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STATE OF MICHIGAN

IN THE SUPREME COURT

(On Application for Leave to Appeal from the Court of Appeals)

W.A. FOOTE MEMORIAL HOSPITAL, d/b/a ALLEGIANCE HEAL TH, a Michigan Non-profit Corporation

Plaintiff-Appellant,

V

MICHIGAN ASSIGNED CLAIMS PLAN, MICHIGAN AUTOMOBILE INSURANCE PLACEMENT FACILITY,

Defendants-Appellees,

and

JOE DOE INSURANCE COMPANY,

Defendant.

Supreme Comi Case No. 156622 Court of Appeals Case No. 333360 Kent County Circuit Court Case No. 15-08218-NF

AMICUS CURIAE BRIEF OF THE MICHIGAN HEALTH & HOSPITAL ASSOCIATION

CLARK HILL PLC Jennifer K. Green (P69019) Cynthia Filipovich (P53173) 151 S. Old Woodward Avenue, Suite 200 Birmingham, MI 48009 (248) 642-9692 Attorneys for Amicus Curiae Michigan Health and Hospital Association

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TABLE OF CONTENTS

TABLE OR AUTHORITIES .......................................................................................................... ii

STATEMENT OF QUESTION PRESENTED ............................................................................. iv

STATEMENT OF INTEREST OF AMICUS CURIAE .................................................................. l

SUMMARY OF ARGUMENT ...................................................................................................... 2

STATEMENT OF FACTS ............................................................................................................. 4

ST AND ARD OF REVIEW ............................................................................................................ 4

ARGUMENT .................................................................................................................................. 4

I. BECAUSE THE COURT OF APPEALS' DECISION IN COVENANT ANNOUNCED A NEW RULE OF LAW, POHUTSKI CONTROLS AND, UNDER THE POHUTSKITEST, IT IS CLEAR THAT THE COVENANT DECISION SOLELY APPLIES PROSPECTIVELY ......................................................................................................................... 4

A. The Court of Appeals' Tortured Analysis Must be Rejected .............................................. 4

B. Under the Pohutski Paradigm, Covenant Applies Prospectively .......................................... .

1) Covenant established a new rule oflaw ........................................................................... 6

2) Application of Pohutski 's three-factor test demonstrates that Covenant solely has prospective application ................................................................................... 9

a) The new rule's purpose is served by prospective application .................................... 9

b) The vast reliance on the old rule inures to prospective application ......................... 10

c) Covenant's disruption to the administration of justice when applied retroactively requires that it solely have prospective application ............................ 13

d). The Court of Appeals Improperly Found that Pohutski Had Been Impliedly Repudiated ................................................................................................................ 16

II. POHUTKSI HAS NOT BEEN "EFFECTIVELY REPUDIATED" AND THE COURT OF APPEALS HAS NO AUTHORITY TO RULE THAT IT HAS .............................................. 17

A. The Comi of Appeals Lacks Authority to Find Supreme Court Precedent "Effectively Repudiated." ....................................................................................................................... 17

B. Pohutski Remains Viable and Has Not Been Undercut by Spectrum, Hathcock, or Devillers ............................................................................................................................. 18

CONCLUSION AND RELIEF REQUESTED ............................................................................ 22

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Cases Bezeau v Palace Sports & Entertainment, Inc,

487 Mich 455; 795 NW2d 797 (2010), citing Pohutski v City of Allen Park, 465 Mich 675; 641 NW2d 219 (2002) ....................................................................................................... passim

Bezeau v Palace Sports & Entertainment, Inc, 487 Mich 455, 795 NW2d 797 (2010) ............... 19 Boyd [v WG. Wade Shows,

443 Mich. 515; 505 NW2d 544 (1993) ....................................................................................... 8 Boydv WG Wade Shows, 443 Mich 515,523,505 NW2d 544 (1993), ....................................... 19 Chiropractors Rehabilitation Group, PC v State Farm Mut Auto Ins Co,

313 Mich App 113; 818 NW2d 120 (2015) ................................................................................ 7 Co of Wayne v Hathcock, 471 Mich 445,484 n. 98; 684 NW2d 765, 788 (2004 ........................ 21 Cooper v MRM Investment Co,

367 F3d 493 (CA 6 2004) ......................................................................................................... 18 Covenant ................................................................................................................................ passim Covenant Med Ctr, Inc v State Farm Mut Auto Ins Co,

500 Mich 591; 895 NW2d 490 (2017) ............................................................................... passim Devillers v Auto Club Ins Ass'n, 473 Mich 562; 702 NW2d 539 (2005) ...................................... 22 Edwards v Clinton Valley Ctr,

138 Mich App 312; 360NW2d 606 (1984) .............................................................................. 18 Foote v Mich. Assigned Claims Plan,

321 Mich App_, 2017 WL 3836645 ............................................................................. passim Great Northern R. Co. v. Sunburst Oil & Refining Co., 287 U.S. 358, 364 (1932)) ...................... 20 Harper v Virginia Dep 't of Taxation,

509 us 86 (1993) ................................................................................................................ 17, 18 Hyde v Univ of Mich Bd of Regents, 426 Mich 223, 240, 393 NW2d 84 7 (1986) ....................... 21 Hyde v Univ of Mich Board of Regents,

426 Mich 223; 393 NW2d 847 (1986) ........................................................................................ 5 Karaczewski v. Farbman Stein & Co,

478 Mich 28, 732 NW2d 56 (2007) .................................................................................. 8, 9, 11 Karaczewski v. Farbman Stein & Co., 478 Mich. 28, 732 N.W.2d 56 (2007), ............................ 19 Lakeland Neurocare v State Farm Mut Auto Ins Co,

250 Mich App 35; 645 NW2d 59 (2002) .................................................................................... 7 LaMothe v Auto Club Ins Ass 'n,

214 Mich App 577; 543 NW2d 42 (1995) .................................................................................. 7 Pohutski v City of Allen Park,

465 Mich 675; 641 NW2d 219 (2002) ............................................................................... passim Riley v Northland Geriatric Center,

431 Mich 632; 433 NW2d 787 (1988) ........................................................................................ 6 Schwartz v Flint (After Remand),

120 Mich App 449; 329 NW2d 26 (1982) ................................................................................ 18 Spectrum Health Hosps v Farm Bureau Mut Ins Co of Michigan,

