LINDA OLSON V JOHN M OLSON III
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STATE OF MICHIGAN
COURT OF APPEALS
LINDA OLSON,
FOR PUBLICATION
May 27, 2003
9:05 a.m.
Plaintiff-Appellee,
v
Nos. 230588, 237244, 237288
Wayne Circuit Court
LC No. 99-915949-DM
JOHN M. OLSON, III,
Defendant-Appellant.
Updated Copy
July 7, 2003
Before: O'Connell, P.J., and Fitzgerald and Murray, JJ.
FITZGERALD, J.
In Docket No. 230588, defendant John M. Olson, III, appeals as of right and contests the
manner in which the trial court divided certain property and the award of spousal support in this
acrimonious and litigious divorce action. In Docket No. 237244, defendant appeals by leave
granted the order entered by Wayne Circuit Judge Cynthia Stephens, acting as chief judge pro
tem, denying his motion to disqualify Wayne Circuit Judge Richard B. Halloran, Jr., from
entertaining postjudgment motions filed by attorney Henry Baskin on behalf of plaintiff Linda
Olson. In Docket No. 237288, defendant appeals as of right the August 14, 2001, "Judgment and
Award of Costs and Attorney Fees" by which Judge Halloran awarded plaintiff additional
attorney fees and costs in the amount of $573,729.1
The parties were married in 1978 and have two children, only one of whom was a minor
at the time this action was filed. The marital estate was substantial, including a 15,000 squarefoot house in Grosse Pointe Farms and defendant's closely owned corporation, J. M. Olson
Corporation ("the corporation"). Defendant owned the corporation before the marriage.
Originally, the corporation built fast-food restaurants and convenience stores. In 1984, the
corporation moved into commercial construction and developed a relationship with Ford Motor
Company. The corporation, a Subchapter S corporation, now engages in general contracting and
1
Earlier in the case, the trial court ordered defendant to pay $50,000 to plaintiff 's counsel and to
deposit an additional $150,000 in plaintiff 's client trust account with her attorney.
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construction management. Defendant owns 71.85 percent of the stock and is the chairman of the
corporation.2
During the marriage, the parties acquired substantial assets in addition to the corporation.
The parties stipulated the values of other assets, including the marital home valued at $2.18
million, various automobiles, boats, investment and retirement accounts, life-insurance policies
and annuities, and business interests. The total value of the other assets to which the parties
stipulated (excluding the corporation and various other properties) was $5,948,519.
Following a twenty-one-day trial, the court made findings of fact and conclusions of law
and entered a judgment of divorce on September 15, 2000. On August 14, 2001, a "Judgment
and Award of Costs and Attorney Fees" was entered.
I. Property Distribution
Defendant does not dispute that the trial court properly awarded each of the parties
approximately fifty percent of the marital estate. Defendant does argue, however, that the trial
court erred by dividing defendant's interest in the stock of the corporation, rather than setting a
value on defendant's interest in the stock and awarding plaintiff one-half of the value of the
stock.3
This Court reviews a property distribution in a divorce case by first reviewing the trial
court's factual findings for clear error, and then determining whether the dispositional ruling was
fair and equitable in light of the facts. Hanaway v Hanaway, 208 Mich App 278, 292; 527
NW2d 792 (1995). In its findings of fact and conclusions of law, the trial court noted the
discrepancies in the testimony of the parties' expert witnesses with regard to the proper method of
valuing the business, as well as the large discrepancy between the experts' valuations. The trial
court then ruled with regard to the valuation of the business:
At this time the court will not set it's [sic] own value on DefendantHusband's interest in the John M. Olson Corporation. Instead, the court will
award Plaintiff-Wife one-half of Defendant-husband's stock in the John M. Olson
Corporation. This will not cause any problems in running the Corporation since
she will be a minority shareholder.
Defendant-Husband and the other
shareholders will retain a 64.08% controlling interest in the Corporation.
Further, since this will be an involuntary transfer on the part of DefendantHusband the provisions in the Stock Redemption Agreement as Amended will not
apply. If there are any impediments to this transfer, then as a Stockholder and the
Controlling Stockholder of the Corporation, Defendant-Husband will cause the
2
Defendant's two long-time business partners, Mark Millich and John Olszewski, who
apparently are defendant's blood relatives, own the remaining 28.15 percent of the stock.
3
A stay was placed on the division of the stock pending this appeal.
