Dan O’Brien of Woods Oviatt Gilman in Rochester, New York gave oral arguments for the plaintiffs in the Yu v. City of Ann Arbor case on Aug. 27, 2014. Here he was providing the court with supplemental documentation on proof of service for the three motions in front of judge Donald Shelton, on Shelton’s last motion day before retirement. The issue of proper service was not explicitly argued on Aug. 27 and appeared resolved in favor of the idea that service had been proper. (Photos by the writer.)

The case involves a claim of unconstitutional takings – inverse condemnation. Plaintiffs in the case, Yu v. City of Ann Arbor, are three Ann Arbor residents who had their footing drains disconnected under the city FDD program.

On his last motion day before retirement, Shelton chose to deny a motion to disqualify the city attorney’s office in its representation of the city. That motion was based on the plaintiffs’ contention that testimony on non-privileged matters would be required of assistant city attorney Abigail Elias.

Shelton’s ruling to deny the motion to disqualify Elias came only after Elias answered what Shelton portrayed as the key question: Would the city’s defense of the lawsuit depend on a contention that the ordinance was enacted based on the opinion of counsel? Elias indicated that she did not think it was relevant, but Shelton insisted on an answer, telling her that if the city wanted to use that as part of its defense, “you’re out of here.” So Elias told Shelton the city would not be using that as part of its defense. Shelton later made clear that such a defense would not be allowed.

In making his ruling on the disqualification issue, Shelton appeared to indicate that he did not think relevant factors in the case included the city’s stated rationale for enacting the FDD ordinance – on grounds of public safety health and welfare – or the efficacy of the ordinance in reducing sanitary sewer overflows and backups. The case was not about whether the FDD ordinance was a good idea, he said, but rather about whether it was a lawful idea.

Shelton also denied a motion to reassign the case away from judge Timothy Connors – who will be taking over all of Shelton’s civil cases after Shelton’s last day as judge on Aug. 29. On that motion, Shelton pointed out that he did not have the power to grant it. He declined to say anything about what he thought regarding the merits of the motion, and indicated that such a motion should go through the regular disqualification process. That entails making a motion in front of the judge to be disqualified – and if the judge declines to disqualify himself, possibly appealing to the chief judge of the circuit court, who is David Swartz.

However, Shelton delayed ruling on a third motion, on sanctions against the city’s attorneys – for making statements in a brief in support of summary disposition that plaintiffs contend did not have a basis well-grounded in fact. Shelton questioned assistant city attorney Abigail Elias closely on the matter, and appeared to indicate some agreement with plaintiffs’ contention that the city had, in its brief filed with the court, mischaracterized the plaintiffs’ position. And during back-and-forth with Shelton, Elias herself stopped just short of admitting that her choice of the word “concede” was a misrepresentation of the plaintiffs’ legal position – something she described as possibly an overstatement in the course of zealous representation of her client.

Shelton indicated that the motion on sanctions – in connection with the brief on summary disposition – should be heard at the same time the motion on summary disposition is heard. So Shelton indicated he would be adjourning that motion until Sept. 18. That hearing on summary disposition is scheduled before Connors.

No substantive matters have yet been decided in the case, which the city first removed to federal court. However, the plaintiffs moved for remand from the federal court back to the circuit court – a motion that was granted by judge Avern Cohn in late May. When the case returned to the circuit court, plaintiffs filed a motion for a preliminary injunction, which was heard and denied by Shelton in early July. The city had filed a motion for summary disposition on June 9, which was originally scheduled for July 30. It was subsequently rescheduled by the city for Aug. 13, and then shifted by the city again to Sept. 18 – which is after Shelton’s scheduled retirement.

When Shelton ruled on the motions after listening to each side, he prefaced the ruling with some general commentary reflecting his 24 years of experience as a judge, which were coming to an end. That commentary highlighted the idea of “winnowing” out the extraneous issues introduced by lawyers on both sides to focus on what a case was actually about.

For the disqualification issue, Shelton wanted to know two things: What specific non-privileged testimony, relevant to the central issue of the case, would be required from Elias? Would the city use as part of its defense the claim that the ordinance had been enacted based upon the opinion of legal counsel? For the judge reassignment issue, the question Shelton identified and answered himself was: Do I have the power to decide this motion? And for the motion on sanctions, Shelton indicated that the central question was: When and in what context should the motion be decided?

A more detailed report of the proceedings is provided below. Dan O’Brien of Woods Oviatt Gilman in Rochester, New York was asked by Shelton to argue all motions in one speaking turn, which he did in the following order: (1) motion to disqualify; (2) motion to reassign away from Connors; and (3) motion for sanctions.

Motion on Disqualification: Background

The motion filed by plaintiffs would disqualify assistant city attorney Abigail Elias, and thereby the city attorney’s office, from representing the city in this lawsuit. [Aug. 20, 2014 Yu v. City of Ann Arbor brief in support of disqualification]

The brief arguing for disqualification cites an email sent by plaintiffs’ counsel in early February notifying Elias that she would likely be called as a witness in the case:

I am advising that your non-privileged testimony and evidence will likely be required in connection with litigation over the FDDP, which is now in preparation for filing. The case will include a claim for inverse condemnation. You are a necessary witness on both liability and relief, which probably comes as no surprise.

The plaintiffs argued partly on grounds that they need to depose Elias as a reason to disqualify her as the city’s representation.

In its brief in opposition to the motion on disqualification, the city contends that there is no testimony that Elias is in a unique position to provide other than testimony that would be subject to the attorney-client privilege. [Aug. 22, 2014 Yu v. City of Ann Arbor brief opposing disqualification]

The city also contends that disqualification of its city attorneys would be prejudicial to the city, because “Ms. Elias has been involved with the FDD program since its inception 13 years ago. Her familiarity with and knowledge of the issues in this case from those years cannot be replicated easily or quickly.”

Motion on Disqualification: Oral Arguments

Dan O’Brien led off oral arguments by asking which of the three motions Shelton wanted to hear first. Shelton set the tone of the proceedings by saying: “You can pick any one you want, but you’re going to talk about all three, and I’m only going to listen to you once.”

Judge Donald Shelton.

O’Brien began with the motion to disqualify Elias as the city’s legal counsel. He rejected the idea – expressed in the city’s response brief – that the motion was a tactic or a strategic move to disqualify opposing counsel. O’Brien indicated there was no personal issue, saying he was from New York State, so he didn’t know the lawyers in Ann Arbor and had no personal opinion one way or another. The motion was based on a review of the situation and the “long and very intense involvement” by Elias in the issue.

At that point Shelton interrupted O’Brien: “Counsel, let me ask you … What specifically do you intend to use … in the way of testimony from Ms. Elias?” When O’Brien indicated he would provide some examples, Shelton’s rejoinder was sharp: “I don’t want examples; I want the whole litany.”

O’Brien started with the origins of the FDD ordinance. It was known that a consultant was hired by the city, and that the consultant’s recommendation that the most expedient and practical way to resolve the sanitary sewer overflows and backups was to disconnect the footing drains from target area houses. It was also known that the consultant had significant reservations about the legality of going onto private property and installing equipment and disconnecting the footing drains. In the consultant’s report there were several places where those caveats and concerns are addressed. O’Brien continued, saying that within 42 days of the report’s issuance, the ordinance was approved.

So O’Brien concluded it is a “fair topic” of examination: What did Elias do between delivery of that report and the passage of the ordinance – with respect to her contacts and discussions with representatives of the consultant or other third parties who were not employees of the city? Shelton’s one-word question: “Who?” O’Brien named the consultant, CDMI. Shelton followed up: “Who else? … What is the non-privileged relevance of her testimony?” O’Brien told Shelton that the non-privileged relevance was this: If the legality of going onto private property was a concern that had been raised, and it had not been ignored, then the city had possibly come up with some kind of a legal framework or opinion supporting the constitutionality and legality of the ordinance – but if that were available, plaintiffs had not seen it.

