One Court of Justice

On January 24th, the Court of Appeals approved its November 2011 decision in People v. Allen, No. 299267 for publication.  In that case the Court was reviewing the trial court’s order for the payment of victim restitution to Blue Cross Blue Shield.  The defendant had been convicted of attempting to commit prescription fraud using a valid Blue Cross contract number.  The defendant was an employee for one of Blue Cross’ vendors and Blue Cross investigated the attempted purchase and made efforts to determine if there had been any other fraud.  The trial court awarded Blue Cross restitution based on the pro rata share of the Blue Cross department’s budget as determined by the amount of investigator time spent on this case.  The defendant argued that Blue Cross did not suffer financial harm because Blue Cross would have incurred the costs of the investigation (the salary of the investigator) regardless of the fraud.  The Court of Appeals affirmed the trial court’s conclusion that Blue Cross had been harmed and could be awarded restitution, reasoning that the loss of time that could have been spent on other things, amounts to direct financial harm.

In People v. Kabanuk, No. 301536, the defendant was convicted of criminal contempt for violating a personal protection order (PPO) when she lunged toward the PPO complainant in a courthouse and said, “I hate you,” among other things.  Citing People v. Freeman, 240 Mich. App. 235 (2000), the defendant claimed that the complainant was using the PPO as a “sword instead of a shield,” because the complainant came to the courthouse when she knew the defendant would be there.  The Court of Appeals explained that the sword/shield analysis in Freeman, which was contained in a footnote, referred to a poorly drafted PPO that prohibited the defendant from contacting the complainant at the defendant’s own address.  The Court of Appeals used this opportunity to “clarify that one who holds a PPO is under no obligation to act in a certain way.  Instead a court must look only to the behavior of the individual against whom the PPO is held.”

On Monday, January 23, 2012, the Michigan Supreme Court issued a statement regarding the motion for disqualification of Justice Markman in Lawrence v. Board of Examiners, Case No. 144191.  In his statement, Justice Markman explains that Plaintiff has filed a motion seeking to disqualify the Justice because he: 1) introduced opposing counsel as keynote speaker at a 2010 meeting as “one of the finest and most enterprising young men that I know”; and, 2) Justice Markman authored the forward to the opposing counsel’s book. 

Justice Markman concluded no grounds exist for his disqualification under MCR 2.003.  He noted that he is judging the law, not the lawyer.  Merely knowing one of the attorneys involved in a case does not mean that the judge cannot remain impartial.  Further, Justice Markman stated that he has no financial interest in the book authored by opposing counsel, and therefore there is no reason that he cannot remain impartial in this case.

Justice Zahra has previously recused himself from this case because he was a member of the Board of Law Examiners in 2010 and participated in the decision that forms the basis of Plaintiff’s complaint.

On January 19, 2012, the Michigan Court of Appeals published its December 6, 2011 opinion in Malpass v. Department of Treasury, Nos. 299057-059, in which the court concluded that the plaintiffs could not treat income from two separate S corporations as income from a unitary business.  In this case, the plaintiffs filed amended tax returns, in which they applied apportionment factors under the Michigan Income Tax Act (ITA) to both companies as a unitary business.  The Treasury Department denied the amended returns, and the plaintiffs filed an appeal in the Court of Claims.  The Court of Claims granted summary disposition to the plaintiffs, determining that the plaintiffs’ businesses are unitary, and the ITA allowed apportionment as the plaintiffs had done in their amended returns.

The Court of Appeals first explained that under the Due Process and Commerce Clauses of the U.S. Constitution, states may not, when imposing an income-based tax, tax value earned outside their borders.  Accordingly, states employ a “unitary business principle,” which allows a state to tax multistate businesses on the share of business carried out in the taxing state.  The Court of Appeals recognized the “unitary characteristics” of the two businesses, but concluded that no provision in the ITA allows individuals “to combine their business income from separate businesses and then use a combined apportionment formula on the total.”  The Court of Appeals reversed the Court of Claims, holding that the plaintiffs may not combine business income from separate legal entities and then apportion it; rather, they must apportion income at the entity level.