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Stock Redemption Agreement as Amended to be further amended to carry out the
ruling of this court and cause the transfer of one-half of his stock interest to the
Plaintiff-Wife.
If the Defendant-Husband enters into a purchase agreement with the
Plaintiff-Wife's [sic] for her shares in the John M. Olson Corporation the actual
involuntary transfer of the shares to the wife will not have to occur.
This provision was included in the September 15, 2000, judgment of divorce.
Defendant thereafter filed a motion for stay of the transfer of the stock. At the hearing on
the motion, the trial court stated:
The Court feels that it has the authority to award half the stock and that's
what the Court did with the provision with the thought in the background that
either Mr. Olson or Mrs. Olson might enter into negotiation to buy the stock back
from her. Or to leave it in place.
The court ultimately granted the stay, noting:
But since no one provided the Court with what the Court thought was a
situation where we could make a sound basis. We thought maybe what will
happen then is the parties will agree on a sale price and by [sic] Mrs. Olson out.
Now, it appears to the Court that we're not going to do that. But instead
we're going to the court of appeals. We're going to spend a year or two getting to
the court of appeals, which if this Court is reversed, there [sic] going to say,
"Court, you have to decide how much this is worth." So the Court comes back
and by then who knows what it will be worth.
And at that point, the Court will set a figure. And Mr. Olson will then pay
that cash to Mrs. Olson. And two years down the road we'll be at the point where
we could be today if, once again, the attorneys or the parties could just agree on
how much to buy Mrs. Olson's share of the stock.
The trial court stayed its own stock-division order for nearly four months. The trial court
thereafter dissolved the stay, and defendant sought emergency relief in this Court. This Court
ordered the trial court to hold a hearing and issue a decision on the motion for stay. The trial
court thereafter granted a stay.
In support of his argument that the trial court erred by failing to place a value on
defendant's interest in the stock and instead ordering the division of the stock, defendant relies on
Kurtz v Kurtz, 34 Mich App 34; 190 NW2d 689 (1971). In Kurtz, the trial court ordered a
property division that included an equal division of the stock in Concrete Black & Products
Company, a company that was solely owned by the plaintiff before the marriage. The division of
property was made after extensive testimony and the submission of voluminous business records
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to the trial judge. This Court, noting that the plaintiff 's contributions to the management of the
company were great, and noting that the parties agreed that the order resulted in a "totally
impossible situation regarding the management of the company," held that "it is better to place a
money value on the parties' respective interest in this company rather than to leave the division in
the form of an award of shares of stock." Id. at 36.
The trial court distinguished Kurtz on the ground that the order in Kurtz gave each party
fifty percent of the stock and, therefore, "forced the corporation to cease to exit [sic] because
there was no majority to vote." However, there is no language in Kurtz suggesting that the
court's ruling was based on the percentage of stock awarded to a party. Rather, the court focused
on the "impossible situation regarding the management of the company." It appears that the
"impossible" situation referred to arose from the facts that the plaintiff owned the company
before the marriage, that the plaintiff had contributed to the management of the company, and
that it was impossible for the parties to continue in a business relationship. Indeed, in Schaffer v
Schaffer, 37 Mich App 711, 713; 195 NW2d 326 (1972), a case in which the trial court awarded
the wife a substantial cash award in lieu of stock in a closely held family corporation, this Court
stated:
In Kurtz v Kurtz, 34 Mich App 34 [; 190 NW2d 689] (1971), this Court
had ample opportunity to observe the myriad of problems that can arise in a
divorce suit where the parties each owned stock in a close-knit family corporation
after a judgment of divorce has been granted to the parties.
Here the chancellor quite properly awarded all of the stock to the husband
and compensated the wife by a substantial cash award, payable over a period of
years. The record in the instant case discloses expert testimony presented by the
plaintiff wife and defendant husband as to the valuation of the stock in question.
The court's assessment of value of the corporation was much higher than that of
the defendant husband's expert and much lower than that of the plaintiff wife's
expert. In Young v Young, 354 Mich 254, 257 [; 92 NW2d 328 (1958), Justice
Voelker, writing for the Court in a case similar to the instant one, stated:
"There is no mathematical formula in Michigan for the settlement of this
vexing problem; rather it is wisely left to the broad discretion of the learned
chancellor who has the benefit—and often dubious pleasure—of having the
feuding parties wrangle in his presence. See, generally, Johnson v Johnson, 346
Mich 418 [; 78 NW2d 216] (1956). With his closer view of the entire situation he
is ordinarily in a better position to make an equitable division than we."
