MSC Adopts Framework For Applying Amended Court Rules, OKs Case-Evaluation Sanctions Under Old MCR 2.403

The trial court properly awarded case-evaluation sanctions under now-eliminated Michigan Court Rule 2.403(O) because it “had discretion to apply the former court rule” under Michigan Court Rule 1.102 “and did not abuse that discretion,” the Michigan Supreme Court has held.

In Webster v Osguthorpe (Docket Nos. 166627 and 166628), the high court formally adopted the framework outlined by the Michigan Court of Appeals in Reitmeyer v Schultz Equipment & Parts Co, Inc, 237 Mich App 332 (1999), to “guide” the trial courts’ determinations of when to apply a current or former Michigan Court Rule (MCR).

“We agree that MCR 1.102 provides the pertinent analysis because it specifically permits trial courts to apply former court rules if doing so would prevent injustice,” Chief Justice Megan K. Cavanagh wrote for the high court. “We also agree that an individualized determination guided by the nonexhaustive factors from Reitmeyer – including timing, purpose of the newly adopted rule, possible gamesmanship, and reliance – is appropriate given that these factors bear on whether injustice would occur. Therefore, trial courts should look to Reitmeyer as the guidepost for determining whether to apply a newly amended rule to a pending case.”

The Michigan Supreme Court further held that a de novo review of these cases is inappropriate. “[W]e adopt the abuse-of-discretion standard from Reitmeyer for reviewing a trial court’s decision under MCR 1.102. We conclude that this standard is appropriate because the court rule provides discretion to a trial court to apply the former rules ‘if it finds that the application of these rules to that action would not be feasible or would work injustice.’”

Based on the foregoing, “we hold that the trial court [in this case] did not abuse its discretion by applying the former version of MCR 2.403 and awarding case-evaluation sanctions,” the justices said.

Justice Brian K. Zahra, Justice Richard H. Bernstein, Justice Elizabeth M. Welch, Justice Kyra H. Bolden and Justice Kimberly A. Thomas joined the decision. Justice Noah P. Hood did not participate because the court considered the case before he assumed office.

Background

The plaintiff filed a dental malpractice lawsuit against the defendants in Macomb County Circuit Court. The parties participated in the case-evaluation process, which was mandatory at the time under MCR 2.403. A panel entered a case evaluation that included an award in favor of the plaintiff. The plaintiff accepted the award, but the defendants rejected it. Thereafter, the parties participated in at least five settlement conferences and two court-ordered facilitations.

A jury ultimately returned a verdict for the plaintiff. The defendants filed a motion for judgment notwithstanding the verdict or, in the alternative, remittitur. The plaintiff filed a motion for entry of judgment and requested costs, statutory interest and attorney fees as case-evaluation sanctions under MCR 2.403(O).

While litigation in the case was ongoing, MCR 2.403 was amended to eliminate the availability of case-evaluation sanctions. Previously, MCR 2.403(O) had allowed costs and attorney fees as sanctions against a losing party who rejected a case-evaluation award, unless the jury verdict was more favorable to them than the award.

As a result of this rule change, the defendants maintained that an award of case-evaluation sanctions under MCR 2.403(O) was improper. The trial court held a hearing and granted the plaintiff’s motion for sanctions. The parties later stipulated to a reasonable amount of attorney fees. The trial court entered an amended judgment reflecting that amount, along with statutory interest and costs.

The defendants appealed. The Court of Appeals reversed (Docket Nos. 362891 and 363747) the sanctions award but affirmed the trial court’s decision in all other respects. According to the appellate panel, although the trial court had discretion to apply the abolished court rule, the sanctions award was inappropriate because the verdict for the plaintiff was so substantially above the case-evaluation award that there was no injustice to the plaintiff.

Both parties appealed to the Michigan Supreme Court.

‘Reitmeyer’ Is Right

In its analysis, the Michigan Supreme Court explained that MCR 2.403(O) was eliminated in 2022 to “level the playing field for plaintiffs and defendants ….”

The justices also pointed out that, to determine whether a prior version of a court rule should apply, Michigan courts have relied on MCR 1.102. This court rule says: “These rules take effect on March 1, 1985. They govern all proceedings in actions brought on or after that date, and all further proceedings in actions then pending. A court may permit a pending action to proceed under the former rules if it finds that the application of these rules to that action would not be feasible or would work injustice. [Emphasis added.]”

The high court then looked to Reitmeyer, noting it was “instructive” because it “addressed a similar situation in which sanctions that were previously available under the court rules became unavailable after an amendment became effective mid-litigation.” In Reitmeyer, the trial court had determined that an amended court rule applied because “procedural rules are to operate retrospectively in the absence of a clear contrary intention.” On appeal, the Court of Appeals held that MCR 1.102 governed this determination and required application of an amended rule unless doing so would “work injustice.”