Disclaimer:  Warner Norcross & Judd LLP represented the Appellees in this case.  An application for leave to appeal has been filed with the Michigan Supreme Court.

On January 19, 2012, the Michigan Court of Appeals issued its opinion in Woodbury v. Res-Care Premier, Inc., No. 297819.  Defendant Res-Care Premier, Inc. contracted to purchase a home from Defendant Ruth Averill in 2009.  The homeowners in Averill’s subdivision had entered into an agreement that required homeowners to offer the homeowners’ association, Plaintiff Center Woods, Inc., 30-day notice of any home sale and a right of first refusal.  Averill had not provided this notice.  However, Center Woods had failed to file its annual statements or pay its annual fees in 1992 and 1993, causing the corporation to be dissolved under MCL 450.2922.  Nonetheless, the trial court granted the plaintiffs summary disposition; it invalidated the sale because Averill had not complied with the notice and refusal provisions.  The Court of Appeals reversed, holding that Averill was not required to give notice to a dissolved corporation.

On January 19, 2012, the Michigan Supreme Court issued an order denying the plaintiff’s motion to disqualify Chief Justice Young and Justice Kelly in Parise v. Detroit Entertainment, LLC, No. 144072. Chief Justice Young and Justice Kelly rejected the plaintiff’s argument that an appearance of impropriety was created because Candice Miller for Congress donated to the Michigan Republican Party, and the Michigan Republican Party donated to their 2010 election campaigns. Chief Justice Young also held that the plaintiff’s allegations regarding her professional and consulting relationships were “too attenuated” to create an appearance of imprioriety.

The Michigan Supreme Court denied two motions to waive fees.

Following a motion for reconsideration, the Court of Appeals issued a new opinion that revised its earlier holding in Yoost v. Caspari, No. 294299.  Notably the opinion remains the same in many respects – including the result.  The one notable difference is that this revised opinion does not reach the question of whether a party’s failed to establish his abuse-of-process claim, and whether that failure would mean that MCL 600.705(2) could not support jurisdiction.  Judge Meter had concurred in the earlier opinion on the grounds that he would not have reached the abuse of process question.  As that question is not addressed in the revised opinion, he now signs on to the opinion in full.

In lieu of granting leave to appeal in Teegardin v. Hunt, No. 144124, the Michigan Supreme Court remanded the case to the Court of Appeals, for consideration of whether the trial court abused its discretion when it denied the defendants’ motion to strike the testimony of an expert.  The Supreme Court directed the Court of Appeals to consider whether the doctor’s proposed testimony meets the criteria of MCL 600.2955 and MRE 702 in light of  Craig v. Oakwood Hospital, 471 Mich. 67 (2004) and Gilbert v. DaimlerChrysler Corp., 470 Mich. 749 (2004).  The Court ordered the trial court proceedings stayed during the appeal.  The Court also denied one prisoner’s motion to waive fees.

On January 12, 2012, the Michigan Court of Appeals issued its opinion in Kim v. JP Morgan Chase Bank, No. 302528.  The foreclosure-by-advertisement statute, MCL 600.3204, provides, “If the party foreclosing a mortgage by advertisement is not the original mortgagee, a record chain of title shall exist prior to the date of sale under section 3216 evidencing the assignment of the mortgage to the party foreclosing the mortgage.”  MCL 600.3204(3).  In Kim, the defendant was the assignee of the mortgage, and it failed to record its ownership of the mortgage before foreclosing by advertisement.  Thus, the Court held that the foreclosure sale was invalid because the defendant had not complied with MCL 600.3204’s requirements. Read more »

The Michigan Supreme Court denied one application for leave to appeal and one prisoner’s motion to waive fees.  On order of the Chief Justice, two housekeeping orders were issued, granting the Prosecuting Attorneys Association’s motion for extension of time for filing an amicus curiae brief in People v. Kolanek, No. 142695, and granting the Coalition for a Fair & Competitive Insurance Market’s motion for leave to file an amicus curiae brief and for leave to participate in oral argument, limited to five minutes of the time allotted to the Attorney General, in Attorney General v. Blue Cross Blue Shield of Michigan, No. 142671.

