Securities fraud; Section 10(b); 15 USC § 78j(b); Rule 10b-5; 17 CFR § 240.10b-5; Control-person liability; § 78t(a); Class certification; Fed R Civ P 23(b)(3); Fraud-on-the-market presumption; Basic Inc v Levinson; Market efficiency; Halliburton Co v Erica P John Fund, Inc; Price-maintenance theory; Classwide damages; Expert testimony; FRE 702; Daubert v Merrell Dow Pharms, Inc; Material misrepresentation or omission; Subprime & Alt-A exposure; Scienter; Loss causation; Summary judgment; Fed R Civ P 56(a)

The court held that plaintiff-OPERS could pursue its federal securities-fraud claims based on alleged misrepresentations about defendant-Freddie Mac’s subprime and Alt-A exposure, and that the district court erred in rejecting OPERS’s price-maintenance theory. OPERS sued Freddie Mac and three senior officers under § 10(b), Rule 10b-5, and § 20(a), alleging Freddie Mac understated its risky mortgage exposure before its stock price fell. The district court denied class certification, excluded OPERS’s expert, and granted defendants summary judgment. On appeal, the court first held that the district court wrongly rejected price maintenance, explaining that misrepresentations may affect price by “preventing preexisting inflation from dissipating” rather than by causing the stock price to rise. It further held that OPERS established market efficiency through structural evidence, and it vacated the denial of class certification, the exclusion of OPERS’s expert, and the reliance and damages analyses tied to the rejected theory. As to summary judgment, the court held that a reasonable juror could find material misstatements or omissions as to subprime exposure because Freddie Mac publicly said it had “basically no subprime exposure” while internal evidence showed significant exposure to loans employees described as “subprime” or “subprime-like.” It also held that a jury could find Alt-A misstatements because Freddie Mac disclosed 8% Alt-A exposure while internal measures showed materially higher exposure. But the court held that the credit-risk and underwriting-statements theories failed because the challenged language included “rosy affirmations” and general statements adequately qualified by Freddie Mac’s disclosures. It next held that OPERS produced sufficient scienter evidence through “multiple, obvious red flags,” including divergence between internal reports and external statements. It also held that OPERS could establish reliance through a fraud-on-the-market theory and remanded for loss-causation, damages, class-certification, expert, and control-person-liability issues consistent with the price-maintenance analysis. Reversed in part, vacated in part, and remanded.

Rejection of an amended complaint; Barkley v Southfield; MCR 2.118(A)(1); Harmless error; MCR 2.613(A); Whether candidates who were “endorsed” at an endorsement convention were “nominated” (triggering MCL 168.558(1)’s filing requirement); MCL 168.596; MCL 168.591(1); MCL 168.686; Michigan Democratic Party (MDP); Affidavit of identity (AOI)

While the court held that the Court of Claims erred in rejecting plaintiff-Davis’s amended complaint, it concluded that he failed to show he was entitled to the relief he requested on appeal under the circumstances of the case. Thus, it affirmed summary disposition for defendant. The original complaint contained one count seeking a writ of mandamus and a second count seeking declaratory relief. Both rested “on the same underlying legal theory” – that two men endorsed by the MDP at an April endorsement convention “were in fact ‘nominated’ at that convention[,]” triggering an AOI filing requirement that was not met, with the result that neither man can be placed on the November general election ballot. The Court of Claims rejected this argument in the order on appeal. Davis did not challenge the merits of that ruling here. Rather, he challenged the Court of Claims’ rejection of his amended complaint, which added a third count asking for a ruling that a Secretary of State “interpretive statement was legally incorrect for the same underlying reasons” he argued as to the other two counts. The court agreed with him that Barkley made it clear that “the amended complaint was timely filed under MCR 2.118(A)(1) and should have been accepted, as it was Davis’s right to amend his complaint once under that rule.” But it disagreed with his contention “that this error automatically entitles him to his requested relief—namely,” vacatur of the summary disposition ruling and remand to “essentially start this case over,” with only days remaining before the MDP’s fall nominating convention. The court considered the harmless error rule, MCR 2.613(A), which Davis did not address. While the Court of Claims erred in refusing to accept his amended complaint, it provided him “with a substantive answer to the underlying legal question shared by all his claims within the expedited timeframe required by those claims.” He did not suggest “that his amended complaint would fare any better under the Court of Claims’ substantive analysis than his original one did” and he did not make “any attempt to challenge the merits of the Court of Claims’ ruling on appeal[.]”

