Grass Lake Improvement Board v. Department of Environmental Quality, 316 Mich. App. 356

Grass Lake Improvement Board sought a permit to use an augmentation well to raise Grass Lake’s water level; DEQ denied the permit and the Board initiated a contested case under the APA.
Central legal question: whether adding water by an augmentation well "enlarges" a lake under Part 301 of NREPA (MCL 324.30102(1)).
Michigan Admin. Code R 281.811(1)(e) defined "enlarge or diminish" to require activity on bottomlands (dredging/filling or manipulation of structures), which the Board said excluded adding water without bottomland activity.
DEQ maintained that the statute’s plain meaning included adding water and argued that where a statute and an administrative rule conflict, the statute controls.
An ALJ sided with the Board, concluding the rule limited Part 301 jurisdiction and the augmentation well did not "enlarge" the lake; DEQ’s director adopted the ALJ’s order and issued the permit.
In a subsequent contested case the Board sought attorney fees under MCL 24.323(1)(c), claiming DEQ’s prior position was "devoid of arguable legal merit;" the ALJ denied fees, the circuit court reversed and awarded fees, and DEQ appealed to the Court of Appeals.

Issue	Plaintiff's Argument (Board)	Defendant's Argument (DEQ)	Held
Whether DEQ’s prior legal position was "devoid of arguable legal merit" under MCL 24.323(1)(c) (entitling Board to fees)	DEQ knowingly ignored its own duly promulgated rule (R 281.811), and agencies must follow their rules; therefore DEQ’s position was frivolous and without merit	There was a legitimate legal conflict: statute’s plain meaning could encompass adding water and, when statute and rule conflict, statute controls; DEQ’s position had arguable legal merit	Reversed circuit court: DEQ’s position had at least some arguable legal merit given conflicting precedents, so fees were improper; ALJ’s denial of fees reinstated

In re Complaint of Rovas, 482 Mich 90 (agency statutory interpretation entitled to respectful consideration)
Detroit Base Coalition for Human Rights of Handicapped v. Dep’t of Social Services, 431 Mich 172 (agencies must follow their own rules)
Micu v. City of Warren, 147 Mich App 573 (once promulgated, agency rules cannot be violated by the issuing agency)
Adamo Demolition Co. v. Dep’t of Treasury, 303 Mich App 356 (definition of "devoid of arguable legal merit" drawn from analogous frivolous-claim statute)
Walgreen Co. v. Macomb Twp, 280 Mich App 58 (a rule is invalid when it conflicts with the governing statute)