Court Opinion

ID: 4552324
Source: CourtListenerOpinion
Date Created: 2020-07-31 09:07:38.459254+00
Date Added: 2024-06-11T13:08:01.090629
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

TI GROUP AUTOMOTIVE SYSTEMS, LLC,                                       UNPUBLISHED
                                                                        July 30, 2020
                Plaintiff-Appellant,

v                                                                       No. 347781
                                                                        Oakland Circuit Court
POST MERIDIEM PLASTICS, LTD.,                                           LC No. 2017-157855-CB

                Defendant,
and

MILLER CANFIELD PADDOCK AND STONE
and THE MENDELSON LAW FIRM,

                Appellees.

Before: BECKERING, P.J., and SAWYER and GADOLA, JJ.

PER CURIAM.

        Plaintiff appeals as of right the order of the trial court granting it a default judgment against
defendant, and challenges the trial court’s orders finding that plaintiff violated MCR 2.401(F) and
ordering it to pay sanctions to defendant’s attorneys. We vacate the challenged orders, and remand
for further proceedings.

                                              I. FACTS

        This appeal arises out of a contract and warranty dispute between plaintiff and defendant.
Plaintiff manufactures automobile parts, and defendant manufactures custom plastics injection
moldings. Plaintiff initiated this action, contending that defendant sold it defective parts for
inclusion in plaintiff’s fuel tank systems.
        During the litigation, the trial court directed the parties to attend a settlement conference,
and directed that the CEO of each party appear to facilitate a meeting aimed at settlement. When
plaintiff’s attorney informed appellees that plaintiff planned to bring a substitute for its CEO, the
parties convened a telephone call with the trial court. The trial court again directed that the CEO

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of each party was to attend the settlement conference, and thereafter issued an order requiring
plaintiff’s CEO to attend.
        Plaintiff’s CEO, however, did not attend the settlement conference; instead, plaintiff’s
managing director of the relevant business unit involved in the lawsuit attended as a substitute for
plaintiff’s CEO. The trial court found that in doing so, plaintiff violated MCR 2.401. After the
settlement conference, and after holding a show cause hearing, the trial court determined that the
managing director did not have unlimited authority to settle the case and did not qualify as a proper
substitute for the CEO under the court rule. The trial court sanctioned plaintiff $55,257 in attorney
fees, and directed that the amount was to be paid by plaintiff directly to defendant’s lawyers and
was not to be offset against any judgment amount plaintiff obtained against defendant. Plaintiff
thereafter received a default judgment against defendant on the underlying contract dispute in the
amount of $2,918,844. Plaintiff now appeals.

                                         II. DISCUSSION

        Plaintiff contends that the trial court erred by holding that plaintiff violated MCR 2.401(F)
because its managing director appeared at the settlement conference as a substitute for its CEO.
Plaintiff argues that the managing director had adequate knowledge and settlement authority to
meaningfully participate in the conference, and therefore qualified as an appropriate substitute
under MCR 2.401(F). We agree.

        We review de novo the proper interpretation and application of a court rule. Henry v Dow
Chemical Co, 484 Mich. 483, 495; 772 NW2d 301 (2009). In doing so, we apply principles of
statutory construction, considering the plain language of the court rule to determine its meaning,
and determining the intent of the rule by examining the court rule and its place within the Michigan
Court Rules as a whole. Id. We enforce the clear and unambiguous language of a court rule as
written, and give the language its plain meaning. Patel v Patel, 324 Mich. App. 631, 640; 922
NW2d 647 (2018). We review the factual findings underlying the trial court’s application of the
court rules for clear error. Vittiglio v Vittiglio, 297 Mich. App. 391, 398; 824 NW2d 591 (2012).

        MCR 2.401(F) permits a trial court to compel a party’s agent or representative to appear at
a settlement conference or to be immediately available at the time of the conference. A
representative’s failure to attend a settlement conference may constitute grounds for dismissal of
the action or other sanctions. MCR 2.401(G)(1). MCR 2.401 provides, in relevant part:

               (F) Presence of Parties at Conference. If the court anticipates meaningful
       discussion of settlement, the court may direct that the parties to the action, agents
       of parties, representatives of lienholders, or representatives of insurance carriers, or
       other persons:

       (1) be present at the conference or immediately available at the time of the
       conference; and

       (2) have information and authority adequate for responsible and effective
       participation in the conference for all purposes, including settlement.

