Camden v. Kaufman

• Decision Date: 22 June 2000
• Docket Number: Docket No. 214755.
• Citation: 613 N.W.2d 335,240 Mich. App. 389
• Parties: Howard B. CAMDEN, Plaintiff-Appellant/Cross-appellee, v. Herbert W. KAUFMAN, Steven D. Kaufman, Gerald W. Horton, Alan J. Kaufman, Neal F. Zalenko, and Jeffery W. Barry, Defendant-Appellee/Cross-appellant, and Alan H. Barry, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

613 N.W.2d 335

240 Mich. App. 389

Howard B. CAMDEN, Plaintiff-Appellant/Cross-appellee, v. Herbert W. KAUFMAN, Steven D. Kaufman, Gerald W. Horton, Alan J. Kaufman, Neal F. Zalenko, and Jeffery W. Barry, Defendant-Appellee/Cross-appellant, and Alan H. Barry, Defendant-Appellee.

Docket No. 214755.

Court of Appeals of Michigan.

Submitted January 5, 2000, at Detroit.

Decided March 31, 2000, at 9:00 a.m.

Released for Publication June 22, 2000.

Elwood S. Simon & Associates, P.C. (by Elwood S. Simon, Michael G. Wassmann, and John P. Zuccarini), Birmingham, for Howard B. Camden.

Honigman Miller Schwartz and Cohn (by Raymond W. Henney and Richard W. Paige), Detroit, for Alan J. Kaufman.

Barris, Sott, Denn & Driker, P.L.L.C. (by Eugene Driker and Todd R. Mendel), Detroit, for Herbert W. Kaufman, Steven D. Kaufman, and Gerald W. Horton.

Seyburn, Kahn, Ginn, Bess, Deitch and Serlin, P.C. (by Joel H. Serlin and Barry M. Rosenbaum), Southfield, for Neal F. Zalenko, Jeffery W. Barry, and Alan H. Barry.

Before JANSEN, P.J., and HOOD and WILDER, JJ.

PER CURIAM.

Plaintiff appeals as of right from an order granting summary disposition in favor of defendants. Defendants cross appeal as of right from an order granting plaintiff's motion for class certification. We affirm in part and reverse in part.

Plaintiff, a former shareholder of H.W. Kaufman Financial Group, Inc. (hereinafter HWK), filed a complaint alleging breach of fiduciary obligations as a result of the cash out of common stock when HWK merged into AJK Acquisition Company (hereinafter AJK). Specifically, plaintiff alleged that he purchased 1,210 shares of HWK on March 2, 1993, 200 shares on June 1, 1995, and 800 shares on June 5, 1995. Defendant Herbert W. Kaufman was the president, chief executive officer, and director of HWK. He also controlled seventy-seven percent of HWK's outstanding common stock. However, defendant Herbert Kaufman later transferred approximately twenty-five percent of the stock to his ex-wife and, following a charitable contribution, he was left with control of forty-nine percent of the outstanding common stock.

Defendant Alan Kaufman, the son of defendant Herbert Kaufman, was treasurer and a director of HWK. He was the principal owner of AJK, the successor corporation, as a result of the merger. All other named defendants were directors of HWK. At the time of the merger's completion, defendants allegedly owned fifty-three percent of the outstanding shares of HWK. Because of the number of shares held by defendants, the merger was certain to occur. Plaintiff alleged that defendants breached their fiduciary duties to obtain "maximum" fair value for HWK's common stock and "conceived, approved, implemented and completed" the merger for their own personal benefit and to the detriment of plaintiff.

The trial court granted plaintiff's motion for the action to proceed as a class action, despite the fact that a request involving a different shareholder arising out of the same corporate transaction had been denied by the same judge. The trial court also granted defendants' motion for summary disposition, holding that M.C.L. § 450.1545a; MSA 21.200(545a) was satisfied. Specifically, the trial court held that plaintiff had failed to dispute that the corporate transaction had been approved by disinterested directors and a majority of the shareholders, including plaintiff, when the proxy statement had disclosed the circumstances surrounding the transaction.

As an initial matter, defendants contend that plaintiff cannot challenge the validity of the corporate merger because he acquiesced to the transaction by approving it. We agree. The general rule is that a shareholder who assents to a corporate transaction may not later challenge the validity of the transaction in court. Wallad v. Access Bidco, Inc., 236 Mich.App. 303, 305, 600 N.W.2d 664 (1999); Burch v. Norton Hotel Co., 261 Mich. 311, 314-315, 246 N.W. 131 (1933). In the present case, plaintiff admitted that he "looked it [the proxy statement] over a little bit" in that he was able to discern that he would obtain $8.20 a share, but he didn't read it. It is undisputed that plaintiff approved the merger. Accordingly, absent special circumstances, plaintiff is precluded from proceeding with this litigation because of his approval of the transaction.

