Harper Woods Retirees Association v. City of Harper Woods
312 Mich. App. 500
| Mich. Ct. App. | 2015Background
- Harper Woods retired employees (HWRA) sued the City after the City unilaterally changed retiree health plans and increased deductibles/co-pays effective August 1, 2012; plaintiffs alleged these changes breached CBAs and personal contracts that promised specific health-plan terms.
- Plaintiffs sought breach of contract, declaratory and injunctive relief, and class certification for approximately 88 retirees; the trial court ultimately certified the class (after this Court ordered identification/notice on remand).
- The trial court granted summary disposition for the City, relying on the Sixth Circuit’s decision in Reese to hold employers may unilaterally alter retiree health benefits if alterations are "reasonable." Plaintiffs appealed.
- The Court of Appeals reviewed de novo and rejected the trial court’s categorical reliance on Reese, holding Reese is not binding and does not establish a per se right to unilaterally modify vested retiree benefits.
- The court applied ordinary contract principles (in light of the U.S. Supreme Court’s Tackett decision) and remanded for the trial court to identify which contracts govern each class member and to decide, contract-by-contract, whether the retiree health benefits vested and survived CBA expiration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether employer may unilaterally modify retiree health benefits under CBAs/personal contracts | City cannot unilaterally alter vested contractual retiree benefits | City can alter retiree coverage if changes are reasonable (per Reese) | Trial court erred to adopt a per se rule; unilateral alteration depends on contract language and vesting, not blanket reasonableness test |
| Whether Reese controls Michigan courts | Reese permits reasonable unilateral changes to retiree benefits | Reese is persuasive but not binding on state courts; its holding is fact-specific | Reese is not controlling; state court must apply Michigan contract law to each agreement |
| Whether retiree health benefits are vested beyond CBA expiration | Plaintiffs: benefits vested for life as written in CBAs/personal contracts | City: benefits terminated or were subject to change after CBA expiration | Vesting turns on ordinary contract interpretation; Tackett forecloses any presumption of lifetime vesting absent explicit contract language; remand required to examine each agreement |
| Relevance of City's financial condition/reasonableness of changes | Financial crisis justified modifications; reasonableness is a factual inquiry | City relied on reasonableness and fiscal necessity | Michigan law bars judicial refusal to enforce contracts based solely on a court’s reasonableness assessment or hardship; financial state irrelevant to breach element; issue not dispositive here |
Key Cases Cited
- Reese v. CNH Am., LLC, 694 F.3d 681 (6th Cir. 2012) (held in that case that employer could make "reasonable" changes to retiree health plan where parties did not view benefits as fixed)
- M&G Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (2015) (Supreme Court rejected a presumption that retiree benefits vest for life absent explicit contract language)
- Macomb County v. AFSCME Council 25, 494 Mich. 65 (2013) (Michigan contract principles: parties rely on CBAs and courts enforce their plain terms)
- Quality Prod. & Concepts Co. v. Nagel Precision, Inc., 469 Mich. 362 (2003) (mutual assent required; unilateral modification is not allowed)
- Rory v. Continental Ins. Co., 473 Mich. 457 (2005) (courts may not refuse to enforce contractual obligations based on a judge’s assessment of reasonableness)