Dawoud v. State Farm Mutual Automobile Insurance Co.

STATE OF MICHIGAN

COURT OF APPEALS

KEVIN DAWOUD and MIKHO ESSA by Next FOR PUBLICATION
Friend BILBIL MANO and RASHA KAMEL, October 18, 2016
9:05 a.m.
Plaintiffs,

and

GRACE TRANSPORTATION, INC.,

Intervening Plaintiff,

and

UTICA PHYSICAL THERAPY,

Intervening Plaintiff-Appellant,

v No. 327915
Wayne Circuit Court
STATE FARM MUTUAL AUTOMOBILE LC No. 13-01037-NF
INSURANCE COMPANY,

Defendant-Appellee.

KEVIN DAWOUD and MIKHO ESSA by Next
Friend BILBIL MANO and RASHA KAMEL,

Plaintiffs,

and

GRACE TRANSPORTATION, INC.,

Intervening Plaintiff-Appellant,

and

UTICA PHYSICAL THERAPY,

-1-
 Intervening Plaintiff,

v No. 327927
Wayne Circuit Court
STATE FARM MUTUAL AUTOMOBILE LC No. 13-01037-NF
INSURANCE COMPANY,

Defendant-Appellee.

Before: SAAD, P.J., and JANSEN and M. J. KELLY, JJ.

PER CURIAM.

In this consolidated appeal,1 Grace Transportation, Inc. and Utica Physical Therapy
(collectively, “the service providers”) appeal the trial court’s order that granted summary
disposition in favor of defendant, State Farm, and dismissed their claims on the grounds that the
service providers’ claims were barred because the insureds were precluded from recovery, as
their underlying claims had been dismissed for discovery violations. For the reasons provided
below, we affirm.

I. BASIC FACTS

On November 28, 2012, Kevin Dawoud, Rasha Kamel, and Mikho Essa (“plaintiffs”)
were allegedly involved in a motor vehicle accident. They applied for no-fault benefits through
the Michigan Automobile Insurance Placement Facility. State Farm was assigned the claim, and
plaintiffs filed a lawsuit seeking personal protection insurance (“PIP”) benefits from State Farm.
The service providers, who provided therapy and transportation services to plaintiffs, were
allowed to intervene by stipulation of all parties to pursue direct payment of their bills by State
Farm. Plaintiffs, who failed to comply with discovery orders and failed to attend three scheduled
depositions, had their claims dismissed with prejudice.2 Plaintiffs had no further involvement in
this case and are not involved in this appeal.

Thereafter, State Farm moved for summary disposition and argued that the dismissal of
the underlying plaintiff’s case operated as an adverse adjudication on the merits pursuant to
MCR 2.504, which bars the service providers from proceeding with their derivative claims. The
service providers argued that their claims should be allowed to proceed because Michigan law

1
Although appellants filed separate claims of appeal from the same case, this Court consolidated
the two claims. Dawoud v State Farm Mut Auto Ins Co, unpublished order of the Court of
Appeals, entered July 22, 2015 (Docket Nos. 327915 & 327927).
2
The trial court also originally dismissed the service providers’ claims, but later set aside the
dismissal with respect to the service providers.

-2-
allows for such providers to bring a cause of action in their own name. Following a hearing, the
trial court granted State Farm’s motion. The service providers then filed a motion for
reconsideration, which the court also denied.

II. ANALYSIS

On appeal, the service providers argue that the trial court erred when it granted State
Farm’s motion for summary disposition and dismissed the case. We disagree.

Although the trial court did not specify the court rule it relied on when it granted State
Farm’s motion for summary disposition, MCR 2.116(C)(10) is the applicable rule. This Court
reviews de novo a trial court’s ruling on a motion for summary disposition. Marilyn Froling
Revocable Living Trust v Bloomfield Hills Country Club, 283 Mich App 264, 279; 769 NW2d
234 (2009). A motion under this subrule is properly granted if there is no genuine issue with
respect to any material fact and the moving party is entitled to judgment as a matter of law. Id. at
278. All documentary evidence submitted by the parties is considered, and it is considered in the
light most favorable to the nonmoving party. Id.

The parties agree, or at least the service providers concede, that if the elements of an
injured party’s no-fault act claim fails substantively, based on the merits (for example, if the
individual’s injury is not the result of an automobile accident), any providers of services would
have no claim against the insurer, because their claims are derivative. At issue here is whether
the same principle applies when the injured party’s no-fault claim “fails,” as it did here, due to
the injured party’s failure to attend depositions and otherwise comply with discovery orders and
obligations.

The service providers rely only on MCL 500.3112 and Wyoming Chiropractic Health
Clinic, PC v Auto-Owners Ins Co, 308 Mich App 389; 864 NW2d 598 (2014), to support their
argument that the lower court’s decision should be reversed. MCL 500.3112 states as follows:

Personal protection insurance benefits are payable to or for the benefit of
an injured person or, in case of his death, to or for the benefit of his dependents.
Payment by an insurer in good faith of personal protection insurance benefits, to
or for the benefit of a person who it believes is entitled to the benefits, discharges
the insurer’s liability to the extent of the payments unless the insurer has been
notified in writing of the claim of some other person. If there is doubt about the
proper person to receive the benefits or the proper apportionment among the
persons entitled thereto, the insurer, the claimant or any other interested person
may apply to the circuit court for an appropriate order. The court may designate
the payees and make an equitable apportionment, taking into account the
relationship of the payees to the injured person and other factors as the court
considers appropriate. In the absence of a court order directing otherwise the
insurer may pay:

(a) To the dependents of the injured person, the personal protection
insurance benefits accrued before his death without appointment of an
administrator or executor.

