Tzvih Tinman v. Blue Cross and Blue Shield of Michigan

STATE OF MICHIGAN
COURT OF APPEALS
ILENE TINMAN and MICHAEL TINMAN, as UNPUBLISHED
next friends of TZVIH TINMAN, September 24, 2015
Plaintiffs-Appellees/Cross
Appellants,
v No. 322601
Wayne Circuit Court
BLUE CROSS AND BLUE SHIELD OF LC No. 99-932051-CK
MICHIGAN,
Defendant-Appellant/Cross
Appellee.
Before: K. F. KELLY, P.J., and CAVANAGH and SAAD, JJ.
PER CURIAM.
Defendant-appellant/cross appellee, Blue Cross and Blue Shield of Michigan (Blue Cross
or BCBSM), appeals as of right an opinion and order awarding $876,885 in attorney fees to
plaintiffs-appellees/cross appellants, Ilene Tinman and Michael Tinman, as next friends of Tzvih
Tinman (plaintiff). We affirm in part, reverse in part, and remand for further proceedings.
I. BASIC FACTS AND PROCEDURAL HISTORY
This attorney fee dispute arises from litigation in which plaintiff claimed that Blue Cross
improperly failed to pay hospital emergency bills that incurred for Tzvih’s medical care. Though
the issues that confront us on appeal are rather straight forward, the long history of this case is
not. In fact, this is the fourth time this case has been before this Court. See Tinman v Blue Cross
& Blue Shield of Mich, 264 Mich. App. 54; 692 NW2d 58 (2004) (Tinman I); Tinman v Blue
Cross & Blue Shield of Mich, unpublished opinion per curiam of the Court of Appeals, issued
February 14, 2008 (Docket No. 268448) (Tinman II); and Tinman v Blue Cross & Blue Shield of
Mich, unpublished opinion per curiam of the Court of Appeals, issued September 6, 2012
(Docket No. 298036) (Tinman III). Because the parties are familiar with the extensive history of
this case, we need not provide a detailed recitation of facts.
Plaintiff sued Blue Cross after Blue Cross refused to pay for Tzvih’s emergency room
visit, claiming that Blue Cross violated MCL 550.1418 by denying coverage based on Tzvih’s
“final diagnosis” as opposed to his presenting symptoms. Because plaintiff believed that Blue
Cross systematically denied coverage for emergency services on the basis of an insured’s final
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diagnosis, plaintiff brought suit on his behalf as well as other Blue Cross insureds. Blue Cross
then removed the case to federal court, where the federal court dismissed some of the ERISA
claims. The federal court declined to address the issue of whether plaintiff’s action was properly
brought as a class action. Tinman v Blue Cross & Blue Shield of Michigan, unpublished
memorandum opinion and order of the United States District Court, Eastern District of
Michigan, issued January 31, 2002 (Docket No. 00-CV-72327-DT). On remand to the Wayne
Circuit Court from the federal district court, former Judge Warfield Moore certified the class.
However, this Court reversed that order, finding that the individual questions of each plaintiff
predominated over the common questions presented. Tinman I, 264 Mich. App. at 564-656. On
remand from this Court to the Wayne Circuit Court, Judge Moore denied plaintiff’s attempt to
certify a class for declaratory and equitable relief, which this Court affirmed in Tinman II. In the
meantime, Judge Moore had granted plaintiff summary disposition. Plaintiff then sought
attorney fees of over $900,000. An incomplete evidentiary hearing was held and Judge Stempien
awarded plaintiff $655,000 in attorney fees and $2,440 in costs.
The matter then came to this Court for a third time in Tinman III. We found that the trial
court abused its discretion in refusing to complete the evidentiary hearing regarding attorney
fees. Tinman III, slip op, pp 4-7. We also concluded that the trial court’s analysis was
insufficient to justify the award or enable meaningful appellate review, pointing to the trial
court’s failure to make adequate findings regarding “the customary fee in the locality for each
attorney, the number of hours reasonably expended by each attorney on plaintiff’s individual
claim as opposed to their unsuccessful class-action claim, and the use of more than one attorney
on the same general tasks.” Id. at 7. The Tinman III Court ordered the trial court to, on remand,
“make more specific findings, consistent with Smith [v Khouri, 481 Mich. 519, 530-533; 751
NW2d 472 (2008)] and Augustine [v Allstate Ins Co, 292 Mich. App. 408; 807 NW2d 77 (2011)],
regarding [1] the customary fee in the locality for each attorney whose fees plaintiffs seek to
recover, [2] the reasonable number of hours expended by each attorney, and [3] the
reasonableness of having multiple attorneys working on the same general task.” Id. at 11.
Finally, the Tinman III Court addressed defendant’s claim that the trial court improperly
applied the “catalyst theory” to its fee award: “In assessing whether plaintiffs’ baseline attorney
fees were excessive in light of the size of the monetary judgment, the trial court abused its
discretion in considering defendant’s voluntary changes to its emergency-claims procedures.”
Id. at 11. Citing Buckhannon Bd and Care Home, Inc v West Virginia Dep’t of Health and
Human Resources, 532 U.S. 598; 121 S. Ct. 1835; 149 L. Ed. 2d 855 (2001), the Tinman III Court
concluded that “the results achieved should be considered in the context of the claim presented,
i.e., the substantive merits of the case, rather than a change in the defendant’s conduct that the
trial court did not order.” Id.
The case then returned to the trial court and Judge Stempien, where the court conducted
an exhaustive evidentiary hearing.
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John Zuccarini of the Simon firm testified that he was primarily responsible for keeping
track of the hours spent on the Tinman case and class action.1 Zuccarini had been practicing law
since 1988 and was an editor for the Wayne Law Review. Zuccarini explained that Simon was
the firm’s owner and decided which cases to take. Wassman and Young were the principal
attorneys who had primary responsibility for the Tinman case. The case was a collaborative
effort, meaning that the attorneys met and talked about trial strategy. As a general rule, they
would circulate complaints and briefs for review by other attorneys. Simon made it clear that all
attorneys should enter their time contemporaneously with the work performed. Zuccarini would
write his time on a piece of paper and have his secretary type it. For the Tinman case, there was
no monthly summary, but the case was reviewed on a quarterly basis. Zuccarini denied that
there was pressure to inflate the hours worked on the case.
Zuccarini testified to the extensive case history. There were 141 docket entries while the
case was in federal court. In state circuit court, the entries through July 2008 alone numbered
259. He believed that the over 400 docket entries “jived” with the complexity of the case, whose
file comprised several file cabinet drawers and 30 or more boxes. At least six different judges
participated in some way with the case. Contrary to defense counsel’s statement, Zuccarini
testified that a principle allegation in the Tinman case was that defendant had violated MCL
550.1418(1) by denying payment based on final diagnosis.
Zuccarini testified that, in drafting the complaint, a significant amount of time was spent
anticipating and preparing for possible defenses. In its answer, defendant denied withholding
benefits based on illegal criteria. Defendant did not admit that they based the denial on a final
diagnosis, specifically stating that “Blue Cross did not deny Plaintiff’s claim or any alleged class
claims on the basis of final diagnosis.” Even after the class was decertified, defendant never
admitted to wrongdoing. In light of these denials, Zuccarini believed that he had to show that the
allegations in the complaint were true – that defendant was “in fact systematically denying
claims on the basis of final diagnosis.”
Zuccarini testified to certain “smoking gun” documents that were discovered while the
case was in federal court. Defense counsel objected, arguing that “none of these documents are
relevant under the Court of Appeals opinion that decertified the class in 2004.” The trial court
noted: “Well I’m overruling it because it go[es] to the amount of work that may go, I don’t
know, I have to look at it, but that may go to the amount of work that was put into the case
whether it affects Tinman individually or not, I don’t know.”
Zuccarini testified that defendant’s internal documents indicated that while payment for
emergency care must be based on how a patient must be assessed at the time of treatment and not
based on final diagnosis, payouts were administered and based on an outdated and inadequate
benefit criteria in the Medical Emergency Diagnostic List (MEDL), which had the effect of
basing reimbursement on the final diagnosis, rather than signs and symptoms. If the diagnosis
on a claim was not on the MEDL, then the claim was rejected as a nonemergency. The
documents revealed that, when resubmitted, previously rejected claims were paid 88 percent of
1
Zuccarini stopped working at the Simon firm in 2012.
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the time. When manually reviewed, those claims were paid 99.6 percent of the time. This
resulted in a $22 million increase in payout to defendant’s customers. Zuccarini noted that,
although these documents were prepared before plaintiff’s claim was even rejected, defendant
continued to deny wrongdoing in plaintiff’s case. Zuccarini testified that defendant’s repeated
denials created additional work because the responses were inconsistent with defendant’s own
internal memos. And, while one memo indicated that coverage was triggered based on
presenting symptoms, the professional claims form did not include a field for presenting
symptoms.
Zuccarini did not believe the merits of the issue of liability were different for plaintiff
than the other class members and the firm was not seeking fees for time dedicated to the class
action. Only the Tinmans were interviewed; no other class plaintiffs were contacted. Zuccarini
was also seeking fees for time spent researching and preparing the original motion for attorney
fees.
