Discovery sanctions awarded to prevailing party are not considered "costs" in determining right to case evaluation sanctions
The Michigan Courts have a process, called Case Evaluation, where cases are submitted to an experienced panel of attorneys who place a recommended settlement value on the case. Neither party is obligated to accept the evaluation, however, a rejecting party who does not improve on the recommendation by ten percent is sanctioned and must pay the other party's actual fees and costs from one month after the Case Evaluation (when decisions are due).
Michigan also allows a court to award discovery sanctions to a litigant if the litigant does not respond in good faith to interrogatories, requests to produce and depositions. A panel of the Court of Appeals made a surpising decision this week in a case involving both of these "sanction" provisions.
In Shafer Redi-Mix, Inc. v. J. Slagter & Son Construction, the case evaluators recommended a settlement of $100,000.00 to Shafer. The Court had previously awarded Shafer $1500.00 in discovery sanctions. Shafer rejected the case evaluation, however, and the case went to trial. Shafer then recovered a judgment which, with costs not including the discovery sanction, exposed it to Case Evaluation sanctions. If the discovery sanction was added to Shafer's other recoverable costs, however, Shafer would avoid Case Evaluation sanctions because the total final recovery would be 110% of the recommendation.The Court of Appeals decided that discovery sanctions were punitive and not in the nature of normal litigation "costs." Therefore, it ruled that Shafer could not include the sanctions as part of its total recovery when evaluating it's exposure to Case Evaluation sanctions. The sanctions claimed by the Defendant exceeded Shafer's total recovery, so in the end Shafer recovered nothing, even though it was owed almost $100,000.00 and the adversary had abused discovery.