Grant Bauserman v. Unemployment Insurance Agency

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
GRANT BAUSERMAN, KARL WILLIAMS and FOR PUBLICATION
TEDDY BROE, on Behalf of Themselves and All December 5, 2019
Others Similarly Situated, 9:00 a.m.
Plaintiffs-Appellees,
v No. 333181
Court of Claims
UNEMPLOYMENT INSURANCE AGENCY, LC No. 15-000202-MM
Defendant-Appellant.
ON REMAND
Before: GADOLA, P.J., and METER and FORT HOOD, JJ.
FORT HOOD, J.
This putative class action lawsuit returns to us on remand from the Michigan Supreme
Court. In our first opinion in this case, in which plaintiffs allege a deprivation of their due
process rights pursuant to Const 1963, art 1, § 17, we concluded that plaintiffs had not given
timely notice of their due-process claims to defendant, the Michigan Unemployment Insurance
Agency (the Agency) in compliance with MCL 600.6431(3). In an opinion decided April 5,
2019, the Michigan Supreme Court disagreed with our conclusion, reasoning that plaintiffs did
not incur an “actionable harm” in their due-process claims until they were deprived of their
property when their income tax refunds were seized or their wages were garnished. Bauserman v
Unemployment Ins Agency, ___ Mich ____, ___; ____ NW2d ___ (2019) (Docket No. 156398);
slip op at 18, 20-21.1 Because plaintiffs Bauserman and Broe filed their claims in a timely
1
Chief Justice MCCORMACK filed a concurring opinion questioning whether “the strict-
compliance rule from [McCahan v Brennan, 492 Mich. 730; 822 NW2d 747 (2012)] and
[Rowland v Washtenaw Co Rd Comm, 477 Mich. 197; 731 NW2d 41 (2007)] for notice of
statutorily created claims applies to a due-process claim in particular, or to constitutional claims
at all.” Bauserman, ___ Mich at ___; slip op at 1 (MCCORMACK, C.J., concurring).
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manner in compliance with MCL 600.6431(3), but plaintiff Williams did not, our Supreme Court
affirmed in part and reversed in part our judgment and remanded to this Court with the directive
that we “consider the Agency’s argument that it is entitled to summary disposition on the ground
that plaintiffs failed to raise cognizable constitutional tort claims.” Bauserman, ___ Mich at ___;
slip op at 21 n 20.
I. BACKGROUND
We adopt the pertinent facts of this case from our Supreme Court’s opinion:
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
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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)
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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, 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. [Bauserman, ___ Mich at ___; slip op at 2-6.]
In our first opinion in this case, this Court was presented with the following question:
[W]e are asked to determine whether the six months within which plaintiffs were
required to file a notice of intention to file a claim, or the claim itself [in
compliance with MCL 600.6431(3)], began to run (1) when defendant issued
notices informing plaintiffs that they were disqualified from receiving
unemployment benefits, or (2) when defendant actually seized plaintiffs’
property. [Bauserman v Unemployment Ins Agency, unpublished per curiam
opinion of the Court of Appeals, issued July 18, 2017 (Docket No. 333181), p 4.]
We answered this question by stating “that plaintiffs’ cause of action accrued when the wrong on
which they base their claims was done.” Bauserman, unpub op at 7. Disagreeing with plaintiffs’
argument that their cause of action arose when their federal and state income tax refunds were
seized or their wages garnished, we held that because plaintiffs alleged a constitutional claim
alleging a deprivation of due process, plaintiffs’ cause of action accrued when the Agency first
notified “plaintiffs of its determination that plaintiffs had engaged in fraudulent conduct, and
they were not given the requisite notice and opportunity to be heard.” Bauserman, unpub op at
9. We reversed the order of the Court of Claims denying the Agency’s motion for summary
disposition and remanded to the Court of Claims for entry of an order granting summary
disposition in favor of the Agency. Bauserman, unpub op at 11.
Plaintiffs subsequently filed an application for leave to appeal in the Michigan Supreme
Court, which scheduled oral argument on the application, directing the parties to address the
following issues:
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
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actually seized the appellants’ property. MCL 600.6431(3); MCL 600.5827; cf.
Frank v Linkner, 500 Mich. 133, 149-153; 894 NW2d 574 (2017). [Bauserman v
Unemployment Ins Agency, 501 Mich. 1047 (2018).]
In its subsequent decision, the Michigan Supreme Court considered whether plaintiffs
had complied with MCL 600.6431, which provides, in pertinent part:
(1) No claim may be maintained against the state unless the claimant, within 1
year after such claim has accrued, files in the office of the clerk of the court of
claims either a written claim or a written notice of intention to file a claim against
the state or any of its departments, commissions, boards, institutions, arms or
agencies, stating the time when and the place where such claim arose and in detail
the nature of the same and of the items of damage alleged or claimed to have been
sustained, which claim or notice shall be signed and verified by the claimant
before an officer authorized to administer oaths.
* * *
(3) In all actions for property damage or personal injuries, claimant shall file with
the clerk of the court of claims 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.
Our Supreme Court concluded that the dispositive question “is at what point plaintiffs
first incurred or suffered the ‘actionable harm’ for a claim alleging a violation of predeprivation
due process.” Bauserman, ___ Mich at ___; slip op at 13. Our Supreme Court went on to
recognize that “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.” Id. at ___; slip op at 15.
