Caudill v. STATE FARM MUTUAL AUTO. INS. CO.

Order                                                                      Michigan Supreme Court
                                                                                 Lansing, Michigan

  March 5, 2010                                                                          Marilyn Kelly,
                                                                                             Chief Justice

  140130 & (29)(31)(36)                                                            Michael F. Cavanagh
                                                                                   Elizabeth A. Weaver
                                                                                    Maura D. Corrigan
                                                                                   Robert P. Young, Jr.
  ESTILL GERALD CAUDILL,                                                           Stephen J. Markman
            Plaintiff-Appellee,                                                    Diane M. Hathaway,
                                                                                                  Justices
  v                                                      SC: 140130
                                                         COA: 294951
                                                         Oakland CC: 2008-094413-NF
  STATE FARM MUTUAL AUTOMOBILE
  INSURANCE COMPANY,
           Defendant-Appellant.

  _________________________________________/

         On order of the Court, the motion for immediate consideration, the motion to file a
  document under seal, and the motion for leave to file a reply brief are GRANTED. The
  application for leave to appeal the December 3, 2009 order of the Court of Appeals is
  considered, and it is DENIED, because we are not persuaded that the questions presented
  should be reviewed by this Court.

        KELLY, C.J. (concurring).

         I concur in the Court’s order denying defendant’s interlocutory application for
  leave to appeal. This case involves a lengthy and contentious dispute over discovery.
  Defendant argues that the trial judge lacked any authority to appoint a master to help
  manage discovery. A master was appointed in March 2009. In a later order, the judge
  stated that the master’s purpose was to “assist and promote a mutually acceptable
  settlement of discovery disputes” and made clear that the master had “no authoritative
  decision making power.” The master was merely to make recommendations to the trial
  court.

          Defendant filed a motion for clarification on April 22, 2009. It questioned how
  the discovery master would be compensated and by what authority the master was
  appointed. A hearing on the motion was scheduled for July 15, 2009, but no oral
  argument was placed on the record. Instead, the parties agreed to the entry of an order
  stating that defendant would produce a chart or grid listing certain documents that
  plaintiff had requested. The order specified that it would be entered under a protective
  order of the trial court and was for use by plaintiff only. Defendant did not push for a
                                                                                           2

resolution of its motion regarding the authority for appointment of the master. Instead,
over the next months, defendant conducted active discovery and behaved as if it had
accepted the master’s appointment. It scheduled twenty-nine depositions, started sixteen,
and completed fifteen.

       In the meantime, defendant never produced the grid as agreed. When this was
brought to the trial judge’s attention on August 12, 2009, the judge entered an order
requiring defendant to produce the grid within 21 days. Defendant did not produce the
grid within 21 days. Instead, it sent plaintiff’s attorney a letter and a proposed protective
order governing the production of the grid. Plaintiff’s counsel refused to sign it because,
he asserted, the July 15, 2009, order was a protective order.

        The matter went before the trial judge once again on September 30, 2009. The
judge agreed with plaintiff that a protective order was already in place and again ordered
defendant to produce the grid. Defendant failed to produce it. On October 7, 2009,
plaintiff filed a motion for entry of a default based on defendant’s failure to produce
documents, including the grid, as ordered by the court. At that time, defendant filed a
renewed motion for clarification and/or to strike the order appointing the discovery
master.

       The trial judge seemed displeased with defendant’s delays in making discovery
and with its repeated violations of the court’s orders. In an October 27, 2009, order, the
judge found that defendant had “blatantly ignored” three discovery orders and assessed
costs and sanctions against it in the amount of $1,500. Finding it “noteworthy that
Defendant’s request for clarification and/or to strike comes nearly six months following
the appointment of a discovery master[,]” the court denied defendant’s motion.

        I concur in this Court’s decision to deny defendant’s interlocutory application for
appeal. Defendant seems intent on obstructing the discovery process. It waited nearly
six months after the appointment of the discovery master to ask the trial court to resolve
whether it had authority to appoint the master. That occurred only after it grew
dissatisfied with the way discovery was proceeding. Thus, it appears that defendant
waived its objection to the trial court’s authority to make the appointment. This Court
properly declines to allow defendant to harbor the alleged error until after it became
dissatisfied with an adverse ruling.1

         CORRIGAN, J. (dissenting).

