ANN AYRE V ATTWOOD CORP
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STATE OF MICHIGAN
COURT OF APPEALS
ANN AYRE, as Personal Representative of the
Estate of JAMES O. AYRE, Deceased, and
ELIZABETH SWIFT, as Personal Representative
of the Estate of HOWARD G. SWIFT, III,
Deceased,
FOR PUBLICATION
May 13, 2003
9:00 a.m.
Plaintiffs,
and
SUSANNE BURNSIDE, as Personal
Representative of the Estates of RODNEY G.
BURNSIDE, Deceased, and BRADLEY H.
BURNSIDE, Deceased,
Plaintiff-Appellant,
v
No. 234826
Kent Circuit Court
LC No. 96-006527-NO
OUTLAW DECOYS, INC., AND WINGSET
COMPANY d/b/a OUTLAW MARINE,
Defendants,
and
ATTWOOD CORPORATION,
Defendant-Appellee,
Updated Copy
June 20, 2003
and
LEFLER MARINE LIMITED,
Third Party Defendant.
Before: Whitbeck, C.J., and Cavanagh and Bandstra, JJ.
CAVANAGH, J.
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Plaintiff Susanne Burnside, personal representative of the estate of Bradley H. Burnside,
deceased, appeals as of right the trial court's order awarding $232,794 in case evaluation
sanctions to defendant Attwood Corporation. We vacate and remand.
On November 11, 1995, James O. Ayre; Howard G. Swift, III; Rodney G. Burnside; and
Bradley H. Burnside, Rodney's fourteen-year-old son, died when Ayre's eighteen-foot
recreational boat capsized on Saginaw Bay while they were duck hunting. This consolidated
wrongful death and products liability action was filed against the manufacturer of the boat,
Outlaw Decoys, Inc., and Wingset Company, doing business as Outlaw Marine (hereinafter
referred to collectively as Outlaw), and Attwood Corporation (Attwood), the manufacturer of a
fuel system component of the boat. The matter proceeded to case evaluation1 where separate,
unanimous awards were rendered in each plaintiff 's favor, with seventy percent of the liability
assigned to Outlaw and thirty percent apportioned to Attwood. The Ayre, Swift, and Rodney
Burnside estates accepted their awards, conditioned on the acceptance of all defendants. Plaintiff
rejected the case evaluation award, and Outlaw and Attwood rejected all the awards.
On the eve of trial, Outlaw entered into a settlement agreement with all the plaintiffs.
Thereafter, a thirty-day jury trial commenced against Attwood, and resulted in a verdict of no
cause of action in Attwood's favor. A motion for new trial was denied, which this Court
affirmed. See Ayre v Attwood Corp, unpublished opinion per curiam of the Court of Appeals,
issued March 16, 2001 (Docket Nos. 217911, 218064). Subsequently, the trial court granted
Attwood's motion for case evaluation sanctions in the amount of $232,794 against plaintiff only,
on the ground that plaintiff rejected the case evaluation award, while her coplaintiffs accepted
their awards. Plaintiff appeals from the trial court's order.
Plaintiff argues that the trial court erred in assessing as sanctions all of Attwood's
attorney fees accrued following case evaluation, because the fees were not incurred as a result of
plaintiff 's rejection of the case evaluation award. We agree. A trial court's interpretation of a
court rule and decision to award case evaluation sanctions are questions of law we review de
novo. Marketos v American Employers Ins Co, 465 Mich 407, 412; 633 NW2d 371 (2001); Elia
v Hazen, 242 Mich App 374, 376-377; 619 NW2d 1 (2000). The amount of case evaluation
sanctions awarded is reviewed for an abuse of discretion. Id. at 377.
MCR 2.403(O)(1) provides:
If a party has rejected an evaluation and the action proceeds to verdict, that
party must pay the opposing party's actual costs unless the verdict is more
favorable to the rejecting party than the case evaluation. However, if the
opposing party has also rejected the evaluation, a party is entitled to costs only if
the verdict is more favorable to that party than the case evaluation.
1
Although at the time of the proceeding it was referred to as "mediation" under MCR 2.403, we
use the current terminology for clarity because the amendment does not affect our analysis.
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Whether "the verdict is more favorable" to a party is determined after appropriate adjustments
are made to the verdict. MCR 2.403(O)(3). However, in cases involving multiple parties, MCR
2.403(O)(4)(a) provides:
Except as provided in subrule (O)(4)(b), in determining whether the
verdict is more favorable to a party than the case evaluation, the court shall
consider only the amount of the evaluation and verdict as to the particular pair of
parties, rather than the aggregate evaluation or verdict as to all parties.
