Adair v. State

Michigan Supreme Court
Lansing, Michigan

Opinion
Chief Justice Justices
Maura D. Corrigan Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman

FILED JUNE 9, 2004

DANIEL ADAIR, a taxpayer of
the Fitzgerald Public
Schools, and FITZGERALD
PUBLIC SCHOOLS, et al.,

Plaintiffs-Appellants,

v o. 121536
N

STATE OF MICHIGAN, DEPARTMENT
OF EDUCATION, DEPARTMENT OF
MANAGEMENT AND BUDGET, and
TREASURER OF THE STATE OF
MICHIGAN,

Defendants-Appellees.

_______________________________

BEFORE THE ENTIRE BENCH

TAYLOR, J.

This Court is once again called on to decide if the

state has met its constitutional mandate to adequately fund

public education. Plaintiffs are taxpayers and school

districts seeking a declaratory judgment that the state

failed to meet its funding responsibility mandated by Const

1963, art 9, § 29, a section of our Constitution that is

commonly known as the “Headlee Amendment.” The complaint
asserts that the state did not provide funding to school

districts in Michigan for the necessary increased costs of

providing activities and services that are new or mandated

at an increased level since December 23, 1978. The Court

of Appeals found that claims plaintiffs did raise or could

have raised in earlier suits were barred pursuant to the

doctrine of res judicata.1 As to those issues that were not

subject to res judicata analysis, the Court of Appeals held

that they were otherwise barred because of releases the

parties executed or the activities2 were not new or were not

increased activities within the meaning of Const 1963, art

9, § 29. We affirm in part, reverse in part, and remand.

I. CONSTITUTIONAL PROVISIONS

Under Michigan’s Headlee Amendment,3 as of 1978, the

state is forbidden from reducing funding levels for the

necessary costs of existing activities or services mandated

by the Legislature, and is to completely fund the necessary

costs of new or increased activities or services mandated

by the Legislature:

1
Adair v Michigan, 250 Mich App 691; 651 NW2d 393
(2002).
2
Throughout this opinion, for brevity’s sake,
“activities and services” are frequently referred to as
simply “activities.”
3
Const 1963, art 9, §§ 25-34.

The state is hereby prohibited from reducing
the state financed proportion of the necessary
costs of any existing activity or service
required of units of Local Government by state
law. A new activity or service or an increase in
the [level] of any activity or service beyond
that required by existing law shall not be
required by the legislature or any state agency
of units of Local Government, unless a state
appropriation is made and disbursed to pay the
unit of Local Government for any necessary
increased costs. The provision of this section
shall not apply to costs incurred pursuant to
Article VI, Section 18. [Const 1963, art 9, §
29.]

These two different provisions in art 9, § 29 have

been described by this Court as follows:

The first sentence of this provision
prohibits reduction of the state proportion of
necessary costs with respect to the continuation
of state-mandated activities or services. The
second sentence requires the state to fund any
additional necessary costs of newly mandated
activities or services and increases in the level
of such activities or services from the 1978 base
year. [Judicial Attorneys Ass’n v Michigan, 460
Mich 590, 595; 597 NW2d 113 (1999), quoting 228
Mich App 386, 396; 597 NW2d 378 (1998).]

To assist the public in understanding the different

thrusts of these two sentences, this Court has described

the first sentence as a “maintenance of support” (MOS)

provision and the second sentence as a “prohibition on

unfunded mandates” (POUM) provision. See id. Accordingly,

to establish a Headlee violation under the MOS clause, the

plaintiffs must show “(1) that there is a continuing state

mandate, (2) that the state actually funded the mandated

activity at a certain proportion of necessary costs in the
3
base year of 1978-1979, and (3) that the state funding of

necessary costs has dipped below that proportion in a

succeeding year.” Oakland Co v Michigan, 456 Mich 144,

151; 566 NW2d 616 (1997)(opinion by Kelly, J.). Under the

POUM clause, they must show that the state-mandated local

activity was originated without sufficient state funding

after the Headlee Amendment was adopted or, if properly

funded initially, that the mandated local role was

increased by the state without state funding for the

necessary increased costs.

However, not all activity changes established pursuant

to statute or rule constitute “new or increased” activity

requiring state funding. MCL 21.234(5) explains what the

POUM provision excludes:

(a) A requirement imposed on a local unit of
government by a state statute or an amendment to
the state constitution of 1963 adopted pursuant
to an initiative petition, or by a state law or
rule enacted or promulgated to implement such a
statute or constitutional amendment.

(b) A requirement imposed on a local unit of
government by a state statute or an amendment to
the state constitution of 1963, enacted or
adopted pursuant to a proposal placed on the
ballot by the legislature, and approved by the
voters, or by a state law or rule enacted or
promulgated to implement such a statute or
constitutional amendment.

(d) A due process requirement.

(e) A federal requirement.

(f) An implied federal requirement.

(g) A requirement of a state law which
applies to a larger class of persons or
corporations and does not apply principally or
exclusively to a local unit or units of
government.

(h) A requirement of a state law which does
not require a local unit of government to perform
an activity or service but allows a local unit of
government to do so as an option, and by opting
to perform such an activity or service, the local
unit of government shall comply with certain
minimum standards, requirements, or guidelines.

(i) A requirement of a state law which
changes the level of requirements, standards, or
guidelines of an activity or service that is not
required of a local unit of government by
existing law or state law, but that is provided
at the option of the local unit of government.

(j) A requirement of a state law enacted
pursuant to section 18 of article 6 of the state
constitution of 1963.

Thus, under a POUM analysis, not every required change in

school activities requires state funding under the Headlee

Amendment. Judicial Attorneys Ass’n, supra at 603.

Headlee, at its core, is intended to prevent attempts by

the Legislature “to shift responsibility for services to

the local government . . . in order to save the money it

would have had to use to provide the services itself.” Id.

at 602-603.

Taxpayers alleging a violation of the Headlee

Amendment may file a request for declaratory relief in the

Court of Appeals under Const 1963, art 9, § 32.4 In this

case, plaintiffs have brought suit under art 9, § 32,

alleging that the Legislature violated the second provision

of art 9, § 29 by requiring new activities and increases in

existing activities without providing sufficient additional

funding. Because of the extensive history of similar

litigation between these parties, a brief review of the

earlier suits is required.

II. HISTORY

Many of these plaintiffs have brought allegations of

underfunding against these defendants in earlier suits. In

1980, the first of these suits was filed; it was not

resolved until seventeen years later. Durant v Michigan,

456 Mich 175; 566 NW2d 272 (1997) (Durant I). Chiefly at

issue in Durant I was a reduction in state funding for

special education activities. Ultimately, this Court not

only granted declaratory relief for the plaintiffs, but

also, in an award that deeply divided the Court on the

issue of the Court’s authority, awarded money damages. In

4
The remedy provision reads:
Any taxpayer of the state shall have
standing to bring suit in the Michigan State
Court of Appeals to enforce the provisions of
Sections 25 through 31, inclusive, of this
Article and, if the suit is sustained, shall
receive from the applicable unit of government
his costs incurred in maintaining such suit.

this case, there is no claim for damages and we need not

revisit the issue of the propriety of a damages award, but

would note that even the proponents of money damages in

Durant I described it as “atypical” and predicated the

claim for the award on the prolonged duration of Durant I.

Subsequently, the Legislature, perhaps taken aback by the

monetary damages award, undertook to work statewide equity

by making available similar relief to those local and

intermediate school districts that were not plaintiffs in

Durant I. As the legislation described it, it was to be in

“settlement and compromise of any claim or claims that were

or could have been asserted by these districts and

intermediate districts” in the Durant I litigation. MCL

388.1611f(1), (2), (4). To receive the settlement funds,

however, a school district had to provide the State

Treasurer with a board resolution

waiving any right or interest the district or
intermediate district has or may have in any
claim or litigation based on or arising out of
any claim or potential claim through September 3,
1997 that is or was similar to the claims
asserted by the plaintiffs in the consolidated
cases known as Durant v State of Michigan. [MCL
388.1611f(1). Similarly, see MCL 388.1611f(2).]

Three hundred eighty-two of the local and intermediate

school districts named as plaintiffs in the instant suit

adopted the statutorily prescribed resolution, timely sent

the executed resolutions to the State Treasurer, and

received settlement payments.5

Several months later, in 1998, plaintiffs taxpayers

and school districts brought a second suit, alleging that

the system the state used for distributing funds resulted

in an underfunding of the schools for the years 1997-1998

through 2000-2001 in violation of the Headlee Amendment.

Durant v Michigan (On Remand), 238 Mich App 185; 605 NW2d

66 (1999) (Durant II). The Court of Appeals granted

declaratory relief largely in the plaintiffs’ favor. This

Court denied leave on the substantive issues of the case.

462 Mich 882 (2000).

A year later, similar plaintiffs returned to file two

suits. In the first, Durant v Michigan, 251 Mich App 297;

650 NW2d 380 (2002) (Durant III), the plaintiffs alleged

that 2000 PA 297, which had been enacted in response to

Durant II to cure the deficiencies the Court had found in

the State School Aid Act, MCL 388.1601 et seq., was

constitutional. However, the Court of Appeals found this

system was constitutional, and this Court denied leave.

