False Claims Act (FCA) retaliation claim; Motion to compel arbitration; Waiver; In re Checking Account Overdraft Litig (11th Cir); The Federal Arbitration Act (FAA); “Actual prejudice”

The court held for the first time in this circuit that a party who acted inconsistently when it first asked a court to rule on arbitrability and then later argued that an arbitrator must make the determination waived its right to arbitrate through its “inconsistent actions and delayed assertion . . . .” When relator-Dorsa began working for defendant-Miraca, he signed an employment contract containing an arbitration clause. He later filed this qui tam action against Miraca. Miraca fired him, asserting he had been named in a sexual harassment investigation. Dorsa then amended his complaint to add a FCA retaliation claim. The government intervened and a settlement was reached as to the other FCA claims. Miraca moved to compel arbitration. In doing so, it “invited the district court to rule on the scope of the arbitration clause.” The district court ruled that the clause did not cover the FCA retaliation claim. In a prior appeal, the court dismissed Miraca’s challenge to the district court’s ruling, because the FAA only confers appellate jurisdiction for a denial of “a request to stay the proceedings or to compel arbitration.” On remand, Miraca moved to stay the proceedings or to compel arbitration, arguing that an arbitrator, not the district court, should consider the arbitrability issue. The district court denied that motion, again ruling that the arbitration clause did not cover the retaliation claim. In this appeal, the court noted that Miraca asked the district court to rule that the retaliation claim was arbitrable when it moved to dismiss. Then, it changed course and argued that “an arbitrator had to rule on the arbitrability of the claim. . . . Miraca’s filing of the motion to dismiss is completely inconsistent with its later attempts to rely on the arbitration agreement. Miraca may not first ask the district court to determine arbitrability and then later argue that the court cannot decide after receiving an unfavorable ruling.” The court noted that at least one other circuit court has ruled “that a party waives its right to arbitration in similar circumstances.” It agreed. Turning to the issue of actual prejudice, it found that Miraca’s actions caused Dorsa “unnecessary delay and expense . . . .” Further, it held that Miraca “forfeited” its argument that the district court erred by ruling the retaliation claim fell outside the arbitration clause where “Miraca did not argue about the district court’s motion-to-dismiss ruling in its petition” to stay arbitration. Affirmed.

Shareholder deadlock; Whether a forced stock sale violated the court’s remand instruction; Valuation; Interest on cash advances; Pitsch Holding Company, Inc. (PHC)

The court rejected plaintiffs’ contention that a forced stock sale violated the court’s remand instructions, concluding that it “did not limit the trial court’s resolution” of the shareholder deadlock to a corporate dissolution. And it found plaintiffs’ challenges to the trial court’s valuation of the company shares similarly lacked merit. The appeal arose out of a dispute over control of a family-owned business. The trial court ordered plaintiffs-Loren and Gary Pitsch to sell their stock in defendant-PHC to PHC and defendants-Steven, Laura, and Lewis Pitsch. Plaintiffs argued that “the trial court was required to dissolve and liquidate PHC on remand following Pitsch I.” The court found that the “trial court proceeded on a reasonable interpretation of this Court’s opinion and order, but opted against dissolution. This did not exceed the scope of the trial court’s authority on remand.” Plaintiffs contended that the court “must have intended to order dissolution as that was the sole relief available to resolve a shareholder deadlock under MCL 450.1823. The statutory language does not require dissolution when deadlock occurs, but states that a corporation ‘may be dissolved by judgment’ when certain criteria are met.” The court concluded that the trial court’s “authority cannot be limited in the manner suggested by plaintiffs.” As to valuation, considering “the trial court’s goal of resolving the deadlock issue in a way that maximized value to the shareholders, testimony” from an accountant (K) with the management firm, Amicus, appointed as a special master in the case “that a forced sale would do that,” as well as testimony from Amicus’s president “that $1,859,923 was a ‘very fair price,’ and all parties’ initial willingness to sell their stock for that amount, we are not left with a ‘definite and firm conviction’ that the trial court erred.” Finally, the court held that the “plain language of the cash advance agreement requires plaintiffs to pay interest on the cash advances as they did not reach an agreement to sell their stock before” the set date. The trial court “did not err in upholding that contract.” Affirmed.

