Archive for the ‘business law’ Category

Business Law Update: Michigan Bill Would Prohibit Non-Disparagement Clauses with Consumers.

I’m not going to sugar coat it – it is a gray day in downtown Grand Rapids.

I had lunch with a friend today, who told me – he can’t stand it when in response to the question “how are you doing” someone gives a pat answer – “good”.



I agree.

I appreciate authenticity.

And today, is gray, and somewhat depressing and I am a little down.

Yesterday, I attended the funeral of a friend and fellow attorney who died suddenly. I am grieving and in prayer for Adam’s family, including his wife, two small children and his brother and parents.




Ok, enough authenticity, and on to the subject matter of this post…


I previously wrote about an interesting article published by the ABAJournal.

The article presents interesting questions that come up in business transactions:

when faced with entering a business relationship should you enter into a non-disclosure agreement? (NDA)

What about if the NDA contains a Non-Disparagement Clause?

What is Disparagement?

Michigan courts have held that “disparagement” is plain in its meaning. It is not ambiguous. Therefore, when signing a non-disparagement clause you can have some reasonable certainty in your conduct.

Disparage – as you will see below – has a fairly common meaning


‘Disparagement’ is ‘a false and injurious statement that discredits or detracts from the reputation of another’s property, product, or business.’ Black’s Law Dictionary (7th ed. 1999).

stated another way:

(1) To speak of in a slighting or disrespectful way; belittle.

(2) To reduce esteem or rank.’ . . . American Heritage Dictionary (4th Ed. 2000)


Non-Disparagement Clauses in Contracts with Consumers


Recently the Federal government passed a law holding that such non-disparagement provisions in contracts are unenforceable under Federal law

California has had such a law in place since 2016.


It is one thing if two sophisticated business parties are negotiating a business relationship, but should consumers have specific protections concerning Non-Disparagement Clauses?


At least one Michigan lawmaker thinks so.

Michigan House Bill 5193

On October 31, 2017, HB 5193 was introduced to amend the Michigan Consumer Protection Act (“MCPA”).

“The MCPA provides protection to Michigan’s consumers by prohibiting various methods, acts, and practices in trade or commerce.” Slobin v. Henry Ford Health Care, 469 Mich. 211, 215; 666 NW2d 632 (2003).

The Amendment would prohibit anyone engaged in Trade or Commerce from including in a contract with a consumer for the sale of lease or sale of consumer goods:





Of note, under this Bill businesses would still be permitted to include provisions that protect its proprietary information.


I understand the intent of this provision. However, it hasn’t made any progress in committee. I will keep you posted on any development.



Questions?  Comments?


Twitter: @JeshuaTLauka


Business Law Update: Michigan LLCs Filing with LARA: Pardon the Delays and Thank you for your Patience.

February 22, 2018 Leave a comment

Happy Thursday, all! I took this photo earlier today – the sun is out in downtown Grand Rapids, Michigan and people are enjoying  the ice rink at Rosa Parks Circle.


Last week I posted about an update I received from the Michigan Department of Licensing and Regulatory Affairs (“LARA”) extending the deadline to file annual statements and reports for LLCs and PLLCs to March 1, 2018.

Annual Statements are Due on February 15th each year, “however, due to increased demand for pre-assigned Customer ID Number (CID) and PIN information, an automatic 14-day extension will be granted.


In my post I also mentioned that I wasn’t surprised at the filing extension, given the fact that my experience with LARA lately has been frustrating to say the least. My clients have been experiencing serious delays in returned filings from LARA.


Today, I received an update from LARA’s Director Julia Dale, thanking me, and other system users for our patience in the delays that we have been experiencing.

In part, Director Dale acknowledged that:

“The Corporations Division serves more than 800,000 customers doing business in Michigan and reviews more than 240,000 documents and 640,000 annual reports each year…For the last two years…LARA worked diligently to bring the agency’s aging Corporations database into the modem era by completely replacing the outdated server-based technology with a new web-based system… The database was unstable, utilized unsupported technology and the fax-based filing system had become a burden for customers and staff.”


I am glad that my reasonable frustrations are being acknowledged by LARA. Thank you, Director Dale.


Many of my clients, (real estate investors, small business owners, entrepreneurs, etc..) rely on quick turn around for corporate filings. The fact that LARA’s e-filing system has not been reliable has been troubling for my clients – and therefore troubling to me.


