Court Opinion

ID: 4259273
Source: CourtListenerOpinion
Date Created: 2018-03-29 07:12:31.415628+00
Date Added: 2024-06-11T14:28:35.921278
License: Public Domain

STATE OF MICHIGAN

                             COURT OF APPEALS

MICHIGAN RADIOLOGICAL SOCIETY,                                       UNPUBLISHED
                                                                     March 27, 2018
                 Plaintiff-Appellant,

v                                                                    No. 336417
                                                                     Oakland Circuit Court
OMIC, LLC, doing business as OAKLAND MRI,                            LC No. 2016-153236-CZ
and SUSAN SWIDER,

                 Defendants-Appellees.

Before: K. F. KELLY, P.J., and MURPHY and RIORDAN, JJ.

PER CURIAM.

       Plaintiff appeals as of right an order granting defendants’ motion for summary disposition
pursuant to MCR 2.116(C)(8) (failure to state a claim) and denying plaintiff’s motion for leave to
amend its complaint to add a count of quo warranto. We affirm, concluding that plaintiff lacks
standing to pursue the lawsuit and that a quo warranto claim necessarily fails as a matter of law.

       This case arises from plaintiff’s effort to prevent defendants from continuing the
operation of their business. Plaintiff is a non-profit corporation, whose membership is comprised
of radiologists licensed to practice medicine in Michigan. Defendant OMIC, LLC, doing
business as Oakland MRI,1 is a for-profit limited liability company and business enterprise that
provides diagnostic imaging to the public and is solely owned and managed by defendant Susan
Swider, who is not a licensed physician. Plaintiff alleged that defendants were in violation of the
Michigan Limited Liability Company Act (MLLCA), MCL 450.4101 et seq., the Business
Corporation Act (BCA), MCL 450.1101 et seq., and the Public Health Code (PHC), MCL
333.1101 et seq., with plaintiff seeking declaratory and injunctive relief. Plaintiff claimed that
defendants offer a variety of radiological, diagnostic, and testing services that constitute medical
services under the PHC, that Michigan law requires companies engaged in providing medical
services to be 100% physician owned and managed, that Swider is not a licensed physician, that
defendants are thus practicing medicine without a license, and that such conduct violates the
MLLCA, BCA, and the PHC. The gist of plaintiff’s position is that Oakland MRI could not be

1
    Hereafter, we shall simply refer to Oakland MRI.

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formed as a simple limited liability company. As noted above, the trial court concluded that
plaintiff had failed to state a claim on which relief could be granted. This appeal followed.

        We review de novo a trial court’s decision on a motion for summary disposition,
Altobelli v Hartmann, 499 Mich. 284, 294-295; 884 NW2d 537 (2016), as well as issues of
statutory construction, Estes v Titus, 481 Mich. 573, 578-579; 751 NW2d 493 (2008). Whether a
party has standing is likewise subject to de novo review. Barclae v Zarb, 300 Mich. App. 455,
467; 834 NW2d 100 (2013). In McHone v Sosnowski, 239 Mich. App. 674, 676; 609 NW2d 844
(2000), this Court discussed “standing” in the context of MCR 2.116(C)(5) and (8), observing:

               In this case, the trial court granted summary disposition under MCR
       2.116(C)(5) and (C)(8) on the basis that plaintiff neither pleaded nor provided
       evidentiary support for facts that, if true, would provide him with standing . . . .
       Review of a determination regarding a motion under MCR 2.116(C)(5), which
       asserts a party's lack of capacity to sue, requires consideration of the pleadings,
       depositions, admissions, affidavits, and other documentary evidence submitted by
       the parties. By comparison, a motion under MCR 2.116(C)(8) tests the legal
       sufficiency of a claim as pleaded. All factual allegations and reasonable
       inferences supporting the claim are taken as true. The motion should be granted
       only when the claim is so clearly unenforceable as a matter of law that no factual
       development could possibly justify a right of recovery. Consequently, this Court's
       review de novo of the instant question requires drawing all inferences in the light
       most favorable to plaintiff, and then determining if plaintiff either pleaded or
       established facts that would give him standing to sue. [Citations and quotation
       marks omitted.]

       In Miller v Allstate Ins Co, 481 Mich. 601, 606-608; 751 NW2d 463 (2008), our Supreme
Court recited the following relevant principles regarding standing:

               Our constitution requires that a plaintiff possess standing before a court
       can exercise jurisdiction over that plaintiff's claim. This constitutional standing
       doctrine is longstanding and stems from the separation of powers in our
       constitution. Because the constitution limits the judiciary to the exercise of
       “judicial power,” Const 1963, art 6, § 1, the Legislature encroaches on the
       separation of powers when it attempts to grant standing to litigants who do not
       meet constitutional standing requirements.

               Although the Legislature cannot expand beyond constitutional limits the
       class of persons who possess standing, the Legislature may permissibly limit the
       class of persons who may challenge a statutory violation. That is, a party that has
       constitutional standing may be precluded from enforcing a statutory provision, if
       the Legislature so provides. This doctrine has been referred to as a requirement
       that a party possess “statutory standing.” Statutory standing simply entails
       statutory interpretation: the question it asks is whether the Legislature has
       accorded this injured plaintiff the right to sue the defendant to redress his injury.

