Valeria HALIW and Ilko Haliw, Plaintiffs-Appellees/Cross-Appellants,
v.
CITY OF STERLING HEIGHTS, Defendant-Appellant/Cross-Appellee.
Docket No. 237269.
Court of Appeals of Michigan.
Submitted March 12, 2003, at Detroit. Decided August 5, 2003, at 9:10 a.m. Released for Publication September 18, 2003.*565 Haliw, Siciliano and Mychalowych (by Andrew J. Haliw and Raymond L. Feul), Farmington Hills, for the plaintiffs.
O'Reilly, Rancilio, Nitz, Andrews & Turnbull, P.C. (by Bert T. Ross), Sterling Heights, for the defendant.
Before: MARKEY, P.J., and WHITE and ZAHRA, JJ.
*564 MARKEY, P.J.
This case presents the question whether "actual costs," as provided in MCR 2.403(O), include reasonable appellate attorney fees necessary to obtain a favorable verdict after rejection of a case evaluation.[1] We hold that they do, and accordingly, reverse and remand for further proceedings in the trial court.
I. Overview of Facts and Proceedings
Mrs. Valeria Haliw was walking on a snow-covered sidewalk when she slipped and fell on a patch of ice that had formed where two sections of the sidewalk met to create a depression. Mrs. Haliw and her husband, Ilko Haliw, filed their complaint on January 6, 1997, alleging that defendant city of Sterling Heights breached its duty under M.C.L. § 691.1402 to maintain the sidewalk in a condition reasonably safe and convenient for public travel. After discovery, defendant moved for summary disposition, arguing that it was immune from liability because plaintiffs' claim was barred by the natural accumulation doctrine. See e.g., Stord v. Dep't of Transportation, 186 Mich.App. 693, 694, 465 N.W.2d 54 (1991). On September 8, 1997, the trial court denied defendant's motion from the bench. Before the order granting *566 summary disposition was entered, plaintiffs' claim was submitted to mediation. On October 13, 1997, both parties rejected the unanimous mediation award of $55,000 in plaintiffs' favor. On April 28, 1998, this Court granted defendant leave to appeal the trial court's denial of its motion for summary disposition. We affirmed the trial court, Haliw v. Sterling Hts, unpublished opinion per curiam of the Court of Appeals, issued October 5, 1999 (Docket No. 206886), but our Supreme Court granted defendant leave to appeal and reversed, Haliw v. Sterling Hts., 464 Mich. 297, 627 N.W.2d 581 (2001). Our Supreme Court held that the natural accumulation doctrine precluded plaintiffs from recovering against defendant. Id. at 310-312, 627 N.W.2d 581. Accordingly, the Supreme Court reversed this Court and remanded the case to the trial court to grant defendant's motion for summary disposition. Id. at 312, 627 N.W.2d 581.
On remand, defendant moved for the entry of an order granting it summary disposition and for its costs and attorney fees pursuant to MCR 2.403(O). Defendant requested $31,618 in case evaluation sanctions which included its appellate attorney fees. The trial court entered an order granting defendant summary disposition but agreed with plaintiffs that MCR 2.403(O) did not provide for payment of defendant's appellate attorney fees. Because the trial court could not segregate defendant's trial court costs and attorney fees from its appellate costs and attorney fees, the trial court requested that defendant do so and resubmit a bill of costs. Thereafter, defendant presented a supplemental motion for mediation sanctions in the amount of $5,335 for its trial court expenses. At the hearing on defendant's supplemental motion, the trial court recognized it had the discretion to not award costs or attorney fees, but noted that there were two sides to the case and that defendant had incurred expenses. The trial court further reasoned that because plaintiffs' claim was not frivolous and because the appellate ruling established legal precedent benefiting defendant, it would award defendant only $1,500 in case evaluation sanctions.
Defendant appeals by right the trial court's order granting case evaluation sanctions, arguing that although the trial court granted its motion, the trial court improperly excluded its appellate attorney fees. Defendant asserts that the plain language of MCR 2.403(O) permits awarding a litigant that ultimately obtains a verdict more favorable than a rejected mediation award its reasonable attorney fees without drawing any distinction between fees incurred in the trial court and those incurred on appeal. Plaintiffs cross-appeal, arguing that the trial court abused its discretion by failing to invoke the interest of justice exception of MCR 2.403(O)(11) and refusing to award defendant any of its attorney fees under their exception.
