DONALD E TINSMAN V CITY OF SOUTHFIELD

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STATE OF MICHIGAN COURT OF APPEALS DONALD E. TINSMAN, JOHN E. VARNHAGEN, WILLIAM P. KEMPER and STANLEY R. STEINKE, UNPUBLISHED December 3, 1999 Plaintiffs-Appellants, v No. 207035 Oakland Circuit Court LC No. 95-491548 CK CITY OF SOUTHFIELD, Defendant, and CITY OF SOUTHFIELD FIRE AND POLICE RETIREMENT SYSTEM and CITY OF SOUTHFIELD FIRE AND POLICE RETIREMENT SYSTEM BOARD, Defendants-Appellees. DONALD E. TINSMAN, JOHN E. VARNHAGEN, WILLIAM P. KEMPER and STANLEY R. STEINKE, Plaintiffs-Appellees, v No. 207056 Oakland Circuit Court LC No. 95-491548 CK CITY OF SOUTHFIELD, Defendant, and CITY OF SOUTHFIELD FIRE AND POLICE -1­ RETIREMENT SYSTEM and CITY OF SOUTHFIELD FIRE AND POLICE RETIREMENT SYSTEM BOARD, Defendants-Appellants. Before: Gribbs, P.J., and Smolenski and Gage, JJ. PER CURIAM. Plaintiffs are retired members of the City of Southfield's police department. They filed a two­ count complaint alleging that they were deprived of retirement benefits previously earned contrary to the state constitution, Const 1963, art 9, § 24, and the Civil Rights Act, MCL 37.2202; MSA 3.548(202). Plaintiffs’ claims arise from a change in their retirement benefits as set forth in the collective bargaining agreements. Plaintiffs alleged that under the collective bargaining agreement entered before 1988, each of them were entitled to receive a regular retirement pension payable throughout his life of two and one­ half percent of his average final compensation (AFC) multiplied by the first twenty-five years of service credited to him, plus one percent of his AFC multiplied by the number of years, and fraction of a year, of service rendered by him in excess of twenty-five years. Under a new collective bargaining agreement dated July 1, 1988, the computation of plaintiffs’ benefits was limited to credit for only twenty-five years of service, with the compensation multiplier increased from two and one-half percent to 2.8 percent of their AFC. The parties agreed that the trial court could decide the matter pursuant to cross-motions for summary disposition, based on stipulated facts. The trial court ruled in favor of plaintiffs with respect to count I, holding that the new formula adopted in the 1988 collective bargaining agreement to compute retirement benefits violated Const 1963, art 9, § 24, because application of the new formula to plaintiffs deprived them of financial benefits they had already accrued for work performed. However, the trial court ruled in favor of defendants with respect to count II of plaintiffs’ complaint, holding that plaintiffs failed to establish age discrimination under the Civil Rights Act. Plaintiffs appeal as of right the trial court's decision in Docket No. 207035. Defendants appeal as of right the court's decision in Docket No. 207056. The appeals have been consolidated for this Court’s consideration. We affirm. This Court reviews a trial court’s decision on summary disposition de novo. Baker v Arbor Drugs, Inc, 215 Mich App 198, 202; 544 NW2d 727 (1996). A motion under MCR 2.116(C)(10) tests the factual support for a claim. Id. A court reviewing such a motion must consider the pleadings, affidavits, depositions, admissions, and other documentary evidence. Baker, supra at 202. Summary disposition may be granted if, except as to the amount of damages, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Babula v Robertson, 212 Mich App 45, 48; 536 NW2d 834 (1995). Docket No. 207035 -2­ In Docket No. 207035, plaintiffs contend that the trial court erred in dismissing count II of their complaint, in which they alleged that defendants' retirement system discriminated against older employees with regard to the amount of benefits paid. We disagree. Defendants' retirement system was primarily funded by the City of Southfield, but employees were required to contribute five percent of their income to the system. Upon retirement, employees had the option of withdrawing their mandatory contributions. The parties agree that, when retiring officers elected to withdraw their contributions at the time of retirement, defendants reduced the benefits paid to those retirees based in part on the retiree's life expectancy and the life expectancy of a spouse. Defendants made this adjustment because, after withdrawals were made from the retirement system, there was less time for defendants to recoup the funding of benefits related to those employees that retire at a more advanced age. To offset this difference, the benefits of older retirees were reduced more, although not a substantial amount. Plaintiffs rely upon a disparate treatment theory. In order to establish a prima facie case