Court Opinion

ID: 6320364
Source: CourtListenerOpinion
Date Created: 2022-03-04 21:06:31.509326+00
Date Added: 2024-06-11T09:02:25.207170
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                  revision until final publication in the Michigan Appeals Reports.

                           STATE OF MICHIGAN

                            COURT OF APPEALS

ENHANCE CENTER FOR INTERVENTIONAL                                     UNPUBLISHED
SPINE & SPORTS,                                                       November 9, 2021

               Plaintiff-Appellant,

v                                                                     No. 354517
                                                                      Wayne Circuit Court
AUTO-OWNERS INSURANCE COMPANY and                                     LC No. 19-016609-NF
HOME-OWNERS INSURANCE COMPANY,

               Defendants-Appellees.

Before: GLEICHER, P.J., and K. F. KELLY and RONAYNE KRAUSE, JJ.

PER CURIAM.

        The common law of preclusion is complicated, and adding an assignment overlay adds to
the analytical challenge. The good news is that for more than a century, Michigan law has
steadfastly adhered to an easily understood principle. A party that has been assigned a right to sue
is not bound by a judgment obtained after the assignment was made unless that party had a right
to have the merits of its claim adjudicated. Aultman, Miller & Co v Sloan, 115 Mich 151, 154; 73
NW 123 (1897). This principle is grounded in the due process notion that a party must have a full
and fair opportunity to litigate its own claim before that claim may be dismissed.

        Here, plaintiff Enhance Center for Interventional Spine & Sports received an assignment
of a patient’s right to sue for first-party benefits before the circuit court dismissed the assignor’s
lawsuit. Enhance was not involved in that case. Nevertheless, the circuit court summarily
dismissed Enhance’s subsequent suit for repayment for the services it had provided. Because
Enhance was not a party to the first case, it was not bound by its result. We reverse.

                       I. BACKGROUND FACTS AND PROCEEDINGS

        Kelly Johnson was involved in an automobile accident in February 2018, and filed a lawsuit
less than a year later. Her complaint sought both first- and third-party benefits, and named as
defendants Auto-Owners Insurance Company and Jacqueline Devitt, the driver of the allegedly at-

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fault vehicle.1 In defiance of a court order, Johnson failed to respond to requests for admission
resulting in her admission that she was not claiming “any allowable expense benefits, pursuant to
MCL 500.3107(1)(a).”2 She also failed to produce court-ordered discovery materials. Home-
Owners moved for partial summary disposition seeking the dismissal of Johnson’s first-party
claim.

        Before that motion was decided, Johnson assigned to Enhance her right to pursue her claim
against Home-Owners “for non-payment of the services provided by Enhance Center.” Enhance
did not intervene in Johnson’s suit, and no effort was made to bring Enhance into the litigation.
The circuit court subsequently granted Home-Owners’ motion for partial summary disposition,
dismissing with prejudice Johnson’s first-party benefit claims against Home-Owners.

        Enhance then brought this lawsuit against Home-Owners, seeking payment for the
chiropractic services it had provided to Johnson. Home-Owners moved for summary disposition
under MCR 2.116(C)(7) and (C)(10), asserting that the doctrine of res judicata barred Enhance’s
claims. Home-Owners’ argument rested primarily on this Court’s decision in Dawoud v State
Farm Mut Auto Ins Co, 317 Mich App 517, 522-523; 895 NW2d 188 (2016). Enhance countered
with this Court’s unpublished opinion in Mecosta Co Med Ctr v Metro Group Prop & Cas Ins Co,
unpublished opinion of the Court of Appeals, issued March 24, 2020 (Docket No. 345868).3 The
circuit court ruled that because Dawoud was “precedential and binding” it controlled the outcome
and that res judicata barred Enhance’s suit.

                                           II. ANALYSIS

       We review de novo the circuit court’s summary disposition ruling. Moser v Detroit, 284
Mich App 536, 538; 772 NW2d 823 (2009). We also review de novo questions of law, including
“the application of legal doctrines, such as res judicata and collateral estoppel.” Estes v Titus, 481
Mich 573, 578-579; 751 NW2d 493 (2008).

