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Splitting from Delaware Corporate Law, SJC Affirms BLS Decision Holding that Directors Owe Fiduciary Duty to the Corporation, not its Shareholders
By Ian D. Roffman and Eric P. Magnuson on
Posted in Derivative Actions, Fiduciary Duty, Mergers and Acquisitions

In IBEW Local No. 129 Ben. Fund v. Tucci., the Supreme Judicial Court (SJC) affirmed a decision by Judge Leibensperger of the BLS dismissing a class action brought by EMC shareholders against EMC board members. The plaintiff alleged that the board members violated their fiduciary duties when they approved the sale of EMC to Dell for $64 billion. Affirming Judge Leibensperger’s decision, the SJC held that directors of a Massachusetts corporation generally have a unitary duty to act in the best interests of the corporation, rather than dual duties that run to both the corporation and its shareholders.

Tucci clarifies that, except in limited circumstances, shareholder complaints in Massachusetts must be brought as derivative claims, subject to a pre-suit demand process. Thus, a Massachusetts corporation can determine for itself whether pursuing a shareholder demand is in the best interests of the corporation so long as that determination is made by disinterested persons acting in good faith after making a reasonable inquiry. See G.L. c. 165D, §§ 7.42-44.

This is a clear break from Delaware law, which allows for direct shareholder class actions alleging fiduciary breaches and does not mandate a pre-suit demand process. The upshot is that Massachusetts confers far greater protections for corporate directors than does Delaware, where board members face direct claims from disgruntled shareholders.  

IBEW Local No. 129 Ben. Fund v. Tucci

March 6, 2017

Full decision here.

Note: Nutter filed an amicus brief in Tucci on behalf of the Associated Industries of Massachusetts.

Justice: Justice Leibensperger

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