Opinion
353794
09-16-2021
GLT PACKAGING CORPORATION, Plaintiff-Counter Defendant-Appellee, v. L & K COFFEE CO LLC, d/b/a MAGNUM COFFEE, d/b/a MAGNUM COFFEE ROASTERY, d/b/a, Defendant-Counter Plaintiff-Third Party-Appellant and BRIAN BURNS, Third-Party Defendant.
UNPUBLISHED
Kent Circuit Court LC No. 18-002673-CB
Before: Murray, C.J., and M. J. Kelly and O'Brien, JJ.
Per Curiam
Defendant-Counter Plaintiff, L & K Coffee Company LLC (defendant), appeals as of right the trial court's order awarding offer-of-judgment sanctions to plaintiff-counter defendant, GLT Packaging Corporation (plaintiff), under MCR 2.405. We affirm.
I. BACKGROUND
Plaintiff manufactures "[c]orrugated paper and corrugated plastic" products, such as corrugated boxes. It also sells products that it does not manufacture. In situations where plaintiff does not manufacture the product that it sells, plaintiff sources the product for the customer, and if the customer approves of the sourced product, plaintiff sells the product to the customer for a markup.
Plaintiff's business relationship with defendant began in 2013. Brian Burns, the part-owner of plaintiff, contacted defendant's general manager at the time, Mark Stedman, and the two discussed the possibility of plaintiff providing defendant with corrugated packaging supplies like corrugated boxes. At the start of the relationship, plaintiff was able to manufacture the product that defendant desired. Eventually, however, defendant required a supplier for "folding cartons." Defendant did not manufacture "folding cartons," but Burns told Stedman that plaintiff could nevertheless provide the product to defendant. Burns provided a folding carton manufactured by Spartan Graphics as a sample for Stedman, who approved the sample. Thereafter, in the spring of 2014, defendant began ordering folding cartons from plaintiff, even though the cartons were manufactured by Spartan.
From the spring of 2014 until the fall of 2017, defendant would order folding cartons from plaintiff, plaintiff would quote a price to defendant and then deliver the folding cartons to defendant with an invoice, and defendant would pay the invoice. In August 2017, however, defendant stopped paying the invoices because it believed that plaintiff was overcharging it for the folding cartons. Plaintiff continued making deliveries to defendant, despite not being paid. That lasted until December 2017, at which point plaintiff stopped deliveries to defendant.
By the time plaintiff stopped making deliveries, defendant had $341,127.51 in outstanding invoices that it refused to pay. This led plaintiff to file a claim for breach of contract on March 22, 2018. Plaintiff alleged that it had provided defendant $341,127.51 in goods, that defendant had accepted the goods and accompanying invoices without objection, that defendant now refused to pay for the goods, and that plaintiff was entitled to the price of the unpaid goods as damages.
On June 14, 2018, plaintiff sent an offer of judgment to defendant. Plaintiff proposed to stipulate to a judgment in the amount of $310,000 in favor of plaintiff to resolve all claims in the case. Defendant never responded to the offer.
Eventually, plaintiff moved for summary disposition. On February 22, 2019, the trial court granted plaintiff's motion for summary disposition on its breach of contract claim as to liability, but not damages. The court scheduled an evidentiary hearing to determine plaintiff's damages.
On March 29, 2019, after the trial court granted summary disposition for plaintiff on liability but before the evidentiary hearing for plaintiff's damages, defendant wrote a check to plaintiff in the amount of $63,947.38. Plaintiff voided the check and returned it to defendant. Correspondences between the parties' attorneys reflect that plaintiff's attorney inquired as to what the check was for because it came without a letter or explanation, and defendant's attorney explained that it was the "uncontested" amount that defendant owed plaintiff. Plaintiff's counsel explained that plaintiff did not want to accept the money because the evidentiary hearing on damages was still pending and plaintiff was uncertain how to apply the money to the invoices it intended to present. Eventually, on April 22, 2019, plaintiff's counsel made clear that plaintiff "decided it will not accept any partial payments from [defendant]. Please do not have [defendant] reissue the payment." Despite this, on April 26, 2019, defendant wired the $63,947.38 directly to plaintiff's account.
