Title: Allison v. Eriksson

State: massachusetts

Issuer: Massachusetts Supreme Court

Document:

NOTICE:  All slip opinions and orders are subject to formal 
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SJC-12391 
 
W. ROBERT ALLISON  vs.  ELOF ERIKSSON & others.1 
 
 
 
Suffolk.     February 5, 2018. - May 30, 2018. 
 
Present:  Gants, C.J., Gaziano, Budd, Cypher, & Kafker, JJ. 
 
 
Limited Liability Company.  Damages, Breach of fiduciary duty. 
 
 
 
 
Civil action commenced in the Superior Court Department on 
May 22, 2013. 
 
 
The case was heard by Mitchell H. Kaplan, J. 
 
 
The Supreme Judicial Court on its own initiative 
transferred the case from the Appeals Court. 
 
 
 
Dana Alan Curhan for the plaintiff. 
 
Sean T. Carnathan for the defendants. 
 
Ben Robbins & Martin J. Newhouse, for New England Legal 
Foundation, amicus curiae, submitted a brief. 
 
 
 
KAFKER, J.  At issue in the instant case is the remedy 
available for limited liability company (LLC) mergers undertaken 
                     
 
1 Gudrun Eriksson, individually and as trustee of the Elof 
Eriksson Irrevocable Trust-2003; and Karl H. Proppe, 
individually and as trustee of the Elof Eriksson Irrevocable 
Trust-2003. 
2 
 
 
in violation of fiduciary duties.  The defendant, Elof Eriksson, 
contends that the exclusive remedy for dissenting members to 
such mergers is the distribution of their interest in the LLC, 
pursuant to G. L. c. 156C, § 60 (b).  The plaintiff, W. Robert 
Allison, contends that other equitable relief is available but 
that the judge erred in declining to rescind the merger.  We 
conclude that G. L. c. 156C, § 60 (b), provides the exclusive 
remedy for dissenting members of a limited liability company 
that has voted to merge, so long as the merger is undertaken in 
accordance with G. L. c. 156C, §§ 59-63.  Of relevance here is 
G. L. c. 156C, § 63 (b), which provides that members of a 
limited liability company owe each other fiduciary duties, but 
that such duties may be enhanced or restricted according to the 
terms in the operating agreement.  Where, as here, a member of 
an LLC conducts a merger in breach of his fiduciary and 
contractual duties, the merger has not been conducted in 
compliance with § 63, and the remedy provided by G. L. c. 156C, 
§ 60 (b), is not exclusive.  Thus, the trial judge did not abuse 
his discretion in fashioning an equitable remedy.  We also 
affirm most of the equitable relief awarded, but remand that 
portion of the trial judge's decision which increases Allison's 
interest in the merged LLC to five per cent, as we cannot 
discern any basis in the record for that figure.2 
                     
 
2 We acknowledge the amicus brief submitted by New England 
3 
 
 
 
1.  Background.  We recite the trial judge's relevant 
findings of fact, supplemented with undisputed evidence from the 
record. 
 
a.  Formation and operation of Applied Tissue Technologies.  
Allison is an experienced corporate attorney who left the legal 
field in 1997.  Eriksson is the former chief of the division of 
plastic surgery at a hospital in Boston.  In 1999, Eriksson was 
looking to start a business based on technology he had developed 
at the hospital.  He reached out to Allison, and the two 
eventually agreed to form Applied Tissue Technologies (ATT-MA), 
a Massachusetts LLC.  Allison contributed $15,000 to the 
company, and Eriksson contributed $45,000.  Allison received a 
twenty-five per cent membership interest in ATT-MA; Eriksson 
received a seventy-five per cent interest.  Allison became the 
president and chief executive officer (CEO) of the company. 
 
Allison drafted the initial operating agreement for ATT-MA.3  
It provided that Allison and Eriksson were the only members of 
ATT-MA and that ATT-MA was to be managed by the members, who 
would vote based on their respective membership interests.  Any 
additional capital contributions required the unanimous consent 
of all members.  The judge found that this requirement "is not 
                                                                  
Legal Foundation in support of the defendant. 
 
 
3 The trial judge found that W. Robert Allison was not 
acting as Elof Eriksson's attorney when Allison drafted the 
operating agreement. 
4 
 
 
uncommon in a joint venture involving two participants who agree 
that they must both consent to certain, fundamental business 
changes, even though they do not have equal interests in the 
profit and loss of the enterprise." 
 
