Maple Manor Neuro Ctr. v. Farmers Ins. Co.

1

MAPLE MANOR NEURO CENTER, INC, and MAPLE MANOR REHAB CENTER OF NOVI, INC., Plaintiffs/Intervening Plaintiffs- Appellants, v. FARMERS INSURANCE COMPANY, FARMERS INSURANCE EXCHANGE, FARMERS INSURANCE GROUP INC., and BLUE CROSS BLUE SHIELD OF MICHIGAN, Defendants, and MID-CENTURY INSURANCE COMPANY, Defendant/Cross-Defendant, and RONALD ELKIN, Defendant/Cross-Plaintiff-Appellee.

No. 366264

Court of Appeals of Michigan

September 24, 2024

UNPUBLISHED

Oakland Circuit Court LC No. 2018-164787-NF

Before: LETICA, P.J., and GARRETT and FEENEY, JJ.

PER CURIAM

In this action arising under the no-fault act, MCL 500.3101 et seq., plaintiffs, Maple Manor Neuro Center, Inc. and Maple Manor Rehab Center of Novi, Inc. (collectively "Maple Manor") appeal by delayed appeal granted^[1] the trial court's February 8, 2023 order apportioning attorney fees resulting from a settlement agreement in this case between the attorneys for Maple Manor and the attorney for defendant/cross-plaintiff, Ronald Elkin ("Elkin").^[2] On appeal, Maple Manor argues that the trial court erred when it awarded attorney fees to Elkin's attorney from funds that were set aside under the settlement agreement for later apportionment between the attorneys for Maple Manor and Elkin, and the trial court should have awarded the full amount of attorney fees to Maple Manor's attorneys. We affirm.

Maple Manor provided in-patient rehabilitation services to Elkin beginning on March 15, 2017, which resulted from injuries Elkin suffered in a 1985 motor vehicle accident. The admissions agreement between Maple Manor and Elkin required that Elkin pay all fees for services rendered that were not covered by an insurer. Mid-Century Insurance Company ("Mid-Century") was Elkin's no-fault insurer. Elkin did not assign to Maple Manor the rights to his claim for nofault benefits from Mid-Century. Maple Manor waited about a year before beginning to seek payment from Mid-Century. Elkin's attorney, John Stevenson ("Stevenson"), was already representing Elkin in a claim for no-fault benefits in a case separate from this one. Both Maple Manor's attorneys and Stevenson demanded payment from Mid-Century, which initially only agreed to issue payment to Maple Manor for services provided in 2017.

In early 2018, Maple Manor filed a claim for no-fault benefits against Mid-Century and a claim for breach of contract against Elkin. Elkin filed a cross-claim against Mid-Century for payment of no-fault benefits. The trial court dismissed Maple Manor's claim against Mid-Century because Maple Manor lacked standing to bring a claim for no-fault benefits against an insurer without an assignment of the insured's rights. The benefits in this case became due after the Supreme Court decided in Covenant Med Ctr, Inc v State Farm Mut Auto Ins Co, 500 Mich. 191, 218; 895 N.W.2d 490 (2017), that a medical provider cannot maintain a cause of action for no-fault benefits against an insurer without an assignment of rights to the claim from the insured.^[3]

Nevertheless Mid-Century agreed to make payments to Maple Manor for about three months, totaling $123,186.81. One-third of that amount was held in an Interest on Lawyer's Trust Account (IOLTA) for later apportionment of attorney fees between Maple Manor's attorneys and Stevenson. Disputes continued to arise between the parties and their attorneys regarding the payment of benefits and, particularly relevant here, the payment of attorney fees, and how the payments from Mid-Century were to be apportioned.

A few months later, the trial court granted Maple Manor leave to intervene in Elkin's claim against Mid-Century. The next day, the parties reached a trilateral settlement agreement under which Maple Manor received $275,000, minus one-third of that amount for attorney fees, and all claims were released against all parties. Under the settlement agreement, the attorney fees^[4] were placed in an IOLTA account to be apportioned between Maple Manor's attorneys and Stevenson by either mutual agreement of the attorneys, arbitration, or court order. The parties were unable to arrive at an agreement.

