Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Bauserman v. Unemployment Insurance Agency

Supreme Court of Michigan

April 5, 2019

GRANT BAUSERMAN, KARL WILLIAMS, and TEDDY BROE, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs-Appellants,
v.
UNEMPLOYMENT INSURANCE AGENCY, Defendant-Appellee.

          Argued on application for leave to appeal October 10, 2018.

          Chief Justice: Justices: Bridget M. McCormack Stephen J. Markman Brian K. Zahra Chief Justice Pro Tem: Richard H. Bernstein David F. Viviano Elizabeth T. Clement Megan K. Cavanagh

         BEFORE THE ENTIRE BENCH (except Cavanagh, J.)

         Grant Bauserman, Karl Williams, and Teddy Broe, on behalf of themselves and all others similarly situated, brought an action in the Court of Claims against the Unemployment Insurance Agency, alleging that defendant had violated their due-process rights by depriving them of property without providing adequate notice and an opportunity to be heard and that defendant had also engaged in unlawful collection practices. Defendant had employed an automated fraud-detection system to determine that plaintiffs had received unemployment benefits for which they were not eligible, and then garnished plaintiffs' wages, benefits, and tax refunds to recover the amount of alleged overpayments, interest, and penalties that defendant had assessed. Plaintiffs each challenged the determinations and, while defendant's investigation of Williams's situation remained pending, defendant issued redeterminations with respect to Bauserman and Broe that cleared them of fraud. Defendant moved for summary disposition on a number of grounds, including that plaintiffs had failed to comply with the notice provision of MCL 600.6431(3) because they did not file their complaint within six months following the "happening of the event giving rise to the cause of action." The Court of Claims, Cynthia D. Stephens, J., denied defendant's motion, concluding that plaintiffs' claims accrued when they received defendant's redetermination notices that nullified its previous fraud findings and that plaintiffs' claims had been filed within six months of that event. The Court of Appeals, Gadola, P.J., and Meter and Fort Hood, JJ., reversed, concluding that plaintiffs' claims accrued when they received the original notices alleging fraudulent conduct and explaining the effect that would have on their unemployment compensation. Bauserman v Unemployment Ins Agency, unpublished per curiam opinion of the Court of Appeals, issued July 18, 2017 (Docket No. 333181). Plaintiffs applied for leave to appeal in the Supreme Court, which ordered and heard oral argument on whether to grant the application or take other action. 501 Mich. 1047 (2018).

         In a unanimous opinion by Justice Markman, the Supreme Court, in lieu of granting leave to appeal, held:

         Under MCL 600.6431(3), the "happening of the event giving rise to the cause of action" for a claim seeking monetary relief is when the claim accrues, and a procedural-due-process claim seeking monetary relief accrues when the deprivation of life, liberty, or property has occurred. In the instant case, plaintiffs were deprived of their property when their tax refunds were seized or their wages garnished. As a result, plaintiffs Bauserman and Broe timely filed their claims within six months following the deprivation of their property, while plaintiff Williams did not. Accordingly, the judgment was affirmed in part and reversed in part, and the case was remanded to the Court of Appeals for further proceedings.

         1. MCL 600.6431, which establishes when and how a claim against a government agency may be initiated, provides in part that a claimant must file a notice of intention to file a claim or the claim itself within 6 months following the happening of the event giving rise to the cause of action. For purposes of this provision, dictionary definitions indicate that an event has given rise to a cause of action when it triggers a person's ability to obtain a remedy in court. MCL 600.5827 provides in part that a period of limitations generally runs from the time a claim accrues, which is at the time the wrong upon which a claim is based was done regardless of the time when damage results. With regard to claims seeking monetary relief, there is no meaningful distinction between the happening of the event giving rise to the cause of action in MCL 600.6431(3) and when such a claim accrues under MCL 600.5827.

         2. Article 1, § 17 of the Michigan Constitution provides that no person shall be deprived of life, liberty, or property without due process of law. The Due Process Clause is violated only if there has been a deprivation of life, liberty, or property. If there is no such deprivation, no process is due and thus no harm has occurred. In other words, a plaintiff incurs no harm under the Due Process Clause until and unless the plaintiff incurs a deprivation of property. Thus, the actionable harm in a pre-deprivation due-process claim occurs when a plaintiff has been deprived of property and therefore such a claim accrues when a plaintiff has first incurred the deprivation of property.