In 2003, Allison and Eriksson each decided to transfer a 
portion of their respective interests in ATT-MA into trusts for 
the benefit of their families.  To that end, Allison and 
Eriksson also executed a new operating agreement that was 
lengthier and more sophisticated than the original.  It 
contained several important changes:  (1) it created a manager 
position, to be elected by voting members; (2) it defined the 
term, "Original Members," as Allison and Eriksson; (3) both 
original members had to agree to the addition of any new 
members; (4) any change to the operating agreement required 
consent from both original members; (5) any change to the 
operating agreement that had the effect of reducing a member's 
interest in ATT-MA or interest in distribution from a sale of 
assets or cash flow required consent from the affected member; 
(6) a vote of at least sixty per cent of the membership was 
required to make significant business decisions.  The agreement 
further provided that members were entitled to examine ATT-MA's 
books and records at any and all reasonable times, and that 
members had a duty to conduct company affairs in good faith.  
The new operating agreement also maintained a provision from the 
5 
 
 
original agreement that required both Allison and Eriksson to 
consent to any further capital contributions.  Subsequent to the 
enactment of the new operating agreement, Allison was elected as 
manager. 
 
At some point, ATT-MA hired Christian Baker to work as a 
full-time employee.  In 2004, Baker received a two per cent 
interest in ATT-MA, transferred from Allison and Eriksson 
according to their twenty-five per cent/seventy-five per cent 
split.  By 2007, ATT-MA could not afford to pay Baker, and his 
employment was terminated.  A dispute arose between Allison and 
Eriksson about the terms of Baker's termination, which was 
ultimately resolved by Allison transferring two per cent of his 
interest in ATT-MA to Eriksson.  After this transfer, the 
membership interests in ATT-MA were as follows:  Eriksson owned 
55.5 per cent; Eriksson's family trust owned twenty per cent; 
Allison owned 14.66 per cent; Allison's family trust owned 7.84 
per cent; and Baker owned two per cent. 
 
From 2006 to 2008, Eriksson lent ATT-MA $200,000 to cover 
operating expenses.  This sum was later repaid to him with 
fifteen per cent interest.  In March, 2010, Allison stepped down 
as CEO, and Karl Proppe, Eriksson's close friend, became the new 
CEO.  In November, 2011, Allison resigned as president and 
manager. 
6 
 
 
 
By January, 2012, ATT-MA was almost out of cash.  Eriksson 
was unwilling to lend the company any more money, but indicated 
he would be willing to invest money in exchange for additional 
equity.  However, Allison was unwilling to have his interest 
diluted unless the investment came from an outside investor, 
even though the members generally agreed that ATT-MA was at 
least one year away from being able to attract outside 
investors.  In response to Allison's stance, Eriksson indicated 
that the operating agreement should be amended.4 
 
Eriksson eventually offered to invest $600,000 if Allison 
invested $200,000, but Allison rejected the proposal.  Allison 
also refused to use personal assets to secure a bank loan for 
ATT-MA.  Eriksson was frustrated by Allison's position and 
suggested that ATT-MA should be dissolved. 
 
b.  The merger.  In February, 2012, Eriksson's daughter 
arranged for him to meet with a senior attorney at her firm, 
Gary Schall, to discuss his concerns about the company.  They 
ultimately decided that an appraisal of the company was 
necessary.  Eriksson and Proppe retained Schall and his firm to 
represent ATT-MA.  The judge found that Eriksson, Proppe, and 
                     
 
4 The trial judge explained that Eriksson wanted to amend 
the operating agreement "presumably so that he could invest 
equity over Allison's objection, but [he] was non-specific 
concerning what the amendments should be." 
7 
 
 
Schall all specifically decided not to let Allison know of 
Schall's engagement. 
 
ATT-MA hired a firm to conduct the appraisal.  Eriksson 
informed Allison of the appraisal, but not Schall's involvement 
or the purpose of the appraisal.  The appraisal firm concluded 
that one hundred per cent of ATT-MA's equity had a value of 
$239,000, but only if $620,000 of additional funding was 
invested; without the additional $620,000, ATT-MA was worth $0.5 
 
In May, 2012, Eriksson and Schall planned how they would 
deal with Allison.  First, Eriksson would offer to purchase 
Allison's individual and trust membership interests based on the 
appraisal value.  If Allison rejected the offer, Eriksson would 
form a new LLC under Delaware law (ATT-DE), and create a new 
operating agreement "that would accomplish Eriksson's goals."  
ATT-MA would then be merged into ATT-DE. 
 