467 Mich 900 (2002). The second lawsuit, which is the

subject of this appeal, was similar to Durant I except,

5
For further discussion of the settlement and
resolution, see the Court of Appeals opinion in this case,
Adair, 250 Mich App 691.

unlike Durant I, which focused on the first sentence of art

9, § 29, the MOS clause, this action focused on the second

sentence, the POUM clause. Thus, plaintiffs claim that the

state did not provide sufficient funding for activities

that were new or were mandated to be provided at increased

levels, causing a Headlee-prohibited unfunded mandate.

Specifically, plaintiffs alleged in count I that,

through seven administrative rules,6 the state mandated that

the school districts provide a variety of new special

education activities and services7 and then failed to fund

those activities. In count II, they alleged that, pursuant

to MCL 380.1284, school districts were required to increase

annually the hours of pupil instruction without increased

state funding.8 Count III alleged that, through twelve

6
These are: 1999 AC, R 340.1721e, R 340.1738, R
340.1740, R 340.1744, R 340.1745, R 340.1750, and R
340.1758.
7
These include provisions for transitional services, a
lower student-teacher ratio in four different situations, a
classroom aide, adaptive devices, a director of special
education, and autistic services.
8
In 1978, local school districts were required to
provide a minimum of 900 hours of pupil instruction a year;
the statute increased this incrementally, requiring 1134
hours by 2006-2007.

statutes9 and Executive Order No. 2000-9, the state mandated

local districts to provide activities and services not

required in 1978,10 again without providing funding.

9
MCL 380.622, 380.1169, 380.1272a, 380.1277, 380.1278,
380.1279, 380.1280, 380.1282, 380.1282a, 380.1527,
388.1752, and 257.1851.
10
The Court of Appeals opinion succinctly described
these as
(1) an annual financial records audit by a
certified public accountant for intermediate
school districts; (2) the instruction of students
regarding dangerous communicable diseases; (3)
specialized training for teachers regarding human
immunodeficiency virus infection and acquired
immunodeficiency syndrome; (4) the provision of a
breakfast program; (5) the annual development and
implementation of a three- to five-year school
improvement plan [the “school improvement plan”
obligation]; (6) the development of a continuing
school improvement process; (7) the provision of
a core academic curriculum; (8) the
administration of state assessment tests to high
school pupils; (9) the provision of remedial
educational services and periodic retesting for
pupils who fail the required assessment tests;
(10) the accreditation of school buildings; (11)
the provision of “learning processes” and special
and sufficient assistance to each pupil in order
to enable each pupil to achieve a state-endorsed
diploma [the “special assistance” obligation];
(12) the provision of summer school classes for
pupils who fail to meet standards for basic
literacy skills or basic mathematics skills by
the end of the third grade year; (13) the
provision of a minimum of four days of “teacher
professional development” in the 2000-01 school
year and a minimum of five days in the 2001-02
school year and each subsequent school year; (14)
the creation and maintenance of data on
“essential student data elements” and the
transmission of this data through the Internet in
a standardized form to the Department of
(continued…)
10
Defendants moved for summary disposition of all counts

pursuant to MCR 2.116(C)(7) (claim barred as a matter of

law) and C(8) (failure to state a claim on which relief can

be granted), as well as summary disposition of count I

pursuant to C(10) (no genuine issue of material fact).

Defendants argued chiefly that, under C(7), plaintiffs

were barred by the doctrine of res judicata because of the

Durant I litigation and by release and waiver because of

the statutorily required release they had executed pursuant

to the Legislature’s post-Durant I enactment, MCL

388.1611f. Defendants further argued that the claims

failed either as a matter of law under C(8) or as a matter

of fact under C(10) because plaintiffs did not sufficiently

allege the type or the extent of the necessary increased

costs of new activities. See Oakland Co, 456 Mich 166.

Plaintiffs responded that res judicata did not apply

because Durant I resolved only issues relating to the first

sentence of art 9, § 29, whereas this action concerns the

second sentence. Furthermore, they asserted that res

judicata was inapplicable because the relief they sought

(continued…)
Education . . . [the “record-keeping”
obligation]; and (15) the provision of
compensation to school bus drivers for time spent
attending various training and tests. [250 Mich
App 699-701.]

was prospective and covered a different period than that

covered by Durant I. With regard to those plaintiffs who

signed the statutory release, they claimed they should not

have lesser rights than the actual litigants and that

furthermore the release permits claims arising after the

release date. Regarding the C(10) factual issues,

plaintiffs asserted that their proofs would show sufficient

factual support for their claims.

The Court of Appeals majority ruled for defendants on

all counts. 250 Mich App 715. It found that, under MCR

2.116(C)(7), all the plaintiffs who were also plaintiffs in

Durant I were barred by res judicata because the present

claims, except for one activity alleged in count III, could

have been raised in the earlier suit. 250 Mich App 706.

Reinforcing this point, the Court found that because some

plaintiffs had raised POUM claims, all plaintiffs were

barred because those raising POUM issues effectively

represented the interests of the others. The majority also

found that the districts that had signed releases were

similarly barred under C(7) because the release expressly

applied to “any claim or potential claim . . . similar to

the claims asserted by the plaintiffs in [Durant I],” and

the alleged underfunding predated the releases. 250 Mich

App 708, 710. Thus, the majority reasoned, these

plaintiffs had no more rights than the parties who had
12
actually litigated Durant I, and all claims, with the one

exception discussed below, were disposed of pursuant to MCR

2.116(C)(7).

The remaining claim, that the record-keeping

requirements found in MCL 388.1752 and EO 2000-9 imposed a

new or increased mandate, was found by the Court of Appeals

not to violate the Headlee Amendment. The majority

concluded that these requirements predated Durant I and

thus could have been raised in Durant I. In considering

MCL 388.1752, it pointed out that the obligations imposed

by the statute already existed in 1978. Further, any later

amendments of the statute simply renumbered it11 and defined

the scope of the obligation.12 250 Mich App 712.

Accordingly, it was the Court’s view that the amendment did

not violate Headlee because “[c]larifying nonsubstantive

changes in an earlier, existing state law does not

constitute a new activity or service or increase in the

level of an existing activity or service. MCL 21.233(7).”

Id. With regard to EO 2000-9 and its standards for uniform

reporting of information, the majority found that they were

merely designed to streamline a process that had existed

before Headlee and thus did not mandate new activity. 250

11
1979 PA 94, § 512.

12
1989 PA 197, § 152.

Mich App 713-714, citing Judicial Attorneys Ass’n, supra at

605. Therefore, with regard to these record-keeping

requirement issues, the Court granted defendants’ motion

for summary disposition pursuant to MCR 2.116(C)(10).

Reinforcing this last holding, the Court of Appeals

noted that the record-keeping activities were

administrative functions that “constitute the essence of

the state’s constitutional obligation to ‘maintain and

support a system of free public education and secondary

schools . . . .’ Const 1963, art 8, § 2,” and accordingly

fell outside the restrictions of the Headlee Amendment.

250 Mich App 714.

Plaintiffs sought leave to appeal to this Court,

raising the same arguments they brought in the Court of

Appeals to challenge defendants’ motion for summary

disposition. We granted leave. 467 Mich 919 (2002).

III. STANDARD OF REVIEW

The question whether res judicata bars a subsequent

action is reviewed de novo by this Court. Pierson Sand &

Gravel, Inc v Keller Brass Co, 460 Mich 372, 379; 596 NW2d

153 (1999). Whether the Court of Appeals properly

determined that release barred those plaintiffs pursuant to

MCR 2.116(C)(7) is likewise reviewed de novo. Maskery v

Univ of Michigan Bd of Regents, 468 Mich 609, 613; 664 NW2d

165 (2003).
14
We also review de novo the Court’s decision to grant

or deny summary disposition. Maiden v Rozwood, 461 Mich

109, 118; 597 NW2d 817 (1999). “A motion under MCR

2.116(C)(8) tests the legal sufficiency of the complaint.

All well-pleaded factual allegations are accepted as true

and construed in a light most favorable to the nonmovant.”

Maiden, supra at 119. The motion “may be granted only

where the claims alleged are ‘so clearly unenforceable as a

matter of law that no factual development could possibly

justify recovery.’” Id. (citation omitted). We discussed

this pleading requirement as it pertains to Headlee claims

in Oakland Co, supra at 166 (opinion by Kelly, J.):

Under Durant [I], future plaintiffs must
allege the type and extent of the harm so that
the court may determine if a § 29 violation
occurred for purposes of making a declaratory
judgment. In that way, the state will be aware
of the financial adjustment necessary to allow
for future compliance.[13]

In a C(10) motion, testing the factual sufficiency of

the complaint, we consider “the substantively admissible

evidence actually proffered in opposition to the motion.”