492 Mich 503; 821 NW2d 117 (2012) ............................................................................... passim Tebo v Havlik,

418 Mich 350; 343 NW2d 181 (1984) ........................................................................................ 6 Univ of Mich Regents v State Farm Mut. Ins Co,

250 Mich App 719; 650 NW2d 129 (2002) ................................................................................ 7

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WA Foote Memorial Hospital v Michigan Assigned Claims Plan, 3 21 Mich App 159; _ NW2d _ (2017) .............................................................................. 3, 4

Wyoming Chiro Health Clinic, PC v Auto-Owners Ins Co, 308 Mich App 389; 864 NW2d 598 (2014) ................................................................................ 7

Statutes MCL 418.845 ....................................................................................................................... 8, 9, 11 MCL 500.3112 ................................................................................................................ 7, 9, 13, 14

Rules MCR 7.312(H) ................................................................................................................................ 1

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STATEMENT OF QUESTION PRESENTED

I. WHETHER THIS COURT'S DECISION IN COVENANT MEDICAL CENTER, INC. V STATE FARM MUT. AUTO. INS. CO., 500 MICH. 191, 895 N.W.2D 490 (2017), SHOULD BE APPLIED TO THIS CASE

Plaintiff-Appellant Allegiance Answers: No.

Defendants-Appellees Answer: Yes.

Amicus Curiae MHA Answers: No.

The Court of Appeals Answered: Yes.

This Comi Should Answer: No.

II. WHETHER THE COURT OF APPEALS CORRECTLY CONCLUDED THAT THIS COURT'S DECISION IN POHUTSKI V CITY OF ALLEN PARK, 465 MICH. 675, 696, 641 N.W.2D 219 (2002), HAS BEEN "EFFECTIVELY REPUDIATED" IN THE CONTEXT OF JUDICIAL DECISIONS OF STATUTORY INTERPRETATION, SEE SPECTRUM HEALTH HOSPITALS V FARM BUREAU MUT. INS. CO. OF MICHIGAN, 492 MICH. 503,821 N.W.2D 117 (2012); WAYNE COUNTY V HATHCOCK, 471 MICH. 445, 484 N. 98, 684 N.W.2D 765 (2004); DEVILLERS V AUTO CLUB INS. ASS'N, 473 MICH. 562, 587 N. 57, 702 N.W.2D 539 (2005).

Plaintiff-Appellant Allegiance Answers: No.

Defendants-Appellees Answer: Yes.

Amicus Curiae MHA Answers: No.

The Court of Appeals Answered: Yes.

This Court Should Answer: No.

III. IF POHUTSKIHAS NOT BEEN EFFECTIVELY REPUDIATED, WHETHER THE POHUTSKIFRAMEWORK SHOULD HAVE BEEN APPLIED IN SPECTRUM.

Plaintiff-Appellant Allegiance Answers: No.

Defendants-Appellees Answer: No.

Amicus Curiae MHA Answers: No.

The Court of Appeals Answered: Did not Answer.

This Court Should Answer: No.

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STATEMENT OF INTEREST OF AMICUS CURIAE

Amicus curiae Michigan Health & Hospital Association ("MHA") advocates for

Michigan hospitals and the patients they serve. Established in 1919, the MHA represents the

interests of its member hospitals and health systems in both the legislative and regulatory arenas

on key issues and supports their efforts to provide quality, cost-effective and accessible care.

Using their collective voice, the MHA advocates for its members before the legislature,

government agencies, the media and the public. In addition, the association provides members

with essential information and analysis of healthcare policy and offers relevant education to keep

hospital administrators and their staffs current on statewide issues affecting their facilities. The

MHA appears before this Court as a representative of nearly 150 healthcare facilities, ranging

from community hospitals, teaching hospitals, long term acute care hospitals, public hospitals

(owned by city, county, state or federal government) and nonpublic hospitals (individually

incorporated or owned and operated by a larger health system). The issues before the Court are

the utmost concern for the MHA's members, as services rendered to auto accident victims

comprise a substantial portion of the revenue at the MHA member facilities, and any decrease in

that revenue will inevitably result in less access to healthcare for the patients that they serve.

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SUMMARY OF ARGUMENT

This Court's decision in Covenant Med Ctr, Inc v State Farm Mut Auto Ins Co, 500 Mich

591; 895 NW2d 490 (2017) announced a new rule of law that ove1ruled decades of jurisprudence

providing a healthcare provider a direct cause of action against an insurer. In its wake, the

Covenant decision left circuit courts grappling with how to treat the wealth of cases that accrued

and/or were filed under the old rule of law. To be sure, post-Covenant, healthcare providers,

insureds, and insurers alike have experienced conflicting decisions from circuit courts, not only

from county to county, but from judge to judge, with the bottom-line outcome all too often being

that healthcare providers are deprived payment for services rendered to an injured insured.

The confusion that has resulted enables insurers to obtain windfalls, shirking their

obligations to their insureds in total contravention of the purpose of the No-Fault Act. Pending

cases initiated by providers prior to Covenant are being dismissed despite the obligation of the

Defendant insurer to pay benefits on behalf of the injured person, and it is often too late for the

injured person to recover against the insurer directly because of MCL 500.3145 ("the one year

back rule"). This is effectively leaving providers with no other choice but to sue the injured

person for payment that is the obligation of their insurer to pay or to suffer losses for necessary

treatment provided to severely injured people who would otherwise have their treatment covered

under the statute.

The clear and simple solution to correct the havoc that any retroactive application of

Covenant is having on the effective administration of justice is to apply it prospectively only. By

doing so, healthcare providers, such as MHA members, are not improperly penalized for relying

on the old rule of law, insurers are simply held to pay what they are obligated to pay, and all

insureds - along with the general public - rest secure in the knowledge that healthcare providers

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remain fiscally viable. Prospective only application would have only limited applicability and

would not result in any unexpected liability or prejudice for insurers. Only those currently

pending cases filed by medical providers would be able to continue under the framework that

existed prior to Covenant.

