Mich. Neurology Assocs. v. Beall
| Decision Date | 16 September 2021 |
| Docket Number | 354565 |
| Parties | MICHIGAN NEUROLOGY ASSOCIATES, PC, Plaintiff/Counterdefendant-Appellee/Cross-Appellant, v STEVEN S. BEALL, MD, Defendant/Counterplaintiff-Appellant/Cross-Appellee. |
| Court | Court of Appeal of Michigan — District of US |
UNPUBLISHED
Macomb Circuit Court LC No. 2016-004048-CB
Before: Cameron, P.J., and Jansen and Gleicher, JJ.
To succeed on a motion for case evaluation sanctions, the requesting party must present some evidence to prove the reasonableness of the fee requested and the number of attorney work hours claimed. This case involved two rejected case evaluations-one arising from a complaint and the other from a counterclaim. The parties stipulated that to calculate the sanctions, the hours spent by their attorneys would be allocated between litigating the complaint and litigating the counterclaim. But the parties then claimed that this was an impossible task and presented no evidence of the allocation. Given the absence of this critical evidence, we affirm the circuit court's denial of both parties' motions for case evaluation sanctions.
Dr Steven S. Beall is a physician who was previously employed by Michigan Neurology Associates, PC (MNA). Dr. Beall resigned in 2011, after a medical assistant accused him of sexual harassment and a human resources employee alleged that a physician- partner in the practice asked her to cover up Dr Beall's misconduct. Mich Neurology Assocs, PC v Beall, unpublished per curiam opinion of the Court of Appeals, issued April 2, 2020 (Docket No. 347341) (MNA I), p 5. Those two employees subsequently filed suit against MNA for constructive discharge, which MNA settled for a total of $150, 000. Id. at 6. MNA then filed suit against Dr. Beall, seeking indemnification for the settlement it paid and return of overpaid compensation (referred to by the parties as the "clawback" claim). Dr. Beall filed a counterclaim, asserting that MNA's "clawback" math was wrong and that MNA actually owed him withheld compensation. Id.
The matter was submitted to case evaluation. A three-member panel valued MNA's complaint at $60, 000, but evaluated Dr Beall's counterclaim at zero. Both parties rejected the case evaluation.
The matter proceeded to a three-day bench trial. Id. at 6. On January 2, 2019, the circuit court determined that neither party had a cause of action. Id. at 8. This Court affirmed. Id. at 12.
Dr. Beall then sought case evaluation sanctions against MNA pursuant to MCR 2.403(O)(1) because MNA had rejected the $60, 000 case evaluation and the court's ultimate judgment-$0-was less favorable. Citing MCR 2.403(O)(6)(b), Dr. Beall sought $24, 187.50" 'for services necessitated by the rejection of the case evaluation.' "
MNA retorted that Dr. Beall was not entitled to case evaluation sanctions because the court's finding of "no cause of action with respect to the parties' claims" was not a "verdict" under the definition of MCR 2.403(O)(2) from which case evaluation sanctions could be assessed. MNA has abandoned that challenge on appeal. MNA also described the case evaluation as "two-fold"- the panel evaluated MNA's complaint at $60, 000 and Dr. Beall's counterclaim at $0. Dr. Beall's rejection of the case evaluation for his counterclaim negated his request for sanctions, MNA contended.
The hearing on Dr. Beall's motion was adjourned from a date in late January 2019 until February 2019, a fact of consequence to one of the legal issues presented. MNA subsequently filed its own motion for sanctions. MNA noted that Dr. Beall rejected the case evaluation of $0 for his counterclaim. "Dr. Beal[l] needed the verdict to be more favorable to him" and it was not. Accordingly, MNA sought $15, 345 in sanctions.
Dr. Beall challenged the timeliness of MNA's motion for case evaluation sanctions, noting that it had not been filed within 28 days of the judgment's entry as required by MCR 2.403(O)(8). Dr. Beall conceded that MNA accurately described the case evaluation award as involving two components-one related to MNA's complaint and the other to Dr. Beall's counterclaim. But, he posited, MNA failed to explain the legal significance of this distinction and MNA did not improve its position on either count. Dr. Beall continued that his counsel's work to defend against MNA's clawback claim was the same work performed to litigate Dr. Beall's counterclaim. Specifically, MNA sued Dr. Beall under his employment contract for overpaying him during his employment, and Dr. Beall defended based on the same provisions that MNA had actually underpaid him. "His counterclaim was just based on an extension of the math."