Maiden, supra at 121. Thus, when such a motion is properly

brought, the nonmovant must, under MCR 2.116(G)(3)(b) and

13
Although Oakland Co dealt with MOS claims, as we
noted in Judicial Attorneys Ass’n, supra at 598 n 2, that
does not make it “inapplicable to an analysis of the second
sentence of § 29.” Thus, the requirements of POUM claims
are, in this respect, similar to MOS claims.

2.116(G)(4), produce admissible support for its opposition

in order to defeat the motion.

IV. ANALYSIS

A. Res judicata

In discussing res judicata in the context of a Headlee

claim, it is important to begin by asking how the

constitutional ratifiers of Headlee, the citizens of

Michigan, would have envisioned the handling of repeated

relitigation of the same issue. We ask this because it is

their understanding that must control. As we have observed

many times:

A constitution is made for the people and by
the people. The interpretation that should be
given it is that which reasonable minds, the
great mass of the people themselves, would give
it. “For as the Constitution does not derive its
force from the convention which framed, but from
the people who ratified it, the intent to be
arrived at is that of the people, and it is not
to be supposed that they have looked for any dark
or abstruse meaning in the words employed, but
rather that they have accepted them in the sense
most obvious to the common understanding, and
ratified the instrument in the belief that that
was the sense designed to be conveyed.”
[American Axle & Mfg, Inc, v Hamtramck, 461 Mich
352, 363; 604 NW2d 330 (2000), quoting 1 Cooley,
Constitutional Limitations (8th ed), p 143.]

We consider it apparent that the people would have

thought, as with all litigation, there would be the

traditional rules that would preclude relitigation of

similar issues by similar parties: that is, the area of law

we describe formally as encompassed by the doctrine of res
16
judicata. We must then consider res judicata and apply it

to this unique Headlee situation.

The doctrine of res judicata is employed to prevent

multiple suits litigating the same cause of action. The

doctrine bars a second, subsequent action when (1) the

prior action was decided on the merits, (2) both actions

involve the same parties or their privies, and (3) the

matter in the second case was, or could have been, resolved

in the first. Sewell v Clean Cut Mgmt, Inc, 463 Mich 569,

575; 621 NW2d 222 (2001). This Court has taken a broad

approach to the doctrine of res judicata, holding that it

bars not only claims already litigated, but also every

claim arising from the same transaction that the parties,

exercising reasonable diligence, could have raised but did

not. Dart v Dart, 460 Mich 573, 586; 597 NW2d 82 (1999).

Examining the Sewell factors, we note that it is

uncontested that Durant I was decided on its merits. In

Durant I we resolved the question of the state’s ability

under Headlee to reduce funding, in the circumstances there

presented, for existing programs.

With respect to the second res judicata requirement,

that the parties in the later suit be the same or be those

in privity with them, plaintiffs acknowledge that there is

some overlap among the school districts, but assert it is

not complete and the individual taxpayers are also not
17
identical. This defense implicates the scope of the

concept of “privity.”

To be in privity is to be so identified in interest

with another party that the first litigant represents the

same legal right that the later litigant is trying to

assert. Baraga Co v State Tax Comm, 466 Mich 264, 269-270;

645 NW2d 13 (2002). The outer limit of the doctrine

traditionally requires both a “substantial identity of

interests” and a “working functional relationship” in which

the interests of the nonparty are presented and protected

by the party in the litigation. Id., quoting Baraga Co v

State Tax Comm, 243 Mich App 452, 456; 622 NW2d 109 (2000),

citing Phinisee v Rogers, 229 Mich App 547, 553-554; 582

NW2d 852 (1998). In litigation concerning the MOS or POUM

provisions of the Headlee Amendment, Const 1963, art 9, §

29, where a taxpayer or a local unit of government is suing

the state, the issue is whether the Legislature’s act is

unconstitutional as it applies not just to a single local

unit of government, but to all local units affected by the

legislation. In such cases, the interests of all similar

local units of government and taxpayers will almost always

be identical. If the relief sought by one plaintiff to

remedy a challenged action is indistinguishable from that

sought by another, such as when declaratory relief is

sought concerning an act of the Legislature establishing
18
the proportion of state funding for local government units,

the interests are identical.

Thus, for the purposes of the second Sewell factor, a

perfect identity of the parties is not required, only a

“substantial identity of interests” that are adequately

presented and protected by the first litigant. We find

that the interests of the current plaintiffs were, for

Headlee purposes, adequately represented by the plaintiffs

in Durant I. The taxpayer parties all have the same

interest: that mandated activities are funded as they are

required to be under the Headlee Amendment. These

interests were presented and protected by the extensive and

thorough litigation that occurred in Durant I.14 Thus, we

find the current taxpayer plaintiffs are in privity with

the Durant I plaintiffs.15

14
We find Justice Kelly’s implication (post at 4 n 2)
that any taxpayer moving to the state after 1997 could
relitigate any Durant I claim unreasonable not merely
because it would be burdensome to the parties and the
courts but also because it would preclude ever having a
final answer upon which state and local governments could
confidently act. It is indeed such concerns that have
animated the judicial utilization of the doctrine of res
judicata. As we said in In re MCI, 460 Mich 396, 431 n 7;
596 NW2d 164 (1999), “The doctrine of res judicata was
judicially created in order to ‘relieve parties of the cost
and vexation of multiple lawsuits . . . .’”
15
This is not to say, as Justice Weaver suggests (post
at 6), that these plaintiffs lack standing. Any taxpayer
may bring a claim—that is, any taxpayer has standing. If
(continued…)
19
We find the school districts, again for Headlee

purposes, also have the same legal interest protected by

the Durant I plaintiffs and are similarly in privity. In

this case, particularly because only declaratory relief,

not damages, was sought, it is evident that all school

districts have the same interest.

Finally, concerning the last element of res judicata,

we must decide whether the matter in the second case was or

could have been resolved in the first. Res judicata bars

every claim arising from the same transaction that the

parties, exercising reasonable diligence, could have raised

but did not. Sewell, supra at 575-576. This Court has

noted that “[r]es judicata bars a subsequent action between

the same parties when the evidence or essential facts are

identical.” Dart, supra at 586. This statement refers to

what is generally called the “same evidence” test. Because

there appears to be some confusion regarding the

relationship between the “same transaction” test and the

“same evidence” test, we take this opportunity to provide

clarification.

The “same transaction” test and the “same evidence”

test are alternative approaches used in determining the

(continued…)

the claim concerns an issue that has already been the

subject of litigation, it is subject to the doctrine of res

judicata.

applicability of res judicata. As stated by the Illinois

Supreme Court in River Park, Inc v Highland Park, 184 Ill

2d 290, 307-309, 703 NE2d 883 (1998) (citations omitted):

Under the "same evidence" test, a second
suit is barred "if the evidence needed to sustain
the second suit would have sustained the first,
or if the same facts were essential to maintain
both actions." The "transactional" test provides
that “the assertion of different kinds or
theories of relief still constitutes a single
cause of action if a single group of operative
facts give rise to the assertion of relief.”

* * *

[U]nder the same evidence test the
definition of what constitutes a cause of action
is narrower than under the transactional test.
As explained in the Restatement (Second) of
Judgments, the same evidence test is tied to the
theories of relief asserted by a plaintiff, the
result of which is that two claims may be part of
the same transaction, yet be considered separate
causes of action because the evidence needed to
support the theories on which they are based
differs. By contrast, the transactional approach
is more pragmatic. Under this approach, a claim
is viewed in “factual terms” and considered
“coterminous with the transaction, regardless of
the number of substantive theories, or variant
forms of relief flowing from those theories, that
may be available to the plaintiff; * * * and
regardless of the variations in the evidence
needed to support the theories or rights.”

Because this Court has accepted the validity of the

broader transactional test in Michigan, we need not

consider as dispositive plaintiffs’ assertions that the

evidence needed to prove this case is different than was

needed in Durant I. Although that fact may have some

relevance, the determinative question is whether the claims
21

in the instant case arose as part of the same transaction

as did the claims in Durant I. “Whether a factual grouping

constitutes a ‘transaction’ for purposes of res judicata is

to be determined pragmatically, by considering whether the

facts are related in time, space, origin or motivation,

[and] whether they form a convenient trial unit . . . .”

46 Am Jur 2d, Judgments § 533, p 801 (emphasis added).

With the limited exception of several count III claims

discussed below, the statutory and regulatory requirements

complained of in this case, and alleged to be “new” or

“increased” activities since Headlee was enacted, existed

during the pendency of Durant I. Moreover, the

requirements, like those in Durant I, have been imposed by

the Legislature and executive bodies on local school

districts for the purpose of providing public education.

Thus, they are related to one another in “time, space [and]

origin.” Further, because the allegations in both this

case and Durant I concern the Headlee Amendment, the claims

are related by “motivation” as well. As pleaded, we find

no indication that plaintiffs, with due diligence, could

not have asserted these claims during the pendency of

Durant I. Indeed, some of the claims in this case were

actually claimed in Durant I.16

Therefore, with the several count III exceptions

discussed below, we agree with the Court of Appeals that

plaintiffs’ claims in this case arose from the same

transactions as did the Durant I claims and that

plaintiffs, exercising due diligence, could have filed them

during the pendency of Durant I.17 Thus, plaintiffs’ claims

are barred by res judicata.