involving disparate treatment, plaintiffs were required to show that they were members of a protected class and that they were treated differently than persons of a different class for the same or similar conduct. Barnell v Taubman Co, Inc, 203 Mich App 110, 120-121; 512 NW2d 13 (1993). Age need not be the sole factor in an employment decision in order to constitute discrimination, but it must be a determining factor. Matras v Amoco Oil Co, 424 Mich 675, 682; 385 NW2d 586 (1986). Furthermore, for a disparate treatment theory, the plaintiff must show that the defendant had a discriminatory motive in order to establish a prima facie case. Farmington Education Ass'n v Farmington School District, 133 Mich App 566, 572; 351 NW2d 242 (1984). However, MCL 37.2202(2); MSA 3.548(202)(2) provides that the prohibition against discrimination in the Civil Rights Act shall not apply to the implementation or establishment of a bona fide retirement policy or system if it is not a subterfuge to evade the purposes of the act. A retirement policy is considered bona fide where it "exists and pays benefits." Zoppi v Chrysler Corp, 206 Mich App 172, 177; 520 NW2d 378 (1994). Plaintiffs' contention involves a dispute over how defendants' actuaries reduced payments made to older retirees using mortality tables to estimate life expectancies. However, plaintiffs have not shown that the method to compute the annuity withdrawals is a subterfuge to evade the Civil Rights Act. See McNabb v Mich Consolidated Gas Co, 656 F Supp 866, 869 (ED Mich, 1987) (the Civil Rights Act does not require employers to alter actuarial reality). Plaintiffs also contend that defendants violated the Civil Rights Act by requiring plaintiffs to continue to contribute five percent of their income towards retirement when they were not credited for service beyond twenty-five years after the new formula went into effect. The trial court did not address the merits of this argument, apparently because it concluded that the twenty-five-year cap for accruing benefits did not apply to plaintiffs, given that application of the new pension formula to plaintiffs was unconstitutional. As hereinafter discussed, we agree that the state constitution was violated. Thus, the new pension formula does not apply to plaintiffs to the extent that they would receive greater benefits under the old formula. Moreover, to the extent that plaintiffs would fare better under the new formula, it follows that they have not been harmed by the change in formulas, and the requirement that they must -3­ continue to contribute to their pension plans, because their benefits would not decrease overall as a result of the switch in formulas. Accordingly, the trial court correctly granted defendants’ motion for summary disposition as to count II of plaintiffs' complaint. Docket No. 207056 In Docket No. 207056, defendants contend that the trial court erred in holding that the new formula adopted in 1988 for computing retirement benefits is unconstitutional as applied to plaintiffs. Defendants further contend that Const 1963, art 9, § 24 was not violated because plaintiffs had no vested right in the formula for computing benefits. We disagree and hold that the trial court correctly granted summary disposition for plaintiffs on this count. Const 1963, art 9, § 24 provides in pertinent part that, “[t]he accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.” We agree with plaintiffs and the trial court that, under the facts of this case, by changing the formula for calculation of pension benefits, defendants diminished plaintiffs’ accrued financial benefits. In Advisory Opinion re Constitutionality of 1972 PA 258, 389 Mich 659, 662-663; 209 NW2d 200 (1973), our Supreme Court construed the term “accrued financial benefits” as the right to receive pension payments upon retirement for services performed based upon the framers’ intent expressed at the 1961 Constitutional Convention. 1 We agree with the trial court’s findings that, under the facts in this case, the framers intended to include plaintiffs’ “second tier” pension benefits (i.e., benefits earned for service beyond twenty-five years under the old formula) as “accrued financial benefits” under Const 1963, art 9, § 24: The Court finds that all four Plaintiffs had accrued financial benefits under the second tier or phase of the “old formula” pension plan. Plaintiffs Kemper and Steinke both had over 30 years of service accumulated at the time the “new formula” was ratified by the tentative agreement in November 1989. Plaintiffs Varnhagen and Tinsman both had over 25 years of service. All four Plaintiffs had reached the second phase or tier of the plan and effectively vested in the formula in existence at