For more information on the difference between case evaluation, mediation, and arbiration see the outline below. I am not sure who to credit this to, but I have found some useful info in it. Enjoy...
Like other types of civil litigation, most employment cases settle before trial. The Michigan Court Rules contain several provisions that attempt to enhance the possibility of settlement. In case evaluation under MCR 2.403, the parties submit written summaries to three independent attorneys who discuss the case briefly with counsel for the parties and recommend a settlement amount. The parties must then accept or reject the award. If one or both of the parties rejects it, the case proceeds to trial. A rejecting party is potentially liable for sanctions under the court rule, including attorney fees.
In mediation under MCR 2.411, a neutral third party meets with the parties and attempts to facilitate a resolution to the dispute. This process involves the parties more directly in the process and can be more creative in terms of the type of relief that may be part of the resolution. Mediation may be used at any stage of the litigation, but it is nonbinding and a failure to settle will not result in sanctions for either party.
Arbitration involves the use of a neutral third party to decide the dispute instead of traditional litigation. Arbitration may be pursued only if there is an agreement providing for its use. The agreements may be made before or after the dispute has arisen, although the validity of some aspects of predispute mandatory arbitration agreements continue to be attacked. Federal and state legislation and court rules govern the validity and enforcement of arbitration agreements, but, to a great extent, the parties can create their own dispute-resolution procedure.
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II. Case Evaluation
A. Definition and Distinctions; Advantages and Disadvantages
§12.2 The practice of “case evaluation” has been formally recognized by the Michigan Court Rules since 1980. Until 2000, this process was referred to as “mediation.” However, it was never mediation in the true sense of the word and was commonly known as “Michigan mediation.” Mediation typically is a facilitative process in which a neutral third party attempts to create an environment in which the parties can discuss and hopefully arrive upon a mutually satisfactory resolution of the case; see the discussion in §§12.13–12.25. On the other hand, case evaluation is not a facilitative process. Rather, it is an evaluative process under MCR 2.403 in which three independent attorneys review summaries of the case, discuss it briefly with the attorneys for the parties, and recommend a settlement amount.
Statistically, only a relatively small percentage of cases are resolved by both sides accepting a case evaluation award. Further, the case evaluation process might actually be destructive to the settlement process by locking one side or the other into the case evaluators’ number. If the case evaluators give a very low award on a case, the defense attorney has an uphill struggle convincing his or her corporate client to pay significantly more. Similarly, if the case evaluators give a very high award, the plaintiff’s attorney will find it difficult to convince his or her client to accept less. However, the case evaluation process can still facilitate settlement when it breaks the ice by giving the parties a starting position for settlement discussions. Instead of starting negotiations with the plaintiff demanding $1,000,000 and the defendant offering $5,000, the parties can instead start the discussions with the case evaluation award and negotiate for numbers that are somewhat higher or lower than that benchmark.
B. Client Preparation
§12.3 For case evaluation to successfully facilitate settlement negotiations, the attorneys must communicate effectively and candidly with their clients about the limitations of the process. One approach is for the attorney to broach the subject of settlement with his or her client before the case evaluation by discussing a range of possible case evaluation awards. While making predictions is always somewhat risky, it is an excellent opportunity for the attorney to have a candid conversation with the client about the realistic value of the case. Instead of starting a divisive conversation with the client about why the attorney thinks the client’s case has certain weaknesses, the attorney can use the upcoming case evaluation process to point out how the case evaluators might view the case and what value they might put on it.
By using a range of possible results, the attorney should also point out the flaws and inconsistencies in the case evaluation process. It is important for the client to be educated about the case evaluation process before receiving the award. With this prior preparation, the client will be ready to put the award into a proper context when it is received, will be able to compare it to the attorney’s assessment of the value of the case, and will be ready to discuss how to use the case evaluation award in settlement negotiations.
C. What Actions Are Subject to Case Evaluation
§12.4 Under MCR 2.403, a court may submit to case evaluation “any civil action in which the relief sought is primarily money damages or division of property.” MCR 2.403(A)(1). It has been the common practice in many circuit courts to routinely submit all employment cases to case evaluation, even if the cases involve significant issues of equitable relief. In particular, employment cases that seek reinstatement as a primary remedy may not be well suited for a case evaluation. However, case evaluation can be useful to at least get the parties thinking about a “cash-out” figure for the case. As a practical matter, very few employment termination cases are resolved with reinstatement. The ill will between the parties that may have led to the litigation in the first place and the bad feelings generally created during litigation often make a cash settlement more attractive to both parties. However, if the primary focus of the case remains reinstatement or other equitable relief, a party may file an objection to case evaluation. MCR 2.403(C).
D. Panels of Evaluators
§12.5 One major criticism of the current case evaluation system is that the results vary significantly depending on the particular members of the case evaluation panel. Case evaluators are selected in accordance with the case evaluation plan of each court. Under MCR 2.404 they must meet certain minimum requirements, including being a practicing attorney for at least five years, being a member in good standing of the State Bar, and having a substantial portion of their practice in civil litigation matters.
Some courts have “specialty” panels for employment cases. Requiring experienced employment attorneys significantly reduces the variation in case evaluation results, and also greatly facilitates the conduct of the hearing. However, it is often difficult, especially for smaller counties, to coordinate the scheduling of employment cases with the schedules of employment practitioners, especially when the panels are to consist of separate plaintiff, defense, and neutral evaluators.
To minimize the uncertainty of the “draw” of an employment panel, some practitioners prefer to select a “special” case evaluation panel. A special panel is also helpful in more complex matters, since the parties and the panel can schedule as long as they wish for the hearing, rather than the typical 15–30 minute session. As long as the parties stipulate and there is no undue delay in the proceedings, most judges routinely allow the parties to select a special panel. However, if one party objects, it is much more difficult to get a judge to order the opposing party to submit to a special panel because of the extra expense involved in paying for the special mediators. With a special mediation panel, the parties can typically stipulate to whatever process they wish to select the panel. A common method is to have the plaintiff select one panel member, have the defendant select another, and have the two party-appointed panel members select the third panel member. The parties typically pay for their party-appointed case evaluators, and split the cost of the third. Some defense attorneys believe that special panels tend to increase the amount of the case evaluation award because the stipulation of the parties to the expense of a special panel tends to send a message regarding the seriousness of the matter. Whether a special panel leads to a higher award depends on who the panel members are and the facts of the case. Also, in deciding whether to use a special panel, the attorneys should consider the purpose they wish to have the case evaluation serve. If the defense attorney’s only purpose is to try to get the lowest award possible to send a message to the plaintiff, then perhaps the defendant should avoid a special panel. However, if the purpose is to have a panel of carefully selected experts make a settlement recommendation that all parties may respect and agree to, then a special panel may be more appropriate.
