Azzar v. Primebank, FSB

• Citation: 198 Mich.App. 512,499 N.W.2d 793
• Decision Date: 02 March 1993
• Docket Number: Docket No. 131450
• Parties: James D. AZZAR and Extrusions Division, Inc., Plaintiffs-Appellants, v. PRIMEBANK, FSB; and Charles G. Conville and Kenneth J. Hoexum in their capacity as officers and directors of Primebank, FSB; and Margaret E. Byington, John J. Jackoboice, William W. Muir, Jr., Terrence M. O'Rourke, Edward F. Havlik, Ronald J. Dykstra, Bruce J. Osterink, Lealand T. Wallin, Gordon L. Kauffman and Roger L. Warnshuis, Jr., in their capacity as directors of Primebank, FSB, jointly and severally, Defendants-Appellees.
• Court: Court of Appeal of Michigan (US)

Page 793

499 N.W.2d 793

198 Mich.App. 512

James D. AZZAR and Extrusions Division, Inc. Plaintiffs-Appellants, v. PRIMEBANK, FSB; and Charles G. Conville and Kenneth J Hoexum in their capacity as officers and directors of Primebank, FSB; and Margaret E. Byington, John J Jackoboice, William W. Muir, Jr., Terrence M. O'Rourke Edward F. Havlik, Ronald J. Dykstra, Bruce J. Osterink, Lealand T. Wallin, Gordon L. Kauffman and Roger L. Warnshuis, Jr., in their capacity as directors of Primebank, FSB, jointly and severally, Defendants-Appellees.

Docket No. 131450.

Court of Appeals of Michigan.

Submitted Oct. 13, 1992, at Grand Rapids.

Decided March 2, 1993, at 9:00 a.m.

Released for Publication May 24, 1993.

Gruel, Mills, Nims & Pylman by Grant J. Gruel and Brion J. Brooks, Grand Rapids, for plaintiffs.

Miller, Johnson, Snell & Cummiskey by Richard Postma, Jon G. March, and Richard R. Hyde, Grand Rapids, and Howard & Howard by John W. Allen, Kalamazoo, for defendants.

Before HOLBROOK, P.J., and MacKENZIE and SAWYER, JJ.

PER CURIAM.

Plaintiffs James D. Azzar and Extrusions Division, Inc., appeal as of right a July 30, 1990, Kent Circuit Court opinion and order granting the defendants summary disposition pursuant to MCR 2.116(C)(8). We affirm.

This appeal arises from the plaintiffs' action against the defendants Primebank and its board of directors for breach of fiduciary duty. Azzar owned one hundred percent of the common stock of Extrusions Division, Inc. Primebank was a federally chartered savings bank. Azzar and Extrusions Division, Inc., collectively owned 9.98 percent of Primebank's common stock.

In late 1988, the plaintiffs considered buying an additional fifteen percent of Primebank's common stock. Federal regulations in effect at that time required the Federal Home Loan Bank Board (FHLBB) to approve such an acquisition. To receive approval of the FHLBB, the plaintiffs filed a "rebuttal of control" document explaining with particularity why no control relationship would exist if the acquisition were permitted. Defendants opposed the plaintiffs' acquisition of additional stock and informed the FHLBB that the plaintiffs provided the FHLBB with incomplete information. After making inquiries of the plaintiffs, the FHLBB found their "rebuttal of control" to be "materially insufficient" and required them to provide additional information. Unless overturned at a higher regulatory level, that finding barred the plaintiffs from buying more Primebank stock.

On November 16, 1989, Primebank and First of America bank agreed to merge. First of America was to acquire all of Primebank's issued and outstanding common stock. The merger agreement contained a "lock-up warrant" entitling First of America to purchase unissued shares of Primebank stock at twenty dollars a share upon the occurrence of certain events.

On December 4, 1989, the plaintiffs requested permission to examine Primebank's books, records, list of stockholders, and other documents. Defendants denied access to the documents because the plaintiffs' request was overly broad and not relevant to their stated purpose in requesting the documents.

On April 23, 1990, the plaintiffs filed their complaint, alleging that the defendants breached the fiduciary duty they owed the plaintiffs and the other stockholders of Primebank. Plaintiffs also alleged that the defendants wrongfully refused to honor shareholder requests for valuation information. Plaintiffs sought actual damages for the profits they would have received had they been approved to purchase additional shares of stock, costs and fees, interest, and a preliminary and permanent injunction prohibiting the defendants from refusing to immediately furnish the requested information.

The circuit court determined that the defendants' actions in petitioning the FHLBB constituted an attempt to influence governmental action and were thus immune from liability. The court held that the First Amendment of the United States Constitution barred litigation arising from injuries incurred as a consequence of First Amendment petitioning activities because the prospect of litigation would chill the exercise of the right to petition. The court determined that even if the defendants' petitioning of the FHLBB was a sham because it was based on false information, their efforts were immune from liability because successful petitioning was presumed to be genuine.