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 they were deprived of property, as they
incurred no harm before that deprivation. Because the accrual under MCL
600.5827 of a due-process claim seeking monetary relief “giv[es] 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.
[Bauserman, ___ Mich at ___; slip op at 18.]
Applying its holding to the facts of this case, our Supreme Court rejected the Agency’s
argument that plaintiffs were first deprived of property when initial redetermination notices were
sent to the plaintiffs informing them of their financial liability, or when plaintiffs received the
Agency’s notice of its intention to intercept their tax returns or wages. Instead, our Supreme
Court concluded that plaintiff Bauserman first incurred a deprivation of property when the
Agency actually intercepted his federal and state income tax refunds, and therefore his
September 9, 2015 complaint was filed in compliance with MCL 600.6431(3). Bauserman, ___
Mich at ___; slip op at 20. Our Supreme Court reached a similar conclusion with regard to
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plaintiff Broe, holding that he first incurred a deprivation of property when the Agency seized his
tax refunds in May 2015, thus his claims were also timely filed in accordance with MCL
600.6431(3). In contrast, plaintiff Williams incurred a deprivation of his property on May 6,
2014 when his wages were first garnished, and he did not comply with MCL 600.6431(3),
because his claims were not filed within six months of that initial deprivation. Bauserman, ___
Mich at ___; slip op at 21. Observing that “[i]t is yet to be determined whether plaintiffs will
succeed on their claims against the Agency,” our Supreme Court stated the following instructions
for this Court:
[o]n remand, the Court of Appeals should consider the Agency’s argument that it
is entitled to summary disposition on the ground that plaintiffs failed to raise
cognizable constitutional tort claims. [Id. ___; slip op at 21 n 20.]
A. PROCEDURE IN THE COURT OF CLAIMS AS PERTINENT TO
PLAINTIFFS’ CONSTITUTIONAL TORT CLAIMS
Given that our Supreme Court has expressly directed that we consider the Agency’s
assertion that plaintiffs2 did not allege cognizable constitutional tort claims, a brief background
regarding the proceedings in the Court of Claims as pertinent to this issue is helpful in our
analysis. In the Court of Claims, the Agency argued that it should not be held liable for
plaintiffs’ claims on the basis of governmental immunity. In this vein, the Agency asserted that
plaintiffs could not pursue a constitutional tort claim against the Agency because other alternate
remedies were available if plaintiffs pursued their appellate rights pursuant to the Michigan
Employment Security Act, MCL 421.1 et seq (the MES Act). In response, plaintiffs countered
that governmental immunity would not insulate the Agency from liability in this case, given that
plaintiffs alleged a constitutional tort against the Agency, a department of the state of Michigan.
Because the Agency acted pursuant to what plaintiffs characterized as an “unconstitutional
custom or policy[,]” plaintiffs could pursue a claim for damages against it in state court,
particularly given that plaintiffs could not pursue redress under 42 USC 1983. Plaintiffs also
claimed that their administrative remedies were “inadequate” because appeals to the Agency
were not handled in a competent, timely and responsive fashion. Observing that they were
challenging “the entire [Agency] fraud-determination procedure, plaintiffs also questioned
whether the Agency “is . . . empowered at any level to decide the constitutionality of its own
customs and policies.”
The Court of Claims held a hearing on the Agency’s motion on March 8, 2016, and the
parties advanced legal arguments consistent with their briefing in the Court of Claims.
Specifically, during oral argument, counsel for plaintiffs stated, “[t]his case is not a super appeal
of [an] individual fraud determination. Rather, this is a structural challenge to the
constitutionality of [the] fraud determination and seizure process.” According to plaintiff’s
counsel, “[plaintiffs are] not challenging the administration of the [MES Act]. We’re
challenging the constitutionality of the seizure that flows from a fraud finding that’s made
without due process of law.” The Court of Claims issued a lengthy written opinion and order
2
Our reference to plaintiffs is limited to plaintiff Bauserman and plaintiff Broe.
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denying the Agency’s motion to dismiss on May 10, 2016. In addressing whether plaintiffs
could maintain a cause of action seeking damages for an alleged violation of the Michigan
constitution, the Court of Claims, ruled, in pertinent part, as follows:
However, defendant further argues that plaintiffs cannot establish an
additional prerequisite for maintaining a constitutional tort claim. Following its
decision in Smith [v Dep’t of Pub Health, 428 Mich. 540, 544; 410 NW2d 749
(1987)], the [Michigan] Supreme Court in [Jones v Powell, 462 Mich. 329; 612
NW2d 423 (2000)], further explained that “Smith only recognized a narrow
remedy against the state on the basis of the unavailability of any other remedy.
Id. at 337 (emphasis added). Relying upon the language in Smith, defendant
argues that because plaintiffs could pursue the administrative process, they had
“other remedies available,” and therefore, they cannot maintain a constitutional
tort claim. This Court finds defendant’s argument unavailing. Simply put, the
administrative process fails to afford sufficient relief to plaintiff’s [sic]
challenging an entire statutory and policy scheme. Therefore, a constitutional
claim continues to be viable.
On remand, we now review the Court of Claims’ decision regarding plaintiffs’ claims
alleging constitutional torts as instructed by our Supreme Court. Bauserman, ___ Mich at ___;
slip op at 21 n 20.
