We recently held an informal ICLE Community Zoom discussing the amendments to the case evaluation rules eliminating sanctions, among other changes. Attorneys Justin Hakala from Plunkett Cooney and Henry Langberg from Henry Langberg PC joined us to provide their expert analysis and insights. Here are some of the highlights:
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Major changes. (1) Case evaluation sanctions under MCR 2.403(O) were eliminated. (2) The provision in the offer of judgment court rule that offer of judgment sanctions may not be awarded in cases that had been submitted to case evaluation unless the case evaluation award was nonunanimous was deleted. Under the amended court rule, offer of judgment sanctions may be imposed whether or not a case has been submitted to case evaluation and whether or not the case evaluation award is unanimous. (3) Parties may file a stipulation or stipulated order to use an ADR process other than case evaluation. See Chapter 14 of ICLE’s Michigan Civil Procedure book for a detailed discussion of case evaluation and offers of judgment, including additional changes.
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Effective date. The effective date was January 1, 2022. The order adopting the amendments did not indicate how the effective date was to be applied. There is a body of caselaw on transition issues presented by amendments to the case evaluation and offer of judgment rules. It appears from that body of law that the applicable version is the version in effect at the time of rejection. See Dresselhouse v Chrysler Corp, 177 Mich App 470, 442 NW2d 705 (1989). There is also a court rule on the effective date of court rules, MCR 1.102, and it has been applied to court rule amendments. It is not clear, however, how the courts are actually applying the effective date of the case evaluation changes. The only thing that can be said with certainty is that the amendments apply to cases filed on and after January 1, 2022.
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Conflict with statutes. Some statutes, such as MCL 600.4969, require attorney fee sanctions. It is unclear how the rule changes will impact these statutes until the issue is taken up on appeal. Generally, however, court rules trump statutes in matters of procedure, such as process of ADR. Caselaw indicates that you cannot recover sanctions under the court rule and the statute. For contract cases, it is likely that the contract will govern as to whether a party will have to pay fees and costs.
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Facilitating rather than going to case evaluation. Attending case evaluation is now optional under the rules if the parties agree to a different ADR process. Many attorneys appear to be taking this route. The general consensus is that it often makes sense to skip case evaluation because the parties can choose their own facilitators, who are presumably experienced and knowledgeable in the subject area. Additionally, some facilitators do not like having a case evaluation number as it can impact negotiations at facilitation. In the past, a party may have been concerned about the case evaluation number because it was a pivot point in the case.
- Token offers of judgment. Whether an offer of judgment of zero is allowed is debatable, but it is likely prohibited by the court rules. The Michigan Supreme Court was attempting to avoid gamesmanship with the offer of judgment sanctions, though it is unclear what the courts would do in this circumstance. The case Guillard v Hegewald, No 353883 (Mich Ct App Oct 21, 2021) (unpublished), was brought up in this context. This case was decided before the rule changes, so the court rules may trump the holding, although the issue has not ultimately been resolved. The issue of a minimal offer versus a counteroffer was also discussed.
- Removal to district court. A participant noted their experience indicating that, even though the monetary sanctions provision has been removed, they had a case evaluate below the $25,000 threshold, and the case was removed to district court and the district court mediation process. Court rule MCR 2.227 was discussed, which does not provide for a transfer to district court merely because the case evaluation award was less than $25,000. Under AO 1998-1, a circuit court may not transfer an action to a district court under MCR 2.227 based on the amount in controversy unless the parties stipulate to the transfer or “[f]om the allegations of the complaint, it appears to a legal certainty that the amount in controversy is not greater than the applicable jurisdictional limit of the district court.”
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Other ADR processes and the importance of offers of judgment. Some judges are holding status conferences earlier in the case, which can narrow issues and shape how ADR will unfold. Facilitation and mediation are effective tools to settle cases. Offers of judgment are more important now because sanctions are still possible. Under the current rule, a party can make the offer at the beginning of litigation and then recover sanctions for attorney fees for most or all of the litigation.
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Settlement conferences. Some judges are now requiring in person settlement conferences and requiring all necessary people with settlement authority to attend the conference. This tactic has been effective in settling cases. Many judges, however, are still holding conferences remotely.
- Selecting a specialized case evaluation panel. Having a specialized case evaluation panel may make sense in some cases, but it can be a tough sell because the parties are paying the panel an hourly rate. The benefit of facilitative mediation is that someone with experience is using diplomacy to get the case resolved.
If there are other topics you’d like guidance on, please email me at mfranson@icle.org.