Rejection of an amended complaint; Barkley v Southfield; MCR 2.118(A)(1); Harmless error; MCR 2.613(A); Whether candidates who were “endorsed” at an endorsement convention were “nominated” (triggering MCL 168.558(1)’s filing requirement); MCL 168.596; MCL 168.591(1); MCL 168.686; Michigan Democratic Party (MDP); Affidavit of identity (AOI)

While the court held that the Court of Claims erred in rejecting plaintiff-Davis’s amended complaint, it concluded that he failed to show he was entitled to the relief he requested on appeal under the circumstances of the case. Thus, it affirmed summary disposition for defendant. The original complaint contained one count seeking a writ of mandamus and a second count seeking declaratory relief. Both rested “on the same underlying legal theory” – that two men endorsed by the MDP at an April endorsement convention “were in fact ‘nominated’ at that convention[,]” triggering an AOI filing requirement that was not met, with the result that neither man can be placed on the November general election ballot. The Court of Claims rejected this argument in the order on appeal. Davis did not challenge the merits of that ruling here. Rather, he challenged the Court of Claims’ rejection of his amended complaint, which added a third count asking for a ruling that a Secretary of State “interpretive statement was legally incorrect for the same underlying reasons” he argued as to the other two counts. The court agreed with him that Barkley made it clear that “the amended complaint was timely filed under MCR 2.118(A)(1) and should have been accepted, as it was Davis’s right to amend his complaint once under that rule.” But it disagreed with his contention “that this error automatically entitles him to his requested relief—namely,” vacatur of the summary disposition ruling and remand to “essentially start this case over,” with only days remaining before the MDP’s fall nominating convention. The court considered the harmless error rule, MCR 2.613(A), which Davis did not address. While the Court of Claims erred in refusing to accept his amended complaint, it provided him “with a substantive answer to the underlying legal question shared by all his claims within the expedited timeframe required by those claims.” He did not suggest “that his amended complaint would fare any better under the Court of Claims’ substantive analysis than his original one did” and he did not make “any attempt to challenge the merits of the Court of Claims’ ruling on appeal[.]”

Medical malpractice; Direct liability of healthcare facility; Staffing, training, & supervision; Discovery; Relevance & proportionality; MCR 2.302(B)(1); Financial documents; Government citations; Physician-patient privilege; MCL 600.2157; Pandemic Health Care Immunity Act (PHCIA); MCL 691.1475; Retroactive immunity period; MCL 691.1477; COVID-19 connection; Franklin v Flint; Skipper-Baines v Board of Hosp Managers for the City of Flint; Jokinen v Beaumont Hosp Troy; Center for Medicare & Medicaid Services (CMS)

The court held that the challenged financial discovery and most citation discovery were improper, but citations about the decedent (Frances) had to be produced, and that PHCIA immunity applied only to the periods when her care was connected to COVID-19 treatment. This medical-malpractice action arose from alleged negligent wound care, staffing, hygiene, hydration, and nutrition during Frances’s admissions to defendant’s rehabilitation facility in 2020. The trial court compelled production of financial documents and government citations, then granted defendant partial summary disposition under the PHCIA for claims arising between 3/29/20 and 7/14/20. On appeal, the court first held that the trial court abused its discretion by ordering production of tax returns, balance sheets, income statements, staffing budgets, CMS cost reports, and payroll journals because those documents were “not relevant to the standard of care, breach, or if Frances’ injuries were caused by the breach.” It reasoned that the relevant issue was not “why” defendant allegedly failed to provide adequate staff, but “simply whether it did.” The court next held that citations about Frances were discoverable, but citations involving nonparty patients were not because the physician-patient privilege “prohibits disclosure even when the patient’s identity is redacted.” As to PHCIA immunity, the court held that immunity required “‘some connection . . . between the alleged malpractice and the pandemic.’” There was no such connection from 3/29/20 through 4/14/20, or during the May and June admissions after COVID-related care had ceased. But immunity applied from 4/15/20 through 4/17/20 and from 4/27/20 through 5/9/20 because Frances was receiving COVID-related care and the allegedly negligent services were given “in support of this state’s response to the” pandemic. Affirmed in part, reversed in part, and remanded in Docket No. 371166. Reversed and remanded in Docket No. 374483.

