Jump To Navigation

Amended Verified Class Action Complaint

STATE OF MICHIGAN

IN THE COURT OF CLAIMS

THOMAS R. OKRIE, et al.,

Plaintiffs,

STATE OF MICHIGAN, GOVERNOR RICK SNYDER, MICHIGAN DEPARTMENT OF TECHNOLOGY, MANAGEMENT AND BUDGET, OFFICE OF RETIREMENT SERVICES, MICHIGAN STATE EMPLOYEES RETIREMENT SYSTEM, MICHIGAN PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM, and MICHIGAN DEPARTMENT OF TREASURY,

Defendants.

Case No.: 13-93-MK

HON. Rosemarie E. Aquilina

Gary P. Supanich (P45547)

LAW OFFICE OF GARY P. SUPANICH

117 North First Street, Suite 111

Ann Arbor, MI 48104

(734)276-6561

www.michigan-appeal-attorney.com

Patrick M. Fitzgerald (P69964)

Joshua Booth (P53947)

Thomas Quasarano (P27982)

MICHIGAN DEPARTMENT OF ATTORNEY GENERAL

State Operations Division

Attorneys for Defendants

P.O. Box 30754

Lansing, MI 48909

(517) 373-1162

AMENDED VERIFIED CLASS ACTION COMPLAINT

There is no other civil action between these parties arising out of the same transaction or occurrence as alleged in this complaint pending in this court, nor has any such action been previously filed and dismissed or transferred after having been assigned to a judge.

NOW COME the Plaintiffs, THOMAS R. OKRIE, the class representative on his own behalf and on the behalf of all persons similarly situated, by and through GARY P. SUPANICH, ESQ. (P45547) and GARY P. SUPANICH P.L.L.C., seek damages for Breach of Contract based upon Promissory Estoppel (Count I), Equitable Relief (Count II), Unjust Enrichment (Count III), and violations of the due process clause under 1963 Const, art 1, § 17 and US Const, Am XIV (Counts IV & V) against Defendants STATE OF MICHIGAN, MICHIGAN GOVERNOR RICK SNYDER, MICHIGAN DEPARTMENT OF TECHNOLOGY, MANAGEMENT AND BUDGET, OFFICE OF RETIREMENT SERVICES, MICHIGAN STATE EMPLOYEES RETIREMENT SYSTEM, MICHIGAN PUBLIC SCHOOL EMPLOYEES RETIREMENT SYSTEM, and MICHIGAN DEPARTMENT OF TREASURY, jointly and severally and in the alternative, as provided by MCR 2.111(A)(2). In support, Plaintiffs state as follows:

JURISDICTION

1. This Court has jurisdiction over this Verified Class Action Complaint pursuant to MCL 600.6419 and MCL 600.6419(a). The matter in controversy exceeds the sum or value of $1,000.00, exclusive of interest and costs.

PARTIES

2. The Plaintiff Thomas R. Okrie resides at 15211 Root Road, Yale, Michigan 48097. He is a former public school teacher who retired from the Troy School District, effective July 1, 2000. After retiring, he received a tax-exempt pension, as was promised by the State of Michigan, through the Michigan Department of Technology, Management and Budget, Office of Retirement Services, and Michigan Public School Employees Retirement System ("MSPERS"), from July 25, 2000 until January 1, 2012. Pursuant to the entry in force of 2011 PA 38 and the related legislation, 2011 PA 41, 43-45, signed into law by Michigan Governor Rick Snyder, his promised tax-exempt pension was subject to state and local taxation by the Michigan Department of Treasury. (Collectively, Defendants will be referred to as "the State of Michigan.")

3. Plaintiff is the Class Action Representative of all similarly situated public employees ("the affected public employees") - public school employees covered by MPSERS and state employees covered by the Michigan State Employees Retirement System (MSERS) - whose tax-exempt pensions promised by the State of Michigan, through the Michigan Department of Technology, Management and Budget, Office of Retirement Services administering MSPERS and MSERS, were subject to state and local taxation by the Michigan Department of Treasury on January 1, 2012 pursuant to the entry in force of 2011 PA 38 and the related legislation, 2011 PA 41, 43-45, signed into law by Michigan Governor Rick Snyder.

