Amicus Curiae Brief — General Motors Corp. v. Romein

No. 90-1390 _—

IN THE

Supreme Court of the United States

OcTOBER TERM, 1990

GENERAL MOTORS CORPORATION, Petitioner

7

EVERT ROMEIN, ET AL., Respondents

FORD MOTOR COMPANY, Petitioner

v.

ARTURO GONZALEZ, ET AL., Respondents

On Petition For A Writ Of Certiorari

To The Supreme Court Of Michigan

BRIEF OF AMICUS CURIAE,

THE NATIONAL COUNCIL OF SELF-INSURERS,

IN SUPPORT OF PETITIONER

DOUGLAS F. STEVENSON

STEVENSON, Rusin AND FRIEDMAN, Lp.

10 South Riverside Plaza

Suite 1530

Chicago, Illinois 60606

(312) 454-5110

Counsel for Amicus Curiae

Midwest Law Printing Co., Chicago 60611, (312) 321-0220

mat

i

TABLE OF CONTENTS

REASONS FOR GRANTING THE PETITION ..

I.

THE DECISION BELOW VIOLATES THE CON-

TRACT CLAUSE OF THE U.S. CONSTITUTION.

THIS COURT DECLARED IN STATE INDUS-

TRIAL COMMISSION v. NORDENHOLT CORP.,

259 U.S. 263 (1922), THAT A WORKERS’ COM.-

PENSATION “AWARD IS READ INTO AND BE-

COMES PART OF THE CONTRACT” OF EM-

PLOYMENT. SO, ALL THE PAYMENTS MADE

HERE FROM 1982 TO 1987 WERE PURSUANT

TO THAT EMPLOYMENT CONTRACT, IN AC-

CORDANCE WITH THE 1981 STATUTE AND

ITS EXPRESS APPROVAL BY THE MICHIGAN

SUPREME COURT IN 1985. THESE PAYMENTS

VALIDLY DISCHARGED CONTRACTUAL OBLI-

GATIONS. THE DECISION BELOW REOPENS

ALL THESE CONTRACTS AND DEFINITIVELY

INVADES THE CONSTITUTIONAL PROVISION

FORBIDDING THE IMPAIRMENT OF CON.

pp INO Tere rrr ear ee ee LETT ELLE

A. The Contract Clause Is Stated In Terms

As Absolute As The First Amendment’s

Protection Of Free Speech. It Forbids

“Any Law Impairing The Obligation Of

Ce See ee etek adeeeeen eee

ii

B. The Majority Opinion Below Does Not Pass

Any “Rational Relationship Test’? Even If

That Test Is Applicable ................

1. The Impairment of Contract Is Not

a Pe

2. There Is No Impairment Because “the

Defendants Knew That Their Rights

Were Subject to Alteration” ........

3. The Legislature and the Courts May

Impair Contracts in the “Reasonable

Exercise of the Police Power” ......

II.

LEGISLATORS MAY ACT ONLY DURING THE

PERIOD THEY HOLD OFFICE. A CURRENT

LEGISLATURE CANNOT ACT FOR OR BIND

FUTURE OR PAST LEGISLATORS WITHOUT

VIOLATING DUE PROCESS OF LAW.......

CUONRCLUBION on ccccsvsdvcceenen enna

APPENDIX:

U.S. Department of Labor, January, 1990, “Off-

set Provisions in State Workers’ Compensation

YM

11

12

13

14

16

20

la

ili

TABLE OF AUTHORITIES

Cases PAGE

Alessi v. Raybestos-Manhattan Corp., 451 U.S. 504

UPR ArEEe se seen secessccesccecce 3,4

Allied Structural Steel v. Spannaus, 438 U.S. 233

ecu eee eeeeeeecceecescee. 12, 14, 18

Brown vy. Elder Outdoor Advertising Co., 139 Mich.

App. 7, 360 N.W.2d 322 (1984) ............. 9, 12

Chambers vy. General Motors Corp., 422 N.W.2d

ee Redes cccesscccececces 6

Chicago Board of Realtors v. City of Chicago, 819

CM MED cccccccccccscsccecs 11

Energy Reserves Group v. Kansas Power & Light

Sg EY GD GEUED co cccccccsccccccess 13

Franks v. White Pine Copper Div., 422 Mich. 636,

i i ED co cccccccccccccsccces 6, 17

Garris v. Hanover Insurance Co., 630 F.2d 1001

ee ccc e sce ceeccseccees 15

Home Building & Loan Assn. vy. Blaisdell, 290

eres wees eccbccececccccs 11

Richardson vy. Belcher, 404 U.S. 78 (1971)..... 4,5

State Industrial Commission v. Nordenholt Corp.,

ED < cccscsecescccccccccces a

Thomas v. Parker Rustproofing Co., 284 Mich. 260,

2TO N.W.2d GO4 (19GB) ........... ccc eeeees 4

United States Trust Co. v. New Jersey, 431 U.S.

Ee CC keke eccececccceccccccss 9,15

iv

Other Citations

Article I, Section 10, U.S. Constitution .......

Michigan Statutes:

ED cccadcuccecoescceessvereees

ey GEE vo ccccucccdececucedenensede

Public Act 203 of 1981 .............ees00e-

Fe & £ —Pee ee rear

American Bar Foundation Journal, 1987, pp. 379

et seq. “Temporal Limits on the Legislative

10

10

10

16

15

Mandate: Entrenchment and Retroactivity” . 17, 18, 19

No. 90-1390

IN THE

Supreme Court of the United States

OcTOBER TERM, 1990

GENERAL MOTORS CORPORATION, Petitioner

y

EVERT ROMEIN, ET AL., Respondents

FORD MOTOR COMPANY, Petitioner

v.

ARTURO GONZALEZ, ET AL., Respondents

On Petition For A Writ Of Certiorari

To The Supreme Court Of Michigan

BRIEF OF AMICUS CURIAE,

THE NATIONAL COUNCIL OF SELF-INSURERS,

IN SUPPORT OF PETITIONER

tien

(Pursuant to the consent of all the parties, this brief

is filed under Supreme Court Rule 37.)