         3. The instant case was unlike the situation in Frank v Linkner, 500 Mich. 133 (2017), which involved an action for member oppression within a limited liability company under MCL 450.4515. In Frank, the Supreme Court concluded that the plaintiffs' claim accrued before they incurred any calculable financial injury, reasoning that because the actionable harm for a member-oppression claim under MCL 450.4515 consists of actions taken by the managers that substantially interfere with the interests of the member as a member, and because monetary damages constitute just one of many potential remedies for that harm, an action for member oppression does not necessarily accrue when a plaintiff incurs a calculable financial injury; instead, it accrues when a plaintiff incurs the actionable harm under MCL 450.4515, i.e., when defendants' actions allegedly interfered with the interests of a plaintiff as a member, making the plaintiff eligible to receive some form of relief under MCL 450.4515(1). Unlike a claim for member oppression under MCL 450.4515, in which the harm itself can occur before incurring a calculable financial injury, no harm for a violation of due process can occur without or before a deprivation of property. Accordingly, the Court of Appeals erred by holding that plaintiffs' due-process claims seeking monetary relief accrued when plaintiffs were deprived of process; rather, these claims accrued only when plaintiffs were deprived of property. Because the accrual under MCL 600.5827 of a due-process claim seeking monetary relief gave rise to a cause of action for purposes of MCL 600.6431(3), the six-month period from MCL 600.6431(3) was triggered when plaintiffs were deprived of property.

         4. Plaintiffs were not deprived of property either when the initial redetermination notices were sent informing plaintiffs of liability or when plaintiffs received defendant's notices of an intention to intercept their tax refunds or wages. These notices merely apprised plaintiffs of the amount owed to defendant and the actions that would be undertaken if payment was not made; they did not actually seize plaintiffs' property. With regard to plaintiff Bauserman, he first incurred a deprivation of property on June 6, 2015, when defendant intercepted his federal and state income tax refunds. Accordingly, his September 9, 2015 complaint was timely filed within six months following the happening of the event giving rise to the cause of action under MCL 600.6431(3). Similarly, plaintiff Broe first incurred a deprivation of property when his tax refunds were seized in May 2015, and therefore his claim against defendant was also timely filed under MCL 600.6431(3). However, plaintiff Williams first incurred a deprivation of property when his wages were garnished on May 16, 2014, and his claim was not filed within six months of that deprivation. Therefore, plaintiffs Bauserman and Broe timely filed their claims, while plaintiff Williams did not.

         Affirmed in part, reversed in part, and remanded to the Court of Appeals for further proceedings.

          Chief Justice McCormack, concurring, agreed that if the six-month notice period in MCL 600.6431(3) governed plaintiffs' claims, it started to run when the state deprived plaintiffs of a property interest without due process. She wrote separately, however, because she was not convinced that the rule from McCahan v Brennan, 492 Mich. 730 (2012), and Rowland v Washtenaw Co Rd Comm, 477 Mich. 197 (2007), which requires strict compliance with the notice requirements for statutorily created claims, applied to due-process claims in particular or to constitutional tort claims in general. However, because Williams conceded that the six-month notice period in MCL 600.6431(3) for property damage or personal injury applied to his claims, Chief Justice McCormack agreed with the majority that Williams's claim was untimely because he failed to file notice within six months of the May 2014 garnishment, when he first suffered a deprivation of property.

          Justice Cavanagh did not participate in the disposition of this case because the Court considered it before she assumed office.

          OPINION

          MARKMAN, J.

         This case involves a narrow, but practically consequential, issue: whether plaintiffs gave timely notice of their due-process claims to defendant, the Michigan Unemployment Insurance Agency (the Agency), and therefore are entitled to consideration of the merits of those claims. More specifically, the issue concerns whether plaintiffs filed notices of intention to file their claims or the claims themselves "within 6 months following the happening of the event giving rise to the cause of action." MCL 600.6431(3). We hold that the "happening of the event giving rise to the cause of action" for a claim seeking monetary relief is when the claim accrues, and a procedural-due-process claim seeking monetary relief accrues when the deprivation of life, liberty, or property has occurred. In the instant case, plaintiffs were deprived of their property when their tax refunds were seized or their wages garnished. As a result, plaintiffs Bauserman and Broe timely filed their claims within six months following the deprivation of their property, while plaintiff Williams did not. Accordingly, we affirm in part and reverse in part the judgment of the Court of Appeals and remand to that court for further proceedings consistent with this opinion.

