Srvan Brick & Stone Inc v. Wb Hunt Corp ( 2015 )

STATE OF MICHIGAN
COURT OF APPEALS
SRVAN BRICK & STONE, INC., UNPUBLISHED
January 22, 2015
Plaintiff/Counter-Defendant-
Appellee,
v No. 316585
Bay Circuit Court
W B HUNT CORP., BAY BLOCK, LLC, LC No. 12-003009-CK
Defendants/Counter-
Plaintiffs/Third-Party Plaintiffs-
Appellants,
and
WILLIAM B. HUNT,
Defendant-Appellant,
and
MARK VAN POPPELEN and RENEE VAN
POPPELEN,
Third-Party Defendants-Appellees.
SRVAN BRICK & STONE, INC.,
Plaintiff-Appellee,
v No. 319213
Bay Circuit Court
W B HUNT CORP. and BAY BLOCK, LLC, LC No. 12-003009-CK
Defendant/Third-Party Plaintiffs-
Appellant,
and
WILLIAM B. HUNT,
Defendant-Appellant,
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and
SUSAN ELLEN HUNT,
Defendant,
and
MARK VAN POPPELEN,
Third-Part Defendant-Appellee
Before: MURRAY, P.J., and SAAD and K. F. KELLY, JJ.
PER CURIAM.
In Docket No. 316585, defendants-counter plaintiffs, WB Hunt Corporation and Bay
Block LLC, along with defendant-appellant William B. Hunt (collectively “defendants”), appeal
by leave granted1 from an April 18, 2013 order entered by Bay Circuit Court Judge Joseph K.
Sheeran, which granted default judgment and other sanctions in favor of plaintiff-counter
defendant-appellee, SRVAN Brick & Stone Inc., and third party defendants-appellees, Mark and
Renee Van Poppelen.
In Docket No. 319213, defendants appeal by leave granted2 from three November 14,
2013 orders entered by Bay Circuit Court Judge Harry Gill: (1) denying their motion to vacate
the April 18, 2013 sanctions order and a June 11, 2013 partial judgment, (2) denying their
motion for reexamination, and (3) granting plaintiff SRVAN Brick and Stone Inc.’s motion to
compel discovery.
Finding no errors warranting reversal, we affirm.
I. BASIC FACTS AND PROCEDURAL HISTORY
SRVAN sells building materials. It is wholly owned by Renee Van Poppelen. SRVAN
employs Renee’s husband, Mark Van Poppelen. Mark Van Poppelen was the owner and
manager of Van Poppelen Bros., Inc. (VPB), a manufacturer of concrete blocks. VPB employed
Renee as its controller.
1
SRVAN Brick & Stone Inc v W B Hunt Corp, unpublished order of the Court of Appeals,
entered December 18, 2013 (Docket No. 316585).
2
SRVAN Brick & Stone Inc v W B Hunt Corp, unpublished order of the Court of Appeals,
entered December 4, 2013 (Docket No. 319213).
-2-
VPB had a history of financial troubles, including a bankruptcy filing in 2005. VPB
emerged from bankruptcy with a $750,000.00 debt to Independent Bank, secured by VPB assets
and a personal guaranty by Mark. In 2007, the operations of SRVAN and VPB became
intertwined.
In September 2011, Renee and Mark discussed a possible sale of VPB assets to William
Hunt’s company, WB Hunt, for $225,000.00. They entered into a purchase agreement. At that
time, Independent Bank had an action pending against VPB for failing to pay its debt of more
than $600,000.00. Before the sale was finalized, VPB was placed into receivership. Bay Circuit
Court Judge Joseph K. Sheeran presided over the case, and entered a consent order appointing a
receiver on September 6, 2011 in the case of Independent Bank v Van Poppelen, circuit court
case no. 11-003534-CH.
WB Hunt continued its efforts to purchase VPB out of receivership, and eventually
became parties to the Independent Bank case. SRVAN claimed that it owned some of the assets
that were used by VPB. On October 27, 2011, Mark and Renee entered into a conditional
purchase agreement with WB Hunt. Mark and Renee would sell WB Hunt all of SRVAN’s
assets, except its inventory, for $1.00 and WB Hunt would assume SRVAN’s liability of
$34,000.00. The purchase was conditioned on a due diligence investigation, an agreement to
purchase the assets of VPB in the receivership action, and Renee and Mark signing noncompete
agreements. In the Independent Bank action, SRVAN objected to the sale of VPB assets,
claiming ownership of some of them. Ultimately, the court ordered liquidation of VPB’s assets,
and the money obtained was not enough to satisfy VPB’s debts.
On January 5, 2012, SRVAN brought the instant action against defendants, alleging
tortious interference with business relationship, fraud, and conversion. SRVAN later added
claims for violations of Michigan’s Uniform Trade Secrets Act and business defamation. The
case was assigned to Judge Gill.
On January 26, 2012, Judge Sheeran transferred the case to himself. He indicated in his
order that the case shared “substantial and controlling questions of law and fact” with the
Independent Bank receivership action.
On February 3, 2012, defendants filed a countercomplaint, alleging that SRVAN and
Mark Van Poppelen engaged in tortious interference with contract, and seeking specific
performance of the asset purchase agreement. They filed a third-party claim against Mark and
Renee for breach of the noncompete agreements and tortious interference.
