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Wright v. Genesee County

Supreme Court of Michigan

July 18, 2019

GENESEE COUNTY DRAIN COMMISSIONER JEFFREY WRIGHT, Plaintiff-Appellee,
v.
GENESEE COUNTY, Defendant-Appellant, and CHARTER TOWNSHIP OF FENTON, DENNIS BOW, KARYN MILLER, BONNIE MATHIS, PAULA ZELENKO, MARILYN HOFFMAN, LARRY GREEN, JAKE LAFURGEY, RAY FOUST, DAVID GUIGEAR, ROBERT M. PALMER, RICK CARUSO, WILLIAM W. KOVL, MAXINE ORR, VILLAGE OF GOODRICH, VILLAGE OF GAINES, VILLAGE OF LENNON, CHARTER TOWNSHIP OF MUNDY, TOWNSHIP OF ARGENTINE, CHARTER TOWNSHIP OF FLINT, CHARTER TOWNSHIP OF MT. MORRIS, TOWNSHIP OF GAINES, and CITY OF FLUSHING, Plaintiffs, and GENESEE COUNTY BOARD OF COMMISSIONERS, Defendant.

          Argued on application for leave to appeal April 10, 2019.

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

         Genesee County Drain Commissioner Jeffrey Wright and others filed an action in the Genesee Circuit Court against Genesee County and the Genesee County Board of Commissioners, asserting a contract claim and claims for various intentional torts, including conversion and fraud. The drain commissioner and the county jointly purchased group health insurance coverage from Blue Cross Blue Shield of Michigan (BCBSM), and the county administered the plans. After BCBSM determined that the county's collective insurance premiums, including those paid by the drain commissioner, had exceeded the amount that should have been charged, BCBSM refunded the overpayment to the county, which the county deposited into its general fund. The drain commissioner demanded his office's share of the refunded premiums, which the county denied. Plaintiffs filed this action, and defendants moved for summary disposition of the intentional-tort claims and moved for partial summary disposition of the contract claim with regard to the damages sought that extended beyond the six-year period of limitations set forth in MCL 600.5807. The court, Geoffrey L. Neithercut, J., denied the motion with regard to the intentional-tort claims, but the court granted the motion with regard to the contract claim, concluding that damages were limited under MCL 600.5807 to those that accrued after October 24, 2005. The parties appealed in the Court of Appeals. The Court of Appeals, Stephens, P.J., and Saad and Boonstra, JJ., affirmed the trial court's grant of partial summary disposition with regard to the contract claim but reversed the trial court's order with respect to the intentional-tort claims, reasoning that those claims had to be dismissed because intentional torts were not stated exceptions under the governmental tort liability act (GTLA), MCL 691.1401 et seq. 309 Mich.App. 317 (2015). As the only remaining plaintiff, the drain commissioner thereafter amended his complaint, claiming that the county (the only remaining defendant) had been unjustly enriched when it retained his office's portion of the refunded health insurance premiums. The county moved for summary disposition of the unjust-enrichment claim, arguing that the unjust-enrichment claim was also barred by the GTLA because the claim was, in effect, a claim for conversion, fraud, or a similar tort; the trial court denied the motion. On appeal, the Court of Appeals, Sawyer, P.J., and Servitto and Riordan, JJ., affirmed the denial, reasoning that the GTLA did not apply because the unjust-enrichment claim ultimately involved contract liability, not tort liability. 321 Mich.App. 74 (2017). The county sought leave to appeal, and the Supreme Court ordered and heard oral argument on whether to grant the application or take other action. 501 Mich. 1086 (2018).

         In an opinion by Chief Justice McCormack, joined by Justices Viviano, Bernstein, Clement, and Cavanagh, the Supreme Court, in lieu of granting leave to appeal, held:

         Under In re Bradley Estate, 494 Mich. 367');">494 Mich. 367');">494 Mich. 367');">494 Mich. 367 (2013), claims seeking compensatory damages for breach of contract and claims seeking a remedy other than compensatory damages are not barred by the GTLA. The drain commissioner's unjust-enrichment claim was not barred by the GTLA because the claim was neither a tort nor based in contract and the drain commissioner sought restitution, not compensatory damages. To the extent that Bradley Estate implied that tort liability for purposes of the GTLA includes noncontractual liability without qualification, the case overstated the scope of tort liability.

