Title: International Brotherhood of Electrical Workers Local No. 129 Benefit Fund v. Tucci
Citation: N/A
Docket Number: SJC-12137
State: Massachusetts
Issuer: Massachusetts Supreme Court
Date: March 6, 2017

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SJC-12137 
 
INTERNATIONAL BROTHERHOOD OF ELECTRICAL WORKERS LOCAL NO. 129 
BENEFIT FUND1  vs.  JOSEPH M. TUCCI & others2 (and eight 
consolidated cases3). 
 
 
 
Suffolk.     November 7, 2016. - March 6, 2017. 
 
Present:  Gants, C.J., Botsford, Lenk, Hines, Gaziano, Lowy, & 
Budd, JJ. 
 
 
Corporation, Stockholder's derivative suit, Merger, Sale of 
assets, Valuation of stock, Board of directors.  Practice, 
Civil, Class action, Dismissal. 
 
 
 
                     
1 Individually and on behalf of all others similarly 
situated. 
 
 
2 Joseph M. Tucci, Jose E. Almeida, Michael W. Brown, Donald 
J. Carty, Randolph L. Cowen, James S. Distasio, John R. Egan, 
William D. Green, Edmund F. Kelly, Jami Miscik, Paul Sagan, 
Laura J. Sen, EMC Corporation, Denali Holding Inc., Dell Inc., 
and Universal Acquisition Co. 
 
3 Breffni Barrett vs. Joseph M. Tucci & others; City of 
Miami Police Relief and Pension Fund vs. Joseph M. Tucci & 
others; Karl Graulich IRA & others vs. Joseph M. Tucci & others; 
Lawrence Frank Vassallo vs. EMC Corporation & others; Howard 
Lasker vs. EMC Corporation & others; Local Union No. 373 U.A. 
Pension Plan vs. EMC Corporation & others; City of Lakeland 
Employees' Pension and Retirement Fund vs. Joseph M. Tucci & 
others; Su Ma vs. Joseph M. Tucci & others. 
2 
 
 
 
 
Civil actions commenced in the Superior Court Department on 
October 15, October 16, October 19, October 20, October 23, 
October 28, and October 29, 2015. 
 
 
After consolidation, a motion to dismiss was heard by 
Edward P. Leibensperger, J. 
 
 
The Supreme Judicial Court granted an application for 
direct appellate review. 
 
 
 
Jason M. Leviton (Michael G. Capeci, of New York, & Joel A. 
Fleming also present) for International Brotherhood of 
Electrical Workers Local No. 129 Benefit Fund & others. 
 
Thomas J. Dougherty (Kurt Wm. Hemr also present) for Joseph 
M. Tucci & others. 
 
John Pagliaro & Martin J. Newhouse, for New England Legal 
Foundation, amicus curiae, submitted a brief. 
 
Ian D. Roffman & Matthew J. Connolly, for Associated 
Industries of Massachusetts, amicus curiae, submitted a brief. 
 
 
 
BOTSFORD, J.  In these consolidated cases, shareholders of 
a publicly traded corporation claim that a merger transaction 
proposed by the board of directors will result in the effective 
sale of the corporation for an inadequate price.  The question 
we consider is whether they may bring that claim directly 
against the board members, or must bring it as a derivative 
claim on behalf of the corporation.  We answer that the claim 
must be brought derivatively.4 
                     
 
4 We acknowledge the amicus briefs submitted by Associated 
Industries of Massachusetts and New England Legal Foundation. 
 
