Commercial Law Reporter
A Publication Devoted to Commercial Law and Intellectual Property Issues
July 2010

Managing Editor: Karen Libertiny Ludden
Co-Editors: Robert D. Goldstein and Mark Shreve

• New case law addresses trucker liability under MCS-90 endorsement.
• What you need to know about… getting clients to pay.
• Commercial law update: $2 million default judgment reversed, breach of contract on home purchase.

New case law addresses trucker liability under MCS-90 endorsement by: Mark Shreve

The MCS-90 is an endorsement on a trucking company’s liability insurance policy, which is required by the Federal Motor Carrier Safety Regulations. The endorsement serves as a surety for the safety of the public. Even if the trucking company is not entitled to liability coverage due to an exception or exclusion in the insurance policy, an injured member of the public may recover under this endorsement. The insurance company may then seek reimbursement from the trucking company.

The MCS-90 does not create a duty to defend by the insurer, but only a duty to the public to pay any judgment against the motor carrier resulting from the negligence in operation, maintenance or use of motor vehicles. See, e.g., Canal Ins. Co. V. First Gen. Ins. Co., 889 F.2nd 604, 614 (5th Cir. 1989).

The MCS-90 overrides policy exclusions that would otherwise preclude coverage, including noncooperation and notice clauses and including exclusions for unintentional acts, intoxication, and similar activities. See Campbell v. Bartlett, 975 F.2d 1569, 1580-81 (10th Cir., 1992). However, exclusions for intentional acts are likely to preclude MCS-90 coverage because the endorsement language covers situations “resulting from negligence.” Importantly, courts may not always require the

MCS-90 endorsement as a matter of law. Waters v. Miller, 564 F.3d 1355 (11th Cir. 2009). In an important new decision, the 11th Circuit held that there was nothing to indicate to the insurer that the insured was operating its tractor trailer interstate, therefore an MCS-90 endorsement was not required. The matter arose when the insurer’s policy expired by its own terms. The District Court found that the insurer had not notified the federal agencies as to the cancellation of the policy. On appeal, the 11th Circuit concluded that the claimant did not present sufficient evidence to support the conclusion that the insurer knew or should have known that the prior insured was operating the tractor/trailer in interstate commerce. Therefore, the Court would not require the insurance policy to include the MCS-90 endorsement. However, as the 11th Circuit noted, some courts have required the endorsement be added to insurance policies as a matter of law, particularly when there is evidence that the insurer knew it was insuring an interstate motor carrier. See., e.g. Howard v. Quality Express, Inc., 128 N.N. 79; 989 P.2d 896, 900 (1999).
Mr. Shreve is an attorney in the Troy office of Garan Lucow Miller who handles litigation involving trucking companies. You can reach him by telephone, at(248)6417600/(800)875-7600, or mshreve@garanlucow.com

What you need to know about… getting clients to pay
by: Thomas P. Christy

Many businesses assume that, if the buyer does not pay, the seller can simply get the goods back. After all, if the buyer has not paid, the buyer does not own the goods yet, right?

Wrong. Under the Uniform Commercial Code, which has been adopted in similar versions in all 50 states, goods become the buyer’s property as soon as the buyer receives them. Nothing that you put in the sales contract can change this. Worse yet, if the buyer is bankrupt, the goods could be auctioned off, and the proceeds would then be shared among all the buyer’s creditors. What you can do is reserve a “security interest” in the goods. A security interest is similar to a mortgage; the goods become collateral for the credit that you are extending to your buyer. While you may still need to go through legal proceedings to get the goods back, in most cases you will have priority to the goods over all other creditors.

The time to obtain a security interest is when the contract is being signed, not after the fact, so do not wait to seek a security interest to “wait and see” if the buyer is going to make good on the deal. Be proactive. Mr. Christy is an attorney in the Troy office who handles creditors’ rights for commercial companies. You can reach him at (248) 641-7600/(800) 875-7600 or tchristy@garanlucow.com

Commercial Law Update by Karen Libertiny Ludden
COURT REVERSES $2 MILLION DEFAULT JUDGMENT IN INTELLECTUAL PROPERTY CASE

In June, the Michigan Court of Appeals reversed the entry of a $2 million default judgment in an intellectual property case involving the use of video and computer boards, finding an abuse of discretion by the lower court.

In RDI of Michigan v. Michigan Coin-Op Vending, Inc., 2010 WL 2431911 (Mich. App.), the defendant’s attorney sought to withdraw from the case, and the request was granted. The trial court stated on the record that the proceedings would be stayed for 21 days and a status conference would be scheduled requiring all parties to attend. A written order allowing the withdrawal and scheduling the status conference was entered, but the conference was set for 20 days hence. The defendant failed to appear, and the lower court entered a default judgment.

