Damages Under The Anti-Lockout Statute

In Christie v Fick, a recent unpublished Michigan Court of Appeals case (March 2, 2010, No.285924), the Court was asked to review whether a tenant alleging violation of Michigan’s Anti-Lockout Statute (MCL 600.2918) was entitled to exemplary damages.

The Anti-Lockout Statute specifically states that “any tenant in possession of premises whose possessory interest has been unlawfully interfered with by the owner, lessor, licensor, or their agents shall be entitled to recover the amount of his actual damages or $200.00, whichever is greater, for each occurrence and, where possession has been lost, to recover possession.” (emphasis added).  This statute prohibits a landlord from attempting self-help eviction of a tenant, or eviction without legal process.

In Christie, plaintiff tenant filed a complaint alleging that defendant landlord unlawfully locked them out of the rental premises and also moved a large quantity of valuable equipment from the rental premises to storage, where it was subsequently damaged.  Defendants argued that the plaintiffs were behind in rent, the plaintiffs had abandoned the premises, and that plaintiffs had numerous opportunities to retrieve their personal property after it was moved.

At trial, the court gave the jury an instruction regarding the award of exemplary damages.  Specifically, the jury was instructed that “an award of exemplary damages is proper if it compensates a plaintiff for humiliation, sense of outrage, and indignity resulting from injustices maliciously, willfully, and wantonly inflicted by the defendant.”  After a jury found for plaintiffs and against defendants on plaintiffs’ claim for violation of the anti-lockout statute, MCL 600.2918, they awarded plaintiffs treble damages for the anti-lockout claim, or three times the actual damages amount.

Defendants appealed on this issue, arguing that a statutorily based cause of action will not allow for damages other than those specified in the statute.  Exemplary damages are not specifically provided for in the Anti-Lockout Statute.

Although Michigan Court of Appeals in Christie agreed with Defendants argument, it did not reverse the ruling.  The Court reasoned that, under Michigan law, recovery under the Anti-Lockout Statute may include damages for emotional distress, embarrassment, and humiliation, as part of actual damages.  Therefore, although a separate award for exemplary damages is not appropriate in a statutorily based action unless the statute in question specifically provides for such damage, damages for mental distress are allowable as part of a plaintiff’s actual damages. As a result, the Court allowed plaintiffs to recover the damages awarded as emotional distress damages under the Anti-Lockout Statute.

This article was written by Natalie C. Najarian, Associate at 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.

Is the Other Side Liable for Attorney’s Fees if I Win My Case?

In most countries when a party loses an adversarial proceeding such as a lawsuit, he or she is made to pay for the other party’s costs and attorney’s fees.   However, the United States subscribes to what is in essence a no-fault legal system where both parties pay for their own legal fees and costs despite which party prevails.   There are statutory exceptions, but again these are exceptions, not the rule. Michigan has select statutes where attorney’s fees are awarded to a prevailing party such as consumer protection laws or civil rights violations.  Parties are also free to include language in a contract wherein should litigation be necessary; the non-prevailing party would be liable for the other party’s attorney’s fees and costs.  Michigan statutes and Court Rules also provide for an award to any party in a lawsuit, if another party has forced him to expend money on attorney’s fees to defend against a claim utterly or substantially lacking any possible merit.   This is typically called a frivolous lawsuit.   Again, the awarding of attorney’s fees and costs is the exception and not the rule.

Recently, our firm won two separate awards of attorney’s fees for two companies in lawsuits they were forced to file or defend.    In the first case, the statute allowed for attorney’s fees and costs to our client when the opposing bank refused to honor an irrevocable letter of credit.    Our second case involved the judge ruling that based on the statute and the Michigan Court Rules the other party’s complaint was so frivolous that sanctions, including attorney’s fees and costs were warranted.

This article was written by Michael R. Dorfman, Senior Associate at Demorest Law Firm.

A Contract Could Effect Damages in a Lawsuit

In a previous article we had examined the fact that the Michigan Court of Appeals affirmed the common law principle that contract provisions that shorten the statutory period for bringing a cause of action are allowable.   Recently, the Court applied similar reasoning in affirming the principle that a contract can even limit the amount of damages if the agreement is violated. The parties can agree in their contract to limit the damages to only those that occurred within a certain period of time before the date that the lawsuit was filed.

In the Michigan Court of Appeals case Bronco Oil v Citizens Bank (click here to download), the contract language, in essence, immunized the breaching party from having to pay the damages it allegedly caused because they occurred outside of a 12-month period before the lawsuit was filed. Even though the lawsuit was timely, the potential damages were lost because of when the lawsuit was filed.

This article was written by Michael R. Dorfman, Senior Associate at 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

Settlement Discussions: What You Say Will Not Be Held Against You

An estimated 95% of lawsuits brought in Michigan are settled out-of-court, without ever going to trial.  Trial preparation is expensive and fears of excessive verdicts are a major motivating factor for small businesses to settle matters.  A settlement amount might not always be palatable because it is lower or higher than expectations, but it removes the unknown variable of an unpredictable jury or judge from the equation.

