                         STATE OF MICHIGAN

                            COURT OF APPEALS



JEANNE HARRISON,                                               UNPUBLISHED
                                                               October 19, 2017
              Plaintiff-Appellee/Cross-Appellant,

v                                                              No. 331957
                                                               Grand Traverse Circuit Court
MUNSON HEALTHCARE, INC.,                                       LC No. 2009-027611-NH

              Defendant-Appellant/Cross-
              Appellee,

and

SURGICAL ASSOCIATES OF TRAVERSE
CITY, PLLC, WILLIAM P. POTTHOFF, MD,
and CINDY GILLIAN,1 RN,

              Defendants.


JEANNE HARRISON,

              Plaintiff-Appellee,

v                                                              No. 332017
                                                               Grand Traverse Circuit Court
MUNSON HEALTHCARE, INC., SURGICAL                              LC No. 2009-027611-NH
ASSOCIATES OF TRAVERSE CITY, PLLC,
WILLIAM P. POTTHOFF, MD, and CINDY
GILLIAN, RN,

              Defendants,

and



1
 Cindy Gillian appears as Cindy Gilliand throughout the lower court record and file. We will
use the spelling Gilliand throughout the body of this opinion.


                                             -1-
THOMAS R. HALL,

                 Appellant.


Before: MURRAY, P.J., and SAWYER and MARKEY, JJ.

PER CURIAM.

        In these consolidated appeals after remand, defendant, Munson Healthcare, Inc., and its
attorney, defendant Thomas R. Hall, 2 appeal as of right the trial court’s decision and order
reimposing sanctions.3 In Docket No. 331957, plaintiff Jeanne Harrison also cross-appeals the
trial court’s sanctions order. For the reasons stated herein, we reverse.

                              I. FACTS AND PROCEDURAL HISTORY

        These consolidated appeals arise out of Harrison’s action for medical malpractice. On
April 24, 2007, during thyroid surgery performed by Dr. William P. Potthoff at Munson Medical
Center, owned by Munson Healthcare, Harrison suffered a quarter-sized burn on her forearm
from an electrocautery device called a Bovie. According to two staff members involved in the
surgery, the Bovie activation alarm sounded during the procedure, prompting those in the
operating room to step back and look for the Bovie. It was discovered on a surgical drape
covering Harrison’s arm, and may have been activated when Dr. Potthoff leaned against it.
When the drape was ultimately removed, the burn on Harrison’s arm became apparent. Dr.
Potthoff informed Harrison’s husband of the burn, obtained permission to make the necessary
repair during surgery, and spoke with plaintiff about the burn that afternoon.

        Upon recovering from her thyroid surgery, Harrison contacted Barbara A. Peterson,
Munson’s operating room manager, and Bonnie Schreiber, Munson’s risk manager, to inquire
about the burn. Dissatisfied with the responses she received, she filed this medical malpractice
action.

        Throughout discovery, Harrison attempted to learn who had responsibility for the Bovie
at the time she was burned, but defendants denied that any surgical participants possessed a
present memory of the exact circumstances until the depositions of David Scott Babcock, a
surgical technologist, and Ann Tembruell, a student at the time of Harrison’s surgery working for
Babcock. Both Babcock and Tembruell recalled hearing the Bovie alarm during the procedure,
and discovering the Bovie lying on the drape over Harrison’s arm. Neither, however, knew how
the Bovie came to rest there.



2
  Although Hall brought a separate appeal, he does not raise his own issues. Instead, he
incorporates and adopts the arguments set forth in Munson’s brief and reply brief on appeal.
3
    We refer to Hall and Munson collectively as defendants.


                                                -2-
        At trial, Hall and Munson presented a defense based on habit and routine practice,
essentially presenting testimony and argument that those involved in Harrison’s surgery
exercised the proper standard of care, and that the Bovie may have become accidentally
unholstered. Then, through the testimony of Peterson, Munson’s operating room manager, the
trial court learned that an incident report had been prepared by nurse Cindy Gilliand on the day
of Harrison’s surgery. On the first page, Gilliand handwrote, “During procedure, bovie was laid
on drape, in a fold.” Further, on the second page of the report, Peterson handwrote, “Bovie
holder was on field for this case, however bovie was not placed in it.” This second notation was
dated 15 days after Harrison’s surgery.

