By Ben Solis
Gongwer News Service
A Tax Tribunal ruling that it was required to release confidential information protected under the court rules without an applicable Freedom of Information Act exemption was an abuse of discretion outside the range of reasonable and principled outcomes, a unanimous Court of Appeals ruled in an opinion published Thursday.
The per curiam opinion in New Covert Generating Company v. Covert Township (COA Docket No. 364076) was initially issued in June but was unpublished at the time. The holding was approved for publication on Thursday and rereleased on Friday.
The panel of Judge Colleen O’Brien, Judge Michael Kelly and Judge Kathleen Feeney also held that the Tax Tribunal is a public body under the bounds of the Open Meetings Act, even though it may exercise its discretion to appoint a single hearing officer to hold a hearing. The panel reasoned that the Tax Tribunal Act still provides that all hearings, regardless of the number of hearing officers, are subject to OMA.
The plaintiff in the case has owned a gas power plant facility in Covert Township since 2014. Between 2010 and 2016, they appealed the township’s value assessment of its plant parcels on a yearly basis. The township then attempted to compel the owner to pay the assessment value on the basis of the Tax Tribunal decision from previous years.
In early 2017, the two parties entered into a confidentiality agreement, and the next year, the agreement received a protective order pursuant to court rules. That order sealed certain exhibits and redacted other pieces of information due to confidentiality concerns for tax appeals in 2012 and 2016.
Later, in 2021, the Tax Tribunal states that it had erroneously used the in camera review process — which was used in the development of the confidentiality agreement in question – and misapplied previous precedent from the Court of Appeals.
In 2022, Covert Township and Van Buren County requested discovery items from New Covert Generating Company, which included information sealed under the protective order.
The county, as an intervening defendant, sought to modify and clarify the protective order. The company said it was willing to produce the discovery items if the proper confidentiality protections remained in place.
The Tax Tribunal denied the county’s motion to modify and its request to allow the parties to use the sealed documents. The company moved for partial reconsideration of the order, and the Tax Tribunal issued two orders in response – one partially granting the motion and another ordering the company to provide the requested discovery items.
Reconsideration was again requested on both orders, but the Tax Tribunal denied reconsideration. Another in camera review was ordered while the company appealed the decision to the Court of Appeals.
A focus of the order on appeal surrounded a finding that a protective order issued by a lower court would only protect from disclosure information that was also exempt from disclosure under the Freedom of Information Act.
The Court of Appeals was asked to review for abuse of discretion, as the plaintiff had sought a ruling that the Tax Tribunal “fundamentally misapplied” the precedent in Herald Company Inc. v. Tax Tribunal, and contradicted the Tax Tribunal’s own rules and the Tax Tribunal Act.
O’Brien, Kelly and Feeney wrote that they agreed the Tax Tribunal misapplied the precedent.
“This court agreed with the amici curiae argument (in Herald), stating that ‘it is disingenuous to grant a taxpayer confidentiality at the assessment level and then to revoke that confidentiality when the taxpayer appeals a tax determination before the Tax Tribunal,’” the panel wrote. “There was no tax tribunal rule regarding protective orders; therefore, this court stated that MCR 2.302(C) and MCL 24.273 of the
Administrative Procedures Act governed the issue.”
The court in Herald further concluded that the parties in that case erred because they did not request a confidentiality determination before a referee hearing.
“Had the Tax Tribunal been confronted with a confidentiality request, it would have had to determine the scope and breadth of confidentiality when deciding whether to issue a protective order, in much the
same manner as an FOIA exemption, before conducting a closed session under the Open Meetings Act,” the panel wrote.
As it related to the New Covert Generating Company case, the Tax Tribunal stated, in its newsletter admitting to the misapplication of precedent, that it failed to require the parties to identify and support specific FOIA and OMA exemptions that would have allowed the Tribunal to conduct a portion of a hearing in a closed session. That misapplied the Court of Appeals’ Herald holding because the Tax Tribunal, when faced with FOIA exemptions as applied to the OMA, must state on the record those documents that it deemed exempt under the information law, and then complete the process in an open session before a closed session is conducted.
