Appendix — Cohl v. Otsego County, Michigan (No. 06-1417)
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QSupreme Court of the Vbnited States
COHL, STOKER, TOSKEY & MCGLINCHEY, P.C.,
Petitioner
V.
46% CIRCUIT TRIAL COURT,
Respondent
AND
OTSEGO COUNTY,
Respondent
ON PETITION FOR WRIT OF CERTIORARI TO THE
MICHIGAN SUPREME COURT
APPENDIX IN SUPPORT OF
PETITION FOR WRIT OF CERTIORARI
ALLAN FALK (P13278)
Counsel of Record and Counsel for Petitioner
ALLAN FALK, P.C.
2010 CIMARRON DRIVE
OKEMOS, MI 48864-3908
(517) 381-8449
APPENDIX
Appendix A — Michigan Supreme Court order
denying leave to appeal, issued Nov. 1, 2006 ...........++. la
Appendix B - Michigan Supreme Court order
denying rehearing, issued January 29, 2007 ...........0+: 3a
Appendix C — Michigan Supreme Court order
denying leave to appeal, issued Nov. 1, 2006 .............. 5a
Appendix D — Michigan Supreme Court order
denying rehearing, issued January 29, 2007 ...........:+. 7a
Appendix E — Michigan Court of Appeals opinion
Speed May DS, BOTS nevencscesresonsrseseveveenevenneenmanonsssensaseninehs 8a
Appendix F - Trial court order issued May 30, 2003,
granting sanctions against petitioner ............sseseeeees 52a
Appendix G Trial court opinion issued May 30,
2003, granting sanctions against petitioner ................ 55a
Appendix H Amici curiae petition of Michigan
Judges Ass’n, Michigan District Judges Ass’n, and
Michigan Probate Judges ASS’N ........cccsccseecseeeeeeereeeees 92a
Appendix! 46" Circuit Trial Court v Crawford Co,
476 Mich 131 (2006) (majority decision only) ............. 98a
Appendix J Michigan State Treasurer’s Report .... 134a
Appendix K Michigan Supreme Court orders
of November 1, 2006, remanding for
EL rntnidneceeien cocececesesevesseecnscecovervesees 145a
Appendix L Michigan Judges Ass’n annual
ET ilitcintsincceecisetnescsveccesecsesvoecssseseotsosecesureses 149a
Appendix M Michigan Judges Ass’n Articles
of Incorporation and Assumed Name Certificate ... 155a
Appendix N Judge Kolenda’s autobiographical
NE ir eehandsaveries vecevsnvereesseesscorscvorescereececees 162a
Appendix O Application for leave to appeal,
Mich S Ct No. 128882) (sanctions as to 46" Circuit
occ cccncsescsucescusnesoterecesecerse 164a
Appendix P Application for leave to appeal,
Mich S Ct No. 128884 (sanctions as to Otsego
TT dEis Hitslttesesrernriecesoreoorcesreevereesoecesesseseovecosensees 235a
Appendix Q - United States Constitution,
Amendment Fourteen, Section 1 .......ccccceeecceeeeeeeee eens 306a
Appendix R_ Transcript of Oral Argument,
Michigan Court of Appeals, Feb. 15, 2005
EE Eis heisspavstvsoneeesseoseerconceeossccenoverersecessesserseees 307a
Appendix S 28 U.S.C. §§1443(1) and 1446(b) ......... 346a
Appendix T Michigan Supreme Court Admin
RON BOR, A) BVLICIN. CIV ..00:c0ccccccccoscovrnecesesvescsssoeeee 347a
Appendix U Mich. Comp. L. §§600.8148 and
GDS sssnisesusinssaricnscatitainiviestssmiteadaniiniliaanntiiiiiieiliineds 350a
Appendix V Michigan Court Rules 2.114(E) and
2326 CGF) QUE GIG tiveesecssonsincisnsniinntittiaitcinmmbndinias 35la
Appendix W Michigan Uniform Budgeting and
_ Accounting Act (UBAA) (Sections 16-20) ............. 352aa
Appendix X Mich. Const. 1963, art. 6, §§1
RIVE SD .cocersnrviniovestiivisiannaviniesaniintdipiabaeinatniias 357a
Appendix Y Mich. Comp. L. §600.226(1) ...........+. 358aa
Appendix Z Rule 2 of the Rules Concerning
the Judicial Conference of Michigan .............:s0000 359a
Appendix AA Michigan Code of Judicial
ene CIEE SE nctercscncsscrtcticendnncinniaaceniien 360a
Michigan Supreme Court Order 11/1/2006
Order
Entered: Nov. 1, 2006
128882
46" Circuit Trial Court
Plaintiff, Counter-
Defendant, Third-
Party Plaintiff-Appellee
Vv
County of Crawford and
Crawford County Board
of Commissioners
Defendants,
and
Kalkaska County,
Third Party Plaintiff,
Counter-Defendant,
and
County of Otsego,
Appendix A
Michigan Supreme Court
Lansing, Michigan
Clifford W. Taylor,
Chief Justice
Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Maura D. Corrigan
Robert P. Young, Jr.
Stephen J. Markman,
Justices
SC: 1228882
COA: 254181
Crawford CC: 02-005951-CZ
Third Party Defendant-Appellee
Cohl, Stoker, Toskey & McGlinchey, P.C.,
Appellant.
/
By order of December 28, 2005, the application for
leave to appeal the May 3, 2005 judgment of the Court of
Appeals was held in abeyance pending the decision in 46"
Circuit Trial Court v Crawford County (Docket No. 128878). On
order of the Court, the case having been decided on July 28,
la
Michigan Supreme Court Order 11/1/2006 Appendix A
2006, 476 Mich 131 (2006), the application is again
considered and, pursuant to MCR 7.302(G)(1), in leu of
granting leave to appeal, we VACATE in part the judgment
of the Court of Appeals and we REMAND this case to the
Court of Appeals, which shall hold this case in abeyance
pending its decision on remand in 46th Circuit Trial Court v
Crawford County (Court of Appeals Docket Nos. 246823,
248593 and 251390). If, after 46th Circuit Trial Court v
Crawford County .is decided on remand, the Court of Appeals
determines that Kalkaska and Crawford Counties are
responsible for the 46th Circuit Trial Court’s attorney fees,
the Court of Appeals shall consider whether Kalkaska and
Crawford Counties should be liable for sanctions when they
will be responsible for the fees of the attorneys that
responded to the sanctionable pleadings. In all other
respects, leave to appeal is DENJED, because we are not
persuaded that the remaining questions presented should be
reviewed by this Court.
The motions for immediate consideration and for
peremptory reversal are DENIED. The remaining motion for
miscellaneous relief is GRANTED. A public question being
involved, and in light of the relationships between the
parties, no costs are awarded.
KELLY, J., would deny leave to appeal.
I. CORBIN R. DAVIS, Clerk of the
Michigan Supreme Court, certify that the
foregoing is a true and complete copy of
the order entered at the direction of the
Court.
November 1, 2006 __—/s/ Corbin A. Davis
Clerk
2a
Michigan Supreme Court Order 1/29/2007 Appendix B
Order Michigan Supreme Court
Entered: Jan. 29, 2007 Lansing, Michigan
Clifford W. Taylor,
Chief Justice
128882 Michael F. Cavanagh
Elizabeth A. Weaver
46" Circuit Trial Court Marilyn Kelly
Plaintiff, Counter- Maura D. Corrigan
Defendant, Third- Robert P. Young, Jr.
Party Plaintiff-Appellee Stephen J. Markman,
Vv Justices
County of Crawford and
Crawford County Board SC: 1228882
of Commissioners COA: 254181
Defendants, Crawford CC: 02-005951-CZ
and
Kalkaska County,
Third Party Plaintiff,
Counter-Defendant,
and
County of Otsego,
Third Party Defendant-Appellee
Cohl, Stoker, Toskey & McGlinchey, P.C.,
Appellant.
/
On order of the Court, the motion for reconsideration
of this Court’s November 1, 2006 order is considered, and it
is GRANTED. In light of the fact that the circuit court did not
impose sanctions on Kalkaska or Crawford Counties in this
case, but only imposed sanctions on Cohl, Stoker, Toskey &
McGlinchey, P.C., and the parties concede that if sanctions
3a
Michigan Supreme Court Order 1/29/2007 Appendix B
are paid by Cohl, Stoker, Toskey & McGlinchey, P.C., the
46th Circuit Trial Court will not receive a double recovery of
its attorney fees, we VACATE that part of our November 1,
2006 order that vacated the Court of Appeals opinion in part
and remanded this case to the Court of Appeals. On
reconsideration, the application for leave to appeal the. May
3, 2005 judgment of the Court of Appeals is again
considered, and it is DENIED, because we are not persuaded
that the- questions presented should be reviewed by this
Court.
I, CORBIN R. DAVIS, Clerk of the
Michigan Supreme Court, certify that the
foregoing is a true and complete copy of
the order entered at the direction of the
Court.
January 29, 2007 __/s/ Corbin A. Davis
Clerk
4a
Michigan Supreme Court Order 11/1/2006 Appendix C
Order Michigan Supreme Court
Entered: Jan. 29, 2007 Lansing, Michigan
Clifford W. Taylor,
Chief Justice
128884 & (84) Michael F. Cavanagh
Elizabeth A. Weaver
County of Crawford and Marilyn Kelly
County of Kalkaska, Maura D. Corrigan
Plaintiffs Robert P. Young, Jr.
Stephen J. Markman,
Vv Justices
County of Otsego,
Defendant-Appellee SC: 1228884
COA: 254182
and Crawford CC: 02-010014-CZ
Cohl, Stoker, Toskey & McGlinchey, P.C.,
Appellant.
os /
By order of December 28, 2005, the application for
leave to appeal the May 3, 2005 judgment of the Court of
Appeals was held in abeyance pending the decision in 46"
Circuit Trial Court v Crawford County (Docket No. 128878). On
order of the Court, the case having been decided on July 28,
2006, 476 Mich 131 (2006), the application “is again
considered, and it is DENIED, because we are not persuaded
that the questions presented should be reviewed by this
Court.
Sa
Michigan Supreme Court Order 11/1/2006 Appendix C
The miscellaneous motion is GRANTED. A public
question being involved, and in light of the relationships
between the parties, no costs are awarded.
I, CORBIN R. DAVIS, Clerk of the
Michigan Supreme Court, certify that the
foregoing is a true and complete copy of
the order entered at the direction of the
Court.
November 1, 2006 s/ Corbin A. Davis
Clerk
6a
Michigan Supreme Court Order 1/29/2007 Appendix D
Order Michigan Supreme Court
Entered: Jan. 29, 2007 Lansing, Michigan
Clifford W. Taylor,
Chief Justice
128884(88) Michael F. Cavanagh
Elizabeth A. Weaver
County of Crawford and Marilyn Kelly
County of Kalkaska, Maura D. Corrigan
Plaintiffs Robert P. Young, Jr.
Stephen J. Markman,
V Justices
County of Otsego,
Defendant-Appellee SC: 1228884
COA: 254182
and Crawford CC: 02-010014-CZ
Cohl, Stoker, Toskey & McGlinchey, P.C.,
Appelant.
innmeniagan vahiusbinienaiaiinisats /
On order of the Court, the motion for reconsideration
of this Court’s November 1, 2006 order is considered, and it
is DENIED, because it does not appear that the order was
entered erroneously.
I, CORBIN R. DAVIS, Clerk of the
Michigan Supreme Court, certify that the
foregoing is a true and complete copy of
the order entered at the direction of the
Court.
january 29, 2007___/s/ Corbin A. Davis
Clerk
Michigan Court of Appeals opinion 5/3/05 APPENDIX E
STATE OF MICHIGAN
COURTOFAPPEALS
46TH CIRCUIT TRIAL COURT, FOR PUBLICATION
May 3, 2005
Plaintiff /Counter- 9:05 a.m.
Defendant/ThirdParty-
Plaintiff-Appellee, No. 254179
Vv Crawford Circuit Court
LC No. 02-005951-CZ
COUNTY OF CRAWFORD and CRAWFORD
COUNTY BOARD OF COMMISSIONERS,
Defendants /Counter-Plaintiffs /
Third-Party-Plaintiffs-Appellants,
COUNTY OF KALKASKA,
Third-Party-Plaintiff/
CounterDefendant-Appellant,
and
COUNTY OF OTSEGO,
Third-Party-Defendant-Appellee.
COUNTY OF CRAWFORD and COUNTY OF KALKASKA,
Plaintiffs- Appellants,
Vv No. 254180
Otsego Circuit Court
COUNTY OF OTSEGO, LC No. 02-010014-CZ
_ Defendant-Appellee.
[*2] 46TH CIRCUIT TRIAL COURT,
Plaintiff /Counter-Defendant/Third
Party-Paintiff-Appellee,
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
v No. 254181
Crawford Circuit Court
L.C. No. 02-011004-CZ
COUNTY OF CRAWPORD and CRAWFORD
COUNTY BOARD OF COMMISSIONERS,
Defendants /CounterPlaintiffs /
Third-Party-Plaintiffs,
COUNTY OF KALKASKA,
Third-Party-Plaintiff/CounterDefendant,
COUNTY OF OTSEGO,
Third-Party-Defendant-Appellee,
and
COHL STOKER TOSKEY & MCGLINCHEY PC,
Appellant.
COUNTY OF CRAWFORD and COUNTY OF KALKASKA,
Plaintiffs,
v No. 254182
Otsego Circuit Court
COUNTY OF OTSEGO, LC No. 02-010014-CZ,
Defendant-Appellee,
And
COHL STOKER TOSKEY & MCGLINCHEY PC,
Appellant.
Before: Zahra, P.J., and Neff and Cooper, JJ.
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
COOPER, J.
Kalkaska and Crawford Counties and the Crawford
County Board of Commissioners (the Counties) appeal as of
right in these consolidated appeals from various orders and
the judgment entered by Judge Dennis Kolenda (the lower
court) in the litigation pursued by the 46th Circuit Trial
Court (the Trial Court) seeking adequate funding. The
Counties also appeal from various orders entered in the
related suit filed by the Counties against Otsego County, the
control unit for the Trial Court. We affirm.
[*4] I. Facts and Procedural Background
These consolidated cases arise out of a funding
dispute between the Trial Court and two of its funding
units—the Counties. A detailed narrative of much of the
history of this case is provided in 46th Circuit Trial Ct v
Crawford Co,’ an opinion issued by this Court following an
interlocutory appeal. In that appeal, this Court affirraed the
lower court’s award of attorney fees to the Trial Court based
on its inherent power to seek adequate funding. While that
appeal was pending, however, this case proceeded in the
lower court.
The 46th Circuit Trial Court was created by order of the
Michigan Supreme Court as an experiment in consolidating
the various levels of trial courts into one, unified trial court
system.’ The 46th Circuit was the only multi-county
experimental court created and included Otsego, Crawford,
and Kalkaska counties. During the early stages of
unification, the Trial Court concluded that all employees,
regardless of the county in which they physically worked,
should earn equal pay and receive equal benefits. Wages
needed to be redetermined, as many positions had been
eradicated and others had taken on_ consolidated
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
functions. Consequently, in the summer of 2000, Chief
Judge Alton Davis asked the employees to make cost-saving
concessions to serve as a bargaining chip in securing the
funding units’ approval of a retiree healthcare plan and an
improved pension plan. The employees agreed to phase out
longevity pay and dedicate a portion of all future wage
increases to fund the retiree benefits package. Employees
also agreed to accept a cost-saving PPO that offered less
coverage and had a higher prescription co-pay. Following
the funding units’ passage of resolutions approving these
plans, the Trial Court implemented the employee
concessions at substantial savings to the Trial Court and its
funding units.
During the August 29, 2000 meeting, at which the
Crawford County Board of Commissioners passed
resolutions approving the plans, the commissioners voiced
their concerns about becoming financially responsible for
potential future unfunded liability and over the low figure
represented as the annual retiree payment cap:’ Judge Davis
promised to put a “failsafe” provision in writing to outline
the method of handling any unfunded liabilities. Despite
these concerns, the Board passed the following resolutions at
the conclusion of the meeting:
MOTION by Hanson, seconded by Beardslee, to
authorize the County [to] pay 24% of $50,000
($12,000) for the year 2000 and that payment will
increase at 4% per year until 2017, and at that time
will pay an estimated $94,649 and that the Blue
Cross/Blue Shield medical supplement payment per
individual would be
1 46th Circuit Trial Court v Crawford Co, 261 Mich App 477;
lla
Michigan Court of Appeals opinion 5/3/05 APPENDIX E
682 NW2d 519 (2004), lv held in abeyance 687 NW2d 297
(2004) (pending the resolution of these consolidated
appeals).
2 As will be discussed in further detail later, the
“demonstration project” status of the Trial Court ended in
2004; however, the Trial Court continues to function as a
unified court system.
3 Judge Davis told the Board that each retiree would be
entitled to $4,087 per year; however, the Board was aware
that the correct figure was over $1,000 more.
[*5] capped at [sic] the year 2000 at $4,087.00 [and]
would increase at 4% per year until 2017 for an
employee to be eligible for $7,654.00 per year.
MOTION by Wieland, seconded by Hanson, to request
the [Trial] Court [to] not implement the MERS B-4
upgrade at this time, but recognize the change in the
2001/2002 budget cycle.
