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