Opinion
SC 165341 COA 359389
04-25-2024
ADAM MASSERANT, Petitioner-Appellant, v. STATE EMPLOYEES' RETIREMENT SYSTEM, Respondent-Appellee.
Ingham CC: 21-000436-AA
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 March 14, 2024, the Court heard oral argument on the application for leave to appeal the November 17, 2022 judgment of the Court of Appeals. On order of the Court, the application is again considered, and it is DENIED, because we are not persuaded that the questions presented should be reviewed by this Court.
WELCH, J. (concurring).
This appeal concerns petitioner Adam Masserant's application for disability retirement benefits. Respondent State Employees' Retirement System denied petitioner's application. The Ingham Circuit Court and the Court of Appeals affirmed that denial. On appeal, petitioner asserts that respondent's denial violated his right to procedural due process.
Because petitioner received procedural due process in this case, I concur in the Court's decision to deny petitioner's application for leave to appeal. I write separately, however, to highlight concerns I have about the Court of Appeals' opinion.
I. FACTUAL AND PROCEDURAL HISTORY
Petitioner served as a park ranger for the Department of Natural Resources. Over the years, he developed chronic and worsening medical conditions that he alleges were exacerbated by his job requirements. Petitioner then applied for nonduty disability retirement benefits. The State of Michigan Retirement Board designated Dr. R. S. Henderson as an independent medical advisor. Dr. Henderson reviewed petitioner's medical records and, according to petitioner, conducted a brief in-person examination. Dr. Henderson concluded that petitioner was not totally and permanently disabled. Based upon Dr. Henderson's determination, the retirement board denied petitioner's application. In response, petitioner produced additional medical records. Dr. Henderson reviewed those records and concluded once again that petitioner was not eligible for nonduty disability retirement benefits.
Petitioner appealed the denial of his application and requested an administrative hearing. At the hearing, petitioner testified, as did two chiropractors who had treated him. The administrative law judge (ALJ) also admitted the administrative record into evidence, including petitioner's medical records and both of Dr. Henderson's reports. The ALJ recommended that the retirement board deny petitioner's application. The ALJ reasoned that because Dr. Henderson did not certify petitioner as totally and permanently disabled, petitioner did not satisfy the requirements for benefits set forth in the State Employees' Retirement Act, MCL 38.1 et seq. (the Retirement Act). Importantly, the ALJ also reviewed the record and determined that Dr. Henderson's conclusions were supported by competent, material, and substantial evidence. The retirement board adopted the ALJ's proposal for decision and denied petitioner's request for benefits.
The circuit court affirmed the retirement board's decision in an opinion and order. The circuit court held that Polania v State Employees' Retirement Sys, 299 Mich.App. 322 (2013), controlled. Under Polania, the circuit court reasoned, for an applicant to receive nonduty retirement benefits, an independent medical advisor must certify that an applicant is permanently and totally disabled. Because an independent medical advisor did not do so in this case, petitioner was ineligible for benefits. The circuit court did not discuss the ALJ's determination that the medical advisor supported his evaluation with competent, material, and substantial evidence.
The Court of Appeals affirmed the denial of benefits in an unpublished per curiam opinion. The majority held that defendant lacked a legitimate property interest in obtaining disability retirement benefits and accordingly lacked a viable procedural due process claim. Masserant v State Employees' Retirement Sys, unpublished per curiam opinion of the Court of Appeals, issued November 17, 2022 (Docket No. 359389). The panel declined to address petitioner's argument that it should overrule Polania. Like the circuit court, the Court of Appeals majority did not review the medical advisor's evaluation.
Judge JANSEN dissented and would have reversed the order denying benefits and remanded for the retirement board to consider all medical evidence. According to the dissent, the interpretation of MCL 38.67a provided in Polania violates an applicant's procedural due process rights. Judge JANSEN would have held that Polania was wrongly decided and ordered that a conflict panel be convened pursuant to MCR 7.215(J)(3).