Securities fraud; Section 10(b); 15 USC § 78j(b); Rule 10b-5; 17 CFR § 240.10b-5; Control-person liability; § 78t(a); Class certification; Fed R Civ P 23(b)(3); Fraud-on-the-market presumption; Basic Inc v Levinson; Market efficiency; Halliburton Co v Erica P John Fund, Inc; Price-maintenance theory; Classwide damages; Expert testimony; FRE 702; Daubert v Merrell Dow Pharms, Inc; Material misrepresentation or omission; Subprime & Alt-A exposure; Scienter; Loss causation; Summary judgment; Fed R Civ P 56(a)

The court held that plaintiff-OPERS could pursue its federal securities-fraud claims based on alleged misrepresentations about defendant-Freddie Mac’s subprime and Alt-A exposure, and that the district court erred in rejecting OPERS’s price-maintenance theory. OPERS sued Freddie Mac and three senior officers under § 10(b), Rule 10b-5, and § 20(a), alleging Freddie Mac understated its risky mortgage exposure before its stock price fell. The district court denied class certification, excluded OPERS’s expert, and granted defendants summary judgment. On appeal, the court first held that the district court wrongly rejected price maintenance, explaining that misrepresentations may affect price by “preventing preexisting inflation from dissipating” rather than by causing the stock price to rise. It further held that OPERS established market efficiency through structural evidence, and it vacated the denial of class certification, the exclusion of OPERS’s expert, and the reliance and damages analyses tied to the rejected theory. As to summary judgment, the court held that a reasonable juror could find material misstatements or omissions as to subprime exposure because Freddie Mac publicly said it had “basically no subprime exposure” while internal evidence showed significant exposure to loans employees described as “subprime” or “subprime-like.” It also held that a jury could find Alt-A misstatements because Freddie Mac disclosed 8% Alt-A exposure while internal measures showed materially higher exposure. But the court held that the credit-risk and underwriting-statements theories failed because the challenged language included “rosy affirmations” and general statements adequately qualified by Freddie Mac’s disclosures. It next held that OPERS produced sufficient scienter evidence through “multiple, obvious red flags,” including divergence between internal reports and external statements. It also held that OPERS could establish reliance through a fraud-on-the-market theory and remanded for loss-causation, damages, class-certification, expert, and control-person-liability issues consistent with the price-maintenance analysis. Reversed in part, vacated in part, and remanded.

Abstention under Younger v Harris; Sprint Commc’ns, Inc v Jacobs; Whether the underlying state proceedings were ongoing; Distinguishing Doe v University of KY

Concluding that the underlying state proceedings were not ongoing, the court held that the district court erred in abstaining under Younger. Defendant-University of Kentucky placed plaintiff-professor (Woodcock) “on administrative leave while it investigated whether his actions violated any law or university policy. During the investigation’s early stages,” he filed this suit. Considering the two-step inquiry used to determine whether Younger abstention applies, the court assumed “without deciding that a state university’s formal enforcement procedure for reviewing a professor’s alleged violations of university policy constitutes a civil enforcement proceeding akin to a criminal prosecution.” Given that assumption, there were three additional factors to consider. The court found the first, whether the underlying state proceedings are “ongoing,” was dispositive here. It noted that “the disciplinary proceedings against Woodcock remain in a preliminary, investigatory stage. There is no ongoing formal proceeding against [him], nor has the University filed a formal complaint against him.” In fact, it had “not even made a threshold determination that Woodcock violated one of its policies.” Further, its Notices of Investigation were “insufficient triggers for Younger abstention.” So far, its “investigatory steps—including temporarily reassigning Woodcock’s duties—fall short of a formalized, ongoing proceeding.” While the University relied on Doe, the court found that case “distinguishable. The plaintiff there had already gone through multiple formal Title IX hearings and had more scheduled before filing suit.” The court simply “held that those formal hearings were enough to satisfy Younger’s ongoing proceeding requirement. Here, the University is still determining whether a formal hearing will be necessary.” The court declined “to extend Doe to a new context.” Reversed and remanded for consideration of plaintiff’s motion for a preliminary injunction and further proceedings.