II. Standard of Review
We review de novo the interpretation and application of a court rule. Marketos v. American Employers Ins. Co., 465 Mich. 407, 412, 633 N.W.2d 371 (2001). Thus, whether MCR 2.403(O)(1) applies and mandates the imposition of sanctions presents a question of law that we review de novo. Campbell v. Sullins, 257 Mich.App. 179, 667 N.W.2d 887 (2003) Great Lakes Gas Transmission Ltd. Partnership v. Markel, 226 Mich.App. 127, 129-130, 573 N.W.2d 61 (1997). There are three exceptions to the general rule requiring the imposition of sanctions, one being MCR 2.403(O)(11), which allows trial courts to refuse to award actual costs to a prevailing party "in the interests of justice" when the verdict was entered as a result of a motion. Great Lakes Gas, supra at 130, 573 *567 N.W.2d 61. We review for an abuse of discretion a trial court's refusal to award actual costs pursuant to MCR 2.403(O)(11). Campbell, supra at 205 n. 9, 667 N.W.2d 887. A trial court's determination of the amount of "a reasonable attorney fee" under MCR 2.403(O)(6)(b) is also reviewed for an abuse of discretion. Zdrojewski v. Murphy, 254 Mich.App. 50, 73, 657 N.W.2d 721 (2002); Maryland Cas. Co. v. Allen, 221 Mich.App. 26, 32, 561 N.W.2d 103 (1997). A trial court abuses its discretion only if its decision is grossly contrary to fact and logic, Michigan Basic Prop Ins. Ass'n v. Hackert Furniture Distributing Co., Inc., 194 Mich.App. 230, 234, 486 N.W.2d 68 (1992), or evidences a perversity of will, a defiance of judgment, or the exercise of passion or bias, Elia v. Hazen, 242 Mich.App. 374, 377, 619 N.W.2d 1 (2000).
III. Appellate Attorney Fees Under MCR 2.403(O)
We are required to apply general principles of statutory construction when interpreting the meaning of a court rule. Hinkle v. Wayne Co. Clerk, 467 Mich. 337, 340, 654 N.W.2d 315 (2002); Marketos, supra at 413, 633 N.W.2d 371. When the language of the rule is clear and unambiguous, we must enforce the meaning plainly expressed. Hinkle, supra at 340, 654 N.W.2d 315, citing Grievance Administrator v. Underwood, 462 Mich. 188, 193-194, 612 N.W.2d 116 (2000). If construction is necessary, the first principle guiding our review is to apply the plain language of the rule, giving effect to the ordinary meaning of the words used in light of the purpose to be accomplished. Dessart v. Burak, 252 Mich.App. 490, 497, 652 N.W.2d 669 (2002); Dykes v. William Beaumont Hosp., 246 Mich.App. 471, 484, 633 N.W.2d 440 (2001). The overall purpose of MCR 2.403(O) "is to encourage settlement, deter protracted litigation, and expedite and simplify the final settlement of cases." Id. at 498, 633 N.W.2d 440. Although the rule is not punitive, it places the burden of court costs and reasonable attorney fees incurred by the prevailing party on the party that forces the litigation to continue by rejecting case evaluation. Id.; Jerico Constr., Inc. v. Quadrants, Inc., 257 Mich.App. 22, 666 N.W.2d 310 (2003)
As a preliminary matter, we note that MCR 2.403 has been frequently amended. In general, this Court applies the version of the rule existing at the time mediation, now case evaluation, was rejected. Dessart, supra at 497, 652 N.W.2d 669. See also Dresselhouse v. Chrysler Corp., 177 Mich.App. 470, 481-482, 442 N.W.2d 705 (1989) (requiring application of the mediation rule in effect at the time of rejection to avoid injustice), and Herrera v. Levine, 176 Mich.App. 350, 359-360, 439 N.W.2d 378 (1989) (applying the version of the rule existing at the time of mediation).
On March 5 and 14, 1997, the Michigan Supreme Court adopted several amendments of MCR 2.403 that initially were ordered to take effect on July 1, 1997, but were postponed until October 1, 1997. 454 Mich, cxxii. In addition to other changes, the language in MCR 2.403(O)(1) was amended from "and the action proceeds to trial" to "and the action proceeds to verdict." 454 Mich, cxxvii (emphasis added); 429 Mich. cxvi. Consequently, at the time mediation was rejected in this case, MCR 2.403(O)(1) 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.
