Owner disputes, noncompetes and trade secrets in Michigan

MCL 450.4515 lets a member sue in circuit court to establish that the acts of the managers or members in control are illegal, fraudulent, or willfully unfair and oppressive toward the company or the member. If the member establishes grounds, the court may order relief such as dissolution, changes to the operating agreement, a buyout at fair value, or damages.

The action is brought in the circuit court for the county where the company's principal place of business or registered office is located. The statute gives the court wide discretion, listing dissolution and liquidation, cancellation or alteration of a provision in the articles or operating agreement, direction or prohibition of an act of the company or its members, purchase at fair value of the member's interest by the company or the members responsible, and damages.

The key concept is willfully unfair and oppressive conduct, which the statute defines as a continuing course of conduct or a significant action or series of actions that substantially interferes with the interests of the member as a member. Examples owners complain about include cutting off distributions, denying access to books, issuing interests to dilute a member, and diverting business opportunities.

The operating agreement matters because the definition excludes conduct permitted by the articles, an operating agreement, another agreement the member signed, or a consistently applied written policy. Bring the operating agreement, amendments, tax returns, and any messages about the dispute.

Authority: MCL 450.4515(1)-(2). Reviewed Oct. 2026.

Under MCL 450.4515(2) and MCL 450.1489(3), it means a continuing course of conduct or a significant action or series of actions that substantially interferes with your interests as a member or shareholder. It does not include conduct permitted by the articles, an operating or shareholder agreement, another agreement (for an LLC member, one to which the member is a party), or a consistently applied written policy.

Two features of the definition drive most cases. First, the interference has to be substantial and has to affect your interests as an owner, not merely your preferences about how the company is run. Second, the carve-out for conduct permitted by agreements means the documents you signed can defeat a claim that would otherwise look unfair.

In Madugula v Taub, the Michigan Supreme Court held that a violation of a shareholder agreement may constitute evidence of shareholder oppression under MCL 450.1489(3). That cuts both ways: breaching the agreement can support a claim, while acting within the agreement can defeat one.

The statutes also address employment. Termination of employment or limitations on employment benefits can count to the extent they interfere with distributions or other ownership interests disproportionately as to the affected owner, which I discuss in a separate answer.

Because the outcome often turns on the exact words of the agreements, the operating agreement or bylaws, buy-sell terms, and any amendments need to be read before assessing a claim.

Authority: MCL 450.4515(2); MCL 450.1489(3); Madugula v Taub, 496 Mich 685 (2014). Reviewed Oct. 2026.

Possibly. Both the LLC statute and the shareholder statute say willfully unfair and oppressive conduct may include termination of employment or limitations on employment benefits to the extent the actions interfere with distributions or other member or shareholder interests disproportionately as to the affected owner. It depends on the agreements and on how the action affected your ownership.

In a closely held business, a job is often how an owner gets paid. Michigan's statutes recognize that by listing termination of employment and limitations on employment benefits as conduct that may be oppressive, but only to the extent the action interferes with distributions or other owner interests disproportionately as to the affected owner. A termination that has no effect on your ownership interests is not enough by itself.

The carve-out for conduct permitted by an agreement also applies. If your employment agreement or the operating or shareholder agreement allowed termination, the company will argue the conduct is outside the definition.

What matters is the combination: removal from a role, cutting off compensation that substituted for distributions, and a pattern that squeezes the owner while others benefit. Equitable remedies, such as a buyout at fair value, may be available in addition to damages.

Bring the employment agreement, the operating or shareholder agreement, the termination notice, and distribution and compensation records for several years.

Authority: MCL 450.4515(2); MCL 450.1489(3). Reviewed Oct. 2026.

A claim seeking damages must be commenced within 3 years after the cause of action accrued or within 2 years after you discovered or reasonably should have discovered it, whichever occurs first, under MCL 450.4515(1)(e). In Frank v Linkner the Michigan Supreme Court held the claim accrues when the managers substantially interfere with your interests, not when you suffer a calculable financial loss.

Frank involved former members whose interests were subordinated in 2009 and who received nothing from a 2012 sale. They argued their claims accrued with the 2012 financial injury. The Supreme Court disagreed: the actionable harm is the substantial interference with the member's interests, monetary damages are only one remedy, and later additional damages from the same harm do not restart the clock.

The Court also held that the 3-year period is a statute of limitations rather than a statute of repose, so it can be tolled under the fraudulent concealment statute, MCL 600.5855, if the plaintiffs prove concealment.

