An Evening with Dan Gilbert at Wayne Law

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Last night I attended an Evening with Dan Gilbert at Wayne Law.  Gilbert, a graduate of Wayne Law (’87), participated in a question-and-answer session with Wayne Law Dean Jocelyn Benson.  Gilbert discussed growing up in Detroit, from his days as a pizza delivery guy in Southfield (who relied on shortcuts and not GPS), to his days as chairman and founder of Quicken Loans.  He also discussed moving Quicken and its family of companies to Detroit’s central business district in 2010.  At the time, approximately 70 employees resided in Detroit.  Now, over 3,100 employees reside in Detroit.  Finally, Gilbert shared his business philosophy, including the importance of failure and various “ISMs in Action,” a book created each year by Quicken.  My favorite ISM and the one stressed the most by Gilbert was awareness:

Keep your head up.  Look.  Be curious.  Notice what is actually happening around you.  Really notice.  Listen.  Listen to your clients.  In fact, listen to everyone.  Everything starts with awareness.  Being alert.  Being awake.  Tuning in to the frequency.  It’s a perpetual choice to both stay aware and raise your level of awareness.

Congratulations to Mr. Gilbert and Dean Benson for putting on such a great event.  For additional ISMs, visit http://www.quickenloanscareers.com/about-us/culture/

Forum-Selection Clauses (Michigan Law): Can Parties Pick a Specific Court to Decide Future Disputes?

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A forum selection clause is a contractual provision that, generally speaking, designates where the parties would like legal disputes to be decided.  The clauses appear in all types of contracts, from simple consumer agreements to complex commercial contracts.  Michigan’s public policy favors the enforcement of contractual forum-selection clauses.  The enforcement is premised on the parties’ freedom to contract.  A party seeking to avoid a contractual forum-selection clause bears a heavy burden of showing that the clause should not be enforced.

Although Michigan courts will typically honor forum-selection clauses that identify the state in which future lawsuits must be filed, they do not normally enforce the contracting parties’ choice of venue.  Venue in this context refers to a specific court.  The appropriate venue for a lawsuit is governed by statute in Michigan and parties cannot avoid venue statutes by contract.  But if that’s the case, then why do parties continue to designate specific courts in forum selection clauses?  There may be a few reasons for this.

First, parties may not be aware of the law.  Parties infrequently draft contracts from scratch and if they start with an old contract (perhaps one from another state or the internet), the parties may not be aware of Michigan law regarding venue.

Second, even though venue provisions may be unenforceable, it’s possible that the parties will still honor them.  For example, a party filing a lawsuit may simply choose to honor the parties’ chosen venue, as opposed to second guessing whether all terms in the contract are enforceable.  It’s also possible that the party being sued will not object to the court because of the venue provision, and an objection to venue is waived if a party fails to raise it in a timely manner.

Third, parties that agree to a venue provision will typically agree to a separate severability clause, providing that in the event any provisions of the contract are found to be invalid or unenforceable, such invalidity or unenforceability shall have no effect on the remaining provisions of the contract.  For example, in a case originally filed in California, the parties agreed to the following forum selection clause: “Vendor consents to exclusive jurisdiction and venue in the federal and state courts located in or nearest to Oakland County, Michigan.”  Skillnet Solutions, Inc. v. Entertainment Publications, LLC, 2012 WL 1670182 (N.D. Cal 2012).  They also agreed to a severability clause.  The court held that even though the venue language was unenforceable, it was severable, and the case could still be transferred to Michigan based on the other language.

Finally, parties frequently pick the right venue for future lawsuits.  In other words, the parties’ pre-selected court complies with the statute so the venue selection clause never becomes an issue.

Venue selection clauses have not gone extinct in Michigan and it’s likely that they’ll stick around for many years to come.  But picking a venue in a forum-selection clause and intentionally ignoring statutory law when you file a lawsuit may not be a risk-free approach.  Courts can always order a change of venue on their own and they have the power to sanction a party if a filing does not comply with the law.

