Weekly Legal Update: October 16, 2026.

The Sixth Circuit affirmed a judgment of $25,179,709.24 against an individual who personally guaranteed surety bond premium obligations. Applying West Virginia law, which the parties assumed governed, the court held that the defined term "Total Indebtedness" in the amended agreement is dynamic rather than fixed, and that it grows as premiums become 60 or more days past due during the term. The court further held that the guaranty's cap, phrased as "the amount of the Total Indebtedness specified," reached the full dynamic amount rather than the static figure of $3,538,400.75 recited in the document, contrasting that phrasing with the collateral cap, which stated a precise number. The court also held that the amended agreement carried no fixed end date and continued until the indebtedness was paid in full, so the passing of the October 1, 2021 collateral deadline did not terminate it. Each holding rested on the conclusion that the contracts were unambiguous, and the court therefore declined to consider extrinsic evidence or to construe the documents against the drafter.

The Court of Appeals affirmed an award of $63,446.25 in attorney fees and $1,717.90 in costs, imposed jointly and severally against an employer and its law firm under MCL 600.2591(3)(a)(ii). The employer had sued a former electrician of nine years for breaching a noncompetition and confidentiality agreement after he joined a competitor. The trial court found the noncompetition provision inapplicable because the employee resigned voluntarily, and the only confidentiality evidence the employer ever produced consisted of two online photographs of electrical panels, which surfaced after the amended complaint was filed and which the company's witness could not tie to the employee. Citing Pioneer State Mutual Insurance Co v Michalek, the panel held that frivolousness is measured at the time the claim was asserted, and that at filing the employer possessed nothing beyond the employee's move to a competitor and his training of that competitor's electricians. A speculative belief, the court held, does not supply a reasonable basis to believe that the facts underlying a claim are true.

Applying Michigan law, the Sixth Circuit affirmed dismissal of a buyer's breach of contract claim arising from a $250,000 asset purchase agreement for a website business. Section 13(c) of the agreement waived any claim based on discrepancies, fluctuations, or changes in the performance of the assets occurring during the migration process or the inspection period. The parties had agreed to conduct the fourteen day inspection period before migration rather than after, and the buyer argued that this reordering narrowed the waiver. The court disagreed, holding that the migration process could extend beyond the inspection period and that the buyer therefore waived claims based on traffic, revenue, and other performance metrics, including a collapse in site traffic that followed the seller's failure to enable indexing. The court also rejected the argument that the waiver reached only the right to terminate rather than the right to recover damages.

The panel affirmed summary disposition under MCR 2.116(C)(10) and a judgment of $22,451.94 for the sellers in a real estate purchase dispute. The court held that the record amply supported the finding that time was of the essence, given the agreement's express payment and closing deadlines. Although a factual question existed as to whether the parties orally extended a deadline, the court held the question immaterial, because the agreement permitted modification only by a written instrument signed by the parties. Promissory estoppel failed for the same reason, since estoppel cannot rest on an oral promise that a binding contract expressly contradicts. The court also held that a $40,000 check drawn on the account of a stranger to the contract would not have constituted valid tender.

On its October 13, 2026 order list, the Supreme Court granted certiorari in Roofing Designs by JR, L.L.C. v Royal American Construction, Inc., vacated the judgment below, and remanded for further consideration in light of Keathley v Buddy Ayers Construction, Inc., 608 U.S. 647 (2026). Keathley, decided June 11, 2026 in an opinion by Justice Jackson, held that a court deciding whether a debtor's omission of a claim from bankruptcy schedules was inadvertent or mistaken should look to the totality of the circumstances surrounding the omission, and that the Fifth Circuit's less holistic formulation was erroneous. The Court assumed without deciding that judicial estoppel applies in the bankruptcy context and that inadvertence or mistake can serve as an exception. The same order list granted certiorari in three other matters, none of which concerns a commercial dispute.

The IRS announced that it will not impose a penalty when dyed diesel fuel is sold for use, or used, on highways nationwide. The relief covers penalties for failure to make semimonthly deposits of tax and for failure to maintain adequate records. It applies retroactively to October 1, 2026 and runs through December 31, 2026. The release follows an executive order dated October 5, 2026 and cites 26 U.S.C. 7508A together with sections 4041(a)(1)(A) and 4041(b)(1)(B). The IRS stated that it anticipates further guidance addressing postponement of payment and the treatment of Form 720, and it emphasized that the relief applies for federal tax purposes only and does not affect state fuel taxes or state penalties.

