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Verified Class Action Complaint: OKRIE et al. v State of Michigan et al.

THOMAS R. OKRIE, et al.,

Plaintiffs,

v

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

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) and Equitable Relief (Count II) 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 the Counts I and II of 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 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 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 and relied 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, which was 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 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 200,000 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 1-20 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."

VERIFICATION

I HAVE READ THIS VERIFIED COMPLAINT AND THE FACTUAL STATEMENTS CONTAINED HEREIN WHICH ARE TRUE AND ACCURATE TO THE BEST OF MY INFORMATION, KNOWLEDGE AND BELIEF.

___________________________________

Mr. Thomas R. Okrie

On this day, July ___ 2013, Mr. Thomas R. Okrie appeared before me and verified the allegations contained in the above Verified Class Action Complaint,

________________________ County, State of Michigan

_______________________________________

(Notary Public)

Respectfully Submitted,

LAW OFFICE OF GARY P. SUPANICH

__________________________

Gary P. Supanich (P45547)

Attorney for Plaintiffs

117 N. First St., Suite 111

Ann Arbor, MI 48104

(734) 276-6561

Dated: July 9, 2013

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