The Building Tradesman Newspaper

Friday, April 19, 2019

Supreme Court sustains legal option for falsely accused jobless claimants

By Marty Mulcahy, Editor

LANSING - The number of people who could sue the State of Michigan after being falsely accused of unemployment insurance fraud could be greatly expanded after a state Supreme Court ruling on April 5.

The ruling allows two of three people who sued the state after being accused of fraudulently getting unemployment benefits to proceed with their lawsuit. The question in the case was whether the three plaintiffs filed their respective complaints within the six-month statute of limitations. The court said that two of them did file in time, which effectively green lights a proposed class-action lawsuit and the possibility of thousands of falsely accused claimants winning awards and damages from the case. 

The unanimous Supreme Court decision overturns a 2017 state Court of Appeals ruling, which chose an earlier date (when the state publicly issued notices about the alleged fraud) for the start of the six- month statute of limitations, and ruled that all three plaintiffs filed their cases too late.  The Supreme Court ruling, written by Justice Stephen Markman, said the clock should have started ticking later when the state seized assets such as income tax returns or other property to pay for the state's fines.

"The Court of Appeals erred by holding that plaintiffs' due-process claims seeking monetary relief accrued when plaintiffs were deprived of process," Markman wrote. "Rather, these claims accrued only when they were deprived of property, as they incurred no harm before that deprivation."

The case stems from the state UIA's use of MiDAS, the Michigan Data Automated System - which spit out fraud accusations in 62,784 cases during a period from October 2013 to August 2015. Without any human oversight, the system falsely accused jobless workers of fraud in claiming benefits. Incredible financial hardships, including personal bankruptcies, were imposed on jobless workers who did nothing wrong. 

The state finally conducted what it said was a "top to bottom" review of its own computer program, and the UIA reversed 85 percent of the fraud accusations.  In August 2017 the UIA announced that it was refunding $20.8 million to people who were falsely determined to have committed fraud in receiving jobless benefits, but that came after many claimants were unable to make rent or car payments, had their homes foreclosed or were forced into bankruptcy because of the false fraud accusations.

Jennifer Lord, the plaintiffs' attorney, said they would move forward to ensure all victims can be made whole. "Now is the time for the governor's office, the attorney general and the Legislature to explore with us ways to make this right for the thousands of innocent workers who were caught up in this nightmare," she told the news service MIRS. "We stand ready to make this happen."

One last legal hurdle remains before a class action can proceed to the Michigan Court of Claims. The state Supreme Court sent the case back to the state Court of Appeals, to consider whether an individual can sue the state for monetary damages for violation of the state constitution. 

In related matters, a federal appeals court ruled that a similar lawsuit can proceed against the company that sold the MiDas system to the state. 

And, minority Democrats in the Michigan House and Senate have been clamoring to make the victims whole with an allocation by the Legislature, but that has yet to gain traction.