Adair v. State of Michigan

651 N.W.2d 393

250 Mich. App. 691

Daniel ADAIR, et al., Plaintiffs, v. STATE OF MICHIGAN, Department of Education, Department of Management and Budget and Treasurer of the State of Michigan, Defendants.

Docket No. 230858.

Court of Appeals of Michigan.

Submitted October 8, 2001, at Lansing.

Decided April 23, 2002, at 9:00 a.m.

Released for Publication July 30, 2002.

Pollard & Albertson, P.C. (by Dennis R. Pollard and Richard E. Kroopnick), Bloomfield Hills, for the plaintiffs.

Jennifer M. Granholm, Attorney General, Thomas L. Casey, Solicitor General, and Jane O. Wilensky, Edith C. Harsh, Elaine D. Fischhoff, Deborah Anne Devine, Gary L. Hicks, Matthew H. Rick, and Darrin F. Fowler, Assistant Attorneys General, for the defendants.

Before: HOLBROOK, JR., P.J., and SAAD and TALBOT, JJ.

TALBOT, J.

Plaintiffs, who have commenced this original action under Const. 1963, art. 9, § 32, MCR 2.605, and MCR 7.216(A)(7), seek a declaratory judgment that the state has failed to honor its funding obligations under the second sentence of Const. 1963, art. 9, § 29 with regard to certain activities and services that state law obligates plaintiff school districts to provide. Defendants have moved for summary disposition with regard to all counts. We hold that those plaintiff districts who participated in the Durant I litigation (hereafter explained), and the taxpayer plaintiffs who currently represent them, are barred from prosecuting their claims, with one exception, by the doctrine of res judicata. We further hold that the remaining plaintiff districts, all of whom executed a statutory release pursuant to M.C.L. § 388.1611f, and the taxpayer plaintiffs representing them, are barred from pursuing these same claims by the principle of release. Finally, with regard to plaintiffs' record-keeping claim set forth in ¶ 22K of count III of their second amended complaint, we hold that neither M.C.L. § 388.1752 nor Executive Order No.2000-6, promulgated on July 28, 2000, as Executive Order No. 2000-9, effective September 28, 2000, mandates a new activity or increases the level of a state-mandated activity within the meaning of art. 9, § 29. Accordingly, we grant summary disposition in favor of the defendants and dismiss plaintiffs' complaint in its entirety with prejudice.

I HEADLEE AMENDMENT

Michigan voters amended the constitution of this state by ratifying article 9, §§ 25-34 of the Constitution of 1963 pursuant to an initiative petition at the general election of November 7, 1978. Durant v. Michigan (On Remand), 238 Mich.App. 185, 193, 605 N.W.2d 66 (1999). These added sections are popularly and collectively known as the "Headlee Amendment," named after the amendment's original proponent and taxpayers' rights crusader, Richard Headlee. Voters intended the Headlee Amendment to limit legislative expansion of requirements placed on local government spending, to limit excessive government spending, and to lower taxes at both the state and local levels. Airlines Parking, Inc. v. Wayne Co., 452 Mich. 527, 532, 550 N.W.2d 490 (1996); Mahaffey v. Attorney General, 222 Mich.App. 325, 341, 564 N.W.2d 104 (1997). Essentially, those who ratified the Headlee Amendment sought to prevent the Legislature from enacting ever-increasing state laws and regulations that create financial burdens on local units of government, unaccompanied by any financial support to alleviate those burdens. Durant v. Dep't of Ed. (On Remand), 129 Mich.App. 517, 525, 342 N.W.2d 591 (1983), aff'd in part and rev'd in part 424 Mich. 364, 381 N.W.2d 662 (1985).

The Headlee Amendment provision at issue in this case, art. 9, § 29, provides:

The state is hereby prohibited from reducing the state financed proportion of the necessary costs of any existing activity or service required of units of Local Government by state law. A new activity or service or an increase in the level of any activity or service beyond that required by existing law shall not be required by the legislature or any state agency of units of Local Government, unless a state appropriation is made and disbursed to pay the unit of Local Government for any necessary increased costs. The provision of this section shall not apply to costs incurred pursuant to Article VI, Section 18.

