Michigan Supreme Court Holds Mediation Fee is a Taxable Cost

Michigan courts increasingly use alternative dispute resolution procedures (“ADR” for short) in an effort to resolve civil cases. In fact, MCR 2.410(A)(1) provides that “[a]ll civil cases are subject to alternative dispute resolution”, which the rule defines as:

“any process designed to resolve a legal dispute in the place of court adjudication, and includes settlement conferences ordered under MCR 2.401; case evaluation under MCR 2.403; mediation under MCR 2.411; domestic relations mediation under MCR 3.2016; and other procedures provided by local court rule or ordered on stipulation of the parties.”   [MCR 2.410(A)(2).]

Courts can order any civil matter into ADR “at any time” and can do so more than once if necessary. MCR 2.410(C)(1)(“More than one such order may be entered in a case.”).

One of the ADR processes listed in MCR 2.410(A)(2) is mediation, also known as facilitation. MCR 2.411(A)(2) defines mediation as:

“a process in which a neutral third party facilitates communication between parties, assists in identifying issues, and helps explore solutions to promote a mutually acceptable settlement.”

We have resolved numerous cases through mediation – both as a party and serving as the mediator – and find it to be a cost-effective way to resolve disputes. While mediation can be cost-effective, it is not without cost.  In this regard, “[a] mediator is entitled to reasonable compensation commensurate with the mediator’s experience and usual charges for services performed.”  MCR 2.411(D)(4).  The costs of mediation are generally split pro rata between the parties unless the court orders otherwise.  MCR 2.411(D)(2).  MCR 2.411(D)(4) further provides that “[t]he mediator’s fee is deemed a cost of the action.”

In Patel v. Patel, et al, __ Mich.App. __ (June 19, 2018)(for publication), the Michigan Court of Appeals recently held that a prevailing party in a civil matter may recover mediation fees as a taxable cost.  In Patel, the plaintiff brought shareholder oppression claims against his two brothers arising out of their ownership of a hotel in Holland.  The parties attended mediation, which was not successful.  After a bench trial, the trial court entered judgment in favor of the defendant brothers and awarded them their mediation expenses as a taxable cost under MCR 2.625(A)(1), MCR 2.411(D)(4) and MCL 600.2405(2).  In upholding the award, the Court of Appeals noted that MCR 2.625(A)(1) allows costs to the prevailing party “unless prohibited by statute or by these rules or unless the court directs otherwise[.]”  The Court found no statute, court rule or court decision that prohibited recovery of mediation costs.  In fact, the Court found that under the “plain terms” of MCL 600.2405(2) and MCR 2.411(D)(4), mediation fees are a taxable cost and, as such, were properly awarded under MCR 2.625(A)(1).  This appears to be the first reported decision on the issue although, as the Patel Court noted, the language of the Court Rules is “plain” on the issue.

The next time you or your client prevail in a civil action, be sure to include any mediation expenses in your request for taxable costs. The thousands of dollars you save may be your own.