(Green v. Ziegelman 282 Mich App 292 (2009)
The redress of grievances through the filing of suit in the various Courts is the hallmark of our judicial system. Fighting the fight is one thing, but in our Courts of Damages, actual recovery on claims is what renders the fight worthwhile. A successful resolution in litigation is rendered Pyrrhic in the face of an inability to collect on the judgment.
…[S]ince time immemorial, Parties Plaintiff have been interested not in obtaining a judgment but in obtaining satisfaction. While the road to the judgment may have been broadened and straightened and generally improved, the road from the judgment to the satisfaction thereof is suffering badly from neglect and want of repair[i].
Practitioners are certainly very familiar with the concept of Limited Liability afforded shareholders and directors of corporate entities, be they Corporations or Limited Liability companies. Relevant to any analysis in the prosecution of suit is the liability for claims which must be considered as against any and all potential defendants, including principals of a corporation arguably protected by the statutory concept of limited liability associated with Corporations and Limited Liability Companies.
It is clear under Michigan law that the concept of whether to disregard a corporate entity is to be considered Sui Generis and must be decided in accordance with a case’s underlying facts[ii].
With respect to the procedural manner in which a plaintiff could pursue piercing of the corporate veil, it has not been uncommon for plaintiffs to pursue such claims as part of their case in chief OR as part of proceedings supplementary to judgment pursuant to MCR 2.621 and MCL 600.6101 et. seq.[iii]
The ostensible ability of a plaintiff to pursue entities or individuals, who may or may not have been a party to an underlying suit, in order to satisfy a judgment, is found at MCL 600.6104 which provides, in pertinent part:
After judgment for money has been rendered in an action in any court of this State, the judge may, on motion in that action or any subsequent proceeding:
(5) Make any order as within his discretion seems appropriate in regard to carrying out the full intent and purpose of these provisions to subject any non-exempt assets of any judgment debtor to the satisfaction of any judgment against the judgment debtor. [iv]
In short, the previous application of MCR 2.621 appeared to allow, by motion or separate action, the ability to obtain relief supplementary to the entry of a judgment, meaning that a practitioner could elect either procedural route in order to secure his or her client’s rights. However, the recent case of Green v. Ziegelman, 282 Mich App 292 (2009) telegraphs that the ability of a practitioner to assert liability, post-judgment, against individuals or entities other than the named parties in the suit pursuant to proceedings supplementary to judgment is, arguably, at an end. [v]
Specifically, the Plaintiffs in Green alleged that evidence obtained post-judgment, in the form of a creditors examination, could serve as the basis, pursuant to MCL 600.6101 et. seq. and MCR 2.621, to pursue individuals who are not subject to the underlying judgment in that case. On the strength of that deposition, the Plaintiffs in Green filed a Motion to pierce the corporate veil, asking the Circuit Court to impose personal liability on an individual for a judgment adjudicated against a corporate entity in the underlying suit.[vi]
The Green Court expressly ruled that it was clear that MCLA 600.6104(5) “did not authorize entry of judgment” against [ the individual]. Moreover, the Court emphasized that the Circuit Court “…essentially used a proceeding supplementary to judgment to enter an additional judgment against a party not previously subject to a judgment on the claim at issue”.[vii]
The Green Court goes on to invoke authority from the State of Illinois, citing the rejection of efforts to hold a third party liable under a corporate veil piercing theory in the course of proceedings supplementary to judgment, ruling that it is improper to do so.[viii]
What should be of great significance to any practitioner is the Court’s Dicta set forth in the Green case, supra:
We will not answer the questions whether Plaintiffs are legally entitled to file a new and separate action against Ziegelman (Defendant in that suit) outside the PSJA, under a corporate veil piercing theory and whether res judicata or the compulsory joiner rule, MCR 2.203, would bar such an action. [ix]
Based upon the totality of the Courts ruling in Green v. Ziegelman, it is almost certain that, to the extent that it is believed that certain individuals/shareholders/principals of a corporate entity may have committed an act rendering them personally liable for a debt or damage suffered by a plaintiff, this issue may be required to be raised as part of the Case in Chief by virtue of inclusion of that party as a party defendant, in light of both the substantive ruling in Green v. Ziegelman as well as the associated Dicta. The previously broad construction of proceedings supplementary to judgment pursuant to MCL 600.6101 et. seq. which would arguably allow assertion of a judgment against non-parties to the underlying judgment, appears to have been foreclosed by the Green Court.
Accordingly, close examination of such potential liability would seem to be required in order to insure the ultimate proper parties are rendered liable for any successful claim prosecuted through litigation.
[i] King. The Enforcement of Money Judgments in California 11 So. Cal. L R 224 (1938).
[ii] Herman v. Mobile Homes Corp. 317 Mich 233, 243 (1947); Klager v. Robert Meyer Co., 415 Mich 402 (1982).
[iii] MCR 2.621; MCL 600.6101 et. seq.
[iv] MCR 2.621(A)(2).
[v] Green v. Ziegelman 282 Mich App 292 (2009).
[vi] Green, supra at 298.
[vii] Green, supra at 303, 304.
[viii] Miner v. Fashion Enterprises, Inc. 342 ILL. App 3d 405, 415 (2003); Pyshos v. Heart-Land Dev. Co., 258 Ill App. 3d 618, 624 (1994).
[ix] Green, supra at 305.
Daniel J. McGlynn is the Managing Partner of McGlynn Associates, PLC. He concentrates his practice in the area of complex commercial litigation and transactional work and acts as General Counsel for multiple closely held and middle-market companies. Mr. McGlynn is a member of the Governing Council of the Litigation Section of the State Bar of Michigan. Dan obtained his Juris Doctorate from the Detroit College of Law, now known as Michigan State University College of Law.