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Michigan Supreme Court hears key case on jobless fraud

October 10, 2018

DETROIT (AP) — The Michigan Supreme Court heard arguments Wednesday in a case that’s likely to determine if thousands of people can sue the state for abusing their rights when they were wrongly accused of defrauding the unemployment program.

The issue for the court is a technical but crucial one: When did the six-month deadline to sue kick in?

An automated computer system used by Gov. Rick Snyder’s administration was a disaster over a two-year period. People were accused of cheating to get jobless aid. They were forced to repay money, along with substantial penalties, before the Unemployment Insurance Agency finally acknowledged widespread errors affecting more than 40,000 people.

Although refunds have been made, the state still is the target of lawsuits by people who claim that their due-process rights were violated while they tried to untangle themselves from the mess.

The Supreme Court must decide whether the six-month clock began to tick when people lost tax refunds and had wages garnished. The state says the window to sue opened and closed much earlier, when the first fraud notice was sent.

“This is not a bar I made up. This is something the Legislature adopted,” Aaron Lindstrom, the state’s chief appellate lawyer, told the court.

Justice Richard Bernstein was deeply skeptical, asking Lindstrom if he expected average folks suddenly accused of unemployment fraud to know when their right to sue might expire.

“Does that really make sense? ... Dealing with this department would be worse than going to the secretary of state,” Bernstein said, referring to the agency that handles car registrations and driver’s licenses.

An attorney for plaintiffs, Jennifer Lord, said due-process rights were violated when money was seized, an event that occurred long after the initial fraud notice.

“The agency has overturned 40,000 of these (fraud) determinations. That doesn’t erase the damages that these people experienced,” Lord said.

The case has become a hot potato in the middle of the race for governor. The Republican candidate, Attorney General Bill Schuette, said his staff must defend the unemployment agency in court, even if he doesn’t believe certain laws are good ones.

But his statement didn’t indicate whether he personally believes lawsuits should go forward.

“The Snyder administration failed Michigan families when it falsely accused them of fraud and instead of comforting the victims and finding a reasonable settlement Bill Schuette victimized them again by fighting them in court with their own tax dollars,” said Rep. Sam Singh, an East Lansing Democrat.

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