UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF MICHIGAN 

SOUTHERN DIVISION 

JENNIFER ZYNDA, et al. 

 Plaintiffs, 

v 

STEVE ARWOOD, in his official 

capacity as Acting Director of the 

Michigan Department of Talent and 

Economic Development, and 

SHARON MOFFETT-MASSEY, in 

her official capacity as Director of 

the Unemployment Insurance 

Agency. 

 Defendants. 

No. 2:15-cv-11449 

HON. ROBERT H. CLELAND 

DEFENDANTS’ MOTION TO 

DISMISS PLAINTIFFS’ 

COMPLAINT PURSUANT TO 

FED. R. CIV. P. 12(b)(1) 

AND 12(b)(6) 

 

 

David M. Blanchard (P67190) 

Joseph X. Michael (P79084) 

Attorneys for Plaintiffs 

101 N. Main Street, Ste. 555 

Ann Arbor, MI 48104 

(734) 663-7550 

 

Kimberly K. Pendrick (P60348) 

Peter T. Kotula (P41629) 

Shannon W. Husband (P60352) 

Attorneys for Defendants 

Michigan Department of Attorney General 

Labor Division 

3030 W. Grand Blvd., Ste. 9-600 

Detroit, MI 48202 

(313) 456-2200 

 / 

2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 1 of 64 Pg ID 51
1 

DEFENDANTS’ MOTION TO DISMISS PLAINTIFFS’ 

COMPLAINT PURSUANT TO 

FED. R. CIV. P. 12(B)(1) AND 12(B)(6) 

Pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6), Defendants move 

for dismissal of the Plaintiffs’ Complaint. The Plaintiffs improperly 

seek federal intervention into state unemployment determinations of 

fraud. 

1. Defendants have sought concurrence pursuant to E. D. Mich. 

LR 7.1. Despite reasonable efforts, the movant was unable to conduct a 

conference. 

2. The Unemployment Insurance Agency properly applied the 

Michigan Employment Security Act, Mich. Comp. Laws, § 421.1, et. seq.

3. This Court should dismiss Plaintiffs’ Complaint due to lack 

of subject matter jurisdiction as the claims are barred by Eleventh 

Amendment sovereign immunity. U.S. Const. amend. XI. 

4. This Court should dismiss Plaintiffs’ Complaint as 

Defendants are not “persons” under 42 U.S.C. § 1983. 

5. This Court should dismiss Plaintiffs’ Complaint as Plaintiffs 

lack standing to bring this suit as there is no injury in fact or causation, 

and redressability is speculative. Further, Sugar Law and the UAW are 

2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 2 of 64 Pg ID 52
2 

asserting the claims of third parties and the UAW lacks associational 

standing. 

6. This Court should dismiss Plaintiffs’ Complaint under the 

Burford abstention doctrine as the State’s complex regulatory 

unemployment scheme would be disrupted by federal review. Burford 

v. Sun Oil Corp., 310 U.S. 315 (1943). 

7. This Court should dismiss Plaintiffs’ self-incrimination 

claims under the U.S. Constitution’s Fifth Amendment and Mich. 

Const. art. I, § 17 as neither Constitution is violated by the State 

requiring mandatory reporting, the privilege was not asserted, and the 

Michigan Employment Security Act provides for immunity from 

criminal prosecution. 

8. This Court should dismiss Plaintiffs’ U.S. Constitution 

Eighth Amendment excessive fines claim as the Supreme Court has 

never announced that the federal excessive fines clause applies to the 

states and the statutory civil penalty is not excessive. 

9. This Court should dismiss Plaintiffs’ Mich. Const. art. 1, § 17 

excessive fines claim as the statutory civil penalty is not excessive and 

the amount of the penalty is not discretionary. 

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3 

10. This Court should dismiss Plaintiffs’ U.S. Constitution 

Fourth Amendment search and seizure claims as the seizure of 

fraudulently obtained benefits is not unreasonable, the authority to 

recover fraudulently obtained benefits is provided by statute, and the 

seizure provisions are not applicable to the collection of public revenue. 

11. This Court should dismiss Plaintiffs’ Social Security Act 

claims, as the Social Security Act does not provide Plaintiffs with a 

private right of action. 

12. This Court should deny Plaintiffs’ request for declaratory 

relief as such request would not settle the controversy or clarify the 

legal relations in issue, and would, in fact, result in friction between 

federal and state courts. 

WHEREFORE, Defendants request this Honorable Court to 

dismiss Plaintiffs’ Complaint in its entirety and award any appropriate 

costs and fees. 

Respectfully submitted, 

Bill Schuette 

Attorney General 

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4 

/s/ Kimberly K. Pendrick 

Kimberly K. Pendrick 

Peter T. Kotula (P41629) 

Shannon W. Husband (P60352) 

Assistant Attorneys General 

Attorneys for Defendants 

Labor Division 

3030 W. Grand Blvd., Ste. 9-600 

Detroit, MI 48202 

(313) 456-2200 

kendrickk@michigan.gov 

P60348 

Dated: July 10, 2015 

CERTIFICATE OF SERVICE 

I hereby certify that on July 10, 2015, I electronically filed the above 

document(s) with the Clerk of the Court using the ECF System, which 

will provide electronic copies to counsel of record. 

/s/ Kimberly K. Pendrick 

Assistant Attorney General 

Attorney for Defendants 

Labor Division 

3030 W. Grand Blvd., Ste. 9-600 

Detroit, MI 48202 

(313) 456-2200 

pendrickk@michigan.gov 

P60348 

2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 5 of 64 Pg ID 55
UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF MICHIGAN 

SOUTHERN DIVISION 

JENNIFER ZYNDA, et al. 

 Plaintiffs, 

v 

STEVE ARWOOD, in his official 

capacity as Acting Director of the 

Michigan Department of Talent and 

Economic Development, and 

SHARON MOFFETT-MASSEY, in 

her official capacity as Director of 

the Unemployment Insurance 

Agency. 

 Defendants. 

No. 2:15-cv-11449 

HON. ROBERT H. CLELAND 

DEFENDANTS’ BRIEF IN 

SUPPORT OF THEIR 

MOTION TO DISMISS 

PLAINTIFFS’ COMPLAINT 

PURSUANT TO FED. R. CIV. 

P. 12(b)(1) 

AND 12(b)(6) 

 

 

David M. Blanchard (P67190) 

Joseph X. Michael (P79084) 

Attorneys for Plaintiffs 

101 N. Main Street, Ste. 555 

Ann Arbor, MI 48104 

(734) 663-7550 

 

Kimberly K. Pendrick (P60348) 

Peter T. Kotula (P41629) 

Shannon W. Husband (P60352) 

Attorneys for Defendants 

Michigan Department of Attorney General 

Labor Division 

3030 W. Grand Blvd., Ste. 9-600 

Detroit, MI 48202 

(313) 456-2200 

 / 

2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 6 of 64 Pg ID 56
DEFENDANTS’ BRIEF IN SUPPORT OF THEIR MOTION TO 

DISMISS PLAINTIFFS’ COMPLAINT PURSUANT TO 

FED. R. CIV. P. 12(b)(1) AND 12(b)(6) 

Bill Schuette 

Attorney General 

Kimberly K. Pendrick (P60348) 

Peter T. Kotula (P41629) 

Shannon W. Husband (P60352) 

Assistant Attorneys General 

Attorneys for Defendants 

Labor Division 

3030 W. Grand Blvd., Ste. 9-600 

Detroit, MI 48202 

(313) 456-2200 

Dated: July 10, 2015

2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 7 of 64 Pg ID 57
i 

TABLE OF CONTENTS 

Page 

Table of Contents ......................................................................................... i

Index of Authorities .................................................................................. iii

Concise Statement of Issues Presented ..................................................... x

Controlling or Most Appropriate Authority ............................................. xi

Introduction ................................................................................................ 1

Statement of Facts ...................................................................................... 5

Plaintiffs’ Complaint ......................................................................... 5

The MES Act ...................................................................................... 5

Argument .................................................................................................. 12

I. Standard of Review ......................................................................... 12

II. Plaintiffs’ suit is barred by sovereign immunity. .......................... 14

III. Plaintiffs’ § 1983 claim fails because Defendants are not 

“persons” as defined under 42 U.S.C. § 1983. ................................ 16

IV. Plaintiffs lack standing to bring this lawsuit. ............................... 20

A. Individual Plaintiffs lack standing ....................................... 21

B. Sugar Law and UAW lack standing ...................................... 22

C. UAW lacks associational standing ........................................ 25

V. The Court should abstain from review of the State’s 

unemployment insurance program ................................................ 27

VI. Plaintiffs’ constitutional claims fail to state a claim upon 

which relief can be granted. ............................................................ 29

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ii 

A. Plaintiffs’ self-incrimination claims fail because 

mandatory state reporting requirements do not violate 

the Fifth Amendment and the MES Act contains an 

immunity provision. ............................................................... 29

B. The fraud penalty is not an excessive fine under the 

federal or state constitutions because the amount is set 

by the MES Act and protects the integrity of the 

unemployment system. .......................................................... 33

1. United States Constitution claim ................................ 33

2. Michigan State Constitution claim .............................. 37

C. The search and seizure provision of the U.S. 

Constitution does not apply to civil attachments. ................ 39

VII. The Social Security Act authorizes no private right of action. ..... 41

VIII. Declaratory Relief is unavailable under the Declaratory 

Judgment Act. ................................................................................. 43

Conclusion and Relief Requested ............................................................. 45

Certificate of Service ................................................................................ 46

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iii 

INDEX OF AUTHORITIES 

Page 

Cases

Ada-Cascade Watch Co. v. Cascade Resource Recovery, Inc., 

720 F.2d 897 (6th Cir. 1983) ................................................................. 27 

Allard v. Weitzman, (In Re DeLorean Motor Corp), 

991 F.2d 1236 (6th Cir. 1993) ............................................................... 14 

Association of Data Processing Serv. Orgs., Inc. v. Camp, 

397 U.S. 150 (1970) ............................................................................... 24 

Blessing v Freestone, 

520 U.S. 329 (1997) ............................................................................... 42 

Browning-Ferris Indus. v. Kelco Diosposal, 

492 U.S. 257 (1989) .......................................................................... xi, 34 

Burford v. Sun Oil, 

310 U.S. 315 (1943) .................................................................... xi, 27, 28 

Camden County Beverage Co. v. Blair, 

46 F.2d 648 (D.N.J. 1930) ..................................................................... 40 

Director, Bureau of Workers’ Disability Compensation v. 