Shelton shot back: “So what? What if 10 lawyers said, ‘I think this may be unlawful.’” The issue, Shelton continued, is whether the ordinance is, in fact, unlawful or not. Shelton said he didn’t care what 10 lawyers thought about whether the ordinance was lawful or not – that was the issue to be decided in the lawsuit. It would not be decided by taking a poll, Shelton said.

O’Brien forged ahead, saying that based on the motions that the city has made thus far, it is defending the ordinance on the basis of its ability to serve a public need – to provide for public safety, health and welfare. So O’Brien believed that those issues were relevant in terms of the discussions that took place between the time the report was issued by the consultant and the enactment of the ordinance.

Shelton was skeptical: “Of what relevance can they be?” O’Brien noted that he hadn’t raised that issue, but rather the city had. Shelton dismissed that idea as “fishing.” In the course of the continued back-and-forth, Shelton said he did not understand what Elias had to do with anything other than the fact that she was the lawyer and she was advising the city and the city was paying her to do that.

O’Brien then brought up a memorandum Elias wrote earlier this year – not prepared for her colleagues at the city or as advice to the city council. Instead, Elias had prepared that and read it and distributed it to a citizens advisory committee. That was a group formed by the city to review the efficacy and acceptance in the community of the FDD program and to work in conjunction with the city to prepare a second report on the efficacy of the FDD program. Elias had gone to the citizens advisory committee voluntarily, O’Brien said, and she had extensive discussions with the committee about legal positions. But Shelton asked: “What does that have to do with the guts of this lawsuit?”

O’Brien argued that the city had raised the issue of how effective the ordinance has been. But Shelton responded by saying the city could maintain that was an issue, but he didn’t see it as a relevant issue in this case – no matter how the city characterizes it. “This is not a case about whether this is a good or bad idea. The issue is whether it is a lawful idea or not,” Shelton stated.

When O’Brien made a gambit to get the city to agree to some stipulations as to what the relevant issues would be, Shelton stated: “I’m not asking you or them to stipulate to a non-issue. The court will decide what they are, and I’m telling you that whether it’s a good idea or bad idea is not an issue in this case.”

O’Brien expressed some apparent frustration by saying he was simply trying to deal with issues the city had raised, adding that he appreciated Shelton’s “guidance” on what is relevant and what isn’t. Shelton replied: “I have a couple of more days to issue more than guidance!” Shelton emphasized the point that the court will decide the relevant issues: “Ultimately the court has to decide what the legal issue is and I am telling you … that whether this program was a good or bad idea is not a legal issue that is going to be decided by this court. The court is going to decide whether it is lawful or not.”

O’Brien asked if Shelton was saying that the plaintiffs could not take Elias’ deposition. But Shelton told O’Brien to go on to his next motion.

When Elias took her turn at the podium, she told Shelton that she would be happy to address the motion on her disqualification if he wanted her to do that. Shelton told her: “You probably need to do that!” Elias began by reviewing the arguments in the city’s brief, saying that the plaintiffs had not identified anything on which she would need to testify that is not privileged or a legal issue. She didn’t get very far before Shelton interrupted. He wanted to know: Is the city going to defend the case at all based on the idea that the city had enacted the ordinance in reliance upon advice of counsel?

Elias at first did not respond to the question, hazarding an attempt at humor by asking if Shelton meant legal counsel or the city council. When Shelton laughed and indicated he meant the non-elected, legal counsel, Elias began to advance an argument that she didn’t think reliance on advice of counsel was relevant. Shelton interrupted, saying he agreed it wasn’t relevant, but asked: “Are you going to defend on that basis?” When Elias responded, “I hadn’t gotten to that point …,” Shelton cut her off: “You’ve got to get there right now. Fish or cut bait. Because if you’re going to rely on it at all, you’re out of here.” Elias confirmed the city would not be relying on that.

Elias then addressed some of the characterizations by the plaintiffs of engineering reports. The engineers’ statements were basically that they were engineers and as such did not make legal decisions so it would need to go through the city attorney’s office. Shelton gave Elias treatment similar to what O’Brien had received on the question of what people thought about the legality of the ordinance: “… No denigration to the engineers, or your office, and I don’t think I have ever quoted George Bush, but you are not the ‘deciders’ here.” When Elias started to continue with her arguments, Shelton told her she’d answered the one question he’d had, and invited her to address the other motions.

Motion on Reassignment: Background

The motion to reassign was based on the fact that attorney Mark Koroi is co-counsel for the plaintiffs. According to the brief in support of the motion to reassign the case away from Connors, Koroi has filed four Judicial Tenure Commission grievances against Connors, two of which have been upheld. Koroi’s brief also notes that he has engaged in “vigorous public advocacy against political candidacies of both Timothy Connors and his wife.”

The plaintiff’s brief notes that Michigan court rules stipulate that it is the challenged judge who must make an initial ruling on a motion for disqualification, so the motion to reassign is a proactive measure to eliminate the need to file a motion in front of Connors, which would ask that Connors disqualify himself. [Aug. 20, 2014 Yu v. City of Ann Arbor brief on reassignment]

The city’s response brief argues that the motion is actually a motion for disqualification, and as such the motion is premature and should be heard by Connors. The city also argues explicitly against the idea that Connors should be disqualified, noting that if political speech critical of a judge were adequate grounds for disqualification, then an attorney could engage in such speech specifically so that the attorney would never have to appear in front of that judge.

The city also argues that the brief in support of the motion to reassign doesn’t provide any evidence that Connors is aware of Koroi’s political advocacy or that Connors is actually biased against Koroi. [Aug. 22, 2014 Yu v. City of Ann Arbor response brief on reassignment]

Motion on Reassignment: Oral Arguments

O’Brien led off by saying that the motion was to reassign rather than a motion to disqualify because there is an old law school proverb: A live person has no heirs. “You are still on the bench and you are still on this case,” O’Brien told Shelton. O’Brien indicated that he understood that typically the way cases are reassigned is by lot. Shelton then disabused O’Brien of that notion by explaining that when a judge leaves the bench – as Shelton will do on Aug. 29 – the cases are reassigned by the chief judge as a “bulk reassignment.”

Shelton continued by describing a situation in which assignment could be by lot: If the motion were for Shelton to disqualify himself, and he granted that motion, then it would be circulated to all the other civil judges to be drawn by lot. In that explanation, Shelton injected some humor based on wordplay with the phrase “civil judges,” saying that he meant civil judges “with a capital C” – that is, judges who hear civil cases, not judges who behave in a civil manner. For his criminal cases, a visiting judge is going to handle the criminal cases currently assigned to him, Shelton explained – until the newly elected judge takes office.

Judge Donald Shelton.

But the civil cases are going to be assigned to judge Timothy Connors, and Connors would be keeping them, because the newly elected judge [either Pat Conlin or Veronique Liem] won’t have a civil case load initially. O’Brien responded by saying that he had no personal issue or animus, and wouldn’t know Connors if he bumped into him in the hallway. But based on Koroi’s “previous entanglements” with Connors, O’Brien thought the situation warranted reassignment to some other judge instead of Connors.

Shelton responded by saying he was simply going to rule on the motion, adding that any motion to disqualify would have to be made after it was reassigned to Connors. Shelton described the motion in front of him as a way to “jump ahead” of that process and reassign it to someone else. “I have no power to do that,” Shelton said. That would qualify as “extraordinary relief,” he said, and only the chief judge could do that. If plaintiffs did file a motion with the chief judge, Shelton ventured that he [judge David Swartz] would probably tell the plaintiffs to go through the disqualification process. So Shelton told O’Brien to move on to the next motion.

When Elias’ turn came to make arguments, she ventured that she did not need to address the motion on reassignment, which Shelton confirmed.

