Archive for October, 2013

FIRE! (FIRREA) – U.S. Government Holds BoA Liable for Fraud Under “Seldom Used” Law

October 30, 2013 Leave a comment

A federal jury on found Bank of America liable under FIRREA for a fraud the government said its Countrywide unit orchestrated, originating shoddy home loans in a process called “Hustle” that were then sold to Fannie Mae and Freddie Mac.

The  story is reported in Reuters:


 the Financial Institution Reform, Recovery and Enforcement Act “FIRREA” was enacted during the savings and loan insolvency crisis to enable the FDIC and the Resolution Trust Company (RTC) to efficiently and expeditiously wind up the affairs of hundreds of failed financial institutions. See Freeman v. FDIC, 56 F.3d 1394, 1398 (D.C.Cir.1995).
The story  notes that FIRREA had been used before by the Dept of Justice -but this was the first time it was taken to a jury trial.
Wednesday’s verdict, which faulted the bank for making bad home loans and passing them to Fannie Mae and Freddie Mac, was the first test of FIRREA that went all the way through trial. The use of the law could transform the Justice Department’s relationship with Wall Street.”
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Man Creates Incomplete $200 Million Estate Plan and Dies Before Signing – Son Files Lawsuit

October 25, 2013 Leave a comment

This post came out from the American Bar Association’s Journal.  Concerning Henry Faison, a North Carolina Real estate developer.  You can See the Article here:


Also see the original article in the Charlotte Observer:


It appears he engaged a law firm to set up a charitable foundation (named after his dog) to minimize estate taxes on approx $200 million in assets. The money was apparently originally to go to his Company.


Before he could sign off on his new estate plan, he suddenly died,


The result?

His sons and estate are suing Faison’s company for Unjust Enrichment – claiming that the approx $200 Million should have gone to the foundation.


The legal issues are novel: what is required in order to create a Will?


In Michigan, pursuant to Mich. Comp. Laws Ann. § 700.2502

 a will is valid only if it is all of the following:
(a) In writing.
(b) Signed by the testator or in the testator’s name by some other individual in the testator’s conscious presence and by the testator’s direction.
(c) Signed by at least 2 individuals, each of whom signed within a reasonable time after he or she witnessed either the signing of the will as described in subdivision (b) or the testator’s acknowledgment of that signature or acknowledgment of the will.
(2) A will that does not comply with subsection (1) is valid as a holographic will, whether or not witnessed, if it is dated, and if the testator’s signature and the document’s material portions are in the testator’s handwriting.
If this case were to have occurred in Michigan, it would create a similar problem: the statute was not complied with, but there was other evidence that the deceased intended to create a will.
This is why the sons are arguing “equity” – they are recognizing that, legally, they do not comply with the requirements to create a will, but in the interest of fairness, this Court should simply not allow the Company to benefit from the $200 Million.
If anything, this case highlights the importance of putting your agreements in writing, whether it is your estate plan, or business succession plan. People are prone to postponing these things, since they aren’t generally fun things to think about – death, change…etc… but as this story highlights – they are very necessary.



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Michigan Law Update: Senate Bill 626 – Marijuana Not a Crime?

October 21, 2013 Leave a comment


An interesting Bill has been proposed in the State Senate – it would decriminalize possession of  1 oz or less of Marijuana,

See the Bill Text here: It was referred to the Senate Judiciary Committee on October 16th.


According to the Bill, an individual found in possession of less than an ounce of Marijuana will only be subject to a Civil Infraction – which amounts to a $25 ticket.


The practical effect:

                        It’s probably going to cost you more if your parking meter runs out in downtown Grand Rapids than for getting stopped by a police officer with an ounce of marijuana on you. 

Although I do note, that for repeat infractions, the penalties steepen – to $50 – $100.


This is far removed from the current possession offense which is a misdemeanor conviction.


I am sure there are a number of policy rationales for presenting this Bill, one comes to mind, possibly a way for law enforcement to avoid enforcement problems with the Michigan Medical Marihuana Act.
Regardless, the Bill will undoubtedly make for interesting discussions.




ph: (616) 454-3883



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DOJ is Up and Running – AG Holder Welcomes Back Employees

October 17, 2013 Leave a comment

The Department of Justice Website (up and running again) posted Attorney General Eric Holder’s welcome back to the federal employees who were temporarily laid off due to the government shutdown.

See the DOJ’s website here:


See the Memo Sent from AG’s office here:


I am sure we all hope that as we near January 15th our Federal Government employees won’t be facing the same anxieties and hardships they have been dealing with during the shutdown.




Phone: (616) 454-3883


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Business Contracts: Should your Business Contract Include an Arbitration Clause?

October 15, 2013 2 comments

A construction client of mine found itself faced with a lawsuit.

However, its Contract specifically provided that any dispute would be settled by binding arbitration.

Good, idea, or not?

It depends.

Generally, there are real benefits to arbitration, the two big benefits are related to cost and time.  Arbitration is typically much more cost-effective than litigation, and arbitration is typically handled much quicker as well.

