Five Stories That Matter in Michigan This Week – March 1, 2024

  1. Growing Marijuana in Michigan – No Matter the Amount – is a Misdemeanor

Late last week, the Michigan State Police shut down an illegal marijuana growing facility in Highland Park, seizing 4,000 marijuana plants and processed weed worth $6.3 million. It may surprise readers to know that, pursuant to a Michigan Court of Appeals ruling in October, 2023, the unlicensed growers may only face misdemeanor charges. In another case involving an illegal growing operation, the court ruled that violations that previously were subject to felony punishments should now be prosecuted under the Michigan Regulation and Taxation of Marijuana Act (the “Act”).

Why it Matters: Under the Act, it’s legal to store up to 10 ounces of marijuana, possess 2.5 ounces and grow up to 12 plants. Violations for exceeding those amounts range from civil infractions to misdemeanors. It will be interesting to see if these provisions will be revisited given that black market sales have been blamed for increased competition and falling prices for legal sales.


  1. Navigating the Cost and Process of Hiring a Trademark Attorney

In the fast-paced world of business, protecting your brand is paramount. Whether you’re a startup or a large corporation, safeguarding your trademarks is essential for maintaining your identity and reputation in the market. However, navigating the legal intricacies of trademark registration and enforcement can be complex and overwhelming. This is where a skilled trademark attorney can be your greatest ally.

Why it Matters: Without adequate protection, your trademarks are vulnerable to infringement, dilution, and misappropriation, which can result in lost revenue, brand erosion, and legal disputes. By securing federal trademark registration and enforcing your rights, you establish a legal foundation that empowers you to safeguard your brand and its value. Read more from attorney Andrew G. Martin.


  1. Fraser Trebilcock Attorney Michael E. Cavanaugh Named in Michigan Lawyers Weekly Class of 2024 Hall of Fame

Fraser Trebilcock attorney Michael E. Cavanaugh has been selected as a member of Michigan Lawyers Weekly “Hall of Fame Class of 2024.” This special award recognizes esteemed members of the legal profession who have been in practice for at least 30 years.

Why it Matters: Michigan Lawyers Weekly’s annual “Hall of Fame” award recognizes only twenty-one lawyers each year. These lawyers truly are legends, making their mark in the courtroom or the boardroom, in their firms and with community organizations, and with local, state and national bar associations. With their guidance and mentorship, they have launched hundreds of thriving legal careers and have left an indelible imprint on the profession through precedent-setting cases, high dollar outcomes and successful resolutions for their clients.


  1. A Health Professional’s Guide to Navigating the Disciplinary Process: What to Expect if You Are Facing a Professional Licensing Investigation or Administrative Complaint

Health professionals are committed to caring for patients with expertise, compassion, and integrity. However, in the heavily regulated healthcare field, those professionals can sometimes find themselves navigating not just the medical challenges of their patients but licensing issues of their own as well. Licensing issues can arise unexpectedly, and, when they do, they can cause tremendous stress and uncertainty.

Why it Matters: As an attorney with years of experience handling professional licensing matters for health professionals, Robert J. Andretz has witnessed firsthand how professional licensing investigations and Administrative Complaints can disrupt health professionals’ careers and their ability to provide patient care. He will explore how to navigate the disciplinary process in Michigan so that you can know what to expect if you are ever faced with a threat to your license. Learn more.


  1. Increase in the Small Business Property Tax Exemption

Eligibility for the so-called “Small Business Property Tax Exemption” has expanded. Legislation passed last October 2023, expands the exemption by increasing the eligibility limit to from the $80,000 true cash value limit to $180,000.

Why it Matters: The exemption is only for commercial and industrial personal property (residential/individuals are not subject to personal property taxes). Once filed, and if granted, the exemption will remain as long as the small business still qualifies. In other words, there is no need to file an exemption claim every year. Read more.

