Legal fallout from a Michigan financial crisis will soon be before the en banc Sixth Circuit. Responding to the City of Pontiac’s deficits, Pontiac’s emergency manager modified collective bargaining agreements in 2011 to reduce retirement benefits for Pontiac’s retired employees. A Michigan statute granting him those emergency powers was later rejected by referendum. Retired employees brought suit, raising a series of federal constitutional claims – specifically, impairment of contract, federal preemption, and deprivation of property interest without due process. A district judge determined that the retired employees were unlikely to prevail and denied their request for injunctive relief.
On appeal, a split Sixth Circuit panel sent the case back to the district court. Declining to reach the federal constitutional issues briefed by the parties, the majority sua sponte suggested that the emergency measures may be void under Michigan law. The majority instructed the district court to review whether the manager had the power to do what he did. Examining Michigan constitutional principles, the majority questioned whether the law was properly in effect at the time of his acts, and whether the referendum rejecting the law later voided those acts.
On March 19, the en banc Sixth Circuit will take another look. En banc review occurs when a majority of active circuit judges vote to rehear the case. Often when the Court grants en banc review, a dissent from the panel opinion gets the attention of other judges. In this case, Judge Griffin argued in dissent that the majority “misapplie[d] the constitutional avoidance doctrine, direct[ed] the district court to address issues more appropriately left to the Michigan courts, and unjustifiably depart[ed] from our well-established principles of appellate review[.]” Judge Griffin contended that the state-law grounds were not before the Sixth Circuit and in any event offered no basis for questioning the validity of the Michigan statute. Reaching the federal claims, Judge Griffin concluded that they were unlikely to succeed on the merits and that the public interest in addressing the financial crisis supported denial of preliminary relief.
The outcome stands to be significant in terms of both procedure and substance. The Court may make pronouncements about principles of appellate review in the Sixth Circuit. And if reaching the federal claims, the Court’s conclusions may have far-reaching effects on the rights of public employees.