Posture: Appeal from judgment for defendants after a bench trial in the S.D.N.Y.

Facts: Demian, a Pennsylvania importer of leather garments, engaged Charles A. Frank Associates — a service organization with Far East contacts — to locate manufacturers and arrange importation, for a commission. Frank arranged with K.C. Sun of Da Chong Hong Trading in Korea that, for 50% of Frank's commission, Sun would find manufacturers and, following Frank's instructions, do whatever else was needed. Demian ordered two styles from Korean maker Koreanna Moulson and sent letters of credit payable on presentation of Sun's certificate that the goods had been inspected and were merchantable. The jackets were defective.

Arguments: Demian: Frank arranged the transaction and promised inspection; Sun performed Frank's function, so Frank answers for the failure. Frank: Sun dealt with Demian directly and took its own share; Demian's letters of credit ran to Korea.

Holding: Whether Frank is responsible turns on whether Sun was Frank's subagent — employed to perform duties Frank owed Demian — or an agent answerable directly to Demian. Separately, if Frank personally promised the goods would be inspected, Frank is liable for his own breach regardless of subagency.

Disposition: Judgment dismissing the complaint vacated and remanded for further findings; dismissal of Frank's counterclaim for commissions affirmed.

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Posture: Motion for summary judgment by third-party defendant Devlin.

Facts: New York attorney Edward Devlin, acting without a fee, referred his clients' personal injury case to New Jersey attorney Milton Yormark — who was under criminal indictment. Yormark converted the $148,997 settlement draft. The clients sued the banks, which impleaded Devlin.

Arguments: Banks: Devlin negligently placed the clients' affairs in a criminal's hands. Devlin: No fee, no formal retainer, and referrals to local counsel are routine.

Holding: An attorney-client relationship existed despite the absence of a retainer or payment, because Devlin undertook to provide services. An agent authorized to employ others to conduct the principal's affairs owes a duty to exercise reasonable care in selecting them.

Disposition: Summary judgment granted in part — as to the portion of the claim resting on facts unknown at the time of referral — and denied in all other respects, leaving the negligent-selection theory alive.

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Posture: Appeal from a small claims judgment for the traveler.

Facts: The travel agency booked a package tour through a wholesaler; the reservations failed.

Arguments: Agency: The wholesaler alone is liable for its own default. Bucholtz: I hired the agency and never agreed to a wholesaler.

Holding: Absent proof of an independent relationship between retail agent and wholesaler, the travel agent is the customer's agent. If the agent used a wholesaler with the customer's express or implied consent and exercised reasonable diligence in selecting it, the agent is not liable for the wholesaler's default; without consent, the agent is liable. Knowledge of the industry practice is not so pervasive as to compel a finding of implied consent.

Disposition: Judgment for the traveler affirmed.

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Posture: Appeal from a bench-trial refusal to impose a mechanic's lien.

Facts: Flushing bought a building and leased it to Dutch Treat Bakers, agreeing to fund roughly $45,000 in improvements. Dutch Treat contracted with Rowen & Blair for electrical work exceeding that authority. The contractor did not know Flushing's role.

Arguments: Rowen & Blair: We improved the building and reasonably expected the owner to stand behind the work. Flushing: Dutch Treat's authority was capped; a contractor who never knew of me cannot have relied on anything I did.

Holding: Dutch Treat was a special agent for an undisclosed principal, and its authority to contract was limited to the amount granted. A third party cannot bind the principal beyond the authority actually conferred where nothing traceable to the principal supported a broader belief.

Disposition: Affirmed — no lien beyond the authorized amount.

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Posture: Defendant's exceptions after a jury verdict against the track and two officers.

Facts: A patron at Suffolk Downs was assaulted by two Boston police officers working the race meeting. The track argued they were public officers acting in the public interest, and that it ran the meet as agent for the National War Fund.

Arguments: Cowan: They were the track's employees, placed there to keep order. Track: Public officers, not our servants — and we took no profit.

Holding: Respondeat superior turns on employee status, which is a question of the right to control; the method of payment is not decisive, and no single factor controls. The evidence permitted a finding that the officers served the track.

Disposition: Exceptions overruled — verdict for the plaintiff stands.

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Posture: Report to the Appellate Division, then to the SJC; the only issue was scope of employment.

Facts: Rebello, a garage employee whose work included picking up and delivering cars, delivered a customer's car, arranged for the owner's daughter to pick him up the next morning, was driven to her workplace, and was told to return the car to the garage. Instead he drove home for breakfast; the collision occurred as he drove from his home toward the garage. His shift began at eight.

Arguments: Miguel: He was returning the employer's customer's car on the employer's business. Linden: The breakfast trip was his own, and he wasn't yet on the clock.

Holding: The question is whether the deviation was incidental to the employment or a departure substantial enough that the employee was serving only himself.

Disposition: The Appellate Division's order — finding for the plaintiff vacated, finding for the defendant to enter — was the decision under review; the case stands for the deviation analysis rather than for its outcome. Read the last paragraph closely before class.

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Posture: Defendants' motion for summary judgment.

Facts: Kelleher worked as an Entenmann's shipping clerk with benefits, a time clock, and a supervisor. He then bought Arnold Foods distribution rights for the Fitchburg/Leominster area. District sales manager Mutascio interviewed him, asked coworkers about his work ethic, and required a valid driver's license. Kelleher struck and killed a pedestrian while delivering.

Arguments: Wright: The distributorship is employment in contract form; the brand owners controlled him. Defendants: Independent contractor — he could hire anyone to drive the route and made his own business decisions.

Holding: The contractual label does not resolve the classification; the record showed both indicia of independence and indicia of control, and the vicarious-liability and direct-negligence theories both presented triable questions.

Disposition: Motion for summary judgment DENIED.

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Posture: Cross-motions on the classification question.

Facts: Ruggiero's written agreement described him as an independent contractor and gave him control over the time, place, manner, and means of his work.

Arguments: Ruggiero: G.L. c. 149, § 148B presumes employee status; the employer must disprove it. AUL: Insurance agents are conventionally independent contractors, and this one operated on "a rather long leash."

Holding: The statutory ABC test is a separate inquiry from common-law agency: the putative employer must prove all three prongs, and the contract's label does not satisfy any of them.

Disposition: Resolved on the statutory test; the doctrinal point is the divergence between common-law and statutory classification of the same worker.

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Posture: Commonwealth's interlocutory appeal from denial of summary judgment.

Facts: A car struck the exterior pedestrian railing of the New Bedford–Fairhaven Bridge and fell into the Acushnet River, drowning the driver and a passenger. On the eastbound side, only the original 1901 pedestrian railing ran the full length; the interior railing and parapet curb installed by MHD in 1972–73 did not extend far enough to stop the car.

Arguments: Fortenbacher: MHD breached its duty to maintain and keep the bridge safe. Commonwealth: Railing design involves weighing alternatives — discretionary policy and planning under § 10(b) of the Tort Claims Act.

Holding: Decisions about bridge railing design and placement are the kind of policy-and-planning judgments the discretionary function exception immunizes.

Disposition: Order denying summary judgment reversed; judgment to enter for the Commonwealth. So ordered.

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Posture: Appeal by the homeowner from a $250 judgment against him.

Facts: Mrs. Lederer asked Novera, the part-time caretaker and yardman, whether one maple tree needed care. Novera brought in Wing, a licensed tree surgeon. Accounts diverge: Novera says he told Wing to speak to the lady of the house; Wing says Novera told him to do what was necessary. Wing sprayed, pruned the maple, and root-fed several trees. Price was never discussed. Wing had no contact with Lederer.

Arguments: Wing: Novera hired me as Lederer's agent, or Lederer ratified by accepting the benefit. Lederer: No authority express, implied, or apparent — and I learned of the work only after the trees were altered.

Holding: Apparent authority depends on what the principal knowingly permits or holds the agent out as possessing; nothing Lederer did justified a belief that a part-time yardman could order extensive tree work. Ratification fails for want of a meaningful opportunity to reject.

Disposition: Judgment against Lederer reversed.

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Posture: Petition to the Supreme Court of Texas after the court of civil appeals rendered a take-nothing judgment.

Facts: Donald Spear, Senior Vice-President of Marketing, made an oral one-year employment agreement with Elliott; $12,500 went unpaid. The company denied Spear's authority.

Arguments: Elliott: A senior officer with marketing responsibility had authority — or at least apparent authority — to hire. Great National: Spear had no authority to bind the company to a fixed term.

Holding: There was evidence of authority, including authority to communicate the offer; the court of civil appeals erred in finding none.

Disposition: Judgment of the court of civil appeals reversed and the cause remanded to that court for consideration of its remaining points.

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Posture: Appeal from a directed verdict for Texaco.

Facts: Gizzi, a steady patron, was injured when the brakes failed on a used Volkswagen van sold to him by Russell Hinman, who leased and operated a Texaco station. Texaco owned some of the station equipment, supplied products, and ran the "trust your car to the man who wears the star" campaign.

Arguments: Gizzi: Texaco's national advertising, signage, and equipment held Hinman out as authorized. Texaco: We license a brand and sell gasoline; we never held out a station operator as authorized to sell vehicles.

Holding: Apparent authority may rest on a principal's general manifestations to the public — advertising, signs, and branded premises. Whether those manifestations made the plaintiff's belief reasonable is a jury question, not one for a directed verdict.

Disposition: Reversed and remanded for further proceedings.

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Posture: Hilton's motion for summary judgment.

Facts: Verna Drummond fell at a hotel operating under the "Hilton Inn" name. Hilton neither owned nor operated it; the franchise agreement disclaimed agency but required prominent use of the Hilton name and gave Hilton inspection rights and operating standards.

Arguments: Drummond: Hilton controlled the operation, and its branding held the hotel out as Hilton's. Hilton: Separate corporate ownership and an express no-agency clause.

Holding: The disclaimer is not dispositive. Two independent theories survive: actual agency through retained control, and apparent agency through manifestations to guests.

Disposition: Summary judgment denied.

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Posture: Appeal by the store from a judgment for the customer.

Facts: Mrs. Hoddeson paid cash on the sales floor to a well-dressed man who knew the merchandise, prices, and availability. The store had no record of the sale and no such employee.

Arguments: Hoddeson: He behaved in every respect like a salesman on your floor. Koos Bros.: We made no manifestation of anyone's authority — indeed, we have no idea who he was.

Holding: The court distinguishes authority actually granted, implied authority, and apparent authority — the last requiring manifestations from the principal, which were absent. But a proprietor who negligently permits an impostor to appear to conduct its business may be estopped, or directly liable for failing to protect customers.

Disposition: Reversed and new trial allowed on the estoppel/negligence theory.

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Posture: BMW's appeal from an $18,000 judgment for the buyer.

Facts: Cullen paid a financially failing dealer, Bavarian, for a car he never received. BMW/NA had identified deficiencies and given Bavarian sixty days to cure.

Arguments: Cullen: BMW knew the dealer was failing and let it keep operating under the mark. BMW/NA: No actual or apparent authority, and no duty to police a dealer's finances.

Holding: The district court erred; knowledge of a dealer's difficulties did not create a duty running to individual customers, and the asserted basis for holding BMW/NA liable failed.

Disposition: Reversed — judgment for the plaintiff cannot stand.

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Citation-only assignment — 86 Mass. App. Ct. 128; not reproduced in the casebook.

Posture: Appeal from an order compelling arbitration.

Facts: Scott Barrow helped his mother enter the nursing home and, during admission, signed an optional arbitration agreement. She was not present, did not specifically authorize it, made no manifestation to the home, and was never told he had signed. He later sued as her executor.

Arguments: Nursing home: He signed as her representative in the admission process. Barrow: Authority to arrange admission is not authority to waive her right to litigate.