3 
 
 
 
 
Background.  The plaintiffs appeal from the dismissal of 
their first amended class action complaint (complaint)5 alleging 
breaches of fiduciary duty by the board of directors of EMC 
Corporation (EMC) arising from a merger between EMC and Denali 
Holding Inc. and Dell Inc. (collectively, Dell).  At the time 
that they commenced these actions, the plaintiffs were 
shareholders of EMC; the proposed merger would result in the 
shareholders receiving a cash payment in exchange for their EMC 
stock.  The plaintiffs' complaint alleges that they bring the 
actions on behalf of a class consisting of "all other 
shareholders of EMC . . . who are or will be deprived of the 
opportunity to maximize the value of their shares of EMC as a 
result of the [directors'] breaches of fiduciary duty and other 
misconduct."  The plaintiffs assert that the members of EMC's 
board of directors violated their fiduciary duties, allegedly 
owed to both EMC and the shareholders, by "(i) failing to take 
steps to maximize the value of EMC stock; and (ii) agreeing to 
unreasonably preclusive deal protection provisions, thereby 
hindering any potential bid that may have been superior" to the 
sale of EMC to Dell. 
                     
5 The first amended class action complaint (complaint) was 
filed by the International Brotherhood of Electrical Workers 
Local No. 129 Benefit Fund (IBEW).  The actions brought by the 
other plaintiffs were consolidated with IBEW's action prior to 
the dismissal of the complaint. 
4 
 
 
 
 
We recite the pertinent facts alleged in the complaint, 
taking as true its factual allegations and drawing all 
reasonable inferences in the plaintiffs' favor.  Blank v. 
Chelmsford Ob/Gyn, P.C., 420 Mass. 404, 407 (1995).  EMC is a 
Massachusetts corporation providing information technology 
products and services in a global market, with its principal 
place of business in Hopkinton.  Its stock is traded on the 
NASDAQ stock exchange. 
 
EMC has a federation structure; that is, it acts as parent 
company to numerous related but independently functioning 
businesses.  The defendant Joseph M. Tucci, the long-time chief 
executive officer of EMC and the architect of this federated 
structure, wanted to keep the federation of companies together.  
This caused EMC's shares to trade at a "conglomerate discount" 
because investors valued the large company less than they would 
its individual components.  In the fall of 2014, an investor in 
EMC, Elliott Management (Elliott), began advocating for EMC to 
sell off the most valuable subsidiaries of the federation to 
provide maximum value to EMC's shareholders; the individual 
sales of some or all of EMC's subsidiaries would yield higher 
value per share for EMC shareholders than would sale of the 
company as a whole.  Elliott argued for an alternative to the 
conglomerate discount in which VMware, one of EMC's most 
valuable subsidiaries, would be sold separately and EMC would 
5 
 
 
 
inquire into acquisition for the remaining components.  Tucci, 
fearing that Elliott would prevail in breaking up the EMC 
federation, reached an agreement with Elliott in January, 2015, 
by which Elliott was permitted to participate in the appointment 
of new directors but agreed to a limit on stock it could buy for 
a period of time.  Tucci and EMC used this period to strategize 
the sale of the company to Dell.  Tucci had scheduled his 
retirement several times, but continually extended the date.  He 
negotiated the sale of EMC and all its subsidiaries to Dell via 
his long-time friend and business associate, Michael Dell, in 
order to keep the company's federated structure intact.  Tucci 
is to receive approximately $27 million in "change-in-control" 
benefits as a result of selling the entire company, a sum that 
Tucci would not have received if he had retired as planned.  The 
proposed transaction also permits Dell to shelter significant 
tax liability and to retain the value locked in the subsidiaries 
through a potential break-up of the EMC federation in the 
future. 
In October, 2015, Tucci announced that Dell agreed to 
acquire all of EMC for approximately $67 billion.6  Tucci used 
his influence over the other board members to convince them to 
approve the merger.  The transaction was unanimously approved by 
                     
 
6 There appears to be a discrepancy in the complaint as to 
the exact value of the transaction.  Both $67 billion and $64 
billion are figures used to describe its value. 
6 
 
 
 
the board and announced on October 12, 2015.  In approving the 
proposed merger, the board also agreed to termination fees that 
further dissuaded competing companies from placing a higher bid 
on EMC than Dell:  the merger agreement between EMC and Dell 
included a $2 billion termination fee that any higher bidder 
would have to pay before it could top the Dell bid. 
 
