Recently in Breach of Fiduciary Duty Category

April 10, 2014

Business Disputes in Automotive Industry Can Present Unique Issues

A recent decision from the United States District Court in Massachusetts illustrates how business disputes in the automotive industry may be subject to specific laws that can have an effect on substantive claims as well as the enforcement of arbitration agreements to resolve such disputes. In Aston Martin Lagonda of North America, Inc. v. Lotus Motorsports, Inc., laws specific to automotive business disputes led the federal court to dismiss various claims brought by dealership franchisee Lotus Motorsports, Inc. (Lotus) against franchisor Aston Martin Lagonda of North America, Inc. (Aston Martin).

After entering into an automobile dealership franchise agreement with Aston Martin in 1996, Lotus served as the only Aston Martin dealer in New England, except for southern Connecticut. Around 2003, Aston Martin advised Lotus that the showroom at Lotus's dealership was insufficient for the anticipated increase in volume, and assured Lotus that it would sell 75 to 100 units per year when Aston Martin's new volume model was released. Based on these statements and encouragement from Aston Martin, Lotus moved its dealership to a larger facility in which it invested more than $700,000, and passed on other business opportunities. In 2013, Lotus learned that another Aston Martin authorized dealership would be opening 8.7 miles from Lotus's new location.

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March 27, 2014

Bonus Payment Excluded from Wage Act Claim

The Suffolk County Superior Court recently analyzed the Massachusetts Wage Act in a case involving the compensation package of a company's departing president. The case was complicated by the multiple and inconsistent compensation agreements the plaintiff and defendant company signed. At bottom, the court decided the issue of whether annual bonuses and vacation pay may be considered wages under the Wage Act. The court found that annual bonuses may not be considered wages under the Wage Act, but that vacation pay may be wages, provided that certain criteria are be met.

In Boesel v. Swaptree, Inc., the plaintiff brought claims the defendants under the Wage Act, for breached of fiduciary duties, and for interference with contractual relations. The plaintiff founded Swaptree, Inc. and served as its CEO until 2010. As part of an investment agreement, the plaintiff resigned as CEO, and accepted the position of president of the company. Upon accepting the position, the plaintiff entered into an employment agreement with the company that differed from the original agreement he had signed at the company's inception. The agreement provided that Boesel receive a certain salary, health and retirement benefits, paid vacations, and would receive compensation for unused vacation days. In addition, Boesel was to receive an annual bonus each year he worked for the defendant company, as well as a discretionary bonus based on his success as president. However, the company paid Boesel only his base salary, without bonuses or vacation time reimbursement.

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March 20, 2014

No Breach of Fiduciary Duty by Corporate Shareholder Who Opened Similar Business

In Ricci Consultants, Inc. v. Bournival, a case recently tried in the Norfolk Superior Court, it was determined that a defendant did not breach a fiduciary duty when she left employment with Ricci Consultants, Inc. (RCI), an actuarial consulting firm in which she was a shareholder with a one-third interest, to start her own actuarial consulting firm, KMS Actuaries, Inc. (KMS). Although both firms provided actuarial consulting services for clients, the types of clients each firm serviced differed: RCI specialized in private sector work, while KMS focused on the public sector. Following the defendant's departure from RCI, both parties filed suit against each other, both alleging intentional interference with contractual/advantageous relations with customers, and breaches of fiduciary duties. A jury returned verdicts in favor of the defendant and KMS on the intentional interference claims. The parties waived their right to have a jury decide the breach of fiduciary duty claim, which the judge considered.

RCI alleged that the defendant, through KMS, competed with RCI and thereby stole corporate opportunities from KMS, to which she owed fiduciary duties. In doing so, RCI alleged that the defendant breached her duty of loyalty owed to RCI.

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