## Facts

- Richard Holland retired from a successful finance career and moved to Provincetown, Massachusetts, where he worked in real estate.
- Holland met Sean Burke, Phillip Mossy, and David Silva, who had restaurant experience, and the four decided to buy a Provincetown property and convert it into a restaurant.
- The parties formed Red Inn, LLC to own the real estate and formed a related corporation to operate the restaurant business.
- The members signed an operating agreement that (among other things) restricted transfers of membership interests, set procedures for removing officers, and gave any member the right to obtain an audit of the LLC’s books at that member’s expense.
- After formation, the members took trips to Mexico that were paid for with LLC funds.
- The restaurant performed well. The LLC later purchased another property intended for restaurant operations through a separate corporation.
- Over time, Holland became unhappy with working long hours for comparatively low salary and disagreed with the other members’ business philosophy and approach to running the enterprise.
- As relations deteriorated, Burke, Mossy, and Silva took additional Mexico trips without Holland, also paid from company funds.
- Holland proposed several transactions to separate from the business, including proposals that would buy out his interest at a high price and proposals to divide the business; the other members rejected these proposals, in part because they did not match the operating agreement’s approach.
- The other members voted to remove Holland as an officer and terminated his employment, while Holland kept his ownership interest in the LLC.
- None of the entities had ever declared dividends.
- Holland sued Burke, Mossy, and Silva claiming they wrongfully removed him as an officer, wrongfully terminated his employment, and converted company funds (including travel expenses). He also sought an accounting.

## Issues

1. Whether, in a closely held enterprise, the other owners breached fiduciary duties by removing Holland as an officer and terminating his employment while he remained an equity owner.
2. Whether paying for members’ Mexico trips with entity funds—especially trips taken without Holland—constituted conversion or a fiduciary breach requiring monetary relief.
3. Whether Holland was entitled to an accounting (or comparable equitable relief) given the operating agreement’s audit provision and the parties’ dispute over finances.

## Decision

- After a jury-waived trial, the court entered findings of fact, rulings of law, and an order for judgment resolving Holland’s fiduciary-duty, conversion, and equitable-relief claims.
- The court evaluated Holland’s removal as an officer and termination of employment in the setting of a closely held business relationship and the parties’ agreed governance terms, including the operating agreement’s removal procedures.
- The court addressed the challenged use of entity funds for travel and other expenditures, determining whether the proof showed improper personal use actionable as conversion or as a breach of duties owed among co-owners.
- The court addressed Holland’s request for an accounting in light of the operating agreement’s provision allowing a member to obtain an audit at the member’s expense, and in light of the evidentiary record developed at trial.

## Legal Principles

- In Massachusetts, participants in closely held business entities may owe one another heightened duties of good faith and loyalty, and disputes are assessed with close attention to the parties’ relationship and expectations as owners.
- Claims that majority owners acted wrongfully by terminating a minority owner’s employment or stripping management roles are assessed in context, including what the entity’s governing documents permit and what the parties reasonably expected from the arrangement.
- An operating agreement (or similar governance document) is central to evaluating internal disputes in an LLC, particularly where the parties negotiated and signed terms addressing transfer restrictions, officer removal, and access to financial information.
- Conversion and related fiduciary theories based on use of entity funds require proof that funds were used improperly for personal benefit (as opposed to disputed business spending), and that the conduct caused a cognizable loss to the claimant as an owner.
- Equitable remedies such as an accounting depend on the circumstances and the adequacy of contractual information rights; where parties have agreed to a defined financial-review mechanism (such as an audit right), a court may weigh that agreed remedy when deciding whether broader equitable relief is warranted.

## Conclusion

Holland v. Burke concerns a breakdown among co-owners of Red Inn, LLC and related close corporations after business success, with the plaintiff challenging his removal from office, termination as an employee-owner, and the use of company money for member travel, while also seeking an accounting; the court resolved these claims after a bench trial by applying Massachusetts close-entity fiduciary-duty concepts in light of the operating agreement’s governance and information-access terms.


Holland v. Burke, 24 Mass. L. Rep. 551 (2008)