Articles Posted in Massachusetts Supreme Court

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Selmark Associates, Inc. and Marathon Sales, Ltd. were closely held Massachusetts corporations that operated manufacturer’s representative companies. In 2001, Evan Ehrlich entered into a series of written agreements providing for the gradual sale of Marathon to Selmark and Ehrlich. Ehrlich subsequently became an employee and minority shareholder of Marathon. After Marathon and Selmark’s then-sole shareholder, David Elofson, terminated Ehrlich’s employment with Marathon, Ehrlich took a job with Tiger Electronics, a competing manufacturer’s representative company, where Ehrlich attempted to solicit several Marathon principals’ business. In 2008, Selmark and Marathon filed a breach of fiduciary complaint against Ehrlich. In response, Ehrlich asserted several counterclaims against Selmark, Marathon, and Elofson. The fury found (1) Ehrlich breached his fiduciary duties to Marathon by soliciting and acquiring Marathon principals for Tiger; (2) Selmark and Elofson committed a breach of contract to Ehrlich and breached their fiduciary duties to Ehrlich; and (3) all the Selmark parties engaged in unfair or deceptive acts or practices. The Supreme Judicial Court (1) affirmed the jury verdict in favor of Selmark and Marathon on their breach of fiduciary duty claim against Ehrlich; (2) affirmed the verdict in favor of Ehrlich on his breach of fiduciary duty counterclaim against Selmark and Elofson; (3) concluded that Ehrlich was entitled to recover on his breach of contract counterclaim but vacated the award of damages and remanded for a new trial on the issue of contractual damages; and (4) concluded that Ehrlich was not entitled to recover under Mass. Gen. Laws ch. 93A. View "Selmark Assocs., Inc. v. Ehrlich" on Justia Law

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The Funds, closed-end investment companies registered under the Investment Company Act of 1940, 15 U.S.C. 80a- 5(a)(1)(2), are organized as Massachusetts business trusts under G.L. c. 182. Plaintiffs are beneficial owners of preferred shares of each of the Funds. The Funds’ declarations of trust state that meetings shall be held “so long as Common Shares are listed for trading on the New York Stock Exchange, on at least an annual basis." After plaintiffs delivered written notice stating an intention to nominate one of their partners for election as a preferred shares trustee of each fund at the 2011 annual meeting, the Funds issued a press release stating that their annual meeting was being rescheduled to July 2012, the last day of the Funds' 2012 fiscal year. Plaintiffs claimed that the bylaws require that an annual shareholders’ meeting be held within 12 months of the last annual shareholder meeting. The Funds argued that the bylaws require only that one meeting be held each fiscal year. The Massachusetts Supreme Court held that "on at least an annual basis" means that a shareholders' meeting for each Fund must be held no later than one year and 30 days after the last annual meeting. View "Brigade Leveraged Capital Structures Fund, Ltd. v. PIMCO, Income Strategy Fund" on Justia Law

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Employee filed suit against Employer, a limited liability company (LLC), and two of its managers under the Massachusetts Wage Act for failing to pay compensation that was allegedly owed to him under an employment contract. The superior court granted the managers' motion to dismiss, concluding that the Wage Act does not, by its plain language, impose individual liability on the managers of an LLC. The Supreme Court vacated the judgment of dismissal, holding that a manager who "controls, directs, and participates to a substantial degree in formulating and determining" the financial policy of the business entity may be a person having "employees in his service" under the Wage Act, and thus may be civilly or criminally liable for violations of the Act. Remanded. View "Cook v. Patient Edu, LLC" on Justia Law

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Demoulas Super Markets (DSM) was a closely held Massachusetts corporation. In this case, several minority Class A stockholders (Sellers), whose offer to sell their shares to DSM was rejected, brought an action seeking a declaration that, consistent with DSM's articles of organization (articles), Sellers could dispose of their shares in any manner they saw fit. DSM counterclaimed, claiming that Sellers could not sell their shares to any buyer who would imperil DSM's status as a Subchapter S Corporation and that Sellers were obligated to reoffer their shares to DSM before selling them to a third party on more favorable terms. A superior court judge declared (1) Sellers were not bound by the articles from freely transferring their stock, and (2) Sellers were not obligated to reoffer their shares to DSM before offering them to a third party on more favorable terms than those arrived at by arbitrators designated in accordance with the articles. The Supreme Court affirmed, holding (1) Sellers were not bound by fiduciary duty and could sell their shares regardless of whether the buyer's ownership would terminate DSM's S corporation status; and (2) DSM's articles did not create a preemptive right of first offer held by DSM. View "Merriam v. Demoulas Super Markets, Inc." on Justia Law

