JOHN SINGER III V ANURADHA SREENIVASAN
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STATE OF MICHIGAN
COURT OF APPEALS
JOHN SINGER III,
UNPUBLISHED
September 1, 2009
Plaintiff-Appellant,
v
No. 284575
Macomb Circuit Court
LC No. 06-002281-NI
ANURADHA SREENIVASAN and BALAJI
GANAPATHY,
Defendants-Appellees.
Before: Cavanagh, P.J., and Markey and Davis, JJ.
PER CURIAM.
Plaintiff appeals by right judgment entered after a jury trial, awarding defendants case
evaluation sanctions. We affirm.
Plaintiff first argues that the trial court erred when it awarded defendants attorney fees
under MCR 2.403(O)(1) because both parties rejected the case evaluation award. We disagree.
Our Supreme Court in Smith v Khouri, 481 Mich 519, 526; 751 NW2d 472 (2008)
(Taylor, C.J., plurality opinion), stated the applicable standard of review:
A trial court’s decision whether to grant case-evaluation sanctions under MCR
2.403(O) presents a question of law, which this Court reviews de novo. We
review for an abuse of discretion a trial court’s award of attorney fees and costs.
An abuse of discretion occurs when the trial court’s decision is outside the range
of reasonable and principled outcomes. [Citations omitted.]
The pertinent portions of the court rule regarding case-evaluation sanctions, MCR
2.403(O), provide:
(1) 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 evaluation.
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(6) For the purpose of this rule, actual costs are
(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.
For the purpose of determining taxable costs under this subrule and under MCR
2.625, the party entitled to recover actual costs under this rule shall be considered
the prevailing party.
“The purpose of MCR 2.403 is to expedite and simplify the final settlement of cases to
avoid a trial.” Bennett v Weitz, 220 Mich App 295, 301; 559 NW2d 354 (1996). “‘Actual costs,
including attorney fees, are awardable when both parties reject the award as well as when only
one does.’” Haliw v City of Sterling Heights (On Remand), 266 Mich App 444, 451; 702 NW2d
637 (2005), quoting Zalut v Andersen & Assocs Inc, 186 Mich App 229, 232-234; 463 NW2d
236 (1990). “Actual costs” are defined as “those costs taxable in any civil action,” as well as “a
reasonable attorney fee . . . .” MCR 2.403(O)(6); Badiee v Brighton Area Sch, 265 Mich App
343, 376; 695 NW2d 521 (2005).
In this case, both plaintiff and defendants rejected a case evaluation award for plaintiff in
the amount of $95,000. After trial, a jury returned a verdict of $42,500 in plaintiff’s favor, which
the trial court adjusted for prejudgment interest to $46,758.41. MCR 2.403(O)(3). Plaintiff does
not dispute that the outcome was more favorable to defendant because it was more than 10%
below the case evaluation. Id. Rather, plaintiff argues that the first sentence of MCR
2.403(O)(1) specifically references “actual costs,” whereas the second sentence, addressing a
situation where both parties reject a case evaluation award, provides that the party entitled to
sanctions is entitled to only to “costs,” which do not include attorney fees. Although plaintiff
concedes that this Court interprets the terms “actual costs” and “costs” in MCR 2.403(O)(1) as
both including attorney fees, he argues this Court’s reading of the court rule violates the precept
that exceptions to the “American Rule”1 are to be construed narrowly. We disagree.
The Smith Court stated, “[c]onsistently with the American rule, this Court has specifically
authorized case-evaluation sanctions through court rule, allowing the awarding of reasonable
attorney fees to promote early settlements.” Smith, supra at 527 (Taylor, C.J., plurality opinion).
Moreover, as noted by defendants, the argument plaintiff advances was specifically rejected in
Zalut, in which this Court explained:
1
“The general ‘American rule’ is that ‘attorney fees are not ordinarily recoverable unless a
statute, court rule, or common-law exception provides the contrary.’” Dessart v Burak, 470
Mich 37, 42; 678 NW2d 615 (2004), quoting Nemeth v Abonmarche Dev, Inc, 457 Mich 16, 3738; 576 NW2d 641 (1998). “As such, the term ‘costs’ ordinarily does not encompass attorney
fees unless the statute or court rule specifically defines ‘costs’ as including attorney fees.” Id.
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We have found nothing in the commentary to the rule or in the case law which
would support plaintiffs’ reading of the court rule. It is our opinion that the
omission of the word “actual” in the second sentence of MCR 2.403(O)(1)
describing costs was inadvertent. We believe that to read the rule any other way
would create a distinction where one is not warranted or intended. [Zalut, supra
at 232-233.]
Thus, as explained in Zalut and followed in Haliw, supra, it is clear that attorney fees are
included in the costs awarded under MCR 2.403, even when both parties have rejected the case
evaluation award, and therefore, plaintiff’s argument is without merit.
