Pontiac Police & Fire Retiree Prefunded Group Health & Insurance Trust Board of Trustees v. City of Pontiac No 1
309 Mich. App. 590
| Mich. Ct. App. | 2015Background
- The City of Pontiac police & fire VEBA trust (a 501(c)(9) established 1996) held contributions from employees and the city to prefund retiree health and insurance benefits; trustees administered the trust per its Declaration.
- The trust and applicable collective bargaining agreements (CBAs) required the City to make annual actuarially determined contributions; the 2011–2012 required contribution (~$3.47M) was due on or before June 30, 2012.
- Pontiac’s emergency manager (EM) sought and received State Treasurer concurrence under 2011 PA 4 §19(1)(k) to modify CBAs and issued Executive Order (EO) 225 on August 1, 2012, stating it would amend the trust to remove the City’s obligation to “continue to make contributions” as determined by trustees.
- Plaintiff (the VEBA trustees) sued the City alleging violation of Const 1963, art 9, §24; ordinance violation; and breach of contract for failure to pay the 2011–2012 contribution. The trial court granted the City’s summary-disposition motion; trustees appealed.
- The Court of Appeals agreed PA 4 actions taken before PA 4’s suspension remained enforceable if validly taken; it rejected the constitutional and ordinance claims but held EO 225 did not retroactively eliminate the City’s accrued 2011–2012 contribution obligation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Const 1963, art 9, §24 protects the trust’s prefunded health benefits funding requirement | The trust’s Declaration states its benefits are to be considered guaranteed by Art 9 §24, so the annual funding requirement is constitutionally protected | Studier controls: health-care benefits are not "accrued financial benefits" under §24, so §24 does not protect the VEBA funding requirement | Dismissed: §24 does not apply to prefunded health benefits here; constitutional claim lacked merit |
| Whether any local ordinance was violated by nonpayment | Trustees contended the City violated local obligations to fund the trust | City argued PA 4 authorized EM to amend ordinances/CBAs; plaintiff cited no ordinance governing the trust | Dismissed: no identified ordinance governing the VEBA; claim deemed abandoned or properly treated as contract claim |
| Whether EO 225 (under PA 4 §19(1)(k)) could retroactively eliminate the City’s accrued 2011–2012 trust contribution | Trustees: EO 225 cannot be retroactive to eliminate an obligation that had already accrued (past due July 1, 2012) | City/EM: PA 4 empowers EM to reject/modify CBAs, and such modifications may be retroactive; therefore EO could eliminate accrued liability | Court: Although PA 4 empowers modification (including retroactive application generally), EO 225’s plain language (removing City’s obligations to “continue to make contributions” and taking immediate effect) and communications show it applied prospectively; it did not eliminate the already-accrued 2011–2012 contribution. Court reversed summary dismissal and remanded |
| Whether actions taken under PA 4 remain enforceable after PA 4’s later suspension/repeal | Trustees implied that PA 4’s suspension might invalidate EM’s EO | City argued actions valid if taken while PA 4 was in force and consistent with the statute | Court: Actions valid if they complied with PA 4 when taken; repeal/suspension does not abrogate vested rights or liabilities incurred while statute was in force |
Key Cases Cited
- Studier v Michigan Public School Employees Retirement Bd, 472 Mich 642 (Supreme Court of Michigan) (health-care benefits are not “accrued financial benefits” under Const 1963, art 9, §24)
- Rory v Continental Ins Co, 473 Mich 457 (Supreme Court of Michigan) (contract interpretation principles; give unambiguous terms their plain meaning)
- Port Huron Ed Ass’n v Port Huron Area Sch Dist, 452 Mich 309 (Supreme Court of Michigan) (parties generally free to modify contract terms; context on retroactivity and mutual assent)
- Minty v Board of State Auditors, 336 Mich 370 (Supreme Court of Michigan) (repeal of statute does not affect rights acquired while it was in force)