Summary
explaining attorney's liens in Michigan
Summary of this case from Taleb v. Miller, Canfield, Paddock & Stone, P.L.C. (In re Kramer)Opinion
Docket No. 182832.
Submitted September 16, 1996, at Detroit.
Decided November 26, 1996, at 9:35 A.M. Leave to appeal sought.
Lakin, Worsham Victor, P.C. (by S. Jay Ahmad), for the plaintiffs.
Holahan, Malloy, Maybaugh Monnich (by John R. Monnich and William J. Kliffel), for the defendants.
In this medical malpractice action involving mediation sanctions, plaintiffs appeal by leave granted the circuit court's reversal of the district court's order granting plaintiffs' motion to compel the distribution of attorney fees and costs. We affirm.
After mediation, the panel issued an evaluation in favor of plaintiffs Cynthia and James Bennett for $7,500, which all parties rejected. The jury later rendered a $5,000 verdict for plaintiffs. Because the adjusted verdict of $5,787.40 was more than ten percent below the mediation evaluation, defendants were entitled to mediation sanctions. The district court ruled that plaintiffs owed defendants $6,389.65 in mediation sanctions plus interest.
Plaintiffs then moved for reimbursement from defendants of $1,687.39 in costs and $1,366.66 for their attorney's one-third contingency fee. The district court granted plaintiffs' motion and ordered defendants to pay the costs and contingency fee. The circuit court, however, denied plaintiffs' motion, opining that defendants were not bound by the terms of the contingency agreement for attorney fees because they were not parties to the agreement. Plaintiffs appeal.
This figure represents one-third of the judgment after costs were subtracted (or one-third of $4,100).
Plaintiffs assert that their counsel is entitled to the satisfaction of his attorney fees and costs from the judgment before defendants' mediation sanctions are offset because the attorney's lien is enforceable against a third party with actual knowledge of the lien. We disagree.
Michigan recognizes a common-law attorney's lien on a judgment or fund resulting from the attorney's services. George v Sandor M Gelman, PC, 201 Mich. App. 474, 476-477; 506 N.W.2d 583 (1993); Doxtader v Sivertsen, 183 Mich. App. 812, 815; 455 N.W.2d 437 (1990). A special or charging lien is an attorney's equitable right to have the fees due for services secured from the judgment in a particular suit. George, supra at 476. In accordance with that theory, plaintiffs' counsel would be entitled to a one-third contingency fee from the judgment.
In Doxtader, supra, a case cited by both parties regarding a common-law attorney lien, the trial court entered a default judgment against the defendant for $25,000. The plaintiff, without informing his attorney, later entered a satisfaction of judgment agreement for only $1,500. The plaintiff's attorney moved to set aside the satisfaction, arguing that he had a lien on the default judgment. Doxtader, supra at 813-814. This Court addressed whether the plaintiff had the right to discharge a judgment without his attorney's consent and decided that the plaintiff could not discharge the claim if it prejudiced the lien. Id. at 815. Doxtader is distinguishable from the instant case because mediation sanctions were not at issue in Doxtader. Also, the Doxtader plaintiff was entitled to a $25,000 judgment, whereas in this case, plaintiffs' judgment amounts to a negative number. Further, the Doxtader plaintiff attempted to satisfy the judgment without his attorney's knowledge; in this case, plaintiffs' attorney knew that plaintiffs rejected the mediation evaluation.
Also, the action at bar is unlike cases with multiple defendants where one defendant has settled with the plaintiff, and then the verdict at trial is more favorable to another defendant, to whom the court later awards mediation sanctions. Under that circumstance, the plaintiff's counsel is entitled to collect his contingency fee from the settlement, which was separate and apart from the verdict. Moreover, in that instance another defendant had paid the settlement, which is not the situation here.
The current action also does not present facts similar to those in cases where counsel seeks reimbursement of attorney fees from an existing fund. See Aetna Casualty Surety Co v Starkey, 116 Mich. App. 640; 323 N.W.2d 325 (1982); Miles v Krainik, 16 Mich. App. 7; 167 N.W.2d 479 (1969). In this case, no fund exists from which plaintiffs' counsel may collect his fee.
In contrast with the common-law principles illustrated above, MCR 2.403, the mediation sanctions court rule, provides that the party to whom the verdict was more favorable is entitled to sanctions. Under that rule, defendants are entitled to sanctions against plaintiffs in an amount that exceeds the sum of the verdict. Whether defendants must pay plaintiffs' attorney fees from the judgment before offsetting the mediation sanctions is an issue of first impression and is a question of law subject to review de novo. McCaw v T L Operations, Inc, 217 Mich. App. 181, 185; 550 N.W.2d 852 (1996); Lockhart v 36th Dist Court Judge, 204 Mich. App. 684, 688; 516 N.W.2d 76 (1994).
