Michigan Afscme Council 25 v. County of Wayne

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to

revision until final publication in the Michigan Appeals Reports.

STATE OF MICHIGAN

COURT OF APPEALS

MICHIGAN AFSCME COUNCIL 25 and UNPUBLISHED

AFFILIATED LOCAL 101, April 21, 2022

Plaintiffs-Appellants,

v No. 356320

Wayne Circuit Court

COUNTY OF WAYNE, LC No. 20-007378-CL

Defendant/Third-Party Plaintiff-

Appellee,

and

VICTOR PLESA,

Third-Party Defendant.

MICHIGAN AFSCME COUNCIL 25 and

AFFILIATED LOCAL 101,

Plaintiffs,

v No. 356322

Wayne Circuit Court

COUNTY OF WAYNE, LC No. 20-007378-CL

Defendant/Third-Party Plaintiff-

Appellee,

and

VICTOR PLESA,

Third-Party Defendant-Appellant.

-1-

Before: JANSEN, P.J., and SAWYER and RIORDAN, JJ.

PER CURIAM.

In these consolidated appeals, plaintiffs Michigan AFSCME Council 25 and Affiliated

Local 101 appeal as of right in Docket No. 356320, and third-party defendant Victor Plesa appeals

as of right in Docket No. 356322, all challenging the trial court’s order denying plaintiffs’ and

Plesa’s motions for summary disposition to confirm an arbitrator’s awards, granting summary

disposition in favor of defendant and third-party plaintiff Wayne County pursuant to MCR

2.116(I)(2), and vacating an arbitrator’s awards in favor of Plesa on the ground that the arbitrator

exceeded his authority in issuing the awards. We affirm.

I. FACTS AND PROCEEDINGS

Plesa applied for retirement while awaiting the outcome of a disciplinary action initiated

by defendant arising from a work accident that resulted in an injury to another worker. His

retirement application required him to assent to a “separation waiver,” which stated that he was

terminating his employment and not seeking reemployment. Defendant terminated his

employment the following day. Plesa allowed his retirement application to proceed, but he also

filed a grievance pursuant to a collective-bargaining agreement (CBA) with defendant, seeking

reinstatement of his employment. In the meantime, the Wayne County Employees’ Retirement

System (“WCERS”) approved Plesa’s retirement. Plesa thereafter transferred his defined

contribution retirement account funds to an individual retirement account.

Plesa’s grievance proceeded to arbitration. Defendant argued that Plesa could not be

reinstated because he represented in the separation waiver that he was terminating his employment

and not seeking reemployment. Defendant argued that if Plesa was reinstated after he withdrew

his retirement account funds, his employment would violate defendant’s retirement ordinance and

the Internal Revenue Code (IRC), which prohibit actively employed persons from receiving

retirement benefits. Defendant believed that WCERS and its members could be subject to adverse

tax consequences as a result of these violations. The arbitrator found that defendant violated the

CBA’s just-cause termination provision when it terminated Plesa’s employment, and that

suspension, not termination, was the appropriate disciplinary action. The arbitrator disagreed with

defendant’s argument that Plesa’s retirement application precluded his reinstatement.

Accordingly, the arbitrator issued an award that reduced Plesa’s discipline from termination to

suspension, reinstated Plesa’s employment, and required defendant to pay him backpay. The

arbitrator later issued a second award clarifying issues regarding the dates of the suspension and

backpay.

Plaintiffs filed this action to enforce the arbitration awards. Defendant filed a counterclaim

against plaintiffs and a third-party claim against Plesa for vacation of the arbitration awards and to

recover compensation for improperly awarded backpay. Plaintiffs and Plesa moved for summary

disposition, and defendant moved for summary disposition in its favor. The trial court concluded

that the arbitrator exceeded his authority by ordering Plesa’s reinstatement contrary to Plesa’s

separation waiver, and therefore vacated the arbitration awards. Plaintiffs and Plesa objected to a

-2-

proposed order submitted by defendant, and also to defendant’s amended proposed judgment. The

trial court signed defendant’s first proposed order without holding a hearing on plaintiffs’

objections. This appeal followed.

II. DEFENDANT’S STANDING TO ASSERT SEPARATION WAIVER

Preliminarily, plaintiffs and Plesa argue that defendant lacked standing to assert the

separation waiver as grounds for establishing that the arbitrator lacked authority to reinstate Plesa.