E. Summaries
§12.6 Under MCR 2.403(I)(1), at least 14 days before the hearing, each party must file three copies and exchange one copy of “documents pertaining to the issues to be mediated” and “a concise summary setting forth that party’s factual and legal position on issues presented by the action.” Within this general framework, there is enormous variation in the types and length of the summaries submitted. Some attorneys opt for a short and catchy summary of their position with very few attachments. A common rule of thumb among this camp is to keep the summary under 10 pages. Other attorneys put together their entire case with a lengthy summary and voluminous attachments. Often, these longer summaries closely resemble the party’s summary disposition brief or response.
The key to deciding which type of summary to submit is to know your audience. In a case evaluation there is a two-fold purpose in preparing the summary: (1) to persuade the case evaluation panel to recommend an award that is favorable to your side; and (2) to persuade your opponent of the strength of your case so that they are likely to accept an award that is favorable to your side. Focus first on the case evaluators. If possible, call the case evaluation assignment office and find out who the case evaluators are and how many case evaluations they are hearing that day. Consider how much time they will realistically be able to spend reading your summary. A case evaluation panel may be scheduled to hear two cases every 15 minutes. In those situations, dumping an 80-page summary on the case evaluators with four inches of attachments is unlikely to win them over. With a special panel that has the entire day devoted to the case, an attorney can effectively use a longer summary and presentation. Next, focus on the message you want to send to the other side. Most attorneys send the opposing party’s case evaluation summaries to their clients. Therefore, a case evaluation summary is an opportunity to express the strength of the case directly to the opposing party, without it being filtered by the opposing attorney. Through the summary, opposing parties can get a taste of what they are going to face in a trial. Therefore, attorneys should use their best efforts to put together a strong summary of their position, while trying to keep the length of the summary reasonably short. An attorney can be a little more generous in the length of exhibits to the summary. Attorneys should not expect the case evaluators to read every exhibit, but transcripts and documents are a handy reference if the case evaluators want to see the supporting documentation for a particular point. If a document is lengthy, highlight the relevant portion to assist the case evaluators.
Another tactical consideration for attorneys to consider is how strongly to argue their position on a potential summary disposition motion. Summary disposition is the critical point in most employment cases. For the plaintiff, beating the summary disposition motion is often the biggest hurdle in the case. For the defendant, the summary disposition motion is the difference between a decisive victory and facing a potential catastrophe in the uncertainty of a jury trial. However, the significance of a summary disposition motion is a touchy subject with many case evaluators. For the plaintiff, the position to take at case evaluation is simple: the plaintiff should explain why the summary disposition motion is likely to be denied. For the defendant, the issue is more complex. If defense counsel argues too strenuously that the defendant will prevail on summary disposition, the case evaluators may tell him or her that the purpose of case evaluation is to provide a settlement figure, and that the attorney should save the summary disposition argument for the court. Some case evaluators go so far as to say that the possibility of summary disposition is irrelevant for purposes of case evaluation. Most case evaluators are influenced by the strength or weakness of a potential motion for summary disposition since it is a significant part of evaluating the settlement value of a case. However, the importance of such a motion depends in large part on when the motion is scheduled to be decided. A motion for summary disposition that is scheduled to be heard, and is expected to be decided, within the time period for accepting or rejecting the case evaluation award may very well be irrelevant for purposes of the case evaluation, since the case evaluation can only settle the case if the motion is denied.
Another key issue to address in the case evaluation summary is whether to make a specific case evaluation recommendation in the written summary. Some attorneys may wish to simply outline the best possible case for their client in the summary and wait until the case evaluation hearing to make the specific recommendation in a private meeting with the evaluators outside the hearing of their opponent. By waiting until the hearing, attorneys also can use the feedback they get from the case evaluators during the hearing before deciding how low or how high to make the recommendation.
F. Hearings—Procedure and Strategies
§12.7 There are very few rules governing the conduct of the case evaluation hearing, and the format is generally left to the discretion of the case evaluators. Typically, the case evaluators are dealing with a packed schedule, and the time for the hearing is very brief. Further, much of the hearing time may be taken answering the case evaluators’ questions. Under MCR 2.403(J)(2) the oral presentation is to be limited to 15 minutes per side, unless multiple parties or unusual circumstances warrant additional time. Therefore, attorneys should put their best foot forward in the written case evaluation summary and not count on being able to use the case evaluation hearing for a full presentation. For the hearing, attorneys must be prepared to quickly summarize their strongest points and answer questions about the primary weaknesses in their case. Most case evaluators are very good at detecting such weaknesses, and the attorney’s answers to their questions about those weaknesses can have a substantial impact on the amount of the award. On the other hand, the attorney also must be prepared to give a more complete summary of their case in situations where it appears that the case evaluators have not thoroughly read the summary or where they ask few or no questions.
In all cases attorneys should try to assess the dynamics of the particular case evaluation hearing and be ready to adapt their oral presentation accordingly. One of the biggest mistakes attorneys make in case evaluation hearings is to follow a preplanned presentation instead of responding to the issues or specific questions raised by the case evaluators. It is not unusual to see advocates openly argue with the case evaluators about the presentation. While the hearing process is often short and frustrating, attorneys should never forget that they are trying to convince the case evaluators to give their client a favorable award. Therefore, arguing with, alienating, and being hostile towards the decision makers are rarely good strategies.
