Summary
In Mecosta Co Med Ctr, as in this case, the injured claimant had assigned to the medicalprovider-plaintiffs his right to seek payment for their medical services from his no-fault insurer.
Summary of this case from Synergy Spine & Orthopedic Surgery Ctr. v. State Farm Mut. Auto. Ins. Co.Opinion
No. 161628 No. 161650
06-10-2022
MECOSTA COUNTY MEDICAL CENTER, doing business as Spectrum Health Big Rapids, Spectrum Health Hospitals, Spectrum Health Primary Care Partners, doing business as Spectrum Health Medical Group, Mary Free Bed Rehabilitation Hospital, and Mary Free Bed Medical Group, Plaintiffs-Appellees, v. METROPOLITAN GROUP PROPERTY AND CASUALTY INSURANCE COMPANY, Defendant-Appellant, and State Farm Mutual Automobile Insurance Company, Defendant-Appellee. Mecosta County Medical Center, doing business as Spectrum Health Big Rapids, Spectrum Health Hospitals, Spectrum Health Primary Care Partners, doing business as Spectrum Health Medical Group, Mary Free Bed Rehabilitation Hospital, and Mary Free Bed Medical Group, Plaintiffs-Appellees, v. Metropolitan Group Property and Casualty Insurance Company, Defendant-Appellee, and State Farm Mutual Automobile Insurance Company, Defendant-Appellant.
Miller Johnson (by Joseph J. Gavin, Grand Rapids) for Mecosta County Medical Center, doing business as Spectrum Health Big Rapids; Spectrum Health Hospitals; Spectrum Health Primary Care Partners, doing business as Spectrum Health Medical Group; Mary Free Bed Rehabilitation Hospital, and Mary Free Bed Medical Group. The Rossi Law Firm PLLC (by Chrisdon F. Rossi and Monica Hoeft Rossi ) for Metropolitan Group Property and Casualty Insurance Company. Hewson & Van Hellemont, PC (by Jordan A. Wiener, Southfield) for State Farm Mutual Automobile Insurance Company. Scarfone & Geen, PC, Madison Heights (by John C. W. Hohmeier ) for Michigan Defense Trial Counsel, amicus curiae
Miller Johnson (by Joseph J. Gavin, Grand Rapids) for Mecosta County Medical Center, doing business as Spectrum Health Big Rapids; Spectrum Health Hospitals; Spectrum Health Primary Care Partners, doing business as Spectrum Health Medical Group; Mary Free Bed Rehabilitation Hospital, and Mary Free Bed Medical Group.
The Rossi Law Firm PLLC (by Chrisdon F. Rossi and Monica Hoeft Rossi ) for Metropolitan Group Property and Casualty Insurance Company.
Hewson & Van Hellemont, PC (by Jordan A. Wiener, Southfield) for State Farm Mutual Automobile Insurance Company.
Scarfone & Geen, PC, Madison Heights (by John C. W. Hohmeier ) for Michigan Defense Trial Counsel, amicus curiae
BEFORE THE ENTIRE BENCH
Viviano, J.
Jacob Myers was injured in a car crash and received medical treatment from plaintiffs Mecosta County Medical Center and Mary Free Bed Rehabilitation Hospital. As compensation for this treatment, Myers assigned them his right to seek no-fault personal protection insurance (PIP) benefits from the insurer responsible for making those payments. After the assignment, Myers filed suit seeking PIP benefits for separate services he received arising from the crash. In that lawsuit, to which plaintiffs here were not party, the trial court held that Myers had not properly insured the vehicle and was therefore not entitled to any benefits. The question in the present case is whether that holding applies to plaintiffs and precludes them, under the doctrines of res judicata or collateral estoppel, from succeeding on the present assigned claim against the defendant insurers. Because plaintiffs were not parties to the earlier suit, they are bound by the judgment only if they were in privity with Myers when the earlier judgment against him was entered. The Court of Appeals properly determined that plaintiffs were not bound by the earlier judgment because it was entered after they were assigned the claim. Accordingly, because plaintiffs were neither parties to the earlier suit nor privies with respect to the subsequently entered judgment, the doctrines of res judicata and collateral estoppel are inapplicable here.
