Five Stories That Matter in Michigan This Week – April 26, 2024

  1. FTC Issues Final Rule Banning Non-Compete Agreements Nationwide

On April 23, 2024, in a 3-2 vote, the Federal Trade Commission (FTC) issued a final rule banning non-compete clauses in most employment agreements nationwide. The rule is scheduled to go into effect 120 days after it is published in the Federal Register.

Why it Matters: Under the final rule, “Non-compete clause” is defined as “a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from: (i) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (ii) operating a business in the United States after the conclusion of the employment that includes the term or condition.” Read more from your Fraser Trebilcock attorneys.

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  1. State and Local Governments Subject to ADA Website Rules

On April 23, 2024, in a 3-2 vote, the Federal Trade Commission (FTC) issued a final rule banning non-compete clauses in most employment agreements nationwide. The rule is scheduled to go into effect 120 days after it is published in the Federal Register.

Why it Matters: While staffing at many schools has grown due to pandemic relief funding, student enrollment has dwindled. This report comes on the heels of another report – this one from the Michigan Center for Data and Analytics – projecting the state population could decline by nearly 700,000 residents by 2050.

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  1. Michigan 04/20 Sales Hits All-Time High

Per data from Michigan Cannabis Regulatory Agency, sales of cannabis topped $28.5 million on April 20, 2024, an increase from the reported $21.6 million in sales from the year prior.

Why it Matters: Marijuana sales remain strong in Michigan, particularly for recreational use. However, there still are significant concerns about profitability and market oversaturation that the industry is contending with. Contact our cannabis law attorneys if you have any questions.

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  1. The 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.

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  1. Fraser Trebilcock Attorney Secures Victory for Firm Client

Fraser Trebilcock attorney Andrew J. Moore was successful in obtaining summary disposition on behalf of the firm’s client. Plaintiff and their spouse applied for credit life insurance from the firm’s client, a prominent independent insurance company, in conjunction with an RV they purchased.

Why it Matters: The spouse misrepresented their medical history and was in fact diagnosed with and treating for a disqualifying medical condition. The spouse died of heart attack two months after purchase. The firm’s client rescinded the credit certificate, then was sued. Plaintiff claimed RV salesman misrepresented application, eligibility, insurability, and coverage limits, while simultaneously claiming RV salesman was an “agent” of the firm’s client such that they should be held liable for their misrepresentation. After discovery and at summary disposition, the Judge ruled in favor of the firm’s client and dismissed all counts. Learn more.

Related Practice Groups and Professionals

Business & Tax | Robert Burgee
Labor, Employment & Civil Rights | David Houston
Business & Tax | Andrew Martin
Cannabis Law | Sean Gallagher
Insurance Law | Andrew Moore

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.”

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  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.

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  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.

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  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.

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  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

Five Stories that Matter in Michigan This Week – June 10, 2022

Five Stories that Matter in Michigan This Week – June 10, 2022; Legal, Legislative, and Regulatory Insights


  1. Wayne County Announces $54 Million Fund for Small Businesses

A new $54 million fund to support small businesses, called the Wayne County Small Business Hub, was announced at last week’s Detroit Regional Chamber’s Mackinac Policy Conference (“Mackinac Conference”). It will provide support to new and existing businesses, with a specific focus on minority- or women-owned businesses, and micro businesses with 10 or fewer employees with a focus on technical assistance.

Why it Matters: Small businesses are often the first to be hit when the economy slows, and with credit markets tightening there are likely to be fewer sources of liquidity for small business owners to tap. This new fund, a collaboration between the Wayne County Executive’s Office and New Economy Initiative, will provide needed resources for historically disadvantaged businesses.

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  1. Ford and Pfizer to Make Significant Investments in Michigan

Also at the Mackinac Conference, Ford Motor Company and Pfizer announced significant investments in Michigan. Ford reportedly will spend $2 billion across the company’s Michigan plants, and intends to create more than 3,000 jobs. Pfizer will make a $120 million investment at its Kalamazoo facility.

Why it Matters: With a great deal of economic doom and gloom in the headlines, these announcements are bright spots showing that large companies are still making investments in their businesses—and in Michigan, in particular.

