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Michigan apologizes for screwing residents. Then fights like hell.

lansing
mike cox

For well over a year, state officials knew Michigan’s computer-driven unemployment insurance system had wrongly accused thousands of workers of benefit fraud.

That didn’t stop lawyers for the state from working to derail a class action against the Unemployment Insurance Agency. They’ve succeeded – for now – after the Michigan Court of Appeals dismissed the case in July on a technicality, ruling that workers had waited too long to file their claims.

State lawyers have taken the same hard-line approach against individual workers. In one case, the state spent two years and deployed a team of attorneys to pry back $158 in benefits from a seasonal worker at Bloomfield Hills Country Club named Suzanne Lawrence – only to lose when an appeals court ruled in July there was not “even a scintilla of evidence” she had committed fraud.

But these aren’t the only instances in which Michigan has chosen to fight, rather than make things right, when state government has harmed its citizens.

Consider Flint. Government lawyers continue to contest a battery of lawsuits over the state’s role in the lead poisoning of Flint’s drinking water, a crisis that unfolded in 2014 when the impoverished city was under state control.

Michigan tenaciously fights the claims of Flint residents despite the findings of a state-appointed commission, which concluded state government was primarily to blame for the disaster. Thousands of children were exposed to toxic lead levels as a result of state employees’ neglect and refusal to take seriously complaints over contaminated drinking water.

On another front, Michigan aggressively contested allegations of sex abuse of female prisoners by state prison guards, well after the evidence became overwhelming. The class action was finally settled in 2009 for $100 million, following 13 years of litigation and two lost trials. A lawyer for the women said she had earlier offered to settle the cases for one-quarter of the eventually cost.

Few would dispute the state’s right to defend itself in court, or to ensure that damages be limited to residents who truly suffered harm. But the state’s tendency to fight rather than settle cases where the state is clearly, even spectacularly, at fault raises questions about how seriously state officials take their most profound duty: to keep residents safe.

schlanger

“The state does have an obligation to be a good steward of taxpayers’ money,” said University of Michigan law professor Margo Schlanger, an expert on policies relating to prison sexual assault who followed the abuse litigation. “But it also has a responsibility to people they harm. If the state has harmed people, it’s the right thing to make things whole.”

“Sometimes,” she added, “state officials don’t want to be the one who actually writes the check. They kick the can down the road and leave it for the next guy. That does a real disservice to taxpayers. You spend time and money putting off the result everybody knows is coming.”

Former Michigan Attorney General Mike Cox counters that such broad critiques ignore the singular legal obligations of government lawyers. The first duty of lawyers from the Attorney General’s Office is to protect the interests of their clients – state employees – and more broadly, the taxpayers, said Cox, who served two terms as attorney general, through 2010.

Cox said that duty extends to vigorously defending lawsuits in Flint, even though he said of the crisis, “you can’t find a more gross example of incompetence in my life in anything that’s happened in Michigan.”

That obligation includes ensuring that any taxpayer money paid to lead victims is reasonable and justified. “In the Flint class actions,” Cox said, “a key question here is, ‘What are the damages?’ We don’t know what the damages are. In court cases, you need to rely on the rule of law.

“You don’t want court cases resolved as if they were political deals.”

Andrea Bitely, spokesperson for Attorney General Bill Schuette, said Schuette cannot comment on legal strategy in the Flint lawsuits. She said he is “walled off” from the civil lawsuits as he pursues criminal charges against several state officials involved in the water crisis.

In the worker fraud litigation, Schuette acknowledged in a recent television appearance “there are obviously problems with the unemployment insurance system,” adding: “Most of the time it’s better to solve the problem instead of going to court, right? We ought to fix this and solve the problem.”

Despite getting the fraud class action dismissed, Schuette said lawyers on both sides need to address the merits of each worker’s complaint. “Each party on any lawsuit has to sit down and turn off the phones, turn off the mics and try to get down to business,” he said.

Jennifer Lord, the Royal Oak-based attorney leading the unemployment class-action suit, said it is hard to square Schuette’s television remarks with his “hyper technical defenses designed to block the refund and compensation process.”

