Craig Serafino v. City of Hamtramck, Mich.
707 F. App'x 345
| 6th Cir. | 2017Background
- Michigan appointed an emergency manager for Hamtramck during a financial crisis; Emergency Manager Cathy Square implemented changes to retiree health plans in Jan. 2014.
- Plaintiffs are retired Hamtramck police and firefighters who retired on or after July 1, 1986, covered by three CBAs: 2007 FOP, 2007 ROA, and 2009 IAF.
- Under the prior plans the City paid premiums and retirees had low/no deductibles; Square’s changes preserved premium payments but moved retirees to plans with higher deductibles and co-pays (City provided HSAs previously, then switched to a deductible plan).
- Plaintiffs sued claiming breach of contract (vested lifetime health benefits) and various constitutional (Contracts Clause, Takings, Due Process) and bankruptcy-law theories; district court granted summary judgment for defendants, finding no vested lifetime right to healthcare.
- The Sixth Circuit affirmed: the CBAs contain unambiguous general-durational clauses and the four-corners of the agreements show no intent to vest lifetime, unalterable retiree healthcare benefits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the CBAs create a vested, lifetime right to retiree health benefits? | CBAs promise premium-free, continuous healthcare tied to retiree status and age/Medicare eligibility, so rights vested for life. | General-durational clauses govern the CBA; absent clear carve-out, benefits terminate with the agreement and are not vested. | No vesting: general-durational clauses supply the temporal limit; benefits did not vest for life. |
| Did defendants breach enforceable contractual rights when they changed plans? | Changes altered the terms retirees relied on; thus breached CBAs that promised specific healthcare terms. | Even if terms changed, the CBAs did not create perpetual promises; benefits were non-vested and subject to modification. | No actionable breach of a vested lifetime right; district court correctly dismissed contract claims based on lack of vesting. |
| Can plaintiffs’ constitutional claims proceed (Contracts Clause, Takings, Due Process) without a vested property interest? | Plaintiffs argue changes impaired contractual expectations and deprived property. | Constitutional claims require a protected property interest; uninsured/alterable benefits not property. | Claims fail: constitutional theories require a vested property interest which plaintiffs lack. |
| Do ongoing premium payments by the City mean plaintiffs retained their contractual entitlement to full cost coverage? | Plaintiffs stress prior plans effectively covered all costs (no deductibles) and were altered materially. | The CBA’s promise to pay the “cost” of insurance is reasonably read as covering premiums; City continues to pay premiums. | Court notes equities but holds that, even if construed for plaintiffs, the contracts still do not show irrevocable lifetime entitlements. |
Key Cases Cited
- M & G Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (2015) (use ordinary contract principles; do not infer lifetime vesting absent clear intent)
- Gallo v. Moen, Inc., 813 F.3d 265 (6th Cir. 2016) (general-durational clause supplies temporal limit for unspecified provisions)
- Reese v. CNH Indus. N.V., 854 F.3d 877 (6th Cir. 2017) (carving out or differing durational language can create ambiguity supporting vesting)
- Arbuckle v. General Motors LLC, 885 N.W.2d 232 (Mich. 2016) (applying Tackett reasoning under Michigan law; vested benefits are unalterable)
- Litton Fin. Printing Div. v. NLRB, 501 U.S. 190 (1991) (contractual obligations generally cease upon termination of the bargaining agreement)