The National Council of Self-Insurers speaks for major

employers of the United States, frequently multi-state

employers. These are employers who assume the direct

responsibility of paying workers’ compensation benefits

to their employees, a method sometimes referred to as

“self-insuring” under applicable state and federal workers’

compensation laws. It is generally accepted that 30% of

the employees of the United States work for employers

who are self-insured.

This National Council is also the parent organization for

30 state self-insurance associations who are active in each

state on workers’ compensation issues.

The National Council supports the workers’ compensa-

tion laws as an essential part of the social and economic

framework of our society. But, like our state and federal

governments, the National Council is concerned with the

proliferation of duplicating benefits in our society. The cost

of benefits has grown enormously, affecting price levels

to consumers and inhibiting the ability of United States

employers to export their products.

The proliferation and cost of benefit programs is the

subject matter of this case.

STATEMENT

The workers’ compensation issue before the Court in

this matter is often described as “‘coordination” or “in-

tegration” of benefits, the offsetting of alternative benefits

for income maintenance against workers’ compensation

benefits for that same income maintenance purpose.

The issue has a historic background. Workers’ compen-

sation was this nation’s first no-fault program for sustain-

ing the income capacity of an employee injured in his

alin

employment. In the 1910-1920 period, every state and the

federal government adopted workers’ compensation stat-

utes covering employment in each jurisdiction.

Beginning in the 1930’s, other programs developed to

maintain the income of individuals suffering wage loss for

other reasons. The federal government enacted unemploy- -

ment benefits for the unemployed, and social security for

retirees and the disabled. These programs were indepen-

dently enacted with little regard for each other, and with-

out regard to other duplicative programs, such as workers’

compensation.

Following World War II, programs for group insurance,

for weekly benefits payable during a period of non-occu-

pational disability, and for company retirement programs

developed rather fully in major industries. Many of these

private income maintenance programs were adopted with-

out regard for the other programs already in place for

income maintenance. =e

As a result, individuals in our society often sought and

obtained income maintenance benefits from more than one

of these programs. In combination, amounts received by

an individual for income maintenance while not working

often exceeded his earnings when he did work.

As a corollary, efforts to control the costs of workers’

compensation, social security, pension programs and med-

ical disability programs were totally frustrated when all

these income avenues were available and could accumulate.

The effort to coordinate or integrate these various bene-

fits to prevent abuse has been a continuing one. In the

last section of the Occupational Safety and Health Act

of 1970, Congress created the National Commission on

State Workmen’s Compensation Laws (84 Stat. 1600 et

seq.) to examine and make recommendations about work-

ers’ compensation. That Commission reported its recom-

=

mendations back to Congress in 1972. Its Recommenda-

tion R. 33 stated:

We recommend that . . . the benefits of other public

insurance programs should be coordinated with work-

men’s compensation benefits. Report of National Com-

mission on State Workmen's Compensation Laws, p.

58.

The International Association of Industrial Accident

Boards and Commissions (the associetion of state workers’

compensation administrators, commonly referred to as the

IAIABC) formally adopts recommended standards for all

the states. In 1980 it adopted coordination of benefits as

one of its standards:

11. Coordination of Benefits

Compensation payable for total disability or survivor

benefits should be coordinated under the jurisdiction’s

law with social security and other employer-funded

disability programs so as to best effectuate the ob-

jectives of wage replacement and rehabilitation.

And in the explanation, it added “. . . to avoid overlapping

and duplication of benefits.” This remains its current stan-

dard. Journal of International Association of Industrial

Accident Boards and Commissions, Summer Issue, 19990,

p. 43.

The importance of controlling the costs of these multi-

ple benefit programs did not escape Congress. In 1974,

Congress enacted ERISA, a program governing pension

plans. ERISA expressly permits this same coordination

or integration of benefits. In 1977, when the State of New

Jersey passed a statute forbidding any integration or coor-

dination of workers’ compensation and pension benefits,

this Court in Alessi v. Raybestos-Manhattan, 451 U.S. 504

(1981), declared the state statute null and void as pre-

empted by ERISA, a federal law. This preserved the

same coordination or integration of benefits involved in

the instant case.

oe

The Congress in 1967 amended the Social Security Act

to require coordination (or offsets) between workers com-

pensation and social security disability benefits. Sec. 224,

Social Security Act, upheld in Richardson v. Belcher, 404

U.S. 78 (1971).

Alessi was decided in March, 1981. The Michigan leg-

islature in December of its 1981 session adopted, effective

March 31, 1982, integration or coordination of workers’

compensation with pensions and social security benefits

much like this Court described in Alessi. Its action was

prospective; no claimant had to pay back any amounts

previously received, but continued “‘double dipping’’ was

eliminated.

The instant case arises because of the efforts of the plain-

tiffs below to retain the duplicating benefits of pension,

social security, and workers’ compensation, which collec-

tively exceeded the plaintiffs’ income when they worked.

The facts of this case, as stated by the majority opin-

ion below, portray the 1981 situation. Plaintiff (and GM

employee) Romein was receiving $12,513.80 a year in

workers’ compensation benefits, pursuant to a formula en-

titling him to two-thirds of his gross earnings. Such work-

ers’ compensation benefits are tax-free under Internal

Revenue Code §104(aX1), so this $12,513.80 was very close

to his former “take home pay” when he worked. In ad-

dition, Romein was receiving social security and General

Motors’ company pension, which with his workers’ com-

pensation benefits totalled $19,377.80 a year, more than

he had ever made when he worked, and virtually all of

it tax free.

The Michigan legislature, concerned about its business

climate and its unemployment rate of over 14%, passed

a statute in 1981 forbidding these duplicative payments.

Aside from the background of recommendations by the

National Commission and the IAIABC, supra, and this

ulin

Court’s decision in Alessi, its statute was supported by

copious legislative history concerning its aims and pur-

poses, perhaps best summarized in Governor William Mil-

liken’s statement:

. we must keep in mind that the purpose of work-

ers’ compensation is to restore wage-earning capacity

lost in on-the-job accidents. Workers’ compensation

was never intended to be more lucrative than gain-

ful employment, or be a retirement bonus. . . . (Gov-

ernor Milliken, November 18, 1981, quoted in the

Opinions below)

(This Court noted and followed the same rationale in

upholding Congress’ action for “coordination of benefits”’

between social security and workers’ compensation in Rich-

ardson v. Belcher, 404 U.S. 78 (1971), noting that the two

benefits collectively exceeded earnings.)