Similarly, in McDougal v McDougal, 451 Mich 80, 91 n 9; 545 NW2d 357 (1996), although the
case involved different factual circumstances (awarding the wife an interest in the defendant's
patents), the Court noted, "it would be a rare divorcing couple who would benefit from a
judgment that requires them to maintain an ongoing business relationship." In Young v Young,
354 Mich 254; 92 NW2d 328 (1958), the Court removed from one spouse shares in a family
business that she owned before the divorce, and replaced the shares with stocks of comparable
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worth in order to prevent the ex-spouse's continued, harmful interference with management of
the company.
In the present case, the testimony of the parties' experts spanned five days. Plaintiff 's
expert's valuation of the corporation was much higher than the valuation placed on the
corporation by defendant's expert. Unlike Schaffer, however, the trial court in this case did not
make a finding regarding the value of the corporation. Rather than select one of the expert's
valuation figures, choose another figure, or appoint its own expert, the court ordered that the
stock be split unless the parties could come to a mutual agreement regarding the value. In
essence, the trial court neglected its duty to make a finding of fact. Instead, the court admittedly
came up with the stock division as a means of forcing the parties to agree on a value for
defendant's ownership interest. Given the nature of the relationship between the parties,
however, it is apparent that the parties will not be able to come to an agreement.
Moreover, it is settled law that trial courts are required by court rule to include a
determination of the property rights of the parties in the judgment of divorce. MCR 3.211(B);
Yeo v Yeo, 214 Mich App 598, 601; 543 NW2d 62 (1995). As a prelude to this property division,
a trial court must first make specific findings regarding the value of the property being awarded
in the judgment. Beaty v Beaty, 167 Mich App 553, 556; 423 NW2d 262 (1988). There are
numerous ways in which a trial court can make such a valuation,4 but the most important point is
that the trial court is obligated to make such a valuation if the value is in dispute.5 Accordingly,
we have held that a trial court clearly errs when it fails to place a value on a disputed piece of
marital property. Steckley v Steckley, 185 Mich App 19, 23-24; 460 NW2d 255 (1990) (the trial
court clearly erred in failing to determine value of the plaintiff 's interest in McDonald's
franchises); McNamara v McNamara, 178 Mich App 382, 393; 443 NW2d 511 (1989) (the trial
court abused its discretion in failing to place value on law practice); Kowalesky v Kowalesky, 148
Mich App 151, 157; 384 NW2d 112 (1986) (the trial court clearly erred in failing to place value
on accounts receivable of dental practice). Hence, it was not enough in this case to simply
conclude that because neither party submitted persuasive evidence regarding the value, the
parties should be left to settle the value after the judgment and findings were entered. Settlement
negotiations had presumably failed, which necessitated the trial in the first place. Once trial
commenced, the trial court's duty to determine a value was triggered, and the parties did not have
a continuing obligation to settle the issue.
4
See, e.g., Young, supra at 257 (valuation based on expert testimony), Lee v Lee, 191 Mich App
73, 75-76; 477 NW2d 429 (1991) (valuation based on lay testimony), Sullivan v Sullivan, 175
Mich App 508, 511; 438 NW2d 309 (1989) (valuation based on parties' testimony), or the trial
court could appoint its own independent expert to provide it with a perhaps more objective
valuation. MRE 706; Steckley v Steckley, 185 Mich App 19, 23-24; 460 NW2d 25 (1990).
5
The actual value may not always be in dispute. A court could, for example, order the sale of a
marital home (if that is an option in the case) without determining its value and splitting
whatever equity exists in the house between the parties. In this case, however, selling the
corporation was not possible, thus necessitating the valuation.
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Further, the trial court's conclusion that Kurtz is inapplicable because defendant and his
fellow stockholders will still retain a 64.08 percent controlling interest in the company assumes
that the other shareholders holding 28.15 percent will combine with defendant to form a
majority. However, it cannot be assumed that the fellow shareholders will necessarily join with
defendant, particularly since their votes are presumably now more powerful because no one holds
a majority of the stock. At trial it was clearly established that the success of this corporation is
dependent on defendant and his business connections, particularly with Ford Motor Company.