We must decide whether the court rules regarding attorney fees and mediation sanctions take precedence over a common-law attorney lien. This Court applies the rules of statutory construction when interpreting court rules. Smith v Henry Ford Hosp, 219 Mich. App. 555; 557 N.W.2d 154 (1996); Larson v Auto-Owners Ins Co, 194 Mich. App. 329, 332; 486 N.W.2d 128 (1992). When the language of a statute conflicts with the common law, the unambiguous language of the statute takes precedence. Barker Bros Construction v Bureau of Safety Regulation, 212 Mich. App. 132, 140; 536 N.W.2d 845 (1995). Also, the Legislature presumably is aware of contrary common-law rules that a statute will abrogate. Dep't of Treasury v Campbell, 107 Mich. App. 561, 568; 309 N.W.2d 668 (1981). Similarly, our Supreme Court presumably is aware of contrary common-law rules when fashioning court rules.
The common-law right to an attorney's lien is not codified in a statute. George, supra at 477.
MCR 8.121 governs the contingency fees of attorneys in actions for personal injury. MCR 8.121(B) and (C) provide:
(B) Maximum Fee. The maximum allowable fee for the claims and actions referred to in subrule (A) is one-third of the amount recovered.
(C) Computation. The amount referred to in subrule (B) shall be computed on the net sum recovered after deducting from the amount recovered all disbursements properly chargeable to the enforcement of the claim or prosecution of the action. In computing the fee, the costs as taxed and any interest included in or upon the amount of a judgment shall be deemed part of the amount recovered. In the case of a settlement payable in installments, the amount referred to in subrule (B) shall be computed using the present value of the future payments. [Emphasis supplied.]
MCR 8.121 provides that the maximum allowable contingency fee is one-third of "the amount recovered." In this case, plaintiffs will not recover any money as a result of the litigation. Although the jury awarded plaintiffs a $5,000 verdict, plaintiffs owe defendants $6,389.65 in mediation sanctions. Because plaintiffs recovered nothing in the litigation, no "recovery" exists upon which an attorney's lien may attach. The court rule specifies that the fee operates against the net recovered amount. The unambiguous language of the court rule takes precedence over the common law upon which plaintiffs rely. Barker Bros, supra.
MCR 2.403 delimits mediation sanctions and describes a rejecting party's liability for costs. MCR 2.403(O)(1) and (3) provide:
(1) If a party has rejected an evaluation and the action proceeds to trial, 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.
* * *
(3) For the purpose of subrule (O)(1), a verdict must be adjusted by adding to it assessable costs and interest on the amount of the verdict from the filing of the complaint to the date of the mediation evaluation. After this adjustment, the verdict is considered more favorable to a defendant if it is more than 10 percent below the evaluation, and is considered more favorable to the plaintiff if it is more than 10 percent above the evaluation. If the evaluation was zero, a verdict finding that a defendant is not liable to the plaintiff shall be deemed more favorable to the defendant.
This Court construes a court rule in accordance with the ordinary and approved usage of the language, considering the purpose of the court rule. Larson, supra at 332. The purpose of MCR 2.403 is to expedite and simplify the final settlement of cases to avoid a trial. Neal v Neal, 219 Mich. App. 490; 557 N.W.2d 133 (1996). The sanction condition places the burden of litigation costs on the party who demands a trial by rejecting a proposed mediation award. Id. Because plaintiffs rejected the mediation award, which necessitated the additional time and expense of trial, plaintiffs should bear the costs of litigation. This Court declines to force defendants to pay plaintiffs' attorney fees, which would impose the additional burden on defendants of attempting to collect a larger amount of mediation sanctions from plaintiffs.
Additionally, we decline to impose a duty upon defendants to pay the contingency fee of plaintiffs' counsel as a matter of policy. Under the traditional "American rule," each side must bear its own litigation expenses, unless the law or court rules specify an exception. Roan v Murray, 219 Mich. App. 562; 556 N.W.2d 893 (1996); State Farm Mutual Automobile Ins Co v Allen, 50 Mich. App. 71, 74; 212 N.W.2d 821 (1973). This rule was designed to ensure that private parties who pursue individual remedies bear the expense of litigation under most circumstances. Roan, supra. By rejecting the mediation award, plaintiffs and their counsel assumed the risk that the verdict would be lower than the award. Defendants should not be made to pay plaintiffs' attorney fees merely because plaintiffs lost their gamble. No special equitable circumstances exist to support the collection of plaintiffs' contingent attorney fees from defendants.
Affirmed.