Further, MCR 2.403(O)(2), which defined "verdict," was amended in subsection c from "a judgment entered as a result of a *568 ruling on a motion filed after mediation" to "a judgment entered as a result of a ruling on a motion after rejection of the mediation evaluation." 454 Mich. cxxviii. The 1997 amendments did not change MCR 2.403(O)(6), which provided:
For the purpose of this rule, actual costs are
(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. [434 Mich. cxlvi; 454 Mich. cxxviii.]
Here, the parties rejected the mediation award on October 13, 1997, twelve days after the 1997 amendments became effective MCR 2.403(O) essentially contained the same language at the time the trial court granted defendant's motion for case evaluation sanctions.[2] Therefore, we analyze whether "actual costs" include appellate attorney fees pursuant to MCR 2.403 as amended October 1, 1997. Dessart, supra at 497, 652 N.W.2d 669; Herrera, supra at 359-360, 439 N.W.2d 378. We begin by noting that as a general rule, attorney fees are not recoverable either as an element of costs or damages unless recovery is expressly authorized by statute or court rule. Grace v. Grace, 253 Mich.App. 357, 370-371, 655 N.W.2d 595 (2002). However, when the plain language of the amended version of MCR 2.403(O)(1), which eliminated the term "trial," is read together with MCR 2.403(O)(2) and MCR 2.403(O)(6), the following construction develops: If a party has rejected an evaluation and the action proceeds to verdict (a judgment entered as a result of a ruling on a motion after rejection of the case evaluation) that party must pay the opposing party's actual costs (costs taxable in any civil action, and 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 case evaluation) unless the verdict is more favorable to the rejecting party than the case evaluation.
The plain language of the rule neither expressly allows nor disallows appellate attorney fees. The only qualifications regarding attorney fees are that a trial judge determine that the fees are reasonable, and that they were "necessitated by the rejection" of the case evaluation. MCR 2.403(O)(6); Campbell, supra at 198-199, 667 N.W.2d 887. We have previously held that the language "necessitated by the rejection" is a temporal demarcation requiring only that the party entitled to recover its reasonable attorney fees in defending or pursuing a claim have incurred the fees after rejection of the evaluation. Michigan Basic Prop. Ins., supra at 235, 486 N.W.2d 68. Therefore, a rejecting party "could be liable for any attorney fees incurred [by the prevailing party] after rejection of the case evaluation, so long as those fees were reasonable." Campbell, supra at 199, 667 N.W.2d 887. Further, the 1997 amendment removed the requirement of MCR 2.403(O)(1) that sanctions apply when "the action proceeds to trial,"[3] thus de-emphasizing "trial" as the sole or determinative proceeding in regards to *569 awarding sanctions after rejection of a case evaluation. Moreover, this Court has held that it is the ultimate "verdict" after appellate review that controls whether sanctions are appropriate under MCR 2.403(O). Hyde v. Univ. of Michigan Regents, 226 Mich.App. 511, 526, 575 N.W.2d 36 (1997); Keiser v. Allstate Ins. Co., 195 Mich.App. 369, 374-375, 491 N.W.2d 581 (1992). Accordingly, we hold that appellate attorney fees may be awarded under MCR 2.403(O)(6)(b) because (1) they are not excluded, (2) a trial is not necessary to trigger sanctions, and (3) the applicable "verdict" for determining sanctions is that rendered after appellate review.
