A short summary:
A law firm that is a party to a lawsuit and entitled to attorney fees in case evaluation sanctions may be able to recover these attorney fees even if it represents itself. Before this ruling by the Michigan Court of Appeals in Fraser Trebilcock Davis & Dunlap, PC v. Boyce Trust 2350 et al., case law was clear that an attorney that represents himself cannot recover his own attorney fees, but the Court had not addressed whether a law firm that represents itself would be entitled to recover its own attorney fees. In making its ruling, the Court drew a distinction between an attorney that represents himself and a law firm that is represented by its attorneys. The Court further noted that the purpose of case evaluation sanctions to encourage litigants to settle their disputes and deter them from taking these disputes to court would still be accomplished by allowing a law firm to recover its own attorney fees.
This ruling seems like it might also be applicable to any case in which a law firm is a party to a contract and that contract contains a provision for attorney fees. If that was the case, a law firm that represented itself would be able to recover for the breach of contract and for its own attorney fees under the contract provision. However, it is unlikely that the court would find that a law firm was entitled to its own attorney fees under a provision for attorney fees in a contract. This is because the purpose of recovering attorney fees under the contract provision is to compensate the law firm for the costs incurred in representing itself and not to encourage the parties to settle or deter them from bringing disputes to court.
See below for a more in depth analysis:
On February 6, 2014, the Michigan Court of Appeals in Fraser Trebilcock Davis & Dunlap, PC v. Boyce Trust 2350 et al. affirmed the trial court’s decision awarding case evaluation sanctions to a law firm represented by its own attorneys in a fee dispute with a client (the Court, however, reversed and remanded the case in part for recalculation of case evaluation sanctions). The Court held that a law firm represented by its own attorneys is not a pro se litigant for purposes of entitlement to attorney fee sanctions under MCR 2.403(O).
The Plaintiff law firm represented the Boyce Trusts in transactions to purchase and redevelop four hydroelectric dams in the Midland County area. The Trusts appeared satisfied with the law firm’s services in these transactions and subsequently requested the law firm’s services in handling legal disputes that arose out of one of the transactions. The Trusts, however, were not happy with the results of this latter representation and ceased paying the attorney fees, leaving an outstanding balance of over $74,000.
The law firm then brought claims against the Trusts for breach of contract, account stated, and quantum meruit, and sought damages of $87,632.40. The case was evaluated at $60,000, but the Trusts rejected the evaluation and the case proceeded to trial. The trial court entered a judgment of $73,501.90. Since the Trust rejected the evaluation and did not do better at trial than offered through case evaluation, it was liable for case evaluation sanctions in addition to the $73,501.90 judgment.
On appeal, the Trusts argued that the law firm was not entitled to attorney fees for case evaluation sanctions because the law firm represented itself. The Trusts argued that the law firm did not incur attorney fees, and was not eligible to receive attorney fees as case evaluation sanctions, because MCR 2.403(O) does not authorize an award of attorney fees to a party that represents itself. The Trusts pointed to several cases in which individual attorneys were not granted statutory attorney fees where they represented themselves. The Court, however, rejected the Trusts’ argument for the following reasons that distinguish the present case from other cases in which individual attorneys have not been awarded statutory attorney fees:
First, the Court distinguished the purposes behind statutory awards of attorney fees. Some statutes awarded attorney fees to encourage a person to seek independent legal counsel while others awarded attorney fees for their deterrent effect. The court noted that the purpose of awarding case evaluation sanctions falls into this second category because the purpose is to encourage people to settle their claims and therefore deter them from taking these claims to trial. The court noted that where attorney fees are awarded for their deterrent effect, the deterrent effect is still maintained whether a person or entity represents itself or seeks outside counsel. Therefore, an award of attorney fees to a law firm that represents itself furthers the purpose behind awarding attorney fees in case evaluation sanctions.
Second, the court noted the distinction between an individual attorney representing him/herself and a law firm representing itself by its individual attorneys. Where an individual attorney represents him/herself, the Michigan Court of Appeals has disallowed attorney fees in case evaluation sanctions because of a belief that to allow litigant attorneys to recover compensation for time spent in their own behalf, while not extending such a rule to non-attorneys would most likely contribute to widespread public perception that the courts exist primarily for the benefit of the legal profession. Although the Court finds a similarity between attorneys that represent themselves and individuals that represent themselves, it refused to acknowledge this similarity in law firms that represent themselves. Instead, the Court pointed to a U.S. Supreme Court case that held “an organization is not comparable to a pro se litigant because the organization is always represented by counsel, whether in-house or pro bono, and thus, there is always an attorney-client relationship.”
For these reasons, the Court concluded that a law firm represented by its own attorneys is not a pro se litigant for purposes of entitlement to attorney fee sanctions under MCR 2.403(O).
The Court’s full Opinion can be accessed at the link below:
http://publicdocs.courts.mi.gov:81/OPINIONS/FINAL/COA/20140206_C302835_48_302835.OPN.PDF
Lisa Okasinski is licensed to practice law in California. If you have any questions, please contact the attorneys at Demorest Law Firm, PLLC.
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