II. STANDARD OF REVIEW
While the Court of Claims did not specify under which subrule of MCR 2.116(C) it was
denying the Agency’s motion seeking dismissal of plaintiffs’ claims alleging a violation of the
state constitution, the Court of Claims did not consider material outside of the pleadings, and
instead focused on whether plaintiffs had alleged valid constitutional claims as a matter of law.
Accordingly, we review the decision of the Court of Claims denying the Agency’s motion for
summary disposition as having been granted pursuant to MCR 2.116(C)(8) (failure to state a
claim). As this Court recently observed in Kazor v Dep’t of Licensing & Regulatory Affairs,
Bureau of Professional Licensing, ___ Mich App ___, ___; ___ NW2d ___ (2019) (Docket No.
343249); slip op at 1-2:
A motion under MCR 2.116(C)(8) tests the [legal] sufficiency of the complaint
based on the pleadings alone, and we review a decision made pursuant to this
subrule de novo. Maiden v Rozwood, 461 Mich. 109, 119; 597 NW2d 817 (1999).
In reviewing a motion brought under MCR 2.116(C)(8), “[a]ll well-pleaded
factual allegations are accepted as true and construed in a light most favorable to
the nonmovant.” Id. Judgment is properly granted under this subrule “when the
claims are so clearly unenforceable as a matter of law that no factual development
could possibly justify recovery.” Long v Liquor Control Comm, 322 Mich App.
60, 67; 910 NW2d 674 (2017) (citation and quotations omitted).
III. ANALYSIS
A. CONSTITUTIONAL TORTS
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At issue here is whether plaintiffs alleged cognizable constitutional tort claims allowing
them to recover monetary damages arising from the alleged state due process violations they
incurred as a result of the Agency’s actions. Such claims originated in Bivens v Six Unknown
Named Agents of Federal Bureau of Narcotics, 403 U.S. 388, 389, 397; 91 S. Ct. 1999; 29 L. Ed. 2d
619 (1971), a case in which the United States Supreme Court recognized that the petitioner could
pursue a cause of action for monetary damages against the respondents arising from injuries he
suffered during an unlawful search and seizure in violation of the Fourth Amendment.
Following Bivens, in the Michigan Supreme Court’s memorandum opinion in Smith, the Court
recognized that a majority of the justices agreed that “[a] claim for damages against the state
arising from violation by the state of the Michigan Constitution may be recognized in appropriate
cases.” Smith, 428 Mich. at 544. However, the Smith Court did not provide further guidance
regarding the circumstances under which such a claim for damages may be judicially inferred.
Accordingly, appellate courts have looked to Justice BOYLE’S concurring opinion in Smith for
guidance concerning when a claim for damages arising from an alleged constitutional violation
may be judicially inferred. See Reid v Michigan, 239 Mich. App. 621, 628; 609 NW2d 215
(2000) (recognizing that “[a]lthough an appropriate analysis for determining whether a
constitutional tort had been established did not garner a majority opinion, Justice BOYLE’S
extensive analysis of this issue has generally been utilized by this Court.”); Marlin v Detroit
(After Remand), 205 Mich. App. 335, 337-338; 517 NW2d 305 (1994).
In Justice BOYLE’S concurring opinion in Smith, she recognized that the ability to recover
monetary damages arising from the violation of rights protected by the Michigan constitution is
not provided by any general statute in Michigan. Smith, 428 Mich. at 644 (BOYLE J., concurring
in part). Therefore the inquiry that the Smith Court was presented with was whether such a
remedy ought to be “inferred directly from protections found in the Michigan Constitution[.]”
Id. (BOYLE, J. concurring in part). Justice BOYLE looked to Bivens as instructive in her analysis.
We would recognize the propriety of an inferred damage remedy arising directly
from violations of the Michigan Constitution in certain cases. As the Bivens
Court recognized, there are circumstances in which a constitutional right can
only be vindicated by a damage remedy and where the right itself calls out for
such a remedy. On the other hand, there are circumstances in which a damage
remedy would not be appropriate. The absence of any other remedy would, as in
Bivens, heighten the urgency of the question. Justice Harlan, concurring in
Bivens, states that “[t]he question then, is, as I see it, whether compensatory
relief is ‘necessary’ or ‘appropriate’ to the vindication of the interest asserted.”
403 U.S. at 407. In answering this question in the positive, Justice Harlan
commented, “[f]or people in Bivens’ shoes, it is damages or nothing.” Id. at p.
410. [Smith, 428 Mich. at 647 (BOYLE, J. concurring in part) (emphasis added).]
