Case Information
*1 S T A T E O F M I C H I G A N C O U R T O F A P P E A L S BOARD OF TRUSTEES OF THE CITY OF FOR PUBLICATION PONTIAC POLICE & FIRE RETIREE March 17, 2015 PREFUNDED GROUP HEALTH & 9:10 a.m.
INSURANCE TRUST,
Plaintiff-Appellant, v No. 316680
Oakland Circuit Court CITY OF PONTIAC, LC No. 2012-127682-CZ
Defendant-Appellee. Before: M ARKEY , P.J., and O WENS and F ORT H OOD , JJ.
P ER C URIAM .
Plaintiff Board of Trustees of the City of Pontiac Police and Fire Retiree Prefunded Group Health and Insurance Plan (board of trustees or trustees) appeals by right Oakland Circuit Judge Shalina D. Kumar’s order granting defendant’s motion for summary disposition pursuant to MCR 2.116(C)(5) (lack of standing), (C)(8) (failure to state a claim), and (C)(10) (no genuine issue of material fact). We affirm.
I. FACTS AND PROCEEDINGS
The Board of Trustees of the City of Pontiac Police and Fire Retirement System (retirement system trustees) and plaintiff trustees filed a complaint in circuit court asserting that defendant funded the City of Pontiac Police and Fire Retirement System, which provided retirement benefits to retired police and fire employees. Plaintiffs also asserted that defendant funded the City of Pontiac Police and Fire Retiree Prefunded Group Health and Insurance Plan (the trust), a tax-exempt voluntary employees’ beneficiary association, 26 USC 501(c)(9), which provided health, optical, dental, and life-insurance benefits to police and fire employees who retired on or after August 22, 1996. The trust’s board of trustees is comprised of five members: *2 the city’s mayor, the city’s finance director, and a firefighter, a police officer, and a fifth trustee who the other trustees would select and who could participate in the trust. [1]
During the fiscal year ending June 30, 2012, the city’s emergency manager (EM), Louis
Schimmel, entered into termination collective bargaining agreements (CBAs) with the various
police and firefighter unions. The EM acted pursuant to the authority of § 19(1)(k) of 2011 PA
4, MCL 141.1519(1)(k).
[2]
The city also contracted to receive police services from Oakland
County effective August 1, 2011, and fire services from Waterford Township, effective February
1, 2012. As of April 24, 2012, the CBAs outlining benefits funded by the trust included the
Police Supervisors Contract Termination Agreement, the Police Non-Command Contract
Termination Agreement, the Fire Contract Termination Agreement, the Police Supervisors
Collective Bargaining Agreement, the Police Non-Command Collective Bargaining Agreement,
and the Fire Collective Bargaining Agreement. On April 25, 2012, the city’s EM issued
Executive Orders 206 and 207, which modified the healthcare benefits set forth in the various
CBAs. The executive orders were identical, with Executive Order 206 applying to fire retirees
and Executive Order 207 applying to police retirees. Executive Orders 206 and 207 took effect
on July 1, 2012, and modified retirees’ healthcare benefits by requiring pre-Medicare-aged
retirees to enroll in a Humana PPO-08 Plan, limiting Medicare-aged retirees to a Medicare
Advantage Plan G, eliminating defendant’s reimbursement of retirees’ Medicare Part B
premium, and requiring pre-Medicare-aged retirees to pay the amount above the “hard cap” of
On August 29, 2012, a stipulated order of the dismissal was entered as to the claim of the retirement system trustees because of Executive Order 224, which memorialized a settlement. On the same day, a stipulated order was entered authorizing plaintiff board of trustees [3] to file an amended complaint alleging that the city improperly reduced retiree healthcare benefits through Executive Orders 206 and 207. Count I alleged a violation of Const 1963, art 9, § 24; Count II alleged that through Executive Order 225 the city improperly sought to amend the trust by *3 eliminating its obligation to financially contribute to the trust, and Count III alleged a breach of contract claim. Plaintiff sought a declaratory ruling, an injunction, and monetary damages.
On February 13, 2013, the city moved for summary disposition pursuant to MCR 2.116(C)(5), (C)(8), and (C)(10). In its supporting brief the city argued that plaintiff trustees lacked standing to sue for a certain level of healthcare benefits as it was not responsible for the level of retirees’ healthcare benefits. Rather, the city argued, the board of trustees was only responsible for ensuring compliance with the Internal Revenue Code, managing and investing trust funds, and providing health, optical, dental, and life-insurance benefits to police and fire employees who retired on or after August 22, 1996, as required by the various CBAs. The city also argued that Count I was meritless because of our Supreme Court’s holding in Studier v Michigan Pub Sch Employees Retirement Bd , 472 Mich 642; 698 NW2d 350 (2005), that healthcare benefits are not protected by Const 1963, art 9, § 24, and that Count III was meritless because the emergency manager had the authority under 2011 PA 4 to unilaterally modify collective bargaining agreements.
