Michigan Business Lawyer Blog

For many "regular" businesses, a growing percentage of their value is made up of intangible assets like intellectual property and trade secrets. As these items grow in value, ensuring protection of your business's trade secrets is of the utmost importance to its success and future growth.

Trade secrets include such items as research and development data, customer lists and related information, financial data, and strategic plans and corporate information. It comes as a surprise to many business owners that one of the biggest threats to a business's trade secrets is its current and former employees. But, this makes sense when one considers that today's employees are more like free agents than long-term "franchise players."

It is imperative that businesses take the appropriate steps to guard and protect their trade secrets and confidential business information. The loss or theft of this information can be devastating to a business, especially if it is used by former employees to unfairly compete by undercutting their former employer's market position or to solicit their former employee's customers or clients.

Michigan law provides protection to businesses who are the victims of misappropriation of their trade secrets and confidential business information. If you are faced with the loss or theft of important business information, you should consult with an experienced Michigan trade secrets lawyer to assist you in enforcing your rights.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Litigation , Trade Secrets Law

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The New York Times Magazine has published a piece detailing the apparent strengthening of businesses interests before the U.S. Supreme Court. In the article, the Times profiles the efforts of the U.S. Chamber of Commerce in its advocacy of business interests before the United State Supreme Court. The article notes that in the Supreme Court's most recent term the chamber’s litigation center filed briefs in 15 cases, with its side winning in 13 of them — the highest percentage of victories in the center’s 30-year history.

An interesting aspect of this story is that some of the justices on the Supreme Court who are generally considered "liberal" joined in decisions that favored the positions advocated by the U.S. Chamber of Commerce, positions that are typically considered to be very conservative. This shift represents what the article terms "an ideological sea change on the Supreme Court," especially when one considers that only a number of years ago businesses interests were viewed with skepticism by the Supreme Court.

Although many business owners and entrepreneurs might feel inclined to applaud this apparent shift in the Supreme Court's judicial philosophy, this change is not without its critics. Many observers and legal practitioners are concerned at what they believe is a growing and one-sided sympathy by courts across the country with business interests. These critics complain that the interests and legal rights of consumers and individuals are being subordinated to corporate America's pursuit of profits. Some of these critics also point out that the U.S. Chamber of Commerce tends to serve the interests of very large businesses, which can be and often are divergent from the interests of small businesses.

Whatever side of the debate you are on, the article is an interesting and informative read about an issue that affects all of us.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Litigation , Michigan Business News

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Many people assume that when they have a written contract with someone else that any disputes about their agreement will be resolved simply by reading the contract itself. Sometimes this instinct is right. Indeed, Michigan state courts and federal courts applying Michigan law have generally ruled that the most reliable indication of the parties’ intent is the language of the contract itself.

It is basic Michigan law that courts must avoid allowing into the evidentiary record outside evidence of the parties’ intentions because this often leads to contract interpretations that are contradictory to the parties' true intent. This means that when the language in a contract is unambiguous, the parties’ intent is to be discerned from the actual language used in the contract. Court use an objective standard to evaluate the meaning of the contractual language.

However, if a court declares a provision in a contract to be ambiguous, then outside evidence may be allowed to prove the parties' intent. Michigan law further provides that an ambiguous provision in a contract is to be construed against the party who drafted it.

The rules that Michigan courts use to interpret contracts are meant to accomplish one thing: figure out what the parties intended when they drafted their contract. All important contracts should be prepared or at least reviewed by an experienced and knowledgeable Michigan contracts lawyer. Involving an attorney early in the contract preparation/review process could mean the difference between having a contract that is enforceable according to the parties' expectations and intent, and one that could lead to totally unpredictable results if there is a dispute.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Contracts , Litigation

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Crains Detroit Business is reporting that Chrysler L.L.C. will appeal a Detroit federal bankruptcy court's order that it cannot retrieve equipment from the premises of Plastech Engineered Products Inc. Plastech filed for bankruptcy protection last month. Chrysler has filed the notice of appeal with the bankruptcy court that is required under the Federal Rules of Bankruptcy Procedure.

This case arises out of a lawsuit that Chrysler filed against Plastech seeking to recover in excess of $167 million worth of tooling machinery Chrysler owns that Plastech used to manufacture parts for Chrysler. Chrysler had requested the bankruptcy court to grant a stay that would allow it to recover the equipment in spite of bankruptcy litigation rules that prevent non-bankruptcy legal proceedings against parties that have filed for bankruptcy.

