Opinion ID: 626814
Heading Depth: 5
Heading Rank: 2

Heading: Property Interest in Expectation of Worker's Compensation Benefits

Text: Having determined that the devaluation or loss of a statutory entitlement is an injury to property, we must next decide whether the plaintiffs in this case had accrued such a legal entitlement. None of the remaining plaintiffs in this case had started receiving any worker's compensation benefits under Michigan law at the time of filing their RICO action. The issue is, therefore, whether an injured employee obtains a property interest in his expectancy of worker's compensation benefits. Again, we look first to Michigan law. Michigan has not directly addressed at what point an injured employee has a property interest in the benefits provided by the WDCA. In construing other statutes, Michigan courts have held that a unilateral expectation of [a statutory] benefit before the benefit is awarded is not property because the claimant must have a legitimate claim of entitlement to the funds. City of St. Louis v. Mich. Underground Storage Tank Fin. Assurance Policy Bd., 215 Mich.App. 69, 544 N.W.2d 705, 708-09 (1996) (citing Williams, 424 N.W.2d 278). However, that principle originates in federal due process law. [8] Town of Castle Rock v. Gonzales, 545 U.S. 748, 756, 125 S.Ct. 2796, 162 L.Ed.2d 658 (2005) (quoting Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972)). And when interpreting federal due process law, [e]very regional circuit to address the question, including the Sixth Circuit, has concluded that applicants for benefits, no less than benefits recipients, may possess a property interest in the receipt of public welfare entitlements, Cushman v. Shinseki, 576 F.3d 1290, 1297 (Fed.Cir.2009), so long as a statute mandates the payment of benefits to eligible applicants based on objective, particularized criteria, Mallette v. Arlington Cnty. Emps.' Supplemental Ret. Sys. II, 91 F.3d 630, 639-40 (4th Cir.1996); see also Hamby v. Neel, 368 F.3d 549, 559 (6th Cir.2004); Flatford v. Chater, 93 F.3d 1296, 1305 (6th Cir.1996). [9] Federal due process law therefore recognizes a property interest in benefits that have not yet been awarded if the party asserting the property entitlement can point to some policy, law, or mutually explicit understanding that both confers the benefits and limits the discretion of the [other party] to rescind the benefit. R.S.W.W., Inc. v. City of Keego Harbor, 397 F.3d 427, 435 (6th Cir.2005) (internal quotation marks omitted); see also Castle Rock, 545 U.S. at 756, 125 S.Ct. 2796 ([A] benefit is not a protected entitlement if government officials may grant or deny it in their discretion.). Michigan law is consistent with this approach. For example, the Michigan Supreme Court has held that a bar owner with a liquor license has a property interest in his expectancy of receiving a renewal license, independent of his interest in his existing license, despite having had no property interest in his expectancy of an initial license in the first place. Bundo v. City of Walled Lake, 395 Mich. 679, 238 N.W.2d 154, 160 (1976). The Michigan Supreme Court focused entirely on the differences in the statutory procedures for obtaining a renewal license as compared to an initial license. An initial applicant for a liquor license must obtain approval from the local legislative body before the license may be granted; the initial applicant therefore has nothing more than a unilateral expectation or hope that he may receive the license. An existing licensee need not obtain such approval; unless an objection by the local body is filed prior to thirty days before his license expires, renewal take[s] place as a matter of course. Id. at 157, 161. Applying this principle to the present context, we look to the statutory procedures for obtaining worker's compensation in Michigan and conclude that applicants for worker's compensation benefits have a property interest in those benefits at the time that their employer becomes aware of the injury. The WDCA's mandatory language deprives the WCAC of discretion about whether to award benefits. The statute says that employees injured in the course of employment  shall be paid compensation, which is calculated according to a rigid schedule. Mich. Comp. Laws § 418.301(1) (emphasis added). In the context of the WDCA, there is no well established tradition of government officials having discretion despite apparently mandatory ... statutes. Castle Rock, 545 U.S. at 760, 125 S.Ct. 2796. In fact, no adjudication is required: an employee receives worker's compensation benefits fourteen days after the employer has notice or knowledge of the disability. Mich. Comp. Laws § 418.801(1). Applicants therefore acquire a property interest in worker's compensation when employers learn of their employees' physical injuries. The property interest has an ascertainable monetary value and the identity of the entitlement is neither indeterminate nor vague. Castle Rock, 545 U.S. at 763, 125 S.Ct. 2796. These features demarcate a property interest guaranteed by the mandatory language of the WDCA. The dissent argues that the employer's statutory ability to dispute the payment of benefits negates any claim of legal entitlement to benefits prior to a decision to award them. [10] As an initial matter, both the dissent and the district court misread Michigan Compiled Laws § 418.801(2) as permitting the nonpayment of otherwise mandatory weekly compensation in the event of an ongoing dispute. It does not. Subsection (2) relieves an employer of an otherwise automatic penalty for the non-payment of the benefits owed under the statute in the event of an ongoing dispute. [11] But even if it did relieve the employer of its obligation, the existence of a limited mechanism to dispute the receipt of benefits otherwise awarded as a matter of course does not make the expectation cease to be a property interest. [12] In Bundo, 238 N.W.2d at 160-61, for example, the Michigan Supreme Court deemed it of no consequence that the local legislative body retained a statutory right to object to renewal of a liquor license. The absence of a specific statutory provision authorizing an employer not to pay compensation during a dispute also distinguishes this case from American Manufacturers Mutual Insurance Co. v. Sullivan, 526 U.S. 40, 58-61, 119 S.Ct. 977, 143 L.Ed.2d 130 (1999). In American Manufacturers, the Supreme Court held that claimants of worker's compensation benefits in Pennsylvania did not have a property interest in the payment of benefits prior to an adjudication that the medical treatments for which they sought compensation were reasonable and necessary. Id. at 61, 119 S.Ct. 977. In 1993, Pennsylvania had amended its worker's compensation laws to insert a procedure by which an employer could require a review of the necessity of an employee's treatments before a medical bill must be paid. Id. at 45, 119 S.Ct. 977. The Supreme Court held that under the new regime, it was no longer enough that the plaintiffs demonstrated their initial eligibility for medical treatment because they had not overcome the second statutory hurdle of showing that the particular medical treatment they received was reasonable and necessary. Id. at 61, 119 S.Ct. 977. The injured employees therefore could not yet claim a property interest in their expectation of benefits. Id. Here, the underlying Michigan state law does not require injured employees to make such an initial showing before they receive benefits, as Pennsylvania's law did. In contrast, Michigan law resembles the old Pennsylvania regime, stating simply that [a]n employee[ ] who receives a personal injury arising out of and in the course of employment by an employer ... shall be paid compensation as provided in this act. Mich. Comp. Laws § 418.301(1) (emphasis added); see 77 Pa. Stat. Ann. § 531(5) (Purdon Supp. 1978) (The employer shall provide payment for reasonable... services rendered ... as and when needed.). Although an employee bears the burden of showing his personal injury arose during the course of his employment in the event of a dispute, Mich. Comp. Laws § 418.851, no Michigan statutory provision permits the employer to withhold compensation until such a showing has been made. Where, as here, the receipt of the benefit is nondiscretionary and statutorily occurs as a matter of course, we firmly believe that the Michigan courts would recognize a property interest in an injured employee's expectancy of worker's compensation. And, as already discussed, because a property interest in the form of entitlement to benefits is consistent with property as defined by RICO, the plaintiffs have properly stated a claim alleging injury to property when they alleged harm to their expectancy of statutory benefits under the WDCA.