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Boler v. Governor

Court of Appeals of Michigan

June 14, 2018

BEATRICE BOLER, EDWIN ANDERSON, ALLINE ANDERSON, and EPCO SALES, LLC, Plaintiffs-Appellees,
v.
GOVERNOR, STATE OF MICHIGAN, DEPARTMENT OF ENVIRONMENTAL QUALITY, and DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendants-Appellees, and DANIEL WYANT, LIANE SHEKTER-SMITH, ADAM ROSENTHAL, STEPHEN BUSCH, PATRICK COOK, MICHAEL PRYSBY, BRADLEY WURFEL, ED KURTZ, DARNELL EARLEY, GERARD AMBROSE, LOCKWOOD, ANDREWS & NEWMAN, P.C., and LOCKWOOD, ANDREWS & NEWMAN, INC., Defendants, and DAYNE WALLING, HOWARD CROFT, MICHAEL GLASGLOW, DAUGHERTY JOHNSON III, and CITY OF FLINT, Defendants-Appellants.

          Court of Claims LC No. 16-000126-MK

          Before: Servitto, P.J., and Markey and O'Connell, JJ.

          PER CURIAM.

         Defendants, Dayne Walling, Howard Croft, Michael Glasglow, Daugherty Johnson III and the City of Flint (hereafter "defendants") appeal as of right the trial court's sua sponte order dismissing plaintiffs' claims against them for lack of subject matter jurisdiction. We affirm.

         Plaintiffs, residents and a company located in the City of Flint, filed this lawsuit in June 2016 (purportedly as a class action) against the City, various of its officers and employees, former emergency managers of the City, the governor, the State of Michigan, the Michigan Department of Environmental Quality ("MDEQ") and various employees of the MDEQ, with respect to the contaminated water supply in Flint, Michigan. Plaintiffs alleged that defendants conspired to keep the seriousness of the pollution and contamination from plaintiffs and allowed the water supply to keep being delivered, risking plaintiffs' health and causing them damages. The specific causes of action were breach of contract, unjust enrichment, and declaratory relief.

         Darnell Earley, Gerard Ambrose, and defendants moved for summary disposition in lieu of answering the complaint. Relevant to the instant matter, before a decision was rendered on that motion, the court, on its own motion, dismissed plaintiffs' claims against defendants "in accordance with the August 25, 2016 opinion and order issued in Collins v City of Flint, et al., Court of Court of Claims Docket No. 16-115-MZ and Vale v City of Flint, Court of Claims Docket No. 16-116-MK." In those cases, the plaintiffs commenced intended class action lawsuits in Genesee Circuit Court against the Governor, the State of Michigan, the City of Flint, the City's former emergency managers, and several City employees regarding the water crisis in Flint. Plaintiffs asserted that defendants breached a contract with residents to provide potable water, breached an implied warranty of fitness for a particular purpose, violated the Michigan Consumer Protection Act, and unjustly enriched the City. The City transferred the claims against the City, the former emergency manager, and city employees from Genesee Circuit to the Court of Claims. Plaintiffs challenged the validity of the notice of transfer contending that the City was an "arm of the state" as set forth in MCL 600.6419(1)(a). Plaintiff in the Vale case sought summary disposition for lack of the Court of Claims subject matter jurisdiction. The Court of Claims found that the City was not an arm of the state and that the claims against the City and its employees were within the exclusive subject matter jurisdiction of the circuit court.[1]

         On appeal, defendants assert that municipalities act as arms of the state whenever they act in the name of public health and municipalities operate waterworks in the name of public health. Defendants additionally assert that the state's emergency management of a municipality under the Local Financial Stability and Choice Act transforms the municipality into an arm of the state and that the Court of Claims has exclusive jurisdiction over claims brought against arms of the state. We disagree and conclude that (1) municipalities are not arms of the state when they operate a waterworks plant, and (2) that municipalities and their employees operating under the state's emergency manager laws are not arms of the state for purposes of jurisdiction in the Court of Claims.

         Issues concerning the jurisdiction of the Court of Claims present statutory questions that are reviewed de novo as questions of law. AFSCME Council 25 v State Employees' Ret Sys, 294 Mich.App. 1, 6; 818 N.W.2d 337 (2011). Challenges to subject-matter jurisdiction cannot be waived, and a court must entertain such challenges regardless of when they are raised, or even raise such challenges sua sponte, as was the case here. O'Connell v Dir of Elections, 316 Mich.App. 91, 100; 891 N.W.2d 240 (2016).

         "The Court of Claims is created by statute and the scope of its subject-matter jurisdiction is explicit." O'Connell v Dir of Elections, 316 Mich.App. 91, 101; 891 N.W.2d 240 (2016), quoting Dunbar v Dep't of Mental Health, 197 Mich.App. 1, 5; 495 N.W.2d 152 (1992). The Court of Claims has exclusive jurisdiction to hear and determine "any claim or demand, statutory or constitutional, liquidated or unliquidated, ex contractu or ex delicto, or any demand for monetary, equitable, or declaratory relief or any demand for an extraordinary writ against the state or any of its departments or officers . . . ." MCL 600.6419(1)(a). Included in the definition of "the state or any of its departments or officers" are the State of Michigan and:

any state governing, legislative, or judicial body, department, commission, board, institution, arm, or agency of the state, or an officer, employee, or volunteer of this state or any governing, legislative, or judicial body, department, commission, board, institution, arm, or agency of this state, acting, or who reasonably believes that he or she is acting, within the scope of his or her authority while engaged in or discharging a government function in the course of his or her duties. [MCL 600.6419(7)]

         The determination of whether the Court of Claims possesses jurisdiction is governed by the actual nature of the claim, not how the parties characterize the nature of the claim or the request for relief. AFSCME Council 25, 294 Mich.App. at 6.

         At issue in this case is the phrase "arm of the state" in MCL 600.6419(7). More specifically, we must determine when one would be considered to be an arm of the state such that one would therefore be considered "the state or any of its departments or officers" and thus that an action against it would fall under the exclusive jurisdiction of the Court of Claims.

         The difficulty in determining when a city or municipality acts as an arm of the state has a long history. In Tzatzken v City of Detroit, 226 Mich. 603, 604; 198 N.W. 214 (1924), our Supreme Court suggested that a municipality exercises dual powers, acting sometimes as an arm of the state, in which all the members of the public are concerned, and acting at other times independently by exercising powers of a proprietary character. This Court explained the dual roles undertaken by a city or municipality:

It developed historically that cities operated under one of two personalities. The municipality when acting as an arm of the state possessed a "public" character, but when acting for the concerns of the citizenry of the city it was functioning within its "private" personality. This public versus private analysis was utilized in evaluating questions of municipal tort immunity. If wearing the public hat, the municipal corporation was said to be performing governmentally and was immune from tort liability as was the state. On the other hand, if the activity was for the benefit of the peculiar locality, then the ...

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