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Bauserman v. Unemployment Ins. Agency
Citations: 931 N.W.2d 539; 503 Mich. 169Docket: No. 156389
Court: Michigan Supreme Court; April 5, 2019; Michigan; State Supreme Court
The case addresses whether the plaintiffs provided timely notice of their due-process claims to the Michigan Unemployment Insurance Agency (the Agency), which is crucial for their claims to be considered on the merits. The central question is whether the plaintiffs filed their notices or claims within six months of the events that triggered their causes of action, as stipulated by MCL 600.6431(3). The court determines that for claims seeking monetary relief, the relevant event for accrual occurs at the moment the deprivation of life, liberty, or property takes place. In this instance, the plaintiffs faced property deprivation when their tax refunds were seized or wages garnished. Plaintiffs Bauserman and Broe filed their claims within the six-month period following their property deprivation, while plaintiff Williams did not. Consequently, the court affirms part of the Court of Appeals' judgment while reversing another part, remanding for further proceedings. The facts indicate that the plaintiffs are former recipients of unemployment benefits who allege wrongful property seizure by the Agency without due process. Bauserman, who received benefits from October 2013 to March 2014, was informed by the Agency in December 2014 of a substantial debt due to alleged overpayments. Bauserman appealed the fraud allegation but did not contest the eligibility determination. Throughout 2015, the Agency communicated various notices regarding the outstanding debt and the potential for garnishment or seizure of refunds. On June 16, 2015, the Agency seized Bauserman's state and federal tax refunds, leading him to file a putative class action against the Agency on September 9, 2015, claiming that the Agency's practices violate due process requirements. On September 30, 2015, the Agency issued new notices of redetermination, nullifying its prior determinations from December 3, 2014, and returned all seized funds to Bauserman. Subsequently, on October 19, 2015, Bauserman filed an amended complaint adding Teddy Broe and Karl Williams as plaintiffs. Broe, who received unemployment compensation from April to August 2013, was initially found eligible based on being laid off from Fifth Third Bank. However, Fifth Third contested this claim, stating Broe voluntarily quit to attend school. In response, the Agency issued notices of redetermination on July 15, 2014, declaring Broe ineligible due to the nature of his termination and alleging he misled the Agency, resulting in an $8,302 debt. Between August 2014 and April 2015, the Agency repeatedly notified Broe of his debt and the potential for wage garnishment or tax refund seizure, including a notice of intent to withhold his federal tax refund. Broe appealed the redetermination in April 2015, claiming he missed prior communications due to not accessing his online account. The Agency denied this appeal as untimely and subsequently intercepted his tax refunds. On November 4, 2015, the Agency reversed its earlier determinations regarding Broe's eligibility and fraud, and returned his seized funds. Williams began employment at Wingfoot Commercial Tire System in May 2011 while still receiving unemployment compensation from a prior employer. He informed the Agency about his new wages but believed he remained entitled to unemployment benefits since his earnings were below the threshold set by MCL 421.48(1). The Agency later issued redeterminations on June 22, 2012, terminating Williams’s unemployment benefits, alleging he was ineligible due to his employment, and claiming he had intentionally misled the Agency. On October 29, 2013, the Agency issued a notice of garnishment, stating his employer would have to deduct up to 25% of his earnings to satisfy the debt if not repaid within 30 days. Williams's wages were garnished starting May 16, 2014, and he received a notice of intent to withhold his federal tax refund. Williams appealed the redeterminations on May 22, 2014, but the Agency and an administrative law judge denied the appeal as untimely. The Agency seized his federal tax refund on February 19, 2015, and continues to collect the debt through this method. Plaintiffs allege that the Agency violated their due-process rights by (1) depriving them of property without sufficient notice and opportunity to be heard, and (2) engaging in unlawful collection practices, including charging excessive interest, collecting interest on penalties, and implementing wage garnishments. The Agency sought summary disposition, arguing plaintiffs did not comply with the notice requirement of MCL 600.6431(3) by failing to file their complaint within six months of the triggering event for their claims. The Court of Claims denied this motion, determining that the claims arose when plaintiffs received redetermination notices nullifying previous fraud findings, which were within the six-month filing period. However, the Court of Appeals reversed this decision, stating that the claims accrued upon receiving the initial redetermination notices indicating fraudulent conduct, which constituted the actionable harm for due-process claims. The Court of Appeals also clarified that the subsequent property seizure was merely a consequence of the initial deprivation rather than the triggering event for accrual. The plaintiffs then sought leave to appeal, with the court asking whether the cause of action arose when the wrongful notice was issued or when the property was seized. The excerpt further explains that MCL 600.6431 sets forth conditions to evade governmental immunity, and failure to comply with these conditions bars claims against governmental entities. The court reviews summary disposition decisions regarding