Michigan Supreme Court

Michigan Supreme Court Modifies Open and Obvious Legal Doctrine

Recently, the Michigan Supreme Court significantly modified a decades old legal doctrine that will have wide reaching impacts on property owners and lessees. In its decision in a pair of consolidated cases (Kandil-Elsayed v F & E Oil, Inc and Pinsky v Kroger Co of Mich), the state’s high court effectively abrogated a legal doctrine known as “open and obvious.” Generally speaking, under this doctrine as it had previously been applied in Michigan, a premises possessor (whether that is the landowner, land contract vendee, lessee, or other party with the right to possess the property) did not have a duty to warn invitees of potentially dangerous conditions on the premises if the condition was “open and obvious.”

In practice, the open and obvious doctrine made it a question of law (that is a determination to be made by the judge, rather than the jury) as to whether the condition that caused an injury was discoverable by a person of average intelligence upon casual inspection. The doctrine was often applied in slip-and-fall and other personal injury cases and acted as an initial barrier for plaintiff’s claims. Defendant premises possessors would bring a motion (typically for summary disposition) and ask the judge to rule on whether the condition was open and obvious. If it were, the case would end there, and the plaintiff’s recovery would be barred. In fact, many premises liability claims likely never made it to the court to begin with, because plaintiff’s attorneys recognized the difficulty in getting past the open and obvious doctrine.

Now, in light of the Kandil-Elsayed and Pinsky decisions, the nature of an open and obvious condition is evaluated as an element of comparative fault that may reduce a plaintiff’s recovery but will not act as complete bar to recover. Moreover, the issue of comparative fault is a question of fact (that is a determination to be made by the jury). In other words, juries can consider the premises possessor’s failure to warn in their comparative fault determinations and still award a plaintiff a portion of their damages even when the condition on the premises that caused the injury was open and obvious. Now, when some is injured as the result of a fall, the claim is much more likely to go to the jury.

What happens next is anybody’s guess, but likely effects of this decision include an increase in the number of personal injury lawsuits filed, an increase in the number of personal injury cases going to trial, and across the board increases in property insurance rates for commercial and residential property owners. If you have questions, or require assistance, please contact your Fraser Trebilcock attorney.

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

Ryan K. Kauffman is a Shareholder at Fraser Trebilcock with more than a decade of experience handling complex litigation matters. You can contact him at rkauffman@fraserlawfirm.com or 517.377.0881.

Michigan Supreme Court Clarifies the Difference Between “Requirements” and “Release-by-Release” Contracts Under the Uniform Commercial Code

In an important decision that impacts customers and suppliers in the manufacturing industry, the Michigan Supreme Court, in MSSC, Inc. v. AirBoss Flexible Prods. Co., clarified the contractual circumstances under which a supplier can become bound to a long-term “requirements contract” under the Uniform Commercial Code. As discussed below, unless a contract identifies a quantity, it will be treated as a release-by-release contract.

The Underlying Dispute

In this case, MSSC, Inc., a “Tier 1” automotive buyer, sought to enforce a purchase order for goods manufactured by “Tier 2” automotive supplier Airboss. Many years before the suit, the parties agreed to a specific set of terms and conditions that would govern the transactions between the parties and the individual purchase orders, or releases, pursuant to that agreement. The parties identified their purchase order as a “blanket” order that listed the parts to be supplied but did not include specific quantities of the parts to be supplied by Airboss. Instead, the quantity to be supplied by Airboss would be based upon the needs of MSSC for their customers’ orders. However, no one purchase order nor the any of the terms and conditions required MSSC to send any specific number of firm orders to Airboss. As time passed, the fixed price agreed to by the parties began to result in substantial losses to Airboss and Airboss eventually threatened to cease production under the agreement unless MSSC agreed to a price increase.

At the trial court, Airboss moved for summary disposition, arguing that the purchase order failed to satisfy MCL 440.2201(1), the statute of frauds of the Uniform Commercial Code, because it did not include a quantity term. In response, MSSC, Inc. moved for summary disposition, arguing that the blanket purchase order was a requirements contract that satisfied the statute of frauds.