Our construction is consistent with this Court's interpretation of certain statutory provisions as permitting an award of appellate attorney fees to successful litigants where the statutes did not exclude appellate fees. In Solution Source, Inc. v. LPR Assoc. Ltd. Partnership, 252 Mich.App. 368, 652 N.W.2d 474 (2002), this Court held that M.C.L. § 570.1118(2) permits a trial court to award reasonable appellate attorney fees to a prevailing party under the Construction Lien Act, M.C.L. § 570.1101, et seq. The Court noted a similar holding under the Michigan Consumer Protection Act, M.C.L. § 445.901et seq., id. at 374-375, 652 N.W.2d 474, quoting Smolen v. Dahlmann Apartments, Ltd., 186 Mich.App. 292, 297-298, 463 N.W.2d 261 (1990), and opined:
Furthermore, this Court has determined in numerous other cases that attorney fees for services rendered in connection with appellate proceedings are recoverable under similarly worded statutes that likewise allow for the recovery of attorney fees and do not restrict the recovery to attorney fees incurred at the trial level. See Leavitt v. Monaco Coach Corp., 241 Mich.App. 288, 311-312, 616 N.W.2d 175 (2000) (appellate fees recoverable under the Magnuson-Moss WarrantyFederal Trade Commission Improvement Act, 15 U.S.C. 2301 et seq.); Grow v. W A Thomas Co., 236 Mich.App. 696, 720, 601 N.W.2d 426 (1999) (appellate attorney fees recoverable under the Civil Rights Act, M.C.L. § 37.2101 et seq.); Bloemsma v. Auto Club Ins. Ass'n (After Remand), 190 Mich.App. 686, 689-691, 476 N.W.2d 487 (1991) (appellate attorney fees available under Michigan's no-fault act, M.C.L. § 500.3148[1]); Escanaba & L S R Co. v. Keweenaw Land Ass'n, Ltd., 156 Mich.App. 804, 818-819, 402 N.W.2d 505 (1986) (appellate attorney fees available under the Uniform Condemnation Procedures Act, M.C.L. § 213.51 et seq., even though the statute only allows recovery for expenses incurred in defending against the improper acquisition of the property at issue).
The underlying purpose of MCR 2.403(O), "`to encourage settlement and deter protracted litigation by placing the burden of litigation costs upon the party that required that the case proceed toward trial by rejecting the mediator's evaluation,' " further buttresses our conclusion. Jerico Constr, Inc, supra at 32, 666 N.W.2d 310, quoting Broadway Coney Island, Inc. v. Commercial Union Ins. Co., 217 Mich.App. 109, 114, 550 N.W.2d 838 (1996). To exclude appellate attorney fees would frustrate the purpose of the rule to impose litigation costs on the rejecting party by allowing the rejecting party to avoid those fees and instead "burden [the prevailing party] because of an error of law on the part of the trial court." Keiser, supra at 374, 491 N.W.2d 581.
IV. Prior Decisions of the Court of Appeals
Plaintiffs rely primarily on this Court's prior decisions in Giannetti Bros. Constr. Co., Inc. v. City of Pontiac, 175 Mich.App.
*570 442, 438 N.W.2d 313 (1989), and American Cas. Co. v. Costello, 174 Mich.App. 1, 435 N.W.2d 760 (1989). In American Cas. Co., the defendants sought recovery of appellate fees as mediation sanctions after the plaintiff unsuccessfully appealed a jury verdict of no cause of action. Id. at 13, 435 N.W.2d 760. In declining the defendants' request for appellate fees, this Court stated:
We believe that the mediation sanctions provided for in MCR 2.403(O) are only intended to apply through final judgment at the trial court level. The trial court in this case has awarded actual expenses for trial activities as a mediation sanction pursuant to MCR 2.403(O). Sanctions for appellate expenses are specifically set forth in MCR 7.216(C). Said rule does not provide for mediation sanctions for appellate activities. See, e.g., Fisher v. Detroit Free Press, Inc., 158 Mich.App. 409, 416-419, 404 N.W.2d 765 (1987). Defendants' request to supplement the trial court's award of mediation sanctions under MCR 2.403(O) is denied. [Id.]
In Giannetti Bros. Constr Co., supra, which involved consolidated appeals, this Court examined whether GCR 1963, 316.7 and 316.8, the predecessors of MCR 2.403(O), allowed recovery of postjudgment appellate attorney fees. In Giannetti Bros. Constr. Co. v. Pontiac, the first of the two consolidated appeals, both parties rejected the mediation award and, after a bench trial, the trial court entered a judgment of no cause of action in favor of the defendant. Id. at 444, 438 N.W.2d 313. Although the trial court initially awarded defendant its costs and attorney fees, after the plaintiff unsuccessfully appealed the judgment, the trial court ruled that the defendant's bill of costs was untimely. Id. at 444-445, 438 N.W.2d 313. The defendant successfully appealed this ruling, however, and sought to add its appellate attorney fees to its bill of costs, which the trial court denied. Id. at 445, 438 N.W.2d 313.