I. FACTS AND PROCEDURAL HISTORY
Plaintiffs Mecosta County Medical Center and Mary Free Bed treated Myers for injuries he sustained in a single-car crash. Instead of paying the medical bills and seeking reimbursement from the vehicle's insurer, Myers assigned plaintiffs his right to collect PIP benefits in the amount of his treatment bills. Myers owned the vehicle with his girlfriend, whose grandmother had purchased the no-fault insurance policy on the vehicle through defendant Metropolitan Group Property and Casualty Insurance Company.
Myers then sued Metropolitan Group and defendant State Farm Mutual Automobile Insurance Company—who was also allegedly liable to provide coverage—for PIP benefits relating to other costs arising from the crash. As that suit was pending in the Wayne Circuit Court, plaintiffs here sued the same defendants in the Kent Circuit Court to recover on the assigned claim. Metropolitan moved to change venue to the Wayne Circuit Court, but plaintiffs opposed the motion, and the trial court ultimately denied it.
In Myers's action, defendants moved for summary disposition under MCR 2.116(C)(10). State Farm argued that Myers did not live with the State Farm policyholders and, therefore, was not covered. Metropolitan claimed Myers was not entitled to coverage because he personally did not maintain insurance coverage on the vehicle—rather, his girlfriend's grandmother did—and thus he violated MCL 500.3113(b), which required him, as the co-owner of the vehicle, to maintain insurance coverage. The Wayne Circuit Court granted both motions, dismissing Myers's PIP claim with prejudice. Myers did not appeal.
After the trial court's decision in that case, we held in Dye v. Esurance Prop. & Cas. Ins. Co. , 504 Mich. 167, 172-173, 934 N.W.2d 674 (2019), "that an owner or registrant of a motor vehicle is not required to personally purchase no-fault insurance for his or her vehicle in order to avoid the statutory bar to PIP benefits." We do not here decide whether and how Dye would apply in the present case.
While the motions were pending in Myers's suit, defendant Metropolitan filed an identical motion in the instant suit in the Kent Circuit Court. However, the Wayne Circuit Court granted summary disposition before the Kent Circuit Court could consider the motion. After that judgment entered, both defendants in the present case filed an additional motion for summary disposition under MCR 2.116(C)(7) and (C)(10), arguing that plaintiffs’ claims were barred by res judicata and collateral estoppel due to the decision of the Wayne Circuit Court holding that Myers was ineligible for PIP benefits. The Kent Circuit Court granted summary disposition, holding that plaintiffs’ claims were barred by res judicata and collateral estoppel.
Plaintiffs appealed in the Court of Appeals, which reversed in a split, unpublished decision. The majority held that an assignee is not bound by a judgment against an assignor in an action commenced after the assignment occurred. Mecosta Co. Med. Ctr. v. Metro. Group Prop. & Cas. Ins. Co. , unpublished per curiam opinion of the Court of Appeals, issued March 24, 2020 (Docket No. 345868), p. 5, 2020 WL 1491755. To hold otherwise, it reasoned, would be to allow an assignor to cut off an assignee's rights without the latter having any notice or opportunity to be heard. Id. Judge MURRAY dissented, expressing his belief that Court of Appeals caselaw mandated the conclusion that plaintiffs were privies of Myers and therefore bound by the judgment against him. See generally id. ( MURRAY , C.J., dissenting).
Defendants sought leave to appeal the majority's decision in this Court. We ordered argument on the application, requesting briefing on whether plaintiffs’ "claims for no-fault personal protection insurance benefits are barred by (1) res judicata or (2) collateral estoppel." Mecosta Co. Med. Ctr. v. Metro. Group Prop. & Cas. Ins. Co. , 507 Mich. 865, 953 N.W.2d 203 (2021).
II. STANDARD OF REVIEW
"We review de novo a trial court's decision on a motion for summary disposition." Meemic Ins. Co. v. Fortson , 506 Mich. 287, 296, 954 N.W.2d 115 (2020). Likewise, "[w]e review de novo the interpretation of a common-law doctrine." Bertin v. Mann , 502 Mich. 603, 608, 918 N.W.2d 707 (2018).