Later that day, Judge Davis learned that the correct
figure for the annual retiree payment was over $5,000, and
immediately informed the Crawford Board of
Commissioners of his error.*
Following this meeting, the Trial Court created a
comprehensive contract outlining the retiree benefits
package to serve as an informative guide for the Trial Court
and its employees. The coritract also included the promised
memorialization of the “failsafe” provision. Kalkaska and
Otsego counties immediately signed the contract, but
Crawford County refused. The Crawford Board of
Commissioners consulted with its auditor and labor counsel
after approving the retiree benefits package and was advised
that its approval was unwise. Crawford County was in the
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
middle of a budget crisis and was forced to cut many
county services. As a result, the Board claimed that it had
not approved the pension plan and was induced to approve
the retiree healthcare plan by the Trial Court's
misrepresentation of cost. This led to Crawford County’s
~ refusal in FY 2001, 2002, and 2003, to appropriate the full
amount of their 24% of the “rial Court’s requested operating
budget.’ Although Kalkaska County initially approved of the
retiree benefits package and fully funded the Trial Court, it
soon followed suit by rescinding its earlier resolutions and
cutting appropriations.
Following lengthy negotiation with its funding units, the
Trial Court filed suit against the Counties, seeking the
enforcement of the contract to implement the retiree benefits
package and adequate funding based on the constitutional
theory of inherent powers. The Counties filed a counterclaim
for declaratory judgment regarding their duty to fund the
Trial Court and defended against the contract claims based
on fraud. Otsego County was brought into the litigation by
the Counties, who also filed a separate suit against it. The
Counties asserted that Otsego County, as the Trial Court’s
contro] unit, had violated the Uniform Budgeting and
Accounting Act (UBAA)° by disbursing funds to the Trial
Court in excess of appropriations. The Counties also raised
a fraud claim against Otsego. The Counties’ fraud defense
and all claims against Otsego County were dismissed before
a trial on the merits began. Following a six-day trial in the
summer of 2003, the lower court ruled in favor of the Trial
Court on both its contract and constitutional theories in
pursuit of funding.’
4 This incorrect figure was never presented to Kalkaska
County.
5 Crawford County only fully funded the Trial Court in FY
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
2004, in exchange for the Trial Court’s voluntarily dismissal
of an additional funding claim for that year. Crawford
County has fully funded the Trial Court in FY 2005.
6 MCL141.421 et seq.
7 Further facts necessary to this appeal will be
discussed throughout this opinion where
(continued...)
[*6] II. Contract Claims
The lower court determined that the resolutions
passed by the funding units created an explicit contract
with the Trial Court to implement the retiree benefits
package. Even if the parties had not formed a contract, the
lower court determined that one could be implied. On
appeal, the Counties contend that the lower court
improperly interpreted the Crawford Board’s resolution
regarding the retiree healthcare plan as a valid acceptance,
rather than a counteroffer. The Counties also contend that
the Crawford Board’s resolution regarding the pension plan
was not an approval of the plan, but showed the Board’s
intent to table all discussion until the following year. We
disagree.
The lower court correctly determined that Crawford
County approved the retiree benefits package and formed a
valid contract with the Trial Court for its implementation.
Issues of contract interpretation are questions of law that
we review de novo.® Issues regarding the formation of a
valid contract are all questions of fact,’ which we review for
clear error.” The interpretation of a county resolution, like
the interpretation of a statute, is a question of law, which
we review de novo.”
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
We reject the Counties’ contention that the
resolutions passed by the Crawford County Board of
Commissioners did not amount to a valid acceptance of an
offer to implement the retiree benefits package.
“Decisions regarding the legitimacy of an offer and
acceptance revolve around the particular facts pertaining to
a specific transaction. . . .””"’ “‘[A]n acceptance sufficient to
create a contract arises where the individual to whom an
offer is extended manifests an intent to be bound by the
offer, through voluntarily undertaking some unequivocal
act sufficient for that purpose.’””’ The acceptance must be
unambiguous and strictly conform to the essential terms of
the offer.’ The Trial Court correctly asserts that the essential
term of the offer to implement the retiree healthcare plan is
the required annual appropriation, which would be
(...continued)appropriate.
8 Burkhardt v Bailey, 260 Mich App 636, 646; 680 NW2d 453
(2004).
9 See In re Costs & Attorney Fees, 250 Mich App 89, 97; 645
NW2d 697 (2002) (Costs I) (regarding whether a legitimate
offer has been made and accepted forming a valid contract);
Hajt v Prevention Ins Agency, Inc, 196 Mich App 84, 87-88;
492 NW2d 460 (1992) (regarding whether there was
consideration for a contract).
10 MCR 2.613(C); Alan Custom Homes, Inc v Krol, 256 Mich
App 505, 512; 667 NW2d 379 (2003).
11 Eggleston v Bio-Medical Applications of Detroit, Inc, 468
Mich 29, 32; 658 NW2d 139 (2003).
12 Costs I, supra at 97, quoting Patrick v US Tangible
Investment Corp, 234 Mich App 541, 549; 595 NW2d 162
(1999).
13 Id., quoting Kraus vu Gerrish Twp, 205 Mich App 25, 45; 517
NW2d 756 (1994).
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
14 Eerdmans v Maki, 226 Mich App 360, 364; 573 NW2d 329
(1997); Giannetti v Cornillie, 204 Mich App 234, 237; 514
NW2d 221 (1994), rev’d on other grounds 447 Mich 998; 525
NW2d 459 (1994) (only a material departure from the terms
of the offer invalidates an acceptance).
[*7] 24% of $50,000 for Crawford County. The
Crawford County Board of Commissioners clearly agreed to
this term in the resolution. The annual payment cap was not
an essential term. The change in amount did not affect the
overall appropriation of the funding units. Therefore, this
error was not a material deviation from an essential term
and Crawford County’s resolution was a valid acceptance.
Furthermore, the initial error in the representation of this
figure did not negate the mutual assent of the parties.
Fraud in the inducement is a defense to the formation of a
contract. However, the claimant must prove that it actually
relied upon a material misrepresentation.” The alleged
“misrepresentation” was not material. Additionally, as
will be discussed in great detail later, the lower court
properly dismissed the Counties’ fraud defense before trial
due to a lack of actual reliance.
We also disagree with the Counties’ contention
that the second Crawford County resolution did not
approve of the pension plan. The only evidence
supporting the Counties’ claimi is a series of affidavits by
the individual commissioners stating their actual intent in
passing the resolution. A county board speaks only
through its official minutes and resolutions and their
import may not be altered or supplemented by parol
evidence regarding the intention of the _ individual
members.’ The clear language of the second resolution
shows the Board’s intent to approve of the plan, but delay
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
its implementation until the following cycle.
We also reject the Counties’ contention that Crawford
County’s failure to sign the written contract outlining the
retiree benefits package vitiated the existence of a contract.
The official minutes and resolutions of the August 29, 2000
meeting memorialize the agreement of the parties. They
officially voted to approve the retiree benefits package and
the Trial Court relied on those resolutions to the detriment
of its employees. While Judge Davis created a formal
written contract regarding the retiree benefits package,
Crawford County’s signature on this extraneous writing was
not required as evidence of the agreement.”
The Counties also argue that any continued duty to
perform under the contract ended when they passed
resolutions rescinding their prior approval of the retiree
benefits package. However, a party to a contract may not
unilaterally modify or waive a contract.”* Finally, we
15 Samuel D Begola Services, Inc v Wild Bros, 210 Mich App
636, 639; 534 NW2d 217 (1995).
16 Tavener v Elk Rapids Rural Agricultural Sch Dist, 341 Mich
244, 251; 67 NW2d 136 (1954), quoting Stevenson v Bay City,
26 Mich 44, 45 (1872).
17 We reject the dissent’s assertion that the contract between
the Counties and the Trial Court to implement the retiree
benefits package lacked consideration as counties have a
preexisting statutory duty to fund the courts. The Trial Court’s
employees supplied the consideration for this contract by
giving up rights to which they were otherwise entitled in
order to secure the Counties’ agreement to the benefits
package.
18 Quality Prods & Concepts Co v Nagel Precision, Inc, 469 Mich
362, 372-373; 666 NW2d 251 (2003); H ] Tucker Assocs, Inc v
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
Allied Chucker & Engineering Co, 234 Mich App 550, 564-
565; 595 NW2d 176 (1999).
[*8] reject the Counties’ contention that the contract
was invalid because its term exceeded the term of the
current Board. There are many administrative functions that
must be handled on a day-to-day basis that may require
contracts lasting longer than the normal term of office.”” If
a successor board had the power to repudiate these types of
contracts at will, a government entity’s ability to do business
would be compromised.” Accordingly, the lower court
properly determined that the Trial Court had formed a
valid contract with its funding units to implement the retiree
benefits package.
III. Right to Seek Adequate Funding Based on Inherent
Powers
The lower court also determined that the Trial Court
had the inherent power to file suit seeking adequate funding
from the Counties. Whether the Trial Court has the inherent
power to compel the Counties to fund its retiree benefits
package is a constitutional question, which we review de
novo.” In discussing a court’s inherent power to seek
adequate funding, this Court reasoned as follows in the
previous appeal:
The principles the lower court relied on in this
regard have been accepted in Michigan for at least the last
thirty-five years. In Wayne Circuit Judges v Wayne Co, 383
Mich 10, 33; 172 NW2d 436 (1969) (Wayne I), Justice Black,
with Justice Dethmers concurring, noted the “unanimous”
authority that a court charged with the responsibility for
judicial service “receives and accepts with that responsibility
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
the inherent power and duty to take such action as is
reasonably necessary to fulfil the constitutional obligation
thus undertaken.” On rehearing two years later, the
Supreme Court adopted the Black-Dethmers opinion as the
opinion of the Court, noting that it had been “authenticated”
by decisions handed down by the supreme courts of
Missouri and Pennsylvania:
In view of the developing strength of the principle
of inherent power and duty of the judiciary, called into
play as it was by the opinion of Justices Dethmers and
Black aforesaid, this Court is constrained on rehearing to
adopt that opinion; adding only that the judiciary . . . must
stand foursquare in support of the constitutional doctrines
which, most recently in the
19 See Harbor Land Co v Grosse Ile, 22 Mich App 192; 177
NW2d 176 (1970) (finding that a township board had the
power to enter into a long-term contract for the
construction and operation of a waste treatment plant).
20 As we affirm the lower court’s determination that an express
contract existed to implement the retiree benefits package, we
need not reach the lower court's alternate determination that
an implied contract existed. However, we note that, if
necessary, a contract could be implied under the
circumstances to prevent the Counties’ unjust enrichment as
the Trial Court’s employee concessions had already been
implemented. See Martin v East Lansing Sch Dist, 193 Mich
App 166, 177; 483 NW2d 656.
21 Harvey v Michigan, 469 Mich 1, 6; 664 NW2d 767 (2003).
[*9} [Commonwealth v Tate, 442 Pa 45; 274 A2d 193
(1971)} case, were declared. “Must” we have accented,
just as the Tate Court stressed “must possess” in this terse
and pointed summary of constitutional necessity . . . :
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“Expressed in other words, the Judiciary must
possess the inherent power to determine and compel
payment of those sums of money which are
reasonable and necessary to carry out its
mandated responsibilities, and its powers and duties
to administer Justice, if it is to be in reality a co-
equal, independent Branch of our Government. This
principle has long been recognized not only in this
Commonwealth but also throughout our Nation.”
[Wayne Circuit Judges v Wayne Co, 386 Mich 1, 8-
9; 190 NW2d 228(1971) (Wayne II ), quoting Tate,
supra at 52.]
A more recent and oft-cited discussion of the
inherent power doctrine is found in Employees & Judge of the
Second Judicial Dist Court v Hillsdale Co, 423 Mich 705; 378
NW2d 744 (1985) [hereinafter Hillsdale]. The opinion of the
majority agreed with the dissenting justices that “an inherent
power analysis is implicated when judicial functions are in
jeopardy” and reiterated that the “Court has stood
‘foursquare’ in support of the constitutional doctrine of
inherent power” while concluding that the doctrine was not
implicated under the facts of the case at hand. /d. at 724.
In a dissent concurred in by two other justices, Justice Riley
noted that, “irrespective of specific grant by constitution or
legis!ation,’” the inherent power doctrine supplies “‘authority
to irwcur and order paid all such expenses as are reasonably
iuecessary for the holding of court and the administration of
the duties of courts of justice.’” Id. at 734 (Riley, J.,
dissenting), quoting 20 Am Jur 2d, Courts, § 78, p 440, and
59 ALR3d, § 2, p 574. Justice Riley explained that [this
inherent authority of the court is nonajudicatory. It does not
deal with justiciable matters. It only relates to the
administration of the business of the court.
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One aspect of the administration of district and
circuit courts is the determination of the operational needs
of the court and the establishment of a budget to provide for
these needs. [Hillsdale, supra at 734-73 5.]
It is clear from these and other precedents, see,
e.g., Judicial Attorneys Ass’n v Michigan, 459 Mich 291, 299-
300; 586 NW2d 894 (1998); Livingston Co v Livingston Circuit
Judge, 393 Mich 265, 273; 225 NW2d 352 (1975); Ottawa Co
Controller v Ottawa Probate Judge, 156 Mich App 594, 602-603;
401 NW2d [*10] 869 (1986); [17th Dist Probate Ct v Gladwin Co
Bd of Comm ‘rs, 155 Mich App 433, 45 1-452; 401 NW2d 50
(1986)], that a court has inherent power to take whatever
steps are reasonably necessary to fulfill the judicial
function.'7!
In taking those steps reasonably necessary to fulfill
the judicial function, a court must remember that “‘each
branch must recognize and respect the limits on its own
authority and the boundaries of the authority delegated to
the other branches.’”” A court has the inherent power to
seek “financing that is reasonable and necessary.”** When a
court files suit seeking adequate funding, it must show that
the funding unit has failed to appropriate funds to allow the
court to function “servicably as a co-equal branch of
Michigan’s government.”” This Court defined “serviceability”
as follows: -
Serviceability must_be defined in the context of
Justice Black’s opinion, i.e. “urgent”, “extreme”, “critical”,
and “vital” needs. A serviceable level of funding is the
minimum budgetary appropriation at which statutorily
mandated functions can be fulfilled. A serviceable level is
not met when the failure to fund eliminates the function or
creates an emergency immediately threatening the existence
of the function. A serviceable level is not the optimal level. A
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
function funded at a serviceable level will be carried out in a
barely adequate manner, but it will be carried out. A
function funded below a serviceable level, however, will not
be fulfilled as required by statute.!*!
The lower court’s determination that the Trial
Court’s requested budget, specifically the requested
appropriation for the retiree benefits package, was
reasonable and necessary represents a factual finding that
we review for clear error.” The lower court found that the
Trial Court had reduced its staff to the “bare bones” and
would be unable to function at a serviceable level if required
to make more cuts. The lower court further found that
funding the requested benefits was indispensable to
serviceability. Many employees had taken on extra
duties and all employees had accepted concessions to
their detriment. Continuing to operate without the
bargained-for retirement benefits package would cause
morale to plummet and competent
22 46th Circuit Trial Court, supra at 488-490.
23 Employees & Judges of the 2d Judicial Dist Ct v Hillsdale Co,
423 Mich 705, 717; 378 NW2d 744 (1985) (Hillsdale), quoting
United States v Will, 449 US 200, 208; 101 S Ct 471; 66 L Ed 2d
392 (1980).
24 17th Dist Probate Ct v Gladwin Co Bd of Comm 'rs, 155 Mich
App 433, 454-455; 401 NW2d 50 (1986) (Gladwin), citing
Livingston Co v Livingston Circuit Judge, 393 Mich 265; 225
NW2d 352 (1975), and Hillsdale, supra.
25 Wayne Circuit Judges v Wayne Co, 383 Mich 10, 33; 172
NW2d 436 (1969) (Wayne 1).
26 Wayne Co Prosecutor v Wayne Co Bd of Comm ‘rs, 93 Mich App
114, 123-124; 286 NW2d 62 (1979). See also Wayne Co Sheriff v
Wayne Co Bd of Comm ‘rs, 148 Mich App 702, 708; 385 NW2d
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Michigan Court of Appeals opinion 5/3/05 APPENIMX E
267 (1983).
27 MCR 2.613(C); Alan Custom Homies, supra at 512. See also
Gladwin, supra at 456-457.
[*11] employees to take alternate employment, leading to a
decrease in productivity. These findings were based on the
record evidence and were not clearly erroneous.
The Counties’ contention that the Trial Court’s
budget request was excessive and unreasonable in light of
the state of the Counties’ budgets is without merit.
Although the Counties assert that they were financially
unable to fund the Trial Court at the requested level, they
have not demonstrated that the requested funds were
necessary to fund other “obligations having the same rank
and priority.” Second, the Trial Court presented evidence
that certain employees in each of the funding units
received identical pension benefits.” Third, the Trial Court
was not required to select a retiree benefits package
consistent with that provided by any of the three funding
units. AO 1998-5 provides that a court with multiple funding
units may implement “a single, uniform personnel policy
that does not wholly conform with specific personnel polices
of any of the court’s funding units.” Finally, we note that the
lower court's factual determination that the retiree benefits
package was a reasonable and necessary expense to the
continued serviceability of the Trial Court is consistent with
longstanding precedent finding similar court expenses to be
within reason.” Accordingly, the lower court did not commit
clear error by determining that the requested appropriation
to fund the retiree benefits package was reasonable and
necessary to the continued serviceability of the Trial Court.
Michigan Court of Appeals opinion 5/3/05 APPENDIX E
IV. Award of Attorney Fees to the Trial Court Based on
Inherent Powers
A. Entitlement to Attorney Fees
Early in the litigation, the lower court determined
that the Trial Court was entitled to recover its attorney fees
expended in seeking adequate funding. The funding units
were each required to provide one-third of these fees. As a
court has the inherent power to seek adequate funding, it
must also have the inherent power to seek attorney fees
in order to bring such litigation. These attorney fees are
based on the constitutional power of a court, not a party’s
success on the merits. Furthermore, as the policy of this state
is to assess interest on awards of
28 Wayne Co Prosecutor, supra at 128; Wayne Circuit Judges v
Wayne Co, 15 Mich App 713, 728-729; 167 NW2d 337 (1969),
rev'd in part on other grounds Wayne I, supra.