Motion for Sanctions: Background

A third motion heard on Aug. 27 was for sanctions on the city attorney’s office for filing papers that are “neither well-grounded in fact nor warranted by existing law or a good faith argument for the extension, modification or reversal of existing law.” The papers in question were the city’s brief in support of its motion for summary disposition. [June 9, 2014 Yu v. City of Ann Arbor brief on summary disposition]

Included in the plaintiffs’ claims asking for sanctions to be imposed is the contention that some of the key arguments in the city’s motion for summary judgment are frivolous. Plaintiffs assert that the city’s argument that the plaintiffs’ complaint is time-barred is frivolous. The plaintiffs then argue that one of the city’s positions – that the plaintiffs’ federal claims should be dismissed – is crucially based on the city’s contention that the claims are time-barred.

The plaintiffs’ brief in support of sanctions also asserts that the city has mischaracterized the plaintiffs’ position, highlighting instances where the city states that the plaintiffs have “recognized” or “conceded” some key aspect of the city’s legal position. The plaintiffs argue that the plaintiffs have not recognized or conceded the things that the city claims in its brief. [Aug. 20, 2014 Yu v. City of Ann Arbor brief on sanctions]

For example, the city claims in its brief that [emphasis added]:

Plaintiffs recognize that they own the sump pumps they installed and that the sump pumps and footing drain system operate as an integral part of their houses; in other words that neither the city nor a third party owns anything located in their homes, occupies their properties, or has otherwise taken their properties.

The claim is presented in the “introduction” section of the city’s brief, a section of pleadings where recitations of uncontroversial fact are typically presented. The question of pump ownership and occupation of residents’ homes by the third party are central points of dispute in the case. The plaintiffs’ brief in support of sanctions argues that the citations by the city to the plaintiffs’ pleadings – in support of the claim of “recognition” – do not in fact support a claim of “recognition.”

Another claim by the city – presented in the “background facts” portion of its brief in support of summary disposition – is that [emphasis added]:

“Plaintiffs concede that Sec. 1.1 [the footing drain disconnection ordinance] was adopted by the City to address the public health, safety and welfare issues of sanitary sewer back-ups in basements and sanitary overflows.”

The portion of the plaintiffs’ brief cited by the city in making that characterization does not, according to the plaintiffs, provide any support for the city’s contention that a concession has been made. And elsewhere in the plaintiffs’ brief, they state [emphasis added]:

Upon information and belief, the Ordinance was not enacted in response to emergency conditions or some other imminent threat to public health, safety or welfare. Rather, the Ordinance was enacted by the City in order to facilitate a solution to long-standing and self-created conditions in the least expensive and/or most expedient way possible.

Based on the city’s descriptions of the plaintiffs’ statements, the plaintiffs contend that the city is distorting the record. From the plaintiffs’ brief in support of sanctions:

This level of mischaracterization goes beyond zealous advocacy: it is misleading and is unfair to both the Court and to the Plaintiffs, whose lawyers are forced to ferret out mischaracterizations and distortions of the record when they should be responding to a “fair presentation of the issues” by opposing counsel.

The city’s response to the plaintiffs’ brief in support of sanctions deals with the part involving plaintiffs’ frivolous legal arguments by arguing for the merit of those arguments.

In its brief opposing sanctions, the city responds to the plaintiffs’ contention that their statements have been misrepresented to the court by insisting that the city’s characterization is based on the plaintiffs’ recitation of facts – and an attachment to the complaint of the city’s written “homeowner’s package” for sump pump installees.

The city’s position appears to be that whatever factual claims and characterizations made in the “homeowner’s package” were recognized and represented to the court by the plaintiffs as true – by dint of the attachment of the “homeowner’s package” to the plaintiffs’ complaint as an exhibit. So the city is not analyzing the plaintiffs’ exhibit merely as a representation by the plaintiffs as to what the city itself claims to be true (via public documents produced by the city), but also what the plaintiffs are recognizing to be true. [Aug. 22, 2014 Yu v. City of Ann Arbor response brief on sanctions]

The city blames any misunderstanding on the plaintiffs, arguing that the plaintiffs wrote poorly worded filings. From the city’s response brief, opposing sanctions:

[T]he City has not mischaracterized Plaintiffs’ Complaint, but has simply analyzed it as written by Plaintiffs. Plaintiffs’ dissatisfaction with the City’s reading of their Complaint arises from Plaintiffs’ own failure to draft a well-pleaded Complaint.

Motion for Sanctions: Oral Arguments

O’Brien began by saying that it was not something he was doing lightly: “I would not bring such a motion if I did not feel that a line had been crossed here.” Addressing an issue raised in the city’s response brief, O’Brien said the city contended the motion was premature, even while indicating that they could not find a case or a rule showing when such motions should be considered.

Plaintiffs’ counsel, Dan O’Brien.

O’Brien told Shelton that the plaintiffs’ brief had cited authority – a Michigan Supreme Court case – which makes clear that the rules governing the imposition of sanctions apply to all motions, affidavits and other papers filed with the court. As a result, there was no impediment to the court to consider the motion for sanctions and to impose them if it finds the court rule has been violated.

O’Brien identified three arguments that the plaintiffs have made. One was that there have been mischaracterizations in the papers filed by the city – “real mischaracterizations and distortions of the positions” that the plaintiffs had described in their complaint.

The city had contended in their brief in support of summary disposition that plaintiffs had “permitted” or “invited” the invasion or occupation complained about in their complaint. O’Brien said that all of the allegations in the plaintiffs’ complaint directly contradict the notion that they “invited” or “permitted” the agents of the city to come in and do work. The fact was that the activity was involuntary. For example, O’Brien said, the complaint talks about “enforced consent,” and “under threat of compulsion.” O’Brien told Shelton that with those kinds of phrases in their complaint, it’s not possible to characterize the pleading as one that “admits” or “acknowledges” the invasion or occupation as permitted or invited.

O’Brien pointed out that in the city’s brief in support of summary disposition, the city indicates it will accept the pleadings of the complaint as true – so the city was not offering any opposing affidavits or any admissible evidence. So for the purposes of their motion, they are acknowledging the allegations of the complaint are to be taken as true. If that is the case, O’Brien continued, then the city’s characterization of the plaintiffs’ argument is “wildly inaccurate.” The city’s characterization is misleading, he said, and it is a distortion of the complaint.

O’Brien also noted that the city had contended the plaintiffs “recognized that they own the sump pumps they installed and that the sump pumps and footing drain system operate as an integral part of their houses; in other words that neither the city nor a third party owns anything located in their homes, occupies their properties, or has otherwise taken their properties.” If you look at the complaint, O’Brien told Shelton, that is directly contrary to what the plaintiffs said in their complaint.

The city had cited as authority for that “admission” – that the plaintiffs had acknowledged there was no unconstitutional taking – the fact that plaintiffs attached the city’s homeowner packet as an exhibit to the complaint. And the city argued that because the plaintiffs attached the city’s own homeowner packet as an exhibit for the complaint, that somehow the plaintiffs had adopted everything the homeowner packet says. There is no way you can read that complaint and the references to the exhibit as the plaintiffs’ “concession” to the city’s position with respect to the FDD program, O’Brien said. “It’s completely uncalled for and is just untrue.”

In the city’s response brief, O’Brien said, the city cites authority for the fact that attached exhibits that contradicts allegations in the complaint trump those allegations. But what cases did the city cite? O’Brien asked. The city cited one case in which a complaint had attached to it promissory notes and guarantees signed by the plaintiff. And based on those promissory notes and guarantees, the court concluded that the allegations of the plaintiff were contradicted by the documentary evidence attached to the complaint – and obviously adopted by the plaintiff. The other case was one where letters by the lawyer were attached, which contradicted the assertions contained in the complaint. Those cases were inapposite, O’Brien said.

Allegations were made in the complaint that the plaintiffs were forced by the city to accept this FDD installation, and the plaintiffs attached the homeowner packet and quoted some of the language in it. To suggest that plaintiffs had adopted the city’s position – just because they’d merely attached that exhibit to the complaint – is fallacious, O’Brien said. “It’s sophistry,” he continued, and that’s the kind of thing that the plaintiffs and the judge should not be required to ferret out any time the city says something.

