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Motion for Reconsideration from April 21, 2014 Opinion and Order




THOMAS R. OKRIE, et al.,


Court of Claims No. 13-93-MK















Gary P. Supanich (P45547)


Attorney for Plaintiffs

117 North First Street, Suite 111

Ann Arbor, MI 48104

(734) 276-656


Patrick M. Fitzgerald (P69964)

Joshua Booth (P53947)

Margaret Nelson (P30342)


State Operations Division

Attorneys for Defendants

P.O. Box 30754

Lansing, MI 48909

(517) 373-1162




NOW COME the Plaintiffs, THOMAS R. OKRIE and other similarly situated retired state and public school employees, by and through GARY P. SUPANICH, ESQ. (P45547), to move this Court for reconsideration of its Opinion and Order dated April 21, 2014 (EX. 1), denying their motion for summary disposition under MCR 2.116(C)(10) and MCR 2.116(I)(1) as to their claims for breach of traditional employment contract and unjust enrichment under state law, their claims for violations of the Contracts Clause, Takings Clause and Substantive and Procedural Due Process Clauses under the state and federal constitutions, granting the State of Michigan's motion for summary disposition as to these counts; dismissing Plaintiffs' Motion to File a Second Amended Complaint to add claims for the breach of the service credit purchase contract and the breach of the Member Investment Plan (MIP) contract; [1] dismissing Plaintiffs' Amended Motion for Class Certification and closing the case against the State of Michigan, et al.

For this Court to grant a motion for reconsideration, "[t]he moving party must [1] demonstrate a palpable error by which the court and the parties have been misled; and [2] show that a different disposition of the motion must result from correction of the error." MCR 2.119(F)(3); Conlin v Scio Twp, 262 Mich App 379 (2004). Here, as before, this Court should grant the motion for reconsideration because its order contains numerous "palpable errors" mandating a completely different result. Churchman v Rickerson, 240 Mich App 223, 233 (2000).

(1) Sitting as the Court of Claims, this Court Has the Obligation to Determine the Constitutionality of 2013 PA 164.

As a preliminary matter, Plaintiffs challenge the authority of the presiding judge to sit simultaneously on the Court of Appeals and Court of Claims and rule as a Court of Claims judge on this case. Although this Court claims that "the validity of 2013 PA 164 [] is properly directed to the Court of Appeals" pursuant to MCL 600.308(4) (EX. 1, p 11), no judge can avoid his or her judicial duty of deciding jurisdictional questions that go to their very authority to rule as a court of law. Subject-matter jurisdiction is so critical to a court's authority that judges have an independent obligation to take notice when it lacks such jurisdiction, even if the parties do not raise the issue. In re AMB, 248 Mich App 144, 166-67 (2001). Indeed, any action taken in a case by a judge lacking subject-matter jurisdiction is void. In re Hatcher, 443 Mich 426, 438 (1993) ; Bowie v Arder, 441 Mich 23, 568 (1992).

Accordingly, given the supreme importance attached to jurisdictional issues, each individual judge has an obligation to decide a challenge to his or her judicial authority. Simply put, the Legislature does not have the power under the Michigan Constitution to take that power away from any judge and assign this determination solely to the Court of Appeals. This is true even if Plaintiffs have filed a Petition challenging the constitutionality of 2013 PA 164 that is pending in the Court of Appeals. Because this Court sitting as a judge on the Court of Claims pursuant to 2013 PA 164 lacks subject-matter jurisdiction to take any action in this case, Plaintiffs request that this Court either rule on the constitutional question in this present Motion for Reconsideration or hold this case in abeyance pending the determination of the Court of Appeals in COA Docket No. 319550.

(2) This Court Abused its Discretion in Dispensing with Oral Argument under MCR 2.119(3).