29 See AO 1998-5 § II. See also Livingston, supra at 288 (“In
determining the amounts to be appropriated for judicial
needs, a board of commissioners necessarily considers
other county needs and the wage levels of other employees
paid with county funds.”).
30 AO 1998-5 § VI.
31 See Judicial Attorneys Ass’n v Michigan, 459 Mich 291, 297;
586 NW2d 894 (1998), vacated in part on other grounds 460
Mich 590; 597 NW2d 113 (1999); Branch Co Bd of Comm'rs v
Service Employees Internat’! Union, Local 586, 168 Mich App
340, 349; 423 NW2d 658 (1988); Ottawa Co Controller v Ottawa
Probate Judge, 156 Mich App 594; 401 NW2d 869 (1986)
(finding that a court has the power to set expenses, such as
employee wages, within the funding unit’s overall
appropriations to the court). See also Cameron v Monroe Co
Probate Ct, 457 Mich 423, 427-428; 579 NW2d 859 (1998)
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
(finding that “the supervision and administration of court
personnel is a necessary expense of justice for which the
county is expected to pay”).
[*12] attorney fees and costs, the lower court properly
determined to assess interest at the statutory rate. The Trial
Court was entitled to the fees incurred in litigating all its
claims, as the contract claims were part and parcel of the
inherent powers funding litigation. The lower court also
determined that the Trial Court was entitled to attorney fees
under MCL 49.73, which requires a county to secure and
fund outside counsel for a county official, including a judge,
who is named as a defendant, based on the Counties’
counterclaims.
The Counties filed an interlocutory appeal of the
lower court’s order. In the prior published opinion, this
‘Court affirmed the lower court’s order. However, this Court
found that MCL 49.73 was inapplicable under the
circumstances as the Trial Court had instituted this action.”
Furthermore, this Court determined that the amount of
attorney fees that a court may recover in funding litigation
must be limited. Therefore, a court may only recover
attorney fees at an hourly rate that was 150% of that charged
by its funding unit’s counsel, and only 150% of the total fees
expended by the funding unit.”
The Counties continue to challenge the lower court's
order and now contend that the previous published opinion
of this Court was erroneous as well. Even if we were to
agree with the Counties’ challenges, we would be unable
to provide any relief. We are bound by the previous
published opinion of this Court.“ We are further bound by
the law of the case doctrine.
Michigan Court of Appeals opinion 5/3/05 APPENDIX E
The law of the case doctrine holds that a ruling by
an appellate court on a particular issue binds the appellate
court and all lower tribunals with respect to that issue.
Thus, a question of law decided by an appellate court will
not be decided differently on remand or in a subsequent
appeal in the same case.!”!
Accordingly, we decline to review the Counties’
claimed errors.
B. Relieving Otsego County of its Duty to Pay the Trial
Court’s Attorney Fees
The Counties also challenge the lower court’s order
relieving Otsego County of its responsibility to fund the
Trial Court’s attorney fees and reapportioning its duty
among the other two counties. Although Otsego County
sought to be indemnified by the Counties for its share of the
attorney fees, the lower court instead determined that it
was entitled to relief based on equitable principles. In doing
so, the lower court rejected the Counties’ attempt to
reapportion
32 46th Circuit Trial Court, supra at 486-488.
33 Id. at 500-591.
34 MCR 7.215(C)(2); Catalina Marketing Sales Corp v Dep 't of
Treasury, 470 Mich 12, 23; 678 NW2d 619 (2004). The fact that
the Counties appealed this decision to the Michigan Supreme
Court, which held the application in abeyance pending the
resolution of these consolidated appeals, has no effect on
the prior opinion’s precedential value. MCR 7.215(C)(2);
Johnson v White, 261 Mich App 332, 347; 682 NW2d 505
(2004).
35 Ashker v Ford Motor Co, 245 Mich App 9, 13; 627 NW2d 1
(2001), citing Driver v Hanley (After Remand), 226 Mich App
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
558, 565; 575 NW2d 31 (1997).
[*13] the fees according to the Trial Court funding
formula, under which Otsego County was responsible for
the lion’s share of the budget.
We review a lower court’s decisions in equity de
novo and all underlying findings of fact for clear error.”
“Jurisdiction of the courts of equity is recognized where ‘the
facts involved in litigation are such that a claimed legal
remedy, although available, will not afford adequate
relief’”’’ Otsego County’s indemnification claim
sounded in tort as it was based on the Counties’
“wrongdoing” in failing to fund the Trial Court and
instigating this litigation. As the underlying suit is
constitutional in nature, such indemnification would be
precluded, denying Otsego County adequate relief. Otsego
County was brought into this litigation with “clean
hands”---it had continually funded the Trial Court at the
requested level. Accordingly, it was entitled to the equitable
relief granted by the lower court.”
Additionally, the lower court properly found that the
Counties were not immune from Otsego County’s motion to
be relieved from its duty to pay the Trial Court’s attorney
fees. As noted previously, the Trial Court’s right to collect
attorney fees arose from its constitutional inherent powers.
Those powers may not be abridged or restricted by statute, by
allowing another governmental unit to be immune while
violating that constitutional power.”
The Counties also challenged the propriety of the
lower court's order as Otsego County failed to present the
claim to the Counties’ clerks pursuant to MCL 46.11(m).
Although the lower court determined that the statute only
requires the presentment of claims based on private wrongs,
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
nothing in the plain language of the statute supports that
theory. However, it would have been futile for Otsego County
to present its claim for relief to the Counties as the Counties
continually fought the payment of the Trial Court’s attorney
fees and were seeking the reapportionment of those fees in
their favor.
C. Determining the Reasonableness of the Trial Court's
- Attorney Fees Without an Evidentiary Hearing
In the previous appeal, the Counties challenged the
lower court’s determination regarding the reasonableness of
the Trial Court’s requested attorney fees. This Court
determined that the Counties forfeited the right to an
evidentiary hearing by failing to request one. This Court also
36 Eller v Metro Industrial Contracting, Inc, 261 Mich App 569,
571; 683 NW2d 242 (2004).
37 Mooahesh v Dep ‘t of Treasury, 195 Mich App 551, 561; 492
NW2d 246 (1992), quoting Wild v Wild, 360 Mich 270, 276-
277; 103 NW2d 607 (1960).
38 Rose v Nat'l Auction Group, 466 Mich 453, 462-463; 646
NW2d 455 (2002).
39 Persichini v William Beaumont Hosp, 238 Mich App 626,
638-639; 607 NW2d 100 (1999). See also Smith v Dep ’t of
Public Health, 428 Mich 540, 544; 410 NW2d 749 (1987).
40 See Manor House Apartiments v City of Warren, 204 Mich
App 603, 606; 516 NW2d 530 (1994); Miller Bros v Dep ‘t of
Natural Resources, 203 Mich App 674, 681; 513 NW2d 217
(1994) (finding that a party need not take futile actions).
{[*14] determined that the Counties would not be entitled to a
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
hearing, even if one had been requested, because the parties
presented a sufficient record from which the lower court could
determine the reasonableness of counsel’s hourly rates and
the hours expended on the litigation.”
As the litigation continued, the lower court granted
the Trial Court’s continuing requests for attorney fees
without evidentiary hearings, although requested by the
Counties. We review a lower court’s determination regarding
the necessity of an evidentiary hearing regarding the
reasonableness of requested attorney fees for an abuse of
discretion.” As the Trial Court continually presented
evidence of the same nature and quality, the lower court
properly determined with each request that the record was
sufficient for a review without an evidentiary hearing.
V. Fraud and Innocent Misrepresentation
In defense of the Trial Court's contract claims, the
Counties asserted that Crawford County was induced to
approve of the retiree healthcare plan, as Judge Davis
misrepresented the actual costs of the plan. Specifically, the
Counties claimed that Judge Davis represented that the
annual payment per retiree would be over $1,000 less than
the actual cost. The Counties also asserted that they were
induced to approve of the pension plan upgrade without
adequate cost information as the Trial Court and Otsego
County misrepresented that they did not possess actuarial
valuations regarding this plan.
All of these claims were dismissed prior to trial, as
they lacked factual support. A letter written by Crawford
County Controller, Paul Compo, to the Counties’ counsel,
Mr. Cohl, on December 17, 2001, became public during
discovery. In this letter, Mr. Compo admitted that the Crawford
County Board of Commissioners was aware of the correct
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
annual payment figure before passing the resolution
approving the plan and included the incorrect figure in the
resolution to cause a reaction.” Based on this letter, the
lower court dismissed the Counties’
41 46th Circuit Trial Court, supra at 502-504.
42 Id. at 502.
43 The letter states in relevant part:
[Implementation Order 2000-11] states that each of the funding
units had passed resolutions approving the shift in benefits.
This is not entirely true. Crawford passed a motion to
approve the caps in retirement health care insurance,
knowing the numbers were wrong as a way to “call the
[Trial Court's] bluff.”
+
The [Trial Court] also included a copy of the minutes for
the Special Board Meeting of August 29th, 2000. During
this meeting [sic] the Board agreed to fund the retirement
health care as proposed for 17 years. They did not agree to
the terms and conditions outlined in the proposed contract.
They agreed to this
(continued...)
[*15] fraud defense against the Trial Court and imposed
sanctions upon the Counties and their counsel for filing a
frivolous defense. The lower court also dismissed the
Counties’ claim that the Trial Court misrepresented actuarial
valuations regarding the pension upgrade. The Counties
learned by records received through a FOIA request before
this litigation commenced that the Trial Court did not possess
any relevant actuarial valuations. None of the valuations
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E_
analyzed the proposed pension plan and each contained a
disclaimer that it was inapplicable to other levels of benefits.
The lower court declined to sanction the Counties for raising
the defense on this ground.
Before trial, the Counties voluntarily dismissed
their fraud claim against Otsego County. In 2001, Otsego
County passed a resolution approving the pension plan.
This resolution indicated that the approval was based on
an actuarial valuation prepared in January of 2001. During
discovery, Otsego County admitted that it never possessed
the cited valuation and based its resolution approving of the
pension plan on form language provided by MERS. The
lower court sanctioned the Counties and their counsel for
raising this claim as the Counties could not allege that they
relied on a resolution and actuarial valuation dated after
their own resolutions approving the pension plan.
The Counties now challenge the lower court’s
dismissal of their fraud claims against the Trial Court
pursuant to MCR 2.1 16(C)(10).“ We review a lower court's
determination regarding a motion for summary disposition
de novo.” A motion under MCR 2.1 16(C)(10) tests the factual
support of a party’s claim.” “In reviewing a motion for
summary disposition brought under MCR 2.1 16(C)(10), we
consider the affidavits, pleadings, depositions, admissions, or
any other documentary evidence submitted in the light most
favorable to the nonmoving party to decide whether a
genuine issue of material fact exists.”“’ Summary
disposition is appropriate only if there are no genuine issues
of material fact, and the moving party is entitled to
judgment as a matter of law.
The elements of fraudulent misrepresentation
are (1) the [declarant] made a material misrepresentation,
(2) the representation was false, (3) when making the
representation, the [declarant] knew or should have known it
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
was false, (4) the [declarant] made the representation with the
intention that the [induced party} would act upon it, and (5)
the [induced party] acted upon it and suffered damages
(...continued)
because they believed the information provided on this issue
by the [Trial Court] was erroneous and would cause the
{Trial Court] to react.
44 The lewer court actually granted the Trial Court’s motion to
strike the Counties’ fraud defense. However, the lower court
based its decision on the lack of factual support for the
claims. Accordingly, we will review the lower court's
decision as a motion for summary disposition pursuant to
MCR 2.1 16(C)(10).
45 Beaudrie v Henderson, 465 Mich 124, 129; 631 NW2d 308
(2001).
46 Auto-Owners Ins Co v Astied Adjusters & Appraisers, Inc, 238
Mich App 394, 397; 605 NW2d 685 (1999).
47 Singer v American States Ins, 245 Mich App 370, 374; 631
NW2d 34 (2001). 48 MacDonald v PKT, Inc, 464 Mich 322, 332;
628 NW2d 33 (2001).
[*16] as a result. A claim of innocent misrepresentation is shown
if a party to a contract detrimentally relies on a false
representation in such a manner that the injury suffered by
that party inures to the benefit of the party who made the
representation. [49]
The letter from Mr. Compo clearly indicates that
the Board knew of the error and purposely included the
figure in its resolution. Furthermore, several commissioners
admitted at their depositions that they knew of the error or
believed the figure was incorrect. Accordingly, the lower
court properly dismissed this defense. Furthermore, as the
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
Trial Court actually did not possess any relevant actuarial
valuations to disclose to the Counties, the lower court
properly dismissed that defense as well.
However, the Counties also challenge the use of
Mr. Compo’s letter by the opposing parties and the lower
court. The Counties assert that the letter was protected by
the attorney-client privilege and, therefore, any injustice
caused as a result of its use must be remedied. The Trial
Court and Otsego County do not dispute that the letter
would be protected by the attorney-client privilege;
however, they assert that the Counties waived their right
to assert that privilege. Whether a party has waived the
attorney-client. privilege is a question of law, which we
review de novo.” :
The Trial Court and Otsego County first relied
upon the letter during Mr. Compo’s deposition. The
Counties objected to its use at that time; however, neither party
could determine how the letter was disclosed. Although the
Counties contend that opposing counsel received this letter by
improper means, the Counties concede for purposes of this
appeal that the letter was disclosed to the opposing parties
inadvertently during discovery. Following Mr. Compo’s
deposition, the Trial Court and Otsego County continually
relied on the letter in seeking the dismissal of the Counties’
fraud claims and in seeking sanctions for these frivolous
claims. However, the Counties failed to reassert their
objection to the use of the letter based on the attorney-client
privilege until five months after the last fraud claim had been
dismissed and three months after the lower court had entered
its final judgment on the merits. The attorney-client
privilege is personal and may only be waived by the
client.” The client’s waiver of that privilege cannot be
predicated upon an inadvertent disclosure; it must be “’an
intentional, voluntary act and cannot rise by implication.’”
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
While the inadvertent disclosure of the letter did not waive
the Counties’ right to assert the privilege, the Counties’
failure to object over a prolonged period of time is a voluntary
and intentional act evincing the Counties waiver of that
49 Novak v Nationwide Mut Ins Co, 235 Mich App 675, 688;
599 NW2d 546 (1999).
50 As neither party disputes that the letter would be protected
by the privilege, we will assume for purposes of this appeal
that the privilege applies.
51 Leibel v General Motors Corp, 250 Mich App 229, 240; 646
NW2d 179 (2002).
52 Paschke v Retool Indus, 445 Mich 502, 518 n 15; 519
NW2d 441 (1994), quoting In re Passmore Estate, 50 Mich
626, 627; 16 NW 170 (1883); Letbel, supra at 240.
53 Sterling v Keidan, 162 Mich App 88, 91; 412 NW2d 255
(1987).
[*17] privilege. Granting the Counties relief now, after their
extended acquiescence to the use of the letter throughout
this litigation, would result in a waste of judicial time and
resources. Accordingly, we affirm all actions taken as a
result of the use of this letter.
VI, Standing Under the UBAA
Prior to trial, the lower court sua sponte questioned
the Counties’ standing to raise claims against Otsego County
based on the UBAA. After giving the parties an opportunity
to brief the issue, which the Counties neglected to do, the
lower court found that the UBAA clearly provides that only
the Attorney General and prosecuting attorney have
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
standing to institute a civil action for a violation of the act.™
Therefore, the lower court dismissed the Counties’ claims
to the extent they were based on the UBAA.” The lower
court also sanctioned the Counties’ counsel for filing these
claims when the lack of standing was self-evident.
Whether a party has standing is a question of law
that we review de novo.” Generally, to have standing, “a
party must have a legally protected interest that is in
jeopardy of being adversely affected.”” A party raising a
claim must have “’some real interest in the cause of action,
or a legal or equitable right, title, or interest in the subject
matter of the controversy.’” However, the Counties’ claims
are governed by statute. This Court has already held that,
according to the plain language of that statute, the only
parties with standing to bring an action under the UBAA are
the Attorney General and prosecuting attorney.*
Accordingly, the lower court properly dismissed the
Counties’ claims against Otsego County for lack of standing.
We also reject the Counties’ contention that the lower
court should not have raised the issue of standing. The
Counties contend that the Trial Court waived its right to
raise this defense by failing to include the defense as a
motion for summary disposition under MCR 2.11 6(C)(5) in
its first responsive pleading pursuant to MCR 2.11 6(D)(2).
However, this Court has determined that a standing defense
need not be raised under MCR 2.1 16(C)(5); it could also be
raised under MCR 2.11 6(C)(8), which can be raised at any
time.” Furthermore, we see no need to prohibit a lower court
from considering an issue of its own accord, especially where
that consideration will prevent further error for our review.”
54 MCL 141.440.
55 The Counties voluntarily dismissed these claims in their
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
entirety on the first day of trial when they could find no
other grounds upon which to base their claims.
56 Nat'l Wildlife Fed’n v Cleveland Cliffs Iron Co, 471 Mich 608,
612; 684 NW2d 800 (2004).
57 In re Foster, 226 Mich App 348, 358; 573 NW2d 324 (1997).
58 Rayford v Detroit, 132 Mich App 248; 347 NW2d 210 (1984).
59 See Kaiser v Schreiber, 258 Mich App 357, 369-371; 670
NW2d 697 (2003), rev’d on other grounds 469 Mich 944; 670
NW2d 671 (2003). See also MCR 2.1 16(D)(3).
60 See LME v ARS, 261 Mich App 273, 287; 680 NW2d 902
(2004); Paschke v Retool Indus (On Rehearing), 198 Mich App
702, 706; 499 NW2d 453 (1993), rev’d on other grounds 445
Mich
(continued...)
