VALERIA HALIW V CITY OF STERLING HEIGHTS
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Michigan Supreme Court
Lansing, Michigan
Chief Justice:
Opinion
Justices:
Clifford W. Taylor
Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Maura D. Corrigan
Robert P. Young, Jr.
Stephen J. Markman
FILED JANUARY 25, 2005
VALERIA HALIW and ILKO HALIW,
Plaintiffs-Appellants,
v
No. 125022
CITY OF STERLING HEIGHTS,
Defendant-Appellee.
_______________________________
BEFORE THE ENTIRE BENCH
CAVANAGH, J.
At issue in this case is whether appellate attorney
fees and costs are recoverable as case evaluation sanctions
under MCR 2.403(O).
We hold that “actual costs” pursuant
to MCR 2.403(O) do not include appellate attorney fees and
costs.
Because the Court of Appeals held to the contrary,
we reverse its decision, reinstate the trial court’s award,
and
remand
the
case
to
the
Court
consideration of plaintiffs’ cross-appeal.
of
Appeals
for
I. FACTS AND PROCEEDINGS
Plaintiff Valeria Haliw was walking on a snow-covered
sidewalk when she slipped and fell on a patch of ice that
formed
in
a
depressed
sidewalk met.
Haliw,
brought
area
where
two
sections
of
the
Mrs. Haliw and her husband, plaintiff Ilko
suit
under
MCL
691.1402,
alleging
that
defendant city of Sterling Heights breached its duty to
maintain the sidewalk so that it was reasonably safe and
convenient for public travel.
Defendant moved for summary
disposition under MCR 2.116(C)(7) and (10), asserting that
plaintiffs’ claim was barred by the natural accumulation
doctrine.
however,
Before the trial court ruled on the motion,
the
matter
was
submitted
to
case
evaluation
pursuant to MCR 2.403.1
On
September
8,
1997,
the
trial
defendant’s motion for summary disposition.
court
denied
On October 13,
1997, both parties rejected the unanimous case evaluation
award
of
$55,000
in
plaintiffs’
favor.
Defendant
then
appealed by leave granted the trial court’s denial of its
motion for summary disposition, and the Court of Appeals
1
When this action commenced, MCR 2.403(O) used the
term “mediation.”
In 2000, this Court amended the court
rule
and,
among
other
things,
changed
the
rule’s
terminology. The term “mediation” was replaced by the term
“case evaluation.”
Thus, for simplicity, we will use the
current terminology when discussing MCR 2.403(O).
2
affirmed.2
This Court granted defendant’s application for
leave to appeal and reversed, determining that the natural
accumulation
doctrine
precluded
claim.3
plaintiffs’
Consequently, this Court remanded the case to the trial
court
for
entry
of
summary
disposition
in
favor
of
defendant.
In addition to moving on remand for entry of an order
granting it summary disposition, defendant also requested
case evaluation sanctions under MCR 2.403(O).
Defendant
sought $31,618 in sanctions; included in this amount were
defendant’s appellate costs and attorney fees.
Consistent
with this Court’s decision, the trial court entered summary
disposition
however,
in
defendant’s
rejected
favor.
defendant’s
attorney fees and costs.
The
request
trial
for
court,
appellate
Defendant subsequently moved to
recover $5,335 in case evaluation sanctions for its trial
court
fees
and
costs.
After
2
considering
defendant’s
Unpublished opinion per curiam of the Court
Appeals, issued October 5, 1999 (Docket No. 206886).
3
of
Haliw v Sterling Hts, 464 Mich 297; 627 NW2d 581
(2001) (Haliw I).
In Haliw I, I joined Justice KELLY’S
dissent and would have affirmed the trial court’s ruling.
I remain committed to the view that plaintiffs presented
genuine issues of material fact sufficient to withstand
defendant’s summary disposition motion.
3
supplemental
motion,
the
trial
court
awarded
defendant
$1,500 in case evaluation sanctions.
Defendant
impermissibly
appealed,
excluded
asserting
its
that
appellate
the
trial
attorney
court
fees
and
costs.
Plaintiffs cross-appealed the trial court’s award,
arguing
that
the
trial
court
abused
its
discretion
by
failing to apply the “interest of justice” exception, MCR
2.403(O)(11), to deny defendant any of its attorney fees
and costs.
