Merola v. Exergen Corp.
Supreme Judicial Court of Massachusetts
668 N.E.2d 351 (1996)
Exergen Corp. (defendant) is a close corporation controlled since its founding by president Francesco Pompei (defendant). Steven Merola (plaintiff) began working there full-time in 1982 expecting to eventually become a major shareholder, and bought over 5,000 shares in 1982-83 at $2.25 and then $5 per share. He was later terminated without cause, which his contract permitted, and sold his stock back to the company in 1991 for $17 per share. Merola sued, claiming Pompei breached the fiduciary duty owed to him as a minority shareholder by terminating him. The trial court ruled for Merola against both Pompei and Exergen; the appellate court affirmed as to Pompei but dismissed as to Exergen.
Whether terminating the employment of a minority shareholder in a close corporation automatically constitutes a breach of the fiduciary duty owed by controlling shareholders to minority shareholders.