Opinion
354549
10-28-2021
LEVI NEW and PULVERDRYER USA, LLC, Plaintiffs-Appellants, v. GARY P. BARTOSIEWICZ and LENNON, MILLER, O'CONNOR & BARTOSIEWICZ PLC, Defendants-Appellees.
UNPUBLISHED
Kalamazoo Circuit Court LC No. 2019-000067-NM
Before: Ronayne Krause, P.J., and Cameron and Rick, JJ.
Per Curiam.
In this legal malpractice action, plaintiffs appeal as of right the trial court's orders granting summary disposition to defendants pursuant to MCR 2.116(C)(8) and MCR 2.116(C)(10). We affirm.
I. BACKGROUND
A. 2014 UNDERLYING ACTION
This matter arises out of an underlying lawsuit brought in November 2014 by Brian and Johanna Haack against plaintiffs for, in relevant part, alleged violations of the Whistleblowers' Protection Act, MCL 15.369 et seq., and for breach of contract. Defendants provided legal representation to plaintiffs in that underlying action. During the course of the action, two defaults were entered against plaintiffs, one of which was for failing to answer a second amended complaint. Defendants tacitly do not dispute that the failure to answer the second amended complaint constituted malpractice. However, defendants contend that the "pleadings default" was not a proximate cause of the ultimate outcome in the underlying action. The other default was for failing to comply with a discovery order, which defendants contend was due to plaintiffs' own misconduct outside their control, and the "discovery default" was the true cause of the judgments ultimately entered against plaintiffs.
It appears that plaintiffs' compliance with discovery was a significant and ongoing problem in the underlying action. Plaintiffs contend that their records were stored on computers to which they had lost access for one reason or another, that they had ceased operations and lacked employees to conduct searches for the records, and that they lacked the technical expertise or money to retain technical expertise for the purposes of recovering the records. The trial court imposed numerous discovery orders regarding those records, and plaintiffs maintain that defendants knew plaintiffs were totally incapable of producing those records. On March 24, 2016, defendants stipulated, on plaintiffs' behalf but allegedly without their knowledge, to an order requiring plaintiffs to produce certain documents within ten days, or, in the alternative, to provide an affidavit explaining why compliance was impossible and describing the efforts undertaken. On April 4, 2016, plaintiffs filed a response and an affidavit explaining the efforts they undertook to acquire the documents and that doing so was beyond their ability. On April 19, 2016, the "pleadings default" was entered against each plaintiff for failing to respond to the second amended complaint.
The trial court held a hearing on May 5, 2016, at which defendants explained plaintiffs' difficulties and asked the trial court for a lesser sanction than default, such as giving plaintiffs more time or having the Haacks pay for data recovery subject to later reimbursement. The trial court observed that default was "a drastic remedy" and it recognized plaintiffs' difficulties. However, the trial court noted that "[i]t's just one thing after another" and opined, "that's the [plaintiffs'] problem, not really the [Haacks'] problem here." The trial court therefore entered a default "concerning liability against all [plaintiffs]." Although the trial court referred to its order as a "default judgment," it clearly intended (as it later recognized) to enter a default. Defendants repeatedly, although unsuccessfully, sought to set aside the defaults on plaintiff's behalf. A default judgment was entered against plaintiffs on December 29, 2016, "as a result of this Default Judgment [sic] for failure to plead or otherwise defend and . . . also entered separately and independently as a result of the Default Judgment [sic] entered on May 5, 2016 because of [plaintiffs'] failure to abide by the Court's discovery order."
A default establishes liability for a claim but continues to permit a defaulted party to challenge the amount of damages, whereas a default judgment establishes money damages on the basis of a default. See Wood v DAIIE, 413 Mich. 573, 578, 583-585; 321 N.W.2d 653 (1982).
Ultimately, a jury trial was held, limited to the subject of damages. A final judgment was entered against plaintiffs on February 15, 2017. Defendants discontinued their representation of plaintiffs on the same date.