Despite the general rule, however, a plaintiff may maintain an action if it is demonstrated that complaining to the directors or requesting that they act differently would have been futile. Wallad, supra; Burch, supra.

In the present case, plaintiff contends that complaining to the directors would have been futile because the transaction would have been consummated because of the number of shares controlled by defendants Kaufman. Plaintiff's allegations are speculative and fail to demonstrate that it would have been useless to challenge the merger. Wallad, supra. Furthermore, M.C.L. § 450.1545a; MSA 21.200(545a) limits the challenges to corporate transactions involving interested directors or officers when the transaction is authorized, approved, or ratified by shareholders. Arguably, if plaintiff had taken action, it would not have been futile because he would have alerted the shareholders to any alleged impropriety surrounding the transaction. Accordingly, the general rule governs. Plaintiff's contention that objection would have been futile is without merit, and we hold that plaintiff does not have standing to challenge the validity of the corporate action. We nonetheless will address plaintiff's issues on appeal because they present issues of public significance that are likely to recur in the future, yet evade appellate review. In re Parole of Scholtz, 231 Mich.App. 104, 108, n. 3, 585 N.W.2d 352 (1998).

Plaintiff first argues that his claim of breach of fiduciary duty pursuant to M.C.L. § 450.1541a; MSA 21.200(541a), which required that defendants act in a manner to obtain the "best" or "maximum" value available for the common stock, was not precluded by M.C.L. § 450.1545a; MSA 21.200(545a). We disagree. We review summary disposition decisions de novo to determine whether the prevailing party was entitled to judgment as a matter of law. Hughes v. PMG Building, Inc., 227 Mich.App. 1, 4, 574 N.W.2d 691 (1997). MCL 450.1541a; MSA 21.200(541a) provides that a director or officer shall discharge his duties in good faith, with the care of an ordinarily prudent person under like circumstances, and in a manner believed to be in the best interests in the corporation. MCL 450.1545a; MSA 21.200(545a) provides, in relevant part:

(1) A transaction in which a director or officer is determined to have an interest shall not, because of the interest, be enjoined, set aside, or give rise to an award of damages or other sanctions, in a proceeding by a shareholder or by or in the right of the corporation, if the person interested in the transaction establishes any of the following:

(a) The transaction was fair to the corporation at the time entered into.

(b) The material facts of the transaction and the director's or officer's interest were disclosed or known to the board, a committee of the board, or the independent director or directors, and the board, committee, or independent director or directors authorized, approved, or ratified the transaction.

(c) The material facts of the transaction and the director's or officer's interest were disclosed or known to the shareholders entitled to vote and they authorized, approved, or ratified the transaction.

If statutory language is clear and unambiguous, additional judicial construction is neither necessary nor permitted, and the language must be applied as written. Ahearn v. Bloomfield Charter Twp., 235 Mich.App. 486, 498, 597 N.W.2d 858 (1999). The primary goal of statutory interpretation is to give effect to the intent of the legislative body. Ballman v. Borges, 226 Mich.App. 166, 168, 572 N.W.2d 47 (1997). Meaning should be given to every word of a statute, and no word should be treated as surplusage or rendered nugatory if at all possible. Hoste v. Shanty Creek Management, Inc., 459 Mich. 561, 574, 592 N.W.2d 360 (1999). Furthermore, a statute should be construed so as to prevent absurd results, injustice, or prejudice to the public interest. McAuley v. General Motors Corp., 457 Mich. 513, 518, 578 N.W.2d 282 (1998). Interpretation and application of a statute presents a question of law that is reviewed de novo. Id. Statutes that relate to the same persons or things or that have a common purpose are in pari materia. State Treasurer v. Schuster, 456 Mich. 408, 417, 572 N.W.2d 628 (1998). When construing a particular statute or interpreting its provisions, all statutes relating to the same subject or having the same general purpose should be read together, even if they do not refer to each other or were enacted at different times. Id.

In the present case, plaintiff contends that the claim of breach of fiduciary duty continues in spite of the creation of M.C.L. § 450.1545a; MSA 21.200(545a). However, review of the two statutes, which were enacted at the same time, reveals that they relate to unique circumstances. That is, M.C.L. § 450.1541a; MSA 21.200(541a) addresses fiduciary duties of directors and officers generally. MCL 450.1545a; MSA 21.200(545a) addresses the circumstances where a corporate transaction involving interested directors or officers may give rise to an award of damages or other sanctions, or may even be set aside. The statute itself does not name the type of action that is foreclosed, but rather, it appears that irrespective of the type of action involved, a transaction will not be set aside if three alternative criteria are present. Accordingly, plaintiff's contention that M.C.L. § 450.1545a; MSA 21.200(545a) has no bearing on M.C.L. § 450.1541a; MSA 21.200(541a) is without merit. Furthermore, in Schulman, Michigan Corporation Law & Practice (2000 Supp), § 5.13, p. 183, it was noted that...