Against this background, the Michigan legislature en-

acted its “coordination of benefits” legislation in 1981, ef-

fective March 31, 1982. The workers’ compensation benefit

(two-thirds of wages on a tax-free basis) was not reduced,

and if he was truly retired (and 62 years of age), he could

receive half of his social security benefits (the 50% paid

for by his own tax payments) in addition. But, the statute

provided that the employer could offset any employer-

financed wage loss programs such as company pensions

against its workers’ compensation obligation. There was

no retroactivity; no claimant had to pay anything back.

The ‘‘double dipping” was eliminated only as payments

became due after March 31, 1982. Thus, this statute put

some control on the problem of proliferating, accumulating

benefit costs.

This workers’ compensation problem in Michigan was

not peculiar to Michigan. Some 25 states in this same gen-

eral period took action to prevent this “double dipping”’

of benefits. Attached hereto as Appendix 1 is the 1990

U.S. Department of Labor publication summarizing similar

willis

statutory changes in 25 other jurisdictions, all set forth

in Table 17 of this U.S. Department of Labor publication.

The Michigan Supreme Court upheld the validity of this

1981 legislation in 1985, holding against plaintiffs like Ro-

mein in this case. Franks v. White Pine Copper Div., 422

Mich. 636, 375 N.W.2d 715 (1985). The pragmatic result

was that an employee received the highest benefit allow-

able under any single program (usually his workers’ com-

pensation benefit), but not a combination of all these wage

loss programs. This decision was entered in 1985, in a

combined opinion, one citation covering the two cases.

Franks v. White Pine Copper Div. and Chambers v. Gen-

eral Motors Corp., 422 Mich. 636, 375 N.W.2d 715 (1985).

The definitive legislation of 1981, confirmed by Michi-

gan’s highest court, did not settle this issue in Michigan.

Thus this case and this Petition for Certiorari. In 1987,

the Michigan legislature sought to overturn the Supreme

Court decision of 1985. Its method was peculiar; it did

not change the 1981 legislation in any respect, but pro-

vided only that those injured before its effective date of

March 31, 1982 should continue to receive multiple bene-

fits. Almost like a “bill of attainder,” the 1987 legislative

action named the case and stated that the Michigan Su-

preme Court decision of 1985 had misconstrued the 1981

legislative intent. The actual statute reads as follows:

The decision of the Michigan Supreme Court in Franks

v. White Pine Copper Div., 422 Mich. 636 (1985) is

declared to have been erroneously rendered insofar

as it interprets this section, it having been and be-

ing the legislative intention not to coordinate pay-

ments under this section resulting from liability . . .

for personal injuries occurring before March 31, 1982.

It is the purpose of this amendatory act to affirm

rd —_— .... Michigan Acts, 1987, PA 28, Sec.

This 1987 act then directed employers to pay all arrear-

ages back to 1982 within 60 days, with interest.

= =

As Chief Justice Riley points out in the dissent, p. &,

only “11 of the 26 senators’”’ who voted in 1981 were still

in the Senate in 1987, and only “20 of the 62 represen-

tatives” who voted in 1981 were around in 1987. The 1987

action reflects the “intention” of its 1987 members, not

the intention of the members voting in 1981.

The instant case arises from these plaintiffs suing Gen-

eral Motors and Ford under this 1987 act for all the ar-

rearages in the multiple payments since March 31, 1982,

despite the Michigan Supreme Court decision of 1985 de-

claring that General Motors and Ford (and all other em-

ployers) had validly discharged these precise obligations.

The Court below then overruled its 1985 decision, bow-

ing to this newly declared “intent,” and upheld plaintiffs’

claim retroactively back to March 31, 1982, the effective

date of the earlier statute. It is this decision for which

certiorari is sought.

The issue before this Court is of great importance to

this amicus curiae, the National Council of Self-Insurers,

which has members in the 25 states who have enacted

similar “coordination of benefit’? programs.

For General Motors and Ford, the claims of these plain-

tiffs amount to a retroactive $25-million liability. While

Ford and General Motors may be two of Michigan’s larg-

est employers, these two collectively are a distinct minor-

ity of all Michigan employers who will now be required

to make the retroactive back payments, with interest,

commanded by the 1987 statute and the decision below

of the Michigan Supreme Court. The total liability is in

gross an amount considerably greater than the $25-million

mentioned in the decisions below.

Further, the question here, getting some kind of control

over the proliferation and overlapping of benefit programs,

is important to the nation’s economic health and is being

colin

addressed currently by many organs of government, fed-

eral, state, and local. That effort gets a decided jolt by

decisions such as this one by the Michigan Supreme Court.

REASONS FOR GRANTING THE PETITION

THE DECISION BELOW VIOLATES THE CONTRACT

CLAUSE OF THE U.S. CONSTITUTION. THIS COURT

DECLARED IN STATE INDUSTRIAL COMMISSION v.

NORDENHOLT CORP., 259 U.S. 263 (1922), THAT A

WORKER’S COMPENSATION “AWARD IS READ INTO

AND BECOMES PART OF THE CONTRACT” OF EM-

PLOYMENT. SO, ALL THE PAYMENTS MADE HERE

FROM 1982 TO 1987 WERE PURSUANT TO THAT EM-

PLOYMENT CONTRACT, IN ACCORDANCE WITH THE

1981 STATUTE AND ITS EXPRESS APPROVAL BY THE

MICHIGAN SUPREME COURT IN 1985. THESE PAY-

MENTS VALIDLY DISCHARGED CONTRACTUAL OB-

LIGATIONS. THE DECISION BELOW REOPENS ALL

THESE CONTRACTS AND DEFINITIVELY INVADES

THE CONSTITUTIONAL PROVISION FORBIDDING THE

IMPAIRMENT OF CONTRACTS.