B. 2019 PRESENT ACTION
On February 14, 2019, plaintiff New, acting in propria persona filed the complaint commencing this action on behalf of himself and plaintiff PulverDryer. In relevant part, the complaint generally alleged that defendants' negligent representation in the underlying matter resulted in the April 19, 2016 default; and defendants therefore cost plaintiffs what would otherwise have been a meritorious defense. The complaint did not mention the May 5, 2016 default. On November 6, 2019, defendants moved to dismiss, asserting that "the default as a discovery sanction [in the underlying action], which was entered as a result of New's inability and/or refusal to comply with discovery orders, would have occurred regardless of any alleged act or omission of [defendants]." The motion also asserted that plaintiffs were "engaging in the exact same discovery abuses in this case that caused them to be defaulted in the underlying action." The trial court denied that motion at the time.
Defendants moved for partial summary disposition on February 19, 2020. Defendants explicitly left aside the issue of their failure to respond to the Haacks' second amended complaint. Defendants argued that PulverDryer must be dismissed, because New was not an attorney and therefore could not represent PulverDryer, the complaint was therefore absolutely void as to PulverDryer, and the limitations period for legal malpractice had expired, so PulverDryer could not now bring any legal malpractice claims. Defendants also argued, generally, that they had done the best they could with the underlying case given plaintiffs' own conduct and refusal to participate in discovery, and defendants' actions and strategic decisions as a consequence were protected by the attorney-judgment rule. In particular, defendants emphasized that they entered into the stipulated discovery order because otherwise they knew the trial court would grant the Haacks' motion to compel, and the stipulated order was the best option to retain some degree of control over the ensuing document production.
Two weeks after defendants filed their motion for partial summary disposition, an attorney filed an appearance on behalf of plaintiffs. The trial court held a hearing on May 14, 2020, at which plaintiffs' attorney appeared and argued. The trial court granted defendants' motion, dismissing PulverDryer and leaving only New's claim based on defendants' failure to answer the Haacks' second amended complaint. Defendants then filed another motion for summary disposition; again, they tacitly did not dispute that their failure to answer the second amended complaint constituted malpractice, but they argued that plaintiffs' discovery noncompliance made the outcome of the underlying action inevitable and totally beyond defendants' control. Plaintiff New contended that both defaults proximately caused the adverse outcome in the underlying matter, and both defaults were proximately caused by defendants. The trial court held a hearing on the second motion for summary disposition on July 23, 2020, following which it agreed with defendants and granted summary disposition in defendants' favor. This appeal followed.
II. STANDARDS OF REVIEW
A grant or denial of summary disposition is reviewed de novo on the basis of the entire record to determine if the moving party is entitled to judgment as a matter of law. Maiden v Rozwood, 461 Mich. 109, 118; 597 N.W.2d 817 (1999). Defendants moved for summary disposition pursuant to MCR 2.116(C)(8) and (C)(10), regarding different parties and claims. On appeal, defendants also contend that summary disposition as to PulverDryer would have been appropriate pursuant to MCR 2.116(C)(7). "Where summary disposition is granted under the wrong rule, Michigan appellate courts, according to longstanding practice, will review the order under the correct rule." Spiek v Michigan Dep't of Transportation, 456 Mich. 331, 338 n 9; 572 N.W.2d 201 (1998). Although the movant must explain why it claims entitlement to summary disposition, see Vadya v County of Lake, 321 Mich.App. 686, 692 n 2; 909 N.W.2d 874 (2017), it is not mandatory for the movant to "identify the specific subrule under which it seeks summary disposition." Ruggeri Electric Contracting Co, Inc v City of Algonac, 196 Mich.App. 12, 18; 492 N.W.2d 469 (1992)
When reviewing a motion under MCR 2.116(C)(10), which tests the factual sufficiency of the complaint, this Court considers all evidence submitted by the parties in the light most favorable to the non-moving party and grants summary disposition only where the evidence fails to establish a genuine issue regarding any material fact. Maiden, 461 Mich. at 120. When "the burden of proof at trial on a dispositive issue rests on a nonmoving party, the nonmoving party may not rely on mere allegations or denials in pleadings, but must go beyond the pleadings to set forth specific facts showing that a genuine issue of material fact exists." Lowrey v LMPS & LMPJ, Inc, 500 Mich. 1, 7; 890 N.W.2d 344 (2016) (quotation omitted). "A genuine issue of material fact exists when the record, giving the benefit of reasonable doubt to the opposing party, leaves open an issue upon which reasonable minds might differ." West v Gen Motors Corp, 469 Mich. 177, 183; 665 N.W.2d 468 (2003).
