Court Opinion

ID: 4383478
Source: CourtListenerOpinion
Date Created: 2019-04-03 09:05:52.801692+00
Date Added: 2024-06-11T14:50:02.619935
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                 revision until final publication in the Michigan Appeals Reports.

                            STATE OF MICHIGAN

                            COURT OF APPEALS

EDWARD LIGHT and RUBY LIGHT,                                      UNPUBLISHED
                                                                  April 2, 2019
              Plaintiffs,

and

MCKEEN & ASSOCIATES, PC,

              Appellant,

v                                                                 No. 339832
                                                                  Wayne Circuit Court
HENRY FORD HEALTH SYSTEM and HENRY                                LC No. 15-002183-NH
FORD WYANDOTTE HOSPITAL,

              Defendants-Appellees,

and

TERENCE BREDEWEG, D.P.M., SOUTHGATE
FOOT AND ANKLE CENTER, PLLC, and
DANIEL ZAHARI, D.P.M.,

              Defendants.

Before: SHAPIRO, P.J., and BECKERING and M. J. KELLY, JJ.

PER CURIAM.

        In this medical malpractice action, appellant, McKeen & Associates, PC, appeals as of
right an order for payment of settlement funds that directed defendants Daniel Zahari, D.P.M.,
and Southgate Foot and Ankle Center, PLLC, to tender a settlement payment, pursuant to a high-
low agreement, to plaintiffs Edward Light and Ruby Light.1 The order further directed that
$86,307.55 from the settlement be disbursed to defendant Henry Ford Health System prior to any
disbursements made to plaintiffs or appellant. We affirm.

                   I. RELEVANT FACTS AND PROCEDURAL HISTORY

       This case arises out of Edward Light’s endoscopic tarsal tunnel release procedure that Dr.
Zahari performed, assisted by defendant Terence Bredeweg, D.P.M.,2 at defendant Henry Ford
Wyandotte Hospital. After the procedure, Edward presented to Dr. Zahari, who noted that
Edward had a pseudo-aneurysm. Dr. Zahari referred Edward to another doctor, who removed
the pseudo-aneurysm and repaired Edward’s posterior tibial artery.

       Plaintiffs filed a medical malpractice suit against Dr. Zahari and Dr. Bredeweg, and
argued that Southgate Foot and Ankle Center, PLLC (“Southgate”), was vicariously liable for
Dr. Zahari’s negligence, and that Henry Ford Health System and Henry Ford Wyandotte
Hospital (collectively, the “Henry Ford defendants”) were vicariously liable for Dr. Bredeweg’s
negligence. Prior to trial, the parties participated in case evaluation, resulting in a proposed
award to plaintiffs of $200,000 against Dr. Zahari and Southgate, and $550,000 against the
Henry Ford defendants. All parties rejected the case evaluation award.

        During the course of the trial, plaintiffs entered into a high-low settlement agreement
with Dr. Zahari and Southgate that capped damages at a low of $100,000 and a high of $250,000.
The jury found Dr. Zahari negligent and returned a verdict in favor of plaintiffs for $47,500.
However, pursuant to the high-low agreement, these defendants were liable to plaintiffs for
$100,000. The jury also found that the Henry Ford defendants, through the actions of Dr.
Bredeweg, were not negligent. The trial court entered an order of judgment of no cause of action
as to the Henry Ford defendants. Because plaintiffs had rejected the case evaluation award of
$550,000 with respect to the Henry Ford defendants, the trial court entered an order for case
evaluation sanctions in favor of the Henry Ford defendants for $86,307.55.

        Subsequently, appellant and Henry Ford disputed which party had priority to the
$100,000 settlement amount. Appellant argued that its contingency fee agreement with plaintiffs
created an attorney’s charging lien, which was superior to the Henry Ford defendants’ case
evaluation sanctions. Contrariwise, the Henry Ford defendants argued that case evaluation
sanctions took precedence over any disbursements based on a contingency fee agreement. The
trial court determined that, for the reasons set forth in this Court’s decision in Bennett v Weitz,
220 Mich. App. 295; 559 NW2d 354 (1996), as well as on equity principles, Henry Ford’s case
evaluation sanctions had priority over appellant’s charging lien. Accordingly, the trial court
entered an order from which appellant now appeals.

1
  The Lights, Dr. Zahari, and Southgate Foot and Ankle Center, PLLC, are not parties to this
appeal.
2
 Dr. Bredeweg was dismissed from the case earlier in the proceedings and is not party to this
appeal.

                                                -2-
                                         II. ANALYSIS

        The parties agree that Henry Ford is entitled to case evaluation sanctions under MCR
2.403(O). Framing the issue as one of priority, appellant argues that its charging lien attached
automatically to any proceeds from the high-low settlement agreement with Dr. Zahari and
Southgate. Because plaintiffs entered into the high-low agreement with Dr. Zahari and
Southgate before Henry Ford filed its “equitable lien” for case evaluation sanctions, appellant
asserts that it has a superior claim to the $100,000 awarded plaintiffs pursuant to the agreement.
We disagree.

