Five Stories That Matter in Michigan This Week – May 5, 2023

  1. Sixth Circuit: Employee Must Alert Employer of Need for Reasonable Accommodation to Bring a Claim of Disability Discrimination

In the case of Hrdlicka v. General Motors, the Sixth Circuit Court of Appeals upheld a lower court ruling that an employee must sufficiently inform their employer of their need for a reasonable accommodation in order to prosecute a claim of disability discrimination under state and federal law.

Why it Matters: This case serves as an important reminder that while employers must be responsive and engaged when an employee requests a reasonable accommodation for a disability, there is also a responsibility for employees to inform their employers of a disability. In this case, the plaintiff’s “purported disability was unknown to either herself or General Motors until well after her employment was terminated.”


  1. Independent Contractor Bills Introduced in Michigan House of Representatives

Even though the Michigan Legislature is currently mired in the often months-long process of passing a budget, there is a package of mostly non-spending bills in the Michigan House of Representatives that businesses should be keeping an eye on.

Why it Matters: The multi-bill package (HB 4390 et seq.) would create one of the strictest standards for defining an independent contractor and provides for significant penalties for those employers that misclassify workers. Learn more.


  1. Limitations of Federal Bankruptcy Law for Marijuana Businesses

Under the federal Controlled Substances Act, marijuana remains classified as a Schedule I drug, making it illegal at the federal level. This creates a unique challenge for marijuana businesses operating legally within their state’s framework, as they are unable to avail themselves of federal bankruptcy protection.

Why it Matters: Federal bankruptcy courts have been reluctant to provide relief to debtors engaged in activities that are illegal under federal law, even if those activities are legal under state law. As a result, marijuana businesses are often left without the benefits of bankruptcy protection, such as the automatic stay, discharge of debts, and court-supervised reorganization.


  1. Attorney Receives Favorable Ruling for Firm Client

Fraser Trebilcock’s Litigation Department Chair Thaddeus Morgan obtained a favorable ruling for the firm’s ERISA plan client in a case brought by a no-fault provider claiming reimbursement for the plan enrollee’s treatment.

Why it Matters: The court granted the plan’s motion to dismiss finding that the provider did not have standing and the plan’s anti-assignment provision was enforceable. Learn more.


  1. Ten Reasons You May Want to Consider a Family Cottage Succession Plan

The goal of cottage succession planning is to set up legal ground rules that provide the best chance to keep a cottage in the family for future generations.

Why it Matters: A cottage plan usually addresses concerns through the creative use of a limited liability company (LLC), or in some cases a trust, to own the property. Here are ten reasons why you and/or your family may want to consider a family cottage succession plan. Learn more from your Fraser Trebilcock attorney.

Related Practice Groups and Professionals

Labor, Employment & Civil Rights | Dave Houston
Business & Tax | Robert Burgee
Cannabis Law | Sean Gallagher
Litigation | Thaddeus Morgan
Cottage Law | Mark Kellogg

As Chapter 11 Bankruptcy Filings Surge, Here’s What Creditors Need to Know to Protect and Enforce Their Rights

The National Bureau of Economic Research recently announced that the U.S. economy officially entered a recession in February, 2020, one month before COVID-19 shut down much of the economy. It should come as no surprise, therefore, that the economic downturn has led to a surge in corporate bankruptcy filings. According to data from Epiq Global, 722 companies sought bankruptcy protection around the U.S. last month, a 48-percent increase from the year-ago period. From Hertz to J.C. Penny, more businesses are seeking refuge to restructure their debts.

As chapter 11 bankruptcies continue to increase (many analysts are forecasting the “wave” of filings to grow), more businesses and individuals will be impacted by the fallout. Creditors of a bankrupt company must be aware of the various deadlines and procedures that govern the chapter 11 process in order to protect and enforce their rights. For creditors to maximize their recoveries, they must stay informed and take action during a bankruptcy proceeding.