I forewarn all clients who are looking for new entity filings that they should expect to experience delays.

If the particular filing is time sensitive, you have a deal closing soon and need an entity prepared ASAP, then you may want to consider paying extra to the State for expedited processing.


Questions? Comments?


Twitter: @JeshuaTLauka

Michigan Limited Liability Companies: LARA extends 2018 Annual Statement Filing Deadline to March 1. Stay in Good Standing and Maintain your Corporate Formalities.

February 15, 2018 1 comment

It is the middle of the dreary season – February 15th. Not too long and I, like many folks in West Michigan with school-aged kids will be heading to Florida for Spring Break.

2017-04-09 21.33.41

This is a photo I took last year – sunnier days ahead.

Anyway, on to the point of this post:


Today I received an e-mail from The Michigan Department of Licensing and Regulatory Affairs(“LARA”) reminding that all annual statements and reports for LLCs and PLLCs are due March 1, 2018.





Annual Statements are Due on February 15th each year, “however, due to increased demand for pre-assigned Customer ID Number (CID) and PIN information, an automatic 14-day extension will be granted.


As a practical note, if you are experiencing delay in receiving filings from LARA – just know that LARA has recently transition to an electronic filing system – and disposing of the fax filing.

All things considered, I am not surprised at the extension, and it is good news.


Per LARA’s announcement:

“Annual statements and reports can be submitted online at The first step to submit annual statements and reports online is to login to the system with the entity’s CID and PIN. If you have forgotten the CID or PIN, please contact the Corporations Division at or call (517) 241-6470 to obtain that information. Please do not send multiple email requests for CID/PIN numbers, as this will slow processing time.”

For more information about LARA, please visit



Consequences for Failing to File:

LARA also reminds that:

“Section 909(2) of the Michigan Limited Liability Company Act, 1993 PA 23, provides that if a domestic or foreign professional limited liability company does not file the annual report by February 15, then in addition to its liability for the fee, a $50.00 penalty is added to the fee.”

“Penalties will be assessed for 2018 annual reports received after March 1, 2018.”

Further LARA reports that, an LLC that “fails to file its annual statement/report or the filing fee is not paid for two years, the limited liability company will not be in good standing.  The status of the limited liability company will be “active, but not in good standing.”

“A limited liability company that is not in good standing is not entitled to a certificate of good standing; its company name will be available for use by another entity, and no document will be filed on behalf of the company other than a certificate of restoration.”


Is your LLC in Good Standing?

Occasionally I will have a business client come in and I will ask – just to make sure – “is your business still in good standing?”

The common answer is “I think so.”

And of course, after I perform a quick internet check with the State of Michigan it is all too common that I discover that either the LLC is “not in good standing” or worse, the company has been dissolved automatically for failure to file annual statements.

A Word on Resident Agents:

My law firm is happy to provide our business clients with resident agent services. One of the benefits of an LLC is that it provides its owners a level of privacy protection.


You can check out a recent ABAJournal Article on how a Court is making Jared Kushner’s real estate partners disclose their identity.


Michigan law requires Limited Liability Companies to have appointed a Resident Agent.

MCL 450.4207(1)(b) requires an LLC to have a resident agent. A person, or business with a physical presence in the State of Michigan.

Michigan law does not require that an “owner” of the LLC be the resident agent.

“The resident agent appointed by a limited liability company is an agent of the company upon whom any process, notice, or demand required or permitted by law to be served upon the company may be served.” MCL 450.4207(1)(b).

Many of my real estate investment clients will utilize my law firm as resident agent when filing their articles of organization with the State of Michigan.

In Conclusion:

Business owners, if you get these annual statements from the State of Michigan, or from your attorney – do not disregard them! Maintain your Corporate Formalities.

Questions? Comments?


Twitter: @JeshuaTLauka

Business Law Basics: A 5 Million Dollar Comma

February 13, 2018 Leave a comment

Today in downtown Grand Rapids is the “World of Winter Festival” where Downtown Grand Rapids, Inc.  provides a “Snow Globe” experience. Very colorful.  A lot of fun downtown.



Rosa Parks Circle, Grand Rapids, Michigan


Today I read an article posted by the ABAJournal that illustrates the profound impact on word and grammar usage in contracts and legislation.