We disagree.

“The purpose of the standing doctrine is to assess whether a litigant’s interest in the issue

is sufficient to ensure sincere and vigorous advocacy.” Lansing Sch Ed Ass’n v Lansing Bd of Ed,

487 Mich 349, 355; 792 NW2d 686 (2010). “Thus, the standing inquiry focuses on whether a

litigant is a proper party to request adjudication of a particular issue and not whether the issue itself

is justiciable.” Id. “[S]tanding refers to the right of a party plaintiff initially to invoke the power

of the court to adjudicate a claimed injury in fact. . . .” Federated Ins Co v Oakland Co Rd Comm,

475 Mich 286, 290-291; 715 NW2d 846 (2006). “A litigant may have standing . . . if the litigant

has a special injury or right, or substantial interest, that will be detrimentally affected in a manner

different from the citizenry at large . . . .” Lansing Sch Ed Ass’n, 487 Mich at 372.

Defendant argues that it has standing to enforce retirement terms that arise from the CBA

and retirement ordinance. Defendant emphasizes that WCERS is the administrator of retirement

plans for defendant’s employees. Defendant asserts that the retirement application form and its

contents were implemented to enforce defendant’s contractual rights and obligations. We agree

that defendant has a legitimate interest in ensuring that it is not employing persons who are

ineligible for active employment. The CBA, the retirement ordinance, and the WCERS rules

operate jointly in governing members’ rights and obligations. Article 30 of the CBA incorporates

by reference defendant’s retirement ordinance, which delegates plan administration to WCERS,

pursuant to MCL 46.12a(12). The employment relationship between defendant and its employees

thus involves rights and obligations that overlap with the contractual relationship between WCERS

and its members. If, as defendant contends, WCERS members who receive retirement benefits are

ineligible for active employment, defendant has an interest in avoiding employment of ineligible

retirees.

Therefore, defendant had standing to raise the issue that Plesa’s retirement agreement

precluded his reinstatement. Because general principles of standing permit defendant to raise this

issue, it is not necessary to address defendant’s alternative argument that it has standing as a third-

party beneficiary of WCERS’s contract with Plesa.

III. TRIAL COURT’S REVIEW OF ARBITRATION AWARDS

Plaintiffs and Plesa also argue that the trial court erred by ruling that Plesa’s retirement

application and withdrawal of his retirement funds precluded him from receiving reinstatement

and backpay. We disagree.

Plaintiffs and Plesa sought to enforce the arbitration awards in motions for summary

disposition under MCR 2.116(C)(10). In response, defendant sought judgment in its favor under

MCR 2.116(I)(2). A trial court’s decision on a motion for summary disposition is reviewed de

-3-

novo. Pontiac Police & Fire Retiree Prefunded Group Health & Ins Trust Bd of Trustees v

Pontiac, 309 Mich App 611, 617; 873 NW2d 783 (2015). “A motion under MCR 2.116(C)(10)

tests the factual support of a plaintiff’s claim.” Zaher v Miotke, 300 Mich App 132, 139; 832

NW2d 266 (2013) (quotation marks and citation omitted). “A trial court may grant a motion for

summary disposition under MCR 2.116(C)(10) when the affidavits or other documentary evidence,

viewed in the light most favorable to the nonmoving party, show that there is no genuine issue as

to any material fact and the moving party is therefore entitled to judgment as a matter of law.”

Lowrey v LMPS & LMPJ, Inc, 500 Mich 1, 5; 890 NW2d 344 (2016). When deciding a motion

for summary disposition, “[i]f it appears to the court that the opposing party, rather than the moving

party, is entitled to judgment, the court may render judgment in favor of the opposing party.” MCR

2.116(I)(2).

