Playing the Sanctions Game in Probate Court

The Court of Appeals recently issued an unpublished opinion in three combined appeals all relating to the Estate of Robert Winfield Cederquist (click here to read the opinion).  The case provides a good launching spot from which to review the rules related to sanctions for frivolous pleadings and wasteful litigation in the course of probate matter.

The opinion ominously introduces the case as follows: “The now-decimated estate at the heart of this suit has been the subject of extensive litigation in the probate court…” And the COA goes on to explain that the total value of this estate when the litigation started was about $500,000, while the appellant is seeking to recover legal fees and costs in excess of $600,000.  That’s right – more legal fees than assets in the entire estate – and those are the fees of just one of the parties.

The party that prevailed in the trial court (the appellant) sought to recover the fees they spent on the case by having the trial court determine that this case was frivolous, and therefore that the losing party was obligated by statute to pay their legal fees. The trial court did not award the fees, and the aggrieved party appealed. The COA affirmed the trial court.

Very importantly, the appellant sought sanctions only under the statute (not the court rule, as discussed below) and under only one prong of the statute. The statute is MCL 600.2591(click here to read the entire statute).  This statute mandates that a trial court sanction the losing party (and their attorney) in any case in which the court finds that the action was “frivolous.”  The statute then defines “frivolous” as one of the following:

(i) The party’s primary purpose in initiating the action or asserting the defense was to harass, embarrass, or injure the prevailing party.

(ii) The party had no reasonable basis to believe that the facts underlying that party’s legal position were in fact true.

(iii) The party’s legal position was devoid of arguable legal merit.

This appellant sought relief only under the first of those prongs. The trial court found, and the COA affirmed, that appellant failed to establish that at the time the original pleadings were filed the primary purpose was to harass, embarrass or injure the respondent.

Abusive Discovery. The case includes a discussion of wasteful and excessive discovery in the course of litigation and the relevance of such conduct in determining whether such sanctions apply. My shorthand characterization of their conclusion is that:  While abusive discovery may be evidence of a bad intent, if is not determinative.  Further, the COA looks at the “defense” that a party cannot assert that the discovery was unnecessary (and therefore evidence of a frivolous action) when that party did not move to have the discovery stricken (i.e., seek protective orders) during the course of discovery.  The COA rejects that defense, and says that abusive discovery can be evidence, but that wasteful discovery alone does not mean that the “primary purpose” at the time the case was started was to harass, injure or embarrass.

The Court Rule Option. The COA notes that the case is limited to the issue raised: the application of MCL 600.2591(3)(a)(1); and that appellant did not assert on appeal that the action, when filed, was without any factual basis or legal merit (the other two options available under the statute), nor did appellant pursue sanctions under the court rule, MCR 2.114.

The relevant provisions of MCR 2.114 are:

(C) Signature.

(1) Requirement. Every document of a party represented by an attorney shall be signed by at least one attorney of record. A party who is not represented by an attorney must sign the document.

(2) Failure to Sign. If a document is not signed, it shall be stricken unless it is signed promptly after the omission is called to the attention of the party.

(3) An electronic signature is acceptable provided it complies with MCR 1.109(D).

(D) Effect of Signature. The signature of an attorney or party, whether or not the party is represented by an attorney, 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.

(E) Sanctions for Violation. If a document is signed in violation of this rule, the court, on the motion of a party or on its own initiative, shall impose upon the person who signed it, a represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the document, including reasonable attorney fees. The court may not assess punitive damages.

(F) Sanctions for Frivolous Claims and Defenses. In addition to sanctions under this rule, a party pleading a frivolous claim or defense is subject to costs as provided in MCR 2.625(A)(2). The court may not assess punitive damages.

Click here to read MCR 2.114 in its entirety.

As this case demonstrates, it is important to appreciate the differences between the statute and court rule in the context of sanctions. For one thing, while sanctions are mandatory for violation of either the court rule or statute, the mandatory sanctions under the statute are the costs and fees of the prevailing party.  Under the court rule the sanction is “an appropriate sanction” which may include legal fees and costs.  The court rule applies separately to each and every document filed (and signed) with the court.  The statute only applies to the pleading that initiated the case: the initial petition or complaint.

Conclusion

Clients always want to recover their fees in cases they win, or where assertions are made without any reasonable basis in fact or law. Michigan law allows for that result in many of those situations. But what clients think is frivolous or wasteful is much different from how the law defines it. [I have written before about managing client expectations on this point.  Click here to read “I love you but…” ]  What this case helps us understand is that when parties seek to recover costs and fees as sanctions, they must be mindful of the very precise language of the statutes and court rules that apply, and must carefully tailor their pleadings accordingly.