Under the proposed transaction's terms, EMC shareholders 
are to receive $24.05 in cash per share and an estimated 0.111 
shares of "tracking stock" of VMware; the tracking stock does 
not provide the same rights that shares in VMware common stock 
provide.  According to Elliott, selling EMC's interest in VMware 
separately would have yielded a total value for EMC's 
shareholders of over forty dollars per share.  In addition, just 
before the transaction was announced, VMware announced a new 
business venture with an expected revenue of several hundreds of 
millions of dollars in 2016.  This value would have been 
realized by EMC shareholders, but as a result of the transaction 
will be realized by Dell. 
 
The plaintiff International Brotherhood of Electrical 
Workers Local No. 129 Benefit Fund (IBEW) filed a complaint on 
October 15, 2015, as a direct action against members of EMC's 
board of directors in their individual capacities.  The 
defendants moved to dismiss the complaint for failure to state a 
claim pursuant to Mass. R. Civ. P. 12 (b) (6), 365 Mass. 754 
7 
 
 
 
(1974), after which eight other actions were consolidated with 
IBEW's action.  After a hearing, the judge allowed the motion, 
ruling that the board owed no fiduciary duty directly to the 
shareholders in this case and that the action was necessarily 
derivative because any alleged harm to shareholders was not 
distinct from harm to the corporation.  He reasoned that there 
were no allegations that any EMC shareholder would receive more 
per share in this proposed transaction than any other 
shareholder, nor were there allegations that any one shareholder 
or group of shareholders controlled the company to assure a 
positive vote on the transaction.  A judgment of dismissal 
entered on December 24, 2015.  The plaintiffs timely filed an 
appeal, and we subsequently granted the plaintiffs' application 
for direct appellate review.7 
 
Discussion.  The parties agree that EMC is a large, 
publicly traded Massachusetts corporation, and that the 
corporate statute under which it operates is the Massachusetts 
Business Corporation Act, G. L. c. 156D (act).  They also agree 
that the plaintiffs' legal claim is one for breach of fiduciary 
                     
 
7 The defendants inform us in their brief that at a special 
shareholder meeting held on July 19, 2016, ninety-eight per cent 
of voting EMC shareholders voted to approve the merger 
transaction.  See Form 8-K submitted by EMC Corporation to 
United States Securities and Exchange Commission (Sept. 9, 
2016), available at https://www.sec.gov/Archives/edgar/data/ 
790070/000119312516706576/d258881d8k.htm [https://perma.cc/8KTL-
XAGW]. 
8 
 
 
 
duty by the members of EMC's board of directors and particularly 
by Tucci for failing to take steps to maximize the value of the 
shareholders' EMC stock in arranging for the merger transaction.  
As indicated at the outset, the principal question raised is 
whether the plaintiffs, as shareholders who challenge the 
fairness or validity of a proposed merger on the ground that it 
will effectively result in the sale of EMC and for them a loss 
of personal property -- their EMC stock holdings -- for an 
inadequate price, must bring their claim against the directors 
as a derivative action on behalf of the corporation, or may 
bring it directly on their own behalf.  We review the judge's 
allowance of the motion to dismiss de novo.  Curtis v. Herb 
Chambers I-95, Inc., 458 Mass. 674, 676 (2011). 
 
1.  Derivative actions and claims.  "The derivative form of 
action permits an individual shareholder to bring 'suit to 
enforce a corporate cause of action against officers, directors, 
and third parties.' . . .  Devised as a suit in equity, the 
purpose of the derivative action was to place in the hands of 
the individual shareholder a means to protect the interests of 
the corporation from the misfeasance and malfeasance of 
'faithless directors and managers'" (emphasis in original; 
citations omitted).  Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 
90, 95 (1991). 
"The derivative action seeks, after management has failed 
9 
 
 
 
or refused to act, to redress a wrong to a corporation or 
association (usually by a few of its shareholders or 
members) . . . .  [T]he wrong underlying a derivative 
action is indirect, at least as to the shareholders.  It 
adversely affects them merely as they are the owners of the 
corporate stock; only the corporation itself suffers the 
direct wrong . . . .  [A] complaint alleging mismanagement 
or wrongdoing on the part of corporate officers or 
directors normally states a claim of wrong to the 
corporation:  the action, therefore, is properly 
derivative" (emphasis in original; citation omitted). 
 