Since Smith, this Court has recognized that a claim for damages resulting from an alleged
violation of the state constitution will be recognized when “an official policy or custom caused a
person to be deprived of [state] constitutional rights.” Carlton v Dep’t of Corrections, 215 Mich
App 490, 505; 546 NW2d 671 (1996). More recently, this Court looked to the multifactor
balancing test set forth in Justice BOYLE’S opinion in Smith in determining whether, in a case in
which the plaintiffs alleged a claim for injury to their bodily integrity arising from their exposure
to contaminated water, it was appropriate to infer a damage remedy for an alleged violation of
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Const 1963, art 1, § 17. Mays v Governor, 323 Mich. App. 1, 65; 916 NW2d 227 (2018), lv gtd
___ Mich ___ (2019)3 (Docket Nos. 157335-7; 157340-2).
To apply the test, we consider the weight of various factors, including, as relevant
here, (1) the existence and clarity of the constitutional violation itself, (2) the
degree of specificity of the constitutional protection, (3) support for the propriety
of a judicially inferred damage remedy in any “text, history, and previous
interpretations of the specific provision,” (4) “the availability of another remedy,”
and (5) “various other factors” militating for or against a judicially inferred
damage remedy. See Smith, 428 Mich. at 648-652; 612 NW2d 423 (BOYLE, J.,
concurring in part). [Mays, 323 Mich. App. at 65-66.]
On appeal, the Agency initially contends that plaintiffs have not established that the
Agency acted pursuant to a state policy or custom that mandated the alleged unlawful actions.4
The Agency further argues that plaintiffs are precluded from recovering damages for the alleged
constitutional violations because the administrative review process for issues with
unemployment benefits set forth in the MES Act provides an adequate remedy for plaintiffs to
address these alleged constitutional violations. More specifically, the Agency asserts that the
administrative process provides an adequate procedure for reviewing plaintiffs’ constitutional
claims because administrative decisions pertaining to unemployment benefits are subject to
review by the Michigan Compensation Appellate Commission (MCAC), the circuit court and the
appellate courts of this state. In response, plaintiffs assert that the present case is an appropriate
one for this Court to infer a remedy for monetary damages arising from the violations of the state
constitution that plaintiffs incurred. Specifically, plaintiffs counter the Agency’s assertion that
they have an adequate remedy by pursuing the administrative process set forth in the MES Act to
adjudicate their constitutional claims, particularly because that administrative process is
procedurally flawed, resulting in claimants being denied rudimentary due process. Plaintiffs
further claim that the administrative process is not the appropriate forum to address the substance
of the constitutional claims at issue here. Addressing other potential alternate avenues for
3
In its order granting leave in Mays, our Supreme Court has directed the parties, as pertinent to
this appeal, to brief the issue:
whether the Court of Appeals erred in recognizing a constitutional tort for
violation of bodily integrity under Const 1963, art 1, § 17, and, if not, whether the
plaintiffs properly alleged such a violation, and whether a damages remedy is
available for such a violation, see Smith v Dep’t of Public Health, 428 Mich. 540
(1987); Jones v Powell, 462 Mich. 329 (2000)[.] [Mays v Governor, ___ Mich
___ (2019) (Docket Nos. 157335-7; 157340-2)].
4
The parties do not dispute that Const 1963, art 1, § 17 protects plaintiffs’ right to not be
“deprived of . . . property[ ] without due process of law.” For example, in its reply brief on
appeal, the Agency, citing Sidun v Wayne Co Treasurer, 481 Mich. 503, 509; 751 NW2d 453
(2008), acknowledges that before the state takes property from its owner, its actions must be
compliant with due process.
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redress, plaintiffs also point out that they cannot sue the Agency in federal or state court under 42
USC 1983.
B. OFFICIAL POLICY OR CUSTOM
As this Court recently observed in Mays, the state may only be held responsible for an
alleged violation of the state constitution “where the state’s liability would, but for the Eleventh
Amendment, render it liable under the standard for local governments as set forth in 42 USC
1983 and articulated in [Monell v New York City Dep’t of Social Servs, 436 U.S. 658; 98 S. Ct.
2018; 56 L. Ed. 2d 611 (1978)].” Mays, 323 Mich. App. at 62 (citation and quotation marks
omitted). In Johnson v Vanderkooi, 502 Mich. 751, 762; 918 NW2d 785 (2018), our Supreme
Court clarified that for liability to be imposed under 42 USC 1983, a showing must be made that
“(1) a plaintiff’s federal or statutory rights were violated and (2) the violation was caused by a
policy or custom of the municipality.”5 (Emphasis added.) See also Holeton v City of Livonia,
___ Mich App ___, ___; ___ NW2d ___ (2019) (Docket Nos. 341624, 341847); slip op at 8
(holding “that the plaintiff must plead and be able to prove that the municipality’s policy or
custom led to the deprivation of the federal constitutional or statutory right at issue” in a suit
brought pursuant to 42 USC 1983).
In Johnson, our Supreme Court noted that an official policy need not be memorialized in
writing as a prerequisite for liability. Johnson, 502 Mich. at 763-764. Moreover, a governmental
custom may provide a foundation for liability if it is a “permanent and well settled” practice that
governmental officials and employees act in accordance with. Id. at 764 (citation and quotation
marks omitted). “Thus, accepted, though unwritten, practices of executing governmental policy
may give rise to liability for the purposes of Monell.” Id. Additionally, if governmental
resources are used to “develop and implement practices and procedures[,]” this too can establish
that an official governmental policy exists. Id. The Johnson Court also stated that “a
municipality may be held liable for unlawful actions that it sanctioned or authorized, as well as
for those that it specifically ordered[ ]” and that liability will flow from concerted choices “to
follow a course of action [that] is made from among various alternatives by the official or
officials responsible for establishing final policy with respect to the subject matter in question.”
