Data Cable Networks, Inc. v. Gogan

22 Mass. L. Rptr. 520
CourtMassachusetts Superior Court
DecidedJune 8, 2007
DocketNo. 0502479
StatusPublished

This text of 22 Mass. L. Rptr. 520 (Data Cable Networks, Inc. v. Gogan) 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
Data Cable Networks, Inc. v. Gogan, 22 Mass. L. Rptr. 520 (Mass. Ct. App. 2007).

Opinion

Gershengorn, Wendie I., J.

This is a dispute between employee-shareholders of plaintiff Data Cable Networks, Inc., a closely-held corporation. The case is before the court on Gogan’s motion for partial summary judgment on the plaintiffs’ breach of fiduciary duty claim (count II) and Gogan’s own breach of fiduciary duty counterclaim (count I). For the reasons set forth below, the motion is ALLOWED.

BACKGROUND

On or about January 9, 2002, plaintiffs John B. Ciccarello (“Ciccarello”) and Matthew S. Cox (“Cox”) along with defendant Matthew B. Gogan (“Gogan”) formed Cablenets, Inc. In or around April 1992, they changed the name of the corporation to Data Cable Networks, Inc. (“DCN”). DCN, located in Framingham, Massachusetts, is in the business of communications cable assembly and network installation. DCN is a closely held corporation; Ciccarello, Cox, and Gogan are the only directors, officers, and shareholders, and were the key employees of the corporation.

On May 3, 2004, Gogan approached Ciccarello and Cox to discuss the poor business condition of DCN. At this time, Gogan offered to buy out Ciccarello and Cox. Ciccarello and Cox refused; they were not interested in selling their shares. Gogan then inquired if either Ciccarello or Cox, or both, would be interested in buying Gogan’s shares of DCN. Ciccarello and Cox were both interested in the latter proposition. Therefore, Ciccarello, Cox, and Gogan decided to contact their accountant, Steven Gallant (“Gallant”) for a recommendation of an individual to perform a business valuation for DCN. Gallant recommended Howard Gordon (“Gordon”) of Gordon Associates to conduct the valuation. Gordon valued the company at approximately $3,000.

Between May 3, 2004, and May 10, 2004, Gogan forwarded DCN records to his home computer. Gogan testified at his deposition that this was a common practice that he would engage in when DCN had lost a bid. He stated that he would try and decipher why previous bids were successful but current bids were not.

Meanwhile, on or about May 6, 2004, Gogan and his wife filed the Articles of Organization for All Connect, Inc. (“ACI”) with the Massachusetts Secretaiy of the Commonwealth. On May 10, 2004, Ciccarello, Cox, and Gogan had another meeting. Ciccarello and Cox inquired into how Gogan had spent his time the prior week. It was not the practice of Ciccarello, Cox, and Gogan to have to account for their time.

On or about May 14, 2004, Ciccarello came upon ACI’s corporate filing and informed Cox of his discovery. Neither Ciccarello nor Cox contacted Gogan to discuss the formation of ACI. By the time Cox became aware of this information, he had “generated the sales figures for the year, which showed [Gogan] basically not doing a whole lot at all.” Cox Depo. 43:11-13. Cox testified that the sales figures for the pay period ending May 17, 2004, showed that Cox had “sold approximately 177,050-some clients” and Gogan had sold 41,000. Id. at 51:8-10. Cox further stated that he and Gogan typically sold around the same numbers, but there were definitely times that the numbers differed.

Ciccarello and Cox contacted an attorney to find out whether it was within their rights to “lock out” Gogan from the DCN office. Cox testified at his deposition that he and Ciccarello were concerned that Gogan would use DCN inventory for ACI. When the attorney informed Ciccarello and Cox that they were within their rights to “lock out" Gogan, they proceeded to change the locks on the inventory building.

On May 17, 2004, Ciccarello and Cox terminated Gogan. Ciccarello and Cox did not consider any other alternative besides terminating Gogan. Ciccarello and Cox told Gogan they were terminating him because he had started a competing company. Gogan took his company cell phone for his personal use after he was discharged. Cox testified at his deposition that he himself only had one cell phone, his company cell phone, that he used for all his calls, both business and personal.