Jackson v. Stuhlfire, 28 Mass. App. Ct. 924, 925 (1990).  See 
Bessette v. Bessette, 385 Mass. 806, 809-810 (1982) (plaintiff 
minority stockholders' claim that majority stockholder and 
director was paid excessive salary qualifies as wrong to 
corporation that plaintiffs were required to pursue as 
derivative claim; plaintiffs' direct action against majority 
stockholder properly dismissed).  To determine whether a claim 
belongs to the corporation, and is therefore derivative, "a 
court must inquire whether the shareholders' injury is distinct 
from the injury suffered generally by the shareholders as owners 
of corporate stock" (citation omitted).  Stegall v. Ladner, 394 
F. Supp. 2d 358, 364 (D. Mass. 2005) (applying Massachusetts 
law). 
 
2.  Direct versus derivative.  As the plaintiffs recognize, 
whether a claim asserted by stockholders of a Massachusetts 
corporation is one that may be pursued directly by them against 
the corporation's directors or must be pursued derivatively 
depends on whether the harm they claim to have suffered resulted 
10 
 
 
 
from a breach of duty owed directly to them, or whether the harm 
claimed was derivative of a breach of duty owed to the 
corporation.  See Bessette, 385 Mass. at 809.  See also Stegall, 
394 F. Supp. 2d at 364, quoting Branch vs. Ernst & Young U.S., 
U.S. Dist. Ct., No. Civ. A. 93-10024-RGS (D. Mass. Dec. 22, 
1995).  The plaintiffs also recognize that the act's provisions 
defining the standards of conduct applicable to corporate 
directors governs, or at least has a direct bearing on, the 
determination whether corporate directors owe a fiduciary duty 
directly to the corporation's shareholders.  We turn to the act. 
3.  The act.  Section 8.30 of the act defines the standards 
of conduct a director of a Massachusetts corporation is required 
to follow.  The section provides in relevant part: 
 
"(a) A director shall discharge his duties as a 
director, including his duties as a member of a committee: 
 
 
"(1) in good faith; 
 
 
"(2) with the care that a person in a like position 
would reasonably believe appropriate under similar 
circumstances; and 
 
 
"(3) in a manner the director reasonably believes to 
be in the best interests of the corporation.  In 
determining what the director reasonably believes to be in 
the best interests of the corporation, a director may 
consider the interests of the corporation's employees, 
suppliers, creditors and customers, the economy of the 
state, the region and the nation, community and societal 
considerations, and the long-term and short-term interests 
of the corporation and its shareholders, including the 
possibility that these interests may be best served by the 
continued independence of the corporation. 
 
11 
 
 
 
 
". . . 
 
 
"(c) A director is not liable for any action taken as 
a director, or any failure to take any action, if he 
performed the duties of his office in compliance with this 
section." 
 
G. L. c. 156D, § 8.30. 
The plaintiffs argue that the provisions of § 8.30 (a) 
demonstrate that corporate directors owe a fiduciary duty to 
shareholders, but the logic and thread of their argument are 
difficult to follow.  They claim that the standards set out in 
§ 8.30 (a) (1)-(3) are "conjunctive," and directors are required 
to "satisfy all three prongs," but then assert that in fact the 
three "prongs" are separate.  They reason that although § 8.30 
(a) (3) speaks directly about a duty owed by a director to the 
corporation, § 8.30 (a) (1) as well as § 8.30 (a) (2) -- 
presumably by not explicitly referencing a duty owed to the 
corporation -- "delineate duties owed to both the corporation 
and its shareholders" (emphasis in original). 
The plain words of the statute contradict the plaintiffs' 
interpretation.  By its terms, § 8.30 (a) sets forth the three 
components of a unitary standard that is to govern a corporate 
director in performing all the duties and actions he or she 
performs as a director.8  That is, the plaintiffs' statement that 
                     
