Case Title: Koshy v. Sachdev

Citation: 

Docket Number: SJC-12222

State: massachusetts

Court: Massachusetts Supreme Court

Date: 2017-09-14T00:00:00Z

Document:
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SJC-12222 
 
GEORGE T. KOSHY  vs.  ANUPAM SACHDEV. 
 
 
 
Middlesex.     May 2, 2017. - September 14, 2017. 
 
Present:  Gants, C.J., Lenk, Hines, Gaziano, Lowy, Budd, 
& Cypher, JJ.1 
 
 
Corporation, Dissolution, Officers and agents.  Practice, Civil, 
Contempt.  Contempt. 
 
 
 
 
Civil action commenced in the Superior Court Department on 
June 28, 2012. 
 
 
The case was heard by Bruce R. Henry, J., and a complaint 
for contempt, filed on March 2, 2015, was also heard by him. 
 
 
The Supreme Judicial Court on its own initiative 
transferred the case from the Appeals Court. 
 
 
 
Charles M. Waters for the plaintiff. 
 
Maureen Mulligan (Timothy M. Pomarole also present) for the 
defendant. 
 
Thomas J. Carey, Jr., for Brian JM Quinn & others, amici 
curiae, submitted a brief. 
 
 
 
LENK, J.  We are called upon in this case to construe for 
                                                          
 
 
1 Justice Hines participated in the deliberation on this 
case prior to her retirement. 
2 
 
 
the first time G. L. c. 156D, § 14.30, the corporate dissolution 
statute.  That statute allows a shareholder to petition a judge 
of the Superior Court to dissolve a corporation in the event of 
a deadlock between its directors.  See G. L. c. 156D, 
§ 14.30 (2) (i).   
 
George T. Koshy and Anupam Sachdev are the sole 
shareholders and directors of Indus Systems, Inc. (Indus).  
After years of deepening dissension and acrimony between the 
two, Koshy filed a petition in the Superior Court in 2012, 
pursuant to the corporate dissolution statute, seeking to 
dissolve Indus.  Koshy also brought claims against Sachdev for 
breach of fiduciary duties and, after a jury-waived trial had 
taken place, but prior to the issuance of the judge's decision, 
filed a separate claim for contempt of court.  The judge 
rejected all of Koshy's claims and Sachdev's counterclaims, and 
dismissed Koshy's complaint for contempt.  Koshy appealed, and 
we transferred the matter to this court on our own motion. 
 
We conclude that the utter impasse as to fundamental 
matters of corporate governance and operations shown to exist in 
these circumstances gave rise to a state of "true deadlock" such 
that the remedy of dissolution provided by the statute is 
permissible.  See comment to G. L. c. 156D, § 14.30, 25A Mass. 
Gen. Laws Ann. at 71 (Thomson/West 2005).  Since dissolution is 
a discretionary remedy, however, we remand the matter to the 
3 
 
 
Superior Court for a determination whether it is the appropriate 
remedy in these circumstances.  In addition, because a number of 
the claims in the complaint for contempt were not raised at 
trial, we vacate and set aside the judgment dismissing that 
complaint, and remand the matter for consideration of the 
allegations in the complaint concerning conduct that occurred 
after the trial.2 
 
1.  Background.  We recite the facts found by the trial 
judge,3 supplemented with references to undisputed facts in the 
record. 
 
a.  Formation and growth of Indus.  As one of the motion 
judges observed, "[t]his case concerns the demise of a long-
standing business relationship between two men who were once 
close friends."  The parties formed Indus in April, 1987, after 
working together for several years at another company.  Indus 
provides "computer aided design" (CAD) services, creating and 
storing digital renderings of "existing manual drawings, 
sketches and other information supplied by client 
organizations."  Koshy and Sachdev each own fifty per cent of 
Indus's shares and serve as its sole directors.  They are both 
authorized to act on the company's behalf. 
                                                          
 
2 We acknowledge the amicus brief submitted by Brian JM 
Quinn, Niloufar Abae, and Alex Pena. 
 
 
3 At argument before us, the parties acknowledged that they 
do not contest the judge's factual findings. 
4 
 
 
 
After a few years of growing pains, Indus developed a 
steady market for its services.  By the end of 1997, the company 
was generating revenues of approximately $700,000 annually.  In 
June, 1999, Indus was awarded a United States Government 
Services Administration contract, which allowed it to bid on 
projects for agencies of the Federal government.  To help meet 
the new wave of demand created by this contract, the parties 
established eSystems Software Pvt. Ltd. (eSystems), an Indian 
corporation, to provide support services to Indus.4 
 
Building upon its success, Indus obtained a Federal 
"streamlined technology acquisition resources for services" 
contract (STARS contract) in 2004.  It allowed government 
clients to purchase products and services from Indus without 
having to go through a competitive bidding process.  The STARS 
contract, which was effective through November 30, 2011, gave 
Indus access to a new client base and provided approximately 
sixty per cent of the company's revenue from 2004 to 2010.  By 
2007, Indus's revenues exceeded $2 million annually. 
 
