Authored By: Stephen McKenney and Lucy Budreau
On December 7, 2023, the Michigan Court of Appeals issued its for-publication opinion in International Outdoor, Inc v SS Mitx, LLC, et al. In it, the Court provided binding guidance concerning the evidence required for relief from judgment based on fraud, misrepresentation, or misconduct of an adverse party, as well as the availability of attorney fees based on another party’s fraudulent or unlawful conduct.
The case involved competing claims concerning the validity of leases to erect a billboard in Auburn Hills. International Outdoor claimed that it had timely renewed its first-in-time lease before Lamar Advertising entered into a subsequent lease for the property. Altior Law’s client, Lamar, contended that International Outdoor’s claimed renewal was a product of fraud and based on a back-dated renewal letter authored by International Outdoor’s president. In addition to their claims concerning the superiority of their respective lease interests, International Outdoor and Lamar also asserted competing tortious interference claims. The case was first tried in 2018, with the jury returning a verdict in favor of International Outdoor.
Following the jury verdict, a former International Outdoor worker that had not been previously disclosed in discovery as having knowledge of the claims in the case came forward and stated he had witnessed International Outdoor’s president fabricate and backdate its claimed lease renewal letter. Based on this testimony, along with a forensic expert’s analysis of International’s computers, Altior Law successfully moved to set aside the first jury verdict under MCR 2.612(C)(1)(c) and a new trial was ordered. At the conclusion of the second trial, the jury found in favor of Lamar and awarded it $687,244 in damages along with its attorney fees. The trial court, however, later declined to award Lamar any of its attorney fees concluding that Michigan law only permitted the recovery of attorney fees incurred in “prior litigation” as the result of fraud or unlawful conduct. Both International Outdoor and Lamar appealed.
On appeal, International Outdoor claimed numerous errors, including that the trial court erred in setting aside the first jury verdict under MCR 2.612(C)(1)(c) because Lamar could have discovered its fraud with due diligence prior to the first trial. In rejecting this argument, the Court of Appeals reasoned that unlike MCR 2.612(C)(1)(b), which imposes a due diligence requirement to set aside a judgment based on new evidence, the plain language of MCR 2.612(C)(1)(c) imposes no due diligence requirement to set aside a judgment on the basis of fraud, misrepresentation, or misconduct. The Court also noted it was “unpersuaded” by International Outdoor’s reliance on the Court’s 1988 opinion in Stallworth v Hazel, which in “interpreted the court rule in such a way as to remove fraud as an independent ground for relief from judgment under MCR 2.612(C)(1).”
Turning to Lamar’s appeal, the Court held that the trial court abused its discretion in refusing to award Lamar its attorney fees consistent with the jury’s verdict. Citing its opinions in Brooks v Rose and Ypsilanti Charter Township v Kircher, the Court reasoned that Michigan law had moved away from earlier opinions which limited an award of attorney fees to those incurred in “prior litigation” based on an adversary’s fraud or unlawful conduct. Rather, under the rule articulated in Kircher, “a trial court has authority to award attorney fees in an action in which the moving party incurred the fees as a result of another party’s fraudulent or unlawful conduct.” Consequently, the trial court’s refusing to following the jury’s verdict and award Lamar its attorney fees was an abuse of discretion, as “Lamar could seek attorney fees associated with prosecuting its claim against International on the basis that International engaged in fraudulent or unlawful conduct that forced Lamar to prosecute its claim.”
The holdings in International Outdoor offer important guidance for attorneys faced with adverse judgments at the hands of an adversary’s misrepresentation or misconduct, as well as those prosecuting claims based on fraud or unlawful conduct.