Holding: The home failed to establish actual or apparent authority to bind the mother to arbitration; authority is transaction-specific, and the agreement was not a condition of admission. Estoppel also failed for want of any manifestation or detrimental reliance.

Disposition: Order compelling arbitration reversed.

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Posture: Appeal in an action seeking a declaration that a lease extension was invalid; summary judgment granted to the landlord below.

Facts: Vartan Jinishian was president and sole stockholder of Madison Avenue Realty, the building's owner. His "managing agent" executed a store lease extension for tenant Roger Gray by informal letter. There was a writing designating the man as managing agent, but it did not specify authority to execute lease extensions. General Obligations Law § 5-703(2) requires the agent's authority to be in writing.

Arguments: Landlord: The writing is too general; the statute demands written evidence of authority for this transaction. Tenant: The designation, plus the agent's long history of negotiating and signing extensions, supplies the required written authority.

Holding: Written evidence of an agent's authority must be sufficiently specific to cover the transaction executed; a bare "managing agent" designation does not. Actual authority in fact and legally sufficient written evidence of it are different questions. A dissent would infer the broader authority from the designation plus the course of conduct.

Disposition: Lease extension held unenforceable; summary judgment for the landlord.

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Posture: Appeal from a finding of individual liability on a guaranty.

Facts: Dugas, chairman and chief operating officer of Automated Products of America, signed a guaranty form for the corporation's fuel debt to Flynn's Truck Stop. He struck the preprinted words "Personally and Individually," inserted the corporation's name, and signed in his corporate capacity. The trial record was 22 pages: the form and testimony from Flynn's general manager, Peter Ferraro.

Arguments: Flynn: A corporate guaranty of the corporation's own debt is meaningless; it must have been personal. Dugas: I struck the personal language and signed as an officer — that is precisely the manifestation of intent.

Holding: By amending the form and signing in a representative capacity, Dugas manifested an intent to bind only the corporation. The evidence did not support personal liability.

Disposition: Judgment reversed; judgment to enter for the defendant.

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Posture: Appeal from an interlocutory decree confirming a master's report and a final decree ordering specific performance.

Facts: Bridge occupied the third floor and part of the second as a tenant at will. In January 1972, Futurity's sales manager Benjamin Rae met Bridge's treasurer Coupounas about leasing part of the first floor. On February 1 they drafted and signed a memorandum in their respective official capacities.

Arguments: Bridge: Your sales manager negotiated and signed; enforce the lease. Futurity: A sales manager has no authority to convey an interest in real estate.

Holding: The court reached the enforceability question on the master's findings. Devlin's assigned question is whether the court applied the correct doctrine — this is better understood as a scope-of-authority problem (does authority to negotiate include authority to bind?) than an equal-dignities problem.

Disposition: Decrees ordering execution and delivery of the lease affirmed.

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Posture: Chevron's appeal from a judgment holding it liable for cancelling a service contract.

Facts: In December 1975 Chevron hired P&A to plug and abandon a well in Breton Sound. A Chevron representative repudiated the contract without affording P&A an adequate opportunity to perform. Chevron personnel with authority learned of the repudiation and did not disavow it.

Arguments: Chevron: The representative acted without authority. P&A: Chevron knew and acquiesced; it also kept the benefit of the cancellation.

Holding: A corporation ratifies an agent's unauthorized act by knowing acquiescence and failure to repudiate within a reasonable time. Acceptance of a benefit is evidence of ratification but is not the only route to it.

Disposition: Judgment against Chevron affirmed; P&A recovers the profit it would have made.

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Posture: Appeal after a twenty-nine-day jury trial, with earlier partial summary judgment set aside by a successor judge.

Facts: Linkage created and ran technical training programs at a BU satellite facility. A BU officer (Meng) renewed the agreement; BU then terminated and denied any renewal. Linkage pleaded contract, tort, and c. 93A claims; BU counterclaimed.

Arguments: Linkage: Meng had apparent authority from BU's own treatment of him, and BU ratified after learning what he did. BU: No authority to renew; the agreement was lawfully terminated and never renewed.

Holding: The jury's findings that the agreement had been renewed were warranted, and the judge should not have granted BU judgment notwithstanding those findings. Apparent authority (what BU manifested before execution) and ratification (what authorized officials did after) are distinct theories that can rest on the same facts.

Disposition: Jury findings largely reinstated; judgment for BU on those claims reversed.

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Posture: Appeal from judgment enforcing the transaction.

Facts: Eleanor Harris's agent made a sale on terms she had not authorized. After she and her counsel obtained access to the material facts, she failed to repudiate within a reasonable time.

Arguments: Harris: I never authorized these terms. Colony: She had the facts and her lawyer, and she sat on it.

Holding: Ratification requires knowledge of the material facts (§ 4.06) — but a principal who has access to those facts and fails to repudiate within a reasonable time ratifies. Deliberate ignorance does not preserve the objection.

Disposition: Judgment affirmed.

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Posture: Appeal by the employer from judgment for the employee's estate.

Facts: A February 1962 agreement hired Thomas as general manager at $725 per month, payable semi-monthly, plus a bonus of 25% of annual net profit before taxes. No term was stated.

Arguments: Thomas: The annual profit-based bonus shows a year-to-year hiring. Employer: Indefinite duration means terminable at will under the American rule.

Holding: Whether the arrangement was for a definite term is for the trier of fact; the compensation structure and surrounding circumstances can support a year-to-year hiring rather than an at-will one.

Disposition: Judgment for the employee affirmed on that basis.

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Posture: Appeal from denial of the defendants' motion to dismiss the complaint.

Facts: A written 1958 contract employed Shenn as a salesman through October 31, 1959, at $200 per week plus 1% commission. He continued working after expiration without a new express agreement and was discharged in April 1965.

Arguments: Shenn: Holding over on the same terms renewed the contract annually through October 31, 1965. Fair-Tex: The written contract had a definite ending; nothing renewed it.

Holding: Continued employment after a fixed term expires does not, without more, create a new annual contract.

Disposition: Order reversed, motion to dismiss the complaint granted, with $10 costs and leave to replead.

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Posture: Employer's appeal from denial of post-trial motions after a jury award for the employee.

Facts: Mettille was hired orally as a loan officer at $12,000 a year with nothing said about permanence or term. The bank later distributed an employee handbook containing job security and disciplinary procedures. He was discharged without those procedures being followed.

Arguments: Mettille: The handbook provisions became part of my contract. Bank: No consideration supported any modification; he remained at will and was free to quit at any time.

Holding: Personnel handbook provisions, if they meet the requirements of contract formation, become enforceable terms; continued employment supplies the consideration.

Disposition: Affirmed — the employee keeps his verdict.

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Posture: Employer's exceptions after a $2,500 jury verdict for the employee.

Facts: Monge was hired at $1.84 an hour and told better work would bring better jobs. She claimed her foreman harassed her because she refused to date him, that the personnel manager condoned it, and that she was ultimately fired.

Arguments: Monge: The discharge was retaliation for refusing the foreman. Beebe: At-will employment; no cause of action for a discharge.

Holding: A termination of an at-will employment motivated by bad faith, malice, or retaliation is a breach of the employment contract. The court balances the employer's interest in running its business against the employee's interest in job security and the public's interest in a proper balance between them.

Disposition: Verdict for the employee sustained, though damages for mental suffering were disallowed because that suffering preceded the discharge.

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Posture: Appeal after a jury verdict for the employee on bad-faith discharge, with the judge entering judgment on a quantum meruit theory.

Facts: The jury found Maddaloni would have earned $61,000 in commissions attributable to past services, and set quantum meruit damages at $28,000.

Arguments: Maddaloni: I was fired to deprive me of commissions I had already earned. Employer: An at-will employee may be terminated at any time, and cannot recover lost future wages and benefits.

Holding: An at-will employee discharged in bad faith may recover commissions attributable to past services, but not lost future wages and fringe benefits. On the record the employer was entitled to a directed verdict on the broader damages theory.

Disposition: Judgment modified accordingly — recovery limited to compensation already earned.

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Posture: Appeal by the employee from JNOV after a $250,000 jury verdict.

Facts: Siles was hired in 1977 as a respiratory therapy specialist and later terminated. The evidence was reviewed in the light most favorable to him.

Arguments: Siles: The termination lacked any good reason, which shows bad faith. Travenol: The absence of a good reason is not evidence of bad faith.

Holding: The judge was correct: the evidence was insufficient to support a finding that the termination resulted from bad faith. A legally improper purpose must be shown.

Disposition: Judgment notwithstanding the verdict affirmed.

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Posture: Review of a court of appeals decision reversing judgment for the employer.

Facts: Brockmeyer was discharged after events he claimed made the firing wrongful.

Arguments: Brockmeyer: Wisconsin should recognize exceptions to at-will employment, including an implied covenant of good faith. Dun & Bradstreet: Employer flexibility in hiring and firing should be preserved.

Holding: Wisconsin recognizes exceptions "in certain limited circumstances" — a narrow public-policy exception, enforced in contract — and declines to adopt an amorphous general requirement of good-faith termination of the Massachusetts kind.

Disposition: Public-policy exception recognized; the broader good-faith theory rejected.

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Posture: Appeal by the later purchaser from judgment for the earlier contract vendee.

Facts: Farr contracted to buy the Newmans' land for $3,000 under an unrecordable memorandum. Hardy later took a conveyance for $4,000. Hardy's attorney learned of Farr's agreement directly from Farr, concluded it was unenforceable, and never told Hardy.

Arguments: Hardy: I paid more, in good faith, and my lawyer told me nothing. Farr: Notice to the attorney handling the purchase is notice to the client.

Holding: Notice given to an agent authorized to receive it operates as notice to the principal. This is not a mere presumption that the agent passed the information along — the giving of notice to the authorized recipient is itself the legally operative act.

Disposition: Judgment affirmed — Hardy takes subject to Farr's equity.

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Posture: Disqualification and imputation issues arising from a prior representation.

Facts: Counsel had previously represented a party in a substantially related matter and held confidences from that representation.

Arguments: Moving party: The prior representation is substantially related; disqualify. Opponent: The client's choice of counsel should be respected.

Holding: Where an agent is subject to a duty to another not to disclose the fact, the ordinary rule imputing the agent's knowledge to the principal does not apply. Attorney confidentiality breaks the imputation chain that Chapter 5 otherwise assumes.

Disposition: Resolved on the confidentiality/imputation ground; read it as the § 5.03(b) exception in operation.

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Posture: Diversity declaratory judgment action by the insurer.

Facts: Joe Jezisek, a minor with an accident and two moving violations, traded a Pontiac for a 1960 Chevrolet; the bank required insurance. He applied through a secretary at the Wattenbarger Agency in Lamb County. Southern Farm investigated, rejected the application, and returned the premium. Coverage was then arranged in his brother George's name in another county.

Arguments: Claimants: The agent knew the true facts, so the insurer knew them. Southern Farm: The agent participated in a scheme to obtain coverage the company had refused.

Holding: Knowledge of an agent acting adversely to the principal, in concert with the third party, is not imputed. A party who deals with the agent knowing of the adverse conduct cannot invoke the protective rule.

Disposition: Reversed and judgment rendered for the insurer — the policy is void.

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Posture: Exceptions after trial in an insurer's action denying coverage for late notice.

Facts: The arena rented its facility to the Berlin Maroons for $100 for an afternoon game; the team hired its own ticket sellers and police. A spectator, Florence Ploude, was struck by a puck. Dr. Danais, the arena's president, was present as a spectator — he had not paid to get in — and heard the public-address announcement.

Arguments: Insurer: Notice was late. Arena: The president learned of it only as a spectator, not in his corporate capacity.

Holding: The question is in what capacity the officer acquired the knowledge. A person's knowledge is not automatically the corporation's merely because that person is an officer.

Disposition: Exceptions overruled.

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Posture: Summary judgment proceedings in litigation arising from the fund principal's fraud.

