Attorney’s Signature Creates Binding Settlement

You might think that the settlement of a lawsuit requires the signature of the client.  That is not the case under this Michigan Court Rules.   A settlement may be enforced if (a) it is agreed to before the Judge in open court on the record by the client or attorney or (b) if there is “written evidence” of the settlement signed by the client or attorney.  MCR 2.507(G0.

In Kennedy v Hayduk, the plaintiff’s attorney claimed that a settlement had not been reached.  The Michigan Court of Appeals disagreed.  The defense attorney sent a letter summarizing the terms of a proposed settlement.  There were more detailed settlement documents still to be prepared.  The plaintiff’s attorney then signed and returned to the defense attorney a stipulation and order to dismiss the case.  The plaintiff later argued that there were terms of the settlement that had not been agreed upon, so there was no binding settlement.    The Court of Appeals ruled that: “The signed stipulation was unconditional acceptance of defendants’ offer. … The objective evidence shows that an agreement was reached.”

A lesson from this case:  Don’t sign a settlement until all terms have been agreed upon.

Download a PDF of the decision by clicking here.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

To Quality as a Future Advance Mortgage, Correct Language Must By Included in the Recorded Mortgage

A mortgage has priority over other liens on the property from the date it is recorded with the Register of Deeds. The mortgage can also have priority for amounts advanced by the lender after the date of recording if the mortgage contains certain specific language making it a “future advance mortgage”. In Citizens State Bank v. Nakash (2010), the Michigan Court of Appeals considered what happens when a recorded mortgage references a promissory note or agreement that contains the future advance language, but the recorded mortgage itself contains no future advance language. The Court of Appeals ruled that the mortgage creates no priority for future advances by the lender when the promissory note or agreement containing the future advance language is unrecorded. MCL 565.901(b) holds that the instrument creating a future advance mortgage must be recorded. This ruling makes sense, because the recorded mortgage should put other parties on notice that it is a future advance mortgage, and not merely refer to another document that is not part of the chain of title.

To download a PDF of the case click here.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

Separate Appeal of Attorney’s Fees and Costs

The Michigan Court of Appeals decided an interesting procedural issue regarding the appeal of post-judgment orders awarding or denying attorney’s fees. In Mossing v. Demlow Products, Inc. (2010), the trial court denied an award of attorney’s fees and costs to the defendants.  This occurred after the plaintiff had already filed an appeal, and the defendants had already filed a cross-appeal, in the Court of Appeals. In their cross-appeal, the defendants seek to have that fee order reversed. The Court of Appeals ruled that a completely separate appeal must be taken from the post-judgment order. In other words, the appeal cannot be tacked on to the cross-appeal; it must stand alone as a separate appeal.

Click here to download a PDF of the Court of Appeals decision in Mossing v Demlow.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

Religion and Civil Rights Act Exception

The Elliott-Larsen Civil Rights Act (“CRA”), which prohibits discrimination on the basis of race, sex, religion, etc., does not apply to “ministerial” employees of religious organizations.  The Michigan Court of Appeals recently ruled that if an employee’s position can be characterized as ministerial, then this employee falls under the ministerial exception and cannot file a discrimination or retaliation claim under the CRA.  In Weishuhn v. Catholic Diocese of Lansing (2010), a teacher filed a claim under the CRA for retaliatory discharge. The plaintiff was a teacher at a Catholic school, and taught more mathematics classes than religious classes. However, because her duties at the school included religious activities, and because she admitted to incorporating religion into everything she taught, her position was found by the Court of Appeals to be ministerial in nature. As a result, a complaint could not be sustained under the CRA. The Court of Appeals affirmed the dismissal of her lawsuit.

Click here for a PDF copy of the Court’s Decision.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

When is a License Fee Really an Illegal Tax?

Faced with tighter budgets, Michigan cities and townships are looking for additional ways to raise revenue.  Due to the Headlee Amendment, property tax increases are severely restricted.   However, a municipality may establish or increase a fee without violating the Headlee Amendment.  The question is:  Where is the dividing line between a permissible fee and an illegal tax increase?

A tax is solely to raise revenue.   A permissible fee (typically a permit or license fee) has three characteristics: (a) the fee serves a regulatory purpose; (b) the amount of the fee is proportionate to the necessary costs for the municipality to provide that service, and (c) payment of the fee is voluntary.