It is rudimentary that a workers’ compensation statute

becomes part of every employment contract covered by

that statute, as this Court expressly held in State Indus-

trial Commission v. Nordenholt Corp., 259 U.S. 263

(1922). Workers’ compensation awards become part of that

contractual obligation:

The contract of employment, by virtue of the statute,

contains an implied provision that the employer, if

the employee be injured, will pay to him a certain

sum... . Ilbid., p. 271.

If not paid, this contractual obligation to pay can be sued

upon and enforced like any other contractual obligation.

The scope of a contract embraces not just the contract

itself, but the state law and its judicial interpretations,

=

as this Court held in United States Trust Co. v. New

Jersey, 431 U.S. 1 (1977). At pp. 19-20, it is stated:

The obligations of a contract have long been regarded

as including not only the express terms but also the

contemporaneous state law pertaining to interpreta-

tion and enforcement.

Thus the 1981 statute and the 1985 decision of the Mich-

igan Supreme court construing it constitute the contract

here, a contract which is retroactively cancelled by the

decision below. Past completed transactions pursuant “to

the express terms ... and contemporaneous state law”’

have been reopened and new and different liabilities cre-

ated. This is precisely what the Contract Clause forbids.

Michigan’s own decisions as well as those of this Court

hold that workers’ compensation obligations are contractual

obligations. Brown v. Eller Outdoor Advertising Co., 139

Mich. App. 7, 360 N.W.2d 322 (1984); Thomas v. Parker

Rustproof Co., 284 Mich. 260, 279 N.W.2d 504 (193%).

The court below, on its own, makes one exception to

its retroactive judgment, a curious exception in view of

the broad, retroactive sweep it gives to the 1987 statute.

It bows to the concept of res judicata, by exempting from

the 1987 statute any case in which the parties had sued

each other and that suit had reached a final judgment.

This produces a curious result; those who respected the

words of the legislature and the judicial holding in 1985

are the ones who now must pay the retroactive tribute.

Those who did not respect the law and resorted to litiga-

tion are exempt from it.

The doctrine of finality is the principle of res judicata,

as well as that of the Contract Clause. It is embodied

in other sections of Michigan’s workers’ compensation stat-

ute, sections not mentioned by the majority below or by

the legislative act. One section provides, as a restriction

on an employee reopening past transactions:

=~ =

. . . nO compensation shall be ordered for any period

which is more than one year prior to the date of such

action. MCL 418.833(a).

The other section of the statute restricts an employer

from reopening completed transactions after one year:

When an employer or carrier takes action to recover

overpayment of benefits, no recoupment of money

shall be allowed for a period which is more than one

year prior to the date of taking such action. MCL

418.833(2).

These two sections, bilaterally fair to employee and em-

ployer, were not mentioned in the 1987 statute or in the

opinion below. They remain unimpaired in the statute, al-

though the first quoted section is cancelled by the deci-

sion below, wthout acknowledging it even exists.

Thus, the statutory scheme of finality of all workers’

compensation transactions after one year is totally breached

here; completed transactions running back to March 31,

1982 are reopened by the decision below.

The opinion seems to believe making this exception for

res judicata saves it from what might otherwise be a vio-

lation of the U.S. Constitution. It does not; “finality’’ is

the basis of the Contract Clause, too. We are dealing with

completed contractual transactions protected by the Con-

tract Clause.

A. The Contract Clause Is Stated In Terms As Absolute As

The First Amendment’s Protection Of Free Speech. It

Forbids ‘‘Any Law Impairing The Obligation Of Con-

tracts.”

Article I, Section 10 of the U.S. Constitution provides

simply that ‘“‘no state shall... pass any . . . law impair-

ing the obligation of contracts... .”

The Michigan court below reads the contract clause as

if it stated, “No state shall pass any law unreasonably

impairing the obligations of contracts.”’ “Reasonable” or

_

“unreasonable” is not the issue when the constitutional

impairment stands alone as here, with no competing con-

stitutional issue involved.

In Chicago Board of Realtors, Inc. v. City of Chicago,

819 F.2d 732 (7th Cir. 1987), Judge Posner wrote at p. 743:

Imagine what freedom of speech would have come

to mean if the court had interpreted the first amend-

ment—which is no more absolute in its language or

clearcut in its history than the contract clause—as

loosely as it interprets the contract clause.

Amicus suggests that the contract clause should be en-

forced as it is written in the Constitution in the instant

case. There is no competing constitutional value to weigh

in this case, nor any “compelling demonstration of neces-

sity” requiring that the contract clause be regarded as

just one of a hierarchy of constitutional values. Nor is

there any crisis shown here even faintly resembling the

problem faced by this Court in the 1934 Depression re-

quiring any balance of competing considerations as in

Home Building & Loan Association v. Blaesdell, 290 U.S.

398 (1934).

Cases may arise presenting a conflict between two con-

stityional values, each absolute in itself, where some rule

of reason may have to be applied. But in this case, only

one constitutional value is involved, the Contract Clause

and the Rule of Law in our society. No countervailing

constitutional value is asserted which requires any weigh-

ing or “rational relationship” test.

The court below had no basis even to explore any

“rational relationship” test.

B. The Majority Opinion Below Does Not Pass Any ‘‘Ra-

tional Relationship Test,’’ Even If That Test Is Appli-

cable.

The majority opinion seems to state first that there is

no contract here to be impaired, despite the Michigan de-

= =

cisions clearly holding that these workers’ compensation

issues involve contractual obligations. Brown v. Eller Out-

door Advertising Co., 139 Mich. App. 7, 360 N.W.2d 322

(1984).

The majority below then quickly leaves this position,

admits there is a contract and a contractual impairment

here, and discusses whether it can be justified. For this

purpose, it launches into a three-part balancing test. Opin-

ion, pp. 16-19, with the following assertions:

1. The Impairment of Contract Is Not Substantial.

One assertion of the majority below is that the impair-

ment of contract is not substantial. Amicus submits that

the $25-million liability imposed on Ford and GM is “sub-

stantial.”