The trial court ruled in favor of MSSC, Inc., reasoning that because the purchase order contained the word “blanket” on the first page, it therefore included a “quantity term” that satisfied the statute of frauds. Airboss appealed to the Michigan Court of Appeals, which affirmed the trial court’s ruling.

The Michigan Supreme Court’s Analysis

At the core of this case is the treatment of “requirements contracts,” under the UCC, which are those whose quantities are determined “by the output of the seller or the requirements of the buyer ….” MCL 440.2306(1). Prior to this case, those were the choices you either had a contract for the “requirements of the buyer” (oversimplified as one for “all of the wood the buyer needs”) or a contract for the “output of the seller” (oversimplified as “all of the wood I can cut”). As the Michigan Supreme Court went on to explain, however, some of these oversimplifications led to unspecific or unidentifiable quantity, which violates the statute of frauds (i.e., a legal principal that dictates the essential items that must be included in order to create a binding contract). The Court went on to conclude that where a contract fails to specify a quantity or a quantity-determining term, it would be found to have created a newly recognized type of contract called a “release by release contract.” Under such an agreement, “the purchase order and incorporated terms and conditions created a blanket—or umbrella—agreement, while the releases created individual purchasing contracts governed by the umbrella terms.” MSSC, Inc. v. Airboss Flexible Prod. Co., No. 163523, 2023 WL 4476721, at *10 (Mich. July 11, 2023). As such, the umbrella agreement included the pricing, shipping, and other terms and conditions of the agreement between the parties, but it was each individual order (or each “release”) that created a binding contract. There is no long-term commitment required by either party in a release-by-release contract.

The Supreme Court ruled that the lower courts erred by relying on parole evidence – that is information not contained within a written contract – to determine whether the parties intended the term “blanket” to identify a contractual quantity and to clarify what quantity was intended. Instead, the contract must contain language that identifies a quantity in order for it to be enforceable as a requirements contract. Accordingly, Airboss was within its rights to reject releases from MSSC because no quantity term was specified in the underlying contract.

Practical Implications

In light of the Supreme Court’s decision, buyers and sellers of goods should review their contracts with legal counsel to evaluate whether they meet the standards for a requirements contract. If you have questions, or require assistance, please contact Bob Burgee.

Robert D. Burgee is an attorney at Fraser Trebilcock with over a decade of experience counseling clients with a focus on corporate structures and compliance, licensing, contracts, regulatory compliance, mergers and acquisitions, and a host of other matters related to the operation of small and medium-sized businesses and non-profits. You can reach him at 517.377.0848 or at bburgee@fraserlawfirm.com.

Five Stories That Matter in Michigan This Week – August 11, 2023

CRA Issues Bulletin, Recalling Vape Cartridges Due to Possible Presence of Banned Chemical

On July 21, 2023, the Cannabis Regulatory Agency (“CRA”), issued a public health safety bulletin, recalling more than 13,000 vape cartridges “due to the possible presence of banned chemical residue exceeding the established action limits.”

Why it Matters: Sky Labs, LLC, is the licensed marijuana processor who manufactured the three batches of vape cartridges that were recalled. Businesses operating in the cannabis market are required to adhere to strict rules and regulations laid out by the CRA. Failure to do so can result in steep fines, recalled product, and potential loss of license(s).

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Business Education Series – Setting Meaningful Goals and Time Blocking for Success

On August 22, 2023, gain valuable knowledge and skills to set meaningful goals, establish priorities, and effectively manage their time through the practice of time blocking.

Why it Matters: Participants will learn practical strategies and techniques to enhance their goal-setting abilities, develop a clear sense of direction, and optimize their productivity. Learn more.

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Michigan Supreme Court Alters Premises Liability Framework

Michigan courts have long held that premises owners generally have no duty to protect invitees from “open and obvious” hazards. In a recent decision (Kandil-Elsayed v F&E Oil, Inc and Pinsky v Kroger Co of Michigan), the Michigan Supreme Court held that whether a hazard is open and obvious is not an integral part of duty but is instead “relevant to breach and the parties’ comparative fault.” The Court overruled the special-aspects exception, holding that “when a land possessor should anticipate the harm that results from an open and obvious condition, despite its obviousness, the possessor is not relieved of the duty of reasonable care.”

Why it Matters: This decision significantly changes the legal standards in premises liability cases, particularly slip-and-fall cases.

