Williams v. Hofley Mfg. Co.

• Decision Date: 27 July 1988
• Docket Number: Docket No. 79949
• Parties: Robert WILLIAMS, Plaintiff-Appellee, v. HOFLEY MANUFACTURING COMPANY, Defendant-Appellant. 430 Mich. 603, 424 N.W.2d 278
• Court: Michigan Supreme Court

Page 278

424 N.W.2d 278

Robert WILLIAMS, Plaintiff-Appellee, v. HOFLEY MANUFACTURING COMPANY, Defendant-Appellant.

Docket No. 79949.

430 Mich. 603, 424 N.W.2d 278

Supreme Court of Michigan.

Argued Oct. 9, 1987.

Decided June 9, 1988.

Rehearing Denied July 27, 1988.

[430 MICH 605] Kozlow, Walkon & Friedman, P.C. by Robert A. Kozlow, Southfield, for plaintiff-appellee.

Plunkett, Cooney, Rutt, Watters, Stanczyk & Pedersen by Jonathan T. Kopit, Paul F. Paternoster, Bloomfield Hills, for defendant-appellant.

OPINION

BOYLE, Justice.

We are asked in this appeal to consider a procedural due process challenge to the constitutionality of two-member, interest-designated panels of Michigan's Workers' Compensation Appeal Board as provided in 1985 P.A. 103, Sec. 261, M.C.L. Sec. 418.261; M.S.A. Sec. 17.237(261). ¹ We conclude that use of these designated panels does not violate the Due Process Clauses of U.S. Const, Am. XIV and Const. 1963, art. 1, Sec. 17. We therefore affirm the decision of the appeal board's award of benefits to the plaintiff in this matter.

I

The plaintiff was employed by the defendant from the period of August 31, 1978, until March 19, 1980. On June 26, 1980, he filed a petition for hearing with the Bureau of Workers' Disability Compensation, alleging an injury to his right arm, an injury to his lower back, and aggravation of a nervous condition. By order of the bureau dated July 31, 1981, the plaintiff was awarded a closed period of disability benefits commencing on his last day of work and ending on November 25, 1980.

The defendant appealed the decision of the bureau, contesting the bureau's findings regarding a personal injury, the date of injury, and the effect of defendant's May 16, 1980, offer of favored work. ² The appeal board affirmed in an opinion and order dated September 8, 1986. The board's opinion was written by member Sheila H. Hughes, a designated representative of the general public. Board member Ramona L. Fernandez, a designated representative of employee interests, concurred in the opinion.

The defendant applied for leave to appeal in the Court of Appeals, arguing that the two-member appeal board panel was unconstitutional, that the appeal board had erred as a matter of law in finding a work-related personal injury, and in failing to suspend the plaintiff's benefits for his refusal of favored work. The Court of Appeals denied leave to appeal in an order dated November 26, 1986. Defendant subsequently applied for leave to appeal in this Court and, in an order dated June 30, 1987, we granted leave, limited to the issue whether the defendant was denied due process of law because of the composition of the two-member appeal board panel. ³ 428 Mich. 910, 409 N.W.2d 202 (1987).

II

At the time of its inception in 1912, the Industrial Accident Board, predecessor of the current WCAB, was composed of only three members who sat as a single appeal panel. ⁴ The Industrial Accident Board members were not designated by interest group, although the act specified that no more than two members of the board could belong to the same political party. ⁵ 1947 P.A. 357 abolished the Industrial Accident Board and created a four-member Workmen's Compensation Commission. ⁶ The commission continued to sit as a single appeal panel. Its members were not designated by interest group, and the party qualification provision of the Industrial Accident Board was deleted. ⁷

1955 P.A. 62 abolished the commission and created a three-member Workmen's Compensation Appeal Board. ⁸ Board members were not designated by interest group or party. The appeal board continued to review the decisions of the hearing referees as a single panel. ⁹

1965 P.A. 139 expanded the appeal board to seven members ¹⁰ and divided the board into rotating four-member hearing panels. ¹¹ Under the 1965 amendment, board members' panel assignments were alternated so that members served with each other on a substantially equal basis. Again, board members were not designated by interest group or party affiliation. 1973 P.A. 73 further expanded the appeal board to eleven members, with five-member hearing panels, but the procedure was otherwise unchanged. ¹²

1978 P.A. 456 further expanded the appeal board to fifteen members and, for the first time, required appeal board members to be appointed from designated employer, employee, and general public interest groups. ¹³ Hearing panels were reduced to three members, although panel members continued to be alternated without regard to their interest designation. Id. This procedure necessarily resulted in some hearing panels which were comprised solely of members of one designated interest group. It also spawned several constitutional challenges on due process grounds. ¹⁴ The statute was amended again in 1980 to require that the three-member hearing panels be comprised of one member from each of the employee, employer, and general public interest groups. ¹⁵

