Merola v. Exergen Corp. case brief summary
423 Mass. 461
SYNOPSIS: Defendants, majority stockholder and corporation, challenged the judgment of the Appeals Court, Middlesex County (Massachusetts) that affirmed a verdict for plaintiff minority stockholder on his breach of fiduciary duty claim stemming from his termination.
FACTS:
-Plaintiff minority stockholder was terminated by defendant majority stockholder from his position with defendant corporation.
-The appellate court affirmed the verdict for plaintiff on his breach of fiduciary duty claim.
HOLDING:
-The court reversed although it agreed that corporation was "close" and that stockholders owed one another a fiduciary duty of "utmost good faith and loyalty."
ANALYSIS:
-The court found, however, that although plaintiff invested in the stock with the reasonable expectation of continued employment, there was no general policy to that regard, and there was no evidence that other stockholders had similar expectations.
-His claim that he was induced to work by a promise that he could become a major stockholder was baseless where he was not a founder of the business, his stock purchases were made after the business was established, and there was no suggestion that he had to purchase stock to keep his job.
-The court concluded that his termination did not constitute a breach of fiduciary duty because it was not against public policy where he was an at-will employee, terminated in accordance with his employment contract, and fairly compensated for his stock.
CONCLUSION:
The judgment affirming the verdict for plaintiff minority stockholder on his breach of fiduciary duty claim was reversed because there was no general policy of continued employment from stock investment, and defendants, majority stockholder and corporation, terminated plaintiff, an at-will employee, in accordance with his employment contract and fairly compensated him for his stock.
NOTES:
Employment law permits termination of employment at will or without cause.
-The termination of a minority shareholder’s employment may present a situation where the majority interest has breached its fiduciary duty to the minority interest.
-Here there was no general policy regarding stock ownership and employment, and there was no evidence that any other stockholders had expectations of continuing employment b/c they purchased stock.
-Majority shareholder did not breach fiduciary duty to minority shareholder.
-Termination was not for financial gain, therefore not against public policy.
-P was terminated in accordance with his employment k and fairly compensated for his stock.
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423 Mass. 461
SYNOPSIS: Defendants, majority stockholder and corporation, challenged the judgment of the Appeals Court, Middlesex County (Massachusetts) that affirmed a verdict for plaintiff minority stockholder on his breach of fiduciary duty claim stemming from his termination.
FACTS:
-Plaintiff minority stockholder was terminated by defendant majority stockholder from his position with defendant corporation.
-The appellate court affirmed the verdict for plaintiff on his breach of fiduciary duty claim.
HOLDING:
-The court reversed although it agreed that corporation was "close" and that stockholders owed one another a fiduciary duty of "utmost good faith and loyalty."
ANALYSIS:
-The court found, however, that although plaintiff invested in the stock with the reasonable expectation of continued employment, there was no general policy to that regard, and there was no evidence that other stockholders had similar expectations.
-His claim that he was induced to work by a promise that he could become a major stockholder was baseless where he was not a founder of the business, his stock purchases were made after the business was established, and there was no suggestion that he had to purchase stock to keep his job.
-The court concluded that his termination did not constitute a breach of fiduciary duty because it was not against public policy where he was an at-will employee, terminated in accordance with his employment contract, and fairly compensated for his stock.
CONCLUSION:
The judgment affirming the verdict for plaintiff minority stockholder on his breach of fiduciary duty claim was reversed because there was no general policy of continued employment from stock investment, and defendants, majority stockholder and corporation, terminated plaintiff, an at-will employee, in accordance with his employment contract and fairly compensated him for his stock.
NOTES:
Employment law permits termination of employment at will or without cause.
-The termination of a minority shareholder’s employment may present a situation where the majority interest has breached its fiduciary duty to the minority interest.
-Here there was no general policy regarding stock ownership and employment, and there was no evidence that any other stockholders had expectations of continuing employment b/c they purchased stock.
-Majority shareholder did not breach fiduciary duty to minority shareholder.
-Termination was not for financial gain, therefore not against public policy.
-P was terminated in accordance with his employment k and fairly compensated for his stock.
The Takeaways
According to a leading employment lawyer from dwi criminal law center, employment laws and its application is very important to prevent unnatural exploitations, financial or otherwise from taking place. A lot of employment law depends on interpretations, and hiring a good employment is the best way to ensure that your case and its presentation becomes a strong one. If you have any other questions on employment law, or the case that has been discussed, let us know in the comments below.
---Interested in learning how to get the top grades in your law school classes? Want to learn how to study smarter than your competition? Interested in transferring to a high ranked school?
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