In the published Court of Appeals decision, Sterling Heights Pain Management, PLC, v Farm Bureau General Insurance Company of Michigan, the Court held that Farm Bureau lacked standing to challenge whether Sterling Heights was properly incorporated or organized under the Michigan Limited Liability Company Act (“MLLCA”), MCL 450.4101, et seq.
Farm Bureau’s insured suffered injuries arising out of a motor vehicle accident and received treatment from Sterling Heights for those injuries. Sterling Heights filed a lawsuit against Farm Bureau for nonpayment of PIP benefits for the services it provided, and Farm Bureau moved for summary disposition arguing that Sterling Heights had not lawfully rendered treatment to the insured. Specifically, Farm Bureau argued that Sterling Heights violated the MLLCA’s requirement that all members and managers of a professional limited liability company (“PLC”) be licensed to render the same professional service as the corporate entity. MCL 450.4904(2).[1] According to Sterling Heights’ 2019 Department of Licensing and Regulatory Affairs (“LARA”) annual report, neither of Sterling Heights’ listed members or managers were licensed physicians. Sterling Heights argued in opposition that Farm Bureau did not have standing to challenge whether Sterling Heights was properly incorporated or organized. The trial court found Farm Bureau had standing and that Sterling Heights did not lawfully render treatment to Farm Bureau’s insured.
On appeal, the Court relied on Miller v Allstate Ins. Co., 481 Mich 601; 751 NW2d 463 (2008), which presented a similar issue where a defendant insurance company argued that a healthcare provider did not lawfully render treatment because it was improperly incorporated under the Business Corporation Act (“BCA”), MCL 450.1101 et seq., rather than the Professional Services Corporation Act (“PSCA”), MCL 450.221, et seq. The Miller Court held that the insurer lacked standing to make its substantive argument, because the BCA provided that only the Attorney General had the authority to challenge an entity’s corporate status under the BCA. Id. at 610; MCL 450.1221. The Miller Court also relied on the BCA provision providing that filing is conclusive evidence that all conditions precedent required to be performed under the act had been fulfilled and that the corporation was formed under the act.
The Court of Appeals in this case noted that although Miller relied on statutory interpretation, other courts have found the State possesses the sole authority to question whether a corporation has been properly incorporated, and further found the MLLCA contains a nearly identical provision to that in the BCA. Thus, Farm Bureau’s argument that it is not challenging Sterling Heights’ corporate form but rather that its organization is in violation of the MLLCA is a distinction without a difference. Specifically, the Court found MCL 450.4202(2) provides that Sterling Heights’ filing of the required documents for incorporation was conclusive evidence that Sterling Heights met the conditions precedent for formation of a PLC, and only the Attorney General has standing to contest that presumption. Therefore, Farm Bureau lacked standing to argue that Sterling Heights was improperly incorporated or organized under the MLLCA, and the Court need not address Farm Bureau’s substantive arguments regarding whether the treatment to Farm Bureau’s insured was not lawfully rendered under the no-fault act, MCL 500.3101, et seq.
[1] Notably, Farm Bureau did not argue that Sterling Heights as an institution was not licensed to provide the type of treatment that was rendered to the insured, and did not dispute that licensed physicians actually provided the treatment to Farm Bureau’s insured.
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Sarah Nadeau, Editor of The Garan Report Publication, is a Shareholder in our Detroit Office. Sarah can be reached at 313.446.1530 or snadeau@garanlucow.com