b.  Parties' dispute.  Sometime in the late 2000s, the 
relationship between the parties began to fall apart.  They 
developed a fundamental difference of opinion concerning the 
future of Indus.  While Koshy wanted the company to focus 
                                                          
 
 
4 George T. Koshy and Anupam Sachdev each own 49.9 per cent 
of eSystems Software Pvt. Ltd. (eSystems).  It is not apparent 
from the record who owns the remaining shares. 
5 
 
 
primarily on its existing services for government agencies, 
Sachdev believed that it should explore new markets.  Both 
parties viewed their counterpart's vision of Indus's future as 
gravely flawed.  Koshy saw Sachdev's efforts to develop new 
markets as quixotic and costly, while Sachdev considered Koshy's 
focus on existing clients myopic and shortsighted.  This 
difference in viewpoints bred growing distrust as well, as is 
evident from a dispute arising around 2010 in connection with 
payments made from Indus to eSystems.  While Sachdev preferred 
to make prepayments to eSystems for services to be performed, 
Koshy favored payments only for services rendered.  Koshy 
believed that prepayments, which could not easily be recovered 
due to jurisdictional obstacles, provided Sachdev with a means 
clandestinely to direct company resources into new projects.  
Notwithstanding Koshy's stated concerns, Sachdev routinely made 
prepayments to eSystems without consulting with Koshy. 
 
As these disagreements strained the parties' relationship, 
an incident in the fall of 2011 furthered its disintegration.  
At that time, Indus had approximately $1.4 million in retained 
earnings.  Koshy wanted this money to be paid out to himself and 
Sachdev as a distribution, while Sachdev did not.  In 
November, 2011, Koshy wrote himself a check from Indus's 
corporate account, in the amount of $690,000, as a distribution, 
without Sachdev's consent.  Koshy encouraged Sachdev, who was in 
6 
 
 
India at the time, to take a matching distribution.  Sachdev 
instead reacted by effectively locking Koshy out of the company.  
He initiated a lawsuit against Koshy on behalf of Indus, seeking 
a return of the distribution; stopped payment of Koshy's salary; 
terminated his company credit cards; and changed the locks on 
the door of Indus's offices.  He also refused to consent to a 
tax distribution to the parties, as had been the practice in 
prior years.  Koshy subsequently placed the $690,000 in an 
escrow account. 
 
As this dispute was ongoing, each party offered to buy out 
the other, based on evaluations of Indus's worth created by 
consultants that each had hired.  Sachdev offered to purchase 
Koshy's shares for $480,000.  Koshy rejected that offer and 
tendered his own offer to purchase Sachdev's shares for 
approximately $2.8 million; Sachdev rejected that proposal.  
Ultimately, the $690,000 was returned to Indus, and in 
June, 2012, the complaint was dismissed.  Koshy's salary, 
company credit cards, and access to his office were restored.  
The relationship between the parties however, continued to 
spiral downward. 
 
The parties' welling antipathy for and toxic distrust of 
each other inevitably began to impinge upon the day-to-day 
operations of Indus.  In December, 2011, without consulting 
Koshy, Sachdev hired Michael Xifaras to help with the company's 
7 
 
 
sales.  Xifaras replaced Roger Geilen, a long-time Indus 
salesperson, who had worked largely with Koshy.  Koshy and 
Xifaras did not get along, as Koshy believed that Sachdev had 
hired Xifaras, in effect, as his replacement.  The hostility 
between the two broke out into open conflict when Xifaras sent 
an extremely critical electronic mail message to Koshy, with a 
copy to Sachdev, which included a variety of insults.5  In 
response, Koshy informed Sachdev that he would be firing 
Xifaras, and provided Xifaras notice of the termination.  
Sachdev responded by saying that he agreed with Xifaras's 
criticisms and that Koshy had no authority to fire employees 
without Sachdev's consent; Xifaras retained his position at 
Indus.  A few months later, Koshy again attempted to terminate 
Xifaras, with the same result.  At the time of trial in October, 
2013, Xifaras still worked for Indus. 
 
Finally, in June, 2012, Koshy commenced in the Superior 
Court the underlying action in this case.  The complaint 
asserted that Sachdev had committed a breach of his fiduciary 
duty to Koshy, as well as the implied covenant of good faith and 
fair dealing; the complaint also asserted that the parties were 
deadlocked and sought corporate dissolution on that ground.  
                                                          
 
 
5 Among other things, Xifaras called Koshy "the greatest 
impediment for the company achieving its potential" and 
"dishonest and self serving."  He also said that Koshy did "not 
have the experience and knowledge to lead." 
8 
 
 
Sachdev filed counterclaims alleging breach of fiduciary duties 
by Koshy and abuse of process. 
 
