Horizon Lawn Maintenance, Inc. v. Columbus-Kenworth, Inc., et al

Filing 72

OPINION and ORDER (1) Granting Partial Summary Judgment in Favor of Defendant Columbus-Kenworth, Inc. on Plaintiff's Claim for Attorneys' Fees Under the Michigan Uniform Commercial Code and (2) Directing the Parties to Appear for a Settlement Conference. Signed by District Judge Matthew F. Leitman. (HMon)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
HORIZON LAWN MAINTENANCE, INC.
Plaintiff,

Case No. 14-cv-13779
Hon. Matthew F. Leitman

v.
COLUMBUS-KENWORTH, INC., d/b/a
KENWORTH OF COLUMBUS et al.,
Defendants.
_____________________________________/
OPINION AND ORDER (1) GRANTING PARTIAL SUMMARY
JUDGMENT IN FAVOR OF DEFENDANT COLUMBUS-KENWORTH,
INC. ON PLAINTIFF’S CLAIM FOR ATTORNEYS’ FEES UNDER THE
MICHIGAN UNIFORM COMMERCIAL CODE AND (2) DIRECTING
THE PARTIES TO APPEAR FOR A SETTLEMENT CONFERENCE
This action involves a garden-variety contractual dispute and a significant
and unsettled question of Michigan law concerning the availability of attorneys’
fees to an aggrieved buyer of goods under the Michigan Uniform Commercial
Code (the “Code”).
Plaintiff Horizon Lawn Maintenance, Inc. (“Horizon”) purchased three
trucks from Defendant Columbus-Kenworth, Inc. (“CKI”). Horizon alleges that
CKI breached certain express and implied warranties related to the trucks. Horizon
seeks both consequential and incidental damages under the Code, and Horizon

1

asserts that it is entitled to recover its attorneys’ fees as an element of those
damages.
Horizon correctly notes that two older Michigan Court of Appeals decisions
– Cady v. Dick Loehr’s, Inc., 299 N.W.2d 69 (Mich. Ct. App. 1980) and Kelynack
v. Yamaha Motor Corp., 394 N.W.2d 17 (Mich. Ct. App. 1986) – support its claim
that attorneys’ fees are recoverable under the relevant section of the Code (Mich.
Comp. Laws § 440.2715). However, the United States Courts of Appeals for the
Sixth and Tenth Circuits have squarely rejected those state court decisions and
have held that attorneys’ fees are not available to an aggrieved buyer under the
Code. See Olbrys v. Peterson Boat Works, Inc., 81 F.3d 161 (Table), 1996 WL
143466 (6th Cir. Mar. 28, 1996); Webco Indus., Inc. v. Thermatool Corp., 278 F.3d
1120 (10th Cir. 2002). Moreover, the “overwhelming weight of authority is that
attorney’s fees are not recoverable” under the Code. Nick’s Auto Sales, Inc. v.
Radcliff Auto Sales, Inc., 591 S.W.2d 709, 711 (Ky. Ct. App. 1979).
This Court agrees with the Sixth and Tenth Circuits that an aggrieved buyer
may not recover attorneys’ fees as an element of incidental and/or consequential
damages under the Code. Accordingly, the Court GRANTS summary judgment in
favor of CKI with respect to Horizon’s claim for attorneys’ fees.

