The facts concern a denial of coverage by Blue Cross Blue
Shield Michigan (BCBSM) for care provided to Francis Miller, who, after
challenging the denial, petitioned the Washtenaw County Circuit Court to review
the decision. When that court issued an order awarding attorney fees, costs and
statutory interest to Miller, BCBSM appealed. The Michigan Court of Appeals
(MCOA) affirmed the lower court order, finding the BCBSM defense to Miller’s
a patient at Heartland’s Skilled Nursing Facility (SNF) in Ann Arbor for 3
months. Her insurance, BCBSM, denied coverage for part of that time, claiming
Miller only needed custodial care for which it didn’t pay. Miller submitted the
matter to Office of Financial and Insurance Regulation (OFIR), which agreed
with BCBSM decision.
Miller petitioned the trial court for review of the OFIR’s
order, asking the court to reverse the order, pay for her treatment and award
her attorney fees for having to seek review.
The trial court framed the issue as whether “there was
substantial competent and material evidence to support the OFIR’s findings.”
The trial court reversed the OFIR’s order, stating that it was frivolous for
BCBSM to assert that petitioner Miller did not need a nurse to administer a
feeding tube in place during the time in question and that “under [MCL]
600.2591 [respondent] had no reasonable basis to believe that the facts
underlying their legal position were true and . . . their position was devoid
of any arguable legal merit.”
BCBSM appealed that decision, arguing the trial court erred
in finding its defense frivolous. The COA disagreed.
Frivolous Defense and Vexatious Appeal
The appeals court, in writing its opinion, offered some thoughts
on the frivolous defense and vexations appeals. BCBSM argued that its defense
was not frivolous per MCL 600.2591, as held by the trial court. The COA
disagreed and upheld the trial court because “the definition of a frivolous
defense under MCL 600.2591 is comparable to the definition of a vexatious
appeal under MCR 7.216(C)(1)(b), and the trial court did not clearly err in
concluding that respondent’s defense was frivolous.”
Under MCL 600.2591
a frivolous defense can occur in the following 3 ways:
1. The party’s primary purpose in .
. . asserting the defense was to harass, embarrass, or injure the prevailing
2. The party had no reasonable basis
to believe that the facts underlying that party’s legal position were in fact
3. The party’s legal position was devoid
of arguable legal merit.
allows the court to sanction a party advancing a vexatious “argument, brief,
document, or record filed . . . [that] was grossly lacking in the requirements
of propriety, violated court rules, or grossly disregarded the requirements of
a fair presentation of the issues to the court.”
The COA ruled that because petitioner Miller didn’t file a
complaint in circuit court and BCBSM didn’t assert its defense in a pleading, the
trial court “plainly erred in awarding attorney fees under MCL 600.2591.
Instead, “this case is governed by the appellate court rules, because the
petitioner filed a petition for review of the OFIR’s final order in the trial
court pursuant to MCL 550.1915 and MCR 7.103(A)(4), and respondent asserted its
defense in a response. MCR 7.216(C); see also MCR 7.112 explaining that “the
circuit court may grant relief as provided in MCR 7.216”).
The court stated in affirming the trial court’s decision:
“Although we agree
that respondent did not defend a “civil action” under MCL 600.2591, we
nonetheless uphold the sanction because the definition of a frivolous defense
under MCL 600.2591 is comparable to the definition of a vexatious appeal under
MCR 7.216(C)(1)(b), and the trial court did not clearly err in concluding that
respondent’s defense was frivolous. Further, we find that the trial court did
not abuse its discretion in calculating the amount of attorney fees and costs
to be awarded.
In his dissenting opinion, Hon. Mark T.
, stated “I have a definite and firm conviction that a mistake was
made” and he would reverse the circuit court’s sanctions award.
He saw the
issue as whether the circuit court properly sanctioned respondent (whether
based on “frivolousness” or “vexatiousness”) in advocating on appeal (to the circuit
court) for the affirmance of an administrative decision of OFIR.”
He argued that the majority was incorrect in equating a finding of
frivolousness with a finding that an appeal is vexatious, that BCBSM argument
that OFIR complied with MCL 550.1911(13) and (15) was a proper, non-vexatious
argument on appeal (albeit unsuccessful) and was concerned that the trial
court’s entire predicate for the its issuance of sanctions was its “medical” judgment
regarding the need of skilled nursing care to administer a feeding tube. That
judgement “has now spawned extensive litigation over the propriety of the
resulting sanctions award.”
Labels: appeals, attorneys fees, Court of Appeals, frivolous defenses, MCL 600.259, MCR 7.216, Michigan Appeals, sanction, vexatious appeals