        The proper interpretation and application of a court rule are questions of law, which we
review de novo. Stenzel v Best Buy, Co, Inc, 320 Mich. App. 262, 275; 906 NW2d 801 (2017).
An attorney’s charging lien is “an equitable right to have the fees and costs due for services
secured out of the judgment or recovery in a particular suit.” Id. (quotation marks and citation
omitted). Souden v Souden, 303 Mich. App. 406, 411; 844 NW2d 151 (2013). Charging liens
“automatically attach to funds or a money judgment recovered through the attorney’s services[,]”
George v Sandor M. Gelman, PC, 201 Mich. App. 474, 477; 506 NW2d 583 (1993), and are
superior to subsequent security interests in the same funds or money judgment, see Warner v
Tarver, 158 Mich. App. 593, 598; 405 NW2d 109 (1986). Similarly, a security interest prior in
time is superior to an attorney’s charging lien. Id. However, none of the cases that address the
relative priorities of charging liens and security interests compel the decision that appellant’s
charging lien in the case at bar takes precedence over an opposing party’s right to case evaluation
sanctions. The Court addressed this specific issue in Bennett v Weitz, 220 Mich. App. 295 (1996).

        Bennett involved a medical malpractice action in which a mediation3 panel issued an
evaluation award of $7,500. Both sides rejected the award. The matter went to trial and the jury
returned a $5,000 verdict for the plaintiffs (after adjustment, $5,787.40). However, because the
judgment was more than ten percent below the mediation evaluation award, the defendants were
entitled to mediation sanctions of $6,389.65, plus interest pursuant to MCR 2.403(O). Id. at 297.
The plaintiffs moved in the district court for payment of their attorney’s fees and costs from the
judgment first, before applying the judgment to satisfy the mediation sanctions owed to the
defendants. The district court granted the plaintiffs’ motion to compel distribution of attorney
fees and costs, but the circuit court reversed the district court’s order, effectively denying
distribution of the judgment proceeds to the plaintiffs without first deducting case evaluation
sanctions. Subsequently, the plaintiffs appealed in this Court. Id.

        This Court affirmed the circuit court’s order. The Court observed that MCR 8.121
computed attorney fees on the “net sum recovered after deducting from the amount recovered all
disbursements properly chargeable to the enforcement of the claim or prosecution of the
action[.]’ ” Id. at 300 (emphasis in Bennett). The plaintiffs had secured a judgment through the
services of their attorney, but they also owed mediation sanctions pursuant to MCR 2.403.
Satisfying the mediation sanctions from the judgment left nothing to which an attorney’s lien

3
  Amendments in 2000 replaced “mediation” as used in MR 2.403 with the term “case
evaluation.”

                                                -3-
could attach. Implicit in the Court’s reasoning is that the “net sum recovered” was the amount
left over after applying the judgment to satisfy the mediation sanctions levied against the
plaintiffs. Stated differently, the Bennett Court viewed mediation sanctions as “disbursements
properly chargeable to the enforcement of [a] claim” that must be deducted from a judgment
before distributing the “net sum recovered” to the plaintiffs.

         The Bennett Court declined to apply the judgment to the fees and costs of the plaintiffs’
attorneys before satisfying the mediation sanctions because it would burden defendants with
having to attempt “to collect a larger amount of mediation sanctions from plaintiffs.” Id. at 301.
The Court also declined to apply the judgment to the fees and costs of the plaintiffs’ attorneys
first because it would be the equivalent of requiring the defendants “to pay the contingency fee
of plaintiffs’ counsel,” contrary to the “American rule,” which requires each side to bear its own
litigation expenses in the absence of a specific exception. Id. at 302. Thus, Bennett stands for
the proposition that case evaluation sanctions generally take precedence over an attorney’s
charging lien. 4 See also Mahesh v Mills, 237 Mich. App. 359, 364 n 3; 602 NW2d 618 (1999)
(citing Bennett for the proposition that “[u]nlike a right of set off, an opposing party’s claim to
mediation sanctions takes precedence over an attorney’s charging lien”).

        Appellant argues, however, that the principle derived from Bennett is not applicable in
the case at bar because it involves multiple defendants, two of which settled with the plaintiffs by
entering into a high-low agreement. Thus, the $100,000 at issue is a settlement, from which it is
entitled to collect its costs and fee. For support, appellant relies on the following observations of
the Bennett Court:

       [T]he action at bar is unlike cases with multiple defendants where one defendant
       has settled with the plaintiff, and then the verdict at trial is more favorable to
       another defendant, to whom the court later awards mediation sanctions. Under
       that circumstance, the plaintiff's counsel is entitled to collect his contingency fee
       from the settlement, which was separate and apart from the verdict. Moreover, in
       that instance another defendant had paid the settlement, which is not the situation
       here. [Id. at 298.]