In
a
published
two-to-one
decision,
the
Court
of
Appeals reversed, holding that appellate attorney fees may
be awarded under MCR 2.403(O) because (1) such fees are not
expressly excluded, (2) a trial is not necessary to trigger
sanctions,
and
(3)
the
applicable
verdict
for
assessing
sanctions is the verdict rendered after appellate review.4
Because the Court of Appeals majority held that the trial
court erred by refusing to consider defendant’s appellate
attorney
fees
and
costs,
the
panel
did
not
determine
whether the trial court abused its discretion in failing to
invoke
the
2.403(O)(11).
“interest
of
justice”
exception
under
MCR
We granted plaintiffs’ application for leave
to appeal, limited to the issue whether appellate attorney
4
257 Mich App 689; 669 NW2d 563 (2003).
4
fees and costs are recoverable as case evaluation sanctions
under MCR 2.403(O).5
II. STANDARD OF REVIEW
The proper interpretation and application of a court
rule is a question of law, which this Court reviews de
novo.
Bauroth v Hammoud, 465 Mich 375, 378; 632 NW2d 496
(2001); CAM Constr v Lake Edgewood Condo Ass’n, 465 Mich
549, 553; 640 NW2d 256 (2002).
III. ANALYSIS
When called upon to interpret and apply a court rule,
this
Court
applies
interpretation.
the
principles
that
govern
statutory
Grievance Administrator v Underwood, 462
Mich 188, 193; 612 NW2d 116 (2000).
Accordingly, this
Court begins with the language of the court rule.
194.
Id. at
At the time both parties rejected the case evaluation
award, MCR 2.403(O) provided in pertinent part:
(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 mediation 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 mediation evaluation.
(2) For the purpose of this rule “verdict”
includes,
5
470 Mich 869 (2004).
5
(a) a jury verdict,
(b) a judgment by the court after a nonjury
trial,
(c) a judgment entered
ruling on a motion after
mediation evaluation.
as a result of a
rejection of the
* * *
(6) For
costs are
the
purpose
of
this
rule,
actual
(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 mediation 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.
* * *
(8) A request for costs under this subrule
must be filed and served within 28 days after the
entry of the judgment or entry of an order
denying a timely motion for a new trial or to set
aside the judgment.
* * *
(11) If the “verdict” is the result of a
motion as provided by subrule (O)(2)(c), the
court may, in the interest of justice, refuse to
award actual costs.
The intent of the rule must be determined from an
examination of the court rule itself and its place within
the
When
structure
of
interpreting
the
a
Michigan
court
rule
6
Court
or
Rules
statute,
as
we
a
whole.
must
be
mindful of “the surrounding body of law into which the
provision must be integrated . . . .”
Green v Bock Laundry
Machine Co, 490 US 504, 528; 109 S Ct 1981; 104 L Ed 2d 557
(1989)
(Scalia,
J.,
concurring).
Here,
neither
the
language of MCR 2.403(O) nor the entire structure of our
court
rules
supports
the
Court
of
Appeals
construction.
Accordingly, we conclude that appellate attorney fees and
costs are not recoverable as case evaluation sanctions.
MCR 1.103 provides that specific court rules control
over general court rules.
evaluation
sanctions
The court rule governing case
appears
addresses civil procedure.
addressed
under
chapter
in
to
appellate
two,
which
Appellate fees and costs are
seven,
the
controlling appellate procedure.
reference
chapter
attorney
chapter
specifically
Thus, the lack of any
fees
and
costs
in
MCR
2.403(O) is understandable because they are covered under
an entirely separate section of the court rules.6
The Court
of Appeals failure to appreciate this organization of the
court rules led it to incorrectly conclude that because MCR
2.403(O) did not specifically
exclude
appellate attorney
fees and costs, the court rule necessarily included them as
a case evaluation sanction.
6
See, e.g., MCR 7.213(A)(6), MCR 7.216(C), and MCR
7.316(D).
7
We note that Michigan follows the “American rule” with
respect to the payment of attorney fees and costs.
v Burak, 470 Mich 37, 42; 678 NW2d 615 (2004).
Dessart
Under the
American rule, attorney fees generally are not recoverable
from
the
losing
party
as
costs
in
the
absence
of
an
exception set forth in a statute or court rule expressly
authorizing
such
an
award.
Id.
The
American
rule
is
codified at MCL 600.2405(6), which provides that among the
items that may be taxed and awarded as costs are “[a]ny
attorney fees authorized by statute or by court rule.”
The
American rule stands in stark contrast to what is commonly
referred to as the “English rule,” whereby the losing party
pays
the
prevailing
exception.
party’s
costs
absent
an
express
MCR 2.403(O)(6) exemplifies the American rule
by expressly authorizing the recovery of attorney fees and
costs as case evaluation sanctions.