       Following an in camera review of the incident report, the trial court declared a mistrial.
The trial court concluded that an evidentiary hearing was needed to determine whether the
incident report should qualify as a peer-review-privileged document, and expressed concern
about the ethical implications of presenting a defense inconsistent with the incident report.

        In an April 8, 2011 decision and order following the evidentiary hearing, the trial court
ruled that the incident report and related documents were protected by the peer-review privilege,
but stated: “[T]he facts recorded in the report as opposed to the conclusions drawn in the report
should not have been kept from the jury in view of the holding in Centennial4 and [Munson’s]
own internal policy. Those facts should have been recorded in the medical chart. And, if the
facts are not recorded and not given to the jury, the Defendants are precluded ethically from
offering an explanation that is inconsistent with those facts.” In so doing, it found that the
statements made in the incident report – that the “ ‘Bovie was laid on the drape’ ” and that the “
‘holster was on field for this case, however Bovie was not placed in it’ ” – were “grossly
inconsistent with an argument that the Bovie was properly holstered and then accidentally
unholstered,” even if protected from disclosure by the peer-review privilege. Based on these
findings, the court determined that Hall violated Michigan Rules of Professional Conduct
(MRPC) 3.1 and 3.3, and imposed sanctions against Hall and Munson for violations of MCR
2.114(D) and (E), and MCL 600.2591(1).

        Defendants appealed the original sanctions award, and this Court issued an opinion on
January 30, 2014, upholding the trial court’s decision and order. Harrison v Munson Healthcare,
Inc, 304 Mich App 1, 23, 43-45; 851 NW2d 549 (2014), vacated by 498 Mich 888 (2015).
Citing Centennial, the Court first held that “[o]bjective facts gathered contemporaneously with
an event” are not shielded from disclosure by the peer-review privilege.” Harrison, 304 Mich
App at 31-32. Thus, it reasoned, “Gilliand’s contemporaneous, handwritten operating-room
observations were not subject to a peer-review privilege,” and “the initial page of the incident
report did not fall within the protection of MCL 333.21515.” Id. at 27.

       Second, recognizing that the court did not sanction Munson and Hall for refusing to
produce the incident report, this Court affirmed the sanctions under MRPC 3.1 and 3.3, MCR
2.114(D) and (E), and MCL 600.2591(1). Harrison, 304 Mich App at 40-45. In so doing, it


4
 Centennial Healthcare Mgt Corp v Mich Dep’t of Consumer & Indus Servs, 254 Mich App
275; 657 NW2d 746 (2002).


                                               -3-
reasoned that the court did not clearly err by finding, based on the relevant facts in the incident
report, that “a surgical participant ‘laid’ the Bovie on the drape (accidentally, negligently or
deliberately) and that that person, or another individual in the room, negligently failed to holster
it,” id. at 39, and “did not abuse his discretion by finding that Munson invoked MRE 406 in bad
faith by introducing habit-and-practice evidence to prove conformity of conduct despite that the
evidence known only to Munson soundly contradicted that defense,” id. at 42.

        Hall and Munson subsequently filed an application for leave to appeal this Court’s
decision, which the Michigan Supreme Court held in abeyance pending its decision in a similar
case, Krusac v Covenant Med Ctr, Inc, 497 Mich 251; 865 NW2d 908 (2015). Harrison v
Munson Healthcare, Inc, ___ Mich ___; 847 NW2d 498 (2014). In Krusac, the Supreme Court
overruled Harrison to the extent that it conflicted with its holding that “§§ 20175(8) and 21515
do not contain an exception to the peer review privilege for objective facts.” Krusac, 497 Mich
at 253, 258-263. On September 30, 2015, it entered an order vacating the remainder of the Court
of Appeals decision, as well as the trial court’s April 8, 2011 sanctions order,5 and remanded to
the trial court, stating: “Because it is unclear from the circuit court’s Decision and Order
Regarding Motion for Sanctions whether this conclusion was central to its decision to sanction
defendant Hospital and its counsel, we remand for reconsideration of the sanctions award. If it
chooses to again impose sanctions, the court shall explain why the specific facts on which it
relies to conclude that defendant Hospital and its counsel were precluded from arguing that the
Bovie was inadvertently or accidentally unholstered justify its sanctions award.” Harrison v
Munson Healthcare, Inc, 498 Mich 888 (2015).