In Dukay Air Ltd. v. Mitsubishi Aircraft Int'l., Inc., the second consolidated appeal, the defendant rejected the mediation award, which the jury verdict exceeded after offsets. Id. The trial court denied the defendant's postjudgment motions and awarded the plaintiff costs. Id. at 446, 438 N.W.2d 313. The defendant appealed the judgment in favor of the plaintiff, and this Court affirmed. Id. Thereafter, the trial court denied the plaintiff's motion for appellate attorney fees and the plaintiff appealed to this Court. Id.
The Giannetti Court reviewed the issue whether the definition of "actual costs" then found in MCR 2.403(O)(3) included appellate attorney fees. Similar to its current version in MCR 2.403(O)(6), MCR 2.403(O)(3) defined actual costs as including "those costs taxable in any civil action and a reasonable attorney fee as determined by the trial judge for services necessitated by the rejection of the ... evaluation." Giannetti Bros. Constr. Co., supra at 447, 438 N.W.2d 313. This Court relied on American Cas. Co., supra, to conclude that it did not:
While we are not bound by decisions rendered by other panels of this Court, we are persuaded that American Casualty represents the correct view. Postjudgment appellate attorney fees do not fall within the realm of mediation sanctions awardable under the court rules. Accordingly, neither trial court abused its discretion in denying them. [Giannetti Bros. Constr. Co., supra at 447, 438 N.W.2d 313.]
First, neither American Cas. Co., nor Giannetti Bros Constr Co, is controlling precedent because each was decided before November 1, 1990. MCR 7.215(J)(1).
*571 Second, the court rule interpreted in each case has been significantly amended since each case was decided in 1989. Finally, we do not concur in the implicit reasoning of the panel in American Cas. Co., supra, adopted by the panel in Giannetti Bros. Constr. Co., supra, that appellate attorney fees may only be obtained under MCR 7.216(C), which provides for the recovery of actual damages if an opposing party pursues a vexatious appeal. MCR 7.216(C)(1) defines a "vexatious appeal" as one where:
(a) the appeal was taken for purposes of hindrance or delay or without any reasonable basis for belief that there was a meritorious issue to be determined on appeal; or
(b) a pleading, motion, argument, brief, document, record filed in the case or any testimony presented in the case was grossly lacking in the requirements or propriety, violated court rules, or grossly disregarded the requirements of a fair presentation of the issues to the court.
MCR 7.216(C) may in some cases provide relief for unnecessary appellate attorney fees to a party who initially prevails in the trial court when an appeal by the opposing party is "vexatious," but it provides no relief to a litigant who ultimately prevails in the trial court after a successful appeal, as in the case at bar. By definition, a successful appellant has not pursued a vexatious appeal. Moreover, our Supreme Court has explicitly recognized that actual, reasonable attorney fees may be obtained under MCR 2.403(O) even where a statute also provides for the recovery of attorney fees, provided that the prevailing party receive no more than actual and reasonable fees. See Rafferty v. Markovitz, 461 Mich. 265, 272-273 and n. 6, 602 N.W.2d 367 (1999), and McAuley v. Gen. Motors Corp., 457 Mich. 513, 578 N.W.2d 282, 284 (1998). The McAuley Court held that a litigant who had already recovered its reasonable attorney fees under a statutory provision[4] could not also recover attorney fees under MCR 2.403(O). Id. at 522, 578 N.W.2d 282. However, the Court in McAuley also recognized that "if the applicable statute limits the recovery of attorney fees to something less than a reasonable attorney fee and there are actual costs remaining, an additional award may be appropriate in some cases." Id. at 521, 578 N.W.2d 282. The Rafferty Court followed McAuley but repudiated its dicta that a double recovery of attorney fees may be possible in certain cases. Rafferty, supra at 272-273 and n. 6, 602 N.W.2d 367. In sum, that one rule may permit the recovery of reasonable attorney fees, i.e., sanctions for frivolous claims or defenses authorized by statute, M.C.L. § 600.2591, and by court rules, MCR 2.114; MCR 2.625(A)(2), or for a vexatious appeal under MCR 7.216(C), does not preclude the application of MCR 2.403(O), provided a litigant has not already recovered all of its reasonable attorney fees under the other rule.