Further, pursuant to MCR 2.403(O)(6), reimbursable "actual costs" include:
(a) those costs taxable in any civil action, and
(b) a reasonable attorney fee based on a reasonable hourly or daily rate as
determined by the trial judge for services necessitated by the rejection of the case
evaluation.
Here, plaintiff does not contest that Attwood is entitled to recover its actual costs under
MCR 2.403(O) following a jury verdict of no cause of action in Attwood's favor. Plaintiff does,
however, contend that Attwood is not entitled to recover all its attorney fees incurred as a
consequence of proceeding to trial because plaintiff 's rejection of the case evaluation award,
alone, did not force the trial since Attwood rejected all of the case evaluation awards. In other
words, the trial would have occurred even if plaintiff had accepted the award because Attwood
rejected the awards with regard to all four plaintiffs. Although we repudiate plaintiff 's reasoning
in this matter of first impression, we agree that plaintiff is not liable for all of Attwood's attorney
fees that accrued following plaintiff 's rejection of the case evaluation.
Plaintiff correctly claims that Attwood's rejection of all the case evaluation awards was a
determinative factor in the entire matter proceeding to trial because the three other plaintiffs
accepted their awards; however, that factor is not dispositive. If any one or all three of the
plaintiffs who had accepted their case evaluation awards had received verdicts more favorable
than the amount of their award, as determined under MCR 2.403(O)(4)(a), Attwood would have
been liable for their actual costs under MCR 2.403(O)(6). Conversely, because those three
plaintiffs accepted their case evaluation awards, they are not liable under MCR 2.403(O) for any
portion of Attwood's actual costs, although Attwood prevailed against them at trial. This result is
consistent with the purpose of the case evaluation rule "to place the burden of litigation costs
upon the party who insists upon a trial by rejecting a proposed mediation award." See Bien v
Venticinque, 151 Mich App 229, 232; 390 NW2d 702 (1986); see, also, Taylor v Anesthesia
Assoc of Muskegon, PC, 179 Mich App 384, 387; 445 NW2d 525 (1989).
The issue here, however, is the scope of one rejecting plaintiff 's liability, by operation of
MCR 2.403(O), in a multiple-plaintiff action, when the defendant prevailed against all the
plaintiffs. Is the rejecting plaintiff liable for all of a defendant's attorney fees that accrued after
case evaluation, including those associated with defending against the claims of the other
plaintiffs that were also litigated in the same trial? The answer is no. The rejecting plaintiff is
only liable for those attorney fees that accrued as a consequence of that plaintiff 's rejection,
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which is determined by examining the rejecting plaintiff 's theories of liability and damage
claims.
The rejecting plaintiff is only liable for attorney fees associated with the defense against
that plaintiff 's theories of liability. If coplaintiffs asserted different theories of liability than the
rejecting plaintiff, only the attorney fees associated with the defense against the rejecting
plaintiff 's theories of liability are taxable. On the other hand, if all the plaintiffs asserted the
same theory of liability, the rejecting plaintiff is liable for the attorney fees associated with the
defense against that theory of liability. Here, all the plaintiffs asserted the same theory of
liability—Attwood manufactured a defective fuel system component. Therefore, the attorney
fees defendant incurred following case evaluation with regard to the liability component of its
defense—disproving that its fuel system component was defective—are recoverable as case
evaluation sanctions against the sole rejecting plaintiff, because that is the risk plaintiff assumed
by rejecting the case evaluation award.
However, the analysis does not end with consideration of the liability component of the
litigation—the damages component must also be considered. The attorney fees associated with
defending against the rejecting plaintiff 's alleged damages must also be determined. The
damage claims asserted by plaintiffs, especially in personal injury and wrongful death causes of
action, are necessarily as unique as each plaintiff in the cause of action. Accordingly, the
rejecting plaintiff is only liable for the attorney fees incurred by the defendant in defending
against the damages component of that plaintiff 's case. Here, plaintiff is not liable for the
attorney fees defendant incurred defending against her coplaintiffs' damage claims because
defendant assumed that risk by rejecting those case evaluation awards.
