Opinion ID: 338688
Heading Depth: 1
Heading Rank: 4

Heading: Disclosure of self-dealing

Text: 30 The district court found a material omission in Medfield's failure to disclose full details of an arrangement whereby a professional corporation, partially owned by a Medfield director and nominee, provided all laboratory, pathology and diagnostic services for Medfield. The contract between the professional corporation and Medfield was described in Medfield's proxy statement as follows: 31 Dr. Edward N. Willey is a stockholder of a professional association (Mateeff, Miller and Willey, M.D.'s, P.A.) which is under a contractual agreement with the Company, which terminates on January 13, 1975, to provide all laboratory, pathology and diagnostic services for the Company's facilities. Dr. Willey owns 331/3% of the stock of the professional association. The association is obligated to provide these services on a 24-hour basis and has done so since 1966. This professional association received aggregate remuneration of $261,914 for providing such services during the last fiscal year. 32 The following facts concerning this contractual arrangement were not revealed to the shareholders: 33 1) In return for its services, the professional corporation was guaranteed $208,500 per year. 34 2) Medfield provided the group with all necessary expendable and non-expendable equipment, supplies, furniture and fixtures, offices and laboratories, and all technologists, technical aides, secretaries, clerks and other non-medical employees. 35 3) Medfield was responsible for maintenance and utilities. 36 4) The members of the professional corporation were further permitted to engage in outside consultation and teaching. 37 We agree with the district court that neither the true extent of the economic benefit conferred on Dr. Willey nor its concomitant cost to the corporation was fully disclosed.