The Gongwer Blog

Federal Windfall Not Jumpstarting Settlement Talks In Unemployment Case

By Zachary Gorchow
Executive Editor and Publisher
Posted: May 4, 2021 5:02 PM

It is the lawsuit that will never end. Perhaps more accurately, the lawsuit that will never start.

Nearly six years ago, a class action lawsuit, Bauserman v. Unemployment Insurance Agency, was filed in the Michigan Court of Claims accusing the state of violating the constitutional rights of almost 40,000 wrongly found to have committed fraud to obtain unemployment benefits.

In 2013, the UIA put in place a computer system, the Michigan Integrated Data Automated System, that had total or near total control in adjudicating fraud cases. The vast majority of fraud determinations, subsequent audits and investigations found, were bogus and unjustified.

Further, state law and practices in place at the time socked these wronged individuals with tens of thousands in repayments of principal, interest and massive penalties. Wages were garnished and income tax refunds intercepted. Had the Flint water crisis not erupted at almost the same time, it would be remembered as one of the most serious errors by state government in its history.

Those wrongly found guilty of fraud have long since been repaid what the state took from them. But for the more than 1,000 who filed for bankruptcy and unknown number of others who lost houses and other assets – as well as everyone who endured the nightmare – it's hard to argue they have been made whole.

It's been said that suing is a bad mechanism to obtain justice. The Bauserman case is a sad demonstration of that theory.

Almost six years after filing, the plaintiffs have yet to even get the chance to make their case thanks to a state government determined to defend itself against what looms as a massive judgment easily in the nine-figure range. First under Governor Rick Snyder and now under Governor Gretchen Whitmer, the state has appealed after repeated losses. The case has bounced all around the courts and is on its second round at the Supreme Court, where the case has been pending for 16 months.

It was the Snyder administration that was responsible for what happened. However, the Whitmer administration has continued the state's defense, unlike in the Flint water cases where Ms. Whitmer and Attorney General Dana Nessel began moving toward a settlement not long after taking office.

I thought maybe with the state receiving a $5.65 billion windfall from the federal government as part of the American Rescue Act, maybe that would prompt the Whitmer administration to consider a settlement to eliminate the last remaining major litigation threat to the state's fiscal picture. But the plaintiffs' attorney, Jennifer Lord, said there has been no sign of any settlement. Instead, the state and the plaintiffs continue to trade briefs on just the question of whether the Supreme Court should hear the state's appeal of a Court of Appeals ruling holding that people can sue the state for damages based on a constitutional violation.

Even if the Supreme Court rules for the plaintiffs a second time, that only simply means the case can finally begin. It would go back to the Court of Claims where the plaintiffs could subpoena for documents and depose witnesses. That still puts the case, best case, on a trajectory for a judgment many years from now.

In January 2020, when Ms. Whitmer and Attorney General Dana Nessel decided to appeal to the Supreme Court, Ms. Lord said she was "heartbroken that the agency has added years to the process to compensate the victims it harmed."

She was not wrong about the timetable.

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