September 27, 2022

Volume XII, Number 270


September 27, 2022

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September 26, 2022

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2022 Offers of Judgement: Being Proactive on Both Sides

On December 2, 2021, the Michigan Supreme Court announced changes, which took effect on January 1, 2022, to the much-maligned case evaluation process. These changes stem from 2010, when the Supreme Court directed the State Court Administrative Office (SCAO) to study the effectiveness of case evaluation. The SCAO hired a consultant and included civil mediation in the scope of its review, since many courts require other resolution processes, such as mediation, ADR Summits and meetings conducted by the SCAO’s Case Evaluation Court Rules Committee. Although the case evaluation process had support from a majority of trial court judges, it lost favor with practicing attorneys, partly due to elongated disposition times. The awards levied by the panels often were inconsistent with the merits of the case, further frustrating the process. Accordingly, the 2022 changes to the case evaluation process likely will awaken the power of Michigan’s Offers of Judgment rule. 

What Is Case Evaluation?

In Michigan, case evaluation is a type of alternative dispute resolution (ADR) that takes place after the conclusion of discovery. Before the January 1 changes, case evaluation was mandatory for all circuit court cases seeking monetary damages or division of property. Typically, case evaluation consists of a hearing between the attorneys for the parties and a panel of three attorneys appointed by the court. The panel normally consists of one advocate for the plaintiff, one advocate for the defendant and one neutral party. On average, the hearings are completed in under 30 minutes. The panel then submits a liability award of a certain dollar amount and the parties then have 28 days to either accept or reject the award. 

Unfortunately, the panels typically were composed of attorneys not familiar with the field of law being evaluated, which led to inconsistent and arbitrary awards. The awards also could be influenced by strong personalities on the panel, further leading to erratic and unfair awards. Instead of assisting in settlement, the awards were a major impediment to resolving a case as they generated unrealistic expectations. 

Prior to 2022, sanctions could be incurred by parties rejecting the case evaluation award. If the award was unanimous, costs could have been assessed against a party that rejected the award. This occurred if a “verdict” – a jury verdict or a judgment ordered by a judge – was less favorable to the rejecting party than the case evaluation award. An award was considered more favorable if the difference between the case evaluation award and the verdict was greater than 10 percent. For example, if a defendant rejected a $100,000 case evaluation award, the verdict must have been less than $90,000 for the defendant to avoid having to pay the plaintiff’s costs incurred due to the rejection. These sanctions could easily dwarf the value of the case since the amount included attorneys’ fees charged since the rejection of the case evaluation award and miscellaneous costs. 

The 2022 amendment eliminated these sanctions, which previously had a strong influence on whether parties accepted or rejected awards. It was extremely common for parties to accept certain awards solely due to the fear of sanctions that could reach well over $100,000 after a case went to trial. This system was not equal though, as plaintiffs were typically difficult to collect from – especially with a small verdict – and could reject awards with impunity. Defendants, usually backed by corporations, had greater resources and would be expected to pay those sanctions. 

What Is Changing?

For starters, case evaluation is no longer mandatory for Circuit Court tort cases. Instead, the parties can stipulate to an ADR process by submitting a discovery plan that must:

  • Identify the type of ADR process

  • State when the ADR will take place in relation to other discovery deadlines

  • Affirm that the ADR will take place no later than 60 days after the closure of discovery. 

If no discovery plan is submitted, the parties may submit a stipulated order to use an ADR process if:

  • The order is submitted within 120 days of the first responsive pleading

  • The parties state when the ADR will take place in relation to other discovery deadlines

  • The parties affirm that the ADR will take place no later than 60 days after the closure of discovery. 

The deadline to submit materials and the related fines for late disclosures also have changed. (Note: a judge still may assign a case to go through case evaluation if no ADR plan has been submitted according to the above-mentioned regulations.) 

What Does this Mean for the Future?

As stated above, sanctions no longer can be awarded as a result of a case evaluation award rejection. With case evaluation sanctions eliminated, Offers of Judgment under Michigan Court Rule (MCR) 2.405 likely will become more popular on both sides. Offers of judgment in Michigan, which are similar to those under Federal Rule of Civil Procedure (FRCP) 68, allow a party to make an offer of settlement. If the opposing party accepts the offer within the designated time period, the offer is filed and the case is resolved. 

Unlike a federal offer of judgment, though, if an opposing party rejects the offer, that party runs the risk of owing the offering party’s court costs and its reasonable attorneys’ fees. For this to apply, the adjusted verdict has to be more favorable than the “average offer,” or the average of the offer and counteroffer, or just the offer if no counteroffer is made. 

In 1997, the Supreme Court revised MCR 2.405(E) to deny costs on offers of judgment in cases where there was a unanimous award at case evaluation, but the 2022 amendments have eliminated this rule. This means that offers of judgment made early in litigation still will be valid at the time of trial, and sanctions will apply to those costs and attorneys’ fees accrued after the rejection of the prevailing party’s last offer or counteroffer. Still, this is an adequate replacement for the now-eliminated case evaluation sanctions. Both sides are encouraged to be more proactive in settlement negotiations, as pending offers or counteroffers will lead to mounting costs and fees over time. Overall, it is expected that cases may settle sooner, therefore reducing litigation costs due to the shorter timelines.

© 2022 Wilson ElserNational Law Review, Volume XII, Number 7

About this Author

Kevin M. Mulvaney Partner Attorney Liability Insurance Lawyer Detroit Michigan Wilson Elser Law Firm

Kevin Mulvaney focuses his practice on catastrophic transportation negligence, professional liability, errors and omissions, and directors and officers matters. He also has substantial experience handling high-exposure cases in the areas of trucking, product liability and Michigan No-Fault. Kevin has tried more than 20 cases to verdict, as well as numerous arbitrations, in a variety of matters, including wrongful death, catastrophic injury and professional liability.

Kevin represents large and small transportation companies, insurance companies...

Jonathan Ilijic Detroit Michigan Associate Attorney Transportation Insurance Coverage

Jonathan Ilijic handles matters involving transportation negligence, premises liability and insurance coverage. He has substantial experience with a wide range of general liability policies and the claims that arise from them. He has assisted in the investigation of potentially fraudulent insurance claims and defended against claims of improper insurance policy cancellations. Jonathan also has experience representing local businesses, bars and restaurants in dram shop litigation. 

Before joining Wilson Elser, Jonathan was a member of staff...