The court also denied the plaintiffs' request for an injunction requiring the defendants to provide all the shareholder information they requested. The court determined that equitable considerations weighed against the plaintiffs because their document demand substantially overreached the legal requirement and they did not have clean hands. The court held that the plaintiffs had effectively injured themselves by ignoring the defendants' attempt to mitigate damages and resolve any differences between the parties. The court also determined that the plaintiffs did not really want the documents, but wanted more money, and used the document issue to perpetuate the lawsuit.

On appeal, plaintiffs first argue that the circuit court erred in holding that the First Amendment protected the defendants from liability for breach of fiduciary duty.

A motion for summary disposition under MCR 2.116(C)(8) tests the legal sufficiency of a claim by the pleadings alone. Hutchinson v. Allegan Co. Bd. of Road Comm'rs (On Remand), 192 Mich.App. 472, 475, 481 N.W.2d 807 (1992). All factual allegations made in support of the claim are accepted as true, as well as any reasonable inferences that can be drawn therefrom. Parkhurst Homes, Inc. v. McLaughlin, 187 Mich.App. 357, 360, 466 N.W.2d 404 (1991). The motion is properly granted when the claim is so clearly unenforceable as a matter of law that no factual dispute could justify a right to recovery. Shuttleworth v. Riverside Osteopathic Hosp., 191 Mich.App. 25, 27, 477 N.W.2d 453 (1991).

The right to petition, as guaranteed by the First Amendment of the United States Constitution, ¹ protects the right of the people to inform their representatives in government of their desires with respect to the passage or enforcement of laws, regardless of their intent in doing so. Eastern Railroad Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S. 127, 139, 81 S.Ct. 523, 530, 5 L.Ed.2d 464 (1961), reh. den., 365 U.S. 875, 81 S.Ct. 899, 5 L.Ed.2d 864 (1961). The Supreme Court in Noerr, supra, p. 143, 81 S.Ct. p. 533, continued:

It is inevitable, whenever an attempt is made to influence legislation by a campaign of publicity, that an incidental effect of that campaign may be the infliction of some direct injury upon the interests of the party against whom the campaign is directed.

Accordingly, unless the petitioning is a sham, the knowing infliction of injury from petitioning does not render the campaign illegal because to hold otherwise would be tantamount to outlawing all such campaigns. Id., pp. 143-144, 81 S.Ct. pp. 532-533. See also United Mine Workers v. Pennington, 381 U.S. 657, 669-672, 85 S.Ct. 1585, 1592-1594, 14 L.Ed.2d 626 (1965). The doctrine espoused in Noerr and Pennington has been applied mainly in antitrust matters. See Allied Tube & Conduit Corp. v. Indian Head, Inc., 486 U.S. 492, 108 S.Ct. 1931, 100 L.Ed.2d 497 (1988); California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972). However, the Noerr-Pennington doctrine is a principle of constitutional law that bars litigation arising from injuries received as a consequence of First Amendment petitioning activity, regardless of the underlying cause of action asserted by the plaintiffs. Webb v. Fury, 167 W.Va. 434, 282 S.E.2d 28 (1981). See also Pennwalt Corp. v. Zenith Laboratories, Inc., 472 F.Supp. 413, 424 (E.D.Mich.1979), app. dis., 615 F.2d 1362 (CA 6, 1980); Baker Driveaway Co. Inc. v. Bankhead Enterprises, Inc., 478 F.Supp. 857, 859 (E.D.Mich.1979). Thus, we agree with the circuit court that the defendants' actions in petitioning the FHLBB constituted an attempt to influence governmental action that was immune from liability under the First Amendment.

Plaintiffs next argue that the circuit court erred in holding that the First Amendment protected the defendants from tort liability for intentionally misrepresenting facts to the FHLBB. Although we accept as true the factual allegation that the defendants intentionally misrepresented facts to the FHLBB, Parkhurst Homes, Inc., supra, we disagree with the plaintiffs. Allegations in a complaint of knowing falsehoods are generally protected from liability under the First Amendment right to petition because citizens would be deterred from petitioning the government if that were not so. Stern v. United States Gypsum, Inc., 547 F.2d 1329, 1345 (CA 7, 1977), cert. den., 434 U.S. 975, 98 S.Ct. 533, 54 L.Ed.2d 467 (1977). Because plaintiffs may easily allege that defendants knowingly and maliciously made false accusations, protecting such knowingly and maliciously made allegations provides breathing space for the First Amendment right to petition the government. Havoco of America, Ltd. v. Hollobow, 702 F.2d 643, 649 (CA 7, 1983). Moreover, the Supreme Court has recently held that the sham exception to the Noerr doctrine involves a defendant whose activities are not genuinely aimed at procuring favorable government action at all and is inapplicable to the defendant who genuinely seeks to achieve his governmental result, but does so through improper means. City of Columbia v. Omni Outdoor Advertising, Inc., 499 U.S. ----, ----, 111 S.Ct. 1344, 1354, 113 L.Ed.2d 382, 398 (1991).

Nevertheless, knowingly and maliciously made allegations in petitions to government are not protected under the First Amendment from liability for defamation. McDonald v. Smith, 472 U.S. 479, 105 S.Ct. 2787, 86 L.Ed.2d 384 (1985); Hodgins Kennels, Inc. v. Durbin, 170 Mich.App. 474, 483, 429 N.W.2d 189...