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A Better Partnership
March 20, 2015

COA finds that trustees lack standing to sue for breach of contracts ancillary to a trust agreement

On April 25, 2012, the City of Pontiac’s emergency manager issued Executive Orders 206 and 207.  Those orders modified retiree healthcare benefits for the City’s firefighters and police, respectively.  In Board of Trustees of the City of Pontiac Police & Fire Retiree Prefunded Group Health & Insurance Trust v. City of Pontiac, No. 316680, the plaintiff board of trustees brought several claims against the City based on Executive Orders 206 and 207 for improperly reducing the healthcare benefits.  The trial court found the board’s claims meritless and granted summary disposition in favor of defendants.  The board appealed.
First, the Court of Appeals addressed the board’s standing to bring its claims.  The City failed to raise a standing issue in its answers to the board’s original and amended complaints.  The City first raised the issue in its motion for summary disposition.  The Court of Appeals heard the issue because it was raised before the trial court, the board responded to the issue, and the trial court ruled on it.  Thus, the City satisfied the “traditional rules of appellate preservation.”  Furthermore, the Court of Appeals characterized the claim as one of whether or not the board was the “real party in interest,” which may be raised at any time.
Getting to the issue, the Court of Appeals found that the board lacked standing to bring its claims.  The core of the case was whether or not Executive Orders 206 and 207 improperly reduced retiree healthcare benefits.  Separate collective bargaining agreements governed the provision of the City’s retirees’ healthcare benefits.  While the board was empowered to bring actions on behalf of the trust, Orders 206 and 207 did not affect the legal rights of the trust.  The orders affected the legal rights of the trust’s beneficiaries, but only as to agreements separate from the trust agreement.  The board tried to save its case by arguing that two of the trustees—one police officer and one firefighter—were members of the class affected by the collective bargaining agreements.  Still, the Court of Appeals held that the board was not the proper plaintiff to bring claims regarding the CBAs.
In the end, the Court of Appeals affirmed summary disposition for the City.

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