Collateral challenges to plea-based convictions based on United States v. Davis; 28 USC § 2255; Whether postconviction changes to the law can circumvent plea-agreement waivers; United States v Bradley; 18 USC § 924(c); Applicability of Vowell v United States

The court dismissed petitioners-Portis and Thompson’s appeals, holding that the appeal and collateral-challenge waivers in their plea agreements could not be overcome by changes to the law made by Davis. They pled guilty to conspiring to rob electronics stores using firearms. Their plea agreements were virtually identical and contained provisions prohibiting them "from bringing direct or collateral challenges to their convictions.” But they filed these collateral challenges to their convictions under § 2255, arguing that Davis, which narrowed the types of offenses that qualify as “crimes of violence” under § 924(c), allowed them to circumvent the waivers in their plea agreement. The court held that the terms of the plea agreement controlled where they “knowingly and voluntarily entered the plea agreement in return for the government’s decision to drop several counts against them.” They argued that their waiver should not apply because they had the right to benefit from Davis’s changes to the law. However, under Bradley, postconviction changes to the law cannot circumvent plea-agreement waivers. They “do not ‘suddenly make the plea involuntary or unknowing or otherwise undo its binding nature.’” The court rejected petitioners’ attempt to avoid the consequences of their agreement by arguing that their sentences exceeded the statutory maximum because they pled “guilty to something for which no one could be convicted today . . . .” It held that their waivers were knowing and voluntary, and “[i]t was well understood then, as it is amply understood now, that judicial interpretations of the Constitution and laws could change, and on that ground alone a collateral attack waiver would not be unknowing.” The court also found that Vowell did not apply, and declined to apply “a ‘miscarriage-of-justice’ exception” to overcome the waivers, noting that petitioners did not argue for such an exception, the court has not recognized it, and it “likely would not apply given the multitude of crimes for which” they were indicted.

Child custody; Best interests of the child; Lombardo v Lombardo; The best-interest factors; MCL 722.23(c) & (j), ; Thompson v Thompson; Heid v AAASulewski (After Remand); Harmless error; MCR 2.613(A); Established custodial environment (ECE); MCL 722.27(1)(c); Rains v Rains

The court held that the trial court did not err by awarding the parties’ joint legal and physical custody of their child. They lived together and raised the child jointly until they separated. Shortly thereafter, plaintiff-father sought sole custody on the basis that defendant-mother’s “heavy” marijuana use caused the child to be exposed to and test positive for marijuana. The trial court found the child had an ECE with both parents and awarded them joint legal and physical custody, with plaintiff having primary residence. On appeal, the court rejected plaintiff’s argument that the trial court abused its discretion by denying his pretrial motion to compel defendant to produce copies of the school report cards for her other children. “Assuming that the requested report cards were not privileged, the trial court did not abuse its discretion by denying father access to them on relevancy grounds. And even if [it] had abused its discretion, the error was harmless.” The court also rejected his claim that the trial court erred by finding an ECE existed with both parents, noting that his “own time line of events indicates that [the child] had a consistent physical custody arrangement with both parents spanning the 13 or 14 months immediately before the trial court’s disputed ruling.” Finally, the court rejected his contention that the trial court abused its discretion “or relied on findings against the great weight of the evidence by finding that several of the best-interest factors equally favored both parties, and by determining that, on the whole, it was in [the child’s] best interests for the parties to share joint legal and physical custody . . . ‘with equal alternate week parenting time.’” The court could “not conclude that the trial court abused its discretion or relied on findings against the great weight of the evidence by ruling as it did.” On the contrary, although the court agreed with plaintiff and the trial court that “the record evidence militated in favor of [plaintiff’s] position somewhat (i.e., that more best-interest factors favored him), it does not follow that he carried his burden of producing evidence so clear, direct and weighty, and convincing as to enable the factfinder to come to a clear conviction, without hesitancy, that it was in [the child’s] best interests to alter the” ECE by awarding plaintiff sole legal and physical custody. “As in Heid, the trial court did not abuse its discretion by refusing ‘to subject [the child] to any further disruption in his young life.’” Affirmed.

Dispute over the division of interpleaded insurance proceeds; Pro rata distribution; Moore v McDowell; Sheehan v Liberty Mut Fire Ins Co (AL); Interpleader action; MCR 3.603; Fidelity & Deposit Co of MD v Cody; Determining a claimant’s rights; MCR 3.603(B)(3); Right to a jury trial in an interpleader action; Curran v Williams; Uninsured motorist (UM) coverage