Under MCR 2.403(J)(1) a party has the right, but is not required, to attend a case evaluation hearing. However, no testimony will be taken or permitted during the hearing. It is very rare to see a party actually attend a case evaluation hearing, with the exception of in-house attorneys for corporate defendants or plaintiffs in pro per cases. The case evaluation process is not well suited for client participation. The discussion at the hearing is often abbreviated, blunt, and contentious. Most parties would not leave such a process feeling like they had a fair hearing, especially since they are not allowed to participate. The presence of a party also may inhibit the candor of the case evaluators in pointing out the weaknesses of the case. Such candor is often a valuable part of the process. The presence of a party also may inhibit the candor of an attorney in acknowledging potential weaknesses of the case. Acknowledging the obvious weaknesses, but providing an effective counter-argument as to how those weaknesses can be overcome, is often an effective strategy. There is also little risk in doing so, since statements by the attorneys and the written summaries are not admissible in court. MCR 2.403(J)(4). If an advocate fails to acknowledge any weakness, he or she will lose credibility with the case evaluators and risk an unfavorable award. Although technically not appropriate, case evaluators are sometimes inclined to use an unfavorable award to “send a message” to a party or attorney who does not seem to understand that his or her case has some flaws. Overall, the facilitative mediation process is far better suited for participation by the parties than case evaluation, and attorneys may wish to discourage their clients from attending the case evaluation hearing.
The case evaluation hearing is a relatively informal discussion, and the rules of evidence do not apply. MCR 2.403(J)(2). However, factual information is to be supported by documentary evidence where possible. MCR 2.403(J)(2). This is typically a self-governing process. If an attorney makes a factual statement that has no support, an opposing attorney and three case evaluators are present to point it out.
Since case evaluators are typically practicing attorneys in the same area, it is not unusual for the advocates and the evaluators to be acquainted with each other. This acquaintance does not disqualify the case evaluators. However, ex parte communications with the case evaluators about the case prior to the hearing is prohibited. MCR 2.403(J)(5). It is permissible to talk to the case evaluators about the case after the evaluation is issued, although the case evaluators are not required to respond to any such inquiries. MCR 2.403(J)(5). Contacting a case evaluator after the hearing can be helpful to gain some insight into how the panel viewed various arguments or facts in the case. Sometimes the case evaluation is the first time a party or attorney receives any feedback from a neutral party about the strengths and weaknesses of their case; therefore, it provides a useful “dry run” in preparing for summary disposition and trial.
G. Awards from the Evaluators
§12.8 After the hearing, the case evaluators typically call in each side privately to ask for their recommendation as to what the award should be. The recommendation that attorneys give in that private session is a key strategic decision, and there is no hard and fast rule to govern what should be said. The factors to consider in making the recommendation are myriad. First, the attorney should consider what he or she is hoping to accomplish with the case evaluation. Is the attorney seeking a reasonable result that might actually help settle the case, or is he or she interested in obtaining the most favorable result possible? As discussed in §12.9, the sanctions for rejecting a case evaluation are typically far more devastating to the plaintiff than to the defendant in an employment case. Therefore, in representing a plaintiff-employee, the strategy should generally try to obtain the highest award possible so that the plaintiff can safely accept and avoid possible sanctions. If the case evaluation award is higher than the actual settlement value of the case, it is often easier to negotiate with the defendant-employer for a settlement that is lower than the case evaluation award than one that is higher than the case evaluation award. On the other hand, if the plaintiff-employee has unreasonable expectations of the value of the case, a high case evaluation award may just feed into those unreasonable expectations. The considerations for the defendant-employer are somewhat different. One of the major criticisms of case evaluation is that if the award is too high or too low, it tends to lock the parties into rigid positions. For that reason, it may be better for the defendant to aim for a more reasonable case evaluation award, rather than the best possible result. In particular, a defendant-employer that is interested in resolving the case may be looking for an award that is just high enough to convince a reluctant plaintiff to accept, with the threat of sanctions adding a twist of the plaintiff’s arm. Obtaining an unreasonably low award just makes the plaintiff’s decision to reject an easier one. In other words, the defendant-employer may be better off aiming for a bargain instead of a decisive victory.
Also, as discussed in §12.6, if the attorney has avoided giving the specific recommendation in the written summary, he or she should consider the feedback from the case evaluators during the hearing in deciding what recommendation to make. If the panel seemed to be favorably impressed with the attorney’s arguments, the attorney may be able to take a more extreme position in making a recommendation. Otherwise, making an extreme recommendation could cause the attorney to lose credibility and therefore push the case evaluators into disregarding the attorney’s recommendation entirely. It is a foolish assumption to think that the case evaluators will simply split the difference between whatever recommendations the two parties make. Although the result typically falls somewhere in between the two recommendations, the case evaluators will have their own opinions about where that number should be.
The case evaluation award is typically issued immediately after the hearing following a brief private caucus by the case evaluators. While the practice of law certainly would be simpler if all cases ended with a binding case evaluation award, part of what makes the case evaluation process useful is the risk, uncertainty, and expense of a lengthy trial if the evaluation award is rejected. Without the threat of a looming trial, parties have little incentive to resolve a case at the case evaluation stage.
H. Accepting or Rejecting the Award
§12.9 After the case evaluation award is issued, each party has 28 days to accept or reject it. MCR 2.403(L)(1). Neither party is advised of the other party’s decision until after the 28 days have expired. MCR 2.403(L)(2). The failure to file a written acceptance or rejection within 28 days constitutes rejection (which is much better than an earlier version of the rule where many cases were “settled” because a mistaken failure to file a timely response was considered an acceptance.)