Petitioner applied for leave to appeal. This Court ordered oral argument on the application, directing the parties to address whether MCL 38.67a(5)(b) violates the Due Process Clause of the Michigan or United States Constitution.
II. LEGAL BACKGROUND
A. PROCEDURAL DUE PROCESS
The United States Constitution provides that no state may "deprive any person of life, liberty, or property, without due process of law[.]" U.S. Const, Am XIV, § 1. The Due Process Clause includes a procedural and substantive component. "Procedural due process imposes constraints on governmental decisions which deprive individuals of 'liberty' or 'property' interests ...." Mathews v Eldridge, 424 U.S. 319, 332 (1976). For that reason, the Fourteenth Amendment requires "some form of hearing . . . before an individual is finally deprived of a property interest." Id. at 333, citing Wolff v McDonnell, 418 U.S. 539, 557-558 (1974). Such hearings must provide parties with "the opportunity to be heard 'at a meaningful time and in a meaningful manner.'" Mathews, 424 U.S. at 333, quoting Armstrong v Manzo, 380 U.S. 545, 552 (1965).
Before determining whether a hearing is sufficient, however, courts "must first determine whether the alleged deprivation is within the ambit of the Fourteenth Amendment's protection of liberty and property." Shoemaker v City of Howell, 795 F.3d 553, 558-559 (CA 6, 2015), citing Hahn v Star Bank, 190 F.3d 708, 716 (CA 6, 1999). Where life and liberty are not threatened, the due process "guarantee requires the claimant to have a protected property interest." Cunningham v Blackwell, 41 F4th 530, 536 (CA 6, 2022). As is relevant in this case, the United States Supreme Court has "recognized the severity of depriving someone of the means of his livelihood ...." Gilbert v Homar, 520 U.S. 924, 932 (1997).
If a court determines that an alleged deprivation falls under the Fourteenth Amendment's protections, it should then "ask what process the State provided, and whether it was constitutionally adequate." Zinermon v Burch, 494 U.S. 113, 126 (1990). Such an "inquiry would examine the procedural safeguards built into the statutory or administrative procedure of effecting the deprivation, and any remedies for erroneous deprivations provided by statute or tort law." Id.
Due process "is a flexible concept that varies with the particular situation." Id. at 127. For that reason, courts weigh several factors to determine whether a state violated a litigant's right to procedural due process:
"First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail." [Id., quoting Mathews, 424 U.S. at 335].
Our Constitution has its own Due Process Clause, which provides that "[n]o person shall be . . . deprived of life, liberty or property, without due process of law." Const 1963, art 1, § 17. When interpreting our Constitution's Due Process Clause, "this Court is not bound by federal precedent interpreting the Due Process Clause of the United States Constitution." Bauserman v Unemployment Ins Agency, 503 Mich. 169, 186 n 12, citing People v Bullock, 440 Mich. 15, 27 (1992). "However, because of the textual similarities between the state and federal Due Process Clauses," this Court "may nonetheless find persuasive United States Supreme Court cases interpreting the federal Due Process Clause in this context." Bauserman, 503 Mich. at 186 n 12, citing People v Sierb, 456 Mich. 519, 523-524 &n 10 (1998).
Under our Constitution, "there can be no question that, at a minimum, due process of law requires that deprivation of life, liberty, or property by adjudication must be preceded by notice and an opportunity to be heard." Bonner v Brighton, 495 Mich. 209, 235 (2014). As with the federal due process guarantee, however, "no processes is 'due'" unless the state deprives a person of life, liberty, or property. Bauserman, 503 Mich. at 186, quoting Williams v Hofley Mfg Co, 430 Mich. 603, 610 (1988).