Other factors to consider when negotiating dispute resolution terms include choice of law provisions (picking which state’s law will govern) and alternative dispute resolution (requiring non-binding mediation before any lawsuit or mandating binding arbitration in lieu of any lawsuit).  But I’ll save these topics for a future blog.  To follow my blog, visit my website (doerrfirm.com).  I can also be contacted by phone (248-212-0167) or email (joseph@doerfirm.com).

Seller’s Disclosure Statement: Tips for Sellers and Buyers

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If you’ve sold or purchased a home in Michigan after 1994, you’re probably familiar with a Seller’s Disclosure Statement (“SDS”).  An SDS is a list of 59 questions concerning the condition of the property.  A seller must complete an SDS by answering the questions honestly and in good faith.  It is required for any transfer of real estate consisting of 1-4 residential units.  It is not required for transfers made pursuant to court order, familial transfers, mortgage foreclosure, transfers by nonoccupant fiduciaries, and other similar transfers.  The SDS must be completed with the best information available and known to the transferor.  If at the time the SDS is filled out, an item of information is unknown or unavailable, the seller may state the information is unknown.

A seller must deliver an SDS to a prospective buyer before the seller executes a purchase agreement.  If a seller delivers an SDS after the seller signs a purchase agreement, the prospective buyer may walk away from the deal within a certain amount of time.  But a buyer’s right to terminate expires at closing when the deed is executed.

The Seller Disclosure Act (MCL 565.951, et al, the “Act”) does not expressly authorize a lawsuit.  Notwithstanding, a buyer may still be able to sue for common-law fraud or silent fraud.  In order to bring a fraud claim, the buyer must establish that the seller knowingly or recklessly misrepresented a material fact with the intent that the buyer rely on it.  For a silent fraud claim, the buyer must prove that the seller knew of a material fact but concealed or suppressed it through false or misleading statements or actions with the intent to deceive.  But a seller cannot be sued for an innocent misrepresentation because the Act precludes liability against sellers who lack personal knowledge with respect to errors, inaccuracies, or omissions in an SDS.  With these principles in mind, here is a list of tips for buyers and sellers.

Tips for Sellers

  1. Be honest, act in good faith: Don’t lie or attempt to cover up known, responsive information.  This may sound like a lesson from All I Really Need to Know I Learned in Kindergarten, but it is an important rule of thumb.
  2. Use the best information available and known: You do not need to go out of your way to find defects, e.g., by ordering an inspection; however, in certain cases, you may be able rely on a report or opinion prepared by a qualified expert.
  3. If information is unknown or a question is inapplicable, say so: Do not guess or speculate.
  4. Answer the question, but nothing more: It’s natural to want to explain or help a buyer, but be cautious if you provide more information than required.  Sellers have subjected themselves to liability by needlessly providing additional information.  Some sellers do not answer questions (e.g., if the property was not owner occupied), but that may not be a risk-free approach, especially if the seller is aware of responsive information.
  5. Amendments: If the SDS becomes inaccurate as a result of any action, occurrence, or agreement after the delivery of the SDS, the resulting inaccuracy does not constitute a violation of the Act.  However, if any changes occur in the structural/mechanical/appliance systems of the property from the date of filling out the form to the date of closing, update the SDS.
  6. Inspections and As-Is Clauses: They will not alleviate your duty to fill out the SDS honestly and in good faith. But an as-is clause could protect you if an alleged defect should have reasonably been discovered upon inspection, but was not.

Tips for Buyers

  1. Do an inspection: The best way to know what you’re buying is to do a thorough inspection.  But go with a reputable inspector because if a defect is conspicuous and the inspector misses it, you may not be able to sue for fraud.
  2. Don’t sign or accept an unsigned SDS: If a seller leaves any questions blank or fails to sign the form, ask for a complete SDS.
  3. Ask the hard questions: If you’re concerned about mold, leaks, flooding, or other serious issues, ask.  The seller’s response may be very telling and you may also be able to use the response in a lawsuit if it was false and intended to mislead you.

The above is not intended to be a complete or exhaustive summary of the Seller Disclosure Act.  Moreover, the appropriate or best strategy will depend on the facts of each case.  If you have any questions about a Seller’s Disclosure Statement or the Seller Disclosure Act, contact Joe Doerr (joseph@doerrfirm.com; 248-212-0167; doerrfirm.com).