In employment cases, the plaintiff must consider not only whether or not the award is a fair settlement, but also the potentially devastating effect of sanctions for rejecting the award. Under MCR 2.403(O)(1), if a party has rejected an evaluation and the action proceeds to a “verdict,” the rejecting party “must” pay the opposing party’s actual costs unless the verdict is “more favorable” to the rejecting party than the case 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 the rejecting party than the case evaluation. For purposes of this rule, actual costs are not only those costs taxable in any civil action, but also “a reasonable attorney fee” based on a reasonable hourly or daily rate as determined by the trial judge for services necessitated by the rejection of the case evaluation award. MCR 2.403(O)(6)(b). For the plaintiff in a typical employment case, this rule is nothing short of draconian, especially if the plaintiff has some income or assets subject to garnishment. Even where the plaintiff’s financial resources are limited, many employers vigorously attempt to collect at least a portion of these sanctions in order to send a “message” to the plaintiff and to deter other current or former employees who might be considering legal action. Even an uncollected judgment for sanctions has a significant emotional impact on the unsuccessful plaintiff and affects his or her credit rating. Generally, the employment plaintiff has lost his or her job or suffered some other significant adverse employment action. The plaintiff risks further financial ruin if he or she wishes to reject the case evaluation and risk sanctions by proceeding to trial. In many cases, the possible sanctions are greater than the settlement value of the case. It is no small wonder that the case evaluation process might be effective in “convincing” plaintiffs in employment cases to agree to a settlement. However, defense counsel are concerned that some panels make awards of several thousand dollars in nuisance value cases, frequently when a motion for summary disposition is pending.
The plaintiffs’ bar believes that the threat of sanctions under these circumstances does not serve the rule’s purpose of encouraging all parties to accept a reasonable settlement, since the sanctions do not weigh equally on the defendant employer. Not only does the employer typically have a much deeper pocket than the employee, in most employment cases there essentially are no case evaluation sanctions for defendant employers. Since in most statutory employment claims an unsuccessful employer must already pay the reasonable attorney fees of the employee’s attorney from the start to end of the cases, the employer cannot also be subjected to additional case evaluation sanctions. Rafferty v Markovitz, 461 Mich 265, 602 NW2d 367 (1999); Grow v WA Thomas Co, 236 Mich App 696, 716–719, 601 NW2d 426 (1999). With no additional penalty, employers have little incentive to accept the case evaluation award. Further, some defendants view case evaluation as a process where the plaintiff employee is almost assured of some award, even if the case lacks merit. Therefore, many employers routinely reject the case evaluation in the hope that they will be able to negotiate a settlement of less than the case evaluation award. What employers sometimes underestimate is that many plaintiffs accept the case evaluation only to avoid the possibility of sanctions. In such instances, plaintiffs are not only unwilling to settle the case for something less than the case evaluation award, they are actually hoping that the defendant will reject the case evaluation so that they do not have to settle for that amount. Therefore, if the defendant-employer believes that the case evaluation award is a reasonable settlement figure, or especially if they believe it is a bargain, the employer should consider accepting it despite the lack of a meaningful penalty for rejecting the award.
When there are multiple parties, the rules become confusing, and an unwary practitioner can unintentionally subject his or her client to potential sanctions if the rules are not carefully followed. In employment cases, the confusion of multiple parties typically arises where the plaintiff has named more than one defendant, such as an individual defendant or a parent corporation. Where the multiple defendants are closely aligned, the easiest solution may be to simply have one mediation award that is “joint and several” as to all defendants. However, in some situations, the interests of the defendants may be distinct, and separate awards for each defendant may be appropriate. The rules are as follows:
If there are separate awards on multiple claims, the party must either accept or reject the evaluation in its entirety as to a particular opposing party. MCR 2.403(L)(1).
Each party has the option of accepting all of the awards covering the claims by or against that party or of accepting some and rejecting others. However, as to any particular opposing party, the party must either accept or reject the evaluation in its entirety. MCR 2.403(L)(3)(a).
A party who accepts all of the awards may specifically indicate that he or she intends the acceptance to be effective only if “i. all opposing parties accept, and/or ii. the opposing parties accept as to specified coparties.” MCR 2.403(L)(3)(b).
Beware of the “conditional acceptance” in option 3. If a party makes his or her acceptance conditional, the case is settled as to those opposing parties who also accept and the case continues as to those opposing parties who reject. MCR 2.403(M)(2). However, if some of the opposing parties accept and others reject, a party who makes a conditional acceptance is deemed to have rejected and is therefore liable for case evaluation sanctions as to those opposing parties who accept. MCR 2.403(L)(3)(c). One common situation where this arises is when the case evaluation panel assesses the bulk of the award against the employer, and assesses a nominal or zero evaluation against an individual defendant. The plaintiff employee may be willing to accept the total amount of the case evaluation. However, if the plaintiff simply makes an unconditional acceptance, the defendant-employer may reject and the individual defendant may accept and be dismissed from the case with little or no money paid to the plaintiff. The natural inclination is for the plaintiff to make his or her acceptance of the case evaluation award as to the individual defendant conditional on the defendant-employer also accepting. However, the risk in doing so is that the plaintiff is making himself or herself liable for case evaluation sanctions as to the accepting individual defendant, even though the plaintiff is willing to accept the case evaluation award as a whole. Even if the individual defendant is just tagging along on the defense of the employer, the amount of attorney fees and costs of going through a trial may be substantial. Therefore, in these situations the plaintiff-employee must carefully weigh the importance of keeping the individual defendant in the case as compared to the substantial financial risk of sanctions for making the acceptance conditional. This is particularly true in light of Elezovic v Ford Motor Co, 472 Mich 408, 697 NW2d 851 (2005), on remand, 274 Mich App 1, 731 NW2d 452 (2007), in which the Michigan Supreme Court overruled Jager v Nationwide Truck Brokers, Inc, 252 Mich App 464, 652 NW2d 503 (2002), and held that agents can be liable as individuals under the Elliott-Larsen Civil Rights Act (ELCRA). For more detailed discussion of individual liability, see §3.30.
I. Proceedings After Rejection; Determination of Verdict
§12.10 If all parties accept the case evaluation award, judgment may be entered in the amount of the award. However, a defendant can avoid having a judgment entered against it and instead obtain a dismissal with prejudice by paying the award within 28 days after notification of the acceptance. MCR 2.403(M)(1). Generally, there is an advantage to both the employee and the employer in entering into a comprehensive settlement once both sides have accepted the evaluation. (Typically, the employer wants the settlement amount to be confidential, and the employee wants a separate check for attorney fees and costs).
When the parties do not accept the case evaluation, the action proceeds in court. MCR 2.403(N)(1). The case evaluation award is inadmissible at trial. Arnold v Darczy, 208 Mich App 638, 640, 528 NW2d 199 (1995). As discussed in §12.9, in cases involving multiple parties, the case may proceed as to some parties and be settled as to others.
