Cahoo v. Fast Enters. LLC

• Decision Date: 18 January 2022
• Docket Number: Case Number 17-10657
• Citation: 580 F.Supp.3d 494
• Parties: Patti Jo CAHOO, Kristen Mendyk, Khadija Cole, and Michelle Davison, Plaintiffs, v. FAST ENTERPRISES LLC, CSG Government Solutions, Stephen Geskey, and Sharon Moffet-Massey, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

580 F.Supp.3d 494

Patti Jo CAHOO, Kristen Mendyk, Khadija Cole, and Michelle Davison, Plaintiffs,

v.FAST ENTERPRISES LLC, CSG Government Solutions, Stephen Geskey, and Sharon Moffet-Massey, Defendants.

Case Number 17-10657

United States District Court, E.D. Michigan, Southern Division.

Signed January 18, 2022

Anthony D. Paris, John C. Philo, Maurice and Jane Sugar Law Center, Hannah Rachael Fielstra, Kevin S. Ernst, Ernst Charara & Lovell, Julie H. Hurwitz, William H. Goodman, Goodman and Hurwitz, P.C., Detroit, MI, Donald H. Slavik, Slavik Law Firm, LLC, Steamboat Springs, CO, Tyler M. Joseph, Mindell Law, Bingham Farms, MI, for Plaintiffs Patti Jo Cahoo, Kristen Mendyk, Khadija Cole.

Anthony D. Paris, John C. Philo, Maurice and Jane Sugar Law Center, Hannah Rachael Fielstra, Kevin S. Ernst, Ernst Charara & Lovell, Julie H. Hurwitz, William H. Goodman, Goodman and Hurwitz, P.C., Detroit, MI, Donald H. Slavik, Slavik Law Firm, LLC, Steamboat Springs, CO, for Plaintiff Michelle Davison.

Craig E. Stewart, Holland & Hart LLP, Denver, CO, Erik F. Stidham, Sara M. Berry, Stefan Hasselblad, Holland & Hart LLP, Boise, ID, Stephen J. Rosenfeld, McDonald Hopkins LLC, Chicago, IL, Walter J. Piszczatowski, Hertz, Schram, Bloomfield Hills, MI, for Defendant Fast Enterprises LLC.

Jennifer D. Armstrong, McDonald Hopkins LLC, Cleveland, OH, John D. Fitzpatrick, Mandell Menkes LLC, Stephen J. Rosenfeld, McDonald Hopkins LLC, Chicago, IL, Timothy J. Lowe, McDonald Hopkins PLC, Bloomfield Hills, MI, for Defendant CSG Government Solutions.

Kimberly Pendrick, State of Michigan, Division of Labor, Detroit, MI, Zachary A. Risk, Department of Attorney General, Rebecca M. Smith, Lansing, MI, for Defendant Steven Geskey.

Debbie K. Taylor, Department of Attorney General, Kimberly Pendrick, State of Michigan, Division of Labor, Detroit, MI, Rebecca M. Smith, Lansing, MI, for Defendant Sharon Moffet-Massey.

OPINION AND ORDER DENYING MOTIONS FOR RECONSIDERATION

DAVID M. LAWSON, United States District Judge

In March of last year, the Court denied motions for summary judgment by defendants Fast Enterprises LLC and CSG Government Solutions, except with respect to former plaintiff Hyon Pak. These defendants now have moved for reconsideration of that order, contending that the Court failed to address whether they can be sued as state actors under 42 U.S.C. § 1983, and FAST also asks the Court to revisit its causation ruling. The defendants are correct that the Court overlooked their state-actor argument, which had been addressed in an earlier ruling on their motions to dismiss. However, any resulting error is harmless and does not justify a different result because the record establishes that the UIA was entwined with the defendants' decision to develop an adjudication system that denied claimants due process. Fact questions also remain regarding FAST's role in developing the unconstitutionally deficient forms as well as whether and how the plaintiffs were affected by them. The motions for reconsideration will be denied.

I.

The parties are well aware of the facts of the case; they were set forth in detail in the Court's opinion on the cross motions for summary judgment, Cahoo v. Fast Enterprises LLC , 528 F. Supp. 3d 719 (E.D. Mich. 2021), the opinion denying motions to dismiss, 508 F. Supp. 3d 162 (2020), and the opinion denying the motion to certify a class, 508 F. Supp. 3d 138 (E.D. Mich. 2020). Put briefly, on March 2, 2017 the plaintiffs filed a putative class action complaint for damages allegedly caused by the Michigan Unemployment Insurance Agency (UIA)'s implementation of an automated system called the Michigan Integrated Data Automated System (MiDAS), which was used to make fraud determinations and to detect and punish individuals who submitted fraudulent unemployment insurance claims. The case was brought against the UIA and some of its employees, and two contractors, defendants CSG Government Solutions and FAST Enterprises LLC, and their employees, who played key roles in the development and implementation of MiDAS.

The defendants moved to dismiss the complaint, and the Court dismissed several individual defendants and several counts, leaving intact the plaintiffs' due process, equal protection, and Fourth Amendment claims against certain defendants. The State defendants appealed the decision arguing qualified immunity, and the Sixth Circuit affirmed the Court's decision with respect to the plaintiffs' due process claims only. Cahoo v. SAS Analytics Inc. , 912 F.3d 887, 907-08 (6th Cir. 2019). The parties then agreed to dismiss the equal protection and Fourth Amendment claims against all defendants.