Both the Michigan Rules of Evidence and the Federal Rules of Evidence recognize the vital importance of settlement discussions between two or more parties involved in active litigation.  The specific settlement rules recognize the need to afford protections to parties before they enter into settlement discussions.   The litigants will only arrive at a meaningful settlement if they are assured that they can speak freely without any offers, admissions, or other details being used against them at trial, should a settlement not be reached.

The relevant Michigan Rule precludes the admission at trial of any of the content of the settlement discussions, any amounts offered to settle the case, or any discussion of liability.  This protection allows the parties to speak freely without the fear of a jury learning of a settlement offer and possibly using it as a floor for its verdict.

Before commencing settlement discussions, it is important that your attorney inform the other party that you are undertaking settlement discussions pursuant to the Rules of Evidence and require all participants sign a document signifying their understanding of the purpose and inadmissibility of the discussions.

This article was written by Michael R. Dorfman, Senior Associate at Demorest Law Firm.

Forum Selection Clauses

When entering into agreements with larger business entities, whether it be to lease a photocopier or host your website, for example, it is critical that you read the entire agreement, including one possibly costly paragraph – the choice of forum clause. A choice of forum clause binds the parties to litigate the matter in the state or county selected by the offering party. This clause is usually boilerplate language and typically glanced over by the accepting party. However, the inclusion of such a clause could cost you or your company thousands of extra dollars in legal fees should you be sued for failure to make payments or another issue related to a breach of the agreement.

An example would be a pre-printed, non-negotiated commercial lease for an office photocopier. There is typically no room for negotiation other than the price. These agreements also typically contain a choice of forum clause wherein as a party to the lease you have agreed that any disagreements related to the lease will be litigated in the state where the leasing company is located. Should you or your company begin missing payments or have some other dispute with the leasing company, the leasing company would be allowed by the terms of the agreement to sue you in their home state, as far away as New York, Florida or California. You would be required to locate an attorney in that jurisdiction to defend your interests. You might also be required to travel there for a deposition of trial. If you ignore the lawsuit filed in the selected forum, a default judgment could be entered against you, and the Judgment then recognized and enforced by Michigan Courts because of the language in the agreement.

Before entering into an agreement, it is imperative that you review all the language and the fine print, including the choice of forum clause and know that should you have a dispute with the other party, you could be hauled into court in a different state. You may be able to negotiate to remove the forum selection clause from the contract, or simply choose another vendor.

This article was written by Michael R. Dorfman, Senior Associate at Demorest Law Firm. Click here to view his professional resume.

WHAT IS A PRELIMINARY INJUNCTION

A typical lawsuit seeks the court’s aid in collecting monetary damages where there has been injury to property or person or one individual has failed to live up to their end of a bargain.     However, there is a mechanism is available to prevent a party from taking an action that can’t be adequately compensated through payment of money.    It is in this scenario where a party would seek an injunction from the court.   A preliminary injunction is a judicial remedy issued in order to prohibit a party from doing or continuing to do a certain activity while the lawsuit is pending.    Examples of injunctions are the prohibition of employee layoffs, enforcement of a non-compete agreement,  preventing a tree from being cut down, or a building from being bulldozed.

Injunctive relief is an extraordinary remedy.    That is because most wrongs can be remedied by financial reparation.   However, as an example again, a 90 foot oak tree cannot be replaced once it is cut down.    The first step for a party seeking to stop an action would be to seek a preliminary injunction.   A preliminary injunction serves to preserve the status quo pending a final hearing, enabling the rights of the parties to be determined without injury to either party.

To determine whether this equitable relief should be granted, the issuing court must consider (1) the likelihood that the party seeking the injunction will prevail on the merits; (2) the danger that the party seeking the injunction will suffer irreparable harm if the injunction is not issued; (3) the risk that the party seeking the injunction would be harmed more by the absence of an injunction than the opposing party would be protected by issuance of the injunction; and (4) the harm to the public interest if the injunction is issued or not issued. All of these prerequisites must be met before a preliminary injunction may be granted.

The preliminary injunction is a mere stop gap, but not the final decision on the matter.  The preliminary injunction maintains the status quo until both sides can present evidence to the deciding court whether or not the subject action should be allowed to be undertaken.

The party seeking the injunction has the lofty burden of demonstrating why the opposing party should be prevented from undertaking its desired action.   This is an extraordinary remedy and issuance of an injunction is not a matter taken lightly by the courts.

It is advisable to contact us or another law firm to review the merits of your case and to advise you on your chances of success in seeking the remedy of injunction.

This article was written by Michael R. Dorfman, Senior Associate at Demorest Law Firm. Click here to view his professional resume.