BMC Mfg., Inc., 200 Mich. App. 478; 504 N.W.2d 695 (1993) ....... 38, 39 

Edelman v. Jordan, 

415 U.S. 651 (1974) ............................................................................... 19 

Emmet County Prosecuting Atty. v. 

Two Thousand Two Hundred Dollars in U.S. Currency (In re 

Forfeiture of 5118 Indian Garden Rd.), 

253 Mich. App. 255; 654 N.W.2d 646 (2002) ........................................ 34 

Ford Motor Co. v. Dept. of Treasury of Indiana, 

323 U.S. 459 (1945) ............................................................................... 15 

2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 10 of 64 Pg ID 60
iv 

Gao v. Jennifer, 

185 F.3d 548 (6th Cir. 1999) ................................................................. 14 

Gonzaga Univ. v. Doe, 

536 U.S. 273 (2002) .......................................................................... xi, 42 

Gould Inc. v. Pechiney Ugin Kuhlmann, 

853 F.2d 445, 450 (6th Cir. 1988) ......................................................... 13 

Grand Trunk Western R.R. Co. v. Consolidated Rail Corp., 

746 F.2d 323 (6th Cir. 1984) ............................................................ xi, 44 

Helvering v. Mitchell, 

303 U.S. 391 (1938) ............................................................................... 35 

Hudson v U.S., 

522 U.S. 93 (1997) ........................................................................... 34, 35 

Hughlett v. Romer-Sensky, 

497 F.3d 557 (6th Cir. 2006)....................................................... 41, 42, 43 

Hunt v. Washington Apple Advertising Comm’n, 

432 U.S. 333 (1977) ............................................................................... 25 

Jewell v. United States, 

548 F.3d 1168 (8th Cir. 2008) ............................................................... 21 

Kastigar v. United States, 

406 U.S. 441 (1972) .......................................................................... xi, 33 

Los Angeles v. Lyons, 

461 U.S. 95 (1983) ................................................................................. 19 

Lujan v. Defenders of Wildlife, 

504 U.S. 555 (1992) .............................................................. xi, 21, 22, 23 

M&D, Inc. v. McConkey, 

231 Mich. App. 22; 585 N.W.2d 33 (1998) ...................................... 31, 32 

Madison-Hughes v. Shalala, 

80 F.3d 1121 (6th Cir. 1996) ................................................................. 13 

2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 11 of 64 Pg ID 61
v 

Mayer v. Mylod, 

988 F.2d 635 (6th Cir. 1993) ................................................................. 14 

MedImmune, Inc. v. Genentech, Inc., 

549 U.S. 118 (2007) ............................................................................... 43 

Miranda v. Ariz., 

384 U.S. 436 (1966) ............................................................................... 32 

Mooney v. Unemployment Compensation Comm’n., 

336 Mich. 344; 58 N.W.2d 94 (1953) ..................................................... 18 

Nestle Ice Cream Co. v. NLRB, 

46 F.3d 578 (6th Cir. 1995) ................................................................... 26 

New Orleans Public Service, Inc. (NOPSI) v. 

Council of the City of New Orleans, 491 U.S. 350 (1989) .................... 28 

O’Shea v. Littleton, 

414 U.S. 488 (1974) ............................................................................... 19 

Pennhurst State School and Hospital v. Halderman, 

465 U.S. 89 (1984) ............................................................................ xi, 15 

Perry v. American Tobacco Co., 

324 F.3d 845 (6th Cir. 2003) ................................................................. 14 

Public Service Comm. of Utah v. Wycoff, 

344 U.S. 237 (1952) ............................................................................... 43 

Scheuer v. Roads, 

416 U.S. 232 (1974) ............................................................................... 13 

Scottsdale Ins. Co. v. Flowers, 

513 F.3d 546 (6th Cir. 2008) ................................................................. 45 

Seminole Tribe of Florida v. Florida, 

517 U.S. 44 (1996) ................................................................................. 15 

Sistrunk v. City of Strongsville, 

99 F.3d 194 (6th Cir. 1996) ................................................................... 14 

2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 12 of 64 Pg ID 62
vi 

St. Louis, I. M. & S. R. Co. v Williams, 

251 U.S. 63 (1919) ................................................................................. 34 

State ex rel. Osburn v. Cole, 

173 W. Va. 596 (1983) ........................................................................... 30 

State v. Rivers, 

146 P.3d 999 (Alaska Ct. App. 2006) .................................................... 32 

Thomson v. Gaskill, 

315 U.S. 442 (1942) ............................................................................... 13 

U. S. v. Droganes, 

728 F.3d 580 (6th Cir. 2013) ................................................................. 34 

U.S. ex. rel. Smith v. Gilbert Realty Co., Inc., 

840 F. Supp. 71 (E.D. Mich. 1993) .................................................. 35, 36 

U.S. v. Bajakajian, 

524 U.S. 321 (1998) ................................................................... 34, 35, 36 

U.S. v. Ritchie, 

15 F.3d 592 (6th Cir. 1994) ................................................................... 13 

U.S. v. Students Challenging Regulatory Agency Procedures, 

412 U.S. 669 (1973) ............................................................................... 20 

United States v. Nat’l Bank of Commerce, 

472 U.S. 713 (1985) .......................................................................... xi, 40 

United States v. Rylander, 

460 U.S. 752 (1983) ............................................................................... 30 

Valley Forge Christian College v. 

Americans United for Separation of Church and State, Inc., 

454 U.S. 464 (1982) ......................................................................... 20, 21 

Warth v. Seldin, 

422 U.S. 490 (1975) ............................................................................... 20 

Will v. Michigan Department of State Police, et al., 

491 U.S. 58 (1989) ...................................................................... xi, 16, 17 

2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 13 of 64 Pg ID 63
vii 

WJW-TV, Inc. v. City of Cleveland, 

870 F.2d 658 (6th Cir. 1989) ................................................................. 23 

Statutes

26 U.S.C. § 3304........................................................................................ 28 

28 U.S.C. § 1257........................................................................................ 10 

28 U.S.C. § 2201........................................................................................ 43 

42 U.S.C. § 1983........................................................................................ 16 

42 U.S.C. § 501.......................................................................................... 12 

42 U.S.C. § 503............................................................................................ 5 

42 U.S.C. § 503(a) ....................................................................................... 6 

42 U.S.C. § 503(a)(3) ................................................................................. 42 

42 U.S.C. § 503(b) ....................................................................................... 6 

Mich. Comp. Laws § 421.1 ......................................................................... 1 

Mich. Comp. Laws § 421.15(m) ................................................................ 40 

Mich. Comp. Laws § 421.15(n) ................................................................. 40 

Mich. Comp. Laws § 421.2 ............................................................. 6, 22, 24 

Mich. Comp. Laws § 421.26 ..................................................................... 39 

Mich. Comp. Laws § 421.27(c)(1) ............................................................... 8 

Mich. Comp. Laws § 421.27(c)(2) ............................................................... 8 

Mich. Comp. Laws § 421.27(c)(3) ............................................................... 8 

Mich. Comp. Laws § 421.28 ....................................................................... 7 

Mich. Comp. Laws § 421.29 ....................................................................... 7 

Mich. Comp. Laws § 421.29(1)(a)-(n) ......................................................... 7 

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viii 

Mich. Comp. Laws § 421.32 ....................................................................... 9 

Mich. Comp. Laws § 421.32a ..................................................................... 9 

Mich. Comp. Laws § 421.32a(2) ................................................................. 9 

Mich. Comp. Laws § 421.33(1) ............................................................. 9, 10 

Mich. Comp. Laws § 421.33(2) ................................................................. 10 

Mich. Comp. Laws § 421.34 ..................................................................... 10 

Mich. Comp. Laws § 421.38 ..................................................................... 10 

Mich. Comp. Laws § 421.46 ....................................................................... 7 

Mich. Comp. Laws § 421.48 ....................................................................... 7 

Mich. Comp. Laws § 421.54 ............................................................... 29, 39 

Mich. Comp. Laws § 421.54(b) ................................................................. 38 

Mich. Comp. Laws § 421.54(b)(i) ........................................................ 11, 38 

Mich. Comp. Laws § 421.54(b)(ii) ...................................................... 11, 38 

Mich. Comp. Laws § 421.62 ......................................................... 11, 29, 40 

Mich. Comp. Laws § 421.62(d) ................................................................. 11 

Mich. Comp. Laws § 421.6g ...................................................................... 12 

Mich. Comp. Laws § 600.4401.................................................................. 12 

Pub. L. 99-562, 100 Stat. 3153 (1986) ...................................................... 35 

Executive Orders

Executive Order 13520 ............................................................................... 2 

Rules

Fed. R. Civ. P. (12)(b)(6) ..................................................................... 13, 14 

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ix 

Fed. R. Civ. P. 12(b)(1) ................................................................. 12, 13, 16 

Fed. R. Civ. P. 12(b)(6) ....................................................................... 17, 41 

Mich Ct. R. 3.305 ...................................................................................... 12 

Constitutional Provisions

Mich. Const. art. VI, § 4 ........................................................................... 12 

U.S. Const. amend IV ............................................................................... 40 

U.S. Const. amend XI ............................................................................... 15 

Other Authorities

DOL 8/7/12 Unemployment Insurance Program Letter No. 02-12 .......... 4 

Handbook for Unemployed Workers, August 2014 ................................... 8 

IPIA 2014 Unemployment Insurance Integrity Rates ............................ 37 

Payment Accuracy, High-Error Programs ............................................ 2, 3 

U.S. Dept. of Labor, UI Payment Integrity Information, Sept. 26, 

2011 .......................................................................................................... 2 

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x 

CONCISE STATEMENT OF ISSUES PRESENTED 

1. This Court should dismiss Plaintiffs’ Complaint due to lack 

of subject matter jurisdiction as the claims are barred by 

Eleventh Amendment sovereign immunity. 