       I dissent from the Court’s order denying defendant’s application for leave to
appeal in what should be a routine first-party no-fault case. Plaintiff apparently engaged
in abusive discovery tactics that the trial court did not control. Instead, the trial court
1
    See Mitan v New World Television, Inc, 469 Mich 898 (2003).
                                                                                           3

delegated its judicial power to a discovery master to review a request for 77,000 pages of
documents and make recommendations to the court. The trial court lacked this authority.
Carson Fischer Potts and Hyman v Hyman, 220 Mich App 116 (1996). Moreover,
defendant’s objection to the appointment of the master was timely. Finally, the wrongful
appointment of a discovery master cannot be corrected after final judgment.
Accordingly, I would remand to the Court of Appeals for consideration as on leave
granted.

        Plaintiff filed this first-party no-fault claim against defendant State Farm, his no-
fault insurer, after he was injured in an automobile accident on March 23, 1994. During
discovery, plaintiff asked defendant to produce its ACE (Advanced Claims Excellence)
program documents. The parties do not describe in detail what types of documents this
includes, but the requested material amounts to approximately 77,000 pages of
documents. After defendant failed to timely produce the documents, plaintiff moved to
compel production of the documents. Defendant responded by moving to strike and
seeking a protective order. It objected to the lack of any limitation on the request for
production of the ACE documents, and to plaintiff’s request for the production of
defendant’s general claims memos, Auto Claims Manual, and for the personnel files of its
employees. On March 18, 2009, after a hearing, the trial court entered a handwritten
order stating, “Mark Frankel is hereby appointed special discovery master in this case.”
On March 30, 2009, the court entered a more detailed order appointing Mark Frankel
discovery master, directing him to review the disputed documents in camera, and then
report to the court with recommendations.

       On April 22, 2009, defendant moved for clarification of the trial court’s authority
to appoint a discovery master. Defendant also pointed out that the order omitted any
direction that the discovery master must keep the documents confidential. A hearing on
the motion was scheduled for July 15, 2009, but the parties instead agreed to the
following order:

              The Court defers hearing on the motion, and because of the volume
       of the records, Defendant shall produce a chart or grid of potential
       Michigan ACE documents for Plaintiff’s review; and the chart or grid shall
       be issued under the protective order of this Court, only by and for use of
       this Plaintiff, only, and not to be revealed to any other parties; and the
       parties will discuss and present the documents generated to the Court, if
       agreement cannot be reached.
       The parties’ attorneys disagree about the nature of the discussions surrounding
agreement on this order. Defense counsel claims that the parties discussed the need for a
separate protective order. Plaintiff’s counsel claims that defense counsel drafted the July
15, 2009 order and said that defendant would produce the grid in about a week.
                                                                                           4

        At an August 12, 2009 hearing on other discovery matters, the trial court learned
that defendant had not yet produced the grid. An order entered on that date requiring
defendant to produce the grid within 21 days. Instead of producing the grid, defense
counsel submitted a proposed protective order concerning production of the grid to
plaintiff’s counsel. Plaintiff’s attorneys contended that the July 15, 2009 order was a
protective order and refused to sign defendant’s proposed protective order.

       On September 15, 2009, defendant moved for clarification regarding whether the
court’s previous orders contemplated a separate protective order. After a hearing on
September 30, 2009, the court ordered that “[t]he order previously entered as a result of
State Farm’s earlier Motion for Clarification shall be the protective order” but “with the
following addition:” that all documents and any copies were to be returned to defendant
within 60 days of the termination of the action, along with an affidavit of plaintiff
indicating compliance with the protective order.

       On October 7, 2009, plaintiff moved for entry of a default on the basis of
defendant’s failure to comply with the court’s orders to produce documents including the
ACE grid. Defendant filed a renewed motion for clarification on the same day, arguing
that the trial court lacked the authority to appoint a discovery master. On October 27,
2009, the trial court denied plaintiff’s motion for entry of a default, denied defendant’s
motion to strike the order appointing the discovery master, and assessed $1500 in
sanctions against defendant. The court also ordered the parties to share the costs of the
discovery master on a pro rata basis.