O’Brien continued by noting that the city had written that the plaintiffs “conceded” that the ordinance was adopted to address public health, safety and welfare. If you read the allegations in the complaint, he noted, you see that the plaintiffs, on the contrary, state that the city enacted the FDD program for expediency – because the city didn’t want to spend money to expand the sewer system or expand the sewage treatment plant. The city enacted the FDD because it was the cheapest way to do it. O’Brien told Shelton: “I don’t know how you can interpret – it’s not even an interpretation – how you can extract from our allegations the statements that they attribute to us.”

O’Brien then moved to the second prong of the plaintiffs’ motion on sanctions – which was the city’s continued assertions that the statute of limitations in this case is six years, when inverse condemnation cases in the state of Michigan have a statute of limitations of 15 years. The city argues frivolously, O’Brien said, that there is a six-year statute of limitations. The position of the city is not well-grounded in fact, O’Brien said.

Shelton did not interrupt O’Brien in his arguments on sanctions.

When Elias took the podium, she began by saying that the city is entitled to rely on and read the plaintiffs’ complaint taking the well-pleaded allegations that are actually supported in the complaint or in the attachments. Conclusory allegations don’t count, she said. The city’s characterizations were made based on the complaint, making the reasonable inferences that they could from the allegations that the plaintiffs had made.

The plaintiffs rely on the homeowner packet, Elias continued, but Shelton cut her off: “One statement that does bother me is your statement that they have ‘conceded’ that the ordinance was adopted in the interest of public health, safety and welfare. That is a stretch even for a lawyer. That’s obviously the whole point of the complaint.”

Assistant city attorney Abigail Elias.

Elias began to respond, saying that if you look at the paragraphs of the plaintiffs’ complaint that the city had cited, the plaintiffs do “recognize” – but she quickly allowed that “maybe ‘concede’ is a strong word there.” Shelton’s two-word commentary: “It is!”

Elias offered that the plaintiffs had acknowledged the sequence of events that led up to the adoption of the ordinance. Elias then told Shelton, “It was not intended – and my apologies to the court if that’s how it was read – to be an argument that …” but Shelton cut her off: “That is what the words say!” Shelton drove home the point: “And those are the words that you are responsible for.”

Elias contended that she was looking at it as a factual issue as opposed to legal issue – so “concession” was more a recognition of the facts, she said. She then stated: “I stand corrected on that if I overstated with some zealousness there.”

Elias then argued that the motion for sanctions was premature. She allowed there is no rule for when a motion for sanctions is decided or considered. But if it is addressed to a motion, those are best decided at the time that the motion has been decided, she said. That’s the same time the merits of the arguments are sorted out – and that’s the appropriate time to be making a ruling on whether or not a motion was frivolous or unsupported.

Elias then advanced an argument that the plaintiffs were arguing that the city owned the sump pumps. But Shelton replied: “That is not the argument that they made. … Their argument simply is that it is a taking when you force them to install a pump on their property.”

Elias responded at moderate length, concluding that the plaintiffs had argued that the sump pump is a physical intrusion, not a regulatory requirement. Shelton’s summary of Elias’ remarks was not complimentary: “The problem here, Ms. Elias, is that you pick a word out and you build a straw man out of it and then burn him alive. I will leave that for the judge. That’s not a strong argument.”

Rulings

After hearing from both sides, Shelton began with some general ruminations on what it’s like to be a judge. It is as much a process of “winnowing” as it is anything else, he said. And that means winnowing through all the verbiage – to get down to what the issue is, and to make a decision on that issue based on the facts and the law.

Judge Donald Shelton exited the courtroom on his final motion day, Aug. 27, 2014. In his retirement, he’ll be teaching at the University of Michigan-Dearborn. In response to some of the well-wishes he received throughout the afternoon, he quipped: “I’ll have to learn to talk to people who don’t have to listen to me.”

Lawyers sometimes feel the need to confuse and obfuscate the issues as much as possible, Shelton ventured, possibly based on their assessment of the strength of their case. But for a judge in a case where there is a significant legal issue – like this one – there is a responsibility to “keep the herd moving west,” and to keep an eye on the crux of the issue.

He announced he was going to deny the motion to disqualify Elias. But Shelton noted that Elias had stated the city will not defend the case on the basis that the ordinance was adopted in reliance upon a legal opinion – so he was ruling that the city cannot defend this case on that basis.

Shelton observed that he’d already denied the motion to reassign the case away from Connors. He noted that plaintiffs could refile that motion with the chief judge, but he suggested waiting until the case is reassigned – and then going through an ordinary disqualification process. He stressed he was not ruling at all on the merits of the motion.

With regard to the motion for sanctions – based on statements by the city in the brief supporting its motion for summary disposition – Shelton had some concerns about a couple of the statements that were made. But he said that the pleadings have to be taken in the context of the entire issue. If he were deciding the motion for summary disposition, it would be appropriate for him to rule on the plaintiffs’ motion for sanctions. However, it would be inappropriate for him to rule on the motion without that motion for summary disposition in front of him.

So Shelton concluded that he would adjourn the motion for sanctions to the hearing on the city’s motion for summary disposition “before whomever it takes place,” he said. Whether the defendant’s statements are without any reasonable basis, or are frivolous, is “really for the judge who hears the motion for summary disposition,” he concluded.

Next Hearing

The next hearing in this case is currently scheduled for 9 a.m. on Sept. 18 in front of judge Timothy Connors at the 22nd circuit courthouse, 101 E. Huron in downtown Ann Arbor.

From left: Assistant city attorney Abigail Elias, city attorney Stephen Postema and co-counsel for the plaintiffs Irvin Mermelstein. The photo is from the July 2, 2014 hearing on a preliminary injunction in the Yu v. Ann Arbor case, which judge Donald Shelton denied.

The latest procedural issues now appear set to be decided on Aug. 27, 2014 – judge Donald Shelton’s final motion day before his retirement.

The case involves a claim of unconstitutional takings – inverse condemnation. Plaintiffs in the case, Yu v. City of Ann Arbor, are three Ann Arbor residents who had their footing drains disconnected under the city FDD program.

The procedural issues that could be decided next week include a motion to disqualify the city attorney’s office from representing the city due to conflicts; a motion to sanction city attorneys for filing documents with statements that plaintiffs allege are not well-grounded in fact; and a motion to reassign the case to a judge other than Timothy Connors. All three motions were filed with the court on Wednesday, Aug. 20.

A dispute about whether those Aug. 20 filings were properly served upon the city is one of the issues Shelton could decide at the start of the hearing.

By way of background, the case was originally filed in the Washtenaw County 22nd circuit court and assigned to Shelton in late February. The city then removed the case to federal court. However, the plaintiffs moved for remand from the federal court back to the circuit court – a motion that was granted by judge Avern Cohn in late May.

When the case returned to the circuit court, plaintiffs filed a motion for a preliminary injunction, which was heard and denied by Shelton in early July. The city had filed a motion for summary disposition on June 9, which was originally scheduled for July 30. It was subsequently rescheduled by the city for Aug. 13, and then shifted by the city again to Sept. 18 – which is after Shelton’s scheduled retirement.

According to the court administrator’s office, the case will not officially be reassigned to a different judge until Sept. 2. However, when The Chronicle inquired with the 22nd circuit court’s central scheduling office, the staff indicated that the plan was to reassign all of Shelton’s civil cases to Connors. So the city’s paperwork scheduling of the Sept. 18 hearing specifies Connors as the judge.

Motion on Reassignment

The Sept. 18 hearing date on the city’s motion for summary disposition could change if Shelton grants the motion to reassign the case to a judge other than Connors.

The motion to reassign is based on the fact that attorney Mark Koroi is co-counsel for the plaintiffs. According to the brief in support of the motion to reassign the case away from Connors, Koroi has filed four Judicial Tenure Commission grievances against Connors, two of which have been upheld. Koroi’s brief also notes that he has engaged in “vigorous public advocacy against political candidacies of both Timothy Connors and his wife.”

