Opinion ID: 2972492
Heading Depth: 3
Heading Rank: 1

Heading: Issue Preclusion Under Michigan Law

Text: Under Michigan law, issue preclusion, known as collateral estoppel, “precludes relitigation of an issue in a subsequent, different cause of action between the same parties where the prior proceeding culminated in a valid, final judgment and the issue was . . . actually litigated, and . . . necessarily determined.” People v. Gates, 452 N.W.2d 627, 630 (Mich.), cert. denied, 497 U.S. 1004 (1990). “[T]he party asserting preclusion bears the burden of proof.” United States v. Dominguez, 359 F.3d 839, 842 (6th Cir.), cert. denied, 125 S. Ct. 261 (2004). Therefore, to prove preclusion, Spectrum must demonstrate that: 1) the parties in both proceedings are the same or in privity, 2) there was a valid, final judgment in the first proceeding, 3) the same issue was actually litigated in the first proceeding, 4) that issue was necessary to the judgment, and 5) the party against whom preclusion is asserted (or its privy) had a full and fair opportunity to litigate the issue. Id. (citing Gates, 452 N.W.2d at 630-31). In this case, the district court found that preclusion was inappropriate because Spectrum failed to meet several of the preclusion requirements. Upon review, we conclude that Spectrum has not satisfied any of the last three requirements, and therefore, is not entitled to preclusion under Michigan law on this issue. First, Michigan courts have held that “[a] question has not been actually litigated until put into issue by the pleadings, submitted to the trier of fact for a determination, and thereafter determined.” VanDeventer v. Mich. Nat’l Bank, 432 N.W.2d 338, 341 (Mich. Ct. App. 1988). The courts have held that an issue which was uncontested or indirectly referenced in the prior judgment was not actually litigated for collateral estoppel purposes. See, e.g., Lichon v. Am. Universal Ins. Co., 459 N.W.2d 288, 295 (Mich. 1990) (holding that an underlying issue was not actually litigated in a prior criminal trial where the party entered plea of nolo contendere); Cogan v. Cogan, 385 N.W.2d 793, 795 (Mich. Ct. App. 1986) (holding that issue of paternity was not actually litigated in the original divorce proceeding which awarded child support). Applying those principles to this case, we conclude that Spectrum has failed to demonstrate that the validity of its lien was actually litigated in the Michigan proceeding. Bowling was simply seeking a protective order to certify that the settlement was in her best interest and to establish the Trust. While approval of the whole settlement necessarily encompasses Spectrum’s lien, there is no evidence in the record that the lien was ever specifically challenged or Medicaid’s balance-billing prohibition ever raised. Spectrum’s lien was never mentioned specifically in the order. The court only referenced the lien as part of the collective amount owed, noting that the settlement “provides Nos. 04-1486/1541 Spectrum Health Continuing Care Group Page 6 v. Anna Marie Bowling Irrevocable Trust for payment of all liens associated with [Bowling’s] medical care;” and that the settlement proceeds should be paid to the Trust “after satisfaction of the existing liens.” J.A. at 99-100 (Mich. Prob. Ct. Order at 1-2). Therefore, because the specific issue was never put forth and determined by the trier of fact, we conclude that it was not actually litigated in the Michigan proceeding. Furthermore, as the district court noted, the validity of Spectrum’s lien was unnecessary to the determination that the malpractice settlement was in Bowling’s best interest or to the establishment of the Trust. The probate court evaluated the settlement pursuant to Michigan Court Rule 2.420, which requires prior court approval for settlements involving legally incapacitated individuals. The comment to the rule lists factors that a court should consider in reaching its decision, but does not include the validity of any liens on the settlement. See Mich. Ct. R. 2.420 Cmt. to 2002 Am. Moreover, in reaching its decision, the Michigan court assumed that the Spectrum lien was enforceable, yet still found the settlement to be in Bowling’s best interest. If the lien was unenforceable and Spectrum was limited to the Medicaid payments, it stands to reason that the benefits of the settlement agreement to Bowling would not be diminished because the Trust would, at the least, receive the amounts specifically allocated to it. Therefore, we conclude that the enforcement of Spectrum’s lien was not necessary to the judgment in the Michigan proceeding. Finally, we conclude that the Trust did not have a full and fair opportunity to litigate the issue in the Michigan court. The issue of the enforcement of the lien was never raised before the probate court and was unrelated to the court’s determination. Moreover, Spectrum was not a party to the action nor in privity with a party to the action in the Michigan court.2 Therefore, the Trust never had a full and fair opportunity to challenge the enforcement of the lien in the Michigan proceeding. Because Spectrum has failed to satisfy several of the collateral estoppel requirements under Michigan law, we conclude that the issue of the validity of the lien is not precluded by the Michigan court judgment.