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### STATE OF MICHIGAN

COURT OF APPEALS

TRAVERSE VILLAGE, LLC,

Plaintiff-Appellee,
and

LOUISE SHOMO,

Plaintiff, UNPUBLISHED December 30, 2014

v Nos. 317194; 317211
Grand Traverse Circuit Court
NORTHERN LAKES COMMUNITY MENTAL HEALTH, GREGORY PAFFHOUSE, KAREN CLINE, DAVE BRANDING, KEN BREHMER, and CARRY GREY, LC No. 13-029698-CK

Defendants-Appellants.

Before: K. F. K ELLY , P.J., and S AWYER and M ETER , JJ.

P ER C URIAM

.
In these consolidated appeals, defendants appeal from the trial court’s order denying defendants’ motion for partial su mmary disposition. The trial c ourt ruled that the individual defendants were not entitled to qua lified immunity from plaintiff’s 1 federal due process claim brought under 42 USC 1983 and that plaintiff stated a claim on wh ich relief could be granted under the fair and just treatment clause of th e Michigan Constitution, Const 1963, art 1, § 17. We reverse and remand for the reasons explained below.

I. FACTS

Plaintiff was a licensed adult-care facility for adults with mental impairments and developmental disabilities. Defendant Northern Lakes Community Health Center (Northern) is a

1 Louise Shomo was added as a party late in the proceedings. For ease of reference, this opinion uses the term “plaintiff” to re fer to Traverse Village, LLC.-2- community mental health agency as defined in the Michigan Mental Health Code and holds a contract with the Michigan Department of Comm unity Health to serve as the Prepaid Inpatient
Health Plan for five counties in Northwest Mi chigan, making it responsible for coordinating services for disorders involving me ntal health, developmental disa bility, and substance abuse for all Medicaid recipients in its assigned region.

On December 17, 2010, plaintiff and Northern entered into a Participating Provider Agreement (the Agreement), under which plainti ff agreed to provide treatment services to eligible consumers in exchange for reimburseme nt from Northern. Re garding its duration, Section I of the Agreement stated:

B. Initial Term: This cont ract shall be in effect from December 17, 2010 to September 30, 2011 inclusive, unless earlier terminated in accordance with the termination section of this Agreement.

C. Evergreen Term: Unless either party has given the other party 70 calendar days’ written notice prior to the e xpiration of the Initial Term, this Agreement shall automatically be ex tended for a period not to exceed one year (“Additional Term”).

Section X of the Agreement further provided that

B. This contract may be terminated or not renewed by either party without cause with sixty (60) calendar day’s [sic ] written notification to the other party unless another date is mutually agre ed to, in writing, by both parties.

On May 29, 2011, plaintiff sent a letter to Nort hern requesting that a resident be removed from plaintiff’s facility, stating that the reside nt required more intense counseling and focused intervention than its staff could provide. On J une 13, 2011, plaintiff sent No rthern a letter giving 24 hours’ notice that it was discharging the resi dent in purported comp liance with Michigan Adult Foster Care licensing rules. The Ag reement provides as follows regarding patient advocacy:

H. Health Care Professionals may not be prohibited from discussing treatment options with the Consumer /guardian which may not reflect the preferences of the NLCMH Health Ca re Professional as defined in CFR
Sec. 438.102.

I. The Provider, including any Hea lth Care Professional employed or contracted by the Provider, is not prohibited from advocating on behalf of one or more consumers with respect to grievance and appeal, utilization management, or authorization issues.

On June 17, 2011, Northern notified plaintiff that it was implementing a contract sanction that would serve as a temporar y action until Northern’s networ k-management-team meeting on July 14, 2011, at which time Northern would conduct a formal review of plaintiff’s performance. According to plaintiff, Louise Shomo, an owner of plaintiff, thereafter attended a meeting with
Northern officials to discuss the contract sanc tion, and a Northern repres entative indicated that-3- the patient-transfer issue prompted the sanction. On July 15, 2011, Northern notified plaintiff in writing that it had decided to not renew the Ag reement when it expired on September 30, 2011, in accordance with sections I(C) and X(B) of the Agreement. According to plaintiff, Northern’s refusal to do business with plai ntiff has rendered it unable to se rve residents in the five-county area within Northern’s supervisi on, which resulted in a significant loss of revenue that forced plaintiff to close its facility and abandon its lease.

