Consent resolution questioned after exec resigns

Ex-officer claims terms of buyout altered, buy-sell provision removed

Defendant/counter-plaintiff Randy Fosgard was an officer, director and 19 percent shareholder of plaintiff/counter-defendant Michigan Mutual, Inc., dating back to 1994. In late December 2006, Fosgard notified his fellow shareholders of his resignation from the company. Under the then-existing shareholder agreement, Fosgard was entitled to a buyout of his shares at the last stipulated stock price set in July 2006.

Two weeks after Fosgard issued his resignation notice, the controlling shareholders and directors secretly executed a consent resolution that purported to substantially reduce the stipulated share price and remove the mandatory buy-sell provision from the shareholder agreement.

The company filed a declaratory complaint against Fosgard, requesting a ruling that the current resolution was valid and that the company had no obligation to purchase Fosgard's shares. Fosgard filed a counter-complaint alleging shareholder oppression, breach of fiduciary duties and breach of contract.

After the close of discovery, the parties filed cross-motions for summary disposition. Before the court ruled on the dispositive motions, the parties accepted the case evaluation award of $1 million in favor of Fosgard.

Type of action: Shareholder oppression, breach of contract, breach of fiduciary duties

Name of case: Michigan Mutual, Inc., et al., v. Fosgard, et al.

Court/Case no./Date: Oakland County Circuit Court; 08-081339-CK; Aug. 27, 2008

Name of judge: Mark A. Goldsmith

Settlement amount: $1 million

Attorney for plaintiff/counter-defendant: Withheld

Attorneys for defendant/counter-plaintiff: Brian E. Etzel, David H. Fink

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