The Court of Appeals reversed the finding, not on the grounds that defendant had no obligation to appear, but on the grounds that the trial court abused its discretion by failing to consider other, milder sanctions, and also because the trial court failed to give defendant an opportunity to participate in the damages phase.

IN COURT AFFIRMS AWARD OF DAMAGES FOR BREACH OF CONTRACT WHEN BUYER PURCHASES OTHER, LESS EXPENSIVE PROPERTY ON GROUNDS OF “IMPOSSIBILITY”

When a buyer entered into a contract for the construction of a new home, but later breached the contract by buying another, less expensive home, the Court of Appeals upheld the award of damages by the trial.

In Oakwood of Cambridge L.L.C. v. Kapsa, 2010 WL 2016294 (Mich. App.), the defendants entered into a contract to construct a home for a total purchase price of $357,990. Although the plaintiff had initially estimated that construction would be completed by Thanksgiving, the house was not finished until August of the following year. Around this time, defendants’ financial situation declined as result of unemployment, pension reduction and elimination of health benefits. The defendants were also unable to sell their former home. Even so, they participated in a final walk-through of the new home and “found no items of concern.” By December, the defendants had closed on another, less expensive home. It was not until Plaintiff observed the Defendants exiting the garage of another, nearby home, that it was discovered that the Defendants would not be closing on the house at issue.

The defendants argued that the change in their financial circumstances rendered their performance impossible as a matter of law, and thus they did not breach the purchase agreement. While acknowledging that the doctrine of impossibility may extinguish a party’s liability under a contract if performance becomes objectively impossible, the Court found that the defendants’ liquid assets were sufficient to supplement their mortgage payments. The Court also found that, “subsequent events which in the nature of things do not render performance impossible but only render it more difficult, burdensome, or expensive, will not operate to relieve a party of its contractual obligations.”

The Court of Appeals also rejected the defendants’ argument that the plaintiff was first to breach on the grounds that the subject house did not meet the specifications. Due to the defendants’ numerous walk-throughs, and agreement that they found “no items of concern,” the Court rejected this defense. Ms. Ludden is an attorney in the Troy office who handles commercial litigation. You can contact her at (248) 641-7600/ (800) 875-7600, or kludden@garanlucow.com

Breaking News

Garan Lucow Miller, P.C. is pleased to announce the opening of its Indiana office Barrister Court 9211 Broadway Merillville, IN 46410 Phone: (219) 756.7901 Fax: (219) 756.7902 See the attached announcement for a full biography of the experienced attorneys servicing claims arising in Indiana. SAVE THE DATE If your company is interested in receiving a free in-house seminar on any commercial law topic, please contact kludden@garanlucow.com

Announcing Our New Indiana Office Garan Lucow Miller, P.C. Is Pleased To Announce Gregory M. Bokota Jennifer L. McCloskey and David A. Wilson have joined the firm as Shareholders in our new Merrillville, Indiana office. Gregory M. Bokota was founding partner at Bokota Wilson McCloskey & Long, P.C. In 1985, Mr. Bokota earned his B.A. from the University of Chicago with honors, and in 1991, he received his J.D. from Indiana University School of Law. Mr. Bokota concentrates his practice in the areas of insurance defense litigation and appellate law. Mr. Bokota is licensed in the State of Indiana and State of Illinois.

Jennifer L. McCloskey was founding partner at Bokota Wilson McCloskey & Long, P.C. In 1992, Ms. McCloskey earned her B.A. from Hillsdale College, and in 1995, she received a J.D. from Valparaiso University School of Law. Ms. McCloskey concentrates her areas of practice in the field of insurance defense, criminal law and premises liability. Ms. McCloskey is licensed in the State of Indiana.

David A. Wilson was founding partner at Bokota Wilson McCloskey & Long, P.C. In 1990, Mr. Wilson earned his B.A. from University of Central Florida, and in 1996, he received a J.D. from Valparaiso University School of Law. Mr. Wilson concentrates his areas of practice in the field of insurance defense litigation, commercial trucking and transportation defense, and is a member in TIDA. Mr. Wilson is licensed in the State of Indiana and State of Illinois.

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Robert D. Goldstein of our Grand Blanc office, Timothy J. Jordan of our Detroit office, and Kelly M. Kluting of our Grand Rapids office, are licensed in the State of Indiana. They are also available for assignments in both the Indiana and Michigan offices. ******

Garan Lucow Miller, P.C., a full-service law firm since 1948, providing quality representation to a national clientele from the Great Lakes Region, is pleased to announce that it has opened an office in Merrillville, Indiana, to further facilitate your claim and litigation needs in Indiana and Illinois. Barrister Court 9211 Broadway Merrillville, Indiana 46410 Phone: 219.756.7901 Fax: 219.756.7902 Ann Arbor – Detroit – Grand Blanc – Grand Rapids – Lansing Marquette – Port Huron – Traverse City and Troy, Michigan and Merrillville, Indiana www.garanlucow.com