        Based on the foregoing quotation, appellant contends that it is entitled to collect its fee
from the settlement and, because its common-law charging lien attached to the settlement
proceeds prior to any lien for case evaluation sanctions asserted by the Henry Ford defendants,
its claim has priority over that of the Henry Ford defendants. Appellant’s argument is
unavailing.

4
  Appellant seeks to distinguish Bennett by pointing out that Bennett involved a “negative
recovery,” whereas in the case at bar, appellant’s charging lien attached to the proceeds of the
high-low agreement. However, this argument assumes, rather than proves, that appellant’s
charging lien is not subject to case evaluation sanctions, contrary to this Court’s holding in
Bennett.

                                                -4-
         The reasoning of the Bennet Court upon which appellant relies for support of its position
is non-binding obiter dictum. See Kasberg v Ypsilanti Twp, 287 Mich. App. 563, 573; 792 NW2d
1 (2010) (“Statements contained in an opinion that pertain to law not essential to a determination
of the case are dicta and do not have the force of an adjudication.”). Nevertheless, the Court
observed correctly that there are instances in which attorneys are entitled to take their fee from
settlement proceeds that, as is the case here, are less favorable than the case evaluation award but
are exempt from application of the case evaluation sanctions rule. If a party rejects the case
evaluation award, but then settles the dispute prior to trial for less than the case evaluation, the
party is not subject to costs under MCR 2.403. Webb v Holzheuer, 259 Mich. App. 389, 392; 674
NW2d 395 (2003). To require a party settling under such circumstances to pay the opposing
party’s costs would “force [parties] to eschew any settlement offer between case evaluation and
the jury’s verdict that does not significantly improve on the case evaluation award. This would
prove counterproductive to the purpose of the rule.” Id. “In general, the purpose of the case
evaluation rule is to expedite and simplify the final settlement of cases to avoid a trial.” Magdich
& Assoc, PC, 305 Mich. App. 272, 276; 851 NW2d 585 (2014), quoting Larson v Auto-Owners
Ins Co, 194 Mich. App. 329, 332; 486 NW2d 128 (1992). Because pre-trial settlements, even if
they are for less than the case evaluation award, fulfill the purpose of the case evaluation rule,
they are not subject to the case evaluation sanctions rule. Webb, 259 Mich. App. at 392. Stated
differently, where pre-trial settlements fulfill the general purposes of the case evaluation rule,
case evaluation sanctions do not take precedence over the attorney’s charging lien with respect to
the settlement proceeds.

        The high-low agreement that plaintiffs entered into with Dr. Zahari and Southgate is not
the equivalent of a pre-trial settlement; it does not fulfill the purpose of the case evaluation rule
and, therefore, is not exempt from operation of the case evaluation sanctions rule, MCR
2.403(O). The high-low agreement was a protective measure designed to provide the parties to
the agreement some comfort during jury deliberations by avoiding the risks of an all-or-nothing
verdict. Although the high-low agreement facilitated the final computation of damages, see
Magdich & Assoc, PC, 305 Mich. App. at 276, it did not expedite a final settlement, deter
protracted litigation, or avoid a trial. In addition, the high-low agreement arguably was not
“separate and apart from the verdict.” Bennett, 220 Mich. App. at 298. In fact, a verdict was
necessary to determine the liability of Dr. Zahari and Southgate under the high-low agreement.
To conclude that entering into a high-low agreement during the course of a trial insulated the
settlement amount from an opposing party’s right to case evaluation sanctions is contrary to the
purpose of the case evaluation sanctions rule.

         In short, appellant has failed to show that the high-low settlement agreement somehow
exempts the $100,000 plaintiffs obtained from the high-low agreement from operation of the
case evaluation sanctions rule or renders appellant’s charging lien superior to case evaluation
sanctions incurred through the litigation. Appellant has provided no persuasive authority in
support of its proposition that, under the facts of this case, it is entitled to deduct its costs and fee
from the high-low settlement amount before any remaining amount is applied to the Henry Ford
defendants’ case evaluation sanctions. Because the high-low settlement agreement was not a
settlement separate and apart from the verdict that served the purposes of the case evaluation
rule, it was subject to the case evaluation sanctions rule as set forth in Bennett. Pursuant to
Bennett, appellant’s charging lien attached to plaintiffs’ “net sum recovered after deducting from
the amount recovered all disbursements properly chargeable to the enforcement of the claim or

                                                  -5-
prosecution of the action[.]’ ” Accordingly, the trial court did not err in using the $100,000 to
satisfy the case evaluation sanctions plaintiffs owed to the Henry Ford defendants first, before
distributing the “net recovery” to plaintiffs and appellant. Nor did the trial court err in declining
to impose the burden on the Henry Ford defendants to collect case evaluation sanctions from
plaintiffs. Bennett, 220 Mich. App. at 301-302.

       Affirmed.

                                                              /s/ Douglas B. Shapiro
                                                              /s/ Jane M. Beckering
                                                              /s/ Michael J. Kelly

                                                -6-