MICHIGAN CHARITABLE GAMING ASSOCIATION, AIM HIGH PROCEEDS, LLC, ALL 4 PLAY, LLC, RIVER LOUNGE, MICHIGAN JAYCEES, KIWANIS CLUB OF HASTINGS, VETERANS OF FOREIGN WARS OF THE UNITED STATES POST #702, SOUTH LYON POST 338 AMERICAN LEGION, ALLENDALE LIONS CLUB, MICHIGAN PUG RESCUE, GRANT ATHLETIC BOOSTERS CLUB, AMERICAN GI FORUM DETROIT, TEAM DIAMOND BMX, GOLDEN RETRIEVER RESCUE OF MICHIGAN, and A-1 BINGO SUPPLIES & GAMES, Plaintiffs-Appellees,
STATE OF MICHIGAN, GAMING CONTROL BOARD, and GAMING CONTROL BOARD EXECUTIVE DIRECTOR, Defendants-Appellants
This opinion is subject to revision before final publication in the Michigan Court of Appeals reports.
Court of Claims. LC No. 14-000112-MZ.
For MICHIGAN CHARITABLE GAMING ASSOCIATION, AIM HIGH PROCEEDS LLC, ALL 4 PLAY LLC, MICHIGAN JAYCEES, KIWANIS CLUB OF HASTINGS, VETERANS OF FOREIGN WARS OF THE UNITED STATES POST #702, SOUTH LYON POST 338 AMERICAN LEGION, ALLENDALE LIONS CLUB, MICHIGAN PUG RESCUE, Plaintiffs-Appellees: CHARLES E. BARBIERI, LANSING, MI.
For RIVER LOUNGE, Doing Business As: CHARLES E. BARBIERI, LANSING, MI.
Before: JANSEN, P.J., and METER and BECKERING, JJ. METER, J. (dissenting).
[310 Mich.App. 586] Jane M. Beckering, J.
Defendants, the State of Michigan, the Gaming Control Board, and the Gaming Control Board Executive Director, appeal as of right the order of the Court of Claims granting summary disposition under MCR 2.116(C)(10) to plaintiffs, the Michigan Charitable Gaming Association et al., and enjoining enforcement of recently promulgated administrative rules governing " millionaire parties" --a form of casino-style charitable gambling. We reverse the ruling of the Court of Claims, vacate the injunction, and remand for further proceedings.
I. PERTINENT FACTS AND PROCEDURAL HISTORY
This appeal concerns administrative rules that went into effect on May 14, 2014, and the process by which those rules
were promulgated. After conducting an investigation into millionaire parties, Richard Kalm, the Gaming Control Board Executive Director, and the [310 Mich.App. 587] Gaming Control Board (the agency), concluded that stricter regulations were necessary. In accordance with the Administrative Procedures Act, MCL 24.201 et seq. (APA), the agency filed a request for rulemaking authority with the Office of Regulatory Reinvention (ORR) under MCL 24.239 to promulgate new rules to govern millionaire parties. Upon ORR granting the request, the agency submitted a set of proposed rules, which ORR approved on September 20, 2013. Thereafter, the agency submitted a regulatory impact statement and a cost-benefit analysis, which were approved by ORR on October 8, 2013. The Legislative Service Bureau (LSB) returned the rules, with edits, on November 4, 2013, and the rules were resubmitted to ORR with a draft public-hearing notice. On November 22, 2013, a public hearing was held.
On the basis of comments made at the public hearing, the agency made several changes to the proposed rules that would lessen the regulatory burden on the industry. After certification from ORR and LSB, the agency submitted the rule set to the Legislature's Joint Committee on Administrative Rules (JCAR). JCAR held a hearing attended by the agency and members of the public. Following the hearing, JCAR Chair, Senator John Pappageorge, suggested that the rules be withdrawn so further changes could be made to address concerns raised by the public. Kalm and Pappageorge agreed that if the rules were withdrawn, amended, and resubmitted, JCAR would not object to the rules, and they would go into effect. After withdrawing the rules, the agency made the following changes that affected 3 of the 50 proposed rules:
1. The Executive Director was authorized to grant up to two millionaire party licenses per day per location instead of one.