Plaintiff filed a complaint against Northern and several of its officers and managementteam members (the individual defenda nts), raising three claims. In Count I, plaintiff alleged that Northern breached the Agreement by terminati ng it in retaliation for plaintiff advocating on behalf of a patient. In Count II, plaintiff alleged, pursuant to 42 USC 1983, that all defendants deprived plaintiff of property without due proc ess of law under the Four teenth Amendment of the United States Constitution by (1) conducting no investigation before issuing the contract sanction and terminating the Agreement, (2) refu sing to give plaintiff specific reasons for the sanction and termination, (3) failin g to give plaintiff an opportuni ty to respond to the issues supposedly justifying terminati on, and (4) refusing to hold a h earing at which plaintiff could respond to witnesses and contest ev idence supporting termination. In Count III, plaintiff alleged that all defendants violated the fair and just tr eatment clause of the Michigan Constitution, 1963 Mich Const, art 1, § 17, by (1) conducting no inves tigation before issuing the contract sanction and terminating the Agreement, (2) refusing to give plaintiff specific reasons for the sanction and termination, (3) failing to provide witnesses or evidence supporting the sanction and termination, and (4) failing to hold a hearing so that plaintiff could confront witnesses and evidence. In each count, plaintiff requested injuncti ve relief in the form of “cont ract restoration,” as well as damages, costs, and attorney fees.

Defendants moved for partial summary dispos ition, seeking the dismi ssal of Counts II and III. Regarding Count II, defendants asserted that the individual defenda nts were entitled to summary disposition under MCR 2.116(C)(7) because they had qualified immunity. Defendants argued that plaintiff had no propert y interest in the continuation of the Agreement, and thus no entitlement to procedural due process, where th e Agreement expressly provi ded that either party
could decide to not renew the Agreement without cause by giving 60 days’ written notice. Defendants also argued that plaintiff could not maintain its § 1983 claim against Northern in the absence of a constitutional violation. Regarding Count III, defendants argued that plaintiff failed to state a claim on which relief could be gr anted under MCR 2.116(C)(8) because only the state can be liable for money damage s arising from a violation of the Michigan Constitution and because plaintiff made no allegations regarding ho w the individual defendants violated plaintiff’s rights under the fair and just treatment clause.

The trial court denied defendants’ motion fo r summary disposition concerning Count II in
reliance on Bundo v Walled Lake , 395 Mich 679; 238 NW2d 15 4 (1976), concluding that extrinsic evidence might ultimately show that pl aintiff had a property in terest protected by due process in the renewal of the Agreement, de spite the contractual language suggesting the contrary. In denying defendants’ motion for summary dispositi on under Count III, the court admitted that it was “somewhat puzzled by Count III,” and ultimately concluded that the issue had not been appropriately briefed and that it was not clear whether any investigation had taken place such that the fair and just treatment clause could be invoked.-4- In Case No. 317194, the individual defendants a ppeal as of right challenging the trial court’s denial of their request for qualifie d immunity from money damages. However,
defendants also ask this Court to order that su mmary disposition be granted regarding Count II in its entirety on the basis that plaintiff’s due proces s argument fails as a matter of law. In Case No. 317211, this Court granted defendants’ application for leave to appe al the trial c ourt’s ruling on Count III and, on its own motion, cons olidated the two appeals. Traverse Village LLC v
Northern Lakes Comm Mental Health , unpublished order of the Co urt of Appeals, issued February 25, 2014 (Docket No. 317211).

II. STANDARD OF REVIEW

We review de novo whether the trial c ourt properly granted or denied summary disposition under MCR 2.116(C )(7) and (C)(8). See Feyz v Mercy Memorial Hospital , 475 Mich 663, 672; 719 NW2d 1 (2006). To the extent th is case involves questions of contract interpretation and constitu tional law, we review thos e issues de novo as well. McDonald v Farm
Bureau Ins Co , 480 Mich 191, 197; 747 NW2d 811 (2008); Van Buren v Garter Belt Inc , 258 Mich App 594, 602; 673 NW2d 111 (2003).