After Gogan was terminated, Ciccarello contacted multiple DCN customers, but only with regards to any equipment that might have been left on site. He did not ask them whether Gogan had discussed ACI with them prior to his termination. Eight of DCN’s former clients are now clients of ACI. Gogan remains a shareholder and director of DCN; however, since his termi[521]*521nation, he has not received any compensation from DCN.

DISCUSSION

A. Standard of Review

Summary judgment shall be granted where there are no genuine issues of material fact and where the moving party is entitled to judgment as a matter of law. Mass:R.Civ.P. 56(c); Cassesso v. Comm’r of Corr., 390 Mass. 419, 422 (1983); Cmty. Nat’l Bank v. Dawes, 369 Mass. 550, 553 (1976). The moving party bears the burden of affirmatively demonstrating the absence of a triable issue, and that the summary judgment record entitles the moving party to judgment as a matter of law. Pederson v. Time, Inc., 404 Mass. 14, 16-17 (1989). The moving party may satisfy this burden either by submitting affirmative evidence that negates an essential element of the opposing party’s case, or by demonstrating that the opposing party has no reasonable expectation of proving an essential element of his case at trial. Flesner v. Technical Communications Corp., 410 Mass. 805, 809 (1991); Kourouvacilis v. Gen. Motors Corp., 410 Mass. 706, 716 (1991).

B. Breach of Fiduciary Duty (Count I)

It is the plaintiffs’ contention that Gogan breached his fiduciary duty to the corporation and to the individual plaintiffs as shareholders of the corporation, by competing with DCN. The plaintiffs have no reasonable expectation of proving this claim at trial, and therefore their claim must fail as a matter of law.

The shareholders of a “close corporation owe one another a fiduciary duty of ‘utmost good faith and loyalty.’ ” Merola v. Exergen Corp., 423 Mass. 461, 464 (1996), quoting Donahue v. Rodd Electrotype Co., 367 Mass. 578, 593 (1975). It is not a breach of fiduciary duty for Gogan to “plan and prepare for creation of a competing business” if he continues to carry out his commitments to DCN. Chelsea Indus., Inc. v. Gaffney, 389 Mass. 1, 10 (1983).

It is the plaintiffs’ contention that Gogan was not only planning to compete with DCN, but also that he was actively pursuing clients on behalf of his new corporation ACI, while still working for DCN. They also contend that Gogan was taking opportunities from DCN and holding them for his own benefit to utilize the opportunities for ACI. However, after the close of discovery, the plaintiffs still have no evidence of their suspicions.

The plaintiffs’ evidence of a breach of fiduciary duty consists of the fact that Gogan wanted out of DCN, that Gogan’s sales were down for the period right before he incorporated ACI, that he took control of his company cell phone and transferred emails to his home computer, and that ACI is now serving eight of DCN’s past clients. However, as a matter of law, these facts are insufficient to establish a breach of fiduciary duty. Cf. Chelsea Indus., Inc., 389 Mass.

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Related

Pederson v. Time, Inc.
532 N.E.2d 1211 (Massachusetts Supreme Judicial Court, 1989)
Donahue v. Rodd Electrotype Co. of New England, Inc.
328 N.E.2d 505 (Massachusetts Supreme Judicial Court, 1975)
Wilkes v. Springside Nursing Home, Inc.
353 N.E.2d 657 (Massachusetts Supreme Judicial Court, 1976)
Community National Bank v. Dawes
340 N.E.2d 877 (Massachusetts Supreme Judicial Court, 1976)
Kourouvacilis v. General Motors Corp.
575 N.E.2d 734 (Massachusetts Supreme Judicial Court, 1991)
Flesner v. Technical Communications Corp.
575 N.E.2d 1107 (Massachusetts Supreme Judicial Court, 1991)
Cassesso v. Commissioner of Correction
456 N.E.2d 1123 (Massachusetts Supreme Judicial Court, 1983)
Chelsea Industries, Inc. v. Gaffney
449 N.E.2d 320 (Massachusetts Supreme Judicial Court, 1983)
Meehan v. SHAUGHNESSY COHEN
535 N.E.2d 1255 (Massachusetts Supreme Judicial Court, 1989)
Merola v. Exergen Corp.
668 N.E.2d 351 (Massachusetts Supreme Judicial Court, 1996)

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Bluebook (online)
22 Mass. L. Rptr. 520, Counsel Stack Legal Research, https://law.counselstack.com/opinion/data-cable-networks-inc-v-gogan-masssuperct-2007.