Michigan Appeals Court Brings Some Clarity to Frivolous Defenses and Vexatious Appeals | Speaker Law
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Michigan Appeals Court Brings Some Clarity to Frivolous Defenses and Vexatious Appeals

Posted on Thursday, May 17, 2018

If you’re curious about frivolous defenses and vexatious appeals, the case of Miller v Blue CrossBlue Shield Michigan, No: 326300, unpublished, is worth a read.

 

 

The facts concern a denial of coverage by Blue Cross Blue Shield Michigan (BCBSM) for care provided to Francis Miller, who, after challenging the denial, petitioned the Washtenaw County Circuit Court to review the decision. When that court issued an order awarding attorney fees, costs and statutory interest to Miller, BCBSM appealed. The Michigan Court of Appeals (MCOA) affirmed the lower court order, finding the BCBSM defense to Miller’s argument frivolous.

 

Facts: Miller was a patient at Heartland’s Skilled Nursing Facility (SNF) in Ann Arbor for 3 months. Her insurance, BCBSM, denied coverage for part of that time, claiming Miller only needed custodial care for which it didn’t pay. Miller submitted the matter to Office of Financial and Insurance Regulation (OFIR), which agreed with BCBSM decision.

 

Miller petitioned the trial court for review of the OFIR’s order, asking the court to reverse the order, pay for her treatment and award her attorney fees for having to seek review.

 

The trial court framed the issue as whether “there was substantial competent and material evidence to support the OFIR’s findings.” The trial court reversed the OFIR’s order, stating that it was frivolous for BCBSM to assert that petitioner Miller did not need a nurse to administer a feeding tube in place during the time in question and that “under [MCL] 600.2591 [respondent] had no reasonable basis to believe that the facts underlying their legal position were true and . . . their position was devoid of any arguable legal merit.”

 

BCBSM appealed that decision, arguing the trial court erred in finding its defense frivolous. The COA disagreed.

 

 

 

Frivolous Defense and Vexatious Appeal

 

The appeals court, in writing its opinion, offered some thoughts on the frivolous defense and vexations appeals. BCBSM argued that its defense was not frivolous per MCL 600.2591, as held by the trial court. The COA disagreed and upheld the trial court because “the definition of a frivolous defense under MCL 600.2591 is comparable to the definition of a vexatious appeal under MCR 7.216(C)(1)(b), and the trial court did not clearly err in concluding that respondent’s defense was frivolous.”

 

Under MCL 600.2591, a frivolous defense can occur in the following 3 ways:

1. The party’s primary purpose in . . . asserting the defense was to harass, embarrass, or injure the prevailing party,

            2. The party had no reasonable basis to believe that the facts underlying that party’s legal position were in fact true, or

3. The party’s legal position was devoid of arguable legal merit.

 

MCR 7.216(C)(1)(b) allows the court to sanction a party advancing a vexatious “argument, brief, document, or record filed . . . [that] was grossly lacking in the requirements of propriety, violated court rules, or grossly disregarded the requirements of a fair presentation of the issues to the court.”

 

The COA ruled that because petitioner Miller didn’t file a complaint in circuit court and BCBSM didn’t assert its defense in a pleading, the trial court “plainly erred in awarding attorney fees under MCL 600.2591. Instead, “this case is governed by the appellate court rules, because the petitioner filed a petition for review of the OFIR’s final order in the trial court pursuant to MCL 550.1915 and MCR 7.103(A)(4), and respondent asserted its defense in a response. MCR 7.216(C); see also MCR 7.112 explaining that “the circuit court may grant relief as provided in MCR 7.216”).

 

The court stated in affirming the trial court’s decision:

 

 “Although we agree that respondent did not defend a “civil action” under MCL 600.2591, we nonetheless uphold the sanction because the definition of a frivolous defense under MCL 600.2591 is comparable to the definition of a vexatious appeal under MCR 7.216(C)(1)(b), and the trial court did not clearly err in concluding that respondent’s defense was frivolous. Further, we find that the trial court did not abuse its discretion in calculating the amount of attorney fees and costs to be awarded.

 

In his dissenting opinion, Hon. Mark T. Boonstra, stated “I have a definite and firm conviction that a mistake was made” and he would reverse the circuit court’s sanctions award.

 

He saw the issue as whether the circuit court properly sanctioned respondent (whether based on “frivolousness” or “vexatiousness”) in advocating on appeal (to the circuit court) for the affirmance of an administrative decision of OFIR.”

 

He argued that the majority was incorrect in equating a finding of frivolousness with a finding that an appeal is vexatious, that BCBSM argument that OFIR complied with MCL 550.1911(13) and (15) was a proper, non-vexatious argument on appeal (albeit unsuccessful) and was concerned that the trial court’s entire predicate for the its issuance of sanctions was its “medical” judgment regarding the need of skilled nursing care to administer a feeding tube. That judgement “has now spawned extensive litigation over the propriety of the resulting sanctions award.”

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