Koshy also sought a preliminary injunction enjoining 
Sachdev from taking certain actions purportedly intended to 
freeze out Koshy.  A Superior Court judge (who was not the trial 
judge) granted the motion in part, enjoining Sachdev from 
(1) blocking or impeding regular tax distributions to Koshy; 
(2) making any non-payroll-related disbursement or expenditure 
in excess of $5,000 on behalf of Indus without providing written 
notice to Koshy in advance; (3) hiring or firing any employee 
without providing written notice to Koshy in advance; (4) making 
any payments on behalf of Indus to eSystems for services not yet 
performed without Koshy's prior written consent; and (5) taking 
any action for the purpose of "forcing or pressuring [Koshy] to 
sell his shares for less than fair market value."  Shortly 
thereafter, Sachdev approved a tax distribution to the parties.  
In September, 2012, Sachdev sought to have the preliminary 
injunction dissolved.  The judge denied the motion, and instead 
modified the order such that the same provisions also were 
applicable to Koshy. 
 
In March, 2015, nearly one and one-half years after the 
trial in October, 2013, and while a decision on the issues 
raised at trial was still pending, Koshy filed a complaint 
seeking a judgment of contempt against Sachdev for asserted 
9 
 
 
repeated violations of the preliminary injunction.  The trial 
judge ultimately dismissed the complaint for contempt when he 
issued his ruling in August, 2015, on the claims litigated at 
trial. 
 
c.  Trial proceedings.  Following an eight-day, jury-waived 
trial, the judge denied all of Koshy's claims and Sachdev's 
counterclaims.  He rejected Koshy's claim that the parties were 
deadlocked such that dissolution was appropriate.  He also 
concluded that Sachdev had not committed a breach of his 
fiduciary duty to Koshy, because Sachdev had had a "legitimate 
business purpose" for all of the conduct Koshy challenged.  For 
similar reasons, the judge denied Koshy's claim for breach of 
the covenant of good faith and fair dealing.  The judge also 
dismissed Koshy's complaint for contempt on the ground that it 
"rehash[ed]" issues that had been litigated at trial.  
Concluding that Koshy had neither committed a breach of his 
fiduciary duty to Sachdev nor brought his claims for an ulterior 
or illegitimate purpose, the judge also denied Sachdev's 
counterclaims. 
 
Koshy appealed from the judgment,6 and we transferred the 
case to this court on our own motion. 
                                                          
 
 
6 Sachdev initially cross-appealed from the trial judge's 
dismissal of his claims against Koshy for breach of fiduciary 
duties and abuse of process.  He ultimately decided not to 
pursue the appeal. 
10 
 
 
 
2.  Discussion.  On appeal, Koshy raises three arguments.  
He contends that the trial judge erred in concluding that the 
parties were not deadlocked; in denying Koshy's claim for breach 
of fiduciary duty; and in dismissing the complaint for contempt.  
We address each in turn. 
 
a.  True deadlock.  i.  Statutory overview.  The corporate 
dissolution statute, G. L. c. 156D, § 14.30, provides "grounds 
for the judicial dissolution of corporations at the request of 
the [C]ommonwealth, a shareholder, a creditor, or a corporation 
which has commenced voluntary dissolution."  See comment to 
G. L. c. 156D, § 14.30, 25A Mass. Gen. Laws Ann. at 70.7  The 
statute allows any shareholder or group of shareholders who hold 
forty per cent of "the total combined voting power of all the 
shares of [a] corporation's stock outstanding" and are "entitled 
to vote on the question of dissolution" to petition the Superior 
Court for dissolution of the corporation on the basis of 
director or shareholder deadlock.  See G. L. c. 156D, 
§ 14.30 (2). 
 
A judge may allow a petition for dissolution due to 
deadlock between a corporation's directors only in cases of 
                                                          
 
 
7 The corporate dissolution statute, G. L. c. 156D, is part 
of the Massachusetts Business Corporation Act.  In interpreting 
the statute, we are guided by the "comments prepared by the task 
force . . . that drafted the act, 'which included more than 
fifty experienced Massachusetts corporate lawyers.'"  See 
Chitwood v. Vertex Pharms., Inc., 476 Mass. 667, 669 (2017), 
quoting Halebian v. Berv, 457 Mass. 620, 625 (2010). 
11 
 
 
"true deadlock."  See comment to G. L. c. 156D, § 14.30, 25A 
Mass. Gen. Laws Ann. at 71 ("the general policy of Massachusetts 
corporation law [is] that involuntary dissolution should be 
available as a mechanism for resolving internal corporate 
disputes only in the case of true deadlock").  To establish the 
existence of a "true deadlock" between directors, the 
petitioning party must prove that (1) "the directors are 
deadlocked in the management of the corporate affairs"; (2) "the 
shareholders are unable to break the deadlock"; and (3) 
"irreparable injury to the corporation is threatened or being 
suffered."  See G. L. c. 156D, § 14.30 (2) (i) 
(§ 14.30 [2] [i]).8  If the petitioning party can establish a 
"true deadlock," then the statute vests the judge with the 
discretion to order dissolution as a remedy.  G. L. c. 156D, 
§ 14.30. 
 