The plaintiff’s brief notes that Michigan court rules stipulate that it is the challenged judge who must make an initial ruling on a motion for disqualification, so the motion to reassign is a proactive measure to eliminate the need to file a motion in front of Connors, which would asked that Connors disqualify himself. [Aug. 20, 2014 Yu v. City of Ann Arbor brief on reassignment]

The city’s response brief argues that the motion is actually a motion for disqualification, and as such the motion is premature and should be heard by Connors. The city also argues explicitly against the idea that Connors should be disqualified, noting that if political speech critical of a judge were adequate grounds for disqualification, then an attorney could engage in such speech specifically so that the attorney would never have to appear in front of that judge.

The city also argues that the brief in support of the motion to reassign doesn’t provide any evidence that Connors is aware of Koroi’s political advocacy or that Connors is actually biased against Koroi. [Aug. 22, 2014 Yu v. City of Ann Arbor response brief on reassignment]

Motion for Sanctions

A second motion filed on Aug. 20 for hearing on Aug. 27 is to sanction the city attorney’s office for filing papers that are “neither well-grounded in fact nor warranted by existing law or a good faith argument for the extension, modification or reversal of existing law.” The papers in question are the city’s brief in support of its motion for summary disposition. [June 9, 2014 Yu v. City of Ann Arbor brief on summary disposition]

Included in the plaintiffs’ claims asking for sanctions to be imposed are that some of the key arguments in the city’s motion for summary judgment are frivolous. Plaintiffs assert that the city’s argument that the plaintiffs’ complaint is time-barred is frivolous. The plaintiffs then argue that one of the city’s positions – that the plaintiffs’ federal claims should be dismissed – is crucially based on the city’s contention that the claims are time-barred.

The plaintiffs’ brief in support of sanctions also asserts that the city has mischaracterized the plaintiffs’ position, highlighting instances where the city states that the plaintiffs have “recognized” or “conceded” some key aspect of the city’s legal position. The plaintiffs argue that the plaintiffs have not recognized or conceded the things that the city claims in its brief. [Aug. 20, 2014 Yu v. City of Ann Arbor brief on sanctions]

For example, the city claims in its brief that [emphasis added]:

Plaintiffs recognize that they own the sump pumps they installed and that the sump pumps and footing drain system operate as an integral part of their houses; in other words that neither the city nor a third party owns anything located in their homes, occupies their properties, or has otherwise taken their properties.

The claim is presented in the “introduction” section of the city’s brief, a section of pleadings where recitations of uncontroversial fact are typically presented. The question of pump ownership and occupation of residents’ homes by the third party are central points of dispute in the case. The plaintiffs’ brief in support of sanctions argues that the citations by the city to the plaintiffs’ pleadings – in support of the claim of “recognition” – do not in fact support a claim of “recognition.”

Another claim by the city – presented in the “background facts” portion of its brief in support of summary disposition – is that [emphasis added]:

“Plaintiffs concede that Sec. 1.1 [the footing drain disconnection ordinance] was adopted by the City to address the public health, safety and welfare issues of sanitary sewer back-ups in basements and sanitary overflows.”

The portion of the plaintiffs’ brief cited by the city in making that characterization does not, according to the plaintiffs, provide any support for the city’s contention that a concession has been made. And elsewhere in the plaintiffs’ brief, they state [emphasis added]:

Upon information and belief, the Ordinance was not enacted in response to emergency conditions or some other imminent threat to public health, safety or welfare. Rather, the Ordinance was enacted by the City in order to facilitate a solution to long-standing and self-created conditions in the least expensive and/or most expedient way possible.

Based on the city’s descriptions of the plaintiffs’ statements, the plaintiffs contend that the city is distorting the record. From the plaintiffs’ brief in support of sanctions:

This level of mischaracterization goes beyond zealous advocacy: it is misleading and is unfair to both the Court and to the Plaintiffs, whose lawyers are forced to ferret out mischaracterizations and distortions of the record when they should be responding to a “fair presentation of the issues” by opposing counsel.

The city’s response to the plaintiffs’ brief in support of sanctions deals with the part involving plaintiffs’ frivolous legal arguments by arguing for the merit of those arguments.

In its brief opposing sanctions, the city responds to the plaintiffs’ contention that their statements have been misrepresented to the court by insisting that the city’s characterization is based on the plaintiffs’ recitation of facts – and an attachment to the complaint of the city’s written “homeowner’s package” for sump pump install-ees.

The city’s position appears to be that whatever factual claims and characterizations that are made in the “homeowner’s package” were recognized and represented to the court by the plaintiffs as true – by dint of the attachment of the “homeowner’s package” to the plaintiffs complaint as an exhibit. So the city is not analyzing the plaintiffs’ exhibit merely as a representation by the plaintiff as to what the city itself claims to be true (via public documents produced by the city), but also what the plaintiff is recognizing to be true. [Aug. 22, 2014 Yu v. City of Ann Arbor response brief on sanctions]

The city blames any misunderstanding on the plaintiffs, arguing that the plaintiffs wrote poorly worded filings. From the city’s response brief, opposing sanctions:

[T]he City has not mischaracterized Plaintiffs’ Complaint, but has simply analyzed it as written by Plaintiffs. Plaintiffs’ dissatisfaction with the City’s reading of their Complaint arises from Plaintiffs’ own failure to draft a well-pleaded Complaint.

Motion on Disqualification

A third motion filed by the plaintiffs for hearing on Aug. 27 is one that would disqualify assistant city attorney Abigail Elias, and thereby the city attorney’s office, from representing the city in this lawsuit. [Aug. 20, 2014 Yu v. City of Ann Arbor brief in support of disqualification]

The brief arguing for disqualification cites an email sent by plaintiffs’ counsel in early February notifying Elias that she would likely be called as a witness in the case:

I am advising that your non-privileged testimony and evidence will likely be required in connection with litigation over the FDDP, which is now in preparation for filing. The case will include a claim for inverse condemnation. You are a necessary witness on both liability and relief, which probably comes as no surprise.

The plaintiffs argue partly on grounds that they need to depose Elias as a reason to disqualify her as the city’s representation.

In its brief in opposition to the motion on disqualification, the city contends that there is no testimony that Elias is in a unique position to provide other than testimony that would be subject to the attorney-client privilege. [Aug. 22, 2014 Yu v. City of Ann Arbor brief opposing disqualification]

The city also contends that disqualification of its city attorneys would be prejudicial to the city, because “Ms. Elias has been involved with the FDD program since its inception 13 years ago. Her familiarity with and knowledge of the issues in this case from those years cannot be replicated easily or quickly.”

Hearing

The next hearing is currently scheduled for Aug. 27 at 1:30 p.m. in front of judge Donald Shelton at the 22nd circuit courthouse, 101 E. Huron in downtown Ann Arbor.

In reaching the conclusion that the vote is legally valid, Postema relies on the city charter, the council’s rules and Robert’s Rules of Order. The opinion relies on the basic principle that objections to a conclusion that a motion has passed must be made in a timely way.

Postema’s opinion does not attempt to settle the question of whether an 8-vote majority should have been required for McWilliams’ appointment. Eight votes arguably should have been required, given the nomination’s withdrawal and apparent subsequent re-introduction by mayor John Hieftje, which made the confirmation a one-step process, requiring eight votes under the council’s rules.

Postema’s opinion indicates that for the purposes of the legal validity of the vote, it does not actually matter if eight votes were required or not. Even in a situation where a name is brought forward for the very first time and the council is asked to vote on it – which would clearly require eight votes under the council’s rules – a vote tally of 6-5 would be legally valid, if no timely objection were made to the conclusion that the motion had carried.

Postema’s written opinion on the matter marks the first one he’s written and filed with the city clerk since he began working for the city of Ann Arbor over 10 years ago in April 2003. The city charter contemplates the writing of opinions as a part of the city attorney’s job responsibility: “The attorney shall … advise the heads of administrative units in matters relating to their official duties, when so requested, and shall file with the Clerk a copy of the entire Attorney’s written opinions; …”

A motion to reconsider the McWilliams appointment was made at the council’s Oct. 3, 2013 meeting, and was immediately postponed until the council’s meeting on Oct. 21.