Moreover, we note that, were this Court to adopt the

approach of Justice Kelly’s dissent, which essentially

removes Headlee declaratory judgment actions from the

general rules of res judicata, we would be subjecting the

state to litigate and relitigate a potentially endless

barrage of repetitive claims with only the plaintiffs

16
Although plaintiffs’ brief to this Court asserts
that their complaint specifically claimed that the state
failed to meet its funding obligation “by operation of the
2000 amendment to the Act, 2000 PA 297,” no such claim or
enactment was alleged in the complaint. Contrary to
Justice Cavanagh’s assertion, we do not create here a “new
requirement” for pleading. Post at 5. We simply note
that, as pleaded (including plaintiffs’ response to
defendant’s motions to dismiss), plaintiffs’ claims were
indistinguishable from those of Durant I.
17
Plaintiffs offer no evidence that, during the
pendency of Durant I, they made any effort to add these
claims under MCR 2.118(E). We thus find no basis for their
assertion that they could not have litigated the claims in
the earlier suit.

changing.18 Justice Kelly would address this problem using

stare decisis rather than res judicata. While she does not

explain how this would work,19 we deduce that she prefers an

outcome where only those issues actually litigated would be

barred, because stare decisis would not apply to claims

that could have been brought in the first suit, but were

not. See Brown v Manistee Co Rd Comm, 452 Mich 354, 365-

366; 550 NW2d 215 (1996). Her approach using stare decisis

would allow each individual taxpayer in the state a chance

to bring a separate suit alleging similar, but not

identical, claims. It is, in short, an invitation to a

total paralysis of government, both state and local, as it

would deprive state and local officials, as well as

citizens, of the ability to know with finality what the law

is. Such an approach would surely bring the Headlee

protections into disrepute and thus jeopardize them. We

18
For example, under the approach of Justice Kelly’s
dissent, an individual taxpayer from the Saginaw School
District could file a particular claim on Monday that is
resolved, then a taxpayer from the Bay City School District
could file an identical claim on Tuesday that is resolved,
and a taxpayer from the Midland School District could file
an identical claim on Wednesday that is resolved, and so
on.
19
Indeed, stare decisis apparently would not work
here, as can be seen by Justice Kelly’s conclusion that all
the claims of the non-Durant I individual litigants would
be allowed by that doctrine, where we would find them
barred by res judicata.

decline to convert Headlee into such a Frankensteinian

monster because we see nothing in the Headlee Amendment

that suggests to us that the people, in passing the

Amendment, also planned to effectively sabotage it by

disregarding well-established rules of res judicata that

could make it workable.

B. Release and waiver

In enacting MCL 388.1611f, the Legislature created a

contract and a release with the local units of government.

The release states that the school district

waives any right or interest it may have in any
claim or potential claim through September 30,
1997 relating to the amount of funding the
district or intermediate district is, or may have
been, entitled to receive under the state school
aid act of 1979, 1979 PA 94, MCL 388.1601 to
388.1772, or any other source of state funding,
by reason of the application of section 29 of
article IX of the state constitution of 1963,
which claims or potential claims are or were
similar to the claims asserted by the plaintiffs
in the consolidated cases known as [Durant I].
[MCL 388.1611f(8).]

The scope of a release is controlled by the language

of the release, and where, as here, the language is

unambiguous, we construe it as written. Batshon v Mar-Que

Gen Contractors, Inc, 463 Mich 646, 650; 624 NW2d 903

(2001).

After Durant I was finally resolved, the Legislature

wanted to produce an outcome relating to the nonlitigating

districts equivalent to those that litigated. Thus, funds
25
were appropriated, conditioned on the recipient executing a

release, which would place the recipient in a position

comparable to that of the Durant I litigants. Accordingly,

the recipients, having executed the release, are also

barred from raising not only claims actually asserted in

Durant I, but also all claims or potential claims through

September 30, 1997, that are similar to those that were

asserted. That being the case, we agree with the Court of

Appeals that, pursuant to MCR 2.116(C)(7), those districts

agreeing to the release are barred from raising the claims

of counts I and II, and all but three claims of count III,

because those claims existed before September 30, 1997, and

they are similar to the claims asserted in Durant I.

C. Claims arising after 1997

Of all plaintiffs’ claims concerning the seven

administrative rules, thirteen statutes, and one executive

order, only a few involve post-Durant I mandates. Of the

seven administrative rules identified in count I, six were

promulgated in 1987 and one in 1983. Thus, none postdates

Durant I, and the analysis in the res judicata and release

sections of this opinion applies to bar these claims.

Regarding count II, it concerns MCL 380.1284, for which the

last amendment making substantive changes to mandated

activities was 1995 PA 289. Thus, it similarly is barred.

With regard to count III, one claim was withdrawn and one
26
of the identified statutes was repealed.20 Of the remaining

ten statutes,21 only two, MCL 380.1277 and 380.1282, include

changes regarding activities added after Durant I. The

executive order also postdates Durant I, having been issued

in 2000.

This leaves, then, these three claims that arguably

are based on post-Durant I mandates. The first we turn to

is the record-keeping activity claimed by plaintiffs to

result from the interaction of MCL 388.1752 and EO 2000-9.

We determine that the Court of Appeals erred in concluding

that the statute and the order do not mandate new

activities within the meaning of the Headlee Amendment. At

the time the Headlee Amendment became effective, the

statute required the school districts to “furnish to the

department [of education] those reports as the department

considers necessary for the determination of the allotment

of funds under this act.”22 1977 PA 90, § 152. This

provision was further amended by 1989 PA 197, § 152, which

20
The claim concerning MCL 380.622 was withdrawn, and
MCL 380.1282a was repealed.
21
These are: MCL 380.1169, 380.1272a, 380.1277,
380.1278, 380.1279, 380.1280, 380.1282, 380.1527, 388.1752,
and 257.1851.
22
As noted above, this provision was, in 1978,
codified at MCL 388.1552, and renumbered by 1979 PA 94, §
152, and amended by 1989 PA 197, § 152.

required schools to provide information “necessary for the

administration of this act and for the provision of reports

of educational progress . . . .” Thus, during the pendency

of Durant I, plaintiffs were already under a broad

obligation to report to the state whatever information it

required pursuant to its statutory duties. The Headlee

Amendment is not necessarily implicated when the state

increases or changes what information it requires because

the schools’ obligation to provide that information has

existed since before the time Headlee was effective. See

Judicial Attorneys Ass’n, 460 Mich 599-600.

However, the executive order, which established the

Center for Educational Performance and Information,

empowered the Center to incorporate or implement two

statewide databases: the Michigan Education Information

System and the Database for Educational Performance and

Information. Plaintiffs alleged that this requires school

districts to create and maintain student data on an ongoing

basis following state-specified data-gathering procedures

and to transmit those data over the Internet to the state.

The allegation here is that the state is not merely

requiring different data from the school districts, but

also requiring the districts to actively participate in

maintaining data that the state requires for its own

purposes. An off-loading of state funding responsibilities
28
onto local units of government without the provision of

funds presents a colorable claim under Headlee. See

Judicial Attorneys Ass’n, supra at 603. In short,

plaintiffs here alleged new requirements that were not

funded at all. Accepting plaintiffs’ allegations as true,

we find, at this stage in the proceedings, they have

sufficiently stated a claim on which relief can be granted

and thus this POUM claim survives defendants’ C(8) motion.

Oakland Co, supra, at 166.23 Furthermore, we note that,

while the Court of Appeals granted summary disposition on

this claim pursuant to MCR 2.116(C)(10), defendants’ motion

actually sought only C(7) and C(8) dismissal with regard to

count III. If defendants had argued under a C(10) motion,

plaintiffs would have been obliged to provide evidentiary

support for their claims. However, under a C(8) motion, no

such support is required. Thus, concerning the record-

keeping activity, we find plaintiffs sufficiently stated a

claim on which relief could be granted, and we reverse the

Court of Appeals dismissal of this claim. On remand, the

parties may explore the factual support for plaintiffs’

23
The dissenting opinion in the Court of Appeals urges
the taking of testimony and fact-finding by a special
master before a decision is made on defendants’ motion.
250 Mich App 715-716. We find that unauthorized because a
C(8) motion is based on the pleadings alone. MCR
2.116(G)(5).

allegations that this constitutes a new, unfunded mandate

in violation of the Headlee Amendment.