PLAINTIFF THOMAS R. OKRIE'S ALLEGATIONS

4. Plaintiff Thomas R. Okrie, a public school teacher, retired effective July 1, 2000 from the Troy School District as a "Health/Social Studies Teacher." Mr. Okrie, who was born on October 16, 1946, was 53 years old when he retired. After more than 33 years in service credit and being less than 55 years old, Mr. Okrie qualified for retirement under the "30 and Out" plan.

5. Before retiring, while he was still a public school teacher, Mr. Okrie regularly received and consulted the MPSERS Retirement Guidelines published by the ORS. The ORS, through the MPSERS Guidelines, instructed him to "Use the MPSERS Retirement Guidelines" and "When you're ready to retire, use it to help you make benefits decisions." It also reminded him of the "[i]rrevocable nature of retirement." The MPSERS' Guidelines that Mr. Okrie regularly received and consulted while he was still a public school teacher and before he retired made the unambiguous, unqualified statement that "Pensions paid by MPSERS are exempt from Michigan state income tax and Michigan city tax."

6. In July 1999, the ORS, through MPSERS, sent Mr. Okrie retirement application forms and informational materials that he had requested, including the 1998 MPSERS Guidelines and the Retirement Pension Estimate Workbook. Before making the irrevocable decision to retire, Mr. Okrie consulted the 1998 MPSERS Guidelines, which made the unambiguous, unqualified statement that "Pensions paid by MPSERS are exempt from Michigan state income tax and Michigan city tax." Mr. Okrie thus reasonably expected that, after retiring, his pension would be exempt from state and local taxation, relying upon the unqualified, unambiguous statement in the Retirement Guidelines, as backed up by MCL 38.1346(1), which exempted public-pension benefits from taxation, in making his irrevocable retirement decision and in calculating his financial security.

7. On August 18, 1999, Mr. Okrie submitted papers to MPSERS stating that the effective date of his pension was July 1, 2000. Among the forms that he submitted to MPSERS was the form entitled "Income Tax Information," which again stated:

MICHIGAN STATE AND CITY INCOME TAX

Pensions paid by MPSERS are exempt from Michigan state income tax and Michigan city income tax. Although you are exempt from paying Michigan income tax, you must still file state and city (if applicable) tax returns, acknowledge receipt of your MPSERS pension, and claim your exemptions on these forms. . . . (Emphasis in original).

8. Mr. Okrie again relied upon this unqualified, unambiguous statement by the ORS administering MPSERS in making his irrevocable decision to retire and in calculating his financial security, as MPSERS directed him to do. There was no statement anywhere in the documents sent to him stating that "the tax exemption could be eliminated at any time, so figure that into your retirement decision." Although his pension was exempt from state and local taxes, it was subject to federal taxation. Thus, Mr. Okrie had to fill out the "Pension Recipient's Federal Income Tax Withholding Authorization" form, but not a corresponding state income tax withholding authorization form. Id. Mr. Okrie elected "the straight life" - no survivor pension provided option, providing him with a monthly lifetime pension of $3,290.15, with a 3% increase of $98.70.

9. On October 14, 1999, Mr. Okrie received a letter from the ORS informing him that his "retirement application is now being processed by the Michigan Public School Employees Retirement System (MPSERS)." In the letter, Mr. Okrie was informed of the following:

Please contact MPSERS immediately if the data on the Benefit Application Summary is incorrect. The "Retirement Guidelines" booklet that accompanied your retirement application forms should be carefully reviewed prior to retirement.

10. As directed, Mr. Okrie again carefully reviewed the Retirement Guidelines, which unambiguously state without qualification that "Pensions paid by MPSERS are exempt from Michigan state income tax and Michigan city income tax." The letter ends by congratulating Mr. Okrie "on your retirement" and telling him: "You will soon reap the rewards of your hard work over the years." The rewards consisted of a pension exempt from state and local taxation.

11. On June 7, 2000, Mr. Okrie received a letter from the ORS stating that "[y]our application for retirement has been processed and you will receive your first pension check . . . at the end of July, 2000." On July 25, 2000, he received a "remittance advice" from the State of Michigan, and no state tax was assessed against him, as promised. Mr. Okrie continued to receive a tax-exempt pension every month for the next 11 years.

12. That, however, changed on January 1, 2012. After the entry in force of 2011 PA 38 and the related legislation, 2011 PA 41, 43-45, which were signed into law by Michigan Governor Rick Snyder, the State of Michigan broke its promise to Mr. Okrie and many similarly situated former state employees and public school employees by subjecting their pensions to state and local taxation after they made irrevocable retirement and employment termination decisions in justifiable reliance upon the State of Michigan's promise that their pension benefits were exempt from state and local taxation.

