Garden City Rehab LLC v. State Farm Mutual Automobile Insurance Co

STATE OF MICHIGAN
COURT OF APPEALS
GARDEN CITY REHAB, LLC, UNPUBLISHED
June 18, 2015
Plaintiff-Appellee,
v No. 320543
Oakland Circuit Court
STATE FARM MUTUAL AUTOMOBILE 2013-009858-AV
INSURANCE COMPANY,
Defendant-Appellant.
Before: METER, P.J., and CAVANAGH and WILDER, JJ.
PER CURIAM.
Defendant appeals by leave granted a circuit court order affirming a district court’s
decision to deny defendant’s motion for partial summary disposition in this action to recover no-
fault personal injury protection (PIP) benefits. We reverse and remand for entry of judgment in
favor of defendant with regard to plaintiff’s services provided to Ali Elchami.
Plaintiff filed this action in district court against defendant, the no-fault insurer for Ali
Elchami, to recover no-fault PIP benefits for physical therapy services provided to Ali Elchami
from February 24, 2012, to April 5, 2012, which were allegedly necessitated by injuries that
Elchami received in an automobile accident in 2009. Elchami had previously filed a lawsuit
against defendant in the Wayne Circuit Court to recover first-party PIP benefits. Following a
bench trial, the court in that case found that Elchami had recovered from his injuries and was not
entitled to benefits after October 2010. Relying on that decision, defendant filed a motion in the
district court for partial summary disposition under MCR 2.116(C)(7), arguing that collateral
estoppel or res judicata precluded plaintiff’s claim with regard to services provided to Elchami in
2012.1 The district court denied defendant’s motion. Defendant appealed that decision to the
circuit court, which affirmed the district court’s decision. This Court granted defendant’s
application for leave to appeal.
1
Plaintiff also sought benefits against defendant for services provided to another individual.
Therefore, defendant’s motion sought only partial summary disposition.
-1-
We review de novo a trial court’s summary disposition decision. Spiek v Dep’t of
Transp, 456 Mich. 331, 337; 572 NW2d 201 (1998). Defendant moved for summary disposition
under MCR 2.116(C)(7), which permits summary disposition if an action is barred due to the
disposition of the claim before commencement of the action, including where collateral estoppel
or res judicata bars the claim. See Alcona Co v Wolverine Environmental Prod, Inc, 233 Mich
App 238, 246; 590 NW2d 586 (1998).
When reviewing a motion under MCR 2.116(C)(7), this Court must accept
all well-pleaded factual allegations as true and construe them in favor of the
plaintiff, unless other evidence contradicts them. If any affidavits, depositions,
admissions, or other documentary evidence are submitted, the court must consider
them to determine whether there is a genuine issue of material fact. If no facts are
in dispute, and if reasonable minds could not differ regarding the legal effect of
those facts, the question whether the claim is barred is an issue of law for the
court. [Dextrom v Wexford Co, 287 Mich. App. 406; 789 NW2d 211 (2010)
(citation omitted).]
Plaintiff is seeking to recover no-fault benefits for services it provided to Elchami from
February 2012 to April 2012. Defendant, as Elchami’s no-fault insurer, is liable for “all
reasonable charges incurred for reasonably necessary products, services and accommodations
for” Elchami’s care, recovery, and rehabilitation arising from the 2009 automobile accident.
MCL 500.3107(1)(a). Because plaintiff was seeking to recover for the services as a no-fault
benefit, it had the burden of proving that each expense was (1) a reasonable charge, (2)
reasonably necessary, and (3) incurred. Nasser v Auto Club Ins Ass’n, 435 Mich. 33, 49-50; 457
NW2d 637 (1990).
Defendant first argues that the lower courts erred in ruling that collateral estoppel did not
apply to bar plaintiff’s claim. We agree. Collateral estoppel precludes relitigation of an issue in
a subsequent, different case between the same parties or their privies if the prior action resulted
in a valid final judgment and the issue was actually and necessarily determined in the prior
matter. Ditmore v Michalik, 244 Mich. App. 569, 577; 625 NW2d 462 (2001); Horn v Dep’t of
Corrections, 216 Mich. App. 58, 62; 548 NW2d 660 (1996). Collateral estoppel requires that “(1)
a question of fact essential to the judgment was actually litigated and determined by a valid and
final judgment, (2) the same parties had a full and fair opportunity to litigate the issue, and (3)
there was mutuality of estoppel.” Estes v Titus, 481 Mich. 573, 585; 751 NW2d 493 (2008).