Moreover, MCR 7.216(C) and MCR 2.403(O) serve different purposes. While MCR 2.403(O) is designed to encourage settlement and deter protracted litigation, Jerico Constr, Inc, supra at 32, 666 N.W.2d 310; MCR 7.216(C) deters clear abuse of the appellate process, DAIIE v. Ayvazian, 62 Mich.App. 94, 103, 233 N.W.2d 200 (1975), citing 6 Honigman & Hawkins, Michigan Court Rules Annotated (2d ed.), p. 194. Indeed, because MCR 7.216(C) is designed to impose sanctions where an appeal is brought "without any reasonable basis for belief that there was a meritorious issue to be determined on appeal," *572 MCR 7.216(C)(1)(a), the rule dovetails with our holding that MCR 2.403(O)(6) includes reasonable appellate attorney fees where a litigant is ultimately successful in the trial court after appellate review.
Similarly, plaintiffs' reliance on DeWald v. Isola (After Remand), 188 Mich.App. 697, 700-701, 470 N.W.2d 505 (1991) (holding that it is inappropriate to expand the scope of MCR 2.114, 2.625[A][2], and M.C.L. § 600.2591 to cover costs, including attorney fees, incurred on appeal and remand for a frivolous action), and Leavitt v. Monaco Coach Corp., 241 Mich.App. 288, 616 N.W.2d 175 (2000), also fails. DeWald, supra, is not pertinent because it does not interpret MCR 2.403(O), and because it analogizes to this Court's decisions in American Cas. Co., supra, and Giannetti Bros. Constr. Co., supra, interpreting MCR 2.403(O) before its amendment in 1997. Likewise, this Court's comments in Leavitt, supra at 312 n. 4, 616 N.W.2d 175, are dicta because the Leavitt panel concluded that the plaintiff waived the issue of whether appellate attorney fees may be recovered under MCR 2.403(O). This Court is not bound by dicta under the first-out rule of MCR 7.215(J)(1). Horace v. City of Pontiac, 456 Mich. 744, 754-755, 575 N.W.2d 762 (1998); Meyer v. Mitnick, 244 Mich.App. 697, 701, 625 N.W.2d 136 (2001).
Thus, after a careful review, we are neither bound by the prior decisions of this Court discussed above, nor are we persuaded that our interpretation of MCR 2.403(O) is wrong.
V. MCR 2.403(O)(11) and the Interests of Justice
Subsection 11 was added by the 1997 amendments to MCR 2.403(O) and provides:
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. [MCR 2.403(O)(11).]
Subsection 11 is one of three exceptions to the general rule set forth in MCR 2.403(O)(1) that a party who rejects a case evaluation "must pay the opposing party's actual costs unless the verdict is more favorable to the rejecting party than the case evaluation." (Emphasis added.) See also Elia, supra at 378-379, 619 N.W.2d 1; Great Lakes Gas, supra at 130, 573 N.W.2d 61. The present case implicates MCR 2.403(O)(11) because the "verdict" here was entered "as a result of a ruling on a motion after rejection of the case evaluation." MCR 2.403(O)(2)(c). Subsection 11 patently confers discretion on the trial court to "refuse to award actual costs" where the verdict is entered as result of a motion and the trial court finds it is "in the interest of justice" to do so. Because the rule does not define "interest of justice," we must "look to the language and purpose of the rule" for definition. Luidens v. 63rd Dist. Court, 219 Mich.App. 24, 31, 555 N.W.2d 709 (1996).
