Representing one of the defendants on the Board of Directors of Demoulas Super Markets, Inc., J. Owen Todd and Christopher R. O'Hara successfully defended a corporate governance lawsuit arising out of a shareholder's request to approve the transfer of his stock to an irrevocable voting trust for the benefit of his wife.
The lawsuit, brought in the Business Litigation Session in Boston one day after the directors' vote took place, alleged among other things that five of the Director Defendants had breached their fiduciary duties to the company in approving the proposed stock transfer. In an evidentiary hearing that took place over nine trial days, the trial court (van Gestel, J.) determined that a majority of the Director Defendants had acted independently and in the corporation's interest, that the evidence failed to persuade the trial court that the defendant directors were under the controlling influence of the shareholder who sought to transfer his stock to the voting trust and that, under existing law, a demand upon the board was necessary to pursue derivative claims on behalf of the corporation.
In a 38-page opinion, the Massachusetts Appeals Court affirmed the trial court's judgment dismissing the plaintiff's amended complaint. The Appeals Court determined that the trial court's analysis of the evidence was proper, that the election of certain directors, in itself, did not render those directors biased, and that the waiver vote at issue as well as prior decisions of the board did not demonstrate that the directors were under the controlling influence of the shareholder or that the decisions were adverse to the corporation's interests. In both the trial court and the Appeals Court's decisions, the respective courts noted that the board's approval occurred after the board had carefully weighed the alternatives, had input from the executive officers running the company and the shareholder who sought to transfer the stock to the irrevocable voting trust, and reached a reasoned result with the assistance of independent legal counsel.