Are ‘Mediation’ Sanctions Still in Play, Despite Amendments?

This article was first published in the Detroit Legal News on April 6, 2023.

A. Vince Colella
Moss & Colella P.C.

On December 2, 2021, the Michigan Supreme Court amended the Michigan Court Rules to allow parties to remove medical malpractice and tort cases from case evaluation and stipulate to an alternative dispute resolution (ADR) process (with judicial approval). Additionally, and perhaps more importantly, the amendments removed sanction provisions under MCR 2.403 (O). While the majority’s support of the amendments is rooted in the notion that most lawyers had lost faith in the process (believing that support of case evaluation had been eroding for years), judges, including some on the Supreme Court, were not convinced. The dissent to the amendments was authored by Justice David Viviano. Presciently, the justice remarked, “[I]f the amendments actually [accomplish] what they set out to do – allowing parties to opt out of case evaluation and [eliminate] sanctions – it would sound the death knell of case evaluation as an effective dispute resolution tool.” From the Michigan Supreme Court, 101 MI Bar Journal., 58, 58: Admin. Order No. 2002-06 (Dec. 2, 2021).

And that is precisely the fallout from the rule change.

However, at least one judge in Wayne County has seemingly recognized the danger of allowing case evaluation to become extinct — and may have set the stage for future challenges that could resurrect the old rule. Recently, the parties to an auto negligence case agreed — to what now has been a customary stipulation — to remove the matter from case evaluation. However, shortly after submitting the stipulated order, the trial court posted a message directly from the judge that read, “Non-binding ‘recommendation’ regarding tort claims is unacceptable, as MCL 600.4969 applies to tort claims.” The parties were further instructed to submit an order that provided for “traditional” case evaluation (referring to the old rule) or an agreement that the matter would proceed to case evaluation under the penalties prescribed by statute. Clearly, this is a sharp rebuke of the 2021 amendment.

The trial court’s position raises questions about the legitimacy of the amendments and the high court’s authority to promulgate court rules in direct conflict with statutory authority. And, while the directive may be viewed as controversial, the trial court’s obstinance is not without legal authority. In his dissenting opinion to the proposed changes under MCR 2.403, Justice Viviano cited a conflict between the new rule and long-standing statutory authority.  

Michigan has historically departed from the ‘American Rule’ to a fee-shifting model to encourage parties to seriously consider settlement or face the financial burdens of litigation as a penalty for dragging a case through trial. Yet, chapters 49 and 49A of the Revised Judicature Act (RJA), MCL 600.101, et. seq., do just that! Under MCL 600.4969, if a party has rejected an evaluation and the action proceeds to trial, that party shall pay the opposing party’s actual costs unless the verdict is more favorable to the rejecting party than the “mediation” award. The statutory provisions adopt — almost verbatim — the 10% rule for determining whether a verdict is considered “more favorable” to the rejecting party. Recognition of this conflict gave Justice Viviano pause for concern, writing, “…unfortunately, the majority today puts our trial courts in the unenviable position of having to determine whether the newly amended court rule or the conflicting laws enacted by our Legislature govern the case evaluation process.” Admin. Order 2020-06, pg. 12.

And that’s exactly the position Michigan courts find themselves in today.

Given the obvious nature of the conflict, tort lawyers may decide to mount a challenge. Over the last couple of years, as more and more cases are removed from case evaluation in lieu of non-binding or sanctionable ADR, the dynamics of tort settlement processes have shifted in favor of the insurance carriers. Where this can be felt most is in the litigation of third-party bodily injury auto cases where it is not unusual to have damages in serious injury cases far exceed applicable policy limits. The economic incentive for auto insurance carriers to pay “full value” is undermined by policy coverage limitations. Thus, with no threat of having to incur attorney fees, carriers have little to lose by going to trial.

While there are no pending cases currently in the appellate courts mounting such a challenge, Justice Viviano’s rationale offers a solid argument to pave the way for Michigan courts to depart from the new rule and compel parties to participate in traditional case evaluation and apply sanctions under the existing statute. Considering the prevailing opinions of trial court judges reflected by their respective judicial associations (collectively expressing strong support in favor of the old rule), it certainly seems personal injury attorneys have the judicial support to challenge the new rule, object to removal of cases from evaluation and seek sanctions under MCL 600.4969.

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A. Vince Colella is a co-founder of personal injury and civil rights law firm Moss & Colella.