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Fraser Trebilcock Attorney Thaddeus Morgan Obtains Summary Judgment for Firm Client; Sixth Circuit Affirms Dismissal

The U.S. Court of Appeals for the Sixth Circuit affirmed a decision by the U.S. District Court for the Western District of Michigan, which granted summary judgment for the firm’s client, who was represented by Fraser Trebilcock attorney Thaddeus Morgan.

Why it Matters: The U.S. Court of Appeals for the Sixth Circuit did not find either of the district court’s decisions erroneous, affirming the denial of the Plaintiff’s motion to amend and granting summary judgment to the defendants.

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Michigan Supreme Court Rules that New No-Fault Law Does Not Apply Retroactively

On July 31, 2023, the Michigan Supreme Court affirmed, in part, a court of appeals decision ruling that medical cost controls in Michigan’s new no-fault auto insurance law do not apply retroactively to car crash victims whose accidents occurred prior to the change in the law.

Why it Matters: As a result of the ruling, drivers who were catastrophically injured in accidents prior to the no-fault must be paid at full rates and not be subject to new cost controls for medical services.

Related Practice Groups and Professionals

Cannabis Law | Sean Gallagher
Business & Tax | Ed Castellani
Insurance Law | Gary Rogers
Litigation | Thaddeus Morgan

The New York Times Feature

Fraser Trebilcock election law attorney Garett Koger was quoted by The New York Times recently on an article discussing the Michigan Supreme Court’s decision to deny requests by three candidates for governor to be restored to the August primary ballot. Fraser Trebilcock’s election law team of Thad Morgan and Garett Koger, aided by attorneys Paul McCord, Robert Burgee, Elizabeth Siefker, Matthew Meyerhuber, and summer associate Joshua Robertson worked on the matters.

You can view the full article HERE.

Fraser’s ballot and election law team has successfully counseled, planned, and litigated for campaigns including high-profile cases resulting in changes to Michigan’s Constitution and case law. Fraser’s team also has extensive experience in election administration, and access to professionals in public relations and communications.

Michigan Supreme Court Officially Incorporates Centers for Disease Control’s Order Halting Evictions

On September 4, 2020, we reported on the Centers for Disease Control and Prevention’s order halting evictions nationwide through December 31, 2020 for tenants who cannot pay rent based on COVID-19 related circumstances. An article interpreting that order and discussing how it might apply to common eviction, landlord, mortgage and land contract situations appears here. It remains accurate and timely, but does not address yesterday’s Michigan Supreme Court Order 2020-17.

Yesterday, October 22, 2020, the Michigan Supreme Court adopted the CDC order and effectively made it the law of the State of Michigan. It did so over the objection of Chief Justice Pro Tem David Viviano, who expressed a preference for ruling on the validity of the CDC order in a case brought by litigants, as opposed to adopting it administratively as the Supreme Court did. Justice Viviano also argued in dissent that the CDC order “has been challenged on a host of grounds and, I believe, rests on a shaky legal foundation.” Order 2020-17 can be found here.

A court form for landlord/plaintiffs and tenant/defendants to file (attesting that the case is not subject to the CDC order or attesting that it is) can be found here.

Please refer back to this article in the coming days for comprehensive updates and analysis. If you are a landlord confronting these issues, please contact your Fraser Trebilcock attorney.

Jared Roberts is a shareholder at Fraser Trebilcock who works in real estate litigation and transactions, among other areas of the law. Jared also “walks the walk” as a landlord and owner of residential rental properties and apartments in Downtown Lansing. He may be reached at jroberts@fraserlawfirm.com and (517) 482-0887.

Michigan Supreme Court finds Statutory Basis of Executive Orders Unconstitutional: Next Steps Uncertain

UPDATE (10/13): On Monday, October 12, 2020, the Michigan Supreme Court issued an Order in Michigan House of Representative and Senate v Governor, reversing the lower Court of Appeal decision in that case which upheld the Governor’s source of emergency authority. The Supreme Court took this action on Monday in light of. and consistent with, its recent decision on the same questions on October 2nd involving certified questions for the US District Court. The Supreme Court’s October 12 Order has been given immediate effect, putting to rest any question regarding the timing of its ruling and or binding effect. You can read that Order here.

