Legally Blawged: Connecting Michigan's (Online) Legal Community

Earlier this year, I met two other Michigan attorneys who write legal blogs (blawgs). We began to meet for dinner and to share our experiences with blawgs as a way to develop and expand our practices. We call ourselves "Legally Blawged" and recently incorporated as a Michigan non-profit corporation (Legally- Blawged.com, Inc.) With the assistance of Justia.com, one of the best legal blog development companies out there, we recently launched our website -- LegallyBlawged.com.

The three attorneys who "blawg" and form the core of this group are:

• Gary Nitzkin -- Michigan Collection Law
• Mike Hamblin -- Michigan Business Lawyer
• Peter Cavanaugh -- Michigan Construction Law Update

We are expanding the membership of Legally Blawged and are looking for other lawyers, paralegals and anyone else with an interest in law firm marketing to join our group. We plan to meet once a month for dinner to discuss marketing ideas that have worked and those that have not. We also plan to invite guest speakers to discuss marketing and technology ideas to help each of us improve our marketing efforts. We also intend to use these monthly meetings as a way to network. Please join us.

Statute of Limitations Bill Passed by House Judiciary Committee

On November 12, 2008, Senate Bill 865, which would revise the statute of limitations for bringing an action against an architect, professional engineer, land surveyor or construction contractor, was unanimously approved by the House Judiciary Committee. Gary Quesada testified before the Committee on behalf of AIA of Michigan, and was joined by ACEC/Michigan Executive Director Ron Brenke, and Ken Lawless, Vice President of Clark Construction and AGC of Michigan Board member, who also testified before the committee in support of the measure.

S.B. 865 was passed out of the Senate in February. This bill was discussed in an earlier post.

For more information about this issue, contact Gary Quesada at Cavanaugh & Quesada, PLC, 306 South Washington, Suite 216, Royal Oak, MI 48067, Tel: (248) 543-8320.

Cavanaugh & Quesada, PLC -- Announcing New Firm

Peter Cavanaugh and Gary Quesada are pleased to announce the formation of Cavanaugh & Quesada, PLC. The new firm is located in Downtown Royal Oak (MI), and will focus on serving the unique legal needs of the design and construction communities.

• Mr. Cavanaugh's practice is concentrated on business and construction law matters, including litigation, arbitration, and mediation of contract, construction lien and payment bond claims, and disputes involving owners, contractors, subcontractors, and suppliers. Mr. Cavanaugh also represents clients who specialize in water and wastewater construction projects, especially those projects involving the Detroit Water and Sewerage Department (DWSD).

• Mr. Quesada's practice is concentrated on representing architects, engineers, owners and contractors in business and construction law matters, including litigation and arbitration of commercial, municipal and residential construction claims, copyright and risk management consultation. Mr. Quesada also represents clients in the fields of photographic, sculptural, literary and film arts.

For more information, you may contact Peter Cavanaugh or Gary Quesada at Cavanaugh & Quesada, PLC, 1027 S. Washington Ave., Suite A, Royal Oak, MI 48067, Tel: (248) 543-8320, Fax: (248) 543-8330 or visit our website -- www.MichiganConstructionLaw.com

New Bill Would Create "Commercial Real Estate Broker's Lien Act"

On May 14, 2008, Sen. Randy Richardville (R. Monroe) introduced S.B. 1313, which would create the "Commercial Real Estate Broker's Lien Act". The bill was reported out of committee on October 2, 2008.

The bill would do all of the following:

• Specify circumstances under which a commercial real estate broker's lien would attach to commercial real estate.
  

• Require a claim of lien to be recorded before conveyance unless the broker's commission was due in installments and at least one was due after conveyance.

• Provide for the recording and attachment of a lien in the case of a lease agreement, a broker's acting as a buyer's agent, or a commission owed on a purchase option.

• Specify information that would have to be included in a claim of lien.

• Provide that a prior-recorded lien or mortgage would have priority over a commercial real estate broker's lien.

• Require the establishment of an escrow account if a lien recorded under the proposed Act would prevent a closing transaction.

