Changes to ADR Rules Leave Injury Lawyers With Limited Arsenal

This article was first published in the Detroit Legal News on August 4, 2022.

A. Vince Colella
Moss & Colella P.C.

Recent amendments to the Michigan Court Rules have gutted the alternative dispute resolution (ADR) program known as case evaluation. A steady decline in the statistical efficacy of the program had not gone unnoticed, leading injury attorneys to question the system for years. From this writer’s perspective, an increase in the number of no-fault automobile cases (largely provider suits), coupled with a decline in experienced trial lawyers selected or willing to serve, led to a precipitous decline in the legitimacy of the proceedings. Formal hearings gave way to more relaxed environments that barely resemble a “real” legal proceeding. Over time, the process drew sharp criticism from other members of the bar, leading to studies of the system’s effectiveness.

In 2011, the State Court Administrative Office (SCAO) commissioned a study of more than 3,000 lawyers and judges, seeking their opinions about the impact of the case evaluation process on docket management. Campbell & Pizzuti, Courtland Consulting, The Effectiveness of Case Evaluation and Mediation in Michigan Circuit Courts (October 31, 2011), found that the case evaluation system was not achieving its intended objective; thus, support among both lawyers and judges was waning. A follow up study in 2018 (by the same consulting group) determined that support for the system had further eroded, leading the SCAO to convene a rules committee to assess the efficacy of the system as a whole. According to the study, the impetus behind a major overhaul of the system was to “level the playing field” for plaintiffs and defendants, given the consensus that case evaluation sanction provisions were disproportionately more favorable to defendants (and insurance carriers) — a dubious observation to say the least.

In January 2022, the State Bar of Michigan adopted the recommendations and amended MCR 2.403 in two critical ways: While retaining the case evaluation process with a three-member panel providing an award, the amendment called for (a) removing the sanction provisions so that parties are not penalized for rejecting an award and proceeding to trial, and (b) permitting the parties to waive participation in case evaluation with approval of the presiding judge in lieu of a different ADR process. Although the rule allows for judges to select a matter for case evaluation by written order, we have seen a growing trend to remove cases from the evaluation process entirely in lieu of facilitation. While few would disagree that facilitation allows for a more robust debate about the facts and law applicable to a case, the elimination of sanctions removes a valuable weapon from the trial lawyer’s toolbox. Interestingly, the rules committee found that case evaluation primarily favored defendants and insurance carriers because they were in a better position to absorb the costs across hundreds of cases as opposed to plaintiffs with a single case. However, this logic is flawed, as the imposition of sanctions encourages defendants and insurance carriers to resolve cases to avoid the payment of attorney fees -. an outcome that is far more likely to occur than sanctions being paid by an insolvent or indigent plaintiff.

The rule change has left trial lawyers with only one other option for gaining leverage in settlement negotiations: a return to an antiquated and seldom used court rule, MCR 2.405 (“Offers of Judgement”). A careful examination of the rule, however, leaves little doubt of its ineffectiveness. By design, the rule allows for a party to provide written notification of the offeror’s willingness to stipulate to the entry of judgment. However, the ability to counter dilutes the offer, giving rise to an “average” bid far less than the intended result. More importantly, sanctions under MCR 2. 405 are not unilateral. Once an offer of judgment has been made, the offering party finds him or herself in the untenable position of facing sanctions should they not obtain a favorable verdict at trial. Unlike case evaluation under the former rule, where a plaintiff could accept a favorable evaluation and forego any risk of sanctions at trial, offers of judgement carry significant risk to both parties. In essence, the offer of judgment rule, rather than advancing settlement negotiations in lieu of protractive (and expensive) litigation, it rewards gamesmanship.”

Moreover, from a practical standpoint, it makes no sense for plaintiffs represented under a contingent fee contract to assume financial risk that otherwise does not exist.

Statistically, only about 1% of all cases filed in the circuit courts result in a jury trial. However, the role of sanctions still play an important role in settlement negotiations. The undeniable truth is that injury lawyers who are largely retained under contingency fee agreements are limited in their recovery by caps on damages and insurance policy limits. Thus, elimination of attorney fees as a sanction has created a disincentive for many lawyers from accepting personal injury cases and a barrier for persons of modest economic means to access the courts.

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A. Vince Colella is a co-founder of personal injury and civil rights law firm Moss & Colella.