In the course of discovery, SRVAN alleged that defendants failed to turn over requested
documents. SRVAN filed motions for default judgment as a discovery sanction. The discovery
dispute centered on computer disks containing defendants’ files and documents. SRVAN
claimed that the files were not accessible on the disks, and alleged that William Hunt deleted
data from the disks that were copied and produced to SRVAN in discovery. SRVAN also
complained that Hunt fabricated an employment agreement with Mark Van Poppelen, used
proprietary information for his own business, obstructed retrieval of property, and failed to
appear at corporate depositions. Judge Sheeran found the motion for default judgment
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premature, but warned defendants that failure to promptly respond to outstanding discovery
would subject them to potential sanctions.
Following an evidentiary hearing on March 20 and March 21, 2013, Judge Sheeran found
that William Hunt tampered with and attempted to delete certain electronic data. As a discovery
sanction, Judge Sheeran dismissed defendants’ counterclaim and third-party claim of tortious
interference and further found that Mark Van Poppelen was entitled to an adverse inference
instruction on defendants’ third party breach of employment contract claim. Judge Sheeran
further ordered that SRVAN was entitled to an adverse evidentiary inference on its trade secrets
claim. Finally, Judge Sheeran awarded SRVAN reasonable attorney fees and costs for “having
to deal with issues and disputes regarding the material deleted from the external hard drive.”
Defendants filed an application for leave to appeal from the order on June 6, 2013.
On June 12, 2013, the discovery sanctions order was reduced to a partial judgment in
favor of SRVAN.
On May 9, 2013, SRVAN amended its complaint to add Susan Hunt as a defendant.
SRVAN alleged that Susan Hunt and William Hunt engaged in “concert of action” and civil
conspiracy, and that Susan aided and abetted William.
On June 17, 2013, Susan Hunt moved to disqualify Judge Sheeran on the basis of actual
bias or the appearance of bias. She asserted that Judge Sheeran and Mark Van Poppelen used to
be neighbors, that their sons grew up playing football together, that Judge Sheeran and Mark
were “drinking buddies” with a close personal friendship, and that on several occasions, Mark
drove Judge Sheeran home after a night of drinking together. Susan’s motion also asserted that
Mark boasted to others that Judge Sheeran would rule in his favor if an issue involving him ever
came before Judge Sheeran, because of their friendship. Susan cited Mark’s deposition
testimony in which he admitted that he has given Judge Sheeran rides home after a night of
drinking when Judge Sheeran might have had too much to drink. Susan supported her assertions
with the affidavit of Herb Nordstrom, an acquaintance of both Judge Sheeran and Mark.
Nordstrom attested that he socialized with both men “on numerous occasions” “at the Bell Bar,
Old City Hall, or other local Bay City establishments[.]” Nordstrom stated: “I have heard Mark
Van Poppelen boast on several occasions that Joe Sheeran would rule in his favor if an issue
involving him ever came before Joe Sheeran as a result of the close relationship between the two
of them.”3
Judge Sheeran granted the motion to disqualify. The court’s July 13, 2013 order
provided: “Counsel met in chambers regarding motion to disqualify. Motion granted. Parties
agreed to handle matter in camera.” The case was then reassigned to Judge Gill.
3
As will be discussed below, Judge Sheeran unequivocally refuted the allegations in the affidavit
and Nordstrom later recanted these claims.
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On September 6, 2013, defendants filed a motion to vacate Judge Sheeran’s prior rulings
in light of his disqualification. Defendants also requested re-examination of the prior rulings. In
the meantime, SRVAN began efforts to enforce the partial judgment. SRVAN moved to compel
discovery of the defendants’ assets to satisfy the judgment. The Hunt Companies objected, and
argued that the partial judgment could not be executed before a final judgment was entered.
Judge Gill heard argument on all three motions on October 29, 2013. Finding no actual
bias on the part of Judge Sheeran, Judge Gill denied the motion for vacatur. Finding clear
evidence that defendants engaged in a pattern of interference, Judge Gill denied the motion for
reexamination. Finally, Judge Gill granted SRVAN’s motion to compel discovery to collect on
the partial judgment.
On appeal, defendants seek review of Judge Sheeran’s April 18, 2013 order granting
discovery sanctions and his June 11, 2013 order granting partial judgment in favor of SRVAN.
They also seek review of Judge Gill’s three November 14, 2013 orders denying their motion to
vacate an April 18, 2013 sanctions order and a June 11, 2013 partial judgment, denying their
motion for reexamination, and granting plaintiff SRVAN’s motion to compel discovery.
II. DISCOVERY SANCTIONS
Defendants argue that Judge Sheeran abused its discretion in imposing discovery
sanctions because the sanctions were not proportionate, just or warranted. We disagree.
“The standard of review for decisions regarding sanctions for discovery violations is
abuse of discretion. An abuse of discretion occurs when the decision results in an outcome
falling outside the range of principled outcomes.” Jilek v Stockson, 297 Mich App 663, 665; 825
NW2d 358 (2012). “This Court reviews any factual findings underlying a trial court’s decision
for clear error. A finding is clearly erroneous when this Court is left with a definite and firm
conviction that a mistake has been made.” Hardrick v Auto Club Ins Ass’n, 294 Mich App 651,
660; 819 NW2d 28 (2011) (internal citations and quotations omitted).
While MCR 2.313(B)(2)(c) authorizes a trial court to enter a default judgment or dismiss
an action, this Court has warned that “a default entered as a sanction is a means to penalize a
party for failure to comply with the trial court’s directives and, as noted above, should be entered
only in the most egregious circumstances.” Kalamazoo Oil Co v Boerman, 242 Mich App 75,
87; 618 NW2d 66 (2000).
The trial court should carefully consider the circumstances of the case to
determine whether a drastic sanction such as dismissing a claim is appropriate.