III. ANALYSIS
The issue in this case is whether plaintiffs’ action is precluded by the judgment against Myers under the doctrines of res judicata or collateral estoppel. Res judicata bars a second action on the same claim if " ‘(1) the prior action was decided on the merits, (2) both actions involve the same parties or their privies, and (3) the matter in the second case was, or could have been, resolved in the first.’ " Foster v. Foster , 509 Mich. 109, 120, 983 N.W.2d 373 (2022) (Docket No. 161892), quoting Adair v. Michigan , 470 Mich. 105, 121, 680 N.W.2d 386 (2004). Whereas res judicata involves preclusion of entire claims, collateral estoppel focuses on specific issues within an action. See generally Migra v. Warren City Sch. Dist. Bd. of Ed. , 465 U.S. 75, 77 n 1, 104 S Ct 892, 79 L Ed 2d 56 (1984). The elements of collateral estoppel are similar: (1) "a question of fact essential to the judgment must have been actually litigated and determined by a valid and final judgment," (2) the parties or privies " ‘must have had a full [and fair] opportunity to litigate the issue,’ " and (3) " ‘there must be mutuality of estoppel.’ " Monat v. State Farm Ins. Co. , 469 Mich. 679, 682-684, 677 N.W.2d 843 (2004) (alteration in original), quoting Storey v. Meijer, Inc. , 431 Mich. 368, 373 n 3, 429 N.W.2d 169 (1988). "[O]ne of the critical factors in applying ... collateral estoppel involves the determination of whether the respective litigants were parties or privy to a party to an action in which a valid judgment has been rendered." Howell v. Vito's Trucking & Excavating Co. , 386 Mich. 37, 42, 191 N.W.2d 313 (1971).
The mutuality requirement has been dispensed with in certain scenarios. See id. at 687-688, 677 N.W.2d 843. No mutuality concerns have been raised in the present case and we have no occasion to opine on this requirement.
Thus, both res judicata and collateral estoppel apply only when the parties in the subsequent action were parties or privies of parties to the original action. Plaintiffs in the present case were not parties to Myers's action. Consequently, this case turns upon whether they were privies of Myers with respect to the judgment that was entered against him after the assignment.
"To be in privity is to be so identified in interest with another party that the first litigant represents the same legal right that the later litigant is trying to assert." Adair , 470 Mich. at 122, 680 N.W.2d 386. "In its broadest sense, privity has been defined as ‘mutual or successive relationships to the same right of property, or such an identification of interest of one person with another as to represent the same legal right.’ " Sloan v. Madison Hts. , 425 Mich. 288, 295, 389 N.W.2d 418 (1986) (citation omitted).
See also Casad & Clermont, Res Judicata: A Handbook on its Theory, Doctrine, and Practice (Durham: Carolina Academic Press, 2001), p. 151 (noting the "classic definition of privity as a ‘mutual or successive relationship to the same rights of property’ "), quoting 2 Black, A Treatise on the Law of Judgments (2d ed., 1902), p. 830.
Generally, a relationship based on an assignment of rights is deemed to be one of privity. See Taylor v. Sturgell , 553 U.S. 880, 894, 128 S.Ct. 2161, 171 L.Ed. 2d 155 (2008) (discussing nonparty preclusion under res judicata and collateral estoppel). An assignment of rights occurs when the assignor transfers his or her rights or interests to the assignee. See State Treasurer v. Abbott , 468 Mich. 143, 150 n 8, 660 N.W.2d 714 (2003) (" ‘This court has defined the word "assignment" in the language of Webster as meaning "to transfer or make over to another"; and in the language of Burrill's Law Dictionary as "to make over or set over to another; to transfer." ’ ") (emphasis and citation omitted), quoting Allardyce v. Dart , 291 Mich. 642, 644-645, 289 N.W. 281 (1939). In these circumstances, the assignee succeeds to the rights of the assignor, thus meeting the general definition of privity. See Casad & Clermont, Res Judicata: A Handbook on its Theory, Doctrine, and Practice (Durham: Carolina Academic Press, 2001), p. 151.