        On November 3, 2009, defendant produced the ACE grid. The grid is a 31-page
list of 930 documents consisting of over 77,000 pages.

       On November 6, 2009, defendant applied for leave to appeal in the Court of
Appeals, which was denied for failure to persuade the court of the need for immediate
appellate review. After defendant sought leave to appeal in this Court, the trial court
stayed the trial court proceedings while this application for leave to appeal is pending, but
the trial court also scheduled a status conference for January 29, 2010, in order to
reconsider the stay order.

       In an introductory section of its application entitled “The Setup,” defendant claims
that plaintiff’s request for documents is part of a plan that “involves using the discovery
process primarily as a vehicle for discrediting one’s opponent, and possibly obtaining a
default so as to avoid having to try a weak case.” Defendant claims that this tactic was
used against it in a federal case by a law firm with whom plaintiff’s attorneys share office
space. Defendant also contends that three prior cases were filed in Oakland Circuit Court
                                                                                            5

on behalf of plaintiff by the same law firm or its predecessors.2 According to defendant,
plaintiff’s claims file is approximately 8,600 pages.

         I dissent from this Court’s decision to deny defendant’s interlocutory application
for leave to appeal. First, controlling case law supports defendant’s argument that the
trial court had no power to appoint a discovery master. In Carson, 220 Mich App at 121,
the trial court authorized an expert witness to “make findings of fact, conclusions of law
and a final recommendation and proposed judgment as to the disposition of this matter
. . . .” The Court of Appeals concluded that the trial court’s delegation of power violated
the Michigan Constitution:

              The judicial branch is provided for in article 6 of our state
       constitution. Const. 1963, art. 6, § 1 provides:
                     The judicial power of the state is vested exclusively in
              one court of justice which shall be divided into one supreme
              court, one court of appeals, one trial court of general
              jurisdiction known as the circuit court, one probate court, and
              courts of limited jurisdiction that the legislature may establish
              by a two-thirds vote of the members elected to and serving in
              each house.
              Further, Const. 1963, art. 6, § 27 provides:
                     The supreme court, the court of appeals, the circuit
              court, or any justices or judges thereof, shall not exercise any
              power of appointment to public office except as provided in
              this constitution.



2
   A review of Oakland County Circuit Court records confirms that plaintiff filed three
prior no-fault cases against defendant in that court and that the same attorney represented
plaintiff in all three lawsuits. 1994-478680-NF, 1996-522795-NI, 1998-007489-NF. In
all three lawsuits, plaintiff claimed that defendant failed to pay the full amount of no-fault
benefits to which he was entitled under his policy with defendant for injuries arising out
of the same March 23, 1994 automobile accident. In one motion filed in the 1998
lawsuit, plaintiff claimed, “Defendant has at all times failed and refused to pay attendant
care benefits for all hours required by Plaintiff at reasonable market rates, requiring
Plaintiff to bring suit against Defendant on three separate occasions, including the current
litigation, all terminating in the past in Defendant’s ultimate payment of additional
attendant care benefits on the eve of trial.” Each of the three lawsuits was resolved by
stipulation of the parties to orders of dismissal without prejudice pursuant to three
separate release agreements.
                                                                                            6

               In Michigan, judicial power is vested in the courts under our state
       constitution. Johnson v Kramer Bros Freight Lines, Inc, 357 Mich. 254,
       258; 98 NW2d 586 (1959). Although the Supreme Court is empowered by
       the Michigan Constitution to authorize persons who have been elected and
       have served as judges to perform judicial duties for limited periods or
       specific assignments, Const. 1963, art. 6, § 23, there are no constitutional or
       statutory authorities permitting a circuit court judge the power to appoint a
       retired judge or any other person to sit as a court in a civil action.
       Brockman v Brockman, 113 Mich App 233, 237; 317 NW2d 327 (1982).
       Rather, Const. 1963, art. 6, § 27 specifically prohibits such action. In
       Brockman, this Court held that a Wayne Circuit Court judge was without
       constitutional or statutory authority to appoint a former circuit court judge
       to sit as the court and try the matter. Id., p 237. [Carson, 220 Mich App at
       119-120.]
Thus, the Court of Appeals “agree[d] with [the] defendant that there is no constitutional
authority for the trial court to delegate specific judicial functions to an ‘expert witness.’”
Id. at 121.

