Brodie v. Jordan

Rule of Law:

The remedy for a majority shareholder's breach of fiduciary duty in a close corporation must be tailored to restore the minority shareholder's frustrated reasonable expectations of benefit. A court-ordered buyout is an inappropriate remedy where the minority shareholder had no reasonable expectation of having their shares purchased, as such a remedy would place the shareholder in a better position than they would have been in absent the wrongdoing.

Facts:

• Walter S. Brodie, Robert J. Jordan, and David J. Barbuto each held a one-third interest in Malden Centerless Grinding Co., Inc. (Malden), a close corporation.
• After disagreements arose, Walter Brodie's requests for the company to purchase his shares were rejected; no corporate agreement or bylaw obligated such a purchase.
• The corporation stopped paying dividends in 1989, but Jordan and Barbuto continued to receive financial benefits through salaries, director's fees, and rent payments, while Walter Brodie (and later his wife) received no compensation after 1995.
• In 1992, Jordan and Barbuto voted Walter Brodie out as president and director.
• After Walter died in 1997, his wife, Mary M. Brodie, inherited his shares.
• At a subsequent shareholders' meeting, Jordan and Barbuto voted against electing Mary Brodie as a director.
• The defendants refused Brodie's requests for a company valuation, denied her access to company information, and failed to hold annual shareholder meetings for five years prior to trial.

Procedural Posture:

• Mary M. Brodie sued Robert J. Jordan and David J. Barbuto in the Massachusetts Superior Court, which is a trial court of general jurisdiction.
• Following a jury-waived trial, the Superior Court judge found that the defendants breached their fiduciary duty to Brodie.
• The judge ordered the defendants, as a remedy, to purchase Brodie's shares at a price determined by a court-appointed expert.
• The defendants (appellants) appealed the decision to the Massachusetts Appeals Court, an intermediate appellate court.
• A divided panel of the Appeals Court affirmed the Superior Court's judgment.
• The defendants (appellants) successfully petitioned the Supreme Judicial Court of Massachusetts, the state's highest court, for further appellate review, limited to the issue of the remedy's propriety.