Several years ago, we were involved in litigation that resulted in the Wayne County Circuit Court declaring a license fee imposed by Sumpter Township illegal.  The Court decided that the fee for a sand excavation license was really being used by the Township to discourage additional landfills from being located in the Township, and that the amount of the fee was excessive in relationship to the Township’s costs to regulate and inspect sand excavation sites.  The Ordinance was set aside.

On January 21, 2010, the Michigan Court of Appeals issued its decision in Wolf v City of Detroit.    The plaintiff claimed that a new Solid Waste Inspection Fee adopted by the City of Detroit was really just a disguised tax.  The inspection fee was imposed on properties that did not use the City’s Department of Public Works for solid waste pick-up.  The Court of Appeals analyzed the three criteria for a fee and decided that the fee was permissible.   A copy of the Court of Appeals’ decision is attached.

Whenever a municipality imposes a new fee, or dramatically increases the amount of a fee, then one should analyze whether the three criteria for a fee are met.  If not, the fee may be challenged as a hidden tax.

Click here to download a PDF copy of the Court of Appeals Decision.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

Important Supreme Court Decision on Corporate Free Speech

Last week, the Supreme Court issued an important decision on the free speech rights of corporations.  The law has long recognized that, just like individuals, corporations are protected by the First Amendment to the Constitution.  However, in 1990 (Austin v Michigan Chamber of Commerce) and in subsequent decisions, the Supreme Court had ruled that the government may restrict corporate expenditures to support or oppose political candidates.   The Supreme Court overruled those earlier decisions in Citizens United v Federal Election Commission.  Justice Kennedy wrote:  “The Government may regulate corporate political speech through disclaimer requirements, but it may not suppress that speech altogether.”  In other words, the government may require that the sponsor of the advertisement be disclosed, and whether it was approved by a particular candidate.  However, the government may not prohibit or limit the amount of money spent by a corporation to support or oppose a particular candidate or issue.

Corporations previously used political action committees (PAC’s) to get involved in political activities.  Based on the Supreme Court’s decision, the use of PAC’s may no longer be necessary.

Click here to download a PDF copy of the Supreme Court Decision.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

Michigan Smoking Ban – Summary of House Bill No. 4377

The Michigan Legislature has passed a bill which bans smoking in almost all indoor public venues. This ban has been in the works for a long time; many other States have already enacted similar laws. Governor Granholm is expected to sign the bill into law, and it will go into effect on May 1, 2010.

“Smoking” is defined as “the burning of a lighted cigar, cigarette, piper or any matter or substance that contains a tobacco product.” There is a ban on smoking in “public places.” A “public place” includes areas owned and operated by the government; areas not owned or operated by the government, but used by the general public for certain specified purposes; and (unless otherwise exempt) a place of employment. The third one covers almost all of the businesses in the State. A “place of employment” is an enclosed indoor area that contains a work area for one or more people.

Business owners are expected to take steps to reasonably prevent customers, employees, or other people from smoking on their premises. Business owners are expected to do ALL of the following:

1. Clearly and conspicuously post no smoking signs (or the international no smoking symbol) at the entryway and in all buildings where smoking is prohibited.
2. Remove all ashtrays or other smoking paraphernalia from any place smoking is prohibited under the Act.
3. Inform individuals smoking in violation of the Act that they are in violation of state law and are subject to penalties.
4. Refuse to serve an individual smoking in violation of the Act.
5. Ask an individual smoking in violation of the Act to refrain from smoking, and ask them to leave if they refuse to stop.

If owners do all of the preceding things, they have an affirmative defense against any prosecution against them for a violation of the Act. This means that the business owner can be exempt from penalties under the Act, but only if all of the preceding conditions are met.

The Act includes a few exceptions. Casinos in existence before the Act can allow smoking in gaming areas only. Casinos built later cannot allow smoking. (The term casino in the bill does not include a casino operated under the Indian Gaming Regulatory Act. Thus, the smoking ban does not apply to these casinos.) An existing separate specialty tobacco shop may allow smoking. Cigar bars may also allow smoking (but only the smoking of cigars, not other tobacco products).  The ban also does not apply to motor vehicles.

Overall, business owners should be proactive in preventing smoking in their place of business by following the five requirements described above.

