LANSING, Mich. -- Residents who were falsely accused of defrauding Michigan's unemployment benefits system won another victory Thursday when the state appeals court ruled 3-0 that their lawsuit seeking financial damages should proceed.
The Michigan Supreme Court decided in April to allow the affected residents to sue, but ordered the lower court to consider a separate issue potentially enabling the state to escape liability. The appeals panel said the residents have legitimate constitutional claims that, if proven, allow them to recover damages.
“It's important for these plaintiffs, but it's also an important legal principle that has now been definitively answered,” said Jennifer Lord, a lawyer who has been leading the suit that seeks class-action status for between 26,000 and 40,000 residents.
Between 2013 and 2015, a disastrous automated computer system used by then-Gov. Rick Snyder's administration wrongly accused thousands of people of collecting excessive benefits based on discrepancies in reported earnings, hours worked and other information. Although $21 million was refunded to those who were forced to repay money and substantial penalties, the state is the target of lawsuits claiming due-process rights were violated while some tried to untangle themselves from the mess.
A spokeswoman for state Attorney General Dana Nessel said her office was reviewing the ruling with the Unemployment Insurance Agency. Nessel, who took office this year, has expressed support for people who were incorrectly accused of fraud.
If no appeal is filed, Lord said, the case can be remanded to the Court of Claims for the start of taking depositions, obtaining documents, certifying the class and analyzing damages “so that we can try and finally help these people.”
One of the three men who sued, Grant Bauserman, has alleged that the state seized his state and federal income tax refunds in 2015 after wrongly determining he owed nearly $20,000 in overpayments, penalties and interest for unemployment compensation he received in parts of 2013 and 2014.
Some victims had to hire lawyers to fight false findings. Others had to file for bankruptcy, saw their wages garnished, suffered worse credit ratings or had trouble finding a job and housing, according to Lord.
At the time of the fiasco, Michigan had what were believed to be the nation's highest financial penalties for collecting excessive unemployment benefits.
In their ruling, Judges Karen Fort Hood and Patrick Meter said the “egregious nature" of the state's alleged actions may have undermined the due-process rights of thousands of innocent citizens “at a particularly vulnerable time in their lives.” Judge Michael Gadola concurred with the result but urged the Michigan Supreme Court to address more clearly if damages can be awarded for due-process violations in the absence of legislative action.
Senate Minority Leader Jim Ananich, a Flint Democrat, said people deserve their day in court after being victimized by “downright criminal” missteps.
“These wrongful accusations of fraud have ruined people’s lives," he said in a written statement. “Since 2013, countless victims have reached out to my office with stories of going into debt, having to declare bankruptcy and losing their homes."
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