Kirby Grill Management, Inc v MESC – 2.21

Kirby Grill Management, Inc v MESC
Digest no. 2.21

Section 32a

Cite as: Kirby Grill Mgt, Inc v MESC, unpublished per curiam Court of Appeals, issued July 28, 1995 (Docket No. 166288).

Appeal pending: No
Claimant: N/A
Employer: Kirby Grill Management, Inc.
Docket no.: L91-00461-2192
Date of decision: July 28, 1995

View/download the full decision

COURT OF APPEALS HOLDING: Good cause for late protest of a determination of successorship may be found where the employer submitted a revised registration report containing additional or corrected information regarding the percentage of assets acquired.

FACTS: In May, 1990 employer submitted a Liability Registration Report in which it indicated it had acquired 100% of predecessor Kings Manor. Employer was mailed a Notice of Successorship on June 22, 1990, which indicated that employer had purchased more than 75% of the assets of its predecessor. This was not protested until September, 1990. Request for redetermination denied on October 5, 1990, because employer failed to protest within thirty days or establish good cause for late protest. Employer submitted revised registration report showing it only acquired 15% of Kings Manor instead of the 100% in the original registration. Employer’s position is that submission of revised registration report meets good cause standard set forth in Unemployment Agency Administrative Rule 270(1)(b).

DECISION: Reversed and remanded for determination of whether good cause exists for reconsideration under Rule 270(1)(b).

RATIONALE: Under the statute, the Agency is authorized to redetermine a prior successorship determination for any “good cause” shown. The focus of a good cause inquiry is not limited to whether the employer could show good cause for not filing its protest within thirty days. Limiting the Agency’s discretion to deciding if there is good cause for untimely filing is overly technical and bureaucratic especially as Rule 270 expressly indicates good cause can be established on the basis of “additional or corrected information.” “That is, the additional or corrected information can provide the necessary good cause to reconsider the successorship determination and, hence, the all-important rate determination.”

Digest Author: Board of Review (original digest here)
Digest Updated: 7/99

MESC v NL Industries (USA), Inc – 2.09

MESC v NL Industries (USA), Inc
Digest no. 2.09

Sections 21, 32a

Cite asMESC v NL Industries (USA), Inc, unpublished opinion of the Oakland County Circuit Court, issued January 5, 1994 (Docket No. 93-459745-AE).

Appeal pending: No
Claimant: N/A
Employer: NL Industries (USA), Inc.
Docket no.: L90-10851-2103
Date of decision: January 5, 1994

View/download the full decision

CIRCUIT COURT HOLDING: Where the MESC fails to issue rate determinations and, instead assigns temporary rates by means of quarterly contribution reports, for a period of years, those so-called temporary rates become final if the employer is not notified of a contribution rate within six months of the computation date (June 30).

FACTS: In 1985, MESC issued determination of successorship. No rate determination was issued, but employer’s quarterly contribution reports showed rate of 2.7%. Sometimes a “T” appeared before the rate. Employer paid the 2.7% rate until October 27, 1989, at which time the MESC issued rate determinations covering 1985-89 of 9.1%, 8.7%, 7.8%, 7.3% and 6.6%. MESC’s position was that the quarterly reports were not rate determinations and not subject to the finality provisions of Section 32a(2). Further, the statute and Administrative Rules do not provide for temporary rates and therefore, the rates shown on the quarterly contribution statements could not become final rates under Section 21(a).

DECISION: Decision of MES Board of Review affirmed. (Later MESC appeal to Court of Appeals withdrawn.)

RATIONALE: Under Section 21(a), employers are entitled to notification of contribution rate no later than six months after the computation date. This notification is mandatory, not discretionary. The computation date under Section 18(a) is June 30 of each year. Therefore, employers must be notified of rate by December 31 of each year. Otherwise the finality provisions of Section 32a(2) apply. A statement of a rate such as that on the quarterly contribution report is a “statement” of a rate determination pursuant to Section 21(a).

