1 RECOMMENDED FOR FULL-TEXT PUBLICATION Pursuant to Sixth Circuit I.O.P. 32.1(b) File Name: 15a0044p.06 

### UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

_________________

G WYN R. H ARTMAN R EVOCABLE L IVING T RUST U/A/D 11/16/93, Plaintiff-Appellant ,

v

.

S OUTHERN M ICHIGAN B ANCORP , I NC . and J OHN H. C ASTLE , Defendants-Appellees

. ┐ │ │ │ │ │ │ │ │ │ ┘ No. 14-1866

Appeal from the United St ates District Court for the Western District of Michigan at Grand Rapids.

No. 1:13-cv-00825—Janet T. Neff, District Judge. Argued: March 3, 2015 Decided and Filed: March 13, 2015 Before: CLAY, GILMAN, and SUTTON, Circuit Judges.

_________________ COUNSEL

ARGUED: James W. Rose, JAFFE RAITT HEUER & WEISS, PC, Southfield, Michigan, for Appellant. Madelaine C. Lane, WARNER NORCROSS & JUDD LLP, Grand Rapids, Michigan, for Appellees. ON BRIEF: James W. Rose, R. Chri stopher Cataldo, JAFFE RAITT HEUER & WEISS, PC, Southfiel d, Michigan, for Appellant. Madelaine C. Lane, WARNER NORCROSS & JUDD LLP, Grand Rapi ds, Michigan, for Appellees.

_________________ OPINION

_________________ SUTTON, Circuit Judge. Whenever a Michigan corporation holds a shareholder meeting, it must disclose any proposals on the ag enda that a shareholde r wishes to submit for 

### >No. 14-1866 Gwyn R. Hartman Revocable Living Trust v. S. Mich. Bancorp, Inc. Page 2

shareholder action. In 2012, one of Southern Michigan Bancorp’s sh areholders asked the company to circulate such a proposal before the company’s 2013 annual meeting. In its proxy statement discussing the agenda for the meeti ng, Bancorp neither distributed the proposal nor described it. After the proposal was voted down at the meeting, the shareholder sued Bancorp
and the chairman of its board of directors for violating their statutory and common-law disclosure obligations. A federal district cour t dismissed the complain t under Rule 12(b)(6) of
the Federal Rules of Civil Procedure. Because Michigan law required Bancorp to say more than it did, we reverse the judgme nt of the district court and remand for further proceedings.
Bancorp’s bylaws do not permit the corporation to claw back fees pa id to directors found liable for breaching their fiduciary duties. In 2012, the Gwyn R. Hartman Revocable Living Trust, a Bancorp shareholder, drafted a one-par agraph resolution exhorting Bancorp’s board to fill that gap. It asked the board to include the resolution in Bancorp’s proxy statement for the upcoming annual meeting along with a two-paragr aph “supporting statement” invoking the need for more “director accountability.” R. 25-2 at 2–3.
The board refused. Its March 2013 proxy statem ent told shareholders merely that a shareholder planned to propose a resolution urging the board to amend the company’s bylaws. If that resolution materialized, the statement conti nued, the directors would us e their “discretionary authority” to vote it down by treating all submitted proxies as no-votes absent instructions to the contrary. R. 24 at 2. The statement said nothing else a bout the proposal or its substance.
When the annual meeting convened a month or so later, the tr ust’s representative objected to the sufficiency of the disclosure, a nd objected again when the proposal came up for a vote. The vote did not go the trust’s way. Ju st 150,000 shares favored the proposal, and more than 1.7 million shares opposed it.
The trust sued Bancorp and John H. Castle , the company’s chairman and CEO, for “intentional[ly] withholding” its proposal from the proxy statemen t and for “denying” the trust “any meaningful opportunity to solicit votes.” R. 4 at 9. It also filed a derivative claim on behalf of Bancorp itself. The district court dismissed the complaint for failing to state a claim on which relief could be granted.No. 14-1866 Gwyn R. Hartman Revocable Living Trust v. S. Mich. Bancorp, Inc. Page 3