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  1. Concerns Expressed About Losing Another EV Investment in Michigan

But it’s not all good news on the economic front in Michigan. At the Mackinac Conference, John Rakolta Jr., chairman of Walbridge, pointed out that Michigan is missing out on major opportunities in the electric vehicle industry. For example, Stellantis announced last week that it was bypassing Michigan and locating its new electric vehicle battery manufacturing plant in Kokomo, Indiana.

Why it Matters: According to a study by Fortune Business Insights, the global electric vehicle market is expected to grow from approximately $287 billion in 2021, to $1.3 trillion by 2028. To take advantage of this opportunity, Michigan must make itself attractive to companies in the electric vehicle market. As Rakolta points out, this involves more than designing tax incentives. It requires a more comprehensive approach to utilities, zoning and other important business, financial,  legal and regulatory issues.

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  1. Unemployment Claimants Get to Keep Pandemic Overpayments

Michigan sought to claw back Pandemic Unemployment Assistance benefits paid to many Michigan residents who were accused of misreporting their income. Michigan argued that claimants were liable because they entered their gross pay from prior years to determine their weekly benefit amount when they should have entered their net pay. Michigan reversed course and announced that it would no longer seek to claw back the funds after media reports revealed that at least some claimants were asked during the application process to provide total pay—not net pay—which resulted in confusion and overpayments.

Why it Matters: This announcement surely came as a relief to many Michigan residents who were embroiled in disputes with the Michigan Unemployment Insurance Agency. More broadly, this situation demonstrates the importance of using precise, accurate language in contracts and other important documents. The alternative is to invite confusion, dispute and litigation.

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  1. Michigan Cannabis Company Files for Chapter 11 Bankruptcy

A Kalamazoo cannabis company, Master Equity Group,  recently filed for  Chapter 11 bankruptcy in the U.S. Bankruptcy Court in the Western District of Michigan.

Why it Matters: This case will be closely watched by the cannabis industry, as well as by corporate restructuring professionals. Bankruptcy courts have historically prevented cannabis companies from filing for protection under the United States Bankruptcy Code because, while marijuana is legal in Michigan, it remains illegal under the federal Controlled Substances Act. And because bankruptcy courts are federal courts, similar attempts by cannabis companies to file for bankruptcy protection have been disallowed.


Related Practice Groups and Professionals

Administrative & Regulatory | Michael Ashton
Business & Tax  | Mark Kellogg
Labor, Employment & Civil Rights | Aaron Davis
Cannabis | Klint Kesto

Filing a Proof of Claim in Bankruptcy: What You Need to Know

When a company files for bankruptcy and it owes you money, it means you have a “claim” in the debtor’s bankruptcy proceedings. A claim, in short, is a right to payment. A creditor with a claim must often take affirmative action by filing a “proof of claim” form in order to preserve and protect its rights to payment.

Filing a proof of claim can be a relatively simple process involving the submission of a short form. But it’s often not that easy, and the negative consequences of doing it wrong can be severe.

Experienced legal counsel can help you to avoid the common pitfalls inherent in filing a claim. While the information below provides a general overview of many of the most salient issues, there are many nuances and considerations that should be taken into account with all of these issues, and an attorney can help you to identify and weigh them.

Do You Have to File a Claim?

If you’re owed money by a bankrupt debtor, you likely have to file a claim. The technical definition of a “claim” under Section 101(5) of the Bankruptcy Code is: “(A) a right to payment, whether or not reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (B) a right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured.”

The only instance when you would not have to file a claim for money you are owed is if your claim is accurately reflected on the debtor’s schedules (which must be filed shortly after a case is filed) and is not listed as disputed, contingent or unliquidated. A creditor must take care to ensure that the claim amount listed on the debtor’s schedules is accurate and the claim is scheduled against the right debtor (in cases involving more than one debtor entity). Even when a claim is scheduled, and assuming there are no reasons not to (see below), a creditor may choose to file a claim to guard against a debtor modifying or removing its scheduled claim.

By When Must You File a Claim?

The bankruptcy court will establish a deadline, or “bar date,” by which claims must be filed. That said, a claim can be filed well in advance of the bar date. Often, it’s best to strike the right balance when it comes to timing—not so early that all information related to your claim isn’t captured, but not so late that you’re bumping up against the deadline. It’s important to follow all procedures set forth in the Federal Rules of Bankruptcy Procedure, local rules, and orders issued in the case when it comes to the timing of the submission of your claim form. Don’t put yourself in a position of having to petition the court to late-file a claim due to an avoidable mistake or misunderstanding regarding the applicable rules.

