Tag Archives: fund

Detroit files for bankruptcy

When I heard about this story on NPR I wasn’t surprised.  Detroit has struggled since the closing of car factories.  Several years ago when I visited Detroit, in my opinion Detroit seemed like an empty city.  The factories were big lots of land deserted.

Yesterday (July 18th) Detroit filed for bankruptcy under Chapter 9.  Detroit is seeking to negotiate is $18.5 million debt.  Governor Snyder stated,

The fiscal realities confronting Detroit have been ignored for too long. I’m making this tough decision so the people of Detroit will have the basic services they deserve and so we can start to put Detroit on a solid financial footing that will allow it to grow and prosper in the future.

This is a difficult step, but the only viable option to address a problem that has been six decades in the making.

Consequently, two pension funds have filed a complaint against emergency manager Kevyn Orr (Gen. Ret. Sys. of the City of Detroit v. Orr., No. 13-768-CZ, Circuit Court Ingham County, Michigan) and Governor Snyder seeking to block the bankruptcy from proceeding.

The funds allege that a bankruptcy proceeding would interfere with the constitutional protection of public retiree rights.

via Detroit files for bankruptcy, the biggest US city ever to do so – ABA Journal.

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Federal funding restrictions and the First Amendment

Generally, it is well-known that under the Spending Clause of the Constitution if you want federal funding, you have to abide by the conditions/limitations imposed by the government.  For instance, you could receive a federal grant as long as you submit X reports to the government every month.  And generally, if you are opposed to these policies/conditions, you always have the option of declining the grant.

Think, for example, of the grant offered to States if they adopt the federal Affordable Care Act Medicaid extensions.  Some States have agreed to expand, while others have rejected the expansion.  The States that choose to expand will receive monetary aid, while the rejecting States will not. See the May 29, 2013 image here.

The Supreme Court has highlights a new twist.  In Agency for Int’l Devep. v. Alliance for Open Society Int’l, No. 12-10 (2013), the Supreme Court has held that in some situations these restrictions run foul of the First Amendment – Freedom of Speech.

The Alliance for Open Society case deals with a organization receiving federal funds to combat AIDS/HIV.  As a condition for this federal funding, the government required the organization to adopt policies against prostitution and sex trafficking.

Justice Roberts pointed to how the court has interpreted the First Amendment.  Pursuant to the Freedom of Speech, the government is prohibited from telling people what they must say.  See, e.g., Rumsfeld v. Forum for Academic and Inst. Rights, Inc., 547 US 47, 61.  Consequently, the Supreme Court held that the requirement violated the First Amendment.

The question for the Supreme Court then focused on whether the government can still impose that requirement as a condition for receipt of federal funding.  The Supreme Court explained,

As a general matter, if a party objects to a condition on the receipt of federal funding, its recourse is to decline the funds….

At the same time, however, we have held that the Government “‘may not deny a benefit to a person on the basis that infringes his constitutionally protected . . . freedom of speech even if he has no entitlement to that benefit.'”… In some cases, a funding condition can result in an unconstitutional burden on First Amendment rights.

This is a fine line being followed by the Supreme Court.  The Supreme Court distinguished cases where the government infringes the Freedom of Speech with cases where Congress is merely deciding not to subsidize certain actions/scenarios/circumstances.

The Supreme Court explains these different scenarios as follows:

We explained that Congress can, without offending the Constitution, selectively fund certain programs to address an issue of public concern, without funding alternative ways of addressing the same problem.  In Title X, Congress had defined the federal program to encourage only particular family planning methods.  The challenged regulations were simply “designed to ensure that the limits of the federal program are observed,” and “that public funds [are] spent for the purposes for which they were authorized…

The regulations governed only the scope of the grantee’s Title V projects, leaving it “unfettered in its other activities.”  … The TitleX grantee can continue to . . . engage in abortion advocacy; it simply is required to conduct those activities through programs that are separate and independent from the project that receives Title X funds.” … Because the regulations did not “prohibit[] the recipient from engaging in the protected conduct outside the scope of the federally funded program,” they did not run afoul of the First Amendment.

(italics and marks in original).

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ERISA and “spouse” definition

I bring to your attention Radtke v. Local 638 Health, Welfare, Eye & Dental Fund, 10-cv-4175 (MJD/JJG) (D. Minn. 4/2/2012).  In this case, the Fund terminated the enrollment of Plaintiff based on its interpretation of Minnesota law.  In summary, the Fund obtained information that Plaintiff was a transgendered individual and terminated her benefits.  The District Court disagreed with the Fund’s decision on the basis that the Fund had ignored all evidence of Minnesota’s view of Plaintiff’s sex and marital status.

When Plaintiff was born, Plaintiff’s gender was categorized as male.  Plaintiff was diagnosed with gender dysphoria, in which a patient’s psychological identification of her gender doe snot match the anatomical identification.  The Hennepin County Court granted the name change of Plaintiff to a female name.  Plaintiff also participated in a Transgender Program, and eventually underwent sex-reassignment surgery.  In 2005, Plaintiff filed a Petition for Modification of Birth Record and Issuance of Replacement Birth Certificate, whereby the birth record identified Plaintiff as female.  Later in 2005, Plaintiff married her spouse in Minnesota, and they were issued a marriage license by a Minnesota court.

The District Court determined that Plaintiff is the legal spouse of Mr. Radtke under Minnesota law and therefore an eligible dependent under the Plan.

The Plan was unambiguously written to allow all persons who are legal spouses under Minnesota law to be eligible family dependents.  The Fund’s role was to ascertain Minnesota law.  It was not the Fund’s role to impose its own definitions of gender and marriage upon its participants.  In this case, the Fund ignored all evidence of the State of Minnesota’s view of Plaintiff’s sex and marital status.  The Fund’s decision was not only wrong, under a de novo review, it was a flagrant violation of its duty under any standard of review. 

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