Archive

Archive for July, 2013

Guest Blog Post with GRAPE – Are Business Owners & HR Professionals Affected By The Medical Marijuana Issue?

I recently posted an article regarding employee handbooks and how they benefit businesses – primarily by avoiding liability and claims from former employees.

I authored a guest blog article for Grand Rapids Area Professionals For Excellence. Learn more about GRAPE here at: http://grapegr.com/

Issues have arisen as of late regarding marijuana usage of employees and the Michigan Medical Marijuana Act (“MMMA”). Should an employer fear liability for terminating an employee who has failed a drug test?

See my article below.

http://grapegr.com/small-business-networking-blog/are-business-owners-hr-professionals-affected-by-the-medical-marijuana-issue/?goback=%2Egde_2729599_member_261763290

 

 

 

 

Do you have an interesting issue related to business or real estate? I’d love to hear about it.   

Email or call me. Email: Jeshua@dwlawpc.com / Ph: (616) 454-3883.
Categories: Uncategorized

Lesson For Banks: When Fighting over Mortgage Priority – Don’t Forget about the Property Owner.

 

An interesting unpublished decision came out on June 27, 2013 –  JPMorgan Chase Bank, N.A. v. First Michigan Bank, 309857, 2013 WL 3239983 (Mich. Ct. App. June 27, 2013).

The case essentially involved a fight over whose mortgage had priority: Chase or First Michigan Bank.

FACTS:

JP Morgan Chase Bank and First Michigan Bank had  mortgages  on property in West Bloomfield, Michigan.

The property was owned by a married couple, the Zairs.

The lender of the first mortgage, Peoples State Bank (PSB), foreclosed on the mortgage and the property was sold at a sheriff’s sale.

The security interest of the second lender, JP Morgan Chase Bank, was extinguished.

Chase sued  and claimed that its lien had priority due to a “Subordination Agreement” it entered into with PSB.

The assignee of PSB’s rights to the property, First Michigan Bank, argued that the subordination agreement was not effective and that any breach of the agreement by PSB did not entitle Chase to relief against First Michigan.

During the litigation, Chase and First Michigan Bank made a deal pursuant to a “Consent Order” – they agreed to undo the foreclosure sale and stipulated that Chase’s mortgage would have priority. over First Michigan’s mortgage.

This was all fine and well……EXCEPT

The Banks evidently forgot to ask what the Zairs thought about all this.

Well, not really, the Banks thought they didn’t need to include the Zairs, in their Consent Order they indicated that “the Zairs had not consented but their consent was not necessary.

The Zairs Appealed the decision, claiming that, as owners of the Property, they were parties to the lawsuit and the banks needed their permission to enter any Consent Order.

 

LAW:

An agreement or consent between the parties or their attorneys respecting the proceedings in an action is not binding unless it was made in open court, or unless evidence of the agreement is in writing, subscribed by the party against whom the agreement is offered or by that party’s attorney.

Essentially, the Zairs said – hey, Banks, wait a second – we are parties to this lawsuit – we didn’t agree to any Order!

The Court of Appeals agreed with the Zairs, and rejected the Consent Order, and remanded the case back to circuit Court.
LESSON:
The gist of this case was a simple dispute over a subordination agreement, and the case didn’t really result in a new development in real estate law.  However, I believe there is a larger take away point here. The two banks were wrapped up in resolving a contract dispute between themselves and took for granted that the property owners had a legitimate interest – as parties – that needed to be accounted for.  The homeowners also had a legitimate interest in the property, albeit a “redemption interest” that would likely be extinguished within 6 months after the foreclosure.   Now, the banks will need have their case remanded back to Circuit Court which, regardless of the outcome, will result in additional expenses for everyone.
Do you have an interesting issue related to business or real estate? I’d love to hear about it.   
Email or call me.  Ph: (616) 454-3883; Email: Jeshua@dwlawpc.com
Categories: Uncategorized

Closely Held Businesses: Why the Words You Use in Your Formation Documents Matter.

Another example demonstrating the significance of the words you agree to bind your business relationship.

 

On July 3rd the Michigan Supreme Court came out with an (I think) interesting Order reversing an appellate Court decision, Levine v. O’Dorisio, 299639, 2011 WL 5609825 (Mich. Ct. App. Nov. 17, 2011) rev’d, 494 Mich. 874 (2013).

 

FACTS:
The parties were two cardiothoracic surgeons in practice together. The operation of a vascular laboratory was part of the parties’ practice. The parties formed a  Professional Limited Liability Company and entered into an operating agreement in 1996; the agreement covered the parties’ entire practice, including a “vascular laboratory.”
The PLLC was dissolved in January 2004 per its operating agreement.
After the dissolution of the PLLC,  one of the owners, Levine,  sued the other owner, O’Dorisiom for specific performance of O’Dorisio’s contractual obligation to resign, and for an accounting and distribution of the PLLC’s assets.

