-1- 

STATE OF MICHIGAN 

COURT OF APPEALS 

PETER L. CONWAY, PC., 

 Plaintiff/Counter-DefendantAppellant, 

UNPUBLISHED 

March 19, 2015 

v No. 319011 

Lapeer Circuit Court 

EASTERN LAKES TRANSPORT MUSEUM, LC No. 10-042747-CK 

 Defendant/Counter-Plaintiff/ThirdParty Plaintiff-Appellee, 

and 

RALPH D. GILPIN, DENNIS GARNER, 

ANDREW ROBINSON, GERALD B. SMITH, 

GERALD L. FANTINI, LARRY L. HARTLEY, 

and ROBERT T. JONES, 

Defendants-Appellees, 

and 

PETER L. CONWAY, 

Third-Party Defendant. 

Before: BOONSTRA, P.J., and SAWYER and O’CONNELL, JJ. 

PER CURIAM. 

 Plaintiff1 appeals by right the trial court’s order denying its motion for sanctions pursuant 

to MCR 2.114 and MCL 600. 2591. We affirm. 

 

1

 Attorney Peter L. Conway was not named, individually, as a plaintiff. Therefore, and for ease 

of reference, we use the term “plaintiff” to refer to the law firm of “Peter L. Conway, P.C.” We 
-2- 

I. PERTINENT FACTS AND PROCEDURAL HISTORY 

 This action initiated with a claim by plaintiff for unpaid legal fees. The following is a 

brief review of the underlying facts and litigation. In 2004, defendants2

 retained plaintiff to 

perform legal services concerning litigation involving the Yankee Air Force, Inc. (“YAF”) and a 

certain parcel of property referred to as “the Farmhouse” property. Apparently, a breakdown in 

the attorney-client relationship compelled plaintiff to withdraw as defendants’ counsel on 

March 1, 2010. Plaintiff brought this action on April 30, 2010, to collect unpaid attorney fees 

from defendants in the approximate amount of $95,000. 

 In answering the complaint, defendants essentially admitted that they owed a “reasonable 

value” to plaintiff in unpaid legal fees, but denied that the amount requested was reasonable. 

Defendants alleged that plaintiff failed to credit them for payments made on their account. In 

addition, defendants pleaded four affirmative defenses.3 Defendants’ answer and affirmative 

refer to third-party defendant, Peter L. Conway, individually, as “Conway.” We refer to 

defendant/counter-plaintiff/third-party plaintiff, Eastern Lakes Transport Museum, as “ELTM.” 

The term “defendants,” in the plural, refers to ELTM and the individual defendants, collectively. 

2

 Defendant ELTM is the successor in interest to the Ad Hoc Membership Group (“Group”), a 

non-profit corporation. Individual defendant Ralph D. Gilpin was the resident agent of the 

Group. The other individual defendants were involved with the Group in various capacities. All 

individual defendants had provided written guarantees of costs and legal fees incurred by ELTM. 

3

 Defendants pleaded the following affirmative defenses: 

 FIRST. Fraud in the Inducement. Beginning around 2007 Plaintiff led 

Defendant down the “primrose path” with assurances that the running billings 

need not be worried about. He gave the same assurance to Jan L. Herrick, Esq. 

Defendant relied on Plaintiff’s assurance that a sizeable recompense would be 

available from winning the Ad Hoc case. Plaintiff now demands payment in full 

of nearly one hundred thousand dollars knowing full well that Defendants, jointly 

or severally, cannot produce that sizeable a sum now or in the future without a 

bankruptcy protection. Further, Defendant demanded that Plaintiff rework his 

billings to reflect what Defendant asserts are un-necessary services, error billings 

and similar errata. Plaintiff has refused to entertain the requests. 

 SECOND. Failure to accept Defendant’s instructions in more than one 

instance. Plaintiff’s specific instructions as to goals to be accomplished were 

brushed aside thereby causing an inflation of the billing totals when Plaintiff 

chose different routes which satisfied him but were inimical to Defendant’s 

interests. 