“This Court reviews de novo a circuit court’s decision whether to vacate an arbitration

award.” TSP Servs, Inc v Nat’l-Standard, LLC, 329 Mich App 615, 619-620; 944 NW2d 148

(2019). “Judicial review of an arbitrator’s decision is narrowly circumscribed.” City of Ann Arbor

v AFSCME Local 369, 284 Mich App 126, 144; 771 NW2d 843 (2009). “A court may not review

an arbitrator’s factual findings or decision on the merits. Likewise, a reviewing court cannot

engage in contract interpretation, which is an issue for the arbitrator to determine. Nor may a court

substitute its judgment for that of the arbitrator.” Id. (citations omitted). But a court may review

whether an arbitrator acted within the scope of his or her authority. 36th Dist Court v Mich

AFSCME Council 25, Local 917, 295 Mich App 502, 508-509; 815 NW2d 494 (2012), rev’d in

part on other grounds 493 Mich 879 (2012).

Preliminarily, the parties dispute the scope of the trial court’s authority to review an

arbitration award, specifically with respect to the arbitrator’s interpretation of the CBA. Defendant

argues that the principles enunciated in Detroit Auto Inter-Ins Exch v Gavin, 416 Mich 407; 331

NW2d 418 (1982), also apply to arbitrations in labor disputes. Gavin involved an arbitration

conducted pursuant to an arbitration clause in an insurance policy. The arbitration agreement

provided for statutory arbitration governed by MCL 600.5001 et seq., repealed by 2012 PA 370.1

The issue in Gavin was whether the arbitrator erred by finding that four automobile no-fault

insurance policies could be stacked to allow the injured insured party to receive the maximum

benefit under all four policies, contrary to antistacking provisions in the policies. Id. at 415. Our

Supreme Court framed the inquiry as whether an arbitrator’s plainly erroneous contractual

interpretation was subject to correction by the courts. Id. at 425. The Court declared itself “not

ready to assume that the parties in these cases agreed to forego observance of a plainly applicable

provision of their written contract, one which is dispositive of the only matter genuinely in dispute

between them, in exchange for a speedy, thrifty, and final resolution of their differences in a way

which disregards the law substantially determinative of their rights and duties.” Id. at 427. The

Court held:

[I]n discharging their duty, arbitrators can fairly be said to exceed their power

whenever they act beyond the material terms of the contract from which they

1

Statutory arbitration is presently governed by the Michigan Uniform Arbitration Act, MCL

761.1681 et seq.

-4-

primarily draw their authority, or in contravention of controlling principles of law.

[Id. at 434.]

The Court further stated:

The character or seriousness of an error of law which will invite judicial

action to vacate an arbitration award under the formula we announce today must be

error so material or so substantial as to have governed the award, and but for which

the award would have been substantially otherwise. [Id. at 443.]

The Court noted that “the validity of the express contract terms was essentially a legal

question.” Id. at 444. The Court remarked that although arbitrators are primarily “concerned with

factfinding,” they also decide legal questions. Id. But “just as a judge exceeds his power when he

decides a case contrary to controlling principle of law, so does an arbitrator.” Id. The Court

concluded “that in disregarding the anti-stacking provisions of the ‘other insurance’ clause of the

contract from which, in part, they derived their powers, the arbitrators in both cases committed

errors of law so substantial that, but for such errors, the awards must have been substantially

different.” Id. at 445.

Plaintiffs and Plesa argue that Gavin applies only to statutory arbitration and has no

relevance to public-sector labor arbitration. In Roseville Community Sch Dist v Roseville

Federation of Teachers, 137 Mich App 118, 122; 357 NW2d 829 (1984), this Court observed that

the analysis in Gavin had “a complete lack of reference to cases involving collective bargaining or

traditional labor arbitration.” This Court found “no language in Gavin which indicates either a

departure from the existing standard of judicial review of a labor arbitration award or an intent to

broaden its scope.” Id. This Court concluded that in the trial court decision it reviewed, the trial

court “did not err in applying the standard delineated in Ferndale,”2 i.e., “that the award drew its

essence from the contract and that the award was within the authority of the arbitrator,” “rather

than the standard of judicial review set forth in Gavin.” Roseville Community Sch, 137 Mich App

at 123-124. However, because Roseville Community Sch was decided before November 1, 1990,

it is not binding on this Court. MCR 7.215(J)(1).

