The check won’t be in the mail

Let’s suppose you were overcharged on your electric bill for a number of months.

The overcharge could have been clerical error, a misread meter or some other reason. It really doesn’t matter. What matters is you’ve paid too much and you’d like your money back.

No problem, says the electric company, we’re responsible for this mess. We’ll credit next month’s bill.

But there won’t be a next month’s bill, you say, at least not from you guys. I’m all paid up and I’ve switched to a different electric company.

Well then, we’re very sorry but we only credit bills to make up for overcharges. We don’t send checks. That would cost us a lot of money and besides, the law says we don’t have to.

So you charge off to court and learn, to your astonishment and dismay, that the electric company is right.

Huh? Whaaaatt?

Relax, that’s not the way it really goes for a typical residential electric customer.

But that’s exactly the way it went for a couple of Detroit Edison’s largest customers recently.

Detroit Edison applied to the PSC for a multi-million dollar rate increase. Under MCL 460.6a(1), if the PSC doesn’t act on the application within a certain time, the utility can “self-implement” a rate increase. Later, when the PSC acts, if a smaller-than-requested rate increase is approved, customers are due a refund.

That’s what happened with Detroit Edison’s application in this case. But when refund time came around, Detroit Edison proposed, and the PSC approved, a prospective refund scheme for its “primary customers” (entities that buy lots and lots of electricity) that would give only current primary customers a pro rate share of the refund in the form of a credit on future bills.

Two of Detroit Edison’s “primary customers” complained. Having switched electrical suppliers, they had no Detroit Edison bills upon which a credit could be made. For them, a prospective refund meant no refund at all.

We’re not talking small change. The primary customers were looking for a share in a $26 million refund.

In the Court of Appeals, the Association of Businesses Advocating Tariff Equity (ABATE) sued on behalf of the complaining primary customers.

In a 2-1 decision, Judge David Sawyer, joined by Joel Hoekstra, said the case turns on interpreting a portion of MCL 460.6a(1).

The commission shall allocate any refund required by this section among primary customers based upon their pro rata share of the total revenue collected through the applicable increase … .

That means, according to ABATE, that Detroit Edison must calculate primary customers’ refunds based on their actual overpayment and then refund an amount equal to the actual overpayment.

It might mean that, said the COA majority. But there’s a lot of ambiguity in the statute.

[MCL 460.6a(1)] calls for a “refund” to “customers” and, with respect to “primary customers” requires that the refund be “based upon their pro rata share of the total revenue collected through the applicable increase.” This could be viewed as requiring a “refund” in the traditional sense, i.e., a return of monies previously paid.”

But the majority noted that in Attorney General v. Public Service Comm’n, 215 Mich. App. 356 (1996) and Attorney General v. Public Service Comm’n,  235 Mich. App. 308 (1999), two cases dealing with refunds under MCL 460.6h(13), COA panels ruled that 6h(13):

allowed for an adjustment of future rates and did not require a return of actual monies paid. Thus, within the context of PSC statutes, the term “refund” enjoys a broader meaning. There is nothing in the statute that compels the conclusion that use of the term “refund” means the monies returned to a primary customer must be based on the individual primary customer’s actual overpayment.

Nonetheless, § 6a(1) requires that the refund to “primary customers” be based on “their” “pro rata” share of revenues collected. “Primary customers” could be interpreted to mean the individual primary customers, since the reference is to “primary customers” and not the class of primary customers. Conversely, the absence of the phrase “individual primary customers” allows for the “primary customers” to be viewed and treated as a group. Further, “their pro rata share” could be interpreted to mean the amount of self-implemented increase in rates that each individual customer actually paid. However, the statute could also be read as requiring that all of the primary customers together be given a refund based on all of the primary customers’ pro rata share of the total revenue collected.

When a statute can be reasonably read in differing ways, the COA majority noted, an agency’s interpretation is entitled to deference unless there are “cogent reasons” for not doing so.

There are no cogent reasons to overrule the way the PSC applied the statute, the majority concluded.

A PSC accountant testified that calculating refunds in the manner ABATE suggested “would result in burdensome administrative costs,” costs that would be passed on to others in future ratemaking decisions, the majority observed.

And, the primary customers who chose to switch suppliers would presumably have factored the potential loss of a refund as part of their determination whether switching made economic sense, according to the PSC.

That presumption would have been based on those two cases dealing with 6h(13), said the COA majority.

In his dissent, Judge Henry Saad wasn’t buying any of it.

I strongly dissent because the largest users of electricity who make the move to a Detroit Edison competitor end up losing the most. …

The PSC … justifies its unfair methodology on the self-serving theory that primary customers should have known that the PSC has broad discretion and that it likely would not have granted primary customers a refund (despite the act’s language which seems to guarantee a refund). According to the PSC, primary customers must have factored this in to their decisions to switch electric suppliers and, therefore, did not really lose anything at all by the PSC’s decision not to give them refunds. …

[T]his rationale [is] a form of reasoning backward from a desired result[.]