However, arbitration clauses should be carefully drafted to contemplate each’s unique business. What might work for a nationwide manufacturer might not be the best for a local residential construction company.


some considerations….



1. Where is the Other Party located?

For a client who engages in business over state lines, an arbitration clause might not be effective if you are trying to quickly collect a debt that is owed to you.  Instead, you  might want a “Jurisdiction and Venue Selection Clause

This clause would include language indicating that no matter where the dispute occurred, the contract will be interpreted under Michigan law, and the parties agree that any dispute shall only be resolved in _______ County (Typically,  Kent County, Michigan, for my clients.) Therefore, if your contract contains a jurisdiction and forum selection clause, and you are owed money by a company in Florida, you would not need to retain a Florida attorney to try and collect.

Other considerations, generally are:

2. Is the Arbitration Agreement between the company and consumers? If so, companies need to be aware of consumer protection rights, and AAA rules regarding dispute resolutions with consumers.

The AAA has ruled that any company that wants to incorporate their services in its arbitration contract must follow their policies:

“The American Arbitration Association’s policy on consumer arbitration is guided by the state of existing law, as well as its obligation to act in an impartial manner. The Association supports the principles of the Consumer Due Process ProtocolAll cases involving a consumer where the claim is under $10,000 will be administered under the Consumer Rules and the fee schedule for those rules, without regard to the rules or fees that may be incorporated in the arbitration clause.” See, Consumer Due Process Protocol:

3. If the Arbitration Agreement involves a Construction industry, make sure the arbitration clause does not negate your ability to record a claim of lien with the register of deeds.

– as a side note, if the construction agreement is a residential construction agreement with the owner of the home, make sure the Agreement contains the specific language as required by the Michigan Construction Lien Act, MCL 570.1118.


A recent unpublished Michigan Court of Appeals Case demonstrates some of the complexities of arbitration clauses, and how, in practice, the value of an arbitration clause does not always work the way it should. See  Namari v. Subway Real Estate Corp., 308384, 2013 WL 5450283 (Mich. Ct. App. Oct. 1, 2013).

I. Facts of the Subway Franchise Agreement Disputes

This case involved a franchisee dispute over Subway restaurants.

Plaintiff: Namari.

Defendants: Subway Real Estate Corporation (SREC), and Doctor’s Associates Inc, (DAI).

On January 27, 2003, Plaintiff, Namari and Abraham Nunu entered into franchise agreements with DAI1 to operate 14 Subway restaurants in the Detroit area and SREC entered into subleases with the franchisees.
                                  a.  the Arbitration Clause
The franchise agreements contained an arbitration clause that provided in relevant part as follows:
The parties will arbitrate any Dispute the parties do not settle under the discussion and mediation procedures above and any Dispute which this Agreement provides will be submitted directly to arbitration except as provided in this Agreement.
The franchise agreements also contained termination clauses that allowed DAI to terminate the agreements for cause and “without prejudice to any of [DAI’s] rights or remedies provided under this Agreement….”
In 2004, shortly after signing the agreements, Nunu sued plaintiff.
DAI participated in the litigation and, according to plaintiff, ultimately the stores were split between the two parties with Nunu’s name being removed from the stores.
On November 16, 2007, DAI terminated plaintiff’s franchise agreements. Thereafter, according to plaintiff, DAI sued plaintiff and Nunu in Wayne Circuit Court.
In the meantime, it appears that while DAI was involved in a dispute with plaintiff and Nunu, on September 8, 2009, SREC terminated plaintiff’s subleases for his former Subway franchise locations. SREC then sued plaintiff in the 36th District Court to recover possession of the premises and for damages relating to the subleases.

– confusing, isn’t it?

On December 2, 2009, the parties were in court and verbally agreed to submit “ALL of their respective issues, disputes, and causes of action to arbitration” by entering an agreement to arbitrate on the record in the 36th District Court.
So now, just to clarify, there are two arbitration agreements at issue in this case:
                1.  a “written agreement to arbitrate” contained in the Franchise Agreement, and
                 2.  an oral agreement to arbitrate, contained on the record, in Court.

The 36th District Court adjourned the case “for arbitration” on December 2, 2009.
Almost two years later, Defendants demanded arbitration, for unpaid rents and other damages allegedly owned from the Subway leases.
Plaintiff demanded that instead of a single-arbitrator, that the arbitration would be performed by a 3-member panel of arbitrators.  Defendants objected.
So Plaintiff sued Defendants in Circuit Court.

“The parties filed numerous motions, briefs, and other pleadings in the lower court” (which directly translates into “very expensive”).

