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In March, 2012, we described how a citizens' group, Stand Up
for Democracy, opposed Michigan's emergency financial manager
law, officially entitled "Local Government and School District
Fiscal Accountability Act, MCL §§ 141.1501, et
seq. (the "Act"), by filing petitions to place the
issue of the Act's repeal on the state ballot in November. The
Board of State Canvassers reached a stalemate with respect to a
motion to certify the petition, with the two Republican members of
the Board believing that a question arose as to the size of the
words of the petition heading, and the two Democrat members
believing that the petition was in total compliance with the
requirements for certification. Based on this stalemate, the Board
did not approve the motion to certify the petition.
Thereafter, Stand Up for Democracy filed a complaint for
mandamus in the Michigan Court of Appeals, requesting that the
court order certification of the petition. The Michigan Court of
Appeals granted the writ of mandamus based on substantial
compliance, thus compelling inclusion of the referendum on the
ballot. However, an organization calling itself the Citizens for
Fiscal Responsibility challenged certification of the petitions and
the signatures contained therein, alleging that (i) the form of the
petition failed to comply with the type-size requirement of MCL
168.482(2), and (ii) the doctrine of substantial compliance is
inapplicable to cure defects in petitions.
On August 3, 2012, the Michigan Supreme Court ruled in favor of
certification of the petition, thus suspending the Act until
registered voters of the State of Michigan decide whether to
approve the Act on November 6, 2012. Stand Up for Democracy v.
Secretary of State, __ N.W.2d __, 2012 WL 3155687 (Mich. Aug.
3, 2012). In sum, the Michigan Supreme Court held that although the
doctrine of substantial compliance could not cure a defect in the
petition as the Michigan Court of Appeals had ruled, the petition
was nonetheless in total compliance because the "type" of
the petition heading measured the requisite 14 points.
The decision in Stand Up for Democracy has now
suspended the Act until the election in November. As a result,
current emergency financial managers and perhaps even a financial
consent agreement between the State of Michigan and the City of
Detroit are in limbo. In the meantime, it appears that the Governor
and the State Treasurer are taking the position that a former
emergency financial manager statute, MCL §§ 141.1201,
et seq., is being revived as a stop-gap measure until the
November election. Although the former statute contemplates the
appointment of emergency financial managers, it does so without
many of the broad powers included in the current Act, such as the
ability to modify collective bargaining agreements and general
contracts. It is unclear, however, how the former statute is being
resurrected in such short order, as it was repealed when the
current Act went into effect. Therefore, additional challenges to
the authority of emergency financial managers may arise in the
weeks to come.
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