The court held that although the trial court correctly relied on case law holding that a pro rata distribution was required under the circumstances, it erred by splitting the insurance proceeds equally between the two defendants-estates without holding a trial or making any factual findings, despite one of the estates claiming unequal losses. Thus, it reversed and remanded, instructing the trial court to hold a jury trial to determine the damages arising from each decedent’s death and order a pro rata distribution of the insurance funds consistent with this opinion. Stamp and Mahaffy were killed in an auto accident. Stamp’s estate sought UM coverage from plaintiff-insurer (Secura). Secura filed this interpleader action against the estates, alleging there would likely be multiple lawsuits relating to the UM coverage with aggregate losses exceeding the $500,000 limit on UM coverage previously determined by the trial court. Mahaffy’s estate moved the trial court to equally divide the $500,000 between the estates. Stamp’s estate opposed this on the basis it suffered more damages because Stamp had a dependent child while Mahaffy had no dependents, and asserted that a jury should determine each estate’s damages. The trial court agreed with Mahaffy’s estate. On appeal, the court agreed with Stamp’s estate that the trial court erred by dividing the “insurance proceeds equally without holding a jury trial or evidentiary hearing to determine each estate’s losses.” It concluded that Moore “did not hold that each claimant should receive the same share of the limited insurance funds regardless of the extent of their damages; rather, it held that when the claims exceed the funds, equity requires distribution on a pro rata basis.” As such, a pro rata distribution when there are limited funds means that “the claimants will receive distributions in proportion to their claims.” The court explained that “[m]erely dividing a limited fund into equal shares when a claimant asserts unequal losses is not an equitable result. Because Stamp’s estate maintains that its losses exceed Mahaffy’s estate, there was a material question of fact as to each estate’s damages.” Further, to the extent the trial court “had discretion to grant a jury trial, [it] abused that discretion by resting its decision on a misinterpretation of Moore.” Stamp’s estate “had a right to a jury trial in the earlier action,” and the fact that “Secura demanded a jury trial on damages in that action only supports the conclusion that one should be held.” Moreover, no persuasive argument was “offered for why a jury trial should not be held.”

False Claims Act (FCA) retaliation claim; Motion to compel arbitration; Waiver; In re Checking Account Overdraft Litig (11th Cir); The Federal Arbitration Act (FAA); “Actual prejudice”

The court held for the first time in this circuit that a party who acted inconsistently when it first asked a court to rule on arbitrability and then later argued that an arbitrator must make the determination waived its right to arbitrate through its “inconsistent actions and delayed assertion . . . .” When relator-Dorsa began working for defendant-Miraca, he signed an employment contract containing an arbitration clause. He later filed this qui tam action against Miraca. Miraca fired him, asserting he had been named in a sexual harassment investigation. Dorsa then amended his complaint to add a FCA retaliation claim. The government intervened and a settlement was reached as to the other FCA claims. Miraca moved to compel arbitration. In doing so, it “invited the district court to rule on the scope of the arbitration clause.” The district court ruled that the clause did not cover the FCA retaliation claim. In a prior appeal, the court dismissed Miraca’s challenge to the district court’s ruling, because the FAA only confers appellate jurisdiction for a denial of “a request to stay the proceedings or to compel arbitration.” On remand, Miraca moved to stay the proceedings or to compel arbitration, arguing that an arbitrator, not the district court, should consider the arbitrability issue. The district court denied that motion, again ruling that the arbitration clause did not cover the retaliation claim. In this appeal, the court noted that Miraca asked the district court to rule that the retaliation claim was arbitrable when it moved to dismiss. Then, it changed course and argued that “an arbitrator had to rule on the arbitrability of the claim. . . . Miraca’s filing of the motion to dismiss is completely inconsistent with its later attempts to rely on the arbitration agreement. Miraca may not first ask the district court to determine arbitrability and then later argue that the court cannot decide after receiving an unfavorable ruling.” The court noted that at least one other circuit court has ruled “that a party waives its right to arbitration in similar circumstances.” It agreed. Turning to the issue of actual prejudice, it found that Miraca’s actions caused Dorsa “unnecessary delay and expense . . . .” Further, it held that Miraca “forfeited” its argument that the district court erred by ruling the retaliation claim fell outside the arbitration clause where “Miraca did not argue about the district court’s motion-to-dismiss ruling in its petition” to stay arbitration. Affirmed.

Disabled veteran property tax exemption under MCL 211.7b; MCL 211.7b(1) & (2); Michigan Tax Tribunal (MTT) 

The court held that applying the plain language of the statute, it was clear that petitioner (a disabled veteran’s surviving spouse) was not entitled to the disabled veteran property tax exemption under MCL 211.7b where the husband’s name was not on the deed. The MTT found that the husband never owned the Firesteel property because the property was deeded to petitioner only. That finding was “supported by competent, material, and substantial evidence.” The quitclaim deed she “received for the Firesteel property only included her name, and she admitted that her husband’s name was not on the deed because of issues between him and the prior owner of the property.” Thus, the MTT’s finding was conclusive. Because the “husband did not own the Firesteel property, he was not eligible for the exemption under MCL 211.7b(1). In turn, because he was not eligible for the exemption, petitioner, as his surviving spouse, is not eligible for the exemption.” Affirmed.