The second post-Durant I activity involves special

assistance to students having academic difficulty and is

embodied in MCL 380.1282, last amended by 1997 PA 181. The

amendment, added to the existing statute after Durant I,

was permissive. That is, it identified special assistance

a school district “may” provide to pupils experiencing

academic difficulties. Such optional programs are

expressly excluded from being “requirements” by MCL

21.234(5)(h), and thus are beyond the scope of the Headlee

POUM clause as a matter of law.24

Similarly, the statute setting forth the third “new”

activity, MCL 380.1277, was amended in 1997 to change the

elements that must be included in a school improvement

plan. That amendment added some elements and removed some,

but the changes in essence simply reworded the criteria

24
Justice Kelly’s dissent, correctly pointing out that
MCL 380.1282 includes a “meeting” activity that is merely
permissive in that statute but mandated in MCL 380.1279,
asserts that when these two statutes are read together, the
result is a new, mandatory activity. Post at 5. We
disagree. The mandate of MCL 380.1279 was effective in
1993 and thus any claim that the meeting is a new mandate
is barred for the same reasons as the other pre-Durant I
claims. The meeting guidelines set forth in MCL 380.1282
are, indeed, new to that statute, but they existed verbatim
in the pre-Durant I version of MCL 380.1279. They,
therefore, are not new.

that existed before 1997.25 We therefore find that these

changes did not impose any “new” or “increased”

requirements on the schools as a matter of law.

25
For example, before the amendment, school
improvement plans had to include:
(a) Identification of the adult roles for
which graduates need to be prepared.

(b) Identification of the education and
skills that are needed to allow graduates to
fulfill those adult roles.

(c) A determination of whether or not the
existing school curriculum is providing pupils
with the education and skills needed to fulfill
those adult roles.

(d) Identification of changes that must be
made in order to provide graduates with the
necessary education and skills and specific
recommendations for implementing those changes.

(e) Development of alternative measures of
assessment that will provide authentic assessment
of pupils' achievements, skills, and
competencies.

(f) Methods for effective use of technology
as a way of improving learning and delivery of
services and for integration of evolving
technology in the curriculum.

(g) Ways to make available in as many fields
as practicable opportunities for structured on-
the-job learning, such as apprenticeships and
internships, combined with classroom instruction.

The 1997 amendment changed these to include:
(a) Goals centered on improving student
academic learning.

(b) Strategies to accomplish the goals.

of action regarding the record-keeping requirement, but

that neither of the other two post-Durant I mandates

identified by plaintiffs imposes POUM requirements on the

schools. These two requirements are either not “new” or are

permissive and thus not “mandates.” Thus, neither runs

afoul of the POUM funding requirement.

VI. CONCLUSION

Except for the record-keeping claim, we affirm the

decision of the Court of Appeals, concluding that, except

for three activities, the claims presented in the present

action are barred by res judicata or release. Regarding

the three post-Durant I activities, two are not “new

unfunded mandates” because, as pleaded, the activities are

simply not new or are merely permissive. With regard to

the record-keeping requirement set forth in MCL 388.1752

(continued…)
(d) Development of alternative measures of
assessment that will provide authentic assessment
of pupils' achievements, skills, and
competencies.

(e) Methods for effective use of technology
as a way of improving learning and delivery of
services and for integration of evolving
technology in the curriculum.

(f) Ways to make available in as many fields
as practicable opportunities for structured on-
the-job learning, such as apprenticeships and
internships, combined with classroom instruction.

and EO 2000-9, we find plaintiffs have sufficiently stated

a claim on which relief may be granted. We reverse the

Court of Appeals grant of summary disposition regarding

this claim, and remand the case to that Court for further

proceedings consistent with this opinion.

Clifford W. Taylor
Maura D. Corrigan
Robert P. Young, Jr.
Stephen J. Markman

S T A T E O F M I C H I G A N

SUPREME COURT

DANIEL ADAIR, a taxpayer of the
Fitzgerald Public Schools, and
FITZGERALD PUBLIC SCHOOLS, et al.,

Plaintiffs-Appellants,

v No. 121536

STATE OF MICHIGAN, DEPARTMENT
OF EDUCATION, DEPARTMENT OF
MANAGEMENT AND BUDGET, and
TREASURER OF THE STATE OF MICHIGAN,

Defendants-Appellees.
_______________________________

KELLY, J. (concurring in part and dissenting in part).

I agree with the reasoning of the majority in part

IV(C) of its opinion as it relates to: (1) the analysis of

the record-keeping activity resulting from the interaction

of MCL 388.1752 and Executive Order No. 2000-9 and (2) the

claims regarding what must be included in school

improvement plans under MCL 380.1277.

I further agree with the conclusion of part IV(B) of

the majority opinion. The releases signed by the plaintiff

school districts not involved in Durant I1 in 1997 were

designed to place those districts in a position similar to

that of the Durant I plaintiffs.

1
Durant v Michigan, 456 Mich 175; 366 NW2d 272 (1997).
However, I cannot agree that the "post-Durant I"

activities involving special assistance to students having

academic difficulty were solely permissive activities in

MCL 380.1282 as amended by 1997 PA 181. I respectfully

dissent from the majority’s holding and would remand the

case for further factual development of the claim involving

those activities.

Moreover, because I cannot agree with much of the

majority’s analysis concerning plaintiffs' remaining

claims, I respectfully dissent from the conclusion that

those claims were barred by res judicata. I would remand

the remainder of plaintiffs' claims to the Court of Appeals

for further substantive review.

I. Plaintiffs' "Post-Durant I Claims"
Involving Special Assistance.

The majority has chosen to find all but three of

plaintiffs' claims barred by res judicata. I will discuss

the three before proceeding to the remaining claims. As

stated above, I agree with the majority's treatment of the

alleged obligations under MCL 388.1752 and EO 2000-9, and

those under MCL 380.1277.

However, I cannot join the majority's decision

regarding the activities required by the 1997 changes to

MCL 380.1282, 1997 PA 181. The majority maintains that a

substantial number of the activities mandated in the

amendment are permissive activities, not included as "state

requirements" as described in MCL 21.234(5)(h). However,

MCL 380.1279, the statute outlining the requirements for

state endorsed diplomas mentioned in MCL 380.1282(2),

contains language that affects the review of the meeting

discussed by the majority concerning MCL 380.1282.

Specifically, one of the mandated activities in MCL

380.1279 is the meeting that the majority found to be

merely permissive in MCL 380.1282. Ante at 30. See MCL

380.1279(4). When the two statutes are read together, it

becomes clear that the allegedly new or increased

activities in MCL 380.1282 are mandatory, despite the

permissive language in MCL 380.1282.2

2
The particularities of MCL 380.1279 also provide an
example of the problem created by the majority's decision
to use the issuance date of Durant I as the cutoff date for
preclusion under res judicata. The first 1997 revision of
MCL 380.1279 made a number of changes to the language of
the state-endorsed high school diploma provision. However,
they did not become effective until June 16, 1997, which
was after Durant I was argued, but before the opinion was
issued. A litigant should not be expected to amend a
complaint after oral argument while this Court's decision
is pending at the risk of having his claim barred by res
judicata. Moreover, only a mandate coupled with
underfunding will give rise to a Const 1963, art 9, § 29
claim. Therefore, a cause of action concerning these
particular 1997 changes could arguably not accrue until at
least the 1997-1998 school year when the state failed to
fund the mandated activities.

II. Plaintiffs' Remaining "Pre-Durant I" Claims

I next address plaintiffs' claims that involve

activities mandated by statute or otherwise in existence

before this Court's Durant I decision on July 31, 1997. I

first question whether res judicata can be properly

applicable to these claims under the circumstances. In

order to invoke res judicata, a court must find that the

parties were in privity. In concluding here that the

nonparticipating school districts were in privity, the

majority focuses on the nature of the declaratory relief

sought in Durant I.3

3
The majority concludes that a taxpayer in a non-Durant
I school district stands in privity with Durant I school
district or nonschool district plaintiffs for res judicata
purposes. I disagree. As the majority notes, ante at 17-
18, the outermost limit of the doctrine requires both a
"'substantial identity of interests'" and a "'working
functional relationship,'" quoting Baraga Co v State Tax
Comm, 466 Mich 264, 269-270; 645 NW2d 13 (2002). The
taxpayer plaintiffs who were not involved in Durant I may
have interests similar to those of the other plaintiffs.
But I fail to see how they have a working functional
relationship with the Durant I plaintiffs. Moreover, some
of the taxpayers may not have been in the school districts
during the years preceding the majority's 1997 cutoff date.
Could they be bound by the actions of either set of school
district plaintiffs? Accordingly, given that the taxpayers
are the real parties in interest here, I particularly
question the application of res judicata to the non-Durant
I taxpayers. The majority expresses concern that
recognizing the lack of privity here will open the
floodgates to repeated litigation of exactly the same claim
with different plaintiffs. I acknowledge these concerns.
However, rather than rely on a strained application of
privity and res judicata, I would address them using the
(continued…)
4
However, I believe that the majority fails to

adequately discuss the proper application of res judicata

to declaratory judgments. I would find that our judgment in

Durant I does not preclude the claims that plaintiffs

allegedly "failed" to raise in that case.

