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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

MARCIA L. GANUN,

Plaintiff, CASE NUMBER: 09-12966

HONORABLE VICTORIA A. ROBERTS

Magistrate Judge Michael Hluchaniuk

v.

STATE FARM MUTUAL

AUTOMOBILE INSURANCE CO.,

Defendant.

 /

ORDER ADOPTING THE MAGISTRATE JUDGE’S 

REPORT AND RECOMMENDATION

I. INTRODUCTION

Before the Court is Defendant State Farm Mutual Automobile Insurance

Company’s (“State Farm”) motion for summary judgment against Plaintiff Marcia L.

Ganun. A hearing on the motion was held before Magistrate Judge Michael Hluchaniuk

on December 16, 2010. Magistrate Judge Hluchaniuk’s Report and Recommendation

(“R & R”) recommends the Court DENY State Farm’s motion. State Farm objected;

Ganun responded to State Farm’s objections.

For the reasons below, the Court OVERRULES Defendant’s objections and

ADOPTS the magistrates R & R. State Farm’s Motion for Summary Judgment is

DENIED.

II. BACKGROUND

In May 1999, Plaintiff’s daughter, Krista Ganun, suffered severe and permanent

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injuries in an automobile accident. Krista requires around-the-clock care by attendant

care service providers. Krista’s automobile insurer is State Farm. In March 2003, a jury

awarded Plaintiff attendant care benefits of $18 per hour for all reasonable and

necessary charges incurred for Krista’s care, recovery, and rehabilitation, to be paid by

State Farm. However, in January 2009 State Farm reduced the amount of benefits it

paid Plaintiff to $12 per hour. This lawsuit to recover the difference, including any

amount over $18 per hour to which Plaintiff may be entitled, followed. In its motion for

summary judgment, Defendant argues it was entitled to reduce Plaintiff’s benefits to $12

per hour because Plaintiff admitted to a State Farm Claim Representative she currently

pays care providers that amount. Defendant says the remaining $6 is paid to Plaintiff’s

attorneys as a retainer fee and Defendant is not obligated to pay Plaintiff’s attorney

fees. 

Additional facts and summary of the parties’ arguments are presented in the

magistrate’s R & R at pages 2-7. This Court incorporates that discussion by reference

here.

III. STANDARD OF REVIEW

This Court reviews de novo any part of the magistrate’s recommendation on a

dispositive motion that is properly objected to. 28 U.S.C. § 636 (b)(1); Fed. R. Civ. P.

72 (b)(3). “The district judge may accept, reject, or modify the recommended

disposition; receive further evidence; or return the matter to the magistrate judge with

instructions.” Fed. R. Civ. P. 72 (b)(3).

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IV. OBJECTIONS

State Farm objects to the magistrate’s R & R on three grounds: (1) there is no

genuine issue of material fact as to whether Plaintiff pays Krista’s care providers only

$12 per hour because Plaintiff’s deposition testimony, and the affidavit of State Farm

Claim Representative, Ruthann Tuttle, establish that fact; (2) the magistrate erred by

holding Plaintiff’s attorneys had a charging lien on Plaintiff’s award of $18 per hour,

obliging State Farm to continue to pay this amount and allowing Plaintiff’s attorneys to

receive fees from State Farm “in perpetuity” for expenses not “incurred” by Plaintiff; and

(3) the magistrate erred by suggesting that Plaintiff might be entitled to partial summary

judgment, after additional briefing, on collateral estoppel grounds, because Plaintiff did

not file a dispositive motion seeking same by the Court’s deadline of October 22, 2010. 

Plaintiff responds that State Farm’s objections are untimely and therefore, waived, and

the magistrate’s R & R is supported by the facts and law.

V. ANALYSIS

A. There are material factual issues in dispute precluding summary

judgment in Defendant’s favor.

The Court need not decide whether Defendant’s objections are waived because

they were filed one day late, as Plaintiff contends. Even on de novo review of the

portions of the R & R objected to, the Court overrules the objections and holds that

State Farm is not entitled to summary judgment because there are genuine issues of

material fact in dispute. 

State Farm contends it is only required to pay Plaintiff $12 per hour in attendant

care benefits under Michigan’s No-Fault Act, Mich. Comp. Law (“MCL”) §§ 500.3101 et

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seq, despite the jury’s 2003 award of $18 per hour, because Plaintiff admitted that she

pays attendant care providers only $12 per hour for the services provided Krista.

The Court will grant summary judgment in favor of the moving party if that party

establishes that “the pleadings, the discovery and disclosure materials on file, and any

affidavits show that there is no genuine issue as to any material fact and that the

movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c)(2); Celotex

Corp. v. Catrett, 477 U.S. 317, 323 (1986). “[W]hen a properly supported motion for

summary judgment is made, the adverse party ‘must set forth specific facts showing

that there is a genuine issue for trial.’” Anderson v. Liberty Lobby, 477 U.S. 242, 250

(1986); Fed. R. Civ. P. 56(e)(2). The Court views the evidence in favor of the nonmoving party. Leahy v. Trans Jones, Inc., 996 F.2d 136, 138 (6th Cir. 1993). However,

the evidence supporting the plaintiff’s position must be more than a mere scintilla; it

must be sufficient for the jury to reasonably find in favor of the plaintiff. Liberty Lobby,

477 U.S. at 252. “The judge’s inquiry, therefore, unavoidably asks whether reasonable

jurors could find by a preponderance of the evidence that the plaintiff is entitled to a

verdict- whether there is evidence upon which a jury can properly proceed to find a

verdict for the party producing it, upon whom the onus of proof is imposed.” Id. (citation

and internal quotation marks omitted) (emphasis in original).

