.) Specifically, Plaintiffs refer to the Sixth Circuit’s decisions
in City of Pontiac Retired Association (PREA) v. Schimmel, 751 F.3d 427 (2014),
and Welch v. Brown, 551 F. App’x 804 (2014). In Schimmel, however, the
appellate court did not reverse the district court’s denial of the plaintiffs’ motion
for preliminary injunction based on a disagreement as to whether the plaintiffs had
a vested right to retiree healthcare benefits. Instead, the court of appeals indicated
that “[t]his issue was not considered thoroughly by the district court” and that it
could not “properly assess the retirees’ claim without analyzing the collective
bargaining agreements in their entireties, which were not before the district court
when it considered this issue.” Id. at 432.
Similarly, in Welch, neither the Sixth Circuit nor the district court analyzed
the terms of the relevant CBAs to determine whether the plaintiffs were entitled to
vested retiree healthcare benefits. See 551 F. App’x at 810 n.1; Welch, 935 F.
Supp. 2d 875 (E.D. Mich. 2013). In fact, the CBAs were not included in the record
before the district court or on appeal. Welch, 551 F. App’x at 810 n.1. Unlike
here, the plaintiffs’ claims in Welch were evaluated at an early stage to assess
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whether the plaintiffs were entitled to a preliminary injunction, and the courts
appear to have accepted as true the plaintiffs’ allegation that the defendants’
alteration of retiree health insurance benefits interfered with an existing right. See
id. at 805. Notably, it is not evident from the trial or appellate courts’ decisions in
Welch whether the CBAs at issue had even expired when the emergency manager
made the challenged changes. See, e.g., id. at 805 (“Plaintiffs challenge several
orders the Emergency Manager issued, which modified existing contracts and
collective bargaining agreements with respect to health-care benefits of municipal
retirees.”).
The CBAs had expired when Square instituted the changes to retiree health
insurance coverage that are the subject of this lawsuit. Because those benefits did
not vest, Plaintiffs no longer had a contractual right to their receipt. Plaintiffs’
breach of contract claim therefore fails. Plaintiffs’ claim alleging a violation of
their rights under the Contract Clause likewise fails because, to prove a violation,
Plaintiffs must show “that a ‘change in state law has operated as a substantial
impairment of a contractual relationship.’ ” Mascio v. Pub. Employees Ret. System
of Ohio, 160 F.3d 310, 313 (6th Cir. 1998) (quoting General Motors Corp. v.
Romein, 503 U.S. 181, 186 (1992)) (additional quotation marks and citation
omitted).
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Similarly, to prove their claims under the Due Process Clause or Takings
Clause, Plaintiffs must demonstrate that they were deprived of a protected property
interest. Richardson v. Twp. of Brady, 218 F.3d 508, 517 (6th Cir. 2000) (citing
Bd. of Regents v. Roth, 408 U.S. 564, 569577 (1972); Puckett v. Lexington-Fayette
Urban Cnty. Gov’t, -- F.3d --, 2016 WL 4269802, at *12 (6th Cir. 2016) (citing
Coalition for Gov’t Procurement v. Fed. Prison Indus., Inc., 365 F.3d 435, 481
(6th Cir. 2004)). Plaintiffs rely on the CBAs as the source of their property
interest. (ECF No. 35 at Pg ID 490-91.) Having found that the CBAs did not
create a promise for retiree healthcare benefits beyond the term of the CBAs, and
because the CBAs expired, Plaintiffs “cannot rely on [the CBAs] as a source of
their protected interest.” Ash v. Bd. of Ed. of the Woodhaven Sch. Dist., 699 F.2d
822, 825-27 (6th Cir. 1983) (citations omitted). Plaintiffs’ due process and takings
claims therefore fail.
Finally, Plaintiffs allege that Section 903 of the U.S. Bankruptcy Code and
the Constitution’s Supremacy Clause preempt Square’s actions to modify retiree
healthcare. Plaintiffs’ claim is dependent on a finding that the City owed a debt in
the form of healthcare benefits to retirees. Having decided otherwise, the Court
concludes that this claim also fails.
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In short, because the Court concludes that Plaintiffs did not have a vested
right to health insurance benefits in retirement, Defendants are entitled to summary
judgment with respect to their claims.
Accordingly,
IT IS ORDERED that Plaintiffs’ motion for partial summary judgment
(ECF No. 35) is DENIED;
IT IS ORDERED that Defendants’ motion for summary judgment (ECF
No. 36) is GRANTED.
s/ Linda V. Parker
LINDA V. PARKER
U.S. DISTRICT JUDGE
Dated: September 27, 2016
I hereby certify that a copy of the foregoing document was mailed to counsel of
record and/or pro se parties on this date, September 27, 2016, by electronic and/or
U.S. First Class mail.
s/ Richard Loury
Case Manager
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