Weekly Legal Update: October 23, 2026.

A West Bloomfield Township ordinance prohibits renting or occupying a residential unit without a certificate of compliance, and the landlords conceded that they never obtained one for the period the tenant lived in the unit. The Court of Appeals held that the lease was void from the outset, reasoning that renting and occupying the unit was central to the bargain and that a contract made contrary to law will not be enforced merely because the ordinance creates no private right of action. The consequences ran in both directions. The landlords lost their breach of contract claim for unpaid rent entirely, and the tenant lost his own contract theories, including his claim for conversion of the security deposit, because no valid lease created a duty to return it. The court nonetheless reinstated the tenant's claims for unjust enrichment, disgorgement, and conversion of other personal property, holding that those theories do not depend on a valid contract, and it reversed a 500 dollar sanction imposed without notice and an opportunity to respond.

Commercial tenants leased a Detroit property to sell tires under a lease that accepted the premises in "as is" condition and required the tenants to comply with all laws at their own expense. City inspections determined that the property lacked a required automatic sprinkler system and that the intended use was unlawful. The tenants stopped paying rent and abandoned the premises, and an arbitrator awarded the landlord 411,131.50 dollars plus interest and held the guarantors personally liable. The Court of Appeals affirmed confirmation of the award, holding that review is confined to legal error discernible on the face of the award itself and that it would not examine the arbitrator's reasoning. It rejected impracticability because the lease placed compliance obligations on the tenants, and it rejected mutual mistake because, unlike the barren cow in Sherwood v Walker, the missing sprinkler system did not go to the whole substance of the agreement.

A title search vendor sued Oakland County after the county shifted work to a competitor without issuing a new request for proposals, and it sued the competitor for tortious interference. The court affirmed dismissal of every claim. Section 13.13 of the contract stated plainly that the agreement was non-exclusive and guaranteed no fixed volume of work, specific language controlled over the general language the vendor relied on, the county's internal policies were never incorporated into the contract, and limitation of damages provisions barred reliance damages and lost profits. The court further held that the interference counts were contract claims wearing a different label and failed along with the contract claim. Most significant procedurally, the court held that the trial court abused its discretion in ruling that offer of judgment costs under MCR 2.405 are unavailable to a party that wins on summary disposition, and it remanded for consideration of the interest of justice exception.

A customer at a Target store in Michigan was photographed through the partition of an adjoining fitting room stall by a third party who was later criminally convicted. She sued the retailer on theories of premises liability, ordinary negligence, emotional distress, invasion of privacy, and consumer protection, arguing that the fitting room design afforded inadequate protection against foreseeable voyeurism. Applying Michigan law, the Sixth Circuit affirmed judgment on the pleadings for the retailer. A merchant is not an insurer of its customers' safety; its duty arises only when it knows of a specific, presently occurring criminal situation involving an identifiable potential victim, and even then the duty extends no further than reasonably expediting police involvement. The court held that foreseeability alone creates no duty, that a plaintiff cannot evade that rule by recasting a crime-based claim as a dangerous condition claim, and that adopting voluntary safety measures does not obligate a merchant to provide perfect protection.

Conservation groups challenged the environmental review supporting a multibillion dollar replacement of a coal plant with a gas-fired plant. They never sought a preliminary injunction, and construction proceeded for roughly two years. The district court found two violations of the National Environmental Policy Act and vacated the environmental impact statement and the record of decision. The Sixth Circuit granted an emergency stay of that vacatur pending appeal, concluding that the agency is likely to succeed because the statutory requirement to consider a range of alternatives does not compel two qualifying alternatives when only one exists, because the agreement with a pipeline operator was likely not an unlawful commitment to a predetermined outcome, and because vacatur was likely the wrong remedy for the errors identified. The court also found irreparable harm in halting construction and reserved judgment on the plaintiffs' standing and on the ultimate merits.

Treasury and the IRS partially withdrew the proposed regulations on device and active trade or business under section 355 that were published on July 15, 2016. Three provisions are gone as of October 21, 2026: proposed section 1.355-2(d)(2)(iv)(E), an anti-abuse rule aimed at transactions undertaken principally to change a corporation's nonbusiness asset percentage; proposed section 1.355-2(d)(5), the mechanical "per se" device test keyed to nonbusiness asset percentage thresholds that would have applied without regard to nondevice factors such as corporate business purpose; and proposed section 1.355-9(d), the minimum active trade or business anti-abuse rule. The agencies attributed the withdrawal to stakeholder feedback that was generally critical and stated that they continue to study the issues. The withdrawal is partial, so the remainder of the 2016 proposal stands, and the document states expressly that the withdrawal does not affect the potential application of other rules or judicial doctrines, such as substance over form or step transaction.

Revenue Procedure 2026-34 expands and restructures the Employee Plans Compliance Resolution System, replacing Revenue Procedure 2021-30 as the framework plan sponsors use to correct plan errors through the Self-Correction Program, the Voluntary Correction Program, and the Audit Closing Agreement Program. The IRS states that it is effective October 22, 2026. Revenue Procedure 2026-33 is the more novel item, because it establishes a correction program for individual retirement accounts for the first time. That program permits IRA custodians and IRA owners to request correction of certain inadvertent failures, including failures caused by a service provider's error, and it moves requests to waive the 60-day rollover requirement out of the private letter ruling process and into the new program during 2027 and 2028. The IRA program takes effect May 1, 2027, and the existing automatic waiver and self-certification routes under Revenue Procedures 2020-46, 2016-47, and 2003-16 remain available at no cost in the meantime.

