NORTHWEST MICHIGAN LAW FIRM PC V DENNIS MCLAIN
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STATE OF MICHIGAN
COURT OF APPEALS
NORTHWEST MICHIGAN LAW FIRM, P.C.
and G & B II P.C.,
UNPUBLISHED
April 1, 2010
Plaintiffs-Appellants,
v
DENNIS MCLAIN AND SHARON MCLAIN,
No. 283775
Livingston Circuit Court
LC No. 06-22463-CK
Defendants-Appellees.
Before: K.F. KELLY, P.J., and SAAD and WHITBECK, JJ.
PER CURIAM.
In this action to collect unpaid attorney fees, the trial court denied plaintiffs’ motion for
summary disposition under MCR 2.116(C)(10), and subsequently granted defendants’ motion for
attorney fees and costs from the prior action pursuant to MCR 2.504(D). Plaintiffs failed to
comply with this order, resulting in dismissal of the action in an order dated January 31, 2008.
Plaintiffs now appeal, and we affirm.
I. FACTS AND PROCEEDINGS
Plaintiffs represented defendant Dennis McClain, and possibly his wife, Sharon McClain,
in various legal matters in the 1990s. By April 1996, defendants had allegedly accrued
approximately $150,000 in unpaid legal fees owed to plaintiffs. Also in April 1996, defendant
Sharon McClain negotiated a settlement of a wrongful death action in which she was personal
representative of her daughter’s estate. Defendants signed an agreement promising to pay
plaintiffs the unpaid legal fees out of the settlement proceeds, with a payment of $100,000 up
front, and the balance to be paid within two weeks. Plaintiffs allegedly threatened to issue a lien
to block distribution of the wrongful death settlement proceeds if defendants did not sign this
agreement. Defendants paid $100,000 in accordance with the agreement, and subsequently paid
an additional $10,000, but the balance remained unpaid. Defendants allegedly incurred an
additional $130,000 in legal fees to plaintiffs between April and June 1996.
Plaintiffs brought an action against defendants in Oakland Circuit court to recover the
unpaid fees in December 1996. The action dragged on for nine years, including periods in which
the action was stayed for arbitration, but no resolution was achieved. In 2004, plaintiffs
voluntarily dismissed the action without prejudice. In 2006, plaintiffs reinitiated the action in
Livingston Circuit Court. The action was based on general claims of breach of contract and
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account stated for unpaid fees, and also on breach of the April 1996 agreement to pay the debt
out of the settlement proceeds.
Plaintiffs moved for partial summary disposition under MCR 2.116(C)(10), arguing that
there was no question of fact that defendants breached their agreement to pay fees incurred as of
April 1996 out of the wrongful death settlement proceeds. Defendants opposed the motion on
the ground that there was a question of fact concerning whether the agreement was invalidated
because they signed it under duress. They also moved to amend their pleadings to assert an
affirmative defense of duress. The trial court granted defendants’ motion to amend and denied
plaintiffs’ motion for summary disposition.
Defendants also moved for attorney fees and costs pursuant to MCR 2.504(D). The trial
court granted the motion and ordered an evidentiary hearing to determine the amount of fees and
costs due. Following the hearing, the trial court ordered plaintiff law firms to pay the McLains
compensation in the amount of $59,215.66 ($56,119.14 legal fees, plus $3096.52 costs). The
order provided that the case would be stayed for a period of 45 days; if plaintiffs failed to submit
an affidavit verifying payment in that period, the case would be dismissed. Plaintiffs moved the
trial court to lift the stay and compel defendants to arbitrate, but the trial court denied the motion.
Plaintiffs failed to comply with the order to pay defendants $59,215.66, and the trial court
dismissed the action. Plaintiffs now appeal.
II. DENIAL OF PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY DISPOSITION
We review de novo a trial court’s disposition of a motion for summary disposition.
Walsh v Taylor, 263 Mich App 618, 621; 689 NW2d 506 (2004). “Summary disposition is
appropriate under MCR 2.116(C)(10) if there is no genuine issue regarding any material fact and
the moving party is entitled to judgment as a matter of law.” West v General Motors Corp, 469
Mich 177, 183; 665 NW2d 468 (2003).