Related Practice Groups and Professionals

Cannabis Law | Sean Gallagher
Intellectual Property | Andrew Martin
Labor, Employment & Civil Rights | Michael E. Cavanaugh
Professional Licensing | Robert Andretz
Business & Tax | Paul McCord

Increase in the Small Business Property Tax Exemption

Eligibility for the so-called “Small Business Property Tax Exemption” has expanded. Generally, all personal property used by businesses in Michigan is subject to property taxation. Beginning with calendar year 2014, however, an exemption was created for the personal property owned by businesses if the “True Cash Value” or, in other words, market value of their personal property either owned, leased, or possessed by a related party is less than $80,000 within any city or township. This exemption has become known as the “Small Business” exemption.

The exemption is only for commercial and industrial personal property (residential/individuals are not subject to personal property taxes). Legislation passed last October 2023, expands the exemption by increasing the eligibility limit to from the $80,000 true cash value limit to $180,000.

In order to claim the exemption, eligible small businesses must file a Form 507 no later than February 20, 2024, with their local assessor. Late filed claims are not accepted. Once filed, and if granted, the exemption will remain as long as the small business still qualifies. In other words, there is no need to file an exemption claim every year.

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

Headshot of Fraser Trebilcock attorney Paul V. McCordFraser 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

Five Stories That Matter in Michigan This Week – June 30, 2023

  1. Michigan’s New Distracted Driving Law Takes Effect June 30

In an effort to mitigate the risks associated with distracted driving, Michigan recently enacted legislation meant to deter and punish instances of distracted driving. Michigan is the 26th state in the United States to pass a hands-free driving law, signifying the growing national consensus around the importance of focused driving.

Why it Matters: The new law, which takes effect June 30, 2023, makes holding and using a mobile electronic device while operating a motor vehicle illegal. Learn more about the new law from your Fraser Trebilcock attorney.


  1. Gain Peace of Mind Through Life’s Toughest Challenges

Family law involves deeply personal and often emotional issues – that can be as complicated as they are sensitive. A strong family law attorney understands the judicial processes and procedures, while also handling your case with care and compassion.

Why it Matters: Fraser Trebilcock attorney Paula C. Spicer has over a decade of experience assisting clients in family law matters. Paula compassionately and efficiently works with clients to help them understand their options and navigate the often challenging and emotional situations. Learn more how she may be able to assist.


  1. 6th Circuit Decision Clarifies Rights of Schools to Discipline Students for Off-Campus Speech and Conduct

In a case that involved a student creating a fake Instagram account impersonating a teacher, and the student being suspended by his school, the U.S. Court of Appeals for the Sixth Circuit clarified that schools can regulate student speech—even off-campus speech—that causes or can reasonably be forecast to cause substantial disruption to the educational environment.

Why it Matters: As this case (Kutchinski v Freeland Community School District) demonstrates, off-campus speech can easily make its way onto school grounds given the widespread use of social networks and other digital means of communication by students. While every case of discipline for off-campus speech must be evaluated pursuant to its own unique facts and circumstances, the Sixth Circuit affirmed a school’s rights to take disciplinary action under appropriate circumstances.


  1. Governor Whitmer Announces New Support Hubs for Small Businesses

On June 27, Governor Whitmer, along with the Michigan Economic Development Corporation, announced a new program aimed at supporting small businesses in the state by providing additional resources to them.

Why it Matters: The program is designed to allocate new and improved resources to small businesses through funding, direct support, and programming. Learn more about the new program.


  1. City of Detroit Approves Second Round of Recreational Cannabis Applications

On June 27, the Detroit City Council approved a second of three rounds of recreational cannabis applications to open up for submission.

Why it Matters: The second round will see a maximum of 50 applications for cannabis operations, broken down into the following categories: 15 adult-use retailer licenses, 15 adult-use equity retailer licenses, five microbusiness licenses, five microbusiness equity licenses, five designated consumption establishment licenses, and five designated consumption establishment equity licenses.