By not rescheduling the hearing date for the parties' cross-motions for summary disposition, Plaintiffs' Motion to File a Second Amended Complaint and their Amended Motion for Class Certification, this Court has abused its discretion in effectively denying Plaintiffs an opportunity to be heard in violation of the Due Process Clauses under the state and federal constitutions. In particular, the dispositive motions presented issues of great jurisprudential significance that should have been afforded full argument before this Court. It is especially true since Plaintiffs also moved to file a Second Amended Class Action Complaint, adding claims for breach of investment contracts relating to MIP and the purchase of service credit. So even if the parties' cross-motions for summary disposition were "thoroughly briefed," Plaintiffs were never given an opportunity to brief adequately their proposed counts added in the Motion to File a Second Amended Complaint. By denying Plaintiffs the opportunity to present all their arguments, this Court acted in an unprincipled fashion. Woodard v Custer, 476 Mich 545, 557 (2006).

(3) This Court Cannot Rely upon the Advisory Opinion as "Persuasive Authority" Because that the Michigan Supreme Court Did Not Address Plaintiffs' Claims for Unjust Enrichment and for Violations of the Takings Clause, and Substantive and Procedural Due Process Clauses.

The Michigan Supreme Court's decision in In re Request for Advisory Opinion regarding Constitutionality of 2011 PA 38, 490 Mich 295 (2011) ["Advisory Opinion"] primarily addressed only whether 2011 PA 38, by eliminating the statutory exemption for public-pension incomes, impaired accrued financial benefits under Const 1963, art 9, § 24, or impaired a contractual obligation in violation of Const 1963, art 1, §10 or US Const, art 1, § 10(1). It did not address the specific claims brought by Plaintiffs in the present action, particularly their claims for unjust enrichment, violations of the Takings Clause and Substantive and Procedural Due Process Clauses under the state and federal constitutions, and breach of investment contracts relating to the MIP and the purchase of service credit. Moreover, the Advisory Opinion only addressed the particular arguments brought by the parties in that case; it did not address the specific arguments that Plaintiffs raise on behalf on their claims in this case. Therefore, it is palpable error for this Court to treat the Advisory Opinion as being "persuasive authority" as to claims and arguments that it simply did not address.

Underpinning Plaintiffs' claims that the Supreme Court did not address in the Advisory Opinion is their entitlement to tax-exempt pensions because it represented deferred compensation for the performance of past governmental services, which fact the State is judicially estopped from denying. See Davis v State of Michigan, 160 Mich App 98, 105 (1987)(agreeing with the State's argument that the "income tax exemption is an integral part of the retirement benefits conferred upon state employees, functioning as an "economic inducement" for "attracting and retaining []qualified employees"), rev'd on other grounds, Davis v Michigan Dep't of Treasury, 489 US 803, 808 (1989) ("We have no difficulty concluding that civil service retirement benefits are deferred compensation for past years of service rendered to the Government."). So even if tax-exempt pensions are not protected under Const 1963, art 9, § 24 as "accrued financial benefits," they nonetheless constitute financial benefits, i.e., "property," which the State appropriated in violation of the Takings Clause under the state and federal constitutions. Bd of Regents v Roth, 408 US 564, 577 (1972).

(4) The United States Supreme Court's decision in Winstar Supports Plaintiffs' Claim that the State Cannot Deny Them the Financial Benefits of a Tax-Exempt Pension by a Subsequent Change in the Tax Law.

As previously stated, Plaintiffs are not challenging the Legislature's exclusive power to tax or eliminate the statutory tax exemption for public pensions, nor are they even disputing the power of the Legislature to tax their pensions. Rather, what they are challenging is the State's wrongful appropriation of their deferred compensation, already earned, which was payable to them in the form of a tax-exempt pension. See United States v Winstar Corp, 518 US 839 (1996)(holding that the government is liable for damages when a subsequent, targeted change in the tax law is made that deprives a contracting party of favorable tax treatment that the government specifically used as an inducement or consideration). Moreover, Plaintiffs are not contesting whether the statutory tax exemption was revocable as to active or current public employees, but rather whether the revocation of the statutory tax exemption may be applied retroactively to them. See Lon L. Fuller, The Morality of Law (1964).[2] In any event, answering the retroactivity question in the aftermath of Davis, the Attorney General stated:

It is my opinion, therefore, that the Legislature may, without violating Const 1963, art 9, § 24, limit or repeal the tax exemptions now found in the four retirement statutes as to current retirees and members if it provides alternative benefits in their place that are equal to or greater than the pension benefit[s] that would be limited or withdrawn since there would be no constitutionally cognizable impairment of the pension benefit[s]. [OAG No. 6697, p 6; 1991 AG LEXIS 39](emphasis added.)

This Court should heed the Attorney General's Opinion, which is in accord with Winstar and which is binding authority under the Supremacy Clause of the U.S. Constitution. US Const, art VI, cl. 2. [3]

(5) Plaintiffs' Proposed Counts for Breaches of the MIP Investment Contract and the Purchase of Service Credit are not "Futile."

It is well-established that courts should freely grant leave to amend when justice so requires; amendment is a matter of right rather than grace, and should be denied only for particularized reasons. Ben P. Fyke & Sons v Gunter Co, 390 Mich 649, 656, 659 (1973). It is equally well-established that a grant of summary disposition for the defendant does not automatically preclude amendment of the complaint. Formall, Inc v Community Nat'l Bank, 166 Mich App 772, 783 (1988). Thus, a court must give a party the opportunity to amend unless amendment would be futile. Weymers v Khara, 454 Mich 639, 658 (1997).

Absent any briefing or argument, Plaintiffs simply were not given an opportunity to demonstrate whether their proposed amendments were "futile," and this Court incorrectly assumed that "Plaintiffs' proposed new claims are simply variations on the theme of the previous two complaints." (EX. 1, p 11). Had Plaintiffs been afforded their rights to Due Process, this Court would have found out that these proposed counts were qualitatively different in character than the previous claims, as the attached document reveals. (EX. 2 - Your Retirement Plan Choice: The MIP/Basic Choice ["The Booklet"]). Specifically, in comparing alternative investments to MIP, such as Tax Sheltered Annuities and Individual Retirement Accounts, the State-issued Booklet makes the unqualified claim that the MIP investment is better because "MIP and Basic Benefits are exempt from Michigan state and local taxes by law, but income from the alternative investment is not." [Id. at p 17 (emphasis added)].

Unlike the statements promising tax-exempt pensions arising from employment relationships with the State, both the MIP and the purchase of service credit represent individual investment contracts with the State in which state and public school employees invested their own money on the explicit, unqualified condition that these investment returns were tax-exempt. Thus, Plaintiffs are just like the purchasers of tax-exempt municipal bonds who accept a lower interest rate than is available on commercial bonds because the state's promise not to tax the bond's interest adds value to the investment. Otherwise, no rational investor would accept the lower municipal interest rate. The same is true here.

(6) Plaintiffs' Should Be Allowed to Amend their Complaint to Add Proposed Counts for Fraud in the Inducement and Gross Negligent Misrepresentation.

From the commencement of their Complaint, Plaintiffs, all of whom had performed many years of governmental services to the State, have proceeded on the good faith belief that their State would act as an honorable party in this matter. For that reason, Plaintiffs resisted the easy temptation to assert Fraud. At this point in the proceedings, though, it has become painfully clear that Plaintiffs have no other alternative but to allege fraud in the inducement and gross negligent misrepresentation against the State. Specifically, fraud in the inducement occurs when a party materially misrepresents future conduct under circumstances in which the assertions may reasonably be expected to be relied upon and are in fact relied upon. Samuel D Begola Services, Inc v Wild Bros, 210 Mich App 636, 639 (1995). Negligent misrepresentation occurs when a plaintiff has justifiably and detrimentally relied on information provided without reasonable care by one who owed the plaintiff a duty of care. Law Offices of Lawrence J Stockler, PC v Rose, 174 Mich App 14, 33 (1989) .