I reach this conclusion in part through the language

of Durant I itself. The majority there gave a money

judgment to plaintiffs. But all justices agreed that

relief in future cases should be solely of a declaratory

nature. See Durant I, 205-206. In fact, the majority

clearly anticipated the continuing need for review and

declaratory relief in light of the fact that school

mandates and funding are ever changing:

[Const 1963, art 9, § 32] authorizes
taxpayers to file suit in the Court of Appeals to
enforce the provisions of § 29. As arduous as the
proceedings in this case have been, we have
succeeded in deciding many points of law that
will guide future decisions. Thus, there is every
reason to hope that future cases will be much
more straightforward. We anticipate that taxpayer
cases filed in the Court of Appeals will proceed
to rapid decision on the issue whether the state
has an obligation under art 9, § 29 to fund an
activity or service. The Court of Appeals would
give declaratory judgment on the obligation of
the state. If there was such an obligation, we
anticipate that the state would either comply
with that obligation no later than the next
ensuing fiscal year, unless it could obtain a

(continued…)

principle of stare decisis, along with possible sanctions

pursuant to MCR 2.114.

stay from this Court, or remove the mandate.
[Durant I, 456 Mich 205-206.]

The Durant I majority correctly recognized that, because of

the nature of the relief sought, res judicata would not bar

future claims concerning alleged mandates similar to those

actually reviewed in Durant I.

Also pertinent here is the discussion in Restatement

2nd, Judgments, § 33, p 332:

A valid and final judgment in an action
brought to declare rights or other legal
relations of the parties is conclusive in a
subsequent action between them as to the matters
declared, and, in accordance with the rules of
issue preclusion, as to any issues actually
litigated by them and determined in the action.
[Emphasis added.]

Thus, the general rule concerning declaratory relief is

that res judicata applies only to "matters declared” and

“any issues actually litigated . . . and determined in the

action.”

A comment to the Restatement, § 33 continues:

c. Effects as to matters not declared.
When a plaintiff seeks solely declaratory relief,
the weight of authority does not view him as
seeking to enforce a claim against the defendant.
Instead, he is seen as merely requesting a
judicial declaration as to the existence and
nature of a relation between himself and the
defendant. The effect of such a declaration,
under this approach, is not to merge a claim in
the judgment or to bar it. Accordingly,
regardless of outcome, the plaintiff or defendant
may pursue further declaratory or coercive relief
in a subsequent action. [Id., § 33, comment c, p
335.]

Hence, a declaration coupled with no other relief does not

bar a later claim or merge with it.

The problem with trying to apply a doctrine to

circumstances outside the norm is well illustrated by the

troublesome application of res judicata to the facts of

this case. Here, the majority concludes that all the "pre-

Durant I" mandates could have been raised in the earlier

Durant I litigation. Ante at 22-23.

I disagree that the claims here arose out of the same

"transaction" for the purpose of applying res judicata.4

The majority contends that a decision whether factual

grouping constitutes a "transaction" for the purposes of

res judicata involves a consideration of whether the facts

are related in "'time, space, origin, or motivation.'"

Ante at 22 (citation omitted; emphasis added in majority

opinion). As the majority recognizes, a number of the

claims in this case involve statutorily mandated activities

that came into existence only while the Durant I litigation

4
Although it is tangential to my analysis of the issues
here, I disagree with the majority's holding that "this
Court has accepted the validity of the broader
transactional test in Michigan . . . ." Ante at 21. It
cites Sewell v Clean Cut Mgmt, Inc, 463 Mich 569, 575-576;
621 NW2d 222 (2001), and Dart v Dart, 460 Mich 573, 586;
597 NW2d 82 (1999), for this proposition. However, in both
Sewell and Dart, we applied the "transactional" test and
the "same elements" test simultaneously. Id.

was pending. Yet the majority finds that these claims are

related in time, space, and origin. I disagree.

The statutory language at issue in a number of these

claims did not exist when plaintiffs filed suit in Durant

I. This fact is an illustration of the unfortunate snail’s

pace of much appellate process. However, I would not tie

the appellate courts' lack of speed to a finding that

claims arising from later statutory enactments were part of

the original "transaction."5

The new claims may be related to each other in

"motivation" and perhaps in "origin". But a finding that

they are related in "time" essentially requires the use of

the courts' lengthy Durant I deliberations as a vehicle for

time travel. Although interesting from a quantum

mechanic's perspective, I would not find that res judicata

can be applied to claims by the Durant I plaintiffs that

5
I think a more simple analogy may be useful. In year
one, plaintiff is involved in a vehicle accident with
defendant. Plaintiff files suit and defendant responds
that he was not negligent. That claim begins working its
way through our court system. It takes a year to reach the
appellate stage. Ironically, in year two, while the
appellate court ponders the initial question of negligence,
plaintiff and defendant are involved in a second accident.
The same cars, now repaired and on the roadway, are
involved. The first case is decided in favor of plaintiff.
However, plaintiff then brings a second suit for negligence
arising from the second accident. I doubt the majority
would find that the second claim is barred by res judicata.
Yet that is essentially what it decides here regarding the
Durant I plaintiffs.

involve statutory enactments effective after Durant I was

filed. Res judicata should not be ruled to bar these

"later" causes of action.

It took our courts seventeen years to decide the

limited issues actually before them in Durant I. In light

of that fact, I question that the piecemeal amalgamation of

claims suggested by the majority would have actually

created a "'convenient trial unit.'" Id. The majority

faults plaintiffs for failing to move to add claims under

MCR 2.118(E),6 to an ongoing declaratory judgment action

begun seventeen years before this Court's ultimate

decision. I do not. It would serve no useful purpose to

require plaintiffs to try to add these claims solely to

preserve their right to bring them later.

Plaintiffs raise an argument against ever applying res

judicata to claims arising from statutes in existence at

the time the Durant I complaint was filed. They assert

that a new "transaction" arises whenever the Legislature

amends statutory funding vehicles, such as 2000 PA 297, and

fails to include adequate funding to meet its obligations

under § 29. I find the argument persuasive.

Two requirements must be met in a § 29 action: a

mandate and a failure to fund. The proposal of a mandate

6
Ante at 23 n 17.

alone does not form the basis of a claim. It is only when

the mandate is unfunded, or underfunded, that the state has

violated § 29.

It is inappropriate to preclude the litigation of all

claims relating to changes over time in the funding levels

of a mandated program. . Such a preclusion would have

required the Durant I plaintiffs to become mind-readers and

to have anticipated all future funding decisions concerning

"pre-Durant I" mandates.

The majority fails to recognize that a § 29 claim

involves both a mandate and a funding decision. In so

doing, it focuses too narrowly on the specific language

pleaded in the complaint, rather than on the substance of

the underlying claims.

The majority effectively concedes that plaintiffs'

counsel in fact made such an assertion. During oral

arguments and in his appellate brief, counsel argued that

the state decreased its proportion of funding levels of a

mandated program after Durant I. Ante at 23 n 16. However,

the majority relegates this actual claim to a footnote,

without even a discussion of why plaintiffs were required

to plead with more specificity.7

I question what the purpose of plaintiffs' claims in

this declaratory action would be, if not to gain a

declaration that the state failed to meet its current

funding obligations. Language to this effect is included

in plaintiffs’ prayer for relief in the second amended

complaint. The only logical conclusion from the pleadings

is that plaintiffs sought relief because the state

decreased the funding levels of a mandated program from

that required under § 29.

In addition, the majority intimates that plaintiffs

could amend their pleadings to include such a claim. But

rather than simply recognizing the actual substance of

plaintiffs' claims, the majority forces plaintiffs to jump

through yet another hoop. It requires plaintiffs to make a

motion on remand under MCR 2.118(A)(2) or (E) to add the

claims to those that this Court has already directed the

Court of Appeals to entertain. I find this action contrary

to the purpose of res judicata generally and of no service

to the parties in this dispute.

7
I am not aware of any declaration by this Court that
there are pleading requirements particular to an action
claiming relief pursuant to the Headlee Amendment.

III. Conclusion

In conclusion, I agree with the majority's ruling that

the school district plaintiffs who were not involved in

Durant I agreed to be treated similarly to those who

participated in Durant I. However, I dissent from the

majority's disposition of plaintiffs' "pre-Durant I" claims

for the reasons stated. I would not hold that these claims

were barred by res judicata. Instead, I would remand them

to the Court of Appeals for review on the merits.

To the extent that the majority has reviewed

plaintiff's three "post-Durant I" claims, I agree with the

result reached regarding the alleged mandatory activities

under MCL 388.1752, EO 2000-9, and MCL 380.1277. However I

dissent from the majority's analysis of the activities

required under MCL 380.1282. I would instead remand this

claim to the Court of Appeals for further factual findings.

Marilyn Kelly

S T A T E O F M I C H I G A N

SUPREME COURT

DANIEL ADAIR, a taxpayer of
the Fitzgerald Public
Schools, and FITZGERALD
PUBLIC SCHOOLS, et al.,

Plaintiffs-Appellants,

v No. 121536

STATE OF MICHIGAN, DEPARTMENT
OF EDUCATION, DEPARTMENT OF
MANAGEMENT AND BUDGET, and
TREASURER OF THE STATE OF
MICHIGAN,

Defendants-Appellees.