A judge's determination whether a true deadlock exists is a 
matter of law, reviewed de novo.  Cf. Merola v. Exergen Corp., 
423 Mass. 461, 463 (1996) (determination whether actions 
constituted breach of fiduciary duties was matter of law).  
Whether such deadlock warrants dissolution is a matter of 
discretion.  See comment to G. L. c. 156D, § 14.30, 25A Mass. 
Gen. Laws Ann. at 70 ("This section states that a court 'may' 
order dissolution if a ground for dissolution exists.  Thus 
                                                          
 
 
8 The statute does not define any of these terms. 
12 
 
 
there is discretion on the part of the court as to whether 
dissolution is appropriate even though grounds exist under the 
specific circumstances"). 
 
ii.  Analysis.  We have not previously had occasion to 
address the corporate dissolution statute.  As with all 
statutes, "[o]ur primary duty in interpreting [it] is 'to 
effectuate the intent of the Legislature in enacting it.'"  
MacLaurin v. Holyoke, 475 Mass. 231, 238 (2016), quoting 
Wheatley v. Massachusetts Insurers Insolvency Fund, 456 Mass. 
594, 601 (2010), S.C., 465 Mass. 297 (2013). 
 
A.  Deadlock.  The first part of the test for "true 
deadlock" concerns whether the "directors are deadlocked in the 
management of the corporate affairs."  G. L. c. 156D, 
§ 14.30 (2) (i).  Since neither the statute nor the drafters' 
comment defines the term "deadlock," we look to its ordinary 
meaning.  See International Fid. Ins. Co. v. Wilson, 387 Mass. 
841, 853 (1983) ("We begin with the canon of statutory 
construction that the primary source of insight into the intent 
of the Legislature is the language of the statute").  The plain 
meaning of "deadlock" is "a state in which progress is 
impossible, as in a dispute, produced by the counteraction of 
opposing forces."  Webster's New Universal Unabridged Dictionary 
512 (2003).  Other courts to have considered the matter have 
reached a comparable understanding of the term.  See Donovan v. 
13 
 
 
Quade, 830 F. Supp. 2d 460, 489 (N.D. Ill. 2011) (deadlock 
existed due to directors' mutual distrust, lack of 
communication, and inability harmoniously to manage affairs of 
corporation); Belio v. Panorama Optics, Inc., 33 Cal. App. 4th 
1096, 1103-1104 (1995) (deadlock exists when board has even 
number of directors who are equally divided or incapable of 
electing successor board); Black v. Graham, 266 Ga. 154, 155 
(1996) (deadlock occurs when corporation has two shareholders 
who are "wholly unable to agree on the management of the 
business"). 
 
Based on this common definition, we conclude that at least 
four factors are relevant in determining whether a deadlock 
exists.  The first factor is whether irreconcilable differences 
between the directors of a corporation have resulted in 
"corporate paralysis."  See Laskey v. L. & L. Manchester Drive-
In, Inc., 216 A.2d 310, 314-315 (Me. 1966); Petition of Collins-
Doan Co., 3 N.J. 382, 395 (1949); Kim, The Provisional Director 
Remedy for Corporate Deadlock:  A Proposed Model Statute, 60 
Wash. & Lee L. Rev. 111, 119 (2003) (Kim) ("Deadlock generally 
refers to 'an impasse in corporate decisional processes'" 
[citation omitted]).  By "corporate paralysis," we refer to a 
stalemate between the directors concerning "one of the primary 
functions of management."  See Laskey, supra at 314.  Examples 
of such primary functions include payroll, client services, 
14 
 
 
hiring and retention of employees, and corporate strategy. 
 
A second factor in discerning whether a deadlock exists is 
the size of the corporation at issue.  A deadlock is more likely 
to occur in a small or closely held corporation, particularly 
one where ownership is divided on an even basis between two 
shareholder-directors.  See comment to G. L. c. 156D, § 14.30, 
25A Mass. Gen. Laws Ann. at 72 (dissolution remedy "particularly 
important in small or family-held corporations in which share 
ownership may be divided on a [fifty-fifty] basis"); Kim, supra 
at 121 ("The distinguishing features of close corporations make 
them particularly vulnerable to deadlock").  Moreover, in 
closely held corporations, the lack of a ready market for a 
shareholder's stock, and the greater likelihood that a 
shareholder is reliant on the corporation for a salary, tends to 
increase the potential for deadlock and accompanying oppressive 
tactics.  See Donahue v. Rodd Electrotype Co. of New England, 
367 Mass. 578, 588-589 (1975) (structure of close corporation 
can lend itself to oppressive conduct); Kim, supra at 121-122.9 
 