         In general, res judicata precludes a subsequent action when “the first action was decided
on the merits,” “the matter contested in the second action was or could have been resolved in the
first” action, and “both actions involve the same parties or their privies.” Sewell v Clean Cut Mgt,
Inc, 463 Mich 569, 575; 621 NW2d 222 (2001). The third component of res judicata is at issue
here. Parties are in privity for res judicata purposes if the first litigant represents the same legal
right that the second later asserts, the parties share “a substantial identity of interests,” or enjoy “a
working functional relationship in which the interests of the nonparty are presented and protected

1
 During the litigation, the parties stipulated to substitute Home-Owners Insurance Company for
Auto-Owners.
2
  “Allowable expenses” include “reasonable charges incurred for reasonably necessary . . .
services . . . for an injured person’s care, recovery or rehabilitation.” MCL 500.3107(1)(a).
3
  The Supreme Court has granted oral argument to determine whether to grant leave to appeal in
that case. Mecosta Co Med Ctr v Metro Group Prop & Cas Ins Co, 507 Mich 865 (20210).

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by the party in the litigation.” Adair v Michigan, 470 Mich 105, 122; 680 NW2d 386 (2004)
(quotation marks and citations omitted).4

        In Howell v Vito’s Trucking & Excavating Co, 386 Mich 37, 43; 191 NW2d 313 (1971),
the Supreme Court recognized that privity’s “definitional groundwork” incorporates that “[a] privy
is one who, after rendition of the judgment, has acquired an interest in the subject matter affected
by the judgment through or under one of the parties, as by inheritance, succession, or purchase.”
(Emphasis added, quotation marks and citation omitted.) This formulation aligns with Aultman’s
holding that an assignee otherwise in privity with its assignor is not bound by a judgment entered
after the assignment at issue. Aultman, 115 Mich at 154. As this Court explained in Mecosta:

       A contrary rule would allow an assignor to cut off the rights of the assignee without
       affording him an opportunity to be heard. [Aultman, 115 Mich at 154.] Indeed, it
       may constitute a deprivation of property without due process of law to extend
       privity to bind an assignee by a judgment entered against his or her assignor that
       occurred after the assignor assigned his or her rights in the property. Postal Tel
       Cable Co, 247 US 464, 476; 38 S Ct 566; 62 L Ed 1215 (1928). In this state rather,
       for purposes of property law, an assignee is in privity with the assignor only up to
       the time of the assignment. See [Howell, 386 Mich at 43.] Accordingly, if the party
       asserting preclusion has no other basis for establishing privity beyond the fact that
       the assignee succeeded to the assignor’s interest, the party asserting preclusion will
       not prevail unless the judgment was entered before the transfer at issue. Id.
       [Mecosta Co Med Ctr, unpub op at 4-5.]

       Enhance was not bound by the judgment against Johnson in the first action because the
assignment was made before the judgment against Johnson was entered and Enhance had no
opportunity to be heard in that case. In Taylor v Sturgell, 553 US 880, 891; 128 S Ct 2161; 171 L
Ed 2d 155 (2008), the United States Supreme Court observed that “[t]he federal common law of
preclusion is, of course, subject to due process limitations,” and Aultman supports that Michigan’s
common law, too, embraces this principle. Accordingly, the circuit court erred by summarily
dismissing this case on res judicata grounds.

         We must also respectfully take issue with the circuit court’s determination that Dawoud
controls the outcome. While Dawoud bears superficial similarities to this case, it is readily (and
fatally) distinguishable. Dawoud, 317 Mich App at 519-520, was also a first-party no-fault action,
and it involved a dismissal for a discovery violation. But the legally relevant similarities stop
there, as in Dawoud the service providers, who filed a second lawsuit following the dismissal of
the first, “were allowed to intervene by stipulation of all parties to pursue direct payment of their
bills[.]” Id. at 519. In other words, the providers were parties in the first case, rather than

4
  In Taylor v Sturgell, 553 US 880, 894 n 8; 128 S Ct 2161; 171 L Ed 2d 155 (2008), the United
States Supreme Court observed that the term “privity” has “come to be used . . . broadly, as a way
to express the conclusion that nonparty preclusion is appropriate on any ground.” The facts of this
case counsel that overbroad use of the term risks a deprivation of due process.

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ostensible “privies.” The application of res judicata in that circumstance was a no-brainer, as both
the first and the second action involved “the same parties.” Dawoud is inapposite here.

        We reverse and remand for proceedings consistent with this opinion. We do not retain
jurisdiction. As the prevailing party, Enhance may tax its costs. MCR 7.219(A).

                                                             /s/ Elizabeth L. Gleicher
                                                             /s/ Kirsten Frank Kelly
                                                             /s/ Amy Ronayne Krause

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