2

I.
Horizon is a Michigan corporation that performs various outdoor
maintenance tasks from its base of operations in Canton, Michigan. (See Sec. Am.
Compl. at ¶ 1, ECF #60 at 2, Pg. ID 1036.) CKI is an Ohio corporation that sells
Kenworth trucks from its retail location in Hilliard, Ohio. (See id. at ¶ 2.)
In November and December of 2013, Horizon and CKI entered into
contracts in which CKI agreed to sell Horizon three Kenworth trucks. (See id. at ¶¶
13-14.) The total contract price for the three trucks was $242,734.44. (See id. at ¶
15.) Horizon paid that amount to CKI, and CKI delivered all three vehicles to
Horizon. (See id. at ¶¶ 12, 17.)
Horizon contends that the contracts required CKI to include in all three
trucks a power take-off (“PTO”) gear. (See id. at ¶ 54.) CKI did not include those
gears in the trucks, and it denies that it had any obligation to do so. (See, e.g., Ans.
at ¶ 43, ECF #61 at 6, Pg. ID 1080.)
At some point after CKI delivered the trucks to Horizon, Horizon discovered
that the trucks did not contain PTO gears, and it complained to CKI. (See Sec.
Am. Compl. at ¶ 42, ECF #60 at 13, Pg. ID 1047.) The parties attempted to
resolve their dispute over the PTO gears, but they did not succeed.
On September 10, 2014, Horizon filed this action against CKI (and a number
of other Defendants who have since been dismissed) in the Third Judicial Circuit
3

Court for the State of Michigan. (See ECF #1-2 at 3, Pg. ID 8.) Horizon’s
Complaint asserted a number of claims under Article 2 of the Code, including
revocation of acceptance under Mich. Comp. Laws § 440.2608 (Count I); breach of
warranty under Mich. Comp. Laws § 440.2714 (Count II); and “buyer’s remedies
following revocation of acceptance” under Mich. Comp. Laws §§ 440.2711 and
440.2712 (Count III). (See Compl. at ¶¶ 34-59, ECF #1-2 at 13-21, Pg. ID 13-26.)
Horizon sought $242,734.44 in damages and an award of its “actual costs and
attorneys’ fees.” (Id., ECF #1-2 at 21-22, Pg. ID 26-27.) The Defendants timely
removed the action to this Court. (ECF #1.)
Horizon has twice amended its Complaint.

The current and operative

version asserts several claims under the Code, including revocation of acceptance,
breach of express warranty, and breach of implied warranty. (See Sec. Am.
Compl., ECF #60 at 10, Pg. ID 1044.) The Second Amended Complaint also
reasserts Horizon’s claim for actual attorneys’ fees. (See id., ECF #60 at 24, Pg.
ID 1058.) Horizon alleges that it may recover such fees as an element of the
incidental and consequential damages to which it is entitled under the Code. (See
id. at ¶ 45, ECF #60 at 13-14, Pg. ID 1047-48.)
Following discovery and an unsuccessful settlement conference, Horizon
and CKI filed cross-motions for summary judgment. (See ECF ## 64, 65.) The
cross-motions separately address (1) the merits of Horizon’s claims and (2)
4

Horizon’s demand for attorneys’ fees. With respect to the attorneys’ fees issue,
CKI argues that such fees are not available as incidental and/or consequential
damages under the Code; Horizon insists that they are.
The Court now decides only the portion of the cross-motions concerning the
availability of attorneys’ fees. The Court focuses on the fees issue at this point
because that issue was the primary stumbling block to a resolution at the failed
settlement conference. The Court hopes and believes that with the fees issue
decided, the parties can quickly reach a sensible agreement to bring this litigation
to a close.
II.
The Court has subject matter jurisdiction over this action based upon the
parties’ diversity of citizenship and the amount in controversy.1 See 28 U.S.C.
1332(a)(1). The Court must apply Michigan law as determined by the Michigan
Supreme Court. See Erie R.R. v. Tompkins, 304 U.S. 64, 78 (1938). But that court
has not addressed the question presented here.2 Under these circumstances, the

1

In a removed action like this one, when a district court assesses its subject matter
jurisdiction, it measures the amount in controversy “at the time of removal . . . .”
Hayes v. Equitable Energy Res. Co., 266 F.3d 560, 573 (6th Cir. 2001). At the
time of removal, Horizon sought more than $240,000 in damages. (See Compl.,
ECF #1-2 at 21, Pg. ID 26.)