-3-
 (b) To the surviving spouse, the personal protection insurance benefits due
any dependent children living with the spouse.

Clearly, the text of this statute does not in any way address the issue presented in this appeal. It
says nothing about whether a provider can proceed against an insurer when the injured party’s
claim has been dismissed because of a discovery violation. It merely states that an “interested
party may apply to the circuit court for an appropriate order” if there is doubt about the proper
allocation of PIP benefits, and that PIP benefits “are payable . . . for the benefit of an injured
person.”

In Wyoming Chiropractic, this Court affirmed the trial court’s order that entered
judgment in favor of Wyoming Chiropractic and held that a provider has standing to bring a
direct cause of action against an insurer. Wyoming Chiropractic, 308 Mich App at 396-397.
After discussing MCL 500.3112 and relevant case law, this Court held that MCL 500.3112, and
specifically the phrase “or for the benefit of” in that statute, allowed a provider to bring a claim
against an insurer for PIP benefits. Id. at 392-397. However, the Court only addressed whether
a provider had standing under MCL 500.3112 to sue an insurer for PIP benefits. Id. at 390, 392.
The parties agree that the service providers here have standing under MCL 500.3112 to sue State
Farm for PIP benefits. However, the narrow legal issue is whether the service providers’ claims
for PIP benefits can survive when plaintiffs’ underlying claim for PIP benefits was dismissed
with prejudice because plaintiffs failed to attend depositions and otherwise comply with
discovery orders and obligations.

In regard to the argument that their claims for PIP benefits is “derivative” of plaintiffs’
claim for PIP benefits, the service providers assert without further explanation that “[t]he
‘derivative’ argument is precisely the standing argument [in Wyoming Chiropractic] under a
different cloak, especially here where the ‘failure’ of the injured parties’ claim was due to
litigation misconduct and not any substantive validity of the claim for no fault benefits.” The
service providers also assert that an injured individual may ultimately be precluded from
pursuing a cause of action for PIP benefits where he or she fails to abide by a court order, but
that such preclusion does not invalidate the claim for benefits on substantive grounds.

These arguments are not persuasive. As already noted, the standing issue in Wyoming
Chiropractic has little to do with the issue in this appeal. Additionally, the service providers
agree that if an injured party’s claim fails for “substantive” reasons, the provider is precluded
from obtaining PIP benefits. Thus, they inherently recognize that a provider’s claim to PIP
benefits, at least in some circumstances, is derivative of the injured party’s claim to PIP benefits.
Accordingly, this case boils down to the specific question of whether the dismissal of plaintiffs’
underlying claims with prejudice due to discovery violations should be treated differently than a
“substantive” dismissal “on the merits.” We hold that it should not be treated differently.

Although the trial court did not specify the court rule under which it dismissed plaintiffs’
claims, it stated that it was dismissing them “for the reasons stated in the brief and on the
record.” State Farm’s brief referenced, among other things, MCR 2.313, which pertains to the
failure to provide or to permit discovery. MCR 2.313(B)(2)(c) provides that, for failing to
comply with a court’s discovery order, a court may enter

-4-
 an order striking pleadings or parts of pleadings, staying further proceedings until
the order is obeyed, dismissing the action or proceeding or a part of it, or
rendering a judgment by default against the disobedient party. [Emphasis added.]

And the court rules describe the effect given to such an involuntary dismissal in MCR
2.504(B)(3):

Unless the court otherwise specifies in its order for dismissal, a dismissal
under this subrule or a dismissal not provided for in this rule, other than a
dismissal for lack of jurisdiction or for failure to join a party under MCR 2.205,
operates as an adjudication on the merits. [Emphasis added.]

And, because the court did not provide otherwise in its order for dismissal, its dismissal
of plaintiffs’ claims operated “as an adjudication on the merits” with regard to their rights to PIP
benefits under the clear language of the applicable court rule. Further, as the service providers
have acknowledged, if an insured’s claim is substantively barred on the merits, any derivative
claims necessarily fail as well. See Covenant Med Ctr v State Farm Mut Auto Ins Co, 313 Mich
App 50, 54; 880 NW2d 294 (2015); Moody v Home Owners Ins Co, 304 Mich App 415, 440-
441; 849 NW2d 31 (2014), rev’d on other grounds 499 Mich 211 (2016). Accordingly, the trial
court did not err when it granted State Farm’s motion for summary disposition with respect to the
service providers’ derivative claims.3

3
The service providers also appear to argue that the trial court’s decision violated due process.
Their actual “argument” consists of the following:
The Court Rules and statutes clearly give authority for sanctions to
disobedient parties, but there is nothing that allows punishment for the acts of
others (such punishment would seem to raise constitutional issues as well),
Mich Const, Art I, § 16 (prohibiting cruel and unusual punishment); Art I, § 17
(deprivation of property without due process).

The service providers do not develop any argument with respect to this purported
“constitutional issue[].” Accordingly, we treat that issue as abandoned. See Mitcham v Detroit,
355 Mich 182, 203; 94 NW2d 388 (1959) (“It is not enough for an appellant in his brief simply
to announce a position or assert an error and then leave it up to this Court to discover and
rationalize the basis for his claims, or unravel and elaborate for him his arguments, and then
search for authority either to sustain or reject his position.”). As the trial court noted, it appears
that the service providers’ remedy is to recover the costs of the therapy and transportation
services from plaintiffs.

-5-
Affirmed. State Farm, as the prevailing party, may tax costs pursuant to MCR 7.219.

/s/ Henry William Saad
/s/ Kathleen Jansen
/s/ Michael J. Kelly

-6-