A motion brought under MCR 2.116(C)(8) should be granted only where the complaint is so legally deficient that recovery would be impossible even if all well-pleaded facts were true and construed in the light most favorable to the non-moving party. Maiden, 461 Mich. at 119. Only the pleadings may be considered when deciding a motion under MCR 2.116(C)(8). Id. at 119-120. A motion under 2.116(C)(8) "may be granted only where the claims alleged are so clearly unenforceable as a matter of law that no factual development could possibly justify recovery." Adair v Michigan, 470 Mich. 105, 119; 680 N.W.2d 386 (2004) (quotation marks and citation omitted). Under MCR 2.116(C)(7), where the claim is allegedly barred, the trial court must accept as true the contents of the complaint, unless they are contradicted by documentary evidence submitted by the moving party. Maiden, supra, 461 Mich. 119.
Parties appearing in propria persona are not excused from providing support for their claims, but they are entitled to more generosity and lenity in construing their pleadings than would be lawyers. Estelle v Gamble, 429 U.S. 97, 106-108; 97 S.Ct. 285; 50 L.Ed.2d 251 (1976). Nevertheless, although parties in propria persona may be excused for some deficiencies in drafting, they are not excused from substantive compliance with court rules or other legal requirements, and they are otherwise held to the same substantive standards as lawyers. See Totman v School Dist of Royal Oak, 135 Mich.App. 121, 126; 352 N.W.2d 364 (1984); Bachor v City of Detroit, 49 Mich.App. 507, 512; 212 N.W.2d 302 (1973).
III. DISCOVERY DEFAULT
First, plaintiffs argue that the attorney judgment rule did not foreclose their claim of legal malpractice regarding the discovery-based default. We disagree.
In order to show that an attorney has committed legal malpractice, plaintiffs must show "(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." Coleman v Gurwin, 443 Mich. 59, 63; 503 N.W.2d 435 (1993) (footnotes omitted). Plaintiffs "must prove professional negligence, i.e., that counsel failed to exercise reasonable skill, care, discretion, and judgment in the conduct and management of the underlying case." Radtke v Miller, Canfield, Paddock & Stone, 453 Mich. 413, 424; 551 N.W.2d 698 (1996). "The plaintiff must also establish that, but for the negligence, the outcome of the case would have been favorable to the plaintiff." Id.; see also Coleman, 443 Mich. at 63. When "an attorney acts in good faith and in honest belief that his acts and omissions are well founded in law and are in the best interest of his client, he is not answerable for mere errors in judgment." Simko v Blake, 448 Mich 648, 658; 532 N.W.2d 842 (1995). This is sometimes referred to as the "attorney judgment rule." See People v Trakhtenberg, 493 Mich. 38, 44-45; 826 N.W.2d 136 (2012).
To the extent plaintiffs allege defendants entered into the stipulated discovery order without plaintiffs' knowledge or approval, we find such conduct concerning, especially because defendants are suspiciously careful about avoiding addressing that allegation. Nevertheless, although attorneys generally have "a duty to consult with the client regarding 'important decisions,' including questions of overarching [trial] strategy," they are not necessarily required "to obtain [their client's] consent to 'every tactical decision.'" See Florida v Nixon, 543 U.S. 175, 187; 125 S.Ct. 551; 160 L.Ed.2d 565 (2004) (discussing the context of criminal defense). It may have been, in retrospect, a regrettable choice for defendants not to consult plaintiffs before entering into the stipulated order. However, at least under the circumstances of this case, that choice was within the scope of tactical decisions defendants could reasonably make autonomously.