A third relevant factor in determining whether deadlock has 
occurred is an indication that a party has manufactured a 
                                                          
 
 
9 A claim of oppressive shareholder conduct of the sort 
described in Donahue v. Rodd Electrotype Co. of New England, 367 
Mass. 578, 580-584 (1975), however, is not a necessary 
prerequisite to a finding of deadlock.  While a breach of the 
directors' fiduciary duties would be relevant to whether a 
deadlock exists between them, a deadlock could result even in 
instances where the directors are acting in good faith. 
15 
 
 
dispute in order to engineer a deadlock.  In such circumstances, 
a court should view the party's claim with skepticism.  See 
comment to G. L. c. 156D, § 14.30, 25A Mass. Gen. Laws Ann. at 
71 (corporate dissolution statute not intended to permit 
dissolution in instances of "gamesmanship in the negotiation of 
internal corporate disputes"); Smith-Shrader Co. v. Smith, 136 
Ill. App. 3d 571, 582 (1985) (rejecting claim of shareholder who 
committed breach of fiduciary duty to company to force its 
dissolution); Lien v. Lien, 2004 S.D. 8, ¶¶ 10, 23 (rejecting 
claim of director who boycotted directors' election meeting and 
then claimed deadlock due to failure of corporation to elect 
directors). 
 
A fourth factor in determining whether a deadlock exists is 
the degree and extent of distrust and antipathy between the 
directors.  See, e.g., Shawe v. Elting, 157 A.3d 152, 158 (Del. 
2017) (distrust between directors of corporation contributed to 
deadlock); Black, 266 Ga. at 155 ("hostile and static situation" 
constituted deadlock).  Mutual antipathy can transform what may 
begin as a run of the mill disagreement into irreconcilable 
conflict and stalemate where hostility precludes compromise.  
See Misita v. Distillers Corp., 54 Cal. App. 2d 244, 250 (1942) 
(dispute between parties calcified into deadlock meriting 
dissolution as result of "ill-feeling, dissension, hatred, 
mutual hostility and distrust" between board members). 
16 
 
 
 
Given the undisputed evidence, the conclusion that the 
conflict between the parties constitutes a deadlock is 
inescapable.  Applying the first factor, the acknowledged facts 
underscore corporate paralysis with respect to a number of key 
matters.  The parties have profoundly different opinions 
regarding both Indus's daily operations and its future.  They 
disagree on such basic matters as staffing needs, as well as 
dividend and tax distributions, and even more fundamentally, 
hold diametrically opposed views as to long-term corporate 
strategies and goals.  The areas of disagreement between the 
parties appear to far outweigh the few areas of agreement.  Over 
the past few years, the parties appear to have agreed only on 
the matter of employee raises and the need to hire a new 
salesperson.  As the Xifaras incident demonstrates, their 
agreement on the latter issue was superficial at best.  The 
parties are diametrically opposed on nearly every issue of 
importance concerning Indus's current operations and its future. 
 
The second factor also argues in favor of deadlock.  Since 
the parties each own fifty per cent of Indus, each has the 
ability to prevent the other from enacting any policy with which 
he disagrees, on any subject; their stalemate thereby 
effectively paralyzes Indus on all of the issues on which the 
two disagree.  As to the third factor, we discern no indication 
in the judge's findings that either party engineered the dispute 
17 
 
 
in bad faith.  Rather, the facts reflect a genuine disagreement 
between the parties concerning the most basic aspects of company 
policy. 
 
Looking to the final factor, the parties do not contest the 
trial judge's finding that they operate based on a relationship 
of mutual distrust and antipathy.  The judge was well warranted 
in concluding that Koshy "views all of Sachdev's actions as an 
attempt to freeze him out of the management of the company" and 
that "Sachdev questions all of Koshy's actions."  The record is 
replete with personal insults, questioning of motives, and 
general acrimony between the parties.  This mutual antipathy in 
a two-director corporation has prevented the parties from 
compromising and has inspired increasing levels of 
brinksmanship.  Accordingly, we conclude that Koshy has met his 
burden to show that the parties are deadlocked within the 
meaning of § 14.30 (2) (i). 
 
B.  Irreconcilability of the deadlock.  The second part of 
the test for "true deadlock" under § 14.30 (2) (i) requires that 
the "shareholders are unable to break the deadlock."  The 
critical inquiry with respect to this part of the test is 
whether the shareholders are able to work around the deadlocked 
directors.  See, e.g., Goldstein v. Studley, 452 S.W.2d 75, 80 
(Mo. 1970) (shareholders unable to break deadlock where shares 
evenly divided and board contained four directors).  If the 
18 
 
 
shareholders are able to do so, then there is no need for a 
court to dissolve the company in order to break the deadlock. 
 
