Home > Uncategorized > Michigan Businesses: Before Jumping Into a Lawsuit Consider Kesler Assoc. Inc v Wellman Plastics Recycling, LLC

Michigan Businesses: Before Jumping Into a Lawsuit Consider Kesler Assoc. Inc v Wellman Plastics Recycling, LLC

“You will be hearing from my Lawyer!”

 

Many a lawsuit begins with those parting words.

 

I will occasionally get a call from a business client who is a little fired up (if you’re reading this and you are a business client of mine, I’m definitely not talking about you :)). Maybe he or she got off the phone with a vendor, customer or a business parter, or maybe the client just sent the last shot in a string of e-mail exchanges over a contract dispute.

 

Regardless, my first goal in advising a business client on a dispute is to help them make a good business decision and resolve their conflict as quickly and as cost-effectively as possible.

 

This usually means NOT jumping into a lawsuit.

 

Why?

 

One particular reason – lawsuits are expensive.  Lawyers are expensive.

 

Lawsuits are much more expensive if you have to end up paying the opposing party’s legal fees as well as your own.

 

Legal Fees and the AMERICAN RULE

 

Generally, the “American Rule” does not allow for the recovery of attorney fees from the losing party, in a lawsuit unless there is an exception carved out by statute or court rule. Haliw v. City of Sterling Hts., 471 Mich. 700, 707, 691 N.W.2d 751 (2005).

So if you find yourself in a lawsuit, regardless of whether or not you initiated it, you are expected to bear your own legal fees.
This could change if:
1. You entered a contract that the prevailing party to a lawsuit will get their attorney fees paid for (some examples –  a business operating agreement in an LLC, or by laws in a corporation if the dispute is between a shareholder and the company, a non-disclosure agreement between an independent contractor and a company, or maybe a commercial lease agreement;
2. You are in a case evaluation and you reject the case evaluation recommendation (if you want to learn more about case evaluation, feel free to shoot me an e-mail), and the opposing party accepts; or
3. There is a specific statute that could allow for the recovery of attorney fees.

 

Exceptions 1 and 3 should give you pause before filing a lawsuit. Exception 2 is a point to consider at some time while you are engage in litigation.

 

 

The March 2014 Decision of Kesler Assoc v Wellman Plastics.

I was reviewing a recent order from a long-drawn out business lawsuit in the federal courts for the eastern district of Michigan.

 

In that case, I am sure the Plaintiff looks back and wishes he never filed suit.

 

The case was in litigation for 4 years. It involved a dispute over commissions allegedly owed. Basically, Plaintiff claimed it was owed commissions by the Defendant.  Defendant claimed it owed no amount to Defendant.

 

After 4 years of litigation and a 10 day bench trial the jury found in favor of Defendant – Plaintiff recovered nothing.

 

Bad? Yes. Not only did Plaintiff not recover anything, but it had paid, likely, six figures in legal fees.

 

Then it got worse…

 

Plaintiff sued Defendant under a statute that granted the prevailing party attorney fees. Defendant was the prevailing party. Defendant was entitled to have Plaintiff pay its attorney fees.

An excerpt from the Court’s opinion:
Defendant argues for attorney fees and costs under Mich. Comp. Law § 600.2961(6) (2013) because it was the “prevailing party” in the lawsuit. SCRA awards attorney fees and costs to the prevailing party. The Defendant has provided the Court with itemized documentation addressing the reasonableness of attorney fees and costs. Petterman v. Haverhill Farms, Inc., 125 Mich.App. 30, 33, 335 N.W.2d 710, 712 (1983) (“The party requesting fees, the prevailing party, has the burden of proving the reasonableness of attorney fees.”). The Plaintiff has not filed a response opposing the motion for attorney fees.” Kesler Assoc, Inc v Wellman Plastics Recycling, LLC, No. 10-CV-13390, 2014 WL 897357 (ED Mich March 6, 2014)
The Court ordered Plaintiff to pay Defendant’s attorney fees, which amounted to over $100,000.
Lesson: 
Disputes happen in business. Before you run into a lawsuit, take a breath and work through all of the possible solutions to your dispute. Also, make sure you review any contracts and statutes that your dispute could implicate and determine whether or not there is an attorney fee provision that could potentially result in you paying all attorney fees.
questions? comments?
email me: Jeshua@dwlawpc.com
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