Defendants argued – the Franchise Arbitration Agreement called for a single arbitrator.
Plaintiff argued – the Franchise Agreement was terminated, the only arbitration agreement is the oral arbitration agreement, and it didn’t call for a single arbitrator.
After much more arguments and hearings (again, expensive) The trial court eventually entered an order finding:
1. that arbitration would proceed to a single arbitrator, and
2. DAI’s franchise agreements were terminated and unenforceable against plaintiff, and that “the 36th District Court agreement to arbitrate shall be the only legally operative and controlling agreement during the arbitration proceedings.”
Defendants appealed – arguing that whether or not the Franchise Agreement was enforceable against Plaintiff was an issue to be arbitrated, not decided by the Court.
So the question was: When is an issue in dispute subject to an arbitration clause, and when isn’t it?
II. Law – Whether an Arbitration Clause Applies To a Specific Issue in Dispute
“When deciding whether the parties agreed to arbitrate a certain matter, courts should ordinarily apply basic state-law principles that govern the formation of contracts.” Amtower v. William C. Roney & Co., 232 Mich.App 226, 234; 590 NW2d 580 (1998) (citations omitted).
“The cardinal rule in the interpretation of contracts is to ascertain the intention of the parties. Where the language of a contract is clear and unambiguous, the intent of the parties will be ascertained according to its plain sense and meaning.” Id. (emphasis, citations, and quotations omitted).
To ascertain the arbitrability of an issue, a court applies the “Fromm Test” where it must consider:
[1] whether there is an arbitration provision in the parties’ contract,
[2] whether the disputed issue is arguably within the arbitration clause, and
[3] whether the dispute is expressly exempt from arbitration by the terms of the contract.
The court should resolve all conflicts in favor of arbitration. [Fromm v. Meemic Ins. Co., 264 Mich.App 302, 305–306; 690 NW2d 528 (2004).]

Here, the Appeals Court overruled the Circuit Court – finding that the issue of whether the Franchise Agreement was enforceable was to be decided by the arbitrator.

The Court of Appeals did agree with the Circuit Court that the Oral Arbitration Agreement to arbitrate all disputes was the only arbitration agreement in effect.
III. Lesson: Arbitration Clauses are useful tools, but should be uniquely tailored depending upon the type of business.  Also, in practice, invoking arbitration clauses sometimes does not have the intended effect – saving money and time.
Questions? Feel free to contact me.
(616) 454-3882
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The Justice System and Government Shutdown

October 10, 2013 3 comments

I was in Federal District Court last week. The talk of government shutdown permeated the courthouse- from the Court officers screening me through the security, to the judge on the bench.

Later that week I called into the U.S. Attorney’s Office in GR- no answer. I get Into the voicemail of a U.S. Attorney for the Civil Division and I hear a detailed message how he is out of work due to the government shutdown (now how do I get a federal lien released from some real estate!?)

I noticed a link for the shutdown contingency plan- see attached link.

After reviewing the plan, I am glad that the DOJ is still running to protect “human life and property.”

I guess my release of lien will need to wait.

Real Property Law Update: Proposed Michigan Bills – “Adverse Possession” and “Landlord Rights”

October 9, 2013 1 comment

Two House Bills have been introduced  affecting real property in Michigan – House Bill 5057 revising the adverse possession statutes and House Bill 5069 which revises the unlawful interference with a possessory interest statute (MCL 600.2918) and provides landlords additional rights to remove a wrongful trespasser.



HB 5057 “Slight Revisions” To Adverse Possession Statutes


This House Bill appears to slightly revise several Michigan statutes related to claims of adverse possession.

The proposed revisions affect the statute of limitations period for recovering real estate, MCL 600.5801, governmental immunity from the adverse possession statutes, MCL 600.5822, and certain presumptions regarding possession of land, but don’t seem to create any new substantive provisions, MCL 600.5867.

The only substantive proposed addition is regarding the statute of limitations, it provides that the statute of limitations period does not apply to a person if an adverse party is asserting a claim to the property based upon adverse possession.

The Proposed Bill was read and referred to the Judiciary committee.  See the Text:



HB 5069 “Trespasser Exception” to the Possessory Rights of a Tenant


This Bill was just introduced today and affects the Summary Proceeding Act – particularly it carves out an exception to MCL 500.2918 (defines unlawful intereference with possessory Interests of tenants). Any landlord who has gone through the process of evicting a tenant knows that, in the residential leasing context, there are heightened duties of landlords, and heightened rights of tenants.  Tenants have the right not to have their possessory interest in the property interfered with, without the proper court procedure being complied with (Summary Proceeding Action in District Court).


Traditionally, this right would also apply to a wrongful trespasser who occupies premises. A wrongful trespasser has a possessory interest in the property (by virtue of the fact they are squatting on the property) and if a landlord did not go through the proper procedures to evict that wrongful trespasser, the landlord could be subject to damages, including attorney fees.  This Bill would carve out an exception and allow landlords to peaceably remove trespassers, without filing a lawsuit.


The actual carve out language is:

If Tenant took possession of the premises by means of a forcible entry, holds possession of the premises by force after a peaceable entry, or came into possession of the premises by trespass…


See the text:





Questions? Email or call me.

(616) 454-3883

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