The majority opinion below avoids discussion of such a

simple answer to its own question by going to the opposite

extreme. It launches into a discussion of the employer's

immunity from tort actions, asserting this immunity to be

the “basic benefit’’ to the employer. Because this “basic

benefit” is undisturbed by the 1987 legislation, the major-

ity declares there is no “substantial” impairment of contract.

Under this analysis, any amount of retroactive liability,

perhaps trip''ng the compensation payments in all cases

since 1920 (with compound interest) wouid be permissi-

ble, so long as the exclusive remedy was not disturbed.

Amicus submits this is not the law.

This Court held in Allied Structural Steel v. Spannaus,

438 U.S. 233 (1978), that requiring an employer to pay

pensions which had not yet contractually vested was a

“substantial impairment of contractual expectations.” The

question according to Justice Stewart is whether something

significant has been taken away by the statute, not whether

it leaves anything of some value. (The sum involved in

= ™

Spannaus was $185,000 compared to the stated $25-million

liability and was held to be a substantial impairment.)

Under the majority’s analysis, there must be a total de-

struction of all value before a legislative act could be con-

sidered unconstitutional. But, as this Court has repeatedly

held, “total destruction of contractual expectations is not

necessary for a finding of substantial impairment.” Energy

Reserves Group v. Kansas Power & Light, 459 U.S. 400

at 411 (1983); United States Trust Co. v. New Jersey, 431

U.S. 1 at 26-27 (1977). Most lower courts have so held,

too. State of Nevada Employees Association v. Keating,

903 F.2d 1223, at 1227 (1990) (restriction of employees’

right to withdraw pension contributions without penalty);

Michael v. Workers’ Compensation Court, 763 P.2d 1122,

1125 (Montana, 1988) (mandatory mediation of disputes

causing delay in recovering benefits).

So, contrary to the majority opinion below, the issue

under the contracts clause is whether something substan-

tial has been taken away, not whether anything of value

is left. The decision below took “‘substantial’’ amounts

away from these defendants.

2. There Is No Impairment Because ‘“‘the Defendants

Knew That Their Rights Were Subject to Alteration.”’

This is a second pillar of the majority’s balancing test,

and it doesn’t fit this case. Every citizen knows that fu-

ture rights may be altered by a legislature. But, if past

completed transactions can be reopened and altered, then

no one in our society can possess any reasonable expec-

tations or the confidence required to plan future commit-

ments. Under the majority opinion below, there is no fi-

nality at any time, on any issue, and no transaction is

ever over or closed. No business, no citizen can make any

plans for the future, if the past is so unstable.

=e

Justice Stewart, in Allied Structural Steel v. Spannaus,

supra, wrote:

If the Contract Clause is to retain any meaning at

all, it must be understood to impose some limits upon

the power of a state to abridge existing contractual

rights, even. in the exercise of its otherwise legitimate

police power. 438 U.S. at 242.

Contracts ei able individuals to order their personal

business affairs . . . . Once arranged, those rights

and obligations are binding under the law, and the

parties are entitled to rely on them. [bid. at 245.

There can be no stability in this nation’s affairs if

legislatures can suddenly reopen several years of com-

pleted transactions and decree them null and void. The

Contract Clause forbids such gross alteration.

No citizen can plan a future, if they cannot rely on the

finality of past, completed transactions. These petitioners

had the legitimate expectation, protected by the Constitu-

tion, that these past, completed transactions would not

be altered.

3. The Legislature and the Courts May Impair Con-

tracts in the “‘Reasonable Exercise of the Police

Power.”’

This statement from the majority opinion is much too

broad. If the police power is unlimited, there is no room

left for the Contract Clause, the First Amendment, res

judicata, or any other constitutional right. Such a state-

ment leaves no place for the Rule of Law in our society.

If the contract clause is to retain any meaning at all

... it must be understood to impose some limit up

on the power of a state to abridge existing contrac-

tual relationships, even in the exercise of its other-

wise legitimate police power. J. Stewart in Allied

Structural Steel v. Spannaus, 438 U.S. at 242. See

also Pension Benefit Guaranty Fund v. R. A. Gray

& Co., 467 U.S. 717 (1984); United States Trust Co.

v. New Jersey, 431 U.S. at 22.

As to whether the 1987 legislation meets any special

need requiring the use of the police power, there is ab-

solutely no legislative history or record concerning that

need, no problem described in a legislative record, no ex-

planation of any problem or how this legislation meets

the problem. Garris v. Hanover Insurance Company, 630

F.2d 1001 (4th Cir. 1980) at p. 1009 states the necessity

of legislative sources to evaluate the rationality of a con-

tract clause challenge. There is none in this case.

The majority opinion, however, invents its own assump-

tion to support the lack of any legislative finding of prob-

lem or need. It assumes, although it is nowhere stated

in the statute or legislative history, that the legislature

in 1987 wanted to help employees whose benefits were

not increased in other legislation enacted in 1981.

The majority opinion’s assumption is false, aside from

the propriety of a court’s supplying its own justification,

where the legislature itself has omitted any justification.

The plaintiffs here suffered no decrease in benefits com-

pared to other employees in 1981 or 1982. This coordina-

tion of benefits statute was a separate bill having nothing

to do with the amount of benefits. The opinion below con-

fuses two separate legislative statutes enacted in this

period, one of which gave a benefit increase to this Plain-

tiff Romein. This was Michigan Public Act 357 of 1980.

It had nothing to do with coordination of benefits.

The statute gave increases to prior injury cases, such

as these plaintiffs; all claimants having accidents between

1965 and 1979 received increased benefits, running from

10.3% to 86.6%. Plaintiff Romein, whose accident was in

1977, received $21 more per week. MCL 418 352. Record

Exhibit II-4. (This $21 a week increase was paid from the

=s

state’s general fund, not by employers, thus avoiding any

issue of retroactivity and impairment of contracts.)

This clear fact destroys the assertion by the majority,

its attempt to invent a “rational” reason for the 1987

statute; pre-1981 claimants did get increases in 1981.

Coordination of benefits, the subject here, was passed

later, in December, 1981, effective March 31, 1982, in a bill

confined to that subject. Michigan Public Act 203 of 1981.

