In Re Certified Question From US District Court

Michigan Supreme Court
Lansing, Michigan 48909
____________________________________________________________________________________________
C hief Justice Justices
Maura D. Cor rigan Michael F. Cavanagh

Opinion
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman

____________________________________________________________________________________________________________________________

FILED JANUARY 31, 2002

In re CERTIFIED QUESTION FROM

THE U.S. DISTRICT COURT FOR THE

EASTERN DISTRICT OF MICHIGAN

WAYNE COUNTY,

Plaintiff,

v No. 118261

PHILIP MORRIS INCORPORATED, et

al,

Defendants,

and

JENNIFER GRANHOLM, ATTORNEY

GENERAL, ex rel, THE STATE OF

MICHIGAN,

Intervening Defendant.

BEFORE THE ENTIRE BENCH

CAVANAGH, J.

The Michigan Attorney General brought suit against

numerous tobacco companies, alleging claims for damages

incurred in providing health care services to smokers. This

suit resulted in a master settlement agreement (MSA), in which

the state released its claims and its subdivisions’ claims, in

exchange for injunctive and monetary relief. Two years later,

Wayne County filed suit against the same tobacco companies,

also alleging claims for damages incurred in providing health

care services to smokers. Defendants filed a motion for

judgment on the pleadings, arguing that the county’s claims

had been released by the MSA or, alternatively, that they were

barred by the doctrine of res judicata. The United States

District Court for the Eastern District of Michigan, Judge

Paul Borman, stayed the proceedings and certified the

following question to this Court1:

Does the Michigan Attorney General have the

authority to bind/release claims of a Michigan

county as part of a settlement agreement in an

action that the Attorney General brought on behalf

of the State of Michigan?

Having heard oral argument, this Court answers that question

in the affirmative.

1
MCR 7.305(B)(1) provides:

When a federal court . . . considers a

question that Michigan law may resolve and that is

not controlled by Michigan Supreme Court precedent,

the court may on its own initiative or that of an

interested party certify the question to the

Michigan Supreme Court.

2
I. FACTS AND PROCEEDINGS

In 1996, the Attorney General, on behalf of the people of

Michigan, sued numerous tobacco companies, seeking injunctive

and monetary relief to redress harm to the public health

resulting from defendants’ conduct. See Attorney General v

Philip Morris, Inc, Ingham Cir Ct No 96-84281-CZ. The state

asserted five claims for relief: (1) violations of the

Michigan Consumer Protection Act, MCL 445.901 et seq.;

(2) violation of the Michigan Antitrust Reform Act, MCL

445.771 et seq.; (3) restitution based upon unjust enrichment;

(4) indemnity; and (5) breach of duty voluntarily undertaken.

In 1998, that case was settled without any of the state’s

claims being determined on the merits. Defendants and the

attorneys general of forty-six states, including Michigan,

entered into a master settlement agreement. Defendants agreed

to pay Michigan approximately $8.9 billion over a period of

twenty-five years and to enter into a consent decree

containing broad injunctive provisions. The MSA also provided

for a release and covenant not to sue defendants for a broad

range of claims. The release defined the “Releasing Parties”

as the settling states and their subdivisions, including

counties. Finally, the MSA contained an offset provision that

afforded defendants the right to offset any subsequent

recovery by a state subdivision against future payments to the

settling state. After concluding that the MSA was in the best

interests of Michigan, the circuit court approved the consent

decree and ordered that the state’s complaint be dismissed

with prejudice.

In 1999, Wayne County filed an action in the Wayne

Circuit Court against the same tobacco companies. The county

asserted five claims for relief: (1) unreasonable restraint of

trade, in violation of the Michigan Antitrust Reform Act, MCL

445.772; (2) public nuisance; (3) negligent entrustment;

(4) the undertaking of, and the wilful failure to perform, a

special duty; and (5) conspiracy. Defendants removed the case

to the United States District Court for the Eastern District

of Michigan on the basis of diversity of citizenship

jurisdiction, and filed a motion for judgment on the

pleadings. The federal district court determined that

defendants are “Released Parties” and that the claims brought

by Wayne County are “Released Claims” as defined by the MSA.2

2
The Master Settlement Agreement, § XII(a), provides:

(a) Release

(1) Upon the occurrence of State-Specific

Finality in a Settling State, such Settling State

shall absolutely and unconditionally release and

forever discharge all Released Parties from all

Released Claims that the Releasing Parties

directly, indirectly, derivatively or in any other

4
The remaining issue is whether Wayne County is a “Releasing

Party.”3 The federal district court stayed the proceedings

and certified the following question to this Court:

Does the Michigan Attorney General have the

authority to bind/release claims of a Michigan

county as part of a settlement agreement in an

action that the Attorney General brought on behalf

of the State of Michigan?