2. This Court should dismiss Plaintiffs’ Complaint, as 

Defendants are not “persons” as required by 42 U.S.C. § 

1983. 

3. This Court should dismiss Plaintiffs’ Complaint as the 

Plaintiffs’ lack standing. 

4. This Court should abstain from this matter on the basis of 

the Burford v. SunOil Corp., 310 U.S. 315 (1943) federal 

abstention doctrine as federal jurisdiction would interfere 

with the administrative process authorized by the Michigan 

Employment Security Act. 

5. This Court should dismiss Plaintiffs’ self-incrimination 

claims under the U.S. Constitution’s Fifth Amendment and 

Mich. Const. art. I, § 17 as neither Constitution is violated 

by the State requiring mandatory reporting, the privilege 

was not asserted, and the Michigan Employment Security 

Act provides for immunity from criminal prosecution. 

6. This Court should dismiss Plaintiffs’ U.S. Constitution 

Eighth Amendment excessive fines claim as the Supreme 

Court has never announced that the federal excessive fines 

clause applies to the states and the statutory civil penalty is 

not excessive. 

7. This Court should dismiss Plaintiffs’ Mich. Const. art. 1, § 17 

excessive fines claim as the statutory civil penalty is not 

excessive and the amount of the penalty is not discretionary. 

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xi 

8. This Court should dismiss Plaintiffs’ U.S. Constitution 

Fourth Amendment search and seizure claims, as the 

seizure of fraudulently obtained benefits is not 

unreasonable, the authority to obtain fraudulently obtained 

benefits is provided by statute, and the seizure provisions 

are not applicable to the collection of public revenue. 

9. This Court should dismiss Plaintiffs’ Social Security Act 

claims, as the Social Security Act does not provide Plaintiffs 

with a private right of action. 

10. This Court should deny Plaintiffs’ request for declaratory 

relief wherein such request would not settle the controversy 

or clarify the legal relations in issue and would, in fact, 

result in friction between the federal and state courts. 

CONTROLLING OR MOST APPROPRIATE AUTHORITY 

Browning-Ferris Indus. v. Kelco Diosposal, 492 U.S. 257 (1989)

Burford v. Sun Oil, 310 U.S. 315 (1943) 

Gonzaga Univ. v. Doe, 536 U.S. 273 (2002) 

Grand Trunk Western R.R. Co. v. Consolidated Rail Corp., 746 F.2d 323 

(6th Cir. 1984)

Kastigar v. United States, 406 U.S. 441 (1972) 

Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) 

Pennhurst State School and Hospital v. Halderman, 465 U.S. 89 (1984) 

United States v. Nat’l Bank of Commerce, 472 U.S. 713 (1985)

Will v. Michigan Department of State Police, et al., 491 U.S. 58 (1989) 

2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 18 of 64 Pg ID 68
1 

INTRODUCTION 

Plaintiffs’ Complaint has no merit. The Unemployment Insurance 

Agency (Agency) properly applied the Michigan Employment Security 

Act (MES Act), Mich. Comp. Laws § 421.1, et. seq. Plaintiffs simply 

disapprove of the Agency’s method of pursuing unemployment benefit 

fraud and wish to overturn final decisions issued by the Agency or other 

State administrative and judicial forums. Any complaints regarding 

MES Act provisions should be pursued via the legislative process and 

not with litigation in this Court. 

The Agency is hard-pressed to maintain the financial integrity of 

the unemployment insurance program. It must offer the economic 

shield of unemployment benefits to claimants otherwise eligible and 

qualified while it must remain vigilant to identify fraudulent claims 

and reclaim any sums improperly paid. It is a fine balance maintained 

by the Michigan Legislature for over 75 years. Plaintiffs complain of the 

Agency’s application and determination process. Yet it is this 

application and determination process that reflects the compromise 

maintained by the Legislature between eradicating fraud while 

providing unemployment benefits. Notably, as a joint federal and state 

2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 19 of 64 Pg ID 69
2 

program, federal mandates for the prevention of fraud and improperly 

paid benefits also apply. 

In 2009, President Obama signed Executive Order 13520, which 

directed executive departments and agencies to intensify efforts “to 

eliminate payment error, waste, fraud, and abuse in major programs 

administered by the Federal Government.”1 One such federally 

administered program with a high error rate is the Unemployment 

Insurance program administered by the Department of Labor (DOL), 

with an error rate of 11.6 percent. (Payment Accuracy High-Error 

Program chart, Attachment A.)2 The Unemployment Insurance 

program’s error rate of 11.6 percent is the fourth highest of the 13 higherror federal programs and in 2015 accounted for $5.6 billion in 

improper payments. (Attachment A.) In Michigan, the overpayment 

rate for third quarter 2013 through second quarter 2014 increased from 

 

1 U.S. Dept. of Labor, UI Payment Integrity Information, Sept. 26, 

2011, http://www.ows.doleta.gov/unemploy/improp_pay1.asp

2 Payment Accuracy, High-Error Programs, 

http://paymentaccuracy.gov/high-priority-programs

2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 20 of 64 Pg ID 70
3 

8.06 percent to 17.45 percent. The fraud rate increased from 2.25 

percent to 3.35 percent. (Attachment B).3 

Based upon the foregoing, it has been recognized that 

unemployment fraud is a serious issue confronting most states across 

the nation. In conjunction with the President’s executive order, the 

DOL “announced a call to action to all states to ensure that payment 

integrity remains a top priority and to foster the development of state 

specific strategies to prevent improper payments.” (Attachment C.)4 

This call to action demands that states “implement state-specific action 

plans to reduce their rates [of improper payments].” Id. 

As part of its funding program under the Social Security Act 

(SSA), the DOL mandates that states “impose a monetary penalty (an 

amount not less than 15 percent of the erroneous payment) on 

claimants whose fraudulent acts resulted in overpayments” and 

prohibits states from waiving this Federally-mandated minimum 

penalty. (See DOL 8/7/12 Unemployment Insurance Program Letter 

 

3 U.S. Dept. of Labor, IPIA 2013 – IPIA 2014 Integrity Rate Changes, 

https://www.oui.doleta.gov/unemploy/bam/2014/IPIA_2013_-

_IPIA_2014_Integrity_Rate_Changes.xlsx 

4 U.S. Dept. of Labor, Unemployment Insurance (UI) Improper 

Payments, http://www.dol.gov/dol/maps/Strategies.htm. 

2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 21 of 64 Pg ID 71
4 

No. 02-12, Change 1, Attachment D, pp. 1, 3.) A state’s failure to 

implement the mandatory minimum penalty results in a loss of 

certification by the DOL and a loss of funding. (Attachment D, p. 6.) As 

a result, the Agency is tasked with improving its fraud detection 

controls, mandated by the DOL, in order to receive federal funds. 

Each individual Plaintiff had the ability to pursue an appeal. 

Interestingly, a review of the Complaint, assuming all allegations 

contained therein are true, demonstrates that four of the seven 

individual Plaintiffs (Saylor, Wessinger, Witt and Zynda) successfully 

appealed their fraud determinations. (Complaint, ¶¶s 30, 36, 43 and 

46.) Two of the Plaintiffs (Grifka and Miller) did not timely appeal their 

Agency fraud determinations. (Complaint, ¶¶ 21, 40.) There is no 

information alleged regarding the status of the last Plaintiff (Balma). 

The Plaintiffs’ assertions demonstrate that use of the MES Act’s appeal 

rights allowed for a result in favor of those claimants who chose to avail 

themselves of the available procedures. Plaintiffs are simply 

disappointed at the Agency’s initial fraud findings. Such 

disappointment does not equate with actionable claims. 

2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 22 of 64 Pg ID 72
5 

STATEMENT OF FACTS 

Plaintiffs’ Complaint 

Plaintiffs allege that the Agency unconstitutionally denied the 

individual Plaintiffs due process, required them to self-incriminate 

themselves, subjected them to excessive fines, and exposed them to 

unlawful search and seizure when the Agency determined them to have 

committed fraud while seeking unemployment benefits. (See 

Complaint.) Plaintiff Sugar Law Center claims that the manner in 

which the Agency determinations are made has resulted in an increased 

administrative burden in its handling of unemployment appeals for 

indigent clients. (Complaint, ¶52.) Plaintiff UAW alleges that its 

members experience unemployment and it seeks to protect its members’ 

constitutional and statutory rights. (Complaint, ¶54.) 

