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EXHIBIT (5)(B)
[CMS LETTERHEAD]
June 27, 1995
CMS Energy Corporation
Fairlane Plaza South
Suite 1100
330 Town Center Drive
Dearborn, Michigan 48126
Ladies and Gentlemen:
I am Assistant General Counsel of CMS Energy Corporation, a Michigan
corporation ("CMS Energy"). I refer to the proposed public offering by CMS
Energy of its Class G Common Stock, no par value ("Class G Common Stock"),
pursuant to CMS Energy's Registration Statement (Nos. 33-57719 and 33-57719-01)
on Form S-3, as amended (the "Registration Statement"), filed pursuant to the
Securities Act of 1933, as amended.
Upon the issuance of the Class G Common Stock, CMS Energy will have
outstanding two classes of common stock, the Class G Common Stock and its Common
Stock, par value $.01 per share (the "CMS Energy Common Stock"). You have asked
for my opinion on the effect, if any, on the fiduciary duties of the Board of
Directors of CMS Energy (the "Board") under applicable Michigan law under these
circumstances, particularly in a situation in which a decision or action of the
Board or a committee of the Board might have a disparate effect on the holders
of outstanding shares of any class of its common stock.
Michigan case law affirms the general rule that directors of a Michigan
corporation like CMS Energy have a fiduciary obligation to all of the
shareholders of that corporation. L.A. Young Spring & Wire Corp. v. Falls, 307
Mich. 69, 101, 11 N.W. 2d 329, 341 (1943) ("The rule is thoroughly embedded in
the general jurisprudence of both America and England that the status of
directors is such that they occupy a fiduciary relation toward the corporation
and its stockholders...[and are] entrusted with management of the corporation,
for the benefit of the stockholders collectively..."); Wagner Elec. Corp. v.
Hydraulic Brake Co., 269 Mich. 560, 564, 257 N.W. 884, 886 (1934) (Under
Michigan law, "the directors of a private corporation stand in a fiduciary
relation to its stockholders..."); Salvador v. Connor, 87 Mich. App. 664, 675,
276 N.W. 2d 458, 463 (1978) ("[I]n Michigan, directors and officers of
corporations are fiduciaries who owe a strict duty of good faith to the
corporation which they serve."). See also, Berman v. Gerber Prod. Co., 454 F.
Supp. 1310, 1319 (W.D. Mich. 1978) ("Under the applicable Michigan law, it is
clearly recognized that directors...are fiduciaries, and their dealings with the
corporation and its stockholders are rigorously scrutinized." (citing Thomas v.
Satfield Co., 363 Mich. 111, 108 N.W. 2d 907 (1961)).
I have not located a Michigan case which specifically deals with a
directors' fiduciary duty in the context of a dispute between the holders of
separate classes of stock of a single corporation. However, Thompson v. Walker,
253 Mich. 126, 135, 234 N.W. 144, 147 (1931) confirms that directors have a
fiduciary obligation to manage the corporation "for the common benefit of all
the stockholders" (emphasis added) where there was a dispute between the
majority and the minority shareholders of such corporation. See also, Wagner
Elec. Corp., 269 Mich. at 566, 257 N.W. at 887 (majority shareholder "must act
in the interest of all its shareholders" (emphasis added)); Salvador, 87 Mich.
App. at 675, 276 N. W. at 463 (holding that a company "must be so managed so as
to produce to each shareholder, the best possible return upon his investment" in
a claim
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brought by minority shareholder against majority shareholders (quoting 6
Callaghan's Mich. Civ. Jur. sec.166 (2d ed.)).
Persuasive case law from other jurisdictions confirms that directors'
fiduciary obligations extend to all shareholders of the corporation and not
separately to one class of stock of the corporation or to one set of
identifiable holders of a single class, and that the same legal duties are owed
to the holders of each class of stock outstanding. Schanker v. E.I. du Pont, 329
F.2d 77 (2nd Cir. 1964); Robinson v. T.I.M.E. - D.C., Inc., 566 F. Supp. 1077
(N.D. Tex. 1983); I.P. Phillips v. Instituform of N. Am., Inc., 13 Del. J. Corp.
L. 774 (1988).
In addition, the Michigan Business Corporation Act, Mich. Comp. Laws
sec.450.1541a(1) (1990) provides as follows:
A director or officer shall discharge his or her duties as a
director or officer including his or her duties as a member of
a committee in the following manner:
(a) In good faith.
(b) With the care an ordinarily prudent person in a like
position would exercise under similar circumstances.
(c) In a manner he or she reasonably believes to be in the
best interests of the corporation.
Actions taken by the Board "within the limits of the law, matters of business
judgment and discretion are not subject to judicial review" and may not be
successfully attacked by the holders of any class of stock on the grounds that
such actions violated the director's fiduciary obligations. Wagner Elec. Corp.,
269 Mich. at 565-66, 257 N.W. at 887; Reed v. Burton, 344 Mich. 126, 73 N.W. 2d
333 (1955); In Re Butterfield Estate, 418 Mich. 241, 255, 341 N.W. 2d 453, 459
(1983).
Based on the foregoing, and while I have found no Michigan case authority
directly on point, it is my opinion that:
(i) a Michigan court would hold that the Board owes an equal duty to
all shareholders regardless of class and does not have separate or
additional fiduciary duties to the holders of separate classes of stock;
and
(ii) a good faith determination by a disinterested and adequately
informed Board, or committee thereof, which the Board honestly believes is
in the best interests of CMS Energy, would be a defense to any challenge by
or on behalf of the holders of either the Class G Common Stock or the CMS
Energy Common Stock to a determination by the Board which could have a
disparate effect on either class of CMS Energy common stock.
This opinion is limited to the laws of the State of Michigan.
I hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement and to all quotations or summarizations included in or
made a part of the Registration Statement.
Very truly yours,
/s/ DENISE M. STURDY
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Denise M. Sturdy