Breach of fiduciary duty claims in Michigan businesses
I am Mitchell Bisson, a Grand Rapids business litigation lawyer. I have litigated for over 15 years. Disputes about fiduciary duty usually start when an owner, director, officer or partner is accused of putting themselves ahead of the business or the people they work with. This page covers breach of fiduciary duty questions in Michigan, including what must be proved, duties among partners and co-owners, deals between a director and the company, business opportunities, derivative suits, and the deadline to sue. I act for either side, whether bringing the claim or defending it.
Most fiduciary duty disputes in Grand Rapids, Kentwood, Wyoming and the rest of Kent County start with the same feeling. Someone who was trusted with the business, a co-owner, a manager, a director or a partner, used the position for themselves or hid something that mattered. The proof is usually in the operating agreement or bylaws, the bank records, the sale and loan documents and the emails. Before I can tell you whether there is a claim, I need to answer three questions. Who owed the duty? Whose claim is it, yours or the company’s? Has the time to sue run?
Michigan does not have one fiduciary duty statute. The duty comes from the common law and from several business statutes. The Michigan Supreme Court held in Murphy v. Inman that directors owe common-law fiduciary duties directly to shareholders and that the Business Corporation Act did not abrogate them. 509 Mich. 132 (2022). The corporation statute also sets a standard for directors and officers: good faith, ordinary prudence, and a reasonable belief that the action serves the corporation. MCL 450.1541a(1). The LLC act sets a parallel standard for managers. MCL 450.4404(1). Partners must account to the partnership for benefits and profits from partnership transactions or the use of partnership property. MCL 449.21(1).
The deadline depends on the claim. In Prentis Family Foundation, the Court of Appeals applied the three-year period for injury to property to a breach of fiduciary duty claim and rejected the shorter malpractice period. 266 Mich. App. 39, 47 (2005). Claims under the statutory duties of corporate directors and officers and of LLC managers carry their own limit: 3 years after the claim accrues or 2 years after it is discovered or should have been discovered, whichever comes first. MCL 450.1541a(4); MCL 450.4404(6). Until I have the facts, I calendar the shortest period that could apply.
A fiduciary duty case often travels with other claims. The same facts may support a breach of contract claim under an operating agreement, or a claim for fraud and misrepresentation if someone lied to get your money or your signature. I act for either side, so I know how the owner who is accused will answer these claims. I do not promise outcomes.
Michigan fiduciary duty claims, deadlines and key rules
These are the statutes and cases I check first. The right row depends on the entity and on who is suing.
| Claim or issue | What must be shown | Time limit or key rule | Authority |
|---|---|---|---|
| Breach of fiduciary duty, general | A duty owed to the claimant, a breach, and damages caused by the breach | Whether a duty exists is a question of law. Three-year period applied to a fiduciary claim in Prentis | Highfield Beach at Lake Michigan v. Sanderson, 331 Mich. App. 636 (2020); Prentis, 266 Mich. App. at 43-44, 47; MCL 600.5805(2) |
| Corporate director or officer | Failure to act in good faith, with ordinary prudence, and with a reasonable belief the action serves the corporation | 3 years after accrual or 2 years after discovery, whichever is first | MCL 450.1541a(1), (4) |
| LLC manager | Failure to meet the manager standard, or keeping a profit or benefit from LLC transactions or from personal use of its property | Same 3-year and 2-year limits. The duty to account yields to the operating agreement or a member vote under the statute | MCL 450.4404(1), (5), (6) |
| Partner or co-owner | Carrying on a business for profit as co-owners, whether or not the parties meant to form a partnership | Partners must account for benefits and profits. The fiduciary relationship arises through the partnership | MCL 449.6(1); MCL 449.21(1); Byker v. Mannes, 465 Mich. 637, 645-646 (2002); Urbain v. Beierling, 301 Mich. App. 114, 125-126 (2013) |
| Deal between an insider and the company | An interested director or officer must establish fairness to the corporation when entered into, or approval after disclosure by disinterested directors or shareholders | Meeting the statute does not bar other claims. The burden is on the interested person | MCL 450.1545a; Camden v. Kaufman, 240 Mich. App. 389, 395-396, 398 (2000) |
| Corporate opportunity | An opportunity in the company’s line of business that it could finance and had an interest or expectancy in, taken without full disclosure | A third party’s refusal to deal does not excuse an insider who did not disclose it | Production Finishing Corp. v. Shields, 158 Mich. App. 479, 485-486, 489-490 (1987) |
| Direct or derivative claim | Who suffered the harm, and who would receive the benefit of the remedy | Derivative claim: written demand, then 90 days unless rejected sooner or irreparable injury would result | Murphy, 509 Mich. 132; MCL 450.1493a; MCL 450.4510 |
| Concealed breach | An affirmative act of concealment, not silence alone | 2 years after the claim is or should have been discovered | MCL 600.5855; Prentis, 266 Mich. App. at 48 |
Claims not covered by a shorter period fall under the six-year residual period in MCL 600.5813. Which period fits a particular fiduciary claim is something I analyze from the pleadings, and I do not assume the longer one applies.
