Tanya Sharp v. Farmers Insurance Exchange

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
TANYA SHARP and MARK THOMASON, UNPUBLISHED
April 4, 2019
Plaintiffs,
and
GREENFIELD PHYSICAL THERAPY, PLLC,
Intervening Plaintiff-Appellant,
and
FACT GROUP INC, doing business as
ESSENTIAL PHYSICAL THERAPY, REDFORD
SPINAL CARE PC, DEPENDABLE
TRANSPORTATION, INC., ZMC PHARMACY,
LLC, and VITAL COMMUNITY CARE,
Intervening Plaintiffs,
v No. 340572
Wayne Circuit Court
FARMERS INSURANCE EXCHANGE, LC No. 16-011979-NF
Defendant-Appellee.
Before: TUKEL, P.J., and K. F. KELLY and M. J. KELLY, JJ.
PER CURIAM.
In this suit involving the recovery of no fault personal protection insurance benefits (PIP
benefits) from defendant Farmers Insurance Exchange, intervening-plaintiff Greenfield Physical
Therapy, PLLC appeals by right the circuit court’s order of dismissal, which dismissed the case
with prejudice based on the insured plaintiffs Mark Thomason’s and Tanya Sharp’s repeated
discovery violations. We affirm.
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I. BASIC FACTS
Plaintiffs were involved in an automobile accident in September 2015, and sustained
bodily injuries requiring medical treatment. Neither plaintiff had a no-fault policy in effect at the
time of the accident, so both sought benefits through the Michigan Assigned Claims Plan
(MACP). The MACP assigned the claim to defendant. Defendant denied payment for some of
the treatments plaintiffs obtained, including payment for rehabilitative treatment Thomason
received from intervening-plaintiff between July 28, 2016 and December 28, 2016.1
Approximately a year after the accident, on September 19, 2016, plaintiffs filed suit against
defendant alleging that defendant had failed to pay the statutorily mandated no-fault coverage.
Plaintiffs’ discovery abuses began soon after the suit was initiated. On defendant’s
motion to compel, in mid-December 2016, the circuit court entered a stipulated order requiring
plaintiffs to provide “full and complete answers” to defendant’s first set of interrogatories and
requests to produce, including medical release authorizations, by January 27, 2017. Plaintiffs
submitted answers to the interrogatories, but did not provide the authorizations. Consequently,
by March 2017, defendant filed a motion to dismiss. In the interim, intervening-plaintiff had
filed a motion to intervene, which the circuit court granted, and a complaint alleging that
defendant had violated its statutory duty to provide no-fault benefits.
Around the same time, the circuit court, on another of defendant’s motion to compel,
entered an order compelling plaintiffs’ attendance at independent medical examinations. Then,
after three unanswered supplemental discovery requests and yet another motion to compel by
defendant, the circuit court, on June 2, 2017, entered a stipulated order compelling discovery of
these unanswered or incomplete requests by June 12, 2017 (hereinafter “June 2nd Order”).
When plaintiffs did not comply with the June 2nd Order, defendant filed a renewed motion to
dismiss. The circuit court denied the request for dismissal, but entered an order on July 18, 2017
requiring full and complete responses to defendant’s outstanding discovery requests by July 21,
2017 and sanctioned plaintiffs $500 (hereinafter “July 18th Order”).
When plaintiff failed to comply with the circuit court’s July 18th Order, defendant filed a
second renewed motion to dismiss. Defendant noted that plaintiffs had failed to produce
discovery in violation of both the June 2nd Order and the July 18th Order, and that defendant had
been forced to file numerous motions to compel and multiple motions to dismiss. After a
hearing on the motion in early August 2017, the circuit court entered an order mandating that
plaintiffs provide full and complete responses to outstanding discovery on or before August 11,
2017 and pay costs in the amount of $300 (hereinafter “August 11th Order”). The August 11th
Order further provided that if plaintiffs failed to comply, the case would be dismissed with
prejudice.
