UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

 

JENNIFER ZYNDA, et al. 

Plaintiffs,

v.

STEVE ARWOOD, et al.

Defendants. 

 /

Case No. 15-11449

OPINION AND ORDER DENYING DEFENDANTS’ MOTION FOR PARTIAL

DISMISSAL AND GRANTING DEFENDANTS’ MOTION TO AMEND ANSWER

Plaintiffs, who are various individual unemployment-benefit claimants along with

an association and a union (Sugar Law Center, and the International Union, United

Automobile, Aerospace, and Agricultural Implement Workers of America), filed suit

alleging various Constitutional and statutory violations arising from Michigan’s

administration of its unemployment benefits program. (Dkt. #1, Pg. ID 2.) Before the

court is Defendants’ Motion to File an Amended Answer to Plaintiffs’ Amended

Complaint Pursuant to Federal Rule of Civil Procedure 15 (Dkt. # 32), and Defendants’

Motion For Partial Dismissal Pursuant to Federal Rule of Civil Procedure 12(b)(1) (Dkt.

# 33). Plaintiffs have filed a response to the latter motion (Dkt. #35), but have not filed

any response as to the Motion to Amend. Defendants have filed their reply. (Dkt. # 36.)

The matters have been briefed and the court concludes a hearing on the motions is

unnecessary. See E.D. LR7.1(f)(2). For the reasons stated below, the court will deny

Defendants’ Motion for Partial Dismissal and grant Defendants’ Motion to Amend. 

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I. BACKGROUND 

The underlying facts of the instant case are explained in detail in this court’s prior

Opinion and Order Granting in Part and Denying in Part Defendants’ Motion to Dismiss

(Dkt. #27), familiarity with which is presumed. At the time the court issued that opinion,

Defendants had also filed a separate motion to dismiss pursuant to Federal Rule of Civil

Procedure 12(b)(1). (Dkt. #23.) Following the opinion resolving the earlier motion to

dismiss, the court terminated, without prejudice, Defendants’ latter-filed motion as moot,

and indicated that Defendants would remain free to re-file the motion in light of the

court’s order, which had become law of the case. (Dkt. #31.) The instant motion to

dismiss is an almost verbatim reiteration of the arguments offered in the motion that the

court terminated, but it adds a section expressing confusion over the language in the

court’s opinion regarding the availability of prospective relief. (Dkt. #33.)

Defendants argue that Plaintiffs’ claims related to computer determinations of

fraud should be dismissed as moot because: 1) Defendants voluntarily ceased using the

MiDAS system that Plaintiffs allege was responsible for making the faulty fraud

determinations at issue in this case; and 2) The United States Department of Labor

issued an Unemployment Insurance Program Letter (UIPL) instructing states that they

could no longer use computers to make fraud determinations.

Defendants also request leave to amend their answer. (Dkt. #32.) Defendants

first filed their answer to the amended complaint on April 12, 2016 (Dkt. # 28), and they

filed this motion to amend their answer just over one month later (Dkt. # 32).

II. STANDARD

A. Federal Rule of Civil Procedure 12(b)(1) 

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Federal Rule of Civil Procedure 12(b)(1) allows for dismissal for “lack of

jurisdiction over the subject matter.” When a defendant challenges subject matter

jurisdiction pursuant to this Rule, the plaintiff has the burden of proving jurisdiction in

order to survive the motion. Mich. S. R. R. Co. v. Branch & St. Joseph Ctys. Rail Users

Ass’n Inc., 287 F.3d 568, 573 (6th Cir. 2002). However, “the heavy burden of

demonstrating mootness rests on the party claiming mootness.” Cleveland Branch,

NAACP v. City of Parma, 263 F.3d 513, 531 (6th Cir. 2001). “[A] case becomes moot

only when subsequent events make it absolutely clear that the allegedly wrongful

behavior cannot reasonably be expected to recur and interim relief or events have

completely and irrevocably eradicated the effects of the alleged violation.” Id.

(quotations omitted).

B. Federal Rule of Civil Procedure 15(a)

Leave to amend is “freely given when justice so requires.” Morse v. McWhorter,

290 F.3d 795, 799 (6th Cir. 2002). Denial may be appropriate, however, where there is

“undue delay, bad faith, or dilatory motive on the part of the movant, repeated failure to

cure deficiencies by amendments previously allowed, undue prejudice to the opposing

party by virtue of allowance of the amendment, futility of the amendment, etc.” Foman v.

Davis, 371 U.S. 178, 182 (1962).

