Stay Motion - Our Reply

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No. 13-3790

In the United States Court of Appeals
For the Seventh Circuit

Michael W. Underwood, J oseph M. Vuich, Raymond
Scacchitti, Robert McNulty, J ohn E. Dorn, William J .
Selke, J aniece R. Archer, Dennis Mushol, Richard
Aguinaga, J ames Sandow, Catherine A. Sandow, Marie
J ohnston, and 338 other Named Plaintiffs listed in
Exhibit 1 to Complaint,
Plaintiffs-Appellants,
v.

CITY OF CHICAGO, a Municipal Corporation,
Defendant,
and
Trustees of the Policemens Annuity and Benefit Fund
of Chicago; Trustees of the Firemens Annuity and
Benefit Fund of Chicago; Trustees of the Municipal
Employees Annuity and Benefit Fund of Chicago; and
Trustees of the Laborers & Retirement Board
Employees Annuity & Benefit Fund of Chicago, et al.
Defendants.

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Dist. Court
No. 13-CV-5687

Hon. J udge J ames F. Holderman

Previous Nos. in Cook County
Circuit Court:
01 CH 4962
87 CH 10134

Removed from 2013 CH 17450
Appellants Reply
in Support of Emergency Motion for Stay/Preliminary Injunction
To stop Citys Announced Rate Increases Pending Appeal,
And to Restore the Status Quo at the filing of the Complaint