On May 6, 2012, Eriksson offered to purchase Allison's 
collective membership interests, totaling 22.5 per cent, for 
$53,775, i.e., 22.5 per cent of the $239,000 valuation.  Allison 
rejected the offer. 
                     
 
5 The trial judge noted that the appraisal was "curiously 
principally based on a discounted cash flow valuation, although 
[ATT-MA] had not generated any significant income in the last 
few years, and its only significant assets [were] its 
[intellectual property]."  The appraisal company "did not 
consult with anyone who could value [ATT-MA's intellectual 
property]." 
8 
 
 
 
Later the same month, ATT-DE was created.  Proppe, now the 
manager and CEO of both ATT-MA and ATT-DE, executed the 
agreement and plan of merger on May 29, 2012.  That evening, 
Eriksson and Proppe informed Allison of the merger.  Up to this 
point, Allison had no prior notice of the merger or Schall's 
representation of ATT-MA. 
 
The operating agreement for ATT-DE is significantly 
different from the operating agreement for ATT-MA.  The ATT-DE 
operating agreement creates a class of preferred shares with 
liquidation preference over common shares, and establishes a 
board of directors (board) to manage the company.6  Members have 
no rights other than to select the directors of the board.  
Directors of the board are elected by members holding a majority 
of the company's outstanding shares.  As the holder of the 
majority of the company's shares, Erickson could select the 
directors.  As a minority member, Allison would not have the 
ability to successfully elect directors by himself.  The 
                     
 
6 Section 6.01 of the ATT-DE operating agreement provides in 
relevant part: 
 
"The business and affairs of [ATT-DE] shall be managed 
by or under the direction of the Board [of Directors], 
which shall have the right, power and authority to exercise 
all of the powers of [ATT-DE] except as otherwise provided 
by law or this Agreement. . . .  Except as may be expressly 
provided otherwise elsewhere in this Agreement or pursuant 
to non-waivable provisions of [Delaware's limited liability 
company act], the Members shall have no voting 
rights . . . ." 
9 
 
 
operating agreement also provides that members owe no fiduciary 
duty to ATT-DE or one another, and attempts to limit all other 
duties to the extent permitted by Delaware law.7  Members do not 
have the right to access ATT-DE's books or records, or to 
receive any information about ATT-DE's business or affairs, 
without the board's authorization.8  No membership interest may 
be transferred without board approval, even to family members. 
                     
 
7 Specifically, § 6.04(a) of the operating agreement states: 
 
"The Members' respective obligations to each other are 
limited to the express obligations set forth in this 
Agreement, subject only to the implied contractual covenant 
of good faith and fair dealing.  No Member shall have any 
duties or liabilities, including fiduciary duties, to [ATT-
DE] or to any other Member, or to the Board or any 
Director, and the provisions of this Agreement, to the 
extent that they restrict or otherwise modify, or 
eliminate, the duties and liabilities, including fiduciary 
duties, of the Members otherwise existing at law or in 
equity, are agreed by the Members to replace such other 
duties and liabilities of the Members.  Any standard of 
care or duty imposed by or under the Act or any other law, 
rule or regulation (or any judicial decision based on or 
interpreting the same) shall be modified, waived or 
limited, to the extent permitted by law, as required to 
permit each Member to act under this Agreement and to make 
any decision such Member is authorized to make hereunder in 
such manner as such Member may determine in his, her or its 
sole and absolute discretion, subject only to the implied 
contractual covenant of good faith and fair dealing."  
(Emphasis added.) 
 
 
8 Section 7.01 of the operating agreement provides in 
relevant part: 
 
"Except as otherwise expressly provided in this 
Agreement, no Member shall have any right of access to any 
of the books or records of [ATT-DE] or to receive any 
information about the business, affairs, properties or 
10 
 
 
 
In the meantime, Eriksson quickly purchased $250,000 of 
preferred shares in ATT-DE.  Allison was given the opportunity 
to purchase enough preferred shares of ATT-DE to maintain his 
ownership interest, but declined to do so.  Instead, Allison 
challenged the propriety of these transactions.  In July, 
Allison was denied further access to ATT-MA's offices, which now 
belonged to ATT-DE. 
 