Consequently, the court-supplied assumption to justify

the 1987 legislation, that the 1987 legislature wanted to

give benefits to pre-1981 claimants who received none,

was a false one. No explanation other than this assertion

by the court itself is offered of any need or intent, or

_ how the 1987 legislation might meet that need. There is

none in any legislative record, and the majority’s invented

assumption is false.

Amicus submits there is no problem or need described

anywhere justifying even a “reasonable exercise of the

police power” to justify retroactivity. There is no conflict

between any competing constitutional rights requiring a

weighing of “rational relationship,” nothing which permits

a legal challenge to the clearly stated Contract Clause of

the U.S. Constitution.

LEGISLATORS MAY ACT ONLY DURING THE PERIOD

THEY HOLD OFFICE. A CURRENT LEGISLATURE CAN-

NOT ACT FOR OR BIND FUTURE OR PAST LEGIS-

LATORS WITHOUT VIOLATING DUE PROCESS OF

LAW.

Due process of law in various forms is argued in other

briefs. This amicus will confine itself to a discussion of the

temporal time limits on assertions of power by legislators.

As set forth under the Statement of Facts, the 1987

Michigan legislature purported to construe (actually to

- =

change) the “intent” of the 1981 legislature, after the 1981

statute passed through the crucible of judicial construc-

tion in 1985. The 1987 statute as enacted simply stated

that the 1981 legislature’s “intent” differed from that

found by the Michigan Supreme Court in Franks v. White

Pine Copper Div. and Chambers v. General Motors Corp.,

422 Mich. 636, 375 N.W.2d 715 (1985).

Chief Justice Riley in her dissent points out the ludicrous

nature of the 1987 legislators’ determining the intent of

the 1981 legislators; only 11 of the 26 senators in office

in 1981 were still in the senate in 1987, and only 20 of the

62 representatives were still in office in 1987. Thus, there

is no basis for the 1987 legislators to assert or change

whatever “intent” existed among the 1981 legislators.

It also invades the “time zone” of authority and sov-

ereignty of the 1981 legislature itself by overturning its

1981 vote. This presents the due process question.

Amicus urges the Court to examine an article on this

subject, ““Temporal Limits on the Legislative Mandate:

Entrenchment and Retroactivity,” 1987 American Bar

Foundation Research Journal, beginning on page 379. The

author is Professor Eule of the Law School at the Univer-

sity of California at Los Angeles.

Professor Eule explains why a current legislature can-

not “rewrite history” by overturning the votes of its

predecessor legislators. At p. 445:

.. . What if, on January 3, the newly elected rep-

resentatives conducted a “recount” of all legislative

voting that had occurred during the preceding two

years, substituting the votes of the new represen-

tatives for those of their predecessors?

If these recounts were accompanied by a decree that

the bills which could no longer muster a majority

vote were to be treated as never having been en-

=~ =

acted, we would surely conclude that the spirit, if not

the letter of the Constitution had been violated.

This is precisely what the Michigan legislature did in 1987.

Professor Eule continues:

The voters do not delegate authority to rewrite his-

tory. Their earlier agents exercised legitimate author-

ity when they enacted legislation. While such efforts

may be repealed, this is not the same as retrospec-

tive eradication.

Again, Professor Eule describes exactly what the 1987 Mich-

igan legislature did, eradicating not only the 1981 vote, but

the 1985 Supreme Court decision, too. Professor Eule then

examines the reverse situation, prior bills which did not pass:

A decision that bills defeated by prior legislators can

now be enacted and treated as if they had been en-

acted earlier arguably runs afoul of this same prin-

ciple. The then-authorized representatives made a

choice, and their decision demands recognition of the

polity for that point in time. Each set of elected of-

ficials ought to be viewed as endowed by their sov-

ereign with the mandate to make policy choices only

within a bracketed temporal zone.

Just as the delegation of authority does not encom-

pass incursions into the domain of legislatures to

come, it does not contemplate contravening the sanc-

tity of the past.

Drawing on this Court’s analysis in Allied Structural

Steel v. Spannaus, 438 U.S. 233 (1978) (a case amicus has

cited on impairment of contracts), Professor Eule poses

this question: Assume that the Minnesota legislature, from

1963 to 1974, had defeated pension-vesting legisiation, but

in 1974, that legislation finally squeaks through, not just

for new pension plans, but retroactively to 1963, where

such bills had been defeated:

Doesn’t such an enactment invade the exclusive do-

main of the predecessor legislatures? Jbid., p. 397.

=

Chief Justice Riley in her dissent, pp. 5-6, quotes ex-

tensively from the floor debate of 1981 on this coordina- {

tion of benefits bill. The remarks of Representatives Cush-

ingberry, Emerson, Vanek, and Kelsey in opposition to

its passage expressly recognized the bill’s content and its

“intent” as it passed.

And, in 1982, Senate Bill 834 proposing to repeal this

1981 vote on coordination of benefits was soundly defeated,

a further demonstration of the legislative “intent” to enact

and retain this “coordination of benefits” statute. Thus,

the content and the “intent” was clearly fixed in 1981, as

the Michigan Supreme Court held in 1985. The 1987 legis-

lature can repeal the 1981 statute, but it cannot change

the clearly expressed intent of that statute, or deny its

enactment.

Amicus submits that the 1987 legislature, consistent with

due process of law, did not have the power to rewrite

the history of 1981 and 1982 and declare that these clearly

recorded actions embodying the content and the “intent”

never occurred.

Professor Eule submits that restricting legislatures to

the time zone of their authority is part of due process,

and “serves as our guide to assessing retroactivity where

specific clauses of the Constitution, (ex post facto, contract

or takings) are not applicable.” Jbid., p. 397.

Without this constitutional structure of due process,

there is no stability, past transactions are never final,

plans and expectations based on stability of law are not

allowed to any citizen.

With actions and decisions such as occurred in Michigan,

set forth fully and precisely in this record, there is no

Rule of Law; when the past is unstable, there are no

stable premises permitting citizens to make future com-

~20—

mitments. The whims of legislators may control our fu-

ture, but due process forbids those whims to control our

past as well.