       In Galba v Macomb County Circuit Judge, unpublished opinion per curiam of the
Court of Appeals, issued February 14, 1997 (Docket No. 194185), the Court of Appeals
panel followed Carson and held that the trial court lacked the authority to appoint a
special master to decide a discovery dispute.

        The Court of Appeals also followed Carson in Oakland County Prosecutor v
Beckwith, 242 Mich App 579 (2000). The Beckwith court noted that neither MRE 706,
cited by the trial court in Carson, nor MCR 1.105, cited by the trial court in Beckwith,
expressly authorizes the appointment of a special master. Id. at 584. In addition, in both
cases, the special master’s findings and conclusions were to be recommendations to the
trial court. Id. The Beckwith court noted, however, that were it not bound by MCR
7.215(H) to follow Carson, it “would hold [that] the circuit court possesses the requisite,
albeit implicit, authority to appoint a special master as long as the assigned duties do not
unduly intrude on the exclusive domain of the court to perform judicial functions.” Id.
See also Lindhout v Ingersoll, 58 Mich App 446, 453 (1975) (“The repeal of the general
statute and court rule [authorizing a court to appoint a referee in certain cases] and the
specific inclusion of the power in other statutes lead this Court to the conclusion that a
referee may be appointed in actions at law only where there is specific statutory authority
therefor.”)

       In Mitan v New World Television, Inc., 469 Mich 898 (2003), this Court reversed
an unpublished Court of Appeals decision following Carson, but we limited our order to
the circumstances of that case, where the plaintiffs “requested the appointment of a
special master to make recommendations on discovery issues,” and failed to “raise[]
                                                                                          7

issues regarding the appropriateness of that procedure in the circuit court,” yet raised
several claims of error regarding the appointment of the special master in the Court of
Appeals.

       Second, the trial court provided no express authority for its order appointing a
discovery master. MCR 2.401(C)(1) provides a non-comprehensive list of matters that
the court and the attorneys for the parties “may consider” at a pretrial conference. MCR
2.410(A)(1) simply states that all civil cases are subject to alternative dispute resolution
processes. MCR 2.410(C), which the court did not cite, provides that “[a]t any time, after
consultation with the parties, the court may order that a case be submitted to an
appropriate ADR process.”         MCR 2.410(A)(2), which the court also did not
acknowledge, provides that “[f]or the purposes of this rule, alternative dispute resolution
(ADR) means any process designed to resolve a legal dispute in the place of court
adjudication . . .” (Emphasis added.) The trial court’s appointment of a discovery master
does not fall under these court rules. The trial court did not “submit[]” the “case” to an
ADR process “after consultation with the parties,” and the appointment of the discovery
master to make recommendations was not “designed to resolve a legal dispute in the
place of court adjudication.” And although the court’s opinion characterized the
discovery master’s intended role as one of facilitator or mediator, nothing its March 30,
2009 order appointing the discovery master suggested such a role. Instead, that order
described the “task/mission” of the discovery master as “conducting an in camera
review” of several specific documents and “report[ing] back to the Court with his
recommendations regarding Defendant’s production of said documents to Plaintiff’s
counsel.”

       Third, in 1999, this Court considered and declined to publish for public comment a
proposed court rule that would have authorized the use of discovery masters in trial
courts. Administrative File No. 97-56. In a letter dated June 19, 1998, the Michigan
Judges Association commented on the proposal as follows:

              The reasons for the opposition are we think that this shifts a judicial
       function from judicial officers to attorneys. The proposal as submitted has
       a de novo review standard in it so that it appears there is a high potential for
       duplicative efforts. There are concerns with equal justice, that is this might
       be utilized by individuals who are more financially capable of using the
       process than others, thus creating the potential for an appearance of two
       standards of justice. There are enough remedies available in the court rules
       to resolve discovery disputes. Many judges feel that by resolving these
       discovery disputes they have a better feel for the case as it progresses
       through the docket and helps them to manage the flow of the cases on their
       docket. The entire process seems to be duplicative of that which is
       available to litigants.
                                                                                            8