2

Horizon contends that in Davis v. Forest River, Inc., 774 N.W.2d 327 (Mich.
2009), the Michigan Supreme Court “upheld the trial court’s granting of attorneys’
fees” under the Code. (See Pl.’s Mot. Summ. J. at 17, ECF #65 at 25, Pg. ID
5

Court “must predict how the [Michigan Supreme Court] would rule by looking to
all the available data.” Stryker Corp. v. XL Ins. Am., 735 F.3d 349, 360 (6th Cir.
2012) (quoting Allstate Ins. Co. v. Thrifty Rent-A-Car Sys., Inc., 249 F.3d 450, 454
(6th Cir.2001)). “The sources of data which may guide [the Court’s] inquiry
include” analogous decisions of the Michigan Supreme Court; decisions of the
Michigan Court of Appeals; “positions expressed in a restatement of law;” law
review commentaries; and “decisions from other jurisdictions or the ‘majority
rule.’” Bailey v. V & O Press Co., 770 F.2d 601, 604 (6th Cir. 1985) (citations
omitted).
Published, on-point decisions issued by the Michigan Court of Appeals are
especially important “data” that this Court must consider in ascertaining how the
Michigan Supreme Court would rule. See Grantham & Mann, Inc. v. Am. Safety
Prod., Inc., 831 F.2d 596, 609 (6th Cir. 1987). But they are not conclusive on
questions of Michigan law.

Indeed, the United States Supreme Court has

1267.) That is not accurate. The Michigan Supreme Court disposed of Davis by
order (not by a reasoned opinion), and the only reference in the order to attorneys’
fees is the following single sentence: “This order does not affect the trial court’s
award of attorney fees.” Id. at 327. Moreover, in an earlier order, the Michigan
Supreme Court specifically listed the issues it would consider on appeal, and it did
not include the availability of attorneys’ fees as one of those issues. See Davis v.
Forest River, 764 N.W.2d 278 (Mich. 2009). Finally, the Michigan Court of
Appeals decision under review in Davis did not involve any substantive holding
concerning the availability of attorneys’ fees under the Code. See Davis, 748
N.W.2d 887 (Mich. Ct. App. 2008). Under these circumstances, the Michigan
Supreme Court’s order in Davis cannot be read as expressing any opinion
whatsoever concerning the availability of attorneys’ fees under the Code.
6

repeatedly recognized that a federal court sitting in diversity may disregard a state
intermediate appellate court decision if the federal court “is convinced by other
persuasive data that the highest court of the state would decide otherwise.” West v.
AT&T, 311 U.S. 223, 237 (1940); see also C.I.R. v. Bosch’s Estate, 387 U.S. 456,
464-65 (1967); King v. Order of United Commercial Travelers of Am., 333 U.S.
153, 158 (1948).
Likewise, the Sixth Circuit has long recognized and repeatedly exercised its
authority to deviate from intermediate state appellate decisions when convinced
that a state’s highest court would disagree with the appellate court. See, e.g.,
Leithauser v. Hartford Fire Ins. Co., 124 F.2d 117, 119-20 (6th Cir. 1941)
(recognizing authority); FL Aerospace v. Aetna Casualty & Surety Co., 897 F.2d
214, 218-20 (6th Cir. 1990) (declining to follow a line of Michigan Court of
Appeals decisions construing “sudden and accidental” discharge exclusion in
insurance policy); Swix v. Daisy Mfg. Co., Inc., 373 F.3d 678, 684 (6th Cir. 2004)
(declining to follow a Michigan Court of Appeals decision concerning application
of “open and obvious” doctrine to product defect claims); Manwaring v. Martinez,
527 Fed. App’x 390, 396-97 (6th Cir. 2013) (rejecting Ohio Court of Appeals
decisions concerning Statute of Frauds based upon “belie[f] that the Ohio Supreme
Court would not follow their approach.”). Thus, while intermediate state appellate