Sumi Kailasapathy (Ward 1) questioned CFO Tom Crawford’s conclusions about the travel and mileage policies at the audit committee’s Jan. 24, 2013 meeting. (Photo by the writer.)

Listed among other relatively minor matters in Rehmann’s report was a note identifying three instances of an employee who had claimed mileage reimbursement despite receiving a vehicle allowance. At a scheduled Dec. 20, 2012 meeting of the audit committee, the dual claims were described by Rehmann’s Mark Kettner as a “double dip.” Those claims were also cited in Kettner’s written report as a violation of city policy.

The Chronicle’s write-up of the auditor’s presentation late last year to the audit committee – which did not achieve a quorum on that occasion – included the result of additional reporting: Mileage claims made by city attorney Stephen Postema caused the auditor to flag the issue in his formal report.

But at the Jan. 24 committee meeting, Kettner revealed that he’d been convinced to change the wording of the note. The new wording will not indicate a “violation” of city policy. At the meeting, however, Kettner indicated that a note about this issue would still be included – with the exact wording yet to be settled. City CFO Tom Crawford’s written response to the auditor’s report includes email messages that show it was Crawford and Postema who made a successful effort to convince Kettner to alter the report’s wording.

The wording of Postema’s employment contract factored into arguments made by Postema and Crawford for a revision to the auditor’s report. When Postema made his reimbursement claims, his contract at that time provided for “travel” expenses in addition to a vehicle allowance. Postema’s vehicle allowance was eliminated late last year, as a result of his annual performance review. Also factoring into the argument for revising the auditor’s note was Crawford’s contention that the city’s written policies don’t provide clear guidance on the question.

However, at the Jan. 24 committee meeting, Sumi Kailasapathy (Ward 1) challenged Crawford on that point. [Kailasapathy was elected to the council in November 2012 – running a campaign that stressed her credentials as a certified public accountant.] She reviewed the logic and specific wording of each of the city’s relevant policies, with particular attention to the meaning of the word “travel” – and reached the conclusion that the mileage reimbursements had not conformed with city policy.

And even though Kettner has agreed to change the wording of the note in his report, Kettner wrote in a Jan. 18 response to Postema and Crawford: “… from a business practices standpoint, our conclusion (with or without the existence of a policy) was it would be illogical and, therefore inappropriate, to make mileage reimbursements to persons having a car allowance.” Kettner’s response also indicates that his conclusion of inappropriateness was not based on a review of Postema’s employment contract.

At the Jan. 24 meeting, Crawford interpreted the fact that he and Kailasapathy reached different conclusions about the appropriateness of the mileage claims as evidence that the written policies didn’t provide clear guidance.

Stephen Kunselman (Ward 3) seemed to reflect the general sentiment of the two other committee members present – Chuck Warpehoski (Ward 5) and Margie Teall (Ward 4) – in concluding that he didn’t think anyone had been trying to “game the system.” Kunselman indicated little enthusiasm for delving into the wording of Postema’s contract or existing city policies. He was more interested in making sure that the relevant policies would be revised and applied in the future – not just for the travel and mileage policies, but for the other issues identified in the auditor’s report.

Kunselman also indicated that he was keen to see the audit committee take a more active, engaged role – throughout the year, not just once a year on the occasion of the auditor’s report. The committee as a group also seemed favorably inclined toward adopting a more proactive approach. The committee’s extended conversation about the relationship of the city’s part-time internal auditor indicated that while the internal auditor would still report to Crawford, the audit committee would be looped into the ongoing issues that emerged throughout the year as they arose – instead of six months after they happened. It could result in meetings of the committee at other times besides the occasion of the annual auditor’s report.

That reflects a transition from the role that the audit committee has played as recently as two years ago. The committee did not meet at all during that year, even to review the FY 2010 auditor’s report – because audit committee chair Stephen Rapundalo declined to call a meeting. Kunselman complained at the time about the lack of a committee meeting. Rapundalo was not re-elected in 2011 – when he had faced Jane Lumm, who received more votes than Rapundalo that November.

Travel versus Mileage

The note in the auditor’s formal letter, previously conveyed to the city last year, reads:

Employee Expense Reports. We reviewed various employee expense reports to ensure reimbursements were properly supported and approved. We noted in three instances, that an employee was requesting and receiving mileage reimbursement while also receiving a car allowance, which violates City policy. After further inquiry, it was determined that the City became aware of this situation during the year and has since implemented procedures to address this issue.

Travel versus Millage: Background

As The Chronicle previously reported, a request of the city made under Michigan’s Freedom of Information Act revealed that city attorney Stephen Postema made three claims for mileage reimbursement, despite having a vehicle allowance. One was for a professional meeting in Grand Rapids, while the other two were for court appearances in Cincinnati and Lansing. [.pdf of city of Ann Arbor response to initial FOIA request] [.pdf of follow-up city of Ann Arbor response with additional, corrected data on vehicle allowance amounts]

Up until his performance review in November 2012, Postema’s employment contract provided for a vehicle allowance:

Section 2.14 Car Allowance. Employee shall receive a car allowance calculated at $330/per month.

The resolution approved by the city council as the result of the city attorney’s performance review – which included a salary adjustment upward that is just slightly less than the value of the car allowance – explained the elimination of the car allowance this way:

Whereas, The City Attorney has offered to eliminate his contractual car allowance of $330/month as of January 1, 2013, as has been done with the City Administrator’s contract;

Even though the “whereas” clause seems to invite the conclusion that city administrator Steve Powers also had a vehicle allowance specified in his contract, and that it was also eliminated in the context of a regular performance evaluation, that’s not the case. Previous city administrator Roger Fraser had such an allowance, but Powers, who took over the city’s top job in the fall of 2011, never had such an allowance in his contract.

The initial discussions of the city attorney’s performance review are handled by the council’s administration committee. It currently consists of Sally Petersen (Ward 2), Margie Teall (Ward 4), Christopher Taylor (Ward 3), mayor pro tem Marcia Higgins and mayor John Hieftje. At the time of Postema’s performance review, former Ward 2 councilmember Tony Derezinski served instead of Petersen. Higgins did not respond to an emailed query from The Chronicle asking if she was aware of the issue with Postema’s mileage claims at the time of Postema’s performance review. Hieftje responded to that same query saying he was not aware Postema had made mileage claims.

In his response, Hieftje also insisted that the current review of travel and mileage policies was not caused by Postema’s mileage reimbursements:

I should note that going forward there will be a clarification of city policy regarding mileage reimbursement. However, this was not triggered by Stephen’s being reimbursed but as an overall response to something that came up as a minor issue in a “clean” audit.

In an interview with The Chronicle on Jan. 11, 2013, Hieftje explained his written assertion in part with the idea that Postema does not report to the city administrator but rather to the city council. [Under the city charter, the city council hires and evaluates two positions – the city attorney and the city administrator.] From that, Hieftje concluded that whatever policy revisions might be undertaken now by city administrator Steve Powers would not affect Postema’s reimbursements, because Postema’s reimbursements would be governed by his employment contract.

However, Postema’s employment contract explicitly states that reimbursement is to be made under standard city procedures:

Section 2.2 Business Expenses. Employee is authorized to incur such reasonable budgeted travel, cell phone expenses, entertainment and other professional expenses as are necessary in the performance of his duties. The City will reimburse Employee for such expenses in accordance with standard City procedures.

Hieftje seemed unaware during the Jan. 11 interview that the city’s response to The Chronicle’s record request had linked Postema’s mileage claims to the auditor’s note. At the conclusion of the interview, after being shown the records, Hieftje conceded the connection between Postema’s mileage claims and the policy review.

