Opinion ID: 857420
Heading Depth: 2
Heading Rank: 2

Heading: ALTHOUGH THE HOLDING OF McLAUGHLIN I

Text: THAT SHAREHOLDERS IN CLOSELY HELD CORPORATIONS OWE EACH OTHER FIDUCIARY DUTIES HAS BEEN SUPERSEDED BY STATUTE, THE STATUTE IS NOT DISPOSITIVE IN THIS CASE BECAUSE IT IS NOT RETROACTIVE ¶25 McLaughlin I concluded that shareholders in closely-held 7 MCLAUGHLIN v. SCHENK Opinion of the Court corporations owe each other a heightened duty of “utmost good faith and loyalty.” McLaughlin v. Schenk, 2009 UT 64, ¶¶ 18, 20, 220 P.3d 146. In response to McLaughlin I, the Legislature amended section 16-10a-622 to state that “[a] shareholder of a corporation, when acting solely in the capacity of a shareholder, has no fiduciary duty or other similar duty to any other shareholder of the corporation, including not having a duty of care, loyalty, or utmost good faith. This Subsection . . . applies to . . . a closely-held corporation.” UTAH CODE § 16-10a-622(3). ¶26 The bill’s sponsor described McLaughlin I as a “troubling decision” holding that “shareholders of a closely-held corporation have a fiduciary duty to the other shareholders of the corporation.” Senate Business & Labor Committee Hearing, S.B. 197, 58th Leg., Gen. Sess. (Feb. 16, 2010) (statement of Sen. Liljenquist). He explained that this bill just basically clarifies that a shareholder of a corporation, when acting solely in the capacity of a shareholder, has no fiduciary duty. When they’re just a shareholder, they do not have a fiduciary duty to other shareholders, and this clarifies that the fiduciary duties are basically held with the directors of the company. So this, hopefully, will correct that issue in the McLaughlin v. Schenck [sic.] case. Id. ¶27 The plain language and legislative history of section 622(3) are clear: shareholders, whether in a public corporation or a closely-held corporation, do not owe each other any fiduciary duties. As Cookietree and Schenk correctly note, “[s]ection 622(3) supersedes the McLaughlin I court’s holding that shareholders in closelyheld corporations owe their co-shareholders fiduciary obligations.” It is clear that the McLaughlin I holding regarding shareholder fiduciary duties is superseded by statute. But, section 622(3) does not apply to the facts at issue here since they transpired prior to its passage. ¶28 As a general rule, statutes are not retroactive without clear evidence to the contrary. Warne v. Warne, 2012 UT 13, ¶ 25, 275 P.3d 238; see also UTAH CODE § 68-3-3 (“A provision of the Utah Code is not retroactive, unless the provision is expressly declared to be retroactive.”). Because section 622(3) is silent as to retroactivity, it does not apply retroactively. And because the stock purchase, the 2005 Waivers, and the 2009 Ratifications all occurred prior to the 8 Cite as: 2013 UT 20 Opinion of the Court passage of the amendment, section 622(3) does not apply and is not dispositive here.