In People v. Lockett, No. 296747 (consolidated with People v. Johnson, No. 296848), the Court of Appeals considered the constitutionality MCL 750.520b(1)(c), which prohibits sexual penetration under circumstances involving another felony, as long as that felony is directly related to the sexual penetration.  In this case, the defendants engaged in consensual sexual intercourse with two girls in the backseat of a vehicle while a minor was present in the front seat of the vehicle.  The trial court convicted the defendants under MCL 750.520b(1)(c) on the grounds the penetration occurred while committing the felony of exhibiting a sexually explicit performance to a minor.  The court concluded that the statute “unconstitutionally invites arbitrary and abusive enforcement when it is applied to situations such as the defendants’, where engaging in consensual, legal sexual penetration can be elevated to CSC I solely because a minor is present and where the victim of the penetration is not impacted by the additional felony.” 

The court went on to hold that the statute can be made constitutionally definite by giving it a reasonable construction. Accordingly, the court found that the statute should be read so that the “circumstances involving the commission of the other felony directly impact a victim, or recipient, of the sexual penetration.” 

The court reversed Locket and Johnson’s convictions of CSC I under MCL 750.520b(1)(c) and remanded the cases for entry of convictions on the lesser-included offenses of exhibiting a sexually explicit performance to a minor under MCL 722.675(1)(b). 

On January 10, 2012, the Court of Appeals vacated its earlier order and issued a new opinion in Alfieri v Bertorelli, No. 297733. In Alfieri, the plaintiffs purchased condominiums at a site that had previously been an abandoned factory. After reading a sales brochure and a newspaper article that indicated that chemical contamination at the site had been cleaned up, plaintiffs did not obtain an independent environmental inspection. After discovering that the chemical contamination was in fact still present, the plaintiffs brought a suit against the defendants, the seller’s agents, for negligent misrepresentation and silent fraud. At different stages of the trial, the defendants moved for summary disposition, directed verdict, and JNOV, each time arguing that as the seller’s agents, they owed no duty to plaintiffs.

The Court of Appeals disagreed. While the court acknowledged that silent fraud and negligent misrepresentation both require the defendants to owe a duty to the plaintiffs, the court found that a duty of disclosure may be imposed on a seller’s agent to disclose new information that renders a prior affirmative statement untrue or misleading, especially if a buyer has expressed a concern about that subject. Since the plaintiffs expressed their concerns about the contamination before the sale, the court found that the trial court was correct in deciding there was a genuine question of fact as to whether defendants owed plaintiffs a duty. The court went on to reject the defendants’ next appeal, in which the defendants argued that there cannot be fraud if the defrauded party had the means to independently determine the truth of the mater. While the plaintiffs failed to obtain their own environmental inspection, the court found that plaintiffs’ reliance on the newspaper article and sales brochure was reasonable. The court also rejected the defendants’ final appeal, in which the defendants argued that the trial court should have applied a contributory negligence standard, by simply noting that contributory negligence has long since been abandoned in Michigan.

The Court of Appeals also rejected an appeal brought by the plaintiffs, in which the plaintiffs argued that the trial court should not have instructed the jury on comparative negligence because the plaintiffs’ negligent misrepresentation claim did not involve a claim for personal injury, property damage, or wrongful death, as set out in MCL 600.2959. The court disagreed, finding that an “invasion of a personal right” qualifies as a personal injury under the language of the statute, and that Michigan case law supports comparative negligence when there is sufficient evidence for the jury to find negligence on the part of the injured plaintiff. Given that the plaintiffs failed to obtain their own environmental inspection, the court found that the comparative negligence instruction was proper, and affirmed the trial court.

