On March 31, 2009, the Michigan Court of Appeals (in an unpublished opinion) held that a 2006 legislative amendment to MCL 450.1489 (commonly referred to as the shareholder oppression section) did not apply retroactively.
The basic facts are these: husband and wife formed a corporation while married; they divorced in February 2005, and both continued to work for the company; in February 2006, ex-husband (as company President) fired ex-wife from her administrative position with the company. Wife sued claiming, among other things, that this action constituted sharholder oppression and was actionable under MCL 450.1489 – targeting the “willfully unfair and 0ppressive” language as the basis for her claim.
At the time of ex-wife’s termination, Michigan law was that 450.1489 only proteted a shareholder’s interest as a shareholder. Because terminating a shareholder’s employment does not affect the shareholder’s interest as a shareholder, the section does not allow recovery for harm suffered as an employee. Franchino v Franchino, 263 Mich App 172, 173-174, 185-186 (2004). In March 2006 (the month after the ex-wife’s termination), the legislature amended 450.1489(3) such that willfully unfair and oppressive conduct included employment terminatioon or limiting employment benefits to the extent that it disproportionately interferes with the shareholder’s distributions or other interests. Clearly a change that would have helped ex-wife’s case IF it applied retroactively to her situation.
The court reiterated the general rule that statutes are presumed to operate prospectively unless a contrary intent was manifested. Frank W Lynch & Co v Flex Technologies, Inc, 463 Mich 578, 583 (2001). Numerous times the legislature has shown that it knows how to make clear its intention to apply a statute retroactively. The court found nothing in the amendment’s language suggesting such retroactive legislative intent. Therefore, the amendment only applied prospectively.
Although it seems that this problem will only be had by those bringing shareholder oppresion claims based on actions prior to the 2006 amendment, it is important to note the continued support for only applying legislative amendments prospectively unless the legislature clearly intended otherwise.