The MES Act

In 1935, the SSA was enacted and instituted a payroll tax on 

covered employers to establish an unemployment insurance system. 42 

U.S.C. § 503, et. seq. The SSA provides a credit for employer 

contributions if the state enacts mandatory unemployment-insurance 

legislation that meets certain requirements. Id. To receive federal 

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funding, the state is required to establish administration methods 

found by the Secretary of Labor to be reasonably calculated to ensure, 

in part,: full payment of unemployment compensation when due; 

payment through approved public offices or agencies; an opportunity for 

a fair hearing when claims are denied; reporting requirements; and that 

claimants receiving unemployment benefits participate in 

reemployment services. 42 U.S.C. § 503(a). The SSA further provides 

that the penalty to the state for non-compliance, after “reasonable 

notice and opportunity for hearing to the State agency,” is that the 

Secretary of Labor will cease further payments until any issue is cured. 

42 U.S.C. § 503(b). 

While establishment of an unemployment system was voluntary, 

Michigan enacted the MES Act in 1936 for the welfare of its citizens 

subjected to “[i]nvoluntarily unemployment.” Mich. Comp. Laws § 

421.2. However, Michigan’s unemployment system is not a need-based, 

welfare, or entitlement program. 

Instead, the MES Act contains specific eligibility requirements 

and disqualification provisions for a claimant attempting to receive 

benefits. To be eligible for benefits, among other requirements, a 

2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 24 of 64 Pg ID 74
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claimant must be unemployed, registered for work, actively seeking 

work, and available to perform suitable full-time work. Mich. Comp. 

Laws § 421.28. An individual is “unemployed” if they have performed 

no services nor received any income or, for any week of less than fulltime employment, they received income that is less than 13/5 times their 

unemployment weekly benefit amount. Mich. Comp. Laws § 421.48. A 

claimant must also have worked a sufficient number of weeks to 

establish a benefit year to qualify. Mich. Comp. Laws § 421.46. 

The MES Act sets forth various situations where a claimant, 

although eligible for benefits, may be disqualified from receiving 

unemployment benefits. Mich. Comp. Laws § 421.29(1)(a)-(n). Under 

Section 29, situations leading to disqualification include, but are not 

limited to, leaving work voluntarily without good cause attributable to 

the employer; terminations due to misconduct; intoxication while at 

work; assault and battery at work; and, theft at work. Id. 

Once the Agency deems a claimant eligible and qualified for 

benefits, the claimant must certify biweekly to the Agency to maintain 

eligibility to receive benefits. Generally, claimants certify through 

MARVIN (Michigan’s Automated Response Voice Interactive Network) 

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or its online equivalent. From either the telephone or online version, 

MARVIN asks the same series of questions including “Did you do any 

type of work for pay or promise to pay . . .?” and “Did you have any 

earnings . . . ?” If a claimant has any earnings, the benefit amount will 

be reduced pursuant to the MES Act. Upon filing a claim for benefits, 

the Agency specifically informs claimants: “You must provide truthful 

responses to all Agency questions and requests for information, or you 

may be considered to have intentionally misled the UIA, and fraud 

penalties may be imposed.” (Agency’s Handbook for Unemployed 

Workers, August 2014, Attachment E, p. 2.) 

The MES Act provides that eligible and qualified claimants 

receive a weekly benefit rate. Mich. Comp. Laws § 421.27(c)(1). The 

benefit amount is reduced for each week the claimant earns or receives 

income at the rate of 40¢ per $1.00 earned. Mich. Comp. Laws § 

421.27(c)(2). The claimant cannot receive any unemployment benefits 

that would result in their combined benefits and additional income 

exceeding 13/5 times his or her weekly benefit rate. Mich. Comp. Laws § 

421.27(c)(3). 

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When an individual files a claim for benefits, the Agency obtains 

information from the claimant and employer in order to determine if the 

claimant is eligible and qualified. The Agency asks both claimant and 

employer whether the claimant has earned sufficient wages and the 

reason for separation from employment. From this information, the 

Agency issues a determination as to whether the claimant is or is not 

entitled to unemployment benefits. If information is later provided, the 

Agency can issue subsequent redeterminations when it is determined 

the claimant is ineligible or disqualified from receiving benefits. Mich. 

Comp. Laws § 421.32. If either the claimant or the employer disagree 

with any determination, the MES Act provides an extensive appellate 

process: 

 Redetermination – A party requests review by the 

Agency or transfer to an ALJ for a hearing.5 Mich. 

Comp. Laws § 421.32a. 

 ALJ Hearing – The parties have 30 days to file an 

appeal with the Agency for a hearing before an ALJ, 

otherwise, the redetermination is final. Id. Mich. 

Comp. Laws § 421.33(1). The ALJ is tasked with 

 

5 While either party has 30 days to appeal the matter to the next level, 

if they fail to appeal timely, a late appeal can be considered where 

good cause for the delay is established. Mich. Comp. Laws § 

421.32a(2). 

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affording all parties “a reasonable opportunity for a 

fair hearing” and issuance of a decision. Id. 

 Michigan Compensation Appellate Commission 

(Appellate Commission) – The parties have 30 days to 

appeal an ALJ decision to the Appellate Commission. 

Mich. Comp. Laws § 421.33(2). The Appellate 

Commission can make a decision upon review of the 

record, obtain additional evidence and grant an oral 

hearing. Mich. Comp. Laws § 421.34. 

 Circuit Court appeal – If either party disagrees with 

the decision of the Appellate Commission, they have 

the ability to file an application for review in the circuit 

court. Mich. Comp. Laws § 421.38. If the parties 

agree, they can also waive review by the Appellate 

Commission and appeal directly to the circuit court. 

Mich. Comp. Laws § 421.38. 

 Michigan Court of Appeals and Michigan Supreme 

Court – Finally, the MES Act provides that the decision 

of the circuit court “may be appealed in the manner 

provided by the laws of this state for appeals from the 

circuit court.” Mich. Comp. Laws §421.38. 

 Supreme Court of the United States – Once a decision is 

obtained from the Michigan Supreme Court, claimants 

have the option of filing for a writ of certiorari with the 

U.S. Supreme Court. 28 U.S.C. § 1257 should they 

allege violation of federal law or Constitution 

protections or rights. 

The Agency is tasked with ensuring that claimants do not 

fraudulently obtain unemployment benefits. Individuals seeking 

unemployment benefits are informed that failure to provide truthful 

information may result in the assessment of fraud penalties for 

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11 

intentionally misleading the Agency. (Attachment E, p. 2.) There are 

many instances where claimants commit fraud in order to obtain 

benefits by providing dishonest statements regarding work separation; 

subsequent employment; amount of earnings while collecting benefits; 

and return to work date. 

The MES Act provides that if the Agency determines that a person 

obtains benefits to which they are not entitled, the Agency can recover 

the restitution amount paid plus interest. Mich. Comp. Laws § 421.62. 

Further, the MES Act provides that any person who “makes a false 

statement or representation knowing it to be false, or knowingly and 

willfully with intent to defraud fails to disclose a material fact, to obtain 

or increase a benefit” can be assessed a penalty of “equal to 2 times” the 

amount received for obtaining benefits of less than $500.00 and a 

penalty of “equal to 4 times” the amount received for obtaining benefits 

of $500.00 or more. Mich. Comp. Laws § 421.54(b)(i) and (ii). 

 Finally, the MES Act provides that “[t]he unemployment agency 

shall take the action necessary to recover all benefits improperly 

obtained or paid under this act, and to enforce all interest and penalties 

under subsection (b).” Mich. Comp. Laws § 421.62(d) (emphasis added).

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ARGUMENT 

There are no statutory requirements applicable to the Agency 

relative to how to detect fraud. The SSA contains no provisions 

mandating or directing the states on the detection of fraud. 42 U.S.C. § 

501, et. seq. The MES Act requires fraud detection and prevention, but 

it does not set forth any specific means by which fraud determinations 

are made; however, the Michigan Legislature did appropriate funds to 

be used to secure automated systems for fraud control and collection. 

Mich. Comp. Laws § 421.6g. 

If a legal mandate for fraud detection existed, Plaintiffs could 

have attempted to obtain a Writ of Mandamus which would compel the 

agency to perform a legally required ministerial duty. Mich. Const. art. 

VI, § 4; Mich. Comp. Laws § 600.4401; Mich Ct. R. 3.305. However, 

there is no statutory provision that the Agency is alleged to have not 

performed. Instead, Plaintiffs request a federal review of state Agency 

procedures for fraud detection that has no basis in federal law. 

I. Standard of Review 

A motion to dismiss for lack of subject matter jurisdiction under 

Fed. R. Civ. P. 12(b)(1) seeks dismissal of a lawsuit because the court 

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lacks authority to hear the dispute. Once a lack of subject matter 

jurisdiction is asserted, the Plaintiff bears the burden of establishing 

that the court has subject matter jurisdiction over the dispute. 

Thomson v. Gaskill, 315 U.S. 442, 446 (1942); Madison-Hughes v. 

Shalala, 80 F.3d 1121 (6th Cir. 1996). As a general rule, the court 

should resolve a 12(b)(1) challenge before it addresses any other legal 

issues. Gould Inc. v. Pechiney Ugin Kuhlmann, 853 F.2d 445, 450 (6th 

Cir. 1988). If a 12(b)(1) motion challenging the court’s subject matter 

jurisdiction is based on the sufficiency of the allegations, then the 

motion is a facial attack. U.S. v. Ritchie, 15 F.3d 592, 598 (6th Cir. 