What a claimant has to prove in a fiduciary duty case
A duty owed to you. The elements are the existence of a duty, a breach, and damages caused by the breach. Highfield Beach. Whether a duty exists is a question of law for the court, and the trust placed in the other person has to be reasonable. Prentis, 266 Mich. App. at 43-44. For a director, a manager or a partner, the role usually answers the question. For a co-owner with no formal title, the question is what the relationship was. In Byker, the Supreme Court held that no subjective intent to form a partnership is required, and that the focus is whether the parties carried on as co-owners a business for profit. 465 Mich. at 645-646. For an LLC, the accounting duty in the statute is itself subject to the operating agreement and to a member vote, so the agreement is the first document I read. MCL 450.4404(5).
A breach. Facts that I look for include an insider deal with the company, a business opportunity taken from the company, company money or property used personally, books and records withheld, and material facts left out of a sale or buyout. Some of these have their own rules. Partners owe each other full and frank disclosure, and the fiduciary relationship arises through the partnership. Urbain, 301 Mich. App. at 125-126. An officer and director who diverts a corporate opportunity for personal gain without full disclosure breaches the duty. Production Finishing, 158 Mich. App. at 485-486. That case was decided before November 1, 1990, so a later panel need not follow it (MCR 7.215(J)(1)). An interested transaction can be challenged, but the insider carries the burden of showing that it meets the statute. Camden, 240 Mich. App. at 398.
Harm and a loss you can prove. A breach without a provable loss does not produce damages. In Turner v. J & J Slavik, Inc., the Court of Appeals affirmed a directed verdict on a fiduciary duty claim because, even assuming a breach, the plaintiff could not show damages. No. 370564 (Mich. Ct. App. June 12, 2026). The last financial document in the record was dated August 31, 2010, the limitations period reached back only to August 12, 2016, which left a six-year gap. The court said damages are not presumed and must rest on actual injury, but need not be mathematically precise. Turner is a recent published opinion that is subject to revision until final publication, so I check it again before I rely on it.
Defenses and answers I look at in a fiduciary duty case
No duty, or trust that was not reasonable. Reliance alone is not enough. The court decides whether a duty exists, and the claimant’s trust has to be reasonable. Prentis, 266 Mich. App. at 43-44.
The business judgment rule. Courts are slow to second-guess business decisions. The Supreme Court said long ago that a court will interfere with the decisions of directors only on a showing of something like willful abuse, bad faith, neglect of duty, perversion of purpose, fraud or breach of trust. Reed v. Burton, 344 Mich. 126, 130-131 (1955). The Court of Appeals has held that the rule is overcome by evidence establishing the elements of shareholder oppression. Franks v. Franks, 330 Mich. App. 69 (2019). A bad outcome by itself does not get past that rule. I look for a conflict, bad faith, or a decision made without information the person had.
Reliance on others and compliance with the manager standard. An LLC manager may rely on information, opinions, reports or statements prepared by other managers, members or employees the manager reasonably believes are reliable and competent, or by lawyers, accountants and others on matters within their competence. A manager who performs the duties of the office in compliance with the section is not liable for an action taken or not taken. That reliance is not available if the manager has knowledge that makes it unwarranted. MCL 450.4404(2), (3), (4).