The case is ABATE v. Michigan Public Service Comm’n (majority opinion) (dissent).

Realtors hope $25B foreclosure settlement will spark housing revival

The following post was written by John Stodder, The Dolan Company National Affairs Correspondent. Dolan is the parent company of Michigan Lawyers Weekly.

With the residential real estate industry shell-shocked from years of a moribund market, its spokespeople can be forgiven for taking a cautious attitude toward this week’s announcement of a $25 billion settlement with five of the nation’s biggest mortgage lenders over flawed and fraudulent foreclosure practices.

The money in the settlement will mostly go to borrowers and homeowners who are underwater. According to the Washington Post, the settlement “will force lenders to revamp how they interact with troubled homeowners and bar them from trying to foreclose on borrowers while simultaneously negotiating mortgage modifications.”

But could the settlement help get the residential market moving again, even in the face of historic low interest rates and plummeting prices?

“We do hope that the resolution will help more lenders with the certainty they need to kick loose more loans,” said Walter Molony, a spokesman for the National Association of Realtors inWashington,D.C. He cautioned, however, that the impact will be limited because the settlement doesn’t help the millions of borrowers with loans owned by Fannie Mae or Freddie Mac.

Eric Berman, communications director for the Massachusetts Association of Realtors, was pleased that the settlement was designed to help more homeowners stay in their homes because that kind of stability slows the ongoing descent of home values in many markets – though the market isn’t as bad, he hastened to add, inMassachusetts as it is in many other areas.

But even there, he said, “Distress sales impact values of homes of people who are not in a distress situation.”

Realtors also hope the settlement “can give lenders the confidence to start up with loan modifications, short sales and principal write-downs,” Berman said. “We’re going to have to wait and see. From our members’ point of view, short sales take forever. The only thing short about a short sale is the definition.”

While realtors continue to ruminate, the blogosphere reacted quickly:

 

  • Financial blogger Yves Smith at Naked Capitalism gives “The Top Twelve Reasons Why You Should Hate the Mortgage Settlement.”  She is scathing. “We’ve now set a price for forgeries and fabricating documents: It’s $2,000 per loan,” which, as she points out, for an average loan is “less than the price of the title insurance that banks failed to get when they transferred the loans to the trust.”
  • Writing at the Huffington Post, financial reform activist Dennis Kelleher calls the deal a “criminal sell-out,” because the $20 billion in loan forgiveness, though impressive at first blush, only adds up to $20,000 per 1 million homes. According to a Zillow report in November, some 14.6 million home borrowers have fallen into a negative equity position.
  • Reuters’ financial blogger Felix Salmon likes the deal because the attorneys general didn’t give up too much and the banks didn’t get too much. Banks only got immunity from suits over the practice of robosigning, but can still be sued over a range of other alleged misdeeds that contributed to the mortgage default crisis.

 

– John Stodder

 

It’s true: ‘True majority’ WCAC decisions no longer required

When the Workers’ Compensation Appellate Commission reviews a magistrate’s decision concerning a comp claim, the long-standing law in Michigan has been that the WCAC must issue a “true majority” opinion — one in which a majority agrees in the result and the reasoning behind it.

Not any longer, the Michigan Supreme Court has ruled.

In Findley v. DaimlerChrysler Corp., a workers’ comp magistrate denied a benefits claim. The WCAC affirmed. The WCAC’s decision consisted of a lead opinion by one commissioner. The second commissioner concurred in the result only, without adopting the facts found in the lead opinion or making findings of his own. A third commissioner dissented.

The Michigan Court of Appeals vacated the WCAC decision. Citing MCL 418.274(8) and Aquilina v. General Motors Corp., 403 Mich. 206 (1978), the COA ruled in Findley, that “a true majority decision is one in which at least a majority of the commissioners agree regarding the material facts and the ultimate outcome.”

In making its ruling, the COA turned aside the defendant’s argument that Aquilina was good law when the Workers’ Compensation Appellate Board (the predecessor to the WCAC) reviewed cases de novo but the review standard now is “substantial evidence,” so true majorities are no long necessary.

Importantly, however, our review of the WCAC’’s findings remains the same as our previous review of the WCAB’s findings — we must determine if any competent evidence exists to support the WCAC’s findings. … Thus, the mere fact that the WCAC’s standard for reviewing a magistrate’s decision has changed since Aquilina was decided is simply not relevant to whether competent evidence supports the WCAC’s findings. And, in determining whether any competent evidence exists to support the WCAC’s findings, “we cannot discharge our reviewing responsibilities unless a true majority reaches a decision based on stated facts.” … To allow otherwise would be to corrupt the integrity of the administrative process. … Accordingly, the true-majority requirement articulated in Aquilina continues to be valid.”

