Opinion
No. 335856
10-10-2017
DREW COOPER & ANDING, PC, Plaintiff-Appellee, v. OLDNAR CORPORATION, d/b/a NARTRON, and UUSI, LLC, d/b/a NARTRON, Defendants-Appellants.
UNPUBLISHED Osceola Circuit Court
LC No. 13-013683-CK Before: MURRAY, P.J., and SAWYER and MARKEY, JJ. PER CURIAM.
Defendant Oldnar Corporation, doing business as Nartron, and defendant UUSI, LLC, also doing business as Nartron, collectively referred to as Nartron or defendant, appeal by right the judgment entered on summary disposition against them on plaintiff's contract claim for attorney fees. The trial court granted summary disposition to plaintiff under MCR 2.116(C)(10), and dismissed defendant's affirmative defenses under MCR 2.116(C)(7) and (C)(10). The judgment entered November 7, 2016 only against defendant ("UUSI, LLC, d/b/a Nartron"). Defendant now appeals by right. We affirm.
The judgment was entered only against UUSI, LLC, whose sole member, Norman Rautiola, is the CEO of Oldnar Corp. See Drew, Cooper & Anding, PC v Oldnar Corp, unpublished opinion per curiam of the Court of Appeal, issued June 27, 2013 (Docket No. 311025), slip op at 2.
I. STANDARD OF REVIEW
This Court reviews de novo a trial court's decision on a motion for summary disposition. West v Gen Motors Corp, 469 Mich 177, 183; 665 NW2d 468 (2003). A motion under MCR 2.116(C)(10) tests the factual sufficiency of a claim and must be supported by affidavits, depositions, admissions, or other documentary evidence. Corley v Detroit Bd of Ed, 470 Mich 274, 278; 681 NW2d 342 (2004). When deciding the motion, the trial court must view the substantively admissible evidence submitted up to the time of the motion in a light most favorable to the party opposing the motion. Maiden v Rozwood, 461 Mich 109, 121; 597 NW2d 817 (1999). The motion may be granted where "there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law." West, 469 Mich at 183. A material fact issue exists "when the record, giving the benefit of reasonable doubt to the opposing party, leaves open an issue upon which reasonable minds might differ." Id.
A motion for summary disposition under MCR 2.116(C)(7) asserts that a claim is barred by immunity granted by law and need not be supported or opposed by affidavits, depositions, admissions, or other documentary evidence. By Lo Oil Co v Dep't of Treasury, 267 Mich App 19, 25-26; 703 NW2d 822 (2005). When reviewing a motion under MCR 2.116(C)(7), the allegations in the complaint must be accepted as true unless contradicted by the parties' submissions. Patterson v Kleiman, 447 Mich 429, 434 n 6; 526 NW2d 879 (1994). The motion is properly granted when the undisputed facts establish the moving party is entitled to immunity granted by law. By Lo Oil Co, 267 Mich App at 26. In this regard, whether the doctrines of res judicata or collateral estoppel apply to bar a claim is a question of law reviewed de novo. Estes v Titus, 481 Mich 573, 578-579; 751 NW2d 493 (2008).
II. ANALYSIS
We affirm the trial court because the undisputed facts show that defendant agreed in a written contract to pay plaintiff for legal services at hourly rates plus costs; defendant presented no evidence to dispute that the legal services in the unpaid invoices were performed and the costs assessed were incurred; and defendant presented no evidence that the hourly rates it agreed to pay violated MRPC 1.5(a) or that plaintiff otherwise engaged in unethical conduct with respect to the fees and costs at issue. Defendant's affirmative defenses—that plaintiff charged unreasonable, excessive fees for unauthorized work—were not factually supported except by a single conclusory statement in an attorney's affidavit regarding fees the defendant had already paid. Further, these claims were barred by res judicata. Finally, defendant is not entitled to an evidentiary hearing because plaintiff did not seek an award of attorney fees from the court under a statute or court rule but rather sought to enforce the clear terms of the parties' contract, to which defendant offered no evidence to dispute or any viable defense. A clear written contract must be enforced according to its terms unless in violation of the law or public policy. Wilkie v Auto-Owners Ins Co, 469 Mich 41, 51; 664 NW2d 776 (2003).