• Authorize a person claiming a commercial real estate broker's lien to bring an action to enforce it in circuit court.

• Allow an owner of commercial real estate to serve on a lien holder a demand to enforce the lien or answer a claim; and provide that the lien would be extinguished if the lien holder did not respond within 30 days.

• Specify that a lien under the Act would be available only to a licensed real estate broker.

A commercial real estate broker's lien would attach to commercial real estate in favor of a real estate broker if all of the following circumstances existed:

• The real estate broker had a written commission agreement.

• The broker was entitled to a commission under that agreement.

• The broker recorded a claim of lien before the actual conveyance of the commercial real estate.

To track the progress of S.B. 1313, click here. 

Update: S.B. 1313 died, but a similar bill was introduced on May 27, 2009, S.B. 610, that would also create a lien statute for commercial real estate brokers.  

On October 5, 2010, S.B. 610 was signed into law by Governor Granholm as PA 201 of 2010. The new law is effective immediately.

Detroit City Council Approves Upper Rouge CSO Tunnel, DWSD Contract PC-764

The Detroit Free Press reports -- "The Detroit City Council approved today on a 6-0 vote a $314 million portion of a $1 billion tunnel system to store sewage and storm runoff during heavy rain with the city up against a Sept. 28 deadline to act or face the loss of low-interest loans [as outlined in a September 24 letter from the MDEQ] that could have cost ratepayers an extra $100 million in interest on construction bonds and put the city in violation of its water pollution permit."

Click here for the rest of the story. Read Here for more information about the Upper Rouge CSO Tunnel project. Click here for a copy of the City's NPDES pollution permit.

SBA Suspends Applications for Small Disadvantage Business (SDB) Program

The Small Business Administration (SBA) announced yesterday that it is suspending the receipt of applications for the Government-wide small disadvantaged business (SDB) program effective September 22, 2008. The announcement was made through the Federal Register. The SBA will continue to process all applications received before that date to completion, unless an applicant withdraws its application.

AGC Legal Brief Highlights False Claims Act

The September 2008 issue of the AGC Legal Brief highlights the use of the False Claims Act (FCA) against contractors and subcontractors. The article, written by Attorney Patrick Facca, presents an overview of the FCA and outlines some of the risks associated with the statute. Mr. Facca notes that use of the FCA has been increasing on federal projects and federally funded project. Mr. Facca also includes information about proposed legislation (HB-4773), which would create a Michigan False Claims Act.

AGC Legal Brief is published by the AGC of Michigan's Legal Advisory Committee. Click here for the full text of Mr. Facca's article.

Panel to Consider Arbitration Post-Hall Street Associates

On October 6, 2008, the ABA's Section on Public Contracts is sponsoring a Panel Discussion concerning the Supreme Court's ruling in Hall Street Associates v Mattel, ___ U.S. ___ (2008) and its impact on arbitration in federal procurement cases. We first reported on the Hall Street decision here.

The panel includes:

• Donald P. Armadas, a former Judge at the ASBCA who now serves as an arbitrator and mediator;
• Judge Paul Williams, Chairman, Armed Services Board of Contract Appeals: and,
• Frederick J. Lees, Professor Emeritus, George Washington University School of Law.
  

The panel will discuss the limitations on judicial review of arbitration awards, and the ways in which arbitration can be made more time and cost efficient.

To participate in this event, or to obtain materials from the Public Contract Section website afterwards, click here.

New Article Outlines Laws and Programs Designed to Assist Service-Disabled Veteran-Owned Small Business in the Federal Marketplace

Korsak, "The Service-Disabled Veteran-Owned Small Business in the Federal Marketplace," The Army Lawyer, July 2008, pp. 45-58.

Written by Lieutenant Commander Theron R. Korsak, this article is meant to introduce agency heads, contracting officers, Judge Advocates, and veterans to the laws and programs designed to assist service-disabled veteran-owned small businesses (SDVOSB) in federal contracting.