Related Practice Groups and Professionals

Insurance Law | Gary Rogers
Family Law | Paula Spicer
Business & Tax | Ed Castellani
Cannabis Law | Sean Gallagher

Five Stories that Matter in Michigan This Week – November 18, 2022

  1. Proposed Modifications to Michigan Court Rules Seek to Make Pandemic-Inspired Changes Permanent, Making it Harder to Evict Tenants

During the COVID-19 pandemic, Michigan’s court rules related to landlord-tenant eviction procedures were modified in some ways to utilize video conferencing and to make certain proceedings more efficient, and modified in other ways that made it more difficult for landlords to evict residential and commercial tenants.

Why it Matters: Pursuant to recently proposed amendments to Michigan Court Rule 4.201, Michigan’s State Court Administrative Office has taken steps to make many pandemic-era changes to minimize evictions permanent. Some of the proposed rules are allowing a judge to adjourn trial for at least seven days if a default judgment is not entered, and staying an eviction case if a tenant has applied for rent assistance. Learn more from our Fraser Trebilcock real estate attorneys on the matter.


  1. Michigan Small Business Growth Remains Strong

According to a recent report from the small Business Association of Michigan, Michigan’s entrepreneurial economy continues to grow. Among other things, SBAM’s Entrepreneurship Score Card shows that Michigan small businesses have outperformed U.S. averages in terms of the percentages of businesses being opened and revenue.

Why it Matters: Small businesses have always been the backbone of economic growth in Michigan and across the country. This report highlights the resilience of Michigan entrepreneurial economy.


  1. Business Planning for the Future

A lot of small-to-medium size businesses devote time and focus on their near-term future but may not think of what 5-10 years will bring. The value of a business can often be in the ability to transition it to a new owner, but some business owners are unsure how to set themselves up to be successful in this arena.

Why it Matters: Capitalizing on the ability to plan for the long-term will aid your business in any transitions that may occur. Learn more here.


  1. CRA Issues Michigan Consumer Advisory

Earlier this week, CRA issued a bulletin giving notice to consumers that a marijuana business that operates as both a state-licensed medical and adult-use recreational, Green Culture, sold unregulated products that may have contained several contaminants, such as mold and/or bacteria.

Why it Matters: Following the investigation, the CRA suspended both of Green Culture’s licenses. Marijuana businesses should heed this as a warning, the CRA are cracking down on businesses that do not follow the strict guidelines and rules laid out by the state agency.


  1. IRS Announces 2023 Cost-of-Living Adjustment for Retirement and Health and Welfare Benefit Plans

The Internal Revenue Service recently announced 2023 cost-of-living adjustments for retirement and health and welfare benefit plans. The significant adjustments reflect the increase in inflation over the last year. The adjustments are detailed in IRS Notice 2022-55. For example, the contribution limit for a Simple 401(k) will increase to $15,500 in 2023 from $14,000 in 2022, and for a Health FSA, limits will increase to $3,050 in 2023 from $2,850 in 2022.

Why it Matters: Business owners and employers should be aware of these adjustments and share this information with employees as we approach the new year. If you have any questions regarding these adjustments, please contact our Employee Benefits team.

Related Practice Groups and Professionals

Real Estate | Jared Roberts
Business & Tax | Mark Kellogg
Cannabis Law | Sean Gallagher
Employee Benefits | Robert Burgee

Importance of Signing an Operating Agreement for Your LLC

So, you and your little sister, Rachel, finally started that mitten-shaped decorative soap business you’ve always talked about – Nice! And your friend’s brother’s buddy helped you file for an LLC through the State of Michigan’s website and sent you the link to obtain an EIN from the IRS because the banks said you needed it to open a checking account. That’s it then, you’re all set and ready for the farmer’s market next weekend, right? Nope. You forgot to agree on the rules for running your business, the rules for how you and your sister will make the “big” decisions for your new company. We call these Operating Agreements and they are an important part of any small business – even if it’s just one person. There is nothing worse than having to stop the fun to argue about the rules in the middle of the game because no one can agree – no Rachel, landing on free parking does NOT mean you get all the money paid for the properties.