Plaintiff's contract claim is governed by contract law. See Ginger v. Brookfield, 359 Mich 1; 101 NW2d 351 (1960), affirming the trial court's finding that the plaintiff attorney established that he had a contract to provide legal services at a specified hourly rate but did not establish the number of hours claimed. See also Plunkett & Cooney, PC v Capitol Bancorp Ltd., 212 Mich App 325, 329; 536 NW2d 886 (1995) ("An attorney-client relationship must be established by contract before an attorney is entitled to payment for services rendered."). And, in an action for legal fees in Seyburn, Kahn, Ginn, Bess, Deitch & Serlin, PC v Bakshi, 483 Mich 345; 771 NW2d 411 (2009), the Court considered the nature of the plaintiff's claim for the purpose of determining the pertinent statute of limitations. The Court noted "that the parties' obligations to one another are governed by the explicit terms of their contract and [the claim was] not a mutual and open account current." Id. at 358. The foremost principle pertinent to this case, indeed, the "bedrock principle of American contract law [is] that parties are free to contract as they see fit, and the courts are to enforce the agreement as written absent some highly unusual circumstance, such as a contract in violation of law or public policy." Wilkie, 469 Mich at 51.
In Island Lake Arbors Condo Ass'n v Meisner & Assoc, PC, 301 Mich App 384; 837 NW2d 439 (2013), this Court applied general principles of contract law and interpretation, holding that "the circuit court erred by finding the contract ambiguous and by failing to grant summary disposition in favor" of the attorney seeking to enforce a fee agreement. Id. at 395-396. Specifically, this Court found that the clear language of the contract provided that the defendant agreed to pay the plaintiff "an hourly rate in addition to a contingency fee[,]" id. at 393, and that the plaintiff's contractual right to assert a claim to a contingent fee continued after the attorney's termination. Id. at 395-396. In its opinion, id. at 394, the Court cited MCL 600.919(1), which provides: "The measure of the compensation of members of the bar is left to the express or implied agreement of the parties subject to the regulation of the supreme court." So too, our Supreme Court has held that a competent party may contract for legal services "with knowledge of the facts, and especially if [the party] acquiesces in it for a reasonable time," will be bound by the agreement. Rippey v Wilson, 280 Mich 233, 243-244; 273 NW 552 (1937).
In this case, plaintiff (DCA) presented evidence of, and defendant did not dispute, the parties' written contract that clearly stated that DCA would provide legal services to defendant for which it would be paid at "hourly rates [of] from $95 per hour to $400" and that defendant would reimburse plaintiff for all its "out-of-pocket expenses incurred in connection with" the Cooper-Standard litigation. Further, the parties' contract specified that DCA would provide defendant detailed billings on a bi-monthly basis of all "attorney time spent and costs incurred" and that the "invoices for time and costs must be paid by [defendant] within ten (10) days of the date reflected on the invoice." Defendant does not dispute that it agreed to these terms, nor does defendant assert that the hourly attorney rates were unreasonable or a violation of MRPC 1.5(a). It is also undisputed that both parties abided by their agreement for in excess of five months; plaintiff provided defendant detailed invoices of legal services and costs, and defendant paid plaintiff in excess of $800,000. Defendant only refused to pay plaintiff's last invoice as the parties relationship was ending, and plaintiff was permitted to withdraw as defendant's counsel in the Cooper-Standard litigation by order of the United States District Court for the Eastern District of Michigan entered February 24, 2012. Defendant presented no evidence to raise a material fact issue whether the legal services and costs that are reflected in plaintiff's last invoice were not incurred or that they were otherwise unreasonable. Defendant is bound by the terms of its contract unless a pertinent defense applies or the contract itself is illegal or violates public policy. MCL 600.919(1); Wilkie, 469 Mich at 51; Rippey, 280 Mich at 243-244.