Travel versus Mileage: Significance of the Note

Tom Crawford, the city’s chief financial officer, led off the Jan. 24 meeting of the audit committee by establishing some context for the auditor’s note. He referred committee members to a written response he’d provided them. [.pdf of Crawford's response to auditor's letter]

Crawford reviewed how the basic result of the audit, communicated in the SAS (Statement of Auditing Standards) No. 114 letter, had been essentially a clean audit with two deficiencies. This year the letter had included notes on other matters, of a type that Crawford said he wouldn’t normally expect to see: “I don’t usually look for these comments down here.” The letter typically includes things like a material weakness or other deficiencies, but this year the letter included some other matters, that in Crawford’s experience are usually mentioned orally to staff – the CFO or the city administrator.

Crawford’s portrayal of the notes in the letter is consistent with that of auditor Mark Kettner’s remarks about them – when he presented the report to two audit committee members on Dec. 20, 2012. From The Chronicle’s report:

Kettner described a hierarchy of problems that an auditor can find: deficiencies, significant deficiencies, and material weaknesses.

There are also “other matters” that an auditor is not required to put into writing, he said. But they have to be communicated at least orally, and you have to document who was told and what they were told. So Rehmann’s practice is to include other matters in the management letter, because it’s easier to write down the information.

On Jan. 24, Crawford indicated that typically, the staff just deals with the orally-communicated notes in this category. But because this year the notes were in writing, Crawford said, he wanted to respond in writing. He indicated that a response would be sent to the auditor as well. He wanted the committee to understand that “We take this stuff seriously.”

Crawford welcomed any comments the audit committee members had on the written response. He continued by drawing a distinction between “council policies” and “administrative policies.” Crawford was recommending that the policies be reviewed and he indicated that the revisions to the policies were included in the written response that he’d provided to the committee. He invited questions from the audit committee.

Travel versus Mileage: Definitions

Sumi Kailasapathy (Ward 1) led off questions by focusing attention on the second page of Crawford’s written response. It portrays a lack of consensus among city finance staff about the appropriateness of the mileage claims. But Kailasapathy focused on Crawford’s contention that the city’s written policies don’t provide clear guidance. From Crawford’s written response [emphasis added]:

In evaluating this issue, staff first looks to legal contracts as a guiding document and secondly to administrative policies for guidance. The above employee with 3 trips had an employment agreement (see attached) with the city at the time of travel that included two separate provisions for an auto allowance and for reimbursement of travel expenditures. A review of the travel & mileage policy (see attached APP #504 & #505) revealed they do not provide clear guidance on how to handle this situation. Some finance staff reasonably believed a mileage reimbursement appeared like the same expense was being reimbursed for twice and raised the issue to the CFO. Meanwhile some supervisors and administrators operated with the belief that the vehicle allowance was for ordinary and customary travel within the city/county but not for less frequent out-of-town trips necessary for travel, training, etc.

Kailasapathy indicated that she’d reviewed the administrative policy on travel and on employee mileage reimbursement. She quoted from Policy 505:

The City of Ann Arbor shall pay mileage reimbursement for authorized business travel when an employee uses their personal vehicle.

Kailasapathy said that for her, that sentence is unambiguous: If you use your personal car, then you will be provided reimbursement and that is called “mileage reimbursement.” But in Crawford’s description of the issue, he’d used “travel” repeatedly, Kailasapathy pointed out. That, she felt, was incorrect, because you could come to different conclusions depending on whether it’s considered mileage reimbursement or travel.

By way of additional background on the issue of travel versus mileage, in response to an initial request made by The Chronicle under the FOIA, the city of Ann Arbor did not produce any official “City of Ann Arbor Travel Expense Report” forms for the three mileage claims made by Postema. For other claims, however, such forms were produced. Because the wording of the request had been somewhat vague, The Chronicle made an additional request asking specifically for those forms, if they existed.

After additional back-and-forth with the city in connection with that request, The Chronicle was able to establish that “City of Ann Arbor Travel Expense Report” forms were not submitted for Postema’s claims. Instead, an electronic submission was used, consistent with reimbursement for mileage by city employees who use their personal vehicle for city business. In terms of the distinction Kailasapathy was drawing, the claims appear to have been considered mileage reimbursements, as a opposed to travel expenses. [.pdf of records associated with Postema's mileage claims].

Kailasapathy then appealed to the city’s travel policy, which defines travel in a way that she indicated is consistent with IRS rules, which includes the need to stay overnight:

2.2 General Travel Limitations – Subject to budget limitations, all employees are permitted to attend, subject to authorization by the service area administrator or his/her designee, City work-related overnight conferences, seminars, training, certification programs, continuing education, or other similar work-related educational or professional events. The number of employees from a service area allowed to attend the same travel function will be at the service area administrator’s discretion. Overnight travel will be used only for opportunities that cannot be achieved locally.

Kailasapathy said it’s important to be clear about what it means for someone to be using their personal vehicle. She contended that if an employee has a car allowance, then it is for operating that car – and to her that’s clear. She told Crawford she was disappointed that he was saying the city policies don’t provide clear guidance. She felt the guidance is clear – and that travel and mileage reimbursements are very clearly defined. If you have a car allowance and you’re asking for a car allowance, then you’re asking for the reimbursement for “one and the same thing.” Kailasapathy ventured that a car allowance is not “to park the car in front of your house to look pretty.”

Travel versus Mileage: Intent of a Vehicle Allowance

Earlier in the back-and-forth, Crawford had asked if Kailasapathy was drawing a conclusion about any employee who had a vehicle allowance – and whether “the vehicle they acquire” is still their personal vehicle. Crawford seemed to indicate a view that, to him, it’s reasonable to interpret the intended use of a vehicle allowance to be exclusively the acquisition of a vehicle, not including the operation of that vehicle for businesses purposes.

Responding to Kailasapathy’s “to look pretty” comment, Crawford again reiterated his position that a vehicle allowance was intended for acquisition of a vehicle, saying that if an employee uses their vehicle allowance to acquire a vehicle, that doesn’t make it a city vehicle. Because it’s still their personal vehicle, Crawford contended, the employee could be reimbursed for mileage. He then allowed that it’s at least not clear if an employee with a vehicle allowance could be reimbursed for mileage – because the mileage policy doesn’t mention a vehicle allowance.

Kailasapathy compared the situation to receiving a house as part of your compensation but still claiming rent as an expense. Crawford said he thought Kailasapathy was assuming that the purpose of the vehicle allowance is for the acquisition and use of that vehicle. Crawford asked her what she felt the point of the car allowance was. “Using your personal car to do business,” she replied, giving examples like going to court to defend the city in a lawsuit. Crawford responded by saying, “That’s interesting … that’s not written anywhere what the allowance is for.”

At that point Stephen Kunselman (Ward 3) said, “It’s an outright perk, basically – right? Monetary benefit, car allowance, no strings attached.” Margie Teall (Ward 4) seemed to chafe at Kunselman’s characterization of the car allowance as a perk, saying, “It’s a ‘perk’ if you want to call it that …” Crawford indicated that the vehicle allowance has been used in different ways by different city employees. He was trying to point out that Kailasapathy’s assumption – that the vehicle allowance was meant to cover the operation of a personal vehicle when it’s used for city business – is not recorded anywhere in a written city policy.

Crawford stated that the mileage reimbursement that Postema had been seeking was subject to his contract, which has two clauses that mention travel. At that point, Kailasapathy appeared ready to argue about whether the clauses in Postema’s contract on travel would, in fact, justify the mileage reimbursement. However, Teall indicated no enthusiasm for that kind of detailed debate: “You know, I don’t want get into a contract issue. … I don’t think we can have that discussion here.” Kunselman also indicated he didn’t want to entertain that discussion.

Kunselman came back to the auditor’s note that indicated there had been a “violation” of city policy. It wasn’t the role of the audit committee to interpret the city policy, but rather to have management address any unclarities. Kunselman said it sounded like there were a lot of changes being implemented with respect to car allowances. By way of additional background, in an email to The Chronicle published previously, city administrator Steve Powers wrote:

During the past year, I have removed vehicle allowances from the compensation for service area administrators.

The remaining vehicle allowances are for employees, such as property appraisers, where the use of personal vehicles with an allowance is more advantageous to the City than paying mileage or using a city vehicle.

