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State Supreme Court says victims of jobless benefits system failure can seek damages

Michigan Supreme Court
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A 7-year-old lawsuit against the state of Michigan over malfunctions in its unemployment compensation system will continue. A split decision by the Michigan Supreme Court keeps alive the class-action quest for damages that could encompass as many as 40,000 people caught up in a system malfunction. The lawsuits take aim at the Michigan Unemployment Insurance Agency and a faulty automated system used to evaluate claims.

John Philo with the Sugar Law Center for Economic and Social Justice in Detroit said the decision recognizes the harm caused by the state’s mistake.

“Losing connections to their community, losing their home, going through bankruptcy, garnishments both from their taxes and wages,” he told Michigan Public Radio. “All those sort of things that people suffer when they are faced with, you know, false charges that have been brought against them.”

He said the decision should compel the state to finally reach a settlement.

In a statement Tuesday night, the Unemployment Insurance Agency said, "The UIA is working diligently to right past wrongs at the state and federal level and to get money back into the pockets of thousands of Michiganders, and we’re not done yet."

"Last week, Director [Julia] Dale approved more than 7,300 waivers — and in May 55,000 waivers — that will provide much needed relief for Michigan workers who faced paying back the federal government for benefits they received based on frequently shifting federal and state program rules,” the statement continued.

The statement did not mention settlement discussions.

The decision by the Democratic Party-nominated justices who make up the Supreme Court’s majority returns the case to the Michigan Court of Claims.

The state argued there’s no specific law that says the plaintiffs are allowed to sue the government. But the majority held the people denied benefits would be denied due process rights if their case is not heard.

“The core principle that guides our reasoning is that a right must be enforceable; otherwise, it is not right at all but a mere hope,” wrote Justice Megan Cavanagh in the majority opinion.

“Plaintiffs allege that when they were rightfully eligible for unemployment benefits — meant to be a hand up during a financially difficult and fragile juncture — they were accused of fraud and assessed staggering penalties without notice or any meaningful opportunity to be heard.”

Republican-nominated justices dissented.

Justice David Viviano called the majority decision “a thunderbolt” and “a gross overreach.” He also predicted dire consequences for the state and local governments.

“The Constitution, our foundational document and source of law, has been transformed into a wellspring of potential new claims against the state and its political subdivisions,” he wrote. “A deluge of cases and a swelling of taxpayer liability will surely ensue.”

Rick Pluta is Senior Capitol Correspondent for the Michigan Public Radio Network. He has been covering Michigan’s Capitol, government, and politics since 1987.
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