The panel wrote that generally, FOIA does not limit a court’s discretion to seal documents so long as that discretion falls “within the principled range of outcomes.”
“As such, the Tax Tribunal’s authority to issue protective orders under MCR 2.302 should not be limited by whether an applicable FOIA exemption applies. The petitioner also argues that the Tax Tribunal’s ruling contravenes (its) own rules as well as the (Tax Tribunal Act), which in turn harms taxpayers,” the panel wrote. “In its order, the Tax Tribunal stated that if it were a court under the judicial branch of government, a protective order would be all that would be required, and this would be the end of the story. However, because the Tribunal is in the executive branch, it must also comply with the requirements of FOIA and, therefore, ‘is required to review the information subject to a protective order to determine whether there is an applicable FOIA exemption.”
The upshot, the panel said, was that the Tax Tribunal’s unique position as “a quasi-judicial agency with exclusive jurisdiction over tax appeal proceedings” implies that information in its possession that is protected under MCR 2.302(C)(8) “should be protected from public disclosure regardless of whether an applicable FOIA exemption exists.”
“Therefore, the Tax Tribunal’s ruling that it was ‘required’ to release confidential information protected under the Michigan Court Rules without an applicable FOIA exemption was an abuse of discretion outside the range of reasonable and principled outcomes,” the panel wrote.
On that front, the panel reversed the opinion of the Tax Tribunal.
The same could not be said of the OMA issue presented in the case, affirming that the Tax Tribunal did not abuse its discretion by finding the OMA’s closed session rules can apply to a single-member tribunal proceeding.
“The petitioner also argues that, because the Tax Tribunal Act provides that it is possible for a single Tax Tribunal member to conduct a hearing, the Tax Tribunal is not a ‘public body’ under OMA, and therefore, the Tax Tribunal is not subject to the OMA’s ‘closed session’ rules,” the panel wrote. “We disagree. … Although the Tax Tribunal may exercise its discretion to appoint a single hearing officer to hold a hearing, the Tax Tribunal Act still provides that all hearings, regardless of the number of hearing officers, are subject to OMA.”
Gongwer News Service
A Tax Tribunal ruling that it was required to release confidential information protected under the court rules without an applicable Freedom of Information Act exemption was an abuse of discretion outside the range of reasonable and principled outcomes, a unanimous Court of Appeals ruled in an opinion published Thursday.
The per curiam opinion in New Covert Generating Company v. Covert Township (COA Docket No. 364076) was initially issued in June but was unpublished at the time. The holding was approved for publication on Thursday and rereleased on Friday.
The panel of Judge Colleen O’Brien, Judge Michael Kelly and Judge Kathleen Feeney also held that the Tax Tribunal is a public body under the bounds of the Open Meetings Act, even though it may exercise its discretion to appoint a single hearing officer to hold a hearing. The panel reasoned that the Tax Tribunal Act still provides that all hearings, regardless of the number of hearing officers, are subject to OMA.
The plaintiff in the case has owned a gas power plant facility in Covert Township since 2014. Between 2010 and 2016, they appealed the township’s value assessment of its plant parcels on a yearly basis. The township then attempted to compel the owner to pay the assessment value on the basis of the Tax Tribunal decision from previous years.
In early 2017, the two parties entered into a confidentiality agreement, and the next year, the agreement received a protective order pursuant to court rules. That order sealed certain exhibits and redacted other pieces of information due to confidentiality concerns for tax appeals in 2012 and 2016.
Later, in 2021, the Tax Tribunal states that it had erroneously used the in camera review process — which was used in the development of the confidentiality agreement in question – and misapplied previous precedent from the Court of Appeals.
In 2022, Covert Township and Van Buren County requested discovery items from New Covert Generating Company, which included information sealed under the protective order.
The county, as an intervening defendant, sought to modify and clarify the protective order. The company said it was willing to produce the discovery items if the proper confidentiality protections remained in place.
The Tax Tribunal denied the county’s motion to modify and its request to allow the parties to use the sealed documents. The company moved for partial reconsideration of the order, and the Tax Tribunal issued two orders in response – one partially granting the motion and another ordering the company to provide the requested discovery items.
