State’s Approach to Unemployment Lawsuit Puts Victims in Limbo

The Whitmer administration has had to handle a number of massive lawsuits that it inherited from former Gov. Rick Snyder’s administration.

As part of the weekly series MichMash, hosts Jake Neher and Cheyna Roth talk with Gongwer Executive Editor and Publisher Zach Gorchow about what’s at stake with those lawsuits, and how the governor and attorney general are handling them. Gorchow wrote about this in a recent post on the Gongwer blog.

One lawsuit in particular stands out.

Gorchow notes that the state has settled most other major lawsuits. Those include the civil lawsuit connected to the Flint Water Crisis, the Detroit Public Schools “Right to Read” lawsuit and a case related to youth mental health.

“But the one that’s still out there, the biggie that still out there, is involving the unemployment false fraud scandal,” says Gorchow.

From 2013 to 2015, Michigan used a computer system to catch cases of unemployment fraud. That software falsely identified tens of thousands of people as having committed fraud. Those people did nothing wrong. 

“That is extremely significant because under the penalty system the state had in place at the time, these folks not only had to pay back all the benefits they received, they had to pay interest and penalties. And the penalties at the time were four times the principal received,” says Gorchow. “So in many cases, people were having to pay back tens or even hundreds of thousands of dollars. Income tax refunds were intercepted wages are garnished, people were driven into bankruptcy, lost homes, lives were ruined.”

“At some point, the bill for this is going to come due. I would be absolutely shocked if this case ended up with no cost to the state.” –Zach Gorchow, Gongwer

But Gorchow says, unlike other lawsuits from the Snyder Era, Gov. Gretchen Whitmer and Attorney General Dana Nessel have shown no interest in settling the lawsuit.

“The state — first under the Snyder administration with Bill Schuette as attorney general and then now with Governor Whitmer and Attorney General Nessel — has been fighting these cases tooth and nail. (The state) is on its second go-round at the Michigan Supreme Court, which still has to decide whether it’s even going to hear a Court of Appeals ruling that was in favor of the plaintiffs.”

Why would Whitmer and Nessel want to fight this, of all cases?

“If I had to guess, there seems to be a concern that if the state cedes that it can be sued for damages for violation of state constitutional rights, how much does that open the door to other litigation that seeks damages?” says Gorchow. “Is this opening the door to a flood tide of this type of litigation?”

But he says the state’s chances to avoid consequences in court are slim.

“At some point, the bill for this is going to come due,” he says. “I would be absolutely shocked if this case ended up with no cost to the state.”

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