Whenever a business or individual receives a notice from a United States Bankruptcy Court indicating that a business they have had dealings with has filed a chapter 11 bankruptcy petition, the clock starts ticking, and they should be aware of the following timeline, and key events and milestones that may affect their rights.

The Petition Date

The petition date is the date on which a debtor files a chapter 11 bankruptcy proceeding. The debtor is required to serve all known creditors with notice of the commencement of the chapter 11 case. An “automatic stay” is imposed as of the petition date, which prevents creditors from taking any further action, such as pursuing collection activity, related to a pre-petition debt.

To remain informed throughout a bankruptcy proceeding, a creditor may request to receive notice of all pleadings filed in a case pursuant to Federal Rule of Bankruptcy Procedure 2002. In addition, creditors have an opportunity to obtain information about a case and the debtor’s finances by attending the “Section 341” meeting of creditors that takes place shortly after a case is filed.

“First Day” Motions

In most chapter 11 cases, the debtor files a series of “first day” motions with the bankruptcy court seeking relief that it may not otherwise be automatically entitled to receive under the Bankruptcy Code. Such relief may include a request to pay some unsecured creditors (such as employees or “critical vendors”) ahead of others. Because debtors require sufficient cash to operate their businesses and pay for the administrative expenses of the chapter 11 process, many seek interim court approval for financing (called “debor-in-possession” or “DIP” financing) and/or the use cash collateral that is subject to a secured creditor’s lien. In some cases, the debtor’s pre-petition lender becomes the DIP lender, and in other cases a new lender, or syndicate of lenders, steps in and tries to “prime,” or supersede, an existing lender’s lien to the extent of DIP financing extended to the debtor.

It is important for creditors and their advisors to carefully review “first day” motions in order to know how their rights may be affected, and take action as appropriate. For example, while the Bankruptcy Code allows for a DIP loan to prime the lien of an existing secured creditor, the secured creditor must receive “adequate protection” that its position will not be diminished as a result of the use of cash collateral or new financing. A creditor may need to file an objection to requested first-day relief to protect its rights.

Proof-of-Claim Bar Date

In order to participate in the distribution of the debtor’s assets to satisfy pre-petition claims, a creditor must have a valid claim. After filing for bankruptcy, a debtor is required to file a schedule of assets and liabilities, which is supposed to include all claims against the debtor. If a creditor agrees with the debtor as to the amount listed for its claim in the debtor’s schedules, and the claim is not listed as contingent, unliquidated or disputed, then the creditor does not need to file a proof of claim. However, if a creditor disagrees with how its claim is scheduled, then it must file a proof of claim in order to preserve its rights.

The bankruptcy court will enter a bar date setting a deadline by which claims must be filed, and the debtor will mail notice of the bar date, as well as other details of the claims filing process, to creditors. To the extent a creditor fails to file its claim by the bar date, it may be objected to and disallowed as untimely. Your attorney can help you through the process of understanding the deadlines associated with filing your claim, as well as supporting your claim with sufficient evidence to prove what you are owed.

Debtor’s Post-Petition Obligations

In chapter 11, a business keeps running with the goal of reorganizing, which means that expenses continue to accrue after it files for bankruptcy. A debtor is required to pay all post-petition expenses in the normal course of business. Unlike pre-petition debts, post-petition debts are not subject to the automatic stay—the debtor is required to pay such debts and creditors can and should take action with the bankruptcy court to ensure they get paid.

Post-petition debts are given priority as “administrative claims,” which are actual, necessary costs and expenses of preserving the estate. Accordingly, a creditor that is, for example, supplying goods (post-bankruptcy) to a debtor under a supply agreement is entitled to be paid for those goods as an administrative claim, and can petition the bankruptcy court to order payment to the extent it is being wrongfully withheld. Those who deliver goods to the debtor within 20 days of the petition date are also entitled to an administrative expense claim. While neither the Bankruptcy Code nor Bankruptcy Rules establish a specific date by which a party must file a motion for allowance of an administrative expense claim, such deadlines are typically set by local rule and/or in a scheduling order entered by the bankruptcy court.