         I. FACTS AND HISTORY

         Plaintiffs are former recipients of unemployment compensation benefits who allege that the Agency unlawfully seized their property without affording due process of law. Plaintiff Bauserman received unemployment compensation from October 2013 through March 2014. In October 2014, the Agency sent Bauserman and his former employer, Eaton Aeroquip (Eaton), a questionnaire regarding suspected unreported earnings that Bauserman received while he was receiving unemployment compensation. Both Bauserman and Eaton responded that Bauserman had not worked for Eaton at the time. On December 3, 2014, the Agency sent Bauserman two notices of redetermination, one claiming that he had received unemployment compensation for which he was ineligible and the other claiming that he had intentionally misled the Agency or concealed information from it to obtain compensation for which he was not eligible. As a result, the Agency informed Bauserman that he owed $19, 910 in overpayments, penalties, and interest. The next day, Bauserman submitted an online appeal through the Agency's website regarding its assertion that he had committed fraud, but did not submit a separate appeal regarding the Agency's determination that he had received compensation for which he was not eligible.

         From January 2015 through June 2015, the Agency sent Bauserman multiple notices stating the amount he owed to the Agency, informing him of missed payments on his debt, and raising the possibility that his wages would be garnished or his tax refunds seized. One of these communications consisted of a "notice of intent to reduce/withhold federal income tax refund," which warned Bauserman that "if you do not pay the amount shown or take other action described below within 60 days of the mail date on this form, the [Agency] will submit this benefit overpayment balance (restitution) to . . . the United States Department of Treasury . . . [which] will reduce or withhold any federal income tax refund you may be due and will instead forward that amount to the [Agency]." Around this same time, Bauserman sent multiple letters to the Agency attempting to explain the situation, two of which included an attached letter from Eaton explaining that Bauserman received one payment in 2014 for work performed in 2013 but was not employed by Eaton during the time he was receiving unemployment compensation. Finally, on June 16, 2015, the Agency intercepted Bauserman's state and federal income tax refunds.

         On September 9, 2015, Bauserman filed a putative class action against the Agency in the Court of Claims, alleging that the Agency had deprived him of his property without providing due process of law. More specifically, he alleged that "Michigan's unemployment fraud detection, collection, and seizure practices fail to comply with minimum due process requirements." On September 30, 2015, the Agency issued two new notices of redetermination, rendering its December 3, 2014 redeterminations "null and void," and the Agency has since returned all monies seized from Bauserman.

         On October 19, 2015, Bauserman filed an amended complaint, which added Teddy Broe and Karl Williams as named plaintiffs to the class action. Broe had received unemployment compensation from April 2013 to August 2013, and he had initially been determined eligible on the basis that he had been laid off by his employer, Fifth Third Bank (Fifth Third). However, Fifth Third challenged that determination, alleging that Broe voluntarily terminated his employment to attend school. The Agency then sent requests for information to Broe regarding his eligibility for compensation, and on July 15, 2014, it sent two notices of redetermination to Broe, the first claiming that he had received compensation for which he was ineligible because his termination of employment at Fifth Third "was voluntary and not attributable to the employer," and the second claiming that he had intentionally misled the agency or concealed information from it to obtain compensation that he was not eligible to receive. As a result, the Agency informed Broe that he owed $8, 302 in overpayments, penalties, and interest.

         From August 2014 through April 2015, the Agency sent Broe multiple notices stating the amount owed to the Agency, informing him of missed payments on the debt and raising the possibility that his wages would be garnished or his tax refunds seized. Specifically, on September 2, 2014, the Agency sent Broe a "notice of intent to reduce/withhold federal income tax refund" that was materially identical to the notice provided to Bauserman. In April 2015, Broe sent the Agency a letter appealing its redeterminations and claiming that he had not received the Agency's previous communications because they had been sent to him through his online account with the Agency, which he no longer accessed because he was reemployed and no longer seeking unemployment compensation. The Agency denied the appeal as untimely and, in May 2015, intercepted Broe's state and federal tax refunds. On November 4, 2015, the Agency issued two notices of redetermination, reversing its July 15, 2014 redeterminations that Broe was ineligible for compensation and had committed fraud. The Agency has since returned all monies seized from Broe.