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               The Court’s order may require the availability of a specified individual;
       provided, however, that the availability of a substitute who has the information and
       authority required by subrule (F)(2) shall constitute compliance with the order.

               The Court’s order may specify whether the availability is to be in person or
       by telephone.

                                               ***

               (G) Failure to Attend or to Participate.

       (1) Failure of a party or the party’s attorney or other representative to attend a
       scheduled conference or to have information and authority adequate for responsible
       and effective participation in the conference for all purposes, including settlement,
       as directed by the court, may constitute a default to which MCR 2.603 is applicable
       or a ground for dismissal under MCR 2.504(B).

       (2) The court shall excuse a failure to attend a conference or to participate as
       directed by the court, and shall enter a just order other than one of default or
       dismissal, if the court finds that

               (a) entry of an order of default or dismissal would cause manifest injustice;
       or

               (b) the failure was not due to the culpable negligence of the party or the
       party’s attorney.

        The court rule thus provides that although the trial court may order that a specified
individual be available for a settlement conference, a party complies with the order if it appears
with a substitute who has “information and authority adequate for responsible and effective
participation in the conference for all purposes, including settlement,” as required by MCR
2.401(F)(2).

        In this case, the trial court ordered that plaintiff’s CEO appear at the settlement conference.
Plaintiff instead brought its managing director. The trial court concluded that the appearance of
plaintiff’s managing director at the settlement conference was not a proper substitute for plaintiff’s
CEO, and that plaintiff therefore did not comply with the court rule. The trial court observed that
during the trial court’s show cause hearing, the managing director testified that he had settlement
authority “within the limits he set” during his discussions of the matter with his superiors. The
trial court therefore found that the managing director

       was not an individual who was possessed of “information and authority adequate
       for responsible and effective participation in the conference for all purposes
       including settlement,” nor was he a person who had “unlimited authority and
       unfettered discretion to settle the case.”

        In support of its conclusion that the managing director was required to have “unlimited
authority and unfettered discretion,” to be an appropriate substitute, the trial court relied on this

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Court’s opinion in Kornak v Auto Club Ins Ass’n, 211 Mich. App. 416; 536 NW2d 553 (1995). In
Kornak, this Court addressed whether the trial court had the authority to direct a party to “produce
a representative along with its attorney at a settlement conference regardless of the attorney’s
unlimited authority to settle . . . .” Id. at 421. The version of MCR 2.401(F) then in effect provided
that the trial court could direct that “persons with authority to settle the case,” be present at a
conference in which meaningful discussion of settlement was anticipated, or to be immediately
available at the time of the settlement conference.

        This Court in Kornak, interpreting the prior version of MCR 2.401, observed that “the court
rules do not confer upon the lower courts authority to designate who may serve as the
representative of [a party].” Id. at 422. Reversing the trial court’s decision to enter a default as a
result of the defendant’s failure to bring the representative designated by the trial court, this Court
concluded that “[t]he purpose behind MCR 2.401 . . . is satisfied when [a party] sends a
representative who has unlimited authority and unfettered discretion to settle the case and who is
able to participate in meaningful settlement discussions.” Id.

        The 2003 amendment to MCR 2.401(F) replaced the language that a trial court could
require that someone with “authority to settle” attend a settlement conference with the “more
flexible requirement that the person attending the proceeding have ‘information and authority
adequate for responsible and effective participation’ in settlement discussions.” MCR 2.401, 467
Mich. clxxiv (staff comment).1 The amended court rule also now provides that the trial court “may
require the availability of a specified individual,” but that the availability of “a substitute who has
the information and authority required by subrule (F)(2) shall constitute compliance with the
order.” This Court’s conclusion in Kornak that former MCR 2.401(F) was satisfied when a party
was represented at a settlement conference by someone with “unlimited authority and unfettered
discretion to settle the case,” is not equally applicable to the more flexible amended language of
MCR 2.401(F). We therefore consider not whether plaintiff’s managing director in this case had
unlimited authority and unfettered discretion to settle the case, but whether he had “information
and authority adequate for responsible and effective participation in the conference for all
purposes, including settlement” as required by the amended language of MCR 2.401(F).

        At the hearing to show cause, the trial court questioned the managing director regarding
his authority to settle the case. The following colloquy occurred:

       The Court: Can you make a decision without having to go above it? Can you
       settle the case?