[*18] VII. Sanctions for Frivolous Claims and Defenses
The Counties and their counsel challenge the
imposition of sanctions for filing a frivolous fraud defense
against the Trial Court and for filing a frivolous fraud claim
and claims predicated upon the UBAA against Otsego
County. We review a lower court’s determination that a
claim or defense is frivolous for clear error. A determination
is clearly erroneous when, although there is sufficient
evidence to support it, we are left with a definite and firm
conviction that a mistake has been made.” Pursuant to MCR
2.114(D), an attorney or party that signs a pleading certifies
that “to the best of his or her knowledge, information, and
belief formed after reasonable inquiry, the document is well
grounded in fact and is warranted by existing law or a good-
faith argument for the extension, modification, or reversal
of existing law[.]”” Sanctions may be imposed on the
attorney, client or both for a violation of this rule. These
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
sanctions “may include an order to pay to the other party or
parties the amount of reasonable expenses incurred because
of the filing of the document, including reasonable attorney
fees.”” A party raising a frivolous claim or defense is also
subject to costs pursuant to MCR 2.625(A)(2) and MCL 600.259
1 as follows:
1. Upon motion of any party, if a court
finds that a civil action or defense to a
civil action was frivolous, the court
that conducts the civil action shall
award to the prevailing party the costs
and fees incurred by that party in
connection with the civil action by
asserting the costs and fees against the
nonprevailing party and their attorney
2. The amount of costs and fees awarded
under this section shall include all
reasonable costs actually incurred by
the prevailing party and any costs
allowed by law or by court rule,
including court costs and reasonable
attorney fees.
(3) As used in this section:
(a) “Frivolous” means that at least 1 of the following
conditions is
met:
(ii) The party had no reasonable basis to believe
that the facts underlying that party’s legal position
were in fact true.
(...continvume?}502; 519 NW2d 441 (1994).
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
61 Kitchen v Kitchen, 465 Mich 654, 661-662; 641 NW2d 245
(2002); In re Attorney Fees & Costs, 233 Mich App 694, 701;
593 NW2d 589 (1999).
62 MCR 2.1 14(D)(2).
63 MCR 2.1 14(D){3).
64 MCR 2.625(A)(2) directs that costs may be charged
pursuant to the statute.
[*19] (iii) The party’s legal position was devoid of
arguable legal merit.'*!
As noted previously, the lower court properly
determined that Crawford County had actual knowledge
that the annual payment cap represented by Judge Davis
was incorrect at the time the resolution was passed. Their
counsel learned of this fact one year before the lawsuit
was initiated. Accordingly, the lower court properly
determined that the Counties’ fraud defense against the Trial
Court was frivolous at the time it was filed and, therefore,
imposed sanctions against both the Counties and their
counsel.”
Also as noted above, it is clear from the plain
language of the UBAA and binding precedent of this Court
that the only parties with standing to raise a claim under
that statute are the Attorney General and prosecuting
attorney. This authority was available long before counsel filed
these claims in this litigation. As these were statutory
claims, counsel could have no argument that standing was
conferred on any other ground. Accordingly, the lower court
also properly imposed sanctions against counsel for filing the
UBAA claims against Otsego County.
The Counties and their counsel also challenge the
lower court’s imposition of sanctions without first holding
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
an evidentiary hearing. As noted above, the Trial Court
presented a sufficient record from which the lower court
could determine the reasonableness of its fees without an
evidentiary hearing. Otsego County presented an
identically sufficient record, including detailed billing
statements and affidavits of counsel.” Therefore, no
evidentiary hearing was required to determine the
reasonableness of the fees imposed as sanctions. However,
the Counties also challenge the lower court’s determinations
regarding the percentage of counsel’s time used in
defending the claims for which sanctions were imposed.
Judge Kolenda presided over the entire proceeding and
was aware of the amount of time spent litigating the issues
in court. Furthermore, he equitably divided the fees
amongst each claim raised in the lawsuits. Under the
circumstances, this formula was a reasonable approximation
of the time actually expended and we find no abuse of
discretion.®
65 MCL 600.2591.
66 The dissent argues that these sanctions are duplicative as
the Counties were already required to pay the Trial Court's
attorney fees and costs and, therefore, were unnecessarily
punitive and a waste of taxpayer dollars. However, neither
the court rule nor the statute makes a distinction between
attorneys for private, versus public, clients. A careful review
of the record in this case would indicate that both the
proceedings before the lower court and this Court were
entirely frivolous. These sanctions are designed to reimburse
counsel for excess work necessitated by such meritless
claims and were properly imposed.
67 The Counties do not contest the reasonableness of the
hourly rates of Otsego County’s counsel.
68 See Costs I, supra at 104-106.
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
[*20] VI. Disinterested Judge
The Counties contend that SCAO improperly
assigned an interested judge in violation of AO 1998-5. The
order requires the assignment of a disinterested judge to hear a
case involving a funding dispute between a court and its
funding unit. The Counties failed to move for Judge
Kolenda’s disqualification in the lower court. Whatever
their articulated reason for failing to do so, it is fatal to their
claim. Accordingly, the Counties waived appellate review of
their challenge to the judicial assignment by failing te raise
an objection below.”
IX. Motion for Guidance
Shortly before we were scheduled to hear oral
argument in this case, the Counties filed a motion for
guidance asserting that the Trial Court ceased to exist on
August 1, 2004, with the passage of AO 2004-2. With that
order, the Michigan Supreme Court ended the
demonstration project status of the 46th Circuit Trial Court.
The Supreme Court also adopted the concurrent jurisdiction
plan proposed by the Trial Court. However, a review of the
concurrent jurisdiction plan clearly reveals that the Trial
Court intends to continue to function as a unified trial court
system. Accordingly, we reject the Counties’ frivolous
contention that the entire litigation must be dismissed.
Affirmed. |
/s/ Jessica R. Cooper /s/ Janet T. Neff
69 See MCR 2.003(C)(1), (3).
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
[*21]STATE OF MICHIGAN
COURTOFAPPEALS
46TH CIRCUIT TRIAL COURT, FOR PUBLICATION
May 3, 2005
Plaintiff /Counter- 9:05 a.m.
Defendant /ThirdParty-
Plaintiff-Appellee,
No. 254179
V Crawford Circuit Court
LC No. 02-005951-CZ
COUNTY OF CRAWFORD and CRAWFORD
COUNTY BOARD OF COMMISSIONERS,
Defendants /Counter-Plaintiffs /
Third-Party-Plaintiffs-Appellants,
COUNTY OF KALKASKA,
Third-Party-Plaintiff/
CounterDefendant-Appellant,
and
COUNTY OF OTSEGO,
Third-Party-Defendant-Appellee.
COUNTY OF CRAWFORD and COUNTY OF KALKASKA,
Plaintiffs-Appellants,
Vv No. 254180
Otsego Circuit Court
COUNTY OF OTSEGO, LC No. 02-010014-CZ
Defendant-Appellee.
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
[*22] 46TH CIRCUIT TRIAL COURT,
Plaintiff /Counter-Defendant /Third
Party-Paintiff-Appellee,
Vv No. 254181
Crawford Circuit Court
L.C. No. 02-011004-CZ
COUNTY OF CRAWFORD and CRAWFORD
COUNTY BOARD OF COMMISSIONERS,
Defendants/CounterPlaintiffs /
Third-Party-Plaintiffs,
COUNTY OF KALKASKA,
Third-Party-Plaintiff/CounterDefendant,
COUNTY OF OTSEGO,
Third-Party-Defendant-Appellee,
and
COHL STOKER TOSKEY & MCGLINCHEY PC,
Appellant.
COUNTY OF CRAWPORD and COUNTY OF KALKASKA,
Plaintiffs,
v No. 254182
Otsego Circuit Court
COUNTY OF OTSEGO, LC No. 02-010014-CZ
Defendant-Appellee,
And
COHL STOKER TOSKEY & MCGLINCHEY PC,
Appellant.
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
Before: Zahra, P.J., and Neff and Cooper, JJ.
ZAHRA, J. (concurring in part and dissenting in part).
I concur with the results reached in sections III, IV,
V, VI, VIEL, and IX of the majority opinion. | respectfully
dissent from sections II (addressing contract claims) and
VII (addressing the imposition of sanctions) of the majority
opinion. In short, I disagree with the majority’s conclusion
that a valid contract existed between the Counties and the
Trial Court. The Counties were under a preexisting duty to
appropriate reasonable funds necessary for the Trial Court
to carry out its constitutionally mandated duties. Thus, the
promise to fund the Trial Court cannot constitute adequate
consideration to support a contract. I further conclude that
the imposition of sanctions on the Counties served no
purpose except to punish the Counties. The sanctions
mandated under MCL 600.2591 and MCR 2.625(A)(2) are
intended only to compensate litigants for attorney fees and
costs expended in answering frivolous claims and defenses.
These [*24] sanctions should not be punitive. Here,
the Counties were already paying the Trial Court’s
reasonable attorney fees and costs. Therefore, the Trial
Court did not incur expenses as a result of the Counties’
pursuit of allegedly frivolous claims and defenses.’ Thus,
the award of attorney fees as a sanction was not
warranted. I would reverse that portion of the lower
court’s judgment that found the Counties in breach of
contract. I would also vacate the award of attorney fees and
costs as a sanction for pursuit of frivolous claimns and
defenses. In all other respects, 1 would affirm the judgment
of the lower court.
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
I. Contract Claims
The majority concludes in section II of its opinion that the
Counties breached an express contract with the Trial Court
to implement an improved employee retirement plan. I
dissent from this decision because the Counties could not
enter into a contract with the Trial Court to fund something
they had a preexisting duty to fund under statute and the
Michigan Constitution.
The duty of the counties to fund the circuit courts is
defined by statute. MCL 600.59 1(1) requires the county
board of commissioners in each county to annually
appropriate funds for the operation of the circuit court in
that county. Administrative Order No. 1998-5 sets forth
the details of court budgeting.” Not only do counties have
this statutory duty to fund circuit courts, but the judiciary
possesses the inherent constitutional power to compel the
counties to pay those sums of money that are reasonable
and necessary to carry out the courts’ mandated
responsibilities. 46th Circuit Trial Court v Crawford Co, 261
Mich App 477, 489; 682 NW2d 519 (2004), citing Wayne
Circuit Judges v Wayne Co, 386 Mich 1, 8-9; 190 NW2d 228
(1971) (Wayne II). This includes the power to fix the salaries
of its employees within the budget appropriations.
Employees and Judge of the Second Judicial District Court v
Hillsdale Co, 423 Mich 705, 722; 378 NW2d 744 (1985);
Ottawa Co Controller v Ottawa Probate Judge, 156 Mich App
594, 603-604; 401 NW2d 869 (1986). The judiciary also has
the inherent authority to manage its employees in order to
carry out its operations. judicial Attorneys Ass ‘n v
Michigan, 459 Mich 291, 297; 586 NW2d 894 (1998), vacated
in part on other grounds 460 Mich 590; 597
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
1 For purposes of addressing this issue, I shall assume
without deciding that the claims and defenses pursued by
the Counties were frivolous.
2 Administrative Order No. 1998-5, § II provides, in
pertinent part:
A court must submit its proposed and appropriated annual
budget and subsequent modifications to the State Court
Administrator at the time of submission to or receipt
from the local funding unit or units. The budget
submitted must be in conformity with a uniform chart of
accounts. If the local funding unit requests that a proposed
budget be submitted in line-item detail, the chief judge
must comply with the request. . . . A chief judge may not
enter into a multiple-year commitment concerning any
personnel economic issue unless: (1) the funding unit
agrees, or (2) the agreement does not exceed the
percentage increase or the duration of a multiple-year
contract that the funding unit has negotiated for its
employees. . ..
[*25] NW2d 113 (1999). “[T]he fundamental and ultimate
responsibility for all aspects of court administration,
including operations and personnel matters within the trial
courts, resides within the inherent authority of the judicial
branch.” Id. at 299. A court may file a civil action to
compel funding “[iJf, after the local funding unit has made
its appropriations, a court concludes that the funds
provided for its operations by its local funding unit are
insufficient to enable the court to properly perform its
duties and that legal action is necessary ....”
Administrative Order No. 1998-5, § III.
Simply put, the Counties were obligated by statute
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
and constitution to provide the Trial Court funding
adequate to fulfill its function. In fact, the Trial Court
asserted its inherent power to order adequate and
necessary funding under Administrative Order No. 1998-
5. The lower court concluded that funding for the
retirement plan was reasonable and necessary for the Trial
Court to fulfill its statutorily mandated function. The
majority has determined that there is sufficient evidence to
support the lower court's finding.’ “A pledge to undertake
a preexisting statutory duty is not supported by adequate
consideration.” Gen Aviation, Inc v Capital Region Airport
Auth (On Remand), 224 Mich App 710, 715; 569 NW2d 883
(1997). Because the Counties had a preexisting duty to
appropriate funds for the retirement plan, this duty could
not provide adequate consideration for any alleged
contractual relationship. Alar v Mercy Mem Hosp, 208
Mich App 518, 525; 529-NW2d 318 (1995). Further, the
Trial Court could not offer the Counties anything in
exchange for the Counties providing funding beyond that
required by statute. The funding of the trial courts is not a
bargained-for exchange subject to contract principles, but
is a statutory obligation for the funding units and a
constitutional right for the courts. Because the alleged
contract between the Trial Court and the Counties
lacked consideration, plaintiff's contract claims must fail.
3 The lower court’s finding that funding for the retirement
plan was reasonable and necessary for the Trial Court to
function is reviewed for clear error. MCR 2.613(C); Alan
Custom Homes, Inc v Krol, 256 Mich App 505, 512; 667
NW2d 379 (2003). Clear error exists only where a
reviewing court is left with a definite and firm conviction
that a mistake has been made. Id. While I have concerns
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
whether the funding of a retirement plan can be
necessary to the functioning of a court, | cannot conclude
definitively that the lower court erred in making this
finding, given the very unique circumstances surrounding
the merger of courts under the demonstration project
umposed upon the Counties.
4 Plaintiff alleged alternative counts of breach of contract and
contract implied in law (quantum meruit), which he was
entitled to do under MCR 2.11 1{A)(2). H ] Tucker & Assoc,
Inc v Allied Chucker & Engineering Co, 234 Mich App 550,
573; 595 NW2d 176 (1999). Quantum meruit is an equitable
principle. In re McKim Estate, 238 Mich App 453, 458; 606
NW2d 30 (1999)
“A contract implied in law is not a contract at all but
an obligation imposed by law to do justice even though
it is clear that no promise was ever made or intended. A
contract may be implied in law where there is a receipt of a
benefit by a defendant from a plaintiff and retention of the
benefit is inequitable, absent reasonable compensation.
However, this fiction is not applicable where there exists
a relationship between the parties that gives rise to the
presumption
(continued...)
[*26] Additionally, neither the statutes
governing appropriations for trial courts nor
Administrative Order No. 1998-5 provide that trial
courts and their funding units can enter contracts
concerning court appropriations. Rather, Administrative
Order No. 1998-5 speaks only of contracts between the
courts and their employees. Because courts have the
authority and responsibility for personnel matters, any
contract regarding the salaries or benefits of court
employees should be between the court and its employees,
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
not between the court and its funding unit.° The funding
unit must appropriate sufficient funds to satisfy a contract
between the court and its employees. If the funding unit
considers an agreement between a local judiciary and its
employees to be excessive because it appears that the
budget reflecting the contract will exceed the total
appropriation, the funding unit may file suit to test the
reasonableness and necessity of the provisions contained
in the agréement. Livingston Co, supra at 274; Stanley v
City of Ferndale, 115 Mich App 703, 709; 321 NW2d 681 (1982).
However, there is no legal authority supporting the pursuit
of contract claims between courts and their funding units.
Accordingly, I conclude that the contract claims lack legal
merit.
II. Sanctions for Frivolous Claims and Defenses
The majority concludes in section VII of its
opinion that the lower court properly sanctioned the
Counties for raising frivolous fraud claims and defenses. I
dissent because the sanction amounts to a duplicative
award of attorney fees and costs to the Trial Court.
If a party raises a frivolous.claim or defense, the
court must award the prevailing party costs and fees
incurred by that party in connection with the civil action.
MCL 600.2591; MCR 2.625(A)(2). “The amount of costs
and fees awarded under this section shall include all
reasonable costs actually incurred by the prevailing party
and any costs allowed by law or by
(...continued) that services were rendered gratuitously.”
[Id. at 457-45 8, quoting In re Lewis Estate, 168 Mich App 70,
74; 423 NW2d 600 (1988).]
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
In the present case, there can be no contract implied in law
because the Counties did not receive any benefit from the
Trial Court. The Counties were statutorily and
constitutionally obligated to fund the retirement plan
whether or not the Trial Court employees gave up
employment benefits in exchange for implementation of
the retirement plan.
5 In Judicial Attorneys Ass ‘n, supra at 299 n 6, our Supreme
Court noted:
Over the years, some trial court judges have arrived
at agreements under which the trial courts have allowed
their funding units to negotiate on their behalf- directly
with court employees. In those jurisdictions, typically, the
terms and conditions of the court employees vary little if
at all from those of the funding unit employees. In
contrast, in many jurisdictions the funding units have not
desired to play any role concerning the terms and
conditions of trial court employment. And in a few
jurisdictions, from time to time, courts and their funding
units have found themselves at loggerheads over
employment issues. It is this category that our case law
concerning separation of powers and court employment
arises.
[*27] assuming that the Counties’ fraud claims and
defenses were frivolous, the lower court had the duty to
award the Trial Court reasonable attorney fees and costs.
In re Attorney Fees and Costs, 233 Mich App 694, 705; 593
NW2d 589 (1999).