1. Contrary to the Citys Response, the situation has substantially changed from
when the District Court dismissed the complaint, based primarily on its wrong prediction that
retiree healthcare benefits would not be recognized as protected.
2. In light of Kanerva, there is now a strong presumption that retiree healthcare
benefits are protected for life at whatever level they exist, without the need for explicit promises
of lifetime protection. Second, the City does not dispute that the motion was triggered by the
Citys sudden unilateral September 15, 2014 declaration to raise rates, and gave retirees no more
than 18 days to either pick a new plan, seek out alternative coverage, or be renewed in their
current plan, but with 30-79% premium increases. This new, and second round of increases
Case: 13-3790 Document: 44 Filed: 09/30/2014 Pages: 11
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came after the Illinois Supreme Court decision. The City did not disclose last year that the
phase out was going to be done by staggered increases in rates, avoidable by substantially
lessening coverage. It is the City who set the schedule in this case; these increases could have
been announced at any time, but the City chose not to disclose the increase, and did so with an
unfairly limited time until they went into effect and requiring a very short time to respond by the
Retirees, only until October 3, 2014.
3. The Citys dispute that this is an emergency rings hollow, given the parties
positions. Citys Response at 2-3. The City sprang this on retirees without even the courtesy of
notice to retirees counsel, who only learned of it from retirees calls after receiving packages in
the mail, and had to request copies to evaluate what the City was imposing, or the time frame,
further diminishing our ability to act. The Citys plaint that we did not act fast enough is
disingenuous on its facts. It is the City who chose to launch without notice and gave only 18
days to respond.
4. The Retiree Healthcare participants do ask for scaled relief, all of which is a
return to the status quo at the filing of the Complaint. Citys Response at 3. Plaintiffs-
Appellants thus ask for the following relief:
1) hold in abeyance the recently announced 2015 increases in rates charged by the City to
retiree participants for health insurance coverage benefits;
2) roll-back the 2014 rate increases in rates charged by the City to retiree participant for
health insurance coverage benefits; and
3) to require the City to accept any formerly covered person to rejoin the City program
who has left for any reason after the 2014 rate increase was imposed.
Number one is explicitly a request to maintain the status quo. Number two is not a
request for monetary relief (it will be sufficient to restore the 2013 rates pendent lite), in light of
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Kanerva. We do not request refunds at this time, just restore the rates, going forward. Indeed,
Number two, is simply a return to the 2013 rates that were in effect at the time the Complaint
was filed; i.e., the status quo prior to the Kanerva decision. Number three is explicitly equitable
in nature, and following the Kanerva decision a return to the status quo, for retirees who were
forced off their earned benefits. If the 2014 increase and the current increases are found to be in
violation of the Constitutional protection, a retiree forced off their benefits by wrongly imposed
increases should be returned to at least the 2013 rates for the duration of this current litigation.
Retirees have been forced to leave for other coverages, because of the lessened coverage and
higher costs imposed by the City. The right to return to the Citys coverage is a return to where
there were before the unilateral increases were imposed.
5. The City asserts that there is no City obligation to subsidize retiree health care
benefits. Citys Response at 4, 6, 7-10. This mischaracterization of what the deal was, is
admittedly a contested question of fact, on which the City lost, and is bound to lose again. The
structure was not that the City subsidizes healthcare. The program was that the City acted as
an insurer, providing coverage at a fixed rate, which the pension funds either paid (Police and
Fire) or subsidized (Municipal and Laborers), begun with a deal struck by the Byrne
administration, which proceeded for years with full and formal appropriations and pre-retirement
seminars, until (to offset its liability for converting money belonging to the Pension Funds) the
City decided to renege. Appropriately the Citys Korshak claim of nonliability for healthcare
coverage was dismissed, and the State court denied the Citys motion to dismiss the retirees
counterclaim asserting lifetime entitlement to their health care retiree benefits. Doc. No. 42,
Motion, Ex. 9. J udge Greens decision is dispositive, binding, and never appealed upholding
the retirees counterclaims asserting the Citys obligation to continue lifetime retiree healthcare
coverage under the then-existing terms, (City v. Korshak, 87CH 10134, decision attached, Ex.
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9). Whether or not that holding became res judicata against the City, it certainly is entitled to
deference, supporting the Stay imposed there and requested here.
The issue was tried in a bench trial, then settled by a series of interim settlements, the last
of which expired J une 30, 2013, but all of which preserved retiree/participants rights to assert
the claims they had asserted in the litigation prior to the first settlement. Doc. No. 42, Motion,
Ex. 1, p. 11 & Ex. 2, p. 4, 7.
6. The Citys mischaracterization of the alleged oral statements purportedly by
unidentified persons, supposedly made to participants Citys Response at 9, simply ignores the
now uncontroverted affidavits of J ames McDonough and Herbert C. Kordeck. Doc. No. 42, Exs.
10 and 11. Indeed, McDonough was involved in negotiating the agreement, and is available to
testify. Mr. Kordeck, though now deceased, gave his affidavit describing his explanations of the
lifetime healthcare plans to annuitants. There is also actual testimony at the Korshak trial, which
we can provide, to the same effect. Mr. Kordecks uncontroverted Affidavit is in line with the
many Retirees statements that they were informed (before and during their employment, as well
as at pre-retirement seminars conducted by the City) that they would receive a pension annuity
and health benefits during their retirement.
7. The Citys argument that it had or asserted a reservation to terminate earned
retiree health benefits, (ignoring that Kanerva would override such a provision) introduces new
documents not in this record; indeed, never previously produced in 30 years of litigation prior to
this injunction, not even during the 1988 trial, nor in any of the litigation thereafter; and thus, in
this instance has not been subject to discovery or trial. The language is not just procedurally out
of bounds, but is also factually contested. The Citys reliance on this clause is open to its own
interpretation, and contradicts Kanerva the Retiree Seminars, and is further not supported by
inter alia, thesummary of benefits books that were actually provided to retirees.
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Nor is it likely, following Kanerva, that such reservation language would trump the
Illinois Constitutions Article XIII, 5 protections. Citys Response at p. 4, 7-10, 14 and Currier
Affidavit at 8, citing Exhibits B, C, D, and E. In the only now presented purported plan
document (outside the record to this court, or any previous court in thirty years), the cited
termination clause only says that the Plan Administrator may terminate the Plan so long as it
does not violate a collective bargaining agreement, but fails to state how a plan can be
terminated, or define under what circumstances it can be terminated. This vague provision is
limited and does not set forth the basis under which the Plan can be terminated. Moreover, it is
contested whether the plan document, never shown to participants, would override Article XIII
5s protections which at this point is dubious and highly unlikely. Indeed, an important legal
issue, even for post-8/23/1989 hires, is whether the legislature can legally create a benefit of
participation that is not protected by Article XIII, 13.
8. The Citys arguments that annuitants do not suffer irreparable harm, (Citys
Response at 12-15) is essentially refuted on its face. First, the City readily admits that a retiree
choosing to leave the Citys plan will have to show insurability by proof of good health to return
to City program. City Response at 13. The Citys defense (i.e., that it has always been so) does
not refute the irreparable harm for a person who may seek coverage outside the Citys plan by
October 3. Here, the difference is that the City is intentionally seeking to financially force
retirees out or into reduced coverage or lesser benefits. Even if the retirees stay with the City,
the Citys position is explicitly that they will not be able to change for a year.
Second, the Citys assertion, that all of this is merely routine money damages that can be
remedied after the fact, ignores the significant role that reducing retirees healthcare benefits
impacts on retirees lives. Financially forced to select the limited provider network plan
eliminates large swaths of significant hospitals and doctors; separating annuitants from their
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usual doctors and accustomed treatments, limit which network of doctors they can seek treatment
from, and the substantially increased premiums (reducing ones pension check) or out-of-pockets
(reducing spendable cash) put them in a position that far more compromises their lifestyles in
their senior years.
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Indeed, based on conversations with retirees, a retiree with an annuity of
about $3,000 a month is hardly able to live on this amount, before deductions for healthcare, let
alone the 2015 increased premiums. If the City continues to raise deductions, there is of course a
irreparable harm, if the City succeeds to wipe out the annuity or not provide health care, the
harm is catastrophic. As stated by one annuitant to counsel, Many of the retirees worked
with the understanding that at least there would be a few good benefits in exchange for all the
sacrifice. Many of us do not qualify for [M]edicare, social security, or any other assistance.
We have to pay more for the cost of living. It is impossible to keep paying more for the cost of
living and keep getting less money in the pension payment. I am tired of this. I am a contributor
who pays a substantial amount of property tax and other add-on city taxes. I worked since I was
16 since 1968 to earn my pension.
By abruptly reducing coverage and raising rates the City is placing an insurmountable
burden on those who can least afford to carry added weight, aging senior citizens on fixed
income.
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In the short time we have had to review the Citys new plans, it appears that the City claims
that it is offering four plans for non-Medicare eligible retirees to select from. However, health
services covered in the two least expensive plans appear to only be only available in 8 Illinois
counties. Never was there any indication that retirees who moved out of Illinois would be so
discriminated against. Plus it should be noted as well, that it appears that compared to the
standard plan that has been offered for the past 12 years, the two least expensive plans offer very
limited services and prohibit obtaining services at some of the Chicago's better hospitals (e.g.
Northwestern and the University of Chicago).

