Mason County v. Department of Community Health
293 Mich. App. 462
Mich. Ct. App.2011Background
- WMCMHS is a Michigan CMH authority created in 1997 to operate a CMH program, funded with state and federal funds, including Medicaid.
- County-owned Madden Building (Mason County) and Lincoln Street Building (Oceana County) are leased to WMCMHS; leases were renegotiated in 2003 and 2005.
- In 2006, DCH guidelines via OMB Circular A-87 defined less-than-arm’s-length transactions and WMCMHS began withholding rent from county plaintiffs.
- Plaintiffs Mason and Oceana Counties filed a July 2008 declaratory action seeking a ruling that their leases with WMCMHS were arm’s-length and that WMCMHS must pay past and future rents.
- The trial court held the leases were arm’s-length and WMCMHS had an obligation to pay past and future rents; it refused to join CMS and denied other claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction of the suit | Plaintiffs argued circuit court; CMS involvement may implicate state contract claims | Defendants argued Court of Claims has exclusive jurisdiction over state contracts and related claims | Circuit court has concurrent jurisdiction; not error |
| Arm’s-length transaction under the Mental Health Code | Plaintiffs contend they can control WMCMHS and transactions are not arm’s-length | Defendants contend plaintiffs have control or substantial influence over WMCMHS | No control by plaintiffs; transaction is arm’s-length; defendant WMCMHS owes rents |
| Whether CMS is a necessary party | CMS participation may affect funding and validity of the relief | CMS not necessary; state funding mechanisms are intact | CMS not required to be joined; trial court did not abuse discretion |
| Unjust enrichment and rent payments | WMCMHS must pay rents from the leases as the arm’s-length assumption entitles reimbursement | Previous agreements and funding structures may negate entitlement to rent payments | Rent payments owed; no unjust enrichment defense defeats plaintiffs |
Key Cases Cited
- Parkwood Ltd Dividend Housing Ass’n v State Housing Dev Auth, 468 Mich 763 (2003) (concerning exclusive vs concurrent jurisdiction in state contracts)
- Duncan v Michigan, 284 Mich App 246 (2009) (concurrent jurisdiction and ancillarity principles (vacated in part, aff'd in part))
- Detroit v. Ambassador Bridge Co, 481 Mich 29 (2008) (statutory interpretation; public health/legislative intent context)
- Kinder Morgan Mich, LLC v City of Jackson, 277 Mich App 159 (2007) (legislative history and interpretation guidance)
- Biloxi Regional Med Ctr v Bowen, 835 F2d 345 (D.C. Cir. 1987) (illustrates the 'power of the sword/damocles' concept of potential influence)
- Oakland Co v Dep’t of Mental Health, 178 Mich App 48 (1989) (state funding and local involvement in mental health services)