         1. MCL 691.1407(1) states that except as otherwise provided by the GTLA, a governmental agency is immune from tort liability if the agency is engaged in the exercise or discharge of a governmental function. The GTLA encompasses all legal responsibility for civil wrongs, other than a breach of contract, for which a remedy may be obtained in the form of compensatory damages. For that reason, claims seeking compensatory damages for breach of contract and claims seeking a remedy other than compensatory damages are not barred by the GTLA.

         2. Unjust enrichment is different from actions in tort and contract. Restitution is the remedy for unjust enrichment; an unjust-enrichment claim does not seek compensation for an injury-that is, it does not seek compensatory damages-but to correct against one party's retention of a benefit at another's expense. In contrast, in a tort action, an injured party may seek compensatory damages for an injury caused by the breach of a legal duty to compensate the injured party for the injury caused by the defendant's wrongful conduct. And in a breach-of-contract action, an injured party may also seek compensatory damages for an injury caused by another party's breach of a contractual obligation. Unjust enrichment evolved through the years from being a restitutionary claim with components in law and equity into a unified independent doctrine that uniquely corrects for a benefit received by the defendant rather than correcting for the defendant's wrongful behavior. Therefore, unjust enrichment, with a remedy of restitution, is a cause of action independent of contract or tort; it is neither a tort action nor a contract action, both of which seek compensatory damages. Both the nature of an unjust-enrichment action and its remedy-whether restitution at law or in equity-separate it from tort and contract.

         3. In this case, the drain commissioner sought restitution to correct for the benefit the county unfairly received when it retained his office's portion of the refunded premiums. Consequently, because his claim did not seek compensation for an injury flowing from the county's civil wrong, liability was not in tort or contract, and therefore, the GTLA did not bar his unjust-enrichment claim. To the extent that Bradley Estate implied that tort liability includes noncontractual liability without qualification, the case overstated the scope of tort liability. Bradley Estate did not consider an action like that in this case-wherein liability arose from an unjust benefit received, not from a civil wrong-and the case was distinguishable because the petitioner in that case sought compensatory damages for injuries related to a civil wrong, not restitution.

         Affirmed.

         Justice Markman, joined by Justice Zahra, concurring, agreed with the majority that the county was not entitled to governmental immunity under the GTLA because the drain commissioner's unjust-enrichment claim did not seek to impose tort liability. He wrote separately to express his disagreement with the majority's analysis, particularly its interpretation and application of Bradley Estate. Under Bradley Estate, for purposes of MCL 691.1407(1), "tort liability" means all legal responsibility arising from a noncontractual civil wrong for which a remedy may be obtained in the form of compensatory damages. To determine whether a claim involves tort liability, a court must consider the nature of the duty that gives rise to the claim and the nature of the liability the claim seeks to impose; if the wrong alleged is based on the breach of a contractual duty, then no tort has occurred and it would be unnecessary to consider the nature of the liability. The drain commissioner's unjust-enrichment claim sought restitution at law on the basis of an implied-in-law contract, which was premised on the common-law action of assumpsit. For that reason, Justice Markman agreed with the Court of Appeals that the drain commissioner's unjust-enrichment claim was premised on a contractual relationship and that the claim was therefore not barred by governmental immunity. Because he reached that conclusion, Justice Markman considered it unnecessary to address whether every claim for unjust enrichment that is not grounded in the common-law action of assumpsit, or is not premised on a contractual relationship, is barred by governmental immunity. Justice Markman disagreed with the majority's attempt to limit the scope of Bradley Estate by removing unjust enrichment from the contract/tort civil-wrong dichotomy and by instead declaring that unjust enrichment was an independent cause of action, outside of tort and contract. The majority's conclusion that unjust enrichment is an independent cause of action was contrary to Bradley Estate's recognition that there are only two classes of wrong for which an individual may demand legal redress: those based on a breach of contract and those that arise independently of contract (that is, in tort). The binary analysis in Bradley Estate was clear, and the majority's conclusion that unjust enrichment was an independent cause of action, outside of contract and tort, confused and unsettled this framework. The central purpose of governmental immunity is to reduce depletion of the state's financial resources by avoiding a contest on the merits of those claims that are barred by governmental immunity. The majority's holding opens the door on future claims that other nontraditional tort claims against a public defendant are outside the Bradley Estate framework. By failing to treat Bradley Estate as legitimate precedent, the majority diminished its holding, incentivized further GTLA litigation over the meaning of "tort liability," imposed greater litigation costs on public defendants (contrary to the GTLA's central purpose), and introduced ambiguity and ad hoc judicial decision-making in the future. While Justice Markman agreed that the drain commissioner's unjust-enrichment claim was not barred by the GTLA, he would have so held on the basis that the drain commissioner sought restitution as a legal remedy in the form of money damages, premised on an actual or implied contractual relationship with the county and that such a claim was not barred by the GTLA.

