MAPERS ConferenceSpring 2020

Legal Update WebinarJune 24, 2020

Presented by:

Aaron L. Castle, Esq.

VanOverbeke, Michaud & Timmony, P.C.

79 Alfred Street, Detroit, Michigan 48201

313-578-1200

www.vmtlaw.com

Overview

• Retiree Health Care

• Benefits Administration

• Investment

• Collective Bargaining

• Domestic Relations

• FOIA / Open Meetings Act

RETIREE HEALTH CARE

Retiree Health CarePrice, et al. v Charter Township of BloomfieldMichigan Court of Appeals No. 344026May 28, 2019

❖Township made changes to health care benefits for all retirees under the age of 65

❖Retirees claimed that the changes violated the CBAs which provided vested right tolifetime healthcare benefits

❖Township claimed that its obligations did not extend beyond the CBAs’ general durationalclauses

❖Court of Appeals found ambiguity amongst the provisions of the CBAs

➢ Survivor benefit provisions that continued healthcare coverage beyond retiree’s death

➢ Vested former members entitled to healthcare benefits upon eligible to collect apension

Retiree Health CareKendzierski, et al. v Macomb County Michigan Supreme Court No. 156086 May 30, 2019

❖Approximately 1600 County retirees alleged that the County breached the terms of CBAs dating backto 1989 by reducing and altering retiree healthcare benefits

➢CBAs all contained a 3-year general durational clause

➢CBAs did not include a provision expressly granting a vested right to lifetime and unalterableretiree healthcare benefits

❖MI Supreme Court relied upon U.S. SupremeCourt’s Tackett and Reese opinions

➢Consistent with Michigan’s principles of contract law

❖CBAs were not ambiguous despite provisions providing for survivor benefits, termination for failure toenroll in Medicare, and suspension of coverage while covered through another employer

➢Guaranteed benefits only until the agreements expired

Retiree Health CareAllen Park Retirees Association Inc., et al. v City of Allen Park and Joyce A. ParkerMichigan Court of Appeals No. 341567August 13, 2019

❖City’s Emergency Manager (Parker) altered retiree healthcare benefitsduring period of financial emergency

➢ Increased co-pays and deductibles

❖City continued providing altered retiree healthcare after termination offinancial emergency

❖Retirees sued for breach of the terms of the applicable CBAs

❖Court of Appeals sent the case back to the trial court for analysis in light ofMI SupremeCourt’s opinion in Kendzierski.

Retiree Health CareCity of Wayne Retirees Association, et al. v City of WayneMichigan Ct. of Appeals Nos. 343522; 343916October 15, 2019

❖City made changes to retiree healthcare benefits

❖Retirees sued alleging a vested right to healthcare benefits under CBAs in effect at time of retirement

➢ Past practice of treating retiree healthcare are lifetime benefits

➢ City honored retiree healthcare obligations beyond the expiration of the agreements

❖Retirees did not meet their burden

➢ Past practice may only be used to show amendment of a CBA before an employee retires

➢ Failed to show that there was mutual agreement that retiree healthcare benefits were not subject to future modifications

Retiree Health CareMichigan Education Association Family Retired Staff Association, et al. v MEA, et al.United States District Court for the W.D. Michigan, Southern Division No. 1:19-cv-1074December 27, 2019

❖Retirees sought a temporary restraining order prohibiting their former employer fromunilaterally altering retiree healthcare benefits

➢ Relied on 1993 Letter of Understanding stating that retiree fringe benefits become“vested for life” on commencement of retirement benefits

❖Court refused to grant the TRO

➢ Stated that 1993 LOU appeared to be extrinsic evidence

➢ Retirees failed to point to any “clear, affirmative language” in any CBA indicating thathealthcare benefits extend beyond the general durational clauses

BENEFITS ADMINISTRATION

Benefits AdministrationWilson v City of Ferndale United States District Court for the E.D. Michigan, Southern Division No. 19-10752August 29, 2019

❖Mandatory retirement

❖City Charter required members of police and fire retirement system to retire upon attainment of 60years of age

❖Wilson alleged age discrimination and that he was not subject to the Charter’s mandatory retirementprovision as he had relinquished his rights to a pension in favor of a defined contribution plan

❖Court dismissed age discrimination claim as Age Discrimination in Employment Act specificallyauthorizes mandatory retirement provisions for law enforcement officers and firefighters

❖Wilson was subject to mandatory retirement at age 60 because he was determined to be a memberofCity’s retirement system under City Charter provision

Benefits AdministrationClark v Ford Motor Company and Ford Motor Company General Retirement PlanUnited States District Court for the E.D. Michigan, Southern Division No. 19-cv-11410December 26, 2019

❖Clark claimed that the Retirement Plan wrongfully denied him 13 years of contributionsthat resulted in a reduced pension benefit