Approval, fairness and the operating agreement. A defendant may say the deal was fair to the company when made, or was approved after disclosure by disinterested directors or by the shareholders entitled to vote. MCL 450.1545a(1). The statute applies irrespective of the type of action, Camden, 240 Mich. App. at 395-396, but satisfying it does not preclude other claims. MCL 450.1545a(4). In an LLC, a manager may say the operating agreement or a member vote changed the duty to account. I ask for the agreement, every amendment and every vote or consent before I tell anyone where they stand.
Timing. I compare the date of the breach, the date the claimant knew or should have known, and the date of filing against the periods in the table. A claimant who says the breach was hidden has to show more than silence. Fraudulent concealment requires an affirmative act. Prentis, 266 Mich. App. at 48. If it applies, the action may be commenced within 2 years after the claimant discovers or should have discovered the claim, even though the ordinary period has run. MCL 600.5855.
Damages, remedies and consequences
Money damages. Damages can be recovered when a position of influence has been acquired and abused or when confidence has been reposed and betrayed. Prentis, 266 Mich. App. at 47. The amount must be tied to evidence, as Turner shows.
Accounting and profits. An LLC manager must account to the company and hold as trustee for it any profit or benefit derived from a transaction connected with the conduct or winding up of the company, or from personal use of its property, unless the operating agreement or a member vote provides otherwise. MCL 450.4404(5). Partners must account for benefits and profits in the same way. MCL 449.21(1).
Court orders in an oppression case. When a shareholder or member establishes illegal, fraudulent or willfully unfair and oppressive conduct, the circuit court may grant relief it considers appropriate. The list includes dissolution, directing or prohibiting an act, purchase of the owner’s interest at fair value, and damages. MCL 450.1489(1); MCL 450.4515(1). An action seeking damages under those sections must be commenced within 3 years after it accrued or 2 years after the owner discovered or reasonably should have discovered it, whichever is first. A shareholder oppression claim under section 489 is heard by the court in equity, without a jury. Madugula v. Taub, 496 Mich. 685, 719-720 (2014). The library answers below cover buyout price and attorney fees in oppression cases.
Attorney fees. Michigan follows the American rule: fees are ordinarily not recoverable unless a statute, court rule or common-law exception allows them. Turner. For an LLC derivative suit, the court may order a plaintiff who acted in bad faith or without reasonable cause to pay the defendants’ reasonable expenses and attorney fees, or order the company to pay the plaintiff’s reasonable expenses if the proceeding resulted in a substantial benefit to the company. MCL 450.4514.
Direct claims, derivative claims and oppression claims
This is the part of a fiduciary case that most often goes wrong at the start. If the company was harmed and the company would receive the remedy, the claim belongs to the company and a shareholder or member must bring it derivatively. If the owner was harmed independently and would receive the remedy, the claim is direct. Murphy states the test as two questions: who suffered the alleged harm, and who would receive the benefit of any remedy. In Murphy, the claim over the directors’ handling of a cash-out merger was direct.
A derivative claim has prerequisites. An LLC member must show that management is vested in managers with sole authority to sue, or that the plaintiff lacks that authority under the operating agreement. The member must make a written demand on the managers or members with authority, and 90 days must pass unless the member is told the demand was rejected or irreparable injury would result from waiting. The member must have been a member when the act occurred, must fairly and adequately represent the company’s interests, and must remain a member until judgment, subject to the exception in the statute. MCL 450.4510. A shareholder of a corporation faces a written demand and a 90-day wait, MCL 450.1493a, and standing rules that include having been a shareholder at the time of the act, fair and adequate representation and continued ownership until judgment. MCL 450.1492a.
The company may then ask the court to dismiss. In an LLC case, the court shall dismiss a derivative proceeding on the company’s motion if it finds that a qualifying group made a good-faith determination, after a reasonable investigation, that maintaining the proceeding is not in the company’s interest. Who carries the burden depends on which group made the determination. MCL 450.4512. The corporation act has a parallel provision. MCL 450.1495. If I represent the owner who wants to sue, I plan around that motion from the day the demand letter goes out. If I represent the company or the managers, I make sure the investigation is real and documented.