But the Court of Appeals in WA Foote Memorial Hospital v Michigan Assigned Claims

Plan, 321 Mich App 159; _ NW2d _ (2017) saw it differently. (Exhibit 2, Foote, 2017 WL

3836645 (Aug 31, 2017) In an end-driven opinion, the Court of Appeals not only held that

Covenant applies retroactively, but in doing so, the court engaged in the height of judicial

activism by sweeping aside this Court's controlling jurisprudence as being "effectively

repudiated." That is, based simply on its own flawed reasoning, the Court of Appeals found that

this Court's decision in Spectrum Health Hasps v Farm Bureau Mut Ins Co of Michigan, 492

Mich 503; 821 NW2d 117 (2012), renounced the Court's long-standing decision in Pohutski v

City of Allen Park, 465 Mich 675, 696; 641 NW2d 219 (2002), such that Pohutski no longer

applied. Then, so as to somehow justify its decision to eschew stare decisis and justify its end­

driven analysis, the Court of Appeals misapplied the Pohutski test. In essence, by disavowing

decades of Michigan jurisprudence under the rational that Pohutski had been impliedly

repudiated, the Court of Appeals did exactly what it railed against - judicial activism.

For all of the reasons set forth below, Spectrum Health did nothing to disturb the

paradigm set f01ih by this Court in Pohutski for determining whether a decision is to have

prospective application only. And, for all of the reasons set forth below, Covenant must be

applied prospectively because, absent prospective application, this new rule of law ultimately has

a negative impact on healthcare providers and patients alike, such that the health and wellbeing

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of the citizemy of this State is compromised Covenant's retroactive application. This bad public

policy created by Foote must be reversed.

STATEMENT OF FACTS

Amicus curiae MHA adopts as its own the Statement of Facts set f01ih in Allegiance's

Application for Leave to Appeal.

STANDARD OF REVIEW

Amicus curiae MHA adopts as its own the Standard of Review set forth in Allegiance's

Application for Leave to Appeal.

ARGUMENT

I. BECAUSE COVENANT ANNOUNCED A NEW RULE OF LAW, UNDER POHUTSKI, WHICH CONTROLS, IT SHOULD BE APPLIED PROSPECTIVELY ONLY AND NOT TO THIS CASE.

A. The Court of Appeals' Tortured Analysis Must be Rejected.

The Comi of Appeals recognized that the issue before it was "whether Covenant applies

only prospectively, or applies to cases pending on appeal when it was issued." Foote v Mich.

Assigned Claims Plan, 321 Mich App_, 2017 WL 3836645 at *4. The court then noted the

"general rule" that decisions are to be given retroactive effect, but then accurately recognized

that "[ c ]omplete prospective application has generally been limited to decisions which ovenule

clear and uncontradicted case law." Id. at *6. Likewise, the comi also accurately recognized

that, as Allegiance advocated, decisions from this Court employ a "flexible approach" to

determining whether a judicial decision has retroactive effect." Id, citing Bezeau v Palace

Sports & Entertainment, Inc, 487 Mich 455; 795 NW2d 797 (2010), citing Pohutski v City of

Allen Park, 465 Mich 675,696; 641 NW2d 219 (2002).

Indeed, the Court of Appeals quoted this Comi' s decision in Hyde v Univ of Mich Board

of Regents, 426 Mich 223, 240; 393 NW2d 847 (1986) when emphasizing the exception to 4

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retroactive application: '"We have often limited the application of decisions which have

overruled prior law or reconstrued statutes. Complete prospective application has generally

been limited to decisions which overrule clear and uncontradicted case law."' Foote, supra at

*6 (emphasis added). Likewise, the Court of Appeals further recognized this Comi's long line of

cases that expressly embraced the exceptions to the "general" rule ofretroactive application. For

example, the Comi of Appeals recognized this Comi's admonition in Pohutski that "a more

flexible approach" to retroactivity should be employed "'if injustice would result from full

retroactivity. . . . Prospective application may be appropriate where the holding overrules settled

precedent."' Foote, supra at *6, quoting Pohutski, 465 Mich at 696.

To that end, the Court of Appeals also recognized the paradigm set forth in Pohutski for

determining whether a decision should solely be given prospective application: first, the

threshold question of "whether the decision clearly established a new principle of law" must be

answered in the affirmative; second, if the answer to the threshold question is "yes," then three

factors, (1) the purpose to be served by the new rule, (2) the extent of reliance on the old rule,

and (3) the effect of retroactivity on the administration of justice[,]" must be weighed. Foote,

supra at *6. And the Court of Appeals reiterated that the approach to determining retroactivity is

a "flexible" one. Id., citing Tebo v Havlik, 418 Mich 350, 360; 343 NW2d 181 (1984). Finally,

the Comi of Appeals recognized this Comi's pronouncement in Riley v Northland Geriatric

Center, 431 Mich 632; 433 NW2d 787 (1988), that "'resolution of the retrospective-prospective

issue ultimately turns on considerations of fairness and public policy."' Roofe, supra at *6

( emphasis added), quoting Riley, 431 Mich at 644.

In what can only be described as a means to justify an end-driven result, the Comi of

Appeals swept this body of case law out of the jurisprudence. The Court of Appeals found that it

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"need not address the 'threshold question' and 'three-factor test' of Pohutski because this Cami's

holding in Spectrum Health "effectively repudiated" the Pohutski paradigm, "at least in the

context of judicial decisions of statutory interpretation." Foote, supra at *12 (emphasis added),

citing Spectrum Health Hasps v Farm Bureau Mut Ins Co of Michigan, 492 Mich 503, 821

NW2d 117 (2012). Thus, simply on its own accord, the Court of Appeals decided that, as to the

retroactivity inquiry, Pohutski and this Cami's similar body of case law was no longer good law.

B. Under Pohutski, Covenant Should Apply Prospectively Only.

1) Covenant established a new rule of law.

The threshold factor of the Pohutski test is satisfied because Covenant clearly established

a new principle of law. To illustrate, for more than twenty years prior to this Court's decision in

Covenant, the language of MCL 500.3112 of Michigan's No-Fault Insurance Act - stating that

benefits are "payable to or for the benefit of an injured person" - had consistently been

interpreted as allowing for a direct cause of action against a no-fault isurance carrier by a third­

pmiy healthcare provider. See, e.g., Chiropractors Rehabilitation Group, PC v State Farm Mut

Auto Ins Co, 313 Mich App 113, 124; 818 NW2d 120 (2015); Wyoming Chiro Health Clinic, PC

v Auto-Owners Ins Co, 308 Mich App 389, 398-97; 864 NW2d 598 (2014); Univ of Mich

Regents v State Farm Mut. Ins Co, 250 Mich App 719, 731-34; 650 NW2d 129 (2002); Lakeland

Neurocare v State Farm Mut Auto Ins Co, 250 Mich App 35, 42-43; 645 NW2d 59 (2002);

LaMothe v Auto Club Ins Ass 'n, 214 Mich App 577, 586; 543 NW2d 42 (1995).