The next hearing date, August 18, 2017, was noticed for defendant’s motion for summary
disposition as to Sharp. At the hearing, the circuit court sua sponte inquired whether plaintiffs
1
Thomason had $38,900 in unpaid fees for rehabilitative services from intervening-plaintiff.
Sharp did not receive treatment from intervening-plaintiff.
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had complied with its August 11th Order. Plaintiffs’ counsel admitted that the $300 sanction had
not been paid and defense counsel pointed out that the responses plaintiffs provided were simply
re-signed, inadequate responses that defendant had already received. Consequently, the circuit
court dismissed the entire case as to Thomason for the repeated discovery violations and failure
to abide by the August 11th Order.2
Five days after the circuit court had dismissed the case with prejudice at the hearing,
intervening plaintiff moved to amend its complaint, pointing out that it had received an
assignment of Thomason’s rights to pursue PIP benefits. The assignment, which intervening
plaintiff attached to its motion, was dated August 22, 2017—four days after the court had already
dismissed the case. Intervening-plaintiff also filed an objection to the proposed order of
dismissal, asserting that dismissal was improper given that it had a valid assignment of plaintiff
Thomason’s rights.
The circuit court heard oral argument on the objections. Intervening-plaintiff argued that
no motion against it had been noticed for the August 18th hearing, that it had complied with all
discovery requests in the case, and that dismissal of its case was a violation of due process where
it had a viable claim for PIP benefits against defendant. The circuit court rejected this argument,
noting the Supreme Court had recently held in Covenant Med Ctr, Inc v State Farm Mut Auto Ins
Co, 500 Mich. 191, 204-2018, 895 NW2d 490 (2017), that, under the plain language of the no
fault act, medical providers have no independent cause of action against insurers for the recovery
of PIP benefits; instead, such providers’ recourse is against the insured. Thereafter, the circuit
court entered an order of dismissal, dismissing the entire case with prejudice.
II. DUE PROCESS
Intervening-plaintiff first argues that its due process rights were violated when the circuit
court dismissed the entire case at the motion hearing noticed for a summary disposition motion
against Sharp. According to intervening-plaintiff, it had no notice of the pending dismissal, nor
did it have an opportunity to be heard. Whether constitutional due process has been satisfied is a
legal question that we review de novo. Reed v Reed, 265 Mich. App. 131, 157; 693 NW2d 825
(2005).
The Michigan and United States Constitutions forbid the state from depriving any person
of life, liberty, or property without due process of law. Const 1963, art 1, § 17; US Const, Am
XIV, § 1. “Due process in civil cases generally requires notice of the nature of the proceedings,
an opportunity to be heard in a meaningful time and manner, and an impartial decisionmaker.”
Cummings v Wayne Co, 210 Mich. App. 249, 253; 533 NW2d 13 (1995). A full trial-like hearing
is not required, but some type of hearing is necessary for a party to know and respond to
evidence. Id.
2
The circuit court granted defendant’s summary disposition motion as to Sharp on the basis that
Sharp had made material misrepresentations and, thus, was ineligible for PIP benefits. The court
also predicated its dismissal with prejudice of Sharp’s case on her repeated discovery violations.
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Intervening-plaintiff’s due process rights were not violated. At the August 18th hearing,
the circuit court sua sponte inquired whether Thomason had complied with its latest discovery
order from August 11th. In particular, the August 11th Order made clear that “the case” would
be dismissed if plaintiffs did not satisfactorily provide discovery by August 11th and pay the
$300 sanction. At this point in time, intervening-plaintiff knew, given the state of the law, that it
could not obtain recovery from defendant if Thomason could not, meaning it had notice that its
claim would be dismissed if Thomason’s claim was dismissed.3 Further, notice of Thomason’s
ongoing discovery abuses and the possibility of imminent dismissal of the entire case under the
terms of the August 11th Order is reasonably imputed to intervening-plaintiff, given that it was
an actively participating party in the ongoing litigation. Cf. Hill v Sears, Roebuck & Co, 492
Mich. 651, 668; 822 NW2d 190 (2012) (notice will be imputed if person using ordinary diligence
should have been aware of certain facts). Intervening-plaintiff had notice, then, that dismissal of
its case was imminent any time after August 11th in the instance that Thomason did not comply
with the August 11th Order.