The first section of the article summarizes the laws intended to assist service-disabled veteran-owned small businesses. Section two focuses on socio-economic programs and eligibility requirements. Section three is a review of common procedural issues affecting service-disabled veteran-owned businesses. Section four explores policy conflicts that may impact contract awards to a service-disabled veteran-owned small business. Section five summarizes the role that federal agencies, quasi-government organizations, and industries play to meet the 3% goal. The article concludes with recommendations to increase contract awards to service-disabled veteran-owned small businesses.

Click here for a full text copy of this article.
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Note: Thanks to Jerry Walz at PubKLaw.com for the heads-up on this article. Jerry's PubKLaw-Digest is an excellent resource for those involved with federal procurement. This article is among many that Jerry includes in his "Papers of Interest" collection. Highly recommended!

Michigan Seller Disclosure Act (SDA): Innocent Misrepresentation Not a Claim under SDA Rules Michigan Court of Appeals

Holding that innocent misrepresentation is not a viable theory of liability under the Seller Disclosure Act (SDA) (MCL 565.951, et seq), the Michigan Court of Appeals recently reversed a judgment awarding Plaintiffs $86,813 in damages and costs and remanded the case for entry of a judgment in favor of the Defendant-Sellers. Roberts v Saffell, ___ Mich App ___ (2008) (Lawyers Weekly No. 07-67463 - 12 pages) (published opinion) (Markey, J., joined by Wilder, J.) (White, J., dissenting). On appeal from the Leelanau County Circuit Court; Rodgers, J.. Click here for the slip opinion.

In this case, Plaintiffs asserted that Defendants failed to disclose a termite infestation in the home they purchased from Defendants. Prior to trial, Plaintiffs successfully moved for dismissal of all claims, except one for innocent misrepresentation. This claim was based on Defendants' "No" answer on their Seller Disclosure Statement in response to the item "History of infestation, if any: (termites, carpenter ants, etc.)"

The Court of Appeals found nothing in the plain terms of the act requiring a transferor of property covered by the SDA "to exercise ordinary care to discover defects in the property being transferred." The act requires a transferor "to answer all items required by MCL 565.957 honestly, based on information actually known to the transferor at the time the SDS is completed." Apart from the SDS, the Legislature had not modified the rule of caveat emptor and its common law exceptions imposing liability for fraud.

A transferor cannot "be held liable for any errors, inaccuracies, or omissions in the SDS unless they were within his personal knowledge." Since liability for innocent misrepresentation can be imposed "without regard to whether the party making the representation knew it was false or was acting in good faith and because MCL 565.955(1) precludes imposition of liability on transferors who lack personal knowledge with respect to errors, inaccuracies, or omissions in an SDS, there is no liability for a disclosure made on an SDS under a theory of innocent misrepresentation."

VA Proposes New Rules to Increase Opportunities for Service-Disabled Veteran-Owned Small Business (SDVOSB)

Veterans Administration (VA), Federal Acquisition Regulations: Supporting Veteran-Owned and Service- Disabled Veteran-Owned Small Businesses, Proposed Rules, 73 Fed. Reg. 49141, August 20, 2008.

This proposed rule would implement portions of the Veterans Benefits, Health Care, and Information Technology Act of 2006 and Executive Order 13360, Providing Opportunities for Service-Disabled Veteran Businesses to Increase Their Federal Contracting and Subcontracting. The Public Law and Executive Order authorize the Department of Veterans Affairs (VA) to establish special methods for contracting with service-disabled veteran-owned small businesses (SDVOSBs) and veteran-owned small businesses (VOSBs).

Under this proposed rule, a VA contracting officer could restrict competition in contracting for SDVOSBs or VOSBs under certain conditions. Likewise, sole source contracts with SDVOSBs or VOSBs would be permitted under certain conditions. The proposed rule would implement these special acquisition methods as a change to the VA Acquisition Regulation (VAAR).

Dates: Comments on the proposed rule should be submitted on or before October 20, 2008 to be considered in the formulation of the final rule.

Note: Thanks to Jerry Walz at PubKLaw.com for the heads-up on this announcement. For those of you who are involved in public contracting, especially federal procurement, Jerry's PubKLaw-Digest is an excellent resource. For a modest annual cost, you receive a daily newsletter updating all aspects of procurement law, and recent decisions from the various boards of contract appeals, and federal district and circuit courts. Highly recommended!

