City of Fraser v. Almeda Univ.

• Decision Date: 14 January 2016
• Docket Number: Docket No. 323499.
• Citation: 886 N.W.2d 730,314 Mich.App. 79
• Parties: CITY OF FRASER v. ALMEDA UNIVERSITY.
• Court: Court of Appeal of Michigan — District of US

314 Mich.App. 79

886 N.W.2d 730

CITY OF FRASER

v.ALMEDA UNIVERSITY.

Docket No. 323499.

Court of Appeals of Michigan.

Submitted Dec. 2, 2015, at Detroit.

Decided Jan. 14, 2016, at 9:00 a.m.

Foley & Mansfield, Ferndale (by Gregory M. Meihn ) for city of Fraser.

Bodman PLC, Detroit (by Brian C. Summerfield ) and Alexander Paykin for Almeda University.

Before: MURRAY, P.J., and METER and RIORDAN, JJ.

RIORDAN

, J.

Defendant Almeda University appeals as of right the trial court's order granting plaintiff City of Fraser's motion for summary disposition. We affirm in part, reverse in part, and remand for further proceedings.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

This case involves the Authentic Credentials in Education Act (the Act), MCL 390.1601 et seq.

Defendant is an online university, incorporated in the Caribbean island of Nevis, that offers “Life Experience” degrees to prospective “students.” All interactions with those students take place through defendant's website.

To obtain a degree, an applicant submits an electronic application and a résumé outlining the applicant's “verifiable professional and educational achievements....” If defendant determines that an applicant is eligible to receive the requested degree, the student is required to make an online credit card payment of $499 for a bachelor's degree, $795 for a master's degree, or $1,495 for a doctoral degree. Once the applicant pays the online fee, defendant mails the desired degree directly to the applicant's home. In addition to providing degrees, defendant offers assistance with résumés, job applications, and interviews and markets promotional apparel bearing defendant's name for purchase.

On its website, defendant states that it has “over 26,000 online students in over 7,000 cities worldwide.” It is undisputed that some of those students are Michigan residents. At one time, defendant highlighted on its website the success of two Michigan residents who were awarded degrees by defendant.

Plaintiff is a municipality located in Macomb County. Between 2003 and 2009, 16 of its employees, all police officers, obtained degrees from defendant. None of the employees were required to complete any classes, coursework, research, or exams to receive the degrees. At issue in this case are degrees issued to 11 of plaintiff's employees between June 6, 2003, and March 5, 2009. After obtaining these degrees from defendant, the 11 employees used the degrees to increase their salaries between $1,000 and $3,000 per year, depending on the type of degree purchased. Along with increasing those employees' compensation, plaintiff reimbursed 11 of them with educational allowances. Overall, plaintiff paid a total of $143,848 to the employees for the purchase of Almeda degrees.

On January 31, 2013, plaintiff filed a one-count complaint against defendant, alleging that defendant violated the Act by holding itself out as an institution authorized to award academic degrees. Plaintiff sought more than $1 million in damages, $100,000 for each of plaintiff's employees who used Almeda degrees for salary increases and tuition reimbursement.

Defendant moved for summary disposition pursuant to MCR 2.116(C)(1)

(court lacks jurisdiction over the party), (5) (party asserting claim lacks legal capacity to sue), and (8) (failure to state a claim). Most relevant to this appeal, defendant argued that the trial court did not have personal jurisdiction over defendant. The trial court disagreed and denied defendant's motion.

Plaintiff subsequently filed its own motion for summary disposition pursuant to MCR 2.116(C)(10)

, contending that defendant's admissions that it lacked accreditation under state or federal law entitled plaintiff to an order of liability against defendant and damages in plaintiff's favor. In its response, defendant denied liability on the basis that (1) the Act requires that degrees be issued or manufactured in Michigan to prove liability because Michigan cannot control behavior that lawfully occurs outside the state, and (2) since the degrees were only mailed to Michigan residents, defendant did not violate the Act. Defendant also asserted that plaintiff was not damaged by defendant's conduct, but by its own employees who used the degrees to obtain additional pay and tuition reimbursement. Finally, defendant asserted that plaintiff waived its right to sue defendant under the Act because plaintiff, which had known about the situation since at least 2007, inexplicably waited until 2013 to file the action and continued to accept defendant's degrees from its employees and increase their pay after it discovered the details of the way the degrees were earned and defendant's lack of accreditation.

The trial court ruled in plaintiff's favor and awarded it $600,000 ($100,000 each for the six degrees issued by defendant after the Act took effect in 2005).

