Authored By: Matthew Smith and Kenneth Neuman
Shareholder and member oppression claims are commonly referred to as “minority” oppression claims. This labeling is so prevalent that it has found its way into opinions authored by both the Michigan Supreme Court and Michigan Court of Appeals. (For example, see Madugula v. Taub, 496 Mich. 685, 695 (2014); Franchino v. Franchino, 263 Mich. App. 172, 178 (2004)). But Michigan’s oppression statutes, MCL 450.4515 and MCL 450.1489, do not speak in terms of an action by a minority owner and against a majority oppressor. Rather, the express language of these statutes provide an action by a shareholder or member, without regard to their share of ownership, against persons or entities “in control” for acts that “are illegal, fraudulent, or willfully unfair and oppressive.” Thus, the moniker “minority oppression” is in fact a misnomer.
But this has not stopped litigants – and occasionally courts – from confusing the colloquialism “minority oppression” as requiring the oppressed-plaintiff to be a minority owner. The recent unpublished per curiam opinion of the Michigan Court of Appeals in Young v VanderMeer, 2021 Mich. App. LEXIS 1260 (Mich. Ct. App. Feb. 25, 2021) is such an example. Young involved a lengthy dispute between Young and VanderMeer – two equal 50% shareholders of Grand Connection, Inc. (“GCI”), a closely-held corporation. Deadlock ensued between them, in part due to allegations by Young that VanderMeer, as GCI’s vice president and secretary, had taken control of GCI’s financial affairs, excluded Young from GCI’s website host and email server, and was exercising authority that was properly vested in Young as president. An initial round of litigation resulted in the appointment of a receiver to oversee the corporation’s remaining financial obligations concerning certain “pipeline projects.” But during this receivership-phase, Young accused VanderMeer, as well as her husband and a newly formed entity, of misappropriating some of the pipeline projects and the corporation’s business opportunities. Young then filed a second lawsuit, which included a claim for shareholder oppression under MCL 450.1489 against VanderMeer. The trial court later dismissed Young’s oppression claim, because Young was not a minority shareholder of GCI.
The Michigan Court of Appeals reversed. Beginning with the plain language of MCL 450.1489, the Court rejected the legal premise that Young was required to be a minority shareholder to mount an oppression claim. It reasoned “[t]he statute does not contain the word ‘minority,’ but courts have described the statute as allowing for actions by ‘minority shareholders….” Young, at *18. But this description was not authoritative, and the Court noted that it was “not aware of any case holding that the statute is only available to minority shareholders,” nor could it “read language into an unambiguous statute.” Id. Applying the plain language of the statute, “Young did not need to prove that she was a minority shareholder; she only needed to show VanderMeer was in control of GCI during the relevant time frame.” (Emphasis added). “Because there was evidence that VanderMeer was in control of GCI at the time of the alleged acts of shareholder oppression, the trial court erred when it dismissed Young’s claim on the ground that she was not a minority shareholder.” Id. Young is not the first Michigan appellate decision to reject a “minority” ownership requirement. SeeLozowski v Gray, 2006 Mich. App. LEXIS 324, *10-11 (2006) (“the plain statutory language does not require that the plaintiff be a minority shareholder, or show that each defendant individually is a majority shareholder. Rather, subsection 489(1) requires only a showing that the defendants are ‘In control of the corporation.’”). However, the discussion of this issue in Young is the most squarely on point in Michigan, and it is now the most recent authority on the subject.