Under Michigan law, those decisions were binding and provided the rule of law to be

followed in Michigan. MCR 7.215(C)(2) ("A published opinion of the Court of Appeals has

precedential effect under the rule of stare decisis."); Tebo v. Havlik, 418 Mich. 350, 362 (Mich.

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1984) ("A decision by any panel of the Court of Appeals is, therefore, controlling statewide until

contradicted by another panel of the Court of Appeals or reversed or ovenuled by this Court.").

But on May 25, 2017, in Covenant, this Court "overruled" this decades-old body of law,

and held that "healthcare providers do not possess a statutory cause of action against no-fault

insurers." Covenant, 895 NW2d at 493. According to the Comi, the dictionary definition of

"payable," as used in § 3112, is something "that may, can, or must be paid[;]" therefore, the

language of § 3112 "does nothing more than allow a no-fault insurer to satisfy its [payment]

obligation to the insured by paying the injured person directly or by paying a party providing

PIP services on the injured person's behalf[,]" and just because "a third party may receive

payment directly from an insurer for PIP benefits does not mean that the third pmiy has a

statutory entitlement to that method of payment." Id. at 500-01.

This Comi's new pronouncement in Covenant is akin to the Court's new pronouncement

m Karaczewski v. Farbman Stein & Co, 478 Mich 28, 732 NW2d 56 (2007) where, as

recognized in Bezeau, supra, 487 Mich at 463, this Court

overruled Boyd [v WG. Wade Shows, 443 Mich. 515; 505 NW2d 544 (1993)] because the Boyd interpretation of MCL 418.845 failed to recognize that the statute's text required that an injured employee must have been a resident of Michigan at the time of the injury and the contract for hire must have been made in Michigan in order for the employee to be able to successfully file a workers' compensation claim in Michigan. [Bezeau, supra, 487 Mich at 463 ( emphasis added).]

This Comi further recognized that "the purpose of the new rule" announced in Karaczewski "was

to interpret the law consistently with the Legislature's apparent intent when drafting MCL

418.845." Bezeau, supra, 487 Mich at 463 (emphasis added). Finally, this Court recognized that

"[a]lthough the Karaczevvski Court interpreted the statute [MCL 418.845] consistently with its

plain language, the Court's interpretation established a new rule of law because it affected

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how the statute would be applied to parties in workers' compensation cases in a way that

was inconsistent with how the statute had been previously applied." Id. (emphasis added),

citing Pohutski, 465 Mich. at 696-697.

Thus, just as employees who were not residents of Michigan at the time of the injuries

may have been able to successfully file a workers' compensation claim in Michigan pursuant to

MCL 418.845 prior to this Court's decision in Karaczewski, so too healthcare providers to no­

fault patients were able to successfully file a claim directly against a no-fault insurer prior to

Covenant. And, just as this Court recognized its decision in Karaczewski was to interpret the law

in accordance with the plain language of MCL 418.845, this Court based its decision in

Covenant to interpret the law in accordance the plain language of MCL 500.3112. It must

therefore follow that, just as this Comi set forth a new rule of law in Karaczewski, the Comi

likewise set forth a new rule of law in Covenant.

The Comi of Appeals' conclusion to the contrary is as tortured as the whole of its

decision. That is, the Court of Appeals concluded that Covenant did not establish a new rule of

law "because MCL 500.3112 at no time provided plaintiff with a right of action against

defendants, and the intervening caselaw from this Court never was the law." Foote, supra at

* 13. According to the Comi of Appeals, "Covenant merely recognized that the law as set fotih

in MCL 500.3112 is and always was the law." Id. The Court of Appeals found that its

conclusion was "particularly" justified given that "the law at issue concerns the very existence of

a right of action." Id.

The Comi of Appeals' conclusion and the reasonmg behind it stands in stark

contradiction to this Court's decision Bezeau, supra. As indicated above, in Bezeau this Comi

found that its decision in Karaczewski set fotih a new rule of law where, prior to Karaczewski,

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employees who were not Michigan residents at the time of their injuries had a claim for workers

compensation benefits pursuant to MCL 418.845. There simply is no way to reconcile the

Comi of Appeals' conclusion to this Court's decision in Bezeau, which of course, relied upon

Pohutski. This thereby further demonstrates the end-driven nature of the Court of Appeals'

decision, because the court could not have reached its conclusion that Covenant did not establish

a new rule of law without first sweeping aside - under the guise of the court's own brand of

decision making - Pohutski and its progeny as "effectively repudiated." The only conclusion

under stare decisis is that Covenant indeed established a new rule of law and, as indicated below,

under Pohutski 's three-factor test, that new rule solely must have prospective application.

2) Application of Pohutski 's three-factor test demonstrates that Covenant solely has prospective application.

a) The new rule's purpose is served by prospective application.

In Covenant, this Comi stated that purpose behind its decision was "to conform our

caselaw to the text of the applicable statutes to ensure that those to whom the law applies may

look to those statutes for a clear understanding of the law." Covenant, 895 NW2d at 496. It is

this very purpose that this Court in Bezeau and in Pohutski found would be fmihered prospective

application of the new rules of law. Specifically, this Court recognized in Bezeau that the

"purpose of the new rule from Karaczewski" was that of "interpreting the law consistently with

the Legislature's apparent intent when drafting MCL 418.845[,]" and that prospective

application served this purpose. Bezeau, 487 Mich at 463, 465 n 6. Likewise, in Pohutski, this

Comi stated that "the purpose of the new rule" was to correct an error in the interpretation of § 7

of the governmental tort liability act[,]" and that "[p ]rospective application would fmiher this

purpose." Pohutski, 465 Mich at 697.