After a hearing on the legal aspects of the parties' arguments, the court took under advisement whether it could grant MNA case evaluation sanctions as MNA filed its motion beyond the 28-day deadline. MNA's counsel reminded the court that the parties had been before the court on January 27, 2019, and on that date the court adjourned the hearing because MNA announced its intent to file its own motion for case evaluation sanctions. MNA's counsel implied that Dr. Beall could not be prejudiced even if MNA filed its motion a few days late as he was on notice. The court determined that "based upon your arguments," each party was entitled to case evaluation sanctions under the court rule.
On March 18, 2019, the circuit court issued an order resolving only the issue of whether it could consider MNA's late filed motion for case evaluation sanctions. The court noted that MCR 2.403(O)(8) provides that a motion for case evaluation sanctions "must be filed and served within 28 days after the entry of judgment." The court looked to an unpublished opinion of this Court stating that although the court rule requires a party to file the motion within 28 days, courts retain the discretion "to entertain pleadings filed after a stated deadline." The court further cited Maldonado v Ford Motor Co, 476 Mich. 372, 388; 719 N.W.2d 809 (2006), for the proposition that a court has discretion to consider late-filed motions as part of its inherent authority to control the proceedings before it.
Following the resolution of the appeal on the merits of the case in MNA I, the parties entered a stipulated order in lieu of an evidentiary hearing. The parties agreed to reasonable hourly rates for each attorney and stipulated that each side spent 50 hours on the case after rejecting the case evaluation award. The parties asked the court to consider each parties' legal entitlement to case evaluation sanctions, and to allocate the hours spent by the attorneys on the claim and counterclaim.
The parties then submitted supplemental briefs regarding the allocation of their attorney's hours between the complaint and the counterclaim. MNA asserted that this was "a difficult subjective task . . . [s]ince hours were not kept separately for billing purposes." Moreover, Dr. Beall. MNA noted that reviewing Dr. Beall's testimony, his attorney's hours were intermingled too-"because preparation was strategized to deal with both the complaint and counter claim." Absent any method for dividing the hours, MNA recommended simply allocating them equally, with 25 hours being spent by each party in preparation for the complaint and 25 hours in preparation for the counterclaim.
Dr. Beall, on the other hand, argued that all 50 hours should be allocated to preparing to litigate on the complaint, describing the counterclaim as "purely incidental." Dr. Beall further posited that "[t]he history of this dispute" was important to resolving the sanctions issue. Dr. Beall described that he "retired in 2011 and quietly honored his noncompete thereafter." Although he had grounds to file suit, Dr. Beall "was satisfied with the status quo." MNA was not satisfied, however, and filed suit against Dr. Beall in 2014 seeking indemnification "related to the settlement of an earlier lawsuit" and a return of pay under a "clawback" theory. That case was dismissed without prejudice so the parties could attempt to resolve the dispute outside of court. Negotiations failed, and Dr. Beall described himself as "willing to let the status quo continue" and "satisfied with a situation where neither party made any payment to the other." When MNA filed suit again in 2016, Dr. Beall "filed a short counterclaim" because his "mathematical analysis demonstrated to him that he was actually entitled to payment based on his employment contract." In Dr. Beall's estimation, the trial court "essentially adopted" his position at trial, concluding "that neither side should pay anything to the other."[1]
Dr Beall contended that the court must "separate out MNA's claim for indemnification related to the earlier settlement agreement." Dr. Beall did not file a counterclaim in relation to that claim, and he successfully defended against it. Accordingly, Dr. Beall asserted that he was entitled to repayment of his attorney fees and costs for the hours spent on the reimbursement issue, estimated at 20% of his attorney's total hours, or 10 hours. "All of the remaining time on the 'clawback' claim was necessitated by MNA's complaint," Dr. Beall insisted, representing his attempt to defend himself against a claim seeking the return of "hundreds of thousands of dollars" in salary. While Dr. Beall filed a counterclaim seeking recompense for withheld salary, this work "would have...
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