As recognized by the majority in section IV of its opinion,
this Court concluded in Crawford Co, supra at 490-491, that
under the Trial Court’s inherent powers, it was entitled to
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
recoup reasonable attorney_fees and costs it incurred in
litigating all of its claims. The majority in the present case
holds that the Trial Court is also entitled to attorney fees
and costs under MCL 600.2591 for raising frivolous claims
and defenses, thus effectively giving the Trial Court a
duplicate recovery of attorney fees and costs.
In McAuley v General Motors Corp, 457 Mich 513,
525; 578 NW2d 282 (1998), repudiated in part on other
grounds by Rafferty v Markovitz, 461 Mich 265, 273 n 6; 602
NW2d 367 (1999), our Supreme Court held that the plaintiff
was not entitled to recover duplicative attorr ey fees under
the mediation rule because he already had been fully
reimbursed for his reasonable attorney fees under
statute. In so holding, the Court explained that only
compensatory damages generally are available in
Michigan, and that punitive sanctions may not be
imposed. Id. at 519-520.° “Because the purpose of
compensatory damages is to make the injured party
whole for the losses actually suffered, the amount of
recovery for such damages is inherently limited by the
amount of loss; the party may not make a profit or obtain more
than one recovery.” Id. at 520. If a party has already been
fully reimbursed for reasonable attorney fees and costs,
there are no “actual costs” remaining to be reimbursed.
Id. at 521. However, if a party has been awarded
something less than a reasonable attorney fee and there are
actual costs remaining, an additional award may be
appropriate in some cases. Id.’
Here, the Trial Court was awarded reasonable
attorney fees and costs under the inherent power doctrine.
MCR 2.625(A)(2) and MCL 600.2591 also provide for an
award of coust costs and reasonable attorney fees. But
there is no indication in MCR 2.625(A)(2) or MCL 600.2591
that a double recovery would be appropriate. Further, the
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Michigan Court of Appeals opinion 5/3/05 APPENDIX E
purposes of neither the statute, court rule, nor Michigan
Constitution would be served by giving a court double
recovery at the expense of its funding unit—a sum that
would ultimately punish the taxpayers and result in the
court recovering money that is not necessary for its
functioning.
6 As the Court observed, there are “statutory exceptions to
this general rule that specifically provide for punitive
damages, e.g., MCL 15.240(7) .. ., MCL 600.29 1 1(2)(b). .
., MCL 750.53 9h(c).. . .” McAuley, supra at 520 n 8.-
7 In McAuley, supra at 522, our Supreme Court stated in
dicta that there are situations where independent policies
and purposes may serve to allow a party double recovery.
Id. at 522. But in Rafferty v Markovitz, 461 Mich 265 Mich 273 n
6; 602 NW2d 367 (1999), the Supreme Court repudiated “the
dicta in McAuley that left open the possibility of recovering
attorney fees under both a court rule and a statute where
each attorney-fee provision serves an independent
purpose.”
[*28] Because the Trial Court was already
reimbursed for reasonable attorney fees and costs, I
conclude that it is not entitled to a double recovery of these
costs. McAuley, supra at 522-524.
/s/ Brian K. Zahra
S5la
Trial Court’s May 30, 2003 Order APPENDIX F
STATE OF MICHIGAN
IN THE TRIAL COURT FOR THE
46™ JUDICIAL CIRCUIT
46TH CIRCUIT TRIAL COURT,
Plaintiff/Counter-Defendant,
Crawford County
VS Case No. 02-05951-CZ
CRAWFORD COUNTY, et al.,
Defendants/Counter-Plaintiffs,
/
CRAWFORD COUNTY, et al.,
Plaintiffs, Otsego County
Case No. 02-10014-CZ
vs
OTSEGO COUNTY, ORDER
Defendant.
/
At a session of said Court, held in the
Kent County Courthouse, in the City of Grand Rapids,
in said county on May 30, 2003.
PRESENT: Hon. Dennis C. Kolenda
Assigned Circuit Judge
For the reasons stated in a written opinion being filed
in these consolidated cases by this Court simultaneously
52a
Trial Court's May 30, 2003 Order APPENDIX F
herewith:
IT IS HEREBY ORDERED AND ADJUDGED that
the Trial Court’s motion for partial summary disposition be,
and the same hereby is, DENIED.
IT IS FURTHER ORDERED AND ADJUDGED that
the Trial Court’s motion to strike allegations of
misrepresentation and fraud be, and the same hereby is,
GRANTED.
IT IS FURTHER ORDERED AND
ADJUDGED that Otsego County’s motion for
summary disposition be, and the same hereby is, GRANTED
in large part. All claims predicated on alleged violations of
the Uniform Budgeting and Accounting Act are DISMISSED
with prejudice.
IT IS FURTHER ORDERED AND ADJUDGED
that Crawford County’s and Kalkaska County’s motion
for partial summary disposition seeking the dismissal of Counts
I and II of the Trial Court’s complaint in Case No. 02-05951-
CZ be, and the same hereby is, DENIED.
IT IS FURTHER ORDERED AND ADJUDGED that
Crawford County’s and Kalkaska County’s motion for partial
summary disposition seeking the dismissal, in part, of
Counts III and IV of the Trial Court's complaint in Case No. 02-
10014-CZ be, and the same hereby is, DENIED.
IT IS FURTHER ORDERED AND ADJUDGED that
the Trial Court’s motion for sanctions be, and the same hereby
is, GRANTED in part. The law firm of Cohl, Stoker, Toskey and
McGlinchey, PC, is to pay to counsel representing the Tnal
Court all fees and expenses incurred by them in defense of the
53a
- a eR ee,
Trial Court's May 30, 2003 Order APPENDIX F
allegation that the-TriatCourt misrepresented the anticipated
cost of the retiree healthcare fund at issue in these cases.
IT IS FURTHER ORDERED AND ADJUDGED that
Otsego County’s motion for sanctions be, and the same
hereby is, likewise GRANTED in part. Specifically, the law
firm of Cohl, Stoker, Toskey and McGlinchey, PC, is to
reimburse said county for all attorney fees and costs incurred by
it in defense of all claims by Crawford County and Kalkaska
County that Otsego County violated the Uniform Budgeting
and Accounting Act.
IT Is FURTHER ORDERED AND ADJUDGED that
counsel for the Trial Court and counsel for Otsego County
submit to this Court, within 14 days hereof, itemized
statements to support the amount of sanctions sought by
them as authorized immediately above. Counsel for
Crawford County and Kalkaska County may have seven
days thereafter to respond to the reasonableness and
necessity of the requested fees.
— —
IT IS FURTHER ORDERED AND ADJUDGED that
counsel for Otsego County submit to this Court, also within 14
days hereof, whatever information it has to substantiate the
contention that counsel for Crawford County or Kalkaska
County knew, or should have known that Otsego County did
not know of the MERS actuarial studies which were the subject
their claim of fraud by that county.
Because it resolves only a few of the claims in these
cases, this order does not close either of these cases.
/sf Judge Dennis Kolenda
Dennis C. Kolenda
Assigned Circuit Judge
54a
Trial Court's May 30, 2003 Opinion APPENDIX G
STATE OF MICHIGAN
IN THE TRIAL COURT FOR THE
46" JUDICIAL CIRCUIT
46TH CIRCUIT TRIAL COURT,
Plaintiff/Counter-Defendant,
Crawford County
VS Case No. 02-05951-CZ
CRAWFORD COUNTY, et al.,
Defendants/Counter-Plaintiffs,
PARR: 5
CRAWFORD COUNTY, et al.,
Plaintiffs, Otsego County
Case No. 02-10014-CZ
VS
OTSEGO COUNTY, OPINION
Defendant.
- Because these cases arise out of an intense dispute
between a court and the counties which fund it over their
inextricably intertwined, respective responsibilities for its
operation and funding, this Court’ must walk a tightrope.
' The traditional references herein to “this Court” are to the undersigned. All
references to the court embroiled in the dispute at the heart of this case will
be to “the Trial Court.”
55a
Trial Court’s May 30, 2003 Opinion APPENDIX G
MERC v Detroit Symphony Orchestra, 393 Mich 116, 124
(1974).?-This Court must both remain assiduously “mindful
of the delicate balance of power in each branch of our
tripartite form of government and of the dangers of stepping
into a ‘political thicket,’” Seventeenth District Probate Court v
Gladwin County Bd of Comm, 155 Mich App 433, 437 (1986), lv app
den 428 Mich 874 (1987) (hereinafter “the Gladwin County case”),
and not be deterred or intimidated by the inherent difficulty of
~ that task into shirking its duty to decide. A decision must be
made for the good of the public whom those government
entities serve.
Both the plaintiff Trial Court and the counties at odds
with it must accept that one branch of government being told
that it must yield to a proper decision by another branch is as
much honoring the constitutional separation of powers as is one
branch being told not to intrude into the prerogative of another.
Both directives are the same. “... [A]n indispensable ingredient
of the concept of co-equal branches of government is that ‘each
branch must recognize and respect the limits on its own
authority and the boundaries of the authority delegated to the
other branches,” Second District Court v Hillsdale Co, 423 Mich
705, 717 (1985) (hereinafter “the Hillsdale County case”), quoting
United States v Will, 449 US 200, 228; 101 S Ct 471; 66 L Ed 2d 392
(1980). Otherwise, the governed will be stripped of the
protections provided by the division of the government's
powers.
When a dispute is between a court and another branch
of government, it is, no doubt, disquieting to that other branch
* Although it involved judicial review of administrative decisions, the Detroit
Symphony Orchestra case involved balancing the responsibilities of
independent branches of government, namely: the ability of the judiciary to
review decisions by the executive.
56 a
Trial Court's May 30, 2003 Opinion APPENDIX G
to see the dispute submitted to the judiciary for resolution.
The fear of a preference is understandable. That is, however,
how our constitution divides powers. In our carefully crafted
scheme of limited government, the courts have been
assigned “responsibility for adjudicating each claim that
comes before [them] ...,“Berger v Weber, 411 Mich 1, 12
(1981), including claims which arise out of ¢’sputes with
the judiciary. Wickey v Employment Security Comm, 369 Mich 487,
492-493 (1963) (dissent per Souris, J.). In other words, for a
court to refrain from ordering performance required of
another co-equal branch, even if large sums of public money
must be expended as a result, is to violate the constitutional
separation of powers. Jail Inmates v Wayne Co Sheriff; 391
Mich 359, 364, 365, 369 (1974). Not utilizing an assigned
power is no less inappropriate than is usurping a power
assigned elsewhere.
No doubt, the surest way to assuage the concerns of
the county parties would be to rule in their favor, if not
consistently, at least with some frequency. Perhaps, they will
prevail in the end. Counties have often prevailed in cases like
these. This Court cannot rule in their favor now, however,
because, for the reasons stated below, they are not entitled to
prevail on most of the matters before the Court. The task of a
court is, first and foremost, to resolve the issues before it as the
facts and the law combine to dictate an outcome. Berger v
Weber, supra. That is the rule of law. The people of this State,
by the way they have divided the State’s power, have confided
certain decisions to the judiciary. For a court to do anything
other than decide the cases confided to it in the way the law
dictates would disobey the people, whose constitution is a
charter for us all.
57 a
Trial Court’s May 30, 2003 Opinion APPENDIX G
Instead, to demonstrate to the counties that its decisions are
not motivated by favoritism, personal interests or personal
predilections, this Court will adhere vigorously to the discipline
of careful legal reasoning and the citation of precedent for every
proposition underlying its decisions. Decisions so crafted
demonstrate that they are based on a continuity of principle
and on an inherited tradition. Having a majestic past commands
authority and integrity because such a history rebuts any
intimation of favoritism by one judge for other judges, Cox, The
Court and the Constitution (1987 ed). Only a legally sound
decision, not favoritism, can sport such a pedigree.
Statement of Facts
On May 31, 1996, the Michigan Supreme Court
directed the following courts in Crawford, Kalkaska and
Otsego Counties to begin a demonstration project to evaluate
the feasibility of merging into a single, fully consolidated
trial court: the 46th Circuit Court, which had long served all
three counties; the 83rd District Court, to the extent it served
Crawford County; the 87th District Court, to the extent it
served Kalkaska and Otsego Counties; the Crawford County
Probate Court; the Kalkaska County Probate Court; and the
Otsego County Probate Court. Those courts were designated the
46th Circuit Trial Court (hereinafter “the Trial Court”). See
Admin Order 1996-9.
The Honorable Alton T. Davis, then the Chief Judge of
the 46th Circuit Court, was appointed the Trial Court’s Chief
Judge with all the authority and responsibilities of that position
for each participating court. The judges, magistrates and referees
S— om ee en eee OS —-
* Originally, the demonstration project was to last two years. The project
remains in place. By Admin Order 1997-12, which was entered on
December 19, 1997, the projects were extended until further order of the
Supreme Court.
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Trial Court's May 30, 2003 Opinion APPENDIX G
within the three counties were assigned to serve the whole
court, not just the counties where they had been elected or were
employed, and the Trial Court was authorized to enter into
cooperative agreements with all three counties to test the
feasibility of consolidating essential administrative functions,
such as personnel and financial management, as well as
traditional judicial functions, such as case management.
Demonstration projects were also authorized in a
handful of other counties (Barry, Berrien, Isabella, Lake and
Washtenaw), but the 46th Circuit Trial Court is the only multi-
county project, making consolidation there especially
complex. The Circuit Court had employees in each county, and
their pay and benefits varied. Each Probate and District Court
was a distinct entity with employees whose pay, benefits and
responsibilities also varied, and complicating even more its
efforts at consolidation was the fact that the District Courts
serviced counties which were outside the 46th Circuit and,
therefore, were not part of the demonstration project,
precluding full consolidation. The 83rd District Court also
served Roscommon County, while the 87th District Court
also served Antrim County.
Eventually, the Legislature moved Antrim County
into the 86th District Court and gave Koscommon County its
own District Court. While that realignment eased consolidation
in some regards, it complicated consolidation in other regards.
Because Antrim County had served as the Control Unit for the
46th Circuit Court’s employees, the employees of the 87th
District Court in Kalkaska and Otsego Counties, and the Otsego
County Probate Court, a new Control Unit was necessary.
Otsego County agreed to assume that responsibility. While
Otsego County’s willingness to assume new duties helped the
consolidation effort, the judges of the Trial Court decided that
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Trial Court’s May 30, 2003 Opinion APPENDIX G
more was needed. Employee benefits needed to be improved,
standardized, and their administration centralized. Between
1996 and 2000, the components of the Trial Court had
experienced extraordinary employee turnover, a
phenomenon the judges attributed to low benefits and
fragmented policies. Standardizing and enhancing benefits
was seen as the way to retain employees.
(1)
: After extensive discussions with its components’
employees, the Trial Court was able to achieve
standardization of wages and most personnel policies. Some
upgrades were accomplished, but there were also significant
concessions from the employees. Some wages were frozen, and
just about everyone gave back some fringe benefits. After much
discussion, the employees agreed to switch from a $2.00 co-pay
for prescription medicines to a $10.00 deductible, to switch
insurance coverage to a less expensive and _ less
comprehensive PPO, and to set aside a portion of each
forthcoming pay raise to help fund healthcare benefits for
retirees. The employees also agreed to give up longevity pay.
In return, the Trial Court agreed to seek an
enhancement of the employees’ pensions to the MERS*
benefit level of B-4. Retirement packages for most court staff
varied from B-1 to B-3 benefit levels, depending upon which
court unit for which an employee worked. The employees of the
87th District Court participated in a simplified employee
pension (SEP) plan consisting of individual accounts.
Consolidation required, as a matter of pension law, a single
plan for all court employees, and the B-4 level was proposed.
* MERS is an acronym for Municipal Employees Retirement System of
Michigan.
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Trial Court’s May 30, 200% Opinion APPENDIX G
Several bargaining ur. © ‘vithin the Kalkaska County Sheriffs
Department had such benefits, as did elected and some
appointed officials in Otsego County. The Tria] Court also
agreed to seek better healthcare benefits for retirees. Typically,
relatively generous retirement programs are how government
has attracted good employees from the private sector, despite
the lower wages typically paid by the government. The judges
of the Trial Court believe that those upgrades are financially
feasible because they also believed that a sizeable share of the
cost will be offset by savings from the employees’
concessions.
(2)
Obviously, all changes in wages and benefits must be
coordinated with the counties. They fund and administer
them. Initially, the Trial Court worked with what was
dubbed the Tri-County Court Committee; it was composed
of representatives of the counties. Their objective was to reach
tentative agreements on Trial Court administration and funding
to be recommended to the three counties’ Boards of
Commissioners for ratification. Early on, and without
difficulty, the Trial Court and the Tri-County Court
Committee had reached consensus on numerous items, e.g.,
the centralization of administration. There was also a quick
consensus on a formula for sharing the expenses of the
consolidated Trial Court. Crawford County was to be
responsible for 24%; Kalkaska County for 32%; and Otsego
County for 44%. The Boards quickly ratified those
recommendations. Finally, there developed a consensus on
the proposed pension upgrade and retiree healthcare fund.
Because ratification had been routine, it was expected that the
boards would likewise accept the recommendations about
pensions and retiree health care.
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Trial Court’s May 30, 2003 Opinion APPENDIX G
On August 29, 2000, the Crawford County Board of
Commissioners met to consider the Trial Court’s proposed
retiree healthcare fund and pension upgrade. Not
unexpectedly, there was much concern about costs. Some
commissioners voiced concerns for “unfunded liabilities” and
pressed for procuring actuarial studies from Blue Cross/Blue
Shield on the anticipated cost of the retiree healthcare fund
and from MERS on the cost of the pension upgrade.
Eventually, motions were made to accept the healthcare fund
and “to hold off in 2001 and 2002” the pension upgrade.
Vigorous debate followed.