Defendants entered into the stipulated order in the underlying case to resolve the Haacks' motion to compel discovery before plaintiffs received sanctions for their failure to produce discoverable documents. Plaintiffs characterize the stipulated order as requiring them to produce documents that defendants knew could not be produced. However, that is an unfairly incomplete characterization. Critically, the stipulated order also included a provision under which plaintiffs could, in the alternative, provide an affidavit explaining their inability to produce the documents. Plaintiffs argue they would never have agreed to an order requiring them to produce the documents. However, defendants point out that the only alternative to the stipulated discovery order was for plaintiff to condemn himself to losing a futile effort to avoid becoming subject to essentially the same order, only without the affidavit option. In light of the numerous other discovery orders entered against plaintiffs, and in light of the other decisions made by the trial court in the underlying action, defendants' bleak assessment of plaintiffs' options can hardly be considered unreasonable. In other words, as the trial court found, defendants essentially stipulated to an order that gave plaintiffs a slim chance for survival instead of no chance for survival. The fact that the trial court ultimately rejected plaintiffs' affidavit and explanations of impossibility was not within defendants' power to control. Rather, it shows that the stipulation ultimately made no difference.
Plaintiffs provided the affidavit of Paul McCarthy, a commercial trial lawyer with 27 years of experience, as an expert regarding any attorney's duty to their client. Plaintiffs' expert stated in his affidavit that an attorney of ordinary skill, training, and experience would not stipulate to an order compelling discovery if the attorney knew that his client could not comply with the terms of the order or the attorney did not receive authorization to enter into that order from his client. Again, that is not a fair characterization of the stipulated order. In any event, the fact that one attorney is "willing to second guess the decisions of the first attorney with the advantage of hindsight" is not dispositive. Simko, 448 Mich. at 658 (quotation omitted). At face value, agreeing to something known to be impossible would be disturbing, but that is not what actually occurred. Rather, defendants had a reasonable and good-faith expectation that sanctions would have been entered against plaintiffs if they did not stipulate to the order, which afforded plaintiffs a chance to escape what would otherwise have been certain doom. See MCR 2.313(B)(2).
Therefore, no genuine issue of material fact exists that defendants acted with reasonable care and skill to extend the time that plaintiffs had to fulfill their obligation to produce discoverable material and avoid sanctions. Furthermore, plaintiffs have not established that, but for defendants' alleged negligence, the outcome of the case would have been favorable to plaintiffs, because plaintiffs were already under an obligation to produce the discoverable material. See Radtke, 453 Mich. at 424.
IV. PLEADINGS DEFAULT
Next, plaintiffs argue that all proceedings that occurred after the pleadings-based default were nugatory, including the discovery-based default. We disagree.
"It is axiomatic in logic and in science that correlation is not causation." Craig v Oakwood Hosp, 471 Mich. 67, 93; 684 N.W.2d 296 (2004). Therefore, plaintiff's proofs "must facilitate reasonable inferences of causation, not mere speculation." Skinner v Square D Co, 445 Mich. 153, 164; 516 N.W.2d 475 (1994). If there are "2 or more plausible explanations as to how an event happened or what produced it," those explanations "remain conjectures only" if "the evidence is without selective application to any one of them." Id. (quotation omitted). Plaintiffs must "establish only that the defendant's negligence is a proximate cause of the plaintiff's damages." Coleman, 443 Mich. at 63 n 6 (emphasis in original, quotation omitted). However, as noted, that obligation requires plaintiffs to "show that but for the attorney's alleged malpractice, [they] would have been successful in the underlying suit." Id. at 63 (emphasis added).
We note again that defendants tacitly do not contest that their failure to answer the Haacks' second amended complaint constituted "negligence in the legal representation of [plaintiffs]." Coleman, 443 Mich. at 63. However, as discussed, the trial court in the underlying case entered two defaults, and default judgments, against plaintiffs. One was based on plaintiffs' failure to answer a second amended complaint, and the other was based on plaintiffs' failure to produce discoverable material. Both defaults, and default judgments, presented the trial court in the underlying case with independent reason to enter a final judgment as to liability against plaintiffs. See MCR 2.603(A)(1); MCR 2.313(B)(2). Plaintiffs argue that the pleadings-based default occurred before the discovery-based default and, therefore, is of greater significance than the discovery-based default because all actions that happened after the pleadings-based default were nugatory and of no consequence. We disagree that the timing of the two defaults is important under the circumstances.