In order to assist this Court in deciding whether to answer

capacity ever had, now have, or hereafter can,

shall or may have.

* * *

(3) Each Settling State (for itself and for

the Releasing Parties) further covenants and agrees

that it (and the Releasing Parties) shall not after

the occurrence of State-Specific Finality sue or

seek to establish civil liability against any

Released Party based, in whole or in part, upon any

of the Released Claims, and further agrees that

such covenant and agreement shall be a complete

defense to any such civil action or proceeding.

3
The Master Settlement Agreement, § II, defines

“Releasing Parties” as

each Settling State and any of its past, present,

and future agents, officials acting in their

official capacities, legal representatives,

agencies, departments, commissions and divisions;

and also means, to the full extent of the power of

the signatories here to release past, present and

future claims, the following: (1) any Settling

State’s subdivisions (political or otherwise,

including but not limited to municipalities,

counties, parishes, villages, unincorporated

districts and hospital districts), public entities,

public instrumentalities and public educational

institutions . . . .

the certified question, we granted the Attorney General’s

motion to intervene, ordered the parties to file supplemental

briefs, and held oral argument. 622 NW2d 518 (Mich, 2001).

II. Analysis

A. THE AUTHORITY OF THE COUNTY

The 1963 Michigan Constitution at art 7, § 1,4 provides

for the creation of counties and endows the Legislature with

the authority to establish county powers and immunities.

Pursuant to art 7, § 1, the Michigan Legislature at MCL 45.3

has granted each of the state’s counties the power to sue and

to be sued.5 The Legislature has also granted to counties the

general authority to sue when injured by an act in violation

of the antitrust statute. MCL 445.778. Further, the Michigan

Constitution instructs “[t]he provisions of this constitution

and law concerning counties . . . shall be liberally construed

in their favor. Powers granted to counties . . . by this

constitution and by law shall include those fairly implied and

not prohibited by this constitution.” Const 1963, art 7,

§ 34.

4
“Each organized county shall be a body corporate with

powers and immunities provided by law.”

5
“Each organized county shall be a body politic and

corporate, for the following purposes, that is to say: To sue

and be sued . . . and to do all other necessary acts in

relation to the property and concerns of the county.”

B. THE AUTHORITY OF THE ATTORNEY GENERAL

We next turn to the powers of the Attorney General. The

most basic purpose of her office is to litigate matters on

behalf of the people of the state. Accordingly, it is widely

acknowledged that Michigan’s Attorney General has broad

authority to bring actions that are in the interest of the

state of Michigan. Michigan ex rel Kelley v CR Equipment

Sales, Inc, 898 F Supp 509, 513 (WD Mich, 1995); see Mundy v

McDonald, 216 Mich 444, 450-451; 185 NW 877 (1921).

Specifically, MCL 14.28 provides:

The attorney general shall prosecute and

defend all actions in the supreme court, in which

the state shall be interested, or a party . . . and

. . . may, when in his own judgment the interests

of the state require it, intervene in and appear

for the people of this state in any other court or

tribunal, in any cause or matter, civil or

criminal, in which the people of this state may be

a party or interested. [Emphasis added.]

This statute has been interpreted to allow the Attorney

General to initiate actions as well. CR Equipment Sales at

514. This Court has concluded:

While a distinction may be drawn between

intervening in a proceeding and instituting a

suit[,] there is merger of purpose, by reason of

public policy, when the interests of the State call

for action by its chief law officer and there is no

express legislative restriction to the contrary.

[In re Lewis Estate, 287 Mich 179, 184; 283 NW 21

(1938).]

Moreover, MCL 14.28 has been broadly construed to provide

authority for the Attorney General to litigate on behalf of

the people of the state. Mundy at 450-451. See also

Michigan State Chiropractic Ass’n v Kelley, 79 Mich App 789,

791; 262 NW2d 676 (1977). The Legislature also authorized the

Attorney General to intervene at any stage of a proceeding and

granted her the same rights possessed by other parties to a

suit.6 Accordingly, the Attorney General had the necessary

statutory authority to litigate on behalf of the people of the

state in the present case.

However, although the Attorney General has the authority

to intervene in and to initiate litigation on behalf of the

state, such authority is limited to matters of state interest.

