Huron Behavioral Health v. Department of Community Health
293 Mich. App. 491
| Mich. Ct. App. | 2011Background
- Petitioner is a CMH authority in Huron County that leases real estate from the county and seeks Medicaid-reimbursement for rent under a state contract.
- Respondent DCH audited budgets (1999–2006) and determined the lease to the county was a less-than-arm’s-length transaction, disallowing rent reimbursements under OMB Circular A-87.
- Audit concluded petitioner paid rent to Huron County, but county control over petitioner suggested an arm’s-length concern; respondent demanded $612,985 reimbursement.
- The hearing referee and the DCH decision rejected petitioner’s arguments that A-87, cost settlement, and arm’s-length status favored petitioner.
- The circuit court reversed the agency, finding equitable relief warranted and concluding the relationship was not arm’s-length, though it acknowledged the Legislature’s separation of CMH authorities from counties.
- DCH seeks to affirm; the Michigan Supreme Court affirms, holding the relationship was arm’s-length and petitioner entitled to reimbursement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether petitioner and Huron County had an arm’s-length relationship. | Petitioner | DCH | Yes; relationship arm’s-length; reimbursement allowed |
| Whether county control over petitioner negates arm’s-length status. | Petitioner | DCH | No; county could not control petitioner to a degree defeating arm’s-length |
| Whether equity may be used to reverse an agency decision under APA. | Petitioner | DCH | Equity not controlling; agency decision affirmed on statutory interpretation |
Key Cases Cited
- Mason Co v Dep’t of Community Health, 293 Mich App 462 (2011) (traces CMH statutory history and the separate status of CMH authorities from counties)
- Great Lakes Sales, Inc v State Tax Comm, 194 Mich App 271 (1992) (requires review of the whole record for substantial evidence)
- Dignan v Mich Pub Sch Employees Retirement Bd, 253 Mich App 571 (2002) (defines substantial evidence standard)
- In re Complaint of Rovas Against SBC Mich, 482 Mich 90 (2008) (agency interpretations are not binding if conflicting with legislative intent)
- VanZandt v State Employees’ Retirement Sys, 266 Mich App 579 (2005) (deference to agency findings; credibility of witnesses)