Wright v. Genesee Cnty.

504 Mich. 410

934 N.W.2d 805

Genesee County Drain Commissioner Jeffrey WRIGHT, Plaintiff-Appellee,andCharter Township of Fenton, Dennis Bow, Karyn Miller, Bonnie Mathis, Paula Zelenko, Marilyn Hoffman, Larry Green, Jake LaFurgey, Ray Foust, David Guigear, Robert M. Palmer, Rick Caruso, William W. Kovl, Maxine Orr, Village of Goodrich, Village of Gaines, Village of Lennon, Charter Township of Mundy, Township of Argentine, Charter Township of Flint, Charter Township of Mt. Morris, Township of Gaines, and City of Flushing, Plaintiffs,

v. GENESEE COUNTY, Defendant-Appellant,andGenesee County Board of Commissioners, Defendant.

Docket No. 156579

Supreme Court of Michigan.

Argued on application for leave to appeal April 10, 2019

Decided July 18, 2019

McCormack, C.J.

In this case, we consider whether a claim for unjust enrichment is barred by the governmental tort liability act (GTLA), MCL 691.1401 et seq. A claim for unjust enrichment is neither a tort nor a contract but rather an independent cause of action. And the remedy for unjust enrichment is restitution—not compensatory damages, the remedy for tort. For both reasons, the GTLA does not bar an unjust-enrichment claim.

I. FACTS AND PROCEDURAL HISTORY

Defendant Genesee County served as an administrator for certain employee health insurance plans. Plaintiff Genesee County Drain Commissioner Jeffrey Wright¹ participated in this plan even though the office of drain commissioner has statutory autonomy from the county. See MCL 46.173. The parties' insurer, Blue Cross Blue Shield of Michigan (BCBSM), conducted a multi-year audit that revealed that the county’s collective insurance premiums, including those paid by the plaintiff, significantly exceeded the amount that should have been charged. The county held a public meeting about the overpayment—allegedly totaling millions of dollars—during which it accepted a refund from BCBSM. The county deposited the refund into its general fund.² The plaintiff demanded a proportionate share of the refund; the county denied his request, and this lawsuit followed.

The plaintiff’s first complaint included claims based in contract and tort (specifically, conversion and fraud). The county moved for summary disposition under MCR 2.116(C)(7) and (8). The trial court held that (1) because of the six-year statute of limitations for breach-of-contract actions in MCL 600.5807, the plaintiff’s damages were limited to those that accrued after October 24, 2005, and (2) the GTLA did not bar the plaintiff’s tort claims. The Court of Appeals affirmed in part and reversed in part. The panel agreed with the trial court’s holding on the contract claim but concluded that the plaintiff’s intentional-tort claims were barred by the GTLA. Genesee Co. Drain Comm'r v. Genesee Co. , 309 Mich. App. 317, 334, 869 N.W.2d 635 (2015).

The plaintiff then amended his complaint to add an unjust-enrichment claim, alleging that the county had "wrongfully and unjustly retained a portion of the refunds under the [BCBSM] Plan that belong to [the plaintiff]," that the county "is not entitled to retain [the plaintiff’s] portion of the refunds," that the county had been "unjustly enriched" by its wrongful retention of the plaintiff’s portion, and that it would be inequitable for the county to retain the plaintiff’s portion.

The county again moved for summary disposition, arguing that the plaintiff’s unjust-enrichment claim was also barred by the GTLA. The trial court denied the motion, and the Court of Appeals affirmed. Genesee Co. Drain Comm'r v. Genesee Co. , 321 Mich. App. 74, 908 N.W.2d 313 (2017). The panel concluded that the GTLA did not apply because "a claim based on the equitable doctrine of unjust enrichment ultimately involves contract liability, not tort liability." Id. at 78, 908 N.W.2d 313. The defendant then sought leave to appeal in this Court. We directed the Clerk to schedule oral argument on the application and ordered the parties to address "whether the Court of Appeals erred in holding that the plaintiff’s claim of unjust enrichment was not subject to governmental immunity under the [GTLA], see In re Bradley Estate , 494 Mich. 367, (2013), because it was based on the equitable doctrine of implied contract at law." Genesee Co. Drain Comm'r v. Genesee Co. , 501 Mich. 1086, 911 N.W.2d 731 (2018).

II. THE GTLA AND IN RE BRADLEY ESTATE

Whether governmental immunity applies under the GTLA is a question of law that we review de novo on appeal. Ray v. Swager , 501 Mich. 52, 61, 903 N.W.2d 366 (2017). We review grants and denials of summary disposition de novo too. Id. at 61-62, 903 N.W.2d 366. De novo review means that we review the legal issue independently, without required deference to the courts below. People v. Bruner , 501 Mich. 220, 226, 912 N.W.2d 514 (2018).

