## Facts

- Jeffrey M. Conklin (plaintiff) and Beth A. Perdue (defendant) were attorneys who met while working at Digital Equipment Corporation.
- In 1993, they formed CPInternational, Inc. (CPI), a Massachusetts corporation, to pursue a consulting business.
- Conklin and Perdue each owned 50% of CPI and both participated in management; CPI operated as a closely held corporation with no public market for shares.
- Conklin made all of CPI’s capital contributions, including additional infusions as the business struggled.
- CPI reimbursed both Conklin and Perdue for expenses, and each also took draws from CPI.
- Perdue received \$112,434 from CPI as a draw; Conklin asserted the \$112,434 was a loan and contended Perdue signed a promissory note to repay it.
- By late 1995, CPI still was not succeeding, and Conklin concluded CPI was not economically viable.
- Conklin told Perdue the arrangement was not working and sought a meeting to discuss CPI’s future, after which the relationship deteriorated into mutual accusations.
- During the dispute, Perdue removed files from CPI’s office.
- The parties exchanged letters through January 19, 1996, and then stopped communicating about CPI.
- Neither Conklin nor Perdue took steps to dissolve CPI.
- Conklin later started a new business, TradeAccess, which was not in the same business as CPI and was also unsuccessful.
- Conklin sued Perdue (including in a derivative capacity on CPI’s behalf) for breach of the alleged promissory note and for breach of fiduciary duty based on Perdue’s removal of CPI files.
- Perdue asserted that Conklin breached fiduciary duties by forming and operating TradeAccess.

## Issues

1. Did the evidence show that Perdue’s \$112,434 draw was a personal loan from CPI (or Conklin) that was repayable under an enforceable promissory note, rather than compensation or a shareholder draw?
2. Did Perdue breach fiduciary duties owed in a Massachusetts closely held corporation by removing CPI files, and if so, did that breach cause compensable harm?
3. Did Conklin breach fiduciary duties by starting TradeAccess, including by diverting a corporate opportunity or competing with CPI?
4. What relief, if any, was appropriate given the parties’ 50/50 deadlock and competing individual and derivative claims arising from the failed venture?

## Decision

- The court treated CPI as a classic Massachusetts closely held corporation and evaluated the parties’ conduct under the strict good-faith-and-loyalty standards applied in that setting.
- The court rejected Conklin’s attempt to recover the full \$112,434 from Perdue as a straightforward debt on the promissory-note theory, declining to accept his characterization of the draw as an enforceable loan on the terms he asserted.
- The court rejected Conklin’s fiduciary-duty claim based on Perdue’s removal of CPI files because the evidence did not establish a fiduciary breach that caused legally recoverable damages.
- The court rejected Perdue’s fiduciary-duty theory based on Conklin’s formation and operation of TradeAccess because the evidence did not show actionable diversion of CPI business or a CPI opportunity.
- Judgment entered after a jury-waived trial resolving the parties’ competing claims without granting the sweeping monetary relief either side sought.

## Legal Principles

- A Massachusetts closely held corporation is often treated as partnership-like for fiduciary-duty purposes; shareholders who participate in control owe each other duties of utmost good faith and loyalty (Donahue/Wilkes line of cases).
- Whether money taken from a closely held corporation is a loan, compensation, or a shareholder draw depends on objective evidence of intent and contemporaneous treatment (records, course of dealing, and surrounding circumstances), not solely a later dispute-driven label.
- A fiduciary-duty claim requires proof of duty, breach, causation, and damages; interpersonal conflict and poor business outcomes, standing alone, do not establish liability.
- A corporate-opportunity or diversion claim generally requires proof that the challenged venture competed with the corporation or appropriated a business opportunity that belonged to the corporation, along with resulting harm.

## Conclusion

Conklin v. Perdue is a Massachusetts Superior Court (BLS) “business divorce” arising from a failed 50/50 close corporation where Conklin funded the venture and later claimed Perdue’s \$112,434 draw was a repayable loan under a promissory note and that she breached fiduciary duties by removing corporate files, while Perdue claimed Conklin breached fiduciary duties by starting TradeAccess; the court applied Massachusetts close-corporation fiduciary standards, declined to enforce the draw as the debt Conklin claimed, and denied the parties’ competing fiduciary-duty theories for failure to prove actionable misconduct and compensable harm.


Conklin v. Perdue, 2002 WL 31421763 (2002)