1985 P.A. 103 contains the most recent amendment of appeal board procedure and the statutory provision challenged by the defendant. 1985 P.A. 103 provides in pertinent part:

"Except as otherwise provided for in this act, a matter pending review before the appeal board shall be assigned to a panel of 2 members of the board for disposition, with each panel comprised of 1 member each from the employee and employer representatives, the employee and general public representatives, the employer and general public representatives, or 2 members representative of the general public. The decision reached by the assigned members of a panel shall be the final decision of the board. If the members of a panel cannot reach a decision, the chairperson of the board shall assign a third panel member to review the matter. The third member shall be from a designated representative group that is not already represented on the panel, except for a panel of 2 members representative of the general public in which case the third member shall be a representative of the general public. The decision of the third member shall be controlling and shall be considered to be the final decision of the board." M.C.L. Sec. 418.261(2); M.S.A. Sec. 17.237(261)(2).

The defendant argues that the "unbalanced" appeal board panels instituted by 1985 P.A. 103 created a risk of bias which deprived it of the right to procedural due process. It is well established, however, that the requirements of procedural due process are triggered only by the implication of protected property or liberty interests, Bd. of Regents of State Colleges v. Roth, 408 U.S. 564, 569, 92 S.Ct. 2701, 2705, 33 L.Ed.2d 548 (1972); Perry v. Sindermann, 408 U.S. 593, 599, 92 S.Ct. 2694, 2698, 33 L.Ed.2d 570 (1972). It is only when a protected interest has been found that we may proceed to determine what process is due. Logan v. Zimmerman Brush Co., 455 U.S. 422, 428, 102 S.Ct. 1148, 1154, 71 L.Ed.2d 265 (1982). Therefore, we must first consider what, if any, protected interest the defendant has in this litigation.

III

The applicability of procedural due process guarantees depends initially on the presence of a "property" or "liberty" interest within the meaning of the Fifth or Fourteenth Amendment. Arnett v. Kennedy, 416 U.S. 134, 165, 94 S.Ct. 1633, 1650, 40 L.Ed.2d 15 (1974). However, as the United States Supreme Court has explained:

"To have a property interest in a benefit, a person clearly must have more than an abstract need or desire for it. He must have more than a unilateral expectation of it. He must, instead, have a legitimate claim of entitlement to it. It is a purpose of the ancient institution of property to protect those claims upon which people rely in their daily lives, reliance that must not be arbitrarily undermined. It is a purpose of the constitutional right to a hearing to provide an opportunity for a person to vindicate those claims.

"Property interests, of course, are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as state law--rules or understandings that secure certain benefits and that support claims of entitlement to those benefits." Roth, supra, 408 U.S. at 577, 92 S.Ct. at 2709. See Bundo v. Walled Lake, 395 Mich. 679, 692, 238 N.W.2d 154 (1976).

We need not consider whether the process involved in this claim impinged upon any liberty interest, since we conclude that the defendant has a property interest in this litigation. It is beyond dispute that a money judgment rendered in this litigation against the defendant would deprive it of property. Moreover, the United States Supreme Court has held that a cause of action is, in itself, a species of property protected by the Fourteenth Amendment's Due Process Clause. Logan, supra, 455 U.S. p. 428, 102 S.Ct. at p. 1154. Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 313, 70 S.Ct. 652, 656, 94 L.Ed. 865 (1950). As the Logan Court explained:

"This conclusion is hardly a novel one. The Court traditionally has held that the Due Process Clauses protect civil litigants who seek recourse in the courts, either as defendants hoping to protect their property or as plaintiffs attempting to redress grievances. In Societe Internationale v Rogers, 357 US 197 [78 S.Ct. 1087, 2 L.Ed.2d 1255] (1958), for example--where a plaintiff's claim had been dismissed for failure to comply with a trial court's order--the Court read the 'property' component of the Fifth Amendment's Due Process Clause to impose 'constitutional limitations upon the power of courts, even in aid of their own valid processes, to dismiss an action without affording a party the opportunity for a hearing on the merits of his cause.' Id., at 209 . See also Hammond Packing Co v Arkansas, 212 US 322, 349-351 [29 S.Ct. 370, 379-380, 53 L.Ed. 530] (1909) (power to enter default judgment); Hovey v Elliott, 167 US 409 [17 S.Ct. 841, 42 L.Ed. 215] (1897) (same...