However, the bankruptcy court denied Chrysler's motion and ruled that Plastech's reorganization efforts could be harmed if Chrysler removed its equipment at this point in time.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Litigation , Michigan Business News

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This is the sixth and last post in my series on the Michigan litigation process.

Once a case has gone to trial and a judgment has been entered, the losing party has the right to appeal the judgment. In Michigan, there are two levels of appellate courts: the Michigan Court of Appeals and the Michigan Supreme Court.

In civil cases, the first appeal is made to the Michigan Court of Appeals. This is what is known as an appeal "as of right", meaning that the losing party is absolutely entitled to an appeal. However, under the Michigan Court Rules governing appeals, in order to take advantage of this absolute right, an appeal must be taken within 21 days after the court enters the judgment being appealed. Depending on the complexity of the case, an appeal to the Michigan Court of Appeals can take as many as two years or more from start to finish.

If a party cannot convince the Michigan Court of Appeals of the merits of their appeal, they can appeal further to the Michigan Supreme Court. However, this appeal is not an absolute right. Instead, a party who loses their appeal to the Michigan Court of Appeals, must file what's called an "application for leave to appeal" to the Michigan Supreme Court. If the Michigan Supreme Court accepts the case, that party gets another chance to argue its case. But, the chances of getting the Michigan Supreme Court to accept an appeal are slim. Over 2000 applications per year are filed with the Michigan Supreme Court, with the court accepting only a small number of those cases for consideration.

Winning an appeal is tough, even in the best of circumstances. Any litigant who wishes to take a case to before a Michigan appellate court should retain an experienced and knowledgeable Michigan appellate lawyer who can help them make the best case possible.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Litigation

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This is the fifth post in a series of posts on the Michigan litigation process.

If a judge does not grant a party summary disposition, and the parties do not settle, the case proceeds to trial.

A trial starts with each party giving its opening statements. After opening statements, the parties present their respective cases to the trier of fact. The trier of fact decides which party's evidence is more believable. In a "bench" trial, the trier of fact is the judge. In a jury trial, the trier of fact is the jury. In civil cases, a party must demand a jury trial at the beginning of the case, or it will automatically be conducted as a bench trial.

While presenting their respective cases, each party tries to have evidence favorable to their case admitted to the trial record, so that it can be considered by the trier of fact. A party may object to the admission of the other party's evidence if he or she believes that the evidence should not be admitted. Whether evidence is admitted to the record is governed by the Michigan Rules of Evidence, as interpreted by the judge presiding over the trial.

Once evidence has been presented by both sides, the parties make their closing arguments to the trier of fact. In many cases, one or both of the parties will ask the court for a "directed verdict" on the theory that the other side failed to prove the basic requirements of their case. If the court does not grant a directed verdict, the trier of fact will decide who wins the case.

Once the trier of fact renders a decision, it is memorialized in a judgment, which is entered by the court. At that point, the losing party can appeal the judgment. If the judgment is not appealed (or the appeal is unsuccessful), the winning party can enforce the judgment through a number of post-judgment proceedings.

Trials can be time consuming and financially costly. It is of the utmost importance for any party whose case is going to trial to be represented by an able and competent attorney in order to maximize their chances for success.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Litigation

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This is the fourth post in a series on the Michigan litigation process.

Once discovery has been completed (and sometimes before), the defendant or plaintiff (or both) will typically ask the court to rule in their favor as a matter of law, without a trial. In Michigan state court cases, motions for summary disposition are governed by Rule 2.116 of the Michigan Court Rules.

In evaluating a request for summary disposition, the judge reviews the pleadings as well as the motions and briefs filed by each party essentially summarizing the case and articulating the reasons why that party should win the case without having to go to trial.

The judge also relies on evidence gathered by the parties during the discovery phase of the lawsuit and presented to the court in connection with the motion(s) for summary disposition. It is important to remember that neither party is required to request summary disposition, but in most cases one or both parties usually files a summary disposition motion.

When reviewing the presented evidence, the judge must draw all inferences in favor of the party opposing the summary disposition, and may grant the motion only if there are no genuine issues of material fact and the party requesting summary judgment is entitled to it as a matter of law.

