Question

Mary Brodie, Robert Jordan, and David Barbuto were the only shareholders of Malden Centerless Grinding Co., a Massachusetts corporation. Beginning in 1984, each held one-third of the shares of the corporation, and all three served as directors. Mary’s deceased hus-band, Walter Brodie, was one of the founding mem-bers of the company and served as its president from 1979 to 1992. Walter received compensation from the company prior to 1992, when he was voted out as president and director of Malden. Walter was paid a consultant’s fee in 1994 and 1995. Neither Walter nor Mary received any compensation or other money from the corporation after 1995. When Walter died in 1997, Mary inherited his one-third interest in Malden. In July 1997, Mary attended a Malden shareholders’ meeting, at which she nominated herself as a director; she was not elected because Barbuto and Jordan voted against her. At this same meeting, Mary asked Barbuto and Jordan to perform a valuation of the company so that she could value her shares, but the valuation was never performed. In 1998, Mary sued Barbuto and Jordan, claiming that they breached a fiduciary duty by freezing her out of the corporation. Will the Court find that Barbuto and Jordan breached a fiduciary duty and oppressed Mary? If so, how might court rectify situation ?

Answer 1

The directors fiduciary duties are primarily owed to the Shareholder's of the Company as a whole and do not apply to specific shareholders or specific groups of shareholders.

So, Mary being the shareholder (not founder) of the company and has asked Barbuto and Jordan to value the company. Mary's husband Walter was getting the compensation being founder of the company.

Here, both the directors have not breached the fiduciary duty, as the general shareholders has not asked to value the company. The directors are not bound by the fiduciary duties to obey Mary, a specific shareholder.

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