Let’s look at a few scenarios of how the life of your business can go awry without a one.

Scenario 1: You and Rachel start the business together and agree to split the business 80/20 since you put in all of the startup funding, make all of the soaps, and spend every weekend selling them at farmers markets from Port Huron to Petoskey, and all she did was set up the website – seems like a fair split. After a few months, things are going well and you decide to hire Rachel’s boyfriend, Ray, to expand your sales capacity and sell the soaps at more shows. Unfortunately, you quickly realize that Ray isn’t up to the task and he’s losing more soap than he’s selling – no biggy, you can just fire Ray (even though Rachel says Ray isn’t going anywhere); after all you own 80% of the business. Not so fast; because you and Rachel never signed an operating agreement that says that decisions would be made on the basis of ownership shares, you have to make decisions according to the Michigan Limited Liability Company Act (the Act) which says that each owner (the Act calls them Members) of the company gets one vote. So what now…the status quo wins and Ray stays.

Scenario 2: Rachel started a new company a few months ago and asks you to join. She did the usual start-up procedures like file the Articles of Organization to start the LLC and opened a checking account, but it was just her, so she didn’t think she needed an operating agreement. You both agree that the business is worth about $20,000 dollars, so you pay her that $10,000 you were saving to buy a new car. A few years go by and you and Rachel are happily employed by the company, pulling great benefits and a decent salary, and because you and Rachel work so well together, you even get a few thousand dollars in distributions every year. Unfortunately, Rachel decides to run off with Raul and sells out to her pal Rusty. After a week or two, Rusty tells you he appreciates you, but your services are no longer needed and terminates your employment. “Wait, what!?! We’re 50/50!” you say. Not quite, sorry. There was no operating agreement, remember? And you bought your share from Rachel. Rusty has talked to a lawyer and figured out that you are merely an assignee of 50% of Rachel’s interest in the company, you were never admitted as a member. So long great benefits and decent salary; oh and by the way, Rusty has no idea what he’s doing so those distributions are gone, too.

These two scenarios illustrate the pitfalls of small businesses failing to adopt an operating agreement for their LLCs. It may seem like an unnecessary step when you’re starting out, but waiting until the time is right or until you get big enough, can often lead to forgetting about it completely. If you are starting a business, or have started a business and you’re unsure about whether it is properly structured, you should make sure that you consult with an attorney who can help you write the rule book for your business and ensure that everyone is playing the same game.

This is a brief summary and does not constitute legal advice. If you have any questions, please contact Robert D. Burgee or your Fraser Trebilcock attorney.

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

Five Stories that Matter in Michigan This Week – August 26, 2022

  1. Michigan Sees Unemployment Decrease as Jobs Increase

According to recent data released by the Michigan Department of Technology, Management, and Budget, the unemployment rate in the state dropped from 6.2% to 4.2% over a twelve-month period. Michigan also saw a bump in jobs last month, with 3,000 in July.

Why it Matters: Officials point to the increase in job growth and lower unemployment rates as a reflection of the hard work that the government, people, and businesses have put into the economy to shift to a more positive outlook.


  1. Michigan to Deploy $72M in Federally Funded Small Business Loans and Investments

$72 million of funding Michigan received from the federal Small Business Credit Initiative 2.0 is being deployed for loans to small businesses through Michigan Economic Development Corporation capital and lending programs. The MEDC will also invest  up to $75 million in early-stage, technology-based businesses in Michigan through the Small Business Venture Capital Program.

Why it Matters: Michigan’s venture capital and startup ecosystem continues to grow. The amount of venture capital invested in Michigan reached an all-time high in 2021. According to the Michigan Venture Capital Association’s 2022 Impact Report, a record $1.38 billion into 155 companies last year through 161 deals.


  1. MDOT Seeks to Install Automated Cameras in Work Zones

Michigan HB 5750 would allow the Michigan Department of Transportation (MDOT) to install automated cameras in work zones to capture speeders. While the bill sits on the House floor, the road construction industry is getting behind the bill.