Id. at 765-766, quoting Pembaur v Cincinnati, 475 U.S. 469, 483-484; 106 S. Ct. 1292; 89 L. Ed. 2d
452 (1986). Similarly, in Mays, this Court, also guided by Pembaur, held that “ ‘[a] single
decision’ ” by a policymaker or governing body ‘unquestionably constitutes an act of official
government policy,’ regardless of whether ‘that body had taken similar action in the past or
intended to do so in the future[.]’” Mays, 323 Mich. App. at 63, quoting Pembaur, 475 U.S. at 480.
The Mays Court quoted with approval the following passage from Pembaur:
To be sure, “official policy” often refers to formal rules or understandings—often
but not always committed to writing—that are intended to, and do, establish fixed
5
In this case, given that plaintiffs allege state constitutional violations against the Agency, a
department of the state of Michigan, we must discern whether plaintiffs’ allegations, if
demonstrated to be correct, establish that the alleged constitutional violations were caused by a
policy or custom of the state of Michigan.
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plans of action to be followed under similar circumstances consistently and over
time. That was the case in Monell itself, which involved a written rule requiring
pregnant employees to take unpaid leaves of absence before such leaves were
medically necessary. However . . . a government frequently chooses a course of
action tailored to a particular situation and not intended to control decisions in
later situations. If the decision to adopt that particular course of action is properly
made by that government’s authorized decisionmakers, it surely represents an act
of official government “policy” as that term is commonly understood. More
importantly, where action is directed by those who establish governmental policy,
the [government] is equally responsible whether that action is to be taken only
once or to be taken repeatedly. [Mays, 323 Mich. App. at 63, quoting Pembaur,
475 U.S. at 480–481.]
With regard to causation, the Johnson Court has also instructed, in pertinent part:
Once a municipal policy or custom has been identified, a plaintiff must
then show that the policy or custom was also the “moving force” behind the
action that gave rise to the alleged constitutional violation. Monell, 436 U.S. at
694. In other words, the policy or custom must be the cause of the violation.
[Johnson, 502 Mich. at 767.]
In this case, plaintiffs have alleged that the Agency systemically, and by way of
concerted and coordinated actions, unlawfully intercepted their state and federal tax refunds,
garnished their wages, and forced plaintiffs to repay unemployment benefits that they had
lawfully received. The first amended complaint further alleges that the Agency, in violation of
state law, imposes penalties on individuals in receipt of unemployment benefits and collects
interest also not authorized by state law. Plaintiffs claim that the Agency has taken these actions
under the following circumstances: (1) without providing “required notice of the bases asserted
for disqualification [of unemployment benefits,]” or a hearing, (2) by not allowing plaintiffs to
present evidence in their own defense, and (3) by using an automated computerized system “for
the detection and determination of [alleged] fraud cases,” which does not comport with due
process. Plaintiffs specifically allege that the Agency uses the Michigan Integrated Data
Automated System (MiDAS), “an automated decision-making system” to spot suspected fraud in
the receipt of unemployment benefits, and that MiDAS “initiates an automated process” that can
result in an individual being disqualified from receiving benefits, as well as having penalties
imposed and being subjected to criminal prosecution. All of this, plaintiffs allege, occurs
without plaintiffs being provided with notice, an opportunity to be heard and being allowed to
present evidence in their defense.
These allegations, if established to be true and correct, certainly demonstrate that
plaintiffs’ rights to due process as guarded by Const 1963, art 1, § 17 were violated, and that the
alleged violations “arose from actions taken by state actors pursuant to governmental policy.”
Mays, 323 Mich. App. at 64. In our opinion, the Agency’s use of the MiDAS system to allegedly
disqualify plaintiffs from receipt of unemployment benefits, accuse them of fraudulent receipt of
unemployment benefits, and to engage in a concerted system of unlawfully imposing penalties,
interest and intercepting the financial resources of the plaintiffs can be aptly characterized as an
established practice of state governmental officials such that it amounts to a custom supported by
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the force of law. Johnson, 502 Mich. at 764. Accordingly, we reject the Agency’s assertion that
plaintiffs’ claims in this regard are legally deficient, given that the allegations plaintiffs advance,
if proven to be correct, amply demonstrate that plaintiffs’ constitutional rights were violated as a
result of the Agency’s use of its policy or custom in administering the unemployment benefit
system. Id. at 762.
C. SHOULD A DAMAGE REMEDY BE INFERRED IN THIS CASE?
We now turn our attention to the multi-factor analysis first stated by Justice BOYLE in
Smith and which this Court more recently highlighted in its decision in Mays. In its brief on
appeal, the Agency focuses its argument on the fact that the Agency’s administrative process,
mandated by the MES Act, provides a sufficient remedy to redress plaintiffs’ alleged injuries.
However, we will nonetheless weigh all of the factors that Justice BOYLE articulated in Smith.
The first factor requires that we weigh the “existence and clarity of the constitutional violation
itself[.]” Mays, 323 Mich. App. at 65. Const 1963, art 1, § 17 provides, in pertinent part:
No person shall be compelled in any criminal case to be a witness against himself,
nor be deprived of life, liberty or property, without due process of law.
[Emphasis added.]6
As our Supreme Court recognized in its opinion in this case, the thrust of plaintiffs’ allegations
against the Agency are as follows:
Plaintiffs allege that the Agency violated their due-process rights under the
Michigan Constitution when it (1) seized their property without reasonable notice
and an opportunity to be heard and (2) engaged in unlawful collection practices.