7

court decisions provide significant guidance concerning the content of state law,
they are not binding on federal courts.3
Notably, the Michigan Court of Appeals has emphasized that the two
appellate decisions relied on by Horizon here – Cady and Kelynack – are not even
binding on state courts. In a published decision, the Michigan Court of Appeals
highlighted that because Cady and Kelynack “were decided before November 1,
1990,” they are “not binding precedent” under the Michigan Court Rules. A.S.
Leavitt v. Monaco Coach Corp., 616 N.W.2d 175, 186 n.3 (Mich. Ct. App. 2000).
Cady and Kelynack warrant careful consideration, but they do not control the
resolution of the attorneys’ fees issue before the Court.4

3

There is a line of Sixth Circuit cases in which that court has said that “[d]ecisions
by the Michigan Court of Appeals are binding authority where the Michigan
Supreme Court has never addressed the issue decided therein.” Montgomery v.
Kraft Foods Global, __ F.3d __, 2016 WL 2848623, at *3 (6th Cir. May 16, 2016)
(quoting Berrington v. Wal-Mart Stores, Inc., 696 F.3d 604, 608 (6th Cir. 2012)).
But this line of cases is not consistent with the Supreme Court decisions cited
above nor with the many other published Sixth Circuit decisions that expressly
acknowledge the authority of federal courts to depart from decisions of
intermediate state appellate courts. See, e.g., Ruth v. Bituminous Cas. Corp., 427
F.3d 290, 292 (6th Cir. 1970) (“[W]here the highest court of the State has not
spoken, this Court is obligated to follow published intermediate state appellate
court decisions unless we are convinced that the highest state court would decide
differently.” (emphasis added)). This Court will follow the Supreme Court and the
contrary published Sixth Circuit decisions.
4

“State appellate court precedent is to be considered particularly persuasive where
the [state] Supreme Court has refused to review the decision.” Lukas v. McPeak,
730 F.3d 635, 638 (6th Cir. 2013). The losing parties in Cady and Kelynack did
8

III.
Horizon argues that as an aggrieved buyer it is entitled to recover attorneys’
fees as an element of the incidental and consequential damages available under
Mich. Comp. Laws §§ 440.2712 and 440.2714 (hereinafter, “Section 2712” and
“Section 2714,” respectively). (See Sec. Am. Compl. at ¶ 34, ECF #60 at 11, Pg.
ID 1045.)

Both Section 27125 and Section 27146 expressly incorporate the

not seek leave to appeal in the Michigan Supreme Court, and thus that court did
not refuse to review either decision.
5

The full text of Section 2712 provides as follows:
(1)

(2)

(3)
6

After a breach within the preceding section the buyer may “cover” by
making in good faith and without reasonable delay any reasonable
purchase of or contract to purchase goods in substitution for those due
from the seller.
The buyer may recover from the seller as damages the difference
between the cost of cover and the contract price together with any
incidental or consequential damages as hereinafter defined (section
2715), but less expenses saved in consequence of the seller’s breach.
Failure of the buyer to effect cover within this section does not bar
him from any other remedy.

The full text of Section 2714 provides as follows:
(1)

(2)

Where the buyer has accepted goods and given notification
(subsection (3) of section 2607) he may recover as damages for any
nonconformity of tender the loss resulting in the ordinary course of
events from the seller’s breach as determined in any manner which is
reasonable.
The measure of damages for breach of warranty is the difference at
the time and place of acceptance between the value of the goods
accepted and the value they would have had if they had been as
warranted, unless special circumstances show proximate damages of a
different amount.
9

definitions of “incidental” and “consequential” damages from Mich. Comp. Laws
§ 440.2715 (“Section 2715”). Thus, Horizon’s claim for attorneys’ fees turns on
whether such fees qualify as such damages under Section 2715.
Section 2715 identifies the incidental and consequential damages that an
aggrieved buyer may recover:
(1)

Incidental damages resulting from the seller’s breach include
expenses reasonably incurred in inspection, receipt,
transportation and care and custody of goods rightfully
rejected, any commercially reasonable charges, expenses or
commissions in connection with effecting cover and any
other reasonable expense incident to the delay or other
breach.

