## Facts

- Southern Michigan Bancorp, Inc. (Bancorp) had bylaws that did not permit recoupment of director fees paid to directors later found liable for breaching fiduciary duties.
- A shareholder, the Gwyn R. Hartman Revocable Living Trust, drafted a resolution urging Bancorp’s board to adopt a bylaw authorizing such a “clawback,” along with a short supporting statement focused on director accountability.
- The Trust requested inclusion of the resolution and supporting statement in the proxy materials for Bancorp’s 2013 annual meeting.
- Bancorp declined to include the proposal text or supporting statement; its proxy statement said only that a shareholder planned to propose a resolution urging bylaw amendments and that management would exercise discretionary authority to vote proxies against it unless instructed otherwise.
- At the annual meeting, the Trust objected to the adequacy of the disclosure, and the shareholders voted the proposal down.
- The Trust sued Bancorp and the board chairman, alleging violation of Michigan’s statutory meeting-notice requirement and related common-law disclosure duties; the district court dismissed under Rule 12(b)(6).

## Issues

1. Whether a proxy statement that merely notes an unspecified shareholder proposal to amend bylaws, without describing its subject matter, provides adequate notice of the meeting’s “purposes” under Mich. Comp. Laws § 450.1404.
2. Whether the allegations plausibly state a claim under Michigan common-law disclosure duties owed to shareholders in connection with voting.

## Decision

- The Sixth Circuit reversed the Rule 12(b)(6) dismissal and remanded.
- The court held the proxy statement did not satisfy Mich. Comp. Laws § 450.1404’s requirement to state the “purposes” of the meeting because it failed to give meaningful notice of the proposal’s subject matter.
- The court held the complaint plausibly alleged violations of both Michigan statutory notice obligations and parallel common-law disclosure duties, making dismissal at the pleading stage improper.

## Legal Principles

- Under Mich. Comp. Laws § 450.1404, meeting notice must state the meeting’s “purposes” in a way that provides shareholders meaningful notice of proposals to be acted upon.
- A corporation does not satisfy the “purposes” requirement by acknowledging only that a shareholder will propose a bylaw amendment; it must at least describe the proposal’s subject matter.
- Michigan common law may impose disclosure obligations requiring directors and the corporation to provide shareholders information reasonably necessary to exercise informed voting rights, including when soliciting or using proxies.

## Conclusion

The Sixth Circuit held that Michigan’s shareholder-meeting notice statute requires more than a generic reference to a possible bylaw amendment; shareholders must be informed of the proposal’s subject matter, and allegations of withholding such information state plausible statutory and common-law disclosure claims.


Gwyn R. Hartman Revocable Living Tr. U/A/D 11/16/93 v. S. Mich. Bancorp, Inc., 780 F.3d 724 (6th Cir. 2015)