Thousands wrongly accused of fraud while seeking unemployment benefits can sue state

Thousands of people who were wrongly accused of fraud when seeking unemployment benefits can seek financial relief from the state, the Michigan Supreme Court ruled Tuesday, breaking new ground when someone claims their constitutional rights have been violated by the government.

"The state is prohibited from violating the rights the Constitution guarantees. If it does so, it is liable for the harm it causes," Justice Megan Cavanagh wrote in a 4-3 opinion.

The three dissenters were justices nominated by the Republican Party.

An automated computer system used during the administration of Gov. Rick Snyder was a disaster over a two-year period. People were accused of cheating to get jobless aid. They were forced to repay money, along with substantial penalties, before the Unemployment Insurance Agency finally acknowledged widespread errors that affected more than 40,000 people.

Although refunds were dispersed, the state still is being sued by people who argue that their due-process rights — a right to be heard — were violated while they tried to untangle themselves from the mess.

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Some victims had to hire lawyers to fight false fraud findings. Others filed for bankruptcy, lost wages, suffered poor credit ratings or had trouble finding a job and housing.

The state Supreme Court said it has the power to step in, especially when the Legislature hasn’t come up with a law that offers a remedy to people whose rights have been violated by the state.

"If our Constitution is to function, then the fundamental rights it guarantees must be enforceable. Our basic rights cannot be mere ethereal hopes if they are to serve as the bedrock of our government," Cavanagh wrote.

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In dissent, Justice David Viviano said the majority opinion was a "thunderbolt" with "stunning sweep."

"It represents a gross overreach given that the judicial branch has now seized legislative power to fashion remedies for all manner of constitutional violations. ... A deluge of cases and a swelling of taxpayer liability will surely ensue," said Viviano, who was joined by Justice Brian Zahra.

Viviano said it’s the Legislature’s job to approve a solution if there should be one.