As also discussed, the discovery-based default was essentially inevitable, due to a combination of plaintiffs' own conduct and the trial court's attitude toward plaintiffs' discovery failures. Importantly, the discovery-based default was totally unrelated to the pleadings-based default, and insofar as we can determine from the orders available to us from the underlying action, the trial court treated them as independent. Although both defaults may have been proximate causes of plaintiffs' unfavorable outcome in the underlying action, only the discovery-based default can truly be considered a but-for cause of that outcome. Had defendants timely answered the second amended complaint, the discovery-based default would still have entered. Conversely, the record indicates that, as the trial court found, defendants did what they could to avoid the discovery-based default, but that default was not ultimately within their power to control. Plaintiffs cannot prevail in their legal malpractice claim regarding the pleadings-based default, because they cannot show that, but for that default, a more favorable outcome in the underlying proceedings would have resulted.
This case presents a situation in which plaintiffs would be obligated to establish that they would have been successful in defending against the liability claims in the underlying suit, which plaintiffs have not done. See Coleman, 443 Mich. at 63-64. We presume, strictly for purposes of resolving this issue, that plaintiffs would have prevailed in the underlying action had the defaults not been entered, but we make no such holding, and we emphasize that such success is not immediately obvious.
V. PULVERDRYER'S CLAIMS
Lastly, plaintiffs argue that PulverDryer's claim did not expire because the statutory period of limitations was tolled when New filed the complaint. We disagree.
A legal malpractice action must be filed within two years of the date that the claim accrues. MCL 600.5805(8); Wright v Rinaldo, 279 Mich.App. 526, 529; 761 N.W.2d 114 (2008). The claim accrues on the date that the attorney discontinues serving the client in the matter from which the claim arose. MCL 600.5838(1); Wright, 279 Mich.App. at 528-529. "In a civil action, generally, the period of limitations is tolled and the action is commenced when a complaint is filed." Wood v Bediako, 272 Mich.App. 558, 562; 727 N.W.2d 654 (2006); see also MCL 600.5856(a). However, when "the filing of the complaint is ineffective," it "does not work a tolling of the applicable period of limitation." Scarsella v Pollak, 461 Mich. 547, 552-553; 607 N.W.2d 711 (2000). Corporations are not technically prohibited from self-representation in court; however, they must do so only through agents who are themselves licensed to practice law, and an agent of a corporation does not become authorized to practice law by appearing on the corporation's behalf. Detroit Bar Ass'n v Union Guardian Trust Co, 282 Mich. 707, 711-712; 281 N.W. 432 (1938); Fraser Trebilock Davis & Dunlap PC v Boyce Trust 2350, 497 Mich. 265, 277; 870 N.W.2d 494 (2015). Although persons have a constitutional right to self-representation, representing another entity as a non-lawyer constitutes unauthorized practice of law. Shenkman v Bragman, 261 Mich.App. 412, 416; 682 N.W.2d 16 (2004).
At the time Wright was decided, the applicable statutory provision was located, in identical form, at MCL 600.5805(6).
The parties agree that the attorney-client relationship between plaintiffs and defendants ended on February 15, 2017, when defendants formally withdrew as counsel in the underlying case. Pursuant to MCL 600.5805(8), plaintiffs had until February 15, 2019, to file a complaint against defendants for legal malpractice. Even though New filed a complaint on February 14, 2019, ostensibly on behalf of himself and PulverDryer, he did so in propria persona and not as an attorney on behalf of PulverDryer. Therefore, New's act of filing the complaint on behalf of PulverDryer constituted the unauthorized practice of law, so the complaint was ineffective and a nullity as to PulverDryer. The complaint was only effective as to New, so it did not toll the time period by which PulverDryer needed to submit an effective complaint against defendants for legal malpractice. See Scarsella, 461 Mich. at 552-553. By the time plaintiffs retained counsel, the limitations period had expired, so PulverDryer would not have been able to bring legal malpractice claims against defendants. The trial court correctly dismissed PulverDryer as a party.
Affirmed.
Amy Ronayne Krause, Thomas C. Cameron, Michelle M. Rick, JJ.