According to the Michigan Court of Appeals in Grass Lake Improvement Board v. Dept of Environmental Quality No.326571, tension between legal precedents can serve as the basis of a position of arguable legal merit. A dispute between the Grass Lake Improvement Board (“Board”) and the Department of Environmental Quality (the “DEQ”) resulted in the Board petitioning review of DEQ’s decision to disallow the use of a well to pump water into Grass Lake. The DEQ argued that it relied on Michigan statutory law which prevented the enlarging of inland lakes and streams. However, the DEQ had promulgated a rule interpreting the term “enlarge” and that interpretation did not encompass the activity the Board sought in its application. The DEQ asserted that when a statute and an agency rule conflict, it is well settled, that the statute controls.
The Board countered that under Michigan law, administrative agencies, such as the DEQ have a duty to follow their own duly promulgated rules, even where the agency believed the rule was contrary to statutory plain-meaning. An administrative law judge (“ALJ”) sided with the Board and stated that the DEQ must follow its rules. The Board was not finished. It initiated a second contested case seeking attorney fees; arguing that the DEQ’s arguments were devoid of arguable legal merit pursuant to MCL 24.323(1). The ALJ denied the Board’s request after deciding the DEQ’s position had some arguable legal merit. The Board had even characterized the case as having, “numerous complex legal issues”, in its pleadings. The circuit court reversed the ALJ decision, claiming the ALJ cited no legal authority. Furthermore, the circuit court claimed the DEQ arguments were, “devoid of legal merit”, because no clear conflict between the statute and agency rule existed. The Court of Appeals has sided with the ALJ.
The Court of Appeals makes clear that the circuit court applied the wrong standard as stated in MCL 24.323(1). A frivolous claim does not arise where there is no legal merit, but where there is no arguable legal merit. The Court relied on the interpretation of identical statutory language in a 2013 case. Adamo Demolition Co v Dep’t of Treasury, established a claim as devoid of arguable legal merit where it is not grounded in law or fact, such as when it violates basic, longstanding, and unmistakably evident precedent. Michigan courts have often embraced the principle that a statute controls when in conflict with an agency rule, yet Michigan courts have also established that agencies are bound to follow their own duly promulgated rules. Due to the tension between these precedents, DEQ’s legal position was sufficiently grounded in law as to have some arguable legal merit, thus was not frivolous. The Court, in turn, reinstated the decision of the ALJ.
