Superior Court of Massachusetts, Suffolk, Business Litigation Session
Edward S. TURNER, Individually and as Designee of Shareholders comprising more than 15% of issued and outstanding shares of IVES Group, Inc., a Nevada Corporation
Mark L. CHEFFERS et al.
MEMORANDUM AND ORDER ON PLAINTIFFâS MOTION TO AMEND
Kenneth W. Salinger, Justice Superior Court
Plaintiff Edward S. Turner is a minority shareholder of IVES
Group, Inc., a closely-held Nevada corporation. In December
2017 the court (Sanders. J.) granted partial summary judgment
in favor of Defendants on three claims based on the alleged
diversion of corporate assets and opportunities. She
dismissed claims for an accounting (count III), breach of
fiduciary duty (count IV), and unjust enrichment (count V).
Judge Sanders concluded that these claims could only be
asserted as derivative claims on behalf of IVES. She also
concluded that it would be futile to allow Turner to assert
these three counts as derivative claims because a majority of
the shareholders have voted to ratify the challenged
transactions and to terminate these claims as not being in
the best interest of the company.
now seeks leave to amend his complaint to add claims for
"equity expropriation" (count VII), breach of a
contractual obligation to pay post-employment compensation
and benefits (count VIII), and intentional infliction of
emotional distress (count IX). The Court will DENY this
motion because the proposed amendment would be futile, in
that the proposed new claims could not survive a motion to
dismiss under Mass.R.Civ.P. 12(b)(6).
are not required to grant motions to amend prior complaints
where âthe proposed amendment ... is futile.â"
Johnston v. Box, 453 Mass. 569, 583 (2009), quoting
All Seasons Servs., Inc. v. Commissioner of Health &
Hosps. of Boston, 416 Mass. 269, 272 (1993)); accord
Thermo Electron Corp. v. Waste Mgmt. Holdings, Inc.,
63 Mass.App.Ct. 194, 203 (2005) (affirming denial of motion
for leave to assert counterclaim that would have been
proposed amendment that would add new claims to a complaint
is futile if the new claims could not survive a motion to
dismiss. Mancuso v. Kinchla, 60 Mass.App.Ct. 558,
572 (2004) (affirming denial of motion to amend).
survive a motion to dismiss under Rule 12(b)(6), and thus to
avoid being futile under Rule 15, a complaint must allege
facts that, if true, would "plausibly suggest[ ] ... an
entitlement to relief." Lopez v. Commwealth,
463 Mass. 696, 701 (2012), quoting Iannacchino v. Ford
Motor Co., 451 Mass. 623, 636 (2008), and Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 557 (2007). For the
purpose of deciding the pending motions to dismiss, the Court
must assume that the factual allegations in the complaint and
any reasonable inferences that may be drawn in Plaintiffsâ
favor from the facts alleged are true. See Golchin v.
Liberty Mut. Ins. Co., 460 Mass. 222, 223 (2011). In so
doing, however, it must "look beyond the conclusory
allegations in the complaint and focus on whether the factual
allegations plausibly suggest an entitlement to relief."
Maling v. Finnegan, Henderson, Farabow, Garrett & Dunner,
LLP, 473 Mass. 336, 339 (2015), quoting Curtis v.
Herb Chambers I-95, Inc., 458 Mass. 674, 676 (2011).
Futility of Proposed New Claims
proposed claim for "equity expropriation" would be
futile because the amended complaint does not allege facts
plausibly suggesting that Defendants extracted or
expropriated value from Turner or other shareholders by
diluting the value of their shares and transferring that
value to the majority shareholders.
claim is governed by Nevada law because IVES is a Nevada
corporation. See Harrison v. NetCentric Corp., 433
Mass. 465, 469-72 (2001) (Massachusetts applies "the law
of the State of incorporation to internal corporate
Nevada law, a claim for "equity expropriation claims
involve a controlling shareholderâs or directorâs
expropriation of value from the company, causing other
shareholderâs equity to be diluted." Parametric
Sound Corp. v. Eighth Judicial District Court, 401 P.3d
1100, 1109 (Nev. 2017) (agreeing with Gentile v.
Rossette, 906 A.2d 91, 99-100 (Del. 2006)). "[A]
pure equity dilution claim" must be brought as a
derivative action on behalf of the corporation, because the
value of all shares is diluted equally and there is no
distinct harm to particular shareholders. Id. But if
a majority shareholder unfairly extracts or expropriates
value from minority shareholders, causing them to suffer harm
not shared by other shareholders by reducing the value of
their shares and transferring that value to the majority
owners, the injured minority owners may assert a direct claim
on their own behalf. Id.; accord Gentile,
supra, at 102 n.26.
the amended complaint would repeat Turnerâs allegations
regarding alleged diversion of corporate assets or
opportunities, those allegations do not support a claim for
equity expropriation. Turner alleges that Cheffers usurped
corporate opportunities that belonged to IVERS (by instead
developing them through a separate company, Allen David
Press, Inc.), that Cheffers caused IVES to pay Renda even
when she stopped doing any work, and that Cheffers and Renda
caused IVES to pay for their personal travel. These
allegations were the basis for Turnerâs claim for breach of
fiduciary duty, based on a theory of that all shareholders
were damaged by a decrease in the value of their shares. But
they do not plausibly suggest a disproportionate reduction in
minority shareholder value, and thus do not state a claim for
paragraphs 110 to 115 of the proposed amended complaint,
Turner makes conclusory allegations that all the elements of
an equity expropriation claim are present. None of these
allegations is supported by any underlying factual
allegation, however. Nowhere does Turner identify any
transaction or conduct that would qualify as equity
expropriation. As a result Turnerâs ...