Further, after Roseville Community Sch was decided, in Bay City Sch Dist v Bay City Ed

Ass’n, 425 Mich 426, 440 n 20; 390 NW2d 159 (1986), which involved a labor arbitration pursuant

to a CBA, our Supreme Court quoted Gavin for the principle that “arbitrators can fairly be said to

exceed their power when they act ‘in contravention of controlling principles of law.’ ” The Court

held that a CBA provision “purporting to protect activity prohibited by the [Public Employment

Relations Act, MCL 423.201 et seq.] would not be enforceable, and an arbitration award based on

such a provision should not be enforced.” Id. at 440-441.

In 36th Dist Court, 295 Mich App at 508, this Court stated that “[l]abor arbitration falls

within the realm of the common law . . . where judicial review of an arbitration is limited . . . .”

(Citations omitted.) In the same decision, however, this Court cited Gavin without exception for

2

Ferndale Ed Ass’n v Sch Dist for the City of Ferndale #1, 67 Mich App 637; 242 NW2d 478

(1976).

-5-

the principle that “[a] court may also review an arbitrator’s award for an error of law that clearly

appears on the face of the award or in the reasons stated by the arbitrator for the decision.” Id. at

509. In 36th Dist Court, we ruled that the arbitrator exceeded his authority “by requiring the chief

judge to reappoint the grievants to their former positions” contrary to the CBA, which did not

“abrogate the chief judge’s authority to appoint or reappoint court officers,” but instead

“affirmatively provides that the arbitrator cannot, through his award, require the employer to

relinquish any responsibility that by state law or the constitution cannot be relinquished . . . .” Id.

at 528. This Court therefore vacated the trial court’s order in part and remanded to that court for

it to modify its summary disposition order in accordance with this Court’s judgment. Id. Our

Supreme Court reversed the portion of this Court’s judgment “that reversed the arbitrator’s award

of reinstatement and back pay for the grievants,” concluding that the arbitrator’s decision was

correct because “MCR 3.106(C) does not preclude relief where the collective bargaining

agreement imposes a just cause standard for termination.” 36th Dist Court v Mich AFSCME

Council 25, Local 917, 493 Mich 879; 821 NW2d 786 (2012). In sum, this Court vacated the

arbitration award on the ground that the arbitrator exceeded his authority by erroneously deciding

a question of law involving the interplay between the CBA and a court rule and, although our

Supreme Court concluded that this Court erred in its legal analysis of the issue, it did not comment

on this Court’s application of the Gavin standard.

Our Supreme Court’s decisions in 36th Dist Court and Bay City Sch Dist tacitly apply the

Gavin standard to labor arbitrations, at least to the extent that courts are permitted to vacate an

arbitration award that violates applicable law, or that enforces an interpretation of a CBA that is

contrary to controlling legal principles. Plaintiffs and Plesa overstate the extent to which Gavin

deviates from traditional principles of labor arbitration review. The Gavin principles are consistent

with the general rule in labor arbitration that arbitration awards are enforceable unless the arbitrator

exceeds his authority. “The inquiry for the reviewing court is merely whether the award was

beyond the contractual authority of the arbitrator.” Ann Arbor, 284 Mich App at 144.

Interpretation of a contract in a manner that conflicts with controlling law can be said be outside

the arbitrator’s authority. Additionally, it is well-established that “a court may refuse to enforce

an arbitrator’s decision when it is contrary to public policy.” Gogebic Med Care Facility v

AFSCME Local 992, AFL-CIO, 209 Mich App 693, 697; 531 NW2d 728 (1995). These standards

contemplate that unlawful provisions in CBAs or obvious misinterpretations of CBAs cannot be

enforced under the guise of judicial deference to an arbitrator’s authority. See also Sheriff of

Lenawee Co v Police Officers Labor Council, 239 Mich App 111, 119-120; 607 NW2d 742 (1999)

(vacating an arbitrator’s award because “he disregarded an express provision of the collective

bargaining agreement that mandates discharge when an employee knowingly makes a false

statement on an official document”).

In view of these principles, we turn to whether the arbitrator exceeded his authority by

reinstating Plesa’s employment after Plesa represented to WCERS that he was submitting a bona

fide separation from employment, and after WCERS approved his retirement and allowed him to

withdraw funds from his retirement account. We must determine whether the arbitrator’s decision

was arguably within the confines of the CBA, not contrary to established law and public policy,

and drew its essence from the CBA. Defendant argues that the trial court properly vacated the

arbitration awards because Plesa’s representation of a bona fide separation from his employment

precluded his reinstatement, and the arbitrator was not permitted to construe the CBA in disregard

-6-

of the separation waiver, defendant’s retirement ordinance, and IRC regulations. We agree with

the defendant County of Wayne.