Zuccarini testified to the contents of his February 6, 2008 Declaration, which set forth the
specific time spent on the case. The fee application was for 2,257.5 hours, which reflected
1,896.5 hours spent by the Simon firm and 361 spent by Lebenbom. With hourly fees ranging
from $250 to $495, the total request (without regard to hours spent seeking fees) was
$937,462.50. The Simon firm also sought $241,843.75 for 562 hours spent in connection with
the fee application.
Zuccarini spent considerable time at the evidentiary hearing defending the time spent,
which included: extensive pre-filing investigation, including researching potential preemption
defenses and ERISA; preparing interrogatories; general discovery, planning, and management;
numerous motions to compel; responding to defendant’s motions for protective order;
responding to discovery requests; reviewing, indexing, and analyzing over 50,000 pages of
documents; responding to privilege claims; responding to defendant’s attempts to keep the
records presented in the federal court under seal; preparing for and attending status conferences;
reacquainting themselves after matters were adjourned; drafting and responding to motions for
summary disposition; preparing motions for reconsideration; preparing a trial binder; and, time
spent in settlement negotiations.
Zuccarini acknowledged that there were times when multiple attorneys did the same
work. The firms had four attorneys and an associate, “so everybody pretty much knew what
everybody else was doing.” Plaintiff’s attorneys “were faced with basically a scorched-earth
defense in our view. It seemed that Blue Cross was throwing everything against the wall to see
what would stick and in order to do our job appropriately we had to respond to whatever it is that
they threw at us.”
Zuccarini testified that, in all, the firm put in 1,953.50 hours on the case from 1999 to
2005. “Individual time for the first couple of months of the case” totaled 170.25. There was a
computer change and then a “continuation of the non-discovery time attributed to litigation other
than the class from the time of the computer change until the end of 2005” totaled 812.5 hours.
Non-class discovery totaled 970.75. Zuccarini agreed that 57 hours should be excluded, bringing
the total to 1,896.50. He added:
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I would make the proviso that this was an inexact science, we were asked
to after-the-fact divide our time up between class and nonclass matters.
We certainly didn’t bill our time . . .from 1999 to 2005 thinking that that
was something we would have to do. So when we made the effort to divide our
time we did the best we could and we tried to be as conservative as possible.
So subject to that I think this is an accurate reflection of the time devoted
by Plaintiff’s counsel, counsel to the prosecution of Tinman’s individual claim.
Zuccarini testified that any fees incurred after 2005 were for the recovery of statutory
attorney fees. Through 2008, the Simon Firm had worked 641.25 hours for attorney fees and
expenses. A total of 1,012.75 hours were spent over eight years of fee litigation. He testified
that, if anything, the time was underestimated.
Zuccarini identified a 2006 survey of the top 250 firms reflected an average hourly rate of
$348 per hour. He also considered what the Simon firm charged its hourly clients from 1999-
2005. Simon billed $415 to $465 an hour; Zuccarini billed $395 to $440 an hour; Wassman and
Young each billed $395 an hour. Importantly, he also pointed to defendant’s billing records.
The Bodman firm, which represented defendant, had 32 attorneys work on the case for various
tasks. They billed 2,533.9 hours and the total amount was $493,720.05. There was also
defendant’s in-house counsel, who billed 1,250 hours. James Walsh, defendant’s lead counsel,
billed $410 an hour at the time. Zuccarini noted that his son was four when the litigation started
and had just graduated high school and “we still haven’t been paid a penny,” while defense
counsel was paid as fees were incurred. Plaintiff’s counsel also presented surveys from the State
Bar of Michigan Economics of Law Practice. The trial court considered the National Law
Journal because attorneys had done work nationally.
During cross-examination, Zuccarini acknowledged that the Simon firm often acted as
local co-counsel and that very few of their cases were ever tried. Defense counsel tried to
hammer home the fact that the Simon firm was a class action law firm with very few, if any,
non-contingency or fee-shifting clients. Zuccarini denied that the firm “padded” its time because
it knew it was going to be paid by the opponent. The firm was seeking fees for time spent before
Mrs. Tinman received the EOB as well as for investigating antitrust issues and ERISA
preemption even though those issues did not apply to Tinman. Zuccarini defended spending
140.25 hours to research and draft the complaint. He acknowledged some differences between
Wassman’s time and other attorneys, but suggested that the attorneys simply did not claim the
time or considered the time to be in pursuit of the class action. As defense counsel attacked the
billings line by line, the trial court noted that defendant did not provide a breakdown of each task
performed; it only supplied the total number of hours and the total amount billed.
The trial court questioned Zuccarini about the fact that defendant had changed the
manner in which it administered emergency benefit claims in an effort to comply with the law
and avoid further litigation.
Mark Bendure testified that he had been an attorney for 40 years and concentrated on
appellate work. He was a member of numerous state and federal bars. He has been recognized
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by Super Lawyers every year since 2007, was honored by Michigan Lawyers Weekly, and
Crain’s Detroit. Bendure had entered into a “blended hourly/contingent fee” with plaintiff for
his appellate work. It was originally a fixed amount of $8,000-$10,000 plus a percentage of any
recovery. The $350 an hour that Bendure used, therefore, did not reflect the actual agreement; it
was a reflection of what he believed to be a reasonable hourly rate. His hourly rate to other
clients was $300-$350 and he compared his rates to Walsh. He also consulted the Appellate
Practice Section Survey, which had an average rate of $250, as well as State Economics Survey.
Elwood Simon testified during earlier proceedings and the parties stipulated to admitting
his prior testimony. Simon nevertheless testified at the hearing. 2 His area of expertise was class
action litigation on complex matters. He defended the time spent investigating the case before
filing the complaint as an attempt to comply with the court rules that require an adequate
investigation in law and facts. Simon was “comfortable” to learn that there was a fee-shifting
provision in the statute that would allow him to collect attorney fees, even if a class action failed.
The Simon firm incurred substantial costs of over $60,000 but had been awarded a small
percentage – just over $4,000. Plaintiff’s counsel assured the trial court that he was not seeking
additional costs, but was simply trying to dispel defense counsel’s claim that there was a
windfall.3 Simon guessed that he had “written off” nearly 1,000 hours for class work.
Defense counsel objected when Simon testified that the firm learned about defendant’s
systemic claim denial by defendant after reviewing 50,000 pages of documents. The following
exchange took place:
MR. WALSH: Objection, your Honor, that’s completely irrelevant. The
Court of Appeals has ruled that this case is about Mr. Tinman’s claim and nothing
else.
THE COURT: Overruled, for the reason that he’s explaining what work
he had to do for Mr. Tinman. He[‘s] explaining work he had to do for Mr.
Tinman, also that he was doing for a class, that’s what I’m getting.
2
Defense counsel acknowledged that Simon kept meticulous time records and, therefore, defense
counsel did not doubt that Simon spent his time as accounted. However, defense counsel
challenged whether the hours claimed by the other attorneys (especially Wassman) were actually
spent doing what they did: “I’m challenging Wassman’s time.” “I don’t know about Mr.
Young, I want to see what he says.” In short, defense counsel made it clear that, aside from
Simon, he would be challenging whether the hours claimed were actually worked. The focus
was not necessarily on whether the amount of time claimed was reasonable but whether the time
records were accurate.
3
Plaintiff’s counsel appeared to change his position at a later hearing, arguing that the trial court
could revisit the matter of costs without contradicting Tinman III. But then during final
arguments he added: “They are out $55,000 in costs, as well as the costs of our firm. And we’re
not seeking recovery of that.”
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MR. BENDURE: That’s exactly where we’re going, your Honor.
THE COURT: That’s what I’m getting out of it.
MR. WALSH: For the record, your Honor, I’d like to state that the initial
Court of Appeal[‘]s opinion decertifying the class ruled that it was Mr. Tinman’s
signs and symptoms that were determinative of his recovery and nothing else.
Thank you.
Simon testified that the discovery process confirmed the existence of defendant’s declining
coverage on the basis of final diagnosis. It “allowed us to prevail in the Tinman case both in
terms of disproving the defenses that had been asserted by counsel and by establishing a very,
very extensive record to confirm that Blue Cross itself admitted and confirmed they were
violating the statute, and had violated the statute by their practice.”
Over objection, Simon testified that defendant had changed its policy as a result of the
litigation. “[I]t has always been our belief that the reason they made this change was because
they got caught, not because they voluntarily did it, although that may be true, they may have
voluntarily did it but nothing that we found in our examination of the documentation which was
referenced here indicates that it was anything other than a reaction to, among other things, this
litigation.” Simon testified that defendant had been saving $500,000 a month by rejecting
emergency visit claims. The documents revealed that changes were necessary “‘to avoid
challenges such as the one in the pending case.’” The documents specifically point to the class
action lawsuit based on diagnosis-related rejections.
Simon testified that they took a collaborative approach at the firm and, therefore, some
activities were conducted by more than one attorney at the office. Each attorney played a role.
Wassman was the lead attorney, Zuccarini’s strength was his writing, and Young’s strength was
his command of economics. Simon believed the case was particularly difficult because it was a
matter of first impression and “defendant was very staunch in its defense.” Work on the Tinman
case precluded the firm from taking other clients. Simon concluded: “Whatever the Court
awards in terms of reasonable fee, it will never be a windfall to us, number one, and all it will do
is to reduce the windfall that Blue Cross has benefited from not having to pay out the benefits
and retaining those benefits that were due under the law that they didn’t pay.” When defense
counsel tendered the $800 check in April 2005, there was no offer to satisfy the obligation to pay
attorney fees.