What Supporting Documentation is Required to Assert a Claim?

Federal Rule of Bankruptcy Procedure 3001 provides that proofs of claim must conform to the applicable proof of claim form. Rule 3001 states that when a claim is based on a writing, “a copy of the writing shall be filed with the proof of claim.” In the event the writing has been lost or destroyed, “a statement of the circumstances of the loss or destruction shall be filed with the claim.”

In practical terms, this means that a proof of claim form should include supporting documentation such as relevant contracts, invoices, and correspondence sufficient to support the claim. While the supporting documentation need not be exhaustive, it should be inclusive of all pertinent information necessary to demonstrate the basis of the claim.

In some cases, a creditor will need to file a “contingent” or “unliquidated” claim—meaning a claim is open-ended or the claim amount has yet to be determined—and explain the basis for doing so. The filing of contingent and unliquidated claims is permitted, but it’s a good idea to discuss the risks (and potential benefits) with legal counsel before doing so.

What Happens if the Debtor Objects to My Claim?

The debtor has the opportunity to object to claims filed in the case. The bases for claim objections vary, from disputes as to the amount asserted to arguments that the claim was filed against the wrong entity. A creditor must be served with an objection and has an opportunity to respond.

Often, claim objections are resolved without the parties having to resort to extensive litigation in the bankruptcy court. The lawyers for a creditor and the debtor will typically attempt to reach a resolution of the objection through negotiation and additional information sharing.

Depending on the dollar amount at stake, and the differing viewpoints of the parties as to the merits, some claim objections will not be capable of resolving and it will be necessary to litigate to a resolution. In such instances, additional discovery and a trial before the bankruptcy court may be necessary.

Are There Risks to Filing a Claim?

One of the primary risks that must be considered before filing a claim is that the act of filing a claim constitutes a creditor’s consent to the jurisdiction of the bankruptcy court. The consent is not only to jurisdiction to adjudicate the claim, but also extends to related matters including claims that the debtor may have against the creditor. Accordingly, before filing a claim, a creditor should consult with legal counsel to determine whether there is any risk that, by filing a claim, the creditor will put itself at risk of being sued in the bankruptcy court.

Protect and Preserve Your Rights With a Proof of Claim

Increasing numbers of businesses being affected by the economic fallout from COVID-19 are filing for bankruptcy protection, which means that an increasing number of businesses will be forced to pursue claims for prepetition debts through bankruptcy court. The consequences of not properly preparing and filing a proof of claim can be severe, so it’s important to consult with legal counsel to ensure that your rights are protected. For questions or assistance, please contact Fraser Trebilcock attorney Jonathan T. Walton, Jr.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.


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 jwalton@fraserlawfirm.com.

Recent Amendments Place Creditors in a Stronger Position to Defend Against Chapter 11 Bankruptcy Preference Lawsuits

As the bankruptcy wave continues to build, more businesses are being forced to deal with bankrupt customers. What’s worse—and which often comes as a big surprise—is when a business gets sued by the debtor or bankruptcy trustee seeking to recover payments made by the debtor before the bankruptcy. Such lawsuits, which attempt to recover “preferential payments,” cost businesses time, require the expenditure of legal fees, and often result in the business paying a settlement amount to make the matter go away.

With more companies filing for bankruptcy, the likelihood that businesses will face preference lawsuits is growing. Fortunately, the Bankruptcy Code provides creditors with certain defenses they can use to ward off a preference lawsuit, and Congress recently took action that strengthens those defenses. The “Small Business Reorganization Act of 2019” (SBRA), which went into effect in February, 2020, contains amendments to Chapter 11 bankruptcy preference law that are not limited to small business reorganizations.

What is a Preference Lawsuit?

Section 547 of the Bankruptcy Code allows a debtor or bankruptcy trustee, subject to certain defenses, to recover payments made to creditors within 90 days of the filing of the petition. The look-back period for payments is increased to one year for “insiders.” The policy behind preference actions is that they prevent aggressive collection action against a debtor that might force a debtor into bankruptcy, and they also help ensure equal treatment of creditor claims.