Severe sanctions are generally appropriate only when a party flagrantly and
wantonly refuses to facilitate discovery, not when the failure to comply with a
discovery request is accidental or involuntary. The record should reflect that the
trial court gave careful consideration to the factors involved and considered all its
options in determining what sanction was just and proper in the context of the
case before it. [Id. at 86 (internal citations and quotation marks omitted).]
-5-
Because the courts generally prefer that matters be decided on the merits, dismissal “should be
taken cautiously.” Vicencio v Ramirez, 211 Mich App 501, 506-507; 536 NW2d 280 (1995).
Thus:
Before imposing the sanction of a default judgment, a trial court should consider
whether the failure to respond to discovery requests extends over a substantial
period of time, whether an existing discovery order was violated, the amount of
time that has elapsed between the violation and the motion for a default judgment,
the prejudice to defendant, and whether [willfulness] has been shown. [Thorne v
Bell, 206 Mich App 625, 632-633; 522 NW2d 711 (1994).]
Other factors include “whether the violation was wilful or accidental,” “the party’s history of
refusing to comply with discovery requests” and “whether there exists a history of [] deliberate
delay.” Richardson v Ryder Truck Rental, Inc, 213 Mich App 447, 451; 540 NW2d 696 (1995).
“The sanction of default judgment should be employed only when there has been a flagrant and
wanton refusal to facilitate discovery, that is, the failure must be conscious or intentional, not
accidental or involuntary.” Frankenmuth Mut Ins Co v ACO, Inc, 193 Mich App 389, 397; 484
NW2d 718 (1992). “Ultimately, the court’s chosen discovery sanction must be proportionate
and just.” Hardrick, 294 Mich App at 662 (internal quotation marks omitted).
In the course of discovery, SRVAN alleged that defendants failed to turn over requested
documents. SRVAN filed motions for default judgment as a discovery sanction. The discovery
dispute centered on computer disks containing defendants’ files and documents. SRVAN
claimed that the files were not accessible on the disks, and alleged that William Hunt deleted
data from the disks that were copied and produced to SRVAN in discovery. SRVAN also
complained that Hunt fabricated an employment agreement with Mark Van Poppelen, used
proprietary information for his own business, obstructed retrieval of property, and failed to
appear at corporate depositions.
At a February 20, 2013 hearing on SRVAN’s motion for default judgment, the trial court
noted:
In one respect, I think that the motion [for default judgment] is premature.
I know that allegedly some mass quantity of information has now been provided
by the copying of the computer records, but they’ve been inaccessible. It remains
to be seen whether or not those records contain what they are alleged to contain.
For example, are – are the invoices – are all the invoices really on that computer.
So we’ve taken some steps today to allow counsel to get some information as to
how to access that information out of the electronic records that’ve been copied,
and I’d like, before I decide this, to know the results of that.
Suffice it to say that the defendants are warned that any future violation of
discovery orders, and there have been violations of the discovery orders, I don’t
know that I agree with every single instance cited by counsel that they’re all
violations, but there have been violations, and they are delaying this – the
preparation of this matter, and defendant is warned that any future violations
could result in severe sanctions, including dismissing the cases the defendant has
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brought, and entering default judgments against them in the cases that the
plaintiffs have brought.
Defendants were given until the end of the week to produce the requested information along with
the mechanism for accessing that information. The trial court added, “just to be clear then, for
the balance of the relief requested, I will take it under advisement, pending what happens in the
future and what I’m told about the future, so the issue of sanctions remains open.”
The parties stipulated that the Mas90 program was deleted from the external hard drive
on November 27 at approximately 2:00 a.m., prior to being delivered to plaintiffs. The question
was who was responsible. At an evidentiary hearing on March 20 and 21, 2013, the court heard
testimony from several witnesses regarding how information may have been deleted from the
disc and who might have been responsible. Judge Sheeran found that William Hunt tampered
with the external hard drive after it was copied:
The person who had access to do this at the time that I believe it happened
which I believe is the time indicated that – on the 27th of November was Mr.
Hunt. And this has been coming down the pike for some time. There’s a lot
riding on this. And he hasn’t bothered to really examine where he was or what he
was doing at that time. He’s been vague about that.
Mr. Hewitt [defense counsel] argues that he wouldn’t have any motivation
to do this. I don’t think that’s true. I think that a motivation would be to – to
delay proceedings and to make it as difficult and as expensive as possible for the
plaintiffs to complete their discovery in this matter. So, he – he certainly had a []
motivation in that regard.
***
So, I find that as a matter of fact that Mr. Hunt or someone acting at his
direction tampered with this external hard drive after it had been copied by Miss
Sellers and removed information from it before it was turned over to his attorney.
Resulting in a failure to comply with discovery.
There is no indication that this was accidental or done in anything but a –
a willful and deliberate fashion, that it was done with an intent to just delay the
proceedings here or to hide from the plaintiffs certain information or to make it as
difficult as possible for them to pursue their case or to make it expensive for them.
[Emphasis added.]
Judge Sheeran then proceeded to determine the proper discovery sanction. He asked
defense counsel what sanction would be appropriate, indicating that he was required to consider
other less drastic sanctions than default and dismissal. Judge Sheeran reiterated:
I do find that the defendants have violated the discovery rules and the
biggest violation is the – the intentional, willful deletion of information on the
hard drive that we talked about earlier.
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I don’t believe that was accidental. I believe it was done willfully and
intentionally, and then when there were difficulties encountered by the plaintiffs
in trying to get access to that, it was compounded and – and dragged out by the
continuing discussions about how to access information that wasn’t there in the
first place.
And I think that prolonged the unraveling of that mystery. I don’t believe
it was prolonged by the – Mr. Jezdimir filing the motion. I think that actually
brought it to a head and [] got it to the resolution that [] we have today.