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Moreover, the Citys estimating that the majority of post-1989 retirees qualify for Medicare
coverage is itself a dubious proposition. First, the City must have these numbers already, as the
basis for sending out the packages to annuitants by their groupings. Nonetheless, since none of
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On the other hand, the stay requested has such small impact on the Citys budget, other
than the Citys argument, at Response 16-18,which seeks to impose half of the burden of
meeting the Citys deficit on the retirees, whose aggregate health benefits constitute something
approximating perhaps 3% of the Citys budget.
Regardless, the balance of harms evaluation leaves no doubt that it is the retirees who
suffer vastly greater harms from the Citys actions, than the City suffers from having to continue
the benefits until the merits are decided.
9. The Public Interest favors retirees. The Citys so-called independent RHBC
Commission
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essentially recognized that the City has had decades, generations, and numerous
mayoral administrations since 1987 to deal with these issues, to maintain and resolve its bond
rating and creditworthiness. Indeed, ignoring the problem has been traditional City long-range
planning. Even after the first Korshak settlement was imposed upon retirees over their
objections, with the excuse that they would be able to revive the litigation at the end of ten years
if not permanent resolution was reachedno one did anything, except fight against the retirees
efforts to revive the litigation. Five years later another ten year settlement was reached, recently
ended, and the City still refuses to even negotiate a permanent resolution.
Blaming the Citys financial woes on its retirees temerity to ask only what they were
promised and entitled to continue receiving protected by Illinois Constitution, and threatening to
reduce City services unless fixed income retirees give up their earned healthcare benefits, is

those who began prior to April 1, 1986 qualify for Medicare coverage by their City employment,
the numbers would suggest the reverse, because even those who qualify for retirement after a
mere 20 years would have only retired by 2006, and certainly those who retired after 30 years
(municipal and laborers) would exclude Medicare coverage for some City employees who are
still working.

