In 1996 and 1997, the National Conference of Commissioners on Uniform State Laws approved and recommended for enactment in all the States the following Uniform Acts:
In 1996, the Uniform Law Commissioners also approved a Model Punitive Damages Act (attached).
The Legislature has taken action with respect to the Uniform Interstate Family Support Act and the Limited Liability Partnership Act.
The Legislature enacted the Uniform Interstate Family Support Act (UIFSA) in 1996. P.A. 310, effective June 1, 1997, codified at M.C.L. §§ 552.1101-.1901. The UIFSA replaces the Uniform Reciprocal Enforcement of Support Act (URESA) and the revised URESA. It creates procedures that are intended to facilitate interstate child support enforcement.
The likelihood of universal acceptance of the UIFSA is virtually certain. As part of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996, Congress mandated enactment of the UIFSA in order for a State to remain eligible for federal funding of child support enforcement. P.L. No. 104-193, § 321, 110 Stat. 2221, codified at 42 U.S.C. § 666(f).
The National Commission on Uniform State Laws recently approved amendments to the UIFSA. The Legislature should consider adopting those amendments.
The Uniform Law Commissioners amended the Uniform Partnership Act (UPA) to provide for the creation of an entity known as a limited liability partnership (LLP), a hybrid of the partnership and corporation form of business. Uniform Partnership Act (1994), §§ 1001-1003. The LLP combines the personal liability protection found in corporations with the operational flexibility and tax treatment granted to general partnerships. Except for the tax obligations of the partnership and partnership debts, a partner of a registered LLP is not personally liable for the tortious acts or omissions of other partners committed in the course of LLP business. See Kenneth J. Kutchey, Richard P. Martel & Clark C. Johnson, New IRS Regulations May Diminish Use of Limited Liability Companies Formed Under the Michigan Statute, Mich. Bar J. 340 (March 1997).
Pursuant to P.A. 323 of 1994, the Legislature amended Michigans version of the Uniform Partnership Act to add provisions authorizing the creation of LLPs. M.C.L. §§ 449.44-.48. The 1994 legislation enacts in all material respects the LLP amendments to the UPA.
At common law an unincorporated association, whether nonprofit or for-profit, was not a separate legal entity. It was an aggregate of individuals. Some large nonprofit organizations are or until recently were unincorporated (the National Conference of Commissioners on Uniform State Laws, the Association of American Law Schools from 1900-1972, and the American Bar Association from 1878-1992).
In many ways an unincorporated association has the characteristics of a business partnership. This approach creates problems. As explained by the National Commissioners on Uniform State Laws:
A gift of property to an unincorporated association failed because no legal entity existed to receive it. For example, a gift of Blackacre to Somerset Social Club (an unincorporated nonprofit association) would fail because in law there is no legal entity to receive title. Some courts in time became uncomfortable with this result. Some construed such a gift as a grant to the officers of the association to hold the real estate in trust and manage it for the benefit of the members of the association. Later, some legislatures provided various solutions, including treating the association for these purposes as an entity.¹
As the Prefatory Note to the Uniform Act further explains, unincorporated associations, not being legal entities, could not be liable in tort, contract, or otherwise for conduct taken in their names. On the other hand, their members could be. Courts borrowed from the law of partnership the concept that the members of the association, like partners, were co-principals. As co-principals they were individually liable. Again courts and legislatures, responding to concerns of their constituents about this result, modified these rules. Courts found that, in large membership associations, some members did not have the kind of control or participation in the decision process that made it reasonable and fair to view them as co-principals. Legislatures also took steps. Perhaps the most striking are the statutes adopted in many States in the last decade excusing officers, directors, members, and volunteers of nonprofit organizations from liability for simple negligence. See, e.g., M.C.L. § 450.2209, M.S.A. § 21.197(209).
A nonprofit organization may take at least three forms: a charitable trust, corporation, or unincorporated association. A nonprofit organization, such as a church, could be two entities a charitable trust with respect to a building and its use and a nonprofit corporation with respect to its other activities. The unincorporated nonprofit association is now governed by a hodgepodge of common law and state statutes governing some of their legal aspects. No State appears to have addressed the issues in a comprehensive, integrated, and internally consistent manner. In 1982, the Legislature enacted comprehensive legislation on nonprofit corporations, see Nonprofit Corporation Act, P.A. 162, codified at M.C.L. §§ 450.2101 et seq.. The Legislature has not enacted comparable legislation for unincorporated nonprofit associations, but has created one special unincorporated nonprofit association, the Catastrophic Claims Association, as part of Michigans no-fault law. See M.C.L. § 500.3104. The Associations membership consists of all motor vehicle liability insurers in the State. It indemnifies insurers for losses in excess of $250,000 per occurrence.
