Appeals court tosses suit in jobless benefits fraud case
By DAVID EGGERT
Jul. 18, 2017
LANSING, Mich. (AP) — The Michigan appeals court on Tuesday tossed a lawsuit filed by people who were wrongly accused of defrauding the state's unemployment benefits system, ruling that they waited too long to sue.
A lawyer for the three men, who want class-action status on behalf of 46,000 residents, called the decision "ridiculous" and vowed an appeal to the Michigan Supreme Court.
In a unanimous ruling, Judges Michael Gadola, Patrick Meter and Karen Fort Hood reversed the Court of Claims, which had allowed the 2015 suit seeking economic damages to proceed. They said the plaintiffs — Grant Bauserman, Karl Williams and Teddy Broe — should have sued within six months of being notified that they had been disqualified from benefits instead of waiting until within six months of when the state Unemployment Insurance Agency took actions such as seizing the tax refunds and wages of Bauserman.
The appellate court said Judge Cynthia Stephens "did not properly consider when plaintiffs were harmed."
The state has been reviewing about 50,000 cases from a nearly two-year period that cover roughly 40,000 people who were determined to have committed fraud — either solely by an automated computer system or by a mix of the software and some level of staff involvement. That typically means they were flagged for receiving "overpayments" to which they had not been entitled.
In many cases between 2013 and 2015, however, they did not commit fraud and — to compound being forced to pay restitution — were hit with interest along with penalties equaling two or four times the overpayment. Their wages and income tax refunds were garnished. Attorneys say some suffered worse credit ratings, job prospects and consequences from not being able to spend money they needed.
Jennifer Lord, one of the plaintiffs' lawyers, said thousands of people never received notification of the fraud allegations until their tax refunds or wages were taken.
"This ruling requires people to file hypothetical lawsuits in order to have any protection against the state for violations of their constitutional rights. That is nonsensical because people don't file lawsuits until they've been harmed," she said.
Wanda Stokes, director of the Talent Investment Agency — which houses the Unemployment Insurance Agency — agreed with the decision but said it "does not change" the Snyder administration's commitment to review cases and improve "customer service and integrity." She said more than $16 million has been or will be returned to residents.
"We are working tirelessly to restore the public's trust in our system, and we are on the road to doing that," Stokes said in a statement.
The state stopped "auto-adjudicating" potential fraud cases in August 2015. Earlier this year, a federal judge approved an agreement by which the state halted all collection activities against people who were subject to fraud determinations in the two-year period in question, "unless and until individually reviewed by agency staff and affirmed with new notice to claimant."
U.S. Rep. Sander Levin, a Royal Oak Democrat who has brought attention to the plight of laid-off workers mistakenly snagged by the Michigan Integrated Data Automated System, said the latest ruling is "very disappointing" and "denies justices to thousands of Michiganders." He called on Gov. Rick Snyder and Attorney General Bill Schuette — both Republicans — to "do the right thing and pursue a fair settlement for those so harmed by the state's policies."