_______________________________

WEAVER, J. (dissenting in part and concurring in part).

I respectfully dissent from the majority’s conclusion

that plaintiffs’ claims are barred by res judicata. The

majority’s broad application of res judicata to cases

arising under the Headlee Amendment1 eviscerates the

standing granted to taxpayers under art 9, § 32 of the

constitutional amendment and precludes suits in subsequent

years for subsequent funding violations of art 9, § 29.

Additionally, I dissent from the majority’s conclusion

that the release bars claims by those plaintiffs that

1
Const 1963, art 9, §§ 25-32.
signed releases after Durant I2 to receive a portion of the

money damages. More fact-finding is required to determine

which claims might be barred by the release.

While I disagree with the majority’s analysis of res

judicata and the release, I concur with the majority’s

conclusion that plaintiffs’ claim based on record-keeping

activities, MCL 388.1752 and Executive Order No. 2000-9,

should not be dismissed because plaintiffs have alleged new

activities that were not funded as Const 1963, art 9, § 29

requires.

For these reasons, I would reverse the decision of the

Court of Appeals and remand this case to that Court for

proceedings consistent with this opinion.

I. The Headlee Amendment and Res Judicata

Const 1963, art 9, § 29 provides in part:

The state is hereby prohibited from
reducing the state financed proportion of the
necessary costs of any existing activity or
service required of units of Local Government by
state law. A new activity or service or an
increase in the [level] of any activity or
service beyond that required by existing law
shall not be required by the legislature or any
state agency of units of Local Government, unless
a state appropriation is made and disbursed to
pay the unit of Local Government for any
necessary increased costs.

2
Durant v Michigan, 456 Mich 175; 566 NW2d 272 (1997).

Standing to pursue violations of this section, as well as

other sections of the Headlee Amendment, is given to all

taxpayers in the state. Const 1963, art 9, § 32 provides:

Any taxpayer of the state shall have
standing to bring suit in the Michigan State
Court of Appeals to enforce the provisions of
Sections 25 through 31, inclusive, of the
Article, and, if the suit is sustained, shall
receive from the applicable unit of government
his costs incurred in maintaining such suit.
[Emphasis added.]

Constitutional provisions, including those that

comprise the Headlee Amendment, are interpreted according

to the “common understanding” that the people would give

the provision. As explained by Justice Cooley:

“A constitution is made for the people
and by the people. The interpretation that
should be given it is that which reasonable
minds, the great mass of people themselves, would
give it. ‘For as the Constitution does not
derive its force from the convention which
framed, but from the people who ratified it, the
intent to be arrived at is that of the people,
and it is not to be supposed that they have
looked for any dark or abstruse meaning in the
words employed, but rather that they have
accepted them in the sense most obvious to the
common understanding, and ratified the instrument
in the belief that that was the sense designed to
be conveyed.’” [Traverse City School Dist v
Attorney General, 384 Mich 390, 405; 185 NW2d 9
(1971), quoting Cooley’s Const Limitations, p 81
(emphasis in original).]

Additionally, courts may consider the circumstances

surrounding the adoption of the provision and the purpose

sought to be accomplished. Id.

The majority cites the rule of common understanding

and opines that under the rule, the people would have

expected that the broad principles of res judicata

articulated in the majority opinion apply to cases seeking

enforcement of the provisions of the Headlee Amendment.

But the majority’s application of the rule is disingenuous

and its conclusion is unsupported by the language or

purpose of the amendment.

Art 9, § 32 gives “any taxpayer of the state” standing

to enforce the provisions of the Headlee Amendment. This

grant of standing is consistent with the amendment’s

purpose, which, as explained by this Court, is to limit the

expansion of legislative requirements placed on local

governments:

The Headlee Amendment was “part of a
nationwide ‘taxpayers revolt’ . . . to limit
legislative expansion of requirements placed on
local government, to put a freeze on what they
perceived was excessive government spending, and
to lower their taxes both at the local and state
level.” [Airlines Parking, Inc v Wayne Co, 452
Mich 527, 532; 550 NW2d 490 (1996), quoting
Durant v State Bd of Ed, 424 Mich 364, 378; 381
NW2d 662 (1985).]

Consequently, it is extremely doubtful that the people of

this state would have expected their ability to enforce the

Headlee Amendment to be hampered by the broad application

of res judicata that the majority imposes. Rather, as

explained below, a “common understanding” of the people

would suggest the opposite conclusion—that the

Constitution’s grant of standing under art 9, § 32 to “any

taxpayer” is just that—a broad grant of standing that

permits any taxpayer to pursue actions necessary to enforce

the provisions of the Headlee Amendment.

Traditionally, res judicata requires establishing

three elements: “(1) the first action was decided on the

merits, (2) the matter contested in the second action was

or could have been resolved in the first, and (3) both

actions involve the same parties or their privies.” Sewell

v Clean Cut Mgmt, Inc, 463 Mich 569, 575; 621 NW2d 222

(2001), quoting Dart v Dart, 460 Mich 573, 586; 597 NW2d 82

(1999). The majority applies this doctrine so broadly as

to eviscerate the standing that art 9, § 32 provides to

“any taxpayer” to pursue Headlee violations.

First, the majority’s analysis of “privity” is overly

broad when applied to Headlee cases. Privity examines the

interests of the parties and considers whether there is a

substantial identity of interests between the parties such

that the interests of the current plaintiffs were

adequately represented by parties in a prior suit—in this

case, the plaintiffs in Durant I. The majority reasons

that the interest of one taxpayer or local unit of

government “will almost always be identical” to “the

interests of all similar local units of government and

taxpayers,” ante at 19; consequently, the majority finds

privity between the plaintiffs in Durant I and the

plaintiffs in this case. Under the majority’s analysis,

any time that a school district or a taxpayer in a school

district raises a Headlee claim, there will be privity

between that plaintiff and all other school districts in

the state and taxpayers in those school districts. Thus,

one taxpayer’s decision to pursue a particular Headlee

claim may foreclose suit by any other taxpayer who wishes

to bring suit to enforce the Headlee Amendment. This

erodes the standing granted to any taxpayer in art 9, § 32

of the Headlee Amendment.

Second, when examining whether the claims raised in

this case could have been raised in Durant I, the majority

opines that almost all the claims could have, and

consequently should have, been raised in Durant I. This

conclusion is problematic for at least two reasons. First,

it is unrealistic to expect the plaintiffs in Durant I to

add new Headlee claims that arose as Durant I dragged its

way through the court system for seventeen years. Second,

as Justice Cavanagh notes in his dissent, the majority

focuses solely on one question when addressing this element

of res judicata: when the mandate being challenged was

enacted. However, in addition to considering when the

mandate was enacted, one must also consider when the lack

of funding occurred because, as Justice Cavanagh explains,

the lack of funding may not occur until some time after the

mandate was created .

By applying overly broad privity analysis and by

failing to consider when the lack of funding occurred, the

majority will bar suits by plaintiffs that seek to raise

yet unchallenged Headlee violations or to raise Headlee

violations occurring in subsequent years. This is

inconsistent with art 9, §§ 29 and 32 and contrary to the

people’s understanding that any taxpayer would have

standing to enforce the Headlee Amendment. While the

people may have understood that a specific taxpayer who

raised a specific claim and received a decision on that

specific claim could not pursue that claim a second time

once that claim had been decided by the courts, the people

could not have understood the broad grant of standing to

“any taxpayer” to mean that one taxpayer’s decision to

pursue a specific claim precludes another taxpayer from

pursuing another Headlee violation that may have existed,

but was not raised, in the suit by the first taxpayer.

Moreover, the people could not have understood that

subsequent suits for funding violations under art 9, § 29

would be barred if the mandate existed at the time another

Headlee violation was challenged because this would be

contrary to the very intent of that provision, which is to

prevent the Legislature in subsequent years from reducing

funding or from adding new activities or increasing the

level of activities without providing funding.

The majority surmises that its broad application of

res judicata is necessary to prevent a “total paralysis of

government,” ante at 25, and to provide finality in the

law. However, the majority fails to consider other facts

that will provide finality and discourage frivolous law

suits. First, as Justice Kelly notes in her dissent, if a

second claim by a different taxpayer raises an issue that

has already been decided by the Court of Appeals or this

Court in a previous suit, courts will be bound or guided by

stare decisis to apply the previous decision to the current

claim, and the case will quickly be resolved.3 Second, as

we all know, litigation is expensive, and plaintiffs only

have an opportunity to recover their costs if they prevail

3
Moreover, it seems unlikely that attorneys will
pursue a Headlee claim that has already been clearly
resolved by prior case law, unless they are arguing that a
change in the law is warranted.

on the merits of their suit. Thus, the cost of litigation

will discourage frivolous suits. Third, there is a one-

year statutory period of limitations on Headlee cases. MCL

600.308a(3).4 Thus, the Headlee Amendment is already

“workable” without the majority’s imposition of an

overbroad application of res judicata.

