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A Better Partnership
July 16, 2015

COA determines that an assignee of a cause of action becomes the real party in interest with respect to that cause of action

In the consolidated cases of Cannon Township v. Rockford Public Schools, Nos. 320683 and 320940, the Court of Appeals held that an agreement assigning a cause of action to another party creates a real party in interest. Therefore, the court affirmed the trial court’s denial of Rockford Public Schools’ (RPS) motion for summary disposition against Cannon Township.
In 2011, a water filtration system in one of RPS’s schools malfunctioned due to a power outage and caused a severe sewage backup in one of Cannon Township’s sewer lines. This backup allegedly caused over $90,000 in damages to Robert and Pamela Mack’s home. The Macks sued both RPS and the township, but reached a settlement agreement with the township for partial compensation in the amount of $50,000 via its insurer. Additionally, the Macks agreed to release the township of any future liability and assigned their cause of action against RPS to the township and to the insurer. The township agreed to sue RPS and remit anything in excess of $50,000 in damages to the Macks.

RPS moved for summary disposition, arguing that the Macks could not assign their cause of action to the township because the township never paid RPS directly and because the damages sought were in excess of insurance proceeds. RPS also argued that the township’s claim did not satisfy all elements of a “sewage disposal system event” excepted under the Government Tort Liability Act (GTLA) because its filtration system did not meet the statutory definition, the system did not have a defect, and RPS did not know nor should have known about the defect. The trial court held that the township was the party in interest because of its assignment agreements with the Macks and its insurer. The court also held that the RPS’s filtration system met the statutory requirements in the GTLA. RPS appealed.

The Court of Appeals held that the township is the real party in interest because of its assignment agreements, and therefore upheld the trial court’s denial of summary disposition. The court also concluded that the township was a qualified claimant under the GTLA because of the assignments from the Macks and the township’s insurer, who met the statutory criteria as property owners and as a subrogee, respectively. Furthermore, the Court of Appeals rejected RPS’s argument that the sewage disposal system event exception to the GTLA did not apply. It reasoned that the filtration system fell under the definition of sewage disposal system, that there was sufficient evidence of a defect in the system, and that the evidence and testimony presented at trial demonstrated that there was a genuine issue of material fact regarding RPS’s knowledge of the defect.

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