McAvoy v. H. B. Sherman Co.

Decision Date11 October 1977
Docket NumberNos. 58845,SELF-INSURERS,s. 58845
PartiesRalph McAVOY, Plaintiff-Appellee, v. H. B. SHERMAN COMPANY and American Mutual Liability Insurance Company, Defendants-Appellants. Wiley STRICKLIN, Plaintiff-Appellee, v. AMERICAN CHAIN & CABLE COMPANY, INC., and American Mutual Liability Insurance Company, Defendants-Appellants. Thomas TURNER, Plaintiff-Appellee, v. GENERAL MOTORS CORPORATION, Defendant-Appellant. MICHIGAN' ASSOCIATION, a Michigan Non-Profit Corporation, on behalf of itself and its members, Plaintiff-Appellant, v. STATE of Michigan, Bureau of Workmen's Compensation and Ernest C. Fackler, its Director, Workmen's Compensation Appeal Board and Michael J. Gillman, its Chairman, and Second Injury Fund and Gary L. Calkins, its Administrator, Defendants-Appellees. to 58846, 58983 and 58855.
CourtMichigan Supreme Court

Kasoff, Young, Gottesman, Kovinsky, Friedman & Walkon, P. C. by Irwin J. Kasoff, Southfield, for plaintiff-appellee (Ralph McAvoy).

Marston, Sachs, Nunn, Kates, Kadushin & O'Hare, P. C. by Robert G. Hodges, Detroit, for plaintiff-appellee (Wiley Stricklin).

Conklin, Benham, McLeod, Ducey & Ottaway, P. C. by Thomas P. Chuhran, Detroit, for defendants-appellants.

Lopatin, Miller, Bindes, Freedman & Bluestone by Michael A. Gantz, Detroit, Assisted by Joel Alpert, Law Clerk, for plaintiff-appellee.

Plunkett, Cooney, Rutt, Watters, Stanczyk & Pedersen by Edward K. Pedersen Honigman, Miller, Schwartz & Cohn by Robert A. Fineman, Detroit, for plaintiff-appellant.

Jr., Jeannette A. Paskin, Detroit, for defendant-appellant; Frazer F. Hilder, Gen. Counsel, Thomas W. Watkins, James A. Durkin, Gen. Motors Corp., Detroit, of counsel.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., E. J. Setlock, Asst. Atty. Gen., Detroit, for defendants-appellees.

Beaumont, Smith & Harris by Dwight H. Vincent and J. Walker Henry, Detroit, for Michigan Manufacturers Assn., et al.

Theodore Sachs, Detroit, for Michigan AFL-CIO; Robert W. Howes (P 23191), Kelman, Loria, Downing, Schneider & Simpson, Detroit, of counsel.

MOODY, Justice.

We granted leave in these consolidated worker's compensation cases in order to consider whether 1975 P.A. 34, M.C.L.A. § 418.862; M.S.A. § 17.237(862), comports, on its face and as applied, with certain fundamental constitutional mandates. 1975 P.A. 34 is commonly referred to as the "70% statute". It provides that a claim for review filed by a self-insured employer or a carrier from a worker's compensation award entered by a hearing referee shall not operate as a stay of payment to the claimant of 70% of the weekly benefit.

The statute also provides, in its disputed part, that if the weekly benefit is reduced or rescinded by a final determination upon appeal, the self-insured employer or carrier shall be entitled to reimbursement from the second injury fund for compensation paid during the appellate process in excess of the amount finally determined.

The appellant employers, insurance carriers and self-insurers contend that the foregoing legislative enactment is unconstitutional. They maintain, inter alia, that the instant statute violates (a) various due process guarantees, both procedural and substantive, as articulated in both the United States Constitution and the Michigan Constitution of 1963; (b) traditional equal protection guarantees as set forth in both Constitutions, and, (c), certain proscriptions against the impairment of contracts as found in both Constitutions. Lastly, (d), the appellants maintain the Worker's Compensation Appeal Board exceeds the scope of its authority when it dismisses appeals for noncompliance with the 70% statute.

We have examined all of appellants' contentions in the light of the broad philosophical tenets underpinning Michigan's Worker's Disability Compensation Act; we have scrutinized both the specific language of the 70% statute and the legislative intent underlying the act; and, we have looked to established legal precedent in both our jurisdiction and others in examining the appellants' legal and constitutional positions. We conclude that 1975 P.A. 34, the "70% statute", is constitutional on its face and as applied.

Accordingly, we affirm the Court of Appeals decision which held the instant statute constitutional and found that the Worker's Compensation Appeal Board does not exceed its authority by dismissing the appeals of appellants who do not comply with the statute's mandates.