III. DISCUSSION

A. Motion to Dismiss

1. Defendant’s Voluntary Cessation

Defendants argue that Plaintiffs’ claims regarding computerized fraud

determinations are moot because Defendants have implemented human review and

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voluntarily ceased use of the MiDAS system that Plaintiffs allege was responsible for

due process violations. (Dkt. # 33.) However, “[t]he voluntary cessation of challenged

conduct does not ordinarily render a case moot because a dismissal for mootness

would permit a resumption of the challenged conduct as soon as the case is dismissed.”

Knox v. Service Employees Intern. Union, Local 1000, 132 S.Ct. 2277, 2287 (2012)

(citation omitted). In Knox, the Court stated that an offer of full refunds to Plaintiffs did

not moot the case because the defendant “continued to defend the legality of the [fee,

so] it is not clear why the [defendant] would necessarily refrain from collecting similar

fees in the future.” Id. The same reasoning applies to the instant case. 

Defendants do not explain in detail how fraud determinations are currently made,

nor do they explain how any improvements will affect Plaintiffs’ due process concerns

going forward. It strains credulity to assert that Defendants will never again use

computer systems similar to MiDAS to make fraud determinations, even if use of the

specific MiDAS system has been discontinued and staff determinations have been

implemented as Defendants suggest. The implementation of staff determinations is

evidently no great deviation from the earlier procedure, as Defendants admit that

“[p]reviously, the Agency used MiDAS, in addition to staff, to issue Agency

determinations and redeterminations involving fraud.” (Dkt. #33-1 (emphasis added).)

Defendants have given the court no basis to conclude that their current or future

methods for determining fraud are any more likely to comport with due process than the

procedures that the Defendants have discontinued. For example, Defendants do not

indicate whether they are using some system similar to MiDAS to assist in the staff

determinations, whether staff are actively involved in assessing the facts suggesting the

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presence of fraud, or if the staff are simply responsible for the “issuance” of the

determinations in a way such that a person may rubber-stamp the findings of a

computer system substantially similar to MiDAS. (See generally Dkt. #33-1.) Therefore,

the court cannot conclude on this basis that “subsequent events make it absolutely clear

that the allegedly wrongful behavior cannot reasonably be expected to recur.” See

Cleveland Branch NAACP, 263 F.3d at 531. However, even if the court were armed with

these facts, it could not rule out the possibility that Defendants might resume the

allegedly unconstitutional conduct. Thus, Defendants’ voluntary cessation, even if

entirely correct and fully disclosed herein, does not render Plaintiffs’ claims moot.

2. United States Department of Labor’s UIPL

Defendants also claim that Plaintiffs’ claims are moot because the United States

Department of Labor issued a UIPL directing state agencies not to use computerized

systems in making fraud determinations. (Dkt. #33.) However, the facts and law cited by

Defendants do not support a finding of mootness. Defendants cite to Ammex Inc. v.

Cox, but the court in that case actually reversed the lower court’s finding of mootness

because the Attorney General’s withdrawal of a notice of intended action did “not make

it absolutely clear that the enforcement action is not reasonably likely to recur.” 351 F.3d

697, 705 (6th Cir. 2003). Another case cited by Defendants, Mosley v. Hairston, is

easily distinguishable. 920 F.2d 409, 414 (6th Cir. 1990). In Mosley, Congress had

passed the Family Support Act under which state regulations were promulgated and

federal regulations were proposed which effectively granted plaintiff the relief that she

sought. Id.

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Defendants do not point to any act of Congress or agency rulemaking with

respect to the facts of this case but instead say only that the state of Michigan has

ceased use of MiDAS for the time being and that the Department of Labor had issued a

UIPL directing them not to continue use of computer systems to make fraud

determinations. (Dkt. #33.) Defendants insist that they “will comply with its terms,” but

also admit that “the UIPL is not binding federal law.” Id. Moreover, the UIPL upon which

Defendants rely does not actually prohibit the use of computers in making fraud

determinations but instead merely requires that the agency have “‘independently

verified the information’ obtained from the computer match” before granting notice and

an opportunity to respond. U.S. Dep’t of Labor, Unemployment Insurance Program

Letter No. 1-16, Federal Requirements to Protect Individual Rights in State

Unemployment Compensation Overpayment Prevention and Recovery Procedures

(Oct. 1, 2015).

The UIPL does not guarantee that Plaintiffs will receive the relief that they seek.

