Case evaluation, a process to compel settlements, has been changed to remove sanctions that disproportionately impacted property owners in condemnation cases.
Yesterday, the Michigan Supreme Court revised the Michigan Court Rules that govern case evaluation. Case evaluation is a process whereby the Court identifies three attorneys or former judges to sit as a panel. The parties submit written summaries of their case and appear before the panel for brief oral presentations. After the hearing, the panel identifies an amount that it believes represents the settlement value of the case. The parties have 28 days to blind answer. If both parties accept, a judgment is entered for that amount unless the amount is actually paid within that time. Before the change in Court Rules, any party rejecting the award was subjected to sanctions reflecting the attorney fees incurred by the other party after the deadline to respond to the award.
The revisions to the Court Rules governing case evaluation included eliminating sanctions. This benefits property owners.
Two issues stacked the deck against property owners in case evaluation.
MCL 213.66(3) generally governs the reimbursement of attorney fees for condemned property owners to obtain increased just compensation. The statute is modeled upon the traditional contingent attorney fee arrangement that I use and that has existed since before I was a lawyer. Unlike any other type of case of which I am aware, it requires case evaluation sanctions to be paid to the Court, not the other party.
(3) If the amount finally determined to be just compensation for the property acquired exceeds the amount of the good faith written offer under section 5, the court shall order reimbursement in whole or in part to the owner by the agency of the owner's reasonable attorney's fees, but not in excess of 1/3 of the amount by which the ultimate award exceeds the agency's written offer as defined by section 5. The reasonableness of the owner's attorney fees shall be determined by the court. If the agency or owner is ordered to pay attorney fees as sanctions under MCR 2.403 or 2.405, those attorney fee sanctions shall be paid to the court as court costs and shall not be paid to the opposing party unless the parties agree otherwise.
For public agencies, defined as governments, the payment of case evaluation sanctions to the Court essentially shifts money from one pocket to the other. This is particularly true for County agencies. Further, in an opinion supporting the amendment to the Court Rules, Supreme Court Justice Megan K. Cavanagh recognized that “eliminating sanctions would level the playing field for plaintiffs and defendants, given the consensus that case evaluation primarily favored defendants and insurance carriers (who could absorb the cost of sanctions across hundreds of cases).” The same logic applies to a property owner with one case that is litigating against an agency that may have filed dozens of cases in a single project and files hundreds of cases over time.
The Supreme Court’s Order recognizes the shift away from case evaluation toward facilitative mediation. Mediation is a process where a single person plays shuttle diplomacy in an effort to achieve a settlement. Mediation is significantly more expensive, but that expense was far less than the risk of paying case evaluation sanctions or being compelled to accept a less favorable award to avoid sanction exposure. A case evaluation process free of sanctions now allows property owners to advocate for that to be scheduled instead of the more expensive mediation process. Further, I recently obtained a trial court level order requiring an agency to pay the costs of a special case evaluation based upon the Court Rules governing expenses incurred by prevailing parties. A risk free case evaluation process opens the door to demanding that agencies pay the cost of mediation, which would be consistent with the Uniform Condemnation Procedures Act’s shifting of attorney fees and expert expenses from owners to agencies to allow owners the keep much more of the just compensation they receive without diluting it through litigation expenses.
The new changes are positive for property owners.
If you have any questions about eminent domain issues, please feel free to contact me.