To determine whether a person has a protected property interest, courts must determine whether the "individual has a reasonable expectation of entitlement deriving from existing rules or understandings that stem from an independent source such as state law." Mettler Walloon, LLC v Melrose Twp, 281 Mich.App. 184, 209 (2008) (quotation marks and citations omitted). In other words, a claimant "must have more than just a need, desire for, or a unilateral expectation of [a] benefit." St Louis v Mich. Underground Storage Tank Fin Assurance Policy Bd, 215 Mich.App. 69, 74 (1995). Instead, "[a] claimant must have a legitimate claim of entitlement to the benefit." Id. at 74-75. As an example, this Court has recognized that civil service employees have a protected property right in continued employment absent just cause for dismissal. See Mich State Employees Ass'n v Dep't of Mental Health, 421 Mich. 152, 160-161 (1984).
B. THE RETIREMENT ACT
The Retirement Act provides, in part:
Except as otherwise provided . . ., a qualified participant who becomes totally incapacitated for duty because of a personal injury or disease that is not the natural and proximate result of the qualified participant's performance of duty may be retired if all of the following apply:
(a) Within 1 year after the qualified participant becomes totally incapacitated or at a later date if the later date is approved by the retirement board, the qualified participant, the qualified participant's personal representative or guardian, the qualified participant's department head, or the state personnel director files an application on behalf of the qualified participant with the retirement board.
(b) A medical advisor conducts a medical examination of the qualified participant and certifies in writing that the qualified participant is mentally or physically totally incapacitated for further performance of duty, that the incapacitation is likely to be permanent, and that the qualified participant should be retired.
(c) The qualified participant has been a state employee for at least 10 years. [MCL 38.67a(5) (emphasis added)].
In Polania, the Court of Appeals considered MCL 38.24(1)(b), a provision of the Retirement Act that is virtually identical to MCL 38.67a(5). See Polania, 299 Mich.App. at 331-332. The panel held that the retirement board cannot retire a disabled employee unless" '[a] medical advisor conducts a medical examination of the member and certifies in writing that the member is mentally or physically totally incapacitated for further performance of duty, that the incapacitation is likely to be permanent, and that the member should be retired.'" Polania, 299 Mich.App. at 332, quoting MCL 38.24(1)(b). In other words, an applicant must satisfy all three criteria set forth in MCL 38.67a(5).
III. DISCUSSION
Because the ALJ reviewed the record and determined that competent, material, and substantial evidence supported Dr. Henderson's conclusions, I agree that petitioner received procedural due process in this case. I write separately because I believe the Court of Appeals erred by: (1) holding that petitioner could not possibly have a protectable property interest until and unless the medical advisor determined that he was permanently and totally disabled, and (2) suggesting that the medical advisor's evaluation was effectively sacrosanct and that the ALJ could not disturb his findings.
Petitioner raised a third issue in his reply brief and at oral argument: the Retirement Act never defines "medical advisor." See MCL 38.67a(5)(b); MCL 38.1f (providing definitions for the Retirement Act); VanZandt v State Employees' Retirement Sys, 266 Mich.App. 579, 586-587 (2005) (discussing the absence of a definition for "medical advisor"). Petitioner argues that the term likely refers to a medical advisor retained by an applicant. That argument lacks merit. When interpreting statutes," 'every word should be given meaning, and we should avoid a construction that would render any part of the statute surplusage or nugatory.'" People v Peltola, 489 Mich. 174, 181 (2011), quoting AFSCME v Detroit, 468 Mich. 388, 399-400 (2003). The Retirement Act provides that the retirement board "shall appoint" medical staff "as may be necessary for the proper operation of the retirement system." MCL 38.6. That provision refers expressly to "medical advisor[s]." Id. Perhaps for that reason, the retirement board promulgated a rule defining "medical advisor" as "a physician designated by the retirement system." Mich. Admin Code, R 38.21(j). The retirement board's definition comports with the statute. Indeed, any other interpretation would render the reference in MCL 38.6 to "medical advisor[s]" nugatory. See Peltola, 489 Mich. at 181.
