State wins challenge to emergency financial manager law in COA

The Michigan Court of Appeals reversed an Ingham judge’s decision that governmental bodies meeting with an emergency financial manager violates the Open Meetings Act.

Writing for the court, Judge William Whitbeck said the only issue is whether the State Treasurer and Detroit Financial Review Team are “public bodies” under the Emergency Financial Manager Act (EFMA). If they are, plaintiff, local muckraker and alleged embezzler Robert Davis argued, meetings among them would be subject to the Open Meetings Act.

The issue ultimately hinged on whether the DFRT “governs”:

We therefore conclude that the authority and functions of a financial review team under § 13 of the Emergency Financial Manager Act do not empower a financial review team to independently “govern” through decision-making that effectuates or formulates public policy. A financial review team cannot act “upon” its recommendations; it can only make such recommendations. As a consequence, we conclude that the Detroit Financial Review Team is not a “governing body” and, therefore, not a “public body” within the meaning of the Open Meetings Act.

The fact that a financial review team can hire outside experts, has the power, under certain circumstances, to issue subpoenas and administer oaths to certain enumerated individuals and entities, and can, under certain circumstances, file an action in a circuit court to compel testimony and the furnishing of records and documents does not change our conclusion. These functions are ancillary to the investigative function that we have analyzed above. Again, such functions are not “governing” by independent decision making that effectuates or formulates public policy.

In light of our conclusion that a financial review team is not itself a public body, we conclude that the Supreme Court’s holding in Booth Newspapers is inapplicable here. That is, since the Detroit Financial Review Team is not itself a “public body,” then the State Treasurer could not himself, even if acting as a “one-man” committee, be a “public body” exercising governmental authority.

The panel found that the lower court abused its discretion in it issue injunctive relief. But it also remanded the case back to the lower court for proceedings on Davis’s motion for civil contempt. stating that Davis may be entitled to attorney’s fees and/or other costs.

Judge Peter O’Connell wrote a partial concurrence/dissent in which he said he’d toss the entire action:

I also write separately to remind all public servants that our governmental system turns on a respectful balance of power among the three branches of government. As Thomas Jefferson aptly explained, “the constitution, in keeping three departments distinct and independent, restrains the authority of the judges to judiciary organs, as it does the executive and legislative to executive and legislative organs.” Letter from Thomas Jefferson to William Charles Jarvis (Sept. 28, 1820) in The Writings of Thomas Jefferson, 1816-1826, at 161 (Paul L. Ford, ed., vol X, 1899). The judicial branch’s responsibility is to interpret the law impartially, free from the political process reserved for the other two branches of government. In my view, these tenets preclude any remand in this case. I would vacate and reverse all of the trial court’s rulings.


Group files with Court of Appeals over emergency manager ballot issue

The group Stand Up for Democracy filed a writ of mandamus yesterday at the Michigan Court of Appeals, in hopes that the Court will force the Michigan Secretary of State place the repeal of Michigan’s emergency financial manager law on the November ballot.

The coalition opposing the law says that it threatens democracy and local rights. However, proponents of the law say that it’s necessary to save struggling cities from bankruptcy.

The Detroit Free Press has the full story here.

Emergency manager for MCCA?

Rep. Phil Cavanagh, D-Redford, said he is frustrated that he can’t get the Michigan House Insurance Committee to take up bills that would require a higher level of public disclosure from the Michigan Catastrophic Claims Association (MCCA). This comes at a time when the MCCA has announced that it will impose a 21 percent increase in annual fees to ensure that the fund remains solvent.

Cavanagh said that today he’s going to introduce a house resolution to implore the state treasurer to start a financial review of MCCA, in order to explore the appointment of an emergency financial manager. So far, he’s garnered support from 25 representatives — all Democrats, though he is not ruling out some Republican support.

“They’ve got $14 billion in assets and claim they can’t pay” on future claims without a $30 per vehicle annual increase in fees, Cavanagh said in a phone interview with Michigan Lawyers Weekly.

Cavanagh introduced his “sunshine bills” last year because he was concerned about proposed reforms to no-fault insurance. He said he was particularly worried about the notion of capping lifetime benefits for people injured in car crashes, and with the proposal to allow drivers to purchase as little as $250,000 in personal protection insurance, or PIP benefits.

Without having enough information about individual claims — for example, how much is paid to care for someone with a brain injury or a back injury that requires chronic care — it’s impossible to know whether or not a cap on benefits would hurt injured people.

He said he’s just not buying the idea that the MCCA is in danger of becoming insolvent without such a cap on benefits, or the additional fee, or the idea that the MCCA can keep their claims data secret.

“The MCCA is funded by the public’s money and yet rates are set behind closed doors. They hire their own auditors whose conclusions are favorable to the MCCA at the expense of motorists,” Cavanagh said in a press release soon after the MCCA announced the fee increase. “We are forced to pay this charge. We need to shine a light and open up this agency now that they are about to charge their highest ever annual assessment. All drivers deserve to know where their hard earned money is going.”

He noted that MCCA has paid out $9 billion in total claims in its 33 years of existence. And according to the association’s annual reports, MCCA’s reserves are almost $14 billion. Cavanagh calls that a serious financial discrepancy that doesn’t jive with fee increases.

The sunshine bills would subject MCCA to the Open Meetings Act; would make claims data subject to Freedom of Information Act; and would require an independent annual audit of MCCA. Those bills are 4785 and 4786. Cavanagh expects to introduce the financial manager House resolution at 1:30 today.

Supreme Court recusal over spouse’s interest again at issue

Last February, Congressional Democrats sought to have U.S. Supreme Court Justice Clarence Thomas recuse himself from the inevitable challenge of the Patient Protection and Affordable Health Care Act of 2008. While Thomas himself had no history with the bill, his wife, Ginny, is a lobbyist that represents groups trying to overturn the controversial health care reform package.

So, the Dems argue, the Thomas family is profiting handsomely from opponents of the law, therefore, Justice Thomas should recuse himself.

A similar situation has developed here in Michigan in the challenge over the constitutionality of Gov. Snyder’s emergency financial manger bill.

The new law is being challenged in the Michigan Supreme Court. Opponents of the law have moved for the recusal of Michigan Supreme Court Justice Stephen J. Markman because his wife is defending the law in a federal suit. [The Detroit News].

Markman’s wife, Kathleen, who works for the Michigan Attorney General’s Office, is one of two lawyers representing state officials in a federal lawsuit in which a city of Detroit pension fund alleges the emergency manager law is unconstitutional.

A recusal by Markman would be significant because it would erase the 4-3 majority on the court held by justices nominated by the Michigan Republican Party.