For these reasons, and considering Kurtz, we conclude that the trial court abused its
discretion under the circumstances of this case by failing to make a finding regarding the value of
the corporation and instead ordering the parties to split the stock of defendant's closely held
corporation. We therefore vacate the provision in the judgment of divorce that orders a division
of the stock and remand this matter to the trial court6 to make a finding regarding the value of the
stock and to grant plaintiff a cash award in an amount equal to one-half of the value of
defendant's stock interest in the corporation.7
II. Spousal Support
Defendant argues that the trial court's award of spousal support in the amount of $50,000
a month was inequitable and was based on improperly admitted evidence and erroneous factual
findings. The trial court's factual findings are reviewed for clear error. Moore v Moore, 242
Mich App 652, 654; 619 NW2d 723 (2000). The findings are presumptively correct, and the
burden is on the appellant to show clear error. A finding is clearly erroneous if the appellate
court, on all the evidence, is left with a definite and firm conviction that a mistake has been
made. Id. at 654-655. If the trial court's findings are not clearly erroneous, this Court must then
decide whether the dispositional ruling was fair and equitable in light of the facts. Sparks v
Sparks, 440 Mich 141, 151-152; 485 NW2d 893 (1992). The trial court's decision regarding
alimony must be affirmed unless the appellate court is firmly convinced that it was inequitable.
Sparks, supra.
The judgment of divorce provided with regard to spousal support:
Commencing August 17, 2000, the Defendant shall pay Plaintiff spousal
support of Fifty Thousand $50,000 Dollars per month until the property award
provided for in this Judgment of Divorce has been paid in full and is producing
comparable income for the Plaintiff or until the Plaintiff 's death or until further
order of the court. The spousal support shall be taxable to Plaintiff and deductible
by Defendant.
6
In an Order of Reassignment dated January 2, 2003, Wayne Circuit Court Chief Judges
Timothy M. Kenny and Mary Beth Kelly ordered that this case be reassigned effective January 2,
2003, from Judge Halloran to Judge Maria Oxholm. Therefore, Judge Oxholm will conduct any
proceedings on remand.
7
It is up to the trial court to determine the period over which the cash award will be payable.
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In its findings of fact with regard to the judgment of divorce, the court, after summarizing
the evidence presented, found that "it is unable to fully rely on either the Plaintiff-Wife's budget
or the Defendant-Husband's testimony." The court noted, however, "it is clear from testimony
that the Defendant-Husband, the sole provider for the family, earns One Million Dollars
($1,000,000) per year in salary and in 1998 earned upwards of Two Million Dollars ($2,000,000)
including his salary. This would give the parties a disposable income of about One Million
Dollars ($1,000,000) after taxes or Five Hundred Thousand Dollars ($500,000) each." The court
then concluded, "It is this Court's finding based on this income and coordinating it with PlaintiffWife's budget, that she needs pre-tax income of about $650,000 ($650,000) per year to equal her
current spendable income." Thus, in its conclusions of law, the court concluded, in relevant part:
This Court has determined that Plaintiff-Wife shall receive a substantial
sum of cash and stock as her share of the marital estate and she will eventually be
able to generate income from her investments. It is therefore, the order of this
Court, that to assure Plaintiff-Wife interim income consistent with her needs, that
commencing upon issuance of this opinion, the Defendant-Husband shall pay
Plaintiff-Wife spousal support of $50,000 per month until the property award has
been paid in full and is producing sufficient comparable income for the PlaintiffWife or until the Plaintiff-Wife's death.
The award of alimony is in the trial court's discretion. Pelton v Pelton, 167 Mich App 22,
27; 421 NW2d 560 (1988). The main objective of alimony is to balance the incomes and needs
of the parties in a way that will not impoverish either party, and alimony is to be based on what is
just and reasonable under the circumstances of the case. Moore, supra at 654. Among the
factors that should be considered are: (1) the past relations and conduct of the parties, (2) the
length of the marriage, (3) the abilities of the parties to work, (4) the source and amount of
property awarded to the parties, (5) the parties' ages, (6) the abilities of the parties to pay
alimony, (7) the present situation of the parties, (8) the needs of the parties, (9) the parties' health,
(10) the prior standard of living of the parties and whether either is responsible for the support of
others, (11) contributions of the parties to the joint estate, (12) a party's fault in causing the
divorce, (13) the effect of cohabitation on a party's financial status, and (14) general principles of
equity. Ianitelli v Ianitelli, 199 Mich App 641, 644; 502 NW2d 691 (1993); Thames v Thames,