As the ABAJournal reported:

“A dairy company in Maine has agreed to pay $5 million to its drivers after a federal appeals court last year found ambiguity in a state overtime law because it lacked an Oxford comma.”

The ABA Journal reported in its story last year Oxford comma issue benefits drivers in overtime case:


Ambiguity caused by lack of a comma in a law on overtime pay has benefited Maine dairy delivery drivers.”

“The Boston-based 1st U.S. Circuit Court of Appeals pointed out the issue in the first sentence of its March 13 decision(PDF). ‘For want of a comma, we have this case,” the court said in an opinion by Judge David Barron.

Because the statute was ambiguous, it should be interpreted in favor of the dairy workers who distribute milk but do not pack it, the appeals court found.


As a result – a 5 Million Dollar  Comma.



A few years back I wrote about how the words used in a contract dispute significantly impacted the rights and obligations in a business dispute, based upon the Michigan Supreme Court’s interpretation.

The Michigan Supreme Court made a distinction between the inclusion of the word “in” in a Title Company’s Closing Protection Letter in a prior case, and the “exclusion” of the word “in” in that instant case. In the Court’s determination:

“Although the distinction is slight—the only difference is the word “in”—the distinction is legally significant.”

Words Matter.


Twitter: @JeshuaTLauka

Business Law Update: Recent Court Case On Sour Business Relationships and Arbitration Clauses

February 12, 2018 Leave a comment

Good afternoon, all! The sun was beautiful this morning rising over downtown Grand Rapids.


IMG_2144Today I read a recent unpublished Court of Appeals decision that originated out of Kalamazoo County, Michigan –

The case: Elluru v Great Lakes Plastic, Reconstructive, and Hand Surgery PC


A summary of the Facts:

  • Plaintiff Elluru and defendant Holley practiced medicine together in  the Company.
  • Holley served as president and Elluru as secretary.
  • They entered into employment agreements with the Company.
  • The agreements provided for termination by the Company for cause upon written notice or without cause upon 90 days’ written notice.
  • They also executed a Stock Redemption Agreement that provided that a shareholder must sell his shares to the Company if he voluntarily terminated his employment  or if the Company discharged his employment with or without cause.  See Elluru , page 1.

Then the business relationship took a turn for the worse…

  • In 2015, Elluru began to express his desire to dissolve the Company.
  • Elluru called for special meetings of the shareholders to discuss his proposals for dissolution.
  • Holley disagreed with the plan to dissolve the corporation.
  • Instead, on December 7, 2015, Holley sent a letter to Elluru that he had terminated Elluru’s employment with the Company.
  • Elluru also was notified that, pursuant to the Stock Redemption Agreement, his shares were being acquired by the Company.
  • Elluru was further notified that, because he was no longer employed by the Company, he was also terminated as an officer and director of the Company.
  • The letter also reminded Elluru that he was subject to a non-compete agreement. Id, Page 1-2.

Not completely unexpected, Elluru sued Holley and Company and asked the Court to:  A. Dissolve the Corporation and B. Set Aside his Termination.

Holley and the Company filed a motion to compel Elluru to Arbitration pursuant to an arbitration clause in the parties’ employment contract. Id. Page 2.

Holley argued that “the employment agreement required that the claims be submitted to arbitration. Holley argued that “arbitration was required because all of the claims arose out of the employment agreement.” Id.

The Circuit Court denied Holley’s motion. Holley appealed.

The Court of Appeals was presented with this issue:

“whether the issue of arbitrability should have been decided by the trial court or by the arbitrator.” Id.


About Arbitration Clauses…


Michigan law favors upholding arbitration clauses in contracts.

Under Michigan law, arbitration clauses are to be liberally construed with any doubts to be resolved in favor of arbitration. Amtower v William C. Roney & Co., 232 Mich App 226,233 (1998).



In this case, the Court noted that:

The Uniform Arbitration Act, MCL 691.1681 et seq…provides that, where there is an agreement to arbitrate, a trial court must order the parties to arbitrate unless the court determines that there is no enforceable arbitration agreement. The Act further provides that it is for the court in the first instance to determine arbitrability…” Id. (my emphasis).

There is an exception to the rule that the Court determines arbitrability… 

The parties contractually agreed to delegate to the arbitrator the question of arbitrability. Id. Citing Rent-A-Center, West, Inc v Jackson, 561 US 63, 69 n 1; 130 S Ct 2772; 177 L Ed 2d 403 (2010).

