United States District Court, E.D. Michigan, Southern Division
OPINION AND ORDER GRANTING DEFENDANT'S MOTION TO
DISMISS (ECF #8)
MATTHEW F. LEITMAN UNITED STATES DISTRICT JUDGE.
2016, Defendant Syntel, Inc. asked its shareholders to
approve a new incentive compensation plan for its officers,
directors, and employees. In connection with that request,
Syntel issued a proxy statement describing the proposed plan.
Plaintiff Philip Willner, a Syntel shareholder, and his
lawyer compared the proxy statement to the terms of the
compensation plan and concluded that the proxy
mischaracterized the plan. Willner's lawyer sent a letter
to Syntel demanding that it supplement the proxy statement
with revised disclosures, and Syntel did so (even though
Syntel disagreed with Willner's claim that the proxy was
inaccurate). In this action, Willner insists that his
counsel's work conferred a substantial benefit on
Sytnel's shareholders, and he claims that Syntel must pay
him more than $75, 000 in attorney fees for that benefit. But
Michigan law does not permit such a fee award under these
circumstances. Therefore, the Court DISMISSES Willner's
is a publicly-traded “global provider of digital
transformation, information technology, and knowledge process
outsourcing services to Global 2000 companies.” (Compl.
at ¶2, ECF #1 at Pg. ID 2.) It is headquartered in Troy,
Michigan. (See id.) Willner is a Syntel shareholder
and a citizen of New York. (See id. at ¶1.)
Syntel's 2016 annual meeting, the company asked its
shareholders to approve a new incentive compensation plan.
(See Id. at ¶7, ECF #1 at Pg. ID 2.) Prior to
that meeting, Syntel described the compensation plan - and
its revised limits on executive compensation - in a Schedule
14A Definitive Proxy Statement (the “Proxy”).
(See Id. at Pg. ID 3.) It filed the Proxy with the
Securities and Exchange Commission (the “SEC”)
and issued it to shareholders. (See id.)
compared the Proxy against the compensation plan. He
concluded that the Proxy “falsely represented that the
[compensation plan] restricted the amount of stock awards
that [Syntel's Board of Directors] could grant to an
individual participant during a calendar year.”
(Id. at ¶7, ECF #1 at Pg. ID 3.) According to
Willner, the Proxy represented that the compensation plan
authorized Syntel's Board to award participants “no
more than 1, 850, 000 shares” of stock per year, but
under the actual terms of the plan, that “limit
… [was] only applicable to awards that [Syntel's]
Compensation Committee specifically designate[d] as
subject” to Section 162(m) of the Tax Code.
(Id. at ¶27, ECF #1 at Pg. ID 8.) Simply put,
Willner contended that the Proxy falsely told shareholders
that the compensation plan contained “participant
annual limits” on stock awards. (Id. at Pg. ID
8-9.) Willner believed that “[a]s a result of the
Board's affirmative misrepresentations … Syntel
shareholders were  misled about the material terms of the
[compensation plan] that they were being asked to
approve.” (Id. at ¶35, ECF #1 at Pg. ID
10, 2016, Willner's counsel sent a shareholder demand
letter to Syntel (the “Demand Letter”).
(See ECF #1-1.) In the Demand Letter, Willner's
attorney alleged that the Proxy “misrepresent[ed]
material terms of the [compensation plan]” because it
mischaracterized the plan in the manner described above.
(Id. at Pg. ID 16; see also Compl. at
¶7, ECF #1 at Pg. ID 2-3.) Among other things, Willner
“demanded that the Board issue a supplemental
disclosure to correct the  Proxy before shareholders voted
[on the compensation plan] at the 2016 Annual Meeting.”
(Compl. at ¶37, ECF #1 at Pg. ID 11.)
reviewed the Demand Letter and disagreed with Willner's
contention that the Proxy materially mischaracterized the
compensation plan. (See ECF #1-3 at Pg. ID 23-24.)
Syntel nonetheless decided to file a supplemental Schedule
14A Proxy Statement with the SEC (the “Supplemental
Proxy”). (See Compl. at ¶38, ECF #1 at
Pg. ID 11.) In the Supplemental Proxy, Syntel stated that
“the previously-disclosed annual ‘limit' [on
stock awards] would ‘apply only to Section 162(m)
Awards under the [compensation plan] and not to any other
awards.'” (Id. at ¶39, ECF #1 at Pg.
ID 11, quoting the Supplemental Proxy; internal emphasis
shareholders approved the compensation plan at the
company's 2016 annual meeting. (See Id. at
¶41, ECF #1 at Pg. ID 12.) Willner thereafter sought
“a reasonable attorneys' fee” from Syntel.
(Id. at ¶11, ECF #1 at Pg. ID 4.) Syntel
declined to pay Willner any fee. (See id.)
