FFF Sovereign Immunity Series ' Part V

• Published date: 06 February 2023
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Financial Services, Sovereign Immunity: Public Sector Government, Trials & Appeals & Compensation, Fund Finance
• Law Firm: Cadwalader, Wickersham & Taft LLP
• Author: Ms Danyeale Chung and Michael Johnson Jr.

We are back today to continue along with our tasting menu of state sovereign immunity. In our fifth installment in the series, we will visit Massachusetts, Michigan, Minnesota, Mississippi and Missouri. If you are new to the FFF Sovereign Immunity Series, the first installment in this series provides helpful background as well as links to additional Fund Finance Friday articles that cover sovereign immunity in general.

We are now in the thick of things, having analyzed sovereign immunity statutes and case law for roughly half of the states. As we mentioned in our previous installments here, here, here and here, sovereign immunity is a complex topic warranting thorough examination on a state-by-state basis.

Let's dive in...

MASSACHUSETTS

Massachusetts has abolished contractual sovereign immunity by statute. M.G.L.A. 258 ' 12 states, in relevant part, that claims against the Commonwealth may be enforced in the superior court. Relevant case law has interpreted the waiver of sovereign immunity as primarily applicable in action of contracts against the Commonwealth of Massachusetts.¹

MICHIGAN

Michigan does not have immunity from suit in actions arising out of contracts to which it is a party. In fact, the courts of Michigan have stated (somewhat emphatically) that "[Michigan] never had and does not have immunity from suit in actions arising out of contracts to which it is a party."² Plus one for the home team.

While the State of Michigan does not create a sovereign immunity issue per se, Michigan governmental investors and certain public investors have recently been receiving increased attention by our team and clients alike. Article IX, Section 18 of the Constitution of the State of Michigan provides that "[t]he credit of the state shall not be granted to, nor in aid of any person, association or corporation, public or private, except as authorized in this constitution."³ Certain Michigan public and governmental investors tend to include a provision in their side letters relating to the Michigan Attorney General's interpretation of this Section. The side letter may provide that such investor cannot agree with the fund or the fund's lender to directly honor any request from such lender, including any requirement to fund capital contributions.

These side letter provisions can vary a great degree, while seemingly looking quite similar on their face. It is important for lenders and their lawyers alike to pay close attention to the particular language included in...