Over the next eighteen months, Eriksson purchased preferred 
shares in ATT-DE, totaling $923,536.  As a result, by January, 
2014, Allison's combined interests in ATT-DE had been reduced to 
only 3.32 per cent.  His interests would also be subordinated to 
preferred shareholders' interests in the event of a liquidation. 
 
Allison, Eriksson, Proppe, and Schall met to attempt to 
resolve Allison's claim that Eriksson had committed a breach of 
his fiduciary duties by authorizing the merger and purchasing 
preferred shares.  Schall asked Allison if he would rather have 
3.32 per cent of an ongoing business or 22.5 per cent of a 
defunct one.  Allison responded that he would prefer a larger 
percentage of the failed business. 
 
Eriksson appeared to be willing to amend some of the 
provisions of ATT-DE's operating agreement in Allison's favor.  
                                                                  
ownership of [ATT-DE] unless the Board determines, in its 
discretion in compliance with [§ 6.04(b)], to grant such 
access or to provide such information to one or more 
Members." 
11 
 
 
In particular, he seemed willing to provide Allison with access 
to information and the opportunity to confer on decisions 
affecting ATT-DE, as well as a right of first refusal on 
additional investments or the sale of shares.  However, Eriksson 
was unwilling to reclassify his own investments as debt and 
restore Allison's prior ownership interests in the company.  
Allison would not agree to any compromise that did not include 
the restoration of his equity without the risk of dilution, 
except from a third-party investment. 
 
Eriksson's son-in-law, Michael Broomhead, became CEO of 
ATT-DE in November, 2012.  Broomhead actively looked for 
investors without success.  Broomhead invested $10,000 in ATT-DE 
and Proppe invested $30,000. 
 
In May, 2013, Allison brought suit against Eriksson, 
Eriksson's wife, and Proppe, seeking a preliminary injunction of 
the merger.  The motion judge ordered ATT-DE to allow Allison to 
examine its books and records at reasonable intervals, but 
otherwise denied the preliminary injunction. 
 
In his complaint, Allison brought claims for breach of 
contract, intentional interference with advantageous relations, 
breach of fiduciary duty, civil conspiracy, and declaratory 
judgment.  After a jury-waived trial, Allison prevailed on his 
claim against Eriksson for breach of fiduciary duty, but lost on 
12 
 
 
all other claims.9  The judge granted equitable relief, ordering 
the following amendments to the operating agreement of ATT-DE:  
(1) the rescission of § 6.01, such that members shall have 
voting rights as provided under Delaware law; (2) the rescission 
of § 6.04 to the extent that it eliminated members' fiduciary 
duties to one another, and to directors, officers, and 
shareholders; (3) the rescission of the first two sentences of 
§ 7.01, such that members may access the company's books and 
records; (4) the addition of a provision requiring the directors 
to "report to Allison either orally or in writing on the 
business and affairs of" ATT-DE, to timely advise him of 
anticipated extraordinary business events, and to provide him 
with a copy of ATT-DE's annual financial statements, if any.  
The judge also ordered that the combined membership interest of 
Allison and the Allison Trust be "grossed up" to five per cent 
and not be subject to dilution without a bona fide outside 
investment.  Any such dilution must be on the same terms as 
holders of common or preferred shares of ATT-DE.  If ATT-DE 
should be liquidated before receiving any outside investment, 
Allison's interest must be "treated pari passus with the 
preferred shareholders." 
                     
 
9 Allison did not appeal from the judgment on any of these 
other claims. 
13 
 
 
 
The parties cross-appealed.  We transferred the appeals to 
this court on our own motion. 
 
2.  Discussion.  a.  Relevant provisions of G. L. c. 156C.  
We must first determine whether distribution is the exclusive 
remedy for a minority shareholder of an LLC who has objected to 
a merger that breaches fiduciary duties.  The governing 
provision is G. L. c. 156C, § 60 (b).  Where a minority member 
objects to the merger, but the majority of members vote to merge 
anyway, G. L. c. 156C, § 60 (b), provides: 
"The exclusive remedy of a member of a domestic 
limited liability company, which has voted to consolidate 
or to merge with another entity under the provisions of 
[G. L. c. 156C, §§ 59-63], inclusive, who objects to such 
consolidation or merger, shall be the right to resign as a 
member and to receive any distribution with respect to his 
limited liability company interest, as provided in [G. L. 
c. 156C, §§ 31-37], inclusive.  Such members and the 
resulting or surviving entity shall have the rights and 
duties, and shall follow the procedure set forth in said 
sections." 
 
