Class-Action Lawsuit Claims Michigan Illegally Seized Thousands of Tax Refunds

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A class-lawsuit filed Sept. 9 in the Michigan Court of Claims by a Royal Oak law firm charges the state illegally seized federal and state income tax refunds from potentially thousands of workers.

The lawsuit claims the state’s Unemployment Insurance Agency erroneously flagged a large number of unemployment claims through the use of an automated fraud detection program.

The lawsuit, filed by the Pitt McGehee Palmer & Rivers law firm on behalf of Grant Bauserman and other potential members of the class, claims workers whose tax refunds were denied advance notice of the seizures.

“In its ongoing efforts to operate more like a for-profit business, the state of Michigan has laid-off scores of UIA workers and installed machines,” Jennifer Lord, an attorney with law firm, said in a statement. “The state claims the automated processing is superior to actual people in detecting fraudulent claims.”

According to Lord, the machines are actually programmed to do the opposite of what a human claims reviewer would do. Upon discovery of a discrepancy in an unemployment claim, the machines automatically determine it to be fraudulent and immediately authorize seizure of any federal and state tax refunds the claimant is owed without providing the required advance notice.

The lawsuit seeks economic damages for the plaintiffs in the amount equal to their seized refunds, an order declaring the automated decision-making process illegal and an order permanently enjoining UIA from intercepting and seizing income tax refunds.

That could mean a payout of millions of dollars to workers whose refunds were seized.

The case has been assigned to Judge Cynthia Stephens of the Michigan Court of Appeals serving as trial judge for the Court of Claims.

No hearing date on this case has been set.

Read the complaint below.