Michigan Supreme Court
Lansing, Michigan
Chief Justice: Justices:
Opinion 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 of Appeals for
consideration of plaintiffs’ cross-appeal.
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 area where two sections of the
sidewalk met. Mrs. Haliw and her husband, plaintiff Ilko
Haliw, brought 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. Before the trial court ruled on the motion,
however, the matter was submitted to case evaluation
pursuant to MCR 2.403.1
On September 8, 1997, the trial court denied
defendant’s motion for summary disposition. 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 plaintiffs’ claim.3
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 in defendant’s favor. The trial court,
however, rejected defendant’s request for appellate
attorney fees and costs. Defendant subsequently moved to
recover $5,335 in case evaluation sanctions for its trial
court fees and costs. After considering defendant’s
2
Unpublished opinion per curiam of the Court of
Appeals, issued October 5, 1999 (Docket No. 206886).
3
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 appealed, asserting that the trial court
impermissibly excluded its appellate attorney 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 “interest of justice” exception under MCR
2.403(O)(11). 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 the principles that govern statutory
interpretation. Grievance Administrator v Underwood, 462
Mich 188, 193; 612 NW2d 116 (2000). Accordingly, this
Court begins with the language of the court rule. Id. at
194. 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 as a result of a
ruling on a motion after rejection of the
mediation evaluation.
* * *
(6) 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.
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 structure of the Michigan Court Rules as a whole.
When interpreting a court rule or statute, we must be
6
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. The court rule governing case
evaluation sanctions appears in chapter two, which
addresses civil procedure. Appellate fees and costs are
addressed under chapter seven, the chapter specifically
controlling appellate procedure. Thus, the lack of any
reference to appellate attorney 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. Dessart
v Burak, 470 Mich 37, 42; 678 NW2d 615 (2004). 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 party’s costs absent an express
exception. 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 MCR 2.403(O) does not expressly exclude
appellate attorney fees and costs, such expenses are
recoverable. That conclusion runs contrary to the American
rule governing the payment of attorney fees. As noted, the
8
American rule permits recovery of fees and costs where
expressly authorized. As such, the fact that MCR 2.403(O)
does not expressly exclude appellate fees and costs is not
determinative. Therefore, we do not believe that the
failure of MCR 2.403(O) to expressly exclude appellate
attorney fees and costs is necessarily dispositive under
these limited circumstances.
Our conclusion is supported by the fact that MCR
2.403(O) is trial-oriented. For example, at the time of
this action, MCR 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 as a result of a
ruling on a motion after rejection of the
mediation evaluation.
The most natural reading of MCR 2.403(O)(1) and (2)
contemplates a trial-oriented court rule. Notably absent
from the definition of “verdict,” or any 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.” In support of
its conclusion that appellate fees and costs are
recoverable, the Court of Appeals relied on this amendment.
The Court of Appeals reasoned that because this Court “de-
emphasiz[ed]” a trial as the “determinative proceeding,”
this Court somehow intended that appellate attorney fees
and costs should now be recoverable as case evaluation
sanctions. Haliw, supra at 698. 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. By amending the court rule, this Court
clarified that 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 by denying the defendant’s directed verdict
motion. Keiser v Allstate Ins Co, unpublished opinion per
curiam 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). The trial court ordered the
plaintiff to pay 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; 438 NW2d 313 (1989), which held that
appellate fees and costs are not recoverable under MCR
2.403(O). Further, the Keiser panel observed that
“sanctions for appellate expenses are expressly set forth
in MCR 7.216(C), which does not provide for [case
evaluation] sanctions.” Keiser, supra at 374.
12
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). However, Keiser cannot be interpreted as
concluding that appellate attorney fees and costs are
recoverable under the court rule. 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 as case evaluation sanctions under MCR
2.403(O). Accordingly, we reverse the decision of 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