“Resolution of (Unemployment Insurance Agency) false fraud scandal this year is in the best interests of the citizens, the agency, the governor and other elected state officials,” Lord told Bridge in an email.

“Inexplicably, the litigation continues.”

To be fair, the state unemployment agency did settle a separate federal lawsuit in early February, agreeing to enact sweeping policy reforms in how it handles fraud cases. But that agreement did not award monetary damages beyond refunds of fines and penalties to workers falsely accused of fraud. On Aug. 11, the state said it had reversed more than 44,000 fraud cases and is refunding nearly $21 million to people wrongly accused of collecting excessive benefits.

And despite criticism that the state has acted too slowly and with not nearly enough money, Lansing has committed nearly $300 million in state funds to help address the Flint crisis, with the addition of another $48 million for in the 2017-18 state budget signed in July by GOP Gov. Rick Snyder.

Fighting, but to what end?   

Complaints about the $47 million computerized fraud-detection system poured into state unemployment agency soon after the system went active in the fall of 2013. In essence, the system replaced human calculation of unemployment fraud with (flawed) computer protocols to determine fraud.

Scores of unemployment agency clients said they only learned of the fraud finding after the state garnished their paycheck or seized their income tax returns.

A review in 2016 of more than 20,000 cases handled by computer found an error rate of 93 percent.

The state Court of Appeals ruling in July concluded that workers suing the state missed the statutory deadline for filing claims. The court agreed with the argument pushed by state lawyers that the six-month statute of limitations to file claims began when the UIA first accused workers of fraud, rather than from the time the state took action to reclaim money from workers.

Lord, their attorney, said it was absurd to expect claimants to file lawsuits before they had even been harmed.

“We will absolutely appeal this unjust result,” she said at the time of the ruling.

The battle endured by worker Suzanne Lawrence illustrates just how far the state has been willing to go to defend claims, even when the agency it’s defending, in this case UIA, conceded it had screwed up.

Lawrence was employed as a seasonal office worker at Bloomfield Hills Country Club. When she was laid off, as scheduled, in January 2013, she was given two weeks of vacation pay. Several weeks later, Lawrence was deemed eligible for unemployment benefits, receiving her first check on Feb. 20 of that year.

More than two years later, UIA accused her of collecting the unemployment at the same time she had received vacation pay, and ordered her to repay $158. That didn’t sit well with Lawrence, who argued that the two weeks of unemployment benefits covered the period after she received vacation pay.

Defending herself against UIA attorneys and, later, as many as four lawyers with the Attorney General’s Office, she fought it alone at first, representing herself before two administrative law judges and in Oakland County Circuit Court before turning to attorney Dennis Dubuc in the Court of Appeals.

“She was almost going to write a check,” Dubuc said, before she decided the principle at stake was more important than $158.

In its ruling, the state appellate court said there was “simply no evidence in the record” that Lawrence received unemployment while also earning vacation pay. The court also criticized state lawyers for insisting that the burden was on Lawrence to prove there was no overlap. It was the state’s responsibility, not the worker’s, to prove Lawrence was, in essence, double-dipping on job payments.  

“Such evidence might consist of a cancelled check, a check stub, a notice of electronic funds transfer, or a bank transfer,” the appeals court wrote. The state produced no such evidence.

Dubuc recalled that three state attorneys – or one lawyer for each $52.67 in benefits – showed up at the appeals court hearing in Lansing.

“This should never have happened,” Dubuc said. “It should have been nipped in the bud. Somebody higher up should have said, ‘What the heck is going on here?’”

Schuette spokeswoman Bitely said the office litigated the case to please its client.

“The reason we are pursuing a case for $158 is because the Unemployment Insurance Agency wants to pursue that case,” Bitely said. “As long as the client wishes to go forward, we will continue to pursue the case.”

Remarkably, the state is apparently not done in its battle for $158. On July 31, the state filed a motion asking the appellate court to reconsider its ruling.

Fighting for taxpayers

As for Flint, there’s no dispute state and local officials failed to assure the city’s water was safe when the state approved switching Flint’s drinking water in 2014 to the Flint River. There’s also no dispute residents were exposed to dangerously high lead levels as a result, with levels in some Flint children doubled by 2015.

