Appellate court remands challenge to EM health care cuts

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Keeping track of the legal challenges to Michigan's novel emergency manager law can cause a headache. When the lawsuits become exceptionally difficult to follow, it can cause a migraine. So, if you may, please put on your thinking cap for this one. The U.S. Sixth Circuit Court of Appeals today ordered a lower court to conduct further proceedings on a legal challenge to retiree health care cuts made by Pontiac's former emergency manager, Louis Schimmel. Schimmel was appointed under the state's former EM law, Public Act 4 of 2011. The case began in 2012 when an organization representing more than 500 of Pontiac's 1,200 retirees sued the city and its former emergency manager, Louis Schimmel, after he reduced their health care benefits. The lawsuit contends those cuts made by Schimmel were illegal.

Initially, a U.S. District Judge denied the retirees’ request for a preliminary injunction that would have reversed the imposition of higher monthly premiums and reduced benefits. Schimmel has long maintained that a court-ordered restoration of retiree health care in Pontiac, which was eliminated altogether last fall, could push the city into bankruptcy.

(It's important to note the case began as a challenge to the health care cuts, which, among other things, contended Schimmel's orders violated the U.S. Bankruptcy Code, as well as violated the Contract and Due Process Clause of the U.S. Constitution. It then became a question of whether state law properly authorized emergency managers to impair such benefits.) 

Last August, a three-judge appellate panel punted the issue back to U.S. District Court, and directed it to consider whether acts taken by Schimmel under PA 4, eventually rejected by voters, were valid.

In response to the panel’s initial ruling, the state requested an “en banc” hearing. Such sessions are used in rare instances and includes the full appellate court to reconsider previous decisions from an appeals panel, instead of sending the case back to U.S. District Court.  The appellate court granted the request, and, in March, heard oral arguments from the retirees' counsel and Attorney General Bill Schuette's office. That brings us up to speed. In the opinion issued today, the full appellate court decided to vacate the U.S. District Court's decision to deny a preliminary injunction and remand it for further review. The order today, though, does not direct the district court to consider whether or not the state legislature properly enacted PA 4 in the first place -- a directive in the three-judge panel's previous decision. "The parties and the district court need not focus on the state-law issues presented to this court en banc," the opinion said. The opinion says the lower court should consider if federal bankruptcy law prohibited Schimmel from enacting the order which reduced health care benefits; if the orders violate the Federal Constitution's Contract Clause, which depends on whether or not an emergency manager exercises "legislative authority" through its power under PA 4; and, if the impairments were necessary to address Pontiac's fiscal crisis. "The prudent course of action requires the district court to examine, with the assistance of fuller briefing and a more developed record, the legal, factual, and equitable considerations now in place," the full court wrote today. The district court was also directed to consider how "factual considerations apparently have changed," since the retirees sued the city in 2012. That included Schimmel's order to eliminate all retiree health care benefits and that Pontiac no longer has an emergency manager, "but ... remains in receivership under control of a city administration and a transition advisory board." Prior to being heard at the appellate court, the case wasn't "sufficiently developed" for the full appeals bench to determine the legality of the health care cuts, the opinion said. Also, "The district court failed to consider that a reduction in health care benefits can cause irreparable harm." Alec Gibbs, the attorney representing the retirees in the case, tells Metro Times today, the opinion brings everything "back to square one," as the district court will have to reconsider the retirees' request for a preliminary injunction. "We're very pleased with the decision," he says. "We look forward to making our case before the district court with an adequate legal and factual record this time around." The district court will have to determine if Schimmel was "delegating legislative authority," Gibbs says, and if he was "the 6th Circuit laid out a very clear analysis" on how to proceed. Calls to Schimmel and  the state attorney general's office were not immediately returned.

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