in Re Caraco Pharmaceutical Laboratories Shareholder Litigation
329933
| Mich. Ct. App. | Jun 13, 2017Background
- Caraco Pharmaceutical Laboratories, Ltd. was a Detroit-based generic drug manufacturer.
- Sun Pharmaceutical and Sun Global owned about 75.8% of Caraco; Shanghvi controlled Sun and Caraco.
- GPT: Sun proposed to acquire remaining Caraco shares and take it private; an Independent Committee reviewed the offer.
- An amended complaint added claims about a scheme to depress Caraco’s value prior to the GPT and alleged mis/disclosures.
- Trial court granted summary disposition under MCR 2.116(C)(8); appellate remand allowed amendment and further proceedings.
- Court reverses and remands for further proceedings consistent with its opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Law-of-the-case applicability to Counts II–V | Law of the case did not bind on remand | Law-of-the-case bound trial court, precluding new findings | Law-of-the-case does not apply to Counts II–V; reversal warranted |
| Exculpatory clause and fiduciary liability | Exculpation does not bar claims for intentional harm | Exculpation precludes fiduciary-duty claims | Exculpatory clause does not bar claims for intentional harm or scheme to depress value |
| Bell–Blair communications and fiduciary duty | Allegations show breach via Bell with Blair | Record insufficient to prove breach under pleadings | Amended complaint states breach of fiduciary duty related to Bell–Blair communications |
| Bell–Shanghvi scheme to depress stock | Alleged plan to depress price violated duties | No pleading supports plan | Amended complaint states breach of fiduciary duty by Bell and Shanghvi |
| Business judgment rule applicability | Rule cannot shield fraudulent/bad-faith conduct | Rule forecloses challenge to GPT | Business judgment rule does not defeat fiduciary-duty claims given alleged fraud/bad faith |
Key Cases Cited
- Maiden v Rozwood, 461 Mich 109 (Mich 1999) (de novo review of summary disposition; if genuine issue remains, reversal allowed)
- Churella v Pioneer State Mut Ins Co (On Remand), 258 Mich App 260 (Mich App 2003) (business judgment rule limits, not absolutely bars, review of director decisions)
- Webb v Smith (After Second Remand), 224 Mich App 203 (Mich App 1997) (law-of-the-case scope and application)