 THIRD. Tortious Interference with a Business Proposition. Plaintiff was 

instructed to move the Court in the Ad Hoc matter to release a certain deed from 

escrow, the Ad Hoc Committee having since acquired the necessary IRS 

classification. Plaintiff refused to do so offering several vague excuses. Whether 

the Court would have granted the Motion is immaterial for this matter. Plaintiff 
-3- 

defenses were signed by defendant Gilpin, as “attorney for defendants.”4

 Gilpin testified that he 

came out of a 20-year retirement to prepare and file the answer to plaintiff’s complaint. 

 During the course of litigating plaintiff’s claim for unpaid legal fees, ELTM filed a 

separate legal malpractice action against plaintiff. The trial court declined to consolidate the two 

actions and dismissed the separate legal malpractice action, and instead permitted ELTM to file a 

counterclaim and third-party claim within the context of the instant action. In its counterclaim 

against plaintiff and third-party complaint against Conway, ELTM alleged that during the YAF 

litigation, the deed to the “Farmhouse” was transferred to ELTM and then placed in escrow. 

ELTM alleged that plaintiff and Conway negligently failed to pursue a motion to have that deed 

released from escrow. As a result, ELTM alleged that it lost the opportunity to sell that property 

to an interested purchaser. 

 Plaintiff filed several motions for summary disposition in the instant case, and the trial 

court ultimately granted summary disposition in favor of plaintiff on both its primary claim and 

on ELTM’s counterclaim for legal malpractice. Defendants satisfied the resulting judgment, 

which totaled approximately $96,600, in favor of plaintiff. 

 Following the entry of the final summary disposition order, plaintiff filed a motion for 

sanctions. Plaintiff argued in part that under the offer of judgment rule, MCR 2.405, it was 

entitled to recoup costs in the amount of $21,860, which represented the costs incurred by 

was duty bound to so Move the Court at ELTM’s request, such being legal and 

necessary for a decision. Failure to so Move caused Defendant to lose a favorable 

property sale to an interested buyer for cash, an amount sufficient to pay off 

Plaintiff up to that moment in the AD Hoc case underling the present matter. 

[This Court was moved to do so in February, 2010, but deferred the question for 

trial, on the false assertion of then Defendant that the Yankee AF bylaws 

prohibited such a transaction. Said Yankee AF objection evaporated in March, 

2010, when the removal was accomplished.] [Sic.] 

 FOURTH. Wrongful Conversion. On more than one occasion Plaintiff 

discarded Defendant’s instructions in the Ad Hoc matter as to goals to be 

accomplished, instead substituting his own and issuing his own instructions to 

Defendant to gain the result he wanted. This tactic effectively converted the case 

in chief from Defendant’s control to that of Plaintiff. The result was that 

Plaintiff’s billings to Defendant escalated and Defendant is now demanded to pay 

for Plaintiff’s frolic and detour in the prosecution of Defendant’s underlying civil 

case. Attempts to discuss these objections with Plaintiff have brought rejection. 

Case in point: arranging a second “facilitation” over Defendant’s objection 

(which failed) then attempting to arrange a third one against Defendant’s specific 

refusal to participate further in a failed strategy. 

4

 Indeed, defendant Gilpin is a licensed attorney in good standing in the State Bar of Michigan. 

See http://www.michbar.org/memberdir/detail.cfm?PID=26373 (last accessed February 24, 

2015). 
-4- 

plaintiff after defendants rejected plaintiff’s January 19, 2011 counter-offer of judgment. 

Plaintiff also sought sanctions under MCR 2.114 and MCL 600.2591, arguing that it was entitled 

to an award of $80,607.50, representing the value of the attorney time spent (by plaintiff or 

Conway) defending against defendants’ allegedly unsupportable affirmative defenses, as well as 

the amount of attorney fees incurred by plaintiff having retained the services of an attorney to 

defend against the allegedly frivolous counterclaim for legal malpractice. 

