Opinion ID: 2980667
Heading Depth: 2
Heading Rank: 1

Heading: Michigan’s Fraudulent Concealment Statute

Text: James’s claims are untimely because he filed them outside of the applicable Michigan limitations period. In Michigan, a plaintiff must file an action “to recover damages for the death of -3- No. 10-1211 Chandler v. Wackenhut Corp. a person” within three years of the claim’s accrual. Mich Comp. Laws § 600.5805(10). The claim accrued on the date of Janet’s murder, January 31, 1979. See id. at § 600.5827. However, when the decedent has died before the original limitations period has run, the decedent’s “personal representative” may commence the action no later than “3 years after the period of limitations has run.” Id. at § 600.5852. As Janet’s personal representative, James could have filed the action no later than January 31, 1985. The limitations period was not tolled because Wackenhut’s alleged silence did not trigger Michigan’s fraudulent concealment statute, Mich. Comp. Laws § 600.5855. Section 600.5855 tolls the limitations period if “a person who is or may be liable for any claim fraudulently conceals the existence of the claim or the identity of any person who is liable.” Id. These protections are triggered by affirmative acts or misrepresentations; “mere silence on the part of the defendant is not enough.”1 Draws v. Levin, 52 N.W.2d 180, 183 (Mich. 1952) (quoting Dowse v. Gaynor, 118 N.W. 615, 617 (Mich. 1908)). James claims that Wackenhut fraudulently concealed the action by: (1) maintaining a motto of “I know nothing, see nothing, and speak only kind words”; (2) telling employees that “a scandal was not to be attached to the company name”; (3) actively promoting a code of silence; (4) and directing two perpetrators to secrete themselves to avoid media scrutiny. 1 Wackenhut argues there are three elements to establish fraudulent concealment, relying on Evans v. Pearson Enterprises, Inc., 434 F.3d 839, 850 (6th Cir. 2006). Although Evans evaluated fraudulent concealment under Michigan law, the court incorrectly referred to the elements from Dayco Corp. v. Goodyear Tire & Rubber Co., 523 F.2d 389, 394 (6th Cir. 1975), a case that involved tolling under the Clayton act. However, contrary to James’s contention, this error is of no consequence because both the federal standard and the Michigan require proof of wrongful concealment by a defendant, and not a third party. -4- No. 10-1211 Chandler v. Wackenhut Corp. Appellant Br. 16-18. James describes Wackenhut’s motto and desire to avoid scandal as an “omertà” or a “code of silence.” Appellant Br. at 17. However, Michigan courts have indicated that such a code of silence does not constitute fraudulent concealment. See Doe v. Roman Catholic Archbishop of the Archdiocese of Detroit, 692 N.W.2d 398, 406-7 (Mich. Ct. App. 2004). Further, requiring the two security guards to secrete themselves in a hotel room was tantamount to maintaining the company’s silence. Although it is suspicious that Wackenhut directed the two primary perpetrators to remain silent, there is no allegation that the company engaged in coercion or any other like acts.2 Instead, Wackenhut’s actions were the manifestation of the code of silence. Paiva’s and Nelson’s conduct did not trigger the fraudulent concealment statute against Wackenhut. “The provisions of [the fraudulent concealment] section cannot be extended . . . to concealments made by persons other than those sought to be charged in the action.” Stevenson v. Robinson, 39 Mich. 160, 160 (Mich. 1878). Because the fraudulent concealment statute is designed to punish fraud, the statute’s purpose would not be served by punishing a defendant for the wrongful acts of a third party. Stoneman v. Collier, 288 N.W.2d 405, 407 (Mich. Ct. App. 1979). Here, Paiva and Nelson were acting outside the scope of their employment when they concealed the crime; therefore, they were third parties. In light of this Stevenson rule, the limitations period for an action against Wackenhut is not tolled by the fraudulent actions of Paiva and Nelson. 2 There could be an entirely innocent explanation: Wackenhut may have simply wanted to keep its name out of a media frenzy surrounding the murder. However, the company’s motive is not relevant to the present analysis. -5- No. 10-1211 Chandler v. Wackenhut Corp. Contrary to James’s contentions, subsequent amendments to the fraudulent concealment statute have not abrogated the Stevenson rule. The statute was first amended to address International Union United Automotive Workers of America v. Wood, 59 N.W.2d 60, 62-63 (Mich. 1953). In Wood, the Michigan Supreme Court held that the concealment of a defendant’s identity, as opposed to concealing a “cause of action,” did not trigger the fraudulent concealment statute. In 1954, the Michigan legislature responded by amending the statute: If any person, who is liable to any of the actions mentioned in this chapter, shall fraudulently conceal the cause of such action, [or conceal the identity of any party thereto,] from the knowledge of the person entitled thereto, the action may be commenced at any time within 2 years after the person who is entitled to bring the same shall discover that he had such cause of action, although such action would be otherwise barred by the provisions of this chapter. Vega v. Briggs Mfg. Co., 67 N.W.2d 81, 84 (Mich. 1954) (quoting P.A. 1954, No., 49) (amended language bracketed and bolded). This amendment