In making this determination, a reviewing court must decide 
whether there is a mechanism by which the deadlock can be 
broken.  In closely held corporations, two of the more common 
such mechanisms are buy-sell agreements and agreements providing 
for methods of alternative dispute resolution such as third-
party mediation of disputes.  A buy-sell agreement is a contract 
or other legal mechanism that provides for "the mandatory or 
optional repurchase of a stockholder's shares by the corporation 
or by the other stockholders upon the occurrence of a certain 
event," such as a deadlock.  See Stephenson v. Drever, 16 Cal. 
4th 1167, 1173 (1997).  See also Hoberman, Practical 
Considerations for Drafting and Utilizing Deadlock Solutions for 
Non-Corporate Business Entities, 2001 Colum. Bus. L. Rev. 231, 
232 (2001) (Hoberman) ("Perhaps the most common deadlock 
solution . . . is the 'buy-sell agreement' . . .").  An 
agreement requiring alternative dispute resolution in instances 
of deadlock also may provide shareholders with a mechanism to 
break it.  See Hoberman, supra at 233. 
 
The record contains no indication that such a mechanism 
exists in this case.  Sachdev points to section five of the 
articles as a potential means by which the deadlock could be 
19 
 
 
broken.10  That provision, however, requires the parties to agree 
upon an arbitrator who then will value the selling shareholder's 
stock.  We discern no indication in the record that the parties 
would agree upon such an arbitrator, particularly given their 
previously demonstrated inability to agree on the price for a 
buyout of each other's shares.  In light of this, Koshy has met 
his burden of establishing that the shareholders are unable to 
break the deadlock. 
 
C.  Irreparable injury.  The final part of the "true 
deadlock" test requires that "irreparable injury to the 
corporation is threatened or being suffered."  Since the term 
"irreparable injury" is not defined in the statute, but has a 
long-standing meaning at common law, we assume that the 
Legislature intended to incorporate the common-law meaning.  See 
Commonwealth v. Wynton W., 459 Mass. 745, 747 (2011) ("Where the 
Legislature does not define a term, we presume that its intent 
is to incorporate the common-law definition of that term, 
'unless the intent to alter it is clearly expressed'" [citation 
                                                          
 
 
10 Under section five of the articles, a shareholder who 
desires to divest himself of his shares first must notify the 
directors of the price at which he is willing to sell and 
provide the name of an arbitrator.  Within thirty days, the 
directors either must accept the offer or notify the shareholder 
of the name of another arbitrator.  The two arbitrators then 
select a third; after this panel of arbitrators is constituted, 
it may ascertain the value of the stock.  Following the 
evaluation, the directors have thirty days in which to purchase 
the stock at the set price; if they do not, the shareholder may 
dispose of the stock as he sees fit. 
20 
 
 
omitted]). 
 
At common law, an irreparable injury is a harm which cannot 
be vindicated by litigation on the merits.  See Packaging Indus. 
Group, Inc. v. Cheney, 380 Mass. 609, 616 (1980) (irreparable 
injury occurs when party "suffer[s] a loss of rights that cannot 
be vindicated should it prevail after a full hearing on the 
merits").  An irreparable injury need not be financial in 
nature.  See Mordka v. Mordka Enterprises, Inc., 143 Ariz. 298, 
305 (Ct. App. 1984) (profitability not sole criterion in 
considering irreparable injury); comment to G. L. c. 156D, 
§ 14.30, 25A Mass. Gen. Laws Ann. at 72 (irreparable injury 
standard "may be met in a corporation that is operating at a 
profit").  A corporation may suffer irreparable injury due to 
severe corporate dysfunction or a frustration of the company's 
purpose, or by placing the company's business in jeopardy.  See 
Shawe, 157 A.3d at 159 (profitable company subject to 
irreparable harm due to "irretrievably dysfunctional" management 
structure); Fernandez v. Yates, 145 So. 3d 141, 146 (Fla. Dist. 
Ct. App. 2014) (deadlock preventing effective use of company's 
sole asset created irreparable injury); Black, 266 Ga. at 155 
(inability of sole and equal shareholders to agree on management 
of business presented threat of irreparable injury).  A court 
may also consider "harm to a corporation's reputation, goodwill, 
customer relationships, and employee morale" (citation omitted).  
21 
 
 
See Shawe, 157 A.3d at 161. 
 
The plain meaning of the term "threatened" implicates an 
assessment of the substantial likelihood that irreparable harm 
will occur.  See Webster's New Universal Unabridged Dictionary 
1975 (2003) (defining "threaten" as "to be a menace or source of 
danger to").  In this respect, the term is analogous to the 
concept of "substantial risk" in our jurisprudence on 
preliminary injunctions.  See Packaging Indus. Group, Inc., 380 
Mass. at 617 (preliminary injunction requires showing of 
"substantial risk of irreparable harm"). 
 
