COA holds that the governor has no authority to compensate emergency financial managers
In State of Michigan v. Blackwell, the Court of Appeals considered whether the governor has the power to contract with an emergency financial manager regarding his salary. The Court held that only the local emergency financial assistance loan board had the power to compensate the manager under the statutory scheme; the governor had no authority to do so. Accordingly, the Court affirmed the trial court’s grant of summary disposition to the plaintiffs on the manager’s breach-of-contract counterclaim. The Court also affirmed the trial court’s grant of summary disposition in favor of the plaintiffs on the defendant-manager’s fraud and unjust-enrichment counterclaims, its grant of the plaintiff’s motion to amend the complaint, and its denial for the defendant-manger’s motions for JNOV and remittitur.
The Michigan Emergency Financial Assistance Loan Board sued the emergency financial manager of the City of Highland Park for making unauthorized payments to himself from City funds. The manager counterclaimed for breach of contract, unjust enrichment, and fraud. The trial court granted the Board summary disposition on the three counterclaims. The suit proceeded to trial. Following the close of its proofs, the Board moved to amend the complaint to add the Attorney General as a plaintiff. The trial court granted the motion. The jury returned a verdict in favor of the Board and the Attorney General for $264,000. The trial court then denied for the defendant’s motions for JNOV and remittitur.
The Court of Appeals affirmed the trial court on each of these issues. As noted above, summary disposition was properly granted on the breach-of-contract claim because the governor had no authority to contract with the manager regarding his compensation. The trial court also correctly dismissed the unjust-enrichment claim because it was undisputed that there was a contract governing the manager’s compensation. The fraud claim was also properly dismissed because the Board had governmental immunity.
Regarding the JNOV motion, the manager argued that the jury’s verdict for him on the plaintiffs’ breach-of-contract claim and against him on the breach-of-fiduciary duty claim was inconsistent. The Court of Appeals disagreed and held that the jury’s verdict was consistent because, while the manager’s contract may not have prohibited his payments to himself, those payments might still be made in breach of his fiduciary duties.
The Court of Appeals also upheld the trial court’s grant of the motion to amend because the manager suffered no prejudice: the Board and the Attorney General represented the same interest and pursued the same claims under the same theories.
Lastly, the Court affirmed the denial of the motion for remittitur. The manager argued that a portion of the statutory-conversion damages were barred by the statute of limitations, because the limitations period should be determined by the amendment of the complaint to include the Attorney General. The Court rejected this argument, holding that the relation-back doctrine applied.
