Blog : Litigation

Michigan Court of Appeals affirmed Parmenter O’Toole’s trial court victory

Michigan Court of Appeals affirmed Parmenter O’Toole’s trial court victory.  Parmenter O’Toole was retained to defend several clients who were involved in state court litigation regarding stock redemption agreements.  The stockholders who were redeemed later claimed fraud and forgeries.  The trial court judge dismissed the plaintiffs’ claims and plaintiffs filed an appeal to the Michigan Court of Appeals.  In a 2-1 opinion, the appellate court ruled in favor of Parmenter O’Toole’s clients.

HAND-BUILT SCAFFOLDING COLLAPSE: COMMON WORK AREA

            A recent Court of Appeals case focused on the application of the common work area doctrine to a residential construction job.  An employee of a subcontractor fell from a hand-built scaffold that the rough carpentry subcontractor built and was injured.  The injured party and his co-worker did not use commercially manufactured scaffolding or ladder jacks which were made available by the general contractor.  The plaintiff fell about 15 feet from the hand-built scaffold and sustained hip, back and neck injuries.

            In Michigan, the rule is that a general contractor is not liable for injuries that result from the negligent acts of subcontractors or their employees.  The exception to this rule is the “common work area” doctrine.  If an injured party can show that the general contractor failed to take reasonable steps to guard against “readily observable and avoidable dangers” that create a high risk of harm to a “significant” number of workmen in a common area, the injured subcontractor or its employee can seek recovery from the general contractor.

            In Goodfallow v Glennwood Custom Builders, Inc. (COA Docket No. 296155, April 12, 2011), the Court of Appeals noted that the general contractor had only been absent from the construction site a short time prior to the accident.  A short absence does not equate to a failure to take reasonable precautions to avoid dangers.  The Court of Appeals noted that a common work area requires more than 4 people to be considered a “significant” number of workmen.

            Despite the fact that the general contractor avoided liability in this case, it serves to underscore the importance of job site safety and management of job site risk.  Conducting and documenting job site safety meetings should be on every general contractor’s agenda.

            Our litigation group would welcome your inquiries regarding construction litigation.

LLC’S LIMITED LIABILITY PROTECTION LIMITED BY COURT OF APPEALS

            The Michigan Court of Appeals recently took up the issue of whether the “piercing the corporate veil” doctrine could be properly applied to a Michigan limited liability company.  In Florence Cement Company v Antonio Vettriano (COA Docket No. 295090, 5-3-11), the Michigan Court of Appeals indicated that the limited liability protection of an LLC might not be so bullet proof.  In this case, the owners of a residential real estate development company set up an LLC to own, develop and sell lots.  Unfortunately, the owners made a number of mistakes which included turning over property to the LLC without formal transfer documents, incurring development expenses personally but having the LLC reimburse them directly, falsifying sworn statements and failing to adequately capitalize the LLC.  The Court of Appeals borrowed a page directly from corporate law and found that the members of the LLC were individually responsible for an LLC liability on contract.

             The word to the wise is to treat the LLC as a legally separate and distinct entity in all respects or risk losing the limited liability protection an LLC’s members generally expect.  Also, if you have been wronged by the actions of an LLC which is judgment proof or otherwise practically uncollectible, you should have your attorney review the transactions with the LLC carefully with a view towards ascertaining whether LLC formalities have been respected or whether the LLC is the alter-ego of its members.

           Our litigation group would welcome your inquiries regarding LLC litigation.

To Arbitrate or Litigate – Which is Better for Your Business?

Whether dealing with a real estate contract, employment agreement, or a business contract, chances are there was an arbitration clause included in the contract. Arbitration clauses are becoming more and more commonplace in contracts. However, even though litigation and arbitration share the same goal – dispute resolution – the processes are very different.

There are many areas to consider before simply signing a contract including an arbitration clause. There may be situations where an arbitration clause benefits your business; however, there are also situations where an arbitration clause could bite you. Below are just some areas to consider when deciding if an arbitration clause is right for your business.