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Plaintiff, HipSaver, Inc., was a Massachusetts corporation engaged in the design, manufacture, and sale of hip protectors. In 2007, the Journal of the American Medical Association (JAMA) published an article authored in part by Defendant, an associate professor at Harvard Medical School, that concluded based on the results of a clinical trial that hip protectors were "not effective in nursing home populations." HipSaver filed a complaint against Defendant, claiming that Defendant had disparaged HipSaver's product in the JAMA article and was liable for monetary damages. The trial judge granted Defendant's motion for summary judgment and dismissed HipSaver's complaint. The Supreme Court affirmed, holding that summary judgment was properly entered for Defendant where HipSaver failed to demonstrate that it had a reasonable expectation of proving all of the essential elements of a cause of action for commercial disparagement. View "HipSaver, Inc. v. Kiel" on Justia Law

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This case involved two litigations in which directors-shareholders asserted claims against a closely-held corporation and its directors. The first litigation, brought in 2007, settled, and the instant lawsuit arose out of an alleged violation of the settlement agreement. The case came before the Supreme Court on an interlocutory appeal from an order requiring the corporation to produce documents described in the Plaintiffs' subpoena. At issue on appeal was whether the corporation and its corporate counsel and accountants could assert attorney-client privilege or work product protection against the directors-shareholders. The Supreme Court vacated the order for the production of documents to the extent that it implicated privileged or work-product protect material as related to the 2007 and present litigations, holding that, because there was sufficient evidence that Plaintiffs' interests were adverse to the interests of the corporation as concerned the litigations, Plaintiffs were not entitled to privileged or protected information relating to the two litigations. View "Chambers v. Gold Medal Bakery, Inc." on Justia Law

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This case involved a family dispute among the owners of several business entities (collectively, companies) that were established in connection with the operation of a chain of automobile dealerships. When the family patriarch died, his four sons - James Jr, Mark, Joseph, and Michael - held equal ownership interests in the companies. In 2007, the brothers sold most of the companies' assets. Plaintiffs, the wives of James and Mark, brought this action against Joseph, Michael, and the companies challenging the disposition of business assets remaining after the 2007 sale. In connection with their action, Plaintiffs sought testimony and documents from the companies' general counsel and outside counsel. The lawyers refused to comply with the subpoenas based on the attorney-client privilege. Plaintiffs filed a motion to compel testimony and the production of documents. A judge allowed the motion. The Supreme Court affirmed the superior court's order insofar as the communications sought related specifically to the sale of life insurance policies, as the attorney-client privilege was waived as to this information. View "Clair v. Clair" on Justia Law

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John Marino, who died before this action, owned Corporation. Defendant sold equipment to Corporation, which failed to pay Defendant. Defendant obtained a default judgment against Corporation but was unable to enforce the judgment because Corporation had no assets. Defendant brought an action against Marino's estate, the executrix of Marino's estate, and another corporation owned by Marino, asserting claims for breach of contract, remedies under the Uniform Fraudulent Transfer Act (UFTA), violations of Mass. Gen. Laws ch. 93A, unjust enrichment, and fraud. Defendants filed a joint motion for judgment on the pleadings, arguing that none of the claims survived, as each claim arose from fraudulent acts or misrepresentations made by Marino. A superior court judge dismissed all claims against the estate. The Supreme Court affirmed in part and reversed in part, holding (1) the breach of contract, UFTA, and violations of Chapter 93A claims should not have been dismissed because the claims were contractual in nature; (2) the fraud claim was properly dismissed; and (3) the unjust enrichment claim should not have been dismissed because it was premised on the allegation that the executrix was retaining funds belonging to Defendant. Remanded. View "Kraft Power Corp. v. Merrill" on Justia Law

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Plaintiff Creative Playthings Ltd., a Massachusetts corporation, entered into a franchising agreement with Defendant under which Defendant agreed to operate a Creative Playthings franchise store in Florida. Plaintiff later terminated its agreement with Defendant and commenced this action against Defendant in the U.S. district court for breach of contract and associated claims. Defendant filed several counterclaims against Creative. Creative moved for summary judgment on Defendant's counterclaims, asserting they were time barred under the limitations provision in the franchise agreement. The federal district court judge declined to decide Creative's motion and instead certified the question of whether contractually shortened statutes of limitations are generally enforceable under Massachusetts law. The Supreme Court answered by holding that, in a franchise agreement governed by Massachusetts law, a limitations period in the contract shortening the time within which claims must be brought is valid and enforceable under Massachusetts law if the claim arises under the contract and the agreed-upon limitations period is subject to negotiation by the parties, is not otherwise limited by controlling statute, is reasonable, is not a statute of repose, and is not contrary to public policy. View "Creative Playthings Franchising Corp. v. Reiser" on Justia Law