Serenity Homes-North LLC v. Lynne Doyle

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.

STATE OF MICHIGAN

COURT OF APPEALS

SERENITY HOMES-NORTH, LLC, and UNPUBLISHED
SERENITY HOMES-WEST, LLC, August 20, 2019

Plaintiffs-Appellees,

v Nos. 344757; 344781
Ottawa Circuit Court
LC No. 18-005231-CB
LYNNE DOYLE, COMMUNITY MENTAL
HEALTH OF OTTAWA COUNTY, and
LAKESHORE REGIONAL ENTITY,

Defendants,
and

JEFFREY L. BROWN,

Defendant-Appellant.

Before: CAVANAGH, P.J., and STEPHENS and O’BRIEN, JJ.

PER CURIAM.

Defendant Jeffery L. Brown appeals as of right and by leave granted1 the trial court’s
order denying his motion for summary disposition pursuant to MCR 2.116(C)(7) (immunity
granted by law) and (8) (failure to state a claim). For the reasons set forth in this opinion, we
affirm.

I. BACKGROUND

1
Serenity Homes-North, LLC v Doyle, unpublished order of the Court of Appeals, entered
December 28, 2018 (Docket No. 344781).

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 This case arises from a fee dispute for services rendered by the plaintiffs Serenity Homes-
North, LLC, and Serenity Homes-West, LLC, licensed adult foster-care facilities that provided
foster care and other mental health services to developmentally disabled and mentally ill
individuals and their families (the consumers). Abraham Joshua was the resident agent of both
Serenity Homes-North and Serenity Homes-West. Defendant Community Mental Health of
Ottawa County (CMHOC) was a program that was funded by federal and state tax funds that
provided behavioral health services to vulnerable citizens with mental health issues. Defendant
Lynne Doyle was the Executive Director and the Chief Executive and Administrative Officer of
CMHOC. CMHOC placed individuals in plaintiffs’ facilities pursuant to a written agreement
and subsequent oral agreements. Plaintiffs alleged that CMHOC failed to pay plaintiffs from late
2016 through 2017 for previously rendered services and that CMHOC owed plaintiffs more than
$35,000.

Defendant Lakeshore Regional Entity (LRE) was a Prepaid Inpatient Health Plan that
was responsible for ensuring that Medicaid funding was available for entities to serve vulnerable
individuals. LRE coordinated the management of Medicaid funding for several human service
agencies including CMHOC and also had a quality assurance function regarding service
providers. Defendant Brown was the Chief Executive Officer of LRE at the time of the
occurrences that gave rise to this lawsuit.

Plaintiffs alleged that despite their provision of services to persons placed at their
facilities by CMHOC, their invoices for services were not paid. Plaintiffs asserted that they met
with LRE director Brown in August and September 2017 in an effort to facilitate payment. It
was during this time that plaintiffs alleged Brown told them, “he would take care of it”, referring
to the outstanding billings. In November 2017, plaintiffs filed a formal provider grievance with
LRE regarding the outstanding bills. The principals of the plaintiffs and the defendants engaged
in discussions through the balance of 2017. At one meeting, the plaintiffs alleged that the
CMHOC executive made defamatory remarks. In January 2018, plaintiffs filed the instant
lawsuit. The complaint pled both a written and oral contract claims as well as unjust enrichment
and account stated claims. Additionally, tortious interference and civil conspiracy claims were
pled against all defendants. Claims against the individual defendants were also filed. Plaintiffs
accused Brown of fraud and lodged a defamation claim against Doyle.

Motions for summary disposition were filed, most of which are not at issue in this appeal.
Defendant Brown denied all allegations against him and asserted various affirmative defenses.
Brown moved for summary disposition under MCR 2.116(C)(7) and (8). Plaintiffs responded
and opposed Brown’s motions for summary disposition. The trial court denied his motion
finding that Brown was neither cloaked in absolute governmental immunity or qualified
immunity. This appeal ensued.