➢ 1.5% voluntary contributions were stopped from 2004 – 2017

➢ Clark claimed he did not elect to stop making contributions and was told by Ford H.R.representative that they would work on fixing the issue

❖Ford forced Clark to retire in 2019 and did not include 2004-2017 contributions in hisretirement calculation

❖Court refused to dismissClark’s breach of fiduciary duty claim

Benefits AdministrationZirbel v Ford Motor CompanyUnited States District Court for the E.D. Michigan, Southern Division No. 18-13212January 29, 2020

❖Zirbel was overpaid approximately $250,000 by Ford Retirement Plan due to Ford’s use ofan incorrect benefit commencement date

❖Plan provisions required repayment of benefits paid in error

➢ Plan Committee sought to recover full amount of overpayment

❖Zirbel claimed that the Committee’s refusal to reduce the amount to be repaid wasarbitrary and capricious

❖Court disagreed and ruled that the Committee’s refusal was non arbitrary and capriciousbecause the Plan provisions specifically provided that overpayments must be repaid

Benefits AdministrationVanderhull v City of Dearborn Employees Retirement System Board of TrusteesMichigan Ct. of Appeals No. 346670February 4, 2020

❖Vanderhull was surviving spouse of a vested former member of the retirement system

❖Retirement Board denied her surviving spouse pension on account of her husband’s deathprior to commencement of his deferred retirement benefit

➢He was not a retiree because he was not “receiving” a pension at the time he died

❖Court of Appeals ruled that surviving spouse was entitled to a survivor pension as herhusband’s application for deferred retirement benefits had been approved at the time of hisretirement

➢ He was in the process of “receiving” his pension when he died

➢ Analogized with a football player in the process of receiving a forward pass and amortgagee in the process of receiving mortgage payments

Benefits AdministrationBeck v Michigan Public School Employees’ Retirement SystemMichigan Ct. of Appeals No. 344522February 27, 2020

❖In September of 2012, Beck was notified that she needed to make a retiree healthcare electionvia the online retirement account

❖In February of 2013, Beck received a letter confirming her retiree healthcare election

❖Beck disputed the Retirement System’s record of her retiree healthcare election arguing thatshe did not intend to elect the option on record and that if she had done so it was throughcomputer error or her own haste

❖The Retirement System refused to change her election stating that it was irrevocable at thetime it was made

❖The Court upheld the Retirement Board’s refusal to change the election, holding that substantialevidence existed supporting the Board’s conclusion that Beck elected the option on record inOctober of 2012.

INVESTMENT

InvestmentRetirement Plans Committee of IBM, et al. v Jander, et al.United States Supreme Court No. 18-1165January 14, 2020

❖IBM Employee Stock Ownership Plan (ESOP)

❖Breach of fiduciary duty claim in handling inside information

❖When a complaint “faults fiduciaries for failing to decide, on the basis of inside information,to refrain from making additional stock purchases or for failing to disclose that informationto the public so that the stock would no longer be overvalued, additional considerationsarise.”

➢ ERISA’s duty of prudence does not require the fiduciary of an ESOP to divest the fund’sholdings on the basis of inside information in violation of federal securities laws.

❖Plaintiff’s must plausibly allege an alternative action that the Plan fiduciary could havetaken that would have been consistent with federal securities laws and that a prudentfiduciary in the same circumstances would not have viewed as more likely to harm the fundthan to help it.

COLLECTIVE BARGAINING

Collective BargainingCharter County of Wayne v Wayne County Retirement Commission, et al. Michigan Ct. of Appeals No. 339714May 9, 2019

❖During the course of the County’s financial emergency, the County CEO settled collectivebargaining agreements (the “CBAs”) with theCounty’s employee unions

➢ The CBAs included changes to the composition of the Wayne County Employees’Retirement Commission as set forth in the County Charter and Retirement Ordinance

❖The Retirement Commission contested the CEO’s changes claiming that the County couldnot impose terms or conditions of a CBA on nonunion employees or retirees

❖Court of Appeals refused to implement the changes to the composition of the RetirementCommission

➢Was not a ministerial act and required significant decision-making beyond the scopeof theCourt’s authority

DOMESTIC RELATIONS

Domestic RelationsHieshetter v Tyson Foods Inc., et al.United States District Court for the W.D. Michigan, Southern Division No. 1:19-cv-190November 5, 2019

❖Hieshetter’s ex-spouse retired under a pension plan sponsored by Tyson Foods

❖The Hieshetter’s consent judgment for divorce stated, “[e]ach party shall receive, free and clear ofany interest of the other, all pension, annuity, or retirement benefits which he/she has accrued as aresult of their respective employment[.]”