(2)

Consequential damages resulting from the seller’s breach
include
(a)

any loss resulting from general or particular
requirements and needs of which the seller at the time
of contracting had reason to know and which could
not reasonably be prevented by cover or otherwise;
and

(b)

injury to person or property proximately resulting
from any breach of warranty.

The Court concludes that the incidental and/or consequential damages
available under Section 2715 do not include an award of attorneys’ fees.

(3)

In a proper case any incidental and consequential damages under the
next section may also be recovered.
10

A.
The Michigan Supreme Court has repeatedly held that Michigan “follows
what is sometimes called the ‘American rule’ regarding attorney fees.” Nemeth v.
Abonmarche Dev., Inc., 576 N.W.2d 641, 651 (Mich. 1998) (quoting Popma v.
Auto Club Ins. Assoc., 521 N.W.2d 831 (Mich. 1994)). “This rule provides that
attorney fees are not ordinarily recoverable unless a statute, court rule, or common
law exception provides to the contrary.” Id. Notably, the Michigan Supreme
Court has “charg[ed] the [Michigan] Legislature . . . with knowledge of the
American rule,” and that court has declined to read a statute as deviating from the
rule – and permitting an award of attorneys’ fees – where the legislature did not
expressly authorize such an award. Id. at 653. It is against this background that
this Court considers whether the Michigan Supreme Court would permit an award
of attorneys’ fees under Section 2715.
The Michigan Supreme Court’s primary goal in construing a statute is to
determine and give effect to the Michigan Legislature’s intent. See Farrington v.
Total Petroleum, 501 N.W.2d 76, 79 (Mich. 1993). That court “begin[s] with the
plain language of the statute,” Jesperson v. Auto Club Ins., __ N.W.2d __, 2016
WL 1092194, at *2 (Mich., Mar. 21, 2016), and it declines to read into a statute
new or additional language that “the legislature did not see fit to incorporate.”

11

Ford Motor Co. v. Appeal Bd. of Mich. Unemp’t Comp. Comm’n, 25 N.W.2d 586,
587-88 (Mich. 1947).
The Michigan Supreme Court would place great weight on the fact that
Section 2715 “is silent as to attorney fees” and that “under the literal wording of
the statute’s language, attorney fees are not included.” Olbrys, 1996 WL 143466,
at *4 (emphasis added). That court would deem the omission of any reference to
attorneys’ fees especially significant because, as noted above, the Michigan
Legislature is aware of the American rule and “has expressly authorized [attorneys’
fees in derogation of this rule] in numerous statutes.” Id. Thus, the Michigan
Supreme Court would likely conclude that the Michigan Legislature would have
specifically referenced attorneys’ fees in Section 2715 if it intended to make those
fees available to an aggrieved buyer as incidental or consequential damages. See
id.
Indeed, in Nemeth, the Michigan Supreme Court held that a plaintiff who
prevailed under a statute authorizing an award of “costs . . . if the interests of
justice require” could not recover attorneys’ fees because the “Legislature has
spoken” concerning the recoverable costs, “and it has not included attorney fees.”
Nemeth, 576 N.W.2d at 654. Applying that same reasoning to this case, the
Michigan Supreme Court would not allow an award of attorneys’ fees under