Plaintiff disputes State Farm’s contention that she only pays $12 per hour to 

Krista’s care providers. During her February 4, 2010 deposition, Plaintiff testified that

she never told a State Farm representative that she paid only $12 an hour. (See 2/4/10

Tr. 74-75). Further, in her response to State Farm’s motion, Plaintiff argues that Ms.

Tuttle “falsely claimed that Mrs. Ganun stated during the meeting that she paid her care

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providers $12 per hour. State Farm then used this statement (that never occurred) to

reduce benefits.” (Doc. # 122 at 11). 

Plaintiff’s deposition testimony is supported by Amy Daniels, one of Krista’s care

providers. Ms. Daniels testified that Plaintiff told her she would be paid $18 an hour

plus expenses and that she was, in fact, paid $18 an hour at one point, sometimes

receiving more. (2/4/10 Tr. 15, 25). Moreover, there is a question as to whether Ms.

Tuttle’s affidavit is admissible as proof of the amount of Plaintiff’s claim under Fed. R.

Evid. 408(a)(2). Therefore, there are genuine fact issues in dispute and summary

judgment is inappropriate.

B. The parties are directed to submit additional briefing on the issues of

collateral estoppel and the effect, if any, of Plaintiff’s attorneys’

charging lien on the 2003 judgment against Defendant.

In response to Defendant’s Motion for Summary Judgment, Plaintiff requested

partial summary judgment in her favor, asking that the Court limit the issue for trial to

the amount of an increase in the reasonable value of attendant care services above $18

per hour, to which she is entitled. While the magistrate did not recommend that the

Court grant partial summary judgment in Plaintiff’s favor, he acknowledged that

collateral estoppel might preclude State Farm from paying less than $18 per hour. He

said this Court might choose to issue an order directing both parties to brief the issue of

“whether and to what extent they are bound by the prior jury verdict finding $18 per hour

to be a reasonable rate of compensation for attendant care services and what evidence

supports a change in circumstances warranting an adjustment of that rate.” (R & R at

12). 

The Court agrees with the magistrate; there appear to be questions of law not

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fully addressed in the current briefs that may dispose of the matter, at least partially, in

one party’s favor. Accordingly, the Court gives the parties notice and an opportunity to

respond to the issues identified below. See FED. R. CIV. P. 56(f).

1. Collateral Estoppel

Plaintiff says the doctrine of collateral estoppel, or issue preclusion, prevents

State Farm from paying less than $18 per hour in attendant care benefits. The doctrine

of collateral estoppel may be applied if four criteria are satisfied: (1) the issue raised in

the present case was raised and actually litigated in the prior proceeding; (2)

determination of the issue was necessary to the outcome of the prior proceeding; (3) the

prior proceeding resulted in a final judgment on the merits; and (4) the party against

whom estoppel is sought had a full and fair opportunity to litigate the issue in the prior

proceeding. United States v. Sandoz Pham. Corp., 894 F.2d 825, 826-27 (6th Cir.

1990). 

Plaintiff presents the deposition testimony of Dr. Terry Braciszewski that Krista’s

neuropsychological condition is the same now as it was in 2003, and that nothing has

altered her need for continuing attendant care. (6/15/10 Tr. 134-35). Yet, Plaintiff

seeks more than the $18 per hour she requested then. Although collateral estoppel

may preclude State Farm from paying less than $18 per hour, see Manley v. Detroit

Auto. Inter-Ins. Exch., 425 Mich. 140, 157, 388 N.W.2d 216 (1986) (it is “neither a

workable nor a sound rule of law” to permit an insurer to relitigate factual and legal

issues that were already decided in a prior proceeding when the insured seeks payment

for expenses incurred after the date of trial), it may also prevent Plaintiff from seeking

more. 

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2. Effect of the Charging Lien on the Benefits Owed

The second issue is related to the first: Under MCL § 500.3107(1)(a), is Plaintiff

entitled to deduct an attorney retainer fee from the $18 hourly rate determined to be

reasonably necessary for Krista’s care, and still recover that hourly rate from State

Farm? State Farm appears to argue that collateral estoppel does not preclude a

reduction in benefits because the attorney retainer fee constitutes a substantial change

in circumstance. See Manley, 425 Mich. at 158-59 (when an automobile insurer is

ordered to pay benefits under the No-Fault Act, the insurer and the insured are entitled

to a redetermination of amount, from time to time, if there is “evidence that there has

been a substantial change in the facts and circumstances.”). 

In his R & R, Magistrate Judge Hluchaniuk points out that in Miller v. Citizens Ins.

