VanZandt v. STATE EMP. RET. SYS., Docket No. 251666.

• Decision Date: 31 March 2005
• Docket Number: Docket No. 251666.
• Citation: 266 Mich. App. 579,701 N.W.2d 214
• Parties: Deborah A. VanZANDT, Petitioner-Appellee, v. STATE EMPLOYEES' RETIREMENT SYSTEM, Respondent-Appellant.
• Court: Court of Appeal of Michigan — District of US

701 N.W.2d 214

266 Mich. App. 579

Deborah A. VanZANDT, Petitioner-Appellee, v. STATE EMPLOYEES' RETIREMENT SYSTEM, Respondent-Appellant.

Docket No. 251666.

Court of Appeals of Michigan.

Submitted January 5, 2005, at Lansing.

Decided March 31, 2005.

Approved for publication May 26, 2005, at 9:15 a.m.

Released for Publication August 3, 2005.

Cooper, Bender & Iddings, P.C. (by David J. Cooper) (Daryl Royal, of counsel), Dearborn, Tecumseh, for the petitioner.

Michael A. Cox, Attorney General, Thomas L. Casey, Solicitor General, and Tonatzin Alfaro Maiz, Assistant Attorney General, for the respondent.

Before: JANSEN, P.J., and MURRAY and DONOFRIO, JJ.

JANSEN, P.J.

Respondent appeals by leave granted a circuit court opinion and order vacating its order denying petitioner's claim for state employee nonduty disability retirement pursuant to MCL 38.24. Petitioner's claim for nonduty disability retirement is based on depression, the onset of which she traces back to an incident at her workplace. We reverse.

Petitioner, a youth specialist with the Department of Social Services at the Adrian Training School for youthful felony offenders, claimed that on June 4, 1994, an incident occurred in which a coworker criticized her in front of colleagues. Petitioner stated that she was hurt and shocked by this incident, and, on July 19, 1994, she went on stress leave. Subsequently, petitioner returned to work and continued to work intermittently until April or May 1997. On September 24, 1997, petitioner filed an application for nonduty disability retirement listing her incapacity as "depression." At that time, petitioner had earned service credit of over twelve years. Petitioner's application listed the cause of the incapacity as the June 4, 1994, incident. Petitioner claimed that her incapacity limited her ability to continue work because of "problems with depression, feeling paranoid, incompetent, and incapable." The State Employees' Retirement Board (the Board) denied petitioner's request for duty and nonduty disability retirement on May 10, 2000. The Board's denial was based on the reports of Stuart Fenton, M.D., a psychiatrist; and Emmanuel Obianwu, M.D., an orthopedic surgeon. Petitioner appealed the denial and requested an administrative hearing. Subsequently, an administrative hearing was conducted. On January 3, 2002, the hearing referee issued a proposal for decision (PFD) recommending that retirement be granted. The hearing referee concluded that petitioner was totally and permanently disabled from any gainful employment. Respondent filed exceptions to the PFD.

On April 25, 2002, the Board issued a decision and order adopting in part and rejecting in part the hearing referee's findings of fact and conclusions of law and denying nonduty disability retirement to petitioner. The Board concluded that petitioner failed to show by a preponderance of the evidence that she was totally and permanently disabled. The Board commented that petitioner's responsibilities as guardian of her niece's three children were similar to her responsibilities in her position at the Adrian facility. The Board also concluded that the hearing referee inappropriately considered certain deposition evidence because "[t]he applicable law for workers' compensation and social security provide[s] different review standards for disability than does the State disability retirement statute."

The circuit court vacated the Board's decision and remanded the matter to the Board on May 13, 2003. The court criticized the Board for its "overweening substitution of immaterial and irrelevant factual findings for those contained in the PFD." The circuit court opined that the Board's findings regarding petitioner's smoking habits, housekeeping activities, and guardianship of the three children were not relevant to a determination whether petitioner was totally and permanently disabled and that the Board erred in considering such evidence. The circuit court also held that the Board erred in failing to consider the depositions of the psychiatrists obtained in the prior worker's compensation and social security proceedings. The circuit court further concluded that the evidence presented by Dr. Fenton was incompetent. The circuit court ordered that, on remand, the Board consider all the competent and material evidence, and specifically disregard Dr. Fenton's testimony.

On June 27, 2003, a revised Board order was filed with the circuit court. Again, this order denied petitioner nonduty disability retirement, relied on the opinion of Dr. Fenton, and relied on petitioner's lifestyle information. Petitioner moved to enforce the circuit court's order, and for respondent to be held in contempt for failure to comply with the order. Respondent filed an application for leave to appeal in this Court, and we granted the application.

On appeal, respondent argues that the circuit court clearly erred in determining that the Board's decision was not authorized by law and supported by competent, material, and substantial evidence. We agree.