The IRS requested additional comments on issues arising under section 1400Z-2 concerning investments in qualified opportunity funds and in qualified opportunity zone businesses. The notice asks whether further guidance is needed on qualifying investments of eligible gains in qualified opportunity funds, and on investments by those funds in qualified opportunity zone businesses. Comments are due November 23, 2026. The notice appears at page 497 of Internal Revenue Bulletin 2026-42.

Treasury and the IRS proposed amendments to the section 36B premium tax credit regulations, implementing changes made by Public Law 119-21. Among other changes, the proposal would eliminate the limitation on repayment of excess advance payments for taxable years beginning after December 31, 2025, remove the rule allowing certain lawfully present aliens below 100 percent of the federal poverty level to qualify as applicable taxpayers, treat individuals denied Medicaid solely for failing a community engagement requirement as eligible for minimum essential coverage, and exclude plans enrolled through income based special enrollment periods from the definition of a qualified health plan. Beginning with taxable years after December 31, 2027, a month would count as a coverage month only if the Exchange verified enrollment eligibility. Written comments are due November 30, 2026, and a telephonic public hearing is scheduled for December 8, 2026 at 10 a.m. Eastern time.

The section 7520 rate for October 2026 is 5.60 percent. The annual applicable federal rates for October 2026 are 4.25 percent short term, 4.61 percent mid term, and 5.22 percent long term. The section 7520 rate governs the valuation of annuities, life estates, terms of years, remainders, and reversions, and it therefore drives the arithmetic of grantor retained annuity trusts, charitable lead and charitable remainder trusts, and qualified personal residence trusts. The applicable federal rates set the minimum interest that a family or a business may charge on an intrafamily loan or an installment sale without triggering imputed interest. The ruling appears at page 489 of Internal Revenue Bulletin 2026-42.

The ruling sets the Standard Industry Fare Level cents per mile rates and the terminal charge for the second half of 2026. Employers use those figures under Treasury Regulation section 1.61-21(g) to value noncommercial flights provided to employees on employer provided aircraft. The ruling appears at page 488 of Internal Revenue Bulletin 2026-42.

The Tribunal denied a property tax exemption claimed by a nonprofit operator of senior living facilities in Waterford Township and affirmed taxable values of $3,573,770 for 2023, $3,650,120 for 2024, and $3,598,920 for 2025. The Tribunal held that the petitioner did not carry its burden of proving entitlement to exemption under MCL 211.7o(1) and the Wexford standard, and that it did not satisfy MCL 211.7o(3) or MCL 211.7o(8). The Tribunal vacated an earlier ruling that had excluded the section 7o(3) claim from the appeal, then held that claim moot because the petitioner is not a charitable nonprofit institution. The property, classified as commercial improved, sits at 2450 Watkins Lake Road in Oakland County.

The Court of Appeals affirmed summary disposition for a corporate trustee under MCR 2.116(C)(7) on limitations grounds. The panel held that the trust's November 2022 monthly account statement, which disclosed a $201,185 transaction dated November 23, 2022 and carried legal disclosures stating the time allowed to sue, sufficiently disclosed the existence of a potential claim for breach of fiduciary duty and informed the beneficiary of the time allowed for commencing a proceeding within the meaning of MCL 700.7905(1)(a) and (2). The beneficiary's petition, filed February 1, 2024, was therefore untimely. The panel applied the knowledge standard in MCL 700.1215, noting in a footnote that the standard formerly found in MCL 700.7104(1)(c), as amended by 2024 PA 1, has since been repealed.

The personal representative of an estate sought to quiet title to property that a quitclaim deed, executed and recorded on November 30, 2012, had conveyed to the decedent and her granddaughter "not as tenants in common, but with full rights of survivorship." The panel affirmed summary disposition against the estate, holding that the quoted language created a joint tenancy with full rights of survivorship. The court reasoned that the deed is unambiguous and that the word "joint" is not required, so the language overcame the tenancy in common presumption of MCL 554.44. The court affirmed the trial court's June 6, 2025 partial summary disposition on the quiet title and reformation claims.

The IRS published a Paperwork Reduction Act notice seeking comments on the information collection associated with Form 13925, "Lien Agreement Notice of Election of and Agreement To Special Lien." Section 6324A permits the executor of an estate to elect a lien on section 6166 property in place of a bond or other personal liability. The notice proposes no substantive change to the election itself. Comments are due December 14, 2026.