Facts: Nordlicht orchestrated a scheme involving Black Elk's bondholders; the defendants sought to avoid imputation of his knowledge on adverse-interest grounds.

Arguments: Defendants: He was acting adversely; don't charge us with what he knew. Plaintiffs: He was working to produce financial benefits for these very defendants.

Holding: The opinion quotes the Restatement (Third) rule directly: knowledge material to an agent's duties is imputed unless the agent acts adversely or owes a nondisclosure duty. The adverse-interest exception is narrow — the agent must totally abandon the principal's interests and act solely for himself or another. A conflict of interest is not enough, and wrongdoing that benefits the principal is not adversity.

Disposition: Summary judgment entered on the imputation issue against the parties invoking the exception.

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Posture: Appeal in the bank's action on loans, with imputation raised as a defense.

Facts: The bank's authorized vice-president and loan officer retained counsel, made the loans, and attended closings — his authorized functions. There was evidence that he (with the defendants' knowledge) submitted an old appraisal in support of a loan when a newer, lower appraisal existed, contrary to the bank's commitment letter.

Arguments: Defendants: The officer's knowledge is the bank's, defeating its claim. Bank: He was entangled in the misconduct with these very defendants; his knowledge is not ours.

Holding: Where the officer participated in the problematic transaction together with the parties now seeking to charge the bank, ordinary institutional imputation does not protect them.

Disposition: Resolved against the defendants on the imputation defense.

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Posture: Bankruptcy litigation over whether a complaint reached the principal through a chain of intermediaries.

Facts: The chain ran principal → State Street Bank (indenture trustee) → DTC → Cede & Co. The question was whether notice given into that system reached the top.

Arguments: Claimant: Notice into the depository system is notice to the principal. Respondent: Each intermediary's duties are defined and limited.

Holding: Imputation may operate through subagents, but only where receiving or transmitting the particular communication was within the scope of that link's agency. The court asks specifically whether DTC had an obligation within its agency to transmit the complaint up the chain.

Disposition: Decided on the scope-of-each-link analysis; use it as the method for any multi-entity notice problem.

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Posture: Appeal from the T.T.A.B. in a cancellation proceeding.

Facts: Great Plains registered a mark in 1971 claiming first use in 1961; Georgia-Pacific petitioned to cancel in 1973, asserting prior rights in its G-P mark. Georgia-Pacific salespeople had seen the mark in the field for years while working as salespeople.

Arguments: Great Plains: Your own people knew for years — laches and estoppel. Georgia-Pacific: Salespeople are not agents authorized to receive that kind of legally significant notice.

Holding: Whether knowledge is charged to the corporation depends on whether this class of agent was authorized to receive this kind of communication; authority to sell does not establish authority to receive every notice addressed to the company. On the merits the court found a likelihood of confusion.

Disposition: Decision of the board affirmed in Georgia-Pacific's favor.

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Posture: Employer's suit to enjoin a former instructor from working for a competitor.

Facts: Witter, a dance instructor, left Arthur Murray for Fred Astaire Studios. His contract barred him from working for a competitor after leaving. The opinion surveys the then-chaotic body of noncompete law at length.

Arguments: Arthur Murray: Enforce the covenant and pull him out of the competitor's studio. Witter: Once employment ends, I'm free to practice my trade.

Holding: Enforcement of a post-employment restraint is equitable and turns on whether the employer faces irreparable injury — if not, an injunction is ordinarily denied. The default agency duty not to compete ends with the employment; only a contract extends it.

Disposition: Injunction denied as to the general restraint; the opinion is assigned for the reasonableness framework and the remedy analysis rather than the outcome.

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Posture: Appeal from an injunction against a former employee.

Facts: DeVoe signed a contract with Pop's Vinyl Tops in Decatur containing a two-year nondisclosure and a five-year noncompete within fifty miles, at $200 a week and with no stated term of employment. He had little or no experience installing vinyl roofs before the job.

Arguments: Employer: We trained him; the covenant protects that investment. DeVoe: There is no protectable interest — this is a general trade, not a secret.

Holding: A restraint is enforceable only if the employer has a protectable business interest and the restraint is reasonable in scope, duration, and geography. Training in a general trade is not such an interest.

Disposition: Judgment reversed and the cause remanded — injunction improper.

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Posture: Appeal from summary judgment on the contract count and a jury verdict for the employee on the trade secret count.

Facts: Rezatto worked nearly seven years for the plaintiff's insurance agency, then competed.

Arguments: 1st American: Breach of the covenant and misuse of trade secrets. Rezatto: The covenant is void as a restraint on trade, and the information isn't secret.

Holding: The trial court's disposition was erroneous; the case is reversed for reconsideration. The doctrinal separation matters: absent an enforceable covenant a former employee may compete, but the duty not to use the former employer's confidential information is independent and survives.

Disposition: Reversed and remanded for proceedings consistent with the opinion.

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Posture: Consolidated appeals; employer sought damages and an injunction, employees counterclaimed for vested profit-sharing interests.

Facts: Four employees signed noncompetes after beginning work. The employer also sued Career Resources and its president Micah Garber for tortious interference.

Arguments: National Recruiters: Continued employment and access to training supply consideration. Employees: The preexisting-duty rule defeats a modification unsupported by new consideration.

Holding: The noncompetition clause is invalid for want of consideration where it was exacted after employment began without independent consideration. Minnesota examines the sufficiency of consideration given after the employee agrees to the added terms.

Disposition: Reversed in part, affirmed in part, and remanded.

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Posture: Appeal from dismissal of the employer's amended bill seeking an injunction and damages.

Facts: Metzner and a colleague — officers and high-level managerial employees — made preparations to open a competing shredder operation while still employed. The employer had been presented with, and did not pursue, the relevant opportunity.

Arguments: Maryland Metals: Managerial employees owe undivided loyalty while employed. Metzner: Preparation to compete after leaving is lawful, and the company abandoned the opportunity.

Holding: Employees may make preparations to compete before termination without breaching fiduciary duties, provided they do not otherwise act to the employer's detriment; the chancellor correctly dismissed the complaint. The opinion states both competing policies expressly.

Disposition: Dismissal of the amended bill affirmed.

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Posture: Appeal from findings of liability for breach of fiduciary duty; damages contested.

Facts: Francis Driscoll (general manager of BBF's Silicon division) and John Q. Adams, Jr. (marketing manager) learned, before it was public, that Solitron wanted to sell its germanium operation. With attorney Oliver Ward — an outsider to BBF — they pursued it themselves.

Arguments: Defendants: BBF wouldn't or couldn't have taken the opportunity anyway. BBF: You used confidential knowledge of our corporate opportunity while owing us fiduciary duties.

Holding: The circumstances the defendants pointed to did not relieve them of liability for misuse of Driscoll's and Adams's confidential knowledge of BBF's corporate opportunity; those circumstances bear on causation and the extent of damages, not on liability.

Disposition: Liability sustained; the live questions concern damages — including whether salaries paid during the period of disloyalty are recoverable.

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Posture: Preliminary injunction litigation over restrictive covenants, with a choice-of-law fight.

Facts: Day's agreement contained nonsolicitation and noncompetition provisions and selected Delaware law; he left for a competitor and argued Massachusetts law should govern.

Arguments: Day: Massachusetts law applies and the restriction fails under it. NuVasive: The parties chose Delaware law and the nonsolicitation clause is enforceable under it.

Holding: The chosen law governs, and the nonsolicitation provision was enforceable under it; certain contract claims were dismissed under Massachusetts law.

Disposition: Enforcement granted on the nonsolicitation provision under the selected law.

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Posture: Employer's motion for a preliminary injunction, granted below.

Facts: Hermalyn, a senior DraftKings executive, left for Fanatics. His agreement had a Massachusetts choice-of-law clause and a one-year noncompete; he moved to California and argued for California law, which generally voids such restraints.

Arguments: Hermalyn: California policy governs where I now work. DraftKings: Massachusetts law was chosen, and the covenant complies with G.L. c. 149, § 24L.

Holding: The Massachusetts choice-of-law clause controls, and the one-year restriction is enforceable within the statute's limits.

Disposition: Preliminary injunction granted to the former employer.

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Posture: Proceeding by an attorney to determine and enforce his lien.

Facts: The petitioner was retained as general counsel at $5,000 a year; $3,096.92 in salary was unpaid when the client terminated the general employment. He declined to surrender his papers — properly so. At the client's request he then tried a pending action and recovered a $4,176.64 judgment against Schulte, to be paid what the service was worth. The client assigned for the benefit of creditors; a new attorney was substituted without prejudice to the lien.

Arguments: Attorney: I hold the papers and I produced the judgment. Assignee: A salary claim isn't lienable, and the estate belongs to creditors.

Holding: No lien — general or charging — attaches to a claim for unpaid salary. A retaining lien requires possession of the thing; a charging lien attaches to the fund the attorney's services produced. The judgment he actually obtained is a different matter, measured by the value of that service.

Disposition: Relief on the salary claim denied; the lien recognized only as to the recovery his services created.

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Posture: Appeal by a withdrawing attorney from an order compelling him to turn over case files.

Facts: Attorney Harry Shriman withdrew by leave of court from a trade-secret action. Remaining counsel petitioned for the files. Shriman asserted a common-law retaining lien and asked for an evidentiary hearing on the amount owed. The court ordered turnover but granted him a statutory lien, amount to be fixed on settlement or favorable judgment.

Arguments: Shriman: Possession is the lien; I keep the files until paid. Client: You're holding a live case hostage.

Holding: A retaining lien can be displaced where equity requires, with a statutory lien substituted on the eventual recovery — but the attorney was entitled to procedural protection on the amount.

Disposition: Affirmed in part; reversed in part; remanded with directions.

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Posture: Appeal from a Probate Court judgment dismissing a petition to enforce an attorney's lien under G.L. c. 221, § 50.

Facts: The attorney represented the husband beginning a year after the divorce nisi. A supplemental judgment incorporated a separation agreement; property was later sold and $40,000 placed in escrow to cover capital gains taxes and encumbrances, with the remainder reverting to the wife. The wife objected to the lien; the judge denied it. The attorney argued his efforts produced a higher sale price and protected against a "side deal."

Arguments: Attorney: But for my work there'd be no fund. Wife: The escrow was never an order in the husband's favor.

Holding: Section 50 reaches a "judgment, decree or other order in his client's favor." Escrowed funds held in a neutral depository for a special purpose inconsistent with the lien claim partake of a trusteeship; the attorney's asserted contributions, even if proved, would not convert the escrow into an order in the husband's favor.

Disposition: Dismissal affirmed.

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Posture: Certified questions from the First Circuit (In re Engage, Inc.).

Facts: Ropes & Gray performed patent prosecution work for Engage, which entered bankruptcy; the liquidating supervisor objected to the firm's lien on patents and on the proceeds of their sale.

Arguments: Ropes & Gray: § 50 covers this work and follows the sale proceeds. Jalbert: The statute is about judgments in litigation.

Holding: Both questions answered yes. Section 50 grants a lien on patents and patent applications for patent prosecution work, and the lien attaches to the proceeds of their sale — "proceeds derived therefrom" relates back to all the preceding clauses, and the legislative purpose of protecting the unpaid attorney would otherwise be frustrated.

Disposition: Certified questions answered in the affirmative.

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Posture: Appeal from judgment for Generic on its complaint for possession and damages.

Facts: Robert Bougher signed a document titled "Lease Agreement" with Generic covering a 2000 Western Star semi-truck. Gangloff towed and held the truck and asserted a possessory lien.

Arguments: Gangloff: The "lease" is really a security interest, and my possessory lien has priority. Generic: We own the truck, or at least hold a perfected interest.

Holding: The agreement created a security interest, not a true lease. Under Ind. Code § 26-1-9.1-333, a possessory lien for services furnished in the ordinary course, created by rule of law and dependent on possession, has priority over a security interest unless the lien statute expressly provides otherwise — and the towing statute is silent.

