EDWARD BAUROTH V JAMAL HAMMOUD MD
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Michigan Supreme Court
Lansing, Michigan 48909
____________________________________________________________________________________________
C hief Justice
Justices
Maura D. Cor rigan
Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
Opinion
____________________________________________________________________________________________________________________________
FILED SEPTEMBER 12, 2001
EDWARD BAUROTH and BARBARA
BAUROTH,
Plaintiffs-Appellees,
v
No. 119370
JAMAL HAMMOUD and ENDOCRINE
CONSULTANTS OF MID-MICHIGAN,
P.C., a Michigan Professional
Corporation, Individually
and Jointly and Severally,
Defendants-Appellants.
________________________________
PER CURIAM
The circuit court ordered that the plaintiffs could
discover the defendants’ financial assets in the course of
this civil action.
We reverse because such discovery is
outside the scope allowed by MCR 2.302.
I
Plaintiff Barbara Bauroth was being treated by defendant
Jamal Hammoud, M.D., for hyperthyroidism.
He prescribed the
drug Tapazole, which, she alleges, caused her harm. She sued,
claiming
that
his
actions
and
inactions
constituted
professional malpractice.1
The
case-evaluation
process
produced an evaluation of $250,000.2
described
in
MCR
2.403
This amount exceeded the
defendant's insurance coverage, which was $200,000/$600,000.3
The plaintiffs filed in circuit court a motion asking for
an order requiring the defendants to disclose their assets.4
They explained:
That before Plaintiffs can make a valid and
knowing acceptance or rejection of Mediation,[5]
which might result in the settlement of this
litigation, they must have the opportunity to
review the net worth and/or assets and liabilities
of Defendants in order to make a business judgment
as to what monies may be available over and above
any insurance coverage.
1
Ms. Bauroth's husband, Edward Bauroth, is also a
plaintiff; he presents derivative claims. A second defendant
is Endocrine Consultants of Mid-Michigan, P.C., in which Dr.
Hammoud practiced medicine.
2
The facts pertaining to the case evaluation and to the
defendants' insurance coverage are taken from the apparently
undisputed statements of counsel in the circuit court and in
this Court.
3
The defendants explained in circuit court that their
"insurance policy limits are $200,000 per incident/$600,000
aggregate."
4
At the hearing on the motion, the plaintiffs also asked
for an extension of the time limit, MCR 2.403(L)(1), for
deciding whether to accept or reject the evaluation.
5
In 2000, the name of the process described in MCR 2.403
was changed from "mediation" to "case evaluation." The term
"mediation" now applies to the process described in MCR 2.411.
2
In support of their motion, the plaintiffs relied upon McLaren
v Zeilinger, 103 Mich App 22; 302 NW2d 583 (1981).
Responding to the motion, the defendants stated that they
would neither accept the case evaluation, nor agree to pay any
money toward a settlement.
"Unless plaintiffs agree to
dismiss this action without the payment of money, this matter
will proceed to trial."
The defendants asserted that their
financial status was therefore irrelevant.
The
circuit
disclosure.6
court
granted
the
motion
to
compel
On the representation by plaintiffs' counsel
6
The circuit court's order provided that the defendants
to disclose the following "forthwith”:
1.
A detailed, sworn, net-worth statement
setting forth all of the assets and liabilities of
both Defendants. And
2.
The last five (5) years, Federal, State
and Local Income Tax returns for both of the
Defendants. And
3. Any and all financial statements prepared
prior to the date hereof during the last two (2)
years for any reason whatsoever of both Defendants.
And
4. Such other and further information as will
assist Plaintiffs in determining the true net worth
and/or collect-ability of both of the Defendants.
And
5.
Both Defendants shall submit to a
creditor's exam regarding the disclosure of the
assets herein mentioned.
The order provided that the plaintiffs were to hold these
materials in confidence, and use them for no purpose other
than determining whether to accept the evaluation. The order
further provided that the time for accepting or rejecting the
3
that he would delay the creditors' examination for thirty
days, the circuit court denied the defendants' request for a
stay.
The defendants applied to the Court of Appeals, which
denied leave to appeal.7
The Court also denied a stay.
When the defendants applied to this Court for leave to
appeal, we issued a stay of the circuit court's order.8
Today
we reverse that order.
II
The
interpretation
and
application
of
a
court
presents a question of law that is reviewed de novo.
rule
McAuley
v General Motors Corp, 457 Mich 513, 518; 578 NW2d 282 (1998).
III
The general scope of permissible discovery is stated in
MCR 2.302(B)(1):
Parties may obtain discovery regarding any
matter, not privileged, which is relevant to the
subject matter involved in the pending action,
whether it relates to the claim or defense of the
party seeking discovery or to the claim or defense
of
another
party,
including
the
existence,
description,
nature,
custody,
condition,
and
location of books, documents, or other tangible
things and the identity and location of persons
having knowledge of a discoverable matter. It is
evaluation was extended sixty days after the date of the
order.
7
Unpublished order entered May 30, 2001 (Docket No.