II. MCR 2.116(C)(7)

Brown first argues on appeal that the trial court erroneously determined that he was not
entitled to absolute governmental immunity while the court found that he was the highest ranking
official of LRE. He argues that his former employer LRE is a “level of government.” We
disagree.

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 This Court reviews de novo the trial court’s grant or denial of a motion for summary
disposition. Bailey v Schaaf, 494 Mich 595, 603; 835 NW2d 413 (2013). Additionally, the
applicability of governmental immunity is a question of law that this Court reviews do novo.
County Rd Ass’n of Mich v Governor, 287 Mich App 95, 117-118; 782 NW2d 784 (2010). “In
making this determination, this Court reviews the entire record to determine whether defendant
was entitled to summary disposition.” Maiden v Rozwood, 461 Mich 109, 118; 597 NW2d 817
(1999).

MCR 2.116(C)(7) permits summary disposition if the claim is barred by immunity.
Odom v Wayne Co, 482 Mich 459, 466; 760 NW2d 217 (2008). The movant may support the
motion for summary disposition under MCR 2.116(C)(7) with affidavits, depositions,
admissions, or other documentary evidence. MCR 2.116(G)(2). The trial court shall consider
such evidence if the substance of the evidence would be admissible at trial. MCR 2.116(G)(6);
Odom, 482 Mich at 466. Additionally, “[t]he contents of the complaint are accepted as true
unless contradicted by documentation submitted by the movant.” Maiden, 461 Mich at 119.

The governmental tort liability act (GTLA), MCL 691.1401 et seq., grants absolute
immunity to high-ranking government officials. Odom, 482 Mich at 468-469. MCL
691.1407(5) provides: “A judge, a legislator, and the elective or highest appointive executive
official of all levels of government are immune from tort liability for injuries to persons or
damages to property if he or she is acting within the scope of his or her judicial, legislative, or
executive authority.” Judges, legislators, and the highest executive officials at all levels of
government receive immunity from all tort liability for acts done within the scope of their
judicial, legislative, or executive authority. Odom, 482 Mich at 468.

The purpose of the protection of absolute immunity is to shield public employees who
engage in broad, essential governmental decision-making and to permit the officials to fulfill
their public duties. Grahovac v Munising Twp, 263 Mich App 589, 595; 689 NW2d 498 (2004).
An executive official may be entitled to absolute immunity if he or she has broad-based
jurisdiction or extensive decision-making authority. Id. at 593. In order to determine whether a
governmental entity is a “level of government,” courts “examine whether the entity shares
aspects of governance with other political subdivisions, such as the power to levy taxes, the
power to make decisions having a wide effect on members of the community, or the power of
eminent domain” and whether the governmental entity has policy-making powers. Id. at 593,
595-596.

LRE is a regional entity established under the Mental Health Code. MCL 330.1204b
establishes the requirements and procedures for establishing a regional entity under the Mental
Health Code, MCL 330.1001 et seq. MCL 330.1204b(1) provides that “[a] combination of
community mental health organizations or authorities may establish a regional entity by adopting
bylaws that satisfy the requirements of this section.” The regional entity’s bylaws must contain
the purposes and powers of the regional entity, the manner in which a community mental health
services program participates in governing the regional entity, the manner in which the regional
entity’s assets and liabilities are allocated to each participating community mental health services
program, and the manner in which the regional entity enters into contracts, among other
provisions. See MCL 330.1204b(1)(a), (b), (c), and (f). Additionally, “[a] regional entity

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established under this section is a public governmental entity separate from the county, authority,
or organization that establishes it.” MCL 330.1204b(3).

In this case, the parties do not dispute that Brown was the highest ranking official of
LRE, and the lower court record supports this conclusion. Brown was the Chief Executive
Officer of LRE, and exercised broad-based jurisdiction and had extensive authority over LRE.