There have been other discovery violations including deletion of
burnishing reports, the deletion of information on the computer regarding the
employment agreement it’s alleged that Mark Van Poppelen signed, the failure to
adequately respond to discovery requests for the basis of the tortious interference
with business relation claims that defendants have made. I think that was an
intentional refusal to answer or disclose information relative to that claim.
We have somewhat of a history here of the – the defendants delaying
matters. It’s well outlined in the briefs supplied by the plaintiff how we have a
long and protracted history of refusal to fully comply with – with discovery.
Defendants haven’t made an attempt to timely cure the – these defects,
either. They just – just haven’t. Instead we’ve been kind of led on a wild goose
chase, especially in regard to this getting to the bottom of the missing information
on the – from the electronic discovery.
Judge Sheeran then looked to each of the parties’ claims to see how they were impacted
by the Hunt Companies’ discovery violations. He dismissed defendants’ claim for tortious
interference with business relations. A lesser sanction of a negative inference jury instruction
was applied to defendants’ claim for breach of contract. The jury could also draw a negative
inference regarding missing burnishing reports on the claim for violation of trade secrets. Judge
Sheeran went on:
But because of – of the willful and deliberate and serious violation of
deleting the information from – from the hard drive, I believe that the deletion of
that information has made it impossible for the plaintiffs to properly prosecute
their claims and they’ve been seriously prejudiced as to their claims for tortious
interference and also for the conversion claim.
And so I believe that the appropriate remedy in those matters is to enter
default judgment in favor of the plaintiff on those – those two claims. Tortious
interference and the conversion.
As to the other claims of plaintiff, I don’t think that they were affected to
the degree and I would deny to grant default judgments as to the other counts.
On April 18, 2013 Judge Sheeran reduced his findings into a written order, which granted
SRVAN default judgment on its claims of tortious interference and conversion. Judge Sheeran
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dismissed defendants’ counterclaim and third-party claim of tortious interference and further
found that Mark Van Poppelen was entitled to an adverse inference instruction on defendants’
third party breach of employment contract claim. Judge Sheeran further ordered that SRVAN
was entitled to an adverse evidentiary inference on its trade secrets claim. Finally, Judge
Sheeran awarded SRVAN reasonable attorney fees and costs for “having to deal with issues and
disputes regarding the material deleted from the external hard drive.”
MCR 2.313(B)(2)(c) clearly authorized Judge Sheeran to enter a partial default judgment
and dismissal in this case. This was clearly a situation involving particularly “egregious
circumstances.” William Hunt acted deliberately in deleting critical data. Judge Sheeran found
that his actions were calculated to delay the proceedings and intentionally hide information from
plaintiff. Any subsequent “attempt to cure” by providing a disc with the relevant information
was, in fact, no attempt at all. There was not some accident that prevented defendants from
transmitting the correct information; rather, it was a deliberate attempt to hide information.
Plaintiff and Mark Poppelen were clearly prejudiced by these flagrant violations with trial only a
few weeks away. Judge Sheeran plainly contemplated other drastic sanctions and, in fact,
ordered lesser sanctions on some of the counts. As SRVAN points out, defendants provide no
legal support for their argument that “lack of merit” of a claim is a factor to consider in ordering
discovery sanctions. “It is not enough for an appellant in his brief simply to announce a position
or assert an error and then leave it up to this Court to discover and rationalize the basis for his
claims, or unravel and elaborate for him his arguments, and then search for authority either to
sustain or reject his position.” Mitcham v Detroit, 355 Mich 182, 203; 94 NW2d 388 (1959).
Defendants’ actions were flagrant and wanton. There was also a history of failing to or refusing
to comply with discovery requests. Under these circumstances, Judge Sheeran’s chosen
discovery sanction was proportionate and just.
III. VACATUR
Defendants argue that Judge Gill abused his discretion when he denied their motion for
vacatur. Defendants claim that Judge Sheeran’s disqualification after entering a default
judgment against defendants demonstrated judicial bias. We disagree.
A trial court’s determination on a motion to vacate is reviewed for an abuse of discretion.
CD Barnes Assoc, Inc v Star Heaven, LLC, 300 Mich App 389, 425; 834 NW2d 878 (2013).
At the October 29, 2013 hearing on defendants’ motion for vacatur, defense counsel
argued that a showing of actual bias was not necessary to justify vacating Judge Sheeran’s
sanctions order and partial judgment. Counsel cited Liljeberg v Health Services Acquisition
Corp, 486 US 847; 108 S Ct 2194; 100 L Ed 2d 855 (1988) and Caperton v Massey, 556 US 868;
129 S Ct 2252; 173 L Ed 2d 1208 (2009), highlighting “the risk of undermining the public’s
confidence in the judicial process.”
Judge Gill questioned defense counsel about defendants’ failure to move to disqualify
Judge Sheeran in a timely manner. Judge Gill read from an August 8, 2011 transcript and a
January 30, 2012 transcript in the Independent Bank receivership case. In the first proceeding,
Judge Sheeran disclosed that he was friends with Mark Van Poppelen. Defendants were not
parties to the Independent Bank case at that point. At the January 2012 proceeding, counsel for
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defendants was present, and an attorney representing Independent Bank, Ms. Swisher, referred to
Judge Sheeran’s prior “comment about a relationship between [Judge Sheeran] and [ ] Mr. Van
Poppelen.” Attorney Swisher asked that the court “consider whether or not a reassignment
would be appropriate.” Judge Gill suggested that these transcripts indicated that William Hunt
had notice of Judge Sheeran’s relationship with Mark Van Poppelen from proceedings in the
Independent Bank case.