Reconsideration was again requested on both orders, but the Tax Tribunal denied reconsideration. Another in camera review was ordered while the company appealed the decision to the Court of Appeals.
A focus of the order on appeal surrounded a finding that a protective order issued by a lower court would only protect from disclosure information that was also exempt from disclosure under the Freedom of Information Act.
The Court of Appeals was asked to review for abuse of discretion, as the plaintiff had sought a ruling that the Tax Tribunal “fundamentally misapplied” the precedent in Herald Company Inc. v. Tax Tribunal, and contradicted the Tax Tribunal’s own rules and the Tax Tribunal Act.
O’Brien, Kelly and Feeney wrote that they agreed the Tax Tribunal misapplied the precedent.
“This court agreed with the amici curiae argument (in Herald), stating that ‘it is disingenuous to grant a taxpayer confidentiality at the assessment level and then to revoke that confidentiality when the taxpayer appeals a tax determination before the Tax Tribunal,’” the panel wrote. “There was no tax tribunal rule regarding protective orders; therefore, this court stated that MCR 2.302(C) and MCL 24.273 of the
Administrative Procedures Act governed the issue.”
The court in Herald further concluded that the parties in that case erred because they did not request a confidentiality determination before a referee hearing.
“Had the Tax Tribunal been confronted with a confidentiality request, it would have had to determine the scope and breadth of confidentiality when deciding whether to issue a protective order, in much the
same manner as an FOIA exemption, before conducting a closed session under the Open Meetings Act,” the panel wrote.
As it related to the New Covert Generating Company case, the Tax Tribunal stated, in its newsletter admitting to the misapplication of precedent, that it failed to require the parties to identify and support specific FOIA and OMA exemptions that would have allowed the Tribunal to conduct a portion of a hearing in a closed session. That misapplied the Court of Appeals’ Herald holding because the Tax Tribunal, when faced with FOIA exemptions as applied to the OMA, must state on the record those documents that it deemed exempt under the information law, and then complete the process in an open session before a closed session is conducted.
The panel wrote that generally, FOIA does not limit a court’s discretion to seal documents so long as that discretion falls “within the principled range of outcomes.”
“As such, the Tax Tribunal’s authority to issue protective orders under MCR 2.302 should not be limited by whether an applicable FOIA exemption applies. The petitioner also argues that the Tax Tribunal’s ruling contravenes (its) own rules as well as the (Tax Tribunal Act), which in turn harms taxpayers,” the panel wrote. “In its order, the Tax Tribunal stated that if it were a court under the judicial branch of government, a protective order would be all that would be required, and this would be the end of the story. However, because the Tribunal is in the executive branch, it must also comply with the requirements of FOIA and, therefore, ‘is required to review the information subject to a protective order to determine whether there is an applicable FOIA exemption.”
The upshot, the panel said, was that the Tax Tribunal’s unique position as “a quasi-judicial agency with exclusive jurisdiction over tax appeal proceedings” implies that information in its possession that is protected under MCR 2.302(C)(8) “should be protected from public disclosure regardless of whether an applicable FOIA exemption exists.”
“Therefore, the Tax Tribunal’s ruling that it was ‘required’ to release confidential information protected under the Michigan Court Rules without an applicable FOIA exemption was an abuse of discretion outside the range of reasonable and principled outcomes,” the panel wrote.
On that front, the panel reversed the opinion of the Tax Tribunal.
The same could not be said of the OMA issue presented in the case, affirming that the Tax Tribunal did not abuse its discretion by finding the OMA’s closed session rules can apply to a single-member tribunal proceeding.
“The petitioner also argues that, because the Tax Tribunal Act provides that it is possible for a single Tax Tribunal member to conduct a hearing, the Tax Tribunal is not a ‘public body’ under OMA, and therefore, the Tax Tribunal is not subject to the OMA’s ‘closed session’ rules,” the panel wrote. “We disagree. … Although the Tax Tribunal may exercise its discretion to appoint a single hearing officer to hold a hearing, the Tax Tribunal Act still provides that all hearings, regardless of the number of hearing officers, are subject to OMA.”
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