Co., 288 Mich.App. 424, 794 N.W.2d 622 (Mich. Ct. App. 2010), the Michigan Court of

Appeals upheld a judgment against an automobile insurance company where one-third

of that award went to the Plaintiff’s attorneys in satisfaction of an attorney charging lien

on the judgment. The court of appeals observed, “[i]t appears that a typical contingency

fee contract was entered into by which plaintiff’s attorneys agreed to accept as payment

for their services 1/3 of the amount of monies, if any, recovered on Ryan’s behalf.” Id.

at 434. The appellant, Detroit Medical Center (“DMC”), which was in the same position

as Krista’s care providers – that is, subject to a reduction in payment for services

because of an attorney fee agreement and charging lien – argued it should not have to

pay the plaintiff’s attorney fees under §§ 500.3142(2) and 500.3148(1). Id. at 439. 

However, the court distinguished those provisions, which are related to penalty interest

and penalty attorney fees, saying the issue was whether the plaintiff’s attorneys were

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entitled to collect their fee, or charging lien, against the proceeds of the settlement they

obtained for the plaintiff, not whether the DMC or the plaintiff’s attorneys were entitled to

penalty interest or penalty attorney fees from the insurance company. Id. at 440. The

court held they were entitled to the relief they sought. 

Defendant contends that because Krista’s care providers are only receiving $12

(or some other amount less than $18) per hour for their services, that is the reasonable

cost incurred by Plaintiff for Krista’s care under § 500.3107, and that is how much State

Farm is obligated to pay under the No-Fault Act. State Farm argues it is not responsible

for any amount out of the $18 hourly rate that is paid to Plaintiff’s attorneys as fees for

their continued representation of Plaintiff. The Michigan Court of Appeals rejected a

very similar argument in Miller, though there the challenge to the contingency fee was

made by the care-provider, not the insurer. 

Miller’s holding and reasoning seem to apply to the situation here; Defendant

should attempt to distinguish Miller in its response. In its objections to the magistrate’s

R & R, Defendant simply says Miller is inapplicable, without explaining how or why. 

Defendant characterizes its $18 hourly payments to Plaintiff as voluntary; however,

there is no dispute that there was a 2003 judgment awarded against it in that amount for

Krista’s past care. Defendant acknowledges that “following the jury’s verdict in the

preceding trial, it became expected that State Farm would continue to pay benefits at

the rate of $18.00 per hour unless there was a change in circumstances.” (Doc. # 133

at 4) (emphasis in original). State Farm characterizes its discovery that Plaintiff was

paying some of the benefits to her attorneys as a “change in circumstance,” warranting

a reduction in benefits. However, the Miller court’s holding suggests otherwise. 

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Moreover, Defendant does not allege facts tending to show the type of change in

circumstance that would entitle it to a redetermination as envisioned by the Michigan

Supreme Court. In Manley, that court stated:

Either the Manleys or DAIIE are entitled to a redetermination from time to

time of the amounts properly allowable for nurse’s aides or for room and

board, including the services of the Manleys. If DAIIE contends that John

has sufficiently recovered so that nurse’s aides are not required or that a

fewer number of hours of such assistance is required or that the cost set

forth in the bills rendered is unreasonable, it may apply to the circuit court

for a further determination of the necessity and reasonableness of the

charges. However, absent some evidence that there has been a

substantial change in the facts and circumstances, the trial court would be

acting within its discretion in refusing to set the matter down for a further

evidentiary hearing.

425 Mich. at 158-59. Defendant does not present evidence that Krista has sufficiently

recovered to warrant a reduction in benefits and Plaintiff presents evidence that Krista’s

condition is the same as it was in 2003. Moreover, the Manley court noted that the

insurer “may apply to the circuit court for a further determination of the necessity and

reasonableness of the charges” when it alleges that it is over-paying. Id. at 159. State

Farm did not do this; it simply reduced the amount of benefits it paid Plaintiff.

Unless Defendant can distinguish Miller and provide this Court with legal support

for its position that an insured is not entitled to satisfy an attorney charging lien pursuant

to a fee agreement out of a favorable judgment, or can present evidence sufficient to

create a genuine issue of material fact as to whether Krista’s condition has improved

such that she requires less assistance, summary judgment in Plaintiff’s favor in the

amount of $18 per hour is likely warranted. Likewise, if Plaintiff seeks an increase in

benefits, she must present evidence that the reasonable and necessary charges

incurred for Krista’s care have increased since 2003.

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VI. CONCLUSION

The Court ADOPTS Magistrate Judge Hluchaniuk’s R & R. There are genuine

issues of material fact in dispute precluding summary judgment in Defendant’s favor. In

accordance with this opinion, Defendant is directed to respond to the issues raised by

Monday, June 6, 2011. Plaintiff must reply by Monday, June 20, 2011.

IT IS ORDERED.

s/Victoria A. Roberts 

Victoria A. Roberts

United States District Judge

Dated: May 16, 2011

The undersigned certifies that a copy of this

document was served on the attorneys of

record by electronic means or U.S. Mail on

May 16, 2011.

s/Linda Vertriest 

Deputy Clerk

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