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Keywords

plaintiffdamagesfiduciarycorporationconsumer protectionfiduciary dutygood faith

plaintiffdefendantdamagesfiduciarywillcorporationfiduciary duty

Related Cases

Zimmerman v. Bogoff, 402 Mass. 650, 524 N.E.2d 849

Facts

Robert L. Zimmerman and Lester H. Bogoff were 50% shareholders in BAB Atlas, Inc., a close corporation that ultimately failed. Disputes arose over payments and the management of the corporation, leading Zimmerman to sue Bogoff for fiduciary breaches. The court found that Bogoff had withheld payments due to Zimmerman's corporation and had diverted business to a new corporation he created, CAL Abco, while failing to pay rent for machinery owned by Atlas Design, Zimmerman's company.

The defendant, Lester H. Bogoff, and the plaintiff, Robert L. Zimmerman, are 50% shareholders in BAB Atlas, Inc. (BAB Atlas), a Massachusetts close corporation, which since has failed. As a result of various disputes between the parties, described in detail below, Zimmerman brought suit in Superior Court against Bogoff alleging, inter alia, that Bogoff had violated fiduciary duties owed to Zimmerman and had violated G.L. c. 93A.

Issue

The main legal issues were whether Bogoff breached his fiduciary duties to Zimmerman and Atlas Design, and whether the damages awarded were appropriate.

The main legal issue(s) or question(s) the court needed to resolve.

Rule

Shareholders in a close corporation owe each other a fiduciary duty akin to that owed by partners, which includes the duty of utmost good faith and loyalty.

In Donahue v. Rodd Electrotype Co. of New England, Inc., 367 Mass. 578, 593, 328 N.E.2d 505 (1975) , we held that shareholders in a close corporation owe each other a fiduciary duty akin to that owed by partners to one another.

Analysis

The court applied the rule of fiduciary duty by examining Bogoff's actions, which included withholding payments due to Atlas Design and diverting business to his new corporation. The court found that Bogoff's conduct constituted a clear breach of his fiduciary obligations, as he prioritized his own interests over those of his co-venturer, Zimmerman.

The judge noted that Bogoff did “control … the purse strings of the enterprise.” Bogoff used this power to withhold substantial sums of money legitimately due Zimmerman's corporation and to confiscate BAB Atlas's tools, good will, and other assets for the use of his own secretly-created corporation.

Conclusion

The court affirmed the judgment in favor of Zimmerman and Atlas Design, holding Bogoff liable for his fiduciary breaches and awarding damages accordingly.

Affirmed.

Who won?

The prevailing party was Robert L. Zimmerman and Atlas Design, as the court found that Bogoff had breached his fiduciary duties and awarded them damages.

The court found in favor of Zimmerman and Atlas Design and ordered Bogoff to pay a total of $284,680.30 in damages plus interest and costs.

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