         BEFORE THE ENTIRE BENCH

          OPINION

          McCormack, C.J.

         In this case, we consider whether a claim for unjust enrichment is barred by the governmental tort liability act (GTLA), MCL 691.1401 et seq. A claim for unjust enrichment is neither a tort nor a contract but rather an independent cause of action. And the remedy for unjust enrichment is restitution-not compensatory damages, the remedy for tort. For both reasons, the GTLA does not bar an unjust-enrichment claim.

         I. FACTS AND PROCEDURAL HISTORY

         Defendant Genesee County served as an administrator for certain employee health insurance plans. Plaintiff Genesee County Drain Commissioner Jeffrey Wright[1]participated in this plan even though the office of drain commissioner has statutory autonomy from the county. See MCL 46.173. The parties' insurer, Blue Cross Blue Shield of Michigan (BCBSM), conducted a multi-year audit that revealed that the county's collective insurance premiums, including those paid by the plaintiff, significantly exceeded the amount that should have been charged. The county held a public meeting about the overpayment-allegedly totaling millions of dollars-during which it accepted a refund from BCBSM. The county deposited the refund into its general fund.[2] The plaintiff demanded a proportionate share of the refund; the county denied his request, and this lawsuit followed.

         The plaintiff's first complaint included claims based in contract and tort (specifically, conversion and fraud). The county moved for summary disposition under MCR 2.116(C)(7) and (8). The trial court held that (1) because of the six-year statute of limitations for breach-of-contract actions in MCL 600.5807, the plaintiff's damages were limited to those that accrued after October 24, 2005, and (2) the GTLA did not bar the plaintiff's tort claims. The Court of Appeals affirmed in part and reversed in part. The panel agreed with the trial court's holding on the contract claim but concluded that the plaintiff's intentional-tort claims were barred by the GTLA. Genesee Co Drain Comm'r v Genesee Co, 309 Mich.App. 317, 334; 869 N.W.2d 635 (2015).

         The plaintiff then amended his complaint to add an unjust-enrichment claim, alleging that the county had "wrongfully and unjustly retained a portion of the refunds under the [BCBSM] Plan that belong to [the plaintiff]," that the county "is not entitled to retain [the plaintiff's] portion of the refunds," that the county had been "unjustly enriched" by its wrongful retention of the plaintiff's portion, and that it would be inequitable for the county to retain the plaintiff's portion.

         The county again moved for summary disposition, arguing that the plaintiff's unjust-enrichment claim was also barred by the GTLA. The trial court denied the motion, and the Court of Appeals affirmed. Genesee Co Drain Comm'r v Genesee Co, 321 Mich.App. 74; 908 N.W.2d 313 (2017). The panel concluded that the GTLA did not apply because "a claim based on the equitable doctrine of unjust enrichment ultimately involves contract liability, not tort liability." Id. at 78. The defendant then sought leave to appeal in this Court. We directed the Clerk to schedule oral argument on the application and ordered the parties to address "whether the Court of Appeals erred in holding that the plaintiff's claim of unjust enrichment was not subject to governmental immunity under the [GTLA], see In re Bradley Estate, 494 Mich. 367');">494 Mich. 367');">494 Mich. 367');">494 Mich. 367 [835 N.W.2d 545] (2013), because it was based on the equitable doctrine of implied contract at law." Genesee Co Drain Comm'r v Genesee Co, 501 Mich. 1086 (2018).

         II. THE GTLA AND IN RE BRADLEY ESTATE

         Whether governmental immunity applies under the GTLA is a question of law that we review de novo on appeal. Ray v Swager, 501 Mich. 52, 61; 903 N.W.2d 366 (2017). We review grants and denials of summary disposition de novo too. Id. at 61-62. De novo review means that we review the legal issue independently, without required deference to the courts below. People v Bruner, 501 Mich. 220, 226; 912 N.W.2d 514 (2018).

         The GTLA provides governmental agencies and their employees with immunity from tort liability when engaged in the exercise of governmental functions. Ray, 501 Mich. at 62. MCL 691.1407(1) states, "Except as otherwise provided in this act, a governmental agency is immune from tort liability if the governmental agency is engaged in the exercise or discharge of a governmental function."