Lance Young testified that he worked for a steel company for two years after law school
before joining the Simon firm, where he worked for ten years before spending five years in
private practice and ultimately joining the Sommers Schwartz firm. Young testified that he no
longer had an economic interest in the outcome of the litigation.
Young testified that the Simon law firm kept accurate records, which were required by
the courts and co-counsel. He testified that he accurately reported the time spent on the Tinman
case. He denied being under any pressure to inflate his time. Zuccarini’s declaration accurately
reflected the time spent on the Tinman case and “if anything the numbers here are fairly light.”
Young remembered “30, 40, 50 boxes of physical documents in the hallway” containing 50,000
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pages of documents that the attorneys had to review. It was among those documents that they
unearthed evidence that defendant based its payment decision on final diagnosis instead of signs
and symptoms. In Young’s opinion, “Tzvih’s case was to prove that Blue Cross denied his claim
on the basis of final diagnosis.” “What we were going to prove for Tzvih Tinman as the name
class rep, had the case continued to be certified, would have proven the case for everybody else.
The fact that it was decertified is no detraction from the fact we still had to prove these basic
elements for Tzvih Tinman’s case.”
Young defended time claimed for general strategy, reviewing, indexing, and analyzing
documents, as well as working on privilege logs, motions, and brief writing. Contrary to his
colleagues, Young denied doing much pre-filing work on ERISA and was “surprised” when the
case was removed to federal court. But he also did quite a bit of researching into the meaning of
the term “final diagnosis.” Young’s hourly rate in 1995 was $250 to $300 an hour.
Attorney Michael Wassman lived in Pennsylvania and testified under subpoena. He was
a graduate of Hillsdale College and George Mason Law School. He specialized in corporate and
securities law and his first job was with the Simon firm in 1992.4 He described the Simon firm
as a “boutique specialty firm that focuses on commercial class action litigation,” securities
litigation, ERISA, and consumer protection. Nearly every case was a class action case. Most of
the time the cases were assigned to one or two attorneys. However, strategy was one area where
the firm did a lot of collaboration because invariably, the opposing side would have a team of
attorneys. Wassman was primarily responsible for litigating the Tinman case. The Tinman’s
family attorney, Stuart Lebenbom, approached the Simon firm with what Lebenbom thought was
a unique case – potentially the first case to apply the statute that prohibited denying coverage on
the basis of final diagnosis. The case involved researching the statute for precedent and also
determining whether this was a common practice. Wassman testified that not “skimping” on the
complaint was critical. He defended the time put into the pre-filing as well as time spent drafting
the complaint, noting that the complaint survived six years of litigation. He also defended the
amount of time spent on responding to motions, including defendant’s motions regarding sealing
records. Time was also spent on deciding whether to accept defendant’s settlement check and
whether to settle. Wassman admitted that a concern in accepting the check was the potential
waiver of fees.
Wassman believed that defendant systematically refused payment to its insureds. He
noted that defendant never admitted to refusing to pay emergency room claims on the basis of
final diagnosis “and from what I’m hearing today they still deny it.” Wassman explained that the
merits of Tinman’s individual claim jived with the class action and in order to prove Tinman’s
claim, they had to “prove what was happening behind the curtain.” Wassman believed efforts
taken on behalf of the class were compensable as a result of the common benefit it created for all
of defendant’s customers, regardless of whether the class was decertified.
Wassman felt ethically obligated to represent Tinman even if there was no class
certification. The decertification did not change the nature of the liability issue – “We still had to
4
He left the firm in 2005. He never had an equity interest in the firm.
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prove that his individual claim was denied based on final diagnosis.” Wassman did not consider
the fact that this was simply an $800 case – “I don’t leave my client out to dry because their
claim isn’t big enough. Wassman believed defendant attempted to confuse the issue by using
language such as preliminary diagnosis.
Wassman testified that he would often enter his time at the end of each day, but when he
was busy he would keep a note pad next to his computer and enter his time that way, allowing a
few days to go by. Wassman testified that his time was accurate and denied being encouraged to
inflate his time. He made sure that the time spent on the individual claim was separated from the
time spent on the class action. Wassman spent approximately 1,600 hours in class work and
1,223.75 hours for Tinman’s individual claim. He underestimated the individual claim and
overestimated the class work. Wassman also spent 213.5 hours on the fee application. He
admitted that Tinman’s claim did not involve ERISA. He also admitted to spending time seeking
to unseal records because “sealing the record is a way for defendant who did bad things to hide
from the public what they are doing” and “sunlight will make a defendant more willing to do
right. And that helps the plaintiff.”
When there were adjournments, it required preparing at least two times, which added to
the time. Discovery was also difficult because, in Wassman’s opinion, defendant wrongfully
withheld documents, necessitating various motions to compel and “hoops we were forced to
jump through.” Once the documents were presented, the attorneys confirmed defendant’s
internal analysis and concluded that it was violating the law. Wassman categorized defendant’s
position as “scorched earth,” meaning that nothing was produced unless a judge ordered it. Once
produced, there were over 50,000 documents. There was no attempt to organize the documents
and one key memo was shoved among 2, 000 other exhibits; had the attorneys at Simon not gone
through each page, the memo would not have been discovered. One document indicated that
payment was based on the outdated MEDL, which confirmed plaintiff’s suspicions that
defendant looked to the final diagnosis instead of the signs and symptoms. Even in the face of
these documents, defendant did not admit liability.
Wassman testified that it was not unheard of for him to work over 16 hours a day. If
there were discrepancies in time claimed for conferences, it was likely because Wassman was the
lead attorney and had discussion topics to prepare.
The court issued a written opinion on June 19, 2014. The trial court initially noted that
defendant “never presented any witnesses to rebut or otherwise dispute the testimony of
Plaintiff’s lawyers” and “never presented any witnesses, whatsoever, relying solely on cross
examination of the lawyers from Plaintiff’s firm, present and past.” The court also noted that
defendant “stipulated at the remand hearing that it was not challenging any fees or hours
submitted by Mr. Elwood Simon.”
The court took issue with this Court’s conclusion in Tinman III that defendant voluntarily
changed its emergency claims procedures: “Unrebutted and reliable evidence was presented at
the remand hearing which established that the description ‘voluntary’ is an incorrect conclusion
and the computer change, though not explicitly directed by a trial court order, was made by
BC/BS as a natural and direct result of the Tinman lawsuit.” The trial court concluded,
therefore, that “[t]he matter of a computer change was not, by any stretch of the imagination, a
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voluntary change. This Court finds as a matter of fact based on pleadings, the testimony of
witnesses, testifying that without this legal challenge, [defendant] would not have changed it’s
[sic] computer. The computer change was not voluntary, but a direct result of this lawsuit.”
Specifically, the trial court referred to defendant’s steadfast denials throughout the
litigation that plaintiff’s claims were rejected on the basis of a final diagnosis without
consideration of the presenting signs and symptoms. The court noted that defendant’s “form for
emergency services does not even have a field ‘presenting symptoms’ that a health provider
could utilize.” It was only after the second denial for certification that defendant tendered a
check and “even after [defendant] was confronted with its own internal documents evidencing
that payment was based on final diagnosis in violation of the law, [defendant’s] attorneys
continued to deny the fact in open court.”
The trial court then went on to address the manner in which to establish a reasonable
attorney fee. The court noted that Smith and its reference to the customary charges in the locality
for similar legal services was a plurality opinion and that it would focus primarily on the factors
set forth in Wood v DAIIE, 413 Mich. 573, 588; 321 NW2d 653 (1982). It noted the extensive
file, number of attorneys on both sides, and number of judges who worked on the case.
Extensive discovery was necessary because defendant consistently denied wrongdoing. As such,
“Tinman, individually, had to prove that [defendant’s answer to the complaint] was false before
he could recover any amount from [defendant]. It was only through the discovery process that
Tinman could ever obtain a summary disposition in his favor.” The court found credible
Wassman’s testimony that the Simon firm remained obligated to Tinman even after class
decertification and concluded that, as a matter of fact, “the discovery process was necessary to
prove Tinman’s individual claim,” which included 50,000 unsorted and unlabeled documents.
The court noted that “the key to the individual Tinman case was the discovery of the undisclosed
computer program. Absent that proof, Plaintiff Tinman could never have prevailed on the
summary disposition on the merits.”
The trial court separated Simon’s fees as “uncontested” in light of defense counsel’s
failure to challenge the hourly rate.
Addressing the Wood factors, the trial court found:
Wood Factor #1 – The professional standing and experience of the
attorney are highly experienced and respected.
Many of their clients whom are not contingent fee based, paid Mr. Simon
$480.00 per hour, Mr. Zuccarini $440.00 per hour, Mr. Wassman $395.00 per
hour, Mr. Maloche $210.00 per hour, Mr. Young $420.00 per hour as of 2005.
This Court’s Opinion of 2010 awarded less per hour than the firm billed six (6)
years prior to it’s [sic] opinion.
Wood Factor #2 – the skill, time and labor involved.