But the mere succession of rights to the same property or interest does not, by itself, give rise to privity with regard to subsequent actions by and against the assignor. Cf. Sodak Distrib. Co. v. Wayne , 77 S.D. 496, 502, 93 N.W.2d 791 (1958) ("Privity does not arise from the mere fact that persons as litigants are interested in the same question or in proving or disproving the same state of facts."). Rather, "[t]he binding effect of the adjudication flows from the fact that when the successor acquires an interest in the right it is then affected by the adjudication in the hands of the former owner." Id. at 502-503, 93 N.W.2d 791. In other words, the assignee succeeds to those rights subject to any earlier adjudication involving the assignor that defined those rights. When the litigation involving the assignor occurs after the assignment, the rights could not yet have been affected by the litigation at the time they were transferred to the assignee.
It is therefore well established that a judgment entered after the assignment does not bind the assignee because the assignee is not in privity with the assignor with respect to that judgment. As early as 1898, the United States Supreme Court was able to express this rule as black-letter law:
We remark again that while a judgment or decree binds not merely the party or parties subject to the jurisdiction of the court but also those in privity with them, yet that rule does not avail the plaintiffs in error, for [the defendant's assignee] acquired his rights prior to the institution of the suit in New York and was therefore not privy to that judgment.
"It is well understood, though not usually stated in express terms in works upon the subject, that no one is privy to a judgment whose succession to the rights of property thereby affected, occurred previously to the institution of the suit. A tenant in possession prior to the commencement of an action of ejectment cannot therefore be lawfully dispossessed by the judgment unless made a party to the suit.... No grantee can be bound by any judgment in an action commenced against his grantor subsequent to the grant, otherwise a man having no interest in property could defeat the estate of the true owner. The foreclosure of a mortgage, or of any other lien, is wholly inoperative upon the rights of any person not a party to the suit, whether such
person is a grantee, judgment creditor, attachment creditor, or other lienholder." Freeman on Judgments (1st ed.), § 162.
[ Dull v. Blackman , 169 U.S. 243, 248, 18 S.Ct. 333, 42 L.Ed. 733 (1898).]
See also Freeman, A Treatise on the Law of Judgments (1886), § 162, p. 177 ("The assignee of a note is not affected by any litigation in reference to it, beginning after the assignment."). Courts have continued to abide by this rule, and it remains a bedrock in the literature on the subject. This rule is reflected in this Court's caselaw. In its decision below, the Court of Appeals appropriately relied upon Aultman, Miller & Co. v. Sloan , 115 Mich. 151, 154, 73 N.W. 123 (1897). In that case, after the mortgagee assigned his interest in the property, he sued the mortgagors, who argued that an assignment had occurred. Id. at 152-153, 73 N.W. 123. The mortgagee obtained a judgment, and the question in the second suit, brought by the assignee, was whether that judgment precluded the assignee's action. Id. at 153, 73 N.W. 123. In finding that there was no privity, we observed that the assignee and assignor disputed whether an assignment had occurred. Id. at 154, 73 N.W. 123. Nonetheless, we did not rely upon this disagreement alone and instead pronounced that allowing the assignor's subsequent case to preclude the assignee's case would "cut off the rights of [the assignee], without giving him an opportunity to be heard." Id. Therefore, the judgment obtained after the assignment should not be given preclusive effect. Id. Aultman has long been cited for the rule that judgments rendered after an assignment do not bind the assignee. See, e.g., 24 Garland & McGehee, eds, The American & English Encyclopedia of Law (1903), p. 749 (citing Aultman , among other cases, for the rule that an assignee is not bound by the results of postassignment lawsuits to which it was not a party).