         In In re Bradley Estate, 494 Mich. 367');">494 Mich. 367');">494 Mich. 367');">494 Mich. 367, this Court held that an action for civil contempt seeking compensatory damages against the respondent sheriff's department was barred by the GTLA. The Court reasoned that "the GTLA encompasses all legal responsibility for civil wrongs, other than a breach of contract, for which a remedy may be obtained in the form of compensatory damages." Id. at 371. Thus, at least two categories of claims are not barred by the GTLA: those seeking compensatory damages for breach of contract and claims seeking a remedy other than compensatory damages.

         III. RESTITUTION AND UNJUST ENRICHMENT

         A. GENERAL PRINCIPLES

         Unjust enrichment is a cause of action to correct a defendant's unjust retention of a benefit owed to another. Restatement Restitution, 1st, § 1, comment a, p 12. It is grounded in the idea that a party "shall not be allowed to profit or enrich himself inequitably at another's expense." McCreary v Shields, 333 Mich. 290, 294; 52 N.W.2d 853 (1952) (quotation marks and citation omitted). A claim of unjust enrichment can arise when a party "has and retains money or benefits which in justice and equity belong to another." Id. (quotation marks and citation omitted).

         The remedy for unjust enrichment is restitution. See, e.g., Kammer Asphalt Paving Co, Inc v East China Twp Sch, 443 Mich. 176, 185; 504 N.W.2d 635 (1993) ("[U]nder the equitable doctrine of unjust enrichment, '[a] person who has been unjustly enriched at the expense of another is required to make restitution to the other.' "), quoting Restatement Restitution, 1st, § 1, p 12 (second alteration in original); City Nat'l Bank of Detroit v Westland Towers Apartments, 413 Mich. 938, 938 (1982) (discussing "equitable recovery on the claim of unjust enrichment"); 2 Restatement Restitution & Unjust Enrichment, 3d, § 49, p 176 ("A claimant entitled to restitution may obtain a judgment for money in the amount of the defendant's unjust enrichment.").[3]

         Contrast this with tort and contract. In a tort action, an injured party may seek damages for an injury caused by the breach of a legal duty. Wilson v Bowen, 64 Mich. 133, 141; 31 N.W. 81 (1887). The remedy for the breach is compensatory damages. That is, the defendant compensates the injured party for the injury caused by the defendant's wrongful conduct. State Farm Mut Auto Ins Co v Campbell, 538 U.S. 408, 416; 123 S.Ct. 1513; 155 L.Ed.2d 585 (2003); Rafferty v Markovitz, 461 Mich. 265, 271; 602 N.W.2d 367 (1999).

         In a breach-of-contract action, an injured party may seek damages for an injury caused by another party's breach of a contractual obligation. As in tort, the remedy for the breach may be compensatory damages. Am Jur Legal Forms 2d, § 83:2. That is, remedies are "those that arise naturally from the breach or those that were in the contemplation of the parties at the time the contract was made." Kewin v Massachusetts Mut Life Ins Co, 409 Mich. 401, 414-415; 295 N.W.2d 50 (1980), citing 5 Corbin, Contracts, § 1007.

         Unjust enrichment, by contrast, doesn't seek to compensate for an injury but to correct against one party's retention of a benefit at another's expense. And the correction, or remedy, is therefore not compensatory damages, but restitution. Restitution restores a party who yielded excessive and unjust benefits to his or her rightful position. 1 Restatement Restitution & Unjust Enrichment, 3d, § 1, comments d & e, pp 7-10.

         Beyond the differences in remedy, unjust enrichment is a cause of action independent of tort and contract liability. Therefore, the plaintiff's claim for unjust enrichment is not a tort action seeking compensatory damages. And neither is it a contract action seeking compensatory damages. See, e.g., 1 Restatement Restitution & Unjust Enrichment, 3d, § 1, comment a, p 3 ("The identification of unjust enrichment as an independent basis of liability in common-law legal systems-comparable in this respect to a liability in contract or tort-was the central achievement of the 1937 Restatement of Restitution.") (emphasis added); see also Schirmer v Souza, 126 Conn.App. 759, 765; 12 A.3d 1048 (2011) (stating that "the doctrine of unjust enrichment is grounded in the theory of restitution, not in contract theory").

         B. HISTORICAL CONTEXT

         Unjust enrichment's historical roots help make sense of its modern identity. It has a long jurisprudential pedigree marking its development into an independent action with a restitutionary remedy. At the King's ...


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