Under the Knife: Failed Brain Surgery Joint Venture Results in Large Damages Award for Plaintiff

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Judge Roach issued a rare decision after trial in a business divorce last year that is worth a review, mainly for purposes of understanding damages available in litigation over a failed joint venture. For those interested in doing further research after reading this post, the full name of the case is Advanced Healthcare Mgmt. Servs., LLC v. VHS Acquisition Subsidiary No. 9, Inc. The Plaintiff, Dr. Sagun Tuli (“Dr. Tuli”), is a well-credentialed spinal neurosurgeon who conceived of a business plan for a Brain & Spine Institute (“the Institute”) which she envisioned to be more efficient and effective than traditional … Continue reading

Work It Out: Massachusetts Business Litigation Session Decision Highlights the Wisdom of Settlement

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For LLC members facing allegations of breach of fiduciary duty, the negotiation table is often a far more hospitable environment than a Massachusetts courtroom.  This is the lesson learned by the defendants in a recent Massachusetts Superior Court case, Beninati v. Borghi, in which Judge Sanders imposed millions of dollars in damages and equitable relief on several individuals who she found had breached their fiduciary duties to the business organization known collectively as “Work Out World.” This particular tale of business divorce began in 1999, when Anthony Beninati (“Tony”), Steven Borghi (‘Borghi”), and Joseph Masotta (“Masotta”) opened the first of … Continue reading

No Way Out, Part II: Minority Shareholders Not Entitled to Buy-out

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The Delaware Supreme Court recently affirmed the Court of Chancery’s dismissal of a suit seeking a corporate buy-out of a minority shareholder’s interest in a closely-held corporation. In Blaustein v. Lord Baltimore Capital Corp., the plaintiff owned about 17% of the voting stock of a closely-held corporation called Lord Baltimore Capital Corporation (“LBCC”).  The plaintiff alleged that she invested in LBCC based on the controlling shareholder’s oral promise to repurchase her shares at full value after 10 years.  However, this arrangement was never incorporated into the corporate shareholders’ agreement.  Ten years came and went, and when plaintiff sought to enforce … Continue reading

No Duty To Buy Back Minority Shares

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A Court of Chancery of Delaware recently held that majority shareholders of a close corporation have no fiduciary duty in the buy back of a minority shareholder’s interest in the corporation.  The decision specifically mentions that Massachusetts differs from Delaware in that shareholders of a Massachusetts close corporation owe each other a fiduciary duty.  After reading the Delaware decision, one might jump to the erroneous conclusion that majority shareholders of a Massachusetts close corporation have a duty to purchase shares from minority owners who want to liquidate their investment.  But that is not true. As a blanket rule under the … Continue reading

The Power of Partnership Agreements: Quantum Meruit Claim Fails

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In a decision that emphasizes the power of partnership agreements, the Court of Chancery in Delaware held that if a written agreement defines how assets will be shared when a partnership dissolves, partners cannot use a quantum meruit claim to increase their share. Quantum meruit is a ‘quasi-contractual’ theory of recovery that compensates an individual for work performed regardless of whether the benefited party expressly agreed to pay for the work. In the Delaware case, two lawyers decided to dissolve their partnership and entered into a liquidation agreement to distribute the assets. One of the partners later argued that he … Continue reading

The Price of Freezing Out a Partner

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A recent Massachusetts case provided an example at how an at-will partnership can often come to an abrupt end – with one partner escorted off the premises by an armed officer. In 2009, David Zak and Lisa Reed (a lawyer and a mortgage broker respectively) orally agreed to start a loan modification partnership in the aftermath of the subprime mortgage crisis. The pair split the profits from the business evenly and each received a bi-weekly salary. During the first year of the business, Reed attempted to have Zak agree to a written partnership agreement, but Zak assured her that none … Continue reading

Developer Takes Assets, Pins Debt on Daughter

Recently, after an eight day trial, a Suffolk Superior court jury determined that a father was liable to his daughter for breach of fiduciary duty in commandeering the family company’s assets while pinning his daughter with all the debt.[1] In 2002, while the plaintiff/daughter was still a student at Northeastern University, the defendant/father, who had worked in real estate for most of his life, created a real estate development company with the daughter for purchasing, permitting and subdividing real estate. The father made the daughter the sole shareholder and president of the newly created entity (due to his prior credit … Continue reading

Demoulas v. Demoulas SuperMarkets, Inc.: A Case Study in Business Ventures Going Bad

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The Demoulas dispute started with a trusted family relationship that went bad.  Partly what made it infamous was probably a result of the parties’ wherewithal – they have been able to fund decades of litigation. As the years passed and millions in fees accrued, the animosity built. In 1917, Arthur Demoulas opened a local grocery store in Lowell.  He and his wife operated it for some 40 years and then handed it over to their sons, George and Telemachus (“Mike”).  The brothers grew the business quickly and their families were very close.  In 1964, Mike and George executed wills, stating … Continue reading