Digest Author: Board of Review (original digest here)
Digest Updated: 7/99

MESC v ASC, Inc – 2.06

MESC v ASC, Inc
Digest no. 2.06

Section 22(d)(3), formerly 22(e)(3)

Cite asMESC v ASC, Inc, unpublished opinion of the Court of Appeals of Michigan, issued August 7, 1991 (Docket No. 119777).

Appeal pending: No
Claimant: N/A
Employer: ASC, Inc.
Docket no.: L82 22133 1825
Date of decision: August 7, 1991

View/download the full decision

COURT OF APPEALS HOLDING: Where a vertical merger takes place involving multiple corporate entities related as parent – subsidiary, the merger transactions occur in sequence, not simultaneously.

FACTS: Prior to June 1982, Wisco Corporation was a wholly owned subsidiary of Ultra International, Inc. In turn, Ultra was a wholly owned subsidiary of American Sunroof Corp. Heinz Prechter was the sole stockholder of Sunroof, and he was the sole director of all 3 corporations. At the time Wisco’s contribution rate was 7.8% and Sunroof’s rate was 5.5%. Without applying statutory limit provisions, both corporations would have had a rate of 9%. For economic reasons Sunroof dissolved both Wisco and Ultra into their parent corporations. The business name of Sunroof was changed to ASC, Inc. On June 23, 1981, Prechter signed 3 separate resolutions dissolving the 3 corporations into their parent business effective June 30, 1982. MESC notified ASC, Inc. that it was a successor of the other businesses and assigned a 9% contribution rate for 1982 pursuant to Section 22(e)(3) because it treated the transfer as “simultaneous”.

DECISION: The mergers in this case were not “simultaneous”, and Section 22(e)(3) is not applicable. The rate assigned to ASC is the same as Sunroof’s – 5.5%.

RATIONALE: “We agree with the Board of Review and the circuit court that it was legally impossible for the transfer in this case to have occurred concurrently. If the assets of a subsidiary corporation are to be transferred to the parent corporation the subsidiary and parent may not both dissolve at the same time. The parent must remain in existence in order to accept the subsidiary’s assets. Only after a subsidiary has dissolved and the parent has accepted its assets may that parent dissolve and transfer both its assets and its former subsidiary’s assets to another corporation.”

Digest Author: Board of Review (original digest here)
Digest Updated: 12/91

Ha-Marque Fabricators, Inc v MESC – 2.04

Ha-Marque Fabricators, Inc v MESC
Digest no. 2.04

Section 19, Section 22(d)(3), formerly 22(e)(3)

Cite asHa-Marque Fabricators, Inc v MESC, 178 Mich App 470 (1989); lv den 435 Mich 877 (1990).

Appeal pending: No
Claimant: N/A
Employer: Ha-Marque Fabricators, Inc.
Docket no.: L82 18210 1893
Date of decision: July 17, 1989

View/download the full decision here

COURT OF APPEALS HOLDING: A weighted average of the tax rate of the employer’s two predecessors which were merged into it must be used to determine the employer’s tax rate under Section 19 and 22(e)(3).

FACTS: The employer, based in Illinois, acquired two Michigan subsidiaries and merged them into its operation during a corporate reorganization and then filed a registration report to determine liability with the MESC. MESC assigned a 9% tax rate for 1982. The MESC based its calculations on legislative amendments to the rate calculation provision. The legislature failed to amend Section 22(e)(3) to conform to the other amendments. MESC interpreted the law to require that in mergers the employer should be assigned a total of the former employer’s rates.

DECISION: Employer’s tax rate must be determined by a weighted average of the merged former employer’s rates pursuant to Section 22(e)(3) and 19(a)(6) of the Act.

RATIONALE: “Although in this appeal, the MESC interprets Section 22(e)(3) to mandate a calculation of the employer’s contribution rate based on the balances in the employer’s experience account, we do not believe that the legislature intended such a construction. While we give respectful consideration to the MESC’s interpretation of the statute, we are not bound by it and we decline to follow it here.”