This led plaintiff to file a motion to escrow the funds with the trial court on May 7, 2019. Plaintiff explained that it was unclear what the $63,947.38 was supposed to represent, particularly given that defendant did not explain what, if any, invoices the payment was intended to satisfy. Plaintiff asked the trial court to escrow the funds "to avoid confusion" in the upcoming damages hearing, wherein the court was "to determine precisely who owes what to whom."
At the start of the evidentiary hearing on damages, the trial court addressed plaintiff's motion to escrow funds with the court. The court began by saying that it would "prefer not to handle" the motion, but it understood that the payment was significant because it could affect offer-of-judgment sanctions later on. Nevertheless, the court refused to escrow the funds because it would "rather not handle this by having money placed in escrow," but made clear to the parties that it was "not going to consider that $63,947.38 as paid so that it reduces the judgment."
At the end of the hearing, the court took the matter under advisement and later issued a written opinion. The trial court ultimately calculated plaintiff's damages as the amount of defendant's "outstanding invoice obligations, i.e., $341,127.51." The trial court therefore rendered a verdict in favor of plaintiff against defendant "in the total amount of $341,127.51 on [plaintiff's] claim for breach of contract."
Plaintiff submitted a proposed judgment under MCR 2.602(B)(3) for the amount listed in the court's verdict-$341,127.51-plus costs, for a total of $341,704.79. There were no objections, and the judgment was entered.
After the judgment was entered, plaintiff moved for offer-of-judgment sanctions. The trial court granted the motion, reasoning that plaintiff was entitled to offer-of-judgment sanctions under MCR 2.405 because its $310,000 offer of judgment was less than the $341,704.79 judgment awarded to plaintiff.
Defendant now appeals as of right.
II. ISSUE PRESERVATION
Defendant makes two related, yet importantly distinct, arguments on appeal. Defendant argues that the trial court erred in its application and interpretation of MCR 2.405 because the judgment should have been reduced by the $63,947.98 that defendant paid before the judgment was issued. To the extent that this argument asks this Court to determine whether the trial court properly interpreted and applied MCR 2.405, it is preserved because it was properly raised in the trial court. See Mouzon v. Achievable Visions, 308 Mich.App. 415, 419; 864 N.W.2d 606 (2014).
To the extent that the argument asks this Court to determine whether the damages awarded as part of the judgment were excessive and should have been reduced, the issue is not preserved. A party is required to move for remittitur to preserve an argument that a damage award is excessive. Pena v. Ingham Co Rd Comm, 255 Mich.App. 299, 315; 660 N.W.2d 351 (2003); McFadden v. Tate, 350 Mich. 84, 91; 85 N.W.2d 181 (1957). Accordingly, defendant's challenge to the excessiveness of the damages awarded is unpreserved because it failed to move for remittitur in the trial court. While this Court may overlook preservation requirements if the failure to consider the issue would result in manifest injustice, Laurel Woods Apartments v. Roumayah, 274 Mich.App. 631, 640; 734 N.W.2d 217 (2007), "[m]ore than the fact of the loss of the money judgment of $60,000 in this civil case is needed to show a miscarriage of justice or manifest injustice," Napier v. Jacobs, 429 Mich. 222, 234; 414 N.W.2d 862 (1987). Moreover, any error related to whether defendant's $63,947.38 payment should have been applied to the judgment was caused by defendant forcing the $63,947.38 into plaintiff's possession before the judgment was issued. In effect, defendant's extraordinary conduct brought about any error. Failure to consider an error prejudicial to defendant that defendant itself caused would not result in manifest injustice.
We also note that nothing suggests that plaintiff is even pursuing double recovery so that its damages exceed what it is contractually entitled to. See, e.g., Grace v. Grace, 253 Mich.App. 357, 368; 655 N.W.2d 595 (2002).
