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Apr 2014
01
April 01, 2014

Grab the Wheel – Michigan’s New Road to Receiverships Could Get Bumpy

New rules take effect May 1

 

Attorneys and clients seeking the appointment of a receiver often face the dilemma of uncertainty. The process can be riddled with questions: Will the court appoint the requested receiver? If not, will the court appoint a receiver with knowledge of, let alone specialization in, the subject matter of the receivership? Will the court even appoint a receiver? How long will it take to get the appointment, if ever? And, if the receiver appointed is other than the one requested, will the appointment add so much extra cost to the case that you will wish you had never asked? 

As if those uncertainties weren’t challenging enough, Michigan attorneys now face a new bump on the road to receivership beginning May 1.

A 2013 proposal attempted to hedge some of the uncertainty in the appointment process by amending the court rules governing receiverships to, among other things, direct the court to “defer to the petitioner’s nomination of receiver. . .”

That phrase, however, became not just a bump in the road, but a huge pothole filled by an avalanche of opposition to the proposed amendment. Opponents feared the phrase removed a judge’s discretion in the appointment process and would result in the appointment of receivers who were beholden to the party who sought the appointment.

The final amendments, which take effect May 1, do not require the Court to defer to the petitioning party. Instead, the new rules make clear that, even if stipulated or not contested in a timely manner, “the court shall appoint the receiver nominated by the party . . . unless the court finds that a different receiver should be appointed.” This language, combined with the broad grounds for disqualification set forth in the new rules, ensures that the court retains complete discretion over the appointment of receivers.

There are other changes to Michigan Court Rule 2.622 as well which impose obligations on parties seeking the appointment of a receiver. For example, the petitioning party must now provide specific detail on how the nominated receiver has the requisite competence, qualifications and experience to serve as a receiver, after considering factors such as relevant business, legal and receivership knowledge, and ability to obtain a bond.

To learn more about navigating this new road to receiverships, please contact Matthew K. Casey (248.784.5031 or mcasey@wnj.com), Timothy Hillegonds (616.752.2132 or thillegonds@wnj.com), or any other member of the Restructuring and Insolvency Practice Group at Warner Norcross & Judd.

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