However, mutuality of estoppel is not required where the doctrine is used defensively. Monat v
State Farm Ins Co, 469 Mich. 679, 691-692; 677 NW2d 843 (2004).
The ultimate issue in the second case must be the same as that in the first proceeding.
City of Detroit v Qualls, 434 Mich. 340, 357; 454 NW2d 374 (1990). As explained in Bd of Co
Rd Comm’rs for the Co of Eaton v Schultz, 205 Mich. App. 371, 376-377; 521 NW2d 847 (1994):
The issues must be identical, and not merely similar, and the ultimate
issues must have been both actually and necessarily litigated. To be necessarily
determined in the first action, the issue must have been essential to the resulting
judgment; a finding upon which the judgment did not depend cannot support
collateral estoppel. [Citations omitted.]
-2-
Collateral estoppel will only apply if the basis of “the prior judgment can be clearly, definitely,
and unequivocally ascertained.” Ditmore, 244 Mich. App. at 578.
In order to prevail, plaintiff was required to prove that the physical therapy services it
provided to Elchami in 2012 were reasonably necessary for plaintiff’s care, recovery, and
rehabilitation from the injuries he received in the 2009 automobile accident. In the Wayne
County case, the court found, on October 18, 2012, that Elchami’s condition had improved to the
point that further medical services were no longer reasonably necessary after October 2010. The
court’s judgment expressly states “that all benefits claimed by [Elchami] after October 5, 2010
are not reasonable, necessary, or related to the subject motor vehicle accident.” In its ruling from
the bench, the court noted that doctors had concluded that “plaintiff had reached his maximum
recovery from this accident and . . . there was nothing to support, medically to support the
complaints that were being offered by the plaintiff.” Plaintiff filed this action to recover for
physical therapy services that it provided to Elchami in 2012, well after October 2010. Thus, the
Wayne County court decided an issue that was necessary to plaintiff’s recovery of no-fault
benefits in this case, namely, whether the physical therapy services Elchami received in 2012
were reasonably necessary because of the 2009 accident.
The lower courts also erred in ruling that plaintiff was not in privity with Elchami for
purposes of applying collateral estoppel. In Phinisee v Rogers, 229 Mich. App. 547, 553-554; 582
NW2d 852 (1998), this Court observed:
In Sloan v Madison Heights, 425 Mich. 288, 295-296; 389 NW2d 418
(1986), our Supreme Court defined “privity” as follows: “In its broadest sense,
privity has been defined as ‘mutual or successive relationships to the same right
of property, or such an identification of interest of one person with another as to
represent the same legal right.’” (Citation omitted). Black’s Law Dictionary (6th
ed), p 1199, defines privity as
mutual or successive relationships to the same right of property, or
such an identification of interest of one person with another as to
represent the same legal right. . . . [It] signifies that [the]
relationship between two or more persons is such that a judgment
involving one of them may justly be conclusive upon [the] other,
although [the] other was not a party to [sic] lawsuit.
“Privity between a party and a non-party requires both a ‘substantial identity of
interests’ and a ‘working or functional relationship . . . in which the interests of
the non-party are presented and protected by the party in the litigation.’” SOV [v
Colorado, 914 P2d 355, 360 (Colo, 1996)], quoting Public Service Co v Osmose
Wood Preserving, Inc, 813 P2d 785, 787 (Colo App, 1991).
Here, plaintiff and Elchami shared a substantial identity of interest because plaintiff’s entitlement
to recover benefits from defendant was directly dependent upon a showing that the services to
Elchami qualified as a no-fault benefit in that they were reasonably necessary because of
Elchami’s injuries in the 2009 accident. Moreover, because Elchami was liable to plaintiff for
the services performed, and because Elchami’s Wayne County action also included a request for
-3-
declaratory relief with respect to other benefits, they had a functional relationship for purposes of
finding that Elchami was essentially acting in plaintiff’s interests in the Wayne County case.
Because a necessary issue in plaintiff’s case was previously litigated and actually decided in the
Wayne County case, and because plaintiff and Elchami shared a substantial identity of interests
and a functional relationship, the lower courts erred in ruling that collateral estoppel did not
apply to preclude plaintiff’s claim.
We also agree that plaintiff’s action was barred by res judicata. In Dart v Dart, 460 Mich.
