Barnes v. Sun Chem. Corp.

• Decision Date: 26 February 2016
• Docket Number: No. 1:14-cv-136,1:14-cv-136
• Citation: 164 F.Supp.3d 994
• Parties: Gloria Barnes, as personal representative of the Estate of A.D. Barnes, Plaintiff, v. Sun Chemical Corporation, Defendant.
• Court: U.S. District Court — Western District of Michigan

164 F.Supp.3d 994

Gloria Barnes, as personal representative of the Estate of A.D. Barnes, Plaintiff,

v.Sun Chemical Corporation, Defendant.

No. 1:14-cv-136

United States District Court, W.D. Michigan, Southern Division.

Signed February 26, 2016

Amy J. Derouin, Christopher Trainor & Associates, White Lake, MI, for Plaintiff.

F. William Mckee, Jr., Warner Norcross & Judd LLP, Grand Rapids, MI, Jeffrey Shane Dornbos, Warner Norcross & Judd LLP, Holland, MI, for Defendant.

AMENDED OPINION AND ORDER DENYING MOTION FOR FEES AND COSTS PURSUANT TO MICHIGAN COURT RULE 2.405

Paul L. Maloney, United States District Judge

This matter is before the Court on Defendant's motion for attorney fees and costs. (ECF No. 57.) Plaintiff filed a response and a separate motion to disallow costs. (ECF Nos. 60, 61.) The Court heard oral argument on Defendant's motion. (See ECF No. 70.)

The Court had previously granted Defendant's motion for summary judgment in this case.¹ (ECF No. 54.) Prior to judgment entering against Plaintiff, Defendant had submitted an offer of judgment to Plaintiff, which was rejected; Defendant now seeks to recover attorney fees and costs under a state offer-of-judgment provision, Michigan Court Rule 2.405 (“Offers to Stipulate to Entry of Judgment”).² The Court ordered both parties to submit supplemental briefs on the issue of whether the Michigan court rule is substantive or procedural in nature under the Erie Doctrine. (ECF No. 63.) If the court rule is substantive, Defendant is entitled to costs and reasonable attorney's fees; if procedural, Defendant is only entitled to costs under the Federal Rules.

I. Legal Framework

Michigan Court Rule 2.405 provides the following:

Rule 2.405 Offers to Stipulate to Entry of Judgment

(A) Definitions. As used in this rule:

(1) ‘Offer‘ means a written notification to an adverse party of the offeror's willingness to stipulate to the entry of a judgment in a sum certain, which is deemed to include all costs and interest then accrued. If a party has made more than one offer, the most recent offer controls for the purposes of this rule.

(2) ‘Counteroffer‘ means a written reply to an offer, served within 21 days after service of the offer, in which a party rejects an offer of the adverse party and makes his or her own offer.

(3) ‘Average offer‘ means the sum of an offer and a counteroffer, divided by two. If no counteroffer is made, the offer shall be used as the average offer.

(4) ‘Verdict‘ includes,

(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 offer of judgment.

(5) ‘Adjusted verdict‘ means the verdict plus interest and costs from the filing of the complaint through the date of the offer.

(6) ‘Actual costs‘ means the costs and fees taxable in a civil action and a reasonable attorney fee for services necessitated by the failure to stipulate to the entry of judgment.

(B) Offer. Until 28 days before trial, a party may serve on the adverse party a written offer to stipulate to the entry of a judgment for the whole or part of the claim, including interest and costs then accrued.

(C) Acceptance or Rejection of Offer.

(1) To accept, the adverse party, within 21 days after service of the offer, must serve on the other parties a written notice of agreement to stipulate to the entry of the judgment offered, and file the offer, the notice of acceptance, and proof of service of the notice with the court. The court shall enter a judgment according to the terms of the stipulation.

(2) An offer is rejected if the offeree

(a) expressly rejects it in writing, or

(b) does not accept it as provided by subrule (C)(1).

A rejection does not preclude a later offer by either party.

(3) A counteroffer may be accepted or rejected in the same manner as an offer.

(D) Imposition of Costs Following Rejection of Offer. If an offer is rejected, costs are payable as follows:

(1) If the adjusted verdict is more favorable to the offeror than the average offer, the offeree must pay to the offeror the offeror's actual costs incurred in the prosecution or defense of the action.

(2) If the adjusted verdict is more favorable to the offeree than the average offer, the offeror must pay to the offeree the offeree's actual costs incurred in the prosecution or defense of the action. However, an offeree who has not made a counteroffer may not recover actual costs unless the offer was made less than 42 days before trial.

(3) The court shall determine the actual costs incurred. The court may, in the interest of justice, refuse to award an attorney fee under this rule.

(4) Evidence of an offer is admissible only in a proceeding to determine costs.

(5) Proceedings under this rule do not affect a contract or relationship between a party and his or her attorney.