 
For questions of statutory interpretation, we look first to 
the text of the statute.  Phillips v. Equity Residential Mgt., 
L.L.C., 478 Mass. 251, 257 (2017).  In so doing, we must examine 
"the language of the entire statute, not just a single sentence" 
or phrase, "and attempt to interpret all of its terms 
'harmoniously to effect the intent of the Legislature.'"  Id., 
quoting Commonwealth v. Hanson H., 464 Mass. 807, 810 (2013).  
Here, the statute expressly provides for distribution of the 
dissenting member's interest in the LLC as an exclusive remedy 
14 
 
 
where an LLC has voted to merge "under the provisions" of G. L. 
c. 156C, §§ 59-63.  We must therefore consider the requirements 
of the cross-referenced sections, particularly § 63, to 
understand the scope of the exclusive remedy provision.10,11 
 
General Laws c. 156C, §§ 59-62, address the mechanics and 
consequences of merging or consolidating an LLC.  By contrast, 
G. L. c. 156C, § 63, defines the scope of a member's or 
                     
 
10 We note that unlike G. L. c. 156D, the Commonwealth's 
most recent business corporations statute, which provides 
detailed commentary from its drafters, the legislative history 
on G. L. c. 156C is less clear.  See Halebian v. Berv, 457 Mass. 
620, 624-625 (2010), and authorities cited.  The authors of 
G. L. c. 156C took guidance from a number of sources, including 
the existing corporate statutes, the Massachusetts Uniform 
Limited Partnership Act, other States' limited liability company 
(LLC) statutes, and the American Bar Association (ABA) Prototype 
LLC Act.  Parker, The Limited Liability Company:  An 
Introduction, 39 Boston B.J. 8, 12 (1995).  However, the 
language in G. L. c. 156C, § 60 (b), does not appear to be taken 
from a single source.  The ABA's Prototype LLC Act does not even 
provide a distribution remedy for mergers.  See American Bar 
Association, Working Group on Prototype Act, Prototype Limited 
Liability Company Act, at § 1202 commentary, at 88 (Nov. 19, 
1992).  The Massachusetts Uniform Limited Partnership Act does 
not contain "exclusive remedy" language.  See G. L. c. 109, 
§§ 1A, 16A.  As Eriksson points out, the then most recent 
business corporations statute, G. L. c. 156B, contains an 
"exclusive remedy" provision, but provides an exception for 
"illegal or fraudulent" corporate actions.  See G. L. c. 156B, 
§ 98. 
 
 
11 Eriksson asserts that interpreting G. L. c. 156C, § 60 
(b), in reference to G. L. c. 156C, § 63, is barred by the fact 
that Allison did not make this particular statutory 
interpretation argument below.  Although Allison did not 
explicitly rely on G. L. c. 156C, § 63 (b), below, he did raise 
the issue of how § 60 should be constructed and thus the issue 
is properly before us.  See Wilcox v. Riverside Park Enters., 
Inc., 399 Mass. 533, 535 n.5 (1987). 
15 
 
 
manager's duties and liabilities.  Specifically, § 63 (b) 
states: 
"To the extent that, at law or in equity, a member or 
manager has duties, including fiduciary duties, and 
liabilities relating thereto to a limited liability company 
or to another member or manager, (1) any such member or 
manager acting under the operating agreement shall not be 
liable to the limited liability company or to any such 
other member or manager for the member's or manager's good 
faith reliance on the provisions of the operating 
agreement, and (2) the member's or manager's duties and 
liabilities may be expanded or restricted by provisions in 
the operating agreement." 
 
This provision establishes the rules governing fiduciary and 
contractual duties in LLCs, including the fiduciary duties 
applicable to mergers.  The subsection's opening statement about 
"[t]o the extent that" such duties exist "at law or in equity," 
is best read as an acknowledgement that the courts define and 
determine the nature of such duties, and that the courts provide 
for their enforcement as default rules.  See Piemonte v. New 
Boston Garden Corp., 377 Mass. 719, 723 (1979) (consideration of 
Delaware judicial decisions appropriate where Massachusetts's 
provision is based on similar Delaware statute); Feeley v. 
NHAOCG, LLC, 62 A.3d 649, 661-662 (Del. Ch. 2012) (court 
interpreting analogous phrase in Delaware's LLC statute 
concluded Legislature was not "agnostic" about existence of 
fiduciary duties but recognized that they do exist).12  See also 
                     