There was considerable confusion about the latter
motion. Initially, its proponent characterized it as proposing that
the Trial Court “should be asked to not put that [the pension
upgrade] into effect until 2004.” Then, she said that she was
proposing that the pension upgrade be left “open for
discussion” in the next budget cycle. The meetings were
tape-recorded and have been transcribed for purposes of the
motions at hand, but, unfortunately, the transcript is peppered
with notations of “inaudible,” that simultaneous speakers could
not be deciphered, and that the “tape sounds like it stops and
starts again.” It is conceded that there are gaps in the
recordings.
Ultimately, a vote was taken on both motions. There
was a roll call vote on the motion to accept the healthcare
proposal. There was a voice vote on the pension motion. In due
course, minutes were prepared by the Crawford County Clerk
and distributed to all the members of the Board in advance of
their next meeting. Those minutes were then formally approved
without correction by unanimous vote. They state that the
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following resolutions had been unanimously adopted at the
August 29 meeting:
“MOTION by Hanson, seconded by Beardslee, to
authorize the County [to] pay 24% of $50,000
($12,000) for the year 2000 and that payment will
increase at 4% per year until 2017, and at that time
will pay an estimated $94,649 and that the Blue
Cross/Blue Shield medical supplement payment per
individual would be capped at [sic] the year 2000 at
$4,087.00 [and] would increase at 4% per year until
2017 for an employee to be eligible for $7,654.00 per
year. Roll call: Corlew - aye; Golnick - aye; Hanson -
aye; Pinkelman -absent; Wieland - aye; Beardslee -
aye; Motion carried.
MOTION by Wieland, seconded by Hanson, to request
the [Trial] Court [to] not implement the MERS B-4
upgrade at this time, but recognize the change in the
2001/2002 budget cycle. Ayes (5) five; nays (0) none;
absent (1) one, Motion carried.”
Shortly after the meeting, but still that afternoon, Judge
Davis was informed by the Trial Court’s administrator that an
arithmetic mistake had been made in calculating the base annual
Blue Cross premium for the first year of the retiree healthcare
fund; that premium represented the benefit to retirees which
“would be capped.” Judge Davis immediately contacted the
Chair of the Board to inform her of the mistake. She and he
met, and she suggested substituting the sum of $5,763.00.
Judge Davis agreed. The Chair reviewed the new figure with
the other commissioners still present in the county building. No
objection was expressed then, or, for a considerable time
thereafter.
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Trial Court’s May 30, 2003 Opinion APPENDIX G
The erroneous low figure was, it turns out, no
surprise to Crawford County. Based on experience with Blue
Cross/Blue Shield, it knew that the premium to be paid for
the benefits being sought would be at least $5,763.00 figure. That
is what was being paid for comparable benefits for non-court
county employees. In his deposition, the Crawford County
Controller testified that he knew “precisely” what the premium
would be and that at least one commissioner, the most vocal
objector to accepting the Trial Court’s proposal, although he
voted for it in the end, also knew that “a mistake was made.”
The controller also acknowledged in his deposition, as did some
commissioners in their depositions, knowing that the projected
4% annual increase “was wrong.” Then, discovery
unearthed a letter in which the Crawford County Controller
wrote: -
“... Crawford [County] had passed a motion to approve
the caps in retirement healthcare insurance, knowing
the numbers were wrong as a way to ‘call the [Trial]
Court’s bluff’ Crawford [County] never agreed to the
B-4 benefit in retirement because we could never
receive an actuarial cost on the benefit.
.. During this meeting, the Board agreed to fund the
retirement healthcare as proposed for 17 years. They did
not agree to the terms and conditions outlined in the
proposed contract. They agreed to this because they
believed the information provided on this issue by
the Courts was erroneous and would cause the Court
to react...”
With regard to the pension upgrade, some Crawford
County Commissioners testified in depositions that they
understood the words “recogniz[ing] the change in the
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Trial Court's May 30, 2003 Opinion APPENDIX G
2000/2001 budget cycle” to mean “bring[ing] ... back” that
proposed upgrade the next year, ie., to have, in effect, tabled
that particular proposal. All of that county’s commissioners
have submitted affidavits which aver:
“It was my belief that the Crawford County Board of
Commissioners’ intent was not to approve the
implementation of the MERS B-4 Plan the next year,
but rather [to] wait until after receiving actuarials from
MERS to consider the change during the 2000-2001
Budget Cycle.”
Months before the meeting of August 29, 2000, the Trial
Court’s administrator had received from MERS actuarial studies
for pensions with a B-4 benefit level, but not the same benefit
program which the Court was proposing for its employees.
The proposals had changed since those studies had been
requested. They did not consider an E-2 rider, nor what is
described as “F-5050 20,” and those studies presumed an 8-year
vesting period, not the 10-year vesting period ultimately
proposed. The studies were not passed along to Judge Davis or
to the Board of Commissioners because the administrator did
not consider them pertinent. He came to that conclusion
because of the first paragraph in each:
“The valuation enclosed does address costs and rates for
ONLY the specific benefit program as requested.
These costs and rates may not be reliably combined or
modified to yield accurate actuarial results for other
benefits not included in the original requests. Thus, if the
parties agree to another benefit program (or combination
of programs) not identical to those contained in the
current valuations, you are obligated to advise MERS
in writing as soon as possible so that MERS actuary
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Trial Court's May 30, 2003 Opinion APPENDIX G
may determine the required contribution to support
the benefit plan selected” [emphasis in original].
That disclaimer tracked a directive stated on the form
which MERS had provided to the Trial Court to request
actuarial studies, and which that Court’s administrator had
filled out, signed and submitted. The form’s final paragraph
read: “...[I]f another benefit program is selected or negotiated
an Amendment to Request for Valuation must be
submitted.” Crawford County’s own independent auditor had
explained why at the meeting where the pension upgrade was
discussed and voted on. He explained that pensions consist
of numerous variables, and that “strange things happen” when
any of those variables are altered.
On September 12, 2000, the Kalkaska County Board
rejected both the retirees’ healthcare fund and pension
upgrade proposed by the Trial Court. However, at its
meeting on October 10, 2000, that Board voted “to approve the
benefit program for the courts as presented.” That Board had
been given the correct cost for the healthcare fund, but the
MERS actuarial studies were not disclosed for the same reason
they had not been presented to the Crawford County Board.
The Otsego County Board likewise approved the pension
upgrade and the healthcare fund for retirees proposed by the
Trial Court. Its resolution reflected, too, the correct “cap” for
retiree healthcare benefits, but it, too, was not told of the MERS
actuarial studies.
Immediately after the Crawford County Board voted,
Judge Davis offered to draft a document to memorialize his
assurances to that Board that the healthcare fund would pay
benefits only so long as employee contributions kept it
solvent. Some commissioners had been concerned about the
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Trial Court's May 30, 2003 Opinion “APPENDIX G
prospect of a sizeable unfunded liability. Those commissioners
appeared placated by the limitations accepted by Judge Davis.
He promptly submitted the promised document, and it said
what had been promised, but Crawford County delayed
signing it, and, ultimately refused. The Chairs of the Kalkaska
County and Otsego County Boards did sign, however,
immediately upon presentation.
On December 4, 2000, Judge Davis issued an
implementation order which recited that “[eJach of the Funding
Units has passed resolutions accepting the benefit shifts which
are governed by this order.” True to its title, that order directed
implementation of the various changes in employees’ benefits,
including their concessions. Thereupon, all the Trial Court’s
employees were transferred to a central payroll administered by
Otsego County; the Blue Cross/Blue Shield coverage was
changed; the co-pay for prescription drugs was increased; and
longevity pay was phased out. Both Crawford County’s and
Kalkaska County’s MERS assets were transferred to Otsego
County, and it began paying the invoices from MERS, which
it continues to do, and billing the other counties for their shares.
The healthcare fund began in 2001 and now has a substantial
balance. Otsego County and the employees are making their
promised contributions, and until recently, Kalkaska County
contributed its share.
(3)
On December 11, 2001, the Kalkaska County Board
rescinded its resolution of October, 2000, approving the
retiree healthcare fund and the pension upgrade. It did so, it
said, to “review the thick packets from Crawford County” and to
“join with Crawford County for some serious discussion.” On
February 1, 2002, Crawford County passed a resolution
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Trial Court’s May 30, 2003 Opinion APPENDIX G
rescinding its acceptance of the healthcare fund for retirees. Its
resolution of rescission was silent with regard to the pension
upgrade. The Otsego County Board has not rescinded its
acquiescence in the benefits program. It continues to honor
that acceptance and, in effect, to partially subsidize the other
counties, while this case remains unresolved, by making
payments for all the Trial Court’s employees, payments for
which it is not being reimbursed. The employees have not
rescinded their concessions, and the counties have retained
the benefits of those concessions.
Statement of Proceedings
When a facilitated mediation, conducted jointly by
the Michigan Association of Counties, represented by a
commissioner from Eaton County, and the Michigan Judges’
Association, represented by Judge Richard Lamb from
Kalamazoo County, failed to achieve an amicable resolution,
Chief Judge Davis gave the notice required by Admin Order
1998- 5(111)(1) of the Trial Court’s intent to sue Crawford
County. At that time, both Otsego and Kalkaska Counties were
cooperating. When the mandatory 30-day waiting period passed
without a resolution, the Trial Court filed Case No. 02-5951-
CZ against Crawford County. That was done on November
19, 2002.
Count I alleges breach of an explicit contract. The Trial
Court alleges that the three counties had come to an agreement
on, among other things, the pension upgrade and the healthcare
fund for retirees, but that Crawford County had reneged on its
commitment. A breach of an implied contract is alleged in
Count II. Specifically, the Trial Court contends that, because
Crawford County has had the benefit of the concessions
traded for the healthcare fund and the pension upgrade, it
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Trial Court’s May 30, 2003 Opinion APPENDIX G
cannot legally refuse to fund those benefits, even if there is no
actual agreement regarding them. Count III alleges that
Crawford County failed during the 2001 and 2002 budget
years to provide sufficient funds to the Trial Court to enable
it to operate. Count IV makes the same claim regarding the
2003 budget year. According to the Hillsdale County case,
courts may institute suit against their funding units if there is
disagreement about essential funding.
Crawford County answered the Trial Court’s
complaint, first, with denials of any contract, whether
explicit or implied, and of any underfunding. It, then, filed a
countercomplaint. Its Counts I and I seek a declaratory
judgment that the Trial Court exceeded its authority when it
implemented the pension upgrade and retirees’ healthcare fund.
Count II alleges that the Trial Court misrepresented the cost of
the retiree healthcare proposal and the lack of actuarial
projections for the pension upgrade. “Silent fraud” is alleged in
Count IV. Specifically, Crawford County asserts that the Trial
Court had a duty to disclose the actuarial projections which it
did have, even if they did not relate to the specific pension
upgrade under consideration. Those misrepresentations,
assert Crawford County, vitiated any agreement which
might otherwise be enforceable.
On the same day that Crawford County filed its
counterclaim, Kalkaska County intervened in Case No. 02-
5951-CZ. That county is asking, for all practical purposes, for
permission to back out of its acceptance of the benefits
enhancement on the same grounds that Crawford County is
seeking to avoid any acceptance. That position was not
unexpected because, just a few days earlier, Crawford and
Kalkaska Counties had filed Case No. 0210014-CZ against
Otsego County. In that case’s Counts | and II, those counties
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Trial Court’s May 30, 2003 Opinion APPENDIX G
accuse Otsego County of improperly implementing the
pension upgrade and the retirement healthcare fund, and
Count II alleges that Otsego County colluded with the Trial
Court to withhold key information about the cost of the
pension upgrade.
The first rulings asked of this Court related to
attorney fees. The Trial Court claimed that the counties are
obligated to pay for the attorneys assisting it in these cases and
in the dispute which preceded their filing. This Court agreed in
an opinion dictated from the bench. Later, it decided that the
counties’ obligation for fees should be equal, but opined that
Otsego County might have a claim against Crawford and
Kalkaska Counties for reimbursement of what it had to pay.’ It
is those counties which are creating the dispute. Otsego County
has implemented the Trial Court’s benefits proposals, and it
is siding with that court in these cases. On April 30, 2003,
Otsego County filed a counterclaim in Case No. 02-10014-CZ
asking for reimbursement. That counterclaim is not now
before this Court. The time for answering it has just expired.
Based on disclosures during intense, expedited
discovery, all the parties have filed motions for summary
disposition and/or partial summary disposition. It is those
several motions which are being addressed and resolved by this
opinion. Crawford and Kalkaska Counties contend that it is
indisputable that there was no agreement, either explicit or
implied, to enhance any of the Trial Court’s employees’
pensions or post-employment healthcare benefits, and that
those benefits are not essential to the functioning of the Trial
Court, meaning that their funding cannot be mandated. The
Tria] Court responds that Crawford and Kalkaska Counties’
allegations of fraud are frivolous and that, therefore, because
te wae ee
* An appeal of those rulings is pending.
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Trial Court’s May 30, 2003 Opinion APPENDIX G
its contract claims have been shown to be indisputable, it is
entitled to summary judgment on its Counts I and II. Finally,
the Trial Court contends that Counts III and IV present fact
questions.
Otsego County filed a motion which insists that there is
absolutely no evidence of any fraud, intentional or innocent, by
it and that all of its actions as the control unit for the Trial Court
have been proper. In their brief in response to Otsego County’s
motion, counsel for Crawford and Kalkaska Counties withdrew
the claims of fraud by Otsego County. That withdrawal was
confirmed by their counsel on May 1, 2002 at oral argument on
the several motions before this Court. At oral argument on all
the pending motions, their counsel identified the Uniform
Budget and Accounting Acf (hereinafter “UBAA”) as the
principal basis for their remaining claim.
Finally, the Trial Court and Otsego Counties have
also filed motions asking for sanctions. They both insist that
the other counties’ fraud allegations in Case No. 02-05951-CZ-
have always been groundless, and Otsego County insists, in
addition, that their allegations in Case No. 02-10014-CZ of
unauthorized conduct by it are also groundless. Because
groundless claims violate MCR 2.114(D), sanctions are
mandated by MCR 2.114(E), Otsego County contends. The
Trial Court asks that an appropriate portion of its attorney fees
be assessed against opposing counsel. Otsego County asks that
it be reimbursed a portion of its fees by Crawford and
Kalkaska Countes.
Applicable Law Applied
This Court concludes that the claims by Crawford and
Kalkaska Counties of fraud by the Trial Court are without any
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Trial Court’s May 30, 2003 Opinion APPENDIX G
merit. This Court also concludes, however, that, because
there remain significant disputed questions of fact, the Trial
Court’s several claims in Case No. 02-05951-CZ must go to
trial for resolution, although on narrowed contentions. This
Court also concludes that Crawford and Kalkaska Counties lack
standing to complain that Otsego County has violated the
UBAA. Hence, because they have withdrawn their claim of
fraud by Otsego County, that county is entitled to the
dismissal of Case No. 02-10014-CZ to the extent it is based on
the UBAA. Finally, some sanctions are in order.
A. Trial Court’s Contract Claims
Crawford and Kalkaska Counties contend that it is
indisputable that there is no enforceable agreement with the
Trial Court. Specifically, those counties insist (i) that, while
Otsego and Kalkaska Counties agreed to the retiree healthcare
fund, Crawford County agreed only to something else,
making that County’s resolution a counteroffer, not an
acceptance, (ii) that that counteroffer was rejected by the Trial
Court as “unacceptable,” and (iii) that, therefore, there was no
agreement about the retiree healthcare fund. The agreement of
the other two counties was not enough, argue Crawford and
Kalkaska Counties, because agreement by all three counties
was necessary. Crawford County also insists that it never
agreed to the pension upgrade. Finally, Crawford County
insists that any acceptance by it of either benefit was
conditioned on a mutually-acceptable written
memorialization, which was never achieved. This Court
disagrees with all those contentions.
(1)
It is true that the Crawford County resolution
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Trial Court's May 30, 2003 Opinion APPENDIX G
acquiescing in the retiree healthcare fund capped the annual
benefit at $4,000.00 per employee, and capped the annual!
increase at 4%, while the proposal to which the other counties
agreed contained a cap of $5,763.00. Under circumstances other
than those presented by this case, the Crawford County
resolution would likely have been a counteroffer, which,
because never accepted, would mean that no contract
materialized. When two of three necessary parties agree to
one cost figure, while a third necessary party agrees to
another cost figure, there likely is no agreement at all,
contend the counties, and this Court agrees. Dubey v Macomb
Concrete Corp, 81 Mich App 662, 673 (1978). Those principles
do not apply, however, to this case.
As will be discussed in much greater detail below, when
the Crawford County Board adopted its resolution agreeing to
a healthcare fund with a benefit cap of $4,087.00 for the first
year, plus 4% thereafter, it, in the person of its controller and
some of its members knew that the cap had to be $5,763.00 to
be feasible and that annual increases would likely be greater.
As a matter of common sense, practicality, and fairness, the law
has long held that, when one side of a negotiation knows that a
proposed term carries a meaning different than appears on its
face, acceptance is acceptance of the proposal as actually
understood, not as verbalized. Cf., Biltmore Land Co v Estate of
Munro, 271 Mich 125, 129 (1935); and Ardis v Grand Rapids &
Indiana Ry Co, 200 Mich 400, 414 (1918).
The effect of that principle applied to the facts of this
case is the following: Because Crawford County knew that the
cost per retiree of the health care fund would be $5,763.00, and
that the annual increases would exceed 4%, its Board of
Commissioners’ resolution agreeing to that fund was an
agreement to those amounts, even though the resolution
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articulated different numbers. That means, in turn, that the
Crawford County resolution of August 29, 2000, was not a
counteroffer, but was an acceptance of the Trial Court’s proposal
on the subject. Hence, when Otsego and Kalkaska Counties
also agreed to the fund with those annual caps, there was a
complete acceptance of the Trial Court's offer.