233885).
8
Unpublished order entered June 7, 2001 (Docket No.
119370).
4
not ground for objection that the information
sought will be inadmissible at trial if the
information sought appears reasonably calculated to
lead to the discovery of admissible evidence.
As indicated, the motion granted by the circuit court was
premised on McLaren.
In that case, which arose from a motor
vehicle accident, the plaintiff sought to discover financial
information about the defendant. The circuit court denied the
defendant’s objections to interrogatories, and the Court of
Appeals
affirmed.
In
the
concluding
paragraphs
of
its
opinion, the Court explained that it was applying a “good
cause” test:
We believe that the test now utilized by the
Supreme Court is whether plaintiff has "good cause"
to have discovery of the extent and value of
defendant's assets, and that the trial judge is
vested with discretion to make that determination
on a case by case basis. To hold otherwise would
lead to incongruous results that we do not believe
the Supreme Court intended.
E.g., in this case, if, rather than submitting
interrogatories to defendant, plaintiff had chosen
to proceed under GCR 1963, 310, to require
defendant to produce copies of his income tax
returns, it would appear that if plaintiff
satisfied the trial court there was good cause,
defendant could have been required to produce such
income tax returns, even though they were not
admissible in evidence at trial nor relevant to the
subject matter at trial.
We believe the Supreme Court intended the same
test, namely, "good cause" to apply to the scope of
interrogatories as to the scope of production of
documents.
The question then is whether there is good
cause to require defendant to answer these
interrogatories.
As indicated, we hold this
decision was for the discretion of the trial judge,
5
and we find that, under the circumstances of this
case, "good cause" encompasses the interrogatories
regarding defendant's assets that are in dispute.
The circumstances to which we refer are that
the recommendation of a mediation panel has placed
a substantial value on plaintiff's damages, that
there is a real possibility of a jury award
exceeding the policy limits, and that discovery of
defendant’s assets could be a factor inducing
settlement.
We do not hold that, as a general
rule, a plaintiff in an automobile accident case
will be entitled to discovery of defendant's
assets.
On the contrary, we would expect that it will
only be in the exceptional case that a plaintiff
may have sufficient "good cause" to permit such
discovery.
Where sufficient good cause is present, a
defendant's alleged right of privacy must give way.
Consequently, we hold that the trial court's denial
of defendant's motion was not clearly erroneous.
[103 Mich App 31-32.]
As the Court of Appeals made clear in McLaren, that
decision is based on the General Court Rules of 1963.
The
change effected by the Michigan Court Rules of 1985 is well
explained in Dean & Longhofer, Michigan Court Rules Practice,
§ 2302.2, p 198:
With the adoption of MCR 2.302, which contains
general provisions governing discovery as a whole,
subtle changes were made in discovery practice that
are not readily apparent from a reading of the
individual rules.
GCR 1963, 310 previously
governed the production and discovery of documents
and things. As the rule permitted such discovery
only on motion and order of the court, and
additionally adopted the restrictions of GCR 1963,
306.2, several Michigan cases concluded that a
party must show “good cause” to obtain such
discovery.
6
One of the principal reasons that the Michigan
courts reached the conclusion that good cause must
be shown to conduct discovery was that the Michigan
rules did not contain a comprehensive rule, similar
to Federal Rule of Civil Procedure 26, setting
forth standards and exceptions for the scope of
discovery. Rather, the Michigan scope of discovery
provisions were contained in GCR 1963, 302.2, and
several restrictions thereto were contained in
GCR 1963, 306.2. This was true despite the fact
that GCR 1963, 306.2 purported to govern only
protective orders associated with the taking of
depositions on oral examination. It is not hard to
understand how the courts, considering standards
for issuance of protective orders, could reach the
conclusion that a party had to show good cause to
acquire the discovery requested.
The adoption of MCR 2.302, and the elimination
of the requirement for a motion and order prior to
conducting discovery proceedings under MCR 2.310,
have eliminated any requirement that a party show
good cause for the discovery of particular
information, documents, and the like. MCR 2.302(B)
now compiles all the Michigan rules restricting the
scope of discovery into one rule.
[Emphasis
supplied.]
As this treatise well states, the clarified text of the
1985 rules rendered obsolete the “good cause” approach that
had
been
employed
under
the
1963
rules.
With
it,
the
rationale of McLaren likewise became obsolete.
Again, MCR 2.302(B)(1) sets the bounds of discovery in
most civil actions.
The rule allows discovery of matter that
is “relevant to the subject matter involved in the pending
action” or that “appears reasonably calculated to lead to the
discovery of admissible evidence.” Under the circumstances of
this case, the financial information sought by the plaintiffs
satisfies neither branch of MCR 2.302(B)(1).
7
For these reasons, we reverse the order of the circuit
court requiring disclosure.
We remand this case to the
circuit court for further proceedings.
MCR 7.302(F)(1).
CORRIGAN , C.J., and CAVANAGH , WEAVER , KELLY , TAYLOR , YOUNG , and
MARKMAN , JJ., concurred.
8
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