1994). In a facial attack, the district court will accept all material 

allegations of a complaint as true and construe those facts in the light 

most favorable to the non-moving party. Scheuer v. Roads, 416 U.S. 

232, 236 (1974); Ritchie, 15 F.3d at 598. 

A motion to dismiss for “failure to state a claim upon which relief 

can be granted” is governed by Fed. R. Civ. P. (12)(b)(6). The purpose of 

Rule 12(b)(6) is to permit a defendant to determine, as a matter of law, 

whether a plaintiff is not entitled to legal relief even if all of facts 

alleged in the plaintiff’s complaint are true. Mayer v. Mylod, 988 F.2d 

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635, 638 (6th Cir. 1993). A motion to dismiss brought under Rule 

12(b)(6) for failure to state a claim upon which relief can be granted 

tests the opponent’s cause of action as set forth in the complaint and, 

accordingly, does not challenge a plaintiff’s factual allegations. Gao v. 

Jennifer, 185 F.3d 548, 552 (6th Cir. 1999). The court accepts the 

allegations as true, and dismissal under Rule 12(b)(6) is proper only if it 

is clear that no relief could be granted under any set of facts consistent 

with the allegations. Sistrunk v. City of Strongsville, 99 F.3d 194, 197 

(6th Cir. 1996). A complaint must contain either direct or inferential 

allegations establishing all of the material elements of a claim to 

sustain a recovery under some viable legal theory. Allard v. Weitzman, 

(In Re DeLorean Motor Corp), 991 F.2d 1236, 1240 (6th Cir. 1993). The 

court is not required to view certain legal conclusions as true, nor is it 

obligated to draw unwarranted factual inferences in the non-movant’s 

favor. Perry v. American Tobacco Co., 324 F.3d 845, 858 (6th Cir. 2003). 

II. Plaintiffs’ suit is barred by sovereign immunity. 

Where there is no express waiver or Congressional abrogation, the 

Eleventh Amendment bars claims filed in federal court against a state 

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and its agencies. Seminole Tribe of Florida v. Florida, 517 U.S. 44, 73 

(1996). The Eleventh Amendment specifically states: 

The judicial power of the United States shall not be 

construed to extend to any suit in law or equity, commenced 

or prosecuted against one of the United States by citizens of 

another state, or by citizens or subjects of any foreign state. 

U.S. Const. amend XI. This constitutional provision bars suits in 

federal courts against a state, its agencies, and officials sued in their 

official capacities, whether for money damages or injunctive relief, 

retroactive or prospective, unless this immunity from suit is expressly 

waived by the state or Congress. Pennhurst State School and Hospital 

v. Halderman, 465 U.S. 89, 119-20 (1984). 

A state’s consent to suit in federal court must be “unequivocally 

expressed.” Pennhurst, 465 U.S. at 99. The Eleventh Amendment also 

bars a suit against state officials when “the state is the real, substantial 

party in interest.” Pennhurst, 465 U.S. at 101 (citing Ford Motor Co. v. 

Dept. of Treasury of Indiana, 323 U.S. 459, 464 (1945)). A suit is 

considered against the state when the relief sought would operate 

against it. Pennhurst, 465 U.S. at 101. 

The State of Michigan, by and through its Directors, has not 

expressly consented to suit in federal court. Nor have the Plaintiffs 

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pled a procedural vehicle by which federal constitutional rights may be 

asserted as a cause of action. In other words, Plaintiffs have failed to 

cite a specific federal statute which provides for an express 

constitutional waiver of Eleventh Amendment jurisdictional immunity. 

This is the only mechanism by which this jurisdictional immunity may 

be waived. Therefore, Plaintiffs’ suit should be dismissed pursuant to 

Fed. R. Civ. P. 12(b)(1). 

III. Plaintiffs’ § 1983 claim fails because Defendants are not 

“persons” as defined under 42 U.S.C. § 1983. 

Independent of the Eleventh Amendment, which is applicable in 

federal court, a state is not a sueable person within the meaning of 42 

U.S.C. § 1983. Will v. Michigan Department of State Police, et al., 491 

U.S. 58, 71 (1989). The United States Code, Section 1983 provides in 

pertinent part: 

Every person who, under color of any statute, ordinance, 

regulation, custom or usage of any state . . . subjects or 

causes to be subjected, any citizens of the United States . . . 

to the deprivation of any rights, privileges or immunities 

secured by the Constitution and laws, shall be liable to the 

party injured in an action at law. 

42 U.S.C. § 1983 (emphasis added). 

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The Supreme Court has also recognized that even if a plaintiff 

files a claim against state officials, which are literally persons, a “suit 

against a state official in his or her official capacity is not a suit against 

the official but rather is a suit against the official’s office.” Will, 491 

U.S. at 71. Therefore, even assuming all of the facts alleged to be true, 

Defendants are entitled to an order dismissing Plaintiffs’ claim 

pursuant to Fed. R. Civ. P. 12(b)(6). 

The only exception recognized by the Supreme Court to this 

exclusion of official capacity claims is where the claimant seeks only 

prospective injunctive relief. Will, 491 U.S. at 71. As explained by the 

Will Court, “a state official in his or her official capacity, when sued for 

injunctive relief, would be a person under § 1983 because ‘officialcapacity actions for prospective relief are not treated as actions against 

the State.’” Will, 491 U.S. at 71 (citations omitted). Thus, Plaintiffs’ 

request to re-open previously adjudicated matters; order return of 

collected restitution/penalty payments; provide compensatory damages; 

and pay attorney fees should be dismissed because they are all 

retrospective and, essentially, a second attempt to secure 

unemployment benefits. 

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As Michigan courts recognize, the only procedure to appeal or 

protest a decision issued under the MES Act is through the MES Act 

itself. Mooney v. Unemployment Compensation Comm’n., 336 Mich. 

344, 353; 58 N.W.2d 94 (1953). Any other means are invalid. Here, 

Plaintiffs attempt to evade the decisions issued against them in state 

administrative forum or courts. By operation of law, those decisions are 

final. This Court should not reward Plaintiffs’ attempt at creating a 

federal appeal by proxy. 

The only prospective relief Plaintiffs have requested is to require 

Defendants to “establish and maintain proper procedures for the 

determination of UIA benefit fraud.” (Complaint, ¶ D, p. 27.) But 

proper procedures are in place. Punctuating the point, the instant 

Plaintiffs who timely exercised their statutory protest and appeal rights 

received dispositions in their favor, i.e., the administrative protest and 

appeal process “worked.” Likewise, the fact that several Plaintiffs 

failed to exercise their appeal rights does not render that system or the 

process invalid. 

Further, to succeed on a claim for prospective relief against a state 

official, Plaintiffs must first prove that the state official’s conduct 

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violated federal law. The federal court may then award an injunction 

that governs that official’s future conduct. Edelman v. Jordan, 415 U.S. 

651, 666-67 (1974). Second, Plaintiffs must prove that there exists a 

real and imminent danger of irreparable injury in the future. Los 

Angeles v. Lyons, 461 U.S. 95, 101 (1983). “Past exposure to illegal 

conduct does not in itself show a present case or controversy regarding 

injunctive relief . . . if unaccompanied by any continuing, present 

adverse effects.” Lyons, 461 U.S. at 101 (quoting O’Shea v. Littleton, 

414 U.S. 488, 496 (1974)). 

Here, Plaintiffs fail to establish that Defendants violated any

federal law sufficient to support issuance of the requested vague, 

sweeping injunctive relief. Plaintiffs offer nothing more than broad, 

general allegations that Defendants’ policy, custom, or practice violates 

the federal constitution and the SSA. Also, Plaintiffs fail to establish 

any irreparable injury. These Plaintiffs had the full benefit of the 

entire appellate process available to them for any Agency adjudication. 

Some took advantage of the opportunity and had the fraud 

determination overturned. The failure of others to avail themselves of 

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the process resulted in final determinations by operation of law. Thus, 

Plaintiffs cannot meet the necessary elements for prospective relief. 

IV. Plaintiffs lack standing to bring this lawsuit. 

 Standing “is the threshold question in every federal case.” Warth 

v. Seldin, 422 U.S. 490, 498 (1975). Of particular relevance here, the 

Supreme Court has cautioned that federal courts are not merely forums 

to air public grievances: 

Were the federal courts merely publicly funded forums for 

the ventilation of public grievances or the refinement of 

jurisprudential understanding, the concept of “standing” 

would be quite unnecessary. But the “cases and 

controversies” language of Art. III forecloses the conversion 

of courts of the United States into judicial versions of college 

debating forums. 

Valley Forge Christian College v. Americans United for Separation of 

Church and State, Inc., 454 U.S. 464, 473 (1982). Here, Plaintiffs invite 

this Court to become exactly what the standing requirement is designed 

to prevent: “a vehicle for the vindication of the value interests of 

concerned bystanders.” U.S. v. Students Challenging Regulatory 

Agency Procedures, 412 U.S. 669, 687 (1973). Moreover, federal courts 

should not “hospitably accept for adjudication claims of constitutional 

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21 

violation by other branches of government where the claimant has not 

suffered cognizable injury.” Valley Forge, 454 U.S. at 474. 

Article III of the United States Constitution restricts the federal 

judicial power to the resolution of “Cases” and “Controversies.” The 

case or controversy requirement is only satisfied where a claimant has 

proper standing. There are two components to evidence standing – 

constitutional and prudential. Jewell v. United States, 548 F.3d 1168, 

1172 (8th Cir. 2008). To establish the constitutional minimum of 

standing, Plaintiffs must demonstrate the following: 

1. An injury in fact (i.e., a concrete and particularized 

invasion of a legally protected interest); 

2. Causation (i.e., a fairly traceable connection between 

the alleged injury in fact and the alleged conduct of the 

defendant); and 

3. Redressability (i.e., it is likely and not merely 

speculative that the plaintiff's injury will be remedied by the 

relief the plaintiff seeks in bringing suit). Lujan v. 