LRE was formed as a regional entity pursuant to MCL 330.1204b, and the purpose of
LRE was to carry out the provisions of the Mental Health Code by coordinating and furthering
the statutory purposes of the entities that established LRE. As the statute plainly reads, LRE is a
“governmental entity”. However, applying the Grahovac factors, it is not a “level of
government” under MCL 691.1407(5). Brown did not present any evidence that LRE had the
power to levy taxes, to make decisions that had a wide effect on members of the community, or
had the power of eminent domain. LRE’s authority and jurisdiction regarding issues related to
mental health, developmental disability, and substance use disorder services was limited rather
than broad-based jurisdiction or extensive authority similar to a judge or legislator. Therefore,
LRE did not have aspects of governance or have the statutory authority to make policy decisions.
See Grahovac, 263 Mich App at 593, 595-596.

Further, Brown did not present any evidence that LRE had autonomous authority beyond
its statutory purposes and powers or beyond the powers conferred on it by the organizing entities.
Although LRE had the powers provided in MCL 330.1204b(2), including the powers shared by
the organizing entities, the power to contract with the state and the organizing entities, and the
power to accept funds, LRE’s authority was limited by the organizing entities. There was no
evidence presented of other authorities, such as a city charter or city code that granted LRE
autonomous authority or additional powers. Cf. Davis v Detroit, 269 Mich App 376, 380-381;
711 NW2d 462 (2005). Although LRE had the power to fulfill its purposes pursuant to MCL
330.1204b(2) and its bylaws, it did not have the power to make decisions beyond its statutory
powers and those established by the organizing entities in LRE’s bylaws. Therefore, we
conclude that LRE was not an autonomous governmental unit. Notwithstanding Brown’s role as
the highest executive officer of LRE, the trial court did not err by determining that Brown was
not entitled to absolute immunity under to MCL 691.1407(5) because LRE was not a level of
government. See Maiden, 461 Mich at 119; Grahovac, 263 Mich App at 597.

Brown next argues that the trial court erroneously determined that he was not entitled to
qualified governmental immunity. We disagree.

The Odom Court articulated the test for determining whether an individual has
governmental immunity:

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 If the plaintiff pleaded an intentional tort, determine whether the defendant
established that he is entitled to individual governmental immunity under the Ross
test[2] by showing the following:

(a) The acts were undertaken during the course of employment and the
employee was acting, or reasonably believed that he was acting, within the scope
of his authority,

(b) the acts were undertaken in good faith, or were not undertaken with
malice, and

(c) the acts were discretionary, as opposed to ministerial. [Odom, 482
Mich at 479-480.]

Pursuant to Ross v Consumers Power Co (On Rehearing), 420 Mich 567, 633-634; 363 NW2d
641 (1984), a governmental employee must establish that he or she acted within the scope of his
or her employment in order to be immune from intentional tort claims. Odom, 482 Mich at 473.
This includes actions that the governmental employee reasonably believed that he or she was
authorized to take. Id. Additionally, a government employee’s actions must not have been
malicious or executed with a wanton or reckless disregard of the rights or harm to another. Id. at
474-475. Finally, immunity applies to discretionary as opposed to ministerial actions. Id. at
475-476.

Plaintiffs asserted intentional tort claims of fraud and tortious interference with business
relations. See Health Call of Detroit v Atrium Home & Health Care Servs, Inc, 268 Mich App
83, 90; 706 NW2d 843 (2005); Huron Tool and Engineering Co v Precision Consulting Servs,
Inc, 209 Mich App 365, 370-371; 532 NW2d 541 (1995); see also Odom, 482 Mich at 480.
Plaintiffs’ civil conspiracy claim required plaintiffs to establish the underlying intentional tort
claims. See Urbain v Beierling, 301 Mich App 114, 132; 835 NW2d 455 (2013). Brown had the
burden to prove that he was entitled to qualified governmental immunity pursuant to the Ross
test. Odom, 482 Mich at 479-480.

The parties do not dispute that Brown interacted with plaintiffs in the course of his
employment and within the scope of his authority as Chief Executive Officer of LRE. The
parties also do not dispute that Brown’s statement to plaintiffs that he would take care of the
outstanding invoices was discretionary. The lower court record supports these conclusions.
Plaintiffs alleged that Joshua met with Brown during the course of his employment as Chief
Executive Officer of LRE to discuss the lack of payment for services that plaintiffs provided to
consumers. Additionally, Brown’s statement to Joshua that he would take care of the unpaid
invoices required Brown to exercise judgment to resolve a problem and was not merely the
performance of a duty. See Odom, 482 Mich at 473, 476.

