Where the plaintiff, one of four non-voting shareholders in a corporation, has filed a complaint against the defendant serving as the corporation’s only voting member, a motion by the defendant for summary disposition on Count I, II, III and VII of the plaintiff’s complaint should be denied despite the rulings of an arbitrator.
“Plaintiff is one of four non-voting shareholders of Shellback Manufacturing Company, Inc. (‘Shellback’). Her three siblings are the remaining non-voting shareholders. The Wiliam Nielsen Sr. Revocable Living Trust (the ‘Trust’) is the only voting shareholder of Shellback. Defendant Nielson is the Trustee of the Trust. Both Plaintiff and Defendant are members of Shellback’s Board of Directors. Shellback was created by the siblings’ father in 1963. After their father’s passing in 2020, Plaintiff’s relationship with her siblings became strained. Plaintiff first initiated a decedent’s estate and trust action in probate court. Those matters were mediated. Although it is clear that the mediation resulted in Plaintiff being permitted access to the corporate records for Shellback, a review of the Petitions in each case reveal that neither case actually involved Shellback.
“The probate and trust matters resulted in a Settlement Agreement that permitted any co owner to review corporate documents on site at the corporation (Exhibit E to Motion).
“In August 2023, Plaintiff brought outstanding issues back to the arbitrator, including the request to review corporate records and the failure to sell the business (Exhibit H to Motion). The Arbitrator issued a ruling regarding the personal property, the failure to provide support for trust expenses, the listing of Shellback for sale, and the failure to record deeds (Exhibit J to Motion).
“Plaintiff filed this action against Shellback and William Nielsen, Jr. Plaintiff alleged claims of Violation of MCL 450.1487 (Count I); Shareholder Oppression (Count II); Breach of Fiduciary Duties (Count III); Corporate Waste (Count IV); Negligence and Breach of Care (Count V); Appointment of a Receiver (Count VI); and Declaratory Judgment (Count VII).
“Defendants allege that Counts I, II, III, and VII ‘are entirely based upon an alleged refusal to allow Plaintiff to inspect Shellback records’ (Motion, p 11). Defendants further allege that ‘Plaintiff’s access to Shellback records was specifically mediated, arbitrated , and resolved ’ (Motion, p 11).
“Plaintiff argues that none of the claims for failure to produce records were brought in the arbitration of the Decedent’s Estate and Trust matters. Additionally, Plaintiff argues that the allegations in Counts II and III contain allegations beyond only the failure to produce corporate documents. As evidence that the mediation did not include the claims in this matter, Plaintiff attaches the Arbitration Statement filed on September 11, 2023 (Exhibit 3 to Response). The Statement does not include any argument regarding corporate records and does not request any relief relating to corporate records (Exhibit 3 to Response). Additionally, the Arbitration Statement evidences that Shellback is not a party to the arbitration, but rather only The William J. Nielsen Revocable Living Trust and the Estate of William J. Nielsen (Exhibit 3 to Response) appear to be parties to those matters.
“Based upon the foregoing, the Court finds that MCR 2.116(C)(6) is inapplicable to this matter, and summary disposition under MCR 2.116(C)(6) is denied.”
Nielsen v. Nielsen; MiLW 10-107998, 8 pages; Oakland Circuit Court; Valentine, J.
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