On May 22, 2013, the trial court entered its opinion and order granting defendant’s motion for summary disposition. The trial court first concluded that the trustees had standing:
Pursuant to the language of the Trust Agreement, Plaintiff is responsible for ensuring the Trust’s compliance with the Internal Revenue Code, as well as investing, managing, and controlling the Trust’s assets. In addition, Plaintiff has the “right and duty to enforce . . . the performance of all obligations provided in th[e] Trust.” As Plaintiff is the entity responsible for the Trust’s assets and required to enforce each obligation set forth in the Trust, Plaintiff has standing to bring the instant lawsuit.
The trial court then concluded that Count I was meritless because healthcare benefits are not
protected by Const 1963, art 9, § 24. The trial court also concluded that Count III was meritless
because the emergency manager validly amended the various CBAs pursuant to the authority
granted by
II. STANDARD OF REVIEW
Although the trial court did not identify under which subrule it granted summary
disposition, we review the trial court’s decision under the standard applicable to MCR
2.116(C)(10) “because the trial court’s consideration went beyond the parties’ pleadings.”
Kosmalski v St John’s Lutheran Church
, 261 Mich App 56, 59; 680 NW2d 50 (2004). We
review de novo a trial court’s decision regarding a motion for summary disposition under MCR
2.116(C)(10), which tests the factual sufficiency of a claim.
Corley v Detroit Bd of Ed
, 470
Mich 274, 277-278;
III. ANALYSIS
A. STANDING The city first argues that plaintiff board of trustees lacks standing to maintain the instant action. In particular, the city notes that the trustees have specific and limited duties under the trust agreement. The trust agreement limits the duties of the board of trustees to carrying out the purposes of the trust, maintaining the trust’s tax exempt status under the Internal Revenue Code, and investing, managing, and controlling the trust’s assets. While the purpose of the trust is to provide group insurance benefits for police and firefighter retirees, the nature and extent of those benefits is determined by the pertinent CBAs between the city and the various police and firefighter unions. The city also argues that nothing in the trust agreement establishes that the board of trustees has any role in determining the extent of the benefits accorded the retirees, and the trustees are expressly “bound by the terms of [the] Trust Agreement and any applicable Collective Bargaining Agreements between the City and the collective bargaining associations . . . .” Consequently, the city argues, the board of trustees has no more interest in the level of retiree health insurance benefits than any other citizen, and under the doctrine of standing, the board of trustees is not a proper party to assert the claims made in this lawsuit.
Initially, we must decide if the city’s standing argument is properly before the Court. An
appellee who has taken no cross appeal may nevertheless argue that a judgment in its favor be
affirmed for reasons that were rejected by the lower court.
Middlebrooks v Wayne Co
, 446 Mich
151, 166 n 41; 521 NW2d 774 (1994). But the city did not raise the issue of standing in its
answer to the original complaint or in its answer to the amended complaint. This Court has
viewed a claim that a plaintiff lacks standing as a motion under MCR 2.116(C)(5), i.e., that the
plaintiff lacks the legal capacity to sue. See
Glen Lake-Crystal River Watershed Riparians v
Glen Lake Ass’n
,
*5 MCR 2.116(D)(2) provides that a motion for summary disposition based in the “grounds listed in subrule (C)(5), (6), and (7) must be raised in a party’s responsive pleading, unless the grounds are stated in a motion filed under this rule prior to the party’s first responsive pleading.” But the trial court has the discretion to allow such a motion even if it were not timely. “It is within the trial court’s discretion to allow a motion filed under this subsection to be considered if the motion is filed after such period.” MCR 2.116(D)(4). Here, the city raised the issue of standing in its motion for summary disposition; plaintiff responded to the issue, and the trial court ruled. Thus, under traditional rules of appellate preservation, the issue has been properly preserved. See Gen Motors Corp v Dep’t of Treas , 290 Mich App 355, 386; 803 NW2d 698 (2010) (an issue is preserved for appellate review when it is raised before and decided by the trial court).
Additionally, the city essentially argues that the board of trustees is not the real party in
interest, MCR 2.201(B), to assert claims of injury flowing from modification of the pertinent
CBAs that determine retiree insurance benefits. Our Supreme Court has held that the defense
that a plaintiff is not the real party in interest “is not the same as the legal-capacity-to-sue
defense.”