Download a copy of the Bill in PDF format by clicking here.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

Challenging an Arbitration Award

Arbitration is often a better choice for the parties than litigation in court, because arbitration is often completed more quickly and with less legal expenses than a lawsuit in court.  The downside for the party that loses the arbitration is that there are very few grounds to challenge an arbitrator’s decision.  Furthermore, a complaint to vacate an arbitration award must be filed in court soon after the date of the arbitration award, or the right to challenge the award is forever waived.

Under the Michigan Court Rules, there are only four grounds to vacate an arbitration award.  These focus on the fairness of the proceeding, rather than whether the arbitrator’s decision was correct or incorrect.  The arbitrator can be set aide only if:

(1)  The award was procured by corruption, fraud or other undue means;

(2)  There was evident partiality by an arbitrator appointed as a neutral, corruption of an arbitrator, or misconduct prejudicing a party’s rights;

(3)  The arbitrator exceed his or her powers; or

(4)  The arbitrator refused to postpone the hearing on a showing of sufficient cause, refused to hear evidence material to the controversy, or otherwise conduct the hearing to prejudice substantially a party’s rights.

If you are dissatisfied with the outcome of an arbitration, it is also very important to act promptly.  There is a very short time period to file a complaint in court to vacate an arbitration award.  Depending on the grounds for challenging the arbitration award, the complaint must be filed within 21 days or 91 days after the date of the arbitration award.  If the complaint is not timely filed, it is too late to challenge the arbitration award later.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm

Statute of Limitations Set by Contract

Unless the parties agree otherwise, the Statute of Limitations for a breach of contract claim in Michigan is six years.   However, the parties may agree by contract to a shorter limitations period.   A court would not enforce a one day or one week limitations period, but a contractual limitations period as short as one year has been regularly enforced by the Michigan courts.

The Michigan Court of Appeals continued this trend on September 29, 2009, when it issued its decision in Siuda v Tobin. The contract for purchase of a modular home stated that any claim had to be filed no more than one year from the date of sale of the home, rather than the normal six years.  The purchasers claimed that the home was damaged during construction, but failed to bring suit until three years after construction began.  The Court of Appeals rejected all of the purchasers’ arguments against the enforcement of the shortened Statute of Limitations.

You should review the forms and contracts that your company uses, and decide whether to shorten the time period that your customers or suppliers have to bring a lawsuit.  On the flip side, if you have a potential lawsuit, you need to review the contracts to make sure how long you have to bring a claim.   Don’t simply assume that the Statute of Limitations has not been modified.

Click to Download Case from Michigan Court of Appeals in PDF Format

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm

Decision of Michigan Court of Appeals Expands Rights of Minority Shareholders

On September 24, 2009, the Michigan Court of Appeals issued an important decision on the rights of minority shareholders in Michigan corporations.  The Michigan Business Corporation Act allows a minority shareholder to bring a lawsuit in circuit court if “the acts of the directors or those in control of the corporation are illegal, fraudulent, or willfully unfair and oppressive to the corporation or the shareholder.”

In Schimke v Liquid Dustlayer, Inc., the plaintiff owned less than 1/3 of the stock of the corporation.  The two other shareholders, who were also in control of the board of directors, planned to have their own stock in the corporation redeemed (purchased by the corporation), but the minority shareholder’s stock would not be redeemed.  The plan was never completed.  The circuit court ordered that the corporation must redeem (purchase) the stock owned by the minority shareholder as a remedy for the actions of those in control of the corporation.

The defendant majority shareholders argued that the corporation should not be required to purchase the stock of the minority shareholder, because their plan was not actually carried out.  The Court of Appeals ruled that the circuit court may intervene before an action is finalized, and may order a corporation to purchase a plaintiff’s shares of stock as a result of the defendants attempt to take an unfair and oppressive action.

The defendants also argued that they did not violate the rights of the minority shareholder because there was not a “continuing pattern of oppressive conduct.”  The Court of Appeals ruled that a pattern of conduct was not necessary for the minority shareholder to bring a claim.  Rather, “a single ‘significant action’ is sufficient to show willful and oppressive conduct.”

This decision expands the rights of minority shareholders to make claims of minority shareholder oppression, and makes it easier for minority shareholders to force the corporation to purchase their shares of stock.

Click to Download Case from Michigan Court of Appeals in PDF Format

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.