If a judge grants a motion for summary disposition, the case does not proceed to trial. However, the case may not be over since the party who loses a summary disposition motion is entitled to file an appeal of the judge's decision.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Litigation

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This is the third in a series of posts about the Michigan litigation process.

If a Michigan litigation case proceeds past the initial pleadings phase, the next phase is what's called the "discovery" phase. Discovery is where each party has the chance to gather facts and information needed to prove the various points of their respective cases. The parties can gather these facts and information from both their opponents in the case and third parties.

There are number of basic tools that parties to a litigation case can use to gather facts and information to support their case. These basic tools include:

1. Written interrogatories, or questions, which can a be sent to the opposing party.

2. Oral depositions, or questioning of potential witnesses.

3. Depositions by way of written questions.

4. Requests for admission directed to the opposing party.

5. Requests for production of documents or entry upon land for inspection.

6. Mental or physical examination of a party.

Depending on the particular circumstances of a case, different discovery tools may be better suited for obtaining the desired information. However, a party may use as many or as few of these discovery tools as needed to accomplish their purposes. That said, duplicative or unduly burdensome discovery requests are technically not allowed, although Michigan courts have broad discretion to allow discovery on wide variety of topics related to a case.

It is important to know that discovery can often be very time consuming and expensive. Indeed, discovery is usually where much of a client's money is spent during litigation. The good news is that it is not uncommon for cases to settle after discovery either because a party lacks sufficient facts to pursue the claim further and voluntarily resolves the case or because the court grants a motion to dismiss the case.

Because the discovery phase can be very contentious and difficult, it is important that anyone in litigation have a knowledgeable and experienced Michigan litigation attorney representing them to help ensure that their rights are vigorously pursued and protected.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Litigation

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This is the second post in a series of posts about the Michigan litigation process.

The first stage in a typical lawsuit is the filing of initial pleadings. A lawsuit is started when the plaintiff files a complaint with the court. If a plaintiff wants to have a jury decide the case, they must also file a "jury demand" at this initial stage of the case. Once a complaint is filed, the Michigan Court Rules give a defendant 21 days to file their answer.

Along with the answer, a defendant must file any "affirmative defenses" they may have to the plaintiff's claims. Affirmative defenses are defenses that entitle the defendant to a dismissal of the plaintiff's lawsuit, even if the plaintiff's claims are true. For example, a defendant may claim as an affirmative defense that a plaintiff has not filed their lawsuit within the time required under the applicable statute of limitations. If that is true, then even if what the plaintiff claims in their lawsuit is true, the case will be dismissed.

If a plaintiff does not file a "jury demand" with their complaint, a defendant can file one with their answer, and the case will be decided by a jury, even if the plaintiff did not want a jury to hear their case.

In some circumstances, a case may be dismissed at the initial pleadings phase or judgment could be entered in favor of either party if appropriate. An example of this situation is if the plaintiff fails to state a legally recognizable claim against the defendant. Depending on the circumstances, a court could give the plaintiff the opportunity to "amend" their initial pleadings to cure the deficiency, or it could dismiss the case altogether.

Needless to say, litigation is not a "do it yourself" project. If an entrepreneur or business finds themselves in litigation, or anticipates that they might be in litigation soon, the first thing they should do is contact a knowledgeable and experienced Michigan litigation attorney to assist them in protecting their legal rights.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Litigation

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This is the first in a series of posts about the Michigan litigation process.

At some point, an entrepreneur or small business may find themselves either a defendant in a lawsuit or contemplating filing a lawsuit against someone else. No one should feel hesitant or embarrassed to hire a lawyer to pursue a legitimate claim or file a legitimate lawsuit to protect their rights. Similarly, no one should feel shy about vigorously defending themselves if they find themselves a defendant in litigation.

Often times, however, people do not understand how time consuming and complex a legal case can be and how long it can sometimes take to ultimately settle or resolve a claim or a lawsuit. These mistaken or unrealistic expectations can lead to nasty surprises and great frustration. Therefore, it is imperative that any entrepreneur or small business facing litigation (either as a plaintiff or defendant) have a clear understanding of the litigation process and what they can expect during a lawsuit.