[Bauserman, ___ Mich at ___; slip op at 13.]
Citing its earlier decision in Bonner v Brighton, 495 Mich. 209, 225-226; 848 NW2d 380 (2014),
our Supreme Court also recounted the protections that the Due Process Clause provides:
The Due Process Clause precludes the state from (1) depriving one of life, liberty,
or property (2) without due process of law. Clearly, the clause is violated only if
there has been a deprivation of life, liberty, or property. [Bauserman, ___ Mich at
___; slip op at 14.]
6
Notably, in Smith, Justice BRICKLEY, joined by Justice RILEY, opined that the courts of this
state “should defer to the Legislature the question whether to create a damages remedy for
violations of a plaintiff’s right to due process or equal protection.” See Lewis v State, 464 Mich.
781, 787; 629 NW2d 868 (2001), quoting Smith, 428 Mich. at 631-632 (opinion by BRICKLEY, J.)
(footnote omitted.) However, the Michigan Supreme Court has not yet addressed whether a
judicially inferred remedy for monetary damages is “ever appropriate” under the Due Process
Clause of the state constitution, Const 1963, art 1, § 17. Lewis, 464 Mich. at 787 n 3.
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Because plaintiffs allege that the Agency violated Const 1963, art 1, § 17 in seizing their
property without providing them with adequate notice and an opportunity to be heard, given the
“existence and clarity of the [alleged] constitutional violation itself,” Mays, 323 Mich. App. at 65,
we conclude that the first factor weighs in favor of judicially inferring a remedy for monetary
damages. See also Sidun v Wayne Co Treasurer, 481 Mich. 503, 509; 751 NW2d 453 (2008)
(recognizing that a citizen has the “constitutional right to due process of law before the
government takes . . . property.”).
The second and third factors address “the degree of specificity of the constitutional
protection,” as well as if there is support for a judicially inferred damage remedy in the “ ‘text,
history and previous interpretations’ ” of Const 1963, art 1, § 17. Mays, 323 Mich. App. at 65-66,
quoting Smith, 482 Mich. at 650, 651 (BOYLE, J. concurring in part). While we acknowledge
Justice BOYLE’S general concerns in Smith that the protections inherent in due process may not
be as well-defined as the search and seizure protections embedded in the Fourth Amendment and
at issue in Bivens, Smith, 428 Mich. at 651 (BOYLE, J. concurring in part), we nonetheless are
satisfied that the due process protections at issue in this case are clear and definitive enough that
this factor weighs in favor of inferring a judicial remedy. Plaintiffs allege that they were
deprived of their property in violation of Const 1963, art 1, § 17, and even though due process is
flexible and the procedural protections that it offers may vary depending on the circumstances,
“the Due Process Clause secures an absolute right to an opportunity for a meaningful hearing”
and an opportunity to be heard before individuals are deprived of their property. Dow v State of
Michigan, 396 Mich. 192, 204-205; 240 NW2d 450 (1976). Additionally, with regard to the third
factor, concerning whether support for a judicially inferred remedy exists in the text of Const
1963, art 1, § 17, we observe that unlike Const 1963, art 1, § 2, the plain language of Const 1963,
art 1, § 17 does not leave the implementation of a private cause of action to the Legislature.
Specifically, in Lewis v State, 464 Mich. 781, 782; 629 NW2d 868 (2001), our Supreme Court
held that it would be “inappropriate to infer . . . a damages remedy” with respect to Const 1963,
art 1, § 2, because the plain language of that constitutional provision, providing that “[n]o person
shall be denied the equal protection of the laws” also expressly stated that “[t]he legislature shall
implement this section by appropriate legislation.”
On its face, the implementation power of Const 1963, art 1, § 2 is given to
the Legislature. Because of this, for this Court to implement Const 1963, art 1, §
2 by allowing, for example, money damages, would be to arrogate this power
given expressly to the Legislature to this Court. Under no recognizable theory of
disciplined jurisprudence do we have such power.
* * *
Given the language of the Michigan Constitution, we hold in this case that
we are without proper authority to recognize a cause of action for money damages
or other compensatory relief for past violations of Const 1963, art 1, § 2. [Lewis,
464 Mich. at 787, 789.]
Moreover, while the United States Supreme Court, in its most recent pronouncement on
the validity of the Bivens remedy, has reiterated that caution must be employed before extending
the Bivens remedy into new contexts, it also acknowledged that the United States Supreme Court
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had permitted a Bivens action in the context of the Fifth Amendment Due Process Clause in a
case alleging gender discrimination. Ziglar v Abbasi, ___ US ___, ___; 137 S. Ct. 1843, 1854,
1857; 198 L. Ed. 2d 290 (2017), citing Davis v Passman, 442 U.S. 228; 99 S. Ct. 2264; 60 L. Ed. 2d
846 (1979).7 Accordingly, we likewise conclude that the third factor weighs in favor of a
judicially inferred remedy for damages.