191 Mich App 299, 308; 477 NW2d 496 (1991).
Defendant first argues that plaintiff was awarded a sizable portion of the marital estate
and that the property award is sufficient for her suitable support and maintenance, thus barring
spousal support. Defendant acknowledges that a party should not have to invade property for
support, but relies on Schaffer, supra, for the proposition that a substantial property award bars
spousal support as a matter of law. In Schaffer, the trial court ordered the husband to buy out the
wife's one-half interest in the family-owned business, but compensated her with a "substantial"
cash award payable over a number of years. The husband was also ordered to assume a large
indebtedness. This Court affirmed the denial of alimony in light of the substantial property
award.
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The facts in Schaffer are distinguishable in that the wife in Schaffer received a large cash
award. In the present case, the property award to plaintiff includes mostly nonincome-producing
assets. Other than stock in the company, plaintiff 's income-producing assets amount to
$370,118.31 in cash and securities8 and $51,353.17 in annuities.
Here, the parties have clearly led an affluent lifestyle during their twenty-two-year
marriage, and defendant's income and earning potential are substantial, while plaintiff 's is
essentially nonexistent. Evidence was presented that defendant is in good health, while the
plaintiff suffered from ovarian cancer that is now in remission. In Hanaway, supra at 295-296,
in reversing a denial of alimony by the trial court, this Court stated:
Plaintiff 's information concerning monthly expenses and maintenance
requirements, submitted after trial, established that she could not maintain herself
exclusively on her monthly income, which was considerably less than defendant's,
on which the parties had formerly maintained an affluent lifestyle. Even without
this evidence, we believe plaintiff presented a strong case for alimony given the
length of the marriage, the parties' lifestyle during the marriage, plaintiff 's
$27,000 income and defendant's $371,000 income. With regard to the trial court's
determination that plaintiff 's income, augmented by cash and other assets worth
over $560,000, enabled her to maintain a reasonable standard of living without
defendant's assistance, we believe the court put too much weight on the value of
the property awarded to plaintiff. In a situation such as this, where both parties
are awarded substantial assets, the court, in evaluating a claim for alimony, should
focus on the income-earning potential of the assets and should not evaluate a
party's ability to provide self-support by including in the amount available for
support the value of the assets themselves. Given the length of the marriage, the
magnitude of the marital estate, and defendant's capital position and earning
potential after the divorce, plaintiff should not be expected to consume her capital
to support herself.
In the present case, although both parties received substantial assets in the property settlement,
only a small fraction of plaintiff 's award is liquid or capable of income generation. As in
Hanaway, given the parties' lifestyle, defendant's income potential, the length of the marriage,
and the magnitude of the marital estate, it would be inequitable to require plaintiff to "consume
her capital to support herself." However, it appears that the trial court rejected the budgetary
evidence submitted by the parties and, instead of determining plaintiff 's needs, simply awarded
plaintiff the equivalent of fifty percent of the pretax disposable income generated by defendant in
1998. The trial court abused its discretion by failing to make a finding regarding plaintiff 's needs
and by simply awarding plaintiff one-half of the parties' pretax disposable income.
8
The $370,118.31 is in two IRA's and, therefore, whatever earnings these funds generate are not
available to plaintiff to defray current living expenses.
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On remand, the trial court must revisit the issue of alimony in light of the fact that
plaintiff is to be awarded one-half of the value of the stock of the corporation. The trial court is
encouraged to consider the above factors in determining whether to award spousal support and, if
so, in determining an appropriate award of spousal support.
III. Attorney Fees and Costs
Defendant argues that the trial court abused its discretion by ordering defendant to pay an
additional sum of $573,729,9 representing expert fees in the amount of $154,463.16, basic
attorney fees in the amount of $363,950, and "value-added" attorney fees in the amount of
$112,824, for a total of nearly $800,000.10 The trial court's ruling on a motion for attorney fees is
reviewed for an abuse of discretion. Kosch v Kosch, 233 Mich App 346, 354; 592 NW2d 434
(1999).
In its judgment and award of costs and fees, Judge Halloran stated, "After trial in the
original divorce action this Court found that the Plaintiff did not have the ability to bear the
expense of this action and that the Defendant does have the ability to pay. This Court now finds
that Plaintiff 's fees and costs are reasonable." The "finding" to which the court was referring was
the conclusion in the "Findings of Fact and Conclusion of Law" entered on August 17, 2000,
after the conclusion of the divorce trial.
