2:19-cv-13707
E.D. Mich.Jun 30, 2020Background
- Detroit Trading Company is a Michigan corporation that sells consumer leads to auto dealers; Mark Campbell was its former CEO and a shareholder; MJC Ventures LLC is Campbell’s wholly owned LLC and a shareholder.
- In July 2019, a written shareholders’ consent (majority of shares) amended the bylaws, increased the board from two to three members, elected Peter Bonner, Anik Ganguly, and John Campbell, and removed Mark Campbell from the board.
- The newly constituted board executed a written consent removing Campbell from all offices and terminating any employment/consulting/contract relationships with Campbell and entities he controlled, including MJC.
- Plaintiffs (Campbell and MJC) sued for shareholder oppression (Mich. Comp. Laws § 450.1489), breach of fiduciary duty, unjust enrichment, trademark infringement (Lanham Act), and cybersquatting (ACPA); defendants moved to dismiss the Second Amended Complaint.
- The court concluded Plaintiffs failed to plausibly allege grounds for relief on any claim and granted the motion to dismiss without prejudice, giving Plaintiffs 30 days to amend.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Shareholder oppression (Mich. Comp. Laws §450.1489) | Majority used written consents to oust Campbell and terminate MJC’s consulting arrangement, amounting to willfully unfair and oppressive conduct | Actions were authorized by written shareholder consents and amended bylaws; business judgment rule applies; plaintiffs complain as a former officer, not as shareholders harmed in that capacity | Dismissed — consensual, written shareholder and board actions not shown to be illegal, fraudulent, or willfully unfair; exclusion from governance not §1489 oppression |
| Breach of fiduciary duty | Directors breached duties by terminating Campbell/MJC relationships and overcompensating others | Directors owed duties to the corporation/majority shareholders and had no duty to continue payments to Campbell or MJC | Dismissed — no plausible allegation that directors had a fiduciary duty to keep compensating Campbell/MJC |
| Unjust enrichment | Defendants unfairly retained value from use of 1800CARSHOW marks and from Plaintiffs’ $1.6M investment | Plaintiffs received stock for investment; no specific benefit retention pleaded as to marks; claims are inadequately pled | Dismissed — insufficient pleading; court would decline supplemental jurisdiction over state claims if federal claims were dismissed |
| Trademark infringement & Cybersquatting (Lanham Act & ACPA) | Defendants continued to use 1800CARSHOW mark, phone number, and domain after termination | No likelihood of consumer confusion; no registration/trafficking/ransom or bad‑faith intent to profit alleged | Dismissed — no plausible likelihood of confusion; cybersquatting elements (registration/trafficking/bad faith) not alleged |
Key Cases Cited
- Madugula v. Taub, 853 N.W.2d 75 (Mich. 2014) (shareholder rights may be altered by written voting/shareholder agreements)
- Wolding v. Clark, [citation="563 F. App'x 444"] (6th Cir. 2014) (exclusion from corporate governance is not minority-oppression under §1489)
- Hensley Mfg. v. ProPride, Inc., 579 F.3d 603 (6th Cir. 2009) (elements for Lanham Act trademark infringement)
- U.S. Structures, Inc. v. J.P. Structures, Inc., 130 F.3d 1185 (6th Cir. 1997) (continued unauthorized use after license termination can support likelihood of confusion with factual proof)
- DaimlerChrysler v. The Net Inc., 388 F.3d 201 (6th Cir. 2004) (elements of ACPA cybersquatting)
- Karaus v. Bank of N.Y. Mellon, 831 N.W.2d 897 (Mich. 2012) (elements of unjust enrichment under Michigan law)
- Prod. Finishing Corp. v. Shields, 405 N.W.2d 171 (Mich. 1987) (corporate directors’ fiduciary duties and duty of good faith)