12

Section 2715 because that section does not specifically “include[] attorneys fees.”
Id.
Moreover, the Michigan Supreme Court would construe Section 2715 in
light of other provisions of the Code, cf. Sch. Dist. No. One Fractional, Ira Tp. v.
Sch. Dist. No. 2 Fractional, Chesterfield Tp., 66 N.W.2d 72, 76, 77 (Mich. 1954)
(explaining that provisions of school code “must be considered together” and the
school code “construed as a whole”); In Re Draime, 97 N.W.2d 115, 117 (Mich.
1959) (holding that “entire provisions of the probate code must be read and
construed together”), and at least two provisions of the Code “counsel against
construing incidental damages as implicitly including attorney fees.” Olbrys, 1996
WL 143466, at *4 (emphasis added).
First, Mich. Comp. Laws. § 440.1305(1) provides that “neither
consequential or special damages nor penal damages may be had except as
specifically provided in this act or by other rule of law.” That section is significant
because no provision of the Code nor other rule of law “specifically provide[s]”
that an aggrieved buyer may recover attorneys’ fees as an element of consequential
damages. Olbrys, 1996 WL 143466, at *4.7

7

On the page of Olbrys cited in text above, the Sixth Circuit cited Mich. Comp.
Laws §440.1106(1), but the Code has since been re-numbered in part, and the
current version of §440.1305(1) is identical to the version of §440.1106(1) cited by
the Sixth Circuit. See Official Comment to §440.1305.
13

Second, Mich. Comp. Laws § 440.1103 recognizes that common law rules
continue to govern commercial transactions in goods to the extent that those rules
are not inconsistent with the text of the Code or with the policies underlying the
Code. Id.8 That is important because, as noted above, Michigan common law does
not allow an award of attorneys’ fees to the prevailing party, and that common law
rule may co-exist with the Code because it is not inconsistent with any Code
provision or policy underlying the Code. These two other Code provisions would
further persuade the Michigan Supreme Court to hold that Section 2715 does not
authorize an award of attorneys’ fees.
Furthermore, the Michigan Supreme Court would likely consider decisions
from the highest courts of other states interpreting provisions like Section 2715,
see, e.g., Brightwell v. Fifth Third Bank of Michigan, 790 N.W.2d 591, 596 n.29
(Mich. 2010) (looking to decision of Supreme Judicial Court of Massachusetts
applying identically-worded statutory provision); Kambas v. St. Joseph Mercy
8

In relevant part, Mich. Comp. Laws § 440.1103 provides: “[u]nless displaced by
the particular provisions of this act, the principles of law and equity, including the
law merchant and the law relative to capacity to contract, principal and agent,
estoppel, fraud, misrepresentation, duress, coercion, mistake, bankruptcy, or other
validating or invalidating cause shall supplement its provisions.” The Official
Comment to this provision states that the Code “was drafted against the backdrop
of existing bodies of law, including the common law and equity, and relies on
those bodies of law to supplement its provisions in many important ways.” Id. at
cmt. 2. The Official Comment further notes that the Code preempts only those
common law rules “that are inconsistent with either [the Code’s] provisions or its
purposes and policies.” Id.
14

Hospital of Detroit, 205 N.W.2d 431, 434 (Mich. 1973) (looking to decision of
Ohio Supreme Court interpreting similar statute), and the majority of these
decisions “have found that attorney fees are not included as incidental damages.”
Olbrys, 1996 WL 143466, at *5 (citing Jacobs v. Rosemount Dodge-Winnebago
South, 31 N.W.2d 71, 79 (Minn. 1981), Devore v. Bostrom, 632 P.2d 832, 835
(Utah 1981), Murray v. Holiday Rambler, Inc., 265 N.W.2d 513, 527-28 (Wisc.
1978), and Jelen & Son, Inc. v. Bandimere, 801 P.2d 1182, 1185 (Colo. 1990) (en
banc) (holding attorney fees are not an element of incidental damages under
Colorado’s version of Section 2715)).