The CBA required all employees to “participate in a retirement savings plan as offered by

Wayne County.” The CBA also provided that the provisions of the retirement ordinance controlled

unless the CBA changed or amended them. The provisions of the retirement ordinance pertained

to Defined Contribution Plan #4, of which Plesa was a member. Section 141-9 of the retirement

ordinance required the applicant to satisfy three requirements, including submission of a “written

application for normal retirement, in the form prescribed by the retirement system” 30 to 90 days

before commencement of retirement, and termination of membership. Section 141-42(a) provided

that “[t]he retirement system is intended and has been administered to be a qualified pension plan

under 401 of the Internal Revenue Code, as amended . . . .” The Defined Contribution Plan, Article

XIII, prohibited in-service withdrawals (“no Member or Participant who is employed by an

Employer shall be eligible to withdraw any portion of his Account under the Plan”). The CBA

incorporated the retirement ordinance, which prohibited in-service withdrawals from a retirement

account. The retirement ordinance incorporated the WCERS application process, which included

the separation waiver. The separation waiver, which Plesa executed, provided: “You are

terminating employment and do not have any agreement, offer, or promise, oral or written,

concerning reemployment.”

Plaintiffs and Plesa argue that the separation waiver cannot be construed as a promise that

the applicant forecloses future employment. They argue that the grievance process is not an

“agreement, offer, or promise . . . concerning reemployment.” They emphasize that the waiver

makes no reference to reinstatement of employment as a remedy for an employer’s violation of the

just-cause provision in the CBA. We partially agree.

The arbitrator found that Plesa was not attempting to simultaneously retire and maintain

his employment because he would not have completed the retirement process if defendant had not

wrongfully discharged him or if the grievance was resolved favorably before his retirement

application was accepted. Retirement was his contingency plan if he was not reinstated. The

CBA, the retirement ordinance, and the retirement application forms do not expressly prohibit an

employee in Plesa’s circumstances from pursuing this strategy. However, by acceding to the

separation waiver, Plesa represented that he was presently and voluntarily terminating his

employment. The waiver states: “You are terminating employment and do not have any

agreement, offer, or promise, oral or written, concerning reemployment.” The word “you”

indicated that Plesa was making the decision, and the present-tense verb “are” indicated that he

was presently making the decision at that moment. Plaintiffs and Plesa argue that the phrase “not

have any agreement, offer, or promise” is not inconsistent with seeking reinstatement of

employment through the grievance process, but this argument fails to acknowledge that the

separation waiver stated that the applicant was fulfilling two conditions: (1) present termination

of employment, and (2) disclaimer of seeking reemployment. Assuming that Plesa’s invocation

of the grievance process did not negate the reemployment disclaimer, Plesa still misrepresented

his intentions in the first part of the disclaimer where he affirmatively terminated his employment.

The arbitrator concluded that Plesa should be reinstated notwithstanding his representation

of voluntary termination because he would not have initiated retirement if defendant had not

wrongfully terminated him. The arbitrator found that reinstatement was necessary to fashion a

-7-

make-whole remedy. The flaw in this analysis is that reinstating Plesa after he withdrew his

retirement account funds did not restore him to his prior employed status because active employees

in a defined contribution plan do not have free access to funds in their retirement account. Plesa

withdrew 100 percent of the funds. The arbitrator’s finding that Plesa would no longer receive a

retirement allowance fails to acknowledge that Plesa did not receive an “allowance,” but the entire

account. Although the separation waiver did not specifically preclude future employment with

defendant after a good-faith separation of employment, Plesa’s plan to retire, withdraw his

retirement account funds, pursue reinstatement, and retain the retirement funds regardless of

reinstatement negated his representation that he was presently separating from employment.

The joint authorities of the CBA, retirement ordinance, and WCERS application

procedures precluded Plesa’s employment after Plesa represented that he was terminating his

employment and obtained a full distribution of his retirement funds. Plesa attempted to make a

conditional retirement that could be revoked in the event of reinstatement, but the bona fide

separation waiver and prohibition against in-service distributions did not permit a conditional

separation and revocation, at least not after withdrawal of the retirement account funds.