Plaintiffs maintained that there was no genuine issue of material fact that defendants
promised in writing to pay fees accrued as of April 1996. The trial court determined that the
McLains’ assertion of the defense of duress established a genuine issue of material fact regarding
the enforceability of the promise, thus precluding summary disposition. See Rory v Continental
Ins Co, 473 Mich 457, 470; 703 NW2d 23 (2005), wherein the Court held that duress is a
traditional defense to the provisions of an unambiguous contract. Here, plaintiffs contend that
there can be no valid defense of duress because the trial court improperly and belatedly granted
defendants’ motion to amend their pleadings to include the defense and because defendants
failed to establish a genuine issue of fact in support of this defense. Plaintiffs are incorrect on
both points.1
1
A trial court’s decision to grant or deny a party leave to amend a pleading is reviewed for abuse
of discretion. Weymers v Khera, 454 Mich 639, 654; 563 NW2d 647 (1997). Under MCR
2.118(A)(2), leave to amend pleadings should be freely given when justice so requires. However,
leave to amend may be denied for particularized reasons, such as undue delay, bad faith or
dilatory motive on the part of the movant, repeated failure to cure deficiencies, undue prejudice
(continued…)
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Contrary to plaintiffs’ argument, the trial court did not abuse its discretion in granting the
motion to amend. There was no delay, bad faith, or dilatory motive on the part of the McLains,
or undue prejudice to plaintiff law firms, that renders the trial court’s decision an abuse of
discretion. Although the McLains did not separately list duress as an affirmative defense in
either their initial answer or first amended answer and affirmative defenses, they stated in their
answer, in response to plaintiffs’ allegations, that Sharon McLain signed the “gun to the head
letter” under duress after attorney William Garratt threatened to block distribution of the
settlement proceeds from the wrongful death action. Consequently, plaintiffs had clear notice
that defendants intended to assert the defense of duress in the first response to plaintiffs’
complaint. Clearly, the assertion of this defense was not a surprise to plaintiffs, and the
defendants did not conceal their intention to raise it.
Plaintiffs also argue that the assertion of the defense was futile, because defendants failed
to plead facts in support of the defense, and failed to establish a genuine question of material
fact. What constitutes duress is a question of law, and whether duress exists in a particular case
is a question of fact. Clement v Buckley Mercantile Co, 172 Mich 243, 253; 137 NW 657
(1912). “In order to void a contract on the basis of economic duress, the wrongful act or threat
must deprive the victim of his unfettered will.” Hungerman v McCord Gasket Corp, 189 Mich
App 675, 677; 473 NW2d 720 (1991). In order to prevail on a claim of duress, the defendants to
a breach of contract action must establish that they were illegally compelled or coerced to act by
fear of serious injury to their persons, reputations, or fortunes. “Fear of financial ruin alone is
insufficient to establish economic duress; it must also be established that the person applying the
coercion acted unlawfully.” Farm Credit Services of Michigan’s Heartland, PCA v Weldon, 232
Mich App 662, 681-682; 591 NW2d 438 (1998).
Plaintiffs say that defendants failed to establish that plaintiffs engaged in unlawful
conduct to coerce them to sign the agreement. We find no error in this regard. Defendants made
sufficient allegations and raised sufficient proofs to establish at least a question of fact regarding
unlawful conduct by plaintiffs. Michigan’s Rules of Professional Conduct for attorneys prohibit
an attorney from representing a client if the representation of that client “may be materially
limited by . . . the lawyer’s own interests” unless the attorney believes that the representation will
not be adversely affected and the client consents after consultation. MRPC 1.7(b). Plaintiff law
firms created a conflict of interest when Garratt allegedly threatened to jeopardize defendants’
resolution of the wrongful death settlement in order to serve his own interests of receiving
immediate payment. Furthermore, there is no clear basis for inferring that Garratt had any
legitimate legal grounds to block distribution of the settlement funds. The anticipated amount of
the settlement was far in excess of defendants’ alleged debt to plaintiff law firms. A trier of fact
could infer that Garratt was implicitly threatening to employ illegal means to hold the settlement
monies hostage in order to induce defendants to pay. Accordingly, the trial court did not abuse
its discretion in allowing the amendment, or in denying plaintiffs’ motion for partial summary
disposition.
(…continued)
to the opposing party, or when an amendment would be futile. Sands Appliance Services, Inc v
Wilson, 463 Mich 231, 239-240; 615 NW2d 241 (2000).
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Defendants established sufficient evidence that they acted in the belief that Garratt was
threatening serious injury to their “fortune,” in the form of the expected wrongful death
settlement proceeds. Farm Credit Svc, 232 Mich App at 681-682. Accordingly, the trial court
did not abuse its discretion in allowing the amendment. It also did not err in denying plaintiff
law firms’ motion for summary disposition, because there is sufficient evidence to establish a
question of fact regarding the viability of defendants’ defense of duress.
III. DEFENDANTS’ MOTION FOR ATTORNEY FEES UNDER MCR 2.504(D)
Plaintiffs also raise several challenges to the trial court’s decision to grant defendants’
motion for attorney fees under MCR 2.504(D), and its ultimate dismissal of plaintiffs’ action for
failure to comply with the order to pay attorney fees. We affirm.