 Following a two-day evidentiary hearing, the trial court found that plaintiff was entitled 

to costs pursuant to MCR 2.405 in the amount of $27,720; however, finding that defendants’ 

filings were not frivolous, it declined to assess sanctions pursuant to MCR 2.114 or 

MCL 600.2591. The court stated specifically: 

 Under statute and court rule, again, an attorney and the represented party 

have an affirmative duty to conduct a reasonable inquiry into the factual and legal 

viability of the alleged claim before signing any document. Whether an inquiry 

was reasonable is determined by an objective standard. Reasonableness is 

determined by the efforts taken in investigating a claim before filing suit, and the 

determination of reasonable inquiry depends on the facts in the case. Subjective 

good faith is irrelevant. However, alleged facts that are subsequently determined 

to be false do not invalidate a prior reasonable inquiry. Plaintiff appears to argue 

that the Defendants’ legal position is devoid of merit and therefore frivolous 

pursuant to MCL 600.2591. 

 This Court disagrees. This Court determines that the Defendants’ 

complaint for malpractice was not frivolous under sections of MCL 600.2591. 

Although Defendants’ theory was unsuccessful, this Court does not find it to be 

completely devoid of legal merit, and there is nothing in the record to support a 

finding that Defendants’ primary purpose was to either harass, embarrass, or 

injure the Plaintiff, or that the Defendants had no reasonable basis to believe that 

the facts underlying its legal position were in fact true. This Court is well aware 

of the fact that the Defendants had a right to contest damages or contest the 

imposition of specific remedy. This Court specifically finds that the Defendants 

had no malicious or evil intent in filing their complaint. Absent the finding of 

wrongful intent, the Defendant shall not be penalized for having pursued their 

rights in judicial forums. Therefore, based upon this analysis Plaintiff’s motions 

for sanctions is considered and denied. 

 Plaintiff now appeals the trial court’s resulting order denying plaintiff’s motion for 

sanctions under MCR 2.114 and MCL 600.2591. 

II. STANDARD OF REVIEW 

 We review a trial court’s findings regarding whether an action is frivolous for clear error. 

Kitchen v Kitchen, 465 Mich 654, 661; 641 NW2d 245 (2002). A decision is clearly erroneous 

where, although there is evidence to support it, the reviewing court is left with a definite and firm 

conviction that a mistake has been made. Id. The interpretation of statutes and court rules, such 
-5- 

as MCL 600.2591 and MCR 2.114, is reviewed de novo. Estes v Titus, 481 Mich 573, 578-579; 

751 NW2d 493 (2008). 

III. SANCTIONS 

 Plaintiff argues that sanctions were warranted because ELTM’s counterclaim for legal 

malpractice, their four asserted affirmative defenses, and the allegation that defendants had failed 

to receive credit for payments made to plaintiff, each was wholly frivolous, and that plaintiff was 

therefore entitled to sanctions pursuant to MCR 2.114 and MCL 600.2591. MCR 2.114(D) 

provides that the signature of an attorney or party on a document, constitutes a certification by 

the signer that: 

 (1) he or she has read the document; 

 (2) to the best of his or her knowledge, information, and belief formed 

after reasonable inquiry, the document is well grounded in fact and is warranted 

by existing law or a good-faith argument for the extension, modification, or 

reversal of existing law; and 

 (3) the document is not interposed for any improper purpose, such as to 

harass or to cause unnecessary delay or needless increase in the cost of litigation. 

MCR 2.114(E) permits the court to fashion an appropriate sanction for filing a document in 

violation of MCR 2.114. In addition to sanctions under MCR 2.114(E), MCR 2.114(F) provides 

that a party pleading a frivolous claim or defense is subject to costs as provided in 

MCR 2.625(A)(2). Pursuant to MCR 2.625(A)(2), if the court finds that an action or defense 

was frivolous, costs shall be awarded as provided by MCL 600.2591. That statute states that “if 

a court finds that a civil action . . . was frivolous, the court that conducts the civil action shall 

award the prevailing party the costs and fees incurred by that party in connection with the civil 

action by assessing the costs and fees against the nonprevailing party and their attorney.” 

MCL 600.2591(1). 

 Whether a claim is frivolous within the meaning of MCR 2.114(F) and MCL 600.2591 

will depend upon the facts of the case. Kitchen, 465 Mich at 663. MCL 600.2591(3) defines 

“frivolous” to mean that at least one of the following is met: (1) the primary purpose in initiating 

the action or asserting the defense was to harass, embarrass, or injure the prevailing party, (2) the 

party had no reasonable basis to believe that the facts underling the party’s legal position were in 

fact true, or (3) the party’s legal position was devoid of arguable legal merit. MCL 600.2591(3). 