Each witness has testified regarding the intense labor required to unearth
the [defendant’s] Answer to the Complaint. As noted, the 50,000 documents
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reviewed were necessary to disern [sic] that the computer system automatically
violated Michigan law.
Wood Factor #3 - the amount in question and the results achieved.
This Court recognizes that the end result was a mere Eight Hundred
Eleven and 00/100 ($811.00) Dollars recovery for Tinman. Yet Tinman and his
lawyers were successfully granted summary judgment. The Appellate Court must
keep in mind that by BC/BS attorney’s own admission, BC/BS only paid Tinman
after it heard it would not have to pay any other wrongfully rejected emergency
room bills.
Wood Factor #4 - the difficulty of the case.
It is unquestionable to this trial Court that the Tinman case was very
difficult to prove.
Wood Factor #5 - the expenses incurred.
There were over Fifty Thousand and 00/100 ($50,000.00) Dollars in costs
and were absorbed by the Simon firm. The costs were necessary to prove
Tinman’s claim, let alone a class action. This was due to the intractable position
of [defendant] to the very end of the remand evidentiary hearing.
Wood Factor #6 - the nature and length of the professional relationship
with the client.
This factor is not particularly relevant in plaintiff cases. Most Plaintiffs are
only clients for a specific case. Rarely is a[n] individual repeatedly injured by
someone’s wrongful conduct. A client such as [defendant] would be a repeat
client because it is a very large entity whose need for an attorney would range
from claims by its many employees, construction claims, contract claims and
personal injury claims, to name a few.
The court then reviewed the factors of MRPC 1.5a:
1. The time and labor involved and the novelty of the question and skill
required to perform the legal services.
This case is and remains unique. An analysis of a disputed computer program
requires lawyering of the most sophisticated experience.
2. Likelihood that acceptance of the work would preclude other
employment.
Mr. Wassman and Mr. Zuccarini testified that their firm generally accepted only
10-12 new cases at any given time. They also testified that once the firm was
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retained it continued its representation of the individual to its conclusion. Tinman
was never abandoned in his pursuit of success on the merits.
Factors 3, 4, 5, 6 & 7 are duplicative of the Wood Factors, though
expressed with different terminology.
Factor 8 - whether fee is fixed or contingent.
This was a contingent fee. However, the statute required attorney fees for
a wrongful denial of an emergency room visit. It is obvious from all case law
from Wood to its progeny and the Rules of Professional Conduct, that at some
point an analysis of an attorney fee request can only be made by considering an
hourly fee.
The trial court also pointed out the massive number of hours billed by defense counsel. It
referenced the State Bar Study on the Economics of the Law, which showed that the Simon firm
was at the top 5 percent for its hourly rate. And that in 2007 the ABA Journal noted that the
largest law firms averaged $348 an hour. The court also considered that the Simon firm had not
been paid for nine years. The trial court set an award of $400 per hour. It pointed to the fact that
it had already eliminated duplicative tasks in its earlier opinion. It awarded a total of $655,000
in original attorney fees.
The court then addressed plaintiff’s “fees for fees” request. It found plaintiff’s position
persuasive and believed that it would be illogical to allow defense counsel to be paid for
defending a fee challenge and not allow plaintiff to do so as well. It awarded Simon and
Zuccarini $400 an hour at 466 hours for a total of $186,300. It further concluded that Bendure
was entitled to $350 an hour for his 94.7 hours spent for a total of $33,145. Thus the total fee
recovery was $219,445.
The trial court declined to award plaintiff’s request for fees or costs on appeal because
when the Court of Appeals remanded the case, it did not specifically assess costs or attorney fees
to either side.
Blue Cross now appeals as of right, arguing that the trial court failed to follow this
Court’s directives in Tinman III. Plaintiff cross appeals, arguing that it should have been
permitted to recover attorney fees for services rendered in response to Blue Cross’s prior appeal.
Therefore, the issues on appeal are straight forward – whether the trial court properly followed
this Court’s remand directive in ordering attorney fees, whether plaintiff is entitled to “fees for
fees” in pursuit of those fees, and whether plaintiff is entitled to attorney fees from a previous
appeal.
II. STANDARD OF REVIEW
An appellate court reviews for an abuse of discretion a trial court’s award of attorney fees
and costs. Smith, 481 Mich. at 519. “An abuse of discretion occurs when the trial court’s
decision is outside the range of reasonable and principled outcomes.” Id.
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Whether the law of the case applies is a question of law subject to de novo review. KBD
& Assoc, Inc v Great Lakes Foam Tech, Inc, 295 Mich. App. 666, 679; 816 NW2d 464 (2012).
Similarly, “[w]hether a trial court followed an appellate court’s ruling on remand is a question of
law that this Court reviews de novo.” Schumacher v Dep’t of Natural Resources, 275 Mich. App.
121, 127; 737 NW2d 782 (2007).
III. WHETHER THE TRIAL COURT COMPLIED WITH THIS COURT’S REMAND
ORDER
A. THE CATALYST THEORY
Blue Cross argues that Tinman III soundly rejected any attempt to use the catalyst theory
as a reason to justify attorney fees, having concluded that Blue Cross’s change to its emergency
claims policies was voluntary. However, Blue Cross argues, the trial court improperly revisited
the issue. We conclude that, while the trial court did spend a great deal of time taking this Court
to task for its alleged misinterpretation and application of Buckhannon, the trial court’s
discussion on the issue was largely irrelevant and did not form the basis for the trial court’s
ultimate fee award.
“On remand, a trial court is required to comply with a directive from an appellate court.”
Duncan v Michigan, 300 Mich. App. 176, 188; 832 NW2d 761 (2013). “The law of the case
doctrine holds that a ruling by an appellate court on a particular issue binds the appellate court
and all lower tribunals with respect to that issue.” KBD & Assoc, Inc v Great Lakes Foam Tech,
Inc, 295 Mich. App. 666, 679; 816 NW2d 464 (2012). Thus, “[t]he power of the lower court on
remand is to take such action as law and justice may require so long as it is not inconsistent with
the judgment of the appellate court.” Id. at 544 (internal quotation marks omitted). Under this
doctrine, the decision of an appellate court is controlling at all subsequent stages of litigation, so
long as it is unaffected by a higher court’s opinion. Duncan v State, 300 Mich. App. 176, 188-
189; 832 NW2d 761 (2013). “It is the duty of the lower court or tribunal, on remand, to comply
strictly with the mandate of the appellate court.” Rodriguez v Gen Motors Corp, 204 Mich. App.
509, 514; 516 NW2d 105 (1994).
While the law of the case doctrine precluded the trial court from revisiting the catalyst
theory on remand, there is no indication that the trial court used the catalyst theory previously
rejected in Tinman III as a basis for enhancing fees on remand. When discussing Wood factor 3
(results achieved), the trial court noted:
This Court recognizes that the end result was a mere Eight Hundred
Eleven and 00/ 100 ($811.00) Dollars recovery for Tinman. Yet Tinman and his
lawyers were successfully granted summary judgment. The Appellate Court must
keep in mind that by BC/BS attorney’s own admission, BC/BS only paid Tinman
after it heard it would not have to pay any other wrongfully rejected emergency
room bills.
The trial court was silent on whether plaintiff’s action resulted in a “common good.” The high
fee award was not the result of the trial court finding that plaintiff’s lawsuit was a catalyst to
changing defendant’s behavior; instead, the trial court allowed such fees because it ultimately
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blamed defendant’s tactics during the litigation, which necessitated extensive discovery and
excessive man hours. The trial court’s discussion on the proper interpretation of Buckhannon
notwithstanding, it does not appear that the trial court violated the law of the case in a technical
sense.
B. PLAINTIFF’S NEED TO DEMONSTRATE THAT BLUE CROSS DENIED THE CLAIM
BASED ON “FINAL DIAGNOSIS”
Blue Cross next argues that the trial court was operating under the misconception that this
case required plaintiff to prove that defendant denied Tinman’s emergency room claim on the
basis of his “final diagnosis.” It argues that the issue was much simpler – whether plaintiff
manifested signs and symptoms at the time he presented to the emergency room. We disagree.
Blue Cross points to this Court’s decision in Tinman I, as support for its assertion that
only plaintiff’s signs and symptoms were at issue. In Tinman I, the Court’s sole purpose was to
determine whether the trial court erred in denying defendant’s motion to decertify the class
action. The opinion focused on whether the individual questions of fact predominated over the
issue common to the class members. The Court specifically held:
Here, the trial court broadly framed a common question that merely
encompasses the legal claim in this case. As correctly asserted by defendant, a
highly individualized inquiry must take place to determine whether defendant
engaged in a reasonable investigation based on the available information before
denying a particular claim. In other words, whether a potential class member is
“entitled” to coverage for emergency health services depends at least in part on
whether the individual’s condition rose to the level described in MCL 550.1418.
In the context of plaintiff’s contention that defendant’s alleged violation of MCL
550.1418 also comprises a violation of MCL 550.1402, it must be determined
with respect to each claimant whether the claimant was provided emergency
health services “for medically necessary services” resulting from “the sudden
onset of a medical condition that manifest[ed] itself by signs and symptoms of
sufficient severity,” as well as whether any denial of payment was for emergency
health services up to or after the point of stabilization. The same inquiries apply in
regard to plaintiff’s assertion that defendant’s alleged violation of MCL 550.1418
also constitutes a breach of contract.