The Uniform Unincorporated Nonprofit Association Act (UUNAA) applies to all unincorporated nonprofit associations. The Act covers unincorporated philanthropic, educational, scientific, and literary clubs, unions, trade associations, political organizations, cooperatives, churches, hospitals, condominium associations, neighborhood associations, and all other unincorporated nonprofit associations. Their members may be individuals, corporations, other legal entities, or a mix.
The basic approach of UUNAA is that an unincorporated nonprofit association is a legal entity for the purposes that the Act addresses: owning, receiving, and transferring real and personal property; non-liability of members for the associations tortious acts or omissions; and capacity of the association to sue and be sued. It does not make these associations legal entities for all purposes.
The Act is designed to cover all unincorporated nonprofit associations. To the extent a jurisdiction decides to retain statutes dealing with specific kinds of nonprofit associations, the Act supplements existing legislation. Many States have statutes on special kinds of unincorporated nonprofit associations, such as churches, mutual benefit societies, social clubs, veterans organizations, and Michigans Catastrophic Claims Association.
The Michigan Law Revision Commission recommends that the Legislature adopt the Uniform Unincorporated Nonprofit Association Act.
In 1994 the National Conference of Commissioners on Uniform State Laws established a Drafting Committee on the subject of punitive damages. The scope of the project was limited to one of developing a Model Act, as compared to a Uniform Act. Unlike a Uniform Act, whose principal objective is to obtain immediate uniformity among the States on a particular legal subject, a Model Act may be more of an experimental effort to assist States in developing effective new approaches to a particular problem area of the law. A Model Act may contain more novel approaches, the efficacy of which can only be attained through some trial and error. Although uniformity may prove to be desirable at some point, it is not imperative in the short term. Consequently, the subject of punitive damages was thought to be appropriate for a Model Act.
The Model Punitive Damages Act by itself does not authorize awards of punitive damages in the enacting State. The Act applies only if punitive damages are awardable in the State by common law or other authority. In other words, the Act does not define the types of cases in which an award may be made. Other authority needs to be consulted to make that determination. In addition, the Act does not place any limit or "caps" on punitive awards that do not already exist in the enacting State. The Drafting Committee felt that it could improve upon the procedure, burden of proof, judicial review, and similar matters so that arbitrary monetary limitations may not be necessary. However, if a State currently has a monetary limit or desires to adopt one, there is nothing in the Model Act that would conflict with such a limiting provision.
The Model Act distinguishes between two types of damages, compensatory and punitive. The term compensatory damages is defined as an award of money, including a nominal amount, made to compensate a claimant for a legally recognized injury. The term does not include punitive damages. The term punitive damages means an award of money made to a claimant solely to punish or deter. Section 1, Model Punitive Damages Act.
In the main, the Act attempts to define more precisely when a punitive award may be made by the trier of fact in terms of the standards for culpability and the manner in which the amount of such an award is to be determined. In keeping with these goals, the Act employs measures to facilitate judicial review of punitive awards by juries, and does so in a way to satisfy due process requirements under the Fourteenth Amendment to the United States Constitution. More specifically, the Act provides for the following:
In Michigans case, the Model Punitive Damages Act may be a solution in search of a problem. At common law, punitive damages are not recoverable in Michigan, although exemplary damages may be awarded. While exemplary damages may be recovered in the proper case, Michigan law prohibits an award of punitive damages. See, e.g., Kewin v. Mass. Mutual Life Ins. Co., 409 Mich. 401, 420-21, 295 N.W.2d 50 (1980); Fellows v. Superior Products Co., 201 Mich. App. 155, 506 N.W.2d 534 (1993).
What is the difference between punitive and exemplary damages? Punitive damages are awarded solely to punish or make an example of a defendant because of the maliciousness or recklessness with which he acted. Exemplary damages, on the other hand, are awarded to compensate the plaintiff for injuries to feelings and for the sense of humiliation and indignity because of injury maliciously and wantonly inflicted. The purpose of exemplary damages is not to punish the defendant, but to make the plaintiff whole. Veselenak v. Smith, 414 Mich. 567, 573, 327 N.W.2d 261 (1982).
In the bifurcated damages scheme of the Model Punitive Damages Act, exemplary damages fall under the category of compensatory damages, thus taking exemplary damages outside the scope of the Act.
Michigan does have a handful of statutes² and court rules that provide for an award of punitive damages:
Other than capping an award of punitive damages in the specific instances noted, none of these statutes or court rules sets out procedures for making an award of punitive damages.
The Commission makes no recommendation with respect to the Model Punitive Damages Act.
¹ Uniform Unincorporated Nonprofit Association Act (1996), Prefatory Note, at 1.
² Prior to its repeal, punitive damages were awardable in a malicious prosecution action equal to the award of compensatory damages, trebled. M.C.L. § 600.2907, M.S.A. § 27A.2907.