Defense counsel emphasized that nothing that Judge Gill read from the January 30, 2012
transcript in that case mentioned that the men were drinking buddies or that Judge Sheeran
received rides home from Mark Van Poppelen after nights of drinking. Counsel argued that the
nature and depth of the friendship came to light much later, and “prompted an immediate recusal
without explanation from the judge.” Defense counsel summarized his argument:
But the standard here is a higher one as the Liljeberg case sets out. It’s
what does this chronology of events communicate to the public? What does it say
to the public where a judge sets aside motions on the merits, decides motions
based on discovery abuses and then recuses himself from the case?
Well, I’d say that for someone in the public, John and Mary Doe who
really rely on blind faith that the – that the judicial system will work the way it’s
supposed to work, the answer to the question of what does it communicate to
them is a rhetorical one.
In fact, I think it discloses an answer that is the public’s worst nightmare.
It communicates that this decision was one that was influenced by bias and it
communicates the conclusion that justice is not blind – and this is the nightmare –
but that it depends on who you know. It depends on who you know.
And I will say this. Judge Sheeran’s recusal, for whatever reason he
decided to do it, if – for the reasons set forth in Mr. Nordstrom’s affidavit that
says that he was a long-time friend and drinking buddy of Mr. Van Poppelen, –
***
. . . But this is a case that screams out for resolution on the merits and not
resolution under the circumstances here that as I suggested to you would deeply
erode public confidence in this court and our judicial system generally.
Judge Gill also referred to a third case in which Bay Block is a defendant, and over which
Judge Sheeran presided. In that case, Transworld Materials v Bay Block, circuit court no. 12-
003485-CZ, Judge Sheeran sua sponte recused himself on October 28, 2012. In so doing, Judge
Gill noted that Judge Sheeran “went into a long, detailed explanation as to why he recused
himself in this case.”
In denying the motion for vacatur, Judge Gill noted:
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THE COURT: The defendants’ motion essentially argues that because
Judge Sheeran disqualified himself it follows as a matter of law that any orders he
entered must be vacated.
That is not the law. And I will deny the motion on that basis, to the extent
it is on that basis.
***
The law essentially is in Michigan that in order to vacate the opinions, you
must show that the [ ] judgments were, in fact, the result of the bias or prejudice.
I want to address the facts that [ ] exist in this case.
First of all, Judge Sheeran did not make any secret of what had occurred in
the past between Mr. Van Poppelen and himself. The first proceeding that I’m
aware of that occurred in this case was on August the 20th (sic) 2011.4 I have a
copy of the transcript that has been certified by the court reporter and it is my
understanding that that was the first hearing in the matter . . .
***
And then it goes on. The point is, there was nobody that raised a motion
then, the parties at that time did not include Mr. Hunt or his corporations.
But there was another hearing on January the 30th, 20125 where WB Hunt
Corporation was clearly a party and was present at the hearing in the person of
Mr. Nelson Ropke, a lawyer with Miller, Canfield, Paddock and Stone.
I’ve already read into the transcript – into the record that transcript, but for
purposes of summary, Miss Swisher, the lawyer for Independent Bank again
raised the issue of Judge Sheeran’s relationship with Mr. Van Poppelen and asked
him to reconsider it. No other lawyer said anything and no motion followed and
this is before any of the orders were entered by Judge Sheeran that affected that
litigation at – or at least the issues here, the default orders, et cetera.
And then yesterday, Judge Sheeran was confronted in the case of
Transworld [ ] Materials, LLC versus Bay Block, File 12-[3485] with a motion, I
believe to add Mr. Van Poppelen as a third party-defendant.
4
Although Judge Gill refers to the August 2011 proceedings as a part of “this case,” he is
quoting Judge Sheeran from the transcript in the Independent Bank case, of a proceeding that
occurred before defendants became involved in that case.
5
To be clear, this January 2012 transcript is also from the Independent Bank case.
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Judge Gill quoted Judge Sheeran’s remarks from the previous day in the Transworld Materials
case wherein Judge Sheeran explains that his recusal was based solely on Susan Hunt’s request
and the appearance of impropriety. He refuted the facts set forth in Nordstrom’s affidavit. Judge
Sheeran acknowledged that Mark was a former neighbor and that they were on friendly terms,
but they were not close personal friends and Judge Sheeran was not biased in Mark’s favor.
Nevertheless, Judge Sheeran believed that his recusal would serve “both the integrity of the
Court and the appearance of justice.”
Judge Gill concluded:
Now, I realize those comments weren’t made at the time of [ ] the
disqualification. However, I’m going to deny the motion for the following
reasons.
First, I do not think there has been any proof that Judge Sheeran actually
was biased or that any of the opinions that he rendered or the orders that he
entered were based on bias or any personal relationship with any of the litigants.
***
Second, I find that the defendants WB Hunt and Mr. Hunt personally
because of his ownership of Bay Block were on notice of this well before these [ ]
issues were decided and chose not to act. I base that on the fact that although he
was not a party on the hearing of August 8, 2011, and when I say “he,” I’m
referring to Hunt Corp – the WB Hunt Corporation and/or Mr. Hunt personally,
he certainly was or the corporation was as of January 30th, 2012. And he had, in
the interim between those two hearings, purchased [ ] Bay Block, Inc. And so he
was on notice.
***
I have reviewed the proceedings of the hearings that led to this over
several, several months. And I find that Judge Sheeran’s conclusions were based
on a significant record and well based on fact.
He found that the defendants violated the discovery rules and the biggest
violation was the intentional willful deletion of information on the hard drive that
we talked about earlier . . .