A lawsuit typically proceeds through five basic phases:

1. Filing of initial pleadings.

2. The discovery phase.

3. Filing of motions for summary disposition

4. Trial.

5. Post-trial or appellate phase.

It is also important to understand that each case is unique. The five basic phases listed above are just that, an overview of the five basic phases in a typical litigation case. Depending on the particular circumstances of a case, things could be a little different than my outline above. Indeed, that uncertainty and possible complexity make it very important for you to hire a knowledgeable and experienced Michigan litigation attorney to assist you when facing litigation.

I'll give some more details of the basic five phases of a litigation case in later posts.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Litigation

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Arbitration agreements are becoming more and more common in a wide variety of Michigan contracts. The reason why arbitration is becoming so popular is that it is seen as generally being a faster, cheaper and less disruptive method for resolving business disputes than traditional litigation in the courts.

Although most lay people think that an arbitration agreement will automatically keep them out of court, that is true only if the arbitration agreement contains some statutorily required "magic" language. Michigan courts recognize two different types of arbitration agreements. The first is a "common-law" arbitration agreement, which is revocable by either party until the arbitration award is rendered. The second is a "statutory" arbitration agreement, which is non-revocable and binds both parties to the arbitration process.

Most lay people (and, I suspect, more than a few lawyers) are unaware of the differences between these two types of arbitration and do not know the "magic" language that is required to ensure that their arbitration agreement is of the "statutory" kind. Obviously, it is important to understand the requirements for invoking "statutory" arbitration, otherwise a party could find themselves having to litigate a dispute in court when they had been banking on resolving their dispute in an arbitration proceeding.

To be a "statutory" arbitration agreement, the arbitration clause must specifically state that "a judgment of any circuit court may be rendered upon the award made pursuant to such agreement." This requirement is found in the the Michigan Arbitration Act (MCL 600.5001). If that clause is included, neither party has the power to revoke the arbitration agreement unless the other party also agrees. But, if the arbitration clause does not include the "magic" statutory language, then it is a "common-law" arbitration agreement, which can be unilaterally revoked by either party up until the arbitration award is issued.

Every entrepreneur and small business who wants to be able to enforce their arbitration agreements should have a competent Michigan business lawyer review those agreements before they are signed. This will help to ensure that any arbitration provisions are properly drafted, thus preventing nasty surprises if and when it is necessary to invoke the arbitration process.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Contracts , Litigation

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A report in Crain's Detroit Business notes that the State of Michigan is suing Tyco International, four of its executives, and its auditors for $50 million in losses in Michigan state pension funds. Tyco manufactures a wide variety of products such as electric components and health care products.

Tyco was one of the famous corporate implosions that led to the Sarbanes-Oxley corporate governance law. The "implosion" was was caused by a multibillion dollar accounting fraud, and resulted in some of Tyco's top executives going to prision. As a result of public disclosure of the fraud, Tyco stock plummeted, resulting in massive losses to its stockholders, including the State of Michigan. Overall, Michigan pension funds hold approximately $62 billion in investment assets.

The lawsuit was filed in the United States Federal District Court in Detroit, and will be prosecuted on behalf of the state by Michigan Attorney General Mike Cox.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Litigation , Michigan Business News

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Most Michigan businesses start off with much optimism and good will among the owners. Everyone is on the same page and shares a vision for making the business a wild success. However, as with many things, once the honeymoon phase of the venture ends, the owners may wind up not having as much in common as they thought. In fact, business owners often wind up strongly disagreeing with each other regarding a number of business issues ranging from basic operations to critical strategic planning matters.

Often, minority shareholders (i.e., those holding less than 51% of the corporation) fail to insist on having the corporate formation documents contain an adequate level of protection for them should differences arise with the majority shareholders regarding how the corporation should be managed. Often, the shareholder with the most shares ultimately winds up with control of the corporation and successfully squeezes out minority shareholders. Squeeze outs can take many forms, such as being locked out from the corporation's premises, employment termination, expulsion from board positions, discontinuation of dividends, and partial or complete denial of access to corporate information.

Michigan law provides remedies to minority shareholders who are being squeezed out of their companies, or who are being subjected to some kind of unfair oppression by majority shareholders. Shareholders who believe they are being treated unfairly may bring what is known as a Section 489 action in their local county circuit court. A Section 489 action is based on the Michigan statute found at Michigan Compiled Laws (MCL) 450.1489.