 
12 General Laws c. 156C, § 63 (b), appears to be taken 
almost verbatim from the 1992 version of Delaware's LLC 
16 
 
 
R.W. Southgate & D.W. Glazer, Massachusetts Corporation Law and 
Practice § 19.4 (2d ed. 2012 & Supp. 2018) ("better reading [of 
'to the extent' clause] is . . . to leave the fiduciary duties 
of members and managers to the courts to define over time").  
The LLC statute further allows, however, for the modification of 
these duties.  According to § 63 (b), such duties and 
liabilities "may be expanded or restricted by provisions in the 
operating agreement."  This recognizes that "[a]n LLC is 
primarily a creature of contract, and the parties have wide 
contractual freedom to structure the company as they see fit."  
Seneca Invs. LLC v. Tierney, 970 A.2d 259, 261 (Del. Ch. 2008).  
Additionally, § 63 (b) provides that a member's or manager's 
good faith reliance on the operating agreement provides a 
defense to liability. 
The merger here was done in contravention of the duties 
recognized in § 63 (b) and does not fall under the good faith 
defense provision.  As the trial judge correctly found, Eriksson 
                                                                  
fiduciary duty provision, Del. Code Ann. tit. 6, § 18-1101 (c) 
(2013).  Delaware's LLC Act has since been amended to allow LLCs 
to eliminate fiduciary duties, but our interpretation of § 63 
(b) remains consistent with the Delaware Chancery Court's 
interpretation that the LLC fiduciary duty provision provides 
for the existence of fiduciary duties, and their enforcement as 
default rules in the absence of contractual modification.  See 
Feeley v. NHAOCG, LLC, 62 A.3d 649, 661-663 (Del. Ch. 2012); 
Auriga Capital Corp. v. Gatz Props. LLC, 40 A.3d 839, 851 (Del. 
Ch. 2012). 
17 
 
 
clearly committed a breach of his fiduciary duties.  Indeed, 
this is undisputed on appeal. 
Although § 63 (b) provided Allison and Eriksson the ability 
to restrict members' and managers' duties, they chose instead to 
expand them.  ATT-MA's operating agreement expressly prohibited 
many of the consequences of this merger, such as the ability to 
dilute a member's interest without that member's consent, the 
ability to amend the operating agreement without the original 
members' consent, and the ability to cut members out of the 
management of the company.  Thus, Eriksson was not acting in 
good faith reliance on the operating agreement when he conducted 
the merger in secret, so as to subvert each of these explicit 
protections. 
 
The many minority protections provided in ATT-MA's 
operating agreement also indicate that the company was set up to 
establish protections akin to those provided at law to a close 
corporation.13  Because close corporations often involve a small 
number of owners, who are "quite dependent on one another for 
the success of the enterprise[,] . . . the relationship among 
the stockholders must be one of trust, confidence and absolute 
                     
 
13 A closely held corporation is defined as having (1) a 
small number of shareholders; (2) no ready market for the 
corporation's shares; and (3) substantial majority shareholder 
participation in the management, direction, and operations of 
the corporation.  See Brodie v. Jordan, 447 Mass. 866, 868-869 
(2006), quoting Donahue v. Rodd Electrotype Co. of New England, 
Inc., 367 Mass. 578, 586 (1975). 
18 
 
 
loyalty if the enterprise is to succeed."  Donahue v. Rodd 
Electrotype Co. of New England, Inc., 367 Mass. 578, 587 (1975).  
The nature of these close corporations imposes a duty of "utmost 
good faith and loyalty" (citation omitted).  Id. at 593.  The 
minority protections in ATT-MA's operating agreement established 
an analogous relationship and duty among its members, and thus, 
the close corporation doctrine, and the strict fiduciary duty it 
imposes, applies here.14 
 
The trial judge correctly found that "Eriksson certainly 
did not act with utmost good faith toward Allison."  Eriksson 
does not challenge this finding, nor could he.  Eriksson 
initiated the merger in secret, acting covertly in order to 
dilute Allison's interest in the company and remove Allison's 
minority rights, which were both expressly protected by ATT-MA's 
operating agreement. 
 