Disposition: Judgment for Generic, including damages and fees, reversed; remanded for determination of appropriate damages.

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Posture: Error proceeding from a replevin judgment.

Facts: The plaintiff held a recorded chattel mortgage on a car; the defendant garageman towed, repaired, and stored it at the owner's request and retained possession. The trial court gave the plaintiff possession subject to the defendant's lien.

Arguments: Mortgagee: My recorded interest came first. Garageman: My statutory possessory lien for towing, repair, and storage has priority while I hold the car.

Holding: A garageman's valid possessory lien for towing, repairs, and storage has priority over a previously perfected security interest so long as possession continues. The storage component was sustained because the owner requested it.

Disposition: Trial court's ruling sustained.

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Posture: Appeal in a bill in equity, with evidence reported and the judge's findings of material fact.

Facts: Williams delivered loam and obtained a $3,295.89 finding against Bradford Estates in District Court. Bradford had taken title to Westfield land on June 19, 1947 and mortgaged it to Investors the same day for $15,000; Investors supplied the purchase price. The judge found Bradford was a "straw" for Investors and that the transactions were in fraud of creditors. But there was no evidence of the delivery, value, or timing of the loam on the premises described in the bill.

Arguments: Williams: Investors is the real owner; make it pay. Investors: Not a party to the judgment, and the plaintiff already elected by suing the agent.

Holding: The unjust enrichment finding lacked evidentiary support. And treating Bradford as holding title as agent for an undisclosed principal, the plaintiff could have proceeded against agent or principal at his election, but not both jointly; having taken judgment against the agent, he cannot treat that judgment as a cause of action against the principal.

Disposition: Bill should have been dismissed as against Investors.

⚠ Note for modern practice: Restatement (Third) § 6.09 rejects this election rule — judgment against one discharges neither, and only satisfaction discharges, to the extent satisfied. Williams is Massachusetts law the SJC has not disavowed; know both.

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Posture: Appeals from orders adjudicating a partnership bankrupt and from an order on the claim.

Facts: Kaufman and Brown financed a potato-growing operation run by Horton and Althouse under written contracts, and filed as creditors in bankruptcy. They advanced more than the contracts required, came to California, made recommendations on operations, and had access to partnership books.

Arguments: Kaufman-Brown: We were lenders protecting an investment. Trustee/creditors: You acted as co-owners — which drops you behind us under UPA § 40 and exposes you under § 15.

Holding: The record contains the essentials of a partnership and substantial proof that Horton and Althouse so intended. Advances beyond contract requirements are consistent with either relation, but taken with the control and profit participation they support co-ownership.

Disposition: Orders adjudging the combination bankrupt reversed; the order on the Kaufman-Brown claim affirmed; remanded. ("Affirmed, reversed, and remanded.")

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Posture: Appeal in a creditor's action seeking to hold lenders liable as partners.

Facts: A failing brokerage (Knauth, Nachod & Kühne) received a large loan of securities from Peyton, Perkins, and Freeman. The lenders took a share of profits, option rights, veto powers over speculative or injurious business, resignations held in escrow, and extensive reporting.

Arguments: Martin: Those controls make them partners, liable for the firm's debts. Lenders: Every provision was security for a loan.

Holding: "Mere words will not blind us to realities," and a statement that no partnership is intended is not conclusive — but control taken as security is not co-ownership. The veto over highly speculative or injurious business is "but a provision for the protection of the lenders."

Disposition: Judgment for the defendants — creditors, not partners.

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Posture: Appeal from denial of an accounting and liquidation.

Facts: A farming partnership leasing and farming some 13,000 acres, in existence since 1925 and managed by R.A. Pickens since 1937. At the end of 1975 there were 22 partners; R.A. Pickens & Son held the largest interest at 31%. The agreement provided for a book value buyout.

Arguments: Frank: I'm entitled to an accounting and liquidation, and book value undervalues my interest. Partnership: The agreement's terms govern, and they bind everyone equally.

Holding: Partners may structure profit shares, management rights, and buyout formulas unequally; the arrangement is still a partnership, and the agreed book-value measure controls.

Disposition: Affirmed — no liquidation.

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Posture: Appeal from a Supreme Court judgment reversing the Commission.

Facts: Arline Chesire was hired as cashier and receptionist at $15 a week in the United Beauty Shoppe. When she sought a raise in December 1938, an agreement styled her a partner with 20% of profits — while she kept her salary, contributed no capital, bore no losses, had no management rights, and had no interest on dissolution. If an employee, she was the eighth, making Fenwick a covered employer for 1939.

Arguments: Commission: She was an employee in substance. Fenwick: We signed a partnership agreement, and no fraud is alleged.

Holding: Partnership turns on a cluster of factors — intention, profit sharing, loss sharing, capital contribution, control, conduct toward third parties, and rights on dissolution. On these facts the arrangement was a method of compensation, not co-ownership.

Disposition: Judgment reversed — she was an employee.

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Posture: Appeal from a judgment finding a partnership and ordering relief.

Facts: Sweet began as an hourly employee in Charles Vohland's nursery in 1956. When Paul Vohland took over around 1963, Sweet's status changed: he received 20% of net profits after all expenses — labor, gas, insurance, burlap, nails, insecticide, fertilizer, seed, straw, stock, seedlings — computed at irregular joint settlements. It was called a commission.

Arguments: Sweet: Sharing the net after every expense is co-ownership. Vohland: A commission arrangement with a longtime employee.

Holding: Intent means the intent to do the things that constitute a partnership; parties are partners notwithstanding an express stipulation otherwise. Substance, not the name of the arrangement, determines the relation.

Disposition: Affirmed — partnership found.

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Posture: Petitioners' appeal from judgments for the injured pedestrians.

Facts: Mrs. Love left her car at a Humble filling station for servicing. Before any employee touched it, it rolled off the premises and struck the Martins. Humble paid a large share of the station's operating expenses, controlled the operator's working hours, and required reports.

Arguments: Humble: The operator was an independent dealer. Martins: Humble controlled the details of the operation.

Holding: The financial and operational arrangements established a relationship of agency, distinguishable from a true dealer arrangement (as in The Texas Company v. Wheat) where the lessee bought and resold as his own, set his own prices and credit terms, and bore his own expenses.

Disposition: Judgment of the Court of Civil Appeals reversed; judgment of the trial court affirmed — Humble liable.

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Posture: Sun's motion for summary judgment.

Facts: A fire started at the rear of the plaintiff's car during fueling at a station operated by Barone under a lease from Sun; Smilyk, Barone's employee, was allegedly negligent. Barone kept his own profits, set his own hours, and hired and paid his own staff.

Arguments: Hoovers: Barone acted as Sun's agent. Sun: Landlord-tenant and independent contractor; our representative advised, he didn't direct.

Holding: The test is whether the oil company retained the right to control the day-to-day details of the station's operation; influence over results alone is insufficient. Nothing in the parties' conduct suggested the contracts were a sham.

Disposition: Sun's motion for summary judgment granted. It is so ordered.

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Posture: Defendant's appeal from a finding of individual liability.

Facts: Amory's October 29, 1997 proposal letter went to Checroune, Atlan, and "South Shore Realty Investors" in care of Boston United Realty Corp. Atlan signed the acceptance line. South Shore Realty, LLC had been created on October 16 and bought the "old Patriot Ledger Building" in Quincy that day from Boston United Realty, of which Checroune was president and treasurer.

Arguments: Checroune: I acted solely as an agent for a disclosed principal. Amory: I dealt with the individuals and the name they used.

Holding: The agency defense fails where the individuals held themselves out in a manner supporting partnership by estoppel; the trial judge's finding of individual liability was warranted.

Disposition: Judgment in favor of Amory affirmed.

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Posture: Appeal from an order granting the defendants' motion to dismiss and denying the plaintiffs' cross-motion.

Facts: A two-page 1964 agreement created the Captain Parker Arms Partnership to acquire Lexington land and build apartments "for the term of thirty years." A nominee trust (T&N Realty Trust) held title, and the agreement incorporated c. 108A. The business continued well past 1994. Plaintiffs sought declarations that the partnership was at will, that they had lawfully terminated it, and that winding up and liquidation were required.

Arguments: Plaintiffs: The term expired; this is now a partnership at will. Defendants: The arrangement continued on its original terms.

Holding: A term partnership whose stated term has expired, with the business continuing, becomes a partnership at will — dissolvable by any partner at any time, triggering winding up.

Disposition: Resolved on the at-will characterization; the drafting lesson is the point.

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Posture: Appeal from a judgment for the plaintiff coadventurer.

Facts: Salmon took a twenty-year lease on the Bristol Hotel; Meinhard put up half the money and shared profits and losses, with Salmon managing. Near the end of the term the lessor (Gerry) offered Salmon a far larger project covering the Bristol and adjoining parcels. Salmon took it through his own corporation without telling Meinhard.

Arguments: Meinhard: The opportunity came to you because you managed our venture; you owed me the chance. Salmon: The venture concerned the Bristol lease, which was expiring; this was a new and different undertaking.

Holding: Joint adventurers owe one another "the duty of the finest loyalty" — "not honesty alone, but the punctilio of an honor the most sensitive." The new lease was an extension and enlargement of the subject matter of the venture and came to Salmon as manager; he was bound at least to disclose and give Meinhard the chance to compete for it.

Disposition: Judgment for Meinhard, with his interest in the new venture fixed by the court (a fraction of the shares, one share less than half, to preserve Salmon's control).

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Posture: Cross-appeals after trial on claims for amounts due under the partnership agreement and counterclaims for breach of loyalty.

Facts: Meehan, Boyle, and Cohen left Parker Coulter to start their own firm. Before giving notice they made logistical preparations, and — while still partners — prepared and sent letters to clients, using firm resources, before the firm could respond. When asked directly about rumors they were leaving, they denied or deflected.

Arguments: MBC: Preparation to leave is lawful, and we're owed our partnership amounts. Parker Coulter: You misled us, used firm resources, and unfairly acquired client consent.

Holding: Partners may prepare to compete, but they breached by unfairly acquiring consent from clients through secrecy, misleading denials, and a head start using firm resources. The burden shifts to the departing partners to prove the clients would have followed them in any event.

Disposition: Judgment below reversed and the case remanded to the Superior Court for further proceedings consistent with the opinion.

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Posture: Appeal by the former partners from a determination that they breached fiduciary duty, and from a $1,861,045 damage award.

Facts: Gibbs and Sheehan, the only trusts-and-estates partners at BAM, prepared to move to Chadbourne & Parke. An April 26, 1991 memorandum containing confidential firm employment data — compensation and the firm's own valuation of each employee — went to Chadbourne, and Sheehan testified it was prepared in connection with talking to other firms. They recruited departmental staff before giving notice.

Arguments: Plaintiffs: Partners may invite qualified personnel to move with them. BAM: You handed a competitor confidential data calculated to give it an unfair recruiting advantage.

Holding: Disclosure of confidential firm data to even one competing firm was a direct breach of the duty of loyalty; recruiting while still partners and before notice deprived BAM of the chance to retain its own people.

Disposition: Liability sustained but the order modified, the damage award vacated, and the matter remanded for recomputation.

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Posture: Appeal on an agreed statement of facts.

Facts: Stroud and Freeman were equal general partners in Stroud's Food Center, with no restriction on either's authority in the articles. Months before February 1956 Stroud told Nabisco he would not be personally responsible for additional bread. Between February 6 and 25, Nabisco sold $171.04 of bread at Freeman's request.

Arguments: Stroud: I gave notice; don't charge me. Nabisco: Buying bread is ordinary partnership business and Freeman was a general partner.

