Curing Real-Party-in-Interest Defects Post-Filing through Equitable Remedies:
The Michigan Supreme Court’s Wallace / C-Spine Doctrine

Introduction

In a consolidated opinion released 3 July 2025—C-Spine Orthopedics, PLLC v Progressive Michigan Insurance Co. (Nos. 165537 & 165538) and Wallace v Suburban Mobility Authority for Regional Transportation (SMART) (No. 165964)—the Michigan Supreme Court confronted a recurring procedural tangle in no-fault insurance litigation: What happens when the named plaintiff has already assigned the claim it sues upon? By a 4-1 majority, the Court (Welch, J.) clarified that

“a failure to sue in the name of the real party in interest is not necessarily fatal; the defect can be cured in the course of litigation, and courts possess equitable tools—most notably rescission—to determine whether the cure relates back for limitations purposes.”

The ruling stitches together three doctrinal threads—standing, the Real-Party-in-Interest (RPII) requirement, and the no-fault act’s one-year-back rule—into a new, workable framework. Its immediate effect is to remand both underlying cases for further proceedings, but its precedential force reaches far beyond auto-insurance disputes, redrawing Michigan civil-procedure lines that date to the 1915 Judicature Act.

Summary of the Judgment

• Standing vs. RPII: Both plaintiffs (C-Spine and Wallace) possessed constitutional & statutory standing when they filed. However, because they had assigned away their PIP claims, neither was the RPII at filing.
• Cure is possible: An RPII defect may be cured by appropriate litigation steps—amending pleadings, intervention, joinder, or court-sanctioned rescission.
• One-Year-Back Rule: The limitation in MCL 500.3145(2) is substantive but does not control who is the RPII; whether recovery is time-barred is a distinct, post-cure analysis.
• Outcomes:
  • C-Spine: Court of Appeals affirmed on alternate grounds; trial court must allow C-Spine to amend its complaint to reflect counter-assignments and decide relation-back & damages.
  • Wallace: Court of Appeals affirmed in part, reversed/vacated in part; trial court must decide—via equitable balancing—whether “mutual rescissions” between Wallace and her providers should be recognized and, if so, whether the defect can be cured.
• Notable dissent (Zahra, J.): Would bar post-filing cures altogether, relying on Miller v Chapman Contracting and policy against “gamesmanship.”

Analysis

A. Precedents Cited & Their Influence

1. Covenant Med Ctr v State Farm (2017) – stripped providers of direct actions, spawning widespread assignment practice; referenced to show statutory backdrop.
2. Andary v USAA (2023) – vesting of no-fault rights pre-2019 amendments; Justice Welch’s concurrence laments inconsistency yet treats amended §3112 as governing because parties conceded.
3. Kearns v Michigan Iron & Coke (1954) – foundational RPII rationale: protect defendants from serial suits.
4. DeLong v Marston (1944) & Waters v Schultz (1925) – early authority suggesting courts may substitute proper parties rather than dismiss.
5. Miller v Chapman Contracting (2007) – modern case holding relation-back does not apply to new parties; relied upon heavily by dissent.
6. Bazzi v Sentinel (2018) & Wilmore-Moody v Zakir (2023) – articulate rescission as equitable, discretionary, and not automatic; critical to Court’s view that a contract’s undoing requires judicial balancing, especially when third-party rights are implicated.

B. Court’s Legal Reasoning

1. Conceptual Separation: The Court emphasizes that “standing” (constitutional / prudential locus) and RPII (statutory & rule-based) derive from distinct sources. A plaintiff may have one without the other.
2. Curability Doctrine: Statute (MCL 600.2041) & rule (MCR 2.201(B)) require suit by the RPII, yet older Michigan cases permit substitution or amendment to avoid dismissal where defendant can still obtain “full, final, conclusive” adjudication. The majority revitalizes that tradition.
3. Mechanisms to Cure:
   • Amend complaint under MCR 2.118.
   • Joinder/Substitution under MCR 2.202 & 2.207.
   • Intervention (MCR 2.209).
   • Court-approved rescission restoring rights ab initio.
   Unilateral acts outside the lawsuit (e.g., private “revocations”) are insufficient.
4. Equitable Rescission: Before recognizing rescission that affects third-party defendants, a court must balance equities—fraud, delay, prejudice, potential double liability, etc.
5. Relation-Back Nuances: Although Miller bars relation-back for new parties, the majority suggests that when the same named plaintiff becomes the RPII (through assignment back or rescission) no “new party” is added; hence relation-back analysis under MCR 2.118(D) remains open on remand.

C. Likely Impact

• No-Fault Litigation: Providers and factoring companies can breathe easier—post-filing corrective paperwork need not doom their suits, though diligence and transparency become critical.
• Broader Civil Practice: Any Michigan action in which assignments, subrogation, or third-party claims arise (e.g., commercial receivables, secured lending, tort indemnity) must now account for the possibility of RPII remediation.
• Defense Strategy: Defendants can still seek dismissal, but must now develop records on prejudice and limitations, not merely point to an initial assignment.
• Judicial Workload: Trial courts inherit gate-keeping duties—scrutinizing proposed amendments, balancing equities, and computing one-year-back offsets. Expect more evidentiary hearings on rescission & relation-back.
• Legislative Spotlight: The decision may prompt calls to codify clearer timelines for asserting or curing RPII defects, mirroring Federal Rule 17(a)(3)—an avenue Justice Zahra’s dissent implicitly invites.

Complex Concepts Simplified

Real Party in Interest (RPII)

The person/entity who owns the claim being prosecuted and can give the defendant a full release. Think of it as “the wallet the money finally ends up in.”

Assignment

A contract transferring a claim from one party (assignor) to another (assignee). Total assignment extinguishes the assignor’s right to sue; a partial or collection-only assignment may leave some rights behind.

Standing vs. RPII

“Standing” asks: are you injured under the law? “RPII” asks: do you actually own the lawsuit? You need both to win, but lack of one doesn’t necessarily destroy the other.

One-Year-Back Rule

MCL 500.3145(2) caps retroactive PIP recovery to services incurred within 1 year before suit is filed (subject to tolling under §3145(3)). It limits dollars, not a plaintiff’s status.

Rescission

An equitable remedy that unwinds a contract as though it never existed. Courts grant it only after weighing fairness to all parties, including outsiders who relied on the contract.

Conclusion

The Michigan Supreme Court’s Wallace / C-Spine opinion introduces a pragmatic doctrine: RPII defects are not instant death if the plaintiff can promptly, transparently, and equitably restore its ownership of the claim within the litigation framework. The Court shields defendants from double-jeopardy-style harassment by insisting on judicial oversight and by leaving the one-year-back rule fully intact as a monetary brake. At the same time, it avoids the harshness of automatic dismissal championed by the dissent, aligning Michigan with the liberal trend embodied in Federal Rule 17(a)(3).

Going forward, litigants must map out assignment chains before filing, and trial judges must sharpen their equitable pencils. The decision’s durable legacy is its clear separation of “who may sue” from “how much may be recovered,” giving Michigan civil practice a flexible yet orderly mechanism to address the messy realities of modern claim-financing and healthcare receivables.