                         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
                                   _________________


 GWYN R. HARTMAN REVOCABLE LIVING TRUST ┐
 U/A/D 11/16/93,                                │
                           Plaintiff-Appellant, │
                                                │              No. 14-1866
                                                │
       v.                                       >
                                                │
                                                │
 SOUTHERN MICHIGAN BANCORP, INC. and JOHN H. │
 CASTLE,                                        │
                        Defendants-Appellees. │
                                                ┘
                         Appeal from the United States 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. Christopher Cataldo, JAFFE RAITT
HEUER & WEISS, PC, Southfield, Michigan, for Appellant. Madelaine C. Lane, WARNER
NORCROSS & JUDD LLP, Grand Rapids, Michigan, for Appellees.
                                    _________________

                                         OPINION
                                    _________________

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




                                              1
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 shareholders asked the
company to circulate such a proposal before the company’s 2013 annual meeting. In its proxy
statement discussing the agenda for the meeting, 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 court dismissed the complaint 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 judgment of the district court and remand for further proceedings.

       Bancorp’s bylaws do not permit the corporation to claw back fees paid to directors found
liable for breaching their fiduciary duties. In 2012, the Gwyn R. Hartman Revocable Living
Trust, a Bancorp shareholder, drafted a one-paragraph 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-paragraph “supporting statement” invoking the need
for more “director accountability.” R. 25-2 at 2–3.

       The board refused. Its March 2013 proxy statement 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 continued, the directors would use 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 about the proposal or its substance.

       When the annual meeting convened a month or so later, the trust’s representative
objected to the sufficiency of the disclosure, and objected again when the proposal came up for a
vote. The vote did not go the trust’s way. Just 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 statement 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 Board 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 companies 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 purposes of a meeting,” the statute continues, “shall include notice of
shareholder proposals” that a shareholder intends to submit for a vote. Id. We are hard-pressed
to understand how mere acknowledgement of the 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” requires 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” meetings as opposed to regular ones, 3 The Compiled
Laws of Michigan 1948 § 450.39, at 9090 (1948), the Michigan courts have not looked kindly on
bare-bones disclosures 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 without 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 consultation of the directors.” Id. at 521–22. Had the shareholder been
properly notified, he could have prepared for the meeting, made his case, and perhaps changed
the outcome. Id. at 522. A state appellate court later 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 support it” before the meeting itself. Id. at 546.

        Bancorp’s notice did not satisfy these requirements. Its proxy statement said merely that
a shareholder intended to submit a resolution calling upon the board to amend the company’s
bylaws. But it never specified which bylaw or what topic the bylaw covered. With such skeletal
No. 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 their compensation-committee guidelines or their
indemnification rules or their amendment restrictions 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 analogous 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 the principles set forth in Bourne and Darvin. Some States
have built them into the four corners of a statute. California’s Corporations Code, for instance,
requires disclosure of the “general nature of the 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). Other 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 make 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 obtaining additional information.” 5 Fletcher
Cyclopedia of the Law of Corporations § 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 the trust presents: whether Michigan law incorporates Delaware’s
even more expansive duty of disclosure and whether Bancorp violated that duty too.

        Bancorp’s rejoinders miss the target. It claims 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 notice. But the fact that Michigan does not
No. 14-1866      Gwyn R. Hartman Revocable Living Trust v. S. Mich. Bancorp, Inc.          Page 5

replicate the SEC’s maximal proxy-access regime 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 purposes of only special shareholder meetings, not regular ones.
Even then, Darvin cited approvingly, if in dictum, a treatise 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 accepted 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, derivative, or both? The district court did not
say because it determined that the 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 the district court’s judgment and remand for further
proceedings.