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Yet, the Court of Appeals found that Covenant's purpose - which is completely in line

with the purposes of Karaczewski and Pohutski - was not advanced by prospective application,

while incredibly claiming that its finding was based on the maxim that "the law requires

consistency" and that "prospectivity [sic] undermines rather than advances that objective."

Foote, supra at * 13. It is the Court of Appeals' opinion itself that turns a blind eye to

consistency in the law and stare decisis by engaging in impermissible judicial activism that

Pohutski and its progeny have been "effectively repudiated." Once again, the Court of Appeals'

got it wrong. The purpose of Covenant is clearly served by prospective application alone.

b. The vast reliance on the old rule inures to prospective application.

It is without dispute that the medical providers of no-fault insureds relied upon the old

rule of law for decades. It is this very type of reliance - i.e., reliance on the law where an injured

party is at the center of the dispute - that this Court has embraced as inuring to prospective

application of a new rule of law. For example, in Bezeau, this Court found that its prior decision

giving retroactive application to the new rule of law set forth in Karaczewski was erroneous

because the Court had failed to "give due weight" to the reliance that "[ a]ttorneys, employers,

insurance carriers, and various employees" placed on the old law that had been in place for

decades." Bezeau, 487 Mich at 464, 465. This Court recognized that

In addition to reliance by the courts, insurance decisions have undoubtedly been predicated on this Court's longstanding interpretation of MCL 418.845 under [the old law]. Nonresident injured employees, like plaintiff, who initially entered into contracts for hire in Michigan, but later agreed to work outside Michigan, have relied on the ability to obtain workers' compensation benefits based on their employment relationship with Michigan employers. Prospective application acknowledges that reliance and assures the fair resolution of those pending workers' compensation cases. [Id. (emphasis added; citation omitted).]

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Likewise, in the case of Covenant, attorneys, medical providers, and no-fault insureds

alike have for decades relied upon the old law, and thus have provided services to injured no­

fault patients secure in the knowledge that they would be paid for those services, even if it meant

by way of a lawsuit. In turn, injured no-fault patients readily received the treatment they needed

to heal without having to deal with possible lawsuits in the process. And attorneys representing

those medical providers properly advised their clients that medical services could be provided to

no-fault insureds - without the need for an assignment as suggested by Covenant as being the

providers means of recourse - because if payment was not received a direct cause of action

against the insurer was possible.

Then Covenant comes along and changes everything, and, according to the Court of

Appeals, in doing so, Covenant simply stated what the law was all along. Such shortsightedness

ignores the realities not only of the law, but of the precarious position that the actors involved

must now face. For example, the health care providers may now question its counsel as to why it

was not advised to obtain an assignment regarding its treatment of injured insured. And the

reality is that once an insured is discharged it is oftentimes difficult, if not impossible to locate

them, they are often impecunious, and they often retain their own attorney who instructs them to

not sign an assignment. Without the assignment, the healthcare provider has no recourse to sue

the no fault carrier, and must rely on the patient's attorney to collect the bill, which often then

results in a significant reduction in the amount collected. The only recourse to the healthcare

provider then is to place a charging lien on the suit and demand the insurance canier put the

healthcare provider's name on any settlement check, leaving the issue of plaintiff's claimed

attorney fees to be argued before the court.

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And the reality is that if medical providers cannot recoup the cost for providing

treatment, then it's a slippery slope to the day when they are unable to provide care at all, thereby

severely compromising care to the injured. As this Comi has recognized, this is precisely the

type of hardship that must be avoided by retrospective application of a new rule of law. Id.; see

also Pohutski, 465 Mich. at 697 (finding that "[i]n addition to reliance by the courts [ on the old

law], insurance decisions have undoubtedly been predicated upon [the old law such that]

municipalities have been encouraged to purchase insurance, while homeowners have been

discouraged from doing the same," thereby inuring to prospective application of the new rule).

The Comi of Appeals' conclusion to the contrary simply advances its erroneous end-

driven result in this case. To illustrate, the Comi of Appeals correctly found that

there can be no doubt that plaintiff and others have heavily relied on our prior caselaw over the course of many years. We do not in any way seek to diminish that fact or to minimize the negative effects that might be felt by those who relied on pre­Covenant decisions. The reliance is real, as are the consequences that flow from it. [Foote, supra at *13 (emphasis added).]

But despite the comi's recognition of the significant reliance on the old rule of law and the

negative consequences that flow from that reliance, the Court of Appeals went on to conclude

that the decades of settled jurisprudence never considered whether a private cause of action

under § 3112 existed, which thereby somehow rendered reliance on the old jurisprudence

unreasonable. This conclusion is nonsensical. If the msurers themselves never before

questioned the old rule of law that allowed for a direct action by a third party provider, it

logically follows that the third-paiiy provider's reliance on the old rule was even more

reasonable.

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That is to say, the Court of Appeals' opinion implies that healthcare providers should

have questioned their ability to bring a direct cause of action against an insurance company in the

courts, while the insurance company did nothing. The opinion also suggests that healthcare

provider's counsel should have advised not to pursue a direct cause of action against the insurer

under § 3112, but instead should sue the insured directly, or should instead regularly seek

assignments. But all of these actions were both counter to logic and the state of the law, such

that reliance on the old law was indeed perfectly reasonable. In short, the vast reliance on the old

rule of law clearly inures to Covenant's prospective application.

c. Covenant's disruption to the administration of justice applied retroactively requires that it solely have prospective

application.

when

The detrimental effect that the retroactive application of Covenant 1s having on

administration of justice permeates Michigan's courts. For example, since the Covenant

decision, healthcare providers who are owed significant sums have faced a number of defenses in

their suits against insurance companies such as the lack of any assignment by the insured, which

courts are finding fatal to a healthcare provider's claims, thereby denying healthcare providers

payment for services that were undeniably rendered. When healthcare providers are not paid for

services rendered their livelihood is compromised, just as that of any other similarly situated

business, but in the case of healthcare providers, when their business model suffers, so does the

health and wellbeing of those they serve. And to make matters worse, not only are patients

ultimately harmed, but the very paiiy that is contractually bound to pay for the care and

treatment, the insurance company, is the paiiy who reaps a windfall. Indeed, under retroactive

application of Covenant's new rule of law, not only does the insurer reap the benefits of timely

paid premiums from the insured, the insurer is relieved of its contractual obligation to pay for its

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insured's care simply by way of the serendipitous timing of the healthcare provider's lawsuit for

payment relevant to Covenant's release.

