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A Better Partnership
June 08, 2015

MSC says law firms represented by own lawyers cannot get case-evaluation sanctions

In Fraser Trebilcock Davis & Dunlap PC v. Boyce Trust 2350, Nos. 148931, 148932, & 148933, the Michigan Supreme Court held that a law firm which is a party to litigation may not recover case-evaluation sanctions under MCR 2.403(O)(6)(b) for the legal services performed by its own member lawyers.  The court found that to be considered “attorney fees,” there must be some agency relationship between the attorney and the represented client, with separate identities between the attorney and the client.  Because there was no indication that the member lawyers viewed or treated the firm as a client distinct from themselves, the firm was not entitled to recover this fee as part of a sanctions award.
Fraser Trebilcock Davis & Dunlap, PC is a Michigan law firm that provided legal services to the defendants, a group of trusts, in connection with the financing and purchase of four hydroelectric dams.  Dissatisfied with the representation they received, the defendants refused to pay Fraser Trebilcock.  The firm sued its former clients to recover the unpaid fees.  The matter was submitted to case evaluation, resulting in an evaluation of $60,000 in favor of the firm.  The former clients did not accept the evaluation.  The case proceeded to trial, and Fraser Trebilcock prevailed to the tune of $74,500. 
Fraser Trebilcock moved for case-evaluation sanctions, seeking to recover a reasonable attorney fee for the legal services provided by its member lawyers.  Throughout the case, Fraser Trebilcock was represented entirely by lawyers affiliated with the firm.  The firm did not retain outside counsel, and there is no indication that the firm entered into a retainer agreement with its member lawyers or paid a bill for their services in connection with the litigation. The trial court granted the firm’s motion for case-evaluation sanctions.  The defendants appealed and the Court of Appeals affirmed in all respects but one, reversing the trial court’s award of attorney fees to the firm for time spent pursuing its request for case-evaluation sanctions.    
The Michigan Supreme Court reversed the Court of Appeals in part and vacated the trial court’s case-evaluation-sanctions award.  Although the United States Supreme Court decision in Kay v. Ehrler, 499 US 432 (1991) has been relied on by some federal circuits to conclude that law firms represented by their own member lawyers may recover attorney fees for that representation, the Michigan Supreme Court found that proposition to be non-binding dictum. The Michigan Supreme Court held that because the requisite distinction in identity between plaintiff and its member lawyers was lacking, there was no attorney-client relationship from which an attorney fee could arise.

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