New court rules enacted in Michigan have a significant impact on the procedures for case evaluation. Case evaluation is a form of alternative dispute resolution that is governed by Michigan Court Rule 2.403. The purpose of case evaluation is for a panel of independent lawyers to make an objective assessment of the monetary value of a lawsuit. Generally, the parties would be ordered by the presiding court to participate in case evaluation in front of a panel of three attorneys or retired judges. The parties to a lawsuit would typically submit a case evaluation brief and supporting documents to familiarize the panel with the case and the parties’ positions, and the attorneys would typically make an oral presentation to the panel. The panel will make a determination of an amount of money the panel believes is an acceptable amount that the parties should agree to settle the case for. This is called the case evaluation award. The case evaluation award is not binding on the parties. Rather, the parties then have the opportunity to accept or reject the award.
If both parties accepted the award, the case would be settled for the award amount. However, prior to the recent changes to the court rule, if one or all parties rejected the award, the rejecting party was at risk of sanctions in the form of paying the other side’s actual costs, which include reasonable attorneys’ fees and taxable costs from that point forward. The only way to overcome sanctions was for the rejecting party to obtain a verdict at trial of 10% more than the case evaluation award. The threat of sanctions often caused parties to accept otherwise unsatisfactory awards to avoid the possibility of being liable for sanctions down the line.
The Michigan Supreme Court recognized the dilemma that sanctions had produced. Therefore, effective as of January 1, 2022, the Court modified the rule, removing sanctions for rejecting parties and allowing parties to stipulate to alternate forms of dispute resolution upon the court’s approval. The changes also reduce the time for submitting case evaluation summaries from 14 to 7 days before the hearing.
The biggest question surrounding the changes is how they will apply to pending cases. What if the parties participated in case evaluation prior to the changes being effective, one or all parties rejected the award, but the trial did not take place until after January 1, 2022? The answer to this question will be subject to disputes until the Supreme Court definitively clarifies which rule applies. With the immense backlog of cases due to disruptions imposed by Covid-19, it is likely that there are a number of cases that fall within this grey area.
As the Michigan Court of Appeals has held, “[t]he general rule is that the newly adopted court rules apply to pending actions unless there is reason to continue applying the old rules.” Davis v O’Brien, 152 Mich App 495, 500; 393 NW2d 914, 917 (1986). However, whether or not there is a persuasive reason to apply the old rule requires a case-by-case analysis.
One potential avenue of change is that parties may seek to utilize the Offer of Judgment Rule, MCR 2.405, which imposes similar restraints as the former MCR 2.403 to parties that reject offers of judgment which could have resolved the case. Seeing as we are just a few months into this new era of case evaluation, only time will tell of the impact the changes will have. For now, it is important to continue to utilize the dispute resolution tools available to resolve matters in the most favorable way for clients.
*The information provided above is not intended to be provided as legal advice and should not be construed as such.