Gallagher v. Lambert

Gallagher (plaintiff), an at-will officer and director of close corporation Eastdil Realty (defendant), bought an 8.5 percent stake subject to a buy-back clause requiring him to sell his shares back at book value if his employment ended before January 31, 1985, with a much higher earnings-based valuation applying after that date. Eastdil terminated Gallagher on January 10, 1985 -- three weeks before the valuation switch -- and refused his demand to be paid the post-January 31 earnings-based price (roughly $3,000,000) rather than book value ($89,000); Gallagher sued for breach of fiduciary duty, the trial court denied Eastdil's summary judgment motion citing factual disputes about the termination, and the appellate court reversed.