Indeed, a 2016 report by a task force convened by GOP Gov. Rick Snyder decried a “series of government failures” and accused his administration and in state government of “failure, intransigence, unpreparedness, delay, inaction and environmental injustice” in allowing contamination of Flint’s water supply.

“Flint water customers were needlessly and tragically exposed to toxic levels of lead and other hazards through the mismanagement of their drinking water supply,” the commission report stated.

Even so, the state is battling 10 class-action lawsuits filed in federal court and more than 500 individual suits in state and federal court. The state’s outside criminal and civil defense fees tied to Flint are expected to soon hit and then exceed $21 million.

While declining to discuss the specifics of the state’s position in these suits, veteran municipal attorney Clyde Robinson ‒ who is not involved in the Flint litigation ‒ said the legal calculations considered by state lawyers are not unlike decisions municipalities make about lawsuits.

“What is the liability exposure? Is this a $500 case or a $500 million case? If it goes to trial, what is a jury likely to do?” asked Robinson, Kalamazoo’s city attorney and president of the Michigan Association of Municipal Attorneys.

“As your attorney, I can’t guarantee your results. We could walk away from this with no cause of action or we could get stuck with a quarter million dollars. That said, I’m going to do everything before that time to get the case dismissed. There is an obligation to protect the public treasury.”

Ann Arbor attorney Deborah LaBelle – among a group of lawyers pursuing the Flint class-action lawsuits – sees a state strategy designed to keep the cases as far away from trial as possible.

“It’s all about delay,” she said, noting there is abundant evidence of state negligence in Flint and of “clear harm” to residents. That harm, LaBelle said, ranges from the known, long-term neurological effects of lead poisoning to drops in home property values in Flint during the crisis.

“The goal of the attorney general seems to be delaying the opportunity to prove that before a jury.”

One lawsuit’s huge costs

Annual lawsuit payouts by Michigan’s Department of Corrections jumped because of a $100 million settlement in 2009 over sexual abuse of female prisoners. The settlement was spread out over six years. Here’s a look at lawsuit payments by year:

  • 2006-07 $584,000
  • 2007-08 $4.9 million
  • 2008-09 $442,000
  • 2009-10 $14.7 million
  • 2010-11 $10.5 million
  • 2011-12 $15.5 million
  • 2012-13 $20.2 million
  • 2013-14 $22.5 million
  • 2014-15 $26.7 million
  • 2015-16 $2.4 million

Source: Michigan Senate Fiscal Agency

LaBelle said the state’s strategy is familiar. She recalled facing similar tactics when she represented the women prisoners sexually assaulted by state prison guards, as well as in the current suit alleging prison officials failed to protect juvenile prisoners from sexual assaults by older inmates. In fact, in the juvenile prisoners case, lawyers for the state have been sanctioned in court at least three times for delay tactics.

At one point, Court of Appeals Judge Amy Ronayne Krause blasted the state’s efforts to have the juvenile prisoners’ case to the state's Court of Claims where it could not be heard by a jury. Krause labeled the effort as “some sort of horrible, frivolous attempt to manufacture jurisdiction in the Court of Claims,” adding, “I find your arguments to be really rather ... odious.”

In the Flint litigation, the state is “starting the same tactics of frivolous transfers to the Court of Claims which stops everything, then when the case is transferred back, filing a claim of appeal that stops everything until we can get the appeal dismissed or the stay lifted,” LaBelle wrote Bridge in an email.

LaBelle said the state failed to learn much from its handling of the female prisoner case, despite evidence it did not hold a winning hand.

LaBelle said her legal team initially offered to settle the state claims, involving about 250 women, for $25 million. It was rejected.

By 2007, when the case had swelled to 381 prisoners, LaBelle said she made another settlement offer of $47 million. The state declined.

That same year, a jury needed less than an hour to convict a former state prison guard of sexually assaulting a female inmate at the Huron Valley Women’s Prison.

In 2009, the state ended up paying $100 million to more than 500 prisoners and their attorneys.

LaBelle said the state could take a lesson from that outcome, and apply it to Flint.

“We know the citizens of Flint are hurt and need help,” she said. “It’s a cliché, but justice delayed is justice denied. Resolving these cases now would save an enormous amount of money.”

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