Defenders of Wildlife, 504 U.S. 555, 560 (1992). 

A. Individual Plaintiffs lack standing 

With regard to the individual Plaintiffs, four of the seven 

individual Plaintiffs (Saylor, Wessinger, Witt and Zynda) concede that 

their fraud determinations were reversed through appeal. (Complaint, 

¶¶s 30, 36, 43, 46.) As a result, there is no injury wherein their claims 

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22 

were adjudicated in their favor during the appellate process. They were 

not required to pay any restitution or penalty. 

Two of the seven Plaintiffs (Grifka and Miller) allege they did not 

timely appeal. (Complaint, ¶¶ 21, 40.) As a result, the determinations 

finding that they committed fraud became final. They elected or failed 

to avail themselves of the appellate procedure. There is no causation 

between the monies owed to the Agency by these Plaintiffs and their 

claim that the fraud determinations are unconstitutional when they 

chose to concede to the Agency’s finding. Regarding the remaining 

individual Plaintiff (Balma), she has not pled any injury as a result of 

the allegations contained within the Complaint. 

B. Sugar Law and UAW lack standing 

Sugar Law and the UAW also cannot establish an invasion of 

their legally protected interest under the traditional Lujan standard. 

Neither party can demonstrate any injury in fact. The MES Act was 

enacted to provide unemployment benefits to qualified and eligible 

claimants. Mich. Comp. Laws § 421.2. Based upon the Complaint 

alone, any alleged causation between denial of benefits to specific 

claimants and Sugar Law’s “administrative burden” is tenuous, at best. 

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23 

It is unclear how an entity created to provide legal services can be 

“damaged” by having to provide those services. Also, any remedy 

provided in this lawsuit will not necessarily have any impact on Sugar 

Law’s administrative costs or the number of claimants that elect to 

utilize Sugar Law’s services. 

The UAW has not alleged any injury. The Complaint fails to 

assert that any of the Plaintiffs are UAW members and that any such 

member suffered an invasion of their legally protected interest. Lujan,

504 U.S. at 560. Without an identified member with an injury-in-fact, 

the UAW’s position is nothing more than a “special interest” in 

avoiding a future problem that may never occur. The Sixth Circuit 

Court of Appeals has announced “[c]ourts do not rule on hypothetical 

cases.” WJW-TV, Inc. v. City of Cleveland, 870 F.2d 658, slip op. at 5 

(6th Cir. 1989). This is precisely what the UAW is asking this Court to 

do. 

Even assuming, arguendo, Sugar Law and the UAW could 

establish the constitutional minimum of standing, there are also 

prudential limits on a court’s ability to exercise jurisdiction. Lujan, 504 

U.S. at 560. These limits include: 

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24 

• that a person does not ordinarily have standing to 

assert the claims of third-parties, and 

• a person must be intended to be included as a claimant 

under the statute conferring the cause of action. 

Association of Data Processing Serv. Orgs., Inc. v. Camp, 397 U.S. 150 

(1970). While Sugar Law and the UAW may participate as employers 

in the unemployment system, they are not, as organizations, claimants 

under the MES Act. Both Sugar Law and the UAW assert the rights of 

third parties – individuals who have filed claims or may file claims in 

the future under the MES Act. 

Also, the MES Act does not convey Sugar Law or the UAW any of 

the rights to obtain unemployment benefits. The purpose of the MES 

Act is to alleviate “[e]conomic insecurity due to unemployment [which] 

is a serious menace to the health, morals, and welfare of the people of 

this state.” Mich. Comp. Laws § 421.2 (emphasis added.) Neither the 

Sugar Law nor the UAW allege a violation of their own rights and 

interests under MES Act, but instead rely upon the rights and interests 

of individuals who applied for benefits under the MES Act—the rights 

of third parties. 

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25 

Based upon the foregoing, Sugar Law and the UAW lack both 

constitutional and prudential standing to bring this Complaint and 

should be dismissed as parties. 

C. UAW lacks associational standing 

Any claim that the UAW has associational standing must likewise 

fail. The UAW asserts that it brings the lawsuit to protect the rights of 

“its claimant members and to advance the interest of other claimants

through the litigation of this case.” (Complaint, ¶54 emphasis added). 

In essence, the UAW seeks to represent unidentified members and 

future claimants that may or may not be entitled to unemployment 

benefits at some unknown time in the future. 

An association has standing to bring suit on behalf of its members 

when (1) “its members would otherwise have standing to sue in their 

own right”; (2) “the interests it seeks to protect are germane to the 

organization’s purpose”; and (3) “neither the claim asserted nor the 

relief requested requires the participation of individual members in the 

lawsuit.” Hunt v. Washington Apple Advertising Comm’n, 432 U.S. 333, 

343 (1977). An association cannot maintain associational standing for 

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26 

non-association members. Nestle Ice Cream Co. v. NLRB, 46 F.3d 578, 

586 (6th Cir. 1995). 

The UAW cannot satisfy the first and third prongs of the 

associational standing requirements. Relative to the first prong, the 

members would not have standing to sue in their own right for the 

reasons delineated in Sections III and IV of this brief (sovereign 

immunity and the state is not a sueable person under § 1983). In 

addition, as outlined hereafter, the individual Plaintiffs lack standing 

due to suffering no injury in fact and a lack of causation. 

Relative to the third prong for associational standing, the claim 

and relief requested does require the participation of individual 

members in the lawsuit. The entire basis of Plaintiffs’ Complaint is the 

Agency’s eligibility determinations process for unemployment benefits – 

specifically, the process for reaching fraud determinations. While 

Plaintiffs make broad sweeping assertions regarding how benefit 

determinations are made, this case involves particularized decisions on 

individual claimants’ fraud determinations. In fact, the Plaintiffs 

acknowledge the fact that the individual claims are at issue through 

their request for relief that the Court require Defendants to “[r]eopen 

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27 

the unemployment case file of any claimant who was accused of and/or 

robo-adjudicated as fraud by the Agency’s automated system and 

provide each claimant with an individualized review of their case.” 

(Complaint ¶D, p. 27). 

Thus, none of the Plaintiffs have standing to bring this lawsuit 

and the Complaint must be dismissed. 

V. The Court should abstain from review of the State’s 

unemployment insurance program 

The Sixth Circuit has enunciated two factors that justify 

abstention under Burford v. Sun Oil Corp, 310 U.S. 315 (1943): (1) the 

presence of a complex state regulatory scheme which would be 

disrupted by federal review; or (2) the existence of a state-created forum 

with specialized competence in the particular area. Ada-Cascade Watch 

Co. v. Cascade Resource Recovery, Inc., 720 F.2d 897, 903 (6th Cir. 

1983). The Supreme Court explained that Burford abstention is 

appropriate where timely and adequate state court review is available 

and (1) a case presents “difficult questions of state law bearing on policy 

problems of substantial public import whose importance transcends the 

result in the case then at bar,” or (2) the “exercise of federal review of 

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28 

the question in a case and in similar cases would be disruptive of state 

efforts to establish a coherent policy with respect to a matter of 

substantial public concern.” New Orleans Public Service, Inc. (NOPSI) 

v. Council of the City of New Orleans, 491 U.S. 350, 361 (1989) 

(quotation omitted). 

The Federal government has given the administration of 

unemployment insurance benefits over to the states upon certification 

of the program. 26 U.S.C. § 3304. The MES Act creates a complex state 

regulatory scheme over which adequate Michigan judicial review is 

available as outlined. This case involves the State’s procedures for the 

detection of fraud. Continued operation free of federal interference is 

essential to ensuring fraudulent claims are identified and pursued. 

Interference from the federal court in the State’s ability to implement 

fraud detection procedures would be disruptive of state efforts to 

minimize fraud. It would jeopardize the stability of the process and the 

authority of this statutorily mandated process. In short, this Court 

should abstain under Burford. 

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VI. Plaintiffs’ constitutional claims fail to state a claim upon 

which relief can be granted. 

A. Plaintiffs’ self-incrimination claims fail because 

mandatory state reporting requirements do not 

violate the Fifth Amendment and the MES Act 

contains an immunity provision. 

None of the Plaintiffs have alleged that they have been referred to 

county prosecutors for criminal charges. Instead, the Agency seeks 

restitution of benefits paid and civil penalties pursuant to Mich. Comp. 

Laws §§ 421.54 and 421.62. Yet, Plaintiffs allege that the Agency’s 

written fact-finding questionnaires, which are designed to determine if 

the claimant is attempting to fraudulently obtain benefits, contain selfincriminating questions. Plaintiffs claim that their right against selfincrimination is violated if a fraud determination is made where a 

claimant fails or refuses to answer the inquiry to determine eligibility 

for benefits. 

In order to obtain benefits, a claimant must provide eligibility 

information to the Agency. However, “the Fifth Amendment privilege 

against self-incrimination is not violated by information required to be 

furnished under State mandatory self-reporting systems which are 

essential to the fulfillment of a regulatory statute where (1) the 

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information is facially neutral; (2) the information required is directed 

at the public at large and not to a selective group inherently suspect of 

criminal activities; (3) the area of inquiry is essentially noncriminal and 

regulatory and not permeated with criminal statutes; and (4) the 

possibility of incrimination is not substantial.” State ex rel. Osburn v. 