Avoiding Home Foreclosure in Michigan

Gary Nitzkin, who blogs at Michigan Collection Law Blog, recently posted an important article outlining a number of ways that homeowners can avoid losing their homes to foreclosure.

Gary's suggestions include (a) asking your lender about a Home Retention Program, (b) talking directly with the lender's Loss Mitigation Department, (c) considering a Forbearance Agreement, a Loan Modification, deed in lieu of foreclosure or (d) negotiating a pre-foreclosure short sale. Gary notes that there may be significant tax consequences to any agreement with the lender that involves forgiveness of debt.

To read Gary Nitzkin's post in its entirety, follow this link.

AGC of Michigan Sponsors ConsensusDOCS Seminar

On Thursday, September 25, 2008, at 8:30 a.m., the AGC of Michigan will present ConsensusDOCS: A New United Voice for Construction Contracts at its office in Lansing. The session will run 8:30 a.m. - 11:30 a.m. and includes a continental breakfast and seminar materials. Thomas M. Keranen, Kerenan & Associates, P.C. will be the featured speaker.

A registration form for this seminar can be found here.

New Article Discusses Interplay Between Section 523(a)(4) of Bankruptcy Code and Michigan Builder's Trust Fund Act

As discussed in an earlier post, the Michigan Builder's Trust Fund Act (MCL 570.151, et seq) may impose personal liability upon corporate officers, or members of a limited liability company, who misappropriate construction proceeds in violation of the statute. Pending legislation, such as H.B. 6176, would codify the imposition of personal liability, which is now a function of case law.

The Builder's Trust Fund Act also plays a role in bankruptcy, in which certain debts that arise when the debtor is acting in a "fiduciary capacity" may not be dischargeable. I am not a bankruptcy attorney, but Thomas R. Morris, who is an experienced bankruptcy attorney, has written an excellent article on this important topic, which appears in the latest issue of the Michigan Business Law Journal:

Pursuant to 11 USC 523(a)(4), a debt owing by an individual "for fraud or defalcation while acting in a fiduciary capacity" is not dischargeable in bankruptcy. Two United States Supreme Court cases, one from 1844 and one from 1934, establishes a definition of "fiduciary" for purposes of section 523(a)(4). However, the enactment by Congress and the state legislatures of "statutory trust" laws has created a new type of fiduciary duty not specifically addressed by the Supreme Court cases. The lower courts are not in agreement as to whether a statutory trust creates a "fiduciary capacity" for purposes of section 523(a)(4). As a result, there are a number of unanswered questions which arise under section 523(a)(4). Of particular interest to Michigan attorneys are questions relating to the dischargeability of liability under the Michigan Building Contract Fund Act (MBCFA) or "Builders Trust Fund."

Thomas R. Morris, "Trust Fund Statutes and the Discharge of 'Trustee' Debts Under Bankruptcy Code Section 523(a)(4)," 28 MI Bus LJ 11 (Spring, 2008). For the full text of this article, click here. We also reported on a previous article Mr. Morris wrote on this subject in a February, 2007 post.

Mr. Morris is a member of the West Bloomfield firm of Silverman & Morris, PLLC. Mr. Morris is a 1986 graduate of the University of Michigan Law School. Mr. Morris and his firm concentrate their practice in the areas of bankruptcy, commercial law, workouts, bankruptcy litigation and similar matters, and represents both creditors and debtors. For more information on any of these issues, contact Thomas R. Morris directly.

Materials Deduction Bill Signed by Governor Granholm, Public Act 177 of 2008

On July 9, 2008, Governor Granholm signed into law S.B. 1217 [Public Act 177 of 2008]. As discussed in an earlier post, this new law provides that construction companies can deduct materials purchased for specific construction projects from calculation of their gross receipts taxes. The deduction is retroactive to January 1, 2008.