Not true, ruled the MSC in a 4-3 order released late Friday. The MSC reversed the COA and reinstated the WCAC’s decision:

In contrast with the statutory mechanism in place at the time Aquilina was decided, the WCAC is now required to treat as conclusive the factual findings of the magistrate where those findings are “supported by competent, material, and substantial evidence on the whole record.” MCL 418.861a(3). Because the WCAC must now give deference to the magistrate’s factual determinations, and may no longer engage in de novo fact finding, a WCAC decision does not require a “true majority” “decision based on stated facts.”

Justice Michael Cavanagh, joined by Justice Marilyn Kelly, dissented.

Although the 1985 legislative amendments brought reforms to the Worker’’s Disability Compensation Act, as the Court of Appeals recognized, the review function of appellate courts remains the same. See, e.g., Holden v Ford Motor Co, 439 Mich 257, 262 (1992). And, even after the legislative amendments, this Court has generally recognized the importance of a “carefully constructed opinion by the WCAC” in facilitating appellate review. … Thus, under the facts of this case, I do not believe that the Court of Appeals clearly erred in applying Aquilina where, as in Aquilina, a commissioner in the majority did not issue a separate opinion but, instead, concurred only in the result reached by the lead opinion.

Cavanagh would have denied leave to appeal. Justice Diane Hathaway would have granted leave to appeal.

Two counties sue MERS for transfer taxes

The Lansing State Journal reports this morning that Ingham and Branch counties have sued Mortgage Electronic Registration Systems Inc., and a number of banks and mortgage companies, for unpaid transfer taxes on properties MERS purchased at foreclosure sales and later transferred to financial institutions.

According to Ingham County Register of Deeds Curtis Hertel Jr., although MERS buys the properties, when it later transfers ownership, it claims a transfer tax exemption for tranactions valued less than $100. Hetel believes that the county and state are owed “millions of dollars” in unpaid transfer taxes over the past decade.

From the LSJ:

Just what, exactly, MERS owns and the rights that ownership gives it have become contested questions as the foreclosure crisis has continued.

The company may claim to hold title to tens of millions of U.S. mortgages, but it invests no money in those loans and holds no interest in the debt underlying them.

For that reason, Michigan’s Court of Appeals ruled earlier this year that the company could not foreclose by advertisement, that is, could not foreclose without taking the case before a judge.

“There are some really profound contradictions built into the DNA of the MERS system,” said Christopher Peterson, a professor at the University of Utah’s S.J. Quinney College of Law, who has written on MERS.

“When the financial institutions try to use MERS as a tool to foreclose on your house, they will commonly represent that MERS has an ownership stake that justifies allowing them to do that,” he said, “but when they talk to the county register of deeds offices about whether or not they have to pay fees or taxes, they claim not to have the ownership interest.”

The LSJ reports that counties in six other states have filed similar suits.

Bowling alley immunity bill rolls on

When Michigan’s smoking ban was enacted, bowling alley patrons who smoked, like all other smokers who frequent bars, restaurants and other public places, had to start trooping outside to have a cigarette.

Now, it’s a hassle to take off your bowling shoes and put on your street shoes for a quick puff. Bowling alley operators say most bowlers leave their bowling shoes on when they go outside and light up.

The problem is that when coming back in, bowlers might track in moisture and debris on the bottom of their bowling shoes. This can lead to hazardous footing conditions, which, in turn, can lead to serious slip-and-fall injuries while swinging a heavy bowling ball. Such injuries lead to personal-injury suits.

Bowling alley proprietors, like all business owners, are interested in limiting their liability exposure whenever possible.

SB 281 helps them do just that. From the Senate Fiscal Agency analysis of the bill:

The bill would create the “Bowling Center Act” to require a bowling center operator to post a specific notice about the danger of wearing bowling shoes outside, and provide the operator with immunity from civil liability for injuries to a bowler due to a slip and fall inside the bowling center that resulted from outside use of bowling shoes.

Specifically, the bill would require a bowling center operator to post a notice in a conspicuous place near each entrance to and exit from a bowling center. The notice would have to read:

“Bowling shoes are specialized footwear and are not intended to be worn outside a bowling center because the bowling shoes may be affected by substances or materials such as snow, ice, rain, moisture, food, or debris. Such substances or materials on bowling shoes that have been worn outside a bowling center may cause the person wearing the bowling shoes to slip, trip, stumble, or fall on the floor or alley surfaces in the bowling center.”

