H. Joel Newman, PLLC Business Litigation Attorney

To best protect your interests and your company, a basic understanding of business litigation and a proficient business attorney are essential.

Business litigation involves disputes between one or more businesses or between co-owners, shareholders, members, officers, managers or others involved in the governance of a company.

Business owners should consult with legal counsel to ensure proper agreements and policies are in place before signing anything. This will help prevent future conflicts.

Breach Of Contract

A contract is an oral or written agreement to do or not to do a particular thing in exchange for the other party promising to do or not do something. A breach of contract occurs when a party to a contract fails to fulfill its promise(s) or threatens an intent to breach.

One example of a contract is a Limited Liability Company operating agreement or other shareholder agreement. Breaches of a shareholder agreement. See Madugula v Taub, 496 Mich 685, 720 (2015) (“Thus, we agree with the Court of Appeals to the extent that it determined that a breach of the rights and interests contained in the stockholders’ agreement could be evidence of shareholder oppression.”).

Breach of Fiduciary Duties

A fiduciary relationship arises from the reasonable reposing of faith, confidence, and trust and the reliance of one on the judgment and advice of another.

Examples of fiduciary relationships in business:

• • Corporate officer to corporation and in some circumstances, to shareholders
• • Manager obligation to LLC and in some circumstances, to members
• • Partners to one another
• • Agent to principal

Examples of breaches of fiduciary duty:

• • Self-dealing
• • Conflict of interest
• • Failing to provide proper accounting
• • Engaging in illegal activity
• • Failing to disclose material facts
• • Misusing funds

Business Fraud

Fraud includes any act intended to deceive another person to act in a manner that the actor believes will be to the other's harm but to the benefit of the actor or a third party.

Two types of Fraud

The knowing misrepresentation of facts and the intentional concealment of a material fact in order to create a false impression, either done with the intent to induce another person to rely on the facts or impression to the harm of the other person and the advantage of the actor or a confederate of the actor. Bouvier Law Dictionary - Fraud (Fraudulent or Defraud)

Limited liability company (“LLC”)

LLCs are governed by the Michigan Limited Liability Company Act and by their Operating Agreements or other Agreements. Anything not provided for in the Operating Agreement is generally controlled by the Act. Among other things, the Act provides that members are entitled to financial and other information with respect to the LLC, provides for notice and voting requirements and imposes fiduciary duties on managers. LLC litigation frequently arises from allegations of member oppression, breaches of fiduciary duty, failure to provide information lack of distributions, and the other causes of action discusses here.

To prevent trouble later, it is important that LLC members have their Operating Agreements reviewed by counsel before signing and that members obtain and review all of the information to which they are entitled.

Shareholder Oppression/ Member Oppression Litigation/Shareholder Rights

Shareholders in closely held Michigan Corporations and members of Michigan LLCs can sue officers, managers or others in control of a company for oppression if their conduct is illegal or unfair to the company or the shareholder/member. MCL 450.1489; MCL 450.4515

Shareholders and members are entitled by statute to certain information pertinent to the operation, financial performance and governance of the company.

Although every case is different, this is generally what to expect if our firm takes a Plaintiff’s business litigation matter:

Interview the client and other friendly witnesses.

Review all relevant documents, including agreements, financial information, communications between the parties and all other documents we deem relevant.

Send a letter to the opposing parties setting forth the claims and demands and/or making a statutory request for documents and information.

Assuming the matter doesn’t settle, at this point we file a lawsuit or arbitration demand. The court frequently requires settlement mediation early on.

Lawsuits and arbitrations regarding shareholder oppression, member oppression, breaches of fiduciary duty or other corporate/LLC governance issues can involve voluminous amounts of paper and frequently require retaining forensic accountants and valuation experts.

The matter generally commences with a Complaint and an answer, followed by discovery.

Discovery is the process of obtaining information from the other side. It usually takes a minimum of six months and frequently more. In discovery, the parties ask each other for all documents supporting their position or relevant to the case. Each side also takes the deposition testimony of relevant witnesses.

If the matter still hasn’t resolved, the court usually sends the parties to settlement mediation.

If mediation is unsuccessful, the matter will ultimately be resolved by motion or trial. More than 90% of business litigation cases resolve before trial.

How To Select A Business Litigation Attorney

See A Complete List Of Our Business Litigation Results.