1
  We acknowledge that staff comments are not part of the text of a court rule and are not a binding
interpretation of a court rule; they can, however, be persuasive in understanding the proper scope
or interpretation of a court rule or its terms. People v Comer, 500 Mich. 278, 298 n 48; 901 NW2d
553 (2017). Here, the staff comment aptly describes the amended language of 2.401(F) as putting
in place a “more flexible” requirement.

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        The Witness: I can settle with – as I’ve agreed with my company of what we can
        settle.

        The Court: So if . . . the settlement discussions go you need five dollars more, can
        you make that decision?

        The Witness: Five dollars I would be able to . . .

        The Court: Fifty . . .

        The Witness: . . . make that decision.

        The Court: . . . thousand?

        The Witness: . . . Fifty thousand I would . . .

        The Court: A hundred . . .

        The Witness: . . . be able . . .

        The Court: . . . thousand?

        The Witness: I would be able to make that decision.

        The Court: How far can you go? How far does your authority take you?

        The Witness: My authority goes to settle the case within what I agreed with
        [plaintiff] to be able to settle it.

         The managing director then testified that he had authority to settle the case up to a particular
dollar amount, but to exceed that amount he was obligated to call his supervisor. Based on this
testimony, and relying upon the previously applicable standard articulated in Kornak, the trial court
concluded, in part, that because the managing director did not have unlimited authority to settle
the case, plaintiff had not complied with the requirements of MCR 2.401(F)(2). Under the
amended language of MCR 2.401(F), however, we consider whether the managing director had
“information and authority adequate for responsible and effective participation in the conference
for all purposes, including settlement.” The record indicates that the managing director had, if not
limitless authority, at least ample authority to settle the case. In an affidavit submitted during
proceedings after the trial court’s ruling, the managing director asserted that during the settlement
conference he had made offers of settlement that included reducing plaintiff’s demand from
$2,740,300 to $2,000,000, and that he had authority to settle for an even lower amount.2 Moreover,
there is no indication that settlement in this case was hampered by any limitation of the managing

2
  He further asserted that although plaintiff ultimately rejected the trial court’s proposed settlement
figure of $750,000, the reason for the rejection was that it was too low in light of the costs plaintiff
had incurred.

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director’s authority to settle the case.3 In Kornak, applying the more restrictive language of the
version of MCR 2.401(F) then in effect, this Court nonetheless observed that the substituted
representative who attended the settlement conference in that case was adequate not merely
because there was no limit on his authority, but because “there is no persuasive evidence that the
discussions at the settlement conference were meaningless.” Kornak, 211 Mich. App. at 422.
Likewise, the record in this case does not suggest that plaintiff’s managing director failed to engage
in meaningful discussion at the settlement conference, nor that he lacked the authority to make
necessary concessions to settle the case.

        Further, the fact that the parties did not settle the case is not determinative of whether
plaintiff’s managing director had authority adequate for responsible and effective participation in
the settlement conference. “A court cannot force settlements upon parties,” Henry v Prusak, 229
Mich. App. 162, 170; 582 NW2d 193 (1998) (quotation marks and citation omitted), nor should a
party be compelled to settle in order to demonstrate that its representative has the authority to do
so. Because the record does not support the trial court’s finding that plaintiff’s representative
lacked sufficient “information and authority adequate for responsible and effective participation
in the conference for all purposes, including settlement,” we conclude that the trial court erred
when it found that plaintiff violated MCR 2.401(F).

        We nonetheless understand the trial court’s consternation over the fact that plaintiff and
plaintiff’s counsel defied the court’s direction, and what the record reveals to have been the
common understanding of the parties and the court, that plaintiff’s CEO was expected to, and
would, appear at the settlement conference. There could have been no mistaking that the trial court
expected the CEO to attend the settlement conference, but plaintiff’s counsel chose instead to
appear with the managing director, without advising the trial court in advance that it would do so.
The revised court rule language appears however to allow this choice under these facts and does
not support the trial court’s award of sanctions.

        We vacate the order of the trial court finding that plaintiff did not comply with the
requirements of MCR 2.401(F) and the order granting the motion for sanctions, and remand for
further proceedings consistent with this opinion. We do not retain jurisdiction.

                                                              /s/ Jane M. Beckering
                                                              /s/ David H. Sawyer
                                                              /s/ Michael F. Gadola

3
 Rather, the record suggests that settlement in this case was unlikely because defendant was
without adequate funds to settle the case; the trial court permitted defendant’s attorneys to
withdraw from the case because defendant was unable to pay them.

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