A three-day evidentiary hearing was held with regard to attorney and expert fees and costs
in January 2001. In the judgment resulting from that hearing, Judge Halloran relied on his earlier
conclusion that plaintiff was unable to bear the expense of the litigation and did not readdress the
issue. Judge Halloran then awarded plaintiff additional attorney and expert fees and costs in the
amount of $573,729 in accordance with the documentation and testimony submitted by plaintiff.
A trial court may order one party to a divorce to pay the other party's reasonable attorney
fees and litigation costs if the record supports a finding that financial assistance is necessary
because the other party is unable to bear the expense of the action. Maake v Maake, 200 Mich
App 184, 189; 503 NW2d 664 (1993). The reason for the rule is that no party should have to
invade the assets the party relies on for support in order to obtain representation. Id. Here,
defendant contends that plaintiff is able to bear the expense of the litigation because of the
substantial property award that plaintiff received. However, as noted above, the assets plaintiff
received are generally not liquid assets, and the alimony that plaintiff receives was awarded to
cover the costs of living. The trial court's factual finding that plaintiff is unable to bear the
expense of the litigation is supported by the record and is not clearly erroneous.
9
Defendant had already paid $200,000 to plaintiff 's attorney as ordered by the trial court at the
onset of litigation.
10
We reject defendant's argument that fees and costs were improperly awarded because the
petition for fees had to be filed in plaintiff 's name. The petition by plaintiff 's counsel, which
was submitted pursuant to the trial court's ruling providing for those fees, was correctly
understood by the trial court as being filed on behalf of plaintiff.
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Defendant also contends that plaintiff 's counsels' failure to keep contemporaneous time
records required the trial court to reject or reduce the claim for fees as a matter of law. We
disagree. Defendant cites no authority to support a finding that contemporaneous time records
are required to be kept. Indeed, in Howard v Canteen Corp, 192 Mich App 427, 437-438; 481
NW2d 718 (1991), overruled on other grounds by Rafferty v Markovitz, 461 Mich 265; 602
NW2d 367 (1999), the Court stated that:
The most useful starting point for determining the amount of a reasonable
attorney fee is the number of hours reasonably expended on the case multiplied by
a reasonable hourly rate. The party seeking the fee bears the burden of
establishing entitlement to an award and documenting the appropriate hours
expended and hourly rates . . . . While such [contemporaneous billing] records are
not required to be kept, in demanding a large sum of attorney fees the lack of
contemporaneous time records leaves room for doubt regarding the
reasonableness of the hours expended. Where the opposing party challenges the
reasonableness of the requested fee, the trial court should hold an evidentiary
hearing regarding the issue. If any of the underlying facts, such as the number of
hours spent in preparation, are in dispute, the trial court should make findings of
fact regarding the disputed issues.
Here, the trial court conducted an evidentiary hearing on the issue of attorney fees and
expert-witness fees and costs. Head v Phillips Camper Sales & Rental, Inc, 234 Mich App 94,
113; 593 NW2d 595 (1999). Detailed testimony was presented regarding fees and costs.
Although there is no precise formula for assessing the reasonableness of an attorney fee, the trial
court considered such relevant factors as the skill, time, and labor involved, the fee customarily
charged in the locality for similar services in "high end" divorce actions, the likelihood that
plaintiff 's counsel's time commitment to this case precluded other employment, the amount in
question and the results achieved, the expense incurred, the professional standing and experience
of the attorney, and the retainer agreement. See, e.g., In re Condemnation of Private Property for
Highway Purposes, 209 Mich App 336, 341-342; 530 NW2d 183 (1995). The trial court found
that plaintiff 's counsel expended 1,255 hours of attorney time on the case, that attorney Baskin's
base fee was fixed by his retainer in a reasonable hourly amount, that the base hourly fee for
other attorneys was reasonable, and that the base fee should be enhanced pursuant to the "value
added" clause of the retainer agreement.11 Similarly, the trial court accepted testimony regarding
the issue of expert-witness fees and costs. The evidence presented supports the trial court's
detailed factual findings, and we find no error in the trial court's determination regarding the
reasonableness of the fees and costs.
IV. Disqualification of the trial judge.
11
Defendant's own expert and attorneys for both parties established that a value enhancement
clause is a common and necessary feature of retainer contracts in "high end" divorce actions.