Indeed, the “overwhelming weight of

authority is that attorney’s fees are not recoverable under Uniform Commercial
Code 2-715.” Nick’s Auto Sales, 591 S.W.2d at 711; see also Howard O. Hunter,
Modern Law of Contracts § 18:5 (March 2016 update) (“weight of authority
clearly” holds that attorneys’ fees are not available to an aggrieved buyer as an
element of incidental or consequential damages); 24 Williston on Contracts §
66:67 (4th ed.) (under the “majority view,” attorneys’ fees are not available to an
aggrieved buyer as consequential damages). There is no persuasive reason to
believe that the Michigan Supreme Court would deviate from this “overwhelming
weight of authority.”
In sum, the substantial “available data” described above leads this Court to
conclude – like the Sixth and Tenth Circuits – that the Michigan Supreme Court
15

would not permit an aggrieved buyer to recover attorneys’ fees as incidental or
consequential damages under Section 2715. See Olbrys, supra; Webco Indus.,
supra.
B.
In two published decisions – Cady and Kelynack – the Michigan Court of
Appeals has affirmed an award of attorneys’ fees under Section 2715. Cady is the
leading decision; Kelynack simply follows Cady without any independent analysis
of the attorneys’ fees issue. Horizon contends that the Michigan Supreme Court
would follow these decisions. The Court disagrees.
The court in Cady decided to allow an award of attorneys’ fees under
Section 2715 because it had previously allowed an award of attorneys’ fees under a
statute allowing a plaintiff to recover its “costs . . . if the interests of justice
require”:
In the present case the trial court stated, “(t)he Court does feel
that under these circumstances that not just the attorney fees
that we usually grant of $150.00 but the actual attorney fee is
proper in the sum of $2,930.00”. Plaintiff maintains that he is
entitled to recover the attorneys’ fees based upon the Michigan
Uniform Commercial Code which allows the recovery of
consequential damages.[] M.C.L. [§§] 440.2714, 440.2715;
M.S.A. [§§] 19.2714, 19.2715.
We have found no
interpretation of this statute by any appellate court in this state
which squarely resolves this issue.
M.C.L. [§] 440.2714(3); M.S.A. [§] 19.2714(3) provides that,
“(i)n a proper case any incidental and consequential damages
under the next section may also be recovered”.
16

M.C.L. [§] 440.2715; M.S.A. [§] 19.2715 provides in part:
“(1) Incidental damages resulting from the seller's breach
include expenses reasonably incurred in inspection,
receipt, transportation and care and custody of goods
rightfully rejected, and commercially reasonable charges,
expenses or commissions in connection with effecting
cover and any other reasonable expense incident to the
delay or other breach.” []
This Court in Taxpayers & Citizens in the Public Interest v.
Dept. of State Highways, 70 Mich. App. 385, 245 N.W.2d 761
(1976), and Superior Public Rights, Inc. v. Dept. of Natural
Resources, 80 Mich. App. 72, 263 N.W.2d 290 (1977), held
that under section 3(3) of the Environmental Protection Act,
M.C.L. [§] 691.1203(3); M.S.A. [§] 14.528(203)(3), the clause
‘(c)osts may be apportioned to the parties if the interests of
justice require’ gave the trial judge the right to exercise his
discretion to grant attorneys’ fees.
Similarly, we find that the language of M.C.L. [§§] 440.2714,
440.2715; M.S.A. [§§] 19.2714, 19.2715, confers on the trial
court discretion to award attorneys’ fees as an element of the
damages incurred as a result of a breach of warranty. Under the
facts of this case, the trial court’s exercise of its discretion to
award attorneys’ fees as a “reasonable expense incident to the
breach” was proper.
Cady, 299 N.W.2d at 71-72.
The Michigan Supreme Court has effectively rejected both the Cady court’s
rationale and the key decisions on which that court relied. See Webco Indust., 278
F.3d at 1133 (acknowledging rejection). Indeed, as described above, in Nemeth,
the Michigan Supreme Court held that a trial court could not award attorneys’ fees
under a statute that authorized an award of “costs” if “the interests of justice
17