In determining whether a corporation is "threatened" with 
irreparable injury, a court must look beyond its current, short-
term status.  While a presently declining revenue stream, the 
departure of employees, or the depletion of clients may signal a 
threat of irreparable injury, the present well-being of a 
corporation does not preclude such a threat.  A deadlock that 
prevents corporate management from effectively addressing the 
vital functions of the corporation creates a threat of 
irreparable injury even if the company appears financially 
profitable.  Accordingly, a court must examine the nature and 
impact of a deadlock to determine if the company can remain 
viable in the long term.  If not, then the corporation is 
threatened with irreparable injury. 
 
In the circumstances here, we conclude that the fundamental 
22 
 
 
nature of the deadlock between the parties threatens irreparable 
injury to Indus, because the parties' mutual antipathy renders 
them unable effectively to manage the company.  Their impasse 
regarding nearly every major corporate decision has cast a cloud 
on Indus's future.  The parties cannot agree on anything of 
substance and, as the Xifaras situation demonstrates, the 
palpably corrosive acrimony between them prevents them from 
functioning even in areas of theoretical agreement.  Meanwhile, 
as their dysfunctional relationship continues to deteriorate, 
the parties repeatedly have resorted to costly litigation, in 
efforts to outmaneuver each other and gain the upper hand in 
steering the corporation.  Resort to management by litigation is 
neither a viable means of corporate governance nor an adequate 
substitute for functional management and planning.  On the 
record before us, the trajectory of Indus plainly points south 
and a threat of irreparable injury has been shown.  We therefore 
conclude that the parties' dispute constitutes a "true deadlock" 
within the meaning of § 14.30 (2) (i). 
 
D.  Remedy.  The corporate dissolution statute provides 
that a Superior Court judge "may dissolve a corporation" if the 
three-part test for "true deadlock" set forth in § 14.30 (2) (i) 
is met.  Given that the statute authorizes the "extreme" remedy 
of dissolution, see comment to G. L. c. 156D, § 14.30, 25A Mass. 
Gen. Laws Ann. at 71-72, we conclude that it also authorizes 
23 
 
 
lesser remedies, such as a buyout or the sale of the company as 
an ongoing entity.  See Brodie v. Jordan, 447 Mass. 866, 873 n.7 
(2006) ("In most of these States, statutes authorize the more 
drastic remedy of involuntary dissolution, and thus courts have 
understandably inferred the power to order the lesser remedy of 
a buyout"); Shawe, 157 A.3d at 160 (affirming Court of 
Chancery's decision to appoint custodian to hold public auction 
of company in light of director deadlock); Sauer v. Moffitt, 363 
N.W.2d 269, 275 (Iowa Ct. App. 1984) (statute which provided for 
dissolution allowed for other equitable relief); 21 West, Inc. 
v. Meadowgreen Trails, Inc., 913 S.W.2d 858, 867 (Mo. Ct. App. 
1995) ("Courts are not limited to the remedy of dissolution and 
may, in equity, consider appropriate alternative forms of 
relief, including ordering the corporation to pay the 
petitioning shareholders their proportionate share in money"). 
 
The appropriate remedy should be decided in the first 
instance by the trial judge, and we remand the matter for such a 
determination. 
 
b.  Breach of fiduciary duties.  Koshy contends that 
Sachdev committed a breach his fiduciary duty to Koshy by 
refusing to consent to tax and dividend distributions in late 
2011 and early 2012, and by making an unreasonably low offer for 
Koshy's shares in early 2012. 
 
Shareholders in a close corporation owe fiduciary duties to 
24 
 
 
both their fellow shareholders and the corporation itself.  See 
Demoulas v. Demoulas Super Mkts., Inc., 424 Mass. 501, 528-529 
(1997); Donahue, 367 Mass. at 593.  Like partners, they owe to 
one another a duty of "utmost good faith and loyalty."  Donahue, 
supra.  Accordingly, they may not "act out of avarice, 
expediency or self-interest" towards their fellow shareholders.  
Id.  If a shareholder is able to demonstrate a "legitimate 
business purpose" for a challenged action, however, he or she 
will not be liable "unless the wronged shareholder succeeds in 
showing that the proffered legitimate objective could have been 
achieved through a less harmful, reasonably practicable, 
alternative mode of action."  Zimmerman v. Bogoff, 402 Mass. 
650, 657 (1988). 
The trial judge concluded that Sachdev had a legitimate 
business purpose for the actions that Koshy challenged.  In his 
findings of fact, the judge credited Sachdev's reasons for 
declining to agree to tax and dividend distributions and 
rejected Koshy's assertion that those reasons were a pretext to 
freeze him out of the company.  The judge also found that 
Sachdev's buy-out offer was a "low-ball" offer, but that it was 
not advanced in bad faith.  We review the judge's factual 
determinations for clear error, but we review de novo his 
determination that Sachdev did not commit a breach of his 
fiduciary duties to Koshy.  See Merola, 423 Mass. at 464. 
25 
 