After the “verdict” in the case, the determination is made as to whether or not a party is entitled to case evaluation sanctions. Under MCR 2.403(O)(2), a “verdict” is defined as
(a) a jury verdict,
(b) a judgment by the court after a nonjury trial,
(c) a judgment entered as a result of a ruling on a motion after rejection of the case evaluation.
Therefore, the plaintiff in an employment case faces sanctions not only if he or she loses at trial, but also if the case is dismissed on a motion for summary disposition.
Further, in determining the amount of the “verdict,” the rules provide for certain adjustments to an actual jury verdict in determining whether or not it is “more favorable” to a party than the case evaluation award. In particular, in determining liability for costs 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 case evaluation.” MCR 2.403(O)(3). Under MCL 600.6013(8), judgment interest is applied to attorney fees and costs ordered as sanctions under MCR 2.403(O) from the filing of the complaint against the liable defendant. Ayar v Foodland Distribs, 472 Mich 713, 698 NW2d 875 (2005). “Assessable costs” do not include attorney fees, whether incurred before or after the mediation evaluation. The term costs ordinarily does not include attorney fees unless a statute or court rule specifically defines costs to include attorney fees, and MCR 2.403(O)(6) does not define assessable costs to include attorney fees. Dessart v Burak, 470 Mich 37, 678 NW2d 615 (2004).
J. Motions for Sanctions
§12.11 Once the verdict is computed and adjusted, the parties can determine whether sanctions are applicable. The rule for determining sanctions is set forth in MCR 2.403(O)(1). If a party has rejected the case evaluation, that party “must” pay the opposing party’s “actual costs” unless the verdict is “more favorable” to the rejecting party than the case evaluation. After the adjustments to the verdict, if any,
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.
MCR 2.403(O)(3).
There are three basic exceptions to these mandatory sanctions. First, there can be no case evaluation sanctions if the case evaluation award is not unanimous. MCR 2.403(O)(7). The second exception is that if the opposing party has also rejected the evaluation, the opposing party is only entitled to costs if the verdict is also “more favorable” to that party than the case evaluation. MCR 2.403(O)(1). This generally occurs where the verdict is within 10 percent, plus or minus, of the case evaluation award. MCR 2.403(O)(3).
The third exception is where the verdict also awards equitable relief. In such cases, the court must take into account both the monetary relief and the equitable relief and determine whether it is fair to award costs under all of the circumstances. MCR 2.403(O)(5). Therefore, if a plaintiff has rejected a case evaluation award and the case is proceeding to trial, the plaintiff should consider vigorously pursuing the various equitable remedies available under the civil rights laws. Such equitable relief would at least allow the court the power to waive the otherwise mandatory sanctions where the monetary verdict is relatively low.
The “actual costs” that are recoverable as case evaluation sanctions are those costs taxable in any civil action and a “reasonable” attorney fee based on a “reasonable” hourly or daily rate as determined by the trial judge for services “necessitated by the rejection of the case evaluation.” MCR 2.403(O)(6).
A party entitled to case evaluation sanctions must file and serve a motion for sanctions within 28 days after the entry of the judgment or entry of an order denying a timely motion for a new trial or to set aside the judgment. MCR 2.403(O)(8). As discussed in §12.9, the plaintiff cannot recover double sanctions under both the case evaluation rules and the civil rights fee-shifting rules. However, it is best to still rely on both provisions in seeking an award of attorney fees, since it may persuade the court to be more willing to award the full amount requested. Further, if attorneys’ fees are awarded under both provisions, it may be helpful if the result changes on appeal (e.g., the verdict is reversed as to the civil rights claims and affirmed as to contract or tort claims that do not have a fee-shifting provision). A motion for case evaluation sanctions must be based on the time actually spent by the attorney after the rejection of the case evaluation. Therefore, it is critical for attorneys to keep contemporaneous time records, even if they are representing their client under a contingent fee arrangement.
Generally, case evaluation sanctions only apply up to the trial court’s final judgment, and therefore a party cannot be assessed sanctions for fees and costs incurred on appeal. Haliw v City of Sterling Heights, 471 Mich 700, 691 NW2d 753, on remand, 266 Mich App 444, 702 NW2d 637 (2005); Giannetti Bros Constr Co v Pontiac, 175 Mich App 442, 446–447, 438 NW2d 313 (1989). However, the filing of an appeal can affect the motion for sanctions. If the verdict is reversed on appeal, then any sanctions based on that verdict must also be reversed. Further, a party who obtains a more “favorable” verdict at trial may be subjected to sanctions if that verdict becomes less favorable after appeal. Keiser v Allstate Ins Co, 195 Mich App 369, 374–375, 491 NW2d 581 (1992).
Since the imposition of sanctions is mandatory, the best that can usually be done in opposing a motion for sanctions is to try to reduce the blow by attacking the reasonableness of the hours or the hourly rate. However, the attorney should consider other possibilities to avoid or reduce the sanctions. Sometimes, the opposing party will consider a settlement whereby the case evaluation sanctions are reduced or dropped in exchange for foregoing an appeal. Perhaps there is something else that the losing party can offer to the opposing party in settlement in lieu of sanctions. Case evaluation sanctions can be devastating to a party, and the attorney must get over losing the case and vigorously do whatever is possible to help the client minimize the impact of sanctions.
K. Case Evaluations in Federal Court
§12.12 The Federal Rules of Civil Procedure do not have an analogue to case evaluation under MCR 2.403, although there are local U.S. district court rules authorizing federal judges to refer matters to case evaluation. However, a U.S. district court has no authority to impose the sanctions provisions on the parties, unless they stipulate to it. Tiedel v Northwestern Michigan Coll, 865 F2d 88, 93–94 (6th Cir 1988). Many federal judges will decline to refer a matter to case evaluation unless the parties agree to such a stipulation. If you represent a plaintiff in a case where there is a statutory claim with a fee-shifting provision, you should never agree to such a request. Except in unusual circumstances, there is no good reason to subject a plaintiff to potentially ruinous sanctions when the plaintiff cannot recover any additional sanctions against the defendant for rejecting the case evaluation. In cases where there is a stubborn plaintiff, the plaintiff’s attorney may be tempted to have his or her client subjected to the pressure of sanctions to get the case settled. However, if the client rejects case evaluation and becomes subject to sanctions, the attorney who stipulated to those sanctions may end up being sued for malpractice.
