As I discussed in “Be Cautions When Tempted to Leverage Another into an Agreement,” exerting leverage to force a business partner into settling a dispute could constitute deceptive or unfair acts or practices in violation of M.G.L. c. 93A – which allows for awards of multiple damages and attorneys’ fees. But can validly exercising one’s contractual rights also expose a company to Chapter 93A liability? According to the Massachusetts Supreme Judicial Court, it can.… Keep reading
Historically, Massachusetts courts routinely ruled that it was a violation of the Massachusetts Wage Act to fail to pay an employee who had been promised payment for her work only after the employer received sufficient funding. For example, in Stanton v. Lighthouse Financial Services, Inc., U.S. District Court Judge Nancy Gertner found not only once, but twice, that John Stanton was an employee under the Wage Act, was entitled to payment of deferred compensation under his employment contract and confirmed that there was no carve out from the Wage Act’s requirements for startups. In reaching her decision, Judge Gertner reasoned that a deferred compensation agreement where the compensation was forfeited violated the Wage Act provision prohibiting the entering into of a special contract to avoid Wage Act obligations. Since Stanton, a number of Massachusetts state and federal court cases have ruled that compensation contingent upon a company’s receiving certain levels of funding were wages that were required to be paid in accordance with the Wage Act and required such wages to be paid promptly and upon termination of employment – even if funding had not then occurred.
In what could be viewed as a new twist, Superior … Keep reading
In the course of its decision in Chambers v. Gold Medal Bakery, Inc., the Supreme Judicial Court of Massachusetts highlights a number of important rules related to the attorney-client privilege, as well as various rights and duties of officers and directors in closely held corporations. While it is important to understand the detailed facts of Chambers in order to gain a full appreciation of its multitude of specific rulings, the overarching story is a familiar one that has played itself out over and over again (with the most notorious example being Demoulas v. Demoulas).… Keep reading
Most businesses have a variety of insurance coverage that they hope never to have to utilize. If and when the time does come to exercise one’s rights to the benefit of such a policy, however, the last thing any in-house counsel wants is to be unaware of a technicality that could lead her company to forfeit those rights. Unfortunately for The Saint Consulting Group (“Saint”), that is exactly the situation in which it recently found itself.
In April of 2010, Saint purchased an insurance policy that covered “a Wrongful Act” made by “Insured Persons.” As often is the case with insurance policies, while the actual insurer was The Hartford, Saint had purchased the policy through an agent, the Eastern Insurance Group, LLC.
On June 23, 2010, Saint was sued on a variety of theories of liability arising out of the work that it undertook on behalf of a client. Because Saint wanted to avail itself of the benefits of its insurance policy with The Hartford, which included the cost of defending the litigation, Saint sent Eastern Insurance notice of the lawsuit and included copies of the complaint and first amended complaint at issue. While Eastern Insurance forwarded on that … Keep reading
In a previous blog post, The Fiduciary Duty of Preserving Corporate Opportunities, I wrote:
In general, an officer, director, partner, LLC member or shareholder in a closely held corporation owes a fiduciary duty not to usurp for his personal benefit, a business opportunity that could and should belong to the corporation.
While I have no qualms about that statement, a recent decision out of the Massachusetts Superior Court found that a company insider was not liable for breach of fiduciary duty even though she terminated her employment relationship with the company and started her own independent business that undertook the exact same work she had been doing for her prior company. … Keep reading