Plaintiff next argues that this Court has ignored prior case law by permitting the recovery
of a “reasonable attorney fee” based on a rate higher than the rate actually billed. We disagree.
We interpret a court rule the same way as we interpret a statute, so this is a question of
law we review de novo. CAM Constr v Lake Edgewood Condo Ass’n, 465 Mich 549, 553-554;
640 NW2d 256 (2002). As discussed above, “actual costs” are defined in MCR 2.403(O)(6) as
“those costs taxable in any civil action,” and “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.” The Smith Court explained that this rule “only permits an award of a
reasonable fee, i.e., a fee similar to that customarily charged in the locality for similar legal
services, which, of course, may differ from the actual fee charged or the highest rate the attorney
might otherwise command.” Smith, supra at 528 (Taylor, C.J., plurality opinion).
Although this statement certainly supports an award of an attorney fee less than the
hourly rate charged, this Court has held simply that “[r]easonable fees are not equivalent to
actual fees charged.” Zdrojewski v Murphy, 254 Mich App 50, 72; 657 NW2d 721 (2002).
Moreover, in Cleary v Turning Point, 203 Mich App 208; 512 NW2d 9 (1993), this Court stated,
“[n]othing in the language of MCR 2.403(O) requires a trial court to find that reasonable attorney
fees are equivalent to actual fees . . . . We conclude, therefore, that the trial court did not abuse
its discretion in awarding defendant attorney fees calculated at an hourly rate higher than the
hourly rate that defendant was charged by defense counsel.” Id. at 212.
In the case at bar, defense counsel admitted billing the retaining insurance company at a
rate of $110 an hour, but requested a reasonable attorney fee calculated at a rate of $250 an hour,
supported by the 2007 Economics of Law Survey from the State Bar of Michigan and affidavits
from himself and an another attorney. The trial court determined that a rate of $175 an hour was
“reasonable under the circumstances.” Plaintiff does not argue that this hourly rate was
unreasonable or that the trial judge abused his discretion. Rather, plaintiff argues that the statute
requires that an attorney fee “must be incurred.” Plaintiff asserts the reasoning of this Court in
Cleary cannot control, but instead contends that the reasoning of McAuley v General Motors
Corp, 457 Mich 513; 578 NW2d 282 (1998), overruled on other grounds, Rafferty v Markovitz,
461 Mich 265, 602 NW2d 367 (1999), should control. According to plaintiff, awarding as a
reasonable attorney fee an amount greater than the rate charged is the equivalent of awarding
punitive damages; it constitutes a double recovery and gives attorneys a windfall.
Our decisions, however, leave no doubt that a reasonable attorney fee awarded can be
calculated at an hourly rate higher than the rate charged. Moreover, McAuley is not on point.
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McAuley held that under the circumstances of that case, the prevailing party was not entitled to
recover a second award of attorney fees under MCR 2.403(O) when reasonable attorney fees had
already been awarded pursuant to the Handicappers’ Civil Rights Act, MCL 37.1101 et seq.
McAuley, supra at 515. Thus, plaintiff has failed to persuade us that our past precedent is
erroneous.
Plaintiff’s last argument on appeal is that he was entitled to costs under MCR 2.625. We
disagree.
“When called on to construe a court rule, this Court applies the legal principles that
govern the construction and application of statutes. Accordingly, we begin with the plain
language of the court rule. When that language is unambiguous, we must enforce the meaning
expressed, without further judicial construction or interpretation.” Grievance Administrator v
Underwood, 462 Mich 188, 193-194; 612 NW2d 116 (2000) (Citations omitted).
MCR 2.403(O)(6) provides “[F]or the purpose of determining taxable costs under this
subrule and under MCR 2.625, the party entitled to recover actual costs under this rule shall be
considered the prevailing party.” (Emphasis added.) Plaintiff argues that “to the extent that a
party who has rejected the case evaluation is not entitled to ‘actual costs’ pursuant to MCR
2.403(O)(1),” plaintiff would be the prevailing party pursuant to MCR 2.625 and entitled to
costs. As discussed above, plaintiff’s argument that a party who rejected a case evaluation award
cannot recover actual costs, including a reasonable attorney fee, is without merit. Therefore,
under the plain language of MCR 2.403(O)(6), defendants are the prevailing parties under MCR
2.403 and MCR 2.625; plaintiff is not entitled to costs under MCR 2.625.2
We affirm. As the prevailing party, defendant may tax costs pursuant to MCR 7.219.
/s/ Mark J. Cavanagh
/s/ Jane E. Markey
/s/ Alton T. Davis
2
We also note that MCR 2.625(A)(1) provides: “Costs will be allowed to the prevailing party in
an action, unless prohibited by statute or by these rules or unless the court directs otherwise, for
reasons stated in writing and filed in the action.” On the facts and circumstances of this case,
MCR 2.403(O)(6) prohibits plaintiff from be considered the “prevailing party” for purposes of
MCR 2.625.
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