A trial court’s award of attorney fees and costs is reviewed for abuse of discretion.
Peterson v Fertel, 283 Mich App 232, 235; 770 NW2d 47 (2009). The question of whether the
trial court properly interpreted and applied a court rule is a question of law that is reviewed de
novo. Associated Builders & Contractors v Dep’t of Consumer & Industry Services Director,
472 Mich 117, 123-124; 693 NW2d 374 (2005); Peterson, 283 Mich App at 235. The trial
court’s findings of fact regarding an award of fees are reviewed for clear error, and questions of
law are reviewed de novo. Reed v Reed, 265 Mich App 131, 164; 693 NW2d 825 (2005).
The trial court ordered payment of defendants’ attorney fees pursuant to MCR 2.504,
which provides as follows, in pertinent part:
(A) Voluntary Dismissal; Effect.
(1) By Plaintiff; by Stipulation. Subject to the provisions of MCR 2.420
and MCR 3.501(E), an action may be dismissed by the plaintiff without an order
of the court and on the payment of costs
(a) by filing a notice of dismissal before service by the adverse party of an
answer or of a motion under MCR 2.116, whichever first occurs; or
(b) by filing a stipulation of dismissal signed by all the parties.
Unless otherwise stated in the notice of dismissal or stipulation, the
dismissal is without prejudice, except that a dismissal under subrule (A)(1)(a)
operates as an adjudication on the merits when filed by a plaintiff who has
previously dismissed an action in any court based on or including the same claim.
(2) By Order of Court. Except as provided in subrule (A)(1), an action
may not be dismissed at the plaintiff’s request except by order of the court on
terms and conditions the court deems proper.
(a) If a defendant has pleaded a counterclaim before being served with the
plaintiff’s motion to dismiss, the court shall not dismiss the action over the
defendant’s objection unless the counterclaim can remain pending for
independent adjudication by the court.
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(b) Unless the order specifies otherwise, a dismissal under subrule (A)(2)
is without prejudice.
***
(D) Costs of Previously Dismissed Action. If a plaintiff who has once
dismissed an action in any court commences an action based on or including the
same claim against the same defendant, the court may order the payment of such
costs of the action previously dismissed as it deems proper and may stay
proceedings until the plaintiff has complied with the order.
Subsection (D) recognizes that a plaintiff may not avoid the payment of costs merely by
dismissing an action and commencing a new action. Hill v LF Transportation, Inc, 277 Mich
App 500, 510; 746 NW2d 118 (2008).
Plaintiffs argue that MCR 2.504(D) does not authorize an award of attorney fees accrued
in a previously dismissed action, and they assert that the term “costs” does not encompass
attorney fees. Under Michigan law, the term “costs” does not include attorney fees, Dessart v
Burak, 470 Mich 37, 42; 678 NW2d 615 (2004), but, the narrow issue of whether costs includes
attorney fees under MCR 2.504(D) has been resolved in favor of awarding attorney fees under
MCR 2.504(D). Sirrey v Danou, 212 Mich App 159, 160-161; 537 NW2d 231 (1995); McKelvie
v City of Mt Clemens, 193 Mich App 81; 483 NW2d 442 (1992). Plaintiffs disagree with these
decisions, as we do, but Sirrey establishes binding precedent under MCR 7.215(C) and (J)(1) for
allowing the imposition of attorney fees under MCR 2.504(D). Plaintiffs also contend that MCR
2.504(D) is inapplicable where the action is dismissed by a court order under MCR 2.504(A)(2),
and that it applies only where the prior action was dismissed without a court order pursuant to
MCR 2.504(A)(1). This argument is erroneous because the plain and unambiguous language of
the court rule makes no distinction between the two means of dismissing an action with respect
to the award of costs under subsection (D). See Peterson v Fertel, 283 Mich App 232, 235-236;
770 NW2d 47 (2009), holding that courts must apply court rules in accordance with their plain
language.
Plaintiffs also argue that under the doctrines of res judicata and collateral estoppel, costs
are barred by the order of dismissal in the 1996 action, which dismissed the action without costs.
Plaintiffs misconstrue these doctrines. The doctrine of res judicata is generally employed to
prevent multiple suits litigating the same cause of action. The doctrine bars a subsequent action
when (1) the prior action was decided on the merits, (2) both actions involve the same parties or
their privies, and (3) the matter in the second case was, or could have been, resolved in the first.