Order for a child involved in child-protective proceedings to undergo an independent medical exam (IME) to determine whether she has any physical signs of sexual abuse; Applicability of MCR 2.311; MCL 333.21527(1); MCL 776.21; Due process; Mathews v Eldridge; In re Sanders

In an issue of first impression, the court held that a trial court in a child protection proceeding does not have the authority to order a “child alleging sexual assault to submit to a court-ordered forensic sexual assault” exam. The trial court granted respondent-mother’s motion for the 12-year-old child (A) to undergo an IME to determine whether she had any physical signs of sexual abuse. Respondent did not point “to any viable legal basis for entry of the” order. She failed to provide authority showing “she has a right to request an IME, nor has she provided legal precedent for the trial court to order an IME in the context of a termination proceeding.” While she cited MCR 2.311, this “is a rule of civil procedure—not a rule applicable to child protective proceedings” and the court found that reading it “to authorize the trial court’s unprecedented order expands the court rule well beyond its bounds.” On the other hand, the criminal statutes A cited were persuasive. “The fact that MCL 333.21527(1) requires health care professionals to inform a patient who has alleged sexual assault within the preceding 120 hours of the availability of a forensic" exam, and allows it only with the patient’s consent, highlighted “the trial court’s lack of authority to order an IME of [A] against her consent and so far removed from the time of the alleged assault.” In addition, MCL 776.21 was a “persuasive indicator that the trial court lacked authority to order” the IME. The court also found that the “trial court’s analysis of the issue under due process was incomplete, erroneously determined” the Eldridge factors weighed in favor of ordering the IME, “and failed to ensure [A’s] well-being.” The IME impacted A’s private interests “significantly more than” respondent’s and thus, the first factor weighed against ordering it. The second “factor—the risk of erroneous deprivation of the interest through the procedure—is very minimal.” The court found it “highly unlikely” an IME would definitively answer whether A “was sexually assaulted and even less likely that the results” would resolve whether she told respondent about any assault. The court also held that the third factor, the state’s interest, weighed against ordering the IME. Permitting “trial courts to force sexual assault complainants to undergo medical examinations—particularly when the examination will have minimal probative value—could have the unintended effect of deterring disclosure of sexual assault.” Reversed and remanded.

Removal of a trustee; MCL 700.7706(2)(c); Appointment of a successor trustee; MCL 700.7704(3); Guardian ad litem (GAL)

The court held that the trial court did not abuse its discretion in removing appellant-KeyBank National Association as trustee of the trust at issue under MCL 700.7706(2)(c). But it did abuse its discretion by appointing appellee-BakerOmerod as successor trustee without complying with MCL 700.7704(3). Thus, the court affirmed the order removing KeyBank as trustee, vacated the order appointing BakerOmerod as successor trustee, and remanded. “The Trust was funded with the proceeds of a settlement obtained for” a child’s (Logan) benefit resulting from “injuries he sustained at the hospital in the days after his birth. The sole purpose of the Trust is to provide for Logan’s ‘lifelong care.’” Under MCL 700.7706(2)(c), a trustee may be removed “if, ‘because of . . . persistent failure of the trustee to administer the trust effectively, the court determines that removal of the trustee best serves the purposes of the trust.’” Based on the GAL’s report, there was a basis for finding “that some of the attorney fees and paralegal fees were excessive, at least with respect to the size and nature of this trust. The trustee’s decision to hire a law firm that charged an excessive fee does not amount to the effective administration of the Trust. Next, as repeatedly recognized by the trial court, the Trust had relatively modest assets. By paying a large fiduciary fee and overall excessive attorney fees, the court reasoned that the Trust’s assets would be depleted prematurely. Thus, although KeyBank’s fiduciary fees were reasonable, they were not, as the court noted, reasonable for” this Trust. The record supported the trial court’s conclusion. It indicated “the Trust’s expenditures (including fiduciary fees, attorney fees, and distributions) was persistently exceeding its gains.” Exhausting it early would not serve the Trust’s best interests. However, in appointing the successor trustee, the trial court, contrary to the Trust’s terms, failed to give the Trust Advisor “a 30-day period to designate a successor trustee. Because the court was required to fill the vacancy in the manner designated by the Trust, and because its order did not do so, the court abused its discretion in appointing BakerOmerod as successor trustee.”