Cole, 173 W. Va. 596, 602 (1983). While Osburn is a West Virginia case, 

it is directly on point as it involved an unemployment claimant who was 

asked questions about her employment, and she refused to answer 

claiming self-incrimination. In Osburn, the court noted that while there 

are criminal penalties for fraud, the “system is hardly permeated with 

criminal statutes.” Osburn, 173 W. Va. at 601. As a result, an 

unemployment claimant is not in a situation wherein they are being 

exposed to criminal penalties for the failure to respond. Osburn, 173 W. 

Va. at 601. 

Further, even if applicable, while the Fifth Amendment permits 

an individual to refuse to answer questions that might result in 

incriminating themselves, “it has never been thought to be in itself a 

substitute for evidence that would assist in meeting a burden of 

production.” United States v. Rylander, 460 U.S. 752, 758 (1983). 

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Individuals claiming unemployment benefits must demonstrate their 

eligibility. Claimants cannot claim the Fifth Amendment to avoid 

providing necessary evidence to establish eligibility and qualification to 

receive benefits, and then expect to continue to receive benefits where 

they have failed to meet their burden. 

Plaintiffs suggest that fraud determinations should not be made 

based upon a claimant’s failure to return the Agency questionnaire. 

(Complaint, ¶ 22.) To reinforce non-response to the questionnaire 

would result in widespread withholding of information by claimants, 

and the Agency would be prevented from finding fraud based upon nonresponse. Thus, such a ruling would broadcast to the public that one 

may evade repercussions from committing fraud by simply refusing to 

turn in the questionnaire, and the Agency is thereby prevented from 

issuing a fraud determination. Such action requested by Plaintiffs 

would perpetuate widespread fraud and would disregard the doctrine of 

“silent fraud” that is well-recognized in Michigan. M&D, Inc. v. 

McConkey, 231 Mich. App. 22, 25; 585 N.W.2d 33 (1998). Silent fraud is 

known as fraud by nondisclosure or fraudulent concealment. The 

“suppression of a material fact, which a party in good faith is duty2:15-cv-11449-RHC-RSW Doc # 10 Filed 07/10/15 Pg 49 of 64 Pg ID 99
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bound to disclose, is equivalent to a false representation and will 

support an action in fraud.” M&D, Inc., 231 Mich. App. at 28-29. Thus, 

it is contrary to law and basic public policy concerns. 

Further, Defendants are not aware of any individual claimant who 

has asserted a Fifth Amendment right against self-incrimination when 

responding to written requests for information, nor do Plaintiffs allege 

that any of the individual claimants actually asserted their Fifth 

Amendment right in the questionnaire process. 

Even if this Court found the questionnaire to contain selfincriminating questions, it is the claimants’ obligation to assert their 

Fifth Amendment rights. Miranda warnings only need to be provided 

in custodial interrogations. Miranda v. Ariz., 384 U.S. 436, 463 (1966). 

Filling out a questionnaire does not rise to the level of a custodial 

interrogation. See State v. Rivers, 146 P.3d 999, 1003 (Alaska Ct. App. 

2006) (finding that an unemployment claimant’s interview with 

Division of Employment Security investigator was not a custodial 

interrogation). 

Also, the possibility for incrimination is non-existent where the 

MES Act § 421.9 contains an immunity provision which provides that 

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“no person shall be prosecuted or subjected to any criminal penalty for, 

or on account of, any transaction made or thing concerning which he is 

compelled, upon claiming the privilege to testify.” The Supreme Court 

has held that a grant of “immunity from use and derivative use is 

coextensive with the scope of the privilege against self-incrimination, 

and therefore is sufficient to compel testimony over a claim of the 

privilege.” Kastigar v. United States, 406 U.S. 441, 453 (1972). 

Thus, Plaintiffs fail to state a claim under the Fifth Amendment 

wherein the questions were part of a benefit determination system, 

where they failed to plead the Fifth Amendment, and where the MES 

Act provides immunity. 

B. The fraud penalty is not an excessive fine under the 

federal or state constitutions because the amount is 

set by the MES Act and protects the integrity of the 

unemployment system. 

1. United States Constitution claim 

The Excessive Fines Clause of the Eighth Amendment to the U. S. 

Constitution prohibits the federal government from imposing excessive 

fines. To be excessive, the amount of the fine must be disproportionate 

to the gravity of the offense. U. S. v. Droganes, 728 F.3d 580, 591 (6th 

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Cir. 2013) (citing U.S. v. Bajakajian, 524 U.S. 321, 334 (1998)). 

However, the Supreme Court has never specifically announced that the 

federal Excessive Fines Clause applies to the states. Browning-Ferris 

Indus. v. Kelco Diosposal, 492 U.S. 257, 259 n. 22 (1989). See also, 

Emmet County Prosecuting Atty. v. Two Thousand Two Hundred 

Dollars in U.S. Currency (In re Forfeiture of 5118 Indian Garden Rd.), 

253 Mich. App. 255, 258; 654 N.W.2d 646 (2002)(Michigan Court of 

Appeals declined to address the grant of summary disposition regarding 

excessive fines, brought under the U.S. Constitution). 

Even if the federal Excessive Fines Clause can be applied, its 

application is very limited and demands a showing that the civil fine is 

“so severe and oppressive as to be wholly disproportioned to the offense 

and obviously unreasonable.” Browning-Ferris Industries of Vermont, 

Inc., 492 U.S. at 281 (quoting St. Louis, I. M. & S. R. Co. v Williams, 

251 U.S. 63, 66-67 (1919)). Historically, money penalties are free of the 

“punitive criminal element.” Hudson v U.S., 522 U.S. 93, 104 (1997) 

(“the payment of fixed or variable sums of money [is a] sanction which 

ha[s] been recognized as enforceable by civil proceedings since the 

original revenue of law of 1789,”) (quoting Helvering v. Mitchell, 303 

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U.S. 391, 400 (1938)). Also, the mere fact that money penalties will 

deter others from similar conduct, a traditional goal of criminal 

punishment, does not render a penalty criminal. Hudson, 522 U.S. at 

105. Thus, Plaintiffs’ conclusory statement that “the quintuple penalty 

provision in the MES Act constitutes a criminal penalty” (Complaint, ¶ 

99) is simply not supported by law. 

In forfeiture cases, the Supreme Court analyzed the specific 

language of the statute imposing the penalty. U.S. v. Bajakajian, 524 

U.S. 321 at 322-23 (1998). Likewise, in a case challenging the 

imposition of a civil penalty under the False Claims Amendments Act of 

1986, Pub. L. 99-562, 100 Stat. 3153 (1986), this Court began its 

analysis by reading the Act’s legislative history. U.S. ex. rel. Smith v. 

Gilbert Realty Co., Inc., 840 F. Supp. 71, 74 (E.D. Mich. 1993). In 

Smith, defendant violated the False Claims Act 58 times by making 7 

false statements to the local housing authority and improperly 

endorsing 51 checks. Id. at 72. The Federal Claims Act provides that 

one who “knowingly presents . . . a false or fraudulent claim for 

payment . . . is liable to the United States Government for a civil 

penalty not less than $5,000.” Id. In reviewing the Act’s history, this 

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Court noted the comment of the initial drafters that “defrauding the 

Government is serious enough to warrant an automatic forfeiture 

rather than leaving fine determinations with district courts.” Id. at 72-

73. Thus, this Court determined that it was unlikely that the intent of 

the drafters was to impose the $5,000 penalty on the person (a one-time 

fine) as opposed to a $5,000 penalty per incident. Id. at 73. 

In deciding whether the penalty was excessive under the Eighth 

Amendment, this Court noted that in lieu of simply adopting a 

mathematical test to determine if the penalty was excessive, the court 

would examine “the nature of the conduct.” Id. at 74-75. The conduct 

included defendant making seven certifications directly to the housing 

authority that were “false claims in every sense of the word.” Id. at 75. 

This Court found that these seven acts clearly warranted penalties of 

$5,000 apiece for a total penalty of $35,000. Id. (The penalty for 

endorsing the 51 rent checks was found to be excessive because those 

acts were simply the result of a contract with the housing authority.) 

The U. S. Supreme Court has struck fines as excessive where there is 

no fraud on the Government and no loss to the public. See Bajakajian, 

524 U.S. at 323. 

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Here, the DOL mandates that the Agency impose a penalty where 

it finds fraud in obtaining benefits and the MES Act authorizes a 

penalty of equal to four times the amount of improperly paid benefits. 

Plaintiffs simply suggest that the Agency’s penalties are excessive 

because affected claimants have no source of income with which to pay 

and they believe that the amount “go[es] well beyond the amount 

necessary to make the state whole and maintain the integrity of the UI 

trust fund.” (Plaintiffs’ Complaint, ¶ 102.) But, Plaintiffs’ generalized 

belief does not render the penalty excessive. 

More importantly, the DOL has mandated that states make 

payment integrity their top priority and continue to develop strategies 

to prevent improper payments. (Attachment C.) From July 2013 to 

June 2014, Michigan’s Unemployment Insurance overpayment amount 

was $165,403,726.00. (Attachment B – IPIA 2014 Unemployment 

Insurance Integrity Rates from 7/1/13 through 6/30/14). 

2. Michigan State Constitution claim 

The fines imposed for fraudulently obtaining unemployment 

benefits are set by statute. The MES Act provides that if a claimant 

fraudulently obtains less than $500.00 in benefits, the Agency can 

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recover “damages equal to 2 times that amount.” Mich. Comp. Laws § 

421.54(b)(i). If a claimant fraudulent obtains $500.00 or more in 

benefits, “the unemployment agency shall attempt to recover the amount 

obtained as a result of the knowing false statement or representation or 

the knowing and willful failure to disclose a material fact and may also 

recover damages equal to 4 times that amount.” Mich. Comp. Laws § 

421.54(b)(ii) (Emphasis added). 