The net result of our analysis, then, is that the rejecting plaintiff is only liable for the
attorney fees the defendant incurred, following case evaluation, defending against the rejecting
plaintiff 's case only, as if the plaintiff and the defendant were the only litigants in the cause of
action. One of the virtues of this result is its versatility. For example, when more than one
rejecting plaintiff is liable for a defendant's attorney fees, the attorney fees associated with
defending against a single theory of liability would be divided equally between the liable
plaintiffs, but each plaintiff would be responsible for the attorney fees associated with defending
against their individual damage claims. However, rejecting and liable plaintiffs who pursued
different or additional theories of liability would be solely liable for the defendant's attorney fees
associated with defending against their unique theories of liability, as well as for the fees
associated with defending against their individual damage claims. Similarly, when only some of
the defendants in a multiple-defendant case are entitled to case evaluation sanctions, isolating
each of the rejecting plaintiffs' cases, i.e., theories of liability and damage claims, permits the
proper allocation of liability. Considering each liable plaintiff 's case separately also ensures that
liability is fairly allocated and simplifies the complicated and arduous task of calculating
attorney fees—other virtues of this analysis.
Our holding is premised on MCR 2.403(O)(4)(a) and (6), and is consistent with the
purpose of the case evaluation rule. First, as set forth above, MCR 2.403(O)(4)(a) provides that,
in multiple-party cases, whether the verdict is more favorable than the case evaluation is
determined by considering only the particular pair of parties. Consequently, if plaintiff A
accepted a case evaluation award of $100 and plaintiff B accepted an award of $50 (while
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defendant rejected the awards) and plaintiff A received a trial verdict of $50 while plaintiff B
received a verdict of $300, only plaintiff B would be entitled to case evaluation sanctions.
Although in the aggregate the plaintiffs' positions improved, considered individually, only
plaintiff B's position actually improved. Therefore, the mere appearance that a party's rejection
unjustifiably prolonged the litigation is not enough; the rejection must have been proved
unjustified as evidenced by individual trial verdicts that are less favorable to the rejecting party
than the individual case evaluation awards. This rule protects a party's right to reject, but also
fairly burdens that decision with enough risk to ensure that it is well reasoned.
Similarly, our resolution of the question presented here denies as insufficient the mere
appearance that a party's rejection unjustifiably increased the cost of the litigation. Instead, the
costs directly arising from that rejection must be determined and only those costs are
appropriately borne by the rejecting party. In sum, separately considering the case between each
particular pair of parties equitably accomplishes the objective of MCR 2.403(O) to expedite the
resolution of cases by only imposing sanctions when they are justified.
Second, MCR 2.403(O)(6) provides for the reimbursement of actual costs, including "a
reasonable attorney fee . . . for services necessitated by the rejection of the case evaluation."
MCR 2.403(O)(6)(b). We construe a court rule using the same principles as those that govern
statutory construction, beginning with its plain language.
Grievance Administrator v
Underwood, 462 Mich 188, 193-194; 612 NW2d 116 (2000). Accordingly, MCR 2.403(O)(6)
clearly requires that a causal nexus be established between the services performed by the
attorney and the particular party's rejection of the case evaluation. A rejecting plaintiff who is
liable for a defendant's attorney fees that accrued as a result of having to defend against that
plaintiff 's case, only, is liable "for services necessitated by the rejection of the case evaluation."
The fairness of this principle is aptly illustrated in this case where defendant Attwood
rejected the case evaluations regarding all four plaintiffs, plaintiff 's three coplaintiffs accepted
their awards, but plaintiff rejected her award. Plaintiff 's rejection of her case evaluation award
did not cause defendant to incur attorney fees defending against the three coplaintiffs' claims;
rather, defendant's rejection of those case evaluation awards caused those expenses to accrue.
Therefore, the requisite causal nexus between plaintiff 's rejection of the evaluation and
defendant's accrual of attorney fee expenses with regard to the three coplaintiffs' claims is absent.
However, plaintiff 's rejection did cause defendant to incur attorney fees defending against
plaintiff 's case, including her theory of liability and damage claim. As discussed above, it is
irrelevant that plaintiff 's three coplaintiffs were asserting the same theory of liability. If
plaintiff 's coplaintiffs were asserting different theories of liability, plaintiff would not be liable
for attorney fees defendant incurred defending against those theories of liability, just as plaintiff
is not responsible for those fees resulting from defendant's defense of her three coplaintiffs'
damages claims.
