Welch v. Brown
2013 U.S. Dist. LEXIS 45681
E.D. Mich.2013Background
- Retirees in Flint challenge modifications to lifetime health-care benefits promised via CBAs or city ordinances.
- Emergency Manager Brown, appointed under Public Act 4, issued April 2012 orders unilaterally modifying retiree health-care terms.
- Modifications include requiring Medicare A/B enrollment, $100 per person monthly Medicare cost, higher deductibles and copays, and shifting costs to retirees, effective July 1, 2013.
- City framing the changes as necessary to balance FY2013 budget and address long-running deficits, with includes cost-savings totaling about $3.5 million to retirees part of broader reductions.
- Defendants depict a broad plan to reduce city expenditures; plaintiffs argue the changes impair contracts and threaten access to care, relying on evidence of substantial health-cost increases.
- Court grants plaintiffs’ motion for a preliminary injunction, restoring the contracts/ordinances to their pre-modification status pending merits.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Contracts Clause impairment | CBAs' lifetime benefits substantially impaired by Brown's Order. | Public purpose to balance budget; self-interest minimized; necessity of changes. | Likelihood of success on Contracts Clause for CBAs |
| Duration of benefits under CBAs | Benefits were intended to be lifetime; CBAs lack express duration clauses limiting benefits. | If CBAs had express duration clauses they'd limit benefits; no such clause shown. | Plaintiff shows material issue on lifetime benefits |
| Contracts Clause applies to acts of executive/administrative official | Emergency Manager's actions constitute legislative power affecting contracts. | Perano limits are not controlling; act is not legislative. | Arguments persuasive; acts impinge contracts |
| Bankruptcy Clause viability | Orders reduce debt and resemble bankruptcy-related impairment. | City is not in bankruptcy; Bankruptcy Clause not triggered. | Bankruptcy Clause unlikely to prevail |
| Due Process and taking for health benefits | Taking contract rights without just compensation; due process concerns. | Procedural path not fully ripe; property interests exist but remedies available elsewhere. | Likelihood of success on due process for CBAs and ordinances |
Key Cases Cited
- U.S. Trust Co. of N.Y. v. New Jersey, 431 U.S. 1 (U.S. 1977) (substantial impairment warranted to meet public objectives; necessity of considering alternatives)
- Toledo Area AFL-CIO Council v. Pizza, 154 F.3d 307 (6th Cir.1998) (whether impairment is reasonable/necessary given self-interest and public purpose)
- Six Clinics Holding Corp. v. Cafcomp Sys., Inc., 119 F.3d 393 (6th Cir.1997) (serious questions on merits sufficient for injunction; not require full proof at prelim)
- Camenisch, 451 U.S. 390 (U.S. 1981) (preliminary injunction standard and that not proving full case is required)
- Energy Reserves Grp., Inc. v. Kansas Power & Light, 459 U.S. 400 (U.S. 1983) (explication of substantial impairment and public purpose inquiry)
- Harps v. TRW Auto. U.S., LLC, 351 F. App’x 52 (6th Cir. 2009) (lifetime benefits depend on contract language; duration clauses matter)