Case Evaluation Sanctions Surely are Gone, Baby Gone!

Prior to the Jan. 1, 2022 amendment to the Michigan Court Rules, a party to a lawsuit who accepted a case evaluation award could hit a proverbial “home run” and have its actual costs paid by an opposing party.

This was not automatic, however. If a party rejected a case evaluation award, it could avoid sanctions by obtaining a more favorable verdict at trial. 

Specifically, MCR 2.403(O)(1) previously provided that  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 case evaluation.”  Actual costs included taxable costs and a reasonable attorney fee for work performed after the rejection of the case evaluation award.

The rule forced parties to a lawsuit to seriously consider the impact of failing to accept an award. But that changed when the Michigan Supreme Court amended MCR 2.403, effective Jan. 1, 2022. Since that time, questions have arisen regarding the application of the court rules to cases that pre-dated the amendment. A recent appellate decision appears to have provided an answer.

On Aug. 10, the Michigan Court of Appeals reversed a trial court’s case evaluation sanctions and vacated the court’s orders awarding case evaluation sanctions in the case of R.A.D. Construction v Davis.

In this case, the parties attended case evaluation in January 2021 – about one year prior to the effective date of the amended court rules. RAD rejected the award on Feb. 9, 2021, and the parties, Chase Bank, Integrity and Boyd, accepted. The parties would then go on to a bench trial over one year later in March 2022 during which RAD failed to obtain a more favorable verdict.

While not clear in the opinion, it appears that the trial court awarded case evaluation sanctions against RAD because the parties engaged in case evaluation before the Supreme Court amended MCR 2.403.

The Michigan Court of Appeals, however, reversed the sanctions award. According to the appellate court, the timing of the bench trial was paramount. Specifically, the ruling provided:

The amendments became effective January 1, 2022. MCR 1.102 requires applying the court rules to all pending cases. Amended court rules apply to pending actions unless there is a reason to apply the old rules. We find no reason to apply the old rule in this case.

Ultimately, the appellate court held that the trial court had no authority to sanction RAD for a trial occurring after Jan. 1, 2022, effectively turning that apparent home run into a flyout.

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