The Department of Labor may change its policy at a later date. Indeed, the affidavit filed

in support of Defendants’ motion contemplates this very possibility by stating that “[u]ntil

such time as the US DOL rescinds or amends [the UIPL] ... the Agency cannot use

MiDAS ...” (Dkt. #33-1.) Another possibility is that the Defendants will disagree with and

refuse to abide by UIPL entirely at the risk of reduced federal funding; again the affidavit

contemplates this when it states that “[i]f the Agency fails to comply with the

requirements set forth in [the UIPL] ... the Agency’s federal funding could be impacted.”

Id. Thus, the UIPL, lacking the force of law that the statutes and regulations had in

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Mosley, does not “make it absolutely clear that the allegedly wrongful behavior cannot

reasonably be expected to recur[.]” See Cleveland Branch NAACP, 263 F.3d at 531.

3. Prospective and Retrospective Relief

Finally, Defendants’ arguments as to retrospective relief were addressed in the

court’s opinion and order. (Dkt. #27.) The opinion made a distinction between

prospective injunctive relief, which is available under Ex Parte Young, 209 U.S. 123,

159-160 (1908), and retrospective relief, which is barred by the Eleventh Amendment.

(Dkt. #27.) It explained that to the extent that Plaintiffs requested that the court “‘[o]rder

defendants to return any state or federal tax returns or wages garnished or intercepted’

by the state” their claims were barred by the Eleventh Amendment. Id. It also cautioned

that relief requiring “Defendants to reopen a case and compensate a Plaintiff for

previously unpaid benefits” would be similarly prohibited. Id. The opinion contrasted

these retrospective forms of relief with the prospective injunctive relief implicated in

Plaintiffs’ request for “reinstatement of [Plaintiffs’] current and continuing eligibility for

unemployment benefits[,]” which were determined to be permissible under the binding

precedent of Carten v. Kent State University, 282 F.3d 391, 396 (6th Cir. 2002). (Dkt.

#27.) Finally it explained that “declaratory and injunctive requests as are truly

prospective” would include “an order that Defendants establish and maintain procedures

for detecting and acting upon incidents of fraud that meet Constitutional standards.” Id.

Defendants’ arguments regarding the termination of the MiDAS program in no

way address Plaintiffs’ request for reinstatement of current and continuing eligibility for

unemployment benefits. Defendants’ change of policy cannot be said to “have

completely and irrevocably eradicated the effects of the alleged violation,” see

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Cleveland Branch NAACP, 263 F.3d at 531, because Plaintiffs allege that they still feel

the effects of their current and future ineligibility. On the other hand, Defendants’

change of policy arguably confronts the request that they establish and maintain

procedures that meet Constitutional standards. However, for the reasons discussed

above, Defendants have not shown that the current practices are constitutional and that

Defendants will not revert to previous practices and thus have not successfully carried

the “heavy burden of demonstrating mootness[,]” see Cleveland Branch NAACP, 263

F.3d at 531. That these specific forms of relief are truly prospective was determined in a

prior opinion citing to controlling Sixth Circuit precedent and is now law of the case.

(See Dkt. #27.) The court will not revisit that determination here. 

B. Motion for Leave to Amend Answer

Plaintiffs have filed no opposition to Defendants’ motion for leave to amend their

answer. Defendants’ proposed amendments do not add any new affirmative defenses

but will provide additional detail as to the Defendants’ view of factual allegations

included on the face of the amended complaint. (Dkt. #32-1.) This is the first time that

Defendants have moved to amend, and Defendants did so quickly. Therefore, nothing

suggests “undue delay, bad faith, or dilatory motive on the part of the movant, repeated

failure to cure deficiencies by amendments previously allowed, undue prejudice to the

opposing party by virtue of allowance of the amendment, futility of the amendment, etc.”

Foman v. Davis, 371 U.S. 178, 182 (1962). The court grants Defendants leave to

amend their answer.

IV. CONCLUSION

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For the foregoing reasons, IT IS ORDERED that Defendants’ Motion to Dismiss

(Dkt. # 33) is DENIED.

 IT IS FURTHER ORDERED that Defendants’ Motion For Leave to Amend

Answer (Dkt. #32) is GRANTED. Defendants shall file their amended answer within 7

days of the issuance of this opinion.

 s/Robert H. Cleland 

ROBERT H. CLELAND

UNITED STATES DISTRICT JUDGE

Dated: September 2, 2016

I hereby certify that a copy of the foregoing document was mailed to counsel of record

on this date, September 2, 2016, by electronic and/or ordinary mail.

s/Lisa Wagner 

Case Manager and Deputy Clerk

(313) 234-5522

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