As we have explained, "the danger of abuse of fiduciary 
duty is especially great in a freeze-out merger."  See Coggins 
v. New England Patriots Football Club, Inc., 397 Mass. 525, 534 
(1986), S.C., 406 Mass. 666 (1990).  In close companies and 
close corporations, such freeze-outs defeat "the reasonable 
                     
 
14 Not all LLCs are close companies.  The test for whether a 
corporation is closely held, see note 13, supra, is not 
dispositive for determining whether an LLC is closely held.  As 
LLCs are creatures of contract, determining whether an LLC is 
closely held is a more fact-specific determination that will 
depend on the way in which a particular LLC is structured. 
19 
 
 
expectations" of minority shareholders.  See Pointer v. 
Castellani, 455 Mass. 537, 550 (2009).  Here we have such a 
freeze-out merger. 
 
In sum, we are presented with a merger that clearly 
contravenes the fiduciary and contractual duties recognized in 
§ 63 (b).  The question that remains is whether such a merger 
may still be characterized as a merger "under the provisions of 
[G. L. c. 156C, §§ 59-63]," and therefore be covered by the 
exclusive remedy provision of § 60 (b).  We conclude that it 
cannot for the following reasons. 
First, the exclusive remedy provision is expressly limited 
to mergers conducted "under the provisions of [G. L. c. 156C, 
§§ 59-63]."  It would be anomalous to treat a merger conducted 
in contravention of the fiduciary and contractual duties 
identified in § 63 (b) as a merger "under" § 63.  This is 
especially true given the great flexibility provided to LLCs by 
statute either to restrict or enhance duties.  Here, instead of 
restricting fiduciary duties, the operating agreement structured 
the LLC as a closely held company designed to prevent the very 
freeze-out accomplished by the merger. 
We also have held that "a freeze-out merger in technical 
compliance" with G. L. c. 156B or 156D does not divest the 
courts of their equitable jurisdiction, and shareholders who 
dissented to the merger "are not limited to the statutory remedy 
20 
 
 
of judicial appraisal [and distribution]," where the majority 
has violated its fiduciary duties.  See Coggins, 397 Mass. at 
532 & n.13, 533.  See also G. L. c. 156D, § 13.02 (e) 
(preserving Coggins holding for corporations formed under G. L. 
c. 156D).   We conclude that the same principles apply here 
given how Erickson and Allison structured the LLC, imposing 
contractual and fiduciary duties on each other, including those 
designed not to allow the freeze-out and cash-out of one by the 
other. 
Eriksson argues that G. L. c. 156C, § 60 (b), must 
nonetheless be the exclusive remedy here because, unlike G. L. 
c. 156B, § 98, or G. L. c. 156D, § 13.02 (e), the two business 
corporation statutes discussed supra, it does not contain an 
explicit exception for illegal or fraudulent corporate actions.  
However, Eriksson's interpretation ignores § 60 (b)'s cross-
reference and incorporation of § 63 (b) and the fiduciary and 
contractual duties and defenses it defines.  As we have 
explained, a merger in violation of the duties and defenses 
established in § 63 (b) is not a merger "under" § 63.  Although 
compliance with § 63 (b) is a precondition rather than an 
exception to § 60 (b), it serves the same purpose as the 
exceptions found in G. L. c. 156B and G. L. c. 156D. 
 Finally, we conclude that if it was the Legislature's 
understanding that merger would provide a unilateral means for 
21 
 
 
majority members to extinguish fiduciary duties and freeze out 
minority members from LLCs, it would have said so expressly.  
Although we recognize that the scope of the exclusivity 
provision for LLC mergers could have been more clearly written, 
we conclude that the Legislature would not have intended to 
create anything less than a transparent means of extinguishing 
fiduciary duties and freezing out minority members.  See 
Gevurtz, Squeeze-Outs and Freeze-Outs in Limited Liability 
Companies, 73 Wash. U.L.Q. 497, 533 (1995) ("even if majority 
expulsion is the better default rule, it should be explicit in 
the statute rather than hidden in merger provisions"). 
 
Thus, we hold that in this case, where the merger of an LLC 
constitutes a breach of fiduciary and contractual duties in 
contravention of G. L. c. 156C, § 63 (b), G. L. c. 156C, 
§ 60 (b), does not prevent the courts from providing the 
dissenting members with an equitable remedy other than the 
statutory right of distribution.  See Coggins, 397 Mass. at 532 
& n.13, 533.  Thus, a majority member may not rely on § 60 (b) 
to exclude all other equitable relief when he or she has 
initiated a merger in breach of his or her existing fiduciary 
and contractual duties. 
 
