Alder Food Distributors, Inc. v. Keating

12 Mass. L. Rptr. 89
CourtMassachusetts Superior Court
DecidedJune 6, 2000
DocketNo. 0000748
StatusPublished
Cited by1 cases

This text of 12 Mass. L. Rptr. 89 (Alder Food Distributors, Inc. v. Keating) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Alder Food Distributors, Inc. v. Keating, 12 Mass. L. Rptr. 89 (Mass. Ct. App. 2000).

Opinion

Doerfer, J.

This is a dispute between the majority shareholder and the minority shareholder of a close corporation. Both the corporation, Alder Food Distributors, Inc. (“Alder” or the “Company”) and its majority shareholder, Paul M. Keating, Sr. (“Paul Sr.”) are requesting injunctive relief against Alder’s minority shareholder Paul M. Keating, Jr. (“Paul Jr.”), a former Alder employee John Whouley (“Whouley") and Elite Food Company, Inc. (“Elite”). Specifically, Alder and Paul Sr. seek to enjoin Paul Jr., Whouley and Elite from both doing business with any entity that was a supplier of Alder as of April 13, 2000 and from engaging in the business of buying, selling and distributing certain types of food products to United States military commissaries.1 Paul Jr. in turn seeks to enjoin Alder and Paul Sr. and their agents from either taking any action that threaten, intimidate or coerce any entity involved in the food industry from dealing with Paul Jr. and/or Elite. Paul Jr. further requests that the court enjoin Alder, Paul Sr. and their agents, from maliciously disparaging, slandering or otherwise defaming Paul Jr. and/or Elite. By agreement the claims of both parties were consolidated before the court. After hearing and for the reasons stated below, the cross motions for preliminary injunction are DENIED.

BACKGROUND

The court summarizes below the background facts underlying the parties’ cross motions for injunctive relief.2 The parties have submitted lengthy memoranda to the court containing detailed recitations and discussions of the various factual contentions and issues.

Alder is a close corporation engaged in the business of buying specific food brands and products from their respective manufacturers and then shipping and reselling them to United States military commissaries worldwide. In order to sell these products to commissaries, Alder has entered into a contract with the Defense Commissary Agency (“DeCA”). Under the terms of this contract, DeCA allows Alder to distribute a limited number of specific food products and brands for sale in commissaries.3 Alder must act as the exclusive distributor of these specific products and brands. Alder hires brokers to represent its brand lines in particular geographic regions. As a matter of long-standing business policy, Alder does not hire brokers who represent product lines that compete with brands distributed by the Company.

Paul Sr. founded Alder in 1986 and currently serves as its president. He is also one of the Company’s two directors, its majority shareholder and owns 51% of Alder’s stock. In 1988, Paul Jr. joined Alder at the urging of his father Paul Sr. In 1990, Paul Sr. elected Paul Jr. as Alder’s other director and eventually appointed his son vice president of sales. Over the past several years, Paul Sr. has scaled back his involvement with Alder and as a result Paul Jr. took increasing control over the Company’s operations. In 1997, Paul Jr. received 49% of Alder stocks and assumed control over the day-to-day operation of the Company. That same year Whouley, a boyhood friend of Paul Jr. was hired to be Alder’s director of finance. In August of 1999, Dustin Whitney another acquaintance of Paul Jr. was hired to be Alder’s sales and distribution manager. During the twelve years that Paul Jr. worked at Alder he contributed to the Company’s economic [90]*90success and growth, particularly in area of computerization and data management.

Sometime in 1998, Paul Sr. began serious discussions with his son concerning the issue of Paul Jr. acquiring the controlling interest in Alder. In September of 1998, Paul Jr. asked his sister Michelle Keating (“Michelle”) to join Alder as vice president of marketing, because he anticipated that he would need Michelle’s help in financing his acquisition ofPaul Sr.’s stock. It was understood at the time Michelle joined Alder that she would eventually received an equity interest in the Company. In September of 1999, Paul Sr. offered to sell his interest to both Paul Jr. and Michelle for four million dollars ($4,000,000) as well as air travel and car expenses for ten years. Paul Jr. was initially opposed to Michelle receiving a 50% ownership interest in the Company, however, in January of 2000, he accepted a proposal offered by a mediator which contained a 50 / 50 stock split between himself and Michelle. The parties however never agreed to the terms of a buyout of Paul Sr.’s stock.

On February 11, 2000, Paul Jr. had an encounter with an Alder employee Donna Murphy (“Murphy”), concerning an inventory control mistake. The parties dispute the nature of this encounter between Paul Jr. and Murphy. Alder and Paul Sr. contend that Paul Jr. engaged in a foul-mouthed tirade which led Murphy to inform Michelle that she was leaving the Company as a result of Paul Jr.’s treatment. Paul Jr. asserts that he reasonably reprimanded Murphy for a costly mistake on her part. It is undisputed, however, that after learning of the incident from Murphy, on February 15, 2000, Michelle subsequently informed the Company’s employees that Paul Jr. would be “taking time off.” Michelle, then telephoned Paul Sr. to discuss the incident and recommend that Paul Jr. “take time off.”

On February 17, 2000, Paul Sr. sent Paul Jr. a letter suspending him with pay for a period of thirty days. Paul Sr. stated in his letter that Paul Jr. was to have no contact with the business operations of Alder during the suspension period. Paul Sr. expressed his hope that for the good of both Paul Jr. and the future of Alder, his son engage in some self reflection concerning his recent actions and determine how to grow personally and professionally. The letter closed as follows.

If for any reason you are unwilling to accept these conditions immediately or, if after thirty days you are not ready to resume your role as Vice President in our family company further actions will have to be considered. Prior to your return to Alder Foods you must review your future plans with me.

On February 28, 2000, Paul Jr. sent Paul Sr. a written response to the February 17, 2000 suspension letter. In this response letter, Paul Jr. indicated his belief that the incident between himself and Murphy had been “grossly exaggerated,” and that his relationship with Alder’s employees was one of “compassion and respect.” Paul Jr. also stated his willingness to adhere to the “business principles” of Paul Sr. Paul Jr. closed this letter with a request that Paul Sr. call him to “discuss moving forward.”

On March 14, 2000 Paul Sr. sent a letter to Paul Jr. informing him that as a result of a refusal to either acknowledge or address his treatment of Alder employees, a further suspension without pay was being imposed on Paul Jr. Paul Sr. further stated that the suspension would be lifted only if Paul Jr. complied with three specific conditions. First, Paul Jr. had to participate in a training course to improve his employee management skills. Second, Paul Jr. had to meet with Paul Sr. to improve their working relationship as president and vice president of Alder. Lastly, Paul Jr. was required to meet with Michelle to resolve their working relationship.

Paul Jr. did not agree to abide by the conditions set forth by Paul Sr. as the prerequisites to Paul Jr.’s return to work. Instead, Paul Jr. offered a counter proposal that he, Paul Sr. and Michelle all participate in management training courses and that the Board of Directors meet formally to discuss the relationship between himself and Paul Sr. It is also undisputed that Paul Jr.

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Bluebook (online)
12 Mass. L. Rptr. 89, Counsel Stack Legal Research, https://law.counselstack.com/opinion/alder-food-distributors-inc-v-keating-masssuperct-2000.