I’m not going to go into a minced detail of each and every hearing or each
and every alleged violation of the discovery rules, but Judge [Sheeran] gave
careful and thorough consideration to all of the arguments that were made and all
of the evidence that was before him, and as a – and made his rulings only after he
was confronted with, I think, very persuasive forensic evidence that led him to the
conclusion that Mr. Hunt had deliberately deleted information from a hard drive
or [] from the electronic disclosures that were made to the plaintiff pursuant to []
discovery requests.
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That was in conjunction with a long, protracted record of violations. And
he, I think, gave very thorough thought to what he decided and that he made a
ruling that in spite of its severity and harshness was well founded on the facts and
within his discretion to grant.
I see nothing in those proceedings which in any way indicate a bias, actual
or implied, on the part of Judge Sheeran. In fact, he had been asked on many
occasions before he did enter the sanctions that he entered to grant sanctions
including default and he had declined to do so until he saw further proofs.
I think that under the case law in Michigan, there [ ] must be a showing
that those decisions were based or stem from some bias or prejudice and there is
none in this record.
***
There is nothing in the record to indicate to me or any reasonable observer
that Judge Sheeran’s opinions were formed on the basis of anything other than
clear evidence that Wi – WB Hunt Corporation and Mr. Hunt personally were
engaged in a long, protracted, deliberate attempt to obstruct the discovery process
and to im – delay the proceedings or to alter the results by hiding information and
evidence that should have been produced.
For those reasons, I deny the motion to vacate Judge Sheeran’s orders.
As for the motion to reexamine, Judge Gill concluded:
[T]he conclusions reached by Judge Sheeran were based on clear evidence of a
deliberate and continuing pattern by Mr. Hunt and his corporation to interfere
with the discovery and to obstruct the proceedings.
I think the number of hearings that were conducted before Judge Sheeran
reached that conclusion was clear evidence that he considered lesser sanctions. I
think he was looking for said lesser sanctions. I think he wanted the obstruction
to stop. And when it didn’t, he, I think, entered a very reasonable order.
In Caperton, a justice on West Virginia’s Supreme Court declined to recuse himself from
hearing a case that involved an individual who had contributed extraordinary amounts to the
justice’s election campaign. In finding that failure to recuse was an error, the United States
Supreme Court acknowledged that there are “circumstances in which experience teaches that the
probability of actual bias on the part of the judge or decisionmaker is too high to be
constitutionally tolerable.” Caperton, 556 US at 877 (internal quotation marks and citation
omitted). The Court accepted the justice’s “probing search into his actual motives and
inclinations” and did not dispute “his subjective findings of impartiality and propriety.” Id. at
882. Nevertheless, the Court explained:
The difficulties of inquiring into actual bias, and the fact that the inquiry is
often a private one, simply underscore the need for objective rules. Otherwise
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there may be no adequate protection against a judge who simply misreads or
misapprehends the real motives at work in deciding the case. The judge’s own
inquiry into actual bias, then, is not one that the law can easily superintend or
review, though actual bias, if disclosed, no doubt would be grounds for
appropriate relief. In lieu of exclusive reliance on that personal inquiry, or on
appellate review of the judge’s determination respecting actual bias, the Due
Process Clause has been implemented by objective standards that do not require
proof of actual bias. In defining these standards the Court has asked whether,
under a realistic appraisal of psychological tendencies and human weakness, the
interest poses such a risk of actual bias or prejudgment that the practice must be
forbidden if the guarantee of due process is to be adequately implemented. [Id. at
883-884.]
The Court found that not all campaign activity will render a judge incapable of hearing a case,
but that the focus must be on “the contribution’s relative size in comparison to the total amount
of money contributed to the campaign, the total amount spent in the election, and the apparent
effect such contribution had on the outcome of the election.” Id. at 884. The focus must also be
on the “temporal relationship between the campaign contributions, the justice’s election, and the
pendency of the case.” Id. at 886. Searching for evidence of actual bias is “just one step in the
judicial process; objective standards may also require recusal whether or not actual bias exists or
can be proved.” Id. “The failure to consider objective standards requiring recusal is not
consistent with the imperatives of due process.” Id. The Court concluded: “We find that [the
third party’s] significant and disproportionate influence—coupled with the temporal relationship
between the election and the pending case offer a possible temptation to the average judge to
lead him not to hold the balance nice, clear and true. On these extreme facts the probability of
actual bias rises to an unconstitutional level.” Id. at 886-887 (internal quotation marks and
citations omitted). The Court also noted that several states have untaken reforms to combat not
only actual judicial bias, but the appearance of partiality. Id. at 888.
Here, Judge Sheeran disqualified himself immediately upon Susan Hunt’s request.
Therefore, the issue is not whether Judge Sheeran should have disqualified himself under the
circumstances. The relevant inquiry is: what becomes of Judge Sheeran’s prior orders in light of
his subsequent disqualification?
On appeal, defendants argue that Judge Gill erred in applying an “actual bias” standard.
Defendants argue that the appropriate standard is the federal standard as articulated in Liljeberg,
that a showing of actual bias is not necessary to warrant vacatur of a judgment after recusal of
the trial judge. In Liljeberg, Loyola University was in talks to sell a parcel of land to Liljeberg,
who intended to build a hospital. However, in order to build a hospital, Liljeberg needed a
“certificate of need” from the State of Louisiana. He claimed he had a certificate of need, but
Health Services Corporation filed suit for declaratory judgment against Liljeberg, asking the trial
judge to find that it was the owner of the certificate, not Liljeberg. The trial judge entered
judgment for Liljeberg. Several months later, Health Services Corporation discovered that the
trial judge was a member of the Loyola University Board of Trustees, who had an interest in the
litigation. Health Services filed a motion to vacate under FRCP 60(B)(6). Liljeberg, 486 US at
852-856.