[310 Mich.App. 588] 2. All expenses had to be necessary and reasonable and could not exceed 45% of the gross profits from an event, instead of 35%.
3. The rule requiring a charity to conduct its millionaire party in its county or an adjacent county was eliminated.
According to defendants, these changes were based on public comment.
Thereafter, the agency resubmitted the 2 remaining altered rules and the 47 unaltered rules to JCAR, along with an amended agency report to reflect the changes. Once again, the rules were certified by LSB and ORR. After JCAR did not take action within the allowed period for doing so, the rules were submitted to the Secretary of State on May 14, 2014. ORR filed the rules with the Office of the Great Seal on that same day. The rules were subsequently published in the Michigan Register on June 1, 2014.
The withdrawal, changes, and resubmission process in the preceding paragraph are the subject of this lawsuit. Specifically, plaintiffs contend that pursuant to MCL 24.245a(7), the rules could not be amended after they were withdrawn from consideration by JCAR. Defendants contend that the APA provides for the very procedure used in this case.
On May 22, 2014, plaintiffs initiated the instant proceedings by filing a complaint in the Court of Claims. Pertinent to this appeal, they alleged that the agency failed to comply with § § 41, 42, and 45, MCL 24.241, MCL 24.242, and MCL 24.245, of the APA with respect to the amended rules. They claimed that the agency failed to hold a public hearing on the new rules and that the agency failed to issue a new
regulatory impact statement or small business impact statement. In addition to filing their complaint, plaintiffs moved [310 Mich.App. 589] the Court of Claims for a preliminary injunction. On May 30, 2014, the Court of Claims issued a preliminary injunction enjoining the enforcement of the new rules, concluding, in pertinent part, that plaintiffs were likely to succeed on the merits of their challenge.
On July 10, 2014, plaintiffs filed a motion for summary disposition under MCR 2.116(C)(10). Defendants filed a cross-motion for partial summary disposition under MCR 2.116(C)(10), asserting that the rules were properly promulgated. Defendants contended that considering the text of the APA as a whole, the act does not require an agency to hold a second period of public comment or prepare a second regulatory impact statement before resubmitting amended rules to JCAR. Defendants argued that if the Legislature had intended to require an agency to hold a second public hearing or submit a second regulatory impact statement before resubmitting rules to JCAR, it would have included such language in the statute. Defendants argued that the only rational reason for the withdrawal-and-resubmission provision is to allow an agency to make changes in response to JCAR suggestions. As an alternative, defendants argued that even if plaintiffs were correct in their interpretation of the APA, only 3 of the proposed 50 rules had been amended, so the remaining 47 rules were properly promulgated and should be upheld.
On August 7, 2014, the Court of Claims granted plaintiffs' motion for summary disposition under MCR 2.116(C)(10), holding that the promulgated rules were invalid and dismissing as moot the remainder of plaintiffs' challenges. The court analyzed MCL 24.245a(7), which provides:
An agency may withdraw a proposed rule under the following conditions:
[310 Mich.App. 590] (a) With permission of the committee chair and alternate chair, the agency may withdraw the rule and resubmit it. If permission to withdraw is granted, the 15-session-day time period described in subsection (1) is tolled until the rule is resubmitted, except that the committee shall have at least 6 session days after resubmission to consider the resubmitted rule.
(b) Without permission of the committee chair and alternate chair, the agency may withdraw the rule and resubmit it. If permission to withdraw is not granted, a new and untolled 15-session-day time period described in subsection (1) shall begin upon resubmission of the rule to the committee for consideration.
The court reasoned that the reference in MCL 24.245a(7)(a) to " it" with regard to the rule that is withdrawn and can be resubmitted, " grammatically refers to the proposed rule that the agency withdrew." This meant that a rule that was resubmitted under the statute had to be the same as the rule that had been originally submitted to JCAR. As it indicated in granting a preliminary injunction, the court explained that it was " not persuaded by defendants' argument that an agency may withdraw a rule, change it, and 'resubmit' the changed rule to JCAR under § 24.245a(7)." Reviewing the rulemaking process under the APA, the court agreed with defendants that the APA allows an agency to make changes in proposed rules during the proceeding, such as after the public hearing given that MCL 24.245(2) expressly refers to changes in the ...