Brodie v. Jordan

447 Mass. 866, 857 N.E.2d 1076 (2006)

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Nature of the Case

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Facts

Brodie (P) is a shareholder in Malden Centerless Grinding Co., Inc. (Malden). Jordan and Barbuto (Ds), are the corporation's two other shareholders. P’s deceased husband was one of the founding members. Eventually, P’s husband was no longer involved in the day to day operations and only met with Ds 1-2 times per year. He made a number of requests for them to buy him out. No dividends had been paid since 1989. Jordan receives a salary at a rate set by the board of directors and participates in a profit-sharing plan made available by the corporation and has the use of a company vehicle. Barbuto received director's fees from the corporation until 1998. He owns the building that houses Malden's corporate offices and receives rent from the corporation. Barbuto also owns a separate corporation which is a customer of Malden and for which Malden regularly performs services on an open credit account. Walter received compensation from the company prior to 1992 and was paid a consultant's fee in 1994 and 1995. However, neither Walter nor the plaintiff appears to have received any compensation or other money from the corporation since 1995. The husband died in 1997 and P inherited his shares. She asked Ds to perform a valuation but that was never performed, and Ds voted against her election as a director. P brought suit, claiming that Ds had 'frozen her out' from participation in the company, refused her access to company information, and denied her any economic benefit from her shares. After a jury-waived trial, the judge found that D had breached their fiduciary duty to P. The judge ordered that Ds purchase P's shares in the corporation at a price equal to her share of the corporation's net assets, as valuated by a court-appointed expert, plus prejudgment interest. The appeals court affirmed. The dissenting judge agreed that a breach of fiduciary duty had been established, but maintained that the forced buyout overcompensated P and unfairly punished Ds. Ds appealed.