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III. Mediation
A. Definition; Advantages and Disadvantages
§12.13 There has been a national trend towards the facilitative mediation of civil disputes and employment disputes in particular. In Michigan, this trend culminated on August 1, 2000, with the adoption of a court rule formally recognizing alternative dispute resolution in general, and specifically mediation, as a part of “all civil cases … unless otherwise provided by statute or court rule.” MCR 2.410(A)(1).
In contrast to case evaluation, mediation is not an evaluative process. Rather, it is a facilitative process whereby an independent mediator assists parties in reaching a mutually satisfactory resolution of their dispute. The court rules define mediation as “a process in which a neutral third party facilitates communication between parties, assists in identifying issues, and helps explore solutions to promote a mutually acceptable settlement. A mediator has no authoritative decision-making power.” MCR 2.411(A)(2).
There are many advantages to mediating employment disputes. One key advantage is that mediation allows the parties to directly participate in the resolution of their dispute. It generally takes attorneys some time before they appreciate this as an advantage. Most attorneys are trained to be protective of their clients and to avoid having them say or do something that might jeopardize their case. This approach may be well suited for a deposition or a criminal case. However, it overlooks the fact that employment disputes are generally very personal to both the employee and the employer. The employee typically believes that he or she has been victimized, and the employer typically believes that it has been falsely accused of some heinous act. Frequently, the parties need to be able to express their feelings to the opponent and/or a neutral third party, and the mediation process allows them to do so in a confidential setting. Further, unlike case evaluation, mediation does not impose a result upon the parties. Instead, the participants have input into a resolution that is satisfactory to all parties, with no penalties or sanctions if the case is not settled.
Another advantage of mediation is that it can be utilized at any stage in the litigation, or even before litigation is started, whereas case evaluation typically occurs only at the end of the discovery process. The advantages of the early resolution are obvious, although many clients in employment cases do not initially appreciate these advantages. From the employee’s standpoint, an early end to the case will eliminate the stress of litigation, provide some form of remedy, and let the employee move on with his or her life. The employee’s attorney who is working on a contingent fee basis may also be more amenable to an early resolution before he or she has invested large amounts of time and costs. This is not simply a matter of the attorney’s self-interest, as attorney fees are typically an item of recovery under the civil rights statutes and therefore can become an impediment to settlement later in the case. From the employer’s standpoint, an early resolution saves legal fees (both for the employer’s own counsel and the possibility of having to pay for the employee’s counsel after trial), and minimizes the disruption in the workplace involved in defending the case.
Even if mediation is unsuccessful, it brings the settlement negotiations to the forefront in a relatively short period of time. It is extremely frustrating to have ongoing settlement discussions where weeks go by between offers and counteroffers. While negotiations drag on, the momentum towards settlement with the clients is lost and valuable time for discovery is wasted. In a mediation, at least the parties generally know in a day or so whether the case can be settled or whether they need to get ready for trial.
Another advantage is that mediation allows the parties to discuss and agree on possible settlement terms that cannot otherwise be obtained through the litigation process. Employment litigation typically focuses on money damages, with perhaps some associated equitable relief. In mediation, parties can discuss things such as letters of reference, confidentiality, outplacement assistance, consulting arrangements, employment opportunities, and other noneconomic issues. These items are frequently overlooked in litigation. However, they can make the difference in settlement because often they can be of value to one party without an economic cost to the other.
Typically, the parties and attorneys believe that mediation is a great process when it settles their case. However, when mediation fails to settle a case, the nonbinding nature of the process can be viewed as a disadvantage. The most frustrating part for many parties and attorneys is to go through the time and expense of a mediation, only to find out at the end of the day that there is no resolution. Mediation depends on the willingness of the parties to settle, and if one party, or both, is obstinate in the negotiations, the mediator is powerless to force a resolution. Further, the investment by the parties in an unsuccessful mediation can be significant, both in terms of time and cost. Between preparing the client, preparing the summary, and appearing for mediation, an attorney can easily spend two or more full days. Further, the mediator charges for preparation time and the time at the mediation, regardless of whether the case settles. To avoid this frustration, the parties and attorneys must be very sensitive about selecting the appropriate time and circumstances for scheduling a mediation.
B. Initiation
1. Agreement of the Parties
§12.14 When is a good time to mediate a case? Mediation is appropriate whenever the parties are seriously ready to discuss resolution. Because the mediator has no authority to impose a result on the parties, facilitating communication between the parties is only effective when both sides have an interest in seeking resolution. However, mediation should not be disregarded as an option simply because a party is reluctant to settle or pessimistic about the likelihood of settlement. In many cases, the attorneys may recognize the value to their clients of a reasonable settlement, but the anger of the clients prevents settlement from taking place until after the parties become emotionally and/or financially beaten down through the litigation process. Mediation can be particularly effective in these situations by giving the clients a formal process where they can vent their emotions and see the advantages of resolving the dispute. In fact, attorneys frequently use the mediation process when they have client control problems, since the mediator can be used to help persuade the client to settle without causing a breakdown in the relationship between the attorney and client. It is generally more difficult to get settlement authority from a client in the abstract, before there is any realistic offer on the table from the other side. It is also very easy for clients to be obstinate when they are engaged in a discussion only with their own attorney. Clients are usually more receptive in mediation, where they have to consider the arguments of their opponent and typically temper their reactions because there is a neutral third party present. For example, mediation is an excellent option where the attorney simply cannot get past the hurdle of getting authority from his or her client to make a reasonable opening offer. In those situations, the mediator can act as a buffer to allow the client to make his or her unrealistic opening offer, without causing the opponent to break off negotiations, and then deliver a more realistic proposal in the second round of negotiations.