require.” Nemeth, 576 N.W.2d at 651, 654. That holding is directly contrary to the
rationale of Cady and the precedent on which it relied.
Nemeth also undermines Cady in another significant respect. One of the key
decisions relied upon by the court in Cady – the Taxpayers & Citizens case –
permitted an award of attorneys’ fees based, in part, on the conclusion that the
plaintiffs and attorneys who prevailed under the statute in that case performed
something of a public service. See Taxpayers & Citizens, 245 N.W.2d at 762-63.
But Nemeth rejected this line of reasoning too. The Michigan Supreme Court held
that the public service nature of attorney representation is not sufficient to justify
an award of statutory attorneys’ fees. See Nemeth, 576 N.W.2d at 652-53. Given
that Michigan Supreme Court has effectively rejected the decisions that form the
foundation of Cady, this Court does not believe that that court would follow or
adopt Cady or Kelynack.
The Michigan Supreme Court is also unlikely to adopt Cady and Kelynack
because those decisions have been soundly rejected by several other courts.
Federal and state courts alike – including the Sixth Circuit,9 the Tenth Circuit,10
and the Indiana Court of Appeals11 – have declined to follow Cady. In addition,
9

See Olbrys, supra.

10
11

See Webco Indus., supra.

See Indiana Glass Co. v. Indiana Michigan Power Co., 692 N.E.2d 886, 888 n.2
(Ind. Ct. App. 1998).
18

the Texas Supreme Court has refused to follow Kelynack.12 The Court is not
persuaded that the Michigan Supreme Court would deviate from this consistent
rejection of Cady and Kelynack.
Finally, Horizon argues that the Michigan Supreme Court would follow
Cady and Kelynack because the Michigan Court of Appeals cited those decisions
with approval even after the Sixth Circuit and Tenth Circuit disagreed with them.
(See Pl.’s Mot. Summ. J. at 17, ECF #65 at 25, Pg. ID 1267, citing Elm Plating Co.
v. J Mark Sys., Inc., 2003 WL 21419276 (Mich. Ct. App. June 19, 2003)). But
there is no indication that either party in Elm Plating informed the Michigan Court
of Appeals that Cady and Kelynack had been rejected by other courts; the
Michigan Court of Appeals appears to have assumed the continuing vitality of
those decisions. Moreover, the Court of Appeals in Elm Plating affirmed the
denial of attorneys’ fees, and thus it had no need to reconsider whether the trial
court could have awarded attorneys’ fees if it felt such an award would have been
appropriate.

The Court does not share Horizon’s views that Elm Plating

reaffirmed Cady and Kelynack and/or evidences that the Michigan Supreme Court
would adopt those decisions.

12

See Med. City Dallas, Ltd. v. Carlisle Corp., 251 S.W.3d 55, 59-60 (Tex. 2008)
(citing Kelynack for proposition that some courts have allowed an award of
attorneys’ fees under the Uniform Commercial Code, but declining to follow that
approach and holding, instead, that such fees are available to an aggrieved buyer
only if authorized by a statute outside of the Code).
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IV.
For the reasons explained above, this Court (1) GRANTS CKI’s motion for
summary judgment (ECF #64) to the extent that it seeks dismissal of Horizon’s
claim for attorneys’ fees, and (2) DENIES Horizon’s motion for summary
judgment (ECF #65) to the extent that it sought entry of an order allowing it to
recover attorneys’ fees if it prevailed at trial.
The Court DIRECTS the parties to appear for a settlement conference
before the Honorable Bernard A. Friedman, United States District Judge, at a date
and time set by Judge Friedman. In the event that the parties do not resolve this
action through participation in the settlement conference, the Court will schedule a
hearing on the remainder of the issues raised in the cross-motions for summary
judgment.
IT IS SO ORDERED.

s/Matthew F. Leitman
MATTHEW F. LEITMAN
UNITED STATES DISTRICT JUDGE
Dated: May 24, 2016

I hereby certify that a copy of the foregoing document was served upon the parties
and/or counsel of record on May 24, 2016, by electronic means and/or ordinary
mail.
s/Holly A. Monda
Case Manager
[phone]
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