Frank v. Linkner
310 Mich. App. 169
| Mich. Ct. App. | 2015Background
- ePrize, an LLC, was recapitalized in 2009 via a Fifth Operating Agreement that created prioritized Series C and Series B units; common members (plaintiffs) were subordinated in the distribution "waterfall."
- Plaintiffs were former employees and some former minority members who received little or nothing when ePrize’s assets were sold in August 2012 for $120 million; Series C holders received about $67 million.
- Plaintiffs sued in April 2013 asserting member-oppression (MCL 450.4515), breach of fiduciary duty, breach of contract, conversion, fraud, unjust enrichment, and related claims.
- Defendants moved for summary disposition, arguing plaintiffs’ claims were time‑barred by LLCA limitations/repose provisions (MCL 450.4515 and MCL 450.4404), which they placed as running from March 1, 2009 (the Fifth Operating Agreement).
- The trial court dismissed all claims as untimely, treating the LLCA timing provision as a statute of repose and holding accrual no later than March/April 2009.
- The Court of Appeals reversed: it held MCL 450.4515(1)(e) is a statute of limitations (not repose), plaintiffs’ claims accrued when damages were suffered at the 2012 sale/distribution, and the April 2013 complaint was timely.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether MCL 450.4515(1)(e) is a statute of limitations or a statute of repose | §4515(1)(e) uses accrual/discovery language and thus is a statute of limitations | Baks suggested an analogous corporate provision is repose; defendants argue §4515(1)(e) should be treated as repose | Court: §4515(1)(e) is a statute of limitations based on plain language (accrual/discovery framework) |
| When the claims accrued for §4515(1)(e) purposes | Claims accrued when plaintiffs actually suffered damages — at the August 2012 sale/distribution | Claims accrued when the Fifth Operating Agreement was executed in March 2009 (when alleged dilutive acts occurred) | Court: accrual occurs when the wrong causes compensable harm; here damages arose in 2012, so accrual was 2012 |
| Whether plaintiffs’ breach of fiduciary duty and contract claims fall under the LLCA timing provision | These claims are essentially member-oppression claims (same gravamen) and therefore governed by MCL 450.4515 | Defendants contended fiduciary claims should be governed by MCL 450.4404 or treated separately | Court: substance controls — fiduciary/contract claims are tied to member-oppression and subject to §4515 timing |
| Effect of defendants’ alternative summary disposition arguments (e.g., Frank’s approval/release; standing of non‑member plaintiffs) | Plaintiffs argued questions of fact (e.g., execution of documents, standing) preclude summary disposition | Defendants asked dismissal on those alternate grounds if timing failed | Court: declined to decide alternates on appeal; remanded for trial court to address them in the first instance |
Key Cases Cited
- Sills v. Oakland General Hosp., 220 Mich. App. 303 (discussing difference between statutes of limitation and repose)
- Ostroth v. Warren Regency, GP, LLC, 474 Mich. 36 (statute of repose may bar claim before injury occurs)
- Miller‑Davis Co. v. Ahrens Constr., Inc., 489 Mich. 355 (example of accrual language showing a statute of limitations)
- Baks v. Moroun, 227 Mich. App. 472 (discussed by parties re analogous BCA provision; Court of Appeals found its treatment nonbinding here)
- Moll v. Abbott Laboratories, 444 Mich. 1 (general accrual rule: claim accrues at time wrong causes harm)
- Tryc v. Michigan Veterans’ Facility, 451 Mich. 129 (statutory interpretation principles; plain language controls)