Attorney General ex rel Lockwood v Moliter, 26 Mich 444, 447

(1873). Just as the authority of counties to sue in matters

of local interest cannot be used to undermine the authority of

6
MCL 14.101 provides:

The Attorney General of the State is hereby

authorized and empowered to intervene in any action

heretofore or hereafter commenced in any court of

the State whenever such intervention is necessary

in order to protect any right or interest of the

State, or of the people of the State. Such right

of intervention shall exist at any stage of the

proceeding, and the Attorney General shall have the

same right to prosecute an appeal, or to apply for

a re-hearing or to take any other action or step

whatsoever that is had or possessed by any of the

parties to such litigation.

the state to sue in matters of state interest, the authority

of the state to sue in matters of state interest cannot be

used to undermine the authority of political subdivisions to

sue in matters solely of local interest. As was stated so

well by Justice Cooley, “it is inconsistent with local

institutions, as they have always existed in this country,

that the local community should be coerced by the State in

matters of purely local convenience . . . .” Cooley,

Constitutional Law, p 345. This is even more true today, in

light of the grant of home rule authority to counties in the

Constitution of 1963.

Because the Attorney General possesses the authority to

sue on behalf of the state in matters of state interest, it

follows that the Attorney General necessarily has the

authority to sue on behalf of the state’s political

subdivisions in matters of state interest. CR Equipment Sales

at 514. In CR Equipment Sales, the United States District

Court for the Western District of Michigan concluded that the

Michigan Attorney General possessed the authority to bring an

action on behalf of several hundred school districts across

the state. The court reasoned that such an action was not an

action on behalf of a single unit of local government, but

rather involved the general state interest. We agree with

this reasoning. The Attorney General of Michigan possesses

the authority to represent the interests of the people of

Michigan, and thus the Attorney General has the authority as

part of this representation to represent the people of a

county who are a part of these same people. Thus, although

the Attorney General cannot sue on behalf of a county in a

matter solely of local interest, the Attorney General can sue

on behalf of a county in a matter of state interest.

Next, inherent in the Attorney General’s authority to sue

on behalf of a county in matters of state interest, is the

Attorney General’s authority to settle such a suit. Given

that the Attorney General has the authority to bring claims,

it inevitably follows that the Attorney General has the

authority to settle and release such claims.7 It is said that

the Attorney General “may control and manage all litigation in

behalf of the state and is empowered to make any disposition

of the state’s litigation which [the Attorney General] deems

7
As the Oklahoma Supreme Court has stated:

As an incident to the dominion the Attorney

General possesses over every suit instituted in his

official capacity, he has the power to dismiss,

abandon, discontinue, or compromise suits brought

by him either with or without a stipulation by the

other party and to make any disposition of such

suits as he deems best for the interest of the

state. [Oklahoma ex rel Derryberry v Kerr-McGee

Corp, 516 P2d 813, 818 (1973).]

10
for its best interests.” 7 Am Jur 2d, Attorney General § 27,

p 26. Accordingly, while counties have broad authority to sue

and settle with regard to matters of local interest, the

Attorney General has broad authority to sue and settle with

regard to matters of state interest, including the power to

settle such litigation with binding effect on Michigan’s

political subdivisions.

In determining what constitutes a state interest for the

purpose of deciding whether to initiate litigation, the

Attorney General has broad statutory discretion: MCL 14.28

explicitly provides that the Attorney General may become

involved in litigation “when in his own judgment the interests

of the state require it . . . .” See also MCL 14.101; Mundy

at 450-451. In sum, the Attorney General has the authority to

bring actions involving matters of state interest, and the

courts should accord substantial deference to the Attorney

General’s decision that a matter constitutes a state interest.

On the bases of these principles, we, therefore, conclude

that the Attorney General has the authority to bring suit on

behalf of political subdivisions where there is an issue of

state interest.

C. Balancing County and State Authority

The county’s argument that it has the exclusive authority

to bring suit must fail. We acknowledge that in some

instances, a county has the exclusive authority to sue, but

that issue is not presented where, as here, the claims

asserted by the county may be of state interest.

Further, the structure of the constitution requires an

acknowledgment that, in this case and others where the state

expresses its position on issues clearly of state interest,

subdivisions are subordinate to the state’s position. We note

that the constitution vested even more power in the counties

after the most recent revision in 1963, and the laws of this

state provide counties with extensive powers. However, the

structure of the sovereign state and the constitutional and

statutory powers granted to the Attorney General dictate that

the county is ultimately subordinate to the state where, as

here, the Attorney General acted to bind the state as a whole

in a matter clearly of state interest. Thus, the law

establishes that where the Attorney General has acted to limit

the power of the counties to sue where an issue is of state

interest, the county may not act to defeat the state’s clear

intentions.

III. CONCLUSION

For the foregoing reasons, we answer the certified

question in the affirmative. The Attorney General has the

authority to release potential claims of Michigan counties as

part of a settlement agreement in an action that the Attorney

General brings on behalf of the state of Michigan where that

action involves matters of state interest. Having answered

the certified question, we now return the matter to the United

States District Court for such further proceedings as that

court deems appropriate.

CORRIGAN , C.J., and WEAVER , KELLY , TAYLOR , YOUNG , and MARKMAN ,

JJ., concurred with CAVANAGH , J.