Michigan Court of Appeals; Docket # 349786; Unpublished
Judges FortHood, Cavanagh, and Tukel; per curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
Collateral Estoppel and Res Judicata
In this unpublished per curiam opinion, the Court of Appeals affirmed the trial court’s grant of summary disposition to defendant on the issue of whether plaintiff’s claim was barred under res judicata, finding that the federal court’s order in Omar v. Allstate Ins Co (Omar I), opinion of the United States District Court for the Eastern District of Michigan, issues March 14, 2019 (Case No. 17-cv-13400), which granted summary disposition to defendant in a case based on the same accident at issue here, was controlling.
This case arose from an accident in which Danny Omar was a passenger in a vehicle driven by Marletta Boyd when the vehicle was struck by another car. Omar suffered injuries from the accident and sought and received medical treatment for these injuries from plaintiff. Because Omar did not have insurance at the time of the accident, he submitted a claim for no-fault benefits under Boyd’s insurance policy with defendant. In 2017, Omar sued defendant, alleging that defendant had failed or unreasonably refused to pay plaintiff’s no-fault benefits. In response, defendant removed the case to federal court and filed a motion for summary judgment. In early 2018, while the federal court action was pending, plaintiff and Omar entered into an assignment of rights agreement in which Omar assigned to plaintiff “all rights and privileges to and remedies for payment of health care services, products, or accommodations (‘services’), provided by Assignee to Assignor to which Assignor is or may be entitled under Chapter 31 of the Insurance Code.” After the assignment was executed, plaintiff sued defendant in Wayne Circuit Court, alleging that defendant unreasonably refused to pay plaintiff for the medical services provides to Omar. Defendant denied plaintiff’s claims and asserted that “any claim by plaintiff was barred, and that any subsequent assignment of rights was invalid due to fraudulent statements or misrepresentations by Boyd, which voided the underlying insurance policy.”
While the case between defendant and plaintiff was occurring, the federal court had granted defendant’s motion for summary judgment against Omar in Omar I, finding that “there was no genuine dispute of material fact that Boyd’s policy was obtained through material misrepresentation and, as a result, Omar was not entitled to recover no-fault benefits from defendant.” Omar filed a motion for reconsideration, contending there was “no evidence that he participated in any fraud related to the procurement of Boyd’s policy and, as a result, the equities should have balanced in his favor.” However, the federal court denied this motion, finding that “because Bazzi does not limit the ‘[c]ourt’s equity analysis to the parties’ conduct during the procurement of the policy[,]’ the federal court properly considered Omar’s misconduct while pursuing his claim for no-fault benefits and defendant’s lack of wrongdoing in the balance of equities.” Following the entry of summary judgment in federal court, defendant filed a motion for summary disposition in the current case, noting that “the federal court ruled defendant was entitled to rescind Boyd’s policy and have it declared void ab initio because Boyd made misrepresentations in her application for the policy.” Defendant argued that, once rescinded, neither Omar nor plaintiff was entitled to no-fault benefits from defendant under Boyd’s policy. In response, plaintiff argued that defendant failed to present “any argument that the equities favored recission of Boyd’s policy as to plaintiff’s claims.” The trial court in this case, in granting summary disposition in favor of defendant, stated that it was doing so “because of the federal court order.” Plaintiff filed a motion for reconsideration, contending that insurance policies are not automatically void ab initio when an innocent third party is involved. The trial court denied the motion.
On appeal, the Michigan Court of Appeals first considered the issue of assignment and the effect of Omar’s assignment of his claims to plaintiff in this case. In doing so, the Court held that it is well settled that the provider-assignee “stands in the shoes of the assignor” and only “possesses whatever right [the assignor] would have to collect past due or presently due benefits from the no fault insurer.” The Court noted that “the federal court in Omar I concluded that Omar was not entitled to any no-fault benefits from defendant because, in part, the equities balanced in favor of rescinding defendant’s insurance contract with Boyd. Consequently, Omar’s claim for no-fault benefits, which was premised on the same insurance contract, was substantively barred on the merits and any derivative claim plaintiff has must similarly fail.”
The Court then turned to the dispositive issue of res judicata. While plaintiff argued that res judicata did not apply in this case because the federal court in Omar I ruled on a different claim for no-fault benefits than was at issue in the current case, the court disagreed. In doing so, the court noted that res judicata bars a party’s subsequent action if “(1) the prior action was decided on the merits, (2) both actions involve the same parties or their privies, and (3) the matter in the second case was, or could have been, resolved at first.” Applying these principles, the Court held that (1) the federal court’s decision in Omar I was a decision on the merits; (2) “Omar and plaintiff [were] in privity because they had not only a substantial identity of interests in whether Boyd’s insurance contract with defendant was rescinded, they had an identical interest – plaintiff did not have even a potentially valid claim unless Omar did,” and; (3) “the underlying issue raised by Omar and plaintiff in their respective suits was whether innocent third parties, whom they alleged to be Omar and plaintiff, could collect no-fault benefits from defendant despite recission of Boyd’s policy as void ab initio [and] the federal court addressed and answered this issue in Omar I, deciding Omar’s claim was ‘substantively barred on the merits’” making any derivative claims such as plaintiff’s doomed to fail as well. Thus, the Court clarified that plaintiff was choosing to “essentially use this lawsuit as a substitute for federal appeal,” which is “precisely the type of litigation the res judicata doctrine is intended to bar.” Instead, the Court stated that the proper recourse for plaintiff would have been for Omar to appeal the summary judgment order, or for plaintiff to intervene and do so, but no such recourse occurred. Accordingly, the holding of the trial court was affirmed.