Revenue Ruling 2026-21 publishes the applicable federal rates for November 2026. The annual short-term rate is 4.67 percent, the annual mid-term rate is 5.08 percent, and the annual long-term rate is 5.52 percent. The section 7520 rate, which is used to value annuities, life interests, terms of years, and remainder and reversionary interests, is 6.20 percent for November. That is a 60 basis point increase over the 5.60 percent rate that applied in October 2026 under Revenue Ruling 2026-19, which is a substantial move in a single month. The applicable federal rates also establish the minimum interest a loan must bear before the arrangement carries gift or compensation consequences.

Treasury finalized regulations amending section 1.1502-80(d) to confirm that, in certain transfers between members of a consolidated group, a transferee's assumption of liabilities does not reduce the transferor's basis in the transferee's stock. The rule excludes specified liabilities from the computation under section 358(d)(1) and adds an illustrative example. The regulations are effective October 16, 2026, and they apply to consolidated return years for which the return due date, determined without regard to extensions, falls after that date. Treasury adopted the December 2024 proposed regulations without substantive change, having received no comments and held no hearing.

The IRS announced that it will not challenge certain failures to meet return filing, reporting, and recordkeeping requirements under sections 6001 and 6011 where the failure results solely from liability for the excise tax on taxable uses of dyed diesel under section 4041(a). The relief covers the filing of Form 720 solely to report that liability, the reporting of that liability on an otherwise required Form 720, and the creation or maintenance of records solely to substantiate it, and the IRS will not assert civil penalties or additions to tax for covered failures. The relief applies to taxable uses of dyed diesel occurring on or after October 1, 2026 and before January 1, 2027, and it applies whether or not the filing deadline falls after December 31, 2026, with no requirement to file or reconstruct records afterward. The IRS stated that it is considering a grace period or other measures addressing residual red dye remaining in fuel tanks once the relief period ends.

A trust beneficiary sued the corporate trustee over a 201,185 dollar distribution used to purchase a condominium from the beneficiary himself, in which his mother lived. The Court of Appeals affirmed summary disposition for the trustee under MCR 2.116(C)(7), holding the claims time-barred under MCL 700.7905(1)(a), which sets a one-year limitations period once a beneficiary receives a report that adequately discloses the existence of a potential claim and states the time allowed to bring it. The November 2022 monthly trust statement disclosed the distribution and carried the required notice, and the petition was not filed until February 2024. The court rejected the argument that notice pages were missing from the statement as unsupported by the record, and it held that claims recast as silent fraud, fraudulent concealment, and civil conspiracy were barred for the same reason. This decision falls four days before our ordinary coverage window but was summarized in the State Bar e-Journal this week and is reported here for that reason.

The court enjoined a recapitalization that would have exchanged the founders' shares for nine-vote preferred stock and created a new class of non-voting common stock. The opinion is the most significant construction yet of 8 Del. C. section 144 as amended in 2025, and its structure is what makes it instructive: the court held that the defendants prevail on every statutory issue, finding that the safe harbor reaches this kind of transaction and that the presumption of director disinterestedness applies. The transaction was nonetheless enjoined because the safe harbor also requires that the qualified committee act in good faith and without gross negligence, and the court found it reasonably probable that the plaintiffs can show that standard was not met. The court pointed to advisor notes discussing a "narrative" and "gets" for the founders, a committee member's unauthorized communications with a founder, founder resignation threats, and heavy use of auto-deleting Signal messages despite anticipated litigation. The court made no findings of fact and offered the defendants an expedited bifurcated trial, ideally within about ninety days.

The court dismissed the action for lack of personal jurisdiction, holding that California Labor Code section 925 rendered voidable the Delaware forum selection and choice of law provisions carried into the defendant's agreement through a merger agreement. Although the defendant held a partner title, the court treated him as an employee in substance, noting the absence of managerial control and the buyer's own references to him as an employee. Signing was a condition of his continued employment because refusing would have cost him his job, and the statutory exception for individually represented employees did not apply because he had no counsel of his own and could not negotiate the terms. Applying the Restatement (Second) of Conflict of Laws, the court held that California had both a materially greater interest and a fundamental public policy that Delaware's general interest in freedom of contract did not override, and that the defendant exercised his right to void the provisions by challenging jurisdiction.

The Commission sued to block PlayPower's acquisition of rival playground equipment manufacturer BCI Burke, joined by the attorneys general of Arizona, California, Colorado, Illinois, Nevada, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Washington, and Wisconsin. The complaint alleges that five companies, including both parties, hold between 85 and 90 percent of the United States market, and that eliminating head to head rivalry would permit higher prices following steep increases PlayPower has already imposed, reduce innovation and product quality, and weaken customer service. The complaint also alleges a distinct harm to the independent sales representatives who sell the companies' equipment, in the form of reduced commissions or worse terms. The Commission characterized the resulting concentration as presumptively unlawful under the joint merger guidelines of the FTC and the Department of Justice and voted 2 to 0 to authorize staff to seek a permanent injunction.

The Commission voted 2 to 0 to issue a complaint and accept a proposed consent agreement for public comment in connection with Publicis's acquisition of LiveRamp. The five-year order requires the parties to provide non-discriminatory access and support for LiveRamp's standalone products and services on fair and reasonable terms, and prohibits them from denying, degrading, delaying, or impairing customers' continued access. It requires Publicis to establish firewalls preventing it from accessing or using LiveRamp customer data and confidential business information obtained through customers' use of those standalone products. An independent auditor must review compliance with the contractual commitments every six months for the first two years after closing and annually for the following three years. The proposed order is open for public comment for 30 days following publication of the consent agreement package.