(2)
While not a model of draftsmanship, the resolution
adopted by the Crawford County Board regarding the pension
upgrade admits of only one interpretation. Inartful or clumsy
wording does not necessarily mean an ambiguity, Raska v
Farm Bureau Ins Co, 412 Mich 355, 362 (1982); and Meagher v
Wayne State University, 222 Mich App 700, 722 (1997), lv app den
457 Mich 874 (1998), and that is the situation presented by the
Crawford County resolution. A “request” that the Trial Court
“not implement the MERS B-4 upgrade at this time,” but
“recognize the change in the 2000-2001 budget cycle,” means
that the Board agreed to the upgrade. Those words cannot be
contorted to say that the proposal to upgrade the pension
was rejected. No words conveying that message are to be
found in the resolution. Its words convey quite the
contrary message. Had the Board rejected the proposal,
there would be no need to “request” deferral of its
“implement[ation].” A_ rejected proposal will never be
implemented, so “requesting” a deferral and “recogniz[ing]” it
later are meaningless in the context of a rejected proposal. The
use of those words is intelligible only if in reference to an
accepted proposal.
Admittedly, the discussion which preceded the vote on
the resolution suggests a desire by some to table the proposal
until the next year, and, plainly, the affidavits from the
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commissioners aver that they did not mean to accept the
proposal, even on a deferred basis. It has long been the law of
this State, however, dating back to Stevenson v Bay City, 26 Mich
44, 45 (1872), that the powers of a county board “are
exercised through its official resolutions and proceedings,
recorded in its official minutes,” Crain v Gibson, 73 Mich App
192, 200 (1977), lv app den 400 Mich 828 (1977), so that “their
import cannot be altered or supplemented by parol testimony.”
Tavener v Elk Rapids Rural Agricultural School District, 341 Mich
244, 251 (1954). Why was explained as follows:
“When the law requires municipal bodies to keep
records of their official action in the legislative
business conducted at their meetings, the whole
policy of the law would be defeated if they could rest
partly in writing and partly in parol, and the true
official history of their acts would perish with the
living witnesses, or fluctuate with their conflicting
memories. No authority was found, and we think none
ought to be, which would permit official records as
either partial or uncertain memorials. That which is
not established by the written records, fairly
construed, cannot be shown to vary them. They are
intended to serve as perpetual evidence, and no unwritten
proofs can have their permanence.” Alcona County v
Alcona Probate Judge, 311 Mich 131, 142 (1945),
quoting Stevenson v Bay City, supra.
In addition, the public has a right to know what its
elected officials have done, so it can measure their performance.
If formally-adopted resolutions can be explained away by
affidavits, or other parol evidence, electors cannot evaluate
those in office. Collins v Detroit, 195 Mich 330, 334 (1917).
Finally, there is a very practical reason for an irrebuttable
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conclusion that the Crawford County Board did not table the
Trial Court’s proposal to upgrade its employees’ pensions,
but acquiesced in that proposal. Verbatim records of
commission meetings are not always available, and the quality
of any recordings can be problematic. In these cases, for
example, portions are inaudible, unintelligible, or missing,
adding to the difficulty of accurately deducing from any debate
what was intended. Minutes and resolutions, on the other hand,
can be carefully crafted and accurately recorded. Hence, when
the Crawford County Board approved minutes memorializing a
resolution adopted a month earlier, it created a bar to any
effort to explain that resolution.
(3)
While there can be no dispute that the Crawford
County Board accepted the Trial Court’s proposal to upgrade
its employees’ pensions, there remains a factual question about
whether there is an enforceable agreement to do so. It is unclear
whether those counties’ resolutions were meant to voice
agreement or whether a signed contract was a condition of
there being any agreement. If not, the three resolutions combine
to constitute an agreement which this Court must enforce. If a
signed contract was intended, there may not have been any
contract, for no memorialization acceptable to all ever
occurred.
“..[W]here agreement has been expressed on all the
essential terms of the contract, the mere fact that the parties
manifest[ed] an intention to prepare a written memorial of their
agreement does not render the oral contract unenforceable
merely because the writing is never prepared. On the other
hand, if the written document is to contain any material term
upon which the agreement has not already been reached,
there is no binding contract.” Scholinck’s Importers-Clothiers,
76a
Trial Court’s May 30, 2003 Opinion APPENDIX G
Inc v Lent, 130 Mich App 104, 109 (1983). The latter is also true
if the parties manifested an intent not to be bound unless and
until the execution of a written contract. DiPonio Equipment Co v
Highway Dept, 107 Mich App 756, 761 (1981). See also Adolph v
Cookware Co of America, 283 Mich 561, 569 (1938).
Deciding which is the situation is very fact specific and,
as such, requires a tmal, /d., except, perhaps, in the most
unusual circumstances. All the following needs to be
considered:
“In determining which view is entertained in any
particular case, several circumstances may be helpful
as: Whether the contract is of that class which are
usually found to be in writing; whether it is of such
nature as to need a formal writing for its full
expression; whether it has few or many details;
whether the amount involved is large or small;
whether it is a common or unusual contract; whether
the negotiations themselves indicate that a written
draft is contemplated as a final conclusion of the
negotiations. If a written draft is proposed, suggested,
or referred to during the negotiations, it is some
evidence that the parties intended to be the final
closing of the contract.” Michigan Broadcasting Co v
Shawd, 352 Mich 453, 456 (1958), quoting McConnell v
Harrel & Nicholson Co, 183 Mich 369, 373-374 (1914).
What is plain is that the mere intention that there be a
document does not establish that the document was to be the
contract such that a failure to concur in one means no deal. That
is a factor to be considered, but there are numerous other
factors. A review of the record in this case discloses that those
factors could, depending upon an ultimate assessment of them,
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Trial Court’s May 30, 2003 Opinion APPENDIX G
lead to divergent conclusions. There is, therefore, a
requirement that this case proceed to trial, unless the contract
is invalid, which it is not, to determine whether the
resolutions adopted by the Otsego, Crawford and Kalkaska
Boards are themselves reflective of an agreement or whether
they required for their effectuation the further and finalact of
signing a document on which the three counties and the
Trial Court agreed.
(4)
That Crawford and Kalkaska Counties rescinded their
resolutions does not mean that there is no enforceable
agreement with the Trial Court. “Legislative acts, as
distinguished from contracts, do not tie the hands of
succeeding legislatures,” Gale v Oakland County Board of
Supervisors, 260 Mich 399, 404 (1932), but, it necessarily
follows, succeeding boards cannot unilaterally revoke
contracts. Changing or revoking agreements must be done
mutually, Rowe v Montgomery Ward, 437 Mich 627, 651 (1991);
and Curtis v East Saginaw, 35 Mich 508 (1877). Therefore, if
their initial resolutions reflect an actual agreement, not
merely a tentative agreement still subject to finalization in a
written document, neither the Crawford County Board nor the
Kalkaska County Board, whether acting separately or
together, could rescind that agreement. Otsego County and
the Trial Court had to concur, which they did not.
B. The Trial Court's Inherent Authority Claims
As noted earlier herein, Counts Ill and IV of the Trial
Court’s complaint allege that Crawford County is refusing to
fund the Trial Court at a level which will enable it to perform its
necessary core functions. As also noted earlier herein, given
Kalkaska County’s intervention in the case, and its eventual
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Trial Court’s May 30, 2003 Opinion APPENDIX G
withholding of funds, the same complaints are effectively
made against it. Those two counties now contend that those
counts ought be dismissed. Because the Trial Court has
acknowledged that no employee has yet quit for want of either
benefit, it cannot possibly be established, both counties contend
first, that either is necessary for the Trial Court’s functioning.
This Court disagrees. More significantly, so has the Michigan
Court of Appeals. Both counties also contend that the benefits
upgrades cannot be deemed reasonable because they would
make the Trial Court’s employees the counties’ best-
compensated employees. Again, this Court disagrees.
(1)
In the Gladwin County case, the trial court which heard
that case determined that the plaintiff court had proven by the
requisite clear and convincing evidence that a compensation
structure proposed by it and rejected by the funding unit
was reasonable and necessary to enable the Court to carry out
its assigned functions, even though the lack of that proposed
change had not yet adversely affected either efficiency or
employee loyalty. /d., at 454. The plaintiff court prevailed
because the trial court was persuaded that the dispute over
salary structure had created morale problems among employees
and that not changing the salary structure as proposed would
eventually engender employee dissatisfaction which would
eventually adversely affect performance and productivity.
The Court of Appeals affirmed, finding that the trial
court’s conclusions were not clearly erroneous. In other words,
the Court of Appeals rejected the very argument advanced in
this case by Crawford and Kalkaska Counties, namely: that a
court cannot adequately prove the necessity for funds unless
it can demonstrate an actual adverse effect from not having
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Trial Court’s May 30, 2003 Opinion APPENDIX G
them. Proving the likelihood of an effect in the future is sufficient.
Hence, given the expected trial testimony from the Trial Court's
Chief Judge and from its expert, Crawford and Kalkaska
Counties are not now entitled to summary judgment. If their
testimony is persuasive, the showing found adequate in the
Gladwin County case will also have been made in this case.
That determination can occur only at a full trial.
(2)
The benefits at issue are not necessarily excessive
because they are relatively generous. That is a consideration,
but not necessarily a dispositive consideration. If the wages
and benefits of other employees are not themselves substantial,
being higher does not become absolutely high, but only the upper
side of low or middling. Furthermore, the courts’ employees may
have much different job responsibilities than other county
employees. If so, higher wages and benefits may fit. Finally,
generous wages and benefits may be what are required for the
Trial Court to attract and retain adequately qualified employees.
All of those considerations are fact-specific. Therefore, they
cannot be resolved now. This Court has no evidence regarding
any of them. All it has is the contention that the benefits at
issue will make the Trial Court’s employees the best
compensated employees of the counties. This Court needs
evidence to determine the significance of that contention.
(3)
Nor, however, is the Trial Court entitled to summary
judgment, even though this Court is rejecting the reason
advanced against its claims regarding the retiree health care fund
and the pension upgrade. In another kind of case, this Court
would likely conclude that the failure of a defendant's
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Trial Court’s May 30, 2003 Opinion APPENDIX G
argument and the lack of any proffered contrary evidence
would entitled plaintiff to judgment. Given, however, the case
with which questions of separation of power must be resolved,
the Trial Court's claims need to be aired fully in a public forum.
Those claims should not be decided summarily. Hence, this
issue will not be decided until this Court has heard live from
the several witnesses, has had an opportunity to access their
credibility and the persuasiveness of their testimony, and has
afforded the interested public an opportunity to watch.°
C. Claims of Fraud by the Trial Court
Michigan is one of a minority of jurisdictions which
recognize as actionable both fraud and_ innocent
misrepresentations, i.e., both deliberate falsehoods and honest
mistakes made in good faith. USF&G v Black, 412 Mich 99, 116-118
(1981); and Schwader v Heron-Clinton Metropolitan Authority, 329
Mich 258, 267 (1951). If proven convincingly, Flood v Welsh,
334 Mich 583, 591 (1952), either can be a basis to recover
damages or, in the case of a contract entered into based on one
or the other may be used as an affirmative defense to affect
rescission or reformation. USF&G, supra, at 118, fn 10;
Schwader, supra; and Lash v Allstate Ins Co, 210 Mich App 98, 103
(1995). At oral argument on the parties’ motions, counsel for
Crawford and Kalkaska counties made clear that their fraud
claims are of the innocent variety being used in the latter
fashion. For the reasons stated immediately below, those claims
cannot succeed.
(I)
* Nothing said in this opinion should be read as a prediction of how this
case will be resolved after a trial. The evidence presented then will be
genuinely assessed and evaluated then, and only then. Cf., People v Cobbs,
443 Mich 276, 283 (1993).
8la
Trial Court’s May 30, 2003 Opinion APPENDIX G
Fraud and innocent misrepresentation actions are both
“substantially similar” and “significantly different.” USF&G,
supra, at 118. In this case, it is the similarities which resolve
the claims that any contract between the Trial Court and
Crawford, Kalkaska and Otsego Counties was induced by a
misrepresentation. First, “to establish either [a] fraudulent or
an innocent misrepresentation, a party must demonstrate that he
[she or it] acted in reliance upon the alleged misrepresentation.”
McKinstry v Valley Obstetrics-Gynecology Clinic, PC, 428 Mich 167,
187 (1987). In other words, a fraud nor an_ innocent
misrepresentation “is not perpetrated upon one who has full
knowledge to the contrary of a representation. Montgomery
Ward & Co v Williams, 330 Mich 275, 284 (1951).’
It necessarily follows that_Crawford County cannot
avoid any agreement made by it regarding the retiree
healthcare fund by claiming that the Trial Court
misrepresented the annual cost of that benefit. As stated
more elaborately in this opinion’s Statement of Facts, the
Crawford County controller and some of its commissioners not
only knew that the $4,000 annual cost and the 4% annual
increase put forward by the Court were incorrect, they
” Although there are some cases which have held that “[t]here can be no fraud
where a person has the means to determine that a representation is not true,”
e.g., Nieves v Bell Industries, 204 Mich App 459, 464 (1994); and Webb v First of
Michigan Corp, 195 Mich App 470, 474 (1992), those were cases in which the
parties claiming fraud had actual knowledge that a representation was not true,
knowledge which was ignored. Those were not cases in which the party
claiming to have been defrauded could have, but did not, conduct an
investigation which would have disclosed the misrepresentation later
complained of. Hence, those cases do not represent an exception to the
longstanding rule that “[t]he fact that [a] plaintiff might have ascertained the
situation from others is no defense ...” See, e.g., People’s Furniture and Appliance
Co v Healy, 365 Mich 522, 526 (1962); Baedeker & Associates v Hamtramck State
Bank, 357 Mich 435, 441 (1922); and Schupp v Davey Tree Expert Co, 235
Mich 268, 271 (1926).
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Trial Court’s May 30, 2003 Opinion APPENDIX G
actually knew the correct figures for both. That all of the
commissioners may not have known of those mistakes, if
they did not, does not change the fact that the County knew,
because its principal administrator knew. Cf., USF&G, supra,
at 126. See also Chelsea Associates v Rapanos, 527 F2d 1266,
1269, 1273 (6th Cir, 1975). Under those circumstances, a
fraud was “not perpetrated.” Williams, supra.
That knowledge also means that Crawford County cannot
complain that its Board was fraudulently induced into agreeing
with the pension upgrade, if it is found to have agreed, by the
Trial Court's failure to disclose the actuarial projections which it
had received from MERS projecting the cost of other pension
upgrades. While, as noted below, a misrepresentation is not,
ordinarily, of no moment just because it could have been
discovered with due diligence, “one cannot rely on a
misrepresentation where he [she or it] knows other
representations in the same transaction are false.” Phillips v
Smeekens, 50 Mich App 693, 697 (1973). The latter knowledge
provides too much notice to be ignored. While a party has a
right to rely on what it is told, once it knows that inaccurate
representations have been made, it must be cautious and
check on the rest of what it is told.
(2)
The other similarity which is pertinent to this case is a
key component of the definition of silent fraud. While ‘” [a]
fraud may be consummated by suppression of facts of the
truth, as well as by open false assertions,’ USF&G, supra, at
125, quoting Fred Macey Co v Macey, 143 Mich 138, 153 (1906),
“mere nondisclosure is insufficient. There must be circumstances
that establish a legal duty to make a disclosure.” Hord v ERIM
(aft rem), 463 Mich 399, 412 (2000). Given their particulars, the
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Trial Court’s May 30, 2003 Opinion APPENDIX G
Trial Court had no duty to disclose the actuarial studies which
it had. They were immaterial.
Deciding whether a duty exists is a matter for the court,
cf., Williams v Cunningham Drug Stores, Inc, 429 Mich 495, 500
(1988); and Moning v Alfono, 400 Mich 425, 436-437 (1977), and it
is plain, on the unique facts of this particular case, that the Trial
Court did not have a duty to disclose the actuarial studies which
it had done. Not only did none of those studies relate to the
pension upgrade being proposed by the Trial Court, but
related exclusively to upgrades which the Court had decided
not to propose, a disclaimer in each established that they were
not material to the different upgrade being proposed the
Trial Court. Those disclaimers, which were quoted earlier, are
restated here to avoid the need to search this opinion for them:
“The valuation enclosed does address costs and rates
for ONLY the. specific benefit program (as
requested). These costs and rates may not be
reliably ....- combined or modified to yield
accurate actuarial results for any other benefit
not included in the original request. Thus, if the
parties agree to another benefit program (or
combination of programs) not identical to those
contained in the current valuation, you are obligated
to advise MERS in writing as soon as possible so that
[a] MERS’ actuary may determine the required
contribution to support the benefit plan selected.”
That immateriality is confirmed by the application
form which the Trial Court filled out and submitted to
MERS. Its last paragraph cautioned that “if another benefit
program is selected or negotiated, an Amendment to
Request for Valuation must be submitted.” Combined, those
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Trial Court’s May 30, 2003 Opinion APPENDIX G
statements say unequivocally that the actuarial studies the
Trial Court had were not only immaterial, but could not be
reliably used to project the cost of “any other benefit.”
Crawford and Kalkaska Counties’ own auditor concurred.
As he put it, “strange things happen” to its costs when a
- pension’s variables are changed.
The question of duty is one forthe Court because it
requires assessing competing policy considerations, Fridman
v Dozorc, 412 Mich 1, 22 (1981), a balancing-type assessment
best done by a court. It cannot be sound public policy to
insist that a party ignore, which a duty to disclose would do,
an unequivocal disclaimer, which is conceded to have been
correct, that certain information is not accurate for purposes of
the transaction at hand, which is what the disclaimer from
MERS plainly said. If fair dealing requires disclosure of
such information, there is nothing which, in retrospect, cannot
be found to have been disclosable, making it virtually
impossible for anyone to be fully honest.