Leite v Dow Chemical Co
, 439 Mich 920, 478 NW2d 892 (1992). A motion for
summary disposition asserting as its basis the doctrine of standing invokes a prudential doctrine
that “focuses on whether a litigant ‘is a proper party to request adjudication of a particular issue
and not whether the issue itself is justiciable.’ ”
Lansing Sch Ed Ass’n v Lansing Bd of Ed
, 487
Mich 349, 355;
The issue of standing presents a question of law that is reviewed de novo on appeal.
Barclae v Zarb
,
MCR 2.201(B) provides that “[a]n action must be prosecuted in the name of the real party
in interest . . . .” The real party in interest is a party who is vested with a right of action in a
given claim, although the beneficial interest may be with another.
In re Beatrice Rottenberg
Living Trust
,
First, we agree with the trial court that the board of trustees has standing to enforce the
terms of the trust agreement. The trust agreement specifically accords the trustees “the right and
duty to enforce payment of all contributions provided for in the Collective Bargaining
Agreement and the performance of all obligations provided in this Trust.” Art V, § 4. Also, the
trustees “may compel and enforce payments of contributions, in any manner they deem proper.”
Art III, § 2. And, in general, the board of trustees has a duty to “enforce any claims of the trust .
. . and to marshal and collect outstanding trust property.”
In re Beatrice Rottenberg Living Trust
,
“A party asserting a breach of contract must establish by a preponderance of the evidence
that (1) there was a contract (2) which the other party breached (3) thereby resulting in
damages
to the party claiming breach
.”
Miller-Davis Co v Ahrens Const Co
, 495 Mich 161, 178; 848
NW2d 95 (2014) (emphasis added). Here, the board of trustees asserts no damages to itself as
the governing corporate entity of the trust as a result of modifications to the CBAs that affect
retiree benefits. Rather, the board attempts to assert the rights of the retirees. The board of
trustees is neither a party to the CBAs, an assignee of a party to the contracts, or a third-party
beneficiary of the CBAs. Simply stated, the board of trustees is not vested with, nor does the
board own, a cause of action with respect to the city’s alleged breach of contract regarding
retiree benefits provided in the pertinent CBAs. Just as trust beneficiaries may not enforce rights
owned by the trust, the trust through its board of trustees may not enforce contract rights of the
beneficiaries who are determined outside the terms of the trust. See
In re Beatrice Rottenberg
Living Trust
,
The board of trustees presented two arguments below regarding standing that we find
without merit. First, the board suggests it has standing under MCR 2.605 because it sought
declaratory relief. See
Lansing Sch Ed Ass’n
, 487 Mich at 372 (holding “whenever a litigant
*7
meets the requirements of MCR 2.605, it is sufficient to establish standing to seek a declaratory
judgment”). MCR 2.605(A)(1) provides: “In a case of actual controversy within its jurisdiction,
a Michigan court of record may declare the rights and other legal relations of an interested party
seeking a declaratory judgment, whether or not other relief is or could be sought or granted.”
The declaratory judgment rule, however, “incorporates the doctrines of standing, ripeness, and
mootness.”
UAW v Central Mich Univ Trustees,
295 Mich App 486, 495; 815 NW2d 132
(2012). Also, the essential requirement of an action for declaratory relief is an “actual
controversy.”
Lansing Sch Ed Ass’n
,
The existence of an “actual controversy” is a condition precedent to invocation of declaratory relief. In general, “actual controversy” exists where a declaratory judgment or decree is necessary to guide a plaintiff’s future conduct in order to preserve his legal rights . [Emphasis added; see also Associated Builders & Contractors v Dir of Consumer & Indus Servs , 472 Mich 117, 126;693 NW2d 374 (2005), overruled in part on other grounds Lansing Sch Ed Ass’n ,487 Mich at 371 n 18.]
Here, there is no “actual controversy” between the board of trustees and the city vis-à-vis
insurance benefits provided to police and firefighter retirees. The modifications to the CBAs
affecting the retiree benefits do not affect the legal rights of the board of trustees or the trust
itself. The board of trustees does not need guidance regarding its future conduct in administering
the trust, and the board’s legal rights are not jeopardized by any changes in the retirees’ benefits
resulting from modification of the pertinent CBAs. Consequently, there is no “actual
controversy” between the board of trustees and the city, i.e., an adverse interest necessitating the
sharpening of the issues.
Lansing Sch Ed Ass’n
, 487 Mich at 372 n 20, citing
Associated
Builders & Contractors
,
The board of trustees also argued below that it had standing in this case because three of its members are also beneficiaries of the trust. This argument is without merit.
“It is not disputed that, under Michigan law, an organization has standing to advocate for
the interests of its members if the members themselves have a sufficient interest.”