3
Chaired by now felon and fugitive evading and/or avoiding extradition, former City
Comptroller Ahmad.
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bullying on the lowest level. Indeed, while the City may be facing a deficit, Chicagos finances
are not like Detroits, and the City does not claim it verges on bankruptcy. Even then, Article
XIII, 5 on its face does not permit a unilateral reduction or elimination of the pension benefits
of a current member of a pension system due to exigent circumstances, such as a fiscal
emergency. Madiar, Is Welching On Public Pension Promises An Option: An Analysis of the
Illinois Constitutions Pension Protection Clause., citing, People ex rel. Lyle v. City of Chicago,
360 Ill. 25, 29, 195 N.E. 451 (1935) (holding that the exigency of the Great Depression was an
insufficient basis to reduce judicial salaries in violation of the Illinois Constitution); People ex
rel. Northrup v. City Council of City of Chicago, 308 Ill. App. 3d 284, 31 N.E.2d 337, 339 (1st
Dist. 1941) (an emergency cannot be created by the facts and used as a means of construction of
a constitutional provision which has made no reference to any emergency by its terms.);
Jorgenson v. Blagojevich, 211 Ill. 2d 286, 304, 811 N.E.2d 652 (2004) (explaining that in Lyle,
the Supreme Court noted that any departure from the law is impermissible unless justification
for that departure is found within the law itself. Exigent circumstances are not enough). Indeed,
the City admits, it could simply raise revenue, rather than offering a possible list of a parade of
possible horrible alternatives. Citys Response, Holt Affidavit, 5.
CONCLUSION
Following the Kanerva decision there can be no legitimate dispute that the dismissal
below was wrong and requires reversal.
Supporting their request for Stay/Preliminary Injunction restoring the status quo, the
Retirees have sufficiently shown their entitlement to the:
(1) a likelihood of success, the Illinois Constitutions Article XIII, 5 protection of
benefits of participation in a government retirement system;
(2) an irreparable injury and inadequate remedy presented by the Citys unilateral
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change in healthcare benefits for retirees; and
(3) the public interest weighs in favor of the Retiree Healthcare Participants.
The court should grant a stay/preliminary injunction pending appeal to:
1) hold in abeyance the recently announced 2015 increases in rates charged by the City to
retiree participants for health insurance coverage benefits;
2) roll-back the 2014 rate increases in rates charged by the City to retiree participant for
health insurance coverage benefits, restoring the 2013 rates going forward; and
3) to require the City to accept (without new proof of insurability) any formerly covered
person to rejoin the City program who has left for any reason after the 2014 rate increase was
imposed.
Respectfully Submitted,
s/Clinton A. Krislov
Attorney for Plaintiffs

Clinton A. Krislov (Counsel of Record)
Kenneth T. Goldstein
KRISLOV & ASSOCIATES, LTD.
20 N. Wacker Drive, Suite 1300
Chicago, Illinois 60606
312-606-0500

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PROOF OF SERVICE

I, Clinton A. Krislov, an attorney, state that on September 30, 2014, I caused a copy of
the Attached Reply to be served on counsel of record, listed below on the attached service list, by
First Class Mail and/or ECF, by mailing with proper postage paid.

s/Clinton A. Krislov
One of Plaintiffs Attorneys

Krislov & Associates, Ltd.
20 N. Wacker Drive, Suite 1300
Chicago, IL 60606
312-606-0500

Service List

J ennifer Naber
J oseph Gagliardo
Heather Becker
J ames J . Convery
LANER, MUCHIN
515 N. State Street, 28th Floor
Phone: 312-494-5359
Fax: 312-467-9479
jnaber@lanermuchin.com
jgagliardo@lanermuchin.com
hbecker@lanermuchin.com
jconvery@lanermuchin.com
Counsel for The City of Chicago

Mr. Edward J . Burke
Mary Patricia Burns
BURKE, BURNS & PINELLI LTD.
Three First National Plaza, Suite 4300
Chicago, IL 60602
Phone: 312-541-8600
Fax: 312-541-8603
eburke@bbp-chicago.com
mburns@bbp-chicago.com
Counsel for The Firemens Annuity and Benefit
Fund of Chicago and The Municipal
Employees and Benefit Fund of Chicago

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Mr. Graham Grady
Mr. Cary Donham
SHOEFSKY & FROELICH
111 E. Wacker Drive, Suite 2800
Phone: 312-527-4000
Fax: 312-527-4011
ggrady@shefskylaw.com
cdonham@shefskylaw.com
Counsel for the Laborers' and Retirement
Board Employees' Annuity and Benefit Fund of
Chicago

Mr. David R. Kugler
DAVID R. KUGLER & ASSOCIATES, LTD.
100 N. LaSalle, Suite 501
Phone: 312-782-5430
Fax: 312-782-5450
davidkugler@comcast.net
Counsel for the Policemens Annuity and
Benefit Fund of Chicago
Richard J . Prendergast
Lionel W. Weaver
Michael T. Layden
RICHARD J . PRENDERGAST, LTD.
111 W. Washington St., Suite 1100
Phone: 312-641-0881
Fax: 312-641-3562
rprendergast@rjpltd.com
lweaverf@rjpltd.com
mlayden@rjpltd.com
David J ustin Seery
Benna Ruth Solomon
Myriam Zreczny Kasper
City of Chicago
Corporation Counsel
30 North LaSalle, Suite 800
Phone: 312-744-2825
David.Serry@cityofchicago.org

Stephen Ray Patton
City of Chicago
121 N. LaSalle, Suite 600
312-744-0220
Stephen.patton@cityofchicago.org


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