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Publications | June 12, 2017
2 minute read

MSC grants mini-oral argument to clarify the retroactive application of Executive Order 225 to retiree benefit contributions

The Michigan Supreme Court is not quite done with its analysis of the retroactivity of Order 225.  The Court again granted mini-oral argument in Board of Trustees of the City of Pontiac v. City of Pontiac, No. 154745, to address whether (1) the Court of Appeals correctly applied the findings in LaFontaine Saline, Inc. v. Chrysler Group, LLC, 496 Mich 26 (2014) to Order 225; (2) whether LaFontaine prohibited the retroactive application of Order 225 to the trust; and (3) if LaFontaine does not apply, whether Order 225’s retroactive modification of the 2011-2012 fiscal contribution to the trust is impermissible under the Michigan constitution.  This decision could have an impact on the application of Order 225 retroactively to a wide-range of obligations and claims.

This suit first arose in 2012, when the board of trustees (the “Board”) of the City of Pontiac Police & Fire Retiree Prefunded Group Health & Insurance Plan (the “Trust”) sued the City of Pontiac (the “City”) for failure to make a required contribution for fiscal year 2012.  The Board alleged that the City violated the constitution, an ordinance, and collective bargaining agreements between the unions and the City.  In the first appeal to the Michigan Supreme Court, the Court found that Order 225 was intended to eliminate the fiscal year 2012 obligation.  The Court remanded the case to the Court of Appeals and directed it to consider whether Order 225 permitted retroactive modification of the Board’s right of contribution to the Trust under LaFontaine.

When the Court of Appeals issued its new decision, it held that, according to LaFontaine, retroactive application of Order 225 to extinguish the City’s unpaid contribution to the Trust for fiscal year 2012 was not permitted because Order 225 does not contain “clear, direct, and unequivocal” language providing for retroactive application.  It further held that retroactive application would impair or abolish the Board’s right to prosecute its cause of action for breach of contract.  The City filed an application for leave to appeal, and the Court granted mini-oral argument on the application.

To view our previous posts on the Court of Appeals’ decisions, click here and here.