b.  Propriety of the remedy.  The proper remedy for a 
freeze-out merger is one that "will put [the minority member] in 
the position he would have been in had the freeze-out not 
22 
 
 
occurred, and compensates him for the denial of his reasonable 
expectations."  Pointer, 455 Mass. at 560.  See Brodie v. 
Jordan, 447 Mass. 866, 870-871 (2006) (remedy for freeze-out 
"should, to the extent possible, restore to the minority 
shareholder those benefits which she reasonably expected, but 
has not received because of the fiduciary breach").  This 
"remedy should neither grant the minority a windfall nor 
excessively penalize the majority."  Id. at 871.  The remedy 
must also take into account the passage of time and changed 
circumstances.  See Coggins, 397 Mass at 536.  The LLC merger 
egg may not always be unscrambled.  Courts therefore have broad 
equitable powers in specifying the appropriate remedy, and their 
choice of remedy is reviewed for abuse of discretion.  See 
Brodie, supra at 871. 
 
Here, the trial judge carefully crafted an equitable 
remedy, amending specific provisions in ATT-DE's operating 
agreement that had diminished Allison's rights.  The judge's 
amendments recreate Allison's minority member protections to the 
largest extent possible under Delaware law, within the existing 
structure of ATT-DE.  Despite this, Allison insists that the 
only appropriate remedy was to rescind the merger and restore 
Allison's interest in ATT-MA.  We disagree. 
 
A judge need not order rescission of a freeze-out merger if 
it would not be in the best interest of the company.  See 
23 
 
 
Coggins, 397 Mass. at 536.  This litigation has gone on for five 
years, and concerns a merger that occurred six years ago.  See 
id. (rescission of merger not equitable where litigation lasted 
many years and prior position of parties was difficult to 
restore).  Despite being a sophisticated corporate attorney, 
Allison waited seven months after settlement negotiations had 
ended to file suit.  By that point, the merger had been in place 
for nearly one year and Eriksson had already invested over 
$500,000 in ATT-DE.  Rescinding the merger and backing out 
Eriksson's additional equity six years later would be 
complicated and inequitable.  Further, the merger was 
precipitated by Allison's refusal to invest additional money in 
ATT-MA while preventing Eriksson from making capital 
contributions.  Indeed, the trial judge found that "Allison's 
position that he would not invest anything more in [ATT-MA] or 
secure its debt with personal assets, while simultaneously 
asserting his right against diluting his interest, does not 
appear consistent with his own fiduciary responsibilities to 
Eriksson."  Under these circumstances we discern no abuse of 
discretion in the judge's decision to amend ATT-DE's operating 
agreement to restore Allison's minority protections instead of 
rescinding the merger.  See Demoulas v. Demoulas, 432 Mass. 43, 
67 (2000), quoting Clark v. Greenhalge, 411 Mass. 410, 417 
(1991) ("one who seeks equity must do equity and . . . a court 
24 
 
 
will not permit its equitable powers to be employed to 
accomplish an injustice"). 
 
In addition to amending ATT-DE's operating agreement, the 
judge increased Allison's ownership interest to five per cent.  
Any such equitable change to Allison's ownership interest in 
ATT-DE should, in combination with the amendments to ATT-DE's 
operating agreement, "attempt to reset the proper balance 
between the majority's 'concede[d] . . . rights to what has been 
termed 'selfish ownership,' . . . and the minority's reasonable 
expectations of benefit from its shares."  Brodie, 447 Mass. at 
871, quoting Wilkes v. Springside Nursing Home, Inc., 370 Mass. 
842, 850-851 (1976).  Here, however, the judge did not explain 
how he settled on the five per cent figure.  The only potential 
basis for this increase that we can identify in the record is 
Allison's transfer of two per cent of his interest to Eriksson 
after their disagreement over Baker's termination.  Yet the 
judge's findings do not explain whether this was the reason for 
increasing Allison's interest.  Further, a two per cent increase 
would give Allison a 5.32 per cent interest in the company, not 
five per cent exactly.  Accordingly, we deem it appropriate to 
remand this matter on the question whether and to what extent 
Allison's interest in ATT-DE should be increased, and the 
reasons for any increase provided.  See Pointer, 455 Mass. at 
25 
 
 
560 (remand ordered where appropriate remedy depended on further 
fact finding). 
 
3.  Conclusion.  For the reasons discussed, the judgment 
below is affirmed, except with respect to the issue of Allison's 
ownership interest percentage in ATT-DE.  We remand to the 
Superior Court for further explanation on the propriety of 
increasing Allison's interest to five per cent. 
 
 
 
 
 
 
 
So ordered.