Why it Matters: If this bill passes, drivers will need to be aware of the resulting penalties for exceeding the posted speed by 10 mph or greater, which would range from a written warning to a $300 fine.


  1. Gas Prices Continue to Decrease Since Record June 2022 Highs

The American Automobile Association (AAA) reports that the average Michigander is paying just under $4 for a gallon of gas, down from the record high average of $5.22 in June.

Why it Matters:  While gas prices continue to decrease, Michiganders are still paying more per gallon when compared to 2021. Citizens and officials alike will look to continue seeing the downward trend. Spending less at the pump can increase spending in other areas of the economy.


  1. U of M Study Finds that Wind and Solar Industries Could Fully Replace Jobs Lost at U.S. Coal-Fired Power Plants

A recent University of Michigan study found that the wind and solar industries could fully replace the number of lost jobs at U.S. coal-fired power plants that are expected to close to meet emission-reduction targets.

Why it Matters: The recently enacted Inflation Reduction Act includes substantial funding for wind and solar energy tax incentives. The bill is intended to spur growth and investment in clean energy projects across the country. Michigan has recently seen growth in jobs in the energy sector. In fact, the state ranked first in the nation for energy job growth in a recent U.S. Department of Energy report. Michigan added more than 35,000 energy-sector jobs from 2020 to 2021.

Related Practice Groups and Professionals

Business & Tax| Ed Castellani

Labor & Employment | Aaron Davis

Energy, Utilities & Telecommunication | Michael Ashton

Insurance Defense | Emily Vanderlaan

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.


  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.


  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.


  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.


  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

The CARES Act Will Lead to More Small Business Bankruptcies—Here’s How to Protect Your Business from Getting Burned

JCPenney, Neiman Marcus, and other household names have recently filed headline-grabbing Chapter 11 bankruptcy cases. From energy to hospitality to retail, the COVID-19 crisis has had a devastating economic impact on a wide range of companies across industries. And, of course, small businesses are no exception. According to a survey conducted by the National Federation of Independent Businesses, “92% of small employers are negatively impacted by the outbreak of the novel coronavirus.”

While Chapter 11 bankruptcy has historically not been an option for most struggling small businesses due to the expense and complexity of the process, that may be changing as a result of recent legislation. What does that mean for all of the solvent businesses out there? They may be forced to deal with more of their business debtors inside of bankruptcy court, rather than through traditional debt collection means. In this article, we address recent changes ushered in by the Coronavirus Aid Relief and Economic Security Act (CARES Act), and provide businesses with advice on what to be prepared for and how they can protect themselves in this time of economic uncertainty, including:

  • Signs of customer distress
  • Protect yourself and help ensure payment going forward
  • What to do upon receipt of a notice of bankruptcy filing

Implications of the Small Business Reorganization Act

A case filed under Chapter 11 of the U.S. Bankruptcy Code is often referred to as a “reorganization bankruptcy.” On August 23, 2019, the Small Business Reorganization Act (SBRA), which added Subchapter V to Chapter 11 of the Bankruptcy Code, was signed into law and became effective on February 19, 2020.

SBRA streamlined the Chapter 11 bankruptcy procedure—allowing it to proceed more quickly and less expensively—for small business debtors with debts totaling up to $2,725,625. The CARES Act, which went into effect on March 27, 2020, temporarily (for one year) raised the debt threshold for SBRA filing eligibility to $7,500,000.

The SBRA makes the process for reorganizing under Chapter 11 more streamlined by shortening deadlines for various case filings, appointing a standing trustee in every case to facilitate the debtor’s dealings with creditors and keep the proceeding on track, not appointing a creditors’ committee in most cases, and not requiring debtors to pay quarterly U.S Trustee’s fees. In addition:

  • The debtor is the only party permitted to file a plan of reorganization.
  • The debtor is not required to file a disclosure statement unless ordered to.
  • A plan of reorganization can be approved even if all impaired classes of creditors object.
  • Individual debtors who have used home mortgages to finance their businesses have a right to modify those mortgage loans through a plan of reorganization.
  • Debtors may retain ownership of their business, even if the plan of reorganization does not fully repay unsecured creditors. In other words, the “absolute priority” rule does not apply under Subchapter V.