Late on Friday, October 2, 2020, the Michigan Supreme Court ruled that the Governor’s use of the Emergency Powers of the Governor Act and the Emergency Management Act as two sources of authority to issue a host of executive orders regulating capacity limits in public-facing businesses, public mask use, school re-openings, the size of public and private gatherings, among others was unconstitutional. In the wake of the Court’s ruling, uncertainty abounds regarding the legal effect and enforceability of the Governor’s numerous executive orders issued to date. Although the Attorney General announced Sunday that she will not enforce the Governor’s COVID-19 executive orders, this does not mean all COVID-19 related rules and regulations are invalid or not without practical merit. Further, both state and local health agencies have quickly moved to fill the regulatory void left as a result of the Court’s ruling.

This controversy started towards the end of April, when the state legislature moved forward with a bill aimed at preventing the Governor from renewing her original state of emergency declaration. The Governor, relying on the 1945 emergency powers law, issued an executive order to keep a stay-at-home order in place through June 1 without consent of the Legislature. This law has been the legal basis for continued rolling orders that have kept some public-facing businesses such as bowling alleys and movie theaters shuttered until Oct. 9. There have been a number of lower state court cases challenging the Governor’s action, all of which have sided in her favor.

One particular lawsuit was brought in federal district court by three medical groups in West Michigan. The three medical groups sued the Governor, challenging her spring executive order that prohibited doctors and medical facilities from performing “elective” procedures in an effort to preserve personal protection equipment when it was in short supply during the early days of the pandemic.

The Michigan Supreme Court is the ultimate authority on interpreting state law, and the federal district court judge noted that state law questions regarding the limit of the Governor’s authority were crucial to the case before it. The law permits federal courts to ask for guidance – called a certified question — on state law questions from a state’s highest court. State supreme courts are not required to accept certified questions from a federal court but they usually do.

Here the Federal court certified two questions to the Michigan Supreme Court:

Whether, under the Emergency Powers of the Governor Act, MCL § 10.31, et seq. [(the “1945 law”)], or the Emergency Management Act, MCL § 30.401, et seq. [(the “1976 law”)], [the] Governor has the authority after April 30, 2020 to issue or renew any executive orders related to the COVID-19 pandemic; and
Whether the [1945 law] and/or the [1976 law] violates the Separation of Powers and/or the Non-Delegation Clauses of the Michigan Constitution.

In answering these questions, the Michigan Supreme Court stated:

“[w]e conclude that the Governor lacked the authority to declare a ‘state of emergency’ or a ‘state of disaster’ under the EMA after April 30, 2020, on the basis of the COVID-19 pandemic. Furthermore, we conclude that the EPGA is in violation of the Constitution of our state because it purports to delegate to the executive branch the legislative powers of state government— including its plenary police powers— and to allow the exercise of such powers indefinitely.”

Friday’s ruling throws into doubt the Governor’s many executive orders addressing a variety of issues in response to the COVID-19 pandemic in Michigan. For example, orders that expand unemployment eligibility during a pandemic, that allow local governments to hold their meetings virtually to avoid in-person meetings that could allow the virus to spread, that place moratoriums on foreclosures and evictions, and those that permit remote witnessing and notarization of legal documents, are all somewhat in question.

Additional uncertainly surrounds the effective date of the Court’s order and if it is even entitled to binding effect, as it was issued in response to a certified question from the Federal District Court and therefore merely “advisory” in nature. For the most part, these questions have answered (1) the order was effective on October 2^nd, and (2) there is a clear likelihood that the Court’s decision will be followed in any subsequent state or federal court decisions.

State regulators are nevertheless holding fast. The Michigan Occupational Safety and Health Administration (MIOSHA) has issued thousands of dollars in citations to Michigan businesses for failing to implement COVID-19 precautions under the agency’s “general duty clause,” which requires employers to provide workspaces free of hazards causing death or “serious harm.” Since the Supreme Court decision Friday, many have questioned the validity of the citations, arguing that violations of the general duty clause were based on non-compliance with the Governor’s executive orders on mask usage, social distancing, or employee training. State regulators have said that they will not rescind any fines and penalties for workplace COVID-19 non-compliance, even in light of a Michigan Supreme Court decision upending the Governor’s executive orders back to April 30.