Holding: Each partner has an equal right to manage; in a two-person partnership "half of the members are not a majority," so one partner cannot restrict the other's authority as to ordinary business. Activities within the scope of the business are limited only by the expressed will of a majority.

Disposition: Judgment for Nabisco — Stroud liable.

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Posture: Review after the Court of Appeals held the partner vicariously liable but rejected the UTPA claim.

Facts: Mead represented Roach beginning in 1974 on traffic charges and later on business matters; Berentson prepared Roach's tax returns. Mead and Berentson formed a partnership on November 1, 1979. Mead then borrowed money from Roach and did not repay it. There was expert testimony that a lawyer seeking a loan from a client must advise the client to obtain independent counsel, secure the loan, and warn about a usurious rate.

Arguments: Berentson: A personal loan is outside the scope of the partnership's business. Roach: I relied on my lawyer for advice about the loan.

Holding: Mead's failures were failures as a lawyer advising a client, and the partnership's services included investment advice; because they occurred within the scope of the legal partnership, responsibility is charged to his partner.

Disposition: Court of Appeals affirmed — partner vicariously liable.

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Posture: Appeal from a judgment permitting the majority partners to purchase at a judicially supervised dissolution sale.

Facts: Three partners in a partnership at will owned the West Plaza Shopping Center in Phoenix. The two majority partners sought dissolution, alleging the third was derelict and had failed to contribute his $6,000 share of operating losses, and had excluded him from management.

Arguments: Prentiss: You froze me out and then bought the assets. Majority: Dissolution was proper and our bidding raised the price he received.

Holding: Two majority partners who excluded the third may nonetheless purchase partnership assets at a judicially supervised dissolution sale where there is no fraud and the exclusion did not depress the price.

Disposition: Judgment of the superior court affirmed.

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Posture: Appeal from a judgment for the selling brother.

Facts: Brothers Charles and Sonny formed a milk-hauling partnership in 1967. In July 1984 Sonny gave notice of dissolution, wrote to Dairymen Inc. cancelling the partnership's hauling contract effective October 16, and asked to haul for DI himself. On September 24 they signed a "Partnership Sales Agreement" providing for a private auction of all assets "including equipment, and milk routes," void if DI withheld approval, and containing a covenant not to compete. Charles won the auction at $86,000 on September 27. That same day DI's producers voted not to approve Charles and chose Sonny.

Arguments: Sonny: The contract required DI approval, which never came; the agreement was void. Charles: You positioned yourself to take the very asset we were auctioning.

Holding: The trial court's reasoning ignored Sonny's own conduct: a partner's fiduciary duty continues through winding up, and he may not compete for the asset being sold.

Disposition: Reversed and remanded for entry of a new judgment consistent with the opinion.

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Posture: Plaintiffs' appeal from a final decree after a master's reports.

Facts: In April 1961 Johnson, Walker, and Kennedy formed the Triangle Insurance Agency by oral agreement, each with a one-third interest, with no agreed duration. An unexecuted draft would have specified twenty-five years. Kennedy terminated the arrangement. The master valued the business at $25,000 at dissolution.

Arguments: Plaintiffs: The dissolution was wrongful and we're owed damages and going-concern value. Kennedy: No definite term, so any partner could dissolve at will.

Holding: In a partnership of indefinite duration any partner may lawfully dissolve at any time (§ 31(1)(b)); the unexecuted twenty-five-year draft did not change that. Kennedy's termination, "however unseemly in manner and method, was not a legal wrong." Because dissolution was rightful the partners share equally, and the $25,000 valuation had no basis where the firm was not to continue.

Disposition: Final decree modified — dismissing the counterclaim and dismissing the bill as to Marjorie Kennedy — and as modified, affirmed.

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Posture: Appeal by the defendant brother from a judgment ordering a court-determined division rather than a sale.

Facts: Three brothers ran two feed mills as partners with no written articles. On October 4, 1975 the plaintiffs served a notice of dissolution alleging no fault or contravention. At the March 1977 hearing the defendant asked that the partnership be sold under the Wisconsin analogue of UPA § 38.

Arguments: Defendant: I didn't wrongfully dissolve, so I can force liquidation by an actual sale. Plaintiffs: Let the court value the assets and pay him his share in cash.

Holding: Unless otherwise agreed, a partner who has not wrongfully dissolved has the right to wind up and therefore to force a sale; a court may not impose an in-kind distribution. A sale is the best means of determining true fair market value, and the resulting hardship is avoidable only by a partnership agreement.

Disposition: Judgment reversed and cause remanded for proceedings consistent with the opinion.

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Posture: Appeal from orders granting judgment to several withdrawn partners.

Facts: The law firm Popkin & Stern entered a long-term lease. Sheehan was a partner when it was signed. Noelker, Burdette, Lageson, and Klar became partners afterward and left before the breach.

Arguments: Landlord: All of them are on the hook for the remaining rent. Later partners: Under § 358.170 our liability for pre-admission obligations is satisfiable only out of partnership property.

Holding: Each admission or withdrawal dissolves the existing partnership and creates a new one; debts of the dissolved firm may become debts of the new one but remain the personal obligations of the old firm's partners. A lease implicates both privity of contract and privity of estate. Partners who withdrew before the breach are not personally liable for rent accruing afterward; the landlord must look to the partnership it contracted with and to the assignees.

Disposition: Judgments in favor of the withdrawn partners affirmed.

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Posture: Limited partners' appeal from dismissal of their action for an accounting and dissolution.

Facts: The sole general partner sold its own land to the limited partnership at a profit. The partnership articles permitted the limited partners to consent to such a profit only after the sale. They were informed afterward and did not object.

Arguments: Limited partners: We never consented in the manner the articles require. General partner: Their conduct after learning of the profit implied consent.

Holding: Under the articles the limited partners could consent only after the sale; consent cannot be implied from their conduct after being informed. The general partner is accountable for the profit to which they did not consent.

Disposition: Reversed and remanded, including for determination of counsel fees.

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Posture: Appeal from dismissal of claims against the LLC's manager.

Facts: Thinktank, LLC, a web design and marketing company, was involuntarily dissolved effective May 30, 2002 for failing to file its 2001 annual report. Topel continued to incur obligations on its behalf. The legislature had amended § 10-10 of the Illinois LLC Act to remove the provision imposing personal liability in the manner of the Business Corporation Act.

Arguments: Creditors: Under corporate principles he would be personally liable. Topel: The legislature deliberately removed that provision.

Holding: The Act does not provide for a member's or manager's personal liability to third parties for the LLC's debts, and no rule of construction permits a court to declare the legislature did not mean what the plain language imports.

Disposition: Dismissal affirmed, the court noting expressly that the ruling "does not provide an equitable result" but that it was bound by the statute.

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Posture: Appeal from summary judgment for the LLC's manager.

Facts: Bonnie Sue Strickland was manager and 17% owner of the Strickland Family LLC, formed August 4, 2000 as part of an estate plan; 83% of the equity was transferred to daughter Suzy on December 24, 2000. After Jake Strickland's death in 2002, the manager sold LLC real property. The operating agreement required managers to act in the best interest of the LLC and equity owners, and barred action having a material adverse effect on a similarly situated group of equity owners without consent.

Arguments: Harbison: You sold the property without considering my interests or obtaining consent. Strickland: As manager I may dispose of LLC property.

Holding: The trial court's view that the manager could dispose of property as she saw fit is irreconcilable with the operating agreement; she produced no evidence that she considered the LLC's interests.

Disposition: Reversed and remanded to determine whether she violated her duties under the agreement.

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Posture: Cross-motions for summary judgment.

Facts: Neptune Towers, a 1971 Massachusetts limited partnership governed by a written agreement, owned 334 units of rental housing in Lynn. The Class A limited partners challenged the general partners' sale of the property and also sued attorney William Bailey.

Arguments: Class A limited partners: Breach of fiduciary duty, directly and derivatively. Defendants: The agreement authorized everything we did, and Bailey was never your lawyer.

Holding: The general partners "run Neptune Towers and did nothing not authorized in the Partnership Agreement." Bailey was not a partner or trustee of the Class A limited partners, was not engaged by them, and owed them no fiduciary, common-law, or contractual duty.

Disposition: Judgment for the defendants on all four counts — the direct and derivative claims against both the general partners and the attorney cannot stand.

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Posture: Appeal from summary judgment for the defendants.

Facts: Milliken sought to recover an $8,754,680.11 trade debt owed by Duro Industries (Old Duro) from Duro Textiles, LLC (New Duro), alleging that Patriarch Partners and related entities orchestrated an acquisition of Old Duro's assets while shedding unsecured debt.

Arguments: Milliken: De facto merger or mere continuation; and c. 93A liability for the scheme. Defendants: An arm's-length foreclosure and asset purchase, and no c. 93A relationship with Milliken.

Holding: New Duro was not entitled to summary judgment on the successor-liability theory as the court analyzed it, but on c. 93A the claim failed: Milliken's commercial relationship was with Old Duro, and the entities it accused of the scheme did not stand in the relationship c. 93A requires.

Disposition: Summary judgment for the defendants on the c. 93A count affirmed; the successor-liability analysis is the assigned teaching.

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Posture: Limited partners' appeal from judgment for the general partners after a jury-waived trial.

Facts: Wolff, Fowler, and Millman formed The Cambridge Company in 1984 to acquire and operate commercial real estate. The general partners bought large parcels neighboring the limited partnership's project without involving the limited partners, and charged fees for services provided to the partnership. The judge found the activities reasonable and within ordinary management, and the fees within market rates.

Arguments: Limited partners: Breach of contract and fiduciary duty; misappropriation of partnership opportunities; unreasonable fees. General partners: The limited partnership agreement expressly allowed all of it.

Holding: Because the agreement expressly allowed the general partners' actions, the claims fail. Even if the burden of proving fairness fell on the general partners under Starr v. Fordham, they amply met it.

Disposition: Affirmed — all limited partner claims rejected.

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Posture: Appeal from judgments for the withdrawn partners and partial summary judgment for the firm on collateral estoppel.

Facts: Pettingell had invalidated a provision imposing adverse consequences on withdrawing partners who competed. The firm then amended its agreement to impose identical financial consequences on all partners who voluntarily withdraw. The plaintiffs withdrew and forfeited accrued interests (APICs); none had reached the age-sixty or twenty-year benchmarks.

Arguments: Plaintiffs: The forfeiture still burdens departure and restricts client choice, violating Rule 5.6. Firm: It applies regardless of competition.

Holding: The amended agreement does not violate Rule 5.6, because the consequences do not turn on whether the departing partner competes. Whether the provision might offend the rule as to partners who have reached the age or seniority benchmarks is not before the court.

Disposition: Judgments for the plaintiffs on the Rule 5.6 claims reversed; partial summary judgment for the firm on collateral estoppel affirmed; remanded for entry of judgment for Morrison Mahoney.

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Posture: Application for judicial dissolution.

Facts: Two ophthalmologists practiced together from 1995 through three entities: Cornea Consultants, LLP (sole partners) and two LLCs, LESB and LECB (sole members and managers). There were no written operating agreements for either LLC, and the two were completely deadlocked.

Arguments: Rapoza: Dissolve; we cannot function. Talamo: Contested the terms and consequences.

Holding: Under G.L. c. 156C, § 44, the court may decree dissolution when it is not reasonably practicable to carry on the business in conformity with the certificate of organization or the operating agreement. With total deadlock between the only two members and no operating agreements, that standard is met.

Disposition: Dissolution of the partnership and of both LLCs decreed.

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Posture: Appeal from a Chancery Division declaratory judgment that the donation was intra vires.

Facts: The corporation donated to Princeton University; shareholders objected. New Jersey law provided that every corporate charter thereafter granted was subject to legislative alteration, and statutes had come to authorize corporate charitable giving.

Arguments: Barlow: The board is giving away shareholders' money without authority. Company: The gift is authorized by statute and serves long-term corporate interests.