By raising the debt limit, and making other debtor-friendly changes through the SBRA, Congress made the streamlined Chapter 11 bankruptcy process available to significantly more small business debtors. Debtors have a new tool available to them to restructure their debts, which means their creditors, many of whom are facing their own financial challenges, need to be even more vigilant.

Spotting Signs of Customer Distress

As a supplier of goods or services, there are certain telltale signs you should be on the lookout for to determine whether your customers are experiencing financial distress. Missed payments, requests to modify contract terms, lack of communication, and an increase in collection activity (such as the filing of lawsuits) against a business are all indicators that a business may be struggling to pay its bills.

To help guard against risks, develop and implement internal procedures that will alert you when payments are being made outside of normal trade terms—or not being made at all. While many businesses are making accommodations to their customers right now, going deeper in the hole with a customer often doesn’t make sense if it’s putting your own cash flow at risk. Before taking any steps to accommodate a customer, consult with legal counsel to make sure that you are, first and foremost, protecting yourself.

Protect Yourself and Help Ensure Payment Going Forward

Once you’ve identified signs of potential distress, take steps to minimize the risks moving forward. It’s important to move quickly, and in consultation with legal counsel, because once a customer files for bankruptcy protection, there is little you can do to improve your likelihood of being paid relative to other creditors.

Require Cash in Advance

One of the simplest and most straightforward ways to ensure payment from a customer is to require cash in advance before supplying goods or services. In some cases, this may require the renegotiation of an existing contract. To the extent your customer is not currently paying in accordance with the terms of an existing contract, you may have the right to suspend your own performance, which can give way to discussions regarding new payment terms. An added benefit of requiring cash in advance of performance is that it can mitigate risks associated with preference lawsuits should your customer ultimately file for bankruptcy.

Requests for Adequate Assurance

If you suspect that a customer may be, or may become, unable to perform under a contract for the sale of goods, but is not yet in breach, you may want to consider demanding adequate assurance. Under Section 2-609 of the Uniform Commercial Code, a party to a contract has the right to demand adequate assurance of performance from a distressed contract counterparty. If the counterparty fails to provide adequate assurance, you may be able to repudiate the contract.

Request Other Forms of Financial Assurance

Explore with your legal counsel whether it’s advisable to seek various forms of financial assurance from a customer, such as obtaining a security deposit, letter of credit, or collateral to secure a debt. Depending on the product or service you supply to a customer, you may also be able to exercise a statutory lien, such as a construction lien, or a special tooling lien, in certain circumstances.

What to Do Upon Receipt of a Notice of Bankruptcy Filing

Regardless of how diligent you may be, today’s severe economic downturn makes it likely that you will be forced to deal with certain debtors in bankruptcy court. The new Small Business Reorganization Act only increases that likelihood.

Once you become aware of a customer’s bankruptcy, call your lawyer for advice. The “automatic stay” imposed once a debtor files for bankruptcy means that normal collection activity against a debtor must stop, and you can put yourself at risk of penalty by engaging in such activity. That doesn’t mean, however, that you must sit idly by during a customer’s bankruptcy. There are additional protections that may be available once the bankruptcy has commenced.

The creditors’ rights attorneys at Fraser Trebilcock are up to date on the latest developments in the bankruptcy laws, and we are seasoned Bankruptcy Court litigators. Experience has shown us that favorable results for creditors are possible within the constraints of the bankruptcy laws. For instance, a small business debtor’s reorganization in bankruptcy may allow repayment to creditors in situations where the debtor would otherwise have just shuttered its business and paid nothing. For assistance in dealing with a financially distressed customer, inside or outside of bankruptcy, please contact a Fraser Trebilcock attorney.