Rather than being subject to generalized proofs, the evidence of the type
of emergency health services and medically necessary services provided, the
medical conditions involved and whether they occurred suddenly, the signs and
symptoms that manifested those medical conditions, and whether payment was
denied for services up to the point of stabilization will all vary from claimant to
claimant. Thus, it is evident that to determine defendant’s liability, highly
individualized inquiries regarding the circumstances relevant to each claim clearly
predominate over the more broadly stated common question in this case. [Tinman
I, 264 Mich. App. at 5645-65.]
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Tinman I concluded that individual claims dominated, but it set forth no particular path in
how any one individual would prove his claim. Thus, contrary to Blue Cross’s assertions, the
Court in Tinman I did not hold that plaintiff merely had to show that he presented signs and
symptoms warranting emergency room symptoms; at the heart of the matter was Blue Cross’s
basis for denying payment for the emergency room services. Plaintiff had to demonstrate that
Blue Cross did not commit a “bona fide error” under MCL 550.1402(11). Although Tinman I
indicated that individualized inquiries dominated, it does not follow that plaintiff was relieved of
showing liability. As part of that undertaking, plaintiff set out to prove that Blue Cross
systematically denied coverage to its participants based on the final diagnostic code, which was a
direct violation of MCL 550.1418.
Zuccarini testified that a principle allegation in the Tinman case was that defendant had
violated MCL 550.1418(1) by denying payment based on final diagnosis. The following
exchange took place on direct examination:
Q. From an economic perspective would it make any sense as a lawyer to
commit the time and resources to a case for Tinman alone for $800 without the
statutory promise of a [“]shall be[“] attorney fee?
A. For Tinman alone unless there was a fee shifting provision like this it’s
unlikely a case that we would pursue.
Q. In terms of preparation before filing suit would it make sense to
commit those resources without having some idea of what the potential remedies
and recoveries might be?
A. It would not make sense to do that.
(Brief pause)
I’m not sure I answered your question correctly, but it would not make
sense to do that without having first determined what your rights and remedies
would be, that’s what I meant to say.
Q. And did you understand as your ethical obligations if you decided you
couldn’t make enough money on the case could you just abandon it and say, class
was decertified, sorry, Mr. Tinman, we’re abandoning you?
A. Ethically we could, I would, could not and would not do that.
In light of Blue Cross’s repeated denials that it failed to pay claims on the basis of a patient’s
final diagnosis, Zuccarini believed that he had to show that the allegations in the complaint were
true – that Blue Cross was “in fact systematically denying claims on the basis of final diagnosis.”
Zuccarini testified to certain “smoking gun” documents that were discovered while the
case was in federal court. Defense counsel objected, arguing that “none of these documents are
relevant under the Court of Appeals opinion that decertified the class in 2004.” The trial court
noted: “Well I’m overruling it because it go[es] to the amount of work that may go, I don’t
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know, I have to look at it, but that may go to the amount of work that was put into the case
whether it affects Tinman individually or not, I don’t know.” The following exchange took
place:
MR. WALSH [defense counsel]: It’s irrelevant under the legal standard
articulated by the Court of Appeals, but we can’t seem to disabuse Plaintiffs of
that. So they continue to assert that final diagnosis is critical and it’s not.
THE COURT: We’re not here about final diagnosis, we’re here about
attorney fees.
I’m not here to decide whether or not Blue Cross did or did not pay a bill
based upon a final diagnosis, that’s not my role here.
MR. WALSH: Well that’s what they’re making it, they’re making their
whole case hinge on that.
THE COURT: No, I’m understanding them – well what I’m getting, and
correct me if I’m wrong, I had assumed that you were presenting this as the
documents you used to get Tinman’s summary disposition granted by the state
court [in 2005].
MR. BENDURE [plaintiff’s counsel]: Exactly.
THE COURT: That’s what I understood this to be. And it doesn’t matter
if it was produced in, well you can argue that later, but I’m not understanding
your objection.
I’m not deciding whether they did final diagnosis or not. Apparently
Judge Moore decided that they did and granted summary disposition, and this
would’ve been used to get Judge Moore to make that decision; am I correct?
MR. BENDURE: Yes.
MR. WALSH: Your Honor, our position is this line of argument is we
had to spend hundreds and hundreds of hours in federal court to get these
documents. If they’re saying we’re not asking for recovery of the time spent in
federal court discovery I’ll sit down, but they’re not going to tell you that.
And it was relevant only to –
THE COURT: to what?
MR. WALSH: -- the class prior to its decertification and I think that –
MR. BENDURE: Obviously it was the basis for summary disposition of
the Tinman individual case, that’s not the case.
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THE COURT: That doesn’t make this document any less admissible.
Whether or not at this point in time I can’t tell whether it’s relevant, it may affect
its weight in making a decision, but it doesn’t make it any less admissible because
it is part of the record of the Wayne County Circuit Court.
Zuccarini testified that Blue Cross’s repeated denials created additional work because the
responses were inconsistent with Blue Cross’s own internal memos. And, while one memo
indicated that coverage was triggered based on presenting symptoms, the professional claims
form did not include a field for presenting symptoms.
Zuccarini did not believe the merits of the issue of liability were different for plaintiff
than the other class members and the firm was not seeking fees for time dedicated to the class
action. Only the Tinmans were interviewed; no other class plaintiffs were contacted.
Similarly, attorney Simon testified that the firm learned about a systemic denial by
defendant after reviewing 50,000 pages of documents. The following exchange took place:
MR. WALSH: Objection, your Honor, that’s completely irrelevant. The
Court of Appeals has ruled that this case is about Mr. Tinman’s claim and nothing
else.
THE COURT: Overruled, for the reason that he’s explaining what work
he had to do for Mr. Tinman. He[‘s] explaining work he had to do for Mr.
Tinman, also that he was doing for a class, that’s what I’m getting.
MR. BENDURE: That’s exactly where we’re going, your Honor.
THE COURT: That’s what I’m getting out of it.
MR. WALSH: For the record, your Honor, I’d like to state that the initial
Court of Appeal[‘]s opinion decertifying the class ruled that it was Mr. Tinman’s
signs and symptoms that were determinative of his recovery and nothing else.
Thank you.
Simon testified that the discovery process confirmed the existence of Blue Cross’s declining
coverage on the basis of final diagnosis. It “allowed us to prevail in the Tinman case both in
terms of disproving the defenses that had been asserted by counsel and by establishing a very,
very extensive record to confirm that Blue Cross itself admitted and confirmed they were
violating the statute, and had violated the statute by their practice.”
Young remembered “30, 40, 50 boxes of physical documents in the hallway” containing
50,000 pages of documents that the attorneys had to review. It was among those documents that
they unearthed evidence that defendant based its payment decision on final diagnosis instead of
signs and symptoms. In Young’s opinion, “Tzvih’s case was to prove that Blue Cross denied his
claim on the basis of final diagnosis.” “What we were going to prove for Tzvih Tinman as the
named class rep, had the case continued to be certified, would have proven the case for
everybody else. The fact that it was decertified is no detraction from the fact we still had to
prove these basic elements for Tzvih Tinman’s case.”
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Wassman believed that Blue Cross systematically refused payment to its insureds and a
bona fide error did not exist. He noted that Blue Cross never admitted to refusing to pay
emergency room claims on the basis of final diagnosis “and from what I’m hearing today they
still deny it.” Wassman explained how the merits of Tinman’s individual claim jived with the
class action:
Mr. Tinman’s individual claim was that his claim was rejected based on final
diagnosis. Because defendant denied that they were using final diagnosis in the
answer and they denied it in their responses to discovery requests the only way to
prove that this claim was denied based on final diagnosis was to look at the reject
code on his explanation of benefits.
To dig into Blue Cross’ computer systems, internal policies, internal
practices to figure out what that reject code actually meant to figure out how their
computer analyzed whatever claim data they had. And once we established what
they did internally then we could prove that his reject code was based on final
diagnosis.
To the extent we could prove that then class members could use that proof
for their own claims and say if they had the same reject code then they were
denied based on final diagnosis as well. So that’s the nature of an actual or
potential class action, which is if you prove the individual’s claim on the merits
you’ve proven at least a significant portion of the class members’ claims.
In order to prove Tinman’s claim, they had to “prove what was happening behind the curtain.”
Wassman believed efforts taken on behalf of the class were compensable as a result of the
common benefit it created for all of Blue Cross’s customers, regardless of whether the class was
decertified.
Wassman felt ethically obligated to represent Tinman even if there was no class
certification:
Not only from a legal ethics [standpoint] but just from a basic decency standpoint.
Once you accept representation of the client I believe it’s your obligation to
continue to represent that client to the end unless the client does something to
warrant severing the relationship. You’ve taken the client on. It’s your obligation
to see it through to the end. And it’s your obligation to represent them to the best
of your ability.
The decertification did not change the nature of the liability issue – “We still had to prove that
his individual claim was denied based on final diagnosis.” Wassman did not consider the fact
that this was simply an $800 case – “I don’t leave my client out to dry because their claim isn’t
big enough.”