Defendant Lacks Standing to Challenge Plaintiff's Corporate Status, Michigan Supreme Court rules in Miller v Allstate

On July 2, 2008, the Michigan Supreme Court issued its ruling in the Miller v Allstate case, which was discussed in an earlier post.

The Supreme Court upheld the Court of Appeals' decision denying Allstate's attempt to avoid payment, but vacated the rationale. It held that only the Attorney General has the legal standing to challenge Plaintiff's corporate status. The Court made no ruling on the question of whether the service business was in fact properly incorporated. See, 481 Mich 601; 751 NW2d 463 (2008).

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AGC of Michigan Sponsors ConsensusDOCS Seminars

AGC of Michigan is sponsoring two upcoming seminars designed to acquaint contractors with the new ConsensusDOCS contract forms, which we discussed in an earlier post last September.

• June 18, 2008 Ramada Inn, Marquette, MI
• June 20, 2008 EMU Livonia, Livonia, MI
  

For more information, follow this link.

Sixth Circuit Affirms "Disappointed Bidder" Rule, Upholds Dismissal of Bid Protest

On May 22, 2008, the 6th Circuit Court of Appeals upheld the grant of summary disposition in favor of the City of Detroit, and against the low bidder on a DWSD project, and affirmed the "disappointed bidder" rule in Michigan.

"We reviewed the law surrounding standing and disappointed bidders in Club Italia Soccer & Sports Org., Inc. v. Charter Twp. of Shelby, 470 F.3d 286 (6th Cir. 2006). Club Italia held that absent a statutory exception, "a disappointed bidder does not have standing before this court." Id. at 293. Cases prior to Club Italia consistently refused to allow disappointed bidders to bring claims for violations of the bidding procedures. [citations omitted] A bidder who, in addition to seeing his bid rejected, is disqualified from bidding on future projects may have standing, [citations omitted] but EBI cannot obtain standing this way because EBI was not disqualified from bidding on future projects.

* * *

"United of Omaha [v. Solomon, 960 F.2d 31, 34 (6th Cir. 1992)] is particularly fatal to EBI's claims because it held that a disappointed bidder must show that "it was actually awarded the contract at any procedural stage or that local rules limited the discretion of state officials as to whom the contract should be awarded." United of Omaha, 960 F.2d at 34. EBI cannot meet this test because it was never awarded the contract and because [Detroit Mayor] Kilpatrick has unlimited discretion in awarding contracts in order to comply with the EPA consent decree. Like the bidder in United of Omaha, EBI was "obviously disadvantaged" by the government's actions, id. at 35, but it nevertheless "retained only a unilateral hope of being awarded the contract, not a right to it." Ibid. A "unilateral hope" does not create standing."

See, EBI-Detroit, Inc. v. City of Detroit, 2008 U.S. App. LEXIS 11043, *18-21 (6th Cir. Mich. 2008). The trial court's ruling was reported in an earlier post.

[Update: The official cite for this case is EBI-Detroit, Inc. v. City of Detroit, 279 Fed. Appx. 340 (6th Cir. 2008) ]

New Law Passed to Boost Set Asides for Disabled Veteran Contractors

On May 21, 2008, Michigan's Governor Granholm signed S.B. 751 into law as PA 133 of 2008. The new law takes effect immediately. As noted in an earlier post, the new law amends the Management and Budget Act to increase the goal for contract set asides for disabled veterans from 3% to 5%.

Material Deductions Bill Voted Out of House Tax Policy Committee

AGC of Michigan reports in its May 14, 2008 Midweek Briefing that H.B. 6031, the House version of S.B. 1217, was voted out of committee following testimony by AGC Member, Patrick Cebelak, Controller for Granger Construction.

As noted in an earlier post, S.B. 1217 is designed to correct problems with the Michigan Business Tax as it affects construction contractors.

H.B. 6031 would amend the Michigan Business Tax (MBT) Act to amend the definition of "purchases from other firms" as it applies to general building contractors, heavy construction contractors, and construction special trade contractors that do not qualify for a small business credit under Section 417. For those companies, the definition would apply to "any construction materials or supplies directly purchased by the firm for a construction project." These purchases would, then, not be counted in the gross receipts tax base.