Conversely, a creditor must also perform its post-petition obligations to a debtor. A creditor who refuses to perform its obligations under a valid contract due to a debtor’s failure to pay for goods or services pre-petition can be compelled to perform post-petition.

Executory Contracts

Debtors are authorized to assume or reject executory contracts in chapter 11. An executory contract, while not defined under the Bankruptcy Code, generally is one in which both parties have performance obligations remaining under the contract. Unlike in chapter 7 bankruptcy, there is no specific deadline for chapter 11 debtor to assume or reject an executory contract. If a debtor decides to reject a contract, the contract is treated as breached and a creditor has an unsecured claim for damages. If a contract is assumed, meaning the debtor wants to keep the contract in place, any defaults under the contract, including pre-petition defaults, must be cured. A debtor must obtain bankruptcy court approval to assume or reject an executory contract, either by motion or through the plan confirmation process.

Unexpired Leases

While non-residential real property leases are executory contracts, they are treated a bit differently than other contracts. A debtor must take action to assume or reject a lease within 120 days of the petition, with an option to seek one 90-day extension for cause. In addition, to the extent a lease is rejected, damages, which constitute an unsecured claim, are capped at the greater of (1) one year’s rent or (2) the rent for 15 percent, not to exceed three years, of the remaining term of the lease.

Plan Confirmation Issues

Most unsecured creditors won’t have their pre-petition claims paid until after a debtor’s plan of reorganization is submitted to and approved by the bankruptcy court. A debtor has a 120-day period during which it has an exclusive right to file a plan. The exclusivity period may be extended or reduced by the court, but in no case can the exclusivity period be longer than 18 months. After the exclusivity period has expired, a creditor may file a competing plan.

A plan must be proposed alongside a disclosure statement, which is meant to flesh out all of the important details that interested parties should know to make an informed decision regarding the plan. Unsecured creditors whose rights are “impaired” are entitled to vote on a plan, as well as object to it. Deadlines for (i) requesting the debtor include certain information in a disclosure statement, (ii) filing a combined plan of reorganization and disclosure statement, (iii) returning voting ballots on the plan, (iv) filing objections to the approval of the disclosure statement, and (v) objections to confirmation of the plan of reorganization are set by the bankruptcy court in accordance with the Bankruptcy Code, Bankruptcy Rules, and local rules.

Know Your Obligations, Rights, and Remedies

Chapter 11 bankruptcy is a complex process. Unfortunately, due to the economic downturn, more creditors are going to be mired in the complexity of monitoring cases moving forward. In most cases, especially those when significant sums of money are at stake, it’s important to consult with legal counsel in order to understand your obligations, rights, and remedies with respect to a chapter 11 debtor. Keep in mind that there are steps creditors can take to protect themselves in advance in the event of a customer’s bankruptcy.

If you have questions about the process, or require the assistance of legal counsel to help protect your rights, please contact an attorney at Fraser Trebilcock.

We have created a response team to the rapidly changing COVID-19 situation and the law and guidance that follows, so we will continue to post any new developments. You can view our COVID-19 Response Page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.

Jonathan T. Walton, Jr.’s legal practice focuses on cases arising from commercial transactions, the Uniform Commercial Code, the federal and state securities laws, banking laws and bankruptcy litigation. In the areas of banking, commercial, construction and real estate litigation, he represents lenders, contractors and owners on construction-related claims, and lenders and borrowers in commercial and residential foreclosure matters, large loan defaults and collections, lien priority disputes, and title insurance company liability. He can be reached at (313) 965-9038 or

Fraser Trebilcock Attorney Amanda S. Wolanin specializes her practice in business and tax law, bankruptcy, family law, estate planning, litigation, and real estate law. You can reach her at (517) 377-0897, or at