2
Ross v Consumers Power Co (On Rehearing), 420 Mich 567, 633-634; 363 NW2d 641 (1984).

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 Plaintiffs pleaded that Brown acted with malice or with wanton or reckless disregard of
plaintiffs’ right to be compensated for fulfilling their contractual obligations and disregard of the
risk of harm that plaintiffs would incur additional expenses. Brown did not present any evidence
to contradict plaintiffs’ allegation that he did not act in good faith, other than generally denying
the allegations against him.

In contrast, plaintiffs alleged that Brown wrongfully refused to pay the outstanding
invoices. They also pled that Doyle, CMHOC, and LRE acted, in part, in an effort to conceal
their organizational and personal malfeasance, difficulties with state authorities and loss of
funding. Plaintiffs also alleged that Brown acted with malice or reckless disregard for plaintiffs’
right to be compensated because defendant knew that he was powerless to effectuate the
invoices’ payment but indicated to Joshua that he would take care of the outstanding invoices.
Plaintiffs alleged that Brown intended for plaintiffs to continue to provide services, plaintiffs
relied on Brown’s misrepresentation and continued to provide services, and plaintiffs suffered
damages caused by Brown’s misrepresentation. Regarding the tortious interference claim,
plaintiffs alleged that Brown was aware of plaintiffs’ business relationships with their consumers
and that Brown’s misrepresentation was the cause of injuries and damages to plaintiffs. Finally,
plaintiffs alleged that Brown acted in concert with Doyle, CMHOC, and LRE to deprive
plaintiffs of their ability to provide services to their consumers and to deprive plaintiffs of their
payment for previously rendered services and that they suffered damages.

Accepting these uncontradicted allegations as true, plaintiffs sufficiently pleaded that
Brown acted with malice or with a wanton or reckless disregard of the rights or harm to
plaintiffs. See Odom, 482 Mich at 474-475; Maiden, 461 Mich at 119. Therefore, Brown was
not entitled to qualified governmental immunity pursuant to MCL 691.1407(5) or summary
disposition pursuant to MCR 2.116(C)(7). See Odom, 482 Mich at 479-480. Because plaintiffs
pleaded sufficient facts regarding their civil conspiracy claim and their underlying intentional
tort claims, as we will further discuss, the trial court did not erroneously deny Brown summary
disposition under MCR 2.116(C)(7) regarding each of plaintiffs’ claims. See Odom, 482 Mich at
479-480; Maiden, 461 Mich at 119.

III. MCR 2.116(C)(8)

Brown also argues that the trial court erroneously determined that plaintiffs alleged
sufficient facts to support the elements of their fraud, tortious interference with business
relations, and civil conspiracy claims against Brown. We disagree.

A motion under MCR 2.116(C)(8) tests the legal sufficiency of the complaint and the
pleadings. Bailey, 494 Mich at 603. “All well-pleaded factual allegations are accepted as true
and construed in a light most favorable to the nonmovant.” Johnson v Pastoriza, 491 Mich 417,
435; 818 NW2d 279 (2012). However, a plaintiff’s conclusory statements that are unsupported
by allegations of fact will not suffice to state a cause of action. ETT Ambulance Serv Corp v
Rockford Ambulance, Inc, 204 Mich App 392, 395-396; 516 NW2d 498 (1994). In reviewing a
motion for summary disposition pursuant to MCR 2.116(C)(8), a trial court considers only the
pleadings. MCR 2.116(G)(5).

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 Summary disposition is properly granted when the alleged claims are “so clearly
unenforceable as a matter of law and no factual development could possibly justify recovery.”
Johnson, 491 Mich at 435 (quotation marks and citation omitted). Summary disposition may be
premature if it is granted before discovery on a disputed issue is complete. Dimondale v Grable,
240 Mich App 553, 566; 618 NW2d 23 (2000). “However, summary disposition may be proper
before discovery is complete where further discovery does not stand a fair chance of uncovering
factual support for the position of the party opposing the motion.” Id. (quotation marks and
citation omitted).