573, 586; 597 NW2d 82 (1999), the Michigan Supreme Court explained:
Res judicata bars a subsequent action between the same parties when the evidence
or essential facts are identical. Eaton Co Bd of Co Rd Comm’rs v Schultz, 205
Mich. App. 371, 375; 521 NW2d 847 (1994). A second action is barred when (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. Id. at 375-376.
Michigan courts have broadly applied the doctrine of res judicata. They
have barred, not only claims already litigated, but every claim arising from the
same transaction that the parties, exercising reasonable diligence, could have
raised but did not. Gose v Monroe Auto Equipment Co, 409 Mich. 147, 160-163;
294 NW2d 165 (1980); Sprague v Buhagiar, 213 Mich. App. 310, 313; 539 NW2d
587 (1995).
One of the purposes of res judicata is to prevent repetitive litigation. Bergeron v Busch, 228
Mich. App. 618, 621; 579 NW2d 124 (1998). If, with due diligence, the plaintiff should have
brought the claim in the previous case, then res judicata will apply. Estes, 481 Mich. at 585.
If the same facts or evidence apply in both cases, the two actions are the same for
purposes of res judicata. Dep’t of Transp v North Central Co-op, LLC, 277 Mich. App. 633, 645;
750 NW2d 234 (2008), overruled on other grounds in Dep’t of Transp v Initial Transp, Inc, 481
Mich. 862 (2008); Peterson Novelties, Inc v City of Berkley, 259 Mich. App. 1, 11; 672 NW2d 351
(2003).
This case is factually similar to TBCI, PC v State Farm Mut Auto Ins Co, 289 Mich. App.
39; 795 NW2d 229 (2010). In that case, the injured insured, Eric Afful, filed an action after his
insurer refused to pay benefits because the insurer believed that the claims for attendant-care
services were fraudulent. Id. at 40. A jury found that the claims were fraudulent and returned a
verdict in favor of the insurer. Id. After TBCI provided Afful with services for injuries due to
the same automobile accident, the insurer again refused to pay and TBCI filed suit. Id. at 41.
The trial court granted summary disposition to the insurer because the same core issue was
involved in both cases, i.e., whether there was coverage for Afful’s injuries. Id. at 41-42.
Because TBCI was standing in Afful’s shoes for purposes of entitlement to no-fault benefits,
TBCI was found by this Court to be in privity with Afful. Id. at 44. Because TBCI was
attempting to relitigate the issue of coverage under the policy, this Court held that res judicata
applied to bar TBCI’s claim. Id.
-4-
Based on this Court’s analysis in TBCI, plaintiff’s claim for benefits was resolved in the
prior Wayne County case because, as previously indicated, plaintiff’s claim is dependent upon a
showing that Elchami continued to require medical treatment reasonably related to the 2009
accident after October 2010, and the trial court expressly decided that issue against Elchami in
the Wayne County case. Because plaintiff provided Elchami with services before the Wayne
County trial started, plaintiff’s claims could have been added to that action, and unlike in Elser v
Auto-Owners Ins Co, 253 Mich. App. 64, 69; 654 NW2d 99 (2002), there was a specific finding
that spoke to the lack future damages.
Furthermore, based on TBCI, plaintiff was in privity with Elchami because plaintiff was
required to “stand in his shoes” in order to recover no-fault benefits from defendant. Once again,
Elchami and plaintiff were seeking the same thing: no-fault benefits to cover medical services
necessitated by Elchami’s accident. Elchami properly represented the same underlying interests
in the Wayne County case such that he was in privity with plaintiff.
Accordingly, the lower courts erred in ruling that res judicata did not apply to bar
plaintiff’s present action with regard to its claim for the services provided to Elchami.2
Reversed and remanded for entry of an order of partial summary disposition in favor of
defendant with regard to plaintiff’s claim for services provided to Ali Elchami. We do not retain
jurisdiction.
/s/ Patrick M. Meter
/s/ Mark J. Cavanagh
/s/ Kurtis T. Wilder
2
We note that a case emphasized at oral arguments, Wyoming Chiropractic Health Clinic, PC v
Auto-Owners Ins Co, 308 Mich. App. 389; ___ NW2d ___ (2014), has no bearing on our decision
today because that case did not deal with res judicata or collateral estoppel but rather the
standing of an insurer to sue for benefits; such standing is not at issue here.
-5-