Recent Michigan Supreme Court Oral Argument: The Miller v Allstate Conundrum
The Michigan Supreme Court recently heard oral arguments in an important case involving the proper incorporation of health care corporations that provide licensed services to the public. The case is Miller v. Allstate. The major issue Miller is whether those providing a service requiring a license must incorporate under the Michigan Professional Services Corporation Act (PSCA) instead of under the Michigan Business Corporation Act (BCA). The Michigan Supreme Court is reviewing the decision of the Michigan Court of Appeals ruled, which ruled that under the language of the PSCA, any licensed professional (including a health care professional) who incorporates must do so under the PSCA and not the BCA.
The Miller decision by the Michigan Court of Appeals has caused quite a stir in the Michigan legal and business communities. It has caught everyone off guard, including the State of Michigan. The State of Michigan has taken the formal position that the Miller decision goes contrary to the plain language and purposes of the business incorporation acts in Michigan, as well as the accepted interpretation of those acts by everyone, including the Michigan Attorney General and the State agency that administers corporate filings.
To understand why the Miller decision has caused such an uproar, it is necessary to understand the history of incorporating professional service corporations in Michigan. Traditionally, only members of the “learned professions” such as doctors and lawyers have been required to incorporate under the PSCA. In the past, any other kind of business that provided professional or personal services had the choice of incorporating under the PSCA or the BCA. This was true even if a license was required to provide the services in question. The Miller decision has changed all of this.
The Miller case concerns a patient who was referred to a physical therapy clinic for treatments. Licensed physical therapists administered the treatments pursuant to medical prescriptions that the patient’s doctor’s properly issued. The physical therapy company was incorporated under the BCA. When Allstate was billed for the patient’s treatments, it refused to pay, because the physical therapy company was supposedly improperly incorporated under the BCA instead of the PSCA.
Allstate claimed that the physical therapy company should have incorporated under the PSCA since its business involves providing professional services that require a license. Allstate took the position that that the physical therapy company’s incorporation was defective because it was incorporated under the BCA instead of the PSCA. Allstate claimed that this alleged technical deficiency gave it the legal right to refuse the charges from the physical Therapy company.
There are a number of interesting and important legal issues involved in the Miller case. But, the issue of which statute professionals should incorporate their businesses under has received the most press. This issue also probably has the most potential to disrupt the businesses that have been incorporated under the BCA and not the PSCA. It appears that a ruling by the Michigan Supreme Court in favor of Allstate point could cause Michigan businesses that incorporated under the BCA and provide licensed services significant difficulties. Some of these difficulties might include difficulty collecting receivables and possible personal shareholder liability for company obligations.