III. ANALYSIS

A. DUE PROCESS CLAUSE

The individual defendants argue that the trial court committed error warranting reversal in ruling that they did not have qualified immun ity from the alleged due process violation. We

agree.

Plaintiff alleges that defendant s deprived it of due process in violation of the Fourteenth
Amendment of the United States Constitution when they decided to not renew the Agreement. Plaintiff brings this constitutional claim under 42 USC 1983, which provides, in pertinent part:

Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory or the District of Columbia, subjects, or causes to be subjected, a ny citizen of the United Stat es or other person within the jurisdiction thereof 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, suit in equity, or othe r proper proceeding for redress . . . .

Section 1983 “is not itself a source of subs tantive rights,” but merely provides “a method for vindicating federal rights elsewhere conferred . . . .” Baker v McCollan , 443 U S 137, 144, n 3; 99 S Ct 2689; 61 L Ed 2d 433 ( 1979). In addition, “[t]he doctrine of qualified immunity protects government officials from liability fo r civil damages insofar as their conduct does not violate clearly established stat utory or constitutional rights of which a reasonable person would
have known.” Pearson v Callahan , 555 US 223, 231; 129 S Ct 808; 172 L Ed 2d 565 (2009) (citation and quotation marks omitte d). In determining whether a government official violated a “clearly established” right, “[t]he contours of the right must be sufficiently clear [such] that a
reasonable official would unders tand that what he is doin g violates that right.” Anderson v Creighton , 483 US 635, 640; 107 S Ct 3034; 97 L Ed 2d 523 (1987); see also Pearson , 555 US
at 243-244.-5- We conclude that no factual development could provide a basis for recovery under the due process clause of the Fourteenth Amendment. In Whispering Pines AFC

, Home Inc v Dep’t of Treasury , 212 Mich App 545, 550; 538 NW2d 452 (1995), this Court held that “various constitutional rights may be waived by contr act with a government ag ency, even though such constitutional rights are not sp ecified by the language of the cont ract, if the waiver is clearly
embraced within the terms of that contract.” The sole limitation on this abil ity, said the Court, is that the decision “not be the product of fra ud or tainted with equi valent bad faith.” Id . at 551. Here, plaintiff waived any right it might have had to a heari ng upon Northern’s decision to not renew the Agreement when it unambiguously agr eed that Northern c ould do so (1) “without cause” and (2) by giving 60 days’ written notice. Under Whispering Pines , 212 Mich App at 550, it matters not whether the Agreement specifically referenced plaintiff’ s due process rights, and plaintiff’s voluntary submission to the 60 -day notice procedure pl ainly foreclosed any entitlement it may have otherwise had to a heari ng. Because plaintiff does not allege that the Agreement was the product of fraud or equivalent bad faith, or that it ot herwise violates public policy, its unambiguous language must be enforced as written. Rory v Continental Ins Co , 473 Mich 457, 491; 703 NW2d 23 (2005). 2

Having waived any right to additiona l process beyond the 60-day written notice procedure provided for under the Agreement, plain tiff had no constitutionally protected right to a hearing at which to challenge defendants’ reas ons for not renewing the Agreement—let alone a clearly established one. Accordingly, we concl ude that the trial court erred in denying the
individual defendants’ moti on for summary disposition under MCR 2.116(C)(7). Although defendants ask this Court to venture beyond the qua lified immunity issue appealed as of right
and order that Count II be dismi ssed in its entirety, we choose simply to remand for proceedings
not inconsistent w ith this opinion.

B. FAIR AND JUST TREATMENT CLAUSE

Next, defendants argue that they are entitl ed to summary disposition with respect to plaintiff’s claim under the fair and just treatment clause of the Michigan Constitution, Const 1963, art 1, § 17; it provides:

2 Although plaintiff correctly asse rts that defendants did not rais e their waiver argument below, “[t]his Court may overlook preserva tion requirements if the failure to consider the issue would result in manifest injustice, if consideration is necessary for a proper de termination of the case, or if the issue involves a quest ion of law and the facts necessary for its resolution have been presented.” Nuculovic v Hill , 287 Mich App 58, 63; 783 NW2d 124 (2010). We conclude that not only is this issue a legal one for which the fact s have been sufficiently presented, but that it is necessary for a proper determination of the case. Further, while defendants may not have been specific about their waiver argument below, they did argue that their c ontractual ri ght to not renew the Agreement without cause upon 60 days’ notic e should be enforced as written, which is the essence of their waiver argument.-6- The right of all individuals, firms, corporations and voluntary associations to fair and just treatment in the course of legislative and executive investigations and hearings shall not be infringed.

