State of Michigan Announces Settlement of Civil Rights Class Action Alleging False Accusations of Unemployment Fraud

LANSING, Michigan, Oct. 21 -- Michigan Attorney General Dana Nessel issued the following news release on Oct. 20, 2022:

The State of Michigan has reached a $20 million settlement resolving a class action lawsuit alleging that the Unemployment Insurance Agency used an auto-adjudication system to falsely accuse recipients of fraud, resulting in the seizure of their property without due process.

The settlement was announced by Attorney General Dana Nessel and by Pitt, McGehee, Palmer, Bonanni & Rivers, the Royal Oak-based law firm representing the plaintiffs in the class action lawsuit.

"This settlement honors my commitment to ensure those falsely accused by their government receive fair compensation for their suffering," said Nessel. "All legal issues relative to the case have been decided and it is time to put this to rest and deliver this meaningful resolution to those Michigan residents who were harmed by this error."

In 2015, the Plaintiffs in the case, titled Bauserman v. Unemployment Insurance Agency, sued the State of Michigan Unemployment Insurance Agency for using an automated system known as MIDAS to falsely accuse thousands of Michiganders of unemployment fraud, resulting in the wrongful seizure of their paychecks, income tax refunds, and other assets without due process.

Over the next seven years, the case resulted in two significant decisions from the Michigan Supreme Court. In April 2019, the Court held that the class action was timely filed in accordance with the Michigan Court of Claims Act but only those claimants that had money collected from them for the first time on or after March 9, 2015 could be included in the potential class.

In July 2022, the Court held that the Plaintiffs in the case could seek monetary damages from the State based on the alleged violation of the State Constitution.

Earlier this year, the parties worked with a neutral mediator to negotiate a resolution of the class action. According to the attorneys, the mediator had access to detailed records and information to determine how many people were affected by the auto-adjudication system, how much of their money was seized, and how much money had already been refunded by the State since the fraud auto-adjudication system was discontinued.

"First, as counsel for the class action Plaintiffs, we fought hard for seven years to vindicate the plaintiffs' civil rights. Second, the Attorney General and the State of Michigan demonstrated the will to come to the table and make this right, and by agreeing to this settlement, we believe they have done so," said Michael Pitt counsel for the Plaintiffs.

"Because of the parties' willingness to engage in a meaningful mediation process, we are confident that this settlement accounts for the money that members of the class lost because of the State's use of a fraud auto-adjudication system," Pitt said.

Based on the Supreme Court's 2019 decision, the number of claimants who will be eligible for settlement payments was decreased. Notwithstanding the Supreme Court's ruling, class counsel anticipates settlements for eligible claimants will be fair and equitable.

"Today's settlement resolves long-standing litigation involving the Unemployment Insurance Agency and parallels our commitment to reform the agency by providing exemplary customer service," said UIA Director Julia Dale. "Those reforms include upcoming changes to the decade-old MIDAS computer system, instilling a human-centered focus at the agency, issuing more than 62,000 overpayment waivers, rebuilding the Trust Fund, redesigning our public website for easier access, reducing the case backlog, and implementing ethics and security clearance policies for employees and contractors."

In the coming months, the parties will submit the settlement to the Court of Claims for approval.

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Original text here: https://www.michigan.gov/ag/news/press-releases/2022/10/20/som-settlement-of-civil-rights-class-action-alleging-false-accusations-of-unemployment-fraud