Welcome to Boston Business Divorce, a blog by Attorney Tara Myslinski. We are located in Burlington, MA, and represent many individuals and small companies involved in shareholder disputes. All of our clients start their businesses with the best of intentions and expectations. All of them have involved some degree of trust in their business partners. They come to us because their trust has faltered, or in some cases, the relationship has entirely deteriorated and they are ready to file suit. In many cases, unfortunately, the relationship becomes pure animosity once litigation begins.
This blog is intended as a resource for those who are considering forming a small business, currently pursuing a healthy venture, or discovering differences among business partners. We can help you with analyzing your partnership agreement, limited liability company operating agreement, or by-laws. We are here to mediate a burgeoning dispute you have with your partners. If you have a dispute that has already come to a head, we are experienced trial lawyers who are here to litigate your case with the intensity necessary in a business divorce.
Tell me about your small business! I am constantly looking for topics for this blog and always looking to help out small business owners. Tell me about yours. Are you solidly protected by your operating agreement? Are you worried about the ownership structure or control of your company? How have you resolved potential conflicts among your company’s owners? What kinds of topics would you like to hear about in this blog? Click here to tell me about your business.
We are experienced in business divorce. The earlier you seek advice, the better. Please feel free to call us with any of your concerns, and check our blog frequently to learn about the latest in Massachusetts law on business divorce.
It is settled law that disputes between members of the same entity do not fall within the ambit of Chapter 93A. That tenet, seemingly clear, can be difficult to apply. The Appeals Court’s 2016 decision in Beninati v. Borghi – allowing a Chapter 93A claim against a corporate outsider, who aided and abetted insiders’ breaches of their fiduciary duty – arguably leaves room to explore ways around the “intra-enterprise exception.” Recently, Judge Sanders in the Business Litigation Session rejected one of those attempts. In Petrucci v. Esdaille, the plaintiff, a 30% owner of Market Mater Solutions LLC (“MMS”), sued MMS’s … Continue reading
Judge Sanders of the Business Litigation Session recently denied the defendants’ summary judgment motion in a case alleging theft of confidential information by a 50% owner of an investment banking firm, Boston Equity Advisors, LLC (“BAE”). The complaint alleges that after engaging in secret negotiations to merge BAE with a competitor, Arnold Freedman, a 50% owner of BAE along with the plaintiff Mark Butts, left BAE along with one of BAE’s employees to join WWC Securities, LLC (later known as Outcome Capital LLC), that competitor. Prior to leaving BAE in July 2012, the complaint alleges that Freedman and the employee … Continue reading
In a follow up to a determination after trial on liability, two years later, Judge Saylor issued his partial ruling on the damages phase of the case in a summary judgment decision in Butler v. Moore. In this case, the individual parties were shareholders of a cell tower company, Eastern Towers, Inc. After the individual defendants sold off the company’s assets at well below their market value to newly-formed companies and usurped other opportunities of Eastern, the court found them liable for breach of fiduciary duty to the company. For more detailed factual background, see http://www.bostonbusinessdivorce.com/limited-liability-companies/calling-for-trouble-federal-court-finds-members-of-closely-held-cell-phone-tower-company-breached-their-fiduciary-duties/. The court’s damages decision … Continue reading
We’ve written frequently on this blog about the importance of entering clear, written contracts governing the rights of LLC members. A recent case decided by Judge Leibensberger in the Business Litigation Session demonstrates that despite clear contractual protections of minority shareholders, the enforcement of those protections sometimes requires a court’s intervention. In Penebre v. Kurland, the parties’ company, Shakensoft, sold a successful software application to bars and restaurants that allowed convenient processing of customer orders. The LLC had three members: Dylan Penebre, a minority shareholder, and Daniel and Scott Kurland, who combined owned 77% of the LLC. After an unresolved … Continue reading
Given the intimate relationship between its members, shareholders in close corporations owe each other certain fiduciary duties. When majority shareholders in such a corporation use their majority status to usurp control of the company, effectively “freezing-out” the minority shareholders, there’s a good chance they’ve breached one or more of those fiduciary duties. In the event that such a breach occurs, Massachusetts courts have laid down some guiding principles as to the breadth of remedies available to frozen-out plaintiffs. The basic remedial principles hold that although “the remedy should neither grant the minority a windfall nor excessively penalize the majority” and … Continue reading
In Beninati v. Borghi, the Massachusetts Appeals Court recently vacated a judgment insulating an outside consultant, alleged to have aided and abetted insiders in violating their fiduciary duties, from Chapter 93A liability. The Appeals Court held that “intra-corporate dispute” doctrine absolved the insiders from multiple damages and attorneys’ fees, but did not absolve the outside consultant who assisted them in their breaches. This case arose from a dispute among owners of a chain of New England fitness clubs called Work Out World (WOW). The plaintiffs, members of a limited liability company that operated the WOW clubs, sued co-owners Stephen Borghi … Continue reading
After a seemingly amicable separation last year, things between America’s Test Kitchen Inc. (ATK) and co-founder Christopher Kimball have quickly, now publicly soured. ATK, the locally-based media company behind Cook’s Illustrated magazine and the television show America’s Test Kitchen, sued the celebrity chef and former employee in the Business Litigation Session on Halloween over Kimball’s new business venture, “Milk Street.” Kimball had been with ATK since the early 1990s, as a senior executive and minority owner who acted, the complaint alleges, as the de facto general partner. According to the complaint, which contains highly detailed, stunning allegations gleaned from a … Continue reading
In Baker v. Wilmer Cutler Pickering Hale and Dorr, LLP, Judge Salinger dismissed all claims against outside counsel advising a company and its majority shareholder on a planned freeze out of a minority shareholder. The Court held that corporate attorneys generally owe no fiduciary duty to the individual shareholders of closely held corporations and were not liable for aiding and abetting a majority shareholder’s fiduciary duty even though the law firm had advised the majority shareholder that his actions were lawful. Judge Salinger also dismissed the plaintiff’s M.G.L. c. 93A claim against the attorneys. In Baker, minority members of ATT, … Continue reading
In a recent Business Litigation Session case, Tkhilaishvili v. Torosyan, Judge Kaplan enjoined the defendant from transferring the shares of an LLC pending the outcome of the case even though the Plaintiffs had failed to establish that they were likely to succeed on the merits. The details in the reported decision are scant, but lurid. In 2014, the parties opened a suboxone clinic called Allied Health and entered an operating agreement defining their rights. Torosyan, who had provided all of the financing to open the clinic, had a unilateral right under the operating agreement to manage Allied until his contributions … Continue reading
Many actions between members of small businesses are brought as derivative suits, which means that the individual bringing the action is suing on the corporation’s behalf and seeks damages for harm that has been done to the corporation. Any shareholder may theoretically bring a derivative suit, but Massachusetts law requires that the shareholder first demand that the corporation take suitable action to correct the misconduct at issue. Only if the corporation rejects or ignores this demand may the shareholder commence the derivative litigation. It should be noted that members of limited liability companies do not have to deliver a written … Continue reading