Articles Posted in Business Law

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Mass. Gen. Laws ch. 156C, 60(b) provides the exclusive remedy for dissenting members of a limited liability company that has voted to merge, so long as the merger is undertaken in accordance with Mass. Gen. Laws ch. 156C, 59-63. In this case, a member of a limited liability company (LLC) conducted a merger in breach of his fiduciary and contractual duties. The judge granted equitable relief. At issue was whether distribution of dissenting members’ interest in the LLC is the exclusive remedy of minority shareholders who objected to the merger and whether the judge erred in declining to rescind the merger. The Supreme Court held (1) where, as here, a merger was not conducted in compliance with Mass. Gen. Laws ch. 156C, 63, the remedy provided by Mass. Gen. Laws ch. 156C, 60(b) providing for distribution of dissenting members’ interest is not exclusive; (2) the trial judge did not abuse his discretion in fashioning an equitable remedy in this case, as rescission of the merger would be complicated and inequitable; and (3) the portion of the trial judge’s decision that increased Plaintiff’s interest in the merged LLC to five percent is remanded because there was no basis in the record for that figure. View "Allison v. Eriksson" on Justia Law

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Mass. Gen. Laws ch. 156C, 60(b) provides the exclusive remedy for dissenting members of a limited liability company that has voted to merge, so long as the merger is undertaken in accordance with Mass. Gen. Laws ch. 156C, 59-63. In this case, a member of a limited liability company (LLC) conducted a merger in breach of his fiduciary and contractual duties. The judge granted equitable relief. At issue was whether distribution of dissenting members’ interest in the LLC is the exclusive remedy of minority shareholders who objected to the merger and whether the judge erred in declining to rescind the merger. The Supreme Court held (1) where, as here, a merger was not conducted in compliance with Mass. Gen. Laws ch. 156C, 63, the remedy provided by Mass. Gen. Laws ch. 156C, 60(b) providing for distribution of dissenting members’ interest is not exclusive; (2) the trial judge did not abuse his discretion in fashioning an equitable remedy in this case, as rescission of the merger would be complicated and inequitable; and (3) the portion of the trial judge’s decision that increased Plaintiff’s interest in the merged LLC to five percent is remanded because there was no basis in the record for that figure. View "Allison v. Eriksson" on Justia Law

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After the dissolution of Gentix, a biotech research company established as a Delaware LLC with headquarters in Boston, Johnson and Rose, former Gentix board members and investors were found personally liable under G. L. c. 149, 148 (Wage Act), for failing to pay wages owed to the former president of Genitrix, Segal. On direct appellate review, the Massachusetts Supreme Judicial Court reversed, concluding that the Wage Act does not impose personal liability on board members, acting only in their capacity as board members, or investors engaged in ordinary investment activity. To impose such liability, the statute requires that the defendants be "officers or agents having the management" of a company, G. L. c. 149, 148. The defendants were not designated as company officers and had limited agency authority. The only officer having the management of the company was the plaintiff, not the defendants. View "Segal v. Genitrix, LLC" on Justia Law

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At issue in this case was the construction of Mass. Gen. Laws ch. 156D, 14.30, the corporate dissolution statute, which allows a shareholder to petition a judge of the superior court to dissolve a corporation in the event of a deadlock between its directors. Plaintiff and Defendant were the sole shareholders and directors of a corporation. Plaintiff filed a petition pursuant to the corporate dissolution statute seeking to dissolve the corporation. After a jury-waived trial, Plaintiff also filed a separate claim for contempt of court. Defendant counterclaimed. A judge rejected all of Plaintiff’s claims and Defendant’s counterclaims. The Supreme Judicial Court remanded the matters, holding (1) the impasse as to fundamental matters of corporate governance and operations existing under these circumstances gave rise to a state of “true deadlock” such that the remedy of dissolution provided by the statute was allowable; (2) because dissolution is a discretionary remedy, the superior court must make a determination as to whether it is the appropriate remedy under the circumstances; and (3) the superior court must consider the allegations raised in the complaint for contempt concerning conduct that occurred after the trial. View "Koshy v. Sachdev" on Justia Law

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Plaintiff, a shareholder of a Corporation, made a demand for corporate records pursuant to Mass. Gen. Laws ch. 156D. 16.02(b), claiming that he needed to inspect the records in order to investigate his allegation that the board of directors had committed a breach of its fiduciary duty of oversight. After the Corporation rejected the demand Plaintiff commenced an action in the superior court seeking an order compelling the Corporation to make the requested corporate records available to Plaintiff. The trial judge dismissed the complaint with prejudice, determining that Plaintiff had failed to meet his burden of showing a proper purpose to inspect corporate records under section 16.02(b). The Supreme Judicial Court vacated the judgment dismissing Plaintiff’s claim for inspection and remanded, holding that the trial judge applied too demanding a standard in determining whether Plaintiff had a proper purpose. View "Chitwood v. Vertex Pharmaceuticals, Inc." on Justia Law