 
8 The comment to G. L. c. 156D, § 8.30, supports our 
reading.  The comment states in relevant part:  "[Section 8.30] 
sets forth the standard by focusing on the manner in which the 
12 
 
 
 
§ 8.30 (a) (1) through (a) (3) are to be read conjunctively is 
correct:  every duty and action by a director as director is to 
be undertaken (1) in good faith, (2) with an appropriate level 
of care, and (3) "in a manner the director reasonably believes 
to be in the best interests of the corporation."  Moreover, 
although § 8.30 (a) (3) makes clear that a director may 
consider, among other interests, "the long-term and short-term 
interests of the corporation and its shareholders" (emphasis 
added), it first specifies that the director may do so only in 
the context of "determining what the director reasonably 
believes to be in the best interests of the corporation." 
Particularly in light of this specification, the plaintiffs' 
proposed interpretation of § 8.30 (a) as implicitly imposing or 
recognizing a fiduciary duty owed by a corporate director 
directly to the shareholders must fail.  Rather, both the 
language and structure of § 8.30 (a) persuade us that if the 
Legislature had wished to impose or recognize such a duty owed 
                                                                  
director performs his duties, not the correctness of his 
decisions, and by emphasizing the decision-making process, not 
the decision itself.  Section 8.30 (a) thus requires a director 
to perform his duties in good faith, with the care that a person 
in a like position would reasonably believe appropriate under 
similar circumstances and in a manner he believes to be in the 
best interests of the corporation."  "The comments to [c. 156D] 
were prepared by the attorneys who drafted the [a]ct and were 
intended to be a valuable tool in interpreting the [a]ct."  
Halebian v. Berv, 457 Mass. 620, 625 (2010). 
13 
 
 
 
to shareholders, it would have inserted into the statute an 
explicit provision to that effect.9 
 
The plaintiffs argue that our interpretation of the statute 
is flawed, or in any event not dispositive of their claim, 
because in Chokel v. Genzyme Corp., 449 Mass. 272, 278 (2007), 
we stated that "[d]irectors owe a fiduciary duty to their 
shareholders."  Chokel, however, was a very different case -- 
even though it involved a corporation that, like EMC, was 
publicly traded.  The plaintiff in Chokel owned shares of the 
company's biosurgery division tracking stock (biosurgery stock) 
and challenged a decision of the board of directors to exchange 
the biosurgery stock for the company's general division stock as 
provided for in the company's articles of organization.  See id. 
at 273.  The plaintiff claimed that the directors' decision 
constituted a breach of the covenant of good faith and fair 
dealing implied in those articles, and also of the fiduciary 
duty owed by the directors to the shareholders.  Id.  In 
affirming a Superior Court judge's decision allowing the 
defendant directors' motion to dismiss, we concluded that, 
accepting as true the allegations in the plaintiff's complaint, 
                     
9 It goes without saying that our interpretation of G. L. 
c. 156D, § 8.30 (a) (1)-(3), as not imposing or reflecting a 
duty owed by a corporate director to the company's shareholders 
does not mean that the section authorizes a corporate director 
to act in bad faith or with a lack of care that a person in a 
like position would reasonably believe appropriate with respect 
to the corporation's shareholders. 
14 
 
 
 