II. GENERAL STANDARDS OF REVIEW

We review a trial court's decision regarding a motion for summary disposition de novo. Yoost v. Caspari, 295 Mich.App. 209, 219, 813 N.W.2d 783 (2012)

. Defendant's first claim on appeal arises from the trial court's denial of its motion for summary disposition under MCR 2.116(C)(1).

“When reviewing a trial court's decision on a motion for summary disposition brought under MCR 2.116(C)(1)

, the trial court and this Court consider the pleadings and documentary evidence submitted by the parties in a light most favorable to the nonmoving party.” Yoost, 295 Mich.App. at 221, 813 N.W.2d 783.

The rest of the issues raised on appeal arise from the trial court's grant of summary disposition in favor of plaintiff under MCR 2.116(C)(10)

. When reviewing a motion for summary disposition pursuant to MCR 2.116(C) (10), this Court may only consider, in the light most favorable to the party opposing the motion, the evidence that was before the trial court, which consists of “the ‘affidavits, together with the pleadings, depositions, admissions, and documentary evidence then filed in the action or submitted by the parties [.]’ ” Calhoun Co. v. Blue Cross Blue Shield of Mich., 297 Mich.App. 1, 11–12, 824 N.W.2d 202 (2012), quoting MCR 2.116(G)(5). Under MCR 2.116(C)(10), “[s]ummary disposition is appropriate if there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law.” Latham v. Barton Malow Co., 480 Mich. 105, 111, 746 N.W.2d 868 (2008). “There is a genuine issue of material fact when reasonable minds could differ on an issue after viewing the record in the light most favorable to the nonmoving party.” Allison v. AEW Capital Mgt., LLP, 481 Mich. 419, 425, 751 N.W.2d 8 (2008).

III. PERSONAL JURISDICTION

Defendant first argues that the trial court erred by denying its motion for summary disposition on the ground that the court lacked personal jurisdiction over defendant. We disagree.

A. STANDARD OF REVIEW

We review de novo, as a question of law, “whether a court possesses personal jurisdiction over a party....” Yoost, 295 Mich.App. at 219, 813 N.W.2d 783

. We also review de novo whether an exercise of jurisdiction over defendant, a nonresident corporation, is consistent with the notions of fair play and substantial justice under the Due Process Clause of the Fourteenth Amendment. Id.

When the defendant has brought a motion for summary disposition pursuant to MCR 2.116(C)(1)

,

[t]he plaintiff bears the burden of establishing jurisdiction over the defendant, but need only make a prima facie showing of jurisdiction to defeat [the] motion for summary disposition. The plaintiff's complaint must be accepted as true unless specifically contradicted by affidavits or other evidence submitted by the parties. Thus, when allegations in the pleadings are contradicted by documentary evidence, the plaintiff may not rest on mere allegations but must produce admissible evidence of his or her prima facie case establishing jurisdiction. [Yoost, 295 Mich.App. at 221, 813 N.W.2d 783

(quotation marks and citations omitted).]

B. ANALYSIS

In Yoost, 295 Mich.App. at 222–223, 813 N.W.2d 783

, we summarized the proper analysis for determining whether a trial court has properly exercised personal jurisdiction over a defendant:

When examining whether a Michigan court may exercise limited personal jurisdiction over a defendant, this Court employs a two-step analysis. First, this Court ascertains whether jurisdiction is authorized by Michigan's long-arm statute. Second, this Court determines if the exercise of jurisdiction is consistent with the requirements of the Due Process Clause of the Fourteenth Amendment. Both prongs of this analysis must be satisfied for a Michigan court to properly exercise limited personal jurisdiction over a nonresident. Long-arm statutes establish the nature, character, and types of contacts that must exist for purposes of exercising personal jurisdiction. Due process, on the other hand, restricts permissible long-arm jurisdiction by defining the quality of contacts necessary to justify personal jurisdiction under the constitution. [Quotation marks and citations omitted.]

Defendant challenges the trial court's exercise of personal jurisdiction. It argues that the court erred by exercising personal jurisdiction under Michigan's long-arm statute, MCL 600.715

, because the exercise of personal jurisdiction was not consistent with constitutional due process.¹ In essence, defendant effectively concedes that, under the first step of the analysis, the trial court properly concluded that it could exercise limited personal jurisdiction over defendant under Michigan's long-arm statute. Accordingly, we focus our analysis on whether the trial court's exercise of jurisdiction over defendant comported with due process.

“The ‘constitutional touchstone’ of a due process analysis with respect to personal jurisdiction is whether the defendant purposely established the minimum contacts with the forum state necessary to make the exercise of jurisdiction over the defendant fair and reasonable.”...