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January 2014

Cooley Professor Files Amicus Brief in Shareholder Oppression Suit before the Michigan Supreme Court

Professor James Carey
James Carey,
Corporate Law and
Finance Program

The Michigan Supreme Court requested that the Business Law Section of the State Bar of Michigan (the “BLS”) submit an amicus brief to address the issues raised by the case of Madugula v. Taub. The BLS appointed a committee consisting of Cyril Moscow of Honigman Miller Schwartz and Cohn LLP; Justin Klimko, chair of the BLS Corporations Committee, of Butzel Long; Douglas Toering, chair of the BLS Commercial Litigation Committee, of Toering Law Firm; and James Carey, Professor and Director of the Corporate Law & Finance LLM Program at Cooley Law School to draft and file the brief.

This case dealt with shareholder oppression claims under Section 489 of the Michigan Business Corporation Act. Three issues were raised in the appeal and the BLS amicus brief addressed all three. The positions taken by the BLS were that: (1) claims brought under MCL 450.1489 are equitable claims to be decided by a court of equity; (2) the provisions of a stockholders’ agreement can create shareholder interests protected by MCL 450.1489 provided such interests are interests typically associated with being a shareholder and the interference substantially interferes with the total mix of the shareholder’s rights; and (3) retention of one’s status as a shareholder and director does not preclude a Section 489 action.

The amicus brief concluded that the trial court should have made the determination of whether there was oppression in light of all of the circumstances, but failed to do so. Further, if the trail court found oppression, it should have devised an appropriate remedy.  The BLS took the position that the alleged breaches of high voting requirements in the shareholder agreement and lack of access to information do not appear to meet the statutory standard for oppression under Section 489, especially since plaintiff-appellee Madugula has contractual and statutory remedies for the claimed abuse. The BLS asked that the Supreme Court render a decision consistent with its analysis.

Oral arguments have been heard by the Michigan Supreme Court and a decision is expected mid-year 2014. The full text of the brief may be accessed at:


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