no provable set of facts presented a viable claim of breach of 
the contractual implied covenant.  Id. at 278.  And although, as 
the plaintiffs here point out, we stated that directors owe 
their shareholders a fiduciary duty, we concluded that "[w]hen a 
director's contested action falls entirely within the scope of a 
contract between the director and the shareholders, it is not 
subject to question under fiduciary duty principles."  Id.  But 
more to the point is that, in Chokel itself, the only cases we 
cited in support of the statement that corporate directors owe 
their stockholders a fiduciary duty were cases that involved 
close corporations.  See id., citing Demoulas v. Demoulas Super 
Mkts., Inc., 424 Mass. 501, 528-529 (1997), and Blank, 420 Mass. 
at 408.  As next discussed, although directors of close 
corporations owe a fiduciary duty to the shareholders of such 
corporations, that is not the rule in Massachusetts for 
corporations generally.  The statement in Chokel, 449 Mass. at 
278, that "[d]irectors owe a fiduciary duty to their 
shareholders" was not necessary to the resolution of that case, 
and we think it was too broad.  The statement does not apply 
here. 
4.  Massachusetts corporate law principles.  As reflected 
in § 8.30 (a), its antecedent statute, G. L. c. 156B, § 65,10 and 
                     
 
10 General Laws c. 156B, § 65, provides in pertinent part: 
 
15 
 
 
 
decisions reflecting our common-law principles,11 the general 
rule of Massachusetts corporate law is that a director of a 
Massachusetts corporation owes a fiduciary duty to the 
corporation itself, and not its shareholders -- although, as 
indicated in the previous paragraph and as the motion judge 
recognized, there are at least two exceptions.  First, there is 
a special rule for close corporations:  "[i]n the case of a 
close corporation, which resembles a partnership, duties of 
loyalty extend to shareholders, who owe one another 
substantially the same duty of utmost good faith and loyalty in 
                                                                  
 
"A director, officer or incorporator of a corporation 
shall perform his duties as such, including, in the case of 
a director, his duties as a member of a committee of the 
board upon which he may serve, in good faith and in a 
manner he reasonably believes to be in the best interests 
of the corporation, and with such care as an ordinarily 
prudent person in a like position would use under similar 
circumstances. . . .  The fact that a director, officer or 
incorporator so performed his duties shall be a complete 
defense to any claim asserted against him . . . ."  
(Emphasis added.)   
 
11 See, e.g., Leventhal v. Atlantic Fin. Corp., 316 Mass. 
194, 199 (1944) ("a stockholder does not stand in any fiduciary 
relation with the other stockholders or with the directors of 
the company"); Spiegel v. Beacon Participations, Inc., 297 Mass. 
398, 410 (1937) ("The directors of an ordinary business 
corporation often have been called trustees and their relation 
to the corporation is at least fiduciary.  They are bound to act 
with absolute fidelity and must place their duties to the 
corporation above every other financial or business 
obligation"); Jernberg v. Mann, 358 F.3d 131, 137 (1st Cir. 
2004) ("the same duty of trust and strict good faith owed by 
directors and officers to the corporation itself did not extend 
from them to the individual stockholders," discussing Goodwin v. 
Agassiz, 283 Mass. 358, 360-361 [1933]). 
16 
 
 
 
the operation of the enterprise that partners owe to one 
another, a duty that is even stricter than that required of 
directors and shareholders in corporations generally" (footnote 
omitted).  Demoulas, 424 Mass. at 528-529.  See Donahue v. Rodd 
Electrotype Co. of New England, 367 Mass. 578, 593-594 (1975) 
("stockholders in the close corporation owe one another 
substantially the same fiduciary duty in the operation of the 
enterprise that partners owe to one another" and direct cause of 
action against directors could be maintained in this context).  
Second, where a controlling shareholder who also is a director 
proposes and implements a self-interested transaction that is to 
the detriment of minority shareholders, a direct action by the 
adversely affected shareholders may proceed.  Coggins v. New 
England Patriots Football Club, Inc., 397 Mass. 525, 532-533 
(1986), S.C., 406 Mass. 666 (1990).  Neither of these 
exceptions, however, applies in this case.12  EMC is a very 
                     
 
12 We also consider and reject the plaintiffs' claim that 
G. L. c. 156D, § 2.02 (b) (4), assumes a fiduciary duty between 
directors and shareholders always exists.  Section 2.02 (b) (4) 
provides that a corporation may include a provision in its 
bylaws limiting the liability of a director, but if it chooses 
to include such a provision, it may not limit the liability of a 
director for a breach of fiduciary duties owed to the 
corporation or its shareholders.  Id.  Although this section 
recognizes that a fiduciary duty may be owed by corporate 
directors to the corporation's shareholders and, if so, it may 
not be eliminated or limited through adoption of an exculpatory 
bylaw, we interpret the section to mean that if a director owes 
a fiduciary duty to the corporation's shareholders -- which we 
recognize to be the case in at least the two circumstances 
17 
 
