United States District Court, D. Massachusetts
MEMORANDUM AND ORDER
removed case, plaintiff Paul Nahass, a shareholder and former
director and officer of FlexLite Corporation
("FlexLite"), has sued defendants James Harrison,
Gregory Quarles, Mitchell Cogert, and Lawrence Siegel, a
group of other FlexLite shareholders, for terminating Nahass
as an officer and director of FlexLite. Nahass alleges that
his termination violated FlexLite's corporate bylaws (the
"Bylaws") and defendants' fiduciary duties to
Nahass as a minority shareholder in a close corporation.
Defendants have moved to dismiss. They argue that: (1)
Delaware law applies to the breach of fiduciary duty claim
and, under Delaware law, shareholders in a close corporation
do not have a fiduciary duty to each other; and (2) Nahass
was removed properly by the holders of a majority of
Motion to Dismiss is being allowed. Under Massachusetts
choice-of-law rules, Delaware law applies to Nahass's
breach of fiduciary duty claim. Nahass has not alleged
sufficient facts to prove that defendants owed him a
fiduciary duty under Delaware law. More specifically, he has
not alleged that any of the defendants was individually a
controlling shareholder or that the defendants formed a
control group. Nahass also has not alleged sufficient facts
to state a plausible claim that defendants breached the
ByLaws. In particular, Nahass has alleged only that no
shareholder vote was conducted on his removal as a director.
He has not alleged that the defendants did not remove him by
written consent, which the ByLaws would permit.
filed this case in the Superior Court for Middlesex County of
the Commonwealth of Massachusetts. He asserts two counts
against all defendants. Count I alleges that the defendants
breached their fiduciary duty of "utmost good faith and
loyalty" as shareholders in a close corporation by
terminating Nahass in order to: (1) prevent him from
continuing to receive money as a shareholder and employee of
FlexLite; (2) pressure him into selling his unvested shares
for less than their value; and (3) attempting to
"freez[e] Nahass out of FlexLite." See id.
¶¶39-49. Count II alleges breach of contract,
asserting that defendants violated FlexLite's Bylaws by
removing Nahass as an officer and director without holding a
shareholder vote. See id. ¶¶51-56.
removed the case to this court. Defendants then filed a
Motion to Dismiss and memorandum in support ("MTD
Mem."). Defendants also filed the Affidavit of Frank N.
Gaeta, attaching, among other things, the FlexLite
Certificate of Incorporation, the Founder Stocker Purchase
Agreement, and the ByLaws. On August 11, 2015, Nahass filed
an opposition (the "Opposition").
Rule of Civil Procedure 8(a)(2) requires that a complaint
include a "short and plain statement of the claim
showing that the pleader is entitled to relief." This
pleading standard does not require "detailed factual
allegations, " but requires "more than labels and
conclusions, and a formulaic recitation of the elements of a
cause of action will not do." Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007). A court may disregard
"bald assertions, unsupportable conclusions, and
opprobrious epithets." In re Citigroup, Inc.,
535 F.3d 45, 52 (1st Cir. 2008); see also Penalbert-Roia
v. Fortuno-Burset, 631 F.3d 592, 595 (1st Cir. 2011).
"The plaintiff's factual allegations are ordinarily
assumed to be true in passing on the adequacy of the
complaint, which need not plead evidence."
Penalbert-Roia, 631 F.3d at 595. "But
'ordinarily' does not mean 'always': some
allegations, while not stating ultimate legal conclusions,
are nevertheless so threadbare or speculative that they fail
to cross 'the line between the conclusory and the
factual.'" Id. (quoting Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 557 n. 5 (2007))..
motion to dismiss should be denied if a plaintiff has shown
"a plausible entitlement to relief."
Twombly, 550 U.S. at 559. That is, the complaint
"must contain sufficient factual matter, accepted as
true, to state a claim to relief that is plausible on its
face. A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged." Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at
570). "The plausibility standard is not akin to a
'probability requirement, ' but it asks for more than
a sheer possibility that a defendant has acted
unlawfully." Id. (quoting Twombly, 550
U.S. 556). "Where a complaint pleads facts that are
merely consistent with a defendant's liability, it stops
short of the line between possibility and plausibility of
entitlement to relief." Id. (quoting
Twombly, 550 U.S. at 557). "The relevant
inquiry focuses on the reasonableness of the inferences of
liability that the plaintiff is asking the court to draw from
the facts alleged in the complaint."
Ocasio-Hernandez, 640 F.3d at 13.
Rule 12(b)(6), the district court may properly consider only
facts and documents that are part of or incorporated into the
complaint." Rivera v. Centro Medico de Turabo,
Inc., 575 F.3d 10, 15 (1st Cir. 2009); Rodi v.
Southern New England School of Law, 389 F.3d 5, 15 (1st
Cir. 2004) (considering letters attached to the complaint in
evaluating a motion to dismiss). However, there are
"narrow exceptions for documents the authenticity of
which are not disputed by the parties; for official public
records; for documents central to plaintiff['s] claim; or
for documents sufficiently referred to in the
complaint." Watterson v. Page, 987 F.2d 1, 3-4
(1st Cir. 1993). When "a complaint's factual
allegations are expressly linked to-and admittedly dependent
upon-a document (the authenticity of which is not
challenged), that document effectively merges into the
pleadings and the trial court can review it in deciding a
motion to dismiss under Rule 12(b)(6)." Beddall v.
State Street Bank and Trust Co., 137 F.3d 12, 17 (1st
Cir. 1998). When such documents contradict an allegation in
the complaint, the document trumps the allegation. See
Clorox Co. P.R. v. Proctor & Gamble Consumer Co.,
228 F.3d 24, 32 (1st Cir. 2000).
otherwise indicated, the following facts are alleged in the
Complaint. On December 20, 2013, Nahass, Harrison, Cogert,
and Siegel incorporated FlexLite, a Delaware corporation with
a principal place of business in Massachusetts. The company
focuses on developing wearable light therapy devices to
enable athletes to recover from exertion. Nahass was a member
of the board of directors, as well as the Secretary and Chief
20, 2014, Nahass executed the Founder Stock Purchase
Agreement pursuant to which he paid more than $31, 000 for up
to 768, 000 shares of FlexLite stock. At the same ...