That plaintiff’s undertaking would have potentially benefited the class does not undercut
the fact that the undertaking also benefited him by revealing the “smoking gun” documents
forming the basis for his successful motion for summary disposition. As such, the trial court on
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remand did not abuse its discretion in allowing plaintiff to recover fees for time spent proving
that defendant denied his individual claim on the basis of final diagnosis.
C. CUSTOMARY RATE AND REASONABLENESS OF HOURS CLAIMED
Finally, Blue Cross argues that the trial court failed to make adequate findings regarding
the customary local hourly rate of each attorney, the reasonableness of the hours claimed, and the
need for more than one attorney on the same task. Unfortunately, we have to agree that the trial
court failed to comply with the mandates of our Tinman III opinion.
In Tinman III, this Court clearly set forth the law regarding how attorney fees must be
calculated:
As discussed, the party requesting attorney fees bears the burden of
proving that the fees are reasonable. Smith, 481 Mich. at 528–529. “In Michigan,
the trial courts have been required to consider the totality of special circumstances
applicable to the case at hand.” Id. at 529. In Wood v Detroit Auto Inter–Ins Exch,
413 Mich. 573, 588; 321 NW2d 653 (1982), mod by Smith, 481 Mich. at 522, the
Michigan Supreme Court listed six factors relevant to computing reasonable
attorney fees:
(1) the professional standing and experience of the attorney; (2) the skill,
time and labor involved; (3) the amount in question and the results
achieved; (4) the difficulty of the case; (5) the expenses incurred; and (6)
the nature and length of the professional relationship with the client.
[Internal citation and quotation marks omitted.]
The Smith Court noted that the eight factors listed in MRPC 1.5(a), which overlap
the Wood factors, have also been used to determine reasonable attorney fees:
“(1) the time and labor required, the novelty and difficulty of the questions
involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the
particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers
performing the services; and
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(8) whether the fee is fixed or contingent.” [Smith, 481 Mich. at 530,
quoting MRPC 1.5(a).]
“In determining ‘the fee customarily charged in the locality for similar legal
services,’ the trial courts have routinely relied on data contained in surveys such
as the Economics of the Law Practice Surveys that are published by the State Bar
of Michigan.” Smith, 481 Mich. at 530.
The Smith Court held that some fine-tuning of the multifactor approach
was needed:
We hold that a trial court should begin its analysis by determining the fee
customarily charged in the locality for similar legal services, i.e., factor 3
under MRPC 1.5(a). In determining this number, the court should use
reliable surveys or other credible evidence of the legal market. This
number should be multiplied by the reasonable number of hours expended
in the case (factor 1 under MRPC 1.5[a] and factor 2 under Wood). The
number produced by this calculation should serve as the starting point for
calculating a reasonable attorney fee. We believe that having the trial court
consider these two factors first will lead to greater consistency in awards.
Thereafter, the court should consider the remaining Wood /MRPC factors
to determine whether an up or down adjustment is appropriate. And, in
order to aid appellate review, a trial court should briefly discuss its view of
the remaining factors. [Smith, 481 Mich. at 530–531.]
The Smith Court emphasized that the fee applicant bears the burden to produce
satisfactory evidence that the requested rates are reasonable, and it explained the
types of proofs needed to establish that the rates comport with those prevailing in
the locality for similar legal services. Id. at 531–532.
The fees customarily charged in the locality for similar legal services can
be established by testimony or empirical data found in surveys and other
reliable reports. But we caution that the fee applicant must present
something more than anecdotal statements to establish the customary fee
for the locality. Both the parties and the trial courts of this state should
avail themselves of the most relevant available data. For example, as noted
earlier, in this case defendant submitted an article from the Michigan Bar
Journal regarding the economic status of attorneys in Michigan. By
recognizing the importance of such data, we note that the State Bar of
Michigan, as well as other private entities, can provide a valuable service
by regularly publishing studies on the prevailing market rates for legal
services in this state. We also note that the benefit of such studies would
be magnified by more specific data relevant to variations in locality,
experience, and practice area. [Id. at 531–532.]
“[R]easonable fees are different from the fees paid to the top lawyers by the most
well-to-do clients.” Id. at 533.
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Next, the Smith Court explained that the “court must determine the
reasonable number of hours expended by each attorney.” Smith, 481 Mich. at 532.
The fee applicant is required to “submit detailed billing records, which the court
must examine and opposing parties may contest for reasonableness. The fee
applicant bears the burden of supporting its claimed hours with evidentiary
support.” Id. The reasonable hourly rate must be multiplied by the reasonable
hours billed to produce a baseline figure. Id. at 533. The court should then
“consider the other factors and determine whether they support an increase or
decrease in the base number.” Id. If multiple attorneys expended hours on a case,
the trial court “should be careful to perform a separate analysis with reference to
[each attorney] ..., considering both the hourly rates and the number of hours
reasonably expended....” Id. at 534. A court should also consider whether it was
reasonable to have multiple lawyers “on the clock” during the case. Id.
In Augustine, 292 Mich App at 413, 439, this Court vacated an award of
attorney fees and remanded for rehearing and redetermination because, among
other reasons, the trial court did not properly apply Smith. The trial court “did not
comply with the first step in the Smith analysis, which is to determine the fee
customarily charged in the locality for similar legal services. Though the trial
court discussed the evidence presented regarding the fee customarily charged in
the locality for similar legal services, it did not conclude that $500 an hour was
the fee customarily charged.” Id. at 426. “[T]he trial court apparently failed to
credit the Michigan Bar Journal in its calculus of the appropriate hourly rate. The
Michigan Bar Journal article not only ranks fees by percentile, it differentiates fee
rates based on locality, years of practice, and fields of practice.” Id. at 427.
Although the trial court in Augustine found that $500 was a reasonable fee, it “did
not find that $500 per hour was the fee customarily charged in the locality for
similar legal services .” Id. at 427–428 (emphasis in original). Further, after
multiplying the $500–an–hour rate by the number of hours reasonably expended,
the trial court failed to determine “whether an upward or downward adjustment
was appropriate on the basis of the Wood and MRPC 1.5(a) factors as our
Supreme Court discussed in Smith....” Augustine, 292 Mich. App. at 428.
In addition, the Augustine Court concluded that “[n]ot only did the trial
court fail to make specific findings consistent with Smith generally, but it also
failed to make findings regarding each attorney whose fees plaintiff sought to
recover.” Id. at 428. This Court “direct[ed] the trial court to make specific
findings, consistent with Smith, for each attorney whose fees plaintiff sought to
recover.” Id. at 439. This Court also found deficiencies in the trial court’s finding
regarding the number of hours expended, because of the meager state of the
record. Id. at 434. [Tinman III, at slip op, pp 6-9.]
The Tinman III Court found the trial court’s initial findings insufficient to allow for
appellate review regarding fees customarily charged:
Here, the trial court failed to make adequate findings to aid appellate
review, as required by Smith and Augustine. The trial court listed the Wood
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factors and then correctly cited Smith for the proposition that “[t]he first
determination to be made is what the customarily charge [sic] fee is in the locality
for similar legal services.” However, as in Augustine, the trial court failed to state
any findings regarding the customarily charged fee in the locality for similar legal
services. Instead, the court merely stated, in conclusory fashion: “After
considering all of the evidence in this case, a reasonable fee for attorneys Simon,
Zuccarini, Wassmann and Young is $400 per hour. The remaining attorneys shall
be entitled to the fees requested.” The trial court did not state any findings
regarding the fees customarily charged in the community for similar legal services
or indicate that the fees awarded represented the customary fees. The trial court
also failed to cite any evidence to establish the customary fee for the locality, such
as “testimony or empirical data found in surveys and other reliable reports.”
Smith, 481 Mich. at 531–532. Mere anecdotal statements are insufficient. Id. at
532. In addition, the trial court did not explain why it was awarding the same
hourly rate of $400 for Simon and three of the attorneys in his firm, given their
differing levels of experience. We direct the trial court on remand to make
specific findings consistent with Smith and Augustine regarding the customary fee
in the locality for each attorney whose fees plaintiffs seek to recover. [Tinman III,
slip op, pp 9-10.]
However, the trial court did not correct this problem. On remand, the trial court noted:
The Appellate Court references the State Bar Study on the Economics of
the Law. Even though somewhat outdated, the Simon firm is in the top 5% of
practitioners per its hourly rate as of 2005. The fact that they have remained
unpaid is a consideration. There is no provision in the law for penalty interest on
the fees, such as in no-fault cases. Thus an award of Four Hundred and 00/100
($400.00) per hour is not unreasonable given the fact that the law firm has
remained unpaid for 9 years.
The trial court failed to follow Tinman III’s directive that it “make specific findings consistent
with Smith and Augustine regarding the customary fee in the locality for each attorney whose
fees plaintiffs seek to recover.” Tinman III, slip op, p 10. In no way did it set forth the
customary fee. Once again it stated in a conclusory fashion that $400 was a reasonable hourly
rate. In fact, the trial court on remand undertook its own independent analysis of Smith, finding
persuasive the concurring and dissenting opinions in that case. To the extent the trial court
refused to establish the customary fee in the locality, it violated this Court’s directive as well as
the law of the case doctrine.