The Governor signed Senate Bill 198 into law as 2026 PA 113, creating the motor vehicle dealer data collection act, which took immediate effect on October 9, 2026. The act defines protected dealer data to include consumer information stored in a dealer data system, motor vehicle diagnostic data, and other business operations data, and it requires a third party to obtain prior express written consent, contained in a separate document, before accessing, sharing, or using that data. A dealer may revoke or amend consent without cause on 60 days' notice, or immediately for cause, and a manufacturer may not treat consent as a factor in eligibility for an incentive program. The act bars manufacturers and third parties from cyber ransom practices and from requiring direct access to a dealer data system, requires dealer data vendors to offer a standardized integration framework and open application programming interface access, and requires that vendor agreements be terminable on 90 days' notice with a secure data transition. Manufacturers and third parties must indemnify dealers for qualifying third party claims, although the act places the burden of proof on the dealer.

Following a phase one trial, the court held that a Delaware limited liability company breached sections 8.2(a)(v) and 8.2(a)(xi) of its operating agreement, which required board approval and the approval of a majority in interest before negotiating a strategic partnership concerning the company's software or entering into negotiations with a competitor. The court found that the November 20, 2024 involuntary termination notice served on a minority member was pretextual, and that the company failed to prove a withdrawal event, so the court declared the notice invalid and set aside the April 30, 2025 redemption of that member's equity. The minority member was restored as the holder of Series A Preferred Units representing a 6 percent interest, together with its governance, consent, and information rights, and its board designee was reinstated. The managing member was held liable for nominal damages of one dollar for delivering an annual budget late in breach of section 7.2(c). The court extended the alignment meeting period and the purchase right periods by 694 days, but declined to award fees or a permanent injunction.

Investors who placed $2.5 million into a Delaware startup through a simple agreement for future equity sued the company and its founder after company funds were used to repay the founder's personal loans. Section 1 of the side letter required the company to use the proceeds to finance its business activities and expressly barred using them to repurchase equity or repay shareholder loans. The court entered judgment for the founder, holding that section 1 imposed obligations on the company alone and did not require any founder to direct the funds or to guarantee the company's compliance. The company, which had defaulted, was held liable for breaching sections 1 and 7 of the side letter and section 1(c) of each investor's agreement, with monetary relief reserved for supplemental submissions.

In long running litigation over earn out payments due under a merger agreement, the court resolved the two issues remaining before entry of final judgment. It entered judgment for the acquirer on the claim that the acquirer breached its commercially reasonable efforts obligation as to the first milestone, holding that the selling shareholders' principal theory failed on the merits and that their remaining theories were waived because the shareholders had limited them to later milestones. On post judgment interest, the court held that the merger agreement's contract rate applies from the date of judgment to each damages amount and to prejudgment interest, rejecting the shareholders' proposal to apply the floating legal rate to certain milestones. The court reasoned that Delaware law permits post judgment interest only from the date of judgment, and that expectation damages principles favor the contracted rate in order to avoid a windfall.

The Delaware Supreme Court affirmed a Court of Chancery letter opinion that had conditioned a stockholder's inspection of corporate books and records on a restriction limiting where the stockholder could later file suit. The Court rejected the argument that a trial court evaluating a forum restriction must confine its analysis to the factors identified in United Technologies Corp v Treppel, reasoning that Treppel itself grants broad discretion to assess conditions on inspection based on case specific facts. The Court also held that asking a stockholder where it may need to file litigation is a permissible inquiry that does not force the stockholder to disclose how it intends to use the records. Finally, the Court held that the stockholder's ability to seek relief under Court of Chancery Rule 60(b) and to request expedited treatment adequately mitigated the restriction.

The Division of Corporation Finance updated its staff interpretations. Under the Securities Act rules, the staff added new Question 240.19 concerning Rule 457 and the computation of filing fees, and new Questions 271.28 and 271.29 concerning Rule 701, the exemption for offers and sales of securities under compensatory benefit plans. Under the Securities Act forms, the staff added new Questions 126.46 and 126.47 and revised Questions 126.14 and 126.19, all concerning Form S-8. Under Exchange Act Section 16 and related rules and forms, the staff added new Question 135.05 concerning Form 4. The staff withdrew no interpretations in this update. Staff interpretations state the views of the Division and do not bind the Commission or the courts.