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Defendant contends that he was denied an impartial arbiter with regard to plaintiff 's
motion for fees and costs by the denial of his motion to disqualify Judge Halloran from deciding
plaintiff 's motion. In reviewing a motion to disqualify a judge, this Court reviews the trial
court's findings of fact for an abuse of discretion and the court's application of those facts to the
relevant law de novo. Cain v Dep't of Corrections, 451 Mich 470, 503; 548 NW2d 210 (1996).
Plaintiff filed a motion for attorney and expert fees and costs after the judgment of
divorce was entered. Judge Halloran conducted hearings over the course of three days in January
2001. On July 26, 2001, Judge Halloran was detained by the Wayne County Sheriff 's
Department in a men's restroom at Detroit Metropolitan Airport for allegedly engaging in a lewd
and indecent act. On July 30, 2001, it was announced that Judge Halloran would be taking a
thirty-day paid leave of absence, and that Chief Judge Sapala would review the matter. It appears
that on August 7, 2001, the prosecuting attorney's office announced that charges would not be
filed against Judge Halloran. The fee judgment was entered on August 14, 2001.
Plaintiff 's counsel, Henry Baskin, is a member of the Judicial Tenure Commission. On
August 28, 2001, defendant filed a motion asking Judge Halloran to disqualify himself
retroactive to July 26, 2001, and to vacate as void the fee judgment and to reassign the case to
another judge because of the allegations of misconduct and the potential Judicial Tenure
Commission investigation in which Baskin would be involved. Defendant moved for
disqualification on the grounds of actual bias or prejudice for Baskin under MCR 2.003(B)(1), a
knowing economic interest that could be substantially affected by the proceeding under MCR
2.003(B)(5), and the denial of defendant's due-process right to an impartial arbiter.
Judge Halloran denied the motion to vacate and to disqualify on the ground that plaintiff
offered no evidence of bias in fact or partiality against or for either party or attorney. Judge
Halloran further noted that there were a number of issues that were decided in defendant's favor.
Judge Halloran also ruled that the motion was untimely because the alleged basis for the source
of bias took place on July 26, 2001, yet defendant did not file the motion until August 28, 2001,
after receiving an adverse decision.
The parties eventually appeared before Chief Judge Sapala on September 25, 2001.
Judge Sapala disqualified himself from deciding the motion on the basis that he was "too
involved with this Judge and how we proceed with him because of my duties as Chief Judge."
The following day, the parties appeared for a hearing on the motion before Chief Judge Pro Tem
Stephens. In denying the motion to disqualify, Judge Stephens stated her reasons at length:
The Court does not find in this particular case that the issue of when the
matter was discovered is dispositive. It is interesting, but not dispositive.
It is clear from this case that everyone knew from the beginning of the case
that Mr. Baskin was on the tenure commission. It is obvious that the tenure
commission from the outset of this case has jurisdiction over each and every
person servicing in judicial or quasi-judicial office within the judicial branch of
government. The fact that there was an incident that occurred in July that was
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reported anonymously on the electronic media shortly thereafter and naming the
judicial officer subsequently in the print media is not significant enough for this
Court to use it as a factor in deciding this motion.
* * *
The Court's review of the pleadings and papers filed in this case and
presented to me do not indicate that there were any statements made or alleged of
actual bias by the trial judge against or for either the attorneys or the parties.
The next question, is there a formal complaint—is there a complaint or
matter pending before the Judicial Tenure Commission?
* * *
It is only in the most unusual cases that a period of time between July 26th
and even August 28th, much less August 14th would have been a period of time in
which there was, in fact, a complaint formally filed before the Judicial Tenure
Commission of which a tenure commissioner was likely to be aware. Perhaps
there are circumstances that the Court can imagine that would move more rapidly,
i.e., if an individual on July 26th killed somebody, but that is pretty unusual. The
reality is that every judge each and every day that she serves in judicial office is
subject to a request for investigation and/or complaint by litigants, people walking
about the community, lawyers, or any human being who believes that the Judge
has failed to live up to her or his responsibilities under the constitution and
canons. The mere fact that this was a highly publicized incident does not raise
this conduct to any higher level than any other allegedly inappropriate or canon
violating conduct.