Finally, the mere fact that a party did not ultimately prevail does not render the legal position 

frivolous. Id. at 662. 
-6- 

A. COUNTERCLAIM FOR LEGAL MALPRACTICE 

 Applying these principles to the facts in this case, we conclude that the trial court did not 

clearly err when it found that ELTM’s counterclaim for legal malpractice was not frivolous.5

 

Plaintiff argues vociferously that the counterclaim lacked legal merit; yet nowhere does plaintiff 

articulate that the counterclaim was “interposed for [an] improper purpose, such as to harass or 

cause unnecessary delay or needless increase in the cost of litigation,” MCR 2.114(D)(3), or that 

“the primary purpose in initiating the [counterclaim] was to harass, embarrass, or injure” 

plaintiff. MCL 600.2591(3)(a)(i). The testimony at the evidentiary hearing supports a finding

that the real purpose in pursuing the legal malpractice claim was to reduce the amount of 

outstanding and unpaid legal fees owed to plaintiff, and the record reflects that defendants 

believed that their asserted positions made such a reduction appropriate. While ELTM failed to 

demonstrate that its positions made a reduction in legal fees appropriate, the trial court did not 

clearly err in finding that ELTM did not violate the standards of MCR 2.114(D)(3)6 or 

MCL 600.2591(3)(a)(i). 

 Thus, the remaining issues are whether ELTM “had no reasonable basis to believe that 

the facts underling [its] legal position were in fact true,” and whether ELTM’s “legal position 

was devoid of arguable legal merit.” MCL 600.2591(3).7

 We conclude that the trial court did 

not clearly err when it concluded that the counterclaim for legal malpractice claim did not violate 

these standards. 

 The legal malpractice claim was premised on the assertion that plaintiff committed 

malpractice when, in the YAF litigation, it failed to pursue a motion seeking release from escrow 

of the Farmhouse deed. ELTM alleged that because the motion was not filed, it was unable to 

sell the Farmhouse in 2008, causing a loss in revenue. Plaintiff argued that the legal malpractice 

claim was meritless because ELTM was unable to prove that had the motion been filed, it would 

have been granted. Indeed, plaintiff notes that when the motion to release the deed from escrow 

was pursued in 2010, it was unsuccessful and the trial court ruled that ELTM had no rights to the 

Farmhouse property. Plaintiff further argues that plaintiff’s failure to bring the motion could not 

 

5

 Although plaintiff at times refers to both the counterclaim against it and the third-party 

complaint against Conway, its argument appears to apply only to the counterclaim, and Conway 

is not individually a party to this appeal. Regardless, however, of whether plaintiff intends its 

argument to also apply to the third-party complaint, it would not alter our analysis. 

6

 Plaintiff thus has not demonstrated an “improper purpose as required by MCR 2.114(D)(3). 

That element is the third of three required elements for a finding of frivolousness under 

MCR 2.114(D). Inasmuch as the court rule joins those elements by the word “and,” all three 

requirements must be shown, see Amerisure Ins Co v Plumb, 282 Mich App 417, 428; 766 

NW2d 18 (2009), we therefore need not address the other elements required under that court 

rule. 

7

 Unlike MCR 2.114(D)(3), MCL 600.2591(3) describes “frivolousness” as meaning that “at 

least 1” of the specified conditions is met. 
-7- 

have been a proximate cause of any damages to ELTM. However, the actual events that 

transpired are more complex. 

 In the YAF case, the trial court, on January 17, 2006, entered an order transferring the 

deed to the farmhouse property to ELTM, to be held in escrow. In 2008, defendants requested 

that plaintiff pursue a motion to release the deed from escrow. Plaintiff allegedly refused and, 

eventually, on February 16, 2010 (effective March 1, 2010), plaintiff withdrew its representation 

of defendants. Following this withdrawal, ELTM moved in the YAF case to release the deed 

from escrow.8

 YAF also filed a motion for summary disposition. Before the hearing on the 

motion, ELTM and YAF reached a tentative settlement agreement, but the motions still went 

forward. The trial court granted the motion for summary disposition and granted title to the 