Tinman III also addressed the number of reasonable hours expended on the case. We
noted:
The trial court’s analysis regarding the number of hours expended was
also insufficient to aid appellate review. The trial court stated:
BCBSM argues that Plaintiff’s request includes time spent pursuing the
class action. Plaintiff has already reduced the request for attorney fees by
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the number of hours attributable to the [unsuccessful] class action lawsuit.
It is difficult for the attorneys and the court to allocate the remainder of the
fees to either the individual claim or the class action claim. For example,
because BCBSM utilized an automated procedure for handling all
emergency claims, the discovery sought by Plaintiff related to both
BCBSM’s handling of Plaintiff’s individual emergency claims and
BCBSM’s handling of all other claims. The fact that the evidence
necessary to prove Plaintiff’s individual claims was the same evidence
necessary to prove other claims does not change the fact that the discovery
Plaintiff conducted supported Plaintiff’s individual claim. For that reason,
where the attorney fees can reasonably be associated with the individual
claim, they will be awarded.
The trial court further indicated that it had reduced plaintiffs’ requested fee by
309 hours for excessive time on various tasks, including attendance at and
preparation for motions, drafting pleadings and orders, preparation of a trial
outline, book, and exhibits when no trial was scheduled, and attorney conferences.
The court also stated that Lebenbom’s fee request was “significantly reduced”
because of a lack of detail in his request, but the court offered no further
explanation regarding the reduction. The court then stated that plaintiffs were
awarded $655,000 in attorney fees but did not explain precisely how it reached
that figure.
We conclude that the trial court did not explain adequately how the hours
for which it was awarding a fee were reasonably expended in pursuit of plaintiffs’
individual claim. Again, “[th]e fee applicant bears the burden of supporting its
claimed hours with evidentiary support.” Smith, 481 Mich. at 532. Defendant was
entitled to contest the reasonableness of the hours submitted. Id. As discussed
above, defendant was deprived of a fair opportunity to contest the hours expended
because the trial court erroneously refused to complete the evidentiary hearing.
Further, the trial court did not explain why the substantial time devoted to
discovery efforts in federal court were reasonably necessary to establish plaintiffs’
individual claim as opposed to the unsuccessful class-action claim. Given that
plaintiffs bore the burden of providing evidentiary support for their claimed hours,
it was not sufficient for the trial court to state that plaintiffs had already reduced
the request by the number of hours attributable to the class-action effort or to state
that it was “difficult for the attorneys and the court to allocate the remainder of
the fees to either the individual claim or the class action claim.” Although the trial
court later indicated that it had awarded fees where they were “reasonably
associated with the individual claim,” and that the evidence necessary to prove the
individual claims was necessary to prove other claims, the court’s explanation for
this conclusion did not suffice to aid meaningful appellate review.
Finally, the trial court failed to explain adequately why it was reasonable
for plaintiffs to have multiple lawyers “on the clock” in this case. The court stated
that the use of more than one lawyer on the same general task is not necessarily
excessive, that effective preparation often involves collaboration, and that “[i]n
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several instances, the court deems reasonable the use of more than one attorney in
this case.” The court stated that it reduced the number of hours to a more
reasonable figure when deemed excessive. The court offered no specific findings
explaining on what grounds it had concluded that multiple attorneys were
required to perform specific tasks. The trial court should address this issue more
fully on remand. [Tinman III, slip op, pp 10-11.]
Once again, the trial court failed to correct this issue on remand. While we agree with the
trial court that the mere fact that many of the efforts that plaintiff undertook to prove his
individual assertion (that Blue Cross rejected claims based on final diagnosis) would have also
benefited the class does not compel a finding that those efforts were somehow overdone.
Plaintiff’s attorneys should be compensated for that time, as previously discussed. However, the
trial court failed to provide a more detailed explanation for its award. Once again the trial court
simply indicated that it had substantially reduced plaintiff’s previous fee request by eliminating
class action efforts. So, while plaintiff was entitled to fees that were incurred in proving his case,
the trial court failed to specifically set forth which of the fees requested were incurred as a result
of the individual suit and why or how those fees were reasonable. Again, the trial court’s
statements are conclusory. For example, regarding duplicative efforts, the trial court noted that
“anyone who ever worked in a law firm acknowledges that the firm attorneys discuss cases, as
would be in any firm whose client is their paramount concern. A different analysis of this
phenomenon would be to ignore the fact that most attorneys take their oath of office seriously.”
Much of the evidentiary hearing was focused on efforts that plaintiff’s attorneys claimed were
for the benefit of plaintiff’s individual claim, but may have been more related to the federal class
action, such as investigation of ERISA claims, time spent preventing defendant’s motion to seal
the record, etc. The trial court did not address any of these individual issues.
It is clear that this case must return to the trial court for another visit. However, we are of
the opinion that there is no need to conduct additional hearings on remand. The trial court may
take the vast testimony from prior evidentiary hearings to craft more detailed findings. We,
therefore, leave it to the trial court’s sole discretion whether to accept additional evidence and
testimony on remand.
IV. FEES FOR FEES
Blue Cross next argues that the trial court abused its discretion in awarding “fees for
fees” because they were not recoverable under MCL 550.1402(11). The fees were incurred, not
as a result of maintaining the lawsuit itself, but as a result of post-judgment proceedings and
were not related to the merits of the case. We agree.
On remand, the trial court made the following decision:
At closing arguments, [defendant] suggested that attorney fees for
pursuing the attorney fee request is not compensable. Cases involving 42 USC
1988 have allowed recovery for time spent litigating fees. See Weigant v. Okst.
198 Fd 3rd 311 (2nd Cir. 1992) [sic Weyant v Okst, 198 F3d 311 (CA 2 1999)] as
well as our own federal bench in Weisenburger v. Huecker, 593 F2d 49 (6th Cir.
1979). Michigan unpublished law regarding fee awards other than PA 350 have
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upheld the award of fees for the request, Summers v. Summers, Court of Appeals
#309086 (10/11/12) and Johnson v. Johnson, Court of Appeals #266026
(3/271/7).
There is no published court of appeals opinion precisely on this point. This
court finds that Tinman’s argument is persuasive. In order to accept [defendant’s]
argument, [defendant] would be compensated for the 15 days of testimony on
attorney fees, but not the Plaintiffs. This is particularly illogical in light of the fact
that [defendant] presented no evidence or witness[es] to rebut anything Plaintiff’s
attorneys stated. [The United States] Supreme Court held that even recovery of a
nominal amount of damages is a prevailing party. The court finds, as a matter of
unrebutted fact, that Mr. Simon spent 137.5 hours, Mr. Zuccarini spent 328.5
hours and Mr. Bendure (counsel representing the Simon law firm) spent 94.70
hours on fee recovery.
Mr. Wassman, Young and Yert testified either voluntarily or through
subpoena. No evidence was ever introduced regarding their participation in the
fee recovery aspect of this case. For Mr. Simon and Mr. Zuccarini this Court
awards a fee of One Hundred Eighty-six Thousand Three Hundred and 00/100
($186,300.00) Dollars. Mr. Mark Bendure submitted time of 94.7 hours as
attorney fees for the Simon firm, limited to remand representation.
After discussing Bendure’s qualifications, the trial court determined that his $350 an hour rate
was within the State Economics Survey and awarded him $33,145.00 for the remand evidentiary
hearing.
We conclude that the “fees for fees” issue has been waived, at least as applied to fees
incurred by plaintiff’s attorneys prior to the Tinman III decision. The trial court did not award
such fees in its 2010 order. Although defendant appealed from that order, plaintiff did not file a
cross appeal. As a result, this Court’s decision in Tinman III is silent on the issue of “fees for
fees.” Although an appellate court may not have specifically addressed an issue in a prior
appeal, the law of the case doctrine acts to preclude relitigation of questions “necessarily
suggested” by the court’s ruling. City of Marysville v Pate, Hirn & Bogue, Inc, 196 Mich. App.
32, 35; 492 NW2d 481 (1992). Therefore, the doctrine applies to “those questions necessary to
the court’s prior determination.” City of Kalamazoo v Dep’t of Corrections (After Remand), 229
Mich. App. 132, 135; 580 NW2d 475 (1998). This is in keeping with the “primary purpose” of
the law of the case doctrine, which “is to maintain consistency and avoid reconsideration of
matters once decided during the course of a single lawsuit.” Id. Thus, for the doctrine to apply,
it is enough that the prior ruling implicitly decide an issue. “The doctrine applies to questions
specifically decided in an earlier decision and to questions necessarily determined to arrive at
that decision.” Webb v Smith, 224 Mich. App. 203, 209; 568 NW2d 378 (1997) lv den 459 Mich.
862 (1998). Tinman III was silent on the issue because plaintiff never made it an issue by
appealing from the trial court’s previous order that failed to award such fees. Allowing plaintiff
to pursue “fees for fees” would make for the type of piecemeal litigation that the law of the case
doctrine seeks to avoid.
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However, while plaintiff’s attorney “fees for fees” were waived prior to this Court’s
decision in Tinman III, the same may not be true regarding the fees incurred on remand. “The
power of the lower court on remand is to take such action as law and justice may require so long
as it is not inconsistent with the judgment of the appellate court.” Sokel v Nickoli, 356 Mich. 460,
464; 97 NW2d 1 (1959). Therefore, the trial court was within its right to determine whether
plaintiff was entitled to the collection costs for proceedings that took place after Tinman III.