Did Bancorp’s notice of the trust’s proposal—“ a shareholder intends to present for action at the annual meeting a proposal urging the Boar d of Directors to adopt an amendment to the Company’s Bylaws”—satisfy Michigan law? Notice of Annual Meeting of Shareholders , S. Mich. Bancorp, Inc. (Mar. 28, 2013), http ://www.sec.gov/Archives/edgar/data/703699
/000119312513130714/d444453dex992.htm. We think not.
The relevant Michigan statute requires compan ies to give shareholders “written notice of the time, place if any, and purposes” of any upcoming meeting. Mich. Comp. Laws § 450.1404. “[N]otice of the purpos es of a meeting,” the statute continues, “shall include notice of shareholder proposals” that a sharehol der intends to submit for a vote. Id. We are hard-pressed to understand how mere acknowledgement of th e existence of a proposal—without describing even its subject matter—amounts to “notice” under the statute. By Bancorp’s lights, “notice of a shareholder proposal” require s only a statement that there will be a shareholder proposal. By our lights, that is not “notice.”
Michigan case law suggests as much. In the context of construing the statute’s predecessor, which addressed “special” m eetings as opposed to regular ones, 3 The Compiled Laws of Michigan 1948 § 450.39, at 9090 (1948), the Michigan c ourts have not looked kindly on
bare-bones disclosure s of this ilk. In Bourne v. Sanford , 41 N.W.2d 515 (Mich. 1950), the directors tried to convene a board meeting to dissolve a company w ithout letting its only shareholder know. That was impermissible, the Court held: “We can hardly conceive of an occasion when it is more vital to have a meeting at which there could be a general discussion, interchange of views and cons ultation of the directors.” Id. at 521–22. Had the shareholder been properly notified, he could have prepared for th e meeting, made his case, and perhaps changed
the outcome. Id. at 522. A state appellate court la ter reached a similar conclusion in Darvin v. Belmont Industries, Inc. , 199 N.W.2d 542 (Mich. Ct. App. 1972). It concluded that Michigan’s “purpose-notice” requirement is designed to help shareholders “study [a ] proposal, arrive at a position, and either oppose it or suppor t it” before the meeting itself. Id. at 546.
Bancorp’s notice did not satisfy these requirement s. Its proxy statement said merely that
a shareholder intended to subm it a resolution calling upon the boa rd to amend the company’s bylaws. But it never specified which bylaw or what topic the bylaw covered. With such skeletalNo. 14-1866 Gwyn R. Hartman Revocable Living Trust v. S. Mich. Bancorp, Inc. Page 4

“disclosure” in hand, a shareholder would never know whether the resolution sought to change the bylaws’ record-date procedure or thei r compensation-committee guidelines or their
indemnification rules or their amendment restricti ons or their discussion of director liability. Cf. Horbal v. St. John’s Greek Catholic Church of Detroit , 244 N.W. 493, 495 (Mich. 1932) (holding that an ecclesiastical corporation violated an analog ous requirement by mortgaging its property at a special meeting that its notice described only as involving a “very important” matter, full stop).

Other States have endorsed th e principles set forth in Bourne and Darvin . Some States
have built them into the four corners of a statut e. California’s Corporations Code, for instance, requires disclosure of the “general nature of th e business to be transacted” at special meetings,
and of “those matters that the board . . . intends to present for action by the shareholders” at general meetings. Cal. Corp. Code § 601(a). Othe r States have derived them from common law. Delaware’s General Corporation Law requires a company to give shareholders a summary of only a few types of proposed action. See Del. Code Ann. tit. 8, § 242(b)(1). Its courts, however, have plugged the gaps in that regime with a broader duty of disclosure. See Stroud v. Grace , 606 A.2d 75, 85–88 (Del. 1992). These endorsements ma ke clear that, at a minimum, a meeting notice “should sufficiently apprise [shareholders] of matters to be considered at the meeting, give them information upon which they may exercise intelligent judgment with reference to the proposed questions, and open up avenues for obtai ning additional informa tion.” 5 Fletcher Cyclopedia of the Law of Co rporations § 2008 (2014).
Because Bancorp did not fulfill its statutory obligation to give “notice of shareholder proposals,” the district court erred by dismissing the trust’s claim. And because we base our conclusion solely on our interpretation of Michigan law, we leave for another panel and another day the two trickier questions th e trust presents: whether Michig an law incorporates Delaware’s even more expansive duty of disclo sure and whether Bancorp violated that duty too.
Bancorp’s rejoinders miss the target. It clai ms that our interpretation of Michigan law “rewrite[s]” § 450.1404 to “require submission of a shareholder’s proposal with a corporation’s proxy materials.” Appellee’s Br. at 17. Not true . Michigan does not force companies to hand shareholders the pen when drafting a meeting no tice. But the fact that Michigan does notNo. 14-1866 Gwyn R. Hartman Revocable Living Trust v. S. Mich. Bancorp, Inc. Page 5

replicate the SEC’s maximal proxy-access regi me does not obviate the statute’s own requirements, which set a minimum disclosure floor.
Bancorp persists that, because Bourne and Darvin involve an older version of § 450.1404, neither case deserves our allegiance. Also not true. Before § 450.1404 took effect, companies had to disclose the pur poses of only special shareholde r meetings, not regular ones. Even then, Darvin cited approvingly, if in dictum, a trea tise arguing that the purpose requirement be extended to “any extraordinary matter” up for discussion “at a regular [shareholder] meeting”

too. Darvin , 199 N.W.2d at 546 (citing Norman D. Lattin, The Law of Corporations 286 (1st ed. 1959)). Michigan eventually accep ted the treatise’s invitation, and in fact went further. The notice requirement now applies to all shareholder meetings, special or regular, and to all a meeting’s purposes, extraordinary or not. The new statute simply extends the notice requirements of the old one—as expressed in Bourne and Darvin —to many more shareholder communications, including the notice at issue in this case. Bourne and Darvin control our interpretation of § 450.1404 unless and until the Michigan courts say otherwise.
One last point. Is the trust’s claim direct, de rivative, or both? The district court did not say because it determined that th e claim itself lacked merit. Having concluded otherwise, we
leave the issue for the district court to decide in the first instance.

For these reasons, we reverse th e district court’s judgment and remand for further proceedings.