The Michigan Limited Liability Company Act (“LLC Act“) and the Michigan Business Corporations Act (“MBC Act“) afford limited protection of managers from historic breach of fiduciary duty claims brought by shareholders. Generally, three years is the statute of limitations accrual period for such claims, unless such claims are discovered or should reasonably have been discovered then the plaintiff is limited to two years after actual or constructive discovery (see MCL 450.4404(6); MCL 450.4515(1)(e); and, 450.1541a(4)).
A prudent plaintiff however, may toll this statute of limitations period by properly applying the Michigan Fraudulent Concealment Statute (see MCL 600.5855), whereby the LLC Act and MBC Act maybe tolled so long as the defendant has taken affirmative action of concealment. Note: this is a plaintiff’s only method of tolling a limitations period since the court in Trentadue v. Buckler Automatic Lawn Sprinkler Co., 479 Mich 378; 738 NW2d 664 (2007) decided Michigan no longer recognizes common law tolling.
Thus, so long as a plaintiff may establish a defendant fraudulently concealed his or her cause of action, the plaintiff may bring its claim, even if it exceeds a statute of limitations. Managers, members, officers, directors, and other company stakeholders with fiduciary duties to shareholders or members should not only ‘follow the law‘ but also (1) follow the operating agreement or corporate bylaws, (2) disclose as much as is reasonably prudent to extinguish a member or shareholders actual knowledge or constructive knowledge standard, and (3) review and supervise the actions of other manager, directors, and individuals with fiduciary duties to members or shareholders be certain that the actions taken are proper and allowed, and finally that those actions fall on the individual manager who is acting. Do not rely on the actions of others, unless the operating agreement or bylaws specifically allow such reliance.
Failure to follow these best practices may lead to imputed joint liability by a shareholder for stale claims made by a co-manager.
