## Facts

- Kevin Harrison co-founded NetCentric Corporation, served in senior roles, and acquired nearly three million shares under a stock restriction agreement with a vesting schedule (40% after one year, then 5% per quarter).
- The stock restriction agreement provided that if Harrison’s employment ended “for any reason,” the company could repurchase his unvested shares at the original nominal price by giving written notice within 60 days.
- The agreement also stated it did not guarantee Harrison continued employment, preserving an at-will relationship.
- After Harrison was terminated, about 45% of his shares had vested.
- Within roughly one month, NetCentric gave written notice that it was exercising its contractual right to repurchase Harrison’s unvested shares at the original price; Harrison refused to tender them.
- NetCentric later hired executives and granted significant stock options, intending to source shares in part from repurchased stock.
- Harrison sued the corporation, founders/directors, and investors for (among other claims) breach of fiduciary duty, breach of the implied covenant of good faith and fair dealing, and intentional interference with contractual relations, and sought a declaration invalidating the repurchase.
- Defendants counterclaimed for specific performance of the repurchase provision; the trial court granted summary judgment for defendants on all claims and ordered specific performance, and Harrison appealed (excluding wrongful termination).

## Issues

1. Whether Delaware or Massachusetts law governed fiduciary-duty claims arising from internal corporate affairs of a Delaware corporation operating in Massachusetts.
2. Whether terminating an at-will founder-employee and exercising a contractual repurchase right for unvested shares breached the implied covenant of good faith and fair dealing.
3. Whether corporate insiders could be liable for intentional interference with Harrison’s at-will employment contract based on alleged motives to recapture equity.
4. Whether the company was entitled to specific performance enforcing the repurchase option for unvested shares at the original purchase price.

## Decision

- The Supreme Judicial Court affirmed summary judgment for defendants on all of Harrison’s claims and affirmed specific performance of the repurchase provision.
- Delaware law governed the fiduciary-duty claim under the internal affairs doctrine; Massachusetts close-corporation fiduciary standards did not apply to a Delaware corporation’s internal relationships.
- The implied covenant of good faith and fair dealing was not breached because the agreements expressly contemplated at-will termination and repurchase of unvested shares “for any reason,” and the covenant could not contradict clear contractual allocation of risk.
- The intentional interference claim failed because the individual defendants were corporate insiders acting within the scope of corporate interests, with insufficient evidence of actual malice or improper motive outside corporate purposes.
- Specific performance was proper because NetCentric satisfied contractual conditions for exercising the repurchase option (timely written notice) and the repurchase terms were definite and enforceable.

## Legal Principles

- Under the internal affairs doctrine, the law of the state of incorporation governs fiduciary obligations and related disputes among directors, officers, and shareholders concerning internal corporate affairs.
- Massachusetts close-corporation fiduciary doctrines do not override the internal affairs doctrine for a foreign-incorporated corporation.
- The implied covenant of good faith and fair dealing cannot be used to rewrite unambiguous contract terms or impose duties inconsistent with the parties’ express bargain.
- Unvested equity subject to continued-employment conditions is generally a contingent expectancy, not “earned” compensation protected from forfeiture by a bad-faith termination theory when the contract expressly permits termination and forfeiture/repurchase.
- Corporate officers and directors are typically not “third parties” to the corporation’s contracts for interference purposes when acting within corporate authority; liability requires proof of actual malice or action outside legitimate corporate interests.
- Courts may order specific performance to enforce clear stock repurchase options for unvested shares when contractual prerequisites are met.

## Conclusion

The court held that Delaware law governed the internal fiduciary-duty dispute, rejected implied-covenant and interference theories that would negate explicit vesting-and-repurchase terms tied to at-will employment, and enforced the company’s contractual right to repurchase the founder’s unvested shares through specific performance.


Harrison v. NetCentric Corp., 433 Mass. 465, 744 N.E.2d 622 (Mass. 2001)