5. Delegation Challenges Since the Westervelt Ruling

The Michigan Supreme Court has entertained a number of delegation challenges since the Westervelt ruling. The cases will be discussed chronologically.

In Dukesherer Farms v Director, Dep’t of Agriculture, 405 Mich 1; 273 NW2d 877 (1979), a cherry farmer challenged a statute that set up a mandatory marketing program for cherries. The program was upheld, and Westervelt was cited but not applied because Westervelt was a 3-3 opinion and the Michigan Supreme Court did not see the need to determine which Westervelt opinion set forth the proper test.

In Underhill v Safeco Ins Co, 407 Mich 175; 284 NW2d 463 (1979), a motorcyclist challenged legislation that allowed the Insurance Commissioner to approve motorcycle insurance policies that contained deductibles. The motorcyclist claimed the legislation contained insufficient standards. In the ruling on the case, the Michigan Supreme Court mentioned the two Westervelt opinions, along with other delegation tests. Without much analysis, the Court held that the delegation was proper under any of the tests.

Detroit v Detroit Police Officers Ass’n, 408 Mich 410; 294 NW2d 68 (1980), provides little guidance since it was a 3-3-1 decision. The city of Detroit was unhappy with an arbitrator’s decision following the city’s failed negotiations with the Detroit police union, and the city challenged the constitutionality of state legislation that required labor impasses between municipalities and firefighters or police officers to be submitted to arbitration. Detroit claimed that these important labor questions needed to be decided by politically accountable agents, not politically unaccountable arbitrators.

The three-justice lead opinion began its analysis by looking at the standards component — i.e., the separation-of-powers component from Westervelt. It cited a lengthy litany of standards from the arbitration statute that included to whom the act applied, the procedures to control the arbitration process, time limits for filing, and eight specific factors that the arbitrators were to consider in making their decisions. This portion of the lead opinion was joined by a fourth justice.

The Detroit Police Officers Ass’n lead opinion did not stop after its discussion of the arbitration statute’s standards, but rather continued on to a discussion of “public accountability,” which is in some ways analogous to a due-process concern. It sought to determine whether there were sufficient political controls over the arbitrators. Three justices held that sufficient political controls were present; three held the contrary; and the remaining justice held that the question was irrelevant. The statute was therefore upheld, since four justices agreed that the statute was constitutional, although they did not agree on the analysis to be applied.

In Blue Cross & Blue Shield of Michigan v Milliken, 422 Mich 1; 367 NW2d 1 (1985), the Michigan Supreme Court struck down a legislative delegation of powers because the delegation provided insufficient standards. The test set forth by the Michigan Supreme Court in Blue Cross & Blue Shield bears a strong resemblance to the Westervelt lead opinion’s test:

The criteria this Court has utilized in evaluating legislative standards are set forth in Dep’t of Natural Resources v Seaman, 396 Mich 299, 309; 240 NW2d 206 (1976): 1) the act must be read as a whole; 2) the act carries a presumption of constitutionality; and 3) the standards must be as reasonably precise as the subject matter requires or permits. The preciseness required of the standards will depend on the complexity of the subject. Additionally, due process requirements must be satisfied for the statute to pass constitutional muster. State Highway Comm v Vanderkloot, 392 Mich 159, 174; 220 NW2d 416 (1974). Using these guidelines, the Court evaluates the statute’s safeguards to ensure against excessive delegation and misuse of delegated power.

{422 Mich} at 51-52 (some citations omitted).

The provisions in question in Blue Cross & Blue Shield concerned the process for setting a “risk factor” in insurance policies concerning various business activities. This “risk factor” was defined as the “the relative probability of loss associated with a given line of business, expressed as a percentage of incurred claims and incurred expenses for a calendar year.” Id. at 52. After the health care corporation (in this case, Blue Cross & Blue Shield) assigned a risk factor for each line of a company’s business, the Insurance Commissioner was to either approve or disapprove the risk factors. When the factors were disapproved, the question of the risk factor to be used instead would then be sent to a panel of three actuaries. There was no judicial or administrative review of either the Insurance Commissioner or the actuaries. The Michigan Supreme Court held that there were insufficient standards for the Insurance Commissioner’s exercise of legislative power:

[T]he power delegated to the Insurance Commissioner is completely open-ended. The commissioner is starkly directed to “approve” or “disapprove” the proposed risk factors; the basis of the evaluation is not addressed. In fact, it is impossible to determine even the nature of the Insurance Commissioner’s inquiry — whether the commissioner is deciding (1) that the health care corporation’s proposed risk factors are actuarially sound, or (2) that, although the proposed factors are actuarially sound, a different set of actuarially sound risk factors are preferred by the commissioner.

This ambiguity is central to the dispute; the nature of the inquiry considerably alters the standards required to prevent an abuse of discretion. For instance, if the Insurance Commissioner merely reviews the proposed factors to ensure that they are in accordance with sound actuarial practices, it is unlikely that any further standard is required. If, however, the Insurance Commissioner may reject actuarially sound risk factors proposed by the health care corporation simply because of a preference for alternate risk factors, some criteria must be included to guide the Insurance Commissioner’s preference of one risk factor over another. Without additional standards, the Insurance Commissioner has de facto veto power over the health care corporation’s risk factors. This lack of clarity regarding the Insurance Commissioner’s function permits the Insurance Commissioner to define the authority of the commissioner.

Id. at 53-54 (footnote omitted).

The last delegation case relevant to the use of the Westervelt ruling is Livonia v Dep’t of Social Services, 423 Mich 466; 378 NW2d 402 (1985). The plaintiffs were landowners trying to prevent foster care homes for the mentally ill from being located in their neighborhoods. There was a provision in state law prohibiting an excessive concentration of these facilities in any one community. The plaintiffs claimed that because the term “excessive concentration” was not defined, the statute was insufficiently precise and therefore unconstitutional in its entirety.

The Michigan Supreme Court rejected this argument. It noted, for example, that the statute provided specific standards to prevent foster homes from being placed closely together; the facilities generally had to be at least 1500 feet apart.

The Court then considered plaintiffs’ due-process challenge, which was not the type of due-process challenge at issue in Westervelt. The question in Westervelt was whether proper safeguards existed in a particular legislative delegation to prevent arbitrary government action. In Dep’t of Social Services, the plaintiffs argued that the license for the foster care home should not have been issued before they had received notice of, and had been given an opportunity to appear at, a hearing on the matter. They further alleged that the Director of Social Services was biased. The Michigan Supreme Court rejected these arguments.[9]

[9] The notice-of-hearing claims were rejected because the Michigan Supreme Court held that the plaintiffs did not have a property interest. The bias argument was rejected due to a lack of evidence.