        Fourth, this matter is appropriate for appellate review because, unlike the
objecting party in Mitan, supra, defendant raised and preserved its objection to the
appointment of the discovery master in the trial court, and the court addressed
defendant’s argument in its October 27, 2009 opinion. Defendant preserved its objection
to the appointment of the special master by seeking clarification of the trial court’s
authority to appoint the special master in its motion of April 22, 2009. The court’s July
15, 2009 order deferred hearing on defendant’s motion, and apparently on any role for the
discovery master, pending an attempt by the parties’ attorneys to reach an agreement on
the ACE documents. After delays in the production of the ACE grid stemming at least in
part from disputes over the need for a protective order, defendant renewed its motion for
clarification and moved to strike the order appointing the discovery master. Under the
circumstances, defendant adequately preserved its objection to the appointment of the
special master. The trial court considered the objection sufficiently preserved and
addressed defendant’s argument that the court lacked the authority to appoint a discovery
master in its October 27, 2009 opinion. Moreover, there is no reason to defer appellate
review of this issue until the trial court renders its final judgment. An error in the
appointment of the discovery master cannot be corrected after discovery is complete.

        Fifth, I question the appropriateness of the trial court’s decision to assess $1500 in
sanctions against defendant. The trial court concluded in its October 27, 2009 opinion
that defendant was “subject to a full spectrum of sanctions per the Michigan Court Rules”
because it had “blatantly ignored” the court’s orders entered on July 15, 2009, August 12,
2009, and September 30, 2009. I agree with defendant that this is an inaccurate
description of what occurred. As previously discussed, there was disagreement over
whether the July 15, 2009 order contemplated a separate protective order. And while
defendant did not produce the grid within the 21 days required by the August 12, 2009
order, it did send plaintiff’s attorneys a proposed protective order within that time frame.

       The trial court also mischaracterized the September 30, 2009 hearing and order in
its October 27, 2009 opinion:

              During the September 30, 2009 hearing date, the Court stated from
       the bench that Defendant must immediately turn over the ACE grid
       documents to Plaintiff’s counsel. The September 30, 2009 order also
       reflected that the ACE grid documents must be turned over forthwith.
As defendant correctly points out, the September 30, 2009 hearing and order merely
clarified that, despite defendant’s request for one, no separate protective order would be
entered. Moreover, given the apparently proprietary nature of the requested information,
defendant’s insistence on a more detailed protective order seems reasonable. Defendant
produced the grid only after the trial court entered the October 27, 2009 opinion and
order, which threatened additional sanctions including entry of a default judgment if
defendant did not produce the ACE grid within 7 days.
                                                                                                                9


        Finally, plaintiff has apparently engaged in abusive discovery tactics in this case.
The grid defendant has now produced shows that the materials plaintiff has requested in
this routine no-fault case amount to approximately 77,000 pages of documents—and this
accounts only for the Michigan ACE documents. Plaintiff apparently initially requested
defendant’s nationwide ACE documents, the personnel files of defendant’s employees,
all of defendant’s general claim memos, and defendant’s Auto Claims Manual. The
relevance of these documents in a routine no-fault case is unclear. The trial court’s
attempt to control discovery by appointing a discovery master was both inadequate and
contrary to binding Court of Appeals case law.3 By denying defendant’s application for
leave to appeal, this Court allows the trial court’s abuse of discretion to stand and
plaintiff’s unacceptable discovery tactics to continue.

       YOUNG and MARKMAN, JJ., join the statement of CORRIGAN, J.




3
  I also question whether it was appropriate for the trial court to order the parties to share
the cost of the discovery master when it was plaintiff’s massive discovery request that
generated the perceived need for the discovery master.



                          I, Corbin R. Davis, Clerk of the Michigan Supreme Court, certify that the
                    foregoing is a true and complete copy of the order entered at the direction of the Court.
                          March 5, 2010                       _________________________________________
       p0302                                                                  Clerk