CLASS ACTION ALLEGATIONS

13. Plaintiff Thomas R. Okrie brings this action on his own behalf and on behalf of those similarly situated former state employees and public school employees pursuant to MCR 3.501(A)(1).

14. The individual Plaintiff, Mr. Thomas R. Okrie, seeks to represent the class of individuals consisting of all those Tier I retirees and deferred (vested) state employees (their spouses and surviving spouses) covered by MSERA, as administered by the ORS, and the retired and deferred (vested) public school employees (their spouses and surviving spouses) covered by MSPERS, as administered by the ORS, who were born after January 1, 1946 and whose pension benefits had vested or accrued before January 1, 2012 when 2011 PA 38 and the related legislation, 2011 PA 41, 43-45, went into effect and who made irrevocable retirement and employment termination decisions in justifiable reliance upon the State of Michigan's promise that their pension benefits were exempt from state and local taxation.

15. The exact number of members of the proposed class is not presently known, but based upon information and belief the number is well in excess of 100,000 people, and is so numerous that joinder of all members of the proposed class in this action is impracticable.

16. There are questions of law and fact common to the class. These include legal and factual questions pertaining to the tax-exempt pensions promised by the State of Michigan.

17. The individual Plaintiff's claims are typical of the claims of the members of the proposed class in that all these claims arise from the same promise made to them by the State of Michigan that their pensions were exempt from state and local taxation.

18. The individual Plaintiff, Mr. Thomas R. Okrie, will fairly and adequately represent the interests of the proposed class because they have the same or similar claims and interests arising from the same or similar operative facts and because he has secured representation of an attorney who is skilled, knowledgeable and experienced in labor and employment law, civil constitutional litigation and multiparty and class action litigation.

19. The State of Michigan's wrongful acts were undertaken on grounds that are generally applicable to the proposed class members, making final injunctive relief or corresponding declaratory relief appropriate with respect to the class as a whole.

20. The common questions of law and fact that are implicated predominate over any questions that affect only individual members of the proposed class, and class action is far superior to any other available method for the fair and efficient adjudication of this controversy.

COUNT I

BREACH OF CONTRACT BASED UPON THE EQUITABLE DOCTRINE OF PROMISSORY ESTOPPEL

21. Paragraphs 1-20 are incorporated herein.

22. For decades, the State of Michigan regularly promised Plaintiffs that they would receive a tax-exempt pension. This unqualified, unambiguous promise was clear and definite.

23. The State of Michigan should have reasonably expected to induce action of a definite and substantial character on the part of Plaintiffs.

24. As a result of the promise, the State of Michigan induced Plaintiffs to rely upon its word that their pensions were exempt from state and local taxation.

25. In making irrevocable retirement and employment termination decisions, Plaintiffs justifiably relied upon the State of Michigan's promise to their detriment.

26. The circumstances are such that the State of Michigan's promise must be enforced to avoid injustice.

COUNT II

EQUITABLE RELIEF

27. Paragraphs 1-26 are incorporated herein.

28. Plaintiffs request that this Court:

A. Certify this action as a class action, appoint the individual Plaintiff, Thomas R. Okrie, as class representative, and authorize Plaintiff's counsel to serve as class counsel.
B. Order the State of Michigan to provide a list to Plaintiffs' counsel of all similarly situated former state employees and public school employees whose pensions have been wrongfully taxed since January 1, 2012.
C. Order the State of Michigan to determine the amounts these former state employees and public school employees were taxed as a result of their breach of contract based upon the equitable doctrine of promissory estoppel.
D. Enter an award of damages, plus statutory interest under MCL 600.6455, to compensate Plaintiffs as a result of having their promised tax-exempt pensions subject to state and local taxation.
E. Enter an order compelling the State of Michigan to cease and desist from subjecting the pensions of these former state employees and public school employees to state and local taxation.
F. Award such other relief as warranted by law and equity, including costs and attorney fees from the "common fund."

COUNT III

UNJUST ENRICHMENT

29. Paragraphs 1-28 are incorporated herein.

30. The State of Michigan received benefits from Plaintiffs for services rendered by them as state employees or public school employees.