While MCR 2.403(O)(6) expressly authorizes recovery of
“a reasonable attorney fee” and “costs,” and the court rule
does not distinguish between trial and appellate attorney
fees and costs, the Court of Appeals erred in concluding
that
because
appellate
MCR
attorney
recoverable.
2.403(O)
fees
does
and
not
costs,
expressly
such
exclude
expenses
are
That conclusion runs contrary to the American
rule governing the payment of attorney fees.
8
As noted, the
American
rule
permits
expressly authorized.
recovery
of
fees
and
costs
where
As such, the fact that MCR 2.403(O)
does not expressly exclude appellate fees and costs is not
determinative.
Therefore,
failure
2.403(O)
of
MCR
we
not
believe
that
expressly
to
do
the
exclude
appellate
attorney fees and costs is necessarily dispositive under
these limited circumstances.
Our
conclusion
is
supported
2.403(O) is trial-oriented.
this
action,
MCR
by
the
fact
that
MCR
For example, at the time of
2.403(O)(1)
provided,
“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
mediation
evaluation.”
MCR
2.403(O)(2)
then
defines “verdict” as follows:
(a) a jury verdict,
(b) a judgment by the court after a nonjury
trial,
(c) a judgment entered
ruling on a motion after
mediation evaluation.
The
most
natural
reading
of
as a result of a
rejection of the
MCR
2.403(O)(1)
contemplates a trial-oriented court rule.
from
the
definition
of
“verdict,”
or
any
and
(2)
Notably absent
part
of
MCR
2.403(O) for that matter, is any mention of the appellate
process.
9
In 1997, this Court amended MCR 2.403(O) and changed
the phrase in MCR 2.403(O)(1) from “the action proceeds to
trial” to “the action proceeds to verdict.”
its
conclusion
that
appellate
fees
In support of
and
costs
are
recoverable, the Court of Appeals relied on this amendment.
The Court of Appeals reasoned that because this Court “deemphasiz[ed]” a trial as the “determinative proceeding,”
this Court somehow intended that appellate attorney fees
and
costs
sanctions.
should
now
be
recoverable
Haliw, supra at 698.
as
case
evaluation
However, the purpose of
the 1997 amendment was narrower than that assumed by the
Court of Appeals and, thus, the amendment does not support
the Court of Appeals rationale.
Until this Court amended MCR 2.403(O) in 1997, it was
sufficiently unclear whether a judgment that entered as a
result of a dispositive motion instead of a trial would
engender sanctions.
clarified
that
By amending the court rule, this Court
case
evaluation
sanctions
may
indeed
be
available when a case is resolved after case evaluation by
a
dispositive
motion.
As
such,
the
Court
of
Appeals
analysis went beyond the intent of the 1997 amendment and
the actual language used in the amendment.
Moreover,
we
believe
that
the
Court
of
Appeals
mistakenly relied on Keiser v Allstate Ins Co, 195 Mich App
10
369; 491 NW2d 581 (1992), and Hyde v Univ of Michigan Bd of
Regents, 226 Mich App 511; 575 NW2d 36 (1997), to support
its ultimate conclusion that appellate attorney fees and
costs are recoverable.
In Keiser, the plaintiff brought an
action for no-fault benefits against the defendant.
The
case evaluation resulted in an award of $12,000 in the
plaintiff’s favor.
The plaintiff rejected the award, and
the defendant accepted.
As such, the case proceeded to
trial, the defendant unsuccessfully moved for a directed
verdict, and the jury awarded the plaintiff an amount in
excess
of
the
case
evaluation
award.
The
defendant
appealed, and the Court of Appeals held that the trial
court
erred
motion.
curiam
by
denying
the
defendant’s
directed
verdict
Keiser v Allstate Ins Co, unpublished opinion per
of
the
Court
of
Appeals,
issued
March
23,
1989
(Docket No. 101312).
The Keiser defendant then moved for case evaluation
sanctions under MCR 2.403(O).
plaintiff
to
pay
the
The trial court ordered the
defendant’s
trial
costs
and
fees.
Notably, “[n]o costs or fees were awarded for any appellate
or
posttrial
activity.”
Keiser,
supra
at
371.
The
plaintiff challenged the imposition of sanctions for the
defendant’s trial costs and fees, and the Court of Appeals
affirmed.