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In finding the federal statute setting forth judicial disqualification (28 USC 455) had been
violated, the Court discussed the proper remedy. The Court noted that, “[a]s in other areas of the
law, there is surely room for harmless error committed by busy judges who inadvertently
overlook a disqualifying circumstance. There need not be a draconian remedy for every
violation of § 455(a).” Liljeberg, 486 US at 862.
We conclude that in determining whether a judgment should be vacated for a
violation of § 455(a), it is appropriate to consider [1] the risk of injustice to the
parties in the particular case, [2] the risk that the denial of relief will produce
injustice in other cases, and [3] the risk of undermining the public’s confidence in
the judicial process. We must continuously bear in mind that to perform its high
function in the best way justice must satisfy the appearance of justice. [Liljeberg,
486 US at 864 (internal quotation marks and citation omitted).]
Even accepting that, at the time the case was tried, the district court judge did not have
actual knowledge of Loyola’s interest in the dispute, “[t]he problem, however, is that people who
have not served on the bench are often all too willing to indulge suspicions and doubts
concerning the integrity of judges. The very purpose of § 455(a) is to promote confidence in the
judiciary by avoiding even the appearance of impropriety whenever possible. Thus, it is
critically important in a case of this kind to identify the facts that might reasonably cause an
objective observer to question [the judge’s] impartiality.” Liljeberg, 486 US at 864-865 (internal
footnote and citations omitted). The Court then considered four factors in particular. First, it
was remarkable that the district court judge simply “forgot” about Loyola’s interest. Id. at 865.
Second, an unfortunate coincidence existed wherein the district court judge, who regularly
attended board meetings, was not present at a meeting following the two-day trial while the case
was still under advisement. Third, the Court found it “remarkable – and quite inexcusable” for
the judge to fail to recuse himself after learning of the conflict. Id. at 866. Finally, the district
court judge failed to acknowledge he had known about Loyola’s interest shortly before and after
trial, nor did he indicate an awareness of a duty to recuse himself. Id. at 867.
The Court quoted the Court of Appeals’ opinion with approval:
“The goal of section 455(a) is to avoid even the appearance of partiality. If it
would appear to a reasonable person that a judge has knowledge of facts that
would give him an interest in the litigation then an appearance of partiality is
created even though no actual partiality exists because the judge does not recall
the facts, because the judge actually has no interest in the case or because the
judge is pure in heart and incorruptible. The judge’s forgetfulness, however, is
not the sort of objectively ascertainable fact that can avoid the appearance of
partiality. Under section 455(a), therefore, recusal is required even when a judge
lacks actual knowledge of the facts indicating his interest or bias in the case if a
reasonable person, knowing all the circumstances, would expect that the judge
would have actual knowledge.” [Liljeberg, 486 US at 860, quoting Health
Services Acquisition Corp v Liljeberg, 796 F 2d 796, 802 (CA 5 1986).]
Defendants are correct – a showing of actual bias is not necessary to warrant vacatur of a
judgment after recusal of the trial judge. Liljeberg clearly provides that the appearance of
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partiality may be sufficient to warrant disqualification even in the absence of actual bias.
However, Liljeberg does not suggest that vacatur is mandated even when there is the appearance
of partiality. Quite the opposite is true. The Court carefully noted that “there is surely room for
harmless error” and that “[t]here need not be a draconian remedy for every violation of” the rules
for judicial disqualification. Liljeberg, 486 US at 862. The Court, even after finding that there
was the appearance of partiality based on the district court judge’s affiliation with Loyola, did
not end its inquiry there; instead, the Court went on to consider relevant factors to fashion a
proper remedy.
The case at bar is distinguishable from Liljeberg in a number of ways. First, the conflict
in Liljeberg was directly connected to the district judge’s ruling. Loyola, where the judge was a
trustee, derived a financial benefit from the ruling in favor of Liljeberg. In contrast, the alleged
conflict here is speculative. Judge Sheeran had no pecuniary interest in the outcome of the
proceedings. Second, Judge Sheeran, in a related case, made his connection with Mark Van
Poppelen known and specifically sought the attorneys’ input on the issue. He did not hide or
“forget” about the relationship. Third, Judge Sheeran, unlike the district court judge in Liljeberg,
immediately disqualified himself when Susan Hunt asked him to do so. He did not attempt to
hold onto the case or “explain away” his decision. Fourth, Judge Sheeran, in a related
proceeding, explained why he disqualified himself on the record at length. At that time, Judge
Sheeran indicated that he was doing so in deference to a newly-added party’s request. He flatly
denied the bulk of defendants’ allegations regarding his relationship with Mark Van Poppelen.
Fifth, unlike the party in Liljeberg, defendants sat on their claim and failed to act in a timely
manner. On appeal, defendants argue that the delay was excused because, although they may
have known of the friendship between Judge Sheeran and Mark Van Poppelen, they did not
know of the “extent” of the relationship. That argument is disingenuous, especially in light of
the fact that Herb Nordstrom later recanted the bulk of his affidavit, upon which defendants
relied. Finally, the record is bereft of any indication that Judge Sheeran showed favoritism to
plaintiff or Mark Van Poppelen. Defendants complain that the default and dismissal was a hasty
decision and that the trial court ignored their pending motion for summary disposition.
However, as noted in Section II of this opinion, the default and dismissal were well-justified
following dilatory, evasive, and obstructive behavior.