Defendant Nartron initially sued Cooper-Standard Automotive, Inc, in August 2008, in the Oakland Circuit Court, asserting trade secret violations and patent infringement. The lawsuit, Nartron Corporation v Cooper-Standard Automotive, Inc, No. 4:10-cv-12293 (Cooper-Standard), was removed to the Eastern District of Michigan in June 2010. In August 2011, Nartron retained plaintiff Drew, Cooper & Anding, PC (DCA), to represent it in pursuing its claims against Cooper-Standard. Nartron also hired another law firm, Brooks Kushman, to defend against the counterclaims that Cooper-Standard brought against Nartron. --------
Defendant asserts that over the course of DCA's representation of it in the Cooper-Standard litigation, it paid DCA $819,131.92, "which amount was excessive and constituted overcharges for the work actually performed, and the charges for which Plaintiff seeks payment were for work which was unauthorized, excessive, unnecessary, unconscionable, duplicative and which violate Rule 1.5 of the Michigan Rules of Professional Conduct." Defendant also presented an attorney's affidavit regarding DCA's invoices resulting in these fees and costs in which the attorney opined that on the basis of his "experience in litigating many complex intellectual property matters similar to the Cooper-Standard litigation, the amount billed by DCA was excessive and unreasonable given the circumstances." Defendant did not specifically support these allegations with evidence regarding the unpaid invoices but rather asserted its broad allegations over the entire course of time that plaintiff represented defendant in the Cooper-Standard litigation. But defendant had paid all the prior DCA invoices without objection. And as noted, defendant does not assert that the attorney hourly rates to which it agreed violated MRPC 1.5(a), which provides that "[a] lawyer shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee[,]" that is a "fee [that] is in excess of a reasonable fee." Defendant did not offer any evidence to specifically show that the attorney fees and costs assessed in the unpaid invoice at issue were "unauthorized, excessive, unnecessary, unconscionable, duplicative," or violated MRPC 1.5(a). Consequently, the trial court did not err by concluding the undisputed evidence showed that plaintiff was entitled to judgment as matter of law on its contract claim regarding the unpaid invoice. MCR 2.116(C)(10),
Defendant presents one argument specifically related to the unpaid invoice. Defendant asserts that plaintiff failed to mitigate its damages. See Lorenz Supply, Co v American Standard, Inc, 100 Mich App 600, 610; 300 NW2d 335 (1980) ("[A] breach of contract imposes on the plaintiff a duty to mitigate damages[,] [but] [t]he defendant bears the burden of proving a failure to mitigate."). Defendant does not cite any authority or develop this argument. "It is axiomatic that where a party fails to brief the merits of an allegation of error . . . [or] where a party fails to cite any supporting legal authority for its position, the issue is deemed abandoned." Prince v MacDonald, 237 Mich App 186, 197; 602 NW2d 834 (1999). Furthermore, this argument is meritless because once retained to represent defendant in the Cooper-Standard litigation, plaintiff's representation continued until it was relieved of the obligation by defendant or a court. See Bakshi, 483 Mich at 359.
Defendant's argument that an issue of material fact remained regarding its assertion that it had already paid DCA excessive fees and costs that "constituted overcharges for the work actually performed," and that the work was "unauthorized, excessive, unnecessary, unconscionable, duplicative," and in violation of MRPC 1.5, also fails. But defendant did not factually support this claim except with one conclusory, nonspecific opinion from an attorney. In general, opinions, conclusory denials, unsworn averments, and inadmissible hearsay do not satisfy the court rule regarding establishing disputed fact with admissible evidence. SSC Assoc Ltd Partnership v Gen Retirement Sys of Detroit, 192 Mich App 360, 364; 480 NW2d 275 (1991); see also DeSot v Auto Club Ins Ass'n, 174 Mich App 251, 253; 435 NW2d 442 (1988) ("Opinion evidence, conclusory denials, unsworn averments, and inadmissible hearsay do not satisfy this requirement because the existence of a disputed fact must be established by admissible evidence.").
