On 5/30/2012, I provided my former employer in Michigan with my resignation effective 6/22/2012 to take a position in California, giving 3 weeks and 1 day notice, thinking that it would help with the transition. Later that day, I was walked out of the office and told that I would not be allowed to work through my notice date because I was going to a competitor. I have a copy of the company termination policy stating "Employees released prior to their resignation date will be paid a lump sum equal to payment through the end of the notice period". On 6/14/2012, I received two weeks pay as well as my PTO bank payout and told that it was all I am entitled to. Do I have a case? Would this be a case for small claims court? Also, could I sue in CA (my state of residence) instead of MI?
This is a situation that you should first present to Michigan's department of Wages and Hours. You can do that through the internet or mails. They will do an investigation and they have the power to make your former employer comply.
Whether you can sue Michigan employer in California, probably not.