At a minimum, holding it to have been an actionable,
honest mistake to not disclose information which itself
actually said it was immaterial would intimidate the parties
to negotiations into disclosing vast amounts of useless and
unnecessary information, badly burdening the process and
obscuring the valuable information. The only information which
there is a duty to disclose is that which renders untrue, or
misleading, previous representations. USF&G, supra, at 127.
Nothing in the MERS actuarial studies in the possession of
the Trial Court’s administrator rendered untrue or misleading in
the least any information about the pension upgrade proposed
by the court. Those studies were for other pension upgrades.
Therefore, there was no “silent fraud.”
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Trial Court’s May 30, 2003 Opinion APPENDIX G
D. Otsego County’s Motion
In Case No. 02-10014CZ, Crawford and Kalkaska
County claim that Otsego County, acting as the agreed-upon
Control] Unit for the Trial Court, exceeded its authority by
implementing the retirees’ healthcare fund (Count I) and the
pension upgrade (Count II) when Crawford County had not
agreed to either benefit enhancement. Doing so violated the
UBAA, contend those counties. In Count If, Crawford and
Kalkaska Counties accused Otsego of itself deliberately
withholding actuarial studies regarding the pension upgrade,
but that count was withdrawn when its sustainability was
challenged.
After carefully studying all of the papers submitted to
it, this Court is not quite sure of the legal basis or bases for
Counts I and I. It is unclear whether Crawford and Kalkaska
Counties premise those counts exclusively on alleged
violations of the UBAA, or whether they claim that Otsego
County violated that act, as one theory, and, as a second
theory, that there must be a right to sue for acting without
authority. To the extent Counts I and II are based on the
UBAA, those counts must be dismissed. If that is their only
basis, those counts are to be dismissed in their entirety. If there
is some other basis, that theory is dismissed, but any other
theory will be resolved later upon adequate explication.
Crawford and Kalkaska Counties lack standing to
invoke the UBAA, specifically, to allege violations of that act.
“Any action,” civil or criminal, alleging a violation of that
statute “must be initiated” by the Attorney General or by the
local prosecuting attorney. Rayford v Detroit, 132 Mich App
248, 257 (1984), lv app den 419 Mich 938 (1984); and Firefighter's
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Trial Court’s May 30, 2003 Opinion APPENDIX G
Ass ‘n v Detroit, 199 Mich App 129, 133 (1993).° While Rayford
and Firefighter's Ass 17 differ in one regard from Case No. 02-
10014-CZ, the difference turns out to be legally insignificant.
As a result, those cases are’ not distinguishable, but fully
applicable here. McNitt v Citco Drilling Co, 60 Mich App 81,
84-85 (1975), aff'd 397 Mich 384 (1976).
Neither of those cases involved one government
entity suing another. Both cases involved private parties
suing a municipality. In some circumstances, that might be a
significant distinction, but not with regard to enforcement of
the UBAA. The conclusion that the Attorney General
and prosecuting attorneys have exclusive enforcement powers
follows inexorably from the text of the statute. It says, in so
many words, that the Attorney General “shall ... cause to be
instituted such proceeding{s]” which are necessary to
respond to violations of the act, and that the Attorney General
or prosecuting attorney “shall institute civil action[s]” to
recover monies expended, collected, or not accounted for in
violation of the act. MCL 141.431. When a statute contains
such explicit authorizations, it authorizes nothing else.
Sebewaing Industries, Inc v Sebewaing, 337 Mich 530, 545 (1953). In
sum, Crawford and Kalkaska Counties can complain to the
Attorney General and/or to the Otsego County Prosecuting
Attorney, but they cannot sue.”
* In Detroit City Council v Stecher, 430 Mich 74, 80-81 (1988), our Supreme Court
explicitly reserved deciding whether only the Attorney General and/or
prosecuting attorneys have standing to complain about violations of the UBAA,
but such a reservation does not undermine an outstanding holding by the
Court of Appeals. Macieyewski v Breitenbeck, 162 Mich App 410 (1987)
* That Otsego County did not object to Crawford and Kalkaska Counties’
lack of standing does not preclude this Court basing a ruling on that issue
While a court is obligated to consider only issues which are raised by a party,
it is empowered to go beyond them and to address any issue which, in its
judgment, justice requires be considered and resolved. Paschke v Retool
Industries (on reh), 198 Mich App 702, 705 (1993), rev'd on other grounds 445
87a
Trial Court’s May 30, 2003 Opinion APPENDIX G
E. Sanctions
The summary dismissal of claims or striking of
defenses does not necessarily mean that they were asserted in
violation of MCR 2.114(E). Kitchen v Kitchen, 465 Mich 654, 663
(2002); and Neitzke v Williams, 490 US 319; 109 S Ct 1827; 104 L
Ed 2d 338 (1989). While such a decision by the court means,
obviously, that all pertinent facts were undisputed and/or
indisputable, the granting of such relief does not necessarily
mean that the underlying legal arguments were so defective
that they should never have been made. Summary
disposition can be granted when legal contentions are close,
but ultimately unavailing. Then, sanctions are inappropriate.
These cases involve both scenarios.
(1)
With regard to the claim that the Trial Court
misrepresented the anticipated annual healthcare payment per
retiree, and the anticipated annual increase, unremarkable law
of longstanding was applied to indisputable facts. Crawford
County knew that the figure given to it by the Trial Court was
incorrect, and the law has long been that “[a] fraud is not
perpetrated upon one who has full knowledge to the
contrary of a representation.” Montgomery Ward & Co v
Williams, supra. Therefore, Crawford and Kalkaska Counties
should never have filed that claim, MCR 2.114(D)(2), which,
Mich 502 (1994). See also Bean v Directions Unlimited, Inc, 462 Mich 24, 31
(2000). Due process is satisfied by giving the parties an opportunity to
present their views before the Court rules, or by entertaining afterwards a
motion for reconsideration. [d., at 706. In this case, this Court brought up the
potential issue of standing at oral argument and invited briefs from the
parties
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Trial Court's May 30, 2003 Opinion APPENDIX G
in turn, means that the Trial Court is entitled to sanctions.
The summary striking of the claim of fraud relating
to the pension actuarial studies is a different matter, however.
This Court’s determination, as a matter of law, that the Trial
Court did not have a duty to disclose, given their particulars,
those studies which it did have was a matter of first
impression. While that does not render inappropriate the
summary resolution of the fraud claim, it does preclude the
imposition of sanctions. Neitzke, supra. It is difficult to say that
Crawford and Kalkaska Counties had no legitimate basis to
conclude that they might prevail on the claim. The lack of
duty was fairly apparent, but, until ruled on once, counsel
cannot be criticized for trying. Kitchen, supra, at 662; and
Travelers Ins Co v U-Haul of Michigan, Inc, 235 Mich App 273,
290 (1999). Hence, as to that fraud claim, but only that claim,
there was no violation of MCR 2.114(D)(2).
Sanctions are also appropriate, however, for making
claims against Otsego County based on the UBAA. That
statute is unambiguous: actions, whether civil or criminal,
alleging violations of the act can be brought only by the
Attorney General or a pertinent prosecuting attorney, not by
anyone else. The caselaw has long been equally plain.
Therefore, counsel for Crawford and Kalkaska Counties should
have known that their clients have no standing to allege that
Otsego County violated the UBAA, making the allegation
that it did another violation of MCR 2.114(D)(2). Sanctions
necessarily follow because MCR 2.114(E) dictates that “[i]f a
document is signed in violation of this rule, the Court, on
motion of the party or on its own motion, shall impose ... an
appropriate sanction ...” [emphasis added].
Whether sanctions should also be imposed for Crawford
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Trial Court's May 30, 2003 Opinion APPENDIX G
and Kalkaska Counties’ fraud allegation against Otsego County
is something which cannot now be decided. Just because the
allegations were withdrawn does not mean that they were
known to be unsustainable when made. Sometimes,
subsequent developments undermine what initially
appeared to have significant merit. Hence, if Otsego County
wishes to pursue sanctions for the fraud allegation, the
record will need to be developed further. Exactly what will
need to be presented, and the proper mechanism for doing
so, can be addressed when this case is tried in mid-June.
Subsequent proceedings can then occur.
(2)
The determination that sanctions must be imposed
leaves two more decision to make: How much? and On whom
are they to be imposed? Because sanctions cannot be
punitive, MCR 2.114(E), the only amount which can be
considered appropriate are the costs incurred by the Trial
Court defending the fraud claims and the costs incurred by
Otsego County defending the claims that it violated the
UBAA. Accordingly, those parties’ counsel are to report to
this Court what portions of their fees are attributable to those
endeavors. Itemized billings will need to be produced.
As to the second question, the pertinent rule provides
some discretion. Sanctions can be imposed on “the person
who signed it [the document which violated MCR
2.114(D)(2)], a represented party, or both, ...” In this
particular case, sanctions should be imposed on Crawford
and Kalkaska counties counsel, not on the counties. First of all,
those counties are already obligated to pay the Trial Court’s
attorney fees in these cases. Therefore, at least with regard to
sanctions awarded to the Trial Court, imposing them on the
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Trial Court’s May 30, 2003 Opinion APPENDIX G
other counties is tantamount to no sanction at all, for it
imposes no additional burden."® Second, it was counsel who
should have known that the law plainly precluded what was
being alleged. Clients can genuinely plead ignorance of the
law.
Conclusion
This opinion, this Court fully appreciates, needs
another week of redrafting to read as well as it should and to
be as precise as it should be. However, given its other
responsibilities, and the need of the parties to know where they
stand as trial looms and they prepare for it, this Court does not
have the time to be that careful. It must be satisfied with the
opinion as is and must keep in mind the admonition by
Massachusetts Superior Court Judge Dimond to newcomers to
the bench: “A trial judge is a short order cook, not a gourmet
chef” That is the trial judge’s lot. The Judge’s Book (2d ed), pp
227-228."' While not haute cuisine, this opinion is passable to
deal with the issues at hand."
Dated: May 30, 2003. /s/ Judge Dennis Kolenda
Dennis C. Kolenda
Assigned Circuit Judge
'° If this Court’s award of attorney fees to the Trial Court is reversed on
appeal, this Court will reconsider imposing sanctions directly on
Crawford and Kalkaska Counties.
"' The cited book is a compendium of wisdom by numerous trial judges
collected by the National Conference of State Trial Judges and the
National Judicial College.
* An effectuating order accompanies this opinion.
9la
Amici Curiae Motion of Michigan Judges Ass'n APPENDIX H
STATE OF MICHIGAN
IN THE SUPREME COURT
46TH CIRCUIT TRIAL COURT
Plaintiff / Counter-Defendant/
Third-Party Defendant/ Appellee
vs. Supreme Court Nos. 132986-8
CRAWFORD COUNTY
and CRAWFORD COUNTY Court of Appeals Nos. 246823,
BOARD OF 248593, 251390, and 252335
COMMISSIONERS
Defendants/Counter Crawford County Circuit
Plaintiffs / Third-Party Court No. 02-5951-CZ
Plaintiffs/ Appellants,
vs.
OTSEGO COUNTY,
Third Party Defendant,
and
KALKASKA COUNTY,
Intervening Third Party Plaintiff
And Counter Defendant-Appellant _/
MOTION FOR LEAVE TO FILE BRIEF OF AMICI
CURIAE
Submitted by:
HILDA R. GAGE (P13785)
1795 Alexander Drive
Bloomfield Hills, Michigan 48302
(248) 851-0771
Attorney for Amici Curiae Associations
92a
Amici Curiae Motion of Michigan Judges Ass'n APPENDIX H
The Michigan Judges Association, Michigan District
Judges Association, and the Michigan Probate Judges
Association (hereafter “the Associations”) move pursuant
to MCR 7.306(C), for leave to file a Brief as Amici Curiae
advocating denial of the application for leave to appeal
filed by Crawford and Kalkaska Counties in this matter.
Copies of the Brief are submitted to the Court together with
this motion.
In support of their motion, the Associations say:
The Associations represent the interests of all Michigan
trial and Court of pean judges. They are, therefore,
uniquely positioned to advise this Court of their members’
legitimate and important concerns related to the instant
application. These concerns go well beyond the narrow
issue this case presents — whether under these unique
circumstances the attorney fees and costs of litigation
incurred by the 46» Circuit Trial Court must be paid by its
93a
Amici Curiae Motion of Michigan Judges Ass'n APPENDIX H
responsible funding units. Based on their understanding of
the facts and history of this case, the Associations firmly
believe that the fees at issue should be paid, and that the
Counties’ application should be denied. Their primary
concern, however, is that this Court not adopt the rule
advocated by Crawford and Kalkaska Counties: that
Michigan trial courts should be able to pay their lawyers
in funding disputes only if the courts eventually prevail.
Such a ruling would severely undercut the courts’ ability to
retain counsel in order to have their interests effectively
advocated. And, because attorney fees for other types of
representation are part of a court's operational funding
and subject to the standards articulated by this Court,
adopting a “court must win” requirement in the funding
context could eventually destroy the ability of trial courts to
obtain needed representation in other contexts.
The Associations believe that their accompanying
94a
Amici Curiae Motion of Michigan Judges Assn APPENDIX H
Brief of Amici Curiae provides a discussion and perspective
that will aid the Court in resolving this application.
WHEREFORE, the Associations respectfully
request the Court to grant their motion and to accept for
filing their accompanying Brief as Amici Curiae.
Respectfully submitted,
By: Wilda KR. Hage
HILDA R. GAGE (P13785)
1795 Alexander Drive
Bloomfield Hills, Michigan 48302
(248) 851-0771
Attorney for Amici Curiae Associations
Dated: February 12, 2007
95a
Amici Curiae Motion of Michigan Judges Ass'n APPENDIX H
STATE OF MICHIGAN
IN THE SUPREME COURT
46TH CIRCUIT TRIAL COURT
Plaintiff /Counter-Defendant/
Third-Party Defendant/ Appellee
VS. Supreme Court Nos. 132986-8
CRAWFORD COUNTY
and CRAWFORD COUNTY Court of Appeals Nos. 246823,
BOARD OF 248593, 251390, and 252335
COMMISSIONERS
Defendants/Counter Crawford County Circuit
Plaintiffs / Third-Party Court No. 02-5951-CZ
Plaintiffs/ Appellants,
vs.
OTSEGO COUNTY,
Third Party Defendant,
and
KALKASKA COUNTY,
Intervening Third Party Plaintiff
And Counter Defendant-Appellant
NOTICE OF HEARING
TO: All Counsel of Record
PLEASE TAKE NOTICE that pursuant to MCR 7.313(A), the
acccmpanying Motion For Leave To File Brief Of Amici
96a
Amici Curiae Motion of Michigan Judges Ass'n APPENDIX H
Curiae will be presented to the Michigan Supreme Court
on Tuesday, February 20, 2007.
Respectfully submitted,
By: Hilda R. Hage
HILDA R. GAGE (P13785)
1795 Alexander Drive
Bloomfield Hills, Michigan 48302
(248) 851-0771
Attorney for Amici Curiae Associations
Dated: February 12, 2007
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46" CTC v Crawford Co (Mich S Ct) 7-28-06 APPENDIX I
Michigan Supreme Court Lansing, Michigan
OP IN ION Chief Justice
Clifford W. Taylor
Justices
Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Maura D. Corfigan
Robert P. Young, Jr.
Stephen J. Markman
FILED JULY 28, 2006
46TH CIRCUIT TRIAL COURT,
Plaintiff, Counter-Defendant,
Third-Party Plaintiff-Appellee,
V No. 128878
COUNTY OF CRAWFORD AND CRAWFORD
COUNTY BOARD OF COMMISSIONERS,
Defendants, Counter-Plaintiffs,
Third-Party Plaintiffs-Appellants,
and
COUNTY OF KALKASKA,
Intervening Defendant, Counter-Plaintiff,
Third-Party Plaintiff-Appellant
and
COUNTY OF OTSEGO,
Third-Party Defendant
BEFORE THE ENTIRE BENCH
98 a
46" CTC v Crawford Co (Mich S Ct) 7-28-06 APPENDIX |
MARKMAN, J.
We granted leave to appeal to consider this
funding dispute between the 46th Circuit Trial Court
(hereafter the Trial Court) and two of its three county funding
units. This case involves a conflict between the legislative
branch’s exercise of the “legislative power” to appropriate
and to tax, and the judicial branch's inherent power to
compel sufficient appropriations to allow the judiciary to
carry out its essential judicial functions. Specifically, the Trial
Court seeks to compe! the defendant counties to appropriate
funding for the enhanced pension and retiree health care
plans it deems necessary to recruit and retain adequate staff
to allow it to carry out its essential judicial functions. The
circuit judge found in favor of the Trial Court, holding that
the benefits were “reasonable and necessary” to the court's
ability to perform its constitutional responsibilities and that
the counties created for themselves a contractual obligation
to appropriate funds for the enhanced pension and retiree
health care plans. The Court of Appeals affirmed.
Because we conclude that such benefits were not “reasonable
and necessary” to the “serviceability” of the court, and because
we conclude that the defendant counties were not
contractually obligated to appropriate funds for the enhanced
benefits plan sought by the Trial Court, we reverse the
judgment of the Court of Appeals and remand this case to
the circuit judge for entry of a judgment in favor of
defendants.
I. FACTS AND PROCEDURAL HISTORY
The Tria] Court’s predecessor, the 46th Circuit Court,
was the circuit court servicing Otsego, Crawford, and
Kalkaska counties. Pursuant to Administrative
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46" CTC v Crawford Co (Mich S Ct) 7-28-06 APPENDIX I
Order No. 1996-9, 451 Mich civ, the 46th Ci
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