Kunselman indicated he felt this was the right direction to go, but didn’t want to spend a lot of time looking back and getting bogged down.

Travel versus Mileage: Revision of the Letter

Kunselman was, however, interested in having the wording of the auditor’s letter revised, because Kunselman felt that the statement that there had been a “violation” of city policy was inaccurate. Based on the material provided in Crawford’s response to the auditor’s comment, auditor Mark Kettner had already agreed to revise the phrase that referred to a policy violation – as a result of a phone conversation he’d had with Crawford and Postema.

In Kettner’s written response to Crawford and Postema, he agrees that the phrase “violates city policy” is incorrect and acknowledges that he was not given Postema’s employment contract for review in reaching his conclusion that the mileage reimbursement was not appropriate. Kettner explained his conclusion this way:

As I also stated in our conversations, from a business practices standpoint, our conclusion (with or without the existence of a policy) was it would be illogical and, therefore inappropriate, to make mileage reimbursements to persons having a car allowance. This conclusion is in the absence of knowledge of an agreement that would reasonably identify that payment of both mileage reimbursement and car allowance is acceptable and appropriate.

The question the audit committee was disinclined to settle explicitly is whether Postema’s contract is an employment agreement that identifies payment of mileage reimbursement and car allowance as acceptable.

At the Jan. 24 meeting, Kettner indicated that he’d be willing to change the phrase “which violates city policy.” After “all the extra stuff that has occurred,” Kettner said he concluded that “there is not a policy per se that says ‘You shall not get a mileage reimbursement if you have a car allowance.’” But he would keep the note in the letter – because even though it involves a small dollar amount, it’s an issue involving policies, procedures and contracts, and he felt the city needs to address it and figure out what to do about it. That’s the whole purpose of it, he said.

In the context of the overall city audit, Kettner said, the mileage issue was really a tiny issue. Crawford indicated he felt that the city’s approach to identifying problems seemed to be working. Crawford indicated that there were differing views by city staff about how the policies should be interpreted, and the fact that he and Kailasapathy had different views on interpretation supported the idea that the policies weren’t completely clear. He said the issue had come to light during the audit – in a minor way – and whenever those issues come to light, the staff re-visits them. Teall added that the review of the policy had already started.

Travel versus Mileage: Recommendations

Recommendations by Crawford responding to the audit note on travel and mileage reimbursements include:

• Clarify and revise the city’s travel policy to reflect expectations for reimbursement when an employee receives a vehicle allowance.
• Clarify and revise the city’s travel policy to require travel reimbursement requests for the city administrator and city attorney to be approved by the Council Administration Committee Chairperson.
• Establish a vehicle allowance policy to clarify expectations for what a vehicle reimbursement is intended to be used for.
• Communicate these policy updates with staff and have Service Area Administrators responsible for ensuring consistent treatment across the organization.

Responding to a query from Kailasapathy, Crawford indicated he did not necessarily think that travel reimbursements for mileage should be tied in the future more explicitly to an overnight requirement – because it could create a perverse incentive for employees to stay overnight, thus incurring even greater expense to the city. Kailasapathy countered that whether the travel expense was appropriate or not was already subject to a supervisor’s review. In the case of the city administrator and the city attorney, Crawford pointed out, the recommendation is that their travel requests in the future be subject to review by the council’s administration committee.

Role of the Audit Committee

The travel and mileage issue took about 25 minutes of the Jan 24 audit committee meeting, which lasted about an hour.

In the remaining time, the committee discussed some of other items in Crawford’s written response. For example, they discussed the challenge of implementing regular password changes by employees, when they must log on to several different systems – the sheer number of passwords could result in a sticky-note strategy of recording passwords, which is also not desirable.

However, the main focus of the remainder of the meeting could be summarized as dealing with the future role of the audit committee. It was prompted by Rehmann’s observation about the way the city’s internal auditor reports:

We noted through inquiries of various City employees that the Internal Auditor organizationally reports through the Chief Financial Officer. We recommend that the City review this procedure and determine if this function would be more effective if the Internal Auditor reported directly to the Audit Committee.

But the consensus of the audit committee at the Jan. 24 meeting seemed to be that the internal auditor should not report in an organizational sense to the audit committee. That is, the city council would not want to explore adding a third employee – in addition to the city attorney and the city administrator – to the two they already supervise. But committee members felt that the internal auditor should be able to communicate to the audit committee, if the internal auditor didn’t feel comfortable communicating a concern to the chief financial officer or the city administrator.

The audit committee as a group indicated a desire to be kept apprised of information that comes to light in the course of the year. For example, Crawford noted that the city has an anonymous fraud hotline, and when tips come in through the hotline, they’re investigated – but he pointed out that not many tips come in. The audit committee would be kept apprised of those tips and the outcome of the investigation.

The committee also indicated a desire to meet again, well before next fall, to review how the recommendations from this year’s audit are being implemented. Chuck Warpehoski (Ward 5) seemed to reflect a consensus, however, that the committee did not want to distract the financial services staff from their current preparations for the budget.

In the shorter term, the audit committee will be meeting again before the next regularly scheduled city council meeting on Feb. 4, 2013. No date or time for that committee meeting has been announced. Audit committee member Sally Petersen (Ward 2) was not able to attend the Jan. 24 meeting, and according to some other members of the committee, the next meeting will give Petersen an opportunity to make sure her concerns are addressed.

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As late as Jan. 23, he’d said he had not made a decision about whether to run. Had he entered the race, he would have faced competition from local attorneys Carol Kuhnke, Doug McClure and Erane Washington, who all attended a meeting of Ann Arbor city Democrats in mid-January and asked attendees for their support. Shortly after that meeting, local attorney Jim Fink issued a press release announcing he had entered the race.

The position of city attorney is one of two positions that reports directly to the council – the other is the city administrator. Under Michigan’s Open Meetings Act, reviews of personnel are allowed to be conducted in a closed session on request from the employee, but are not required to be. However, Postema’s contract contains a clause specifying that: “The results of the evaluation shall be in writing and shall be discussed with the Employee in closed session.”

A performance review conducted just two months ago at the council’s Oct. 24, 2011 meeting had been just for 2009 and 2010. That review did not result in any adjustment to Postema’s base salary, but also allowed him to cash-in up to 250 hours of accrued banked time before the end of 2011.

In a rare move, Sabra Briere (Ward 1) sat out most of the closed session on Dec. 19 and voted no on the contract amendment this time around. She questioned whether the council’s administration committee had provided other councilmembers with opportunity to offer feedback on Postema’s performance since the Oct. 24 review. She noted that other councilmembers had been given an opportunity to provide their view on Postema’s performance before the Oct. 24 review, but that review had specficially been just through 2010.

And Briere did not recall being given an opportunity to provide additional feedback since October for the current review – which included 2011. None of the members of the council’s administration committee could point to an occasion when feedback had been solicited during that time period. Mayor John Hieftje offered that sometimes all the forms are confusing.

This brief was filed from the city council’s chambers on the second floor of city hall, located at 301 E. Huron. A more detailed report will follow: [link]

From Postema’s statement: “Finally, as to my future plans … [m]any persons have asked whether I will seek this position you mentioned or suggested that I run, but, for your information, I have made no decision on this.”

Terms for circuit court judges are six years. They’re chosen in non-partisan elections. Eligibility includes residing in the judicial circuit, being licensed to practice law for at least five years, and being younger than 70.

The circuit court is the civil/criminal division of the Washtenaw County Trial Court, and has original jurisdiction in civil cases involving more than $25,000, and in criminal cases involving a felony or certain serious misdemeanors.

Postema’s apparent consideration of the possibility to seek elected office next year reflects an evolution in his perspective over the last seven years on the job as Ann Arbor’s city attorney. Based on an interview with Postema, Ann Arbor News reporter Tom Gantert wrote in a Feb. 24, 2004 article: “Postema insists he has no political ambitions and gives credit to his staff of eight full- and part-time assistant city attorneys. ‘I want this city to be a top-notch legal firm,’ he said.”