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Board of Trustees v. City of Pontiac

Supreme Court of Michigan

June 15, 2018

BOARD OF TRUSTEES OF THE CITY OF PONTIAC POLICE AND FIRE RETIREE PREFUNDED GROUP HEALTH AND INSURANCE TRUST, Plaintiff-Appellee,
v.
CITY OF PONTIAC, Defendant-Appellant.

          Oakland CC: 2012-128625-CZ

          Stephen J. Markman, Chief Justice. Brian K. Zahra Bridget M. McCormack David F. Viviano Richard H. Bernstein Kurtis T. Wilder Elizabeth T. Clement, Justices.

          ORDER

         On January 10, 2018, the Court heard oral argument on the application for leave to appeal the October 25, 2016 judgment of the Court of Appeals. On order of the Court, the application is again considered, and it is DENIED, because we are not persuaded that the questions presented should be reviewed by this Court.

          McCormack, J. (concurring).

         Retroactive laws are often unfair. They upset settled expectations, impose new burdens, and disrupt old agreements. And so we presume laws are prospective unless they say otherwise in very clear terms. The Court of Appeals reaffirmed this foundational principle, and we rightly leave its work in place.

         The Pontiac Police and Fire Retiree Prefunded Group Health and Insurance Trust (the Trust) was organized to pay the healthcare benefits of retired police and firefighters. Under the agreement, the city of Pontiac made retirement benefit payments. But in 2012, the city came under the control of an emergency manager, and after following the necessary steps, the emergency manager issued Executive Order 225 on August 1, 2012. Order 225 read in relevant part:

Article III of the Trust Agreement, Section 1, subsections (a) and (b) are amended to remove Article III obligations of the City to continue to make contributions to the Trust as determined by the Trustees through actuarial evaluations.
The Order shall have immediate effect.

         As a result, the city stopped contributing to the retirement trust fund, and the Trust sued. The only question for us is whether Order 225 has retroactive effect. If the order is retroactive, the city would not need to make contributions for the period from 2011 to the date the order issued, August 1, 2012. If the order is not retroactive, the city must make the contributions that accrued up until that date. Several million dollars hang in the balance.

         Following a lengthy procedural journey, the Court of Appeals held that LaFontaine Saline, Inc v Chrysler Group, LLC, 496 Mich. 26 (2014), in which we clarified the test for determining the retroactivity of statutes, governs the analysis of whether an executive order has retroactive effect. Applying that framework, the panel held that Order 225 should not be given retroactive effect. I see no flaw in the panel's work; our decision today to deny leave is appropriate.

         The rules of statutory interpretation about retroactivity are settled and sound. When determining whether a statute should be given retroactive effect we look first to legislative intent, Frank W Lynch & Co v Flex Technologies, Inc, 463 Mich. 578, 583 (2001), and the plain text of the statute is our starting place, Madugula v Taub, 496 Mich. 685, 696 (2014).[1] LaFontaine created a four-part framework to determine the retroactivity of statutes, and two parts are particularly salient: we must consider whether (1) there is specific language providing for retroactive application, and whether (2) retroactivity would impair vested rights or create new obligations. LaFontaine, 496 Mich. at 38-39. Although LaFontaine's four-part framework was new, its requirement that the Legislature must speak with clarity to make a law retroactive is a traditional rule of statutory interpretation. Harrison v Metz, 17 Mich. 377, 382 (1868) ("[I]t is a sound rule of statutory construction that legislation is to have a prospective operation only, except where the contrary intent is expressly declared or is necessarily to be implied from the terms employed."). See also Murray v Gibson, 56 U.S. 421, 423 (1853).

         There is no compelling reason to treat executive orders differently for retroactivity analysis. An executive order is quasi-legislative and should be interpreted with the same approach used to interpret a statute. Soap & Detergent Ass'n v Natural Resources Comm, 415 Mich. 728, 756-757 (1982); Aguirre v Dep't of Corrections, 307 Mich.App. 315, 321 (2014). And emergency managers derive their power from the Legislature, which further supports the conclusion that the same rules should apply to determine whether their orders are retroactive. See former MCL 141.1519, as enacted by 2011 PA 4. The United States Supreme Court has held that the heightened clarity required for retroactivity applies to statutes and administrative rules alike. Bowen v Georgetown Univ Hosp, 488 U.S. 204, 208 (1988).

         Nothing about this conclusion is groundbreaking, as "[c]ourts have long used the same set of tools to interpret both executive orders and statutes." Newland, Note, Executive Orders in Court, 124 Yale L J 2026, 2069 (2015). The dissent agrees that the rules for interpreting statutes apply to interpreting executive orders. ("There is no doubt that courts must interpret an executive order using the ordinary means of statutory interpretation."). Given that, I see no principled way to exempt retroactivity analysis. The settled precedent that governs courts' interpretations of statutes provides a readily understandable set of expectations for interpreting executive orders. If we were to announce some new, yet-unspecified, set of rules to discern retroactive application of executive orders, we would be sending parties off to sea without a compass, and inviting a host of new litigation. Underlying concerns about unfairness do not change, and neither should our rules: emergency managers must clearly demonstrate their intent that an order be retroactive.

