Case Title: EDWARD BAUROTH V JAMAL HAMMOUD MD

Citation: 

Docket Number: 119370

State: michigan

Court: Michigan Supreme Court

Date: 2001-09-12T00:00:00Z

Document:
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Michigan Supreme Court 
Lansing, Michigan 48909 
C hief Justice 
Justices 
Maura D. Corrigan  
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Clifford W. Taylor 
Robert P. Young, Jr. 
Opinion 
Stephen J. Markman 
FILED SEPTEMBER 12, 2001  
EDWARD BAUROTH and BARBARA  
BAUROTH,  
Plaintiffs-Appellees,  
v  
No. 119370  
JAMAL HAMMOUD and ENDOCRINE  
CONSULTANTS OF MID-MICHIGAN, 
P.C., a Michigan Professional 
Corporation, Individually 
and Jointly and Severally,  
Defendants-Appellants.  
PER CURIAM  
The circuit court ordered that the plaintiffs could  
discover the defendants’ financial assets in the course of  
this civil action.  We reverse because such discovery is  
outside the scope allowed by MCR 2.302.  
I  
Plaintiff Barbara Bauroth was being treated by defendant  
Jamal Hammoud, M.D., for hyperthyroidism. He prescribed the  
drug Tapazole, which, she alleges, caused her harm.  She sued,  
claiming 
that 
his 
actions 
and 
inactions 
constituted  
professional malpractice.1  
The case-evaluation process described in MCR 2.403  
produced an evaluation of $250,000.2  This amount exceeded the  
defendant's insurance coverage, which was $200,000/$600,000.3  
The plaintiffs filed in circuit court a motion asking for  
an order requiring the defendants to disclose their assets.4  
They explained:  
That before Plaintiffs can make a valid and  
knowing acceptance or rejection of Mediation,[5]  
which might result in the settlement of this  
litigation, they must have the opportunity to 
review the net worth and/or assets and liabilities 
of Defendants in order to make a business judgment 
as to what monies may be available over and above 
any insurance coverage.  
1 Ms. Bauroth's husband, Edward Bauroth, is also a 
plaintiff; he presents derivative claims. A second defendant  
is Endocrine Consultants of Mid-Michigan, P.C., in which Dr. 
Hammoud practiced medicine.  
2 The facts pertaining to the case evaluation and to the 
defendants' insurance coverage are taken from the apparently 
undisputed statements of counsel in the circuit court and in 
this Court.  
3 The defendants explained in circuit court that their 
"insurance policy limits are $200,000 per incident/$600,000 
aggregate."  
4 At the hearing on the motion, the plaintiffs also asked 
for an extension of the time limit, MCR 2.403(L)(1), for 
deciding whether to accept or reject the evaluation.  
5 In 2000, the name of the process described in MCR 2.403 
was changed from "mediation" to "case evaluation." The term  
"mediation" now applies to the process described in MCR 2.411.  
2  
 
In support of their motion, the plaintiffs relied upon McLaren  
v Zeilinger, 103 Mich App 22; 302 NW2d 583 (1981).  
Responding 
to 
the motion, the defendants stated that they  
would neither accept the case evaluation, nor agree to pay any  
money toward a settlement.  "Unless plaintiffs agree to  
dismiss this action without the payment of money, this matter  
will proceed to trial."  The defendants asserted that their  
financial status was therefore irrelevant.  
The circuit court granted the motion to compel  
disclosure.6  On the representation by plaintiffs' counsel  
6 The circuit court's order provided that the defendants 
to disclose the following "forthwith”:  
1.
 A detailed, sworn, net-worth statement 
setting forth all of the assets and liabilities of 
both Defendants. And  
2.  The last five (5) years, Federal, State 
and Local Income Tax returns for both of the  
Defendants. And  
3. Any and all financial statements prepared 
prior to the date hereof during the last two (2) 
years for any reason whatsoever of both Defendants. 
And  
4.  Such other and further information as will  
assist Plaintiffs in determining the true net worth 
and/or collect-ability of both of the Defendants. 
And  
5.
 Both Defendants shall submit to a  
creditor's exam regarding the disclosure of the 
assets herein mentioned.  
The order provided that the plaintiffs were to hold these 
materials in confidence, and use them for no purpose other 
than determining whether to accept the evaluation. The order  
further provided that the time for accepting or rejecting the  
3  
 
that he would delay the creditors' examination for thirty  
days, the circuit court denied the defendants' request for a  
stay.  
The defendants applied to the Court of Appeals, which  
denied leave to appeal.7  The Court also denied a stay.  
When the defendants applied to this Court for leave to  
appeal, we issued a stay of the circuit court's order.8  Today  
we reverse that order.  
II  
The interpretation and application of a court rule  
presents a question of law that is reviewed de novo. McAuley  
v General Motors Corp, 457 Mich 513, 518; 578 NW2d 282 (1998).  
III  
The general scope of permissible discovery is stated in  
MCR 2.302(B)(1):  
Parties may obtain discovery regarding any 
matter, not privileged, which is relevant to the 
subject matter involved in the pending action, 
whether it relates to the claim or defense of the  
party seeking discovery or to the claim or defense 
of 
another 
party, 
including 
the 
existence, 
description, 
nature, 
custody, 
condition, 
and  
location of books, documents, or other tangible 
things and the identity and location of persons 
having knowledge of a discoverable matter.  It is  
evaluation was extended sixty days after the date of the  
order.  
7 
 Unpublished order entered May 30, 2001 (Docket No. 
233885).  
8 
 Unpublished order entered June 7, 2001 (Docket No. 
119370).  
4  
 