The parties engaged in another round of motion practice. On April 24, 2020, the plaintiffs moved for class certification; the Court denied the motion. ECF Nos. 278, 497. CSG and FAST moved to dismiss the complaint, raising jurisdiction and real-party-in interest arguments, ECF No. 297, 313; the Court denied those motions. ECF No. 495. All parties also filed motions for summary judgment, which the Court denied except as to certain individual State defendants, who were dismissed from the lawsuit. 528 F. Supp. 3d 719. As a result of these and other decisions, only one procedural due process claim remains against CSG and FAST and two UIA supervisors.

In the opinion denying the motions to dismiss, the Court determined that CSG and FAST were state actors for the purposes of the plaintiffs' section 1983 claims. Cahoo v. SAS Inst. Inc. , 322 F. Supp. 3d 772, 792-94 (E.D. Mich. 2018), aff'd in part, rev'd in part and remanded sub nom. Cahoo v. SAS Analytics Inc. , 912 F.3d 887 (6th Cir. 2019). FAST and CSG raised the issue again post-discovery in their motions for summary judgment, but the Court did not address that question again in its opinion on those motions. Additionally, with respect to FAST, the Court found that a "question of fact remains about whether FAST helped develop the content of the questionnaires and fraud determinations," thereby precluding summary judgment on the claims against it. 528 F. Supp. 3d at 737.

FAST and CSG filed the present motions for reconsideration of the Court's summary judgment opinion and order. Two weeks later, the State defendants filed a notice of appeal, but that notice does not affect FAST's and CSG's present motions.

II.

The orders denying FAST's and CSG's motions for summary judgment are non-final orders. The Court may grant reconsideration of non-final orders only if

(A) The court made a mistake, correcting the mistake changes the outcome of the prior decision, and the mistake was based on the record and law before the court at the time of its prior decision;

(B) An intervening change in controlling law warrants a different outcome; or (C) New facts warrant a different outcome and the new facts could not have been discovered with reasonable diligence before the prior decision.

E.D. Mich. LR 7.1(h)(2). Only the grounds listed in subparagraph (A) are in play here.

A.

CSG argues that the Court erred by not addressing its argument that it is not a state actor that it raised for the first time after discovery closed in its summary judgment motion. It contends that the "joint action" tests require a showing of a civil conspiracy, which never occurred, and that the plaintiffs essentially abandoned their original theory that CSG was entwined with the State. FAST presents similar arguments in its reconsideration motion.

The plaintiffs' claims against these defendants are based on 42 U.S.C. § 1983. For liability to attach under section 1983, "the party charged with the deprivation must be a person who may fairly be said to be a state actor." Lugar v. Edmondson Oil Co. , 457 U.S. 922, 937, 102 S.Ct. 2744, 73 L.Ed.2d 482 (1982). That is because, with one exception, the Constitution protects citizens from infringement of their rights by the government, not by private parties. Flagg Bros., Inc. v. Brooks , 436 U.S. 149, 156, 98 S.Ct. 1729, 56 L.Ed.2d 185 (1978) (recognizing that "most rights secured by the Constitution are protected only against infringement by governments") (citing Jackson v. Metro. Edison Co. , 419 U.S. 345, 349, 95 S.Ct. 449, 42 L.Ed.2d 477 (1974) ; Civil Rights Cases , 109 U.S. 3, 17-18, 3 S.Ct. 18, 27 L.Ed. 835 (1883) ).

Although the Supreme Court has acknowledged that its "cases deciding when private action might be deemed that of the state have not been a model of consistency," Edmonson v. Leesville Concrete Co., Inc. , 500 U.S. 614, 632, 111 S.Ct. 2077, 114 L.Ed.2d 660 (1991) (O'Connor, J., dissenting), the exceptions tend to fall into two broad categories: the "public function exception," and the "entanglement exception." See Chemerinsky, Constitutional Law at 552 (3d ed. 2009).

The Sixth Circuit has interpreted the public function category narrowly, noting only functions like holding elections, exercising eminent domain, and operating a company-owned town meet this test. Chapman v. Higbee Co. , 319 F.3d 825, 833-34 (6th Cir. 2003) (en banc ). That category plays no role here.

The entanglement category includes cases describing "state compulsion" of a private person's conduct, and cases where a "nexus" is found between private conduct and the state, such that it "is entwined with governmental policies or when government is entwined in [its] management or control." Chapman , 319 F.3d at 834 (quoting Brentwood Acad. v. Tennessee Secondary School Athletic Ass'n , 531 U.S. 288, 295, 121 S.Ct. 924, 148 L.Ed.2d 807 (2001) ). Private parties are deemed to be state actors when the state has affirmatively authorized, encouraged, or facilitated the private unconstitutional conduct, or otherwise permitted a private actor to "exercise[ ] power ‘possessed by virtue of state law and made possible only because the wrongdoer is clothed with the authority of state law.’ " West v. Atkins , 487 U.S. 42, 49, 108 S.Ct. 2250, 101 L.Ed.2d 40 (1988) (finding private physician under contract with state to provide medical services...