Holding: The donation was intra vires, supported both by the enabling statutes (validly applied to a pre-existing corporation under the reserved power) and by the modern view that corporate philanthropy serves the corporation.

Disposition: Declaration that the gift was lawful affirmed.

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Posture: Derivative suits tried on two causes of action.

Facts: Celanese directors approved a radio advertising program late in 1941 featuring Jean Tennyson, a professional singer and the wife of president Dr. Camille Dreyfus. The second claim challenged $30,000 a year paid to Henri Dreyfus, a vice-president and director, under an employment contract.

Arguments: Shareholders: The program was a vehicle for the president's wife, and the employment contract was self-dealing. Directors: Advertising is an ordinary business judgment, the fee was reasonable, and the program served corporate purposes.

Holding: The business judgment rule protects informed, disinterested decisions — but the involvement of a director's relative removes the transaction from the rule's ordinary protection and subjects it to closer scrutiny for good faith and inherent fairness. On the evidence, the program served the corporation and the compensation was reasonable.

Disposition: Both causes of action dismissed on the merits.

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Posture: Appeal from dismissal of the amended complaint on the defendants' motion.

Facts: A minority shareholder sued derivatively over Wrigley's refusal to install lights and schedule night games at Wrigley Field, alleging losses from weekday games. Wrigley's stated reasons included the effect of night baseball on the surrounding neighborhood.

Arguments: Shlensky: Negligence and mismanagement; every other club plays at night. Wrigley: Absent fraud, illegality, or conflict, the decision is the board's.

Holding: Courts will not interfere absent a showing of fraud, illegality, or conflict of interest; directors may weigh long-term effects such as the neighborhood's deterioration and the property's value, and "mere failure to 'follow the crowd' is not such a dereliction."

Disposition: Dismissal affirmed.

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Posture: Appeal after denial of partial summary judgment and a bench trial.

Facts: Menard offered $1,450,000 for 30 acres. Arthur Sterling, Dage's president, accepted in a written agreement representing that he had authority to bind the company. Of six directors only Sterling and his wife lived in Indiana, and Sterling had long operated Dage without significant board input. The board disapproved and refused to close. Menard had no notice that the board had limited Sterling's authority as to this parcel.

Arguments: Menard: The president who ran the company signed and represented his authority. Dage: The board reserved approval and exercised it.

Holding: As president, Sterling possessed inherent authority to bind the corporation in these circumstances, where he had long acted without board involvement and the buyer lacked notice of the limitation. A dissent objects that the buyer knew the deal had to go to the board, it did, and the board said no.

Disposition: Contract held binding on Dage.

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Posture: Appeal from dismissal of the derivative complaint after trial before Judge Dooling.

Facts: Lillian Burg held one-third of Darand Realty, a New York corporation owning low-rent Brooklyn buildings; the Horns held the rest and managed it. They acquired nine similar Brooklyn buildings for themselves. Burg knew when she invested that the Horns already owned and continued to acquire such properties, and there was no agreement to offer everything to Darand.

Arguments: Burg: Their function was locating properties; those were corporate opportunities. Horns: No agreement, no expectancy, and she knew our practice from the start.

Holding: Under New York law the properties were not corporate opportunities of Darand; the duty in a close corporation is shaped by the parties' understanding at formation, and the line-of-business test is not mechanical. A dissent applies Meinhard and would find a fiduciary obligation to offer the properties first.

Disposition: Judgment for the defendants affirmed.

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Posture: Defendants' motion for summary judgment.

Facts: Manchester Sand, a wholly-owned subsidiary of Boston Sand, owned about 3,000 acres in Hooksett, New Hampshire. On May 21, 1996 Boston Sand's board unanimously authorized leasing a mined-out 42-acre parcel to Ankat Properties — owned by two of Boston Sand's own officers and directors, Dean M. Boylan, Jr. and Jeanne-Marie Boylan — for $2,000 a month with a three-year option to buy. A separate claim concerned trucking services provided by Collden. Disinterested directors purported to ratify the lease in 2006.

Arguments: Plaintiffs: Classic self-dealing by fiduciaries. Defendants: Board-authorized, later ratified by disinterested directors, and protected by the business judgment rule.

Holding: When a disinterested board refers a demand to a disinterested standing committee, both receive business judgment rule protection — but whether the 2006 ratification satisfies the three-tier Houle test requires an evidentiary hearing.

Disposition: Summary judgment DENIED on the fiduciary duty and contract claims regarding the lease, and DENIED on the Collden trucking claim (with relief limited to prospective injunctive relief if the estate prevails).

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Posture: Appeal from dismissal of the negligence claim on jurisdictional grounds.

Facts: Tiny's Tavern of Charlo, Inc., a Montana corporation whose sole shareholder Lenora Liberty is a tribal member, operates within the exterior boundaries of the Flathead Indian Reservation. Zempel, a nonmember, sued the corporation, Liberty, and Herak.

Arguments: Defendants: Tribal court has adjudicative jurisdiction. Zempel: Montana's general rule bars tribal jurisdiction over suits against nonmembers.

Holding: The tribal court lacks adjudicative jurisdiction over a nonmember's claim against a Montana corporation and a tribal member; no federal statute or treaty provides it, and no qualifying consensual relationship or threat to tribal self-government was shown.

Disposition: Dismissal of Herak affirmed; dismissal of the corporation and Liberty reversed; remanded.

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Posture: Appeal from the Appellate Division's reversal of an order dismissing the complaint.

Facts: Walkovszky was run down by a cab owned by Seon Cab Corporation and driven by Marchese. Carlton was alleged to be a stockholder of ten corporations, each holding two cabs carrying the $10,000 statutory minimum insurance, allegedly operated as a single enterprise for financing, supplies, repairs, employees, and garaging.

Arguments: Walkovszky: The fragmented structure is an unlawful attempt to defraud the public. Carlton: Complying with the statutory minimum is not fraud; sue the corporation that owned the cab.

Holding: The allegation that the corporations operated as a single enterprise would, at most, make the affiliated corporations liable — not the stockholder personally. To reach Carlton individually the complaint had to allege he was conducting the business in his individual capacity, which it did not. (Keating, J., dissenting.)

Disposition: Complaint held insufficient against Carlton personally.

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Posture: Defendants' motion for summary judgment.

Facts: On March 7, 2000 at Logan Airport, a cab owned by Elsie's Cab, Inc. and operated by Ikechukwuka under an alleged lease cut into the taxi line; when dispatcher Jennifer Howie wrote a violation ticket, he rolled the cab onto her foot. The cab was a "Boston Cab," painted like every other, dispatched by a number answered as "The Boston Cab Company," with drivers carrying Boston Cab business cards — amid individual incorporations and self-insured status.

Arguments: Howie: The branding and integrated operation show a single enterprise behind the one-cab shells. Defendants: Separate corporations, separate liability.

Holding: On this record the claims against the related entities survive; the branding and integration distinguish the case from a bare allegation of common ownership. The court also noted the practical efficiency of trying the claims together with common counsel.

Disposition: Motion for summary judgment denied; remaining arguments rejected as without merit.

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Posture: Appeal from summary judgment for Sea-Land piercing and reverse-piercing five corporations.

Facts: Sea-Land shipped Jamaican peppers for The Pepper Source, which never paid the freight bill; a $86,767.70 default judgment went unsatisfied after PS was dissolved for failure to pay franchise tax and proved to have no assets. Marchese ran five corporations with no formalities, no records, no meetings, and virtually no capital, paying personal expenses — mortgage, alimony, boat, car — from corporate accounts.

Arguments: Sea-Land: Unity of interest plus injustice; pierce PS and reverse-pierce the siblings. Marchese: An unpaid judgment is not "fraud or injustice."

Holding: The Van Dorn test requires (1) such unity of interest and ownership that separate personalities no longer exist and (2) circumstances such that adherence to the fiction would sanction fraud or promote injustice. Unity was satisfied; but it is not enough that Sea-Land would be denied a judicially imposed recovery — something more, such as unjust enrichment, must be shown.

Disposition: Summary judgment reversed and remanded on the second prong.

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Posture: Appeal from judgment for the shareholder after a stipulated-facts trial.

Facts: In 1984 Polan formed Industrial Realty and Polan Industries. Industrial had no capital, no records, and no formalities, and took a sublease from Kinney; Polan was its sole shareholder.

Arguments: Kinney: Unity of interest and an inequitable result. Polan: Kinney could have required my signature, a surety, or a credit check.

Holding: West Virginia applies a two-prong test (unity of interest and ownership; inequitable result) with an optional third prong asking whether the creditor could have protected itself. The court declines to apply the third prong here and pierces, noting that this approach fixes responsibility on the responsible party and produces an equitable result.

Disposition: Reversed and remanded with instructions to enter judgment for the plaintiff.

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Posture: Appeal from summary judgment dismissing the individual shareholders.

Facts: In 1982 Roland McBride — uninsured and apparently judgment-proof — crossed the center line and struck the Baatzes on their motorcycle. They alleged Arrow Bar served him beforehand. The Neuroths personally guaranteed a $50,000 loan used as capital and held the corporation out as a corporation.

Arguments: Baatz: Undercapitalization and a personal guaranty justify piercing. Neuroths: The corporation observed its formalities and was held out as such.

Holding: The facts did not establish grounds to disregard the corporate entity; the dismissed individuals were not shown to be personally liable as sellers or otherwise. A dissent stresses undercapitalization and the president's admission that they incorporated "as a shield against individual liability."

Disposition: Summary judgment for the individual defendants affirmed.

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Posture: C.F. Inc.'s exception to the refusal to direct a verdict, after a substantial verdict for My Bread on conversion.

Facts: In August 1960 Byron Haseotes — secretary, treasurer, and stockholder of C.F. Inc., of each codefendant, and of fifteen other corporations — arranged for My Bread's products to be sold in "Cumberland Farms" dairy stores; My Bread supplied bakery racks. When the arrangement ended in September 1963, local store managers acting on Haseotes's instructions prevented recovery of the racks. Title never left My Bread. Stock in C.F. Inc. and each codefendant was held by Haseotes and his family.

Arguments: My Bread: Common control and intermingled operations make C.F. Inc. responsible. C.F. Inc.: We own no stock in the codefendants and never possessed the racks.

Holding: The Massachusetts standard: disregard the separate entities where there is common control plus a fraudulent or injurious consequence, or confused intermingling of activity among corporations in a common enterprise with substantial disregard of separate identities. The jury could find the store companies acted as C.F. Inc.'s agents in following Haseotes's orders, making C.F. Inc. liable for the conversions.

Disposition: A directed verdict was properly refused — verdict against C.F. Inc. stands.

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Posture: Appeal from summary judgment for Westin and dismissal of Westin Mexico for lack of personal jurisdiction.

Facts: John Gardemal drowned near Cabo San Lucas while attending a medical seminar at the Westin Regina. His widow sued Westin and Westin Mexico under Texas law. The evidence showed a shared trademark, shared operations manuals, and a shared reservation system.

Arguments: Gardemal: Alter ego and single business enterprise. Westin: An ordinary parent-subsidiary relationship.

Holding: Those facts show "a typical, working relationship between a parent and subsidiary." There was no evidence of blended identities and none that the plaintiff suffered harm or injustice from the separateness.

Disposition: Summary judgment for Westin affirmed; dismissal of Westin Mexico affirmed.

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Posture: Multiple cross-motions for summary judgment in a salon renovation dispute.

Facts: Philip Alan (president Christine Perkins) contracted for renovation work. Sarcia issued the contract on letterhead purporting to be that of "MSarcia Construction Services, LLC" — but did not incorporate the business until close to ten months later. Philip Alan also sought to pierce to Nosal Builders, offering evidence of shared creditors and a joint Nosal-Sarcia operation but nothing tying Nosal Builders itself to Sarcia.