On the other hand, the time is not always right for mediation. This is especially true early in the case, before either side has seen any convincing proof that the opposing party’s position might have some merit. At the beginning of a case, the expectations of the plaintiff and his or her attorney are typically at their peak, since they have just decided to file the case and have not yet seen or appreciated the points that the defense might make. Similarly, the employer is usually upset at having been sued, and is not in the mood to reward the plaintiff for suing the company. Some cases are ripe for early resolution, but it takes a careful assessment by the attorneys to determine whether the clients are truly ready to engage in a facilitative process. Generally, the more experience the employer has with employment litigation, the more likely it is that an early mediation will be successful. An experienced employer is better able to take an objective early look beyond the emotions of the case and weigh its possible exposure against the legal fees and costs it is sure to incur in defending the action, even if it is ultimately successful.
Although attorneys are increasingly receptive to the use of mediation, some attorneys are still reluctant to agree to the process because it may be viewed as a sign of weakness. How can an attorney zealously advance his or her “take no prisoners” approach to litigation, while at the same time agreeing to a process that by its very nature insists on compromise? If an attorney believes that the time is right for mediation, he or she can approach a reluctant client by explaining that it is a no-lose process. For a relatively modest cost of the mediator to be split by the parties, the client can find out the opposing party’s best offer within one day, without the delays of protracted settlement negotiations. Armed with that information, the client and attorney will be better able to assess whether to settle or to continue with the litigation. Even if the mediation turns out to be completely ineffective, at least the attorney will be able to spend a day with the client to learn more about the merits of each side’s position (this approach works far better with a contingent-fee client who generally is thrilled to have the attorney focusing exclusively on his or her case for a day, as opposed to a client who has to pay counsel by the hour for that attention).
2. Court-Ordered Mediation: MCR 2.410
§12.15 Under MCR 2.410(C)(1) a court may, after consultation with the parties, order that a case be submitted to an “appropriate” alternative dispute process, including mediation. While the authority to order mediation may be helpful in some cases, judges must be sensitive to the dynamics of the case to pick the right time to issue such an order. When mediation is imposed on the parties, it is far less successful. Because there are no sanctions or penalties for failing to settle at mediation, a party who does not want to be there can easily sabotage the process.
3. Mandatory Mediation as Part of an ADR Policy
§12.16 Another use of the mediation process is as a formal part of an employer’s alternative dispute resolution (ADR) policy. It is fairly common in such policies to first require the parties to go through mediation before the case goes to mandatory arbitration. While this may be helpful for some disputes that can be resolved by the employee and employer sitting down in a face-to-face meeting, it suffers the same weakness as court-ordered mediation. If one or both of the parties is not ready to seriously discuss a resolution of the case, they may simply go through the motions of mediation because it is required by the policy.
C. Selecting a Mediator
§12.17 Just as in the selection of jurors, every attorney has his or her own preferences and theories regarding the selection of a mediator. There are no “one size fits all” rules that work in every case. The selection of a mediator depends on the dynamics of the particular case. The attorney should first identify the obstacles that he or she foresees in settling the case. Is the problem that the attorney’s own client is too unrealistic to see the value of settlement? If so, select a mediator whom the client will respect and presumably relate well to. Consider whether the client would react better to someone who takes a harder line or someone who takes a kinder and gentler approach. Is the problem that the employer does not see the business advantages of settlement? If so, select a mediator who has corporate experience and who can relate to the employer. Attorneys should resist the temptation to think about selecting a mediator as they do an arbitrator. In mediation, a party does not need someone who is predisposed or sympathetic to their position. A mediator has no investment in the amount of the settlement, just a desire to see if the case can be settled.
The parties should make every effort to agree on the selection of a mediator, even if the mediation is ordered by the court. The court must appoint a mediator stipulated to by the parties, provided that the mediator is willing to serve within an appropriate time period. MCR 2.411(
(1). Further, the parties are not restricted to the court’s list of approved mediators. A mediator selected by agreement of the parties does not need to meet the qualifications set forth in MCR 2.411(F). MCR 2.411(
(1). If the parties do not agree on a mediator, the court may appoint one from the court’s approved list of mediators. MCR 2.411(
(2)–(3).
D. Summaries
§12.18 Attorneys have a wide range of preferences on the form of the mediation summary. Some prefer to simply give an oral presentation of their case, while others prefer mediation summaries that fill a bankers’ box. Counsel should focus on what he or she is trying to achieve in the particular case and should keep the audience in mind. In a mediation summary, an attorney is not necessarily trying to convince the mediator of the strength of his or her client’s position because the mediator is not going to decide the outcome of the case. Rather, the attorney should primarily be trying to convince the opposing party of the strength of his or her client’s position so that the client can obtain a more favorable settlement. Attorneys should view mediation as a unique opportunity to pitch their settlement position directly to the decision maker on the other side, without it being filtered by the opposing attorney. To take advantage of this opportunity, attorneys should prepare a mediation summary that will persuade their opponents to settle.
E. Advising and Preparing the Client for Mediation
1. In General
§12.19 One key to a successful mediation is for the attorneys to properly prepare their clients for the process. If clients know what to expect, they are more likely to engage in a productive mediation. If clients do not know what to expect, the mediator has to spend the time trying to educate and readjust the clients’ expectations before beginning to work on resolution. In preparing for the mediation, the attorney should discuss with his or her client the purpose of the mediation and emphasize some of the advantages of the process. An attorney who tells the client that the mediation will probably be a waste of time and that they are only showing up because the judge twisted their arm is just setting up the process for failure. The attorney should also emphasize to the client that the mediator is not a decision maker, but has been selected for his or her knowledge, skill, and/or experience, and therefore what the mediator says should be given serious consideration.
2. Who Should Attend
§12.20 One of the first steps in preparing clients is to determine who will attend the mediation session. Under MCR 2.410(D)(2) a court may order that the parties to the action, agents of parties, representatives of lienholders, representatives of insurance carriers, or other persons be present at the ADR proceeding, or be immediately available at the time of the proceeding, and have information and authority adequate for responsible and effective participation in the conference for all purposes, including settlement. The court’s order may specify whether the availability is to be in person or by telephone.