Accordingly, we affirm the trial court’s judgment vacating the arbitration awards because the

awards were not permissible under controlling law.

IV. OBJECTIONS TO PROPOSED ORDER

Plaintiffs and Plesa argue that the trial court did not comply with proper procedures when

entering its final order. The trial court approved the first of two proposed orders submitted by

defendant. Issues involving the interpretation and application of court rules are reviewed de novo.

In re Sanders, 495 Mich 394, 404; 852 NW2d 524 (2014).

MCR 2.602 provides, in pertinent part:

(B) Procedure of Entry of Judgments and Orders. An order or judgment

shall be entered by one of the following methods:

(1) The court may sign the judgment or order at the time it grants the relief

provided by the judgment or order.

(2) The court shall sign the judgment or order when its form is approved by

all the parties and if, in the court’s determination, it comports with the court’s

decision.

(3) Each judgment must state, immediately preceding the judge’s signature,

whether it resolves the last pending claim and closes the case. Such a statement

must also appear on any other order that disposes of the last pending claim and

closes the case.

(a) If no written objections are filed within 7 days of the date of service of

the notice, the judge shall sign the judgment or order if, in the court’s determination,

it comports with the court’s decision. If the proposed judgment or order does not

comport with the decision, the court shall direct the clerk to notify the parties to

appear before the court on a specified date for settlement of the matter.

-8-

(b) Objections regarding the accuracy or completeness of the judgment or

order must state with specificity the inaccuracy or omission.

(c) The party filing the objections must serve them on all parties as required

by MCR 2.107, together with a notice of hearing and an alternative proposed

judgment or order.

(d) The court must schedule the hearing upon filing of the first objection,

and the party filing the objection must serve the notice of hearing under subrule

(B)(3)(c). Other parties to the action may file objections with the court through the

end of the 7-day period. The court must schedule a hearing for all objections within

14 days after the first objection is filed or as soon as is practical afterward.

(4) A party may prepare a proposed judgment or order and notice it for

settlement before the court. Pursuant to MCR 2.119(G)(3)(b), a motion fee may not

be charged.

Plaintiffs and Plesa objected to defendant’s first proposed order on the ground that the trial

court did not state on the record that the arbitrator exceeded his authority by failing to enforce the

terms of the separation disclaimer and issued awards that violated IRS regulations and other

applicable law. Although the trial court did not specifically refer to the IRS regulations, it stated

that it was “siding with the County” because it believed “that the arbitrator made a series of

mistakes or misjudgments that went outside of his authority and that they were material and both

contrary and contrary to the law.” Thus, the trial court implicitly agreed with defendant’s

arguments about the IRS regulations in its oral ruling. Accordingly, the order is not inconsistent

with the trial court’s ruling. To the extent that proper procedures were not followed before the

order was entered, because plaintiffs and Plesa have not demonstrated that the trial court’s order

did not comport with its ruling, any error is harmless. See MCR 2.613(A) (“An error . . . or defect

in anything done or omitted by the court or by the parties is not ground for . . . for setting aside . . .

or otherwise disturbing a judgment or order, unless refusal to take this action appears to the court

inconsistent with substantial justice.”).

Finally, plaintiffs and Plesa have not demonstrated that Plesa has been required to pay any

damages not authorized by the trial court’s final order. Although plaintiffs and Plesa argue that

defendant’s second proposed judgment improperly sought recovery of items totaling $43,976.91,

the trial court did not enter that judgment. Contrary to what plaintiffs and Plesa assert, the trial

court’s final judgment did not award defendant $43,976.91. Further, although plaintiffs and Plesa

assert that defendant has pursued collection efforts in an attempt to collect damages in excess of

the trial court’s judgment, defendant’s collection efforts involve postjudgment matters that are

beyond the scope of this appeal. In any event, plaintiffs and Plesa do not contend that defendant

has been successful in recovering any amounts not authorized by the trial court’s final order.

Accordingly, plaintiffs and Plesa are not entitled to any relief with respect to this issue at this time.

V. CONCLUSION

-9-

The trial court properly vacated the arbitration awards. We affirm.

/s/ David H. Sawyer

/s/ Michael J. Riordan

-10-