Nevertheless, the trial court did not set forth an adequate legal justification for its award.
The trial court cited two unpublished Michigan cases in support of its “fees for fees”
award. Unpublished opinions are not precedentially binding. MCR 7.215(C). Moreover, the
cases themselves are not helpful. In the divorce case Summer v Summers, unpublished opinion
per curiam of the Court of Appeals, issued October 11, 2012 (Docket No. 309086), the wife’s
attorney sought attorney fees for the time spent having to seek attorney fees. The attorney noted
that he had called opposing counsel and wrote several letters trying to resolve the matter but
received a response on the eve of the evidentiary hearing. In the meantime, the attorney had
already researched and contacted an expert to establish his hourly rate and also retained counsel
to represent him at the hearing because he knew he would have to testify. Id. at p 5. After
determining that the fees incurred by the wife were the result of the defendant’s behavior, the
trial court ordered the husband to pay her reasonable attorney fees. Id. at 6. This case is not
helpful because it was decided under MCL 552.13, which permits a trial court to order a party to
“pay any sums necessary to enable the adverse party to carry on or defend the action, during its
pendency,” and MCR 3.206(C), which permits the trial court to order a party to pay attorney fees
in a domestic relations action, including post-judgment proceedings, if (1) the party requesting
the fees is unable to bear the expense and the opposing party has the ability to pay, or (2) the fees
were incurred because of the opposing party’s refusal to comply with a previous court order. In
contrast, MCL 550.1402(11) provides: “If successful on the merits, the member shall be
awarded actual monetary damages or $200.00, whichever is greater, together with reasonable
attorneys’ fees.” It is silent as to post-judgment proceedings. Therefore, it would appear that the
statute focuses on awarding attorney fees to the extent those fees are incurred in pursuit of the
merits of the case.
Johnson v Johnson, unpublished opinion per curiam of the Court of Appeals, issued
March 27, 2007 (Docket No. 266026), is similarly unavailing. The primary issue in that case
was whether the trial court had complied with this Court’s remand order in determining that a
wife’s fees incurred on remand constituted appellate fees. This Court had specifically ordered
the husband to pay the wife’s appellate fees and the issue was whether the proceedings on
remand were properly categorized as “appellate proceedings.” This Court found that the trial
court did not abuse its discretion in finding that the fees incurred on remand following the Court
of Appeals order were appellate fees. Id. at 1-4. It concluded that the trial court’s award for fees
incurred on the original remand were fees “associated with this case” and, therefore, proper. Id.
at 3-4. Once again, however, this was a divorce case, which is different from the case at bar.
Whereas “[a] trial court may order one party to a divorce to pay the other party’s reasonable
attorney fees and litigation costs if the record supports a finding that financial assistance is
necessary because the other party is unable to bear the expense of the action.” Olson v Olson,
256 Mich. App. 619, 635; 671 NW2d 64 (2003), MCL 550.1402(11) provides: “If successful on
the merits, the member shall be awarded actual monetary damages or $200.00, whichever is
greater, together with reasonable attorneys’ fees.” It is silent as to post-judgment proceedings
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and the parties’ relative ability to pay. MCL 550.1402(11) permits fees to the extent those fees
are incurred in pursuit of the merits of the case.
While plaintiff is entitled to attorney fees incurred in pursuit of the merits of his case, the
merits do not encompass fees for fees. The trial court cited 42 USC § 1988, which provides:
In any action or proceeding to enforce a provision of sections 1981, 1981a, 1982,
1983, 1985, and 1986 of this title, title IX of Public Law 92-318 [20 U.S.C.A. §
1681 et seq.], the Religious Freedom Restoration Act of 1993 [42 U.S.C.A. §
2000bb et seq.], the Religious Land Use and Institutionalized Persons Act of 2000
[42 U.S.C.A. § 2000cc et seq.], title VI of the Civil Rights Act of 1964 [42
U.S.C.A. § 2000d et seq.], or section 13981 of this title, the court, in its discretion,
may allow the prevailing party, other than the United States, a reasonable
attorney’s fee as part of the costs . . .[42 USC § 1988(b).]
In Weyant, the Second Circuit reiterated that a citizen must have the opportunity to
recover the costs of vindicating a civil right in court and that “[a] culpable defendant should not
be allowed to cause the erosion of fees awarded to the plaintiff for time spent in obtaining the
favorable judgment by requiring additional time to be spent thereafter without compensation.
Thus, a reasonable fee should be awarded for opposing the culpable defendant’s unsuccessful
postjudgment motions,” including fees for time reasonably spent in preparing and defending an
application for § 1988 fees.” Weyant, 198 F 3d at 316.
Similarly, in Weisenburger, the Sixth Circuit determined that the time spent in pursing
fees was compensable:
When Congress passed the Act its basic purpose was to encourage the private
prosecution of civil rights suits through the transfer of the costs of litigation to
those who infringe upon basic civil rights. If a successful party in a civil rights
suit is awarded attorney’s fees under the Act and he cannot secure attorney’s fees
for legal services needed to defend the award on appeal, the underlying
Congressional purpose for the Act would be frustrated. We conclude that
implementation of Congressional policy requires the awarding of attorney’s fees
for time spent pursuing attorney’s fees in the cases presently under review.
[Weisenberger, 593 F2d at 53-54 (CA 6 1979).]
Unlike vindicating a citizen’s civil rights, however, an action such as the case at bar is not one of
such societal interest that plaintiff should be entitled to fees for fees. Therefore, the fee shifting
found in § 1988 is not exactly on par with MCL 550.1402(11). And, especially given the fact
that the issue was previously waived and the fact that the law upon which the trial court relied
was not on point, the trial court abused its discretion in awarding plaintiff fees spent defending
their fee application.
IV. APPELLATE FEES
On cross-appeal, plaintiff argues that the trial court abused its discretion in failing to
award appellate fees. We disagree.
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At the hearing after Tinman III, defense counsel objected to when plaintiff’s appellate
attorney, Mark Bendure, attempted to testify because there was no basis in law for fees spent
defending the appeal. The trial court agreed:
Generally, the Court of Appeals assesses costs, not specific costs, but says
that costs are awarded and then it remands it back to the Circuit Court for a
hearing on the matter as to costs.
In this instance, the Court of Appeals did not assess costs and fees,
attorney fees, against anyone on either side. But I’m not going to create an
appellate issue by not taking this testimony. We will take this testimony and then
you can appropriately address the matter in a brief as to whether or not this
section of the testimony is relevant to what we’re here for today.
Ultimately, the trial court ruled:
Lastly remains the Appellate costs of Tinman. The Court of Appeals remanded
the case; it did not assess costs or attorney fees to either side. Therefore, until so
ordered by the Michigan Court of Appeals, the trial court does not consider
attorney fees or costs on appeal.
Though not directly on point, the Supreme Court’s decision in Haliw v City of Sterling
Hts, 471 Mich. 700, 702; 691 NW2d 753 (2005) is instructive. In Haliw, the Court was asked to
decide whether appellate attorney fees and costs were recoverable as case evaluation sanctions
under MCR 2.403(O). In so doing, the Supreme Court rejected the Court of Appeals’ theory
that, because the court rule did not specifically exclude appellate attorney fees, it must have
necessarily included them as a part of a case evaluation sanction. Id. at 706. The Court noted,
under the “American rule,” attorney fees and costs are generally not recoverable in the absence
of an exception set forth in a statute or court rule expressly authorizing such an award. Id. at 707.
And because MCR 2.403 expressly authorizes recovery of “a reasonable attorney fee” and
“costs,” but does not expressly authorize appellate attorney fees and costs, the American rule
mandates that appellate fees and costs not be read into the court rule. Id. The Court further
added that MCR 2.403(O) is “trial-oriented” and there is no mention of the appellate process in
the rule. Id. at 707–708. In a footnote, the Court added that “[w]hile a causal nexus plainly
exists between rejection and trial fees and costs, the same cannot be said with respect to rejection
and the decision to bring an appeal. Rather, appellate attorney fees and costs are arguably
‘necessitated by’ a perceived erroneous trial court ruling.” Id. at 711 n. 8.
Although Haliw addressed MCR 2.403, we note MCL 550.1402(11) has similar
language: “If successful on the merits, the member shall be awarded actual monetary damages
or $200.00, whichever is greater, together with reasonable attorneys’ fees.” The language in
both MCR 2.403 and MCL 550.1402(11) is the same to the extent that they each allow for
recovery of “reasonable attorney fees.” Both are silent as to post-judgment proceedings. As
noted in Haliw, an appeal is brought when a party perceives the trial court to have made an
erroneous ruling. Because this Court in Tinman III did not provide for an award of appellate
attorney fees and costs and because MCL 550.1402(100) focuses on awarding attorney fees to
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the extent those fees are incurred in pursuit of the merits of the case, the trial court did not abuse
its discretion in denying plaintiff’s request for appellate attorney fees.
Affirmed in part, reversed in part, and remanded for further proceedings. We do not
retain jurisdiction.
/s/ Kirsten Frank Kelly
/s/ Mark J. Cavanagh
/s/ Henry William Saad
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