Medical malpractice; Direct liability of healthcare facility; Staffing, training, & supervision; Discovery; Relevance & proportionality; MCR 2.302(B)(1); Financial documents; Government citations; Physician-patient privilege; MCL 600.2157; Pandemic Health Care Immunity Act (PHCIA); MCL 691.1475; Retroactive immunity period; MCL 691.1477; COVID-19 connection; Franklin v Flint; Skipper-Baines v Board of Hosp Managers for the City of Flint; Jokinen v Beaumont Hosp Troy; Center for Medicare & Medicaid Services (CMS)

The court held that the challenged financial discovery and most citation discovery were improper, but citations about the decedent (Frances) had to be produced, and that PHCIA immunity applied only to the periods when her care was connected to COVID-19 treatment. This medical-malpractice action arose from alleged negligent wound care, staffing, hygiene, hydration, and nutrition during Frances’s admissions to defendant’s rehabilitation facility in 2020. The trial court compelled production of financial documents and government citations, then granted defendant partial summary disposition under the PHCIA for claims arising between 3/29/20 and 7/14/20. On appeal, the court first held that the trial court abused its discretion by ordering production of tax returns, balance sheets, income statements, staffing budgets, CMS cost reports, and payroll journals because those documents were “not relevant to the standard of care, breach, or if Frances’ injuries were caused by the breach.” It reasoned that the relevant issue was not “why” defendant allegedly failed to provide adequate staff, but “simply whether it did.” The court next held that citations about Frances were discoverable, but citations involving nonparty patients were not because the physician-patient privilege “prohibits disclosure even when the patient’s identity is redacted.” As to PHCIA immunity, the court held that immunity required “‘some connection . . . between the alleged malpractice and the pandemic.’” There was no such connection from 3/29/20 through 4/14/20, or during the May and June admissions after COVID-related care had ceased. But immunity applied from 4/15/20 through 4/17/20 and from 4/27/20 through 5/9/20 because Frances was receiving COVID-related care and the allegedly negligent services were given “in support of this state’s response to the” pandemic. Affirmed in part, reversed in part, and remanded in Docket No. 371166. Reversed and remanded in Docket No. 374483.

Children’s best interests; MCL 712A.19b(5); Relative placement; Fictive kin; MCL 712A.13a(1)(j); In re CJM; Guardianship; MCL 712A.19a(9); In re Rippy

The court held that the trial court’s best-interest determination had to be vacated because it failed to treat the children’s placement with fictive kin as relative placement weighing against termination. Respondent-mother’s rights to DP2 and DP3 were terminated after nearly two years of services, continued meth use, missed drug screens, unresolved mental-health and housing barriers, and inconsistent parenting-time attendance. She did not challenge the statutory grounds for termination, but argued the trial court erred in its best-interest analysis. On appeal, the court held that respondent abandoned any challenge to statutory grounds and rejected most of her best-interest arguments. It found no reversible error in the trial court’s analysis of the children’s trauma or its rejection of the maternal grandmother as guardian. It also held that even if the trial court erred by finding respondent’s bond with DP3 unstable, that “‘factual error does not . . . render the court’s entire best-interests decision clearly erroneous.’” But the court held remand was required because the trial court stated DP2 and DP3 were “not in relative placement,” even though the record indicated they were placed with fictive kin, which qualifies as relative placement under the current statutory definition. The trial court was required to “‘expressly consider [such placement] as weighing against termination,’” and failure to do so rendered the record inadequate for best-interest review. Vacated and remanded with jurisdiction retained.