In the instant case – the Court looked at the Employment Agreement:

“In paragraph 10 of the employment agreement, the parties agreed that ‘[a]ny controversy or claim arising out of or related to . . . this Employment Agreement . . . shall
be settled by arbitration . . . in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association . . . .’ Those rules provide that the “arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or validity of the arbitration agreement.'” Id. Page 3.


The Court of Appeals agreed with Holley:  “that this matter should have been submitted to arbitration and that the trial court should have held the claims in abeyance pending the outcome of arbitration.” Id. page 2.



Lessons and General Arbitration Considerations:

1. Arbitration Clauses are favored. A Court generally decides whether the clause is enforceable, and whether or not the matters are arbitrable.” However, the parties’ can contract to allow the issue of arbitrability to be decided by the arbitrator.

2. This brings up a general point – the parties could have negotiated differently in their employment and shareholder agreements before signing. “Freedom of Contract.

3. Arbitration clauses have the benefit that they are usually most cost-effective, quick, and they are private (as opposed to court cases which are public filings).

4. 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 owed.  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.

5. Arbitration may be a gamble.

Businesses should realize that if you elect to arbitrate a matter and you do not like what the arbitrator finds – your rights to appeal may be severely limited.

Questions? Comments?


Twitter: @JeshuaTLauka

Michigan Law Update: The Neighborhood and Commercial Corridor Food Initiative. Community Revitalization Now Includes Downtown Grocery Stores.

January 17, 2018 Leave a comment


Several years ago ago I took my family to New York City. (and took the below photo).

Even amidst the chaos of protecting my 4 young children from darting out in2015-11-26-13-04-02to oncoming traffic – we absolutely loved the City.


We loved the walk-ability of City life –

that you could walk down a block to a grocery store and get all of your household needs.


I love downtown Grand Rapids.


(Below, photo I took this morning from my office)

If Grand Rapids wants to encourage urban living, it needs to continue to support growth in downtown grocery stores.


This is not a novel concept.

There has been recent exciting development in Grand Rapids on this front – see Meijer opening a grocery store on Bridge Street.

Also, Russo’s International Market opened last year as well.



“Neighborhood and Commercial Corridor Food Initiative” – Public Act 229

Last March, House Bill 4207 was introduced in the Michigan house. Known as the “Urban Food Initiative.” (re-named “Neighborhood and commercial corridor food initiative”)

This Bill intended to provide incentives for community revitalization that would include a downtown Grocery Store.

Specifically, HB 4027 would make “Urban Food Initiatives” allowable to receive funds under the Michigan Community Revitalization Program


Passed into Law

On December 28th this House Bill was given immediate effect and assigned as Public Act 229 . 


The law provides incentives to “new neighborhood” food initiatives. That is why, per the new law:

a new neighborhood and commercial corridor food initiative…is not eligible for a community revitalization incentive if it is located within 1 mile of an existing retail supermarket, grocery store, or produce market…that offers unprocessed USDA-inspected meat and poultry products or meat products that carry the USDA organic seal, fresh fruits and vegetables, and dairy products for sale to the public.”


Hopefully this law will spur development of urban grocery stores in Grand Rapids, and beyond to places like Detroit. There is wonderful community development work going on right now in Detroit, as the article below highlights.


Healthy Food Options – Essential for Urban Living

Clearly having available and healthy food options in a downtown are necessary to City living. Check out this recent article from Non-Profit Quarterly about Communities of Color Developing Residents-Owned Groceries.

According to the Article:

“Grocery stores…often anchor “neighborhood economies, recirculating local revenues through wages and nearby businesses. They can also be neighborhood hubs, where people go to buy good food as well as employment centers and sources of community pride.”

“Alas, the lack of these hubs can be damaging, notes Malik Yakini, who directs the Detroit Black Community Food Security Network. Yakini is one of a host of activists across the country who are working to foster community ownership of food businesses in communities of color.”


We should be encouraging Malik Yakini and others and supporting community ownership of food businesses in communities of color. Hopefully the new law will attract such local ownership.


Parting Thoughts

A downtown grocery store is necessary if a City wants to attract urban living – it is also necessary to provide healthy food options for those living downtown without readily available transportation.

I think particularly of the under-employed and the homeless who receive services from organizations like Mel Trotter Ministries. In Grand Rapids, we are confronted everywhere with the need for Affordable Housing. It would be great to see grocery options as well.

