Opinion ID: 2648092
Heading Depth: 3
Heading Rank: 3

Heading: Necessary and Reasonable

Text: The last consideration under the Contract Clause requires us to examine whether the orders were reasonable and necessary to serve a legitimate public purpose. See, e.g., Mascio v. Public Emps. Ret. Sys. of Ohio, 160 F.3d 310, 313 (6th Cir. 1998) (citing Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 242–44 (1978)). Impairing a contract is not necessary if “a less drastic modification” would have allowed the contract to remain in place. United States Trust Co., 431 U.S. at 25, 30. The Supreme Court has admonished that “a State is not free to impose a drastic impairment when an evident and more moderate course would serve its purposes equally well.” Id. at 31. In any event, any impairment must be reasonable under the circumstances. Id. Under the Contract Clause, “complete deference to a legislative assessment of reasonableness and necessity is not appropriate because the State’s self-interest is at stake.” Id. at 26; see also Toledo Area AFL-CIO Council, 154 F.3d at 325. Although complete deference is inappropriate, courts should confer some respect on a state’s judgment that certain legislative actions are unavoidable. Local Div 589, Amalgamated Transit Union v. Mass., 666 F.2d 618, 643 (1st Cir. - 13 - No. 13-1476 Welch, et al. v. Brown, et al. 1981) (“[W]here economic or social legislation is at issue, some deference to the legislature’s judgment is surely called for.”) In short, careful scrutiny should be applied to a state’s justification for impairing contract rights when its own self-interest is at stake. Toledo Area AFL-CIO Council, 154 F.3d at 325. Defendants’ primary argument boils down to this: to avoid bankruptcy, it had two options— reduce the Public Safety budget or reduce retiree benefits. However, the record does not establish that bankruptcy was imminent, nor does it show that Defendants contemplated filing for bankruptcy. By extension, the record also fails to demonstrate that Defendants considered alternative strategies before modifying retiree benefits. Plaintiffs echo this sentiment, arguing that the City could have used municipal securities, among other alternatives, to pay for retiree health-care coverage. Although Defendants insist that the “only viable option” to restore fiscal order is to modify retiree health-care benefits, the record does not support their argument. The district court concluded that altering Plaintiffs’ health-care benefits was not reasonably necessary to avoid bankruptcy and balance the City’s budget. Unable to find evidence in the record indicating that Flint considered or was facing bankruptcy, the court held that reducing contractual benefits was not necessary to meet the stated purpose of avoiding bankruptcy. The court observed that Flint had been operating at a deficit since at least 2007 and had not entered bankruptcy. In addition, the City’s general fund deficit decreased from $14 million in 2010 to approximately $11 million in 2012. The court further questioned why Defendants planned to eliminate the $25.7 million budget deficit in a single year, when a less drastic change might have allowed the contracts and collective bargaining agreements to remain unimpaired. Without evidence that Defendants - 14 - No. 13-1476 Welch, et al. v. Brown, et al. attempted a more moderate course before modifying health-care benefits, the district court explained that “Defendants cannot simply foreclose other options, such as an additional millage or increased sewer and water fees . . . and use said foreclosure as a reason to abrogate duly-bargained for contracts.” The district court did not abuse its discretion in so holding. As it stands, Plaintiffs raise “serious, substantial [and] difficult” questions with regard to the reasonableness and necessity of the Defendants’ actions, which render these issues “a fair ground for litigation and thus for more deliberate investigation.” Cafcomp Sys., 119 F.3d at 402. We acknowledge that courts are not in the best position to assess the prudence of one policy decision over another. Blaisdell, 290 U.S. at 447–48 (“Whether legislation is wise or unwise as a matter of policy is a question with which we are not concerned.”). Though the wisdom of policy decisions is beyond the realm of the courts, assessing the reasonableness of Defendants’ actions is required under the Contract Clause. Additional fact-finding may illuminate whether the orders were indeed appropriate under the circumstances of this case. But in light of the deferential standard of review and given the evidentiary support for the district court’s decision, it cannot be said that the court abused its discretion in finding that Plaintiffs established a likelihood of success on the merits. E. Irreparable Harm To obtain preliminary injunctive relief, Plaintiffs must also demonstrate irreparable harm that is “both certain and immediate, rather than speculative or theoretical.” NACCO Materials Handling Grp., Inc. v. Toyota Materials Handling USA, Inc., 246 F. App’x 929, 943 (6th Cir. 2007). This court has held that “harm from the denial of a preliminary injunction is irreparable if it is not fully compensable by monetary damages.” Overstreet v. Lexington-Fayette Urban Cnty. Gov’t, 305 F.3d - 15 - No. 13-1476 Welch, et al. v. Brown, et al. 566, 578 (6th Cir. 2002). With respect to the type of harm at issue here, “[n]umerous courts have found that reductions in retiree insurance coverage constitute irreparable harm.” Golden v. KelseyHayes, 845 F. Supp. 410, 415 (E.D. Mich. 1994) (citing United Steelworkers of Am., AFL-CIO v. Textron, Inc., 836 F.2d 6, 8 (1st Cir. 1987) (“[R]etirees as a group have less resources and are more vulnerable to emotional distress