Corporate & Business/Aug 21, 2014

Michigan Supreme Court Strikes Down Right To Jury Trial In Minority Stockholder Oppression Cases

In closely held corporations, the majority stockholders or others in active control of the corporation are in a position of power. Certain majority stockholder action can be viewed by the minority stockholders as unfairly prejudicing minority rights. Under Michigan statute, oppressive conduct includes conduct that is (1) illegal, (2) fraudulent, or (3) willfully unfair and oppressive. To constitute oppression the conduct must cause substantial interference with the minority’s rights as a shareholder. Stockholder rights are fairly limited and include right to vote their shares and right to inspect books and records. Conduct that is permitted by the articles of incorporation, bylaws or past practices of the company are generally immune. The Michigan Supreme Court recently ruled that a minority stockholder who brings a shareholder oppression suit is not entitled by statute or Michigan Constitution to a jury trial. Neither MCL 450.1489 nor Article I, §14 of the Michigan Constitution of 1963 provide for a right to jury trial in an oppression case. The Michigan Supreme Court has squarely put the burden of fact finding on the trial bench. Madugula v Taub, Michigan Supreme Court, Docket No. 146289 (July 15, 2014).

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