In light of these considerations, the three factors set forth in Liljeberg for deciding
whether relief from judgment is warranted – “[1] the risk of injustice to the parties in the
particular case, [2] the risk that the denial of relief will produce injustice in other cases, and [3]
the risk of undermining the public’s confidence in the judicial process” – preclude vacatur in this
case. The particular facts of this case would not reasonably cause an objective observer to
question Judge Sheeran’s impartiality. It follows that Judge Gill did not abuse his discretion
when he denied defendants’ motion for vacatur.
Moreover, although Judge Gill was careful to separate out the motions, it appears that he
did, in fact, reexamine Judge Sheeran’s prior orders and found them well-grounded in fact and
law. Unlike the parties in Liljeberg, a new judge was able to take a fresh look at Judge Sheeran’s
prior rulings. As discussed at length in Section II, Judge Sheeran’s order of default and dismissal
were appropriate under the circumstances of this case.
IV. ENFORCEMENT OF THE PARTIAL JUDGMENT
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Finally, defendants argue that the trial court erred in permitting execution and collection
activity on an interim partial judgment. They point to MCR 7.108(B)(1), which provides that an
execution may not take place until the time has expired for an appeal as of right and, because an
appeal of right may only be taken from a final judgment, execution may not take place on a
partial, interim judgment. We disagree.
Whether the trial court erred in allowing execution on the partial judgment is a question
of law that is reviewed de novo on appeal. Whitman v City of Burton, 493 Mich 303, 311; 831
NW2d 223 (2013). “Issues involving the interpretation of court rules are also reviewed de novo
as questions of law.” Id.This Court interprets court rules using the same principles that govern statutory
interpretation. In re Sanders, 495 Mich 394, 404; 852 NW2d 524 (2014). “When ascertaining
the meaning of a court rule, the reviewing court should focus first on the plain language of the
rule in question, and when the language of the rule is unambiguous, it must be enforced as
written.” Acorn Investment Co v Michigan Basic Property Ins Ass’n, 495 Mich 338, 350; 852
NW2d 22 (2014).
On June 11, 2013, Judge Sheeran entered an order for “Partial Judgment in Favor of
SRVan Brick & Stone, Inc.” The order provided:
This matter came before the Court upon SRVan Brick & Stone, Inc.’s
(“SRVan”) motion for attorneys’ fees and costs pursuant to the April 18, 2013
Order Granting in Part and Denying in Part the Renewed Motion for Default and
Dismissal, the Court having read the filings, heard oral argument, and otherwise
being full[y] advised in the premises,
IT IS HEREBY ORDERED that SRVan’s motion for a partial judgment
of attorneys’ fees and costs is granted in part and a partial judgment is entered in
favor of SRVan against Defendants William B. Hunt, WB Hunt Corp., and Bay
Block, LLC in the sum of $32,707.98, which is an award of $27,846.00 in
attorneys’ fees, $2,892.21 in fees for the time of Renee Van Poppelen, and
$1,969.77 in costs.
This Judgment does not resolve all pending claims and does not close the case.
SRVAN and Van Poppelen sought to execute on the judgment, citing MCR 2.614(A)(1),
which provides:
(1) Except as provided in this rule, execution may not issue on a judgment and
proceedings may not be taken for its enforcement until the expiration of 21 days
after its entry. If a motion for new trial, a motion for rehearing or reconsideration,
or a motion for other relief from judgment is filed and served within 21 days after
entry of the judgment or within further time the trial court has allowed for good
cause during that 21-day period, execution may not issue on the judgment and
proceedings may not be taken for its enforcement until the expiration of 21 days
after the entry of the order deciding the motion, unless otherwise ordered by the
court on motion for good cause.
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Defendants argue that MCR 2.614(D) is applicable, which provides that “Stay on appeal
is governed by MCR 7.101(H), 7.209, and 7.302(G).” Contrary to defendants’ assertions, MCR
7.101(H), which has been replaced with MCR 7.108(B)(1)6 does not apply to the case at bar
because subchapter MCR 7.101 et seq “govern appeals to the circuit court.” MCR 7.101(A).
The plain language of the rule precludes application in this case. Defendants cite Cavaliere v
DiLorenzo, unpublished opinion of the Court of Appeals, issued January 8, 2008 (Docket No.
271663), wherein this Court has previously applied the 7.100 series of the court rules to appeals
in this Court – “[p]ursuant to MCR 7.101(H)(1), ‘an execution may not issue and proceedings
may not be taken to enforce an order or judgment until the expiration of the time for taking an
appeal under subrule (B).’” Cavaliere¸ slip op p 6. Cavaliere is an unpublished decision and,
therefore, has no precedential value. MCR 7.215(C)(1). Moreover, upon closer examination, we
conclude that MCR 7.101(H)(1) applies only to appeals to the circuit court.
That leaves defendants with the only applicable rule cited in MCR 2.614(D) – MCR
7.209, which provides: “Except for an automatic stay pursuant to MCR 2.614(D), an appeal does
not stay the effect or enforceability of a judgment or order of a trial court unless the trial court or
the Court of Appeals otherwise orders.” MCR 7.209(A)(1). At the time of the motion, this
Court had not granted defendants’ application for leave to appeal. There were no orders staying
enforcement. As such, the trial court’s judgment awarding costs and fees was subject to
execution.
Affirmed.
/s/ Christopher M. Murray
/s/ Henry William Saad
/s/ Kirsten Frank Kelly
6
MCR 7.108(B)(1) provides: “Automatic Stay. Unless otherwise provided by rule, statute, or
court order, an execution may not issue and proceedings may not be taken to enforce an order or
judgment until expiration of the time for taking an appeal of right.”
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