squarely addressed the holding in Wood and did not, as James contends, address the Stevenson rule. As a later court found, “[t]here is no showing that the [1954] amendment in any way changed the previously established rule that concealment by one other than the one sought to be charged is not within the prohibition of the statute.” Stoneman, 288 N.W.2d at 407.3 3 James argues that the precise issue “ was almost reached” by the Michigan Supreme Court in Vega, 67 N.W.2d at 84. Appellant Br. 33. However, the Vega court did not consider, or even mention, whether the concealment by one party tolled the statute of limitations against another. See Vega, 67 N.W.2d at 84. Instead, the court found that the 1954 amendment was not applicable because the cause of action accrued before the amendment. Id. -6- No. 10-1211 Chandler v. Wackenhut Corp. The statute was again amended in 1961 to address deficient drafting identified by the Michigan Supreme Court in Ross v. Fisher, 90 N.W.2d 483, 484-485 (Mich. 1958). In Ross, the court noted that the 1954 amendment created a disconnect between the statute’s purpose and its “pay-off” clause. Id. Although concealment of a party’s identity now was mentioned in the statute, the amendment failed to toll the limitations period pending the discovery of the identity of the liable party. Id. To remedy this inconsistency, the legislature amended the statute in 1961 to its current form: If [a] person who is [or may be] liable [for any claim] fraudulently conceal[s the existence of the claim] or the identity of any [person who is liable for the claim] from the knowledge of the person entitled [to sue on the claim], the action may be commenced at any time within 2 years after the person who is entitled to bring the [action] discover[s, or should have discovered, the existence of the claim or the identity of the person who is liable for the claim], although the action would otherwise be barred by the period of limitations. Mich. Comp. Laws § 600.5855 (amended language bracketed and bolded). These amendments fix the “pay-off” clause and make various other semantic clarifications. James argues that the substitution of the word “claim” for the word “action” in the first lines of the statute abrogates Stevenson. Appellant Br. 37-38. Although the words have different meanings,4 it is a stretch to infer that this substitution reflects a legislative intent to discard the Stevenson rule. James points to nothing in the legislative history or subsequent Michigan decisions to support his argument. More 4 A “claim” is “a statement of the facts . . . on which the pleader relies in stating the cause of action . . . .” Mich. Ct. R. 2.111(B)(1). An “action” refers to the lawsuit, brought to remedy such claims. Id. at 2.101. -7- No. 10-1211 Chandler v. Wackenhut Corp. likely, the legislature wanted to clarify that concealment of a single claim, rather than of an entire cause of action, was sufficient to trigger the statute. Subsequent Michigan opinions have continued to apply the Stevenson rule notwithstanding the amendments. See, e.g., Stoneman, 288 N.W.2d at 406; Smith v. Sinai Hosp. of Detroit, 394 N.W.2d 82, 87-88 (Mich. Ct. App. 1986). In Stoneman, the Michigan Court of Appeals declined to toll the limitations period against General Motors where a lawyer for an unaffiliated car insurance company fraudulently concealed GM’s liability. 288 N.W.2d at 406. The court reaffirmed the Stevenson rule, reasoning that it would be inequitable to punish GM for the wrongful acts of a third party’s lawyer.5 Id. at 407. The Stoneman court did not overturn Stevenson, as James argues. In Stoneman, the court stated, “[i]t would be inequitable in the present case to punish General Motors for acts of concealment engaged in by a third party.” Stoneman, 288 N.W.2d at 407. James focuses on the term “inequitable,” and argues that its use means that the Stoneman court conducted an ad hoc balancing rather than implementing a per se rule. However, when read in context, the quoted statement is merely a reiteration of the purpose underlying the Stevenson rule and not a new test. Further, even if the Michigan Court of Appeals intended to set forth a new test, this court sitting in diversity must follow the precedent of the Michigan Supreme Court. 5 James argues that Stoneman was wrongly decided because the court improperly focused on the wrong amendment and ignored Ross. However, as discussed above, neither the 1954 nor the 1961 amendment abrogated the Stevenson rule. The Stoneman court did not discuss Ross for good reason: the case has nothing to do with the Stevenson rule but instead discusses the inartful drafting of the 1954 amendment. -8- No. 10-1211 Chandler v. Wackenhut Corp. The Michigan Court of Appeals again applied the Stevenson rule in Smith v. Sinai Hospital, 394 N.W.2d at 88. In Smith, a woman was injured by the malpractice of defendants during her labor and delivery. Id. at 84-85. The woman argued that the statute of limitations should be tolled because the hospital had fraudulently concealed the identity of an anesthesiologist who had countermanded a doctor’s orders, causing the injury. Id. at 88. The court rejected this, stating that “this position is contrary to law, which clearly states that a defendant cannot be penalized for the fraudulent acts of third parties in concealing the defendant’s identity where the defendant played no part.” Id. (citing Stoneman, 288 N.W.2d at 405).