JAMES F PETERS V KAYS ZAIR
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STATE OF MICHIGAN
COURT OF APPEALS
JAMES F. PETERS, as Trustee of James F. Peters
Trust, and ELEANOR PETERS, as Trustee of
Eleanor Peters Trust,
UNPUBLISHED
April 19, 2007
Plaintiffs-Appellants,
v
No. 266862
Oakland Circuit Court
LC No. 2003-052119-CK
KAYS ZAIR,
Defendant-Appellee,
and
METROPOLITAN TITLE COMPANY,
Defendant.
Before: Donofrio, P.J., and Fitzgerald and Markey, JJ.
PER CURIAM.
Plaintiffs appeal as of right the trial court’s order granting defendant Kays Zair’s request
for case evaluation sanctions in this action alleging breach of contract and
fraud/misrepresentation. The trial court granted summary disposition in favor of defendant after
finding that defendant was not individually liable to plaintiffs because he was not a party to the
contract. We affirm the court’s decision to award sanctions, but remand to allow the trial court
to conduct a hearing regarding the reasonableness and amount of defendant’s requested attorney
fees.
The purpose of the case evaluation sanctions rule is to encourage settlement and deter
protracted litigation by placing the burden of litigation costs on the rejecting party who caused
the case to proceed toward trial. Rohl v Leone, 258 Mich App 72, 75; 669 NW2d 579 (2003).
“[A] party who rejects a case-evaluation award is generally subject to sanctions if he fails to
improve his position at trial.” Campbell v Sullins, 257 Mich App 179, 198; 667 NW2d 887
(2003). If the party requesting sanctions meets the requirements set forth in the court rule, the
party who rejected case evaluation “must pay the opposing party’s actual costs unless the verdict
is more favorable to the rejecting party.”
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Defendants accepted and plaintiffs rejected the case evaluation award of $6,250 in favor
of plaintiffs. There is no dispute that a less favorable judgment was entered against plaintiffs.
Before the court imposed the case evaluation sanctions at issue, plaintiffs moved the court to
allow them to conduct discovery to “determine the facts.” Plaintiffs argued that discovery was
necessary to determine “how much time was spent“ and “who did the work at what rate.” The
trial court denied plaintiffs’ request for discovery and for an evidentiary hearing. The court
found that plaintiffs “provided no authority” to support their position that they were entitled to
conduct discovery regarding the fees. The court also found that:
there’s really been no challenge with regard to the reasonability based on the
hours or time or complexity or sophistication of the work. There has been a
blanket challenge
The court awarded defendant case evaluation sanctions of $32,563.60 pursuant to MCR
2.403(O)(1).
Plaintiffs argue that the trial court erred when it denied their request to conduct discovery
and an evidentiary hearing regarding defendant’s alleged attorney fees. We review a trial court’s
decision regarding discovery requests for an abuse of discretion. In re Pott, 234 Mich App 369,
373; 593 NW2d 685 (1999).
MCR 2.403(O) is trial-oriented. Haliw v Sterling Hts, 471 Mich 700, 707-708; 691
NW2d 753 (2005). A party who rejects an evaluation and fails to improve his position at trial
must pay the opposing party’s “actual costs,” which include reasonable attorney fees. MCR
2.403(O)(1); Elia v Hazen, 242 Mich App 374, 378; 619 NW2d 1 (2000). A reasonable attorney
fee must be based on a reasonable hourly or daily rate, as determined by the trial judge, for
services necessitated by the rejection of the evaluation. MCR 2.403(O)(6)(b); Campbell, supra
at 199. “A causal connection plainly exists between rejection and trial fees and costs.” Haliw,
supra at 711 n 8.
Discovery is limited to matters that are relevant to the subject matter of a lawsuit,
whether it relates to the claim or defense of the party seeking discovery or to the claim or defense
of another party. Cabrera v Ekema, 265 Mich App 402, 407; 695 NW2d 78 (2005). Because
plaintiffs provide no authority to support their position that they are entitled to conduct discovery
regarding the attorney fees, they have failed to show that the court erred in denying their motion
for discovery.