III. STANDARD OF REVIEW
For the reasons explained above, the only issue preserved for review is plaintiff's challenge to the trial court's interpretation and application of MCR 2.405. This Court reviews de novo a trial court's interpretation and application of a court rule. Henry v. Dow Chem Co, 484 Mich. 483, 495; 772 N.W.2d 301 (2009).
IV. ANALYSIS
Defendant argues that the trial court erred by awarding offer-of-judgment sanctions to plaintiff under MCR 2.405 and by otherwise denying defendant's request that the court apply the "interest of justice" exception to sanctions in MCR 2.405(D)(3). We disagree.
On June 18, 2018, plaintiff offered to settle the case for $310,000. Defendant failed to accept the offer within 21 days, thereby rejecting the offer. MCR 2.405(C)(2)(b). Pursuant to MCR 2.405(D)(1), when an offer is rejected, "[i]f the adjusted verdict is more favorable to the offeror than the average offer, the offeree must pay to the offeror the offeror's actual costs incurred in the prosecution or defense of the action."" 'Average offer' means the sum of an offer and a counteroffer, divided by two. If no counteroffer is made, the offer shall be used as the average offer." MCR 2.405(A)(3). Because no counteroffer was made in this case, the "average offer" was plaintiff's offer-$310,000." 'Adjusted verdict' means the verdict plus interest and costs from the filing of the complaint through the date of the offer." MCR 2.405(A)(5). The "adjusted verdict" in this case was $341,704.79 in favor of plaintiff. Plainly, this adjusted verdict is more favorable to plaintiff (the offeror) than the average offer. Accordingly, defendant (the offeree) was required to pay plaintiff's actual costs. MCR 2.405(D)(1).
Defendant seems to argue that "the adjusted verdict is not more favorable to Plaintiff than the average offer" because defendant's $63,947.98 payment had to be subtracted from the total awarded to plaintiff. As stated," 'Adjusted verdict' means the verdict plus interest and costs from the filing of the complaint through the date of the offer." MCR 2.405(A)(5). With this definition in mind, it does not appear that defendant's argument actually concerns the "adjusted verdict." Rather, defendant seems to be arguing that the trial court should have adjusted the verdict. Nothing in MCR 2.405 allows a court to retroactively adjust a verdict when determining offer-of-judgment sanctions, as defendant seemingly suggests. Moreover, for the reasons previously explained, defendant failed to properly preserve its argument that the award of damages was excessive and should have been adjusted downward, so this Court will not address that issue.
Next, defendant argues that it was entitled to the "interest of justice" exception to sanctions in MCR 2.405(D)(3), which states in relevant part, "The court may, in the interest of justice, refuse to award an attorney fee under this rule." This Court has explained that the "interest of justice" exception applies when there is, for instance, evidence of gamesmanship to manipulate offers so as to trigger offer-of-judgment sanctions, when a case involves a legal issue of first impression or an issue of public interest, or when there is misconduct on the part of the prevailing party. Luidens v. 63rd Dist Court, 219 Mich.App. 24, 35-36; 555 N.W.2d 709 (1996). The exception does not apply, however, solely because it was reasonable to refuse the offer or because "the losing party's position was 'not frivolous.' ". Id. at 33-34.
Defendant's argument on this issue boils down to a contention that it was reasonable for defendant to refuse plaintiff's offer. This is clearly not sufficient to support the "interest of justice" exception. Defendant suggests that "[t]here was no way that the Offer of Judgment submitted by [plaintiff] in the fledging states of this litigation was ever going to resolve the case," but this is just another way of asserting that it was reasonable for defendant to refuse plaintiff's offer, which, again, is insufficient to trigger the "interest of justice" exception. During the course of its argument, defendant also mentions that "[plaintiff] devoted several months of litigation to obstructing access to" certain information during discovery, but it is unclear what point defendant is attempting to make. Defendant does not assert that this was misconduct. Even if it was misconduct, it is unclear why it would justify applying the "interest of justice" exception. Accordingly, defendant has not established that the trial court erred by refusing to apply the "interest of justice" exception to offer-of-judgment sanctions.
Affirmed.