 
 
large, publicly traded corporation with over 1.9 billion shares 
of stock outstanding, and there is no differential between any 
class of stock or group of shareholders.  This is also not a 
transaction proposed by a director-majority shareholder that 
affects minority shareholders adversely as compared to the 
majority shareholders.  As the motion judge noted, the wrong 
alleged by the plaintiffs, undervaluing EMC to secure the merger 
and sale of the federation of companies, qualifies as a direct 
injury to the corporation, the entity to which the directors 
clearly owed a fiduciary duty of good faith and loyalty.  
Flowing from that alleged injury is a claimed derivative injury 
to each shareholder, whose individual shares, as a consequence 
of the asserted undervaluing of EMC itself, are consequently 
undervalued as well.  We agree with the motion judge that the 
injury posited by the plaintiffs, and the alleged wrong causing 
it, fit squarely within the framework of a derivative action.  
Because the plaintiffs did not bring their claim as a derivative 
action, their complaint was properly dismissed.13 
                                                                  
described here in the text -- liability for a breach of that 
duty may not be eliminated through the vehicle of a bylaw. 
 
13 Derivative proceedings brought on behalf of a 
Massachusetts corporation are governed by the act.  Halebian, 
457 Mass. at 623.  See G. L. c. 156D, §§ 7.40–7.47.  There is no 
dispute that the plaintiffs did not follow the pertinent 
requirements of the act, including the requirement of making "a 
written demand . . . upon [EMC] to take suitable action."  G. L. 
c. 156D, § 7.42 (1). 
18 
 
 
 
5.  Delaware law.  In reaching this result, we necessarily 
have rejected the plaintiffs' argument that shareholders 
claiming the loss of their stock at an unfair price on account 
of allegedly improper actions by the board of directors is a 
direct rather than a derivative claim.  The plaintiffs have a 
response, however, which is that we should change our approach 
and follow those corporate law jurisdictions, including in 
particular Delaware, that treat the plaintiffs' type of claim -- 
a challenge to the fairness of a merger transaction on the 
ground that the consideration is inadequate -- as a direct 
rather than a derivative claim.  See Parnes v. Bally 
Entertainment Corp., 722 A.2d 1243, 1245 (Del. 1999) ("A 
stockholder who directly attacks the fairness or validity of a 
merger alleges an injury to the stockholders, not the 
corporation . . .").  See also Tooley v. Donaldson, Lufkin, & 
Jenrette, Inc., 845 A.2d 1031, 1033, 1037-1039 (Del. 2004).14  We 
                     
14 As a general matter, the plaintiffs urge us to adopt the 
approach of the Delaware Supreme Court to the determination 
whether a particular shareholder claim is direct or derivative.  
The Delaware court has concluded that the determination in each 
case must "turn solely on the following questions:  (1) who 
suffered the alleged harm (the corporation or the suing 
stockholders, individually); and (2) who would receive the 
benefit of any recovery or other remedy (the corporation or the 
stockholders, individually)?"  Tooley v. Donaldson, Lufkin, & 
Jenrette, Inc., 845 A.2d 1031, 1033 (Del. 2004).  The court in 
Tooley rejected the concept that a suit must be maintained 
derivatively if, as here, the claimed injury is one suffered 
equally by all shareholders, concluding that the concept was 
confusing and inaccurate.  Id. at 1037.  As we indicate in the 
19 
 