See, e.g., Northern Oil & Gas, Inc. v. EOG Resources, Inc. , 970 F.3d 889, 891 (C.A. 8, 2020) ("Under principles of res judicata, litigants in privity are bound by a prior judgment controlling an issue in subsequent litigation. In North Dakota, ‘the privity doctrine cannot be applied if the rights to property were acquired by the person sought to be bound before the adjudication.’ ") (emphasis added), quoting Gerrity Bakken, LLC v. Oasis Petroleum North America, LLC , 915 N.W.2d 677, 684 (N.D. 2018) ; Indus. Credit Co. v. Berg , 388 F.2d 835, 841 (C.A. 8, 1968) ("Ordinarily, a person in privity with a party to a lawsuit, ... under principles of res judicata or collateral estoppel, must acquire his interest in the transaction after commencement of the action or rendition of the judgment."); Wight v. Chandler , 264 F.2d 249, 253 (C.A. 10, 1959) ("Having acquired the interest now in controversy prior to the institution of the action and having owned it ever since, he was not in privity with the defendant [assignor] respecting it at the time of the institution of the action or at any time later."); Laster v. American Nat'l Fire Ins. Co. , 775 F. Supp. 985, 989 (N.D. Tex., 1991) ("There is no preclusion if the assignment takes place before the litigation that is urged as a basis for preclusion."); Gramatan Home Investors Corp. v. Lopez , 46 N.Y.2d 481, 486-487, 414 N.Y.S.2d 308, 386 N.E.2d 1328 (1979) ("In the assignor-assignee relationship, privity must have arisen after the event out of which the estoppel arises. Hence, an assignee is deemed to be in privity with the assignor where the action against the assignor is commenced before there has been an assignment.... Conversely, an assignee is not privy to a judgment where the succession to the rights affected thereby has taken place prior to the institution of the suit against the assignor.").
See Restatement Judgments, 2d, § 55, p. 68 ("The determination of issues in an action by or against either assignee or assignor is not preclusive against the other of them in a subsequent action, except" when the action was "brought by the assignor before the assignment" and the assignee then brings an action or when "there is a further relationship between the assignee and assignor from which preclusion may arise"); 50 CJS, Judgments, § 1106, p. 530 ("The assignee of a right of property or chose in action is concluded by a judgment for or against the assignor in a suit begun before the assignment, but not where the assignee's rights vested prior to the commencement of the action, except as the rule may have been altered by statute, or where the assignee has been notified to defend the action and failed to do so."); 46 Am Jur 2d, Judgments, § 570, p. 937 ("A judgment against an assignor binds the assignee, where the assignee acquiesced to the assignor's prior litigation, there was a substantial legal relationship between the assignee and the assignor, the assignee's interests were aligned with the assignor in the prior litigation, and the assignee had control over the prior litigation and could have terminated it at any time.") (emphasis added); cf. Res Judicata , p. 154 (stating that the transferee of property is not in privity with the transferor if the interest was acquired "before the commencement of the action involving the transferor").
We expressed the same general rule even more directly in Howell , 386 Mich. 37, 191 N.W.2d 313. We stated that " ‘[a] privy is one who, after rendition of the judgment , has acquired an interest in the subject matter affected by the judgment through or under one of the parties....’ " Id. at 43, 191 N.W.2d 313, quoting Bernhard v. Bank of America Nat'l Trust & Savings Ass'n , 19 Cal 2d 807, 811, 122 P.2d 892 (1942). This rule has been cited and relied upon by numerous courts. We have also indicated elsewhere, in an analogous context, that the postassignment actions of an assignor cannot provide a basis to bind the assignee. See Saginaw Fin. Corp. v. Detroit Lubricator Co. , 256 Mich. 441, 443, 240 N.W. 44 (1932) ("After assignment, the assignor loses all control over the chose [in action] and cannot bind the assignee, by estoppel or otherwise.").
See, e.g., Metzler v. United States , 832 F. Supp. 204, 208 (E.D. Mich, 1993) (citing and applying this rule from Howell ); Rohe Scientific Corp. v. Nat'l Bank of Detroit , 133 Mich.App. 462, 467, 350 N.W.2d 280 (1984) (citing Howell and holding that because a party's interest in the property was obtained "long before judgment" in the first action, there was no privity).