                                                ***

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                 Statutory standing, which necessitates an inquiry into whether a statute
         authorizes a plaintiff to sue at all, must be distinguished from whether a statute
         permits an individual claim for a particular type of relief. . . . The statutory-
         standing inquiry is generally jurisdictional; the claim-for-relief inquiry is non-
         jurisdictional. [Citations, quotation marks, and alteration brackets omitted.]

       In the opening paragraph of Miller, the Court outlined the issues presented and its
holding, stating:

                 We granted leave to appeal to consider (1) whether plaintiff corporation
         was improperly incorporated under the . . . BCA . . ., and, if so, (2) whether an
         improperly incorporated entity rendering physical therapy treatment has
         “lawfully” rendered such treatment under MCL 500.3157. However, because
         defendant insurance company lacks statutory standing to challenge plaintiff's
         corporate status under MCL 450.1221,[2] which grants the power to challenge
         corporate status solely to the Attorney General, the above questions are not
         properly before us. Accordingly, we affirm the judgment of the Court of Appeals
         in plaintiff's favor, albeit on alternative grounds, and we remand to the trial court
         for further proceedings. [Miller, 481 Mich. at 604.]

        The Miller Court observed that “[b]y naming only the Attorney General in [MCL
450.1221] . . ., the Legislature has indicated that the Attorney General alone has the authority to
challenge corporate status.” Id. at 611. “In essence, MCL 450.1221 prevents any person – other
than the Attorney General – from bringing any challenge to corporate status under the BCA:
every such challenge would be doomed to failure, because the mere filing of articles of
incorporation constitutes “conclusive evidence” of the corporation's legality.” Id. at 611-612.
The Court concluded that the defendant insurance company lacked statutory standing to assert
that the plaintiff was improperly incorporated. Id. at 616.3 Plaintiff attempts to distinguish this
case from Miller in a variety of unconvincing ways. The same reasoning utilized in Miller

2
    MCL 450.1221 provides:
                 The corporate existence shall begin on the effective date of the articles of
         incorporation as provided in section 131. Filing is conclusive evidence that all
         conditions precedent required to be performed under this act have been fulfilled
         and that the corporation has been formed under this act, except in an action or
         special proceeding by the attorney general.
3
  The Court noted that “Michigan courts have long held that the state possesses the sole authority
to question whether a corporation has been properly incorporated under the relevant law.”
Miller, 481 Mich. at 615.

                                                  -3-
applies to Oakland MRI, organized as a limited liability company.4 As part of the MLLCA,
MCL 450.4202(2) provides:

                The existence of the limited liability company begins on the effective date
       of the articles of organization as provided in section 104. Filing is conclusive
       evidence that all conditions precedent required to be performed under this act are
       fulfilled and that the company is formed under this act, except in an action or
       special proceeding by the attorney general. [Emphasis added.]

        Accordingly, the same analysis employed by the Supreme Court in Miller as to the BCA
applies to the MLLCA. The only person or entity able to challenge Oakland MRI’s status as a
valid limited liability company is the Attorney General. Therefore, plaintiff lacks statutory
standing to challenge the validity of Oakland MRI.5 Given our ruling, it is unnecessary for us to
determine whether Oakland MRI was properly formed as a limited liability company.

         The trial court denied plaintiff’s motion for leave to amend the complaint so as to allege a
claim of quo warranto, MCL 600.4501; MCR 3.306, which was not an issue addressed by the
Miller Court. Plaintiff made an application to the Attorney General to bring an action against
defendants and the Attorney General refused to do so. Given these steps by plaintiff, it is clear
that it was pursuing quo warranto under MCR 3.306(B)(3). Accordingly, the case was required
to fit under MCR 3.306(B)(1) (actions by Attorney General). MCR 3.306(B)(3)(a). In this
context, we conclude that there exists no merit for further inquiry by quo warranto proceedings,
Davis v Chatman, 292 Mich. App. 603, 613; 808 NW2d 555 (2011), where none of the
circumstances listed in MCR 3.306(B)(1) are applicable, given that this case involves a limited
liability company and not a corporation. Thus, albeit for different reasons, the trial court did not
abuse its discretion in denying plaintiff’s motion. Davis, 292 Mich. App. at 611-612.

       Affirmed. Having fully prevailed on appeal, taxable costs are awarded to defendants
under MCR 7.219.

                                                              /s/ Kirsten Frank Kelly
                                                              /s/ William B. Murphy
                                                              /s/ Michael J. Riordan

4
  This Court interprets the BCA and the MLLCA in a consistent manner because they relate to
the common purpose of forming a business entity. Duray Dev, LLC v Perrin, 288 Mich. App.
143, 159; 792 NW2d 749 (2010).
5
 We note that MCL 450.4803, which is part of the MLLCA, authorizes the Attorney General to
bring an action for the dissolution of a limited liability company if the company “[p]rocured its
organization through fraud,” “[r]epeatedly and willfully exceeded the authority conferred on it
by law,” or “[r]epeatedly and willfully conducted its business in an unlawful manner.” MCL
450.4803(1)(a) to (c).

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