due to the imposition of additional insurance costs.”); Schalk v. Teledyne, Inc., 751 F. Supp. 1261, 1267–68 (W.D. Mich. 1990) (“[B]ecause retirees live on fixed incomes, small increases in expenses create extreme financial hardship; they are more likely to suffer uncertainty and worry over the new costs associated with the modified plan.”), aff’d, 948 F.2d 1290 (6th Cir. 1991); Mamula v. Satralloy Inc., 578 F. Supp. 563, 577 (S.D. Ohio 1983)). The district court was not mistaken in finding irreparable harm to Plaintiffs, absent injunctive relief. In Golden v. Kelsey-Hayes, a federal district court held that retirees demonstrated irreparable harm because, without an injunction, they would be forced to choose between paying for needed medical care and paying for basic necessities. Golden, 845 F. Supp. at 415. Like the retirees in Golden, Plaintiffs are likely to suffer non-compensable harm as a result of Defendants changing their contracts and collective bargaining agreements. Plaintiffs have submitted three affidavits, describing how the modifications will affect their finances and ability to access specific medical treatments. For example, Plaintiff Carolyn Sparks averred that after the changes are implemented, she and her husband will no longer be able to afford all of their prescribed medications. If Defendants alter her contract by requiring her to purchase Medicare Part B at an additional cost of $198.00 per month, or pay increased deductibles of $1,000 per person, per year, these additional expenses will cause Sparks to have to either “forgo necessary medical care or give up basic necessities.” - 16 - No. 13-1476 Welch, et al. v. Brown, et al. John Welch testified that he and his spouse have been patients of the same physician for the past thirty years. Under the modifications, his new insurance will not be accepted by his personal physician and he will have to change doctors. Welch suffered a heart attack in 1996, had open heart surgery, and underwent four bypasses. To monitor his condition, he has stress tests conducted once a year and also sees a cardiologist. Welch testified that this treatment is no longer a covered benefit. Defendants reject Plaintiffs’ irreparable harm argument, suggesting that they have an adequate remedy at law—namely, money damages. The injury Plaintiffs experienced is not irreparable, according to Defendants, because the modifications actually provide Plaintiffs with greater benefits than they had when they retired. Even assuming that Plaintiffs may have access to more services, altering their coverage will likely cause a significant interference in care. While money damages would provide Plaintiffs with the resources to afford the increased deductibles and co-pays after the fact, this remedy fails to make Plaintiffs whole for the interim inability to access care. In totality, the affidavits and testimony in this case indicate that Plaintiffs’ medical treatment may be interrupted by Defendants’ modifications, and such a disruption in care constitutes irreparable harm. See Golden, 845 F. Supp. at 415. The district court’s finding on this issue was not clearly incorrect because the record shows that Plaintiffs’ access to medical care may be compromised. Therefore, we are not “left with the definite and firm conviction” that the court erred in finding irreparable harm. Gypsum Co., 333 U.S. at 395. F. Harm to Others/Public Interest - 17 - No. 13-1476 Welch, et al. v. Brown, et al. The remaining factors to consider are whether granting preliminary injunctive relief will cause substantial harm to others and whether the injunction is in the public interest. The district court concluded that a preliminary injunction would not cause harm to third parties and that the public interest “weighed in favor of ensuring continuing health care to members of the public.” Unconvinced by Defendants’ claim that without the injunction they would have to make cuts that would negatively affect the City’s public safety, the court theorized that the City had other options to balance its budget. The district court also reasoned that issuing a preliminary injunction was in the public interest because it ensures that retirees will not suffer harm because of a lack of medical care. Defendants argue that the district court did not give proper weight to the evidence concerning harm to others. If preliminarily enjoined, Defendants claim they will be forced to reduce the Public Safety budget because all other departments have already received significant reductions. This potential reduction, according to Defendants, could threaten the ability of police officers and firefighters to prevent and respond to community safety problems. Trimming the Public Safety budget may cause an increase in violence; however, the applicable standard of review is not “whether we would grant a preliminary injunction if we were acting in the place of the district court . . . .” Leary, 228 F.3d at 739 (emphasis added). Certainly, there are factors favoring Plaintiffs on one hand and the City of Flint on the other. But given the closeness of the questions presented and after balancing the various considerations, the district court did not abuse its discretion by issuing a preliminary injunction. Presumably, additional evidence will be adduced at trial, but our narrow task is to review the district court’s decision to preserve the - 18 - No. 13-1476 Welch, et al. v. Brown, et al. relative positions of the parties until a hearing or trial on the merits can be held. This remedy has not been shown to be unwarranted in the present case. Because we affirm the district court’s award of a preliminary injunction based on the Contract Clause, we need not examine Plaintiffs’ Due Process or Bankruptcy Clause arguments.