How the State of Incorporation of Your Small Business Affects the Duties Owed Between Shareholders


Let’s say that you are starting a small business in Massachusetts and are trying to determine where you should incorporate.  The Massachusetts Supreme Judicial Court has held that the law of the state where a Massachusetts corporation is incorporated governs matters of that corporation’s internal affairs.  This is true even where the corporation primarily conducts its business in a state other than its state of incorporation.  So, for example, a corporation doing business in Massachusetts but incorporated in Delaware will be subject to Delaware corporate law.  Therefore, the decision of where to incorporate is an important one and affects which … Continue reading

The Saga Continues: Demoulas Family Back in Court

Market Basket

Just when it seemed that the Demoulas feud had died down for the summer, the family was back in Suffolk Superior Court this past month. This time, the side of the family aligned with management of the Market Basket chain (the Arthur T. side) was seeking an injunction to block the issuance of $300 million in dividends to the company’s shareholders. The Arthur T. faction alleged that the board chairman, Keith Cowan, who had voted in favor of the large distribution, is not “independent”, as required by an earlier court order in the case. In response to the Arthur T. … Continue reading

The Deep Freeze


In a case recently filed in the Business Litigation Session, Plaintiff Susan Lombardi alleges that she is a 50% owner of the Braintree Emack & Bolio’s and that her former “sugar daddy,” the Defendant Robert Rook, is freezing her out of the franchise.  Rook is the founder, franchisor and principal of the Emack & Bolio’s company.  After Lombardi allegedly met Rook on the website “sugardaddy4me,” Lombardi’s role in the Braintree store skyrocketed from a counter worker to a 50% owner, with a promise of 50% of the store’s profits and a salary of $780/week, in just a few months.  In … Continue reading

J. Geils Band: Whose Name Is It Anyway?

J. Geils Band Guitar

It’s been said that a music band is like family; unfortunately, some families do nothing but fight. So it is with members of the J. Geils Band, who are embroiled in a legal battle over who has the right to use the band’s name. On one side is guitarist John Geils (aka J. Geils), on the other is the band’s four other members, who have used the name on reunion tours without the guitarist. Last year, John Geils filed a lawsuit in federal court in Boston, seeking a judgment that would stop the other band members from using J. Geils, … Continue reading

Cousin Fails, This Time, to Oust Market Basket President

dollar price tag

The Demoulas family is at it again! It’s been more than 20 years since the owners of the Market Basket empire started a long and nasty battle to decide how the company’s shares should be divided among family members.  Fast forward to 2013, where the animosity between cousins Arthur S. Demoulas and Arthur T. Demoulas continues to make headline news. For years, Arthur S.’ attempt to control the company has been frustrated by a single member of his side of the family. For reasons unknown, that family member recently switched allegiances, so Arthur S. launched a campaign to oust his … 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


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


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

Gold Medal: A Case Study Involving Over 30 Years of Buyout Negotiations


Last month, the Massachusetts Supreme Judicial Court (“SJC”)weighed in on a contentious family business dispute in Chambers v. Gold Medal Bakery Inc.   This case demonstrates how heated (and litigious) family negotiations for a corporate buyout can become and clarifies the scope of shareholder and director access to privileged corporate documents. Gold Medal involves two closely held corporations that comprise a Fall River wholesale bakery and bread distributor.  (You might recognize their “Fiber One” bread products.)  Much like the infamous case involving the Demoulas brothers that we discussed in an earlier blog post, here the two LeComte brothers (Roland and Leo) … Continue reading

How Personal Bankruptcy Affects Your Business – and Your Business Partners


Let’s say that your business is profitable, but for various reasons, your business partner is still struggling with his personal finances. In an ideal situation, your business partner would discuss these financial problems with you and, if the partner is unable to resolve his financial problems, give you an opportunity to buy his share of the business or dissolve the company before he resorts to filing for bankruptcy protection. Another option could be convincing your business partner to consider Chapter 13 bankruptcy instead of Chapter 7, which will allow for the repayment of debt over 3 to 5 years, protecting … Continue reading