Similarly, contrary to defendant's argument, defendant's claims of overcharges, unauthorized, excessive, and unnecessary legal work are not self-evident from plaintiff's invoices that defendant paid without protest. Defendant essentially promised at the summary disposition stage that it would produce admissible evidence of its claims at trial if the motion was denied. MCR 2.116(G)(4) provides with respect to a properly supported motion for summary disposition under MCR 2.116(C)(10), "an adverse party may not rest upon the mere allegations or denials of his or her pleading, but must, by affidavits or as otherwise provided in this rule, set forth specific facts showing that there is a genuine issue for trial." (Emphasis added). Thus, under MCR 2.116(C)(10), "[a] reviewing court may not employ a standard citing the mere possibility that the claim might be supported by evidence produced at trial. A mere promise is insufficient under our court rules." Maiden, 461 Mich at 121. In this case, defendant presented mere allegations and a conclusory opinion of claims of overcharges, unauthorized, excessive, and unnecessary legal work. Id.; DeSot, 174 Mich App at 253. Consequently, the trial court did not err by concluding that defendant failed to support its affirmative defenses with admissible evidence concerning specific material facts and that plaintiff was entitled to judgment as matter of law on its contract claim regarding the unpaid invoice. MCR 2.116(C)(10), (G)(4),
Moreover, the trial court correctly ruled that defendant's affirmative defenses were incorporated in defendant's malpractice complaint and therefore were barred by the dismissal with prejudice of defendant's malpractice complaint. In essence, defendant's malpractice claims were in the nature of the affirmative defenses of setoff and recoupment. See Minority Earth Movers, Inc v Walter Toebe Const Co, 251 Mich App 87, 95-97; 649 NW2d 397 (2002) (Michigan allows setoff as a method of satisfying a judgment; recoupment is a common-law doctrine allowing an equitable reason why the amount payable to a plaintiff should be reduced).
In this case, plaintiff correctly cites case law that defendant's affirmative defenses sounded in malpractice. Defendant alleged plaintiff performed unauthorized, excessive, and unnecessary legal work and that its billings constituted overcharges. A claim that legal services were unauthorized sounds in malpractice. See Nelson v Consumers Power Co, 198 Mich App 82, 90; 497 NW2d 205 (1993) (the client's remedy when an attorney fails to follow instructions is an action for malpractice). Also, defendant's first-breach defense is based on defendant's claim that plaintiff failed to meet the standard of care for an attorney skilled in the field of trade secrets and other law pertinent to the Cooper-Standard litigation, and patently sounds in legal malpractice. See Barnard v Dilley, 134 Mich App 375, 378; 350 NW2d 887 (1984).
More importantly, the incorporation of defendant's affirmative defenses in its malpractice complaint against plaintiff is demonstrated by examining the elements of a legal malpractice claim and reviewing defendant's last amended complaint. The elements to prove a legal malpractice claim are: " '(1) the existence of an attorney-client relationship; (2) negligence in the legal representation of the plaintiff; (3) that the negligence was a proximate cause of an injury; and (4) the fact and extent of the injury alleged.' " Simko v Blake, 448 Mich 648, 655; 532 NW2d 842 (1995), quoting Coleman v Gurwin, 443 Mich 59, 63; 503 NW2d 435 (1993). With respect to the last element, "the fact and extent of the injury alleged," we note that defendant's malpractice complaint alleged as its first listed injury the following. "As a direct and proximate result of DCA's . . . professional negligence and/or legal malpractice, Nartron has suffered damages including but not limited to: a. Payment of unreasonable and excessive attorney fees and costs that were not legitimately billed nor earned by DCA . . . ." Thus, defendant's claimed damages clearly encompassed and included the same allegations it asserted as affirmative defenses.
Michigan's doctrine of res judicata bars "not only claims already litigated, but also every claim arising from the same transaction that the parties, exercising reasonable diligence, could have raised but did not." Adair v Michigan, 470 Mich 105, 121; 680 NW2d 386 (2004). The doctrine bars a subsequent action when "(1) the prior action was decided on the merits, (2) both actions involve the same parties or their privies, and (3) the matter in the second case was, or could have been, resolved in the first." Id. In addition, the prior action must also have been a final decision. Richards v Tibaldi, 272 Mich App 522, 531; 726 NW2d 770 (2006).