The statutory deadline applies to an action seeking damages. The statute lists other remedies, such as cancellation or alteration of an operating agreement provision, prohibition of an act, and a buyout at fair value, and the Court noted the plaintiffs could have sought those remedies when the interference occurred. The shareholder statute, MCL 450.1489(1)(f), has the same 3-year and 2-year language.

Because the date of the interference controls, it should be identified early. If you suspect a freeze-out, do not wait for the financial results to prove the damage.

Authority: MCL 450.4515(1)(e); Frank v Linkner, 500 Mich 133 (2017); MCL 450.1489(1)(f). Reviewed Oct. 2026.

Yes, if the shares are not publicly traded. MCL 450.1489 lets a shareholder sue in circuit court to establish that the acts of the directors or those in control are illegal, fraudulent, or willfully unfair and oppressive. It cannot be used by a holder of shares listed on a national securities exchange or regularly traded in a market maintained by securities association members. The claim is tried to the court, not a jury.

The statute applies to corporations with a principal place of business or registered office in the county where suit is filed, and the court may order dissolution, cancellation or alteration of articles or bylaws, an injunction against corporate acts, a buyout of shares at fair value, or damages.

In Madugula v Taub, the Michigan Supreme Court held that the plain language of the statute does not give a claimant the right to a jury trial and that there is no constitutional jury right for these claims. The Court viewed them as equitable matters for a court. It also held that violations of a shareholder agreement may constitute evidence of oppression.

That makes the case record, not a jury, the main audience. Documents such as the shareholder agreement, board minutes, compensation records, and financial statements carry weight.

The damages period is 3 years from accrual or 2 years from discovery, whichever comes first. If you are a minority shareholder in a closely held company, bring the stock records, agreements, and records of distributions and compensation.

Authority: MCL 450.1489(1)-(2); Madugula v Taub, 496 Mich 685 (2014). Reviewed Oct. 2026.

A court may, if you establish grounds. MCL 450.4515(1)(d) and MCL 450.1489(1)(e) list the purchase at fair value of your interest, by the company or by the members, officers, directors, or shareholders responsible for the wrongful acts, among the remedies a court may order. The relief is discretionary and depends on proving illegal, fraudulent, or willfully unfair and oppressive conduct.

The statutes say that if the owner establishes grounds for relief, the court may issue an order or grant relief as it considers appropriate, including but not limited to the listed remedies. A buyout is one option, along with dissolution, altering agreement provisions, and damages. Because the remedy is equitable, the court has wide latitude in picking among them.

The standard is fair value, not a figure you or the other side choose, and the valuation fight is often the heart of the case. Operating agreements and shareholder agreements may contain buy-sell formulas, discounts, or valuation procedures, which can limit or shape what a court orders.

A buyout also shows up in settlement discussions, since the other owners may prefer to purchase the interest rather than face a dissolution claim. Whether that makes sense depends on the company's finances and the proof of oppression.

To evaluate the claim I need the agreements, financial statements, tax returns, and any prior valuations or offers.

Authority: MCL 450.4515(1)(d); MCL 450.1489(1)(e). Reviewed Oct. 2026.

Yes, within limits. An LLC member can request financial statements and tax returns in writing, ask for true and full information on the company's financial condition, and inspect required records on reasonable written request under MCL 450.4503. A corporate shareholder may inspect books and records for a proper purpose on written demand under MCL 450.1487, with a circuit court remedy if inspection is refused for 5 business days.

For an LLC, MCL 450.4503 provides that, on written request, the company sends the member its most recent annual financial statement and income tax returns. A member may inspect and copy required records on reasonable written request during business hours at the member's own expense, may obtain other information or books and records as is just and reasonable, and may have a formal accounting as provided in the operating agreement or whenever circumstances render it just and reasonable.

For a corporation, a shareholder of record needs a written demand describing the purpose with reasonable particularity, delivered to the registered office or principal place of business. A proper purpose is one reasonably related to the person's interest as a shareholder. If inspection is not permitted within 5 business days, the shareholder may apply to the circuit court of the county where the corporation's principal place of business or registered office is located.

The form of the request matters, so the request should be drafted carefully, proof of delivery kept, and the statute's wording followed. A refused request may also become useful evidence in a later oppression case.

Authority: MCL 450.4503; MCL 450.1487(2)-(3). Reviewed Oct. 2026.

They can be. MCL 445.774a allows an employer to obtain an agreement that protects its reasonable competitive business interests and prohibits post-employment competition if the agreement is reasonable as to duration, geographical area, and type of employment or line of business. If it is unreasonable in some respect, a court may limit it and enforce it as limited.

