Sent: Friday, September 11, 2020 3:24 PM

To: William Kohls (peainetownship@gmail.com) <peainetownship@gmail.com>

Subject: Beaver Island Rural Health Center

Bill:

You have asked me to provide an opinion with respect to whether the Beaver Island Rural Health Center (BIRHC) is subject to the Freedom of Information Act (FOIA). You have indicated that the BIRHC receives approximately 1/3 of its funding from the Townships and another approximately 1/3 of its funding from the State. It is my understanding the state funding is in the form of a grant or subsidy. Further, I understand that while the funding from the Township is for the service of a health center on the island that the BIRHC is providing, the townships funding is not based on a fee for service formula or anything resembling a fee for service formula.

Based on these facts, it appears that the BIRHC may be subject to the Freedom of Information Act. MCL 15.232(h)(iv) provides as follows:

(h) Public body means any of the following:

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(iv) Any other body that is created by state or local authority or is primarily funded by or through state or local authority, except that the judiciary, including the office of the county clerk and its employees when acting in the capacity of clerk to the circuit court, is not included in the definition of public body. (Emphasis supplied).

If more than one half of an organizationa's total funding comes from state or local authority, that organization would be considered a public body under the FOIA. Kubick v Child & Family Services of Michigan, Inc, 171 Mich App 304 (1988). This holding was affirmed in Jackson v Eastern Michigan Univ Foundation, 215 Mich App 240 (1996).

In Breighner III v Michigan High School Athletic Assn, Inc, 471 Mich 217 (2004), the Supreme Court considered when any other body is funded by or through state or local authority. The Court held that a body is funded when it receives a governmental grant or subsidy. At 645. The Court found that the mhsaaa's primary source of funding was through ticket sales to post season games that it organized. The Court stated a€re[t]he mhsaa is not the recipient of any governmental grant subsidy. The mhsaaa's member schools do not distribute their financial resources to the mhsaa; nor do the schools indirectly fund the mhsaa through allocation of public monies.a€ The Court adopted the reasoning of < >State Defender Union v Legal Aid and Defender Assn of Detroit, 230 Mich App 426 (1998) as follows:

An otherwise private organization is not funded by or through state or local authority- merely because public monies paid in exchange for goods provided or services rendered comprise a certain percentage of the organization review. Earned fees are simply not a gran subsidy, or funding .

In State Defender Union, the Court of Appeals considered whether a Legal Aid Clinic that received more than 85% of its funding from governmental sources was a public body. In holding that it was not, the Court stated that the majority of those revenues were generated on a fee for service basis. At 432.

As indicated above, it is my understanding the money received by the BIRHC from the townships and the state is not on a fee for service basis. Although the townships have apparently not received a request for financial contributions from the BIRHC for at least several years as required by paragraph 10 of the Agreement with the BIRHC, the amount of contribution provided by the townships has not been based on any fee for service related formula. It simply has been a blanket amount to support the operation and existence of the BIRHC. As a result, it may be determined that the contribution from the townships is more like a grant or subsidy for the generalized services that the BIRHC provides in the townships rather than a fee in exchange for specific services rendered or to be rendered.

More factual development is needed on this issue though with respect to both the funding from the townships and the state so that the nature of BIRHC' funding can be compared with other nonprofits that are 'refunded' government that have been found by the courts to meet the definition or not meet the definition.

You have provided me with an opinion from Mr. Joseph G. Nuyen, Jr. an attorney in Ann Arbor who was asked whether the BIRHC was subject to FOIA in 2018.

Mr. Nuyen provided an opinion that it was not based on OAG 6563 (1989). The

Attorney General Opinion cited states that the above cited definition could not apply to a nonprofit corporation because the inclusion of nonprofits would violate the Const 1963, art 4, Sec. 24, which states, in pertinent part, that "[n]o law shall embrace more than one object, which shall be expressed in its title." Although I have not researched whether the legal analysis in the Attorney General Opinion is accurate or whether the legislature subsequently fixed this issue, I do note the following:

• 1. The Attorney General Opinion is from 1989.
• 2. The Court of Appeals and Supreme Court of Michigan have subsequently considered on several occasions the specific issue of whether a nonprofit was subject to FOIA under this definition and appear to have not once mentioned OAG 6563 or found the provision to be unconstitutional.
• 3. The Court of Appeals in 1996 and 2003 specifically relied on this definition in finding in Scalafani v. Domestic Violence Escape, 255 Mich. App. 260 (2003) and Jackson v Eastern Michigan Univ Foundation, 215 Mich App 240 (1996) that the nonprofits at issue either could be subject to the FOIA if it was found following further discovery that the funding that was provided was not on a fee for service basis (Scalafani) or was subject to the FOIA (Jackson).
• 4. Attorney general opinions, although persuasive, are only binding on state agencies not the Courts or local units of government.
• 5. The current Freedom of Information Act Handbook published by the Attorney General states: "A private, non-governmental body may be Public Body subject to FOIA if it receives fifty percent or more of its funding through State or local governmental grants or subsidies."
• 7. https://www.michigan.gov/documents/ag/FOIA_Handbook_2019_644053_7.pdf

In light of the above, the applicability and effect of the Attorney General Opinion is questionable.

You have also asked me to provide an opinion on whether it is appropriate for the township to withhold funding from the BIRHC for fiscal year 2021. Paragraph 10 of the Agreement with BIRHC provides as follows:

This provision requires the Townships to make a contribution within their reasonable discretion following a request for financial contributions from the BIRHC made before August 1, of each year. Firstly, it is my understanding BIRHC has not made a request for contributions. Therefore, the townships'  obligation, if any, to determine the amount of contribution has not been triggered. Secondly, it is my understanding that the BIRHC has not fully committed to compliance with the Open Meetings Act (OMA) as requested in the letter from the townships on January 16, 2020. As explained in the letter, compliance with the OMA is a material term of the Agreement. It is also clear from the Agreement that it is a material term. A party who substantially breaches a contract cannot maintain an action against the other party for the other party's subsequent breach . Able Demolition v. Pontiac, 275 Mich. App. 577 (2007).

If the BIRHC is in breach of the material term that they comply with the OMA even following the townships demand for performance, the townships are probably justified in refusing to perform under the contract even if the townshipsa obligation to perform has been triggered. Further, the townships obligation to perform is not absolute. The townships are obligated to perform in their a€rereasonable discretion.a€ It is reasonable for townships to determine that the BIRHC’s failure to comply with a material term of the contract justifies a lesser contribution or perhaps no contribution to the extent that the townships are not receiving the benefit of their bargain under the Agreement.

Hopefully this answers your questions. Please let me know if you would like me to assist with anything else.

Karrie

Karrie A. Zeits

Sondee, Racine & Doren, PLC 310 W. Front Street, Suite 300 Traverse City, Michigan 49684 (231)947-0400 (Main) (231)947-0769 ext 210 (Direct)