* * *
It is asserted here that there's a financial relationship, or implicit financial
relationship between the trial judge and the—and Counsel for the plaintiff
respondent herein. While it is true that the Judicial Tenure Commission can make
a recommendation regarding a judge's livelihood, including whether or not a judge
may ever sit as a judge again, it is the Supreme Court who makes the
determination as to whether or not the Judge has been—will be suspended, the
period of time of that suspension, whether or not a judge may sit or be removed,
certainly upon recommendation by the Tenure Commission. The fact that this is a
potential outcome does not create a sufficient financial link for this court to find
that it would be appropriate to remove this trial court judge . . . .
* * *
One has to presume that the People of the State of Michigan knew what
they were doing when they adopted the 1964 [sic] constitution and afforded us,
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and subsequent statutes that afford us the opportunity to have a discipline
commission for judges that is comprised of both members of the public, lawyers,
and practicing lawyers, who by virtue of their practice must practice before the
individual which they may have occasion to have matters pending against. This is
a situation in which the Court finds that the assertions by the defendants are
genuine, but this Court does not believe that by a preponderance of the evidence
or otherwise that it has been presented to this court that there is either a high
probability of prejudice or bias which affected the August 14th decision or that
there is an actual showing of bias or that the petitioner respondent has been
deprived of his fundamental constitutional right of a fair and impartial tribunal.
This is not a situation similar to that of the, I want to say Cramden case, where the
– where there was an actual relationship and an actual investigation that occurred
and where the adjudicator was also the investigator. As of this date, there is no
issue that is joined that is a formal complaint before the tenure commission for
which we can find the similarity.
An order was entered the same day denying the motion "for reasons stated on the record."
On appeal, defendant argues that Judge Halloran had not entered the fee judgment at the
time of his detention and the circumstances require that he be disqualified to preserve defendant's
fundamental rights of due process and right to a fair trial. Defendant also contends that
disqualification is required under MCR 2.003(B)(5) because of the personal issues at stake,
including Judge Halloran's reputation, career, and economic livelihood, all of which could
become issues subject to investigation by the Judicial Tenure Commission. Defendant also
moved under MCR 2.003(B)(1), alleging obvious personal bias and prejudice in favor of Mr.
Baskin on the part of Judge Halloran.
MCR 2.003(B)(1) and (5) provide that a judge is disqualified when the judge cannot
impartially hear a case, including but not limited to circumstances in which the judge is
personally biased or prejudiced for or against a party or attorney, or where the judge knows he
has an economic interest in the subject matter of the controversy "or has any other more than de
minimis interest that could be substantially affected by the proceeding." In addition, where the
requirement of showing actual bias or prejudice under MCR 2.003(B)(1) has not been met, a
party may pursue disqualification pursuant to the Due Process Clause, which requires an
unbiased and impartial decision maker. Cain, supra at 497. In Cain, the Supreme Court noted
that the United States Supreme Court has identified situations "where 'experience teaches that the
probability of actual bias on the part of the judge or decision maker is too high to be
constitutionally tolerable'", and disqualification is warranted without a demonstration of actual
bias. Id. at 498, quoting Crampton v Dep't of State, 395 Mich 347, 351; 235 NW2d 352 (1975).
One of these situations is where the judge or decision maker is "'enmeshed in [other] matters
involving [the moving party].'" Id., quoting Crampton, supra at 351. However, the Cain Court
cautioned that disqualification on this basis is only required "in the most extreme cases." Id.
No evidence was presented that Judge Halloran had a financial interest in the divorce
litigation before him or in the decision whether to award attorney fees to plaintiff. Defendant's
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proposition that Judge Halloran's career as a judge was at stake, thus implicating his future
judicial salary, is too tenuous to be considered a valid ground for disqualification under MCR
2.003(B)(5). Additionally, the mere fact that plaintiff 's counsel is a member of the Judicial
Tenure Commission, and evidence that the fee judgment was still unfinished at the time of Judge
Halloran's detention,12 does not establish that Judge Halloran was biased in favor of plaintiff or
that defendant was denied a neutral arbiter. Defendant failed to present any evidence to support a
finding that Judge Halloran was biased in favor of plaintiff or to support a finding that there was
a high probability of bias on the part of Judge Halloran.
Affirmed in part, vacated in part, and remanded for further proceedings consistent with
this opinion. Jurisdiction is not retained.
Murray, J., concurred.
/s/ E. Thomas Fitzgerald
/s/ Christopher M. Murray
12
Judge Stephens found that the fee judgment was not entered on July 13, 2001, the date
handwritten on its back page, but rather on August 14, 2001, after Judge Halloran's detention.
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