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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 plaintiff s could discover the defendants’ financial assets in the course of this civil action. We revers e 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 thedrug 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 accep ta nce or rejection of Mediation, [5] whichmight resu lt 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 ove r and above any insurance coverage.

1 Ms. Bauroth's husband, Edward Ba urot h, 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 defend ants 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. 2In 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 moneytoward a settlement. "Unl ess plaintiffs agree to dismiss this action without the payment of money, this matter will proceed to trial." The defendants asse rted t hat their financial status was therefore irrelevant. The circuit court granted the motion to compel disclosure. 6 On the representation bypla intiffs' 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 t he date hereof during the last two (2) years for any reason whatsoever of both Defendants. And 4. Suchother 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 confide nce , 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 3that he would delay the creditors' examin atio n 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 d efendants applied to this Court for leave to appeal, we issued a stayof the circuit court's order. 8 Today we reverse that order. II The in terpre tation and application of a court rule presents a question of law that is reviewed de novo. McAuley

vGeneral Motors Corp , 457 Mich513, 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 o r defe nse 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 p ersons having knowledge of a discoverable mat ter. It is

evaluat ion wa s extended sixty days after the date of the order.

7Unpublished order entered M ay 3 0, 2001 (Docket No. 233885).

8Unpublished order entered Jun e 7, 2001 (Docket No. 119370). 4not 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 i nter rogatories, 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 be liev e 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 tri al ju dge 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 G CR 1 963, 310, to require defendant to prod uce co pies of his income tax returns, it would appear that if plaintiff satisfied the trial court there was go od ca use, defendant could have been required to produce such in come tax returns, even though they wer e no t 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 applyto the scope of interro g atories 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, 5and we find that, unde r the circumstances of this case, "good cause" encompasses the interrogatories regarding defendant's assets that are in dispute. The circumstances to which w e re fer 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 settlemen t. 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 hav e suf ficient "good cause" to permit such discovery. Where sufficient good cause is present, a defendant's alleged right of privacymust 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 Co urt of Appeals made clear in McLaren , that decision is based on the General C ourt Rules of 1963. The change effected by the Michigan Court Rules of 1985 is well explained in Dean & Longhofer, MichiganCourt Rules Practice , § 2302.2, p 198: Withthe 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 disc overy onlyon motion and order of the court, and additionally adopted the restrictions of GCR 1963, 306.2, several Michigan cases concluded that a partymust show “good cause” to obtain such discovery.

6One 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 C iv il Procedure 26, setting forthstandards and exceptions fo r the scope of discovery
. Rather, the Michigan scope of discovery p rovi sions were contained in GCR 1963, 302.2, and several restrictions thereto were contained in GCR 1963, 306.2. This was tr ue despite the fact that GCR 1963, 306.2 purported to govern on ly 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 requireme nt t hat a party show good cause for the discovery of particular information, documents, and the like. MCR 2.302(B) nowcompiles all the Michigan rules restrictingthe scope of discovery into one rule. [Emphasis supplied.] As this treatise well states, the clarified text of the 1985 rules rendered obsolete the “good cau se” approach that had been employed under the 1963 rules. With it, the rationale of McLarenlikewise became obsolete. Again, MCR 2.30 2(B)(1) sets the bounds of discovery in most civil actions. The rule allows discovery of matter that is “relevant to the subject matter inv olved in the pending action” or that “appears reasonably calculated to lead to the discoveryof admissible evidence.” Under the circumstances of this case, the financial information sought by the plaintiffs satisfies neither branch of MCR 2.302(B)(1).

7For these reas ons, w e reverse the order of the circuit court requiring disclosure. We re man d this case to the circuit court for further proceedings. MCR 7.302(F)(1). C ORRIGAN , C.J., andC AVANAGH , WEAVER , K ELLY , T AYLOR , Y OUNG , and M

ARKMAN , JJ., concurred.

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