The first sentence of art. 9, § 29 is commonly referred to as the "Maintenance-of-Support-Clause" (MOS clause). Durant v. Michigan, 456 Mich. 175, 181, 566 N.W.2d 272 (1997). The second sentence is a Prohibition-of-Unfunded-Mandates Clause (POUM clause). Wayne Co. Chief Executive v. Governor, 230 Mich.App. 258, 265-266, 583 N.W.2d 512 (1998). The parameters of art. 9, § 29 have been cogently articulated as follows:

"The first sentence of this provision prohibits reduction of the state proportion of necessary costs with respect to the continuation of state-mandated activities or services. The second sentence requires the state to fund any additional necessary costs of newly mandated activities or services and increases in the level of such activities or services from the 1978 base year. This language does not guarantee that local units' spending levels will not increase from the 1978 level. Rather, the Headlee Amendment only guarantees that the state will not reduce its proportion of the necessary costs of existing activities or services, and that the state will pay entirely for necessary costs when it mandates new activities or services or to the extent the state increases the level of an existing activity or service. Increased levels of local spending attributable to other causes, e.g., inflation or the greater utilization of a program by the public, are not addressed by this provision of the Headlee Amendment." [Judicial Attorneys Ass'n v. Michigan, 460 Mich. 590, 595, 597 N.W.2d 113 (1999), quoting Mayor of Detroit v. Michigan, 228 Mich.App. 386, 396-397, 579 N.W.2d 378 (1998), aff'd in part and vacated in part 460 Mich. 590, 597 N.W.2d 113 (1999) (emphasis added).]

This action is brought pursuant to the POUM clause.

DURANT I LITIGATION

Less than two years after the ratification of the Headlee Amendment, seven taxpayers residing in the Fitzgerald School District filed suit on May 7, 1980, on behalf of themselves and the Fitzgerald School District, under § 32 of the Headlee Amendment. Durant, supra, 456 Mich. at 184, 566 N.W.2d 272; Durant, supra, 424 Mich. at 379, 381 N.W.2d 662. The suit named the Department of Education, the Department of Management and Budget, and the State Treasurer as the defendants. The plaintiffs claimed a violation of the MOS clause of art. 9, § 29, alleging that the state was violating its duty to maintain the state-financed proportion of the necessary costs of activities that state law ordered the plaintiff school district to perform. Durant, supra, 456 Mich. at 184, 566 N.W.2d 272. This suit became popularly known as the Durant I litigation. During the seventeen years that the Durant I litigation remained active, this Court consolidated the original Durant suit with thirty-four additional suits brought by numerous taxpayers and local and intermediate school districts, all of which alleged violations of art. 9, § 29. Durant, supra, 456 Mich. at 186, 188,566 N.W.2d 272. Although the vast majority of the claims advanced in these additional suits were premised on a violation of the MOS clause, some plaintiffs also advanced claims premised on a violation of the POUM clause.¹ In 1997, our Supreme Court resolved the Durant I litigation in favor of the plaintiffs by granting a declaratory judgment and awarding monetary damages to the plaintiff school districts for the full amount of underfunding experienced by each plaintiff district during the 1991-92, 1992-93, and 1993-94 school fiscal years resulting from the state's violation of art. 9, § 29. Durant, supra, 456 Mich. at 182, 206,566 N.W.2d 272.

POST-DURANT RELEASES

Following this award of monetary relief, our Legislature enacted, and our Governor signed, legislation appropriating a certain amount of funds to be paid to those local and intermediate school districts that were not plaintiffs in the Durant I litigation in "settlement and compromise of any claim or claims that were or could have been asserted by these districts and intermediate districts" in the Durant I litigation. MCL 388.1611f(1), (2), (4). The receipt of funds appropriated under this legislation was conditioned on the local and intermediate school districts providing the State Treasurer with a board resolution by March 2, 1998,

waiving any right or interest the district or intermediate district has or may have in any claim or litigation based on or arising out of any claim or potential claim through September 30, 1997 that is or was similar to the claims asserted by the plaintiffs in the consolidated cases known as Durant v. State of Michigan." [MCL 388.1611f(1), (2).]

The text of this resolution was established by statute as follows:

"Whereas, the board of _______________ (name of district or) intermediate district) desires to settle and compromise, in their entirety, any claim or claims that the district (or intermediate district) has or had for violations of section 29 of article IX of the state constitution of 1963, which claim or claims are or were similar to the claims asserted by the plaintiffs in the consolidated cases known as Durant v. State of Michigan, Michigan supreme court docket no. 104458-104492[, 456 Mich. 175, 566 N.W.2d 272].

Whereas, the district (or intermediate district) agrees to settle and compromise these claims for the consideration described in sections 11f and 11g of the state school aid act of 1979, 1979 PA 94, M.C.L. § 388.1611f and 388.1611g, and in the amount specified for the district (or intermediate district) in section 11h of the state school aid act of 1979, 1979 PA 94, M.C.L. § 388.1611h.

Whereas, the board of _______________ (name of district or intermediate district) is authorized to adopt this resolution.

Now, therefore, be it

...