In August 2019, Elkin moved to apportion the attorney fees. Elkin argued that Stevenson was entitled to all the attorney fees in this case because only Elkin had a cause of action against Mid-Century and Maple Manor's attorneys had no contingency-fee agreement with Elkin. Maple Manor filed a response to Elkin's motion to apportion attorney fees arguing that (1) it had never agreed to pay Stevenson attorney fees derived from payments made by Mid-Century and recovered by Maple Manor, (2) Elkin was not a part of the settlement between Maple Manor and MidCentury, (3) Stevenson was not allowed to collect attorney fees as a matter of law because Maple Manor retained its own counsel to represent its interests in this case, (4) the legal bills submitted by Stevenson to the court only concerned services for defending the claim brought by Maple Manor, not services to collect from Mid-Century, (5) Maple Manor's attorneys negotiated the settlement with Mid-Century, and (6) Stevenson's claimed fees were unreasonable. Following a hearing, the trial court took the issue of apportioning attorney fees under advisement pending this Court's decision in Univ of Mich. Regents v Valentino, unpublished per curiam opinion of the Court of Appeals, issued December 29, 2020 (Docket No. 349942), lv den 508 Mich. 925 (2021).

Meanwhile, in April 2021, Elkin filed a supplemental brief in support of his motion to apportion attorney fees following this Court's decision in Valentino, unpub op at 12. Elkin argued that the decision reaffirmed previous holdings that no-fault benefit recoveries belong to the insureds, and Elkin, therefore, was entitled to all attorney fees under the facts in this case. Maple Manor filed a response to Elkin's supplemental brief. Maple Manor argued that Stevenson could not claim a valid charging lien because Elkin's involvement in the case was not necessary and should have been avoided by an assignment of Elkin's rights to his no-fault benefits claim to Maple Manor. Maple Manor further argued that, under the circumstances, the American rule for attorney fees applied and Elkin was responsible for paying Stevenson and that Maple Manor agreed to settle its claim against Mid-Century, but never agreed to pay attorney fees to Stevenson because Maple Manor was represented by its own attorneys.

Thereafter, in June 2022, Maple Manor moved to have all the attorney fees held in escrow released and paid to Maple Manor's attorneys. repeating the same arguments that it had made in its previous filings. Similarly, Elkin filed a brief in opposition to Maple Manor's motion to release the escrow funds and reiterated its previous arguments.

In the fullness of time and after a failed attempt to have the parties resolve the dispute through facilitation, the trial court waived oral argument and issued an opinion and order apportioning attorney fees between Maple Manor's attorneys and Stevenson. Given the time passed in February 2023, the trial court awarded Stevenson $3,799.25 for costs. After those costs were deducted from the $132,729.27 held in escrow for attorney fees, the trial court awarded Stevenson 75% of the remaining balance, plus interest, and awarded the remaining 25%, plus interest, to Maple Manor's attorneys. The trial court reasoned that litigation was necessary in this case to secure payment from Mid-Century and only Elkin had a valid claim for no-fault benefits against Mid-Century because Maple Manor lacked standing to bring a claim. The trial court recounted that, for the majority of the proceedings, Maple Manor's only claim was against Elkin for breach of contract. The trial court further explained that attorneys for both Maple Manor and Elkin had expended time and effort pursuing their claims. The trial court ultimately concluded that Stevenson "was responsible for 75% of the services that resulted in the settlement of this lawsuit and payment to the Maple Manor Plaintiffs" and Maple Manor's attorneys were responsible for the rest. Maple Manor argues that the trial court erred when it awarded attorney fees to Stevenson because only Maple Manor's attorneys are allowed to collect attorney fees in this case. We disagree.

An award of attorney fees is reviewed for an abuse of discretion. Farmers Ins Exch v Kurzmann, 257 Mich.App. 412, 422; 668 N.W.2d 199 (2003). "An abuse of discretion occurs when the trial court chooses an outcome falling outside the principled range of outcomes." Nat'l Waterworks, Inc v Int'l Fidelity &Surety, Ltd, 275 Mich.App. 256, 258; 739 N.W.2d 121 (2007). "The trial court's factual findings underlying an award of attorney fees are reviewed for clear error. A finding is clearly erroneous if we are left with a definite and firm conviction that a mistake has been made." Colen v Colen, 331 Mich.App. 295, 300; 952 N.W.2d 558 (2020) (quotation marks and citation omitted).

Michigan follows the "American rule" for attorney fees. Haliw v Sterling Hts, 471 Mich. 700, 706; 691 N.W.2d 753 (2005). "Under that rule, each party is responsible for his or her own attorney fees unless a statute or court rule specifically authorizes the trial court to order an award of attorney fees." Pransky v Falcon Group Inc, 311 Mich.App. 164, 194; 874 N.W.2d 367 (2015). "Consistent with the common-law American rule, the no-fault act generally requires each party to pay its own attorney fees." Miller v Citizens Ins Co, 490 Mich. 905, 905; 804 N.W.2d 740 (2011). Attorney fees and other expenses "are usually not part of the matter at controversy between the parties." ABCS Troy, LLC v Loancraft, LLC, 337 Mich.App. 125, 132; 972 N.W.2d 317 (2021). But this Court has held that "the American rule is not...