LANSING – Claims under the law prohibiting oppression of members in a limited liability company expire three years after the claims arise, not after the membership was entered, the Court of Appeals said in a case this week.
When ePrize LLC was sold in 2012, the proceeds were not sufficient to repay all of the original shareholders, and some of those unpaid sued for a share in the $120 million.
The Oakland Circuit Court dismissed the case, agreeing with the defendants that the law at issue was a statute of repose and any claims expire three years after the shares were issued.
But Judge Christopher Murray, joined by Judge Jane Markey and Judge Stephen Borrello in the published opinion (Frank v. Linkner, COA docket No. 318751), ruled the statute is one of limitation. That meant the claims arose in 2012, when the company was sold and the proceeds distributed, not in 2009 when the last shares were offered.
That made the law suit filed in April 2013 timely, the court said.
The leaders of the company did breach their duty to some shareholders during the 2009 restructuring, the court said. But there were no damages until the company was sold and the proceeds distributed based on that breached duty.
“At best, their damages were speculative at that time, and plaintiffs cannot maintain claims for speculative damages,” the court said.
The earlier court ruling on which the defendants, and the trial court, relied was conclusory and not precedential and so did not control the findings in this case, the court said.
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