A final agency decision is subject to court review but it must generally be upheld if it is not contrary to law, is not arbitrary, capricious, or a clear abuse of discretion, and is supported by competent, material and substantial evidence on the whole record. Const 1963, art 6, § 28;¹ MCL 24.306(1)(d).² "Substantial evidence is that which a reasonable mind would accept as adequate to support a decision, being more than a mere scintilla, but less than a preponderance of the evidence." St. Clair Intermediate School Dist. v. Intermediate Ed. Ass'n/Michigan Ed. Ass'n, 218 Mich.App. 734, 736, 555 N.W.2d 267 (1996). If there is sufficient evidence, the circuit court may not substitute its judgment for that of the agency, even if the court might have reached a different result. Black v. Dep't of Social Services, 195 Mich.App. 27, 30, 489 N.W.2d 493 (1992). With regard to whether a decision is arbitrary or capricious, this Court in Romulus v. Dep't of Environmental Quality, 260 Mich.App. 54, 63-64, 678 N.W.2d 444 (2003), stated:

To determine whether an agency's decision is "arbitrary," the circuit court must determine if it is "`"without adequate determining principle[,] ... fixed or arrived at through an exercise of will or by caprice, without consideration or adjustment with reference to principles, circumstances, or significance, . . . decisive but unreasoned."'" St. Louis v. Michigan Underground Storage Tank Financial Assurance Policy Bd., 215 Mich.App. 69, 75, 544 N.W.2d 705 (1996), quoting Bundo v. Walled Lake, 395 Mich. 679, 703 n. 17, 238 N.W.2d 154 (1976), quoting United States v. Carmack, 329 U.S. 230, 243, 67 S.Ct. 252, 91 L.Ed. 209 (1946). "Capricious" has been defined as: "`"Apt to change suddenly; freakish; whimsical; humorsome."'" St Louis, supra at 75, 544 N.W.2d 705, quoting Bundo, supra at 703 n. 17, 238 N.W.2d 154, quoting Carmack, supra at 243, 67 S.Ct. 252.

This Court reviews a lower court's review of an administrative decision to determine whether the lower court applied correct legal principles and whether it misapprehended or misapplied the substantial evidence test to the agency's factual findings, which is essentially a clearly erroneous standard of review. Dignan v. Pub. School Employees Retirement Bd., 253 Mich.App. 571, 575-576, 659 N.W.2d 629 (2002); Boyd v. Civil Service Comm., 220 Mich.App. 226, 234-235, 559 N.W.2d 342 (1996). A finding is clearly erroneous where, after reviewing the record, this Court is left with the definite and firm conviction that a mistake has been made. Dignan, supra at 576, 659 N.W.2d 629. Thus, the circuit court's decision will only be overturned if this Court is left with a definite and firm conviction that a mistake was made. See Glennon v. State Employees' Retirement Bd., 259 Mich.App. 476, 478, 674 N.W.2d 728 (2003).

As an initial matter, we note that the circuit court's order required respondent to issue specific findings and come to a particular result, which is inconsistent with well-established authority holding that circuit courts may not direct the manner in which an agency exercises its discretion. Teasel v. Dep't of Mental Health, 419 Mich. 390, 409-410, 355 N.W.2d 75 (1984); Vorva v. Plymouth-Canton Community School Dist., 230 Mich.App. 651, 655-656, 584 N.W.2d 743 (1998).³ The circuit court also improperly criticized the Board for substituting its findings for those contained in the PFD. The hearing referee's PFD is a "proposal" and is to be considered a "recommendation" that respondent is "free to accept, reject, or modify," even if the PFD is supported by substantial evidence. Dignan, supra at 578, 659 N.W.2d 629; see also Galuszka v. State Employees Retirement System, 265 Mich.App. 34, 44-45, 693 N.W.2d 403 (2004). Thus, the circuit court went beyond its authority and grossly misapplied the substantial evidence test. Furthermore, the circuit court clearly erred in reversing the Board's decision because the Board's decision was supported by competent, material, and substantial evidence on the whole record, was not contrary to law, and was not arbitrary, capricious, or a clear abuse of its discretion.

At all times pertinent to the proceedings below, the relevant statute for nonduty disability retirement, MCL 38. 24,⁴ read as follows:

Subject to the provisions of [MCL 38.33 and 38.34], upon application of a member, or his department head, or the state personnel director, a member who has been a state employee at least 10 years becomes totally and permanently incapacitated for duty as the result of causes occurring not in the performance of duty to the state, may be retired by the retirement board: Provided, The medical advisor after a medical examination of such member, shall certify that such member is mentally or physically incapacitated for the further performance of duty, and such incapacity is likely to be permanent and that such member should be retired.

MCL...