        Following the Supreme Court’s order, Harrison renewed her motion for sanctions in the
trial court, arguing that the incident report and related documents were not protected by the peer-
review privilege, and that sanctions were warranted against Hall and Munson pursuant to MCR
2.114, MCR 2.302(B), MCR 2.313(B), and MCL 600.2591(1), and (3)(a)(ii), for presenting a
habit and practice defense inconsistent with the facts in the incident report. The itemization
attached to the brief covered work performed by Harrison’s counsel on appeal. In response,
Munson (and thereby Hall)6 asserted that no need existed to revisit whether the incident report
and related documents were protected by the peer-review privilege, and argued that a new award
for sanctions would be inappropriate because: (1) Krusac clarified that objective facts in
otherwise-privileged documents must be protected from disclosure; (2) peer-review privileged
materials may only be used for purposes provided in Article 17 of the Public Health Code, MCL
333.20101 to 333.22260; (3) the defense presented did not contradict the statements made in the
incident report, and even if inconsistent, evidence of habit and routine practice is still admissible



5
  In so doing, the Supreme Court stated, “The circuit court erroneously relied on Centennial
Healthcare Mgt. Corp. v. Dep’t of Consumer & Industry Services, 254 Mich.App. 275, 657
N.W.2d 746 (2002), to conclude that the facts recorded in the incident report should not have
been kept from the jury.” Harrison v Munson Healthcare, Inc, 498 Mich 888 (2015).
6
  Hall filed a response to Harrison’s renewed motion for sanctions, which simply adopted the
arguments set forth in Munson’s brief in opposition to Harrison’s renewed motion for sanctions.


                                                -4-
under MRE 406; and (4) Hall did not present false statements to the court because everyone
knew the Bovie came to rest on the drape, but had no memory of how it got there.

         Ultimately, the trial court entered an order reimposing sanctions against Munson and Hall
for the reasons previously stated and restated. It also answered the question posed by the
Supreme Court in its order vacating the original sanctions decision, writing: “This case returns to
the trial court because it was not clear to the Michigan Supreme Court whether nondisclosure of
the facts in the incident report was central to this Court’s decision to sanction the Defendant
Hospital. The answer is plainly, “No.’ Central to this Court’s decision to sanction the Defendant
Hospital was a clear ethics violation and the breach of its own written internal policy to chart the
‘facts of the event’ in the ‘patient’s medical record.’ ”

                                         II. ANALYSIS

        Defendants argue that the trial court exceeded its authority, and clearly erred, when it
reimposed sanctions because the incident report was protected from disclosure by the peer-
review privilege, and the habit and routine practice defense presented was not inconsistent with
the notations made in the report.

        This Court reviews a trial court’s decision to impose sanctions for an abuse of discretion,
“[b]ut the trial court’s factual findings are reviewed for clear error.” Fette v Peters Constr Co,
310 Mich App 535, 549; 871 NW2d 877 (2015). A “trial court abuses its discretion when its
decision falls outside [the] range of principled outcomes.” Pontiac Fire Fighters Union Local
376 v Pontiac, 482 Mich 1, 8; 753 NW2d 595 (2008). “A finding is clearly erroneous if, after a
review of the record, this Court is left with a definite and firm conviction that a mistake was
made.” Lawrence v Burdi, 314 Mich App 203, 220; 886 NW2d 748 (2016).