❖Ms. Hieshetter requested a pension application from Tyson which was denied on account of her notbeing a participant or beneficiary inTyson’s pension plan

❖The court agreed with Tyson and found that Ms. Hieshetter did not have standing to sue as abeneficiary of its pension plan because the judgment of divorce created no alternate payee and therewas no applicable Qualified Domestic Relations Order to assert her claim for pension benefits fromTyson

Domestic RelationsDorko v Dorko Michigan Supreme Court No. 156557June 20, 2019

❖Dorko and his former spouse were divorced in 2005

❖Ten years and eight days subsequent to the date of divorce, a QDRO was finally submitted,but Dorko argued that it was time barred due to Michigan’s 10-year statute of limitationson noncontractual money obligations

❖The Michigan Supreme Court disagreed stating that entry of a proposed QDRO simplyseeks to enforce a provision of a divorce judgment and is not an action to enforce anoncontractual money obligation.

➢ Statute of limitations would apply to any attempts made by Dorko’s ex-wife to recoverany portion of retirement benefits already paid to Dorko

DISABILITY

Disability Bell v SaginawMichigan Ct. of Appeals No. 341858May 21, 2019

❖Upon his attainment of 50 years of age, Bell’s duty disability pension was recomputed as an ageand service retirement pension benefit

❖Pursuant to the Michigan Workers’ Disability Compensation Act, the City sought to offset Bell’sage and service retirement benefit from his weekly workers’ compensation wage loss benefit

❖Bell argued that upon his attainment of age 50, he was exempt from any coordination ofbenefits because the pension ordinance did not specifically contemplate coordination of an ageand service retirement benefit

❖The Court disagreed, noting that the ordinance did not specifically exempt plan members fromcoordination after they began receiving an age and service retirement benefit and that anyfuture workers’ compensation benefits payable to Bell were subject to coordination with his ageand service pension.

OPEN MEETINGS ACT

Open Meetings ActA Felon’s Crusade for Equality, Honesty, and Truth v Detroit Public Schools Bd. of Ed., et al.Michigan Ct. of Appeals No. 343881November 14, 2019

❖A Felon’s Crusade alleged that the Detroit School Board violated the OpenMeetings Act (the “OMA”) throughout its search for a new school superintendent

❖The Court held that a search committee comprised of members of the SchoolBoard was not a public body subject to the OMA because the committee’s activitieswere purely investigative and it exercised no authority with respect to the actualselection of candidates for the superintendent position

➢ The Court noted that because the committee only gathered and presentedinformation to the School Board, and because the committee had no authority to acton its own recommendation, the committee was not a public body.

Open Meetings ActMeyer v Oakland Community College Board of Trustees, et al.Michigan Ct. of Appeals No. 345738January 7, 2020

❖The OCC Board went into a closed session with its legal counsel to discuss personnelmatters pertaining to Meyer’s employment

❖When the Board returned to open session it approved “the plan” as discussed in its closedsession, resulting in Meyer’s dismissal as chancellor

❖Meyer sued the Board claiming that it violated the Open Meetings Act when the Boarddeliberated and decided to terminate his employment in a closed session meeting

❖The Court determined that the Board did violate the OMA by deliberating and deciding toterminate Meyer’s employment in closed session

➢Although the Court noted that Meyer was entitled to statutory damages for the Board’s OMAviolation, it refused to invalidate the Board’s decision as Meyer’s complaint was untimely.

FOIA

FOIAMcIntosh v City of Rockford Michigan Ct. of Appeals Nos. 343125; 344169June 20, 2019

❖The City failed to provide the required written notice describing the redacted materialprovided in response to McIntosh’s FOIA request

❖McIntosh filed suit for violation of the FOIA and the Court ordered the City to providejustification and explanation for the redactions in the records or, alternatively, to provideunredacted copies of the records

❖The City chose to produce the unredacted records and sought dismissal of the case asmoot

❖The Court dismissed the case but also imposed a $2,500 fine on the City for failure tocomply with the FOIA and awarded McIntosh $8,750 in attorney fees

FOIABleau v Alpena Community College Michigan Ct. of Appeals No. 349466February 25, 2020

❖The Community College’s FOIA Coordinator requested a 50% good faith deposit beforeproducing the records requested by Bleau

❖Bleau claimed that the college lacked authority to request a deposit because it had not properlyadopted a FOIA policy and procedures

➢ Claimed that the college did not publicly post its FOIA procedures prior to his request and thatthe applicable procedures were not adopted by the college’s Board of Trustees, as requiredunder the FOIA

❖The court found that the college did comply with the FOIA when it posted its FOIA proceduresone day prior to responding to Bleau’s request and that its FOIA Coordinator had authority topost those procedures despite the Board of Trustees having not yet adopted them

Questions/Comments

Aaron L. CastleVanOverbeke, Michaud & Timmony, P.C.

313-578-1200

acastle@vmtlaw.com