Arguments: Philip Alan: Reach the related builder, and hold Sarcia personally. Defendants: No corporate connection was shown; the contract was the LLC's.

Holding: Piercing requires evidence sufficient to show a reasonable expectation of proving the elements at trial, which was absent as to Nosal Builders. But an agent is personally bound where the corporate entity purportedly contracting did not exist at contract formation.

Disposition: Nosal Builders' motion on veil piercing ALLOWED; Sarcia held personally bound by the contract.

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Posture: Direct appellate review of summary judgment for all defendants, plus the denial of the defendants' fee motions.

Facts: Wayne Scott, trustee, bought Salem property in January 2002 to build townhouses and found coal tar assumed to have migrated from the abutting Northey Street property. Salem Gas Light operated a gas works there from 1850 to 1890, then sold; the facility was dismantled by 1906. In 1926–27, North Boston Lighting Properties and New England Power Association — a corporate predecessor of NEES — began acquiring Salem Gas stock, some thirty-six years after the sale.

Arguments: Scott: NEES is liable as an operator under G.L. c. 21E, directly or through piercing. NEES: We acquired an interest decades after the contamination and the sale.

Holding: The parent is not directly liable as an operator, and there are no grounds to pierce: "control, even pervasive control, without more, is not a sufficient basis" to ignore corporate formalities — there must be an improper purpose and a connection between the injury and the improper conduct. The opinion collects the twelve factors and describes piercing as reserved for the "rare situation."

Disposition: Summary judgment for all defendants affirmed; the order denying litigation costs and attorney's fees vacated and remanded.

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Posture: Certiorari after the Court of Special Appeals reversed summary judgment for the asset purchaser.

Facts: Brandt bought a treadmill from Atlantic Fitness Products on January 31, 1981; it was made by American Tredex. On July 31, 1981 Nissen bought American Tredex's trade name, patents, inventory, and other assets, assuming some liabilities but expressly excluding liability for injuries from previously sold products. American Tredex continued for five years as "AT Corporation." Brandt was injured on October 18, 1986.

Arguments: Brandt: Continuity of enterprise should make Nissen answer. Nissen: Maryland recognizes only the four traditional exceptions, none of which applies.

Holding: Maryland declines to adopt the continuity of enterprise exception, which is inconsistent with fault-based tort liability; strict liability does not abandon the requirement of fault-based responsibility. No traditional exception was invoked or supported.

Disposition: Summary judgment for Nissen reinstated — the Circuit Court did not err.

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Posture: Direct appellate review of a reported order directing sale, and a later conflicting order directing closure.

Facts: A receiver was appointed under G.L. c. 111, § 72R after the nursing home's owner disclaimed financial responsibility and residents were endangered. One judge ordered the home sold; another ordered it closed. Evidence addressed the increased risk of illness and death from involuntary transfers.

Arguments: Receiver/Commonwealth: The Act permits sale to preserve a viable facility. Owner: Contested the receiver's authority.

Holding: The court construes the receiver's authority under the Act — the case also supplying the "rare situation" formulation later quoted in veil-piercing decisions. Whether Union Square could and should be preserved could not be resolved on this record.

Disposition: Remanded to reconsider the conflicting orders; the judge may vacate either or both and enter a new order directing sale on appropriate terms, or reenter the closure order if a sale cannot be effected.

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Posture: Appeal from a decree dismissing the minority shareholder's bill after oral testimony.

Facts: Euphemia Donahue, widow of a longtime employee, was a minority stockholder in Rodd Electrotype. Harry Rodd — former director, officer, and controlling stockholder — had the corporation purchase his shares for $36,000 as part of a retirement and succession arrangement involving his sons Charles and Frederick. Donahue was offered nothing.

Arguments: Donahue: Rescind the purchase and make Harry repay the corporation; the directors breached their duty to me. Defendants: An ordinary corporate repurchase, properly authorized.

Holding: A close corporation is marked by (1) a small number of stockholders, (2) no ready market for the stock, and (3) substantial majority participation in management. Because it resembles a partnership, stockholders owe one another the same fiduciary duty partners owe — "utmost good faith and loyalty," stricter than the duty owed in a public corporation. When the corporation purchases shares from a controlling stockholder it must afford each stockholder an equal opportunity to sell a ratable number of shares on identical terms.

Disposition: Dismissal reversed — the minority is entitled to relief.

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Posture: Appeal from a decree after a master's report.

Facts: Wilkes, Quinn, Riche, and Pipkin agreed in 1951 to go into business together, incorporating Springside; each participated in management and drew a salary, and no dividends were paid. In 1967, after a falling-out, Wilkes's salary was terminated and he was voted out as officer and director.

Arguments: Wilkes: Salary and office were my entire return; this is a freeze-out. Majority: We are entitled to set business policy and to choose our officers.

Holding: The Donahue duty applies, but the controlling group "must have some room to maneuver." The court adopts a balancing test: the controlling group must demonstrate a legitimate business purpose; the minority may then show the objective could have been achieved through an alternative course less harmful to its interest; and the court weighs the two.

Disposition: Master's findings held warranted; remanded to the Probate Court for further proceedings, including damages measured by the salary Wilkes would have received.

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Posture: SJC review after the Appeals Court ruled for the plaintiff.

Facts: Merola, a vice president and minority stockholder, was terminated by Francesco Pompei, Exergen's president and majority stockholder. When Merola sold his shares back in 1991 he was paid $17 a share — the price paid to earlier selling shareholders — a price he concluded, after consulting his attorney, was fair, and which gave him a significant return on his capital independent of salary. There was no legitimate business purpose for the termination.

Arguments: Merola: No business purpose means a Wilkes breach. Pompei: I gained nothing, and no policy was violated.

Holding: This is not a situation where the majority breached the fiduciary duty. Although there was no legitimate business purpose, the termination was not for the majority's financial gain and not contrary to established public policy. Not every discharge of an at-will employee who happens to own stock in a close corporation gives rise to a successful claim.

Disposition: Judgment for the plaintiff reversed — the defendants prevail.

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Posture: Appeal by the majority shareholder from judgment for the minority.

Facts: Four brothers formed the Sugarman Brothers paper partnership in 1906; by 1918 it was owned equally by three. Leonard, son of Myer, later controlled the business; the plaintiffs are grandchildren of Samuel. Leonard paid himself excessive compensation, denied the minority meaningful participation, and offered to buy their shares at a low price.

Arguments: Minority: Classic freeze-out — drain the value, then buy cheap. Leonard: I run the company and am paid for running it.

Holding: Leonard breached his fiduciary duty to the minority shareholders in a close corporation; none of the alleged errors of fact or law warranted reversal of liability.

Disposition: Liability affirmed; remanded to recalculate the award — increasing the amount attributable to interest under the correct Massachusetts statute and deleting the attorney's fees.

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Posture: Jury-waived trial — four weeks, 24 witnesses, 88 exhibits.

Facts: A family-run food distribution business supplying military commissaries. The son held 49%; father and daughter were aligned against him. He left and started a competing enterprise. The court had to decide whether he quit or was fired, whether he was frozen out of his 49%, whether any buy-sell or stock restriction agreement governed disposition of the stock, whether either side breached fiduciary duties, and whether either committed unfair or deceptive trade practices or intentional torts.

Arguments: Son: I was fired and frozen out. Father and daughter: He quit and then competed against us.

Holding: Extremely fact-bound, with the court describing "a number of very close legal calls." The court found conduct on the family's side — including in the spring of 2000 — that denied the son benefits of his ownership, alongside findings adverse to the son.

Disposition: Mixed judgment; the teaching value is the planning failure (no buy-sell agreement) rather than the outcome.

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Posture: Appeal after denial of the defendant's motion.

Facts: In December 1951 Dr. Louis Wolfson agreed to buy Norwood land for $350,000, offering quarter interests to Paul Smith, Abraham Zimble, and William Burke, each of whom paid $12,500. Smith, an attorney, organized Atlantic and — at Wolfson's request — included an 80% supermajority provision in the articles and by-laws, giving any one of the four a veto. Atlantic retained twenty-eight acres with about twenty aging mill structures needing expensive repairs. Wolfson used his veto to block dividends, and the corporation incurred IRS penalties for unreasonable accumulation of earnings.

Arguments: Wolfson: The money was needed for repairs and improvements. Others: His veto caused the penalty taxes.

Holding: The 80% provision made Wolfson, though a 25% holder, effectively the controlling shareholder for the decisions his veto reached, and the Donahue/Wilkes duties attached to him. His unreasonable exercise of the veto breached that duty.

Disposition: Liability imposed on Wolfson for the resulting penalties.

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Posture: Appeal in a class action by former shareholders challenging a freeze-out merger.

Facts: In November 1959 William H. Sullivan, Jr. bought an AFL franchise for $25,000 and four months later organized a corporation, contributing the franchise while nine others contributed $25,000 each; each of the ten received 10,000 voting shares. Nonvoting shares were later sold to the public. Sullivan borrowed heavily to reacquire control of the voting stock, then organized a merger to eliminate the public shareholders — which would let the corporation service his personal acquisition debt.

Arguments: Coggins: The merger's purpose was to pay Sullivan's personal debt. Sullivan: The reorganization was necessary and the price fair.

Holding: The trial judge was correct that the merger was unlawful: a controlling group effecting a freeze-out merger must establish a legitimate business purpose of the corporation, and financing a controlling shareholder's personal debt is not one.

Disposition: Liability affirmed, but because rescission would be inequitable at this remove, remanded for a damages remedy.

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Posture: Appeal from a Vice-Chancellor's decision holding directors liable in a derivative suit.

Facts: Holland Furnace Company made warm air furnaces and home heating equipment. P.T. Cheff was CEO since 1933 at $77,400 a year and a director owning 6,000 shares; his wife Katharine, the founder's daughter, was a director since 1922 who owned 5,804 shares and 47.9% of Hazelbank, the family investment vehicle holding 164,950 of 883,585 outstanding shares. The board used corporate funds to repurchase shares accumulated by an outside acquirer whose plans the board believed threatened the company's sales organization. Under 8 Del. C. § 160 a corporation has statutory authority to deal in its own shares.

Arguments: Mathes and Lewis: Corporate funds were used to entrench management. Directors: We reasonably believed the raider threatened corporate policy and effectiveness.

Holding: Where directors are charged with using corporate funds to perpetuate themselves in office, they bear the burden of showing reasonable grounds to believe a danger to corporate policy and effectiveness existed — satisfied by showing good faith and reasonable investigation.

Disposition: Decision below reversed — the directors carried their burden.

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Posture: Certiorari on whether a state security-for-expenses statute applies in a federal diversity derivative action.

Facts: The plaintiff's decedent sued in the right of Beneficial Industrial Loan Corporation, a Delaware corporation doing business in New Jersey, alleging a continuing conspiracy since 1929 to enrich the individual defendants at the corporation's expense, with specific charges spanning eighteen years. New Jersey's statute made an unsuccessful derivative plaintiff liable for the defense's expenses including attorney's fees, and required security as a condition of prosecuting the action.

Arguments: Corporation: The statute applies and security must be posted. Cohen: It is procedural and yields to federal practice.

Holding: The New Jersey statute applies in federal courts; it creates a liability rather than a mere procedural rule. (The decision is also the origin of the collateral order doctrine.)

Disposition: Application for security granted — security for expenses required.

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Posture: Appeal from the Court of Chancery's dismissal of an amended derivative complaint for failure to plead demand futility, and from denial of leave to amend again.

Facts: Datapoint, a Delaware corporation with roughly five thousand stockholders and NYSE-listed stock, had an eight-member board. Heineman alleged four board-approved transactions constituted waste and self-dealing.

Arguments: Heineman: Demand was futile; the board was interested. Datapoint: The complaint lacks the particularity Rule 23.1 requires.

