Adoption Trilogy Secures the Future of Direct Placement Adoptions in Michigan

We don’t think we are exaggerating the significance of two published opinions released by the Court of Appeals yesterday in In re MJG (Docket No. 332928) and In re JSP/In re BGP (Docket Nos. 333700, 333813). These three appeals challenged the trial courts' denials of out-of-state adoption agencies' adoption fees. If the trial courts’ decisions were upheld and the agencies were not allowed to be paid for the services they rendered, then agencies would not be able to perform direct placement adoptions in Michigan at all. After all, even a non-profit organization has to be able to pay its staff, rent, utilities, and all the services that go into an adoption. And although the Adoption Trilogy involved out-of-state agencies, three other appeals are also pending that involved an in-state adoption agency whose fees were similarly denied by trial courts.  

In all three cases the fees were uncontested and based on contract between the adoptive family and the adoption agency, the agency and adoptive family were both out of state, the birth mother and child were in Michigan, and the cases were filed in Oakland County.  In JSP and BGP, the trial court denied the fees without a hearing, when the only evidence presented was a lengthy letter from the agency detailing the fees (again, unrebutted), and the trial court approved some of the fees, but denied other fees.  In MJG, the trial court held an evidentiary hearing where a representative from the adoption organization testified by phone about the fees, and the trial court denied all fees of the organization.

The COA conducted a thorough review of MCL 710.54 which delineates which adoption fees are allowable (710.54(3)), which fees are allowable only upon court approval (710.54(1)) and which fees are prohibited (710.54(2)).  The COA also discussed three other important subsections of MCL 710.54.  Section 7 requires a verified accounting submitted by the adoptive family “itemizing all payments ….made or agreed to be made by the petitioner in connection with the adoption.” MCL 710.54(7) (emphasis added). Section 10 requires the court to “approve or disapprove all fees and expenses.” MCL 710.54(10). And Section (11) imposes criminal liability if a person violates MCL 710.54.

The Court of Appeals set forth a multi-step process for a trial court to evaluate fees in an adoption case. First, the court must determine whether the fee is “in connection with an adoption,” as required by MCL 710.54(7).  The court has an independent obligation to make this inquiry even when the fee is included on the disclosure form because petitioners will tend to over-include fees as there are criminal penalties for not reporting.  So if the fee was for services rendered before an adoptive family and child are identified, then they are not in connection with that particular adoption. Also, general administrative fees of the agency (often pro-rated over all of the agencies clients) are not in connection with a particular adoption.  If the fees are not in connection with an adoption, then the “court has no authority to disapprove the fees.”  Second, if the fees are in connection with an adoption, then the court must determine whether the fees fall under MCL 710.54(1) – such that court approval is required, or under MCL 710.54(2) -- such that the fee is prohibited. Third, if the fees are not prohibited by Sections (1) or (2), then the trial court must determine whether the fees are permitted under the exclusive list contained in MCL 710.54(3), and if they are in this list, the trial court must determine whether the fee is “reasonable and actual.” Fourth, although not at issue in the Adoption Trilogy, the Trial Court should also confirm whether the fees are required in Sections (4) or (5).

Reviewing the fees from the Adoption Trilogy, the COA reached the following conclusions:

• Marketing fees to promote the profile of an adoptive family, often on a nationwide or even international basis, are not in connection with an adoption, and cannot be disallowed.

• Administrative fees of the agency, such as general contract labor, IT services, payroll, health insurance, professional insurance, office supplies, and rent, are not in connection with the adoption itself and cannot be disallowed.

• Preliminary fees for work done before any potential adoptees or birth mothers are identified are not in connection with the adoption (much less the specific adoption that occurred of a specific child in Michigan) and cannot be disallowed.

• Apprising the client of various birth mothers, are connected to the adoption, and fall under the prohibited category of “referring a prospective adoptive parent to a parent or guardian of a child for purposes of adoption.”

• Generating a profile for the birth mother and comparing the alignment of preferences of the birth mother and the adoptive parents are prohibited under MCL 710.54(2)(a) and (b) because they amount to assisting the birth mother and adoptive parents evaluate each other.

• Presenting an adoption opportunity to the clients is prohibited under MCL 710.54(1)(b) or MCL 710.65(2)(d) because they are communicating the existence of a child available for adoption or referring a parent or guardian to a prospective adoptive family.

• The intake meetings with the birth mother is allowed under MCL 710.54(3)(c) as counseling of a parent, along with directing and assisting the birth mother to have a physical evaluation, screenings, and testing.

• Obtaining medical records and information about possible birth fathers are allowed under MCL 710.54(3) as expenses incurred in ascertaining information required under the Adoption Code about an adoptee and the adoptee’s biological family and under MCL 710.27, which requires accounts of the health and genetic history of the child and biological parents.

• Analyzing the legal requirements and applicable laws is allowed under MCL 710.54(3)(f) as legal services.

• Introducing the birth mother to the adoptive family is prohibited under MCL 710.54(2)(c) and (d) as a referral between the adopters and parents.

• Providing medical records is allowed under MCL 710.54(3)(e).

• Paying for the birth mother’s needs and transportation is allowed under MCL 710.54(3)(d) and (g).

• Assisting the birth mother in applying for insurance, securing professional counseling, mentoring support services, and support to the birth mother is allowed under MCL 710.54(3)(c).

• Referring the adoptive family to agencies, social workers, and attorneys; managing the adoption plan; communicating with legal entities are not contained within MCL 710.54(3), and are there not allowed.

• Counseling services for the adoptive family is not allowed under MCL 710.54(3), although it “would be payable if these counseling services … [were not] in connection with the adoption.”

While we take issue with a few of the points addressed by the Court of Appeals’ opinions, the overall outcome is a good result and should be workable in the future -although it will certainly require more thought and evaluation by the trial courts to determine whether to allow, prohibit, or disregard the fees that cannot be disallowed.