Even if there had been a failure in notice, however, that failure is rectified by the fact that
intervening-plaintiff was permitted the opportunity to be heard. See Al-Maliki v LaGrant, 286
Mich. App. 483, 485-486, 781 NW2d 853 (2009) (indicating that where a court considers an issue
sua sponte, due process can be satisfied by affording a party an opportunity to be heard on
rehearing). Before the circuit court entered its written order of dismissal, intervening-plaintiff
filed written objections to the order and was provided an opportunity to present oral argument at
a hearing on the objections. There, intervening-plaintiff essentially argued that dismissal would
violate its due process rights because it had a pending claim, and alternatively, that its claim
survived the dismissal of Thomason’s claim. The circuit court addressed the substantive merits,
concluding under Covenant that intervening-plaintiff had no independent statutory right to sue
defendant for the recovery of PIP benefits. While intervening-plaintiff asserts that it was not
permitted to fully argue its objections, brief the matter, and provide evidence, due process does
not require full trial-like proceedings.4 Cummings, 210 Mich. App. at 253. No due process
violation occurred in this case where intervening-plaintiff had sufficient notice that its claim was
subject to dismissal and it was given an opportunity to be heard.
3
Covenant was released approximately two months after intervening-plaintiff became a party to
this case. Covenant recognized that medical providers’ claims under the no-fault act are
derivative of insureds’ entitlement to PIP benefits. As such, intervening-plaintiff knew or should
have known that: (1) it had no independent right to recovery against defendant; (2) its claim was
derivative of Thomason’s ability to obtain PIP benefits from defendant; and, consequently, (3) its
ability to recover from defendant would rise and fall with Thomason.
4
Intervening-plaintiff requests remand for an evidentiary hearing, citing Traxler v Ford Motor
Co, 227 Mich. App. 276, 288-289; 576 NW2d 398 (1998). However, aside from counsels’
disagreement over the meaning of the terms in the August 11th Order, intervening-plaintiff
points to no such evidentiary concerns that would justify a remand for an evidentiary hearing.
Thomason’s counsel admitted Thomason had not complied with the order, failing to pay the
$300 sanction and the record, on its face, supports that Thomason repeatedly failed to produce
complete discovery.
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III. DISCOVERY SANCTIONS
Next, intervening-plaintiff argues that the circuit court erred by dismissing its claim for
Thomason’s discovery violations because intervening-plaintiff did not violate any discovery
orders. Relying on unpublished caselaw, intervening-plaintiff further asserts that reversal is
required because the circuit court did not consider the effect of dismissal on the health providers’
claims and the circuit court did not evaluate lesser options on the record. We review for an
abuse of discretion the circuit court’s decision on a motion to dismiss for discovery violations.
Woods v SLB Prop Mgt, LLC, 277 Mich. App. 622, 630; 750 NW2d 228 (2008). “An abuse of
discretion occurs when the decision results in an outcome falling outside the range of principled
outcomes.” Keinz v Keinz, 290 Mich. App. 137, 141; 799 NW2d 576 (2010).
MCR 2.313(B)(2)(c) grants a circuit court the authority to dismiss a case for discovery
sanctions. Dismissal, however, is a drastic sanction and dismissal should be granted only when
other lesser sanctions are not appropriate. Thorne v Bell, 206 Mich. App. 625, 632-633; 522
NW2d 711 (1994). In determining whether dismissal is appropriate, courts consider the
following non-exhaustive list of factors:
(1) whether the violation was wilful or accidental; (2) the party’s history of
refusing to comply with discovery requests (or refusal to disclose witnesses); (3)
the prejudice to the defendant; (4) actual notice to the defendant of the [evidence
or] witness and the length of time prior to trial that the defendant received such
actual notice; (5) whether there exists a history of plaintiff’s engaging in
deliberate delay; (6) the degree of compliance by the plaintiff with other
provisions of the court’s order; (7) an attempt by the plaintiff to timely cure the
defect, and (8) whether a lesser sanction would better serve the interests of justice.
