BLS Blog

Judge Ricciuti, sitting in the Massachusetts Business Litigation Session, rejected a shareholder’s claim that she could shed herself of the fiduciary duty she owed to a close corporation by renouncing her shares in the corporation.

In Empire Dealer Services, Inc., et al. v. Guerin, et al., Empire Dealer Services, a close corporation, and John Kane, Empire’s sole director, president, treasurer, and secretary, sued Guerin, a former vice president and a minority shareholder of Empire, and Drive Dealer Performance, Guerin’s new company. The plaintiffs sought an injunction to stop Guerin from pursuing the new venture, claiming that Guerin was violating her fiduciary duties owed to Empire and Kane.

Last month, the Social Law Library sponsored the Business Litigation Session 2021 Year in Review. The panel included Judge Kenneth Salinger, the BLS Administrative Justice, as well as Michael Tuteur and Andrew Yost, attorneys at Foley & Lardner LLP.

It was another eventful year at the BLS, which included Judge Green replacing Judge Kaplan in the BLS1. As 2020 concludes, check out our top five widely read posts:

• Facebook Ordered to Turn Over Internal Investigation Documents to Massachusetts Attorney General: Judge Davis of the BLS ordered Facebook to produce documents to Massachusetts Attorney General Maura Healey (AG). The AG obtained the order while investigating Facebook’s policies and protections related to user data.
• Community Health Systems Affiliate Found Subject to Personal Jurisdiction in Massachusetts: In Steward Health Care System v. CHSPSC, Judge Sanders found that CHSPSC, an affiliate of Community Health Systems (CHS), is subject to personal jurisdiction in Massachusetts for claims made under transition-services agreement (TSAs) signed along with an asset-purchase agreement (APA).
• lululemon’s Motion to Dismiss Eviction Case Denied: In CWB Retail Limited Partnership v. Lululemon USA, Inc., lululemon moved to dismiss a summary-process action brought by its landlord, CWB Retail Limited Partnership.
• Comcast Prevails in Dispute over Interpretation of Commercial Lease: Maynard Industrial Properties Associates Trust (MIPA), a commercial landlord, sued Comcast of Massachusetts III, Inc. (Comcast). The dispute focused on the amount Comcast would owe under an extension of the amended lease.
• John J. Donovan Loses Again: Court Rules that Award in Derivative Action be Distributed Based on Shareholders’ Investment to Avoid Windfall to Disloyal Fiduciary: In Brining v. Donovan, the latest blow to former MIT business professor, John J. Donovan, Judge Davis held that shareholders in Donovan’s failed internet start-up, SendItLater (SIL), could recover more than $700,000 in attorneys’ fees in addition to a December 2019 award of $1.57 million in damages.

In Brining v. Donovan, the latest blow to former MIT business professor, John J. Donovan, Judge Davis held that shareholders in Donovan’s failed internet start-up, SendItLater (SIL), could recover more than $700,000 in attorneys’ fees in addition to a December 2019 award of $1.57 million in damages. Relying on equitable principles, Judge Davis also prohibited Donovan’s company and SIL shareholder, Securenet Holdings, LLC (Securenet), from sharing in the award. Judge Davis also ruled that the award must be distributed to the remaining shareholders based on each shareholder’s investment, rather than per-share basis, so as to render shares obtained by Donovan’s wife, Linda Donovan, under “suspect” conditions effectively worthless.

Considering the rights of parties involved in a soured business relationship, Judge Kaplan reiterated that a binding contract requires an agreement on the material terms and an intent to be bound. A term sheet that does not represent an attempt to formalize an already established agreement is not an enforceable contract.

Proving that motions for reconsideration are not always futile, Judge Sanders exercised her discretion to undo part of her own prior ruling. Judge Sanders previously ruled in the case before her that the plaintiffs’ breach-of-fiduciary-duty claim survived summary judgment. The plaintiffs alleged that the defendants sold tilapia “without providing plaintiffs an opportunity to participate in these transactions.” In support of this allegation, the plaintiffs relied on their own interrogatory answer. Judge Sanders, on reconsideration, pointed out that the answer was “not based on personal knowledge and therefore d[i]d not constitute admissible evidence under Rule 56(e).” (Mass. R. Civ. P. 56(e) states that “[s]upporting and opposing affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein.”) For that reason, among others, Judge Sanders allowed the defendants’ motion for reconsideration and awarded summary judgment against the breach-of-fiduciary-duty claim.