The statute codifies the common-law reasonableness approach, and the Court of Appeals in St Clair Medical v Borgiel applied the traditional factors: an honest and just purpose, protection of a legitimate interest, reasonableness between the parties, and no special injury to the public. The employer's interest has to be greater than merely preventing competition. The covenant may protect against an employee gaining an unfair competitive advantage, but it may not stop the employee from using general knowledge or skill. In that case a physician covenant with a 7-mile restriction was modest in geographic scope and upheld.

Because a court may limit an overbroad covenant rather than strike it, an employee should not assume that unreasonable terms mean freedom to compete, and an employer should not assume that overbroad terms will be enforced as written.

The statute applies to covenants entered after March 29, 1985. Bring the signed agreement, any amendments, your job description, and a description of the new role. I represent both employers and employees in these disputes.

Authority: MCL 445.774a(1)-(2); St Clair Med, PC v Borgiel, 270 Mich App 260, 265-269 (2006). Reviewed Oct. 2026.

Under MCL 445.1902(d), a trade secret is information, including a formula, pattern, compilation, program, device, method, technique, or process, that both derives independent economic value from not being generally known or readily ascertainable by proper means and is the subject of reasonable efforts to maintain its secrecy. Both requirements must be met.

The Michigan Uniform Trade Secrets Act protects more than recipes and code. A customer compilation, a pricing method, or a process can qualify, but only if it is valuable because others cannot easily learn it and the owner took reasonable steps to keep it secret.

The second requirement is where businesses often lose. Reasonable efforts typically involve confidentiality agreements, limited access, passwords, marked documents, and policies that employees actually follow. If everyone in the company had the information and no one was told it was confidential, a court may not treat it as a trade secret.

Misappropriation, as the statute defines it, includes acquiring a trade secret by improper means, such as theft, bribery, misrepresentation, breach of a duty to maintain secrecy, or espionage, and disclosing or using a trade secret without consent under specified circumstances.

If you think a former employee or partner has taken confidential information, the questions are what the information is, how it was protected, and what the other side did with it.

Authority: MCL 445.1902(a)-(d). Reviewed Oct. 2026.

Under the Michigan Uniform Trade Secrets Act a court may enjoin actual or threatened misappropriation, MCL 445.1903, and award damages for actual loss plus unjust enrichment, or a reasonable royalty, MCL 445.1904. Fees may be awarded in bad faith or willful and malicious cases, MCL 445.1905. The suit must be brought within 3 years after the misappropriation is discovered or should have been discovered, MCL 445.1907.

An injunction can last until the trade secret ceases to exist and may be continued for a reasonable additional period to eliminate commercial advantage derived from the misappropriation. If a court finds a flat prohibition on future use unreasonable, it may condition future use on payment of a reasonable royalty. A court may also compel affirmative acts to protect a trade secret.

Damages can include the actual loss caused by misappropriation and any unjust enrichment not counted in the actual loss. In lieu of other methods, damages may be measured by a reasonable royalty for the unauthorized disclosure or use.

The court may award reasonable attorney fees to the prevailing party if a claim of misappropriation is made in bad faith, a motion to terminate an injunction is made or resisted in bad faith, or willful and malicious misappropriation exists. That cuts both ways, so a weak claim carries risk.

The 3-year clock runs from discovery, and a continuing misappropriation is treated as a single claim, so the discovery date should be established early. If you suspect theft, preserve emails, access logs, and device records right away.

Authority: MCL 445.1903; MCL 445.1904; MCL 445.1905; MCL 445.1907. Reviewed Oct. 2026.

Not on that basis alone. In CMI v Intermet the Court of Appeals held that for a claim of threatened misappropriation, whether under an inevitable disclosure theory or otherwise, the party must establish more than the existence of generalized trade secrets and a competitor's employment of a former employee who knows them. The court stressed that the concept must not compromise the right of employees to change jobs.

CMI noted that no Michigan case had interpreted the statutory provision on threatened misappropriation at that time. Even assuming it includes an inevitable disclosure concept, the court required more than the mere fact of the new job. In CMI the plaintiff offered no evidence of duplicity beyond the employment and did not even suggest a specific trade secret likely to be misappropriated.

That does not mean an employee is free to take anything. The statute allows an injunction against actual or threatened misappropriation, so evidence that the employee copied files, emailed documents to a personal account, or solicited coworkers changes the picture. A separate noncompete or confidentiality agreement, if reasonable under MCL 445.774a, can also restrict the new job independent of the trade secrets act.