In this case, defendant does not dispute that the dismissal with prejudice of its malpractice complaint was justified and not appealed. The judgment dismissing defendant's malpractice complaint is therefore a final judgment on the merits. MCR 2.504(B)(1), (3); Washington v Sinai Hosp of Greater Detroit, 478 Mich 412, 414; 733 NW2d 755 (2007) (an involuntary dismissal is an adjudication on the merits); Leahy v Orion Twp, 269 Mich App 527, 530; 711 NW2d 438 (2006) ("A decision is final when all appeals have been exhausted or when the time available for an appeal has passed."); Wilson v Knight-Ridder Newspapers, Inc, 190 Mich App 277, 278-279; 475 NW2d 388 (1991) (dismissal with prejudice is an adjudication of the merits and has res judicata effect).
Because the alleged factual basis of defendant's affirmative defenses were included in defendant's malpractice complaint that was dismissed with prejudice, defendant's affirmative defenses to plaintiff's contract claims were barred by the doctrine of res judicata. It does not matter that the plaintiff's contract action was filed first where the second, defendant's malpractice action, decided defendant's claims that formed the bases of its affirmative defenses. See Brownridge v Mich Mut Ins Co, 115 Mich App 745, 750-751; 321 NW2d 798 (1982). Thus, the doctrine of res judicata bars defendant's affirmative defenses in the contract action because the claims were included in the malpractice action that (1) was decided on the merits, (2) involved the same parties or their privies, and (3) the malpractice claims—affirmative defenses—were resolved by the prior final judgment. Adair, 470 Mich at 121; Richards, 272 Mich App at 531. Consequently, the trial court did not err by finding that defendant's affirmative defenses were lost when defendant's malpractice claim was dismissed.
Defendant's argument that it is entitled to a judicial determination regarding the reasonableness of plaintiff's attorney fees also fails under the facts and circumstances of this case. Defendant argues that Souden v Souden, 303 Mich App 406; 844 NW2d 151 (2013), controls this issue. But Souden is not a breach of contract case. Rather, in Souden, the attorney of a party to a divorce action filed a petition with the trial court to enforce a charging lien contained in the judgment of divorce to obtain payment of fees that his client allegedly owed from property that was awarded to the client from the marital estate. Id. at 408-409. The trial court ruled in favor of the attorney except for granting a credit of $2,500 that the client asserted. Id. at 410. The Souden Court observed that while the attorney's claimed fees were premised in contract, the attorney sought to enforce his claim through a charging lien. Id. at 411. Further, charging liens are creatures of the common law that are " 'a means of securing the legitimate interest of the attorney in payment for his services and expenses on behalf of the client, but it is subject to the control of the court for the protection of the client and third parties as well[.]' " Id. (Citation omitted; Emphasis added).
The Souden Court held that the trial court did not properly review the client's assertion that the attorney's fees "were unreasonable and inflated" and that this Court "reviews a trial court's award of attorney fees and costs for an abuse of discretion." Souden, 303 Mich App at 414 (Emphasis added). Thus, Souden involved an "award" of attorney fees under the common-law doctrine of a charging lien, that "is subject to the control of the court for the protection of the client." Id. at 411, 414. Indeed, the Court applied case law holding that "a party requesting a postjudgment award of attorney fees must show both that the attorney fees were incurred and that they were reasonable." Id. at 415 (Emphasis added). The Court also discussed case law concerning "an award of attorney fees as part of case-evaluation sanctions." Id. at 415. Thus, in the context of the attorney's petition requesting that the trial court enforce a charging lien that "is subject to the control of the court for the protection of the client," the Souden Court opined:
A fee agreement between an attorney and a client is a contract. In a fee dispute, the trial court should consider the language of the fee agreement to determine if the charged fees comport with the agreement. However, the trial court, in interpreting the fee agreement and analyzing the disputed fees, should keep in mind the requirement of reasonableness as expressed in the MRPC rule and Michigan law. [Id. at 416 (citation omitted).]
The Souden Court noted that the trial court did not review the attorney's "fee agreement, if any," and did not adequately review the reasonableness of the attorney's claimed fees; nor did trial court review the client's specific objections, including that "67.5 hours billed by [the attorney] was insufficiently detailed and unreasonable[,]" and whether an assessed "finance charge" of $3,000 was reasonable, or might violate Michigan or federal usury laws or other law regulating credit. Id. at 416-419. Therefore, this Court remanded "for an evidentiary hearing on the issue of the reasonableness of [the attorney's] claimed attorney fees" and directed the trial court to consider whether the claimed "finance charge" was lawful. Id. at 417.