        The trial court imposed sanctions pursuant to MCR 2.114(D) and (E), and MCL
600.2591(1), and concluded that Hall violated MRPC 3.1 and 3.3.7 Questions of statutory
interpretation and the interpretation of court rules are reviewed de novo. Ligons v Crittenton
Hosp, 490 Mich 61, 70; 803 NW2d 271 (2011). Further, this Court reviews a trial court’s
construction of the MRPC de novo. Grievance Administrator v Fieger, 476 Mich 231, 240; 719
NW2d 123 (2006).

        Sanctions are proper under MCR 2.114(E) if an attorney or party signs a document in
violation of MCR 2.114(D), which provides:

       The signature of an attorney or party, whether or not the party is represented by an
       attorney, constitutes a certification by the signer that

       (1) he or she has read the document;


7
  The court did not specifically list these provisions in its decision and order to reimpose
sanctions following remand, but it did reaffirm the previous order of sanctions imposed on these
bases.


                                                -5-
       (2) 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; and

       (3) the document is not interposed for any improper purpose, such as to harass or
       cause unnecessary delay or needless increase in the cost of litigation.

In other words, “ ‘[s]anctions are warranted under MCR 2.114 where a plaintiff asserts claims
without any reasonable basis in law or fact for those claims, or where the claims are asserted for
an improper purpose.’ ” Fette, 310 Mich App at 550, quoting Robert A Hansen Family Trust v
FGH Indus, LLC, 279 Mich App 468, 486; 760 NW2d 526 (2008).

       Additionally, MCL 600.2591(1) provides:

       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 assessing the costs and fees against the nonprevailing party and
       their attorney.

According to the statute, a defense is frivolous when “[t]he party had no reasonable basis to
believe that the facts underlying that party’s legal position were in fact true.” MCL
600.2591(3)(a)(ii). Thus, if a party or its attorney presents a defense it knows to be untrue or not
well grounded in fact based on information protected by the peer-review privilege, it appears that
a trial court may impose sanctions pursuant to MCR 2.114 (if the defense is in a document) and
MCL 600.2591.

        However, we need not decide that issue because, after considering the information from
the incident report, we hold that the trial court already erred when it determined that Hall and
Munson presented a defense they knew to be false in light of the statements in the incident
report.

        The trial court, in both the original decision and order, and in its order following remand,
imposed sanctions based on the finding that “the only contemporaneous record of the incident
was diametrically opposed to [defendants’] proffered habit and practice testimony.”8
Specifically, the court determined that Munson’s defense – that it did not violate the standard of
care, and that the Bovie may have become accidentally unholstered – could not be true based on
the notations made in the incident report.

       In the first appeal from the trial court’s sanctions order, this Court affirmed the sanctions,
holding that the court did not clearly err by finding, based on the statements in the incident


8
  Again, the court stated in the order following remand that he was reimposing sanctions for the
reasons previously stated. Thus, we consider the findings made in both.


                                                 -6-
report, that “a surgical participant ‘laid’ the Bovie on the drape (accidentally, negligently or
deliberately) and that the person, or another individual in the room, negligently failed to holster
it,” Harrison, 304 Mich App at 39, and further “did not abuse [its] discretion by finding that
Munson invoked MRE 406 in bad faith by introducing habit-and-practice evidence to prove
conformity of conduct despite that the evidence known only to Munson soundly contradicted that
defense, id. at 42. That decision was vacated, Harrison v Munson Healthcare, Inc, 498 Mich
888 (2015), and thus we are free to look at this anew, see City of Troy v Papadelis (On Remand),
226 Mich App 90, 94; 572 NW2d 246 (1997) (reasoning that where an entire opinion in an
earlier decision is vacated, the law-of-the-case doctrine does not apply).