governmental immunity de novo, considering all submitted evidence, and any statutory interpretation related to notice requirements also undergoes de novo review. MCL 600.6431 outlines the procedural requirements for initiating claims against government agencies in Michigan. A claimant must file a written claim or notice of intent within one year of the claim's accrual, detailing the circumstances and nature of the claim, and it must be signed and verified. For claims related to property damage or personal injury, this timeframe is shortened to six months following the event that caused the action. The distinction between general claims and those involving property damage or personal injury is clarified, with the latter subset being governed by the six-month rule. The determination of the 'event giving rise to the cause of action' is crucial for triggering this notice period, defined as the factual situation that entitles a claimant to seek a remedy. The terms 'rise' and 'give rise to' indicate that an event must originate a basis for suing. Moreover, there is no significant difference between the occurrence of the event and the accrual of the claim, as a claim accrues when the wrongful act occurs, irrespective of when the damage manifests. The actionable harms relevant to a plaintiff's cause of action are defined as the events that give rise to a claim for monetary relief under MCL 600.6431(3). These harms are essential for establishing a cause of action. In the context of due-process claims, the case at hand requires determining when plaintiffs first incurred the alleged harm. Plaintiffs claim that the Agency violated their due-process rights by seizing property without reasonable notice and engaging in unlawful collection practices. The Michigan Constitution prohibits deprivation of life, liberty, or property without due process. A violation occurs only if there is a deprivation, as established in Bonner v. City of Brighton. Without such deprivation, there can be no claim of harm. It is recognized that procedural due process is only implicated when protected interests are at stake. Harm under the Due Process Clause is incurred only upon deprivation of property, meaning that a claim accrues at that moment. The Agency contends that the lack of process itself constitutes the actionable harm, suggesting that deprivation of property is merely a consequence of that harm. They reference Carey v. Piphus, which allowed for nominal damages for due process violations without additional harm. However, the interpretation of Carey is disputed, as the case involved students who had recognized property and liberty interests in education and were deprived of those rights without due process. The central issue was whether damages could be recovered if the suspensions were justifiable despite the due process violations. The Court determined that the right to procedural due process is absolute and should be actionable for nominal damages without requiring proof of actual injury. If the District Court finds that the respondents' suspensions were justified, they are still entitled to nominal damages not exceeding one dollar due to the denial of due process. This ruling indicates that even if the plaintiffs would have faced suspension regardless of due process, they can still claim nominal damages for its denial. However, it clarifies that harm under the Due Process Clause cannot exist without a deprivation of property. A plaintiff can claim damages based solely on due process deprivation, but no harm occurs without prior property deprivation. The Fourteenth Amendment protects established property interests, and a related case, Frank v. Linkner, supports the notion that claims accrue upon the denial of process rather than property deprivation. In Frank, the actionable harm for LLC member oppression claims arises from actions that substantially interfere with member interests, not solely from financial injury. The Agency argues that deprivation of property parallels the calculable financial injury in Frank, asserting that deprivation of process constitutes the actionable harm in due process violation claims. A claim for due process violation requires an actual deprivation of property to constitute harm, differing from LLC member oppression claims where harm may occur without financial injury. The Michigan Court of Appeals mistakenly ruled that due-process claims accrued when plaintiffs were deprived of process rather than property. Claims for due process damage arise only upon property deprivation, triggering the accrual period under MCL 600.5827. The plaintiffs contend they were deprived of property when their tax refunds were seized or wages garnished. The Agency argues the deprivation occurred when initial redetermination notices were sent, but these notices did not constitute actual deprivation, merely informing plaintiffs of potential future actions. The notices did not impair property interests, and thus did not trigger actionable harm. Plaintiff Bauserman's property deprivation occurred on June 6, 2015, when his tax refunds were intercepted, making his September 9, 2015 complaint timely. Plaintiff Broe also timely filed after his tax refunds were seized in May 2015. In contrast, plaintiff Williams's wages were garnished on May 16, 2014, and his claim was untimely as it was not filed within six months of that event. Therefore, Bauserman and Broe's claims are timely, while Williams's is not. Plaintiffs Bauserman and Broe timely complied with the notice requirements under MCL 600.6431(3), allowing their claims against the Agency to proceed substantively. The Court affirms in part and reverses in part the Court of Appeals' judgment, remanding for further proceedings. There is uncertainty regarding whether plaintiff Williams's wages were garnished prior to May 16, 2014; however, even if they were, it does not affect the conclusion that his claim was