An owner who is squeezed out, denied distributions or removed from a role may also have an oppression claim, which is a direct statutory claim with its own remedies, described above. Breach of a shareholder agreement may be evidence of oppression, Madugula, 496 Mich. at 719-720, and the same facts often support both an oppression count and a fiduciary count. I plead the counts the facts support and I keep track of which deadline belongs to which count.
How I handle a fiduciary duty case
- Identify the entity and the relationship. Corporation, LLC, partnership or an informal co-ownership. I get the articles, bylaws or operating agreement, amendments, and any partnership or buy-sell agreement.
- Decide whose claim it is. I apply the direct versus derivative questions before anything is filed, so the complaint is built on the right plaintiff and the right remedy.
- Build the timeline and the money. Dates of each act, the date you learned of it, and the financial records for the years involved. I look for the gap that Turner turned on before the other side does.
- Calendar every deadline. The 3-year and 2-year statutory periods, the general periods, the demand and 90-day wait, and any concealment argument.
- Send or answer the demand. For a derivative claim, I draft the written demand. For a defendant, I review it and advise on the company’s response.
- File or answer, then discovery. I plead the duty, the breach and the damages separately, and I request the books, records, agreements and communications that prove or answer each.
- Motions and trial preparation. Motions on duty, on the business judgment rule, and on damages, and preparing witnesses and the financial proof for trial.
Ways a fiduciary duty dispute may end without a trial
Whether any of these is available depends on the entity, the agreements, the facts and the other side. None is automatic.
Buyout or exit. Many disputes end with one owner buying the other out, or with a sale or dissolution on agreed terms. The paper should set the price, the payment terms, what happens to guaranties and personal debts, and a release that says exactly what is released.
Accounting and repayment. A settlement can require the insider to account for profits, repay money, return property or unwind a deal. A settlement of a derivative claim should address who receives the money and how fees are paid, with MCL 450.4514 in view.
Mediation or arbitration clauses. Some agreements require them. I read the clause before filing.
Dismissal or summary disposition. A case can end on motion if there was no duty, the claim belongs to the company, the demand was not made, the time to sue ran, or there is no proof of damages.
What I need from you
Bring the articles or certificate, the bylaws or operating agreement and every amendment, any partnership, buy-sell or shareholder agreement, and the minutes, consents and member votes. Bring the financial statements, tax returns, bank and credit card records for the years in question, the contracts or loan documents at issue, and the emails and texts that show what was said and when. Write down the dates you learned of each act, because the deadline may turn on them.
Do not take company money, files or accounts to even the score, and do not lock anyone out of the books or systems. Do not sign a buyout, release, resignation or amended agreement until it has been read against the agreements you already have. Do not delete messages or alter records. Do not talk to the other owner about the case in writing before we have spoken.
Where your Kent County fiduciary duty case will be heard
I represent clients in Grand Rapids, Kentwood, Grandville, Wyoming and across Kent County. Under MCL 600.8301(1), the district court has exclusive jurisdiction in civil actions when the amount in controversy does not exceed $25,000. Kent County district courts include the 61st District Court in Grand Rapids, the 59th in Walker and Grandville, the 62A in Wyoming, the 62B in Kentwood and the 63rd for Rockford, Lowell, Cedar Springs, East Grand Rapids and the surrounding townships. Larger claims are filed in the Kent County Circuit Court, the 17th Judicial Circuit, and oppression actions are brought in the circuit court. MCL 450.1489(1); MCL 450.4515(1). A dispute between a business and its owners, managers, shareholders, members, directors or officers, arising out of those relationships, can qualify as a business or commercial dispute under MCL 600.8031(1)(c)(ii), and the statute lists matters involving the rights or obligations of shareholders, partners, members, owners, officers, directors or managers. MCL 600.8031(2)(c).
Why people hire me for a Michigan fiduciary duty matter
You work directly with me, the lawyer handling your case. I give you the strengths and weaknesses of the case straight, including what it could cost you and what it could recover. I build the case the facts support, and then we decide together how to proceed.
Fees depend on the type of case, its complexity and whether it is likely to go to trial. I explain my fee arrangement at the consultation, before you decide whether to hire me.
Questions I hear from people with a breach of fiduciary duty claim in Michigan
Can I sue the directors myself over how they handled the company, or does the company have to bring the claim?