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

Client Alert: State Supreme Court Decision Creates Limited Tax Refund Opportunities

IRS Eagle

Taxpayers who filed as, or were included as a member of, a unitary business group could qualify for a refund following a decision by the Michigan Court of Appeals that the Michigan Supreme Court chose to let stand on January 24, 2017.

“We are not persuaded that the question presented should be reviewed,” said the court.

Left in place is the Michigan Court of Appeals decision in LaBelle Management, Inc. v Department of Treasury that provides a potential refund opportunity for taxpayers that filed as, or were included  as a member of, a unitary business group based on the Department’s interpretation of the constructive ownership rules contained in Revenue Administrative Bulletin (“RAB”) 2010-1.

In LaBelle, the Court of Appeals reversed a Michigan Court of Claims decision upholding the Department’s conclusion that two related entities should be treated as members of a unitary business group because Labelle “indirectly” owned the other entities. The forced combination was based, in part, on the Department’s interpretation of constructive ownership rules. Citing Revenue Administrative Bulletin 2010-1, the Court of Claims looked to “contextually analogous” provisions in the Internal Revenue Code to find that indirect ownership includes situations involving “constructive ownership”.

The Court of Appeals, in a “take-the-language-of-the-statute-seriously” opinion, took issue with the trial court’s interpretation of “indirect ownership” as used in the definition of a unitary business group under the Michigan Business Tax (MBT).  LaBelle challenged the Department’s reliance upon IRC Sec. 318 to define indirect ownership to include constructive ownership or ownership through attribution. The Court of Appeals found in favor of LaBelle, holding that indirect ownership as used in the MBT definition of a unitary business group means “ownership through an intermediary” while “constructive ownership” means “ownership as a result of a legal fiction.” “Indirect ownership and constructive ownership are two different concepts,” according to the Court of Appeals.

In reversing the lower court, the Court of Appeals opined that if the Department’s interpretation, were to be accepted, it would expand the definition of the term “unitary business group” beyond what the Legislature intended.  The end result being that none of the entities involved owned more than 50 percent of any other entity, through an intermediary or otherwise, thus, neither Labelle nor any of its related entities constituted a unitary business group.

Now, as a published decision, LaBelle is binding upon the Department. Taxpayers who filed unitary Michigan Business Tax returns or who are filing combined Corporate Income Tax returns based on the interpretation of the term “indirect” in RAB 2010-1 or RAB 2013-1, should consider reviewing whether the Court of Appeals’ holding in LaBelle might reduce their liability. Taxpayers should consider amending their unitary business group returns where appropriate to do so.  Under the Treasury’s all or none theory, taxpayers may qualify for the small business credit if they do not have to file unitary.

A word of caution, taxpayers should be aware of the impact of the statute of limitations.  Normally, a taxpayer has 4 years from the date that the return was due to claim for refund.  As the last MBT year for most taxpayers was 2011, most tax years are now closed (closing in 2016).  As with most things with tax there are a number of exceptions to the running of the statute of limitations.

However, following the Court of Appeals in Labelle, the Department took the unusual measure of filing a motion to stay the effect of the court’s published opinion until the Department had exhausted all of its appellate rights. The Court of Appeals granted the Department’s motion placing the binding effect of the decision in a sort-of limbo, until the Supreme Court’s recent denial of review.  Not to suggest anything sinister, but while the binding effect of the Labelle decision was stayed, the statute of limitations to amend returns and possibly make refund claims continued to run.  As a result, only a small handful of taxpayer may still have viable refund claims based on Labelle.

The control test under Michigan’s corporate Income Tax requires “direct or indirect” ownership.  In RAB 2013-1, the Department opined that “[i]indirect ownership includes ownership through attribution” and “an ownership interest is indirectly owned by a person when that person constructively owns such an interest.” As a result of the Labelle decision, the Department’s interpretation of indirect ownership for CIT purposes is questionable.

If you have any question about the Labelle decision, please contact Paul McCord.

Fraser Trebilcock attorney Paul McCord, PaulV. 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