not ground for objection that the information 
sought will be inadmissible at trial if the  
information sought appears reasonably calculated to 
lead to the discovery of admissible evidence.  
As indicated, the motion granted by the circuit court was  
premised on McLaren. In that case, which arose from a motor  
vehicle accident, the plaintiff sought to discover financial  
information about the defendant.  The circuit court denied the  
defendant’s objections to interrogatories, and the Court of  
Appeals affirmed. 
In the concluding paragraphs of its  
opinion, the Court explained that it was applying a “good  
cause” test:  
We believe that the test now utilized by the 
Supreme Court is whether plaintiff has "good cause" 
to have discovery of the extent and value of 
defendant's assets, and that the trial judge is 
vested with discretion to make that determination  
on a case by case basis.  To hold otherwise would  
lead to incongruous results that we do not believe 
the Supreme Court intended.  
E.g., in this case, if, rather than submitting 
interrogatories to defendant, plaintiff had chosen 
to proceed under GCR 1963, 310, to require 
defendant to produce copies of his income tax  
returns, 
it 
would 
appear 
that 
if 
plaintiff 
satisfied the trial court there was good cause, 
defendant could have been required to produce such 
income tax returns, even though they were not 
admissible in evidence at trial nor relevant to the  
subject matter at trial.  
We believe the Supreme Court intended the same 
test, namely, "good cause" to apply to the scope of 
interrogatories as to the scope of production of 
documents.  
The question then is whether there is good 
cause 
to 
require 
defendant 
to 
answer 
these  
interrogatories.
 As indicated, we hold this  
decision was for the discretion of the trial judge,  
5  
 
 
  
 
and we find that, under the circumstances of this 
case, "good cause" encompasses the interrogatories 
regarding defendant's assets that are in dispute.  
The circumstances to which we refer are that  
the recommendation of a mediation panel has placed 
a substantial value on plaintiff's damages, that 
there is a real possibility of a jury award 
exceeding the policy limits, and that discovery of 
defendant’s assets could be a factor inducing 
settlement. 
We do not hold that, as a general  
rule, a plaintiff in an automobile accident case  
will be entitled to discovery of defendant's  
assets.  
On the contrary, we would expect that it will  
only be in the exceptional case that a plaintiff  
may have sufficient "good cause" to permit such  
discovery.  
Where sufficient good cause is present, a 
defendant's alleged right of privacy must give way. 
Consequently, we hold that the trial court's denial 
of defendant's motion was not clearly erroneous. 
[103 Mich App 31-32.]  
As the Court of Appeals made clear in McLaren, that  
decision is based on the General Court Rules of 1963.  The  
change effected by the Michigan Court Rules of 1985 is well  
explained in Dean & Longhofer, Michigan Court Rules Practice,  
§ 2302.2, p 198:  
With the adoption of MCR 2.302, which contains 
general provisions governing discovery as a whole, 
subtle changes were made in discovery practice that 
are not readily apparent from a reading of the 
individual rules. 
GCR 1963, 310 previously 
governed the production and discovery of documents 
and things.  As the rule permitted such discovery  
only on motion and order of the court, and  
additionally adopted the restrictions of GCR 1963, 
306.2, several Michigan cases concluded that a 
party must show “good cause” to obtain such  
discovery.  
6  
 
 
 
One of the principal reasons that the Michigan 
courts reached the conclusion that good cause must  
be shown to conduct discovery was that the Michigan  
rules did not contain a comprehensive rule, similar  
to Federal Rule of Civil Procedure 26, setting  
forth standards and exceptions for the scope of  
discovery.  Rather, the Michigan scope of discovery 
provisions were contained in GCR 1963, 302.2, and 
several restrictions thereto were contained in  
GCR 1963, 306.2.  This was true despite the fact  
that GCR 1963, 306.2 purported to govern only 
protective orders associated with the taking of 
depositions on oral examination.  It is not hard to  
understand how the courts, considering standards 
for issuance of protective orders, could reach the 
conclusion that a party had to show good cause to 
acquire the discovery requested.  
The adoption of MCR 2.302, and the elimination 
of the requirement for a motion and order prior to 
conducting discovery proceedings under MCR 2.310, 
have eliminated any requirement that a party show 
good 
cause 
for 
the 
discovery 
of 
particular 
information, documents, and the like. MCR 2.302(B)  
now compiles all the Michigan rules restricting the  
scope of discovery into one rule.
 [Emphasis 
supplied.]  
As this treatise well states, the clarified text of the  
1985 rules rendered obsolete the “good cause” approach that  
had been employed under the 1963 rules. 
With it, the  
rationale of McLaren likewise became obsolete.  
Again, MCR 2.302(B)(1) sets the bounds of discovery in  
most civil actions.  The rule allows discovery of matter that  
is “relevant to the subject matter involved in the pending  
action” or that “appears reasonably calculated to lead to the  
discovery 
of 
admissible evidence.”  Under the circumstances of  
this case, the financial information sought by the plaintiffs  
satisfies neither branch of MCR 2.302(B)(1).  
7  
 
 
 
 
For these reasons, we reverse the order of the circuit  
court requiring disclosure.  We remand this case to the  
circuit court for further proceedings. MCR 7.302(F)(1).  
CORRIGAN, C.J., and CAVANAGH, WEAVER, 
KELLY, TAYLOR, 
YOUNG, 
and  
MARKMAN, JJ., concurred.  
8