The retroactive application of Covenant is also wreaking havoc on the administration of

justice because nearly all no-fault policies contain language that the policy is either not

assignable, or the insured patient needs to ask the insurer's permission before providing an

assignment. It has been the experience of MHA members that the Wayne, Oakland, and

Macomb County Circuit Court have been inconsistent in their enforcement of anti-assignment

clauses. The inconsistencies themselves are adverse to justice - i.e., a healthcare provider may

successfully overcome the anti-assignment language of an injured insured's policy in one county,

but in another county that same healthcare provider cannot overcome the same anti-assignment

language in the same type of policy issued by the same insurer - and to the extent that any court

is disallowing payment to a healthcare provider based on such anti-assignment language the

outcome is detrimental to the both healthcare provider and, perhaps even more so, to the life and

wellbeing of the injured insured.

Perhaps the worst miscarriage of justice caused by the retroactive application of

Covenant is that many of the cases that were pending when Covenant was decided involved an

assignment that was signed beyond one year from the date the services were rendered, even

though the filing of the lawsuit was within one year. Some circuit courts are precluding MHA

members from recovering for services that were provided more than one year from the date of

the assignment. In many instances, this effectively eliminates most, if not all, of the payment

owed, thereby once again providing an impermissible-and unjustified-windfall to insurers.

Finally, yet another of the many adverse effects of Covenant's retroactive application to

the administration of justice is that some circuit courts have ruled that when the patient assigns a

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portion of the policy related to the medical bills, the patient has made a "paiiial assignment,"

which thereby violated the terms of the policy and voided the assignment. MHA members have

experienced such a result and thus had their legitimate claims for payment on services rendered

dismissed.

The above demonstrates that the healthcare providers who, relying on the old rule of law,

filed suit prior to Covenant, are becoming "a distinct class of litigants denied relief because of an

unfortunate circumstance of timing," the likes of which this Court has found runs counter to

retroactive application of a new rule of law. See Pohutski, 465 Mich at 698-699; see also

Bezeau, 487 Mich at 465 ( concluding that the administration of justice was adversely affected by

retroactive application of a new rule of law because the litigation under the old law suddenly

became moot under the new rule). Indeed, if Covenant was applied prospectively, justice would

be served as the circuit courts would have clear guidance on how to proceed under the old rule

which, in turn, would result in an orderly and fair administration of justice.

The Court of Appeals' conclusion that the "weighing of this factor is at best

inconclusive" ignores the wealth of cases filed by healthcare provider cases under the old law

that were, and continue to be pending, the circuit court's conflicting decisions in attempting to

apply Covenant retroactively, and the breadth of the adverse consequences experienced by the

healthcare providers, including MHA members, by the summary dismissal of their claims. To be

sure, the magnitude of the adverse effect that the retroactive application has had on financial

viability of healthcare providers, and therefore on their ability to service the needs of injured

insureds, is profound and cannot logically be considered as "inconclusive." On information and

belief, because of the retroactive application of Covenant, members of the MHA have already

been denied the ability to receive payment for millions of dollars of services rendered. As stated,

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this result is bad for healthcare providers and injured alike, and simply results in an

impermissible windfall to insurers the likes of which makes for bad public policy and the proper

administration of justice.

Accordingly, Covenant undeniably established a new rule of law, and the balance of the

three Pohutski factors clearly shows that Covenant should be solely be applied prospectively.

d. The Court of Appeals Improperly Found that Pohutski Had Been Impliedly Repudiated.

The Court of Appeals' judicial activism did not end there. The court went on to make

another pronouncement as to this Court's retroactivity decisions, by concluding that, in Spectrum

Health, this Court "essentially adopted the rationale of the United States Supreme Court in

Harper relative to the retroac~ive applicability of its judicial decisions of statutory interpretation

'to all cases still open on direct review and as to all events, regardless of whether such events

predate or postdate [the] announcement of the rule."' Foote, supra at *12 (emphasis added),

citing Harper v Virginia Dep't a/Taxation, 509 US 86, 97 (1993). Then, having concluded that

this Court had "essentially repudiated" Pohutski and had "essentially adopted" Harper for

purposes of deciding the case before it, the Court of Appeals incredibly invited this Court to

post-hoc decide whether these conclusions were conect. Id. ("Having so concluded, we invite

our Supreme Court to state expressly whether or to what extent it adopts the Harper rationale

into Michigan state comi jurisprudence.").

The Comi of Appeals' tortured analysis turns the hierarchy of Michigan's comi system

on its head. It is not for the Comi of Appeals to decide whether Supreme Comi precedent is or is

not "essentially" good law or whether this Comi has or has not "adopted" federal law; rather, as

the Court of Appeals itself has recognized, "[u]nder the rule of stare decisis, [the Comi of

Appeals] is bound to follow decisions of the Michigan Supreme Court, even if [it] disagree[s]

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with them." Edwards v Clinton Valley Ctr, 138 Mich App 312, 313; 360 NW2d 606 (1984),

citing Schwartz v Flint (After Remand), 120 Mich App 449, 462; 329 NW2d 26 (1982); see also

Cooper v MRM Investment Co, 367 F3d 493, 507 (CA 6 2004) (recognizing that "[i]mplied

overrulings ... are disfavored").

To add insult to injury, while concluding that this Comi had "essentially repudiated"

Pohutski, and had "essentially adopted" Harper - i.e., while engaging in the height of judicial

activism, the Court of Appeals criticized prospective application of decisions as "the handmaid

of judicial activism, and the born enemy of stare decisis." Foote, 321 Mich App at * 10 (internal

quotation marks and citation omitted). Indeed, but for the Court of Appeals own judicial

activism, the law is clear that the proper analysis in this case is that set fo1ih in Pothutski, and, as

set forth below, under Pohutski, this Court's decision in Covenant should solely have prospective

application.