Under this statute, minority shareholders have remedies for "willfully unfair and oppressive" conduct. Potential defendants in a Section 489 action may be not only corporate directors, but also ‘‘those in control of the corporation". Those in control of the corporation are usually, but not necessarily, the majority shareholders.

Relief available under Section 489 includes injunctive relief, forced purchase of the minority shareholder's stock at fair value, liquidation and dissolution of the company, and monetary damages. Section 489 has been the subject of much litigation and occasional legislative action. Those who believe they are the victims of minority shareholder oppression should carefully choose a Michigan business litigation attorney to assist them with resolving their matter.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Corporations , General Topics , Litigation

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In a contract, a liquidated damages clause simply limits the amount of damages that one party to the contract will be liable for in the event that they breach the contract or somehow cause harm to the other party to the contract. This type of clause is appropriate when the circumstances are such that it would be difficult to determine how much the actual damages suffered actually are, or if the damage amount would be purely speculative in nature. In that kind of case, the parties can stipulate in their contract what the amount of damages will be. This type of stipulation will be enforced by Michigan courts so long as the amount agreed upon by the parties is reasonably related to the actual damages that might have been expected for a breach or other harm.

Michigan courts have been enforcing liquidated damages clauses for a long time. For example, in one 1908 case, the Michigan Supreme Court stated: “In cases where it is difficult to accurately determine the damages which one party may suffer by the failure of the other to perform his contract, the parties themselves may agree upon such sum as in their judgment will be ample compensation for the breach.”

However, Michigan courts will not enforce a liquidated damages clause if the amount of damages can be readily determined or if the clause appears to impose a penalty instead of truly trying to fix a reasonable damage amount.

Having an enforceable liquidated damages clause can be a real lifesaver if you have been sued and there is a potential for a large damage award. These kinds of clauses can also cut the other way as they can allow a party to recover damages in a specified amount even if their true damages are not as much as the damages provided for in the liquidated damages clause. Either way, it is imperative that an experienced Michigan business lawyer review your contracts to make sure that any liquidated damages clauses will be to your benefit should you need to rely on them in the future.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Contracts , Litigation

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For reasons that remain unknown to me, many people try to represent themselves in court. I certainly understand that good legal representation can be expensive, but I still believe that the final cost of a layperson representing themselves in court is usually far more than the expense of hiring a good lawyer to protect their interest.

While Michigan courts can allow individuals to represent themselves, corporations must be represented by a lawyer in Michigan district and circuit courts (but not in small claims courts). This rule stems from a 1938 Michigan Supreme Court case in which the Court dealt with a turf battle between trust companies and the Detroit Bar Association. The Detroit Bar Association argued that trust companies -- which were corporations -- were engaged in the unauthorized practice of law when they drafted probate papers and wills and participated in probate court proceedings. The Michigan Supreme ruled that while the trust companies could draft probate papers, they could not appear in court without being represented by a lawyer because of the very fact that they were corporations (and not real, natural persons who could truly represent themselves).

Another reason behind this rule is a practical one: It is thought that a person who is not an attorney is more likely than an attorney to burden other litigants and the court with time-consuming, meritless arguments and with time-consuming delays attributable to noncompliance with procedural requirements.

Every state that I know of follows the same rule as Michigan when it comes to representation of corporations in court. But, courts in several states have recognized an exception to this rule where a sole shareholder seeks to represent the corporation. These courts have reasoned that an individual has the right to represent a personal cause in court, and a sole shareholder representing the corporation is only representing such a cause. It is unclear whether this exception to the general rule would apply in Michigan, although it has been cited in a dissenting opinion by a Michigan Supreme Court justice.

Some states have extended the prohibition against self-representation from corporations to limited liability companies (LLC's). For example, a New York court recently ruled that an LLC needs to be represented by an attorney in court. At this point in time, it appears that there is no Michigan law specifically on this point. Regardless, I always advise businesses of whatever form to use a lawyer if they have to be in court. If you think I'm saying this out of my own self interest, think again. Lawyers make a lot of money fixing messes that could have been avoided if people would have just gone to a good lawyer when first confronted with a legal issue in the first place.

Posted by Michael J. Hamblin | Permalink | Email This Post

Posted In: Litigation

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