II. Release

A school district that was not a party to the Durant I

suit was permitted to receive a portion of the money

damages awarded in that suit, provided that the school

district signed a release that stated that the district

waive[d] any right or interest it may have in any
claim or potential claim through September 30,
1997 relating to the amount of funding the
district or intermediate district [was], or may
have been, entitled to receive under the state
school aid act of 1979, 1979 PA 94, MCL 388.1601
to 388.1772, or any other source of state
funding, by reason of the application of section
29 of article IX of the state constitution of
1963, which claims or potential claims are or
were similar to the claims asserted by the
plaintiffs in the consolidated cases known as
[Durant I]. [MCL 388.1611f(8).]

4
MCL 600.308a(3) provides:

A taxpayer shall not bring or maintain
an action under this section [Const 1963, art 9,
§ 32] unless the action is commenced within 1
year after the cause of action accrued.

Thus, the issue regarding any district that signed a

release after Durant I is whether any of the claims

asserted by that district in this case are barred by the

release.

As the majority notes, the scope of the release is

controlled by the language of the release, ante at 26. The

language of the release in the present case is very broad.

By it, the district waives “any right or interest it may

have in any claim or potential claim through September 30,

1997,” MCL 388.1611f(8), relating to the amount of funding

it may have been entitled to receive under the school aid

act of 1979 or any other source of state funding. Thus,

under the language of the release, there may be claims that

are barred by the release. However, I would not dismiss

any claims at this time. Additional fact-finding is

required to determine which plaintiffs in the present suit

signed releases in Durant I and to determine which claims,

if any, arose before September 30, 1997. When addressing

this latter question, one must consider not only when the

mandate being challenged was enacted, but also when the

failure to fund occurred.

While this may potentially lead to disparate results

between districts that were parties to the suit in Durant I

and districts that were not parties to the suit, but,

instead, participated in the damages award by signing a

release, these disparate results can be tolerated in the

present case because the circumstances are highly unusual

in two regards. First, money damages were awarded in

Durant I despite the fact that damages are not provided for

in § 29 or § 32 of the Headlee Amendment. See Durant I,

456 Mich 221-233 (opinions of Brickley, J., and Weaver, J.,

each concurring in part and dissenting in part).5 Second,

the school districts that signed releases were not actual

parties to the law suit, but were, nonetheless, allowed to

receive a portion of the damages if they signed a release.

Thus, they should be bound by the release that they signed.

III. Conclusion

I dissent from the majority’s conclusion that

plaintiffs’ claims are barred by res judicata. Such a

conclusion is contrary to the “common understanding” that

the people would give the Headlee Amendment, as well

contrary to the purpose or the language of the amendment.

The majority’s application of overbroad res judicata

principles to plaintiffs’ Headlee claims eviscerates the

standing granted to taxpayers under art 9, § 32 and will

5
I would have concluded that money damages were not
authorized by the Headlee Amendment and that only
declaratory judgment was appropriate. Durant I, 456 Mich
232-233.

preclude suits for subsequent funding violations of art 9,

§ 29. Further, at this time, I would not conclude that the

claims of plaintiffs that signed the release are barred by

the release because more fact-finding is required before

that determination can be made. Consequently, I would

reverse the decision of the Court of Appeals and remand

this case to that Court for proceedings consistent with

this opinion.

Elizabeth A. Weaver

S T A T E O F M I C H I G A N

SUPREME COURT

DANIEL ADAIR, a taxpayer of
the Fitzgerald Public
Schools, and FITZGERALD
PUBLIC SCHOOLS, et. al.,

Plaintiffs-Appellants,

v No. 121536

STATE OF MICHIGAN, DEPARTMENT
OF EDUCATION, DEPARTMENT OF
MANAGEMENT AND BUDGET, and
TREASURER OF THE STATE OF
MICHIGAN,

Defendants-Appellees.

_______________________________

CAVANAGH, J. (dissenting).

Although I agree with the majority that Michigan uses

the same transaction test to determine whether claims are

barred by res judicata, I disagree with the majority’s

application of that test to the facts of this case. The

majority holds that plaintiffs’ claims are barred by res

judicata because they arose from the same transaction as

the claims in Durant v Michigan, 456 Mich 175; 566 NW2d 272

(1997) (Durant I), and, thus, could have been filed while

that litigation was pending. I disagree.

In Sewell v Clean Cut Mgmt, Inc, 463 Mich 569, 575;

621 NW2d 222 (2001), this Court held that res judicata bars
a second action when (1) the first action was decided on

its merits, (2) both actions involve the same parties or

their privies, and (3) the issue in the second case was, or

could have been, resolved in the first case. I agree with

the majority that Durant I was decided on its merits and

that both actions involve the same parties or their

privies. However, I do not agree that plaintiffs’ claims

could have been resolved in Durant I.

Plaintiffs’ claims are based on a lack of funding for

certain activities and services. The majority examines

each activity or service and focuses on when each activity

or service was mandated in order to determine whether the

claim regarding that service is barred by res judicata.

This examination misses the point. Plaintiffs’ action

challenged funding under the second sentence of Const 1963,

art 9, § 29, frequently referred to as the “prohibition on

unfunded mandates” (POUM) clause. As noted by the

majority, the POUM clause requires the state to fully fund

any new or increased activities or services mandated or

increased after 1978. The POUM clause provides:

A new activity or service or an
increase in the [level] of any activity or
service beyond that required by existing law
shall not be required by the legislature or any
state agency of units of Local Government, unless
a state appropriation is made and disbursed to
pay the unit of Local Government for any

necessary increased costs. [Const 1963, art 9, §
29.]

A challenge under the POUM clause is to the funding

for the mandate, not to the mandate itself. Thus, when the

activity was mandated is important to determine whether it

was enacted after the 1978 base year, but it is not useful

in determining whether the current funding challenge is

barred by res judicata. The majority’s approach examines

whether each mandate existed while Durant I was pending;

that is not the operative question. The controlling

question is whether the alleged funding deficiency relating

to that mandate existed while Durant I was pending.1

Plaintiffs’ claims could not have been raised while

Durant I was pending because the claims are based on the

funding established in 2000 PA 297, which was not enacted

1
Although not necessary to my analysis, I note that
the majority asserts that the Durant I plaintiffs could
have amended their pleadings at any time during the
seventeen-year pendency of their suit. While MCR 2.118(E)
provides for liberal amendment of pleadings, it is
nonsensical to suggest that parties should move for leave
to amend their pleadings because of a change in the law
after judgment has been entered. Before today’s opinion,
this Court had not recognized the possibility that a trial
court may grant leave to amend pleadings after judgment has
been entered. Nor had this Court examined whether a party
may amend the pleadings while a case is pending on appeal.
I do not agree with the majority’s holding that a party may
amend its pleadings at any time before this Court issues a
final decision.

until three years after the resolution of Durant I. The

majority fails to recognize that plaintiffs pleaded that

the state decreased its proportion of funding levels of a

mandated program after Durant I. Because the funding

challenge arose after Durant I, plaintiffs’ claims are not

barred by res judicata.

Although it would have been helpful had plaintiffs’

complaint directly referred to 2000 PA 297, explicit

reference to the funding statute is not required in an

action in this state. Plaintiffs’ second amended complaint

contained three counts, each alleging, “Defendant state has

failed to pay plaintiff school districts for the necessary

increased costs of providing [the/these/said] activities

and services [set forth in subparagraphs 15 A-H, 19 A-G, or

22 A-L above].” This is clearly sufficient to satisfy

Michigan’s fact-pleading requirements.

MCR 2.111(B) requires a complaint to contain the

following:

(1) A statement of the facts, without
repetition, on which the pleader relies in
stating the cause of action, with the specific
allegations necessary reasonably to inform the
adverse party of the nature of the claims the
adverse party is called on to defend . . . .

This rule does not require, nor has this Court ever

required, a complaint to specifically state the statute

under which the cause of action arises. MCR 2.111(B) only

requires that the complainant provide the facts and “the

allegations necessary reasonably to inform the adverse

party of the nature of the claims . . . .” The second

amended complaint in this case did exactly that, it

outlined activities and services that were mandated under

specific statutory sections and then alleged that the state

failed to fund these activities and services.

Further, there are no specific pleading requirements

for claims filed under the Headlee Amendment. This Court

recently examined the pleading requirements for Headlee

Amendment cases and issued an order vacating the Court of

Appeals order and allowing the plaintiffs to amend their

pleadings. Duverney v Big Creek-Mentor Utility Auth, 677

NW2d 886 (2004). Because today’s majority opinion creates

a new requirement that complaints specifically refer to the

statute on which the claim is based, plaintiffs in this

case should certainly be allowed to amend their pleadings.

Because I do not agree that a party must specifically refer

to the funding statute in question, I would not dismiss

plaintiffs’ claims on this technicality. Therefore, I

respectfully dissent.

Michael F. Cavanagh

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