Souden is clearly distinguished from the instant case for a number of reasons. First, and foremost, Souden is not a simple breach of contract case, although the attorney's claim apparently was based in contract. Second, Souden concerns the enforcement of a common-law charging lien over which the trial was required to exercise supervising control " 'for the protection of the client and third parties as well' " Souden, 303 Mich App at 411 (Citation omitted). For this reason, the Souden Court correctly applied case law concerning an award of attorney fees on a legal basis other than contract, such as a statute, court rule, or as a sanction. Finally, the client presented specific reasons to contest specific portions of the attorney's claimed fees. See id. at 416-420.
In contrast, the present case is not one concerning an attorney seeking an award of attorney fees that is authorized by a statute, court rule, or a common-law exception to the American Rule. See Pirgu v United Services Auto Ass'n, 499 Mich 269, 274-275; 884 NW2d 257 (2016), citing Haliw v Sterling Hts, 471 Mich 700, 707; 691 NW2d 753 (2005) ("Under the American rule, attorney fees generally are not recoverable from the losing party as costs in the absence of an exception set forth in a statute or court rule expressly authorizing such an award."); Dessart v Burak, 470 Mich 37, 42; 678 NW2d 615 (2004) ("The general 'American rule' is that 'attorney fees are not ordinarily recoverable unless a statute, court rule, or common-law exception provides the contrary.' ") (Citation omitted). Rather, the present case is an action to enforce the plain terms of the parties' clear contract that provided for the provision of legal services at agreed hourly rates that defendant does not assert were unreasonable. See Pirgu, 499 Mich at 281 (holding that when a court must determine the reasonableness of an attorney fee award, "a trial court must begin its analysis by determining the reasonable hourly rate customarily charged in the locality for similar services").
Rather than contest the hourly attorney fee rate that it had agreed to, defendant asserted that over the course of the parties' contract plaintiff invoiced unauthorized, excessive, unnecessary legal work that constituted overcharges for the work actually performed. But as discussed, defendant did not support its claims with specific evidence related to specific claimed overcharges. And, the only evidence defendant submitted, an attorney's conclusory affidavit related to plaintiff's overall billings, did not specifically relate to the unpaid invoices at issue. Our Supreme Court has held that "[a]n attorney may lose his right to fees for unprofessional conduct or abandonment of his client's case" but misconduct in one severable phase of service would not require that an attorney forfeit compensation for services rendered in another phase. Rippey, 280 Mich at 245. Furthermore, as discussed, defendant's claims of legal overcharges were barred by the doctrine of res judicata after the trial court dismissed its malpractice complaint with prejudice. Adair, 470 Mich at 121; Richards, 272 Mich App at 531.
In summary, the present case is governed by contract law and an evidentiary hearing concerning reasonableness is unnecessary under the facts and circumstances of this case. The foremost pertinent principle governing this case is "that parties are free to contract as they see fit, and the courts are to enforce the agreement as written absent some highly unusual circumstance, such as a contract in violation of law or public policy." Wilkie, 469 Mich at 51. As our Supreme Court has held, a competent party may contract for legal services "with knowledge of the facts, and especially if [the party] acquiesces in it for a reasonable time," and will be bound by the agreement. Rippey, 280 Mich at 243-244. Defendant produced no evidence the contract at issue violated a law or public policy, and in particular, produced no evidence that the contract violated MRPC 1.5. Furthermore, defendant did not factually support its claim of overcharges, which also were barred by res judicata. Defendant is bound by the terms of its contract. MCL 600.919(1); Wilkie, 469 Mich at 51; Rippey, 280 Mich at 243-244. Consequently, the trial court did not err by concluding the undisputed evidence showed that plaintiff was entitled to judgment as matter of law on its contract claim regarding the unpaid invoice. MCR 2.116(C)(10),
We affirm. As the prevailing party, plaintiff may tax its costs pursuant to MCR 7.219.
/s/ Christopher M. Murray
/s/ David H. Sawyer
/s/ Jane E. Markey