[Dean v Tucker, 182 Mich. App. 27, 32-33; 451 NW2d 571 (1990) (footnotes
omitted).]
“The record should reflect that the trial court gave careful consideration to the factors involved
and considered all of its options in determining what sanction was just and proper in the context
of the case before it.” Id. at 32.
The record reflects that the circuit court gave careful consideration to these factors in
determining that dismissal was the appropriate sanction, including the viability of lesser
sanctions. Specifically, in its order denying reconsideration of the order of dismissal, the circuit
court laid out its reasoning, noting that Thomason engaged in a willful pattern of non-
cooperation and still had not provided complete discovery despite multiple orders to compel; that
the court had tried numerous other lesser sanctions, including orders to compel graduating to
monetary sanctions; that Thomason never offered a reason for his repeated lack of cooperation;
and, that Thomason completely ignored the court’s order that he pay sanctions. Ultimately, the
court found that none of these lesser measures had compelled Thomason’s cooperation, making
dismissal appropriate under the circumstances. Consequently, the record does not support
intervening-plaintiff’s assertion that the circuit court failed to consider lesser sanctions.
Intervening-plaintiff further argues that the circuit court should have considered
additional factors, including the effect of dismissal on the intervening healthcare providers and
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the fact that intervening-plaintiff did not violate any discovery orders. In support, intervening-
plaintiff relies on an unpublished case from this Court that was decided before Covenant.
However, while Michigan courts may have allowed healthcare providers to maintain a direct
action against an insurer for recovery of the insured’s PIP benefits before Covenant, Covenant
made clear that healthcare providers no longer have this right. See Covenant, 500 Mich. at 217-
218. Dismissal of the insured’s claim against the insurer had no effect on the healthcare
provider’s right to recovery, as Covenant made clear that a healthcare provider’s recourse is
against the insured, and consideration of this fact is irrelevant in determining whether dismissal
was an appropriate discovery sanction against the insured. That intervening-plaintiff did not
engage in discovery abuses is immaterial for this same reason. Given that the circuit court
carefully considered the relevant factors in determining whether dismissal was an appropriate
sanction, it did not abuse its discretion by ordering that the case be dismissed with prejudice.
IV. LEAVE TO AMEND
Finally, intervening-plaintiff argues that the circuit court abused its discretion by denying
it leave to amend its complaint. We disagree. Intervening-plaintiff points out that it received a
valid assignment from Thomason and asserts that leave should have been granted given the
circuit court’s error in dismissing intervening-plaintiff’s claim against defendant based on
Thomason’s discovery violations. A circuit court’s decision on a motion to amend the pleadings
is reviewed for an abuse of discretion. Sanders v Perfecting Church, 303 Mich. App. 1, 9; 840
NW2d 401 (2013).
As previously explained, dismissal of intervening-plaintiff’s case based on Thomason’s
discovery abuses was not in error, given that intervening-plaintiff has no statutory right to an
action against defendant and its entire claim is derivative of Thomason’s right to recover against
defendant. Given that Thomason assigned his rights to intervening-plaintiff after the claim had
been dismissed with prejudice, the assignment, in effect, assigned intervening-plaintiff no right
to pursue an action against defendant. It follows that denial of leave to amend was proper
because Thomason had no rights against the insurer to assign. Futility is a valid reason for
denying a motion to amend. Diem v Sallie Mae Home Loans, Inc, 307 Mich. App. 204, 216; 859
NW2d 238 (2014). Thus, the circuit court did not abuse its discretion by denying intervening-
plaintiff’s motion to amend the pleadings.
Affirmed.
/s/ Jonathan Tukel
/s/ Kirsten Frank Kelly
/s/ Michael J. Kelly
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