CONCLUSION

For these reasons, the National Council of Self-Insurers,

as amicus curiae, urges this Court to grant the Petition

for Certiorari.

Respectfully submitted,

DOUGLAS F. STEVENSON

SreveNsON, Rusin AND FRIEDMAN, LTD.

10 South Riverside Plaza

Suite 1530

Chicago, Illinois 60606

(312) 454-5110

Counsel for Amicus Curiae

—la—

APPENDIX 1

State Workers’ Compensation Laws

U.S. Department of Labor

Employment Standards Administration

Office of Workers’ Compensation Programs

Branch of Workers’ Compensation Studies

January 1990

TABLE 17. OFFSET PROVISIONS

IN STATE WORKERS’ COMPENSATION LAWS

ALASKA

Section 23.30.225(a)—When periodic retirement or sur-

vivors’ benefits are payable under Title II of the Social

Security Act (42 U.S.C., 301 et seq.), the weekly compen-

sation for total disability or death shall be reduced by an

amount equal to one-half of the Federal benefits for such

week. (b) When a claim has been filed under this chapter,

any weekly disability benefits payable shall be offset by

benefits in accordance with 42 U.S.C., 401 et seq., by

an amount which exceeds 80 percent of the employee’s

average weekly wage at the time of injury. (c) When em-

ployer contributions to a pension or profit sharing plan

are used in determining gross earnings and the employee

is receiving pension or profit sharing payments, the week-

ly compensation benefits for total disability and death will

be reduced.

Section 23.30.187—Compensation for temporary total dis-

ability is not payable during any week in which unemploy-

ment compensation benefits are also payable.

CALIFORNIA

Section 4753—Additional compensation for subsequent

injuries shall be reduced by any monetary payments from

any source, except for a pension or a service-connected

disability which was incurred in the U.S. armed forces.

Section 4904—Permits liens to be made against tem-

porary total disability indemnity for any unemployment

compensation disability benefits being received.

COLORADO

Sections 8-50-103 and 8-51-101—Benefits for disability in

this State shall be reduced by 50 percent and death by

100 percent of any Federal OASDI payments, or the work-

men’s compensation act of another State or of the Fed-

eral Government, or of an employer pension or disability

plan.

Section 8-51-101(1XeXii)—Permanent total disability bene-

fits shall be reduced by 50 percent of any Federal OASDI

payments received after the claimant reaches the age of

65, or in the case of a claimant who begins to receive

employer-paid retirement payments at the age of 65, by

‘an amount determined as a percentage of such benefits.

Section 8-51-101(1Xf)—Weekly temporary and permanent

total disability benefits shall be offset by 100 percent of

any unemployment compensation benefits received for the

same week, with certain exceptions.

DISTRICT OF COLUMBIA

Section 36-308(g)—Weekly compensation benefits are off-

set if the sum of any Federal Old Age Survivors Insur-

ance benefits, or any employee benefit plans subject to

the Employee Retirement Income Security Act of 1974,

=

or any other employee income maintenance plan which is

funded solely by the employer plus such weekly compen-

sation benefits exceeds 80 percent of the employee’s aver-

age weekly wage.

FLORIDA

Section 440.15(3\(b\4)—Provides that if an employee is

entitled to both wage-loss benefits and social security

retirement benefits, the social security retirement benefits

will be primary and wage-loss benefits supplementary. The

sum of any combined benefits must not exceed the amount

of wage-loss benefits which would otherwise be payable.

Section 440.15(9)—Weekly compensation benefits for dis-

ability are offset by the amount of any Federal OASDI

payments so that the claimant’s total benefits do not ex-

ceed 80% of his/her average weekly wage.

Section 440.15(10Xa)—No weekly compensation payments

are made for temporary or permanent total disability

under the workers’ compensation law for any week in

which unemployment compensation benefits are paid.

Section 440.15(19Xb)—Offsets wage-loss or temporary

partial disability benefits by the amount of any unemploy-

ment compensation benefit payments.

LOUISIANA

Section 1225—Permanent toial disability benefits payable

under the Act will be reduced for those recipients who

are also receiving Federal OASDI benefits. This reduc-

tion is to be made only to the extent that the amount

of the combined Federal and State workers’ compensa-

tion benefits would otherwise cause or result in a reduc-

tion of the Federal benefits pursuant to the Social Secu-

rity Act (42 U.S.C., Section 424a).

—49—

Section 1225-B—No compensation will be paid for tem-

porary or permanent total disability or supplemental earn-

ings benefits during any week in which the employee is

receiving or entitled to receive unemployment compensa-

tion benefits.

MAINE

Section 111-A—Offsets benefits for personal injury or

disease under an insured disability or medical payments

plan against payments for workers’ compensation.

Section 62-A—Reduces benefit payments by the amount

of any concurrent unemployment compensation benefits,

excluding lump sum settlements and scheduled permanent

partial disabilities.

Section 62-B—Reduces total and partial disability bene-

fits by:

(1) Fifty percent of the amount of old age insurance

benefits received under the Federal Social Security

Act;

(2) The after tax amount of the payments received

under an employee benefit plan provided by the same

employer, if the employee did not contribute direct-

ly to the plan; and,

(3) The proportional amount, based upon the ratio

of the employer’s contributions to the total contribu-

tions, if the employee did contribute directly to the

plan

MARYLAND

Section 36 (1Xa)—Cost-of-living increases for employees

who are entitled to compensation for permanent total dis-

ability under this section and for disability under the Fed-

eral social security act will be reduced to avoid a diminu-

tion of the Federal benefits.

tallies

MASSACHUSETTS

Section 36 B(1)—No benefit shall be payable for tem-

porary total and permanent total disability for any week

in which the employee has received or is receiving unem-

ployment compensation benefits.

Section 36 B(2)—Any unemployment compensation bene-

fits received will be credited against partial disability ben-

efits for the same period or credited against any future

partial disability benefits which are or may become pay-

able.