Further, the Director of the Michigan Department of Health and Human Services, citing authority under the Michigan Public Health Code, quickly issued an emergency order reinstating requirements that masks should be worn at most indoor and outdoor gatherings and events, limiting attendance at indoor and outdoor gatherings, limiting organized sports and other limitations on certain food service establishments, including bars. The order specifies that violations are a misdemeanor punishable by imprisonment for not more than 6 months, or a fine of not more than $200, or both.

Local health departments are issuing similar orders. The Oakland County Health Department on Saturday ordered residents of Michigan’s second-most populous county to wear masks or facial coverings when leaving their homes. More orders will follow to outline capacity limits for bars and restaurants and instill public health screenings, the department said. Ingham County followed suit Sunday by issuing emergency orders similar to Oakland’s, with rules requiring face masks, limiting restaurant capacity to 50%, mandating employee health screenings and putting restrictions on indoor and outdoor gatherings. Other local action is anticipated in Kent, Ottawa, St. Clair, and Wayne.

It will take a while for the Legislature and Governor to sort out these issues legislatively as there are only 3 session days left before the November 3 election and only 14 session days after the election. In the meantime, the Administration will pursue reissuing some of these orders through administrative rules and regulatory action.

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.

Fraser Trebilcock attorney Paul V. McCord has more than 20 years of tax litigation experience, including serving as a clerk on the U.S. Tax Court and as a judge of the Michigan Tax Tribunal. Paul has represented clients before the IRS, Michigan Department of Treasury, other state revenue departments and local units of government. He can be contacted at 517.377.0861 or pmccord@fraserlawfirm.com.

Tax Sales Proceeds In Excess Of The Tax Owed Must Be Returned To The Taxpayer

On July 17 2020, the Michigan Supreme Court ruled in Rafaeli, LLC v Oakland County (the “County”) that the proceeds for a tax sale in excess of the tax owed must be returned to the taxpayer. The ruling stems from a lawsuit filed in Oakland County Circuit Court (the “Circuit Court”), that challenged one part of Michigan’s tax foreclosure law contained in the Michigan General Property Tax Act (the “GPTA”). That provision, which dates back to 1999, allows county treasurers – who collect delinquent taxes on behalf of communities – to pocket all of the proceeds of auctioned properties, regardless of the amount of the delinquent tax debt. But the Supreme Court unanimously ruled that this aspect of the GPTA was an unconstitutional taking under the Michigan Constitution.

The case originated back in 2011 when Uri Rafaeli’s business — Rafaeli, LLC (“Rafaeli”) purchased a modest rental property in Southfield. Rafaeli inadvertently underpaid its property taxes by $8.41, that over time due to interest and penalties grew to $285.81 in unpaid property taxes. In a companion case, Andre Ohanessian (“Ohanessian”) owed approximately $6,000 in unpaid property taxes, interest, and penalties from 2011. The County, foreclosed on both properties and sold the properties at public auction, Rafaeli’s for $24,500 and Ohanessian’s for $82,000. The properties were sold in accordance with the requirements of the GPTA. The County retained the surplus proceeds and distributed them to various governmental entities.

Rafaeli and Ohanessian sued the County alleging the actions of the County violated the due-process and equal protection clauses of the US and Michigan Constitution, as well as an unconstitutional taking. The Circuit Court ruled in favor of the County reasoning that the property was properly forfeited and did not constitute a “taking” in violation of the US or Michigan Constitution. The Michigan Court of Appeals affirmed, relying on precedent from the US Supreme Court in regard to civil-asset taking resulting from criminal activity. The Michigan Supreme Court (the “Court”), reversed holding “defendants’ [Oakland County] retention of those surplus proceeds is an unconstitutional taking without just compensation..”

The Court noted that upon sale, the foreclosing governmental unit deposited all of the sales proceeds from all foreclosure sales into a unified tax sales proceeds account. The proceeds are used to cover the costs for all foreclosure proceedings for the year of tax delinquency with the excess distributed to appropriate governmental units. Michigan is one of nine states that requires the foreclosing governmental unit to disburse the excess proceeds to someone other than the former owner. The Court distinguished the civil-asset forfeiture of criminal statutes in that the purpose of such statutes was, in part, to punish the owner of the property. Conversely, the purpose of the GPTA is to encourage the timely payment of taxes, not to punish the former property owner.