 
 
decline to do so.  Delaware's General Corporation Law, Del. 
Code. Ann. tit. 8, c. 1, differs from the act, and has no 
equivalent of § 8.30.  Delaware also has a history of asserting 
that directors stand in a fiduciary relation to stockholders of 
the company, in contrast to our own precedent.  See In re MONY 
Group, Inc. Shareholder Litig., 853 A.2d 661, 676 (Del. Ch. 
2004) (board of directors "owes its fiduciary duties to 
corporation and its stockholders"); Crescent/Mach I Partners, 
L.P. v. Turner, 846 A.2d 963, 979 (Del. Ch. 2000) ("Directors 
have an unyielding fiduciary duty to protect the interests of 
the corporation and the stockholders alike"). 
6.  Equitable relief.  The plaintiffs claim that the result 
we reach is unjust because even if they had sought to follow the 
statutory procedures governing derivative claims, see G. L. 
c. 156D, §§ 7.40–7.47, it was likely that the defendants would 
have taken steps to assure that the merger occurred before any 
derivative suit could be concluded, and, under our law, once the 
plaintiffs were no longer shareholders, they could not have 
continued to seek derivative relief because their ownership 
rights in EMC would have been extinguished.  We agree that if a 
                                                                  
text, Delaware corporate law principles and those of 
Massachusetts are not always congruent.  We continue to adhere 
to the view that whether a claim is direct or derivative is 
governed by whether the harm alleged derives from the breach of 
a duty owed by the alleged wrongdoer -- here the directors -- to 
the shareholders or the corporation.  See Bessette v. Bessette, 
385 Mass. 806, 809 (1982). 
20 
 
 
 
shareholder no longer owns shares in a corporation, as a general 
rule, the shareholder would no longer have standing to pursue a 
derivative claim on behalf of the corporation.  See Billings v. 
GTFM, LLC, 449 Mass. 281, 296 (2007).  But we disagree that this 
means it is unfair or inequitable to require the plaintiffs and 
similarly situated shareholders to pursue derivative relief in a 
case such as this one. 
The act clearly illustrates the procedures to follow to 
bring a derivative claim.  A shareholder must make a demand 
pursuant to G. L. c. 156D, § 7.42.  The corporation then must 
determine whether it would be in the best interests of the 
corporation to take over the shareholder's claim, and the 
statute specifies alternative ways that the corporation may 
undertake to make this determination.  G. L. c. 156D, 
§ 7.44 (b).  If the demand is rejected, the shareholder may 
commence suit, in accordance with the time requirements in 
§ 7.42 (2).  In this case, at any time between the time the 
proposed merger transaction was announced on October 12, 2015, 
and the date the merger transaction was completed, September 7, 
2016, the plaintiffs could have made a derivative demand on EMC.  
They did not do so.15  We find nothing in the statutory 
                     
15 Moreover, if the plaintiffs had filed suit after having 
made such a demand that was rejected, and it appeared that the 
proposed merger might likely be completed while the suit was 
21 
 
 
 
provisions governing derivative proceedings to indicate or 
suggest that it offered the plaintiffs here, and other 
shareholders in the plaintiffs' position, a hollow or inadequate 
form of relief.16 
 
Conclusion.  For the foregoing reasons, the Superior 
Court's order dismissing the plaintiffs' complaint is affirmed. 
 
 
 
 
 
 
 
So ordered. 
                                                                  
pending, the plaintiffs could have sought preliminary injunctive 
relief. 
 
16 In that regard, it is important to keep in mind that a 
stockholder's derivative action is equitable in nature, and 
"[e]quitable considerations are relevant."  Martin v. F.S. Payne 
Co., 409 Mass. 753, 760 (1991).  See Samia v. Central Oil Co. of 
Worcester, 339 Mass. 101, 123-124 (1959).  See also Marquis 
Theatre Corp. v. Condado Mini Cinema, 846 F.2d 86, 92 n.5 (1st 
Cir. 1988) ("Generally speaking, any recovery in a stockholder's 
derivative action suit belongs to the corporation. . . .  Under 
some circumstances, however, the courts have allowed the direct 
compensation of minority shareholders on a pro rata basis . . ." 
[emphasis in original; citation omitted]).