the time. All four had already performed services under a benefit formula which provided a 1% multiplier of their AFC for that service and contained no limits on the total pension earned. This Court finds that once Plaintiffs entered the post 25 year phase under the “old formula,” the Constitution guaranteed them the right to rely upon those benefits. Indeed, a delegate to the 1961 Constitutional Convention, where the constitutional provision was added, aptly explained: “Once the employee, by working pursuant to an understanding that this is the benefit structure presently provided, has worked in reliance thereon, he has the contractual right to those benefits which -4­ may not be diminished or impaired.” 1 Official Record, Constitutional Convention 1961, p 774. This case illustrates the reliance of a member of a benefit plan who has already performed services under a certain benefit scheme. Prior to the modification of the “old formula,” all four Plaintiffs chose not to retire at 25 years. The existence of service credit beyond 25 years is obviously an important consideration to a member who is determining whether to retire or to continue to work beyond 25 years. These Plaintiffs, who all entered the second tier of the system prior to its modification, had a right to rely on its continued validity. By changing the formula and applying it to all current employees, the net effect was to diminish or impair plaintiffs' accrued financial benefits in the pension plan, contrary to Const 1963, art 9, § 24. While a legislative body may increase pension benefits, it may not reduce the benefits with respect to those individuals who have accrued rights under the pension plan at the time of the legislative enactment. Seitz v Probate Judges Retirement System, 189 Mich App 445, 455-456; 474 NW2d 125 (1991). See also Campbell v Judges’ Retirement Bd, 378 Mich 169, 181-182; 143 NW2d 755 (1966) (“The legislature may add to but not diminish benefits without running afoul of [the] constitutional prohibition against impairment of the obligation of a contract.”) Under the facts of this case, and in light of the principle expressed in Campbell and Seitz, we agree with the trial court that the individual plaintiffs may follow the formula that provides them with the greatest benefits. Defendants also contend that plaintiffs were subject to the terms of the new collective­ bargaining agreement negotiated by their union and, therefore, they are bound by the new agreement. We disagree. While plaintiffs are subject to the new agreement, their union could not diminish or impair their individual rights to benefits already accrued. OAG, 1983-1984, No 6244, p 1688 (August 31, 1984); OAG, 1981-1982, No. 5941, p 2349 (August 5, 1981).2 “[W]hile a union may bargain away collective rights, individual rights of employees may not be bargained away.” Grand Rapids v Grand Rapids Lodge No 97, Fraternal Order of Police, 415 Mich 628, 637-638, n 6; 330 NW2d 52 (1982). Accordingly, we conclude that the new collective bargaining agreement does not apply to plaintiffs to the extent that its provisions violate plaintiffs’ accrued financial benefits under Const 1963, art 9, § 24. We also find no merit in defendants’ contention that plaintiffs waived their rights to retire under the old formula when they failed to retire earlier. This contention lacks merit because a waiver requires a voluntary and intentional relinquishment of a known right or advantage. Van Antwerp v Detroit, 47 Mich App 707, 717; 210 NW2d 3 (1973). Under the facts of this case, we cannot say that plaintiffs intentionally waived their rights to retire under the old formula. Finally, we reject defendants’ contention that plaintiffs' claims are barred for failure to exhaust their contractual remedies. Plaintiffs do not contend that defendants violated the collective bargaining agreement. Rather, plaintiffs contend that defendants’ violated their constitutional rights. Although a union speaks for its members, it has no duty to pursue for its members rights possessed independent of -5­ the collective bargaining agreement. Florence v Dep’t of Social Services, 215 Mich App 211, 214; 544 NW2d 723 (1996). Affirmed. /s/ Roman S. Gribbs /s/ Michael R. Smolenski /s/ Hilda R. Gage 1 Advisory opinions of the Supreme Court are not considered binding authority, but the Court’s advisory opinions may be followed as persuasive authority. Advisory Opinion re Constitutionality of 1972 PA 294, 389 Mich 441, 460 n 1; 208 NW2d 469 (1973). 2 Attorney General opinions, while not precedentially binding, can be persuasive authority. Macomb Co Prosecutor v Murphy, 233 Mich App 372, 382; 592 NW2d 745 (1999). -6­

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