As noted earlier in this opinion, the Agency focuses its argument on the fourth factor at
issue, that being whether plaintiffs have another remedy available to them. Smith, 428 Mich. at
651 (BOYLE, J., concurring in part); Mays, 323 Mich. App. at 66. Specifically, the Agency
contends that plaintiffs have an alternate remedy available to them because they can seek redress
through the administrative system established by the MES Act. The MES Act provides for the
payment of unemployment benefits, MCL 421.27, a person’s eligibility to receive unemployment
benefits, MCL 421.28, criteria for disqualification for benefits, MCL 421.29, the procedures
governing determinations of unemployment benefits, MCL 421.32, as well as review of
determinations leading to a redetermination of benefits, MCL 421.32a. Challenges to
unemployment benefit redeterminations are “referred to the Michigan administrative hearing
system for assignment to an administrative law judge.” MCL 421.33. If a case is transferred to
an administrative law judge, “all matters pertinent to the claimant’s benefit rights . . . under this
act shall be referred to the administrative law judge.” MCL 421.33. A party may also proceed
with an appeal from a decision of an administrative law judge to the MCAC. MCL 421.33(2).
The MCAC “has full authority to handle, process and decide appeals filed under [MCL
421.33(2)].” MCL 421.34(1). Additionally, MCL 421.38(1) provides that a claimant may file an
appeal to the circuit court, and the circuit court may “review questions of fact and law on the
record made before the administrative law judge and the Michigan compensation appellate
commission[,]” but may also “make further orders in respect to that order or decision as justice
may require.” MCL 421.38(2) provides for a direct appeal to the circuit court from an order of
an administrative law judge “if the claimant and the employer or their authorized agents or
attorneys agree to do so by written stipulation filed with the administrative law judge.”
Additionally, “[t]he decision of the circuit court may be appealed in the manner provided by the
laws of this state for appeals from the circuit court.” MCL 421.38(4).
Our review of this legislative scheme leads to the conclusion that while the administrative
process established by the MES Act allows for the review of the Agency’s decisions with respect
to the award or disqualification of unemployment benefits, or pertaining to its imposition of
penalty and interest, it does not provide an avenue for plaintiffs to seek redress in the form of
monetary relief for the alleged violation of their due process rights protected by the state
constitution. See Mays, 323 Mich. App. at 67 (observing that the proper inquiry is whether “a
judicially imposed damage remedy for the alleged constitutional violation is the only available
avenue for obtaining monetary relief.”) (Emphasis added.) Further, while the procedure
7
In Bauserman, our Supreme Court noted that because of the “textual similarities between the
state and federal Due Process Clauses,” this Court may look to United States Supreme Court
cases as persuasive authority, even though plaintiffs only allege a violation of their state
constitutional due process rights. Bauserman, ___ Mich at ___; slip op at 14 n 12.
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established by the MES Act establishes a way for claimants to challenge the Agency’s decision
regarding their unemployment benefits, we agree with the Court of Claims that it does not
provide a suitable avenue for plaintiffs to challenge the Agency’s alleged systemic and concerted
deprivation of their due process rights promulgated by the Agency’s implementation of the
MiDAS system. Put another way, we disagree with the Agency that the administrative process
as set forth in the MES Act provides a remedy for plaintiffs to seek redress for the due process
violations that they allege they suffered as result of the Agency’s alleged unlawful actions. See
id. at 70 (concluding that the federal Safe Water Drinking Act, 42 USC 300f et seq. and the
Michigan Safe Drinking Water Act, (MSDWA), MCL 325.1001 et seq. “do not provide an
alternative remedy for plaintiffs’ claim of injury to bodily integrity” as a result of the alleged
contamination of their water supply). While we are aware that this Court has addressed a First
Amendment claim in the context of reviewing an unemployment benefits determination, Shirvell
v Dep’t of Attorney General, 308 Mich. App. 702, 732-749; 866 NW2d 478 (2015), the present
case is not one where the plaintiffs are merely disputing the determination of their individual
employment benefits. Instead, plaintiffs are mounting a direct and large scale challenge to the
Agency’s administrative process leading to the seizure of their property without their consent,
which plaintiffs assert was done in violation of their right to due process protected by Const
1963, art 1, § 17. In sum, because of the factual and procedural backdrop of this case, we
disagree with the Agency that the existing administrative process as set forth in the MES Act,
including the judicial review provided by the courts of this state, provides plaintiffs with a
remedy to pursue their constitutional claims in this case.
Moreover, while the Agency points to Jones in support of its argument, because the state
of Michigan enjoys the protection of immunity under the Eleventh Amendment in a lawsuit
seeking monetary damages filed in any court under 42 USC 1983 for an alleged violation of
rights protected by the federal constitution or a federal statute, plaintiffs do not have the same
access to a remedy that the plaintiffs in Jones did. Unlike the instant case, in Jones our Supreme
Court observed that the plaintiff did have an alternate remedy available because she could pursue
an action in federal or state court under 42 USC 1983 against a municipality or an individual
defendant without implicating immunity under the Eleventh Amendment. Jones, 462 Mich. at
337.
Additionally, the present case is factually and legally distinguishable from the persuasive
authority of the United States Supreme Court’s decision in Schweiker v Chilicky, 487 U.S. 412,
414; 108 S. Ct. 2460; 101 L. Ed. 2d 370 (1988), in which the Court declined to extend Bivens to a
case in which the respondents were improperly denied Social Security disability benefits and
alleged federal due process violations against the government officials administering the federal
Social Security program. In Schweiker, the United States Supreme Court looked to its earlier
decision in Bush v Lucas, 462 U.S. 367, 368; 103 S. Ct. 2404; 76 L. Ed. 2d 648 (1983), noting that in
circumstances in which Congress had not taken action in enacting legislation to provide a
complete remedy for individuals asserting constitutional claims, such inaction would weigh
against the imposition of a Bivens remedy. Schweiker, 487 U.S. at 423.