This morning, in Hosanna-Tabor Evangelical Lutheran Church & School v. EEOC, the United States Supreme Court reaffirmed the ministerial exception under the Establishment and Free Exercise clauses of the Constitution.  The decision unanimously overturned a decision by the Sixth Circuit that a Lutheran school’s commissioned teacher was not a “minister” for purposes of the ministerial exception.  The Supreme Court’s decision vindicates religious organizations’ constitutional right to make decisions about who will perform ministerial functions free from governmental interference.

Read more »

In 2004, the Pontiac School District privatized services that had been provided by occupational therapists and physical therapists employed by the school district.  The Pontiac Education Association claimed that the school district could not unilaterally act, because the issue was subject to collective bargaining.  The school district rejected the claim and laid off the therapists.  Under the Public Employment Relations Act, MCL 423.215(3)(f), collective bargaining is not allowed with respect to a decision to outsource “noninstructional support services.”  In Pontiac School Dist. v. Pontiac Educ. Ass’n, No. 300555, the Michigan Court of Appeals upheld the decision of the Michigan Employment Relations Commission, which concluded that occupational and physical therapists provide instructional support services under the Act.  Accordingly, the school district’s decision to contract the services out to a third party should have been the subject of collective bargaining.  Chief Judge Murphy authored the opinion, in which Judge Owens joined.  Judge Jansen dissented, because she concluded that occupational and physical therapists provide noninstructional support services.

In lieu of granting leave to appeal in In re Estate of Rosa Louise Parks, Nos. 143419-22, the Michigan Supreme Court reversed the judgment of the Court of Appeals, concluding that counsel’s reference during oral argument to fees charged by the court-appointed fiduciaries did not constitute a breach of a settlement agreement’s confidentiality provision, and the Court of Appeals’ finding that it did was clearly erroneous.  The Court remanded to the Wayne County Probate Court and instructed the court to implement paragraph 1 of the settlement agreement within 30 days of the date of the order.

In lieu of granting leave to appeal in McMurtrie v. Eaton Corp., No. 143779, the Michigan Supreme Court reversed in part the decision of the Workers’ Compensation Appellate Commission (WCAC) and remanded the case to the Michigan Compensation Appellate Commission (MCAC), as successor to the WCAC, for the MCAC to determine whether the plaintiff’s wage loss is due to his injury.

The Court vacated its earlier order and denied the application for leave to appeal in Progressive Michigan Ins. Co. v. Smith, No. 141255, because the Court was no longer persuaded that the question presented should be reviewed by the Court.

In People v. Brown, No. 143733, the Court ordered the Clerk to schedule oral argument on whether to grant the application for leave to appeal.  The Court directed the parties to address whether the defendant was entitled to any relief when he was sentenced to a longer sentence than the maximum sentence that was disclosed in the plea proceeding.

The Court also denied 3 applications for leave to appeal and administratively closed another case due to bankruptcy.

On December 29, 2011, the Michigan Court of Appeals issued its opinion in People v. Douglas, No. 301233.  The Court upheld the constitutionality of the pirate-recording statute, MCL 752.1053, by interpreting the statute as limited to commercial distribution. Read more »

On December 28, 2011, in lieu of granting leave to appeal, the Michigan Supreme Court remanded People v. Stecker, No. 143943, to the Court of Appeals for consideration as on leave granted.

In lieu of granting leave to appeal in Haywood v. Schumaker, No. 143534, the Michigan Supreme Court remanded the case to the Court of Appeals for reconsideration in light of Driver v. Naini, 490 Mich 239 (2011).  Justice Cavanagh would deny leave to appeal.  Justice Hathaway would grant leave to appeal.

In lieu of granting leave to appeal in People v. Spangler, No. 143418, the Michigan Supreme Court remanded the case to the Oakland Circuit Court and directed that court to comply with a Court of Appeals order.  The Court denied the application in all other respects.