II. POHUTSKI HAS NOT BEEN "EFFECTIVELY REPUDIATED" AND THE COURT OF APPEALS HAS NO AUTHORITY TO RULE THAT IT HAS.

A. The Court of Appeals Lacks Authority to Find Supreme Court Precedent "Effectively Repudiated."

This Comi's decision in Spectrum cannot be read as impliedly repudiating Pohutski 's

reflection of Michigan's longstanding jurisprudence. The Comi of Appeals does not have the

authority to determine that cases are impliedly of "effectively overruled." As this Comi stated in

Associated Builders & Contractors v City of Lansing, 499 Mich 177, 191-92; 880 NW2d 765,

772-73 (2016):

While it is inarguable that developments over the past century have undercut the foundation upon which Lennane stood, its holding was never explicitly superseded by the ratifiers of the 1963 Constitution or by the Legislature, nor was it overruled by this Comi. The Court of Appeals is bound to follow decisions by this Comi except where those decisions have clearly been overruled or superseded and is not authorized to anticipatorily ignore our decisions where it determines that the foundations of a

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Supreme Court decision have been undermined. Thus, while we agree with the result of the Comi of Appeals' decision, we disapprove of its usurpation of this Court's role under our Constitution.

Id. (footnote omitted; emphasis in original).

"While the Court of Appeals may properly express its belief that a decision of this Court

was wrongly decided or is no longer viable, that conclusion does not excuse the Court of

Appeals from applying the decision to the case before it." Boyd v WG Wade Shows, 443 Mich

515, 523, 505 NW2d 544 (1993), oveITuled on other grounds by Karaczewski v. Farbman Stein

& Co., 478 Mich. 28, 732 N.W.2d 56 (2007), itself overruled in part by Bezeau v Palace Sports

& Entertainment, Inc, 487 Mich 455, 795 NW2d 797 (2010).

B. Pohutski Remains Viable and Has Not Been Undercut by Spectrum, Hathcock, or Devillers.

Further, the Court of Appeals was not coITect that Pohutski has been undercut by more

recent precedent. The Spectrum Court never even mentions Pohutski, much less repudiates it.

Instead, in a one paragraph analysis, the Spectrum Comi determined that its decision should be

applied retroactively. Spectrum, 492 Mich 503 at 536; 821 NW2d 117, 136.

The Court of Appeals in this case inc01Tectly determined that the Spectrum Court

essentially adopted the United States Supreme Court's rational from Harper. Yet, the Spectrum

Cami never cited Harper, nor does the Spectrum decision indicate that its rational reflects a

depaiiure from the longstanding jurisprudence of Michigan. The Comi of Appeals in this case

thus did no more than layer unfounded assumptions with unsupported inferences and

extrapolations to avoid binding precedent rather than follow clear Michigan Supreme Comi

precedent. This is an error of law beyond the authority of the Court of Appeals. Even if the

comi of Appeals had such authority, the single paragraph in Spectrum devoted to the retroactive

application issue is insufficient to unravel decades of jurisprudence by implication.

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Merely because the principles of retroactivity have their genesis in United State Supreme

Court precedent does not mean that Michigan jurisprudence on issues of Michigan law change as

federal precedent changes. In fact, the Michigan Supreme Court has specifically cautioned that

the federal constitution "does not preclude state courts from determining whether their own law­

changing decisions are applied prospectively or retroactively." Pohutski, 465 Mich at 696 (citing

Great Northern R. Co. v. Sunburst Oil & Refining Co., 287 U.S. 358, 364 (1932)) ("[T]he Federal

Constitution has no voice upon the subject. A state in defining the limits of adherence to precedent

may make a choice for itself between the principle of forward operation and that of relation

backward.").

Despite the admonition in Pohutski that the Michigan Supreme Court is empowered to

determine its own rules for prospective application-regardless of any federal authority on the

subject-the Court of Appeals has essentially held that Michigan jurisprudence adopts federal

precedent, even if that federal precedent has not actually been adopted by any Michigan Court

decisions. Therefore, according to the Court of Appeals, it can find Michigan precedent

impliedly overruled by comparing the sparse reasoning applied in Spectrum with the United

States Supreme Court's decision in Harper. It does so despite the fact that Spectrum never

mentions Harper and does not indicate that it is depaiiing from the previously well settled

rational employed in Michigan. Principles of stare decises dictate that the Spectrum Court

would need to, at the very least, identify that it was applying a new rational and explain the basis

for its departure. However, the Spectrum Court did not even hint that it was changing the law.

Moreover, citing Ha,per, the Comi of Appeals in this case recognized that "State courts

nonetheless appear to remain free to adopt their own approach to retroactivity under state law, so

long as it does not extend to an interpretation of federal law. Foote,, 321 Mich App 159, 180

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(2017), citing Harper, 509 US at 97, 112 SCt 2510. Since Harper has not been directly adopted

nor Pohutski eschewed, explicitly or impliedly, Michigan's longstanding jurisprudence is the

standard to apply and the Harper standard is inapplicable to the extent it conflicts. The Court of

Appeals should not have found Michigan Supreme Court precedent impliedly repudiated merely

because federal law changed.

The Hathcock decision recognized, rather than repudiated Pohutski. Indeed, among the .

issues to be briefed for the Hathcock CoUli was "whether a decision overruling Poletown, supra,

should apply retroactively or prospectively only, taking into consideration the reasoning in

Pohutski v. City of Allen Park, 465 Mich. 675, 641 N.W.2d 219 (2002)." Co of Wayne v

Hathcock, 471 Mich 445, 484 n. 98; 684 NW2d 765, 788 (2004). Justice Cavanagh, in his

partial concurrence, recognized that the factors enumerated in Pohutski "must be considered

when determining whether a decision should have retroactive application." Id. at 505. (emphasis

added).

In Hath9ock, the Court held that Pohutski was inapplicable, not that it had been

repudiated. ("First, this case presents none of the exigent circumstances that warranted the

"extreme measure" of prospective application in Pohutski v. City of Allen Park." Id. at 484 n.

98. Although the Court questioned the appropriateness of rendering prospective only opinions,

the Court fU1iher recognized that prospective only application is appropriate in cases such as this,

where the decision in question "overrule[ d] clear and uncontradicted case law." Id. citing Hyde v

Univ of Mich Bd of Regents, 426 Mich 223, 240, 393 NW2d 847 (1986). Notably, in Hathcock,

the Court overruled Poletown as "inconsistent with our eminent domain jurisprudence [ ... ],"

noting that it was "a radical departure from fundamental constitutional principles and over a

century of this Court's eminent domain jurisprudence[ .. . ]"Id.at 483.