Fraud is an intentional tort claim. Huron, 209 Mich App at 370-371. In order to
establish a claim of fraud,

[A] plaintiff must prove that (1) the defendant made a material
representation, (2) the representation was false, (3) the defendant knew that it was
false when it was made, or made it recklessly, without any knowledge of its truth
and as a positive assertion, (4) the defendant made the representation with the
intention that the plaintiff would act on it, (5) the plaintiff acted in reliance on it,
and (6) the plaintiff suffered injury because of that reliance. [Zaremba Equip, Inc
v Harco Nat’l Ins Co, 280 Mich App 16, 38-39; 761 NW2d 151 (2008)].

The plaintiff’s reliance must be reasonable. Id. at 39. However, a plaintiff is not able to
establish a fraud claim if he or she had the means to determine that a representation was not true.
Id. at 38.

In this case, plaintiffs stated a fraud claim against Brown on which relief could be
granted. Plaintiffs alleged that Brown made a material representation that he would take care of
the payment of plaintiffs’ outstanding invoices. Plaintiffs further alleged that Brown knew that
this representation was false because Brown knew that he was powerless to effectuate payment
or that he simply would not effectuate payment. In support of the former, they have asserted that
at the time the representations were made Brown was aware that LRE and CMHOC had suffered
a loss of funding from the state and were in jeopardy of further losses. Additionally, plaintiffs
alleged that Brown indicated that he would effectuate payment of the invoices with the intent
that plaintiffs would continue to provide services and refrain from seeking legal remedies for the
outstanding invoices. Finally, plaintiffs alleged that they relied on Brown’s statement, continued
to provide services, and suffered an injury by incurring expenses for additional uncompensated
services rendered after Brown stated that he would effectuate payment of the outstanding
invoices. Therefore, plaintiffs alleged each of the six elements of fraud in their amended
complaint. See Zaremba, 280 Mich App at 38-39.

Regarding the reliance element, plaintiffs alleged that they continued to provide services
in reliance on Brown’s statement that he could effectuate CMHOC’s payment of the outstanding
invoices. Although Brown was the Chief Executive Officer of LRE, and was not an employee of
CMHOC, plaintiffs alleged that LRE ensured that Medicaid funding was available to CMHOC
and certified that programs, such as CMHOC, were in substantial compliance with the applicable
standards for community mental health services programs. Accepting plaintiffs’ factual
allegations as true, plaintiffs’ reliance on Brown’s statement was reasonable based on Brown’s
role as Chief Executive Officer of LRE and LRE’s role of ensuring that funding was available to

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CMHOC and ensuring that CMHOC complied with the applicable program standards. Plaintiffs
also sufficiently alleged that, when Brown made the statement that he would effectuate payment,
he did not intend to perform the promise because Brown knew that CMHOC was not in
substantial compliance with program standards and he was powerless to effectuate payment or
that he would not effectuate payment. Therefore, we conclude that plaintiffs sufficiently alleged
facts to support the elements of their fraud claim against Brown, and the trial court properly
denied defendant’s motion for summary disposition regarding plaintiffs’ fraud claim pursuant to
MCR 2.116(C)(8). See Bailey, 494 Mich at 603, 618; Zaremba, 280 Mich App at 38-39.

In order for a plaintiff to establish a claim of tortious interference with a business
relationship or expectancy, a plaintiff must prove:

(1) [T]he existence of a valid business relationship or expectancy that is
not necessarily predicated on an enforceable contract, (2) knowledge of the
relationship or expectancy on the part of the defendant interferer, (3) an
intentional interference by the defendant inducing or causing a breach or
termination of the relationship or expectancy, and (4) resulting damage to the
party whose relationship or expectancy was disrupted. [Health Call, 268 Mich
App at 90].