The Court of Appeals held that petitioner "had no reasonable expectation of receiving disability retirement benefits absent the relevant statute." Masserant, unpub op at 4, citing AFT Mich. v Michigan, 497 Mich. 197, 225 (2015). Because petitioner never satisfied the retirement board's interpretation of MCL 38.67a(5)(b), the panel held, petitioner never had "more than a unilateral expectation to obtain disability retirement benefits ...." Masserant, unpub op at 5. But the panel's analysis is circular. Under its reasoning, a person who is determined by the state's medical advisor to not be eligible for benefits would never have a protected right under the disability benefits statute and therefore would never be able to appeal the determination of the medical advisor with respect to those benefits. This is incorrect.
To determine whether a person has a protectable property interest, Michigan courts examine whether the "individual has a reasonable expectation of entitlement deriving from existing rules or understandings that stem from an independent source such as state law." Mettler Walloon, 281 Mich.App. at 209 (quotation marks and citations omitted). In this case, petitioner developed a protectable property interest when two medical professionals told him that he was permanently and totally disabled and he applied to the retirement board for benefits thinking that he met all three criteria. At that point, his expectations were neither unreasonable nor unilateral. See id.
To hold otherwise would be to say that there is never a situation in which an applicant can challenge the medical advisor's evaluation. That would mean that a medical advisor could make unilateral decisions without a claimant having any right to appeal. Such an interpretation could deprive a claimant of their due process rights depending upon the facts presented. Consider a hypothetical situation: under the Court of Appeals' reading of the statute, petitioner would not have a due process claim even if the medical advisor used a coin-flip to determine whether to certify petitioner's application. The Court of Appeals therefore erred by holding that petitioner's claim failed solely because the medical advisor did not certify his application.
States cannot create arbitrary systems to distribute important benefits and then assert that due process does not apply because the statute fails to establish protectable property interests. That is why, for example, this Court has held that civil service employees have a protectable property interest in job security and may not be fired absent due process. See Mich State Employees Ass'n, 421 Mich. at 160-161.
A far more reasonable reading of the statute is that: (1) an applicant must satisfy all three criteria set forth in MCL 38.67a(5), but (2) the ALJ must conduct a meaningful review of the medical advisor's evaluation. Such a reading avoids constitutional concerns. See Sole v Mich. Economic Dev Corp, 509 Mich. 406, 419 (2022), quoting Workman v Detroit Auto Inter-Ins Exch, 404 Mich. 477 (1979) (explaining that the constitutional doubt canon provides that if" 'the validity of an act . . . is drawn in question, and even if a serious doubt of constitutionality is raised, it is a cardinal principle that this Court will first ascertain whether a construction of the statute is fairly possible by which the question may be avoided' ") (quotation marks and citation omitted; alteration in original).
Under that reading, petitioner still received procedural due process. Recall that Mathews requires courts to consider: (1) "the private interest that will be affected by the official action," (2) "the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards," and (3) "the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail." Mathews, 424 U.S. at 335.
In this case, petitioner's interest was substantial: retirement disability benefits. To the extent that petitioner was totally and permanently disabled, those benefits constitute the "means of his livelihood." Gilbert, 520 U.S. at 932. The other two Mathews factors, however, weigh in respondent's favor. With respect to the second factor, the ALJ reviewed the record and determined that Dr. Henderson's conclusions were supported by competent, material, and substantial evidence. Petitioner has not provided an argument to suggest that the ALJ's method of reviewing the medical advisor's opinion and other record evidence was flawed in any way. The ALJ was permitted to weigh the evidence and determine that on balance, the physician's evaluation was stronger than that of petitioner's two chiropractors. As for the third factor, the retirement board has a strong interest in ensuring that it does not grant lifelong benefits erroneously. Accordingly, even under a correct reading of the statute, petitioner's due process claim fails.
CAVANAGH, J., joins the statement of WELCH, J.