Sunday, August 11, 2013

Sixth Circuit Says Emergency Manager Law May Violate State Constitution

The Sixth Circuit on Friday ruled in City of Pontiac Retired Employees Association v. Schimmel that the Michigan state legislature may have violated the state constitution in approving the state's emergency manager law for immediate effect.  The court remanded the case to the district court for consideration of that claim.  If the district court holds that the law violates the state constitution, and if that ruling is upheld on appeal, the actions of the emergency manager for the City of Pontiac will be void.

The 2-1 ruling is notable insofar as a federal appeals court took it upon itself to rule on a state constitutional claim not raised by the parties, relating to state legislative procedure--all to avoid the plaintiffs' federal constitutional claims.  The next steps in the case, the remand to the district court and the appeal that will surely follow, will be important because those rulings could put in jeopardy any action by any state emergency manager under a state law giving emergency managers broad powers.

The case arose after the Michigan state legislature approved Public Act 4, authorizing an emergency manager to temporarily reject, modify, or terminate existing collective bargaining agreements.  Pursuant to this power, the City of Pontiac's emergency manager, Louis Schimmel, modified the collective bargaining agreements and severance benefits, including pension benefits, of Pontiac's retired employees.  The employees sued, arguing Schimmel and Pontiac violated their federal constitutional rights, including rights under the Contracts Clause, the Due Process Clause, and the Bankruptcy Clause.  They did not raise state law claims.

Still, there may have been state law problems with Schimmel's actions.  First, the legislature approved Public Act 4 for immediate effect with less than a 2/3 vote, despite a state constitutional provision that requires a 2/3 vote for immediate effect.  (Without a 2/3 vote, a legislative act takes effect 90 days after the end of the legislative session in which it was passed.)  If the legislature enacted Public Act 4 in violation of the state constitution, Schimmel's actions pursuant to it are void.

Next, even if the state legislature complied with the state constitution, Public Act 4 may still be invalid.  That's because Michigan voters rejected Public Act 4 in a citizen-initiated referendum in 2012.  The legislature later enacted a law substantially similar to Public Act 4, but insulated from a voter referendum under the state constitution because it contains an appropriation provision.  All this means that the emergency manager authority under Public Act 4 and its successor is questionable.

But the parties didn't raise or argue these state law issues.  Instead, the Sixth Circuit did.

The Sixth Circuit dodged the plaintiffs' federal constitutional arguments (in the name of constitutional avoidance) and ruled that the lower court should consider the state law claims.  In particular, the Sixth Circuit said that the state legislature's practice, across political parties, of approving laws for immediate effect even when they don't get the constitutionally required 2/3 vote may raise constitutional problems:

Apparently, a two-thirds vote occurs whenever the presiding officer says it occurs--irrespective of the actual vote.  This authority is unchecked and often results in passing motions for immediate effect that could not receive the constitutionally required two-thirds vote.  Apparently, the Michigan Legislature believes the Michigan Constitution can be ignored.

There's a state intermediate appellate court ruling that seems to say that this kind of action doesn't violate the state constitution.  But there's no determinate state supreme court ruling on the issue.

For now, the case goes back to the district court for consideration of the state law issues raised by the Sixth Circuit.  

SDS

http://lawprofessors.typepad.com/conlaw/2013/08/sixth-circuit-says-emergency-manager-law-may-violate-state-constitution.html

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