The Court ordered that the application for leave to appeal in People v. Edwards, No. 143502, be held in abeyance pending the decision in People v. Vaughn, No. 142627, pending on appeal before the Court.

The Court directed the Oakland County Prosecuting Attorney to answer the waiver of counsel issue in People v. Childress, No. 143606.

The Michigan Supreme Court denied an application for leave to appeal prior to decision by the Court of Appeals.  The Court denied 211 other applications for leave to appeal.  The Court also denied 12 motions for reconsideration.  A motion for reconsideration was dismissed following the parties’ stipulation to dismissal.

In Wells Fargo Bank, NA v. Cherryland Mall Ltd. P’ship, No. 304682, the Michigan Court of Appeals affirmed the trial court’s judgment awarding plaintiff money damages on its mortgage deficiency claim and for attorney fees. 

This case arises out of a commercial mortgage-backed securities (CMBS) loan.  A CMBS loan has a unique structure: a non-recourse basis in exchange for the isolation of the assets to be financed.  Two components of asset isolation are separateness covenants and limited recourse provisions limiting the lender’s general agreement not to pursue recourse liability.  Accordingly, in a CMBS financing, in the event on “recourse triggers” on the part of the borrower, the lender’s agreement not to pursue recourse liability against the borrower or owner has limited application, allowing the lender to pursue recourse as part of its remedies. 

In this case, defendant partnership obtained a CMBS loan from plaintiff, using property it owned as collateral. When defendant partnership failed to make a mortgage payment, plaintiff commenced foreclosure by advertisement and a sheriff’s sale was conducted, leaving a deficiency of approximately $2.1 million on the loan.  Plaintiff then filed suit to enforce the loan documents for the deficiency against mortgagor and the guarantor of the loan.  Plaintiff filed multiple summary disposition motions, of which all but one were granted in favor of plaintiff.  Defendants appealed two motion grant rulings.  The first objection by defendants was to the grant of summary disposition for plaintiff on the finding that the guarantor was liable for the entire loan deficiency because the trial court had concluded that insolvency was a violation of defendant’s requirement that it remain its single purpose entity (SPE) status.  The second objection was as to the award of attorney fees to plaintiff.  Read more »

Plaintiff was injured when she slipped and fell on a patch of ice while closing the passenger door of her vehicle, after placing some items in the passenger compartment.  The Michigan Supreme Court determined that the defendant insurer is not liable to plaintiff for personal protection insurance benefits under the no-fault act, MCL 500.3101 et seq., because plaintiff’s injury did not arise out of the use of a parked vehicle under MCL 500.3106(1).  In a memorandum opinion in Frazier v. Allstate Ins Co, Nos. 142545, 142547, four justices of the Michigan Supreme Court reversed the judgment of the Court of Appeals and remanded the case to the trial court for further proceedings.

MCL 500.3105(1) provides that:  ”Under personal protection insurance an insurer is liable to pay benefits for accidental bodily injury arising out of the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle, subject to the provisions of this chapter.”  In cases of a parked vehicle, the next section of the act, MCL 500.3106, explains that accidental bodily injury does not arise unless an express exception is met, such as “(b) … [T]he injury was a direct result of physical contact with equipment permanently mounted on the vehicle, while the equipment was being operated or used …” or “(c) … [T]he injury was sustained by a person while occupying, entering into, or alighting from the vehicle.”  MCL 500.3106(1)(b)-(c).  The majority determined that plaintiff’s injury was not “a direct result of physical contact with equipment permanently mounted on the vehicle …” under MCL 500.3106(1)(b) because she was in contact of the door of the vehicle at the time of her injury, which constitutes contact with the vehicle itself rather than with “equipment” mounted on the vehicle.  The majority further determined that plaintiff was not in the process of “alighting from” the vehicle under MCL 500.3106(1)(c), because before her injury, plaintiff had been standing with both feet firmly on the ground outside of the vehicle and she was in no way reliant upon the vehicle itself – in other words, “[a]t the time of her injury, plaintiff had already alighted.” Read more »