Welch, et al. v. Brown, et al.

Case No. 13-1476 (6th Cir. 2014)
In a non-bankruptcy case, the Circuit Court affirmed the entry of a temporary injunction that prohibits the Flint Emergency Manager from making changes to the health care benefits of Flint city employees.
Procedural context:
After the Flint Emergency Manager issued orders modifying health-care benefits of City retires, the retirees sued to enjon the changes. The District Court entered a temporary inunction against implementation of the changes. On appeal, the Circuit Court affirmed.
The City of Flint has been under the control of an Emergency Manager appointed by the Governor pursuant to Public Act 4, which allows the state to appoint a financial manager to provide services for the health, safety and welfare of the citizens, incliding the power to modify collective bargaining agreements and contracts as necessar to rectify the financial emergency. The EM adopted a series of orders that modified collective bargaining agreements that granted retirees lifetime hearlth care benefits identical or comparable to those in effect hwen the person retired. The EM's orders would terminate health care benefits for spouses of City retirees if the spouse had other insurance available; would limit health insurance plans to three rather than the twenty that had been available; and would increase copayments, co-insurance and deductibles; producing savings of almost $8 million annually. The Plaintiffs a group of City retirees, sued to enjoin the changes alleging that the retirees would not be able to afford the health care premiums or higher co-payments. The District Court entered a premilimary injunction to prevent the changes from taking effect while the parties litigated the legality of the changes. On appeal, the Circuit Court affirmed. The Court found that the Plaintiffs met their burden to prove (1) a strong likelyhood of sucess on the merits; (2) that the Plainitiffs would suffer irreparable harm if the injunction was not entered; (3) the issuance of an injunction would not cause substantial harm to third parties; and (4) the public interest would be served by the injunction. On the substantial likelyhood prong, the Court noted that the acts of the EM were legislative in nature and the Contracts Clause of the United States Constitution prevents any state from passing laws that impair contracts. The changes ordered by the EM would alter prior Collective Bargaining agreements. Thus, it appeared that the changes ordered by the EM violate the Contracts Clause. On the Irreparabe Harm prong, the Court found tht denial of the injunction would produce immediate and certain harm to Plaintiffs who would no longer be able to afford health insurance as they live on fixed incomes; and that the alterations would produce substantial emotional distress. On the final two factors, the Court concluded that granting the injunction would not cause harm to third parties and that public interest weighted in favor of ensuring continuing health care to members of the public.
Daughtrey, Cole and White

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