October 16, 2016, Willner filed this action. Willner's
sole count seeks more than $75, 000 in legal fees and
expenses in connection with the Demand Letter. (See
Id. at ¶¶ 3, 46, ECF #1 at Pg. ID 2, 13.)
Willner claims that he is entitled to his fees under
“the common or corporate benefit doctrine” - a
doctrine that authorizes an award of attorney fees and
expenses to “representative plaintiffs and their
counsel … for producing a benefit to a represented
class.” (Id. at ¶10, ECF #1 at Pg. ID 4.)
Willner says that the doctrine applies here because his
efforts benefitted Syntel's shareholders. In
Willner's words, he “conferred [a benefit] on
[Syntel's] shareholders by means of a pre-suit demand
that caused corrective action to be taken and enabled
shareholders to render a fully-informed vote on [the
compensation plan].” (Id. at ¶6, ECF #1
at Pg. ID 2; see also Id. at ¶10, ECF #1 at Pg.
ID 3, in which Willner claims that he is entitled to fees
based on the “substantial benefit he conferred on the
[Syntel's] shareholders.”) Willner maintains that
“[w]ere it not for his counsel's investigation and
review of [Syntel's] voluminous SEC filings, and the
resulting Demand [Letter], shareholders would have been
deprived of their fundamental right to an informed vote at
the 2016 Annual Meeting.” (Id. at ¶10,
ECF #1 at Pg. ID 4.)
filed a motion to dismiss Willner's claim for attorney
fees on November 18, 2016. (See ECF #8.) The Court
held a hearing on Syntel's motion on April 12, 2017.
moves to dismiss Willner's claim for attorney fees under
Rule 12(b)(6) of the Federal Rules of Civil Procedure.
“To survive a motion to dismiss” under Rule
12(b)(6), “a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief
that is plausible on its face.'” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). A
claim is facially plausible when a plaintiff pleads factual
content that permits a court to reasonably infer that the
defendant is liable for the alleged misconduct. See
id. When assessing the sufficiency of a plaintiff's
claim, a district court must accept all of a complaint's
factual allegations as true. See Ziegler v. IBP Hog Mkt.,
Inc., 249 F.3d 509, 512 (6th Cir. 2001). “Mere
conclusions, ” however, “are not entitled to the
assumption of truth. While legal conclusions can provide the
complaint's framework, they must be supported by factual
allegations.” Iqbal, 556 U.S. at 664. A
plaintiff must therefore provide “more than labels and
conclusions, ” or “a formulaic recitation of the
elements of a cause of action.” Twombly, 550
U.S. at 556. “Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements, do
not suffice.” Iqbal, 556 U.S. at 678.
Court has subject matter jurisdiction over this action based
upon the parties' diversity of citizenship and the amount
in controversy. See 28 U.S.C. 1332(a)(1). In a
diversity action like this one, the Court must apply Michigan
law as determined by the Michigan Supreme Court. See Erie
R.R. v. Tompkins, 304 U.S. 64, 78 (1938).
does not dispute that Michigan law governs his claim for
attorney fees, but he nonetheless urges the Court to consult
Delaware law in resolving his claim. Willner argues that
“on unresolved corporate law issues such as [the one
before the Court], ‘Michigan courts commonly refer to
Delaware law….'” (Willner Resp. Br., ECF #11
at Pg. ID 246 quoting Consumers Power Co. Deriv.
Litig., 132 F.R.D. 455, 461 (E.D. Mich. 1990)).
several reasons, the Court declines Willner's invitation
to rely on Delaware law. First, the issues before this Court
are not “unresolved” under Michigan law. On the
contrary, as described below, there is a substantial body of
Michigan case law addressing and resolving the questions
presented. Second, that body of law is inconsistent with the
Delaware rule cited by Willner. Finally, the question before
the Court - whether Willner's fee request falls within an
exception to the common law rule that attorney fees are not
ordinarily recoverable - is unlike the questions of corporate
law on which courts applying Michigan law have looked to
Delaware law. See, e.g., Plaza Sec. Co. v Fruehauf
Corp., 643 F.Supp. 1535, 1543 (E.D. Mich. 1986) (looking
to Delaware law for guidance concerning scope of
directors' fiduciary duties). Willner has not cited any
decisions in which Michigan courts have treated Delaware law
as especially persuasive in fee disputes like the one before
the Court. The Court need not look any further than Michigan
common and statutory law to resolve the questions presented
better or worse, the common-law tradition in Michigan follows
what is sometimes called the ‘American Rule'
regarding attorney fees.” Popma v. Auto Club Ins.
Ass'n., 521 N.W.2d 831, 837 (Mich. 1994).
“Under this rule, attorney fees are not ordinarily
recoverable unless a statute, court rule, or common-law
exception provides to the contrary.” Id.
Exceptions to this rule “are construed ...