We don’t think we are exaggerating the significance of two published opinions released by the Court of Appeals yesterday in In re MJG (Docket 332928) and In re JSP/In re BGP (Dockets 333700, 333813). These three appeals challenged the trial courts' denials of out-of-state adoption agencies' adoption fees. If the trial courts’ decisions were upheld and the agencies were not allowed to be paid for the services they rendered, then agencies would not be able to perform direct placement adoptions in Michigan at all. After all, even a non-profit organization has to be able to pay its staff, rent, utilities, and all the services that go into an adoption. And although the Adoption Trilogy involved out-of-state agencies, three other appeals are also pending that involved an in-state adoption agency whose fees were similarly denied by trial courts.
In all three cases the fees were uncontested and based on contract between the adoptive family and the adoption agency, the agency and adoptive family were both out of state, the birth mother and child were in Michigan, and the cases were filed in Oakland County. In JSP and BGP, the trial court denied the fees without a hearing, when the only evidence presented was a lengthy letter from the agency detailing the fees (again, unrebutted), and the trial court approved some of the fees, but denied other fees. In MJG, the trial court held an evidentiary hearing where a representative from the adoption organization testified by phone about the fees, and the trial court denied all fees of the organization.
The COA conducted a thorough review of MCL 710.54 which delineates which adoption fees are allowable (710.54(3)), which fees are allowable only upon court approval (710.54(1)) and which fees are prohibited (710.54(2)). The COA also discussed three other important subsections of MCL 710.54. Section 7 requires a verified accounting submitted by the adoptive family “itemizing all payments ….made or agreed to be made by the petitioner in connection with the adoption.” MCL 710.54(7) (emphasis added). Section 10 requires the court to “approve or disapprove all fees and expenses.” MCL 710.54(10). And Section (11) imposes criminal liability if a person violates MCL 710.54.
The Court of Appeals set forth a multi-step process for a trial court to evaluate fees in an adoption case. First, the court must determine whether the fee is “in connection with an adoption,” as required by MCL 710.54(7). The court has an independent obligation to make this inquiry even when the fee is included on the disclosure form because petitioners will tend to over-include fees as there are criminal penalties for not reporting. So if the fee was for services rendered before an adoptive family and child are identified, then they are not in connection with that particular adoption. Also, general administrative fees of the agency (often pro-rated over all of the agencies clients) are not in connection with a particular adoption. If the fees are not in connection with an adoption, then the “court has no authority to disapprove the fees.” Second, if the fees are in connection with an adoption, then the court must determine whether the fees fall under MCL 710.54(1) – such that court approval is required, or under MCL 710.54(2) -- such that the fee is prohibited. Third, if the fees are not prohibited by Sections (1) or (2), then the trial court must determine whether the fees are permitted under the exclusive list contained in MCL 710.54(3), and if they are in this list, the trial court must determine whether the fee is “reasonable and actual.” Fourth, although not at issue in the Adoption Trilogy, the Trial Court should also confirm whether the fees are required in Sections (4) or (5).
Reviewing the fees from the Adoption Trilogy, the COA reached the following conclusions:
While we take issue with a few of the points addressed by the Court of Appeals’ opinions, the overall outcome is a good result and should be workable in the future – although it will certainly require more thought and evaluation by the trial courts to determine whether to allow, prohibit, or disregard the fees that cannot be disallowed.