The Luidens panel addressed the meaning of the term "interest of justice" found in MCR 2.405(D)(3), which creates an exception to the imposition of sanctions for rejecting an offer of judgment. Id. We find Luidens instructive because both MCR 2.403(O), imposing costs for rejecting a case evaluation, and MCR 2.405(D), imposing costs for rejecting an offer of judgment, serve identical purposes of deterring protracted litigation and encouraging settlement. Dessart, supra at 498, 652 N.W.2d 669; Luidens, supra at 31, 555 N.W.2d 709. The two rules are not identical, however. MCR 2.405(D)(3) gives trial courts the discretion, in all cases where an offer of judgment has been rejected, to decline to impose attorney fees in the "interest of justice." On the other hand, *573 MCR 2.403(O)(11) applies only to verdicts rendered as a result of a motion but grants the trial court discretion to refuse to award "actual costs," which include both court costs and reasonable attorney fees. The term "interest of justice" in MCR 2.403(O)(11) must not be too broadly applied so as to swallow the general rule of subsection 1 and must not be too narrowly construed so as to abrogate the exception. Luidens, supra at 33, 555 N.W.2d 709. This Court further held that factors normally present in litigation, such as a refusal to settle being viewed as "reasonable," or that the rejecting party's claims are "not frivolous," or that disparity of economic status exists between the parties, are insufficient "without more" to justify not imposing sanctions in the "interest of justice." Id. at 33-34, 37, 555 N.W.2d 709. Rather, the unusual circumstances necessary to invoke the "interest of justice" exception may occur where a legal issue of first impression is presented, id at 35, 555 N.W.2d 709, or
"where the law is unsettled and substantial damages are at issue, where a party is indigent and an issue merits decision by a trier of fact, or where the effect on third persons may be significant...." [Id. at 36, 555 N.W.2d 709, quoting Judge Harrison in Nostrant v. Chez Ami, Inc., 207 Mich.App. 334, 340, 525 N.W.2d 470 (1994).]
The Luidens panel further opined:
The common thread in these examples is that there is a public interest in having an issue judicially decided rather than merely settled by the parties. In such cases, this public interest may override MCR 2.405's purpose of encouraging settlement. These examples involve unusual circumstances under which the "interest of justice" might justify an exception to the general rule that attorney fees are to be awarded. We recognize, of course, that the factors suggested here as relevant to the "interest of justice" exception are not exclusive. We offer them only as examples. Other circumstances, including misconduct on the part of the prevailing party, may also trigger this exception. [Id. at 36, 555 N.W.2d 709.]
In Stitt v. Holland Abundant Life Fellowship (On Remand), 243 Mich.App. 461, 624 N.W.2d 427 (2000), this Court followed the "unusual circumstance" interpretation of the phrase "interest of justice," as found in MCR 2.405(D)(3). Indeed, the Stitt panel determined that the trial court had abused its discretion by not invoking the exception. Specifically, this Court concluded that the combination of two "unusual circumstances," the unsettled nature of the law and the "gamesmanship" evidenced by the large disparity between the rejected mediation evaluation and the defendant's offer of judgment, compelled invocation of the "interest of justice" exception to awarding attorney fees. Id. at 471-476, 624 N.W.2d 427.
Recently, this Court applied the "abuse of discretion" standard employed in reviewing a trial court's application of MCR 2.405(D)(3) to reviewing a trial court's decision whether to invoke the "interest of justice" exception in MCR 2.403(O)(11). Campbell, supra at 205 n. 9, 667 N.W.2d 887. The plaintiff in Campbell advanced four theories at trial: two statutory claims, a breach of contract claim and a fraud claim. Id. 184, 667 N.W.2d 887. The trial court directed verdicts in the defendant's favor regarding the statutory claims, and the jury returned verdicts of no cause of action on the contract and fraud claims. Id. at 185, 667 N.W.2d 887. The trial court found no compelling reason to invoke MCR 2.403(O)(11) because the defendant incurred the same costs regarding the statutory claims as if the case had continued *574 to jury verdict. This Court found no abuse of discretion by the trial court. Campbell, supra at 205-206, 667 N.W.2d 887. The Campbell Court noted:
We deem it appropriate to apply the same standard of review, abuse of discretion, as utilized by this Court in reviewing a trial court's decision in regard to the interest-of-justice exception found in the sanctioning provisions of the offer-of-judgment rule, MCR 2.405(D)(3). Stitt v. Holland Abundant Life Fellowship (On Remand), 243 Mich.App. 461, 472, 476-477, 624 N.W.2d 427 (2000). [Id. 205 n. 9, 667 N.W.2d 887.]
In sum, we conclude that if the trial court finds on the basis of all the facts and circumstances of a particular case and viewed in light of the purposes of MCR 2.403(O) that unusual circumstances exist, it may invoke the "interest of justice" exception found in MCR 2.403(O)(11). It follows that if the exception applies, the trial court may, in the exercise of its discretion, refuse to award any costs or attorney fees, or may award something less than "actual costs," i.e., something less than taxable costs and reasonable attorney fees. The trial court must, however, articulate the bases for its decision. Luidens, supra at 32, 555 N.W.2d 709, citing Hamilton v. Becker Orthopedic Appliance Co., 214 Mich.App. 593, 596-597, 543 N.W.2d 60 (1995).
