Commercial Landlords and Tenants–Pause Before Filing a Damages Lawsuit in District Court

Landlord-tenant lawsuits a/k/a summary proceedings or eviction lawsuits have been around for over 150 years in Michigan and, for the most part, the laws have not changed. But in the last 50 years, the district courts have taken over and the unique laws and rules have become second nature. Five years ago, I wrote an article opining that the legislature should amend the summary proceedings act to eliminate the arbitrary $25,000 damage ceiling in district courts. This would allow landlords and tenants to resolve more disputes in one lawsuit, as opposed to two (i.e., a possession lawsuit in district court and a damages lawsuit in circuit court). Unfortunately, the law has not changed and, thus, we continue to see harsh results.

On April 29, 2021, the Michigan Court of Appeals issued a published/binding opinion, holding that attorney fees under a contractual fee-shifting provision are a form of general damages and, thus, are subject to the district court’s $25,000 jurisdictional limit. See ABCS Troy, LLC v. Loancraft, LLC, 2021 WL 1702906 (Mich. Ct. App. Apr. 29, 2021). The result – the court reduced a request for attorney fees by approximately $26,000. A party may not know what its attorneys’ fees will be at the beginning of a case, but the Court of Appeals indicated that a party can submit a reasonable estimate of fees for purposes of determining the amount in controversy.

Technically, this case did not involve a request for possession (so it wasn’t a summary proceeding). Nonetheless, it supports the argument that district courts’ jurisdictional limit should be increased for landlord-tenant matters. Now, any time there is an attorney-fee provision in a commercial lease (which is quite common), a party will be forced to file in circuit court unless it is convinced that the fees will not exceed $25,000. But given the many unknowns associated with litigation, how can a party be certain? This opinion will likely lead to even more landlord-tenant cases being filed in circuit court, even though the district courts are just as, if not better, suited to resolve such disputes.