The Court took an exhaustive review of common law and prior cases revealing that a Taking Clause violation will occur when the surplus is retained by the taxing authority and not returned to the former property owner. Further “(T)he GPTA does not recognize a former property owner’s statutory right to collect the surplus proceeds.” The Court conclude that the common law of the State of Michigan recognized that right. The purpose of the GPTA is not to seize property and retain proceeds in excess of the taxes owed,

Accordingly, when property is taken to satisfy an unpaid tax debt, just compensation requires the foreclosing governmental unit to return any proceeds from the tax-foreclosure sale in excess of delinquent taxes, interest, penalties and fees reasonably related to the foreclosure and sale of the property – no more, no less.

The case is now headed back to the Circuit Court to determine a remedy. However, an appropriate remedy may involve changing the GPTA. Complicating matters further is the possibility that former foreclosed property owners may come back looking for any surplus proceeds that were collected and distributed to the various government units. Some counties make a considerable sum in auction profits that they use to boost their delinquent tax revolving funds, which some counties then use to fill their budget holes.

Norbert T. Madison, Jr. is a highly regarded corporate and real estate attorney with more than three decades of experience. Primarily focused on real estate matters, Norb represents clients in all facets of the practice, including the purchase, sale, leasing, and financing of various types of real estate, as well as the development of industrial, office, retail, condominium and residential real estate. Contact Norb at 313.965.9026 or nmadison@fraserlawfirm.com.

Michigan Supreme Court Extends Civil and Probate Filing Deadlines Due to COVID-19

On Monday, March 23, 2020, the Michigan Supreme Court issued Administrative Order 2020-3, which extended “all deadlines pertaining to case initiation and the filing of initial responsive pleadings in civil and probate matters during the state of emergency declared by the Governor related to COVID-19.”

For all deadlines that are applicable to the commencement of a civil or probate case, “including but not limited to the deadline for the initial filing of a pleading under MCR 2.110 or a motion raising a defense or an objection to an initial pleading under MCR 2.116, and any statutory prerequisites to the filing of such a pleading or motion, any day that falls during the state of emergency declared by the Governor related to COVID-19 is not included for purposes of MCR 1.108(1).” Since this Order focuses on extending deadlines for “initial” filings, scheduling orders for the vast majority of cases will not be altered.

In sum, this Administrative Order extends all deadlines pertaining to case initiation and the filing of initial responsive pleadings in civil and probate matters during the state of emergency declared by Governor Gretchen Whitmer on March 10, 2020 related to COVID-19. Again, this Order will likely only have an impact on newer cases where initial pleadings still need to be filed. Cases with a scheduling order in place will likely proceed according to the deadlines already imposed.

This Order does not preclude a court from ordering an expedited response to a complaint or motion in order to hear and resolve an emergency matter that requires immediate attention. This Order also does not prohibit or restrict litigants from initiating a proceeding whenever the litigant so chooses.

In addition, this Order requires that courts have a system in place to allow filings without face-to-face contact to ensure that routine matters can continue via electronic or other means without any unnecessary delay.

As always, the attorneys at Fraser Trebilcock remain ready and able to serve. Please contact your legal counsel if you have questions regarding the status of your case or if you would like further information describing how deadlines may be effected by this Order.

Michigan Supreme Court Clarifies Eligibility for Charitable Property Tax Exemption

This week the Michigan Supreme Court in Baruch SLS Inc v Township of Tittabawassee (MSC Docket No 152047) clarified how the factors are to be considered in determining whether real property is exempt from taxation. Continue reading Michigan Supreme Court Clarifies Eligibility for Charitable Property Tax Exemption

If It Doesn’t Say So, it Aint So: Michigan Supreme Court Holds For-Profit Schools Entitled to Property Tax Exemption

A unanimous Michigan Supreme Court decision this week will have big implications for for-profit schools and colleges – and even for-profit laboratories, research and development facilities, and test centers. Continue reading If It Doesn’t Say So, it Aint So: Michigan Supreme Court Holds For-Profit Schools Entitled to Property Tax Exemption