Offer of Judgment Rule remains viable tool for trial lawyers pursuing a prompt and fair resolution
Before January 1, 2022, Michigan Court Rule 2.403 required all civil cases in Michigan to be submitted to case evaluation as a form of alternative dispute resolution.
During case evaluation, the parties provide brief summaries of the case to a panel of attorneys and orally advocate their positions. The panel then issues an award that the parties can either accept or reject. If both parties accept the panel’s award, the case is settled for that amount; if both parties reject the award, the case would continue forward towards trial. The wrinkle prior to January 1, 2022, was that in cases where one party accepted and another party rejected, the rejecting party risked sanctions in the form of paying the accepting party’s attorneys’ fees. Specifically, if the matter were to proceed to a verdict, and the rejecting party did not better its position relative to the case evaluation award by at least 10%, the rejecting party would be responsible for paying the opposing counsel’s actual costs, which includes attorneys’ fees.
However, as of January 1, 2022, MCR 2.403 was significantly revised. For starters, case evaluation is no longer mandatory. Parties are permitted to opt-out for other forms of alternative dispute resolution. More notably, the bite of case evaluation sanctions was removed entirely. For cases that proceed with case evaluation, there is no longer any consequence for rejecting a case evaluation panel’s award. As a result, mutual acceptance of an award between the parties is far less likely and less cases are settled through the case evaluation process.
The Michigan Offer of Judgment Rule under MCR 2.405 remains a powerful tool for encouraging the efficient settlement of disputes.
MCR 2.405 allows any party to serve a settlement proposal on an opposing party. If, within the time specified in the rule, the opponent accepts the proposal, one of the parties may file the offer and notice of acceptance with the court and the case is settled. However, if the party that rejects an offer of judgment does not do better than what the offer was at trial, the rejecting party must pay the other party’s actual costs and attorney’s fees. Moreover, if the adversary presents a counteroffer, costs and attorney fees are awarded to whichever party the judgment favors. In the simplest terms, the party whose offer is furthest from the ultimate judgment is typically required to pay the more accurate party’s attorney fees.
Offers of judgment made early in litigation will be valid at the time of trial, and sanctions will apply to those costs and attorneys’ fees accrued after the rejection of the prevailing party’s last offer or counteroffer. As a result, both sides are encouraged to be more proactive and thorough in settlement negotiations, as pending offers or counteroffers will lead to mounting costs and fees over time. This creates a powerful incentive for the parties to objectively evaluate the case’s true value and to reach a swift and reasonable resolution.
McDonald Hopkins’ attorneys have significant expertise evaluating case value and effectuating a reasonable resolution that is in our client’s best interests. If you have questions about litigation, dispute resolution, and offers of judgment, contact a member of our litigation team.