In sum, the concept of “special factors counselling hesitation in the absence of
affirmative action by Congress” [as first articulated in Bivens] has proved to
include an appropriate judicial deference to indications that congressional inaction
has not been inadvertent. When the design of a Government program suggests
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that Congress has provided what it considers adequate remedial mechanisms for
constitutional violations that may occur in the course of its administration, we
have not created additional Bivens remedies. [Id., quoting Bivens, 403 U.S. at
396.]
Specifically, the Schweiker Court observed that the respondents, after exhausting their
administrative remedies within the Social Security system, could seek judicial review, “including
review of constitutional claims.” Schweiker, 487 U.S. at 424, citing Heckler v Ringer, 466 U.S.
602, 615; 104 S. Ct. 2013; 80 L. Ed. 2d 622 (1984) and Weinberger v Salfi, 422 U.S. 749, 762; 95 S
Ct 2457; 45 L. Ed. 2d 522 (1975) (recognizing that “the Social Security Act itself provides
jurisdiction for constitutional challenges to its provisions.”). The Schweiker Court also
concluded that because Congress did not “make any provision for remedies in money damages
against officials responsible for unconstitutional conduct that leads to the wrongful denial of
benefits[,]” where such a remedy was not included in “the elaborate remedial scheme devised by
Congress,” it was not available to the respondents. Schweiker, 487 U.S. at 414, 424. Notably,
Schweiker did not involve highly egregious facts such as those alleged in the instant case.
Specifically, in Schweiker, the respondents were wrongfully withheld Social Security disability
benefits as a result of a new review procedure, id. at 416, 417-418, whereas plaintiffs in this case
claim that their own monetary funds were wrongfully taken by the Agency after they faced
unsubstantiated allegations of fraud and were not given the opportunity to defend against such
accusations. Under such circumstances, we are not persuaded that the administrative procedures
and judicial review provisions set forth in the MES Act, which admittedly do not expressly allow
individuals to recover monetary damages as a result of alleged state constitutional violations,
provide a remedy to plaintiffs in this case to the extent that a judicial remedy cannot be inferred.
Finally, similar to the conclusion this Court reached in Mays, we afford “significant
weight” to the “outrageousness” of the misconduct by the Agency that plaintiffs allege in this
case, and we conclude that it weighs in favor of a judicially inferred damage remedy. Mays, 323
Mich. App. at 72. Specifically, plaintiffs allege that the Agency, relying on an automated system,
systematically engaged in a series of concerted actions that wrongfully accused thousands of
innocent citizens of this state of fraud and the unlawful receipt of unemployment benefits
without grounds for doing so.8 The MES Act is intended to “safeguard the general welfare
through the dispensation of benefits intended to ameliorate the disastrous effects of involuntary
unemployment.” Korzowski v Pollack Indus, 213 Mich. App. 223, 228-229; 539 NW2d 741
(1995) (quotation marks and citation omitted). Instead, the procedure at issue allegedly deprived
plaintiffs and the others impacted by the Agency’s actions of their due process rights as they
were saddled with undeserved and unnecessary penalties and interest and were forced to endure
the garnishment of wages and state and federal income tax refunds that individuals in this state
rely on to survive. Indeed, the absolutely “egregious nature[,]” Mays, 323 Mich. App. at 72, of
the Agency’s alleged actions in this case may have led to the undermining of the due process
8
While the Court of Claims has not yet ruled on plaintiffs’ motion seeking class certification, we
observe that plaintiffs assert that the number of claimants impacted by the Agency’s alleged
unlawful actions is in the range of 26,000.
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rights of thousands of innocent citizens across this state at a particularly vulnerable time in their
lives, having lost their gainful employment for one reason or another. Consequently, if
plaintiffs’ allegations are borne out in the course of this litigation, this would be a case where a
judicially inferred damage remedy is appropriate to safeguard the constitutional protections that
we as a citizenry in a democracy hold inviolate. In simple terms, the alleged disturbing facts of
this lawsuit would call out for such a remedy.
Considering the factors set forth in Justice BOYLE’S opinion concurring in part in Smith
and as clarified by this Court recently in Mays, we conclude that this multifactor approach
weighs in favor of recognizing a judicially inferred damage remedy in this case for the due
process deprivations that plaintiffs allege they suffered as a result of the Agency’s unlawful
actions. We therefore agree with the Court of Claims’ determination that summary disposition
was not warranted.9
IV. CONCLUSION
The May 10, 2016 opinion and order of the Court of Claims denying the Agency’s
motion to dismiss is affirmed. Plaintiffs, as the prevailing parties, may tax costs pursuant to
MCR 7.219.
/s/ Karen M. Fort Hood
/s/ Patrick M. Meter
9
Given our analysis of this issue concluding that plaintiffs have alleged a valid constitutional
claim against the Agency, governmental immunity does not shield the Agency from liability.
LM v State, 307 Mich. App. 685, 694; 862 NW2d 246 (2014).
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