Opinion
SC 163902 COA 354091
03-13-2023
DAVINA GRADY, Plaintiff, v. STEVEN PATRICK WAMBACH and JOHN P. O'SULLIVAN DISTRIBUTING, Defendants, and LIVONIA CARE PHARMACY, LG TRANSPORTATION & MANAGEMENT, INC, and NORTHLAND RADIOLOGY, INC, Intervening Plaintiffs, and MERCYLAND HEALTH SERVICES, PLLC, Intervening Plaintiff-Appellee, and MEEMIC INSURANCE COMPANY, Defendant-Appellant.
Wayne CC: 18-014393-NI
Elizabeth T. Clement, Chief Justice, Brian K. Zahra, David F. Viviano, Richard H. Bernstein, Megan K. Cavanagh, Elizabeth M. Welch, Kyra H. Bolden, Justices
ORDER
On order of the Court, leave to appeal having been granted and the briefs and oral arguments of the parties having been considered by the Court, we VACATE our order of April 20, 2022. The application for leave to appeal the November 18, 2021 judgment of the Court of Appeals is DENIED, because we are no longer persuaded that the questions presented should be reviewed by this Court.
Clement, C.J. (dissenting.)
I respectfully dissent from the Court's order denying leave to appeal. The order leaves in place the published decision from the Court of Appeals holding that the defendant lacked statutory standing to challenge the plaintiff's compliance with § 904(2) of the Michigan Limited Liability Company Act (MLLCA), MCL 450.4101 et seq. I would have reversed because this case is distinguishable from our precedent on which it relies, Miller v Allstate Ins Co, 481 Mich. 601 (2008). For this reason, I respectfully dissent.
I. FACTS & PROCEDURAL HISTORY
In 2017, Davina Grady was injured in a car accident and sought medical treatment at Mercyland Health Services, LLC. At the time, Mercyland's sole member and manager, Dr. Mohammed Abraham, was not licensed to practice medicine in Michigan. After Grady's no-fault insurance provider, Meemic, refused to pay for the treatment, Grady filed suit against Meemic, and Mercyland obtained an assignment of rights and intervened. Thereafter, the defendant, Meemic, filed a motion for summary disposition under MCR 2.116(C)(10), arguing that it was not required to pay for the treatment because the plaintiff, Mercyland, did not "lawfully render[] treatment" as required by § 3157 of the no-fault act, MCL 500.3101 et seq.
The defendant argued the treatment was not "lawfully" rendered because the plaintiff allegedly failed to comply with the MLLCA. Under § 904(2) of the MLLCA, the defendant argued that the plaintiff's "members and managers" needed to be "licensed or legally authorized in this state to render the . . . professional service." MCL 450.4904(2) (emphasis added). The plaintiff responded, arguing in part that the defendant lacked standing to challenge its compliance with the MLLCA. The trial court granted summary disposition to the defendant, concluding that § 904(2) required Dr. Abraham to be licensed to practice medicine in Michigan, and because he was not, the treatment was not "lawfully render[ed]" under the no-fault act. MCL 500.3157.
The plaintiff appealed, and the Court of Appeals reversed. Grady v Wambach, 339 Mich.App. 325 (2021). Relying on precedent from our Court and the Court of Appeals, the majority held that the defendant lacked standing to challenge the plaintiff's compliance with the MLLCA. Id. at 327-329, citing Miller, 481 Mich. 601; Sterling Hts Pain Mgt, PLC v Farm Bureau Gen Ins Co of Mich, 335 Mich.App. 245 (2020). Judge Sawyer dissented, arguing that the case did not present an issue of standing at all. Id. at 337 (Sawyer, J., dissenting). The defendant sought leave to appeal in our Court, and we granted leave to address "whether an insurance company has statutory standing to challenge whether the members and managers of a healthcare provider incorporated as a professional limited liability company (PLLC) are properly licensed in this state as required by the [MLLCA.]" Grady v Wambach, 509 Mich. 937, 937 (2022).
I conclude the defendant has standing to challenge the plaintiff's compliance with § 904(2) of the MLLCA and would therefore reverse the Court of Appeals judgment and remand for further proceedings.
II. LEGAL BACKGROUND
Under § 3157 of the no-fault act, "a physician, hospital, clinic, or other person that lawfully renders treatment to an injured person for an accidental bodily injury covered by personal protection insurance . . . may charge a reasonable amount for the treatment . . . ." MCL 500.3157(1) (emphasis added).