MICHIGAN

Section 418.354—Temporary total disability benefits will

be reduced by 50 percent of any Social Security benefits;

and by amounts received after taxes under any self-insur-

ance plan, wage continuation plan, pension or retirement

plan provided by the employer to which the employee does

not contribute.

Section 418.354(1Xf)—Temporary total disability bene-

fits will be coordinated with those from employer con-

tributions to a qualified profit sharing plan where the

employer does not provide a pension plan.

Section 418.358—Offsets temporary total, permanent

total, and permanent partial disability benefits under

the workers’ compensation act dollar for dollar by un-

employment compensation benefits.

MINNESOTA

Section 176.101, Subdivision 4—After $25,000 is paid for

permanent total disability, benefits paid by any govern-

ment disability program, or any old age and survivors’

insurance benefits program are credited against workers’

compensation benefits, if such disability benefits are oc-

casioned by the same injury.

—fa—

Section 176.111, Subdivision 21—Death benefits shall not

exceed 100% of the deceased employee’s weekly wage at

the time of the injury causing his death, when the total

weekly government survivor benefits and the state work-

ers’ compensation benefits are combined, nor be payable

for any week in which the government benefits exceed

such percentage.

MONTANA

Sections 39-71-701(2) and 39-71-702(2)—If periodic disabil-

ity benefits are payable to the worker under the Federal

OASDI, weekly temporary total and permanent total dis-

ability benefits resulting from both injury and occupational

disease shall be reduced by an amount approximating one-

half (but not below zero) of the Federal benefit for such

week which amount is to be calculated from the date of

the social security disability entitlement.

NEW JERSEY

Section 34:15-29—Workers’ compensation benefits may

be offset against disability pension benefits or payments.

Section 34:15-95.4—Supplemental benefits for permanent

total disability and death shall be offset by any Federal

survivor or disability benefits, black lung, or disability

pension benefits.

Section 34:15-95.5—Reduces permanent total disability

or subsequent injury benefits of individuals under age 62

by Social Security benefits where the period of disability

began after December 31, 1979.

NEW MEXICO

Section 52-1-70 A&B—Offsets unemployment compensa-

tion benefits against total disability benefits. If a worker

—14—

, is concurrently entitled to both types of benefits, the un-

employment compensation benefits shall be primary and

total disability benefits shall be supplemental only, and

the sum of the two benefits shall not exceed the amount

of total disability benefits otherwise payable.

NEW YORK

Section 16(1-c) and (7)—Applies a statutory offset of a

sole surviving spouse’s compensation by up to 50 percent

of his or her social security benefits, if any. Further, pro-

vides that in computing the offsets, any increase in bene-

fits under the Social Security Act that occurs after the

date of death shall not be considered; and any such off-

set shall be equally applicable to payments under the So-

cial Security Act which are received retroactively, but

shall not apply to increases for such benefits received

retroactively.

NORTH CAROLINA

Section 97-42.1—Provides that compensation for tempor-

ary total or permanent total disability benefits may be

reduced by the amount of any unemployment insurance

benefits received for the same period.

NORTH DAKOTA

Section 65-05-08—Offsets partial or total disability bene-

fits of any worker who fails to report wages received from

any part-time or full-time employment.

Section 65-05-09.1—The aggregate benefits payable for

temporary total or permanent total disability shall be re-

duced, but not below zero, by an amount equal as nearly

as practical to one-half of the benefits payable under Title

II of the Social Security Act (42 U.S.C. 423) and will not

—

be affected by any increase or decrease in Federal bene-

fits. Any escalation of temporary or permanent total dis-

ability benefits, which would adversely affect the bureau's

right to offset workers’ compensation benefits against

social security benefits, shall not be applicable to persons

whose benefits are offset, as provided for in this chapter.

Section 65-05-09.2—Retirement offset. If a claimant is

entitled to permanent total disability benefits and social

security retirement benefits under 42 U.S.C. sections 402

and 405, the aggregate wage-loss benefits payable under

this title must be determined in accordance with this sec-

tion. The employee’s social security retirement offset must

equal forty percent of the calculated ratio of the employ-

ee’s average weekly wages, as calculated on the com-

mencement of the first, or recurrent, disability to the cur-

rent State’s average weekly wage. Any offset calculated

cannot exceed forty percent of the employee’s weekly so-

cial security retirement benefits. If a claim has been ac-

cepted on an aggregate basis and the worker is eligible

for social security benefits, the bureau’s offset must be

proportionally calculated.

OHIO

Section 4123.56—Applies an offset against temporary

total disability payments in the event of concurrent and

duplicative benefits under an employer funded nonoccupa-

tional benefits plan.

OREGON

Section 656.209—Provides for a social security offset

against permanent total disability benefits determined and

authorized by the Department in each case. Such offset ;

must not result in a reduction of benefits to an amoun'

less than the greater of the workers’ compensation bene

—9a—

fit, the total family benefit under Social Security, or 80%

of the average current earnings as determined by Social

Security.

UTAH

Section 35-1-67(4)—After the first 312 weeks of perma-

nent total disability payments have been made, future

payments will be reduced by the dollar amount of 50 per-

cent of the Social Security retirement benefits received

by the employee during the same period.

Section 35-1-68(2(A\ii)—Reduces weekly death benefits

to wholly dependent spouses after the first six-year period

following an employee’s death by 50 percent of any Fed-

eral social security death benefits.

WASHINGTON

Section 51.32—Reduces temporary and permanent total

disability benefits to allow an offset for social security

retirement benefits under the Federal OASDI, in a man-

ner similar to Section 51.32.220 below.

Section 51.32.220—Reduces temporary and permanent

total disability benefits for persons under age 65 by an

amount equal to the benefits payable under the Federal

OASDI, under certain conditions.

WISCONSIN

Section 102.44(5)—Reduces disability benefits under this

section when the employee also receives social security

disability benefits. Combined workers’ compensation and

social security disability benefits are limited to 80 per-

cent of the employee’s average current earnings. How-

ever, such benefits may not be reduced to an amount less

than the benefits payable under this chapter.

—10a—

WYOMING

Section 27-14-401(iii)—Prohibits an employee who is re-

ceiving unemployment compensation to receive disability

benefits under the workers’ compensation act.