Posted in: Business Law

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In these consolidated cases, shareholders of a publicly traded corporation (Plaintiffs) filed a complaint claiming that a merger transaction proposed by the board of directors would result in the effective sale of the corporation for an inadequate price. The superior court allowed Defendants’ motion to dismiss for failure to state a claim, concluding that the board owed no fiduciary duty directly to the shareholders and that the action was necessarily derivative. At issue on appeal was whether Plaintiffs must bring their claims against the members of the corporation’s board of directors as a derivative action on behalf of the corporation or may bring it directly on their own behalf. The Supreme Judicial Court affirmed, holding (1) the injury claimed by Plaintiffs, and the alleged wrong causing it, fit squarely within the framework of a derivative action; and (2) Plaintiffs’ claim was properly dismissed because they did not bring their claim as a derivative action. View "International Brotherhood of Electrical Workers Local No. 129 Benefit Fund v. Tucci" on Justia Law

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A stock transfer restriction required a selling shareholder first to offer his stock to the company at his desired price and then, if the company rejected it, to offer it at a price to be determined by arbitrators. Plaintiff invoked this process by tendering an offer to the company (Defendant) but later changed his mind regarding his desire to sell. When Plaintiff sought to withdraw from the process of valuing his stock, Defendant moved to compel arbitration. The superior court denied the motion to compel, concluding that a mere disagreement over the value of stock was legally insufficient to give rise to arbitration. The Supreme Judicial Court affirmed on other grounds, holding (1) a stock valuation may be conducted through arbitration so long as an actual controversy exists regarding the value of the stock; and (2) because the shareholder in this case decided not to sell the stock prior to the commencement of arbitration, the controversy to be arbitrated was rendered moot. View "Vale v. Valchuis" on Justia Law

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Plaintiffs, two motor vehicle dealers and an organization that represents the interests of new automobile and truck franchised dealerships in the state, filed this action against Tesla Motors, Inc., an automobile manufacturer, and Tesla Motors MA, Inc., its Massachusetts subsidiary, alleging violations of Mass. Gen. Laws ch. 93B and conspiracy to violate chapter 93B. The superior court dismissed Plaintiffs’ complaint, concluding that Plaintiffs lacked standing to maintain the action because they were not affiliated dealers of Tesla or Tesla MA. At issue before the Supreme Judicial Court was whether the 2002 amendments to chapter 93B broadened the scope of standing under the statute since the Court’s 1985 decision in Beard Motors, Inc. v. Toyota Motor Distribs., Inc. such that Massachusetts motor vehicle dealers now have standing to maintain an action for an alleged violation of the statute against unaffiliated motor vehicle manufacturers or distributors. The Court affirmed, holding that chapter 93B does not confer standing on a motor vehicle dealer to maintain an action for violation of the statute against a manufacturer with which the dealer is not affiliated. View "Mass. State Auto. Dealers Ass’n, Inc. v. Tesla Motors MA, Inc." on Justia Law

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Plaintiff, Lightlab Imaging, Inc., filed this action against Defendants, a competitor of Lightlab’s and a supplier, alleging, among other causes of action, breach of contract and the covenant of good faith and fair dealing and misappropriation of trade secrets and confidential information. The trial of this action was conducted in multiple phases. The jury returned a verdict in favor of LightLab on issues of liability. At the damages phase, the parties stipulated that LightLab was entitled to nonlost profits damages in the amount of $200,000. Lastly, the trial judge awarded LightLab permanent injunctive relief for trade secrets the jury found had been misappropriated but denied permanent injunctive relief for protection against future appropriation of Lightlab’s trade secrets. The Supreme Judicial Court affirmed but ordered the inclusion of the declaration sought by LightLab, holding (1) the trial judge did not abuse her discretion in excluding opinion testimony from LightLab’s expert economist on the question of certain future lost profits; (2) the trial judge did not err in declining to issue permanent injunctions to protect Lightlab’s trade secrets; and (3) Lightlab was entitled to a declaration of its contract rights that mirrored the language of the order for summary judgment concerning contract formation. View "Lightlab Imaging, Inc. v. Axsun Techs., Inc." on Justia Law

Posted in: Business Law, Contracts

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The City of Quincy (Quincy) served as trustee of the Adams Temple and School Fund and the Charles Francis Adams Fund (together, the Funds) through two boards. The Woodward School for Girls, Inc. (Woodward) has been the sole income beneficiary of the Funds since 1953. In 2007, Woodward filed suit against Quincy seeking an accounting and asserting that Quincy committed a breach of its fiduciary duties in several respects. A probate and family court judge concluded that Quincy committed a breach of its fiduciary duties by failing to invest in growth securities and failing to heed certain investment advice, removed Quincy as trustee, and ordered Quincy to pay a nearly $3 million judgment. The Supreme Judicial Court affirmed the judgment as to liability, reversed with respect to the calculation of damages on the unrealized gains, and remanded, holding (1) Woodward’s claims were not barred on the grounds of sovereign immunity, the Massachusetts Tort Claims Act, or laches; (2) the judgment against Quincy for committing a breach of its fiduciary duties to the Funds was proper; (3) the award of damages was erroneous in the calculation of unrealized gains on the investment portfolio; and (4) the judge did not err in including prejudgment interest. View "Woodward School for Girls, Inc. v. City of Quincy" on Justia Law