Five Stories that Matter in Michigan This Week – May 27, 2022; Legal, Legislative, and Regulatory Insights
The Republican-led Michigan Senate and House recently passed $2.5 billion in tax cuts, with a party-line vote in the Senate and a more bipartisan vote in the House. The legislation was passed shortly after Governor Whitmer suggested sending $500 rebates to “working families” in Michigan. The proposed tax cuts would include an expansion of Michigan’s Earned Income Tax Credit from 6% to 20% in the 2022 tax year; increasing personal tax exemptions by $1,800; and reducing the personal income tax rate from 4.25% to 4% starting in 2023, among other things.
Why it Matters: The jockeying between the governor and legislature revolves around the broader debate over what to do with the billions of dollars the state has available in the form of unexpected surplus, due in large part to federal pandemic relief funding. How the money is spent, or returned to Michigan residents in the form of tax cuts or rebate checks, is sure to be a key issue in the November elections.
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The Michigan legislature recently voted to put the issue of term limits for lawmakers on this year’s November ballot. The plan would permit lawmakers to serve 12 years in Lansing, and all of that time could be spent in the House or Senate, or it could be divided between the two chambers. Voters will also be asked to approve or reject a requirement that state-level office holders submit annual financial disclosures to address conflicts of interest. If approved by voters, elected officials would have to disclose their assets, income and liabilities, and their involvement in any businesses, nonprofits, labor organizations or educational institutions.
Why it Matters: In 1992, Michigan voters voted in favor of a constitutional amendment for term limits. Since then, Michigan House members have been limited to three two-year terms and Michigan Senate members to two four-year terms—a maximum of 14 years between the two chambers. Accordingly, if the new term limit proposal is passed by Michigan voters, it would represent the first substantive change to term limits in 30 years.
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The Michigan Supreme Court heard oral arguments in a case with significant implications for criminal cases against nine former government officials stemming from the Flint water cases, as well as for criminal procedure, more generally, in Michigan. The criminal defendants, including former Governor Rick Snyder, argue that their constitutional rights were violated when a single grand juror indicted them.
Why it Matters: Beyond the question of whether a one-person grand jury is constitutional, this case also raises interesting separation of power issues, given that the grand juror was a sitting judge.
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In a cash-out merger, the shareholders of the target company cash out and aren’t involved in the ongoing operations of the acquiring company. But what happens when not all the shareholders are happy about the deal? As you might suspect, litigation often ensues, and that’s exactly what happened in a case, Murphy v. Inman, recently decided by the Michigan Supreme Court. It’s an important case because the Court clarified the rights of shareholders bringing claims against directors after a cash-out merger.
Why it Matters: This decision gives shareholders, boards of directors—and their respective advisors—much needed clarity on how actions taken during corporate transactions will be viewed by the courts. First, the Court adopted a two-question test, based on reasoning from Delaware courts, to determine whether a claim should be derivative or direct. Second, it made clear that boards of directors do owe fiduciary duties directly to shareholders during a cash-out merger.
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Three significant developments related to the production and consumption of energy happened recently. First, Governor Whitmer announced a roadmap for making Michigan carbon neutral by 2050. Second, the Attorney General’s office reached a settlement with Consumers Energy that would result in Consumers ending its use of coal by 2025. Third, Governor Whitmer petitioned the U.S. Department of Energy to keep the Palisades Nuclear Plant in southwest Michigan open, arguing that its closure would cost the state 600 well-paying jobs.
Why it Matters: Energy continues to be a major political and economic issue around the world (the war in Ukraine), in the United States (high gas prices), as well as here in Michigan. Energy inflation, together with ongoing efforts to transition from fossil fuels to renewable energy, pose ongoing challenges and opportunities for politicians, policymakers and business leaders alike.
Related Practice Groups and Professionals
Mergers & Acquisitions | Edward Castellani
Criminal | Election Law | Klint Kesto