If an operator posted the required notice, the operator would not be civilly liable for injuries to a bowler resulting from a slip, trip, stumble, or fall inside the bowing center solely caused by a substance or material on the bowler’s bowling shoes that was acquired outside the bowling center immediately before the bowler entered or re-entered the bowling center.

The bill cleared the Senate on a 30-8 vote early this year. The House Judiciary Committee is holding a hearing on the bill today.

House Judiciary Committee mulls mortgage fraud bills

Tomorrow, the Michigan House Judiciary Committee will consider legislation that cracks down on individuals and institutions engaged in residential mortgage fraud.

The committee meets Sept. 8 to consider a bipartisan, 16-bill package for referral to the Committee on Banking and Financial Services.

Sponsors of the legislation are not fooling around.

For example, under HB 4487, lenders face a 15-year felony for fraud during the lending process or when filing mortgage documents afterward, or for failing to disburse funds as promised in a loan commitment.

HB 4488 stiffens penalties for using false pretenses in connection with real estate transactions — the bigger the fraud (as measured by the transaction’s value), the longer the prison term.

Other bills in the package deal with fraud by notaries public and amending sentencing guidelines related to mortgage-fraud crimes.

Listed below are the bills, links to the text and other information, the primary sponsors, and thumbnail descriptions of the legislation.

  • HB 4462 – Rep. Marty Knollenberg (R-Troy) – Crimes; forgery; forging or uttering and publishing a real estate document; prohibit, and provide for penalties and remedies.
  • HB 4478 – Rep. Lisa Lyons (R-Alto) – Criminal procedure; sentencing guidelines; sentencing guidelines for forgery and uttering and publishing of real estate instruments; enact.
  • HB 4487 – Rep. David Nathan (D-Detroit) Financial institutions; generally; residential mortgage fraud; prohibit.
  • HB 4488 – Rep. Brandon Dillon (D-Grand Rapids) – Crimes; fraud; value thresholds for crime of false pretenses; revise.
  • HB 4489 – Rep. George Darany (D-Dearborn) – Criminal procedure; sentencing guidelines; sentencing guidelines for crime of false pretenses; revise to reflect increased penalties.
  • HB 4490 – Rep. Mark Meadows (D-East Lansing) – Criminal procedure; statute of limitations; certain crimes relating to real property; revise statute of limitations.
  • HB 4491 – Rep. Rashida Tlaib (D-Detroit) – Occupations; notaries public; penalties for notary public violations; clarify, and increase.
  • HB 4492 – Rep. Rashida Tlaib (D-Detroit) – Criminal procedure; sentencing guidelines; sentencing guidelines for notary public violations; enact.
  • HB 4495 – Rep. John Walsh (R-Livonia) – Criminal procedure; sentencing guidelines; sentencing guidelines for crime of mortgage fraud; enact.
  • SB 43 – Sen. Tupac Hunter (D-Detroit) – Financial institutions; generally; crime of residential mortgage fraud; establish.
  • SB 44 – Sen. Tupac Hunter (D-Detroit) – Criminal procedure; sentencing guidelines; sentencing guidelines for crime of mortgage fraud; enact.
  • SB 249 – Sen. Darwin Booher (R-Evart) – Crimes; fraud; value thresholds for crime of false pretenses; revise.
  • SB 250 – Sen. Darwin Booher (R-Evart) – Criminal procedure; sentencing guidelines; sentencing guidelines for crime of false pretenses; revise to reflect increased penalties.
  • SB 251 – Sen. Mike Nofs (R-Battle Creek) – Criminal procedure; statute of limitations; certain crimes relating to real property; revise statute of limitations.
  • SB 252 – Sen. James Marleau (R-Lake Orion) – Occupations; notaries public; penalties for notary public violations; increase.
  • SB 253 – Sen. John Gleason (D-Flushing) – Criminal procedure; sentencing guidelines; sentencing guidelines for notary public violations; enact.

Deposit law challenge canned

A law requiring unique Michigan markings on returnable beverage containers does not, on its face, violate the federal Commerce Clause, according to Western District Judge Gordon Quist.

A suit filed by the American Beverage Association against several state officials claims the law unfairly limits interstate commerce.

The Michigan-specific markings enable deposit-return machines to recognize that the container was purchased in Michigan. The state argues that the law is necessary to prevent situations like this one:

All kidding aside, deposit-return fraud is no small matter, wrote Quist:

[A]lthough it has never been stated with precision how many bottles are fraudulently redeemed each year, Plaintiff does not deny that the problem exists, and Defendants have presented sufficient evidence that estimates the scope of fraud to be, conservatively, 10 million dollars per year.

Yet to be determined in the litigation: whether burden imposed on the beverage manufacturers outweighs the benefits that the state obtains from the unique-marking requirement.

The case is American Beverage Ass’n v. Synder, et al.