Background
After the parties divorced, they agreed that Michael Robach would continue providing health insurance for their adult children and that the parents would equally share out-of-pocket healthcare expenses. Their agreement, incorporated into an October 3, 2022 stipulated order, imposed a $100 penalty for a payment breach and an additional $50 for each week the breach continued.
Michael later sought to hold Stacey Morea in contempt, alleging unpaid reimbursements and substantial accrued penalties. After correcting an accounting error, he reduced his penalty claim to $15,950. Morea moved to set aside the stipulated order as unconscionable. Without deciding unconscionability, the trial court granted relief under Michigan Court Rule 2.612(C)(1)(f), describing the penalties as grossly inequitable and criticizing Michael’s delay and accounting.
The Court’s Holding
The Michigan Court of Appeals vacated the order setting aside the parties’ stipulated agreement. Relief under Rule 2.612(C)(1)(f) required extraordinary circumstances mandating relief to achieve justice and could not detrimentally affect the opposing party’s substantial rights. The circumstances identified by the trial court did not satisfy those requirements.
Michael’s alleged accounting problems and delay in enforcement occurred after entry of the stipulated order and did not show improper conduct through which he obtained the order. The accumulation of large weekly penalties also was a foreseeable consequence of the agreement as written, not an extraordinary intervening circumstance. Setting aside the order affected Michael’s substantial rights because it eliminated potential entitlement to outstanding penalties and exposed previously paid amounts to possible reimbursement.
The appellate court did not decide whether Morea owed reimbursements or penalties, whether contempt was appropriate, or whether the late-fee provision was unconscionable or an unenforceable penalty. It remanded for the trial court to address those and other properly presented issues in the first instance. The court also clarified that the late fees were not interest and therefore did not violate Michigan’s usury laws.
Key Takeaways
- A court may not set aside a stipulated order under Rule 2.612(C)(1)(f) merely because its foreseeable operation produces a harsh result.
- Post-order enforcement conduct, including delay or faulty accounting, does not ordinarily establish the extraordinary circumstances required to vacate the underlying order.
- On remand, the trial court may consider unconscionability, improper conduct during formation, and whether the late-fee clause constitutes unreasonable liquidated damages or an unenforceable penalty.
Why It Matters
The decision underscores the demanding standard for obtaining residual equitable relief from a stipulated judgment or order. Courts must apply the specific requirements of Rule 2.612(C)(1)(f), rather than invalidate an agreement solely because its enforcement appears disproportionate or unfair in hindsight.
The ruling does not establish that the claimed late fees are enforceable. It instead requires the trial court to resolve formation-based contract defenses and other challenges on an adequate record before eliminating obligations created by the stipulated order.