Lansing Sch
Ed Ass’n
,
For all the foregoing reasons, we conclude that the board of trustees is not the real party
in interest and does not have standing to assert claims regarding modifications of the CBAs
affecting the nature and extent of police and firefighter retiree benefits. Because this Court will
affirm a trial court’s decision if it reaches the correct result, albiet for the wrong reason,
Burise v
Pontiac
,
B. CONSTITUTIONAL CLAIM
Plaintiff alleges Executive Orders 206 and 207 violate Const 1963, art 9, § 24, which reads as follows:
The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.
Financial benefits arising on account of service rendered in each fiscal year shall be funded during that year and such funding shall not be used for financing unfunded accrued liabilities.
“These two clauses unambiguously prohibit the state and its political subdivisions from diminishing or impairing ‘accrued financial benefits,’ and require them to fund ‘accrued financial benefits’ during the fiscal year for which corresponding services are rendered.” Studier , 472 Mich at 649. But the Court also held that “health care benefits are not ‘accrued financial benefits’ and, thus, are not protected by Const 1963, art 9, § 24.” . at 670.
Plaintiff trustees do not dispute the holding of Studier. Instead they argue that the instant case is distinguishable because Article II of the trust reads in relevant part: “The grantor intends the benefits provided by this Trust to be considered a benefit guaranteed by Article 9, Section 24 of the State of Michigan Constitution.” Therefore, the trustees argue, the plain language of the trust elevates otherwise unprotected health-care benefits to the protection of Const 1963, art 9, § 24. While not clearly stated, it appears the trustees rely on the first clause of Const 1963, art 9, § 24.
*9
The trial court correctly dismissed this claim. As explained by the Court in
Studier
, the
threshold question regarding whether the terms of Const 1963, art 9, § 24 apply is whether
“accrued financial benefits” are at issue.
Studier
,
C. BREACH OF CONTRACT
Plaintiff’s breach of contract argument has two prongs. First, plaintiff argues that Executive Orders 206 and 207 breached the trust instrument itself, which states that covered retirees will be provided health care benefits as stated in the various CBAs between the city and police and firefighter unions. Second, plaintiff argues that the last CBAs, the termination agreements, either explicitly provided for retiree health care benefits or incorporated the provisions of earlier CBAs regarding retiree benefits. Both of these arguments fail.
As plaintiff recognizes, the source of the retirees’ benefits is not the trust agreement itself but rather the various CBAs that provide for certain benefits. See Pontiac Police & Fire Retiree Prefunded Group Health & Ins Plan Trustees v City of Pontiac , ___ Mich App ___; ___ NW2d ___ (Docket No. 316418, ___ __, 2015) ( Trustees I ), Part III (D). And, as we have discussed, the trust agreement itself is unaffected by Executive Orders 206 and 207; consequently, modification of the retirees’ benefits could not possibly result in a breach of the trust agreement itself. After complying with the conditions specified in 2011 PA 4, the emergency manager could “reject, modify, or terminate” one or more of the terms and conditions of an existing CBA, which in this case is the source of police and firefighter retiree health care benefits. MCL 141.1519(1)(k). Trustees I , supra . Even assuming that Executive Orders 206 and 207 affected the trust agreement, we note the new provisions of the orders operated prospectively only, becoming effective on July 1. 2012. So, there has been no breach of contract because there is no contention that the city breached the terms of the trust instrument with respect to providing benefits to the retirees. The allegation is only that collective bargaining agreements have been amended altering the nature and extent of retiree benefits under the CBAs. As we decided above, plaintiff lacks standing to assert a breach of contract with respect to the CBAs. Plaintiff’s contract claims also fail.
We affirm. No taxable costs are awarded to either party, a public question being involved pursuant to MCR 7.219.
/s/ Jane E. Markey /s/ Donald S. Owens /s/ Karen M. Fort Hood
Notes
[1] The pertinent provisions of the trust are set forth in the related case of Pontiac Police & Fire Retiree Prefunded Group Health & Ins Plan Trustees v City of Pontiac , ___ Mich App ___; ___ NW2d ___ (Docket No. 316418, ___ __, 2015) ( Trustees I ), involving Executive Order 225 and the city’s actuarially required contribution to the trust for the fiscal year ending June 30, 2012.
[2]
[3] Hereafter, referred to as the singular plaintiff, board of trustees, or simply, the trustees.
[4] On April 29, 2013, the parties stipulated to dismissal of plaintiff’s claims to the extent they challenged Executive Order 225, which is the subject of Trustees I , supra .
[5] The Court also noted that the defendant “affirmatively acquiesced to [the] plaintiffs’ right to sue by entering into a stipulation agreeing to the entry of a modified lake level order . . . .” Glen
[6] “All decisions shall be made by at least three (3) affirmative votes.” Art IV, § 10.