Court of Appeals Affirms State’s Judgment for Breach of Contract and Conversion Against City Emergency Manager

In this opinion, released for publication yesterday, the Court of Appeals affirmed a trial court judgment in favor of the State of Michigan’s Emergency Financial Assistance Loan Board against the city emergency financial manager of Highland Park.  The state sued the emergency manager alleging breach of contract, common-law conversion, statutory conversion and breach of fiduciary duty.

An impaneled jury determined the defendant made unauthorized payments to himself totaling $264,000.  The trial court entered an amended judgment in favor of the state and against defendant in the amount of $332,837.11, which included $264,000.00, attorney fees and costs.

The defendant argued that his contract and appointment had been modified by an oral agreement with former Governor Jennifer Granholm, which entitled him to compensation after his first year of service. As the Court of Appeals correctly points out, the appointment and compensation of an emergency financial manager is governed by statute and the governor’s role is to determine only whether, in the first instance, such an emergency exists and whether an emergency financial manager should be appointed.  The former governor had no authority to determine the compensation of the emergency financial manager, much less whether any contract could be orally modified after the appointment took place.

Further, citing the case I argued and won in the Michigan Supreme Court, Odom v. Wayne County, 482 Mich. 459 (2008), inter alia, the Court of Appeals also held that the defendant’s causes of action brought in an original action and by way of a counter-complaint in the state’s action were properly dismissed because the defendant had failed to plead in avoidance of governmental immunity from suit.  The Court of Appeals reasoned that the Emergency Financial Assistance Loan Board’s function was governmental in nature and to sue it a plaintiff had to prove and plead one of the narrow statutory exceptions found in the Governmental Tort Liability Act, MCL 691.1401 et seq., applied.

The opinion is important as it discusses the scope and nature of the authority and powers of an emergency financial manager and the authority of the Emergency Financial Assistance Loan Board.  It is also important due to the recent appointment of an Emergency Financial Manager for the City of Detroit.

Read the opinion here:  Michigan v. Blackwell

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