Michigan Court of Appeals; Docket #257702; Unpublished
Judges White, Whitbeck, and Davis; unanimous; per curiam
Official Michigan Reporter Citation: Not applicable, Link to Opinion 
STATUTORY INDEXING:
Allowable Expenses: Incurred Expense Requirement [3107(1)(a)]
Accrual of PIP Benefits [3110(4)]
General / Miscellaneous [3148]
TOPICAL INDEXING:
Not Applicable
CASE SUMMARY:
In this unanimous unpublished per curiam opinion (approved for publication on June 15, 2006), the Court of Appeals reversed the trial court’s refusal to award defendant case evaluation sanctions, finding the trial court’s reason for its denial – the possibility that plaintiff would be denied future first-party benefits if he accepted the evaluation – did not fit within one of the three recognized narrow exceptions to MCR 2.403(O)(1), i.e., the award consists of equitable relief; the award involves a dramshop action; or the verdict was the result of a ruling on a motion.
The plaintiff in this case sustained ill-defined back injuries for which he sought first-party benefits from defendant, his no-fault insurer. After defendant failed to tender payment within 30 days of the submission, plaintiff filed this action. At case evaluation, plaintiff’s claim was valued at $55,000. Both parties rejected, and the matter proceeded to trial at which time the court entered a judgment of no cause of action. Defendant moved for case evaluation sanctions. The trial court denied the motion, finding good cause existed for plaintiff’s rejection. According to the court, had plaintiff accepted the evaluation, he could have been barred from seeking future benefits under MCR 2.403(M)(1) and the Michigan Supreme Court’s decision in CAM Construction v Lake Edgewood Condo Association, 465 Mich 549 (2002).
The Court of Appeals reversed, finding that under the plain language of MCR 2.403(O)(1), the award of case evaluation sanctions is mandatory if a party rejects an evaluation and the resulting verdict is not more favorable to the rejecting party than the case evaluation. In this regard, the court rule provides in part: “[i]f 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.” In reversing, the court found that plaintiff’s argument that it had to reject the evaluation because if it had not, it would have been barred from being able to recover future benefits did not fit within one of the narrow exceptions set out in Great Lakes Gas Transmission Ltd Partnership v Markel. Under the holding in Great Lakes Gas, the only exceptions that will bar case evaluation sanctions include where an award consists of equitable relief; an award involves a dramshop action; and where the verdict is the result of a ruling on a motion. In this regard, the court stated:
“The decision to award case evaluation sanctions is determined as a matter of law; it is not a discretionary matter. The use of the word ‘must’ indicates that the imposition of these sanctions is mandatory. In Great Lakes Gas Transmission Ltd Partnership v Markel, this Court found that there are only three narrow exceptions to the mandatory imposition of case evaluation sanctions. Under the first exception, the trial court may decline to award costs in a case involving equitable relief, when the verdict (considering both equitable and monetary relief) is more favorable to the rejecting party than the evaluated award. The second exception applies only to dramshop actions. Finally, the trial court ‘may, in the interest of justice, refuse to award costs’ when the judgment is ‘entered as a result of a ruling on a motion after the party rejected the [case] evaluation’ under MCR 2.403(O)(2)(c). This case does not fall within any of the exceptions provided in the plain language of the court rule; thus, the trial court was required to impose case evaluation sanctions in State Farm's favor.”
The court next addressed what constitutes actual costs, holding that defendant improperly sought to include paralegal and clerical fees in its award. According to the court, these fees are already taken into account as part of the attorney’s cost of doing business. In this regard, the court stated, quoting its decision in Joeger v Gordon Food Service, Inc, 224 Mich App 167 (1997):
“‘Clearly, attorney fees are not meant to compensate only work performed personally by members of the bar. Rather, the term must refer to a reasonable fee for the work product of an attorney that necessarily includes support staff. The rule allowing an award of attorney fees has traditionally anticipated the allowance of a fee sufficient to cover the office overhead of an attorney together with a reasonable profit. . . . Fixed overhead costs include such items as employee wages, rent, equipment rental, and so forth. . . . Thus, until a statute or a court rule specifies otherwise, the attorney fees must take into account the work not only of attorneys, but also of secretaries, messengers, paralegals, and others whose labor contributes to the work product for which an attorney bills a client, and it must also take account of other expenses and profit.”
Finally, the court affirmed the denial of plaintiff’s motion for JNOV or a new trial, finding there was sufficient evidence for the jury to conclude that plaintiff did not injure his back while fueling his car, but that his back injury was simply a natural progression of a pre-existing back injury.
