Balles v. Babcock Power Inc. (Lawyers Weekly No. 10-039-17)
NOTICE: All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports. If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us SJC-12112 ERIC N. BALLES vs. BABCOCK POWER INC. Middlesex. November 8, 2016. – March 6, 2017. Present: Gants, C.J., Botsford, Lenk, Hines, Gaziano, Lowy, & Budd, JJ. Executive. Employment, Termination. Corporation, Stockholder, Close corporation, Liability of officers. Contract, Employment, Performance and breach. Fiduciary. Civil action commenced in the Superior Court Department on December 21, 2010. The case was heard by Douglas H. Wilkins, J. The Supreme Judicial Court granted an application for direct appellate review. Mark C. Fleming (Jonathan A. Cox also present) for the defendant. Thomas J. Carey, Jr. (Jody L. Newman also present) for the plaintiff. Ben Robbins & Martin J. Newhouse, for New England Legal Foundation, amicus curiae, submitted a brief. Lenk, J. The dispute before us chiefly concerns the meaning and application of the stockholders’ agreement between a company, Babcock Power Inc. (Babcock or company), and its former executive, Eric N. Balles. To a lesser extent, it also concerns the separate employment agreement between the two. Babcock terminated Balles’s employment when it discovered that he was engaged in an ongoing extramarital affair with a young female subordinate. Babcock’s board of directors (board) subsequently concluded that Balles had been terminated “for cause” under the terms of his stockholders’ agreement with the company, thereby allowing the board to repurchase his stock at a minimal price. The board withheld subsequent dividends, amounting to approximately $ 900,000 in total, and refused to pay Balles any severance. Years of litigation followed, with Balles seeking declaratory relief to the effect that the stock be returned to him, along with the withheld dividends. Babcock responded with counterclaims on various grounds. Following a bifurcated trial, a Superior Court jury rejected Babcock’s counterclaims, and although Balles prevailed at a jury-waived trial on his claim for declaratory relief, a portion of his prior salary was subjected to equitable forfeiture and he was unsuccessful in his bid to receive severance pay. Babcock appealed from the judgment at the jury-waived trial, and we allowed its application for direct appellate review. We affirm.[1] Background. We recite the facts found by the trial judge, which the parties acknowledged at oral argument they do not challenge. We have supplemented those findings by reference to facts in the record that the parties do not dispute. Stockholders’ agreement […]