## Facts

- Malden Centerless Grinding Co., Inc. was a Massachusetts close corporation owned equally by Walter S. Brodie, Robert J. Jordan, and David J. Barbuto, who also served as directors and officers.
- As Walter Brodie reduced his involvement, he sought a share-purchase arrangement, including a proposal that the corporation repurchase shares upon a shareholder’s death; no buy-sell obligation was adopted.
- In 1992, Walter Brodie was removed as a director but remained a one-third shareholder until his death in 1997.
- Mary M. Brodie, as executrix, succeeded to Walter Brodie’s shares.
- After Walter’s death, Jordan and Barbuto allegedly excluded Mary Brodie from corporate governance, withheld or delayed financial information, and provided no distributions or other economic benefits tied to her shares.
- Mary Brodie sued the controlling shareholders for breach of fiduciary duty in a close corporation based on a freeze-out.

## Issues

1. Whether, after a freeze-out finding in a close corporation, the trial court may order a compulsory buyout of the minority shareholder’s stock at net-asset value when no agreement, corporate rule, or other basis created a reasonable expectation of a buyout.

## Decision

- Further appellate review was limited to the remedy; the liability finding for breach of fiduciary duty was not in dispute.
- The Supreme Judicial Court held the trial court erred by ordering Jordan and Barbuto to purchase Brodie’s shares at her proportionate share of Malden’s net assets plus prejudgment interest.
- The court reversed the compulsory buyout order and remanded for an evidentiary hearing to determine Brodie’s reasonable expectations as a shareholder, whether those expectations were frustrated, and what remedy would vindicate those interests.

## Legal Principles

- Shareholders in a Massachusetts close corporation owe each other fiduciary duties of utmost good faith and loyalty; freeze-out conduct includes exclusion from participation, denial of information, and denial of economic benefits.
- Remedies for a freeze-out must restore the injured shareholder to the position she would have occupied absent the wrongdoing and must vindicate the shareholder’s reasonable expectations from ownership.
- A forced buyout is improper when it creates an artificial market for illiquid close-corporation shares and puts the minority in a materially better position than she reasonably expected, absent a contractual, statutory, or otherwise expectation-based right to be bought out.
- On remand, the trial court must tailor relief to the proven expectations that were thwarted, which may include monetary or equitable relief tied to participation, information rights, or economic returns rather than a mandatory redemption.

## Conclusion

The Supreme Judicial Court reversed a net-asset compulsory buyout imposed after a close-corporation freeze-out, holding that relief must be calibrated to the minority shareholder’s reasonable expectations and must not confer a benefit—such as an unearned liquidity event—not supported by the parties’ arrangements or other circumstances.


Brodie v. Jordan, 447 Mass. 866, 857 N.E.2d 1076 (2006)