Defendants argue that plaintiff ha s failed to state a cl aim on which relief can be granted based on this clause because it failed to allege how de fendants treated it unfairly or unjustly during the
course of an invest igation. We agree. 3

Plaintiff alleges that defendants treat ed it unfairly or unjustly by conducting no investigation or a sham investig ation before deciding to not re new the Agreement, refusing to explain and present the cau se for not renewing, and refusing to hold a hearing at which plaintiff
could contest defendants’ cause fo r not renewing. However, the pa rties’ rights and obligations owed to one another were governed by the terms of the Agreement, and plaintiff points to no provision giving defendants an ob ligation to conduct an investiga tion, explain its reasons for not renewing, or hold a hearing to allow plaintiff to contest defendants’ reasons for not renewing. To the contrary, plaintiff unambiguously agreed that defendants could not renew the Agreement without cause, a hearing, or an investigation, with the nonrenew al requiring nothing more than 60 days’ written notice. Accordingly, plaintiff c ould not have been trea ted unfairly or unjustly by defendants’ decision to not renew the Agreement in accordance with the terms to which plaintiff freely assented.

Moreover, plaintiff alleges that defendants c onducted a “sham investig ation” at best, but
this Court has clarified that an investigation implicating the fair and just treatment clause requires a “searching inquiry” or a “careful examination.” Carmacks Collision

, Inc v Detroit

, 262 Mich App 207, 211; 684 NW2d 910 (2004). In Carmacks , this Court held that a city’s bidselection process for municipal contracts did not “rise to the level of an ‘investigation’ as that term is properly understood” wh ere the city merely asked for certain information and documentation to judge the bidders’ qualifications a nd the plaintiff voluntarily participated in the information-gathering process by submitting a bid. Id . at 211-212. As in Carmacks , plaintiff voluntarily participated in defendants’ inform ation-gathering process regarding plaintiff’s advocacy of its patients by giving defendants written notice of its activities. Further, this Court
clarified in By Lo Oil Co v Dep’t of Treasury , 267 Mich App 19, 40-41; 703 NW2d 822 (2005), that the fair and just treatment clause requi res “some active conduct during the ‘course of’ a hearing or investigation,” noting that “the histor ical context in which th is clause was adopted suggests that it was intended to protect against the excesses and a buses of Cold War legislative or executive investigations or h earings.” Here, plaintiff does not allege that defendants made any

3 Plaintiff contends that defenda nts did not properly raise this argument below, but defendants did argue in their motion for summary dispositi on that plaintiff made no allegations regarding how the individual defendants violated plaintiff’s rights under the fair and just treatment clause. Further, we again find that this is a legal is sue for which the facts have been sufficiently presented and that its consideration is necessa ry for a proper determination of the case. Hill , 287 Mich App at 63.-7- “active conduct” towards it during “t he course” of whatever fact-gat hering process it conducted. At most, plaintiff alleges that defendants are guilty of inaction, by failing to hold a hearing, failing to explain the basis for not renewing the Agreement, and failing to allow plaintiff the opportunity to challenge defendants’ basis fo r not renewing the Agreement. Moreover, temporally, these alleged failures would have occurred after defe ndants’ fact-gathering process, rather than during it. Finally, to the extent plai ntiff challenges the adequacy of defendants’ factgathering process, the plain text of the fair a nd just treatment clause does not mandate adequate investigations. Const 1963, art 1, § 17. Accordingly, defendant s are entitled to summary disposition with respect to plai ntiff’s claim under the fair and just treatment clause of the Michigan Constitution. 4

Reversed and remanded for proceedings not inconsistent with this opinion. We do not retain jurisdiction.

/s/ Kirsten Frank Kelly /s/ David H. Sawyer
/s/ Patrick M. Meter

4 Having reached this conclusion, we need not a ddress defendants’ more limited argument that plaintiff may not maintain a damages claim agains t them, as individuals or entities that are not “the state,” for violating the Michigan Constitution.