In the present case, because we have concluded that the trial court erred as matter of law by refusing to consider awarding defendant its reasonable appellate attorney fees, we must vacate the trial court's award of costs and reasonable attorney fees and remand the matter to the trial court for further proceedings consistent with this opinion. Therefore, we do not address whether the trial court's partial award of costs and attorney fees incurred by defendant in the trial court was an abuse of discretion. On remand, the trial court shall review all of the costs defendant incurred, including trial and appellate attorney fees, to determine its "actual costs" under MCR 2.403(O)(6), and determine whether unusual circumstances are present in this case that justify an adjustment of "actual costs" in the "interest of justice" under MCR 2.403(O)(11).
VI. Conclusion
We vacate the order granting defendant's motion for case evaluation sanctions and remand this matter to the trial court for further proceedings consistent with this opinion. We do not retain jurisdiction. No taxable costs are awarded pursuant to MCR 7.219 because neither party prevailed in full and a question of public policy was involved.
ZAHRA, J., concurred.
WHITE, J., (dissenting).
I respectfully dissent. MCR 2.403 consistently has been interpreted as providing for attorney fees incurred at the trial level only, and as not providing for attorney fees incurred on appeal. Leavitt v. Monaco Coach Corp., 241 Mich.App. 288, 312 n. 4, 616 N.W.2d 175 (2000); Giannetti Bros. Constr. Co., Inc. v. City of Pontiac, 175 Mich.App. 442, 447, 438 N.W.2d 313 (1989); American Cas. Co. v. Costello, 174 Mich.App. 1, 13, 435 N.W.2d 760 (1989). See also Dean & Longhofer, Michigan Court Rules Practice, § 2403.22, p. 533. None of these cases relied on MCR 2.403's then-requirement that the case proceed to trial in order for mediation sanctions to be invoked.[1]*575 The changes in the court rule relied upon by the majority were not intended to address the issue whether appellate fees and costs are assessable as mediation sanctions. Rather, the changes were addressed at making mediation sanctions available where a party prevails on motion, rather than at trial. I would not read the changes as evidencing an intent by the Supreme Court to modify the construction previously given the rule with respect to whether appellate attorney fees are appropriately included as an element of mediation sanctions.
NOTES
[1] Effective August 1, 2000, the procedure prescribed in MCR 2.403 was renamed "case evaluation." "Mediation" now refers solely to the process established by MCR 2.411, whereby a neutral third party assists the parties to explore solutions to promote a mutually acceptable settlement. As used in this opinion, however, "mediation" refers to the case evaluation process of MCR 2.403 and its predecessors.
[2] See n. 1, supra.
[3] See Herrera, supra at 359, 439 N.W.2d 378 ("The express language of the rule itself sets forth only two conditions to trigger sanctions: (1) the party to be sanctioned rejected the mediation evaluation; and (2) `the action proceeds to trial.'"), and Mehelas v. Wayne Co. Community College, 176 Mich.App. 809, 816, 440 N.W.2d 117 (1989) ("`Until the Supreme Court sees fit to amend the rules, we conclude that MCR 2.403(O) only applies to cases that proceed to trial.'" [Citation omitted.]).
[4] MCL 37.1606(3) of the handicappers' civil rights act, M.C.L. § 37.1101 et seq.
[1] I observe that Keiser v. Allstate Ins. Co., 195 Mich.App. 369, 491 N.W.2d 581 (1992), which the majority notes held that the ultimate "verdict" after appellate review controls whether sanctions are appropriate under MCR 2.403(O), recognized a distinction between the inquiry before it and two issues previously decided in the negative in other cases-whether sanctions could be based on a pretrial motion, rather than a trial verdict, and whether costs and expenses on appeal are recoverable under MCR 2.403(O). While the instant issue was not before the Keiser Court, the Court, having acknowledged the changes in the mediation rule that permitted an award of sanctions following a pretrial grant of summary disposition, then distinguished the cases that held that appellate costs and fees are not recoverable, explaining that "sanctions for appellate expenses are expressly set forth in MCR 7.216(C), which does not provide for mediation sanctions." Keiser, supra at 374, 491 N.W.2d 581.