         Because these same rules apply, precedent stacks the deck against finding retroactivity here. The " 'general rule is that a statute is to be construed as having a prospective operation only, unless its terms show clearly a legislative intention that its terms should operate retroactively.' " Barber v Barber, 327 Mich. 5, 12 (1950) (collecting cases; citation omitted). This presumption of prospectivity "is deeply rooted in our jurisprudence, and embodies a legal doctrine centuries older than our Republic." Landgraf v USI Film Prod, 511 U.S. 244, 265 (1994). And it applies even if "the words of the statute are broad enough in their literal extent to comprehend existing cases . . . unless a contrary intention is unequivocally expressed . . . ." Todd v Boards of Election Comm'rs, 104 Mich. 474, 478-479 (1895) (quotation marks and citation omitted).

         Against this backdrop, LaFontaine instructs courts to consider whether there is specific language providing for retroactive application. The expression of retroactive intent must be "clear, direct, and unequivocal . . . ." Davis v State Employees' Retirement Bd, 272 Mich.App. 151, 156 (2006). The expression here is not; there is no express language signaling retroactive effect. The absence of such language is important to concluding that the order should not be retroactive. See Frank W Lynch & Co, 463 Mich. at 583-584; White v Gen Motors Corp, 431 Mich. 387, 398 (1988); Van Fleet v Van Fleet, 49 Mich. 610, 613 (1883). And the order contains a telltale forward-looking phrase: "The Order shall have immediate effect." When the Legislature provides that a law will take immediate effect, that supports a finding of textual prospectivity. LaFontaine, 496 Mich. at 40. See also Pohutski v City of Allen Park, 465 Mich. 675, 698 (2002); Davis, 272 Mich.App. at 157.

         The Legislature, moreover, knows full well how to make laws retroactive, and the emergency manager could have used similar language if retroactivity was the goal. See, e.g., MCL 141.1157 ("This act shall be applied retroactively . . . ."); MCL 324.21301a(2) ("The liability provisions that are provided for in this part shall be given retroactive application."); MCL 224.19(2) ("The authority and powers granted in this section relative to bridges over navigable streams and the grant of that authority are retroactive . . . ."). See also LaFontaine, 496 Mich. at 40 n 30 (noting that MCL 445.1567(1)-(2), MCL 445.1568, and MCL 445.1570 each begin with the preface "Notwithstanding any agreement" as a sign they were retroactive). Any of these phrases would show retroactive intent, but none were used. Nor does the language of Order 225 give rise to a "necessary, unequivocal and unavoidable implication" that the manager intended it to apply retroactively. Briggs v Campbell, Wyant & Cannon Foundry Co, 379 Mich. 160, 165 (1967) (cleaned up). As a result, Order 225 fails to overcome the heavy presumption against retroactivity.

         Whether the Legislature was clear in its grant of authority to the emergency manager to devise retroactive orders, as the dissent emphasizes, is beside the point. Our focus must be on the text of the executive order that abrogated the contract, not the authority to issue the order.[2] The question is not whether the emergency manager could have issued a retroactive order, it is whether he did.

         Settled expectations matter too. Retroactive application of the order would upend the rights and obligations of those affected by it. The presumption of prospectivity is therefore especially strong "if retroactive application of a statute would impair vested rights, create a new obligation and impose a new duty, or attach a disability with respect to past transactions." Frank W Lynch & Co, 463 Mich. at 583. See also Johnson v Pastoriza, 491 Mich. 417, 429 (2012); Hansen-Snyder Co v Gen Motors Corp, 371 Mich. 480, 484 (1963).

         That concern is significant here. Pontiac's police and firefighters may have spent years-or entire careers-expecting that benefits would be paid out upon retirement. The city's financial distress may support the need for drastic action, but it does not weaken the plaintiff's reliance interests. Even assuming the emergency manager had the authority to invalidate contracts (a constitutional question not before us here), the plaintiff's reliance interests would still stand. There is a crucial difference between affecting a future source of income and taking property away.

         These are central principles in our jurisprudence. "All laws should be therefore made to commence in futuro . . . ." 1 Blackstone, Commentaries on the Laws of England, p *46. Our own Justice Cooley said that "[r]etrospective legislation . . . is commonly objectionable in principle, and apt to result in injustice . . . ." Cooley, Constitutional Limitations (1868), pp 62-63. Without clear language to the contrary, these critiques apply with equal force to executive orders. The Court of Appeals got this right, and for that reason, I support this Court's denial of the defendant's application for leave to appeal.

          Viviano and Bernstein, JJ., join the statement ...


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