Retiree Healthcare Update

[cdillon]

Retiree Healthcare Update!!! Seventh Circuit Rules-Our case is remanded to the State Court!

Where we are now, and the need to replenish the war chest.





Update-Short Version:

As you may have heard, we obtained the Court of Appeals' reversal, vacating Judge Holderman's dismissal of the case, and ordering the case remanded back to the Cook County Circuit Court for a decision on the State law claims.

This is a terrific result, especially from Judge Easterbrook, who, in both the oral argument, previous private employer rulings and this decision, makes no bones about his own views hostile to retiree healthcare vesting.

Essentially, we are (finally!) back to where we were in 1988, after the three week trial, in which Judge Green's decision on the merits was pre-empted by the settlement between the City and the Trustees, which was approved over the participants' unanimous opposition.

We have a good chance to win this. Certainly no guarantee. But we're back where we want to be.

That said, this is the renewed beginning against a City administration determined to wipe us out.

With all appreciation for your past contributions, we need to replenish the war chest, and believe our results to date have earned our request for further contributions.



Why this is a huge victory for us:

This is NOT merely kicking the can further down the road. The proper analogy is instead that the battle now returns to the field in which we actually might win.

So here's the story. And it's one that I think I'm the only lawyer who has been in the case from the beginning .



Beginning at least by 1982, the City had been providing retiree healthcare coverage, ostensibly for life. For Police and Fire, the deal constructed in the Byrne administration was that the City provided annuitant healthcare coverage at $55 or $21 per month (NonMedicare/Medicare Qualified), the annuitant's premium was paid by the Fund, and the annuitant had to pay for spouse and dependant coverage. Municipal and Laborers had the same deal from the City, but their funds paid only $25 of the monthly premium.



The Korshak case: In 1987, the City, having been found in the Byrne administration to have used pension tax levies to earn money for itself, faced a $19 million judgment. The now-Washington administration went to the trustees and offered a back door swap. The City concocted a theory that it had been paying for retiree healthcare for a number of years under an appropriation which in some years did not explicitly mention annuitants. (For each year, that actually depended on whether the final document came from the city's budget department or the council's finance committee). So the City told the trustees that it would assert that it did not have to pay for retiree healthcare and needed to get $50 million back, but if the trustees would waive the City's liability, the City might waive challenging retiree healthcare.



Fearing potential liability for breaching their fiduciary duties to the participants, the trustees of all four funds rejected that deal.



The City then sued the trustees (City v. Korshak et al.-Marshall Korshak just happened to be the first named trustee) for a declaration that it wasn't obligated to provide annuitant healthcare, and to recover the money it had paid for their coverage. We intervened for the participants, and counterclaimed against both the City and the trustees, asserting that participants were entitled to the fixed rate subsidized plan for life, against the City and the trustees, and that no repayment should come from the Funds.



Eventually, Judge Green dismissed the city's complaint and upheld our complaint for claims essentially as we're asserting them here. So the case went to trial for three weeks in June 1988, in which there was testimony and evidence that the City had not only offered these programs, but communicated (especially for Police, by pre-retirement seminars) that this was a lifetime benefit.



After the trial concluded, but before Judge Green could decide the case, the City and Funds' trustees worked out a settlement that certified a class of 12/31/1987 retirees (the Korshak class), divided costs between them (50 or 55% for the City, a fixed dollar subsidy by the Funds) with retirees obligated for the rest of the cost. We opposed the settlement; with affidavits from the participants, but Judge Green approved the settlement over our objections; saying that we shouldn't complain because if no permanent resolution is reached after ten years, that we had the right to revive the litigation.



The Korshak Appeal and the Window Retirees RCPA federal case. We did two things then. First we appealed the settlement approval, as a denial of due process in imposing a settlement over the class' unanimous objection. Probably due to the appeal, the legislation to implement the settlement got bogged down and was not passed until August 23, 1989. Since the people who retired in the window period after 12/31/1987 but prior to the August 23, 1989 statute were similarly entitled, but not bound by the Korshak case (since they were not retirees on the key Korshak 12/31/1987 date), we filed a new case for them in federal court with the Retired Chicago Police Association and some "Window period" retirees, hoping to get a declaration that they were entitled to their healthcare for life under the 55/21 subsidized plan.



While we took the Korshak challenge all the way to the U.S. Supreme Court, (and saved you all from approx. $22 million in increased premiums during that time), the first settlement held, and the federal court knocked out the window class for collateral reasons in the RCPA case. We were left to wait and see what happened at the 1997 expiration of the first settlement.



The 1998 Revival, Rebuff, and Re-Revival Produces the 2003 Settlement. So when no "permanent" resolution had been reached by 1998, we went back to Judge Green to revive the case, and go back to where we were at the close of evidence in 1988. Judge Green essentially said that's all the permanence you get in retiree healthcare and dismissed us. We appealed to the Illinois Appellate Court, which held that "permanent" means permanent, and ordered the case revived.