There is no dispute as to the "facts" in the instant case. Therefore, we adopt the Court of Appeals statement of facts:

"This case consists of several consolidated appeals from orders of the Workmen's Compensation Appeal Board (hereinafter Appeal Board) dismissing the defendant's appeals from decisions of hearing referees for failure to comply with 1975 P.A. 34; M.C.L.A. 418.862; M.S.A. 17.237(862). The appeals are by leave granted and challenge the constitutionality of that statute and the Appeal Board's authority to enforce the statute by dismissing appeals.

"The factual setting for this appeal is illustrated by the history of Turner v. General Motors. Turner was awarded weekly benefits by a workmen's compensation hearing referee. Defendant filed an application for review with the Appeal Board. Plaintiff subsequently filed a motion to dismiss for defendant's failure to comply with 1975 P.A. 34. Defendant objected to the motion, asserting that the act was unconstitutional. The Appeal Board notified defendant that failure to comply with the act might result in dismissal of its appeal. Defendant failed to comply with the act, and the Appeal Board dismissed defendant's appeal. The instant appeal followed." 70 Mich.App. 532, 535, 246 N.W.2d 631, 632 (1976).

As the Court of Appeals implies, the factual sequences in McAvoy v. H. B. Sherman Company and Stricklin v. American Chain and Cable Company, the consolidated cases, are identical to the Turner v. General Motors sequence. Furthermore, the legal arguments presented by the defendant-appellant employers and insurance carriers as to the constitutionality of 1975 P.A. 34 are virtually identical in all these cases.

This Court granted leave in the Turner et al. cases on October 13, 1976, and consolidated them with Michigan Self-Insurers' Association v. Bureau of Workmen's Compensation, 70 Mich.App. 565-567, 246 N.W.2d 316 (1976). The legal issues in Self-Insurers are identical with those in Turner et al. The Court of Appeals pointed out this fact in its brief opinion in Self-Insurers :

"Defendants (Bureau of Worker's Compensation) appeal as of right from the December 8, 1975, order of the Ingham County Circuit Court granting a summary judgment in favor of the plaintiff (Michigan Self-Insurers' Association) and declaring unconstitutional 1975 PA 34; MCLA 418.862; MSA 17.237(862), and permanently enjoining enforcement of the act by the defendants.

"This Court's opinion in Turner v. General Motors, 70 Mich.App. 532; 246 N.W.2d 631 (1976), answers the meritorious issues raised by the parties to this appeal.

". . . the act is not invalid under Const 1963, art. 6, § 28. Accordingly, the judgment of the trial court is reversed and the injunction is hereby dissolved. No costs."

Therefore, the Michigan Self-Insurers' Association joins the various employers and carriers as the appellants herein. Turner, McAvoy, Stricklin and the Worker's Compensation Bureau et al are the appellees.


This Court perceives the principal issue in this case to be whether 1975 P.A. 34, M.C.L.A. § 418.862; M.S.A. § 17.237(862) provides for a taking of property from self-insured employers or carriers without procedural or substantive due process of law.

1975 P.A. 34 provides for the following legislative schema:

"A claim for review filed pursuant to sections 859 or 861 shall not operate as a stay of payment to the claimant of 70% of the weekly benefit required by the terms of the hearing referee's award. Payment shall commence as of the date of the hearing referee's award and shall continue until final determination of the appeal or for a shorter period if specified in the award. Benefits accruing prior to the referee's award shall be withheld until final determination of the appeal. If the weekly benefit is reduced or rescinded by a final determination, the carrier shall be entitled to reimbursement in a sum equal to the compensation paid pending the appeal in excess of the amount finally determined.

"Reimbursement shall be paid upon audit and proper voucher from the second injury fund established in chapter 5. If the award is affirmed by a final determination, the carrier shall pay all compensation which has become due under the provisions of the award, less any compensation already paid. Interest shall not be paid on amounts paid pending final determination. Payments made to the claimant during the appeal period shall be considered as accrued compensation for purposes of determining attorneys' fees under the rules of the bureau." (Footnotes omitted.)

Appellants maintain that this statute denies them procedural due process 1 in that it requires payment of 70% of the hearing referee's award pending appeal without the traditional stay of payment during the appellate process. Appellants further contend that this "70%" provision effectively denies them their right to appeal as guaranteed by Const. of 1963, art. 6, § 28.

Appellants also maintain that the 70% statute denies them substantive due process in that any reimbursement which they receive after a hearing referee's award is reversed must come from the second injury fund, a fund which the appellants themselves are required to keep solvent. Appellants contend that this reimbursement procedure constitutes a confiscatory taking of property and thus renders the statute unconstitutional. We will examine these two due process issues separately.

A. Procedural Due Process: Stays

"A claim for review filed pursuant to ...

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