untimely filed. The Court of Claims determined that the return of funds seized from Bauserman and Broe did not moot their claims and that they were exempt from exhausting administrative remedies due to raising a constitutional challenge. The Agency did not contest these findings at either appellate level, so the Court refrains from addressing them. Additionally, while the Agency argued that the plaintiffs' claims did not constitute viable constitutional tort claims and were thus barred by governmental immunity, the Court of Appeals did not address this since it deemed the timeliness issue decisive. Williams's claim was ultimately found not timely filed as it was not submitted within six months of his property deprivation. A claim alleging a violation of due process is treated as an "action for property damage" under MCL 600.6431(3), as it involves harm to a person's lawful use of property. The case Sanderson v. Unemployment Ins. Agency supports this view, though a concurring opinion argues that such claims aim to recover property rather than damages. The Court of Appeals held in Rusha v. Dep't of Corrections that the principles from McCahan apply to constitutional claims, allowing for an exception to strict notice period enforcement when it would deny access to courts. However, the plaintiffs in this case do not contest the applicability of McCahan or argue against the notice period's enforcement. Thus, failure to comply with MCL 600.6431(3) would bar their claims against the Agency. A "claim" is defined as an assertion of an existing right, and the Agency's interpretation regarding the timing of a cause of action is rejected. The court clarifies that a cause of action does not arise until the plaintiff can obtain a remedy, meaning events leading up to a claim do not constitute its origin. The definition of "accrual" in MCL 600.5827 is presumed to apply similarly to MCL 600.6431, although the conclusion remains unchanged regardless of whether the common-law definition is applied. Under common law, a claim accrues when all elements of the cause of action occur, which in this case is when plaintiffs were deprived of property. The timing of the accrual does not affect the outcome since plaintiffs could only assert their due-process claims after the alleged deprivations occurred. While there are scenarios where a cause of action could arise before actual harm, such as seeking prospective relief, the plaintiffs have waived claims for injunctive and equitable relief, focusing instead on damages due to property deprivation without due process. Thus, the determination of when the event giving rise to the cause of action occurs under MCL 600.6431(3) is not influenced by the availability of prospective remedies. The distinction in language between "accrue" in Subsection (1) and "the happening of the event giving rise to the cause of action" in Subsection (3) may imply different meanings, although this principle of interpreting different terms does not universally apply. Different wording in various sections of a statute implies that the legislature intended different meanings and effects. The parties agree that plaintiffs' claims are governed by MCL 600.6431(3), so the court does not need to define "accrual" in the context of MCL 600.6431(1). The U.S. Supreme Court has recognized that a post-deprivation hearing or a common-law tort remedy can satisfy due process. However, plaintiffs argue that such remedies are inadequate for protecting their rights, as temporary deprivation of wages or benefits significantly burdens their ability to support themselves and their families. They claim that the Agency's procedures prior to any deprivation violated due process. The plaintiffs assert a violation of Michigan's Due Process Clause, which allows the court to interpret state law independently of federal precedent, although federal interpretations may be persuasive due to similarities between state and federal clauses. 42 U.S.C. 1983 provides a cause of action for civil rights deprivations by state actors. The Agency does not contest whether plaintiffs had a property interest in future unemployment compensation, and the court will not address that issue. Even if such an interest existed, Bauserman and Broe did not seek additional compensation when the Agency's redeterminations were made. Their property was not deprived until their tax refunds were seized. Bauserman received a notice of redetermination alleging fraud, which indicated a termination of benefits and required restitution under the Michigan Employment Security Act. Disagreement with the redetermination must be addressed by referring to the Appeal Rights provided on the reverse side of the form. If the individual fails to pay the stated amount or take specified actions within 60 days from the mailing date, the Agency will report the benefit overpayment to the U.S. Department of Treasury, which will then withhold any federal income tax refund due to the individual and redirect those funds to the Agency. The Court has established that a money judgment against a defendant constitutes a deprivation of property; however, a mere expression of intent to deprive someone of property is insufficient to trigger legal action. The notices in question reflect only a future intent to seize property without demonstrating actual deprivation, thus not initiating the six-month notice period under MCL 600.6431(3). This holds true regardless of whether the timeline is calculated from the original or amended complaint filings. Williams's claims were deemed untimely, whether based on the end of his unemployment benefits or subsequent wage garnishments and tax refund interceptions. Additionally, Williams did not contend that each garnishment constituted a new cause of action. On remand, the Court of Appeals should evaluate the Agency's position that plaintiffs did not present valid constitutional tort claims.