While the Korshak I settlement was extended for awhile, by 2002 we were back in court, pursuing the claim, and the City settled with us and the trustees, to extend healthcare coverage for ten more years through June 30, 2013.



By 2008, we discovered that the basis upon which the City had been calculating rates had been significantly overstated each year. We pursued and got an order that imposed an annual audit and reconciliation process for each year, and which has produced about $30 million in reconciliation refunds to you to date.



The 2003 Settlement's June 30, 2013 "termination". So when the June 30, 2013 termination date of the 2003 Settlement (call it Korshak II) started looming, we approached the City, offered to negotiate a permanent resolution, but were rebuffed, with the City's May 2013 announcement that they were going to continue the benefits of the settlement through the end of 2013, then wean all retirees off the City's healthcare program by January 1, 2017.



Re-Re-Re Revival; Call it Korshak 3: So, in late 2013, we moved in the Cook County Circuit Court to revive the Korshak litigation and get the court to enter judgment for us on the merits. Judge Green having left the bench, Judge Cohen ruled for the City and Trustees/Funds' objections, and denied our motion, saying that we had to bring the claims as a new case with a new complaint.



The importance of this procedural formality, as we'd pointed out to Judge Cohen, was that this would enable the City and trustees to remove the case from state court to federal court, which the City perceives as much more conservative on these issues. (Since the City had, back in 1987, filed the Korshak case in State court, it would not be able to remove that revived case to federal court).



The new 2013 Complaint: Michael Underwood plus 300 more participants vs. the City. Sure enough, the City removed the case to federal court, where it was assigned to Judge Holderman. We moved for class certification and summary judgment that the Illinois constitution, and other bases, protect these benefits for life. The City then countered by moving to dismiss, saying that the Illinois Constitution's "pension protection clause" only protects annuities, not other benefits. We pushed for a ruling before year end.



Judge Holderman's dismissal. Judge Holderman then ignored our motions, instead ruled for the City, declaring that healthcare benefits were not protected by the Illinois Constitution.



We appealed that ruling the same day, asking as well for injunctions against the City from raising healthcare rates in 2014, and noting that the issue was before the Illinois Supreme Court dealing with State retirees, although in a slightly different form.



Rather than proceed, the federal appeals court stayed our case to await the Illinois Supreme Court's ruling on retiree healthcare.



We then put together a "friend of the court" brief on behalf of the City retirees, pointing out that the Constitutional provision protects "benefits of participation" in a retirement system, not limited to annuity payments. The City filed a responding brief, and on July 3, 2014, the Illinois Supreme Court issued its decision in Kanerva v. Weems, declaring, as we'd asked, that healthcare benefits are benefits protected by the Illinois Constitution's Article XIII, Section 5.



So, in our briefs to the federal appeals court, we argued that the basis upon which Judge Holderman's dismissal rested was simply wrong, and asked for reversal. The City responded that there were lots of other reasons we should lose, and the court should just affirm Judge Holderman's dismissal as correct, although on the wrong basis.



When the case came up for arguments on December 10, 2014, Judge Easterbrook (whose expressed view in another case is against vesting of healthcare coverage) attacked us, as did Judge Sykes, both of them attacking our claim, while Judge Hamilton seemed more interested in whether the case belonged in federal court at all, since it was a state law issue. Per the court's directions, we briefed additional issues after the arguments, with our view that the court should either certify the legal question to the Illinois Supreme Court, or just remand the case to the Cook County Circuit Court, where we stood a decent chance of prevailing (remember, we had decisions from that court that our claims are good claims). The city, of course, told the court that it should just affirm the dismissal and end the matter.



There was no way that Judges Easterbrook or Sykes were going to rule for us on the merits, so getting us back to the State Courts, either the Illinois Supreme Court or the Cook County Circuit Court, gives us the best shot at winning, because it puts us back to the point we were at, in 1988, with our claims upheld, and on the verge of a decision on the merits, which seemed likely to be favorable.



So this is where we are. While it is likely to be a more favorable forum than the federal district court was, the battle is just beginning, and the City has shown its determination to fight this to the end.



Accordingly, and especially since you've all recently received the January-June 2013 reconciliation refunds that we produced for you, we need to replenish the warchest. Your contributions are voluntary, and really appreciated, and we think that our work to date justifies your continued support.





Sincerely,



Clint



p.s. As always, we're glad to answer any questions you may have.



Clint Krislov

Krislov & Associates, Ltd.

Civic Opera Building, Suite 1300

20 North Wacker Drive

Chicago, Illinois 60606

Telephone: 312-606-0500

Facsimile: 312-739-1098

Website: www.krislovlaw.com

Email: clint@krislovlaw.com