The GTLA provides governmental agencies and their employees with immunity from tort liability when engaged in the exercise of governmental functions. Ray , 501 Mich. at 62, 903 N.W.2d 366. MCL 691.1407(1) states, "Except as otherwise provided in this act, a governmental agency is immune from tort liability if the governmental agency is engaged in the exercise or discharge of a governmental function."

In In re Bradley Estate , 494 Mich. 367, 835 N.W.2d 545, this Court held that an action for civil contempt seeking compensatory damages against the respondent sheriff’s department was barred by the GTLA. The Court reasoned that "the GTLA encompasses all legal responsibility for civil wrongs, other than a breach of contract, for which a remedy may be obtained in the form of compensatory damages." Id. at 371, 835 N.W.2d 545. Thus, at least two categories of claims are not barred by the GTLA: those seeking compensatory damages for breach of contract and claims seeking a remedy other than compensatory damages.

III. RESTITUTION AND UNJUST ENRICHMENT

A. GENERAL PRINCIPLES

Unjust enrichment is a cause of action to correct a defendant’s unjust retention of a benefit owed to another. Restatement Restitution, 1st, § 1, comment a , p. 12. It is grounded in the idea that a party "shall not be allowed to profit or enrich himself inequitably at another’s expense." McCreary v. Shields , 333 Mich. 290, 294, 52 N.W.2d 853 (1952) (quotation marks and citation omitted). A claim of unjust enrichment can arise when a party "has and retains money or benefits which in justice and equity belong to another." Id. (quotation marks and citation omitted).

The remedy for unjust enrichment is restitution. See, e.g., Kammer Asphalt Paving Co., Inc. v. East China Twp. Sch. , 443 Mich. 176, 185, 504 N.W.2d 635 (1993) ("[U]nder the equitable doctrine of unjust enrichment, ‘[a] person who has been unjustly enriched at the expense of another is required to make restitution to the other.’ "), quoting Restatement Restitution, 1st, § 1, p. 12 (second alteration in original); City Nat'l Bank of Detroit v. Westland Towers Apartments , 413 Mich. 938, 938, 320 N.W.2d 881 (1982) (discussing "equitable recovery on the claim of unjust enrichment"); 2 Restatement Restitution & Unjust Enrichment, 3d, § 49, p. 176 ("A claimant entitled to restitution may obtain a judgment for money in the amount of the defendant’s unjust enrichment.").³

Contrast this with tort and contract. In a tort action, an injured party may seek damages for an injury caused by the breach of a legal duty. Wilson v. Bowen , 64 Mich. 133, 141, 31 N.W. 81 (1887). The remedy for the breach is compensatory damages. That is, the defendant compensates the injured party for the injury caused by the defendant’s wrongful conduct. State Farm Mut. Auto. Ins. Co. v. Campbell , 538 U.S. 408, 416, 123 S. Ct. 1513, 155 L. Ed. 2d 585 (2003) ; Rafferty v. Markovitz , 461 Mich. 265, 271, 602 N.W.2d 367 (1999).

In a breach-of-contract action, an injured party may seek damages for an injury caused by another party’s breach of a contractual obligation. As in tort, the remedy for the breach may be compensatory damages. Am. Jur. Legal Forms 2d, § 83:2. That is, remedies are "those that arise naturally from the breach or those that were in the contemplation of the parties at the time the contract was made." Kewin v. Massachusetts Mut. Life Ins. Co. , 409 Mich. 401, 414-415, 295 N.W.2d 50 (1980), citing 5 Corbin, Contracts, § 1007.

Unjust enrichment, by contrast, doesn't seek to compensate for an injury but to correct against one party’s retention of a benefit at another’s expense. And the correction, or remedy, is therefore not compensatory damages, but restitution. Restitution restores a party who yielded excessive and unjust benefits to his or her rightful position. 1 Restatement Restitution & Unjust Enrichment, 3d, § 1, comments d & e , pp. 7-10.

Beyond the differences in remedy, unjust enrichment is a cause of action independent of tort and contract liability. Therefore, the plaintiff’s claim for unjust enrichment is not a tort action seeking compensatory damages. And neither is it a contract action seeking compensatory damages. See, e.g., 1 Restatement Restitution & Unjust Enrichment, 3d, § 1, comment a , p. 3 ("The identification of unjust enrichment as an independent basis of liability in common-law legal systems—comparable in this respect to a liability in contract or tort—was the central achievement of the 1937 Restatement of Restitution.") (emphasis added); see also Schirmer v. Souza , 126 Conn. App. 759, 765, 12 A.3d 1048 (2011) (stating that "the doctrine of unjust enrichment is grounded in the theory of restitution, not in contract theory").

B. HISTORICAL CONTEXT

Unjust enrichment’s historical roots help make sense of its modern identity. It has a long jurisprudential pedigree marking its development into an independent action with a restitutionary remedy. At the King’s Bench, Lord Mansfield described the rationale behind unjust enrichment:

In one word, the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity

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