In advocating for a different result, the Court of Appeals dissent here relied on TBCI, P.C. v. State Farm Mut. Auto. Ins. Co. , 289 Mich.App. 39, 795 N.W.2d 229 (2010). That case also formed the basis for the holding in The Medical Team, Inc. v. Auto-Owners Ins. Co. , unpublished per curiam opinion of the Court of Appeals, issued February 25, 2020 (Docket No. 345449), 2020 WL 908486, which reached a conclusion in direct conflict with the one we reach in the present case. The medical provider's claim in TBCI was not obtained by assignment, however. Rather, the basis for the medical provider's claim was Court of Appeals caselaw (that was subsequently overturned) holding that medical providers had an independent claim that was nonetheless "completely derivative of and dependent on [the insured's] having a valid claim of no-fault benefits against" the insurer. Moody v. Home Owners Ins. Co. , 304 Mich.App. 415, 440, 849 N.W.2d 31 (2014) ; see also Mich. Head & Spine Institute, P.C. v. State Farm Mut. Auto. Ins. Co. , 299 Mich.App. 442, 448 n.1, 830 N.W.2d 781 (2013), citing Lakeland Neurocare Ctrs. v. State Farm Mut. Auto. Ins. Co. , 250 Mich.App. 35, 39, 645 N.W.2d 59 (2002).
That caselaw was overturned in Covenant Med. Ctr., Inc. v. State Farm Mut. Auto. Ins. Co. , 500 Mich. 191, 895 N.W.2d 490 (2017). After Covenant , the Legislature expressly provided a direct cause of action for medical providers. MCL 500.3112. Those statutory causes of action are not before the Court, and we therefore do not decide whether a medical provider bringing such an action would be in privity with an insured for purposes of res judicata or collateral estoppel.
Neither the dissent below, The Medical Team , nor TBCI itself explain why TBCI ’s reasoning should prevail over the traditional approach discussed above. Indeed, none of these opinions mentions the traditional rule or our caselaw reflecting that rule. TBCI did not address assignments, which have long been governed by the rule discussed above. It therefore is not applicable here.
The Medical Team also relied upon Jones v. Chambers , 353 Mich. 674, 91 N.W.2d 889 (1958). In that case, the owner of an oil truck involved in a collision assigned part of the claim to its insurer. The owner and insurer of the truck sued the owner of the other vehicle involved in the collision. Id. at 675-676, 91 N.W.2d 889. About two weeks later, the owner of the other vehicle and his insurer sued the truck owner (and an unrelated party) in a different court. That second case was decided first, and the owner of the other vehicle prevailed as plaintiff. Id. at 676, 91 N.W.2d 889. The trial court in the first suit then held that the truck owner and its insurer were barred from suit. We agreed, quoting the trial court's opinion that even though the assignee-insurer was not a party to the second-filed suit, the insurer obtained only the rights of the truck owner and no more. Id. at 681-682, 91 N.W.2d 889.
The Court in Jones did not, however, address privity at all. In fact, our recitation of the law of res judicata was incomplete, as it did not discuss the need for the two lawsuits to contain the same parties or their privies. Moreover, under the unique facts in Jones , the parties arguably were in privity. They had, together, initiated the first suit. And they proceeded with that suit as the second one was filed and pending. Under these facts, it is arguable that they continued to have "a further relationship" such that the general rule against preclusion would not apply. See Restatement Judgments, 2d, § 55, p. 68 (noting that the rule against application of res judicata is inapplicable where the assignee and assignor have "a further relationship"). These facts might also fall within the "outer limit of the doctrine" of privity as we defined it in Adair , 470 Mich. at 122, 680 N.W.2d 386 : "[T]he doctrine traditionally requires both a ‘substantial identity of interests’ and a ‘working functional relationship’ in which the interests of the nonparty are presented and protected by the party in the litigation." (Citation omitted.) Being coplaintiffs might qualify as a "working functional relationship." In any event, as noted, Jones simply did not address privity at all, much less the rule we are examining in this case. Therefore, it is inapplicable to the issue before the Court.
In light of this analysis, we conclude that the plaintiff assignees here were not in privity with their assignor, Myers, with respect to the subsequently entered judgment. Therefore, the plaintiff assignees cannot be bound by that judgment under the doctrines of res judicata or collateral estoppel.
IV. CONCLUSION
In this case, we hold that plaintiff assignees were not in privity with Myers with respect to the judgment that was rendered against him after he had assigned the present PIP claim to plaintiffs. We therefore affirm the judgment of the Court of Appeals and remand to the trial court for further proceedings consistent with this opinion.
McCormack, C.J., and Zahra, Bernstein, Clement, Cavanagh, and Welch, JJ., concurred with Viviano, J.