Pensioners’ deal terms prevent lawsuits over EM law, constitutional pension protections

Pensioners’ deal terms prevent lawsuits over EM law, constitutional pension protections

Unions and retirees groups would agree to halt their existing — and not pursue future — litigation related to Michigan laws regarding emergency managers and public pensions protections under a deal reached this week in the Detroit bankruptcy case.

The boards of both city retiree groups – the Detroit Police and Fire Retirement System and the General Retirement System – voted in favor of the negotiated deal. The agreement preserves pension payments to retirees far in excess of what Emergency Manager Kevyn Orr had been publicly proposing. It will go to a full vote by the roughly 32,000 pensioners as part of the bankruptcy proceedings, and their favorable vote is needed for the so-called “Grand Bargain.”

The bargain provides for $366 million of foundation contributions, $100 million from the Detroit Institute of Arts and $350 million in state funds – as yet only a proposal with no vehicle for allocation — to go toward pension funding in order to protect the museum’s artwork from sale, among other terms.

It’s the conditions tied to those “other terms” that were articulated for the first time in the city’s latest Plan of Adjustment, filed late Wednesday. Among them is a requirement for unions and retirement systems to halt all lawsuits challenging Public Act 436, the state’s law providing for emergency managers.

Also in the new pensioner-city deal conditions tied to the state funds is an agreement to not sue the state over Article IX, Section 24 of the Michigan Constitution. That’s the provision that provides the state guarantee for public pensions. It is superseded by federal bankruptcy law in the city’s Chapter 9 case, the bankruptcy judge has said.

“A critical part of any settlement is the elimination of potential lawsuits against Michigan taxpayers,” Ari Adler, spokesman for House Speaker Jase Bolger, said in a statement today after NextChapterDetroit.com first reported the terms. “The House of Representatives cannot contribute to any settlement until and unless there is an actual settlement to which to contribute.”

The provision halting and preventing lawsuits has immediate implications but only for cases in which the unions or retirement systems are involved as parties. In February, the 6th Circuit Court of Appeals agreed to hear a challenge from the two retirement systems questioning whether Detroit was even eligible to file for bankruptcy. It includes references to both the emergency law and the pension provision in the state constitution.

Also in February, a federal judge cleared the way for a challenge to Michigan’s emergency manager law made by 22 plaintiffs, including union leaders, ministers, Detroit school board members and city council members from Flint, Pontiac and Benton Harbor but not the unions themselves. The current law replaced a previous measure providing for the unelected managers that had been overturned by voters in November 2012. The next month the Legislature approved PA 436, which Gov. Rick Snyder signed.

Opponents complain it unlawfully emasculates representative government and gives too much power to unelected appointees who report only to the governor.

Ryan Plecha, an attorney who represents the Retired Police and Fire Fighters Association, says the litigation limits represent a balance between interests. “No pensions cuts and retaining 45 percent of COLA (cost-of-living allowances) was a pretty big incentive to do it,” he says. “This is not the final plan.

Attorneys for the city of Detroit have said they will file a fourth version of the Plan of Adjustment and Disclosure Statement probably by April 25. Plecha says ongoing negotiations could revisit and amend the provisions limiting litigation.

“That’s one of the things being discussed,” he says.

Here is the text of the proposed agreement, as found in the latest Plan of Adjustment:

The State’s payment of the State Contribution is conditioned upon, among other things, the following: … (e) active support of the Plan by, a release of and covenant not to sue the State from, and an agreement not to support in any way the litigation described in subsection (f) of this Section by, the City, the Retiree Committee, the Retirement Systems and certain unions and retiree associations, or equivalent assurances of litigation finality; (f) cessation of all litigation, including the cessation of funding of any litigation initiated by any other party, (i) challenging PA 436 or any actions taken pursuant to PA 436 as it relates to the City or (ii) to enforce Article IX, Section 24 of the Michigan Constitution, or equivalent assurances of finality of such litigation; …

-By WDET’s Sandra Svoboda

@WDETSandra and nextchapter@wdet.org