Michigan Supreme Court Provides Comprehensive Guidance on the Statute of Limitations of a Claim of “Oppression” in an LLC

Michigan Supreme Court Provides Comprehensive Guidance on the Statute of Limitations of a Claim of “Oppression” in an LLC

      In a decision rendered in May of this year, the Michigan Supreme Court provided a comprehensive review of the statute of limitations applicable to a claim of “oppression” under the Michigan LLC Act. Frank v. Linkner, 494 N.W.2d 574 (Mich. 2017).

      Minority members of an LLC brought claims after the LLC sold substantially all of its assets, but that sale did not result in any distribution to those minority members. They asserted a number of claims including oppression, breach of contract, and breach of fiduciary duty. Michigan affords a statutory basis for a claim of “oppression” in the context of an LLC and goes on to recite a number of remedies that are available. See Mich. Comp. L. § 450.4515. The crux of this case came down to the question as to when the statute of limitations on the plaintiff’s claims began to run: when the company’s assets were sold or, in the alternative, when the various acts were taken that would ultimately justify the ultimate zero distribution. For example, it was asserted that Linkner “orally promised [the plaintiff’s] that their interest in [the LLC] would never be diluted or subordinated.”

      Ultimately, the court would find that the statute of limitations began to run at the time of the complained of actions rather than at the time of the asset sale. Specifically:

We hold that MCL 450.4515(1)(e) provide alternative statutes of limitations, one based upon the time of discovery of the cause of action and the other based on the time of accrual of the cause of action. We further hold that a cause of action for LLC member oppression accrues at the time an LLC manager has substantially interfered with the interests of the member as a member, even if the member has not yet incurred a calculable financial industry. Accordingly, plaintiffs’ actions accrued here when [the LLC] amended its operating agreement on March 1, 2009, to subordinate plaintiffs’ common shares and not in 2012 when [the LLC] sold substantially all of its assets.