Speed:

Although widely touted as one of the biggest benefits of arbitration, the speed of dispute resolution is impacted by many factors. One such factor is the availability of the arbitrator. Although having the dispute resolved by an expert in the field can be a benefit, there may be a limited number of such experts. Your wait time will depend on this availability. And while some courts are admittedly backlogged, the courts within your jurisdiction may be as efficient as arbitration. Another factor that can impact the speed of resolution is whether the arbitration is run through a national organization such as the American Arbitration Association (AAA) or privately between the parties. Running everything through an out of town go-between can significantly slow down the process.

Cost:

Another widely perceived benefit of arbitration is the belief that it costs less. However, this again depends on the method of arbitration. There may be significant up front fees for the administration of the arbitration (especially if handled through a national association). Consider that most arbitrators are paid an hourly fee; if you have a panel of three arbitrators (as is common), plan on multiplying that factor. Finally, although discovery costs may be reduced by using arbitration, there may be significant drawbacks that come with those reduced costs (see below).

Discovery:

Depending on your jurisdiction, if there will be third-party discovery required, litigation may be necessary. Federal courts are split as to whether the requirement that a third-party appear or produce documents at a hearing also means a third party must produce documents for a discovery request or appear at a deposition. Additionally, arbitration may dramatically limit discovery, which is fine if there are limited number of issues and experts, but if you’re dealing with a large project with many contributors, this could drastically limit your access to information and experts.

Appellate Review:

One of the biggest drawbacks of arbitration is that essentially there is no appeal. In litigation, if the outcome of the case is unreasonable or a major legal issue was ignored, judicial review can correct the errors. However, under the Federal Arbitration Act, review is only available when: 1) the award was procured by corruption, fraud, or undue means; 2) there was evident partiality or corruption by an arbitrator; 3) or the arbitrators were guilty of misconduct that prejudices the rights of a party.

These are just a few of the issues that should be considered when signing a contract involving an arbitration clause. Be aware of the potential benefits as well as the pitfalls, and devote the necessary time and consideration before you sign the contract. An ounce of prevention is worth a pound of cure – make sure you understand what you are signing up for when you sign a document with an arbitration clause.

Parmenter O’Toole is a full-service business and real estate law firm with extensive experience in the area of construction law.  The comments in this article are not intended to be a substitute for legal guidance or advice for a specific situation.  You should obtain informed legal counsel to assist in your decisions relating to any issues which may be raised in this article.  For additional information regarding the above topic, or any other legal issues you may have, please call 231-722-1621.

TiVo Wins Big Against Dish Network

TiVo has patents that protect their “Time Warp” process of recording live TV and playing it back. All of the major cable providers have created their own systems, but TiVo claims these systems (DVRs) infringe on their patents. The US Court of Appeals agreed with TiVo and also ruled that Dish Network failed in its attemps to design around the patents.

Click here to read more.

Avoid Getting Sued by Employees

There are precautions you can take to avoid getting sued by your employee or independent contractor. If they are truly an independent contract, you need to make sure you have a written agreement in place and do not treat them like an employee. They should be free to contract with other companies to do similar work. However, you should make sure they hold your work and information in confidence through provisions in the contract. As stated in a recent Wall Street Journal article linked below, there are other precautions that must be addressed to protect yourself against employees: (1) Are they exempt from employee wage and hour rules? (2) Do you have proper policies in place regarding discrimination and harassment? (3) Have you documented the employee’s history with the company?

Here is the full article. If you have questions about dealing with employees, please contact Jeffery Jacobson.

AT&T and Verizon Drop Legal Battle Over Ads

AT&T and Verizon decided to take there battle over advertising back into the advertising arena with AT&T’s response ads to the “coverage map” campaign by Verizon. The Wall Street Journal reports that AT&T and Verizon both dismissed their complaints. AT&T was complaining that the ads by Verizon constituted false advertising and confused consumers about AT&T’s wireless coverage. However, Verizon argued, and the court seem to agree, that the ads clearly stated that the comparison was based on the 3G networks offered by each company. For more information go here.

Questions contact Jeffery Jacobson