farmhouse property to YAF, finding that ELTM had no right to the property. The court also 

denied ELTM’s motion to release the deed from escrow. Although plaintiff makes much of the 

trial court’s finding that ELTM had no rights to the property, plaintiff ignores events that 

transpired after the YAF matter was dismissed. On March 18, 2010, YAF and ELTM entered 

into a post-judgment settlement agreement in which YAF agreed to release the deed to the 

farmhouse to ELTM in exchange for ELTM waiving its right to file an appeal of the final 

judgment rendered on March 10, 2010. Thus, at the end of the day, ELTM, in 2010, acquired the 

farmhouse deed. Although the legal malpractice claim might not have been successful, this 

chain of events does suggest that ELTM’s legal malpractice claim was not totally devoid of 

arguable legal merit, as an earlier motion to release the deed from escrow may have prompted an 

earlier settlement of the issue. “[M]erely because this Court concludes that a legal position 

asserted by a party should be rejected does not mean that the party was acting frivolously in 

advocating its position.” Kitchen, 465 Mich at 663. Moreover, a claim or defense is not 

frivolous merely because it is based on an erroneous legal analysis. Jerico Constr, Inc v 

Quadrants, Inc, 257 Mich App 22, 36; 666 NW2d 310 (2003). The claim or defense must be 

“completely groundless or ‘devoid of arguable legal merit.” Id. We conclude that ELTM’s 

counterclaim for legal malpractice was sufficient in arguably legal merit to avoid the imposition 

of sanctions for the filing of a frivolous claim. 

 Nor does the record compel the conclusion that ELTM had no reasonable basis to believe 

that the facts underlying its claim for malpractice were in fact true. For example, it appears 

undisputed that plaintiff did in fact fail to pursue a motion to release the deed from escrow, and 

that ELTM did in fact lose an opportunity to sell the property to an interested purchaser. 

Although again ELTM’s claim for legal malpractice was ultimately unsuccessful, the facts 

underlying the claim were not proven to be demonstrably false, nor was it shown that ELTM was 

aware of any falsity at the time of filing. 

 We therefore conclude that the trial court (and we note that it the same trial judge who 

decided both the YAF litigation and the instant case, and who therefore was intimately familiar 

with the facts of both) did not clearly err in declining to find ELTM’s counterclaim for 

malpractice frivolous. Kitchen, 465 Mich at 661. 

 

8

 This motion was signed and filed by individual defendant Gilpin on behalf of defendants. 
-8- 

B. AFFIRMATIVE DEFENSES 

 For its next claim of error, plaintiff asserts that the trial court erred when it failed to find 

that defendants’ affirmative defenses were frivolous or filed in violation of MCR 2.114 and 

MCL 600.2591. We disagree. The trial court, in its statement following the evidentiary hearing, 

did not specifically address plaintiff’s argument regarding defendant’s affirmative defenses and 

general defense. However, the order issued by the trial court denying plaintiff’s motion for 

sanctions stated that it found that the “pleadings filed by Counsels for the Defendants were not 

frivolous.” The trial court was presented with arguments by both plaintiff and defendants 

regarding these issues, both in the context of plaintiff’s motion for sanctions and in the context of 

the parties’ responses to the court’s post-hearing proposed findings of fact and conclusions of 

law. We therefore conclude that these issues were raised before, and, at least implicitly 

addressed and decided by the trial court in favor of defendants. See Walters v Nadell, 481 Mich 

377, 387; 751 NW2d 431 (2008). 

 Plaintiff argues that defendants’ first affirmative defense, entitled “fraud in the 

inducement,” was frivolous because the alleged fraudulent conduct by plaintiff occurred in 2007 

and thus could not have fraudulently induced defendants into entering into the engagement 

agreement in 2005. However, examining the language of the affirmative defense, it is clear that 

while defendants may have labeled the defense “fraud in the inducement,” they were simply 

arguing that fraudulent representations made by plaintiff caused them to incur additional and 

unnecessary legal fees. Specifically, defendants alleged that plaintiff repeatedly assured them 

that they would not be responsible for his legal fees because someone else would have to pay 

them after they were successful in the YAF litigation. The analysis of the affirmative defense 

should be based on the nature of the allegations, not the label placed on them by defendants. 