I am also encouraged by the many businesses in West Michigan honestly asking the question: “How am I building a better community?


Twitter: @JeshuaTLauka


Business Law Update: Concerning Current Politics and Non-Disparagement Clauses

January 9, 2018 Leave a comment

Today I read an interesting article published by the ABAJournal.

The ABAJournal article asks an interesting question (all politics aside):

“If Trump sues Bannon for violating a nondisclosure agreement, what are his damages?”

Again, all politics aside, the article presents interesting questions that comes up in business transactions: when faced with entering a business relationship should you enter into a non-disclosure agreement? (NDA)


The thought that comes to mind when I hear the word “Politics”

What if the NDA contains a non-disparagement clause? Can you even enforce it if breached? If so, what are your damages?

Going back to the ABAJournal Article, one legal scholar quoted in the ABAJournal article opined that such a lawsuit would be problematic, given damages are speculative (my paraphrase). University of Arizona law professor Jane Roberta Bambauer stated:

“It’s difficult for litigants to claim large damages when the nature of the award is that they expected to be less embarrassed (as opposed to NDA cases involving trade secrets and other financially valuable pieces of information that the protected party expected to exploit himself)”

Regardless of the damages argument, in general, such agreements are enforceable. That was the opinion of Yale Law Professor Stephen L. Carter who stated:


“We can put aside nondisparagement clauses buried in the boilerplate of consumer contracts, which companies sometimes try to use to prevent those who buy their products from posting negative reviews. Most courts have understandably held such clauses unenforceable,”…“But when non-disparagement clauses are included in employment contracts or separation agreements, they are enforced more or less routinely.”


Non-Disparagement Clauses…With a Penalty?

Would you sign a non-disparagement clause with a penalty attached to it in the event of breach?

A few years ago an interesting story emerged regarding a non-disparagement clause involving a settlement entered into by the City of Lansing.

As a lawyer, if I was approving my client’s signature on the City of Lansing Settlement agreement, I’d want to be sure that my client fully understood what constitutes “disparagement”


What is Disparagement?

Michigan courts have held that “disparagement” is plain in its meaning. It is not ambiguous. Therefore, when signing a non-disparagement clause you can have some reasonable certainty in your conduct.

Often times as part of a confidential settlement agreement, the parties to a dispute will agree not to “disparage” each other.

Disparage – as you will see below – has a fairly common meaning.

‘Disparagement’ is ‘a false and injurious statement that discredits or detracts from the reputation of another’s property, product, or business.’ Black’s Law Dictionary (7th ed. 1999).

stated another way:

(1) To speak of in a slighting or disrespectful way; belittle. (2) To

 reduce esteem or rank.’ . . . American Heritage Dictionary (4th Ed. 2000)

2. Michigan Case Law Concerning “Non-Disparagement Agreements”

Rarely have I ever seen a non-disparagement clause become an issue. In fact, a review of Michigan case law supports this – I found only a handful of cases in Michigan where the parties litigated over one party’s alleged “disparagement” after a settlement agreement was entered.

One such case was the 2011 case of Sohal v. Mich. State Univ. Bd. of Trs. & Davoren Chick M.D., 2011 Mich. App. LEXIS 915, *12-14, 2011 WL 1879728 (Mich. Ct. App. May 17, 2011).)

There the Court held: “the term “disparage” in the non-disparagement clause is not ambiguous. While plaintiff attempts to ascribe several “reasonable” meanings to the term “disparage,” and thus the non-disparagement clause, the term fairly admits of but one interpretation.” Citing Meagher v Wayne State Univ, 222 Mich App 700, 722; 565 NW2d 401 (1997).

As the Court noted, “Other state courts have determined that the term “disparage” in non-disparagement clauses of settlement agreements are unambiguous.” (citations omitted).


In closing – non-disparagement clauses are standard clauses (but not universally used). Courts have consistently held that “Disparage” is a plainly understood term. It isn’t an ambiguous term.

Disparagement clauses may be enforceable. Most often, I would presume they would at least serve the purpose of deterring a party from speaking disreputably after a settlement is signed. However a good question to ask before entering into the agreement; unless you have a stipulated damages provision, how will you calculate damages in the event of a breach?


Questions?  Comments?


Twitter: @JeshuaTLauka