If you are an employer worried about a departure, the focus is on specific evidence of taking or using confidential information. If you are the employee, the focus is on what you signed and what you took. Bring the agreements, your job description, and a description of the new role.

Authority: CMI Int'l, Inc v Intermet Int'l Corp, 251 Mich App 125, 133-134 (2002); MCL 445.1903(1); MCL 445.774a. Reviewed Oct. 2026.

Some, but not for the misappropriation itself. MCL 445.1908 provides that the trade secrets act displaces conflicting tort, restitutionary, and other law providing civil remedies for misappropriation of a trade secret. It does not affect contractual remedies, other civil remedies not based on misappropriation, or criminal remedies. How you plead the claims matters.

The Court of Appeals in CMI v Intermet applied the displacement section, concluding that the plaintiff's remaining claims necessarily depended on the trade secrets act because the statute displaced conflicting tort remedies for misappropriation.

The statute preserves three categories. Contractual remedies survive whether or not they are based on misappropriation, so a confidentiality or nondisclosure agreement can support a breach of contract claim. Other civil remedies that are not based on misappropriation also survive, which may include claims about different conduct, such as a breach of a fiduciary duty that does not depend on a trade secret. Criminal remedies are unaffected.

The practical result is that a complaint should separate the claims. Facts about stolen confidential information go under the trade secrets act, while claims on the written agreements and other wrongful conduct are pleaded separately. A defendant will often move to dismiss the overlapping tort counts.

Bring any confidentiality, nondisclosure, or employment agreements early, because claims on those documents can be important to the case.

Authority: MCL 445.1908; CMI Int'l, Inc v Intermet Int'l Corp, 251 Mich App 125, 132 (2002). Reviewed Oct. 2026.

Under MCR 3.310(B), a court may grant a TRO without notice only if specific facts in an affidavit or verified complaint clearly show immediate and irreparable injury, loss, or damage will result from the delay needed to give notice, and the attorney certifies in writing the efforts made to give notice and why notice should not be required. A TRO without notice expires within the time the court sets, not to exceed 14 days, unless extended.

A TRO without notice is an emergency tool. The order must be endorsed with the date and time, describe the injury and why it is irreparable, state why it was granted without notice, and set the earliest possible hearing on a preliminary injunction. It may be extended for good cause for a like period, or longer if the restrained party consents.

The restrained party can move to dissolve the order on 24 hours' notice, and the burden of justifying continuation is on the applicant. The court may also require the applicant to post security for costs and damages incurred by a party found to have been wrongfully enjoined.

The order must set out the reasons for its issuance, be specific, and describe the restrained acts in reasonable detail. If a judge denies an injunction, the rule bars asking another circuit judge for the same relief.

Because these requests happen fast, preparation matters: a verified complaint, supporting affidavits, the agreements at issue, and proof of the specific harm. If you are the party being restrained, quick and organized evidence matters as much.

Authority: MCR 3.310(B), (C), (D), (G). Reviewed Oct. 2026.

Besides irreparable harm, the Michigan Supreme Court lists three factors: whether the harm to the applicant without an injunction outweighs the harm to the opposing party, the strength of the applicant's showing that it is likely to prevail on the merits, and harm to the public interest if an injunction issues. Pontiac Fire Fighters v Pontiac, quoting Michigan Coalition of State Employee Unions v Civil Service Commission, stated this framework. The applicant carries the burden at the hearing.

MCR 3.310(A) says an injunction generally may not be granted before a hearing on a motion for a preliminary injunction or on an order to show cause. At that hearing, the party seeking relief has the burden of establishing that an injunction should issue, whether or not a TRO was entered.

If a preliminary injunction is granted, the court must promptly schedule a pretrial conference, and the trial on the merits must be held within 6 months after the injunction is granted unless good cause is shown or the parties stipulate to a longer period. The decision on the merits is due within 56 days after trial.

Irreparable harm is often the contested factor. Courts look closely at whether money damages would be an adequate remedy, so applicants build records showing lost customers, loss of confidential information, or other injury that a judgment may not repair.

The court may also require security. Whether you are seeking or opposing an injunction, early attention to the evidence for each factor matters.

Authority: Pontiac Fire Fighters Union Local 376 v Pontiac, 482 Mich 1, 6 n 6, 8-9 (2008); MCR 3.310(A), (D); Michigan Coalition of State Employee Unions v Civil Service Commission, 465 Mich 212, 225 n 11 (2001). Reviewed Oct. 2026.