“We believe that the circuit court judge correctly interpreted Section 22(e)(3) as requiring that a weighted average approach be applied to determine Ha-Marque’s contribution rate … .”

Digest Author: Board of Review (original digest here)
Digest Updated: 6/91

MESC v Arrow Plating Co – 2.01

MESC v Arrow Plating Co
Digest no. 2.01

Section 22

Cite asMESC v Arrow Plating Co, 10 Mich App 323 (1968).

Appeal pending: No
Claimant: N/A
Employer: Arrow Plating Company, Inc.
Docket no.: L66 176 1277
Date of decision: March 27, 1968

View/download the full decision 

COURT OF APPEALS HOLDING: “If a vital integral part of the business is not transferred, regardless of how many people make up that integral part, so that the business could not continue, then there has not been a transfer of the `organization’ for the purposes of this Act.”

FACTS: The employer bought much of the assets of Wade Boring Works. The main asset of Wade Boring was the right of possession to a building leased by Wade Boriinng because special zoning allowing the flushing of waste chemicals into the public sewer system. Wade Boring Works retained its phone number, customers, and the right to compete. Arrow’s business was confined to plating operations, while Wade Boring had done both plating and sheet metal fabrication.

DECISION: The employer is not a successor employer under the Act.

RATIONALE: The critical wording of Sec. 41(2) is the phrase defining what must be acquired by a successor employer as “the organization; trade or business, or 75% or more of the assets.” As for “trade or business” it is clear that Arrow did not assume the trade or business, since the clientele were different and the type of work performed by the two companies would appeal to different markets.

In accordance with standard accounting principles, accounts receivable are assets to be considered when computing the percentage of assets transferred.

Arrow Plating’s right to use the building with favorable zoning was the primary concern, but such right was not assigned a value in the transfer. Poor accounting practices made it impossible for the Court to accurately determine the exact value of assets transferred and retained.

“`Organization’ means the vital, integral parts which are necessary for continued operation. In this case, there was not a transfer of the vital, integral parts required for continued operation of the Wade Boring Works. Mr. Frank Beck constituted the entire managerial component of Wade Boring Works, and it could not have continued as a going business without managerial talent.”

Digest Author: Board of Review (original digest here)
Digest Updated: 
11/90

MESC v Patt – 2.08

MESC v Patt
Digest no. 2.08

Cite asMESC v Patt, 4 Mich App 225 (1966).

Appeal pending: No
Claimant: N/A
Employer: Fred Patt
Docket no.: N/A
Date of decision: September 13, 1966

View/download the full decision

COURT OF APPEALS HOLDING: The employer’s contributions required under the Michigan Employment Security Act are a tax within the meaning of Section 17 of the Bankruptcy Act and are not discharged in a bankruptcy proceeding. As a result the employer is still liable for them.

FACTS: Employer was a Michigan employer for the years 1955, 1956, and 1957. It was subject to the provisions of the Michigan Employment Security Act. During the period employer paid no contributions as required by the Act.

In 1959 the Commission tried to collect this delinquent contribution in the state circuit court, and got a judgment by default for the delinquent contributions with interest. Employer filed for bankruptcy and obtained a discharge in 1964. In 1965, the MESC garnisheed defendant’s employer to collect on its judgment. Defendant filed a motion to restrain the garnishment on the basis that the judgment had been discharged in bankruptcy.

DECISION: The discharge in bankruptcy did not discharge employer’s obligation to pay the judgment for the delinquent contributions.

RATIONALE: “Regardless of the terminology used, an involuntary exaction, levied for a governmental or public purpose, can be held to be nothing other than a tax within the purview of the Federal bankruptcy act. The right of the State to collect such tax was duly protected by the Congress in the bankruptcy act.”

Digest Author: Board of Review (original digest here)
Digest Updated: 12/91