        Recognizing the deference with which this Court must review a trial court’s findings
under the clear error standard, Arbor Farms, LLC v GeoStar Corp, 305 Mich App 374, 386-387;
853 NW2d 421 (2014), we conclude that the trial court clearly erred. We first consider the
referenced statements from the incident report. Gilliand’s note states, “During procedure bovie
was laid on drape, in a fold,” while Peterson’s notation reads, “Bovie holder was on field in this
case, however bovie was not placed in it.” Contrary to the court’s conclusions, these statements
are ambiguous and do not serve as unrebuttable evidence that the Bovie was placed on the drape,
either deliberately or negligently, rather than accidentally unholstered. Gilliand’s comment
could mean that she witnessed someone place the Bovie on the drape, or could simply have been
an inartful way of describing her observation that the Bovie was lying on the drape when
discovered. Further, Peterson may have intended to convey that the Bovie was clearly not in the
holster at the time Harrison was injured, because it was discovered on the drape covering her
arm, and not that someone failed to place the Bovie in the holster.

        Witness testimony throughout the case serves as further evidence that the statements are
ambiguous. Dr. Potthoff, Gilliand, and Burgett testified in their depositions that they had no
independent recollection of how Harrison came to be burned during the procedure, and other
surgery participants testified at trial that they had no recollection of the procedure at all. And
although Peterson testified at trial that under the circumstances of Harrison’s injury, she would
have spoken with the operating room participants, neither she nor many of the operating room
participants recalled actually having those conversations. This raises doubts about her statement
in the incident report, as she was not in the operating room herself during Harrison’s surgery and
would have had to rely on information from others to form any conclusions. Moreover, when
questioned by the court at the evidentiary hearing, Gilliand testified as follows:

       The Court: So if it says the Bovie was laid on the drape, that’s because you saw
       the Bovie laid on the drape?

       The Witness: To be honest with you, I don’t know that I actually saw it laid on the
       drape. That may have been just a poor way of stating that. It may have—that’s
       one of those things I try to be very articulate in my wording when it comes to
       things like this. [Harrison, 304 Mich App at 18.]




                                                -7-
        Giving due consideration to the ambiguity of the statements in the incident report, we
cannot say that the trial court’s imposition of sanctions under MCR 2.114(D) and (E), and MCL
600.2591(1), was proper. Its determination that defendants’ habit and routine practice defense9
should be precluded was based on the clearly erroneous finding that, in light of the information
in the incident report, defendants knew that the Bovie was placed on the drape over Harrison’s
arm by a surgical participant, and not accidentally unholstered.10

        By concluding that the trial court erred when it reimposed sanctions, we decline to
address defendants’ argument that the trial court lacked the authority to include appellate
attorney fees in its sanctions award. Further, the only issue Harrison raises in her cross-appeal is
that the trial court should have revisited, after remand, its prior ruling that the incident reported
was protected from disclosure by the peer-review privilege. Nothing in the Supreme Court’s
decision in Krusac implies that either the trial court, or this Court, improperly determined that
the incident report was protected by the peer-review privilege. The Krusac Court simply
objected to the exclusion of the facts within the report from the privilege. Krusac, 497 Mich at
253, 258-263; Harrison v Munson Healthcare, Inc, 498 Mich 888 (2015). Moreover, the court
made it clear that the privileged nature of the incident report was not central to its decision to
impose sanctions, and it is not central to this Court’s analysis of the issues presented. As stated
above, the trial court erred in imposing sanctions against defendants, regardless of whether the
incident report was protected by the peer-review privilege.

        Reversed and remanded for further proceedings consistent with this opinion. We do not
retain jurisdiction. Having prevailed in full, defendants may tax costs. MCR 7.219(A).



                                                              /s/ Christopher M. Murray
                                                              /s/ David H. Sawyer
                                                              /s/ Jane E. Markey




9
  MRE 406 provides: “Evidence of the habit of a person or of the routine practice of an
organization, whether corroborated or not and regardless of the presence of eyewitnesses, is
relevant to prove that the conduct of the person or organization on a particular occasion was in
conformity with the habit or routine practice.”
10
  As an example, if one reasonably reads Gilliand’s notation to mean that at some point during
Harrison’s surgery, the Bovie was discovered lying on the drape, Dr. Potthoff’s testimony at trial
that the Bovie may have become accidentally unholstered during the surgery would not be
patently false.


                                                -8-