31. After promising Plaintiffs that they would receive deferred compensation in the form of a tax-exempt pension for services rendered, the State of Michigan has retained these benefits by subjecting their pensions to state and local taxation.

32. The State of Michigan retention of these benefits has resulted in an inequity to Plaintiffs, as the State has unjustly enriched itself at their expense. Given the inequity, Plaintiffs are entitled to restitution, for the State has an obligation to pay the promised deferred compensation.

COUNT IV

BREACH OF THE EMPLOYMENT CONTRACT UNDER TRADITIONAL CONTRACT PRINCIPLES

33. Paragraphs 1-32 are incorporated herein.

34. The State of Michigan's made an offer of deferred compensation to Plaintiffs in the form of a tax-exempt pension. Plaintiffs accepted the offer by performing services in exchange for the promised deferred compensation. This formed a binding, enforceable contract right to deferred compensation under traditional contract principles.

35. The State of Michigan breached this binding, enforceable contract right by applying 2011 PA 38 and the related legislation, 2011 PA 41, 43-45, to Plaintiffs beginning on January 1, 2012, after promising them that they would receive deferred compensation in the form of a tax-exempt pension for services rendered.

36. The State of Michigan has thus breached its contracts with Plaintiff and caused them damages.

COUNT V

VIOLATIONS OF THE CONTRACT CLAUSE UNDER 1963 CONST, ART 1, § 10 AND US CONST, ART 1, § 10(1)

37. Paragraphs 1-36 are incorporated herein.

38. Whether characterized as a breach of contract based upon promissory estoppel or a breach of an employment contract, the State of Michigan's application of 2011 PA 38 and the related legislation, 2011 PA 41, 43-45, to Plaintiffs beginning on January 1, 2012, impairs a contractual obligation in violation of 1963 Const, art 1, § 10 and US Const, art 1, § 10(1).

COUNT VI

VIOLATIONS OF THE TAKINGS CLAUSE UNDER 1963 CONST, ART 10, § 2 AND US CONST, AM V

39. Paragraphs 1-38 are incorporated herein.

40. Whether characterized as a contract right or a non-contractual benefit that the State of Michigan has retained without making restitution, the State of Michigan's application of 2011 PA 38 and the related legislation, 2011 PA 41, 43-45, to Plaintiffs beginning on January 1, 2012, constitutes a taking in violation of 1963 Const, art 10, § 2 and US Const, Am 5 by confiscating property that belongs to Plaintiffs without just compensation.

COUNT VII

VIOLATIONS OF SUBSTANTIVE DUE PROCESS UNDER 1963 CONST, ART 1, § 17 AND US CONST, AM XIV

41. Paragraphs 1-40 are incorporated herein.

42. Whether characterized as a contract right or a non-contractual benefit that the State of Michigan has retained without making restitution, the State of Michigan's application of 2011 PA 38 and the related legislation, 2011 PA 41, 43-45, to Plaintiffs beginning on January 1, 2012, constitutes a violation of substantive due process under 1963 Const, art 1, § 17 and US Const, Am XIV.

COUNT VIII

VIOLATIONS OF PROCEDURAL DUE PROCESS UNDER 1963 CONST, ART 1, § 17 AND US CONST, AM XIV

43. Paragraphs 1-42 are incorporated herein.

44. Until the enactment of the amendments contained in 2011 PA 38, along with 2011 PA 41, 43-45, removing the statutory exemption from state and local income tax, all public-pension benefits had previously been completely deductible under the Income Tax Act.

45. Plaintiffs had reasonably relied to their detriment on the pre-amendment statutes since that state pensions had been exempt from taxation for decades. Further, the amended statutes imposing wholly new taxes were completely unforeseeable at the time that Plaintiffs made their irrevocable retirement and employment termination decisions in reliance upon the promise of tax-exempt pensions. Moreover, the State Legislature acted with an improper motive by targeting Plaintiffs' deferred compensation for taxation after the ORS had deliberately induced them to believe over decades that their pensions were exempt from taxation.

46. Because the retroactive application of the amended tax statutes at issue to Plaintiffs is so arbitrary and capricious, it amounts to confiscation in violation of procedural due process under 1963 Const, art 1, § 17 and US Const, Am XIV.

Do You Have a Case?

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Contact Information

Law Office of Gary P. Supanich
117 North First Street, Suite 111
Ann Arbor, MI 48104
Toll Free: 800-419-7310
Fax: 734-661-0742
Map and Directions