ANR Pipeline Co v Dep’t of Treasury, 266 Mich App 190, 212-213; 699 NW2d 707 (2005). The
doctrine of collateral estoppel precludes relitigation of an issue in a subsequent cause of action
between the same parties where the prior proceeding culminated in a valid final judgment and
the issue was actually and necessarily resolved in the prior proceeding. McMichael v
McMichael, 217 Mich App 723, 727; 552 NW2d 688 (1996). Here, the issue of the McLains’
entitlement to costs under MCR 2.504(D) was not, and could not have been, decided in the 1996
action. The order dismissing the 1996 action disallowed costs at the time the order was entered,
but the circumstances giving rise to an order of costs under MCR 2.504(D)—plaintiffs’ re-filing
of the same action—were not present at the time the order was entered. Accordingly, neither the
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doctrine of res judicata nor collateral estoppel barred defendants from subsequently seeking costs
under MCR 2.504(D) after plaintiffs revived the action in Livingston County in 2006.
Plaintiffs also argue that MCR 2.504(D) does not authorize recovery of costs incurred
while an action is stayed and/or is in arbitration. The arbitration proceedings in the 1996 action
involved statutory arbitration under the Michigan Arbitration Act, MCL 600.5001 et seq. The
arbitration provision in the fee agreement provided that the arbitration award would be enforced
by the circuit court, rendering the agreement valid, enforceable, and irrevocable. MCL
600.5001(2). The trial court stayed the action so that it would be submitted to arbitration; only
the parties’ failure to complete arbitration and the subsequent dismissal of the action prevented
the arbitration proceedings from culminating in an award to be enforced by the court. Under
these circumstances, where arbitration was an inherent part of the civil action, there is no reason
why costs pertaining to arbitration would not be recoverable under MCR 2.504(D). We find no
merit at all in plaintiffs’ argument that awarding costs arising from arbitration contravenes
Michigan’s public policy of favoring arbitration.
Plaintiffs also argue that the attorney fees and costs awarded were not reasonable, and
that they included items that should not have been included as recoverable costs. A trial court’s
determination of the reasonableness of attorney fees awarded is reviewed for abuse of discretion,
while the findings of fact on which the trial court bases its award of attorney fees are reviewed
for clear error. Taylor v Currie, 277 Mich App 85, 99; 743 NW2d 571 (2007). Although
plaintiffs’ witness contended that the properly billable items came to no more than $13,000, and
were possibly as low as $9,000, defendants’ witness determined that only $35 of the $56,119
charged was in error. The trial court found that defendants’ witness’s testimony was more
credible, and we defer to this determination. Drumm v Brodbeck, 276 Mich App 460, 465; 740
NW2d 751 (2007); MCR 2.613(C). Moreover, defendants’ witness testified that defendants’
attorneys provided services valued at $116,298.50, but billed defendants for only $56,119.14.
Under these circumstances, we do not find clear error in the trial court’s finding that defendants
incurred reasonable attorney fees in the amount of at least $56,119.14 in the defense of the 1996
action, excluding services provided for unrelated purposes.
Plaintiffs also argue that no attorney fees or costs may be recovered under MCR 2.504(D)
without proof that the defendant clients actually paid the fees. Nothing in MCR 2.504(D)
requires proof that costs or attorney fees were actually paid as a prerequisite to ordering payment
by the party who re-filed the previously dismissed action.
Finally, plaintiffs argue that the trial court erred in reimbursing defendants for the costs
of producing work product that could be recycled in defending the 2007 action. The legal
premise of this argument is correct: this Court held in Sirrey, 212 Mich App at 161, that “a
plaintiff should not be required to pay a defendant’s costs and attorney fees to the extent that the
work product from the dismissed action is usable in the subsequent action.” Here, the trial court
made the factual finding that the work product from the prior action was not usable because so
much time had passed since the 1996 action. This finding was not clearly erroneous.
IV. PLAINTIFFS’ MOTION FOR A STAY TO COMPEL ARBITRATION
Plaintiffs argue that the trial court should have granted their motion for a stay to compel
arbitration instead of dismissing their action for failure to comply with the order. MCR 2.504(D)
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provides that the trial court “may stay proceedings until the plaintiff has complied with the
order.” The use of the term “may” indicates that the court’s action is discretionary rather than
mandatory. Church & Church Inc v A-1 Carpentry, 281 Mich App 330, 339; 766 NW2d 30
(2008), aff’d 483 Mich 885 (2009). Accordingly, we review the trial court’s decision for abuse
of discretion.
Plaintiffs did not assert the arbitration agreement until after defendants gained a
significant advantage by successfully opposing plaintiffs’ partial summary disposition motion
and by prevailing on a motion for attorney fees and costs that would substantially offset plaintiff
law firms’ anticipated damage award. Under these circumstances, the trial court did not abuse its
discretion by denying plaintiffs’ motion to lift the stay and compel arbitration.
Affirmed.
/s/ Kirsten Frank Kelly
/s/ Henry William Saad
/s/ William C. Whitbeck
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