Here, there is no question that Mr. Okrie and 100,000+ similarly situated state and public school employees, in making irrevocable decisions to retire, reasonably relied upon the statements repeatedly made for decades by the State in the Retirement Guidelines booklets, in seminars, and on the retirement forms that their pensions were exempt from state and local income tax, where these statements reflected the language of the statutory provisions in force at the time of their retirement decisions.[4] Over 100,000 retired state and public school employees are not fools; rather, they were fooled by the State which they had served for years and which has now taken them for fools. This is a shameful chapter in the history of the State of Michigan to which this Court should not give its imprimatur. No private actor would be allowed to get away with what the State has done here. As Justice Brandeis incisively observed in Lynch v United States, 292 US 571, 580 (1934), quoting the Sinking-Fund Cases, 99 U.S. 700, 719 [1879]:

Punctilious fulfillment of contractual obligations is essential to the maintenance of the credit of public as well as private debtors. No doubt there was in March, 1933, great need of economy. In the administration of all government business economy had become urgent because of lessened revenues and the heavy obligations to be issued in the hope of relieving widespread distress. Congress was free to reduce gratuities deemed excessive. But Congress was without power to reduce expenditures by abrogating contractual obligations of the United States. To abrogate contracts, in the attempt to lessen government expenditure, would be not the practice of economy, but an act of repudiation. "The United States are as much bound by their contracts as are individuals. If they repudiate their obligations, it is as much repudiation, with all the wrong and reproach that term implies, as it would be if the repudiator had been a State or a municipality or a citizen." (Emphasis added.)

It is a short step to despotism in this State if such repudiation should be allowed to stand. Accordingly, Plaintiffs should be allowed to amend their Complaint to seek redress any the State for fraud in the inducement and gross negligent misrepresentation.

WHEREFORE, Plaintiffs respectfully request that, as a preliminary matter, this Court, sitting as the Court of Claims, rule on the constitutional challenge to 2013 PA 164 or hold this motion in abeyance pending the determination of the Court of Appeals' decision in Okrie v State of Michigan, No. 319550, regarding its constitutionality. In the event that this Court rules on the present motion for reconsideration, Plaintiffs request that their motion be granted, and that this Court grant their motion for summary disposition under MCR 2.116(C)(10); their motion to file a Second Amended Complaint, adding claims for the breach of the service credit purchase contract and the breach of the Member Investment Plan (MIP) contract; allow Plaintiffs the opportunity to file an Amended Complaint to add claims for fraud in the inducement and gross negligent misrepresentation against the State of Michigan, and grant their Amended Motion for Class Certification.

Respectfully Submitted,



Gary P. Supanich (P45547)

Attorney for Plaintiffs

117 North First St., Suite 111

Ann Arbor, MI 48104

Dated: May 7, 2014 (734) 276-6561


[1] In their Motion to File a Second Amended Verified Class Action Complaint, Plaintiffs mistakenly referred to the MIP contract as the "Michigan Investment Plan."

[2] In this regard, the decision in AFT Mich v Michigan, 303 Mich App 651 (2014) is clearly distinguishable, pertaining to active or current public employees who, unlike retired public employees, cannot be said to have relied upon such statements in making irrevocable decisions in calculating their retirement benefits.

[3] This Court also needs to be reminded that a private actor under the Employee Retirement Income Security Act ("ERISA") may not retroactively apply an amendment to an ERISA plan if it deprives a beneficiary of a vested benefit. See Wheeler v Dynamic Eng'g Inc, 62 F3d 634, 640 (CA 4 1995).

[4] The so-called disclaimer that "the Act controls" in case of a conflict makes no mention that the State may retroactively subject their pensions to state and local taxation after the affected public employees made irrevocable decisions to retire based on the State's representations that their pensions were exempt from state and local taxation.

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