The Keiser Court noted:
11
The only issue on appeal is whether, after a
party rejects a [case] evaluation [award] and,
following a trial, a verdict more favorable to
the rejecting party is returned, MCR 2.403(O)
allows the imposition of sanctions on the
rejecting party following appellate reversal of
the verdict where the final result is no longer
favorable to that party. [Id.]
Accordingly, the Court of Appeals in Keiser concluded
“that it is the ultimate verdict that the parties are left
with
after
appellate
review
is
complete
that
should
be
measured against the [case] evaluation [award] to determine
whether sanctions should be imposed on a rejecting party
pursuant to MCR 2.403(O).”
Id. at 374-375.
The Keiser
panel, however, clearly did not see itself deciding the
question
presented
in
this
case—i.e.,
whether
appellate
attorney fees and costs are recoverable under the court
rule.
In fact, Keiser deliberately noted the decisions in
American Cas Co v Costello, 174 Mich App 1; 435 NW2d 760
(1989), and Giannetti Bros Constr Co v City of Pontiac, 175
Mich
App
442;
appellate
fees
2.403(O).
438
and
NW2d
313
costs
are
Further,
the
(1989),
not
which
recoverable
Keiser
panel
held
that
under
observed
MCR
that
“sanctions for appellate expenses are expressly set forth
in
MCR
7.216(C),
which
evaluation] sanctions.”
does
not
provide
Keiser, supra at 374.
12
for
[case
As such, Keiser and its progeny merely stand for the
proposition
that
the
instant
defendant
may
seek
case
evaluation sanctions for its trial attorney fees and costs
because the result following appeal governs for purposes of
MCR 2.403(O).
concluding
However, Keiser cannot be interpreted as
that
appellate
attorney
recoverable under the court rule.
fees
and
costs
are
Thus, we believe that
the Court of Appeals misread the Keiser decision to support
its ultimate holding.7
In
sum,
we
disagree
with
the
Court
of
Appeals
rationale because none of the bases that the panel relied
on necessitates the conclusion that appellate attorney fees
and costs are recoverable under MCR 2.403(O).
Rather, our
reading of MCR 2.403(O) compels us to conclude that the
court rule is trial-oriented.8
7
In Marketos v American Employers Ins Co, 465 Mich
407, 414 n 9; 633 NW2d 371 (2001), this Court expressed no
opinion regarding the validity of Keiser, supra, because
the issue raised in Keiser was not then before us. In this
case, however, the issue is squarely before this Court.
Accordingly, we take this opportunity to approve of
Keiser’s narrow application of MCR 2.403(O) under the facts
presented in that case.
8
Moreover, in support of our conclusion that MCR
2.403(O) is trial-oriented, we note that a request for case
evaluation sanctions must be made within twenty-eight days
after entry of the judgment, MCR 2.403(O)(8), generally a
time before the bulk of appellate fees and costs have been
incurred.
In addition, MCR 2.403(O)(6)(b) allows recovery
13
IV. CONCLUSION
We hold that appellate attorney fees and costs are not
recoverable
2.403(O).
as
case
evaluation
Accordingly,
we
reverse
sanctions
the
under
decision
of
MCR
the
Court of Appeals and reinstate the trial court’s award.
Because the Court of Appeals did not determine whether the
trial court abused its discretion in failing to invoke the
“interest of justice” exception under MCR 2.403(O)(11), we
remand
to
the
Court
of
Appeals
for
consideration
of
plaintiffs’ cross-appeal.
Michael F. Cavanagh
Clifford W. Taylor
Elizabeth A. Weaver
Marilyn Kelly
Maura D. Corrigan
Robert P. Young, Jr.
Stephen J. Markman
of attorney fees “necessitated by” the rejection of the
case evaluation.
While a causal nexus plainly exists
between rejection and trial fees and costs, the same cannot
be said with respect to rejection and the decision to bring
an appeal.
Rather, appellate attorney fees and costs are
arguably “necessitated by” a perceived erroneous trial
court ruling.
We are cognizant of prior decisions of the Court of
Appeals that have construed the phrase “necessitated by the
rejection” as a mere temporal demarcation.
See, e.g.,
Michigan
Basic
Prop
Ins
Ass’n
v
Hackert
Furniture
Distributing Co, Inc, 194 Mich App 230, 235; 486 NW2d 68
(1992).
On the basis of the language of MCR 2.403(O),
however, we believe the better-reasoned approach goes
beyond a temporal demarcation and requires a causal nexus
between rejection and incurred expenses.
14
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