In Miller, 481 Mich. at 605, the defendant insurer refused to pay for treatment, alleging-like the defendant here-that it was not "lawfully" rendered. The insured received treatment at a corporation called PT Works, Inc., which was incorporated under the Business Corporation Act (BCA), MCL 450.1101 et seq. Id. at 605. The defendant argued that because PT Works should have been incorporated under the Professional Service Corporation Act, MCL 450.221 et seq., not the BCA, the treatment provided was not "lawfully" rendered. Id.
This act has since been repealed. See 2012 PA 569.
Before the Court reached the merits of the defendant's argument, it concluded that the defendant lacked statutory standing under the BCA to challenge PT Works' incorporation. Id. at 612. The Court cited § 221 of the BCA, which states:
The corporate existence shall begin on the effective date of the articles of incorporation as provided in [MCL 450.1131]. Filing is conclusive evidence that all conditions precedent required to be performed under this act have been fulfilled and that the corporation has been formed under this act, except in an action or special proceeding by the attorney general. [MCL 450.1221.]
The Court concluded that § 221 created an "irrebuttable presumption of proper incorporation once the articles of incorporation have been filed." Id. at 611. The language, the Court reasoned, generated an exception only for the Attorney General, who was given the "sole authority to challenge whether a corporation has been properly incorporated under the BCA." Id. Therefore, everyone else was completely barred from challenging the proper incorporation of an entity under the BCA.
In Sterling Heights, 335 Mich.App. 245, the Court of Appeals applied Miller to a defendant challenging compliance under the MLLCA. The defendant insurer refused to pay for treatment rendered by the plaintiff, Sterling Heights Pain Management, alleging it was not "lawfully" rendered, just as the defendants here and in Miller argued. Id. at 248. And like the defendant here, the insurer relied on § 904(2) of the MLLCA, arguing that because the two members and managers of Sterling Heights Pain Management were not licensed physicians, it failed to comply with the requirement that "all members and managers . . . be licensed to render the same professional service as the corporate entity." Id.
The Court of Appeals concluded the defendant lacked statutory standing to challenge compliance with MLLCA requirements. Id. at 249. It relied on § 202(2) of the MLLCA, which mirrors § 221 of the BCA and states in relevant part:
Filing is conclusive evidence that all conditions precedent required to be performed under this act are fulfilled and that the company is formed under this act, except in an action or special proceeding by the attorney general. [MCL 450.4202(2).]
The panel reasoned that when the plaintiff filed "the required documents of incorporation," under § 202(2), it "was conclusive evidence that plaintiff met the conditions precedent for formation of a PLC, including the requirement that all members and managers be licensed persons." Id. at 252. And "[o]nly the Attorney General has standing to contest that presumption," meaning the defendant lacked statutory standing. Id.
The plaintiff in Sterling Heights was designated a "PLC," which is used interchangeably with "PLLC" under the MLLCA. See MCL 450.4903(3).
III. ANALYSIS
In concluding the defendant lacked statutory standing in this case, the Court of Appeals majority relied both on Miller and Sterling Heights. Grady, 339 Mich.App. at 327. The defendant argued that "Miller is inapplicable because it is not challenging [the plaintiff's] corporate status." Id. at 332. But the majority disagreed, noting that "[t]his identical argument was recently addressed and rejected by this Court" in Sterling Heights. Id. The majority concluded Sterling Heights was directly on point and therefore, the defendant lacked "standing to assert an affirmative defense that challenges [the plaintiff]'s formation under the MLLCA." Id. at 333. Because the defendant lacked standing, the majority therefore concluded "it would be improper for us to consider whether the alleged violation of the MLLCA rendered [the plaintiff]'s treatment to Grady unlawful." Id. at 335.
Writing in dissent, Judge Sawyer distinguished the case factually from both Miller and Sterling Heights, arguing that because the defendant challenged the requirement under § 904(2) that all members and managers be licensed in Michigan, it "more directly focuses on a requirement that members and managers of PLLCs that provide services under the Public Health Code must themselves be individually licensed to provide those services." Id. at 338-339 (Sawyer, P.J., dissenting).
I disagree with the application of Miller both here and in Sterling Heights. Unlike the defendant in Miller, who challenged the plaintiff's incorporation under the BCA, the defendants here and in Sterling Heights do not challenge incorporation at all. Therefore, even assuming that the Court of Appeals is correct that § 202(2) of the MLLCA limits standing for particular challenges to the Attorney General alone, the challenges brought here and in Sterling Heights simply do not fall within § 202(2)'s scope.
