The Ongoing Wayne County Jail Debacle

Sad as it is to say, there’s been a lot in the media about Michigan’s jail over-population problems. A few years back it was decided to create a new jail in Wayne County to begin housing some of the overflow. A noble plan, no?

You know what they say about good intentions and the road to hell. The project quickly turned into a quagmire, with each side blaming the other one for mismanagement and the delay of construction. By 2013, the building had sat unfinished for so long the management of Wayne County began to debate the merits of selling the lot and converting it to retail and hotel space.

On Halloween of that year, Wayne County put forth a pretty scathing lawsuit suggesting that AECOM Services, the contractor behind the project, had mismanaged the project to such a degree that the project could no longer be completed as originally designed.

The lawsuit (text of which is viewable here) cites that the contractor violated their agreement to keep costs under the agreed price of $220 million and that the obligations of their contract were not performed in a timely manner.

But a year later, the contractors fired back with a countersuit alleging that the Wayne County Building Authority committee that oversaw the project was grossly incompetent and too prone to leadership and personnel changes to really effectively manage the project. And it shows: the project’s first chief left for a job at Metro Airport, his replacement left due to scandal regarding his predecessor’s severance package, and then his replacement was fired because of contract issues.

And that’s really all it comes down to: contracts. Too many times a construction project encounters issues because of a lack of agreement on one side; if a contract holds the builder to certain standards but not the contract holder, is that really a fair deal? I’ve seen too many examples of contractors held to expectations that the contract holder is unable to assist with or meet as well. And while it’s maybe unreasonable to ask that a company not change leadership in the middle of a project, some stronger guidelines on how to proceed in such an event would have helped keep work progressing on the matter.

All I ask is that you have any public works contracts looked over before you sign them. If you want to look a little further into it, I’ve seen Howard and Howard give some good advice on their website, and Denewith, Dugan, and Parfitt  is a name that comes up a lot too.

Electronic Signatures – Upholdable in Michigan?

There’s been a lot of advancement lately in the field of electronic contracts and electronic signatures. You’ve probably seen one yourself – many businesses are switching over to digital means of capturing signatures for, say, credit card transactions. You know those little squares that coffeeshops and smaller restaurants have sticking out of their iPads? If you’ve used one of those, you’ve done an electronic signature.

But there’s been some talk these days about if Michigan can actually consider those, or other forms of e-signed documents, valid.

The Michigan Uniform Electronic Transactions Act (also referred to as UETA) was passed in 2000 and validated many types of electronically signed documents, such as tax forms and insurance papers. There are the usual rejoinders to prove context and circumstance of the document’s creation and validation, but nothing unusual.

The law’s stated intent was to put e-commerce and physical transactions on “equal footing” (check out the Michael J. Hamblin blog for more specifics) by making electronic signatures and agreements enforceable and legally binding when appropriate. However, just as with any emerging technology, there were a few hiccups along the way.

In 2012, Zulkiewski v. American General Life Insurance Co. began – a court case wherein the family of a man who had committed believe the changes he had made online to his life insurance policy were done fraudulently to benefit his new spouse.

Sad stuff, but a pretty common sight in estate law these days. The previous beneficiaries of the policy contested the payout, as there was no proof the deceased had actually made the changes himself. An electronic ‘paper trail’ was sniffed out, showing that the proper steps and security measures had been taken to verify the policyholder’s identity and intent to change the policy as best as can be done online versus in-person.

The court found that the insurance company made reasonable effort to include security steps taken to validate a customer’s identity, the policyholder had a history of being “computer literate” to the point where he can properly operate similar transactions, and that the new spouse had been made sole beneficiary on a number of other documents around the same time.

So what does this mean for your business? Simple: if you’ve got electronic transactions, pardon my French but cover your ass. Make sure your identify verification steps are still deep without being labrynthine, and make sure it would continue being difficult for anyone to fake an e-signature for any reason. Got all that? You’ll be fine.

Student Loans and Bankruptcy

This one hit a little close to home for me, given as I’m still enrolled in college and all, but I thought it worth mentioning.

I’ve had some friends who have filed for bankruptcy – a sad reality at our age, but it’s something a lot of people face and will continue to at any given point in their lives. Maybe their spending got too out of control, maybe they were saddled with debt because of bad relationships. Whatever the reason, I try not to judge.

But it has recently come to my attention that not all debts are considered equal in bankruptcy proceedings. The first things to be discharged are the major ones like credit card debt, maybe vehicle financing, things like that.

You might be shocked and dismayed (if you’re in circumstances not unlike mine) to learn, however, that while student loans might be discharged under bankruptcy, there is a very high bar to have it considered.

For considering the discharge of student loans under bankruptcy proceedings, a standard of measurements knows as the Brunner Test is employed:

-The plaintiff must be able to prove that they cannot afford a minimum standard of living for themselves and their dependents if forced to continue repaying the loans
-Additional circumstances must exist to prove that the plaintiff’s current state of financial hardship is likely to continue for some time
-And lastly (perhaps most importantly), it must be shown that a good faith effort was made to pay the loans back

If these criteria are not met – sorry to say, you’re still likely to be saddled with student debt even through Chapter 7 bankruptcy proceedings.

A recent court case found a student named Warner who had filed for Chapter 7 and was working as a clinical psychologist was not able to repay his loans solely on failing that third criteria. While the circumstances preventing his repayment were proven to exist for the time being and may proceed into the future, it was shown he had not made a good faith effort to attempt repayment – all but about $400 of the payments that had been made to this point were done by his mother, and it was shown he had not used any of the nearly $6000 he had collected in tax refunds in the year 2013 to make loan payments.

This all came together to show he had not previously made a good faith effort to repay his loans, and they were not found dischargeable.

Just goes to show everyone, even in bankruptcy you’re likely to be stuck with your loans.