However, the trial court erred when it denied plaintiffs’ request for an evidentiary hearing
on this matter. “When requested attorney fees are contested, it is incumbent on the trial court to
conduct a hearing to determine what services were actually rendered, and the reasonableness of
those services.” Reed v Reed, 265 Mich App 131, 166; 693 NW2d 825 (2005). Although there
are instances where the trial court does not need to hold an evidentiary hearing on matters
involving attorney fees and costs, such as when the parties create a sufficient record to review
the issue and the trial court fully explains the reasons for its decision, this is not the case here.
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Head v Phillips Camper Sales & Rental, Inc, 234 Mich App 94, 113; 593 NW2d 595 (1999).
Invoices presented to the court showed the dates work was performed as well as a brief notation
of the work performed, but did not indicate the amount of time spent nor the attorney who
performed the work.1 Each invoice concluded with a blanket “amount due.” The invoices were
accompanied by the affidavit of attorney John A. Kullen, a partner in the firm that represented
defendant, indicating the amount of time spent by each attorney and each attorney’s billable
hourly rate. However, neither the invoices nor the affidavit reflected which attorney performed
which service. The trial court did not specifically address the reasonableness of the hourly
attorney fee rate or the number of attorney hours reasonably incurred in defense of the claim, nor
did the court inquire into the services actually rendered by the attorneys. Accordingly, we
conclude the trial court abused its discretion in determining sanctions because there is an
insufficient record to permit meaningful review. Elia, supra at 377. We therefore remand to the
trial court for a hearing regarding the reasonableness and amount of defendant’s requested
attorney fees.
Plaintiffs also argue that the trial court abused its discretion because it failed to excuse
them from paying case evaluation sanctions in the “interest of justice.” We disagree. We review
a trial court’s decision whether to apply the “interest of justice” exception for an abuse of
discretion. Haliw v Sterling Heights (On Remand), 266 Mich App 444, 449-450; 702 NW2d 637
(2005).
A court may, pursuant to MCR 2.403(O)(11), deny an award of sanctions in the “interest
of justice.” Haliw (On Remand), supra at 448. “If the trial court finds on the basis of all the
facts and circumstances of a particular case and viewed in light of the purposes of MCR
2.403(O) that unusual circumstances exist, it may invoke the ‘interest of justice’ exception found
in MCR 2.403 (O)(11).” Id. at 449. The court rules do not define the term “interest of justice.”
Haliw, supra at 447. For that reason, to determine its meaning we must look to the language and
purpose of the rule. Id. at 447. “The purpose of case evaluation sanctions is to shift the
financial burden of trial onto ‘the party who demands a trial by rejecting a proposed [case
evaluation] award.’” Allard v State Farm Ins Co, 271 Mich App 394, 398; 722 NW2d 268
(2006). An interest of justice exception has been found in circumstances where: (1) there is a
case of first impression, (2) a party is indigent, (3) a party has engaged in misconduct, and (4) the
law is unsettled and substantial damages are at issue. Haliw (On Remand), supra at 448.
Although plaintiffs argue that the trial court should have invoked the interest of justice
exception and denied defendant’s motion for case evaluation sanctions, plaintiffs fail to show
that the circumstances of this case are so unusual to compel the conclusion that the trial court
abused its discretion by failing to invoke the interest of justice exception. Haliw (On Remand),
supra at 450. Plaintiffs primarily argue that the trial court erred in this matter because it failed to
articulate a specific reason for its refusal to invoke the interest of justice exception. Because
MCR 2.403(O)(1) mandates that a party that rejects a mediation evaluation must be subjected to
sanctions if that party does not improve its position at trial, the trial court need not state on the
1
For example, a typical notation stated, “8/24/04 Work on facilitation issues.”
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record its reasons for enforcing the rule, but only its reason for applying the exception to the rule.
Haliw (On Remand), supra at 450; Allard, supra at 398. The facts clearly show that plaintiffs
rejected the case evaluation and continued with this suit knowing that a procedural defect
existed. Despite this knowledge, plaintiffs proceeded with the lawsuit causing both parties to
incur additional litigation expenses and cost. Considering the language and purpose of MCR
2.403(O), and the facts surrounding this case, we conclude that the trial court did not abuse its
discretion when it refused to invoke the interest of justice exception. Haliw (On Remand), supra
at 447.
Affirmed in part and remanded for further proceedings consistent with this opinion.
Jurisdiction is not retained.
/s/ Pat M. Donofrio
/s/ E. Thomas Fitzgerald
/s/ Jane E. Markey
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