Holding: Dismissal of the claim was an abuse of discretion as to at least one count, and the plaintiff should have had the opportunity to enlarge upon the allegations. Demand futility requires particularized facts creating a reasonable doubt that the directors were disinterested and independent or that the transaction was a valid exercise of business judgment.

Disposition: Dismissal reversed and remanded, including for the opportunity to amend further.

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Posture: Rehearing of the court's own prior decision, which had granted summary judgment for the defendants.

Facts: Minority shareholders of All American Assurance Company alleged mismanagement. The board appointed an investigating committee, electing Marion Follin (a retired insurance executive) and Frank Parker (a former Court of Appeals judge) to the board and designating them as the special committee. The committee recommended terminating the derivative action.

Arguments: Defendants: Under the business judgment rule the committee's decision binds the court. Plaintiffs: A committee appointed by the board being sued cannot be independent.

Holding: On rehearing the court reconsiders and reverses its prior holding: a special litigation committee's decision to terminate is not binding on the courts. Under N.C.G.S. §§ 55-55 and 55-30(b)(3) read in pari materia, the court must make its own assessment — an approach broader than Zapata, applying in both demand-excused and demand-required cases and not limited to whether the committee was disinterested, independent, and thorough.

Disposition: Prior holding withdrawn; summary judgment for defendants not sustained.

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Posture: Action under DGCL § 220 to compel inspection of the stockholder list.

Facts: FAST, an unincorporated labor organization established as a department of the AFL-CIO by sixteen affiliated unions, owned 23 shares of Wal-Mart and sought the stockholder list to solicit proxies at the annual meeting, with the ultimate aim of pressing the company on the use of forced labor in China.

Arguments: Wal-Mart: The purpose is a labor campaign, not shareholder value. FAST: Proxy solicitation is a proper purpose.

Holding: Soliciting proxies to be voted at an annual meeting is a proper purpose, following Credit Bureau Reports; a purpose directed at ensuring the corporation complies with its legal obligations is consistent with management's own conception of corporate interest, even where the ultimate aim is not enhancement of share value.

Disposition: Inspection ordered. It is so ordered.

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Posture: Motion to dismiss.

Facts: Plaintiffs alleged Fox made an all-cash offer of $20 per share for Paxson stock that the directors or senior officers summarily rejected; shortly afterward NBC invested $415 million for convertible preferred stock, warrants, and rights to purchase shares held by controlling stockholder Lowell W. Paxson. Plaintiffs conceded the Class B stock was identical to the Class A except for voting power, with identical economic attributes.

Arguments: Plaintiffs: A direct claim for the lost premium and for equity dilution. Defendants: Any such claim is derivative.

Holding: Claims that directors failed to evaluate and respond to a business combination are derivative, following the Sumers v. Beneficial line: the injury is common to all stockholders and states no special or individual cause of action. The dilution theory fails on the plaintiffs' own concession of economic identity.

Disposition: Direct claims dismissed.

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Posture: Extraordinary relief under Pa.R.A.P. 3309 after the trial court denied PECO's summary judgment motion, limited to whether the business judgment rule permits a board to terminate derivative litigation.

Facts: PECO Energy, a regulated Pennsylvania utility subject to PUC regulations governing residential service, sought termination of minority shareholder derivative actions.

Arguments: PECO: The board may terminate under the business judgment rule. Cuker: The board cannot dispose of claims against itself.

Holding: The business judgment rule does permit a board to terminate derivative litigation, and the court adopts the ALI Principles of Corporate Governance §§ 7.02–7.10 as the governing procedure — reasoning that the ALI's work is reliable, consistent with Pennsylvania precedent, and superior to New York's (which supplies no procedures) and Delaware's (which permits a court to substitute its own business judgment in demand-excused cases, a defect that "could eviscerate the business judgment rule").

Disposition: Termination permitted under the adopted framework; remanded for application.

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Posture: Appeal from dismissal of a stockholder derivative complaint under Rule 23.1.

Facts: The 1995 Disney board approved Michael Ovitz's employment agreement; his non-fault termination fourteen months later produced a severance package worth roughly $140 million. The board had relied on compensation expert Graef Crystal, who later publicly criticized the package.

Arguments: Brehm: Waste and failure of due care; Crystal's later admissions bind the board. Directors: We relied in good faith on an expert, as § 141(e) permits.

Holding: Review of a Rule 23.1 dismissal is de novo. Directors are protected in relying in good faith on experts selected with reasonable care; Crystal "was the Board's expert ex ante … not their agent ex post to make binding admissions." Waste requires an exchange so one-sided that no business person of ordinary judgment could conclude the corporation received adequate consideration. The complaint fails to create a reasonable doubt that the decision was protected by the business judgment rule.

Disposition: Dismissal affirmed in substance, but reversed in part so that one aspect is without prejudice, and remanded to allow a further amended complaint. (Certain claims were dismissed with prejudice and that affirmance is final.)

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Posture: Appeal from a decree dismissing the bill, on findings of fact with no report of the evidence.

Facts: In May 1926 Agassiz (president and director) and MacNaughton (director and general manager) bought 700 shares of Cliff Mining Company stock on the Boston exchange — shares the plaintiff had owned. They knew of a geologist's March 1926 written theory about possible copper deposits in the region, which the plaintiff did not. The plaintiff acted on his own judgment and made no inquiry of the defendants or other officers.

Arguments: Goodwin: Buying without disclosing that knowledge wronged me. Agassiz: The theory was unproven, the trade was impersonal, and our duty runs to the corporation.

Holding: Directors owe their fiduciary duty to the corporation, not to individual shareholders trading impersonally on an exchange; relief may be granted in appropriate instances on "special facts" (Strong v. Repide), but none appear here where the information was speculative and the seller made no inquiry.

Disposition: Decree dismissing the bill affirmed with costs.

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Posture: SEC enforcement action under § 21(e); appeal from the S.D.N.Y.

Facts: Between November 12, 1963 and April 16, 1964, TGS officers, directors, and employees — Fogarty, Mollison, Darke, Murray, Huntington, O'Neill, Clayton, Crawford, and Coates — bought TGS stock or calls, personally or through agents, on the basis of drilling results at Timmins. The company also issued a press release characterized as discouraging.

Arguments: SEC: Disclose or abstain; the press release was misleading. Defendants: One drill hole is not material, and the news was public when some of us traded.

Holding: All transactions by individuals in possession of material inside information are prohibited unless the information is disclosed or the trader abstains. Materiality for a contingent event balances the indicated probability the event will occur against the anticipated magnitude in light of the totality of company activity. Information is not public until effectively disseminated and absorbed — Coates traded too soon. Corporate liability for a misleading press release turns on whether it was misleading to reasonable investors.

Disposition: Liability established as to the trading defendants; remanded for further consideration of the press release issue.

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Posture: Certiorari from affirmance of convictions under § 10(b)/Rule 10b-5, the mail and wire fraud statutes, and § 371.

Facts: R. Foster Winans, a Wall Street Journal reporter and co-author of the daily "Heard on the Street" column, secretly supplied the timing and content of upcoming columns to broker Kenneth Felis; his roommate David Carpenter was convicted of aiding and abetting. The columns contained no corporate inside information; their value lay in the column's perceived quality and its capacity to move prices. Brant and Felis denied knowing anyone at the Journal and took steps to conceal the scheme.

Arguments: Petitioners: Schedule information isn't corporate inside information, and the Journal lost no money. Government: The Journal's confidential business information is its property.

Holding: The Journal's confidential business information is property for purposes of the mail and wire fraud statutes, and the scheme deprived it of that property. On the § 10(b) counts the Court divided 4–4, leaving the misappropriation theory unresolved.

Disposition: Mail and wire fraud convictions affirmed; securities convictions affirmed by an equally divided Court.

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Posture: Appeal from convictions under Rule 10b-5, Rule 14e-3(a), mail fraud, and perjury.

Facts: Chestman, a stockbroker, had handled Waldbaum stock for Keith Loeb since 1982, knowing Loeb's wife was a granddaughter of director Julia Waldbaum. On November 21, 1986, Ira Waldbaum agreed to sell the company to A&P at $50 a share, told three of his children and his sister Shirley Witkin, and admonished them to keep it quiet. The information reached Loeb through his wife, and Loeb told Chestman, who traded.

Arguments: Government: Misappropriation from a family relationship of trust. Chestman: I owed no fiduciary duty to anyone.

Holding: Rule 10b-5 misappropriation liability requires a fiduciary relationship or its functional equivalent; marriage and kinship alone, and a history of confidential disclosures without more, do not create one. But Rule 14e-3(a) is a valid exercise of the SEC's § 14(e) rulemaking authority and prohibits trading on undisclosed tender offer information without any breach of duty.

Disposition: Rule 10b-5 and mail fraud convictions reversed; Rule 14e-3(a) convictions affirmed; the panel's reversal of the perjury conviction left intact. Resentencing unnecessary because the sentences ran concurrently.

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Posture: Certiorari after the Eighth Circuit reversed convictions on all counts.

Facts: O'Hagan was a partner at Dorsey & Whitney, which represented Grand Met in its confidential plan to make a tender offer for Pillsbury. He did no work on the representation. He bought Pillsbury call options and profited substantially.

Arguments: O'Hagan: I owed no duty to Pillsbury or its shareholders, so there was no deception on anyone I traded with. Government: The fraud was on the source of the information.

Holding: The misappropriation theory is a valid basis for § 10(b) liability: a person who trades on confidential information misappropriated in breach of a duty owed to the source commits deception "in connection with the purchase or sale of a security," because full disclosure to the source would defeat the scheme. Rule 14e-3(a) is within the SEC's § 14(e) authority even though it dispenses with a breach-of-duty element.

Disposition: Court of Appeals judgment reversed on the securities counts and on the mail fraud counts; remanded for consideration of O'Hagan's remaining arguments. It is so ordered.

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Posture: Motions to dismiss an SEC civil enforcement complaint premised on the misappropriation theory.

Facts: McGee learned of a pending acquisition from a fellow Alcoholics Anonymous member whom he had sponsored and with whom he had shared confidences for years, then traded and tipped Michael Zirinsky, who traded and tipped others. Robert Zirinsky and several family members were named; four were sued as relief defendants holding the profits.

Arguments: McGee: The complaint fails to allege a relationship of trust and confidence, and the SEC exceeded its authority in defining that relationship in Rule 10b5-2. Relief defendants: We have a legitimate interest in our own profits.

Holding: The complaint sufficiently alleges a duty arising from a history and pattern of sharing confidences; the relationship need not be commercial or familial. The relief defendants were adequately alleged to have been unjustly enriched by trading on misappropriated information. But the allegations against Robert Zirinsky do not support a plausible inference of scienter.

Disposition: Motions to dismiss by McGee, Michael Zirinsky, and the relief defendants DENIED; Robert Zirinsky's motion GRANTED with leave to amend as to him.

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Posture: Two motions to dismiss under Rules 9(b) and 12(b)(6).

Facts: Doddi, a bank financial analyst, tipped her romantic partner Spivak, a day trader, about a confidential pending acquisition of a bank client. Spivak bought shares of the target in his own accounts and in his now-deceased mother's account, realizing $222,357 in profits.

Arguments: Spivak: Under Newman, absent an objective pecuniary benefit to Doddi there is no breach and no derivative tippee liability; and his mother directed her own trades. SEC: A gift of confidential information to a romantic partner is itself the personal benefit.

Holding: Under Dirks and First Circuit precedent (Rocklage, Sargent), the benefit need not be pecuniary or tangible — "the mere giving of a gift to a relative or friend is a sufficient personal benefit," and the complaint alleges Doddi conferred a gift upon a romantic partner. Newman's narrower standard does not control. The claim that his mother directed her own purchases is a factual denial unsuitable for resolution on a motion to dismiss.

Disposition: Motions to dismiss DENIED.

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