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Thus, the Hathcock decision merely "return[ed] our law to that which existed before

Poletown." Id. at 484. (emphasis added). This is in stark contrast to the case at hand because

prior to Covenant, it had always been understood that providers had a direct cause of action.

Therefore, Hathcock explicitly overruled Poletown, but did not diminish Pohutski in any way.

("It is true, of course, that this Court must not 'lightly overrule precedent."). Id. (footnote and

quotation mark omitted).

This Court's decision in Devillers v Auto Club Ins Ass'n, 473 Mich 562; 702 NW2d 539

(2005) confirms this reading of Hathcock and does nothing to repudiate Pohutski. Citing to the

footnote in Hathcock which cites to Pohutski, the Devillers opinion notes that "[p ]rospective

application is a departure from this usual rule and is appropriate only in 'exigent

circumstances."' Id. at 586. (footnote omitted). Notably, this is the only reference to Pohutski,

in the opinion. Thus, Devillers recognized that decisions may be given prospective only

application under the Pohutski framework, and that Hathcock did not alter this fundamental

principle of Michigan jurisprudence. ("As we reaffirmed recently in Hathcock, prospective-only

application of our decisions is generally 'limited to decisions which overrule clear and

uncontradicted case law."'). Id. at 587. (quotaion mark and footnote omitted; emphasis in

original).

Like in Hathcock, the Devillers decision was "not a declaration of a new rule, but a

return to an earlier rule and a vindication of controlling legal authority [ ... ]." Id. at 587.

( emphasis added). Thus, Devillers also recognizes the continuing vitality of Pohutski and the

availability of prospective only application under its framework. Furthermore, the Devillers

opinion qualified its application as having only "limited retroactivity," making clear it applied

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only to "pending cases in which a challenge to Lewis's judicial tolling approach has been raised

and preserved." Id. Thus, neither Spectrum, Hathcock, nor Devillers have repudiated Pohutski.

1. The Spectrum Cami Did not need to Apply Pohutski

Spectrum did not require application of the Pohutski framework nor did this Court order

the paiiies in Spectrum to address the retroactivity issue. In both Devillers and Hathcock, this

Comi specifically ordered the paiiies to brief the issue of retro activity on appeal. Deville rs, 4 73

Mich 562 at 586 ("In our order granting leave to appeal, we directed the paiiies to address

whether a decision overruling Lewis should be given only prospective application."); Hathcock,

471 Mich 445 at 454-55 ("Our grant order directed the parties to the following issues: [ ... ]

whether a decision ovenuling Poletown, supra, should apply retroactively or prospectively only,

taking into consideration the reasoning in Pohutski v. City of Allen Park, 465 Mich. 675, 641

N.W.2d 219 (2002)."). No such briefing was called for in Spectrum.

Accordingly, the rational in Spectrum with relation to the retroactivity issues was simple.

In Spectrum, Ryan De Young, who had three drunk-driving convictions, was a named excluded

driver on his wife's insurance policy, and had been expressly prohibited from driving her

vehicles, came home drunk and took his wife's car without her permission. Spectrum, 492 Mich

503 at 513; 821 NW2d 117. As the Spectrum Court held, "because there was absolutely no

textual basis to support a family-joyriding exception to MCL 500.3113(a)1[,]" Ryan DeYoung

was precluded from obtaining benefits under his wife's policy. Id. at 530.

1 Under MCL 500.3113: A person is not entitled to be paid personal protection insurance benefits for accidental bodily injury if at the time of the accident any of the following circumstances existed:

(a) The person was willingly operating or willingly using a motor vehicle or motorcycle that was taken unlawfully, and the person knew or should have known that the motor vehicle or motorcycle was taken unlawfully.

MCL 500.3 l l 3(a)

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With relation to whether the decision should apply retroactively, the Court concluded that

smce "there is no contractual right to have insurance companies provide PIP benefits to

operators" who drove a family member's automobile without permission, the Spectrum decision

did "not at all affect the paiiies' contractual rights, and it is retrospective in its operation." Id.

Given the simplicity of the inquiry before the Spectrum Comi, only one paragraph of analysis is

devoted to the retroactivity issue and the Court gave only cursory treatment to Michigan's

jurisprudence on retroactive application because that was all that was required.

Accordingly, the in-depth analysis of whether application should be retroactive or

prospective required by Pohutski was not required nor called for by the Court in Spectrum.

Indeed, the Spectrum decision was couched within principles of contract interpretation. ("In

other words, our decision today does not at all affect the paiiies' contractual rights, and it is

retrospective in its operation."). Id. On the other hand, in this case, the question of whether

Covenant should be applied as prospective only involves a much different inquiry, and, just like

in Pohutski, is entirely within "the context of erroneous statutory interpretation" rather than

contract. Pohutski, 465 Mich 675 at 679; 641 NW2d 219,224.

Thus, as in Pohutski, the decision before the Court in this case is what "effect [the]

holding will have on the administration of justice." Id. at 696. In considering how Covenant

would impact the administration of justice, one issue to be considered is "whether reliance

interests would work an undue hardship." Id. at 694. In considering the reliance interest, the

Comi considers whether prior jurisprudence has "become so embedded, so accepted, so

fundamental, to everyone's expectations that to change it would produce not just readjustments,

but practical real-world dislocations." Id. at 694. In Spectrum, however, reliance was not an

issue as "it [was] undisputed that there is no contractual right to have insurance companies

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provide PIP benefits to operators in these cases." Spectrum, 492 Mich 503 at 536; 821 NW2d

117, 136. Therefore, Spectrum did not need to apply Pohutski and, accordingly, is limited to its

unique facts.

V. CONCLUSION AND RELIEF REQUESTED

For the above-stated reasons, amicus curiae Michigan Hospital Association respectfully

requests that the Court grant Allegiance's Application for Leave to Appeal, reverse the Court of

Appeals' decision in Foote, and hold that Covenant applies prospectively.

Date: August 10, 2018

Respectfully submitted,

CLARK HILL PLC

By: /s/ Jennifer K. Green Jennifer K. Green (P69019) 151 S. Old Woodward Ave, Suite 200 Birmingham, MI 48009 (248) 642-9692 I Fax (248) 642-2174 j green@clarkhill.com Attorney for Amicus Curiae - Michigan Health and Hospital Association

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