This causation requirement that we formally recognize today was at least implicitly
acknowledged in Michigan Basic Prop Ins Ass'n v Hackert Furniture Distributing Co, Inc, 194
Mich App 230; 486 NW2d 68 (1992). In that case, the plaintiff was an insurance company that
paid a claim arising from a fire that destroyed a building owned by its insured and partially
sublet by the defendants. Id. at 232. The defendants' insurance company, Auto-Owners
Insurance Company, paid the defendants' claim, but then determined that the defendants
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intentionally started the fire. Id. Thereafter, both the plaintiff and Auto-Owners attempted to
recover their claim payments through a consolidated action against their insureds. Id. The case
proceeded to case evaluation where "no cause of action" evaluations were rendered against both
the plaintiff and Auto-Owners, which they rejected. Id.
At the conclusion of a thirty-three-day trial, a jury found that the plaintiff was not entitled
to damages from the defendants, but that Auto-Owners was entitled to damages because it had
been defrauded by the defendants. Id. at 233. The defendants then moved for case evaluation
sanctions against the plaintiff under MCR 2.403(O)(6). Id. The plaintiff argued that all but three
hours of the defendants' attorney's work was devoted to defending against Auto-Owners' claims.
Id. The trial court disagreed, finding that "the defenses overlapped considerably and that the
majority of the testimony presented by Auto-Owners was important to plaintiff 's case." Id. The
trial court then determined that six of the twenty-five witnesses presented at trial were not
necessary to the plaintiff 's case, and reduced the number of attorney hours recoverable under
MCR 2.403 by twenty-four percent. Id. at 233-234.
On appeal, the plaintiff argued that the defendants' attorney fees were not "necessitated
by the [case evaluation] rejection" because "defendants would have been obliged to present
essentially the same defense in response to the suit by Auto-Owners even if plaintiff were [sic]
no longer a party to the suit." Id. at 235. In other words, the plaintiff argued, attorney fees were
only "necessitated by the rejection" "where they could have been avoided had the rejecting party
accepted the mediation evaluation," i.e., in essence, where the theories of liability were different.
Id. This Court rejected the plaintiff 's argument, holding that attorney fees are "necessitated by
the rejection" when accrued after the case evaluation is rejected, and then affirmed the trial
court's reduction of defendants' proposed attorney fees under MCR 2.403(O), holding that
"[p]laintiff should not be forced to pay for litigation hours expended through no fault of its own."
Id. at 236.
In this case, the trial court held plaintiff liable for all of defendant's attorney fees that
accrued after plaintiff 's rejection of the case evaluation. The consequence of this holding is that
plaintiff is held liable for costs that accrued through no fault of her own. See id.; see, also, Bien,
supra. Plaintiff should only be liable for those attorney fees directly flowing from her rejection
of the case evaluation—those that accrued after the rejection and which were caused by
defendant having to defend against plaintiff 's theory of liability and damage claim. See MCR
2.403(O)(6)(b).
Our resolution of this issue is in harmony with the purpose of the case evaluation
sanctions rule and the policy that only compensatory, not punitive, damages are available in
Michigan. As previously discussed, the purpose of case evaluation sanctions is "to shift the
financial burden of those attorney fees that would have been avoided by entry of judgment on the
basis of mediation." Taylor, supra at 387; see, also, Broadway Coney Island, Inc v Commercial
Union Ins Cos (Amended Opinion), 217 Mich App 109, 114; 550 NW2d 838 (1996). Analyzing
the cause of action as if the liable party and the prevailing party were the only two litigants
following the case evaluation accomplishes that purpose. Such analysis also ensures that the
liable party is not punished for asserting her right to a trial on the merits through the imposition
of costs associated with a risk another party assumed and over which she had no control, e.g., the
accrual of attorney fees as a consequence of defendant defending against another party's theory
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of liability and damage claim. See McAuley v General Motors Corp, 457 Mich 513, 523; 578
NW2d 282 (1998), overruled in part on other grounds Rafferty v Markovitz, 461 Mich 265, 273,
n 6; 602 NW2d 367 (1999).
In summary, under MCR 2.403(O), a rejecting plaintiff who is liable for a defendant's
attorney fees is only liable for those fees that accrued after the case evaluation as a consequence
of defending against the rejecting plaintiff 's theories of liability and damage claims. In this case,
plaintiff was ordered to pay all of Attwood's attorney fees that accrued after the case evaluation
without regard to whether some of the fees were incurred defending against the coplaintiffs'
damage claims. Accordingly, we vacate the order and remand for reconsideration in accordance
with this opinion.
Vacated and remanded. We do not retain jurisdiction.
/s/ Mark J. Cavanagh
/s/ William C. Whitbeck
/s/ Richard A. Bandstra
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