Minority member oppression; “Willfully unfair & oppressive conduct”; Franks v Franks; Michigan Limited Liability Company Act; MCL 450.1489(3); Michigan Business Corporation Act; MCL 450.4515(2); Family members’ employment; Indemnification; Good faith; MCL 450.1562

In this member oppression case, the court affirmed the trial court’s dismissal of plaintiff’s “claims of member and shareholder oppression against” defendant, her brother, related to the family business inherited from their father. Also, it found “that the trial court did not err by ruling that defendant is entitled to be indemnified for his attorney fees.” Plaintiff argued “that the trial court clearly erred by finding that defendant’s acts were not willfully unfair and oppressive.” The court concluded that plaintiff’s claim “that the trial court erred by treating the issue of oppression as a question of fact is misplaced.” It found that “the definition of oppression is a matter of law. However, this Court has recognized that the determination of whether ‘willfully unfair and oppressive conduct’ amounts to oppression involves a fact-intensive inquiry requiring an assessment of credibility and context.” It applied “the same oppression framework under both MCL 450.1489(3) and MCL 450.4515(2).” As to plaintiff’s claim “that defendant engaged in oppressive conduct when he employed members of his immediate family, specifically, his wife, as office manager, as well as two of his children,” the court found the record supported the trial court’s conclusions that so long as a “spouse is qualified, and so long as the spouse performs the labor contracted for, and so long as the compensation is reasonable, there is nothing inappropriate” about hiring a spouse. The record also supported its “findings that defendant’s employment of his family members did not constitute oppressive conduct in this case.” As to the two storage facilities, “the modest storage expense did not materially interfere with plaintiff’s interests as a shareholder, and accordingly, the trial court did not clearly err by finding that the storage arrangement did not constitute shareholder oppression.” It also “did not clearly err by finding that defendant’s accounting methods did not constitute oppressive conduct.” Further, the trial court correctly found “that the defendant was entitled to indemnification because the governing documents contain no requirement of a shareholder or member vote for indemnification, and the caselaw permits enforcement of bylaws and operating agreements as written.” Finally, the court determined that “defendant satisfied his statutory and contractual obligation of good faith, and the trial court did not err in this regard.”