Moreover, the Reitmeyer panel emphasized there is “no bright-line rule for determining when an amended or previous version of a rule applies; rather, the court ‘must look more closely to the particular circumstances of the case at issue and at the purpose of the amendment,’” the Michigan Supreme Court observed. The Reitmeyer panel “held that a decision under MCR 1.102 requires an individual determination in this (and in every) case whether such ‘injustice’ would result from the application of the amended version of [the court rule]. This determination should be based on the substance of the rule involved and the timing of plaintiff’s actions, plaintiff’s obvious gamesmanship or lack thereof, and thus plaintiff’s reliance or lack of reliance on the rules as they existed at the time he made the pertinent decisions in this case, and any other pertinent factors in the individual case. We emphasize that while the results may be different between the old and new rule, as may ordinarily be expected, this is not the dispositive factor in the analysis. Rather, we believe that several factors must be considered when determining the ‘injustice’ in a particular case and whether a party ‘relied’ on a court rule to the extent that it would be ‘unjust’ to alter the rule in midstream.”

In relying on Reitmeyer, the Michigan Supreme Court rejected the defendant’s request to instead apply RAD Construction, Inc v Davis, 347 Mich App 716 (2023), where the Court of Appeals reversed an award of case-evaluation sanctions. “Defendants argue that, under RAD Constr, the trial court lacked the authority to award case-evaluation sanctions under former MCR 2.403(O). However, we are not persuaded that the terse analysis of the application of MCR 1.102 in RAD Constr overrides the careful consideration given to this issue in Reitmeyer. … To the extent that RAD Constr suggests that the trial court did not have the authority to apply the former version of the rule, it is overruled.”

‘Abuse Of Discretion’ Applies

Next, the Michigan Supreme Court turned to the appropriate standard of review when examining a trial court’s decision under the Reitmeyer framework.

“To the extent that RAD Constr and the Court of Appeals in this case applied a de novo standard of review to a trial court’s decision under MCR 1.102, we disagree that de novo review is appropriate,” the high court said. “Instead, we adopt the abuse-of-discretion standard from Reitmeyer for reviewing a trial court’s decision under MCR 1.102. We conclude that this standard is appropriate because the court rule provides discretion to a trial court to apply the former rules ‘if it finds that the application of these rules to that action would not be feasible or would work injustice.’ … Abuse-of-discretion review is generally appropriate when a decision ‘require[s] familiarity with the facts of the case and experience in maintaining a trial court docket.’”

Moreover, “[t]his standard is also consistent with how Michigan courts have treated ‘interest of justice’ exceptions in former MCR 2.403 and other court rules,” the justices observed.

Applying an abuse-of-discretion standard, “we hold that the trial court did not abuse its discretion by applying the former version of MCR 2.403 and awarding case-evaluation sanctions,” the Michigan Supreme Court said. “As an initial matter, because defendants rejected the case-evaluation award and the verdict was not more favorable to defendants than the award, plaintiff is entitled to sanctions under the conditions of MCR 2.403(O) as it was applied.”

The justices explained the Court of Appeals had reasoned that applying the new court rule would not “work an injustice” because the “consequence of going to trial ultimately worked to plaintiff’s financial benefit, even when the added expense of going to trial is considered. … While this point is well taken, the Court of Appeals appeared to conduct a de novo analysis of whether application of the current rule would work an injustice under MCR 1.102. However, … the appropriate standard for reviewing the trial court’s decision is the abuse-of-discretion standard. While the Court of Appeals arguably analyzed ‘pertinent factors in the individual case,’ … it failed to contend with the articulated reasons for the trial court’s decision within the Reitmeyer framework. Moreover, the trial court’s decision to apply former MCR 2.403(O) was not outside the range of reasonable and principled outcomes considering the specific facts of this case.”

Based on the foregoing, “[w]e cannot say that there was an abuse of discretion when the trial court correctly applied MCR 1.102 and Reitmeyer,” the Michigan Supreme Court said. “Merely because a denial of sanctions may have been supportable does not mean that the trial court abused its discretion by allowing sanctions. The trial court did not simply rely on the fact that a different result would be obtained from applying the current rule. … Instead, it appropriately considered plaintiff’s reliance interests and the timing of the rule change to conclude that application of the former rule would “’work injustice.’”

In conclusion, the high court said the Reitmeyer framework is the correct guide for trial courts to follow when ascertaining whether to apply a newly adopted court rule to pending actions. “We also hold that a trial court’s decision in this realm is reviewed for an abuse of discretion. Applying the considerations from Reitmeyer, we hold that the trial court did not abuse its discretion by awarding case-evaluation sanctions to plaintiff under former MCR 2.403(O). We therefore reverse the Court of Appeals’ judgment in part and reinstate the trial court’s award of case-evaluation sanctions.”