Procedurally, this case went back and forth several times – from the trial court to the court of appeals, and finally, as of July 3rd, to the Michigan Supreme Court which granted an order reversing in part the court of appeal’s decision.

 

The owners of the company recognized that Levine received profits of approximately $1,020,000 from his continued operation of the business between: the date of dissolution AND the date of sale of the business.  The primary issues that it seems the Court of Appeals in the trial court could not agree on were regarding distribution of funds – what was included in the definition of “business assets” that were supposed to be distributed? Those profits that Levine received after dissolution, but before the sale or winding up of the business?

 

Ultimately, the Michigan Supreme Court issued an order reversing the Court Appeals in part, providing as follows:

we REVERSE that part of the Court of Appeals opinion holding that the trial court erred by failing to equally divide between the parties the profits from use of the vascular laboratory from the date of dissolution to the date of the sale of the laboratory. MCL 450.4404(5) is not applicable to this case. Instead, the division of the profits of the company are governed by the operating agreement, which provides that the PLLC “shall be dissolved” upon the occurrence of a withdrawal event. ¶ 12.1. Thus, the PLLC was dissolved on January 13, 2004, when the hospital and the defendant entered their memorandum of understanding making the defendant’s loss of staff privileges permanent. The value of the PLLC should be assessed as of that date. The defendant is not entitled to any profits derived from the plaintiff’s use of the laboratory between January 13, 2004, and the date that the laboratory was sold. Levine v. O’Dorisio, 494 Mich. 874 (2013)

RESULT:

An Operating Agreement/Bylaws/Partnership Agreement is a contract.

The Court will enforce the language that the parties agreed to.  In this instance Levine was not required to pay any amount as profits for the funds he gained using the business equipment after dissolution, but before sale.

 

LESSON:

This is another reason why it pays to hire legal counsel to draft your business partnership agreement; whether formed as an LLC or a corporation.

 

 

Categories: Uncategorized

Lesson from Court: Why an Employee Handbook Matters.

July 5, 2013 1 comment

Recently I was in court for a hearing  representing a business client being sued by a former employee.  In that case, the former employee claimed it had a guaranteed contract for employment for a specific term.  This provided an opportunity for me to highlight some brief, but key aspects of Michigan law and the importance of an Employee Handbook.

 

I. In general – We are an At-Will Employment State

Michigan is an at-will employment state.  “Employment contracts for an indefinite duration are presumptively terminable at the will of either party for any reason or for no reason at all.” Rood v. Gen. Dynamics Corp., 444 Mich. 107, 116, 507 N.W.2d 591, 597 (1993).

Although it is a presumption that businesses can terminate employment for any reason at all, it does not stop former employees from raising claims of “oral agreements” that they were guaranteed employment as long as they

did not committed any serious offenses (for cause employment) or that they were guaranteed employment for a specific duration. This is where an employee handbook can be very helpful at the beginning of an employment relationship.
II. Employee Handbooks – in general

Employee handbook or manual is a useful tool for an employer to engage its employees at the onset of the employment relationship with its mission statement and clarify its policies. However, the primary purpose of every good handbook should be to protect the employer from claims of any discrimination or wrongful termination.

 

III. Some particulars

A good employee handbook will be concise and will state with particularity that all employment is at-will  and that the document is not a contract that guarantees employment for any specific term.

It will also notify the employee of how they showed raise grievances for any harassment or discrimination or other workforce complaints; it will also notify the employee of the various federal and state laws that offer them protections, and for which the business complies with – this again is a layer of protection from liability for the business.

An employee handbook may also contain specific agreements to arbitrate any dispute, or hold certain information confidential.

 

IV. When a company has an employee handbook – some common problems that could result in issues of the company is sued:

 

1. The Handbook is a form handbook that is not narrowly tailored to the company.

One size handbook doesn’t fit every company. Further, an employer should be careful not to create a policy which it has no intention of abiding by, and thereby give the impression that the handbook really isn’t a document meant to be enforced. So if a certain policy will not be followed – remove it from the handbook! Narrowly tailor the handbook to your specific company.

2. The handbook should be signed by the employee.

Lastly – an employee handbook should be signed by the employee and dated, indicating they have read and agree to the terms of employment contained therein – and the signature page kept in the employee’s personnel file.  This document will be highly valuable evidence that the former employee knew and agreed that employment was at-will (in case of a claim for a specific term of employment. In the case that the claim is one related to wrongful discharge, the handbook will clearly outline that the former employee knew about the discipline procedures, who to report to, etc…
Questions to ask yourself:

 

Does your business have an employee handbook?
If yes, is it narrowly tailored, or just a form document that you purchased?

 

 

 

 

 

 

 

 

 

Categories: Uncategorized