This Court is not bound by a party’s choice of labels. Johnston v City of Livonia, 177 Mich App 

200, 208; 441 NW2d 41 (1989). Consequently, when considering the actual nature of the 

affirmative defense, if proven it would serve to reduce the legal fees defendants owed to plaintiff 

by demonstrating that certain legal fees were fraudulently or unreasonably incurred. Thus, 

plaintiff’s assertions that defendant did not allege any conduct occurring before the execution of 

the engagement agreement is not fatal to the affirmative defense actually pleaded. Plaintiff has 

not established that the trial court clearly erred in failing to find this affirmative defense to be 

frivolous. 

 For its second affirmative defense, defendants alleged that plaintiff inflated its legal fees 

(so as not to be entitled to all of the legal fees requested) because plaintiff failed to carry out the 

wishes of its clients and, instead, pursued its own agenda. The third affirmative defense, labeled 

“[t]ortious interference with a business proposition” appears essentially to be a restatement of the 

allegation of legal malpractice concerning plaintiff’s failure to file a motion to remove the deed 

from escrow. Finally, the fourth affirmative defense, labeled “[w]rongful conversion,” appears 

simply to be a reiteration of the second affirmative defense, although expressed under a different 

title and using different explanatory language. We have previously addressed the efficacy of the 

legal malpractice claim above. With respect to the remaining affirmative defenses, plaintiff 

simply argues that they were frivolous based on the fact that when defendants were called upon 

to support their pleadings, they came forward with nothing and, indeed, defendants agreed to 

withdraw the affirmative defense of “conversion.” 
-9- 

 We conclude that plaintiff has failed to establish that the trial court clearly erred in failing 

to find that these affirmative defenses were frivolous. The question whether a claim is frivolous 

is evaluated at the time the claim was raised. In re Costs & Attorney Fees, 250 Mich App 89, 94; 

645 NW2d 697 (2002). There is nothing in the record to suggest that, at the time defendants 

alleged that plaintiff had refused to act on its clients’ instructions, defendants did not believe that 

this assertion would be borne out by the facts. Indeed, defendants continue to assert that plaintiff 

did not follow defendants’ instructions. Moreover, the fact that defendants did not fully support 

their affirmative defenses, and indeed withdrew the “conversion”-labeled defense, is not 

dispositive. A decision to withdraw an affirmative defense does not necessarily imply that a 

defendant never had any reasonable basis for believing that the facts underlying the defense were 

true. See Szymanski v Brown, 221 Mich App 423, 437; 562 NW2d 212 (1997). Defendants may 

have decided, after discovery had been completed, that they should pursue their strongest 

defenses, and therefore, that it was more advantageous to withdraw certain defenses. Id. Based 

on the foregoing, we cannot conclude that the trial court’s denial of plaintiff’s motion for 

sanctions with respect to defendants’ affirmative defenses was clearly erroneous. 

C. GENERAL DEFENSE 

 Finally, plaintiff contends that a general defense pleaded in defendants’ answer to the 

complaint was not well grounded in fact. Specifically, defendants alleged that certain payments 

had not been not accurately credited to their account. Plaintiff argues that this allegation was 

frivolous because, had defendants simply reviewed their own check register and compared it to 

the invoices, they would have known that all of their payments were in fact properly credited. 

Again, whether a claim is frivolous is evaluated at the time the claim is raised. In re Costs & 

Attorney Fees, 250 Mich App at 94. At the time of the evidentiary hearing, Conway admitted 

that because of a corruption in his billing system software, there was a nine-month period where 

plaintiff did not bill defendants. He further acknowledged that there were charges on 

defendants’ bill for services rendered to other clients. Based on these admissions, we cannot 

conclude that defendants’ allegation of inaccuracies in plaintiff’s accounting were frivolous 

when made. Because defendants advanced defenses sufficiently grounded in law and fact, the 

trial court did not plainly err when it denied plaintiff’s motion for sanctions pursuant to 

MCR 2.114 and MCL 600.2591. 

 Affirmed. 

/s/ Mark T. Boonstra 

/s/ David H. Sawyer 

/s/ Peter D. O’Connell