Plaintiffs argue the Defendants are “automatically assessing the 

maximum penalty.” (Complaint, p. 4.) However, the MES Act provides 

the Agency with the discretion of whether to seek penalties after 

determining benefits were fraudulently obtained, but it has no 

discretion as to the amount of the penalty. Mich. Comp. Laws § 

421.54(b). Indeed, the MES Act provides that penalties for obtaining 

fraudulent benefits over $500.00 is “equal to 4 times” the amount 

fraudulently received—not “up to 4 times” the amount fraudulently 

received. 

In Director, Bureau of Workers’ Disability Compensation v. BMC 

Mfg., Inc., 200 Mich. App. 478, 484; 504 N.W.2d 695 (1993), the Bureau 

Director brought a claim against an employer who failed to maintain 

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statutorily required workers compensation coverage. On appeal, the 

Director argued the trial court failed to impose a $342,000 fine ($1,000 

per day of violation). Id. at 483. The statute provided that a violation 

“shall” result in a fine, or specific jail time, or both. Id. at 485. The 

Court of Appeals noted that since there was a fine or jail time, the fine 

was not mandatory – but that if a fine was awarded, it would have to be 

for the statutory amount. Id. 

C. The search and seizure provision of the U.S. 

Constitution does not apply to civil attachments. 

Michigan’s unemployment system is funded through various 

means, including employer contributions, employee contributions, 

collection of fines, penalties and interest, etc. Mich. Comp. Laws §§ 

421.26 and 421.54. The Agency is statutorily obligated to protect the 

trust fund to ensure eligible and non-disqualified claimants can receive 

unemployment benefits. Plaintiffs allege the Agency’s collection 

procedures involving reduction of future benefits, interception of state 

and federal tax returns, and future wage garnishment results in a 

deprivation of property without a warrant and constitute an improper 

search and seizure. (Complaint, ¶105.) 

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The Fourth Amendment of the U.S. Constitution provides “[t]he 

right of the people to be secure in their persons, houses, papers, and 

effects, against unreasonable searches and seizures, shall not be 

violated, and no warrants shall issue, but upon probable cause.” U.S. 

Const. amend IV. Based upon the language of the amendment, not all 

searches and seizures violate the Fourth Amendment, only 

unreasonable searches and seizures. 

The Michigan Legislature vested the Agency with the authority to 

collect restitution and penalties. The MES Act provides that the 

Agency can obtain improperly paid benefits by deduction from benefits 

or wages, payment by the claimant in cash, deduction from a tax 

refund, levy of a bank account, wage assignment, administrative wage 

garnishment. Mich. Comp. Laws §§ 421.62, 421.15(m) and (n). This is 

analogous to tax collection matters wherein Congress provided the IRS 

with statutory authority to collect taxes. United States v. Nat’l Bank of 

Commerce, 472 U.S. 713 (1985). See also Camden County Beverage Co. 

v. Blair, 46 F.2d 648, 651 (D.N.J. 1930), (“The protection against 

unreasonable search and seizure does not apply to searches and 

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seizures under statutes providing for the collection of the public 

revenue.”). 

Plaintiffs have provided no support for their allegation that the 

Fourth Amendment applies to civil penalties. Based upon the fact that 

the penalties are reasonable, were set by the Michigan Legislature, and 

the Agency was given statutory authority to collect restitution and 

fraud penalties, Plaintiffs’ search and seizure claims should be 

dismissed for failure to state a claim pursuant to Fed. R. Civ. P. 

12(b)(6). 

VII. The Social Security Act authorizes no private right of 

action. 

The SSA does not provide a private right of action available to 

Plaintiffs. Plaintiffs allege they are entitled to a fair hearing and to be 

paid benefits when due pursuant to the SSA. However, the SSA is 

designed to advise state agencies regarding funding and requirements 

to obtain same. In Hughlett v. Romer-Sensky, 497 F.3d 557, 564 (6th

Cir. 2006), Plaintiffs alleged that their constitutional due process rights 

were violated when their foster care child support payments from the 

state were not disbursed within two days and were subjected to an 

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administrative cost in violation of the SSA. The Court found that 

Congress did not create an enforceable individual right, and the 

provisions of the SSA “were intended to be instructive to state 

agencies.” Id. at 562. To determine whether individual rights were 

created, the court utilized the three step approach in Blessing v 

Freestone, 520 U.S. 329, 340 (1997): 

1. Congress must have intended that the provision in 

question benefit the Plaintiff. 

2. Plaintiff must demonstrate that the right assertedly 

protected by the statute is not so “vague and 

amorphous” that its enforcement would strain judicial 

competence. 

3. The statute must unambiguously impose a binding 

obligation on the States. In other words, the provision 

giving rise to the asserted right must be couched in 

mandatory, rather than precatory terms. 

The Supreme Court held it is not enough for a plaintiff to fall “within 

the general zone of interest that the statute is intended to protect.” 

Gonzaga Univ. v. Doe, 536 U.S. 273, 283 (2002). 

The SSA provisions entitled the Secretary of Health and Human 

Services to perform a review of state agencies to determine compliance 

with the SSA, and, if not met, to reduce funding. Hughlett, 497 F.3d at 

564. Similarly, 42 U.S.C. § 503(a)(3) provides that the “Secretary of 

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Labor shall make no certification for payment to any State unless he 

finds that the law of such State, approved by the Secretary of Labor 

under the Federal Unemployment Tax Act . . . includes” a fair hearing 

and payment when due. Here, similar to Hughlett, this provision is a 

mechanism for the federal government to ensure state agencies comply 

with their requirements to obtain state funding – it is not designed to 

create a private right of action. 

Given that the SSA is spending legislation that does not 

unambiguously confer an enforceable right upon unemployment 

claimants, this claim should be dismissed. 

VIII. Declaratory Relief is unavailable under the Declaratory 

Judgment Act. 

Declaratory judgments are discretionary tools utilized by the 

courts to declare the rights of litigants and an alternative to pursuit of 

arguably illegal activity. MedImmune, Inc. v. Genentech, Inc., 549 U.S. 

118, 129 (2007). In this matter, an award of declaratory relief is also 

improper under the Declaratory Judgment Act. 28 U.S.C. § 2201; 

Public Service Comm. of Utah v. Wycoff, 344 U.S. 237, 241 (1952). The 

granting of a declaratory judgment rests in the discretion of the court. 

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Grand Trunk Western R.R. Co. v. Consolidated Rail Corp., 746 F.2d 

323, 326 (6th Cir. 1984). 

In determining how to exercise that discretion, the court should 

consider: 

1. whether the declaratory action would settle the 

controversy; 

2. whether the declaratory action would serve a useful 

purpose in clarifying the legal relations in issue; 

3. whether the declaratory remedy is being used merely 

for the purpose of “procedural fencing” or “to provide an 

arena for a race for res judicata”; 

4. whether the use of a declaratory action would increase 

friction between our federal and state courts and 

improperly encroach upon state jurisdiction; and, 

5. whether there is a better or more effective alternative 

remedy. 

Grand Trunk, 746 F.2d at 326 (citation omitted). These factors 

counsel against granting declaratory relief. As to the first and second 

factors, a declaratory judgment would not settle this controversy or 

clarify the legal relations at issue. Relative to the individual Plaintiffs, 

the Agency’s fraud determinations have already been issued and, in 

some cases, reversed. A declaratory judgment that the Plaintiffs’ 

“constitutional and statutory rights” were violated does not provide 

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Defendants with any information that would change the manner in 

which the fraud determinations were made. 

 Further, in applying the fourth factor, a significant 

consideration is whether there is a close nexus between underlying 

factual and legal issues and state law or public policy. Scottsdale Ins. 

Co. v. Flowers, 513 F.3d 546, 559-60 (6th Cir. 2008). Outside of the 

broad requirements of the SSA to obtain funding, the states were 

responsible for enacting their own unemployment system. Michigan 

enacted, regulates and enforces the MES Act. Any declaratory 

judgment would increase the friction between the federal and state 

courts relative to the unemployment system. The Plaintiffs had 

available the entire Michigan appellate process to challenge their fraud 

determination. Instead, they are asking a federal court to regulate 

Michigan’s process for fraud detection. 

CONCLUSION AND RELIEF REQUESTED 

Defendants respectfully request that this Honorable Court enter 

an order dismissing Plaintiffs’ Complaint as this Court lacks subject 

matter jurisdiction and because the Plaintiffs have failed to state a 

claim upon which relief can be granted. 

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Respectfully submitted, 

BILL SCHUETTE 

Attorney General 

/s/ Kimberly K. Pendrick_______

Kimberly K. Pendrick 

Peter T. Kotula (P41629) 

Shannon W. Husband (P60352) 

Assistant Attorneys General 

Attorneys for Defendants 

Labor Division 

3030 W. Grand Blvd., Ste. 9-600 

Detroit, Michigan 48202 

(313) 465-2200 

pendrickk@michigan.gov 

P60348 

Dated: July 10, 2015 

CERTIFICATE OF SERVICE 

I hereby certify that on July 10, 2015, I electronically filed the above 

document(s) with the Clerk of the Court using the ECF System, which 

will provide electronic copies to counsel of record. 

/s/ Kimberly K. Pendrick 

Assistant Attorney General 

Attorney for Defendants 

Labor Division 

3030 W. Grand Blvd., Ste. 9-600 

Detroit, MI 48202 

(313) 456-2200 

pendrickk@michigan.gov 

P60348 

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