 
 
At trial, Sachdev testified that he had refused to agree to 
dividend distributions in 2012 because of his concern over the 
loss of revenue following the expiration of the STARS contract 
in 2011.  Sachdev also testified that he would not agree to a 
tax distribution because of the fiscal uncertainty caused by 
Koshy's unilateral $690,000 distribution to himself.  We discern 
no error in the trial judge's rulings of law that these actions 
did not constitute a breach of fiduciary duty, because Sachdev 
had a "legitimate business purpose" for his conduct.  See 
Zimmerman, 402 Mass. at 657.  Sachdev's objection to a dividend 
distribution on the eve of the expiration of one of Indus's 
chief contracts was not unreasonable, and Koshy does not suggest 
a plausible "alternative mode of action" given these 
circumstances.  See id.  The same holds true for Sachdev's 
reluctance to sign off on a tax distribution when nearly three-
quarters million dollars of Indus's retained cash was in escrow.  
There is no indication that Sachdev acted out of the "avarice, 
expediency or self-interest" that undergirds a breach of 
fiduciary duty in taking these actions.  See Donahue, 367 Mass. 
at 593. 
 
With regard to Sachdev's "low-ball" offer, the judge found 
that it was not made in bad faith.  Absent an agreement 
establishing such obligations, a shareholder in a close 
corporation does not owe a fiduciary duty to a fellow 
26 
 
 
shareholder in purchasing the other's shares in the corporation.  
See Goode v. Ryan, 397 Mass. 85, 90-91 (1986) (no obligation for 
shareholders to purchase other shareholders' stock in 
corporation in absence of agreement to the contrary).  No such 
obligation is contained in Indus's articles of incorporation, 
nor do these circumstances suggest any compelling reason to 
extend to the present case the duty set out in Donahue.  
Accordingly, we conclude that Sachdev did not commit a breach of 
his fiduciary duties to Koshy. 
 
c.  Contempt.  Koshy maintains also that the judge erred in 
dismissing his complaint for contempt.  In that complaint, Koshy 
asserted that Sachdev repeatedly had violated the terms of the 
preliminary injunction, both before and after the trial. 
 
The "purpose of civil contempt proceedings is remedial."  
Demoulas, 424 Mass. at 571.  A complaint for contempt "is 
'intended to achieve compliance with the court's orders for the 
benefit of the complainant.'"  Mahoney v. Mahoney, 65 Mass. App. 
Ct. 537, 540 (2006), quoting Furtado v. Furtado, 380 Mass. 137, 
141 (1980).  We review the decision to dismiss the complaint for 
abuse of discretion.  See Massachusetts Comm'n Against 
Discrimination v. Wattendorf, 353 Mass. 315, 317 (1967). 
 
The judge dismissed the complaint, determining that it 
"rehash[ed] many of the issues and arguments made during the 
trial of the underlying claims" in the case, and discerning "no 
27 
 
 
reason to revisit those matters by way of a trial on the 
complaint for contempt."  While some of the claims indeed 
reiterated issues litigated at trial, several others asserted 
violations that took place between the end of the trial in 
October, 2013, and the expiration of the preliminary injunction, 
which remained in effect through the entry of judgment in 
August, 2015.  Among these are assertions that, in 
January, 2014, Sachdev canceled checks that Koshy had written to 
a subcontractor; in March, 2014, Sachdev made a payment in 
excess of the limits in the injunction; in December, 2014, 
Sachdev executed a contract with a third-party vendor without 
Koshy's consent; during all of 2014, Sachdev refused to 
authorize a tax distribution; and, in February, 2015, Sachdev 
denied Koshy access to payroll. 
 
While claims duplicative of a prior action are subject to 
dismissal as improper claim splitting, see Mass. R. Civ. 
P. 12 (b) (9), as amended, 450 Mass. 1403 (2008), this 
proscription extends only to claims which raise the same issues 
as did the prior action.  See M.J. Flaherty Co. v. United States 
Fid. & Guar. Co., 61 Mass. App. Ct. 337, 339 (2004) ("Rule 
12 [b] [9] provides for the dismissal of a second action in 
which the parties and the issues are the same as those in a 
prior action still pending in a court of this Commonwealth").  
Given that the complaint for contempt asserted a number of 
28 
 
 
violations of the preliminary injunction that occurred after the 
trial, the judge should not have dismissed the complaint on the 
ground that it merely rehashed issues raised at trial.  On 
remand, the trial judge should consider separately those issues 
involving conduct after the end of trial but during the pendency 
of the proceedings. 
 
3.  Conclusion.  The judgment is vacated and set aside.  
The matter is remanded to the Superior Court for entry of a 
judgment that the parties have reached a "true deadlock" within 
the meaning of G. L. c. 156D, § 14.30, and for further 
proceedings consistent with this opinion. 
 
 
 
 
 
 
 
So ordered.