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Did the State of Michigan violate Sandy Frank’s constitutional rights by denying him tax benefits he felt entitled to as a producer of a reality show about a game show spending lots of money within Michigan’s borders? Last week, Frank, the producer of television classics Name that Tune and Face the Music, filed suit in the Eastern District of Michigan claiming, inter alia, violation of the Michigan Tax Business Act, unjust enrichment, breach of contract, and violations of his right to due process and equal protection.
Michigan has joined a growing number of states that offer generous tax breaks to film and television producers in the hopes of inducing those producers to set up shop within their borders and patronize the local economy. Michigan’s plan is actually considered among the most aggressive, offering qualifying film producers up to 42% in tax rebates. Michigan’s stated purpose is to foster both short and long term job opportunities for Michigan residents. Accordingly, producers who wish to qualify must fill out an extensive application detailing the amount of money they will spend in Michigan (at least $50,000), how many Michigan residents they will hire, and how they will “promote Michigan as a tourist destination.”
The tax plan is surprisingly inclusive, but strict and brief in its list of exclusions. While reality television programs are apparently eligible, game shows are deemed ineligible without explanation or rationale. Unfortunately for Mr. Frank, Making Of was deemed an ineligible game show, and his application for tax rebates was consequently denied in 2009. Mr. Frank argues that (1) Making Of is not a game show, but a reality television show about a game show, and (2) the state of Michigan denied his program arbitrarily while accepting the applications of other game shows, namely Mark Burnett’s Wedding Day and a show called Crash Course. He further argues that, regardless of the correct application of the statute, members of the Michigan Film Office who accept or deny applications orally accepted his application and induced him to commit to spending over $350,000 in reliance on the tax rebate.
Because these are affirmative benefits premised on the state’s interest in promoting a healthy economy, it is going to be difficult for Mr. Frank to establish a constitutional violation in the form of a Due Process claim. The Equal Protection claim will be similarily problematic, especially because there seems to be some disagreement over the nature of the two shows that Mr. Frank claims were approved over Making Of. Wedding Day is arguably not a game show because all competition is completed before the show begins, and it seems unclear whether Crash Course was ever approved. Although these claims will probably fail on the merits, the tax code does appear somewhat arbitrary, with no clear definitions of game show, reality show, or reality show about a game show. In this day and age, these fine distinctions are becoming almost indistinguishable. Michigan might avoid these claims and case by case arguments by establishing some clearer guidelines.
Mr. Frank’s breach of contract and unjust enrichment claims are forcefully stated, both on his lawyer’s website and in the complaint, which at one point states ”unlike the State of Michigan . . . Mr. Frank is man of his word.” Like so many legal claims in which a very wealthy person spends a lot on legal fees seeking a relatively small damages award, it appears that Mr. Frank truly believes that Michigan deliberately took advantage of him. Indeed, if the stated purposes of the Michigan tax plan are to create jobs and boost the economy for Michigan residents, and Mr. Frank can make a factual argument that members of the Film Office induced him to do those very things by promising him tax rebates that they ultimately withheld, then at least his claim of unjust enrichment might be colorable. In the end, either claim will probably come down to the specific powers of the Michigan Film Office and its apparent ability to unilaterally accept an application. In the meantime, Mr. Frank might just be better off taking his talents to Boston.
– Alexandra Pichette
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