I believe that if § 202(2) indeed limits standing to the Attorney General, it only limits it with respect to challenges concerning the "conditions precedent" to forming a limited liability company under the statute, which are not at issue here. Section 202(2) explains that "[f]iling [of the articles of organization] is conclusive evidence that all conditions precedent required to be performed under this act are fulfilled and that the company is formed under this act . . . ." MCL 450.4202(2) (emphasis added). The MLLCA provides no definitive list of what these "conditions precedent" to formation might include. In fact, apart from its inclusion in the definition of "professional service," the phrase appears nowhere else in the statute. But § 202(2) does make clear that the "articles of organization" provide full proof that conditions precedent have been met. Helpfully, the MLLCA provides a list of what such articles must include. According to § 203 of the MLLCA, the articles must include the name of the LLC, the purposes for which it is formed, its mailing address, a "statement that the business is to be managed by or under the authority of managers" if true, and the LLC's duration. MCL 450.4203(1). In short, the articles need not be too detailed to form the "conclusive evidence that all conditions precedent required to be performed under this act are fulfilled and that the company is formed under this act . . . ." MCL 450.4202(2).
See MCL 450.4902(b).
The defendant here, like the defendant in Sterling Heights, challenges the plaintiff's compliance with § 904(2) of the MLLCA, which requires a PLLC rendering a "professional service that is included within the public health code" to have "all members and managers of the company . . . licensed or legally authorized in this state to render the same professional service." In Sterling Heights, the defendant pointed to this provision because it alleged the managers were not licensed to perform medical services whatsoever; here, the defendant argues that the member and manager is not licensed to perform medical services specifically in Michigan.
Neither the defendant here nor in Sterling Heights argues that the plaintiff was not properly formed under the MLLCA. Rather, both seek to challenge compliance with the ongoing requirement under the MLLCA that PLLCs rendering services "included within the public health code" ensure that their members and managers remain properly licensed to provide medical services in the state. A PLLC could easily meet all the requirements for proper incorporation under § 202(2) and nevertheless fail to meet the entirely separate requirement under § 904(2) concerning the licensure of members and managers.
While both the Court of Appeals panel in Sterling Heights and the Court of Appeals majority below classified the defendant's challenges as asking "whether an entity is properly incorporated," I disagree with this characterization. See Grady, 339 Mich.App. at 329 ("Mercyland argues that . . . Meemic lacks standing to challenge whether it is properly incorporated."); Sterling Heights, 335 Mich.App. at 249 ("We agree with plaintiff that defendant does not have statutory standing to challenge whether an entity is properly incorporated or organized under the MLLCA."). Proper formation is completely irrelevant to whether an entity recognized under the MLLCA has met the requirements of § 904(2) at a particular moment in time. Therefore, I conclude that Miller is not directly on point here or in Sterling Heights. Whether or not § 202(2) does restrict standing to bring particular challenges to the Attorney General alone, the provision simply does not apply to the present challenge. For this reason, I would reverse the Court of Appeals here and overrule Sterling Heights, holding the defendant has standing to challenge compliance with § 904(2) of the MLLCA.
Moreover, I question whether Miller itself has continued relevance under our current standing framework. We decided Miller in 2008, before our decision in Lansing Sch Ed Ass'n v Lansing Bd of Ed, 487 Mich. 349 (2010), significantly shifted our standing doctrine. Because its decision predated Lansing Schools, the Miller Court never asked whether the defendant insurance company had a "special injury or right or substantial interest that will be detrimentally affected in a manner different from the citizenry at large . . . ." Lansing Schools, 487 Mich. at 359. I think there is a cognizable argument that it might, because without the ability to challenge particular requirements under the BCA or MLLCA, the insurance company may be barred from protecting its "right" or "substantial interest" in only paying for treatment "lawfully" rendered under the no-fault act. But it is an issue yet to be decided.
To be clear, while I conclude that the defendant here had standing to challenge the plaintiff's compliance with § 904(2) of the MLLCA, I do not necessarily conclude that a failure to comply with § 904(2) means that treatment was not "lawfully" rendered under the no-fault act. MCL 500.3157. But in the wake of Miller, courts have had little opportunity to develop a standard for what is or is not "lawfully" rendered, because most challenges have been categorically barred for a lack of standing. Under the clear statutory language of the MLLCA, I conclude the defendant should at least have the ability to raise the issue. For this reason, I respectfully dissent from the Court's order.