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H. Joel Newman, PLLC
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New +Justia featured Lawyer listing. #businesslaw
H. Joel Newman
H. Joel Newman
lawyers.justia.com
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Significant decision...

Shareholder Derivative Claims/Disinterested Person Statute.

The Michigan Court of Appeals has released Kern v Kern-Koskela for publication. This is the first Michigan appellate decision discussing the application of MCL 450.1495, which is an under-utilized but powerful weapon for defendants in shareholder derivative actions. It authorizes the defendant company to appoint “disinterested” person(s) to stand in the stead of the company and determine, on behalf of the company, whether the suit could benefit the company and should continue, or whether it should be dismissed. The statute is designed to short-circuit litigation and provides a means for early dismissal.

In Kern, Plaintiff and his sister each owned a 50% interest in Maxitrol Co. and Mertik Maxitrol, Inc. Plaintiff, a director, filed a derivative action against the other two directors, his sister, and her husband. He also sued the CFO, and Company Counsel.

Defendants moved for the appointment of a disinterested person under MCL 450.1495. Oakland County Business Court Judge Alexander appointed attorney Joel Serlin as the disinterested person. Mr. Serlin investigated and recommended dismissal of almost all of the derivative action. Judge Alexander dismissed most of the derivative claims under MCR 2.116 (C)(10), relying on Mr. Serlin’s recommendation.

The Court of Appeals affirmed.
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