Baltimore County Circuit Judge Michael J. Finifter knows how to get County Executive Kevin Kamenetz's attention. A year and a half after Maryland's highest court upheld an arbitrator's decision that Baltimore County had overcharged a group of police department retirees for their health insurance benefits and owed them recompense, the county still has not paid and is working its hardest to avoid ever doing so. Now Mr. Finifter has threatened to hold Mr. Kamenetz in contempt and to throw him and two other top officials in jail.
That's a little extreme and of questionable legality, in that Mr. Kamenetz, County Administrative Officer Fred Homan and Finance Director Keith Dorsey aren't actually named in the lawsuit. Nonetheless, it's time for someone to bring the Kamenetz administration to its senses.
Mr. Kamenetz says he's fighting for a higher principle and that paying the judgment would be a policy disaster for the county and its taxpayers. Maybe he's right, and maybe he's wrong. But the Court of Appeals has ruled, and his attempts to get another shot at relitigating the issues in the case are looking increasingly desperate. In the meantime, the tab for the county to pay is growing every day through interest charges. It's time for the executive to recognize the inevitable.
The issues at hand are a bit convoluted, but the story goes like this:
In 2007, Baltimore County negotiated with its employee unions, including the Fraternal Order of Police, to have workers and retirees pay for a larger share of their health benefits than they had before. It did so through the Health Care Review Committee (HCRC), a decades-old entity that, among other virtues, has produced uniformity in the health benefits among different groups of county workers and retirees. Previously, the county had picked up 85 percent of the tab for health benefits, but the new agreement gradually shifted that to 80 percent.
The FOP filed a grievance on behalf of those officers who retired between 1992 and 2007, arguing that the memorandums of understanding they had in place during those years guaranteed them an 85 percent subsidy from the time of their retirement until they became eligible for Medicare. The union took the matter to arbitration and won.
The county appealed that decision to circuit court, arguing that the matter never should have gone to arbitration. The requirement that contract disputes be settled by an arbitrator expired along with those contracts, the county argued. Moreover, the county contended that the HCRC had the authority to retroactively change retirees health benefits. The circuit court disagreed, ruling in favor of the union. The Court of Special Appeals reversed that, ruling the county's way. But Maryland's highest court, the Court of Appeals, ruled unanimously in favor of the union in November 2012.
The reasoning is a bit technical, but it boils down to two things. First, the Supreme Court has held that under certain circumstances, a binding arbitration clause can outlive the contract of which it's a part. In this case, the Court of Appeals concluded, the arbitration clause remained alive because the dispute related to an action taken after the contract expired that affected a vested right under that contract — in this case, the payment split for retiree health care. And second, under Maryland law, courts give broad deference to arbitrators in the interpretation of contracts and in determining the merits of complaints.
The court, rather pointedly, did not address the county's contentions about the HCRC, and now Mr. Kamenetz is pinning his hopes for reversal on getting a second shot at that argument. He intends to appeal Mr. Finifter's order that the county pay on technical grounds dealing with the annual budget cycle and the division of powers between the executive and council when it comes to appropriations. Then, assuming a series of appeals, he would like to re-argue the point about the powers of the HCRC.
He says that's a fight worth fighting because, as he sees it, the issue is bigger than the FOP retirees. At this point, the county owes the 439 FOP retirees — initially, it was 442, but three have died while this dispute has dragged on — $1.4 million to reimburse them for seven years of over-charging, plus $200,000 in interest. As those retirees become eligible for Medicare, this issue goes away. However, Mr. Kamenetz says some of the other unions had similar clauses in their contracts prior to 2007, and out of fairness, he would feel obligated to give them the same deal as the police retirees. The cost then goes to $14 million. Moreover, he says he worries that accepting the judgment would make it impossible in the future for the county to change the terms of retirees' health benefits.
Perhaps Mr. Kamenetz is right on the broader policy question, perhaps he's not. But that is, for better or worse, beside the point. The Court of Appeals was unanimously unimpressed with the county's argument the first time around. Even presuming he finds a way to battle back there, what makes him think he'll be more persuasive the second time around? More likely, the justices will be just as annoyed to see him back as Mr. Finifter is with his tactics now. And what will the county get out of it? A higher bill for interest payments and a lot of wasted time by its lawyers. It's time for the county to pay up.
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