Tortious interference with business relations claims can involve inducing a party to terminate an
employment contract, interfering with a party’s business relationships and expectancies of
continued employment, or a reasonable likelihood of an award of a public contract or a sale of
property. See id. at 90-91; Cedroni Ass’n, Inc v Tomblinson, Harburn Assocs, Architects &
Planners, Inc, 492 Mich 40, 45-46; 821 NW2d 1 (2012).

In this case, plaintiffs stated a tortious interference with business relations claim against
Brown on which relief could be granted. Plaintiffs pleaded that they had valid business
relationships with their consumers and that they have a valid business expectancy to be paid for
their services pursuant to oral and written agreements with CMHOC. Plaintiffs also pleaded that
Brown had knowledge of plaintiffs’ business relationships and that CMHOC owed plaintiffs
more than $35,000 for previously rendered services, as demonstrated by Brown’s meeting with
Joshua to discuss CMHOC’s failure to pay plaintiffs. Plaintiffs alleged that Brown interfered
with plaintiffs’ expectancy to receive payment for plaintiffs’ previously rendered services by
falsely stating that he would effectuate payment of the outstanding invoices, which caused
plaintiffs to incur expenses for additional uncompensated services and to refrain from seeking
repayment of the outstanding invoices and other legal remedies from CMHOC. Accepting
plaintiffs’ factual allegations as true, plaintiffs sufficiently alleged facts to support the elements
of their tortious interference with business relations claim against Brown, and the trial court
properly denied Brown’s motion for summary disposition regarding this claim pursuant to MCR
2.116(C)(8). See Bailey, 494 Mich at 603, 618; Health Call, 268 Mich App at 90-91.

A plaintiff must establish an underlying tort in order to establish a claim of civil
conspiracy. Urbain, 301 Mich App at 132; Advocacy Org for Patients & Providers v Auto Club
Ins Ass’n, 257 Mich App 365, 384; 670 NW2d 569 (2003), aff’d 472 Mich 91 (2005). “A civil
conspiracy is a combination of two or more persons, by some concerted action, to accomplish a
criminal or unlawful purpose, or to accomplish a lawful purpose by criminal or unlawful means.”

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Advocacy Org, 257 Mich App at 384 (quotation marks and citation omitted). If a plaintiff fails
to establish an actionable tort, the plaintiff also fails to establish his or her civil conspiracy claim.
Id. at 384-385.

In this case, plaintiffs stated a civil conspiracy claim against Brown on which relief could
be granted. As noted, the plaintiffs pleaded sufficient factual allegations to support their tortious
interference with business relations claims. They alleged that Brown, Doyle, CMHOC, and LRE
acted in concert to commit that tort. Plaintiffs also alleged that they suffered damages, including
economic injury, harm to their business reputation, and loss of business opportunities.

Plaintiffs sufficiently pleaded that Brown acted with Doyle, CMHOC, and LRE to
accomplish the unlawful purpose of depriving plaintiffs of the rights and payment owed to them
pursuant to their contractual agreements for the previously rendered services. Plaintiffs also
sufficiently alleged that Brown used unlawful means, including Brown’s alleged fraudulent
statement and tortious interference with business relations, to deprive plaintiffs of their
contractual rights and the payment for the previous rendered services. Therefore, we conclude
that plaintiffs sufficiently alleged facts to support the elements of their civil conspiracy claim
against Brown, and the trial court properly denied Brown’s motion for summary disposition
regarding plaintiffs’ civil conspiracy claim pursuant to MCR 2.116(C)(8). See Bailey, 494 Mich
at 603, 618; Advocacy Org, 257 Mich App at 384-385.

The trial court properly determined that Brown was not entitled to absolute or qualified
governmental immunity and that the plaintiffs sufficiently alleged facts to support the elements
of their fraud, tortious interference with business relations, and civil conspiracy claims against
Brown. Therefore, the trial court properly denied Brown’s motion for summary disposition
under MCR 2.116(C)(7) and (8).

Affirmed.

/s/ Mark J. Cavanagh
/s/ Cynthia Diane Stephens
/s/ Colleen A. O’Brien

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