It depends on who was harmed and who would receive the recovery. The Michigan Supreme Court held in Murphy v Inman that if the corporation suffered the harm and would get the remedy, the claim is derivative and the statutory demand rules apply. If the shareholder suffered the harm independently and would get the remedy, the claim is direct. Murphy allowed a shareholder to sue directly over the directors’ handling of a cash-out merger.
What do I have to prove to win a breach of fiduciary duty claim in Michigan?
You must prove three things: that the defendant owed you a fiduciary duty, that the defendant breached it, and that the breach caused you damages (Highfield Beach). Whether a duty exists is generally a question of law for the court, and trust you placed in the other person has to be reasonable (Prentis). Damages must be proved with reasonable certainty, and a claim can fail on that element alone.
Do I owe fiduciary duties to my business partner, or they to me, if we never signed a partnership agreement?
Probably, if you actually carried on a business together as co-owners for profit. Michigan’s Uniform Partnership Act defines a partnership that way (MCL 449.6(1)), and the Supreme Court held in Byker v Mannes that the test is whether the parties intended to and did carry on as co-owners a business for profit, not whether they meant to form a legal partnership. Partners must account for benefits and profits from partnership transactions or the use of partnership property (MCL 449.21(1)).
Can a director or officer make a deal between themselves and the corporation, and when can I challenge it?
Yes, but the insider has to carry the burden. Under MCL 450.1545a, an interested transaction cannot be enjoined, set aside, or support damages or sanctions in a shareholder or derivative proceeding if the interested director or officer establishes that it was fair to the corporation when entered into, or that it was approved after disclosure by disinterested directors, or by the shareholders entitled to vote. Meeting one of those tests does not bar every other claim.
Can my business partner, officer, or co-owner take a business opportunity that came through the company?
Not if it belongs to the company. In Production Finishing Corp v Shields, the Court of Appeals held that an officer and director breached fiduciary duties by diverting a corporate opportunity for personal gain without full disclosure to the corporation, and quoted a test that looks at whether the opportunity was in the company’s line of business and one it could finance and had an interest or reasonable expectancy in. Partners and LLC managers must also account for profits from company transactions (MCL 449.21(1); MCL 450.4404(5)).
Can I sue on behalf of my LLC or corporation when the managers or directors will not, and what must I do first?
Yes, but only after following the statute. An LLC member must make a written demand on the managers or members with authority and wait 90 days, unless the demand is rejected sooner or waiting would cause irreparable injury to the company (MCL 450.4510). A corporate shareholder faces the same demand and 90-day rule (MCL 450.1493a). Because the claim belongs to the company, a recovery generally goes to the company, not to you.
What is a fiduciary duty, and who owes one in a Michigan business dispute?
A fiduciary relationship arises from the reposing of faith, confidence, and trust and the reliance of one person upon the judgment and advice of another, as the Court of Appeals put it in Ulrich v Federal Land Bank. Damages can be recovered when a position of influence has been acquired and abused or when confidence has been reposed and betrayed, as the Court of Appeals said in Prentis Family Foundation.
How long do I have to sue for breach of fiduciary duty in Michigan?
In Prentis Family Foundation the Court of Appeals applied the 3-year period for injury to property to a breach of fiduciary duty claim and rejected the 2-year malpractice period. Because courts look at the gravamen of the complaint, a claim built on fraud may fall under the 6-year residual period in MCL 600.5813. Until the facts are sorted out, the safe course is to calendar the shorter period.
Related Michigan pages
- Grand Rapids Business Litigation Attorney
- Grand Rapids LLC Member and Shareholder Dispute Attorney
- Grand Rapids Partnership Dissolution and Joint Venture Attorney
- Grand Rapids Tortious Interference Attorney
- Corporation governance and shareholder agreements
I handle fiduciary duty disputes among owners, directors, officers and partners in Michigan for either side. Contact me 24/7 by phone or email. Your Rights, My Fight! Call for a free initial consultation.
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Law Offices of Mitchell S. Bisson, 2828 Kraft Ave SE, Suite 295, Grand Rapids, MI 49512, serving Kent County and West Michigan.
This page provides general information about Michigan law and is not legal advice. Reading it does not create an attorney-client relationship. Laws change and every case turns on its own facts. Consult a licensed attorney about your specific situation.