         Williams started working at Wingfoot Commercial Tire System in May 2011. When his employment with Wingfoot began, Williams was receiving unemployment compensation from a previous employer. Williams alleges that he advised the Agency that he was now receiving wages from Wingfoot, yet his unemployment compensation had not been altered; Williams believed that he was still entitled to unemployment compensation because his wages from Wingfoot were less than 1½ times his weekly compensation. See MCL 421.48(1). The Agency sent Williams a request to provide information regarding his employment with Wingfoot. On June 22, 2012, the Agency issued redeterminations that (1) terminated Williams's receipt of future unemployment compensation, (2) asserted that he had already received compensation for which he was ineligible due to his employment with Wingfoot, and (3) alleged that he had intentionally misled the Agency or concealed information from it to obtain compensation for which he was not eligible.

         On October 29, 2013, the Agency sent Williams a "notice of garnishment" stating that, if the amount owed was not provided to the Agency within 30 days, his "employer [would] be required to deduct and send to [the Agency] up to 25% of [his] disposable earnings each pay period until the debt is paid in full." Williams's wages were first garnished, at the latest, on May 16, 2014, [1] and on May 27, 2014, the Agency sent Williams a "notice of intent to reduce/withhold federal income tax refund" that was materially identical to the notices provided to Bauserman and Broe. Williams sent a letter appealing the Agency's redeterminations on May 22, 2014. The Agency denied Williams's appeal as untimely, as did an administrative law judge. Finally, on February 19, 2015, the Agency seized Williams's federal income tax refund and continues to collect his debt by this means.

         Plaintiffs' amended complaint alleges that the Agency violated the class members' due-process rights by (1) depriving them of property without providing adequate notice and an opportunity to be heard and (2) engaging in unlawful collection practices by, among other things: (a) imposing a higher level of interest than permitted, (b) collecting interest on penalties, and (c) employing wage garnishments. The Agency moved for summary disposition on a number of grounds, including that plaintiffs failed to comply with the notice provision of MCL 600.6431(3) because they had not filed the complaint within six months following the "happening of the event giving rise to the cause of action." The Court of Claims denied the Agency's motion, concluding that plaintiffs' claims accrued when they received the Agency's redetermination notices that rendered its previous fraud findings null and void and that plaintiffs' claims had been filed within six months of that event.[2] The Court of Appeals reversed, concluding that plaintiffs' claims accrued when they received the original redetermination notices alleging fraudulent conduct and explaining the effect that would have on their unemployment compensation. Bauserman v Unemployment Ins Agency, unpublished per curiam opinion of the Court of Appeals, issued July 18, 2017 (Docket No. 333181), p 9.[3] The Court of Appeals reasoned that the hallmark of a due-process claim is inadequate process and therefore that was the "actionable harm" for the purposes of accrual; the subsequent seizing of plaintiffs' property merely reflected the damage resulting from that deprivation and did not establish the date of accrual. Id. at 10. Plaintiffs thereafter filed an application for leave to appeal in this Court, and we scheduled oral argument on the application, instructing the parties to address

whether "the happening of the event giving rise to [appellants'] cause of action" for the deprivation of property without due process occurred when the appellee issued its allegedly wrongful notice of redetermination, or when the appellee actually seized the appellants' property. MCL 600.6431(3); MCL 600.5827; cf. Frank v Linkner, 500 Mich. 133, 149-153 (2017). [Bauserman v Unemployment Ins Agency, 501 Mich. 1047 (2018).]

         II. STANDARD OF REVIEW

         MCL 600.6431 "establishes conditions precedent for avoiding" governmental immunity. Fairley v Dep't of Corrections, 497 Mich. 290, 297; 871 N.W.2d 129 (2015). In other words, if a plaintiff fails to comply with MCL 600.6431, his or her claims against a governmental agency are barred by governmental immunity. Id. This Court reviews de novo a lower court's decision to grant summary disposition under MCR 2.116(C)(7) on the basis of governmental immunity. Yono v Dep't of Transp, 499 Mich. 636, 645; 885 N.W.2d 445 (2016). "When a motion is filed under this subrule, the court must consider not only the pleadings, but also any affidavits, depositions, admissions or documentary evidence that is filed or submitted by the parties." Kerbersky v Northern Mich. Univ, 458 Mich. 525, 529; 582 N.W.2d 828 (1996), citing MCR 2.116(G)(5). "Further, whether MCL 600.6431 requires dismissal of a plaintiff's claim for failure to provide the designated notice raises questions of statutory interpretation, which we . . . review de novo." McCahan v Brennan, 492 Mich. 730, 735-736; 822 N.W.2d 747 (2012) (citation omitted).

         III. ANALYSIS

         A. MCL 600.6431

         MCL 600.6431 establishes when and how a claim against a ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.