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A Better Partnership
September 10, 2015

COA holds that a manager of an LLC does not have standing to bring a suit on behalf of its company and that the relation back doctrine for amending a complaint does not apply to adding a party

The Michigan Court of Appeals in Salem Springs, LLC v. Salem Township, et al. No. 322956 held that (1) a manager of a limited liability company (“LLC”) does not have standing to bring an action where the LLC is the proper party to the action; and (2) the relation back doctrine in MCR 2.118(D) does not apply to amending a complaint by adding a new party to the action.
 
Salem Springs, LLC (“Salem Springs”), owned property in Salem Township. In 2009 it transferred the property to Salem Springs Owner, LLC (“Salem Springs Owner”), however Salem Springs remained the sole manager of Salem Springs Owner. In 2011 Salem Springs requested a change in the zoning, and the Salem Township Board of Trustees approved the change. However, interested citizens of Salem Township challenged the zoning change via a referendum. At this time Salem Springs filed suit in the nature of quo warranto under MCL 600.4545 to enjoin the referendum vote. Salem Township and the interested citizens responded that Salem Springs did not have standing to bring the suit and that they may not now amend the complaint to change the name of the party.
 
The Court agreed with the Salem Township. It first reasoned that under MCL 600.4545 only a prosecuting attorney, attorney general or a citizen of the county where the alleged election fraud took place may bring the suit. Salem Springs, it determined was not a “resident” of Washtenaw County as it was merely a manager of the Salem Springs Owner. Its principal place of business was not in Washtenaw County and it did not own any real property in the county. Thus, the Court ruled in favor of Salem Township and determined that the action was required to be filed in the name of Salem Springs Owner, not the manager of the company.
 
Salem Springs then argued that it should be permitted to amend its complaint, and although the statute of limitations under MCL 600.4545 had run, it could use the relation back doctrine to amend its complaint.
 
Again, the Court found in favor of Salem Township. It reasoned that under MCR 2.118(D) only an amendment that adds a claim or defense relates back to the date of the original pleading. Here, Salem Springs was attempting to add a party to the complaint, and it failed to show an inadvertent misnomer or an unimportant mistake that would permit such an amendment. 
 
Thus, the Court held that Salem Springs did not have standing to bring the action, it could not amend the complaint to add Salem Springs Owner, and it remanded the case for summary disposition in favor of Salem Township.

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