From the plaintiff’s standpoint, the attorney should inquire whether there is a third party who is really influencing the client’s views on settlement. Sometimes a plaintiff is greatly influenced by a spouse, close friend, therapist, or clergy member. If there is a third party who is playing a key role in settlement decisions, consider inviting that person to the mediation. It can defeat the whole purpose of the mediation to engage in the process, only to have the client make a phone call for advice to someone who is not participating. The same is true for the employer. Defense attorneys should bring to the mediation the highest-level decision maker who is available.
3. Flexibility in Approach
§12.21 Rather than coming up with a fixed, predetermined settlement amount before the mediation even begins, attorneys should consider a more flexible approach. For example, the attorney can discuss his or her complete thought process with the client about the strengths and weaknesses of the case, the possible outcomes, and what a reasonable settlement range might be. Discussing a possible range of reasonable settlement values leaves flexibility for the mediation process to work. Also, a party that predetermines its bottom line might miss the opportunity for a more favorable settlement. Frequently, mediations lead to a settlement that is more favorable than one party expected.
The client may initially have a negative reaction to the range of reasonable settlement values presented by counsel, but the attorney can emphasize that he or she is just giving the client a professional opinion on how a third party might view the value of the case. More typically, the client at least will be receptive to listening to a number that is at one end of the range. After presenting the range of reasonable settlement figures, the attorney can then move to a discussion about what the client’s initial settlement proposal should be, leaving some room for negotiation. The client typically will jump on board with a reasonable opening position because it sounds a lot better to them than the more realistic settlement range that was presented. If the client still balks even at the attorney’s recommendation for an initial settlement proposal, the attorney should not necessarily cancel the mediation. As discussed in §12.14, mediation allows parties to start with somewhat unrealistic settlement positions that might otherwise shut down one-on-one negotiations, since the mediator will not give up after the opening round. The second round tells the story as to the likelihood of settlement. Having discussed with the client a range of reasonable settlement figures and obtained authority for an initial proposal, the attorney can go into the mediation with enough flexibility to allow the mediation process to work without setting a bottom line. However, maintaining flexibility is easier with a single decision-maker plaintiff, as opposed to a defendant-employer that might have multiple decision makers.
In some situations, the attorney will not be able to obtain any reasonable starting position from the client and does not wish to start the mediation by making a proposal that makes the attorney and client look ridiculous (e.g., making a $50,000,000 demand in a case that is worth $100,000). However, if the attorney still believes that the mediation might be useful, he or she can still attend and simply tell the mediator that they have been unable to come up with a specific proposal at the start, but would be interested in hearing where the other side might be and what might be a reasonable expectation for settlement. The mediator should quickly get the clue as to why the attorney does not have a specific proposal. Even the most stubborn client may become reasonable once he or she has had an opportunity to vent and once the opponent has made a good faith proposal.
4. Participation by the Client
§12.22 The attorney should prepare the client for the possibility that the mediator may hold a joint session with all parties present and may ask the client to speak. Attorneys generally are comfortable speaking extemporaneously but for many clients it can be an intimidating exercise. Thus, the client should be prepared to answer if the mediator invites him or her to speak at the opening session. In advance of the mediation, the attorney should ask the client if he or she would like to communicate to the other side and should offer suggestions about what might be effective. In employment mediations, a description by the plaintiff to the defendant about how he or she has suffered as a result of the adverse employment action can be very effective. An explanation by the defendant-employer of the business reason for the adverse employment action and an acknowledgment of the hardship it has caused the plaintiff can also be effective.
Attorneys should consider encouraging clients to express themselves during the mediation, especially during private caucuses with the mediator. However, the attorney should explain that because the mediator is not a decision maker, he or she may not be interested in hearing a lot of detail about the facts. Rather, at some point the mediator will want to move beyond the factual dispute and talk about a possible resolution. The attorney should warn the client that at times the mediator may be spending more time with the other party, but that is not a concern because the mediator is not a fact finder. Actually, it might be a good thing because the more time the mediator spends with the other side the more he or she is probably trying to get the opponent to reconsider its settlement position.
In encouraging clients to be candid, attorneys may also suggest some restrictions. In particular, in the opening session the clients may be more effective limiting their comments to factual issues, rather than trying to take on the role of an attorney in arguing legal liability. Further, to make sure that the attorney and the client stay on the same path, consider requesting that the client never make a material change in the settlement position without first consulting with the attorney. The attorney usually has a better read on the pulse of the negotiations and most likely will not want the client to make an impulsive move in settlement position without talking to the attorney privately first.
F. Fees
§12.23 Mediators typically charge an hourly rate for their services, although some mediators choose to bill using a per diem rate. The hourly rate usually includes both the time at the mediation and the preparation time (which should be kept in mind when deciding whether to give the mediator a box full of exhibits to review). Generally, the cost of the mediation is split by the parties, although sometimes the employer will agree to pick up the costs of the mediation as part of a settlement. Also, some employer-sponsored ADR plans provide for the employer to pay for the process.
MCR 2.411(D)(2) provides that the costs of the mediation are to be divided by the parties on a pro-rata basis, unless otherwise agreed to by the parties or ordered by the court. Splitting the costs of the mediation means that each party has a financial investment in the process, which can lead to a more serious effort at resolution.
G. The Mediation Process
1. Types or Methods
§12.24 Mediators use a wide variety of styles and methods for conducting the mediation process. The Michigan Court Rules generally describe the process as follows in MCR 2.411(C)(2):
Conduct of Mediation. The mediator shall meet with counsel and the parties, explain the mediation process, and then proceed with the process. The mediator shall discuss with the parties and counsel, if any, the facts and issues involved. The mediation will continue until a settlement is reached, the mediator determines that a settlement is not likely to be reached, the end of the first mediation session, or until a time agreed to by the parties. Additional sessions may be held as long as it appears that the process may result in settlement of the case.
Despite this general description, the court rules also provide that to become an approved mediator, the person must complete a training program approved by the State Court Administrator’s Office “providing the generally accepted components of mediation skills.” MCR 2.411(F)(2)(a). The programs that the SCAO has approved are generally based upon the “BADGER” method of mediation
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