(6) A request for costs under this subrule must be filed and served within 28 days after the entry of the judgment or entry of an order denying a timely motion

(i) for a new trial,

(ii) too set aside the judgment, or

(iii) for rehearing or reconsideration.

(E) Relationship to Case Evaluation. Costs may not be awarded under this rule in a case that has been submitted to case evaluation under MCR 2.403 unless the case evaluation award was not unanimous.

Mich. Ct. R. 2.405 (emphasis added).

The Erie Doctrine “requires a federal court sitting in diversity to apply state substantive law and federal procedural law.” Degussa Admixtures, Inc. v. Burnett , 277 Fed.Appx. 530 (6th Cir.2008) (citing Erie Railroad Co. v. Tompkins , 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ).

The Court finds the Eleventh Circuit's framework helpful, as a starting point:

As a federal court sitting in diversity jurisdiction, we apply the substantive law of the forum state, in this case, Florida, alongside federal procedural law. Erie R.R. Co. v. Tompkins , 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). Under this framework, the disputed provisions of Florida law—Florida's offer of judgment statute; Rule 1.442(c)(2)(F); Rule 1.442(c)(2)(G); and the FDUTPA and its fee-shifting provision—apply only if they are substantive for Erie purposes. Accordingly, we must determine the Erie status of these provisions before applying them to the case at hand.

We make this determination using two tests. If the Florida law is in conflict with a Federal Rule of Civil Procedure, then we apply the test set forth by Hanna v. Plumer , 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965), under which we follow the federal rule so long as it is valid under the Constitution and the Rules Enabling Act. Id. at 472–74, 85 S.Ct. 1136. If no federal statute or Federal Rule is on point, then we instead apply the “outcome determinative test” set forth by Erie and its progeny, under which we apply the Florida law if its application would be so important to the outcome “that failure to apply it would unfairly discriminate against citizens of the forum State, or be likely to cause a plaintiff to choose the federal court.”

Horowitch , 645 F.3d at 1257–58 (quoting Gasperini , 518 U.S. at 428, 116 S.Ct. 2211 ) (other internal citations omitted).

As an initial matter, Defendant has correctly noted that under Supreme Court precedent, Rule 68 does not apply when a defendant prevails in a case. Delta Air L ines v. August , 450 U.S. 346, 352, 101 S.Ct. 1146, 67 L.Ed.2d 287 (1981) (“[I]t is clear that Fed. R. Civ. P. 68 applies only to offers made by the defendant and only to judgments obtained by the plaintiff.”).³ Thus, at least part of the offer-of-judgment rule does not directly conflict with Rule 68.

Under the “American rule,” however, attorney fees are not recoverable from the losing party—absent a statutory exception or court order. E.g. , Fed. R. Civ. P. 54(d)(1) (“Unless a federal statute , these rules , or a court order provides otherwise, costs—other than attorney's fees —should be allowed to the prevailing party.”); Fed. R. Civ. P. 54(B)–(B)(ii) (emphasis added) (“Unless a statute or a court order provides otherwise, the motion [for attorney's fees and related nontaxable expenses] must...specify the judgment and the statute, rule, or other grounds entitling the movant to the award.”); see, e.g., Alyeska Pipeline Serv. Co. v. Wilderness Soc'y , 421 U.S. 240, 257, 270, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975) (As a “general rule..., absent statute or enforceable contract, litigants pay their own attorneys' fees.”) (“[The American Rule] is deeply rooted in our history and in congressional policy; and it is not for us to invade the legislature's province by redistributing litigation costs.”).

Nonetheless, with regard to the applicability of state law provisions shifting attorney fees, the Supreme Court has held:

[I]n an ordinary diversity case where the state law does not run counter to a valid federal statute or rule of court , and usually it will not, state law denying the right to attorney's fees or giving a right thereto, which reflects a substantial policy of the state , should be followed.

Alyeska , 421 U.S. at 259 n. 31, 95 S.Ct. 1612 (emphasis added); see Degussa , 277 Fed.Appx. at 532. Thus, “[f]ederal courts sitting in diversity...customarily will apply state ‘fee-shifting rules that embody a substantive policy , such as a statute which permits a prevailing party in certain classes of litigation to recover fees .’ ” Degussa , 277 Fed.Appx. at 532 (emphasis added) (quoting Chambers v. NASCO, Inc. , 501 U.S. 32, 52, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991) ).

“Whether a state law provision is substantive or procedural depends not on where that law is found, but rather...on whether that particular provision either creates rights and obligations or is so ‘bound up with [state-created] rights and obligations' that it must be considered substantive.” Shropshire v. Laidlaw Transit, Inc. , 550 F.3d 570, 575 (6th Cir.2008) (quoting Byrd v. Blue Ridge Rural Elec. Co-op , 356 U.S. 525, 535, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958) ).

In a footnote in Alyeska, the Supreme...