For example, if one creditor receives payment on a debt in the days leading up to a bankruptcy filing due to aggressive collection action, but another similarly situated creditor doesn’t receive payment because it did not engage in collection action, then the latter would only be left with a claim in the bankruptcy. The preference provisions allow the pre-petition payments made to the aggressive creditor to be clawed back, allowing each creditor’s claim to receive equal treatment in the bankruptcy. That’s how the system is supposed to work.

In reality, all kinds of creditors, including those who have valid defenses to preference claims, typically get sued regardless of their defenses. Prior to the recent amendments, the Bankruptcy Code did not explicitly require debtors to conduct any due diligence as to defenses prior to filing a preference lawsuit. Historically, debtors simply sued all creditors who received payments within the 90-day period before the bankruptcy, and creditors were left to deal with such lawsuits, often filed in far-flung jurisdictions, on a one-off basis. The recent amendments to the Bankruptcy Code’s preference provisions address these issues.

Amendments to Preference Provisions

The SBRA created a new “subchapter V” to Chapter 11 of the Bankruptcy Code, which provides small business debtors an easier path through bankruptcy. Less discussed is the fact that the SBRA contained two amendments to preference laws that strengthen defenses against preference lawsuits in all Chapter 11 cases.

Prior to the amendments, debtors had to meet a low bar to file a preference lawsuit. It was relatively easy for debtors to meet their burden of proof, and once they did the burden shifted to creditors to establish defenses. The SBRA places an additional hurdle in front of debtors. Now, a debtor or trustee must consider a creditor’s statutory defenses before filing a lawsuit “based on reasonable due diligence in the circumstances of the case and taking into account a party’s known or reasonably knowable affirmative defenses….” Previously, the Bankruptcy Code stated that a debtor or trust “may” do so.

Accordingly, there is now an affirmative obligation that a debtor or trustee investigate whether a creditor has a “subsequent new value”, “ordinary course of business” or other defense before moving forward with a preference action. Failure to do so may result in the dismissal of a case and/or an assertion of bad faith filing. Of course, one of the questions that will be sorted out over time in the courts is what constitutes “reasonable due diligence.”

Another welcome change for creditors included in the SBRA relates to the venue in which preference cases may be brought. Prior to the recent changes, the Bankruptcy Code provided that preference claims under $13,650 were to be brought in the district where the defendant resides, rather than where the bankruptcy case was pending. The SBRA raises this threshold amount to $25,000. This change will have a big impact, because it lessens the likelihood of preference claims of less than $25,000 being filed at all, given the costs associated with bringing an action in a distant jurisdiction.

In sum, the SBRA is good news for preference defendants. In fact, many creditors who would have otherwise been sued prior to the amendments will never become a “defendant” in the first place, given the additional obstacles debtors and trustees must overcome.

This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.


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 jwalton@fraserlawfirm.com.

IRA Trusts Can Be Useful to Counteract Recent SCOTUS Ruling on Inherited IRAs

 The Supreme Court ruled on June 12, 2014, that inherited individual retirement accounts (IRAs) are not protected from creditors during bankruptcy proceedings as they are not “retirement funds” within the meaning of 11 U.S.C. §522(b)(3)(c).[1] The petitioners in the case originally filed for bankruptcy under Chapter 7 of the Bankruptcy Code (the “Code”) and attempted to exclude about $300,000 of an inherited IRA from the bankruptcy estate.  They claimed that they fit within the “retirement funds” exemption of the Code. The Bankruptcy Court disallowed the exemption but the District Court reversed, stating that the retirement funds exemption covers any account in which funds were saved for retirement. The Seventh Circuit reversed the District Court and the Supreme Court affirmed.

Continue reading IRA Trusts Can Be Useful to Counteract Recent SCOTUS Ruling on Inherited IRAs

Preserving a Company’s Reputation in the Wake of Bankruptcy

In bankruptcy, there is more at stake than who gets paid first.

Should a company file for bankruptcy or even begin the discussion, it is important to address the public’s opinion as much as it is to deal with the legal issues.

After all, reputation matters.

Continue reading Preserving a Company’s Reputation in the Wake of Bankruptcy