Business Court Update: New Amendments Clarify Business Court Jurisdiction

Effective October 11, 2017, two amendments to Michigan’s Business Court Statute clarified the definitions and jurisdictional requirements under that statute for claims to be filed in the Business Court. The Legislature modified both MCL 600.8031 and 600.8035, which had the effect of adjusting Business Court jurisdiction through both expansion of power to hear certain claims (such as claims for equitable relief and claims against commercial loan guarantors); and a limitation of the power to hear other claims (such as claims between business enterprises that are not truly business disputes, claims between credit unions and their members, and claims for residential evictions and foreclosures).

Background
Enacted in 2013, the Business Court Statute (MCL 600.8031, et seq.) mandates that every circuit court with three or more judges create a “Business Court.” The Business Courts were intended to develop a specialized docket (with a limited number of judges per circuit) that would focus on business and commercial disputes in order to streamline disposition of business and commercial disputes. However, since the Business Courts were created, experience has shown that unintended claims have fallen under Business Courts’ jurisdiction, including cases involving residential property issues (i.e., foreclosures and evictions) or actions involving “members” of credit unions (i.e., claims by or against account holders at credit unions who are traditionally identified as “members”). Additionally, experience has shown that claims practitioners assumed would be Business Court claims (i.e., claims for declaratory or other equitable relief on a commercial contract; or claims against an individual guarantor of a commercial loan) were not technically within the reach of the statute. As a result, the Legislature has made the following changes, intending to exclude the cases not originally intended for specialized courts in order to prevent delays in the system resulting from the former statutory language.

MCL 600.8031
This section of the Business Court Statute, which contains the definitions, was altered in three key ways to clarify both the types of actions that can be heard by the Business Courts.

First, the Legislature refined the definition of a “business or commercial dispute” to include certain classes of claims between a business enterprise and an individual, while excluding others. In particular, business and commercial disputes now explicitly include claims between a business entity, on one side, and individuals, on the other side, where the individuals are “guarantors of a commercial loan.” MCL 600.8301(1)(c)(ii). This change clarified that when a lender sues to collect a commercial loan from a business enterprise, it may also include claims against any guarantors of that loan who may be individuals. Previously, those claims would not have been included in Business Court jurisdiction, because the original statute had no provision for claims against individuals, other than those arising out of disputes regarding the ownership of a business enterprise or employment with a business enterprise. The Legislature further amended the definitions section to clarify that Business Court jurisdiction is limited to claims between a business enterprise and “members of a limited liability company or a similar business organization.” MCL 600.8301(1)(c)(ii). This amendment clarified that the type of membership disputes that belong in the Business Court are those involving members of a limited liability company and not disputes between a credit union and its “members.”

Second, the Legislature limited the types of disputes that can be heard by the Business Court where the disputes are between two business enterprises. Previously, if all parties to any claim were “business enterprises” that claim could be heard by the Business Court. Now, even where all parties are business enterprises, the list of excluded claims (MCL 600.8031(3)) applies to limit those claims that can be heard by the Business Court. Under the amendment, cases that may have previously fallen under the Business Court jurisdiction because both parties had business enterprise status are excluded if that action is solely brought on claims that are specifically excluded under the Business Court Statute.

Third, the Legislature limited the claims that could be brought in the Business Court by expanding the exclusions under MCL 600.8031(3)(k) to exclude actions involving residential construction and condominium lien foreclosure matters.

MCL 600.8035
The Legislature amended MCL 600.8035 to expressly include actions seeking equitable or declaratory relief, so long as those actions otherwise meet the jurisdictional requirements in the circuit court. The prior version of the statute required the amount in controversy to “exceed $25,000” making no reference to claims for equitable relief. The amendment clarifies that actions seeking only equitable relief, which otherwise: (1) meet the requirements of Business Court jurisdiction, and (2) meet the requirements for circuit court jurisdiction, are subject to jurisdiction in the Business Courts.