Court Opinion

ID: 4233334
Source: CourtListenerOpinion
Date Created: 2017-12-29 13:11:07.91703+00
Date Added: 2024-06-11T13:42:43.754198
License: Public Domain

NOTICE: All slip opinions and orders are subject to formal
revision and are superseded by the advance sheets and bound
volumes of the Official Reports. If you find a typographical
error or other formal error, please notify the Reporter of
Decisions, Supreme Judicial Court, John Adams Courthouse, 1
Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-
1030; SJCReporter@sjc.state.ma.us

SJC-12291

             ANDREW SEGAL   vs.   GENITRIX, LLC, & others.1

         Suffolk.    September 5, 2017. - December 28, 2017.

    Present:    Gants, C.J., Lenk, Gaziano, Lowy, Budd, Cypher,
                            & Kafker, JJ.

Massachusetts Wage Act. Limited Liability Company. Agency,
     What constitutes. Practice, Civil, Instructions to jury.

     Civil action commenced in the Superior Court Department on
February 23, 2009.

     The case was tried before Paul D. Wilson, J., and a motion
for a new trial was heard by him.

     The Supreme Judicial Court granted an application for
direct appellate review.

     Thomas H. Dupree, Jr. (Matthew S. Rozen, of the District of
Columbia, Peter M. Durney, & Julianne C. Fitzpatrick also
present) for H. Fisk Johnson, III, & another.
     Timothy J. Wilton (Kathy Jo Cook also present) for the
plaintiff.
     Jonathan A. Karon, Thomas R. Murphy, Matthew J. Fogelman, &
Danielle Jurema Lederman, for Massachusetts Academy of Trial
Attorneys, amicus curiae, submitted a brief.

     1 H. Fisk Johnson, III; Stephen Rose; William Freund; Fisk
Ventures, LLC (Fisk); Jeffrey D. Pellegrom; Metalox, LLC; and
Johnson Keland Management, Inc., The Family Office.
                                                                      2

     Ben Robbins & Martin J. Newhouse, for New England Legal
Foundation, amicus curiae, submitted a brief.

     KAFKER, J.    A jury found the defendants, H. Fisk

Johnson, III, and Stephen Rose, two former board members and

investors in Genitrix, LLC (Genitrix or company), personally

liable under G. L. c. 149, § 148 (Wage Act), for failing to pay

wages owed to the former president of Genitrix, Andrew Segal.

The defendants moved for judgment notwithstanding the verdict

and a new trial.   Both motions were denied, and the defendants

appealed.   We granted the defendants' application for direct

appellate review and conclude that the Wage Act does not impose

personal liability on board members, acting only in their

capacity as board members, or investors engaged in ordinary

investment activity.    Rather, to impose such liability, the

statute requires that the defendants be "officers or agents

having the management" of a company.    G. L. c. 149, § 148.    The

defendants were not designated as company officers and had

limited agency authority.    Indeed, the only officer having the

management of the company was the plaintiff, not the defendants.

We therefore conclude that there was insufficient evidence to

satisfy the statutory requirements and reverse the denial of the

motion for judgment notwithstanding the verdict.2

     2 We acknowledge the amicus brief submitted by the
Massachusetts Academy of Trial Attorneys, in support of the
                                                                       3

    1.     Background.   Because the defendants contend that the

trial judge erred in denying their motion for judgment

notwithstanding the verdict, we construe the facts in the light

most favorable to the plaintiff.     See O'Brien v. Pearson, 449
Mass. 377, 383 (2007).    In 1997, representatives for Johnson

contacted Segal about investing in Segal's cancer research.

Segal and Johnson agreed to form a biotechnology startup company

with Segal serving as president and chief executive officer

(CEO) and Johnson providing initial funding.    Stephen Rose was a

representative for Johnson, and spoke to Segal on Johnson's

behalf during their negotiations over the formation of the

company.   The company, Genitrix, was established as a Delaware

limited liability company (LLC) headquartered in Boston.

    Segal transferred his intellectual property rights to the

company in exchange for a substantial equity interest.       Johnson

also received a substantial equity interest in return for his

initial investment in the company.    Segal and Johnson each had

authority to appoint two board members to Genitrix's four-member

board of representatives, and both could remove and replace

their representatives with or without cause.    Most board

decisions required a seventy-five per cent majority to pass.

Johnson served on the board for only the first year of the

plaintiff, and the amicus brief submitted by the New England
Legal Foundation, in support of the defendants.
                                                                       4

company.    Rose was appointed as one of Johnson's board

representatives in 1999 and remained a Johnson board member

until the company's dissolution.    Johnson indicated to Segal

that Segal should contact Rose about any financing issues,

stating that Rose "speaks for" Johnson.

     As a condition of Johnson's investment in the company, he

insisted Segal sign an employment agreement with Genitrix.       The

agreement provided that Segal would serve as the president and

CEO of the company, with the "duties, responsibilities and

authority" commensurate with those positions, such as

"conducting the [c]ompany's business, research and development,"

and managing its "finances and other administrative matters,

subject to the overall direction and authority of [its]

[b]oard."   The agreement further provided that "[a]t any time

after the second anniversary . . . , the [c]ompany, with the

approval of at least [fifty per cent] of the [board], may

replace [Segal] as chief executive officer."    If no suitable

replacement CEO could be found within fifteen months who

seventy-five per cent of the board could agree upon, the Johnson

board members were authorized to appoint a new CEO.3

     The employment agreement contained terms for Segal's

     3 In 2003, upon Fisk becoming a shareholder of Genitrix, LLC
(Genitrix), board members designated by Johnson and Fisk were
those authorized to appoint a new chief executive officer (CEO)
pursuant to this provision.
                                                                    5

removal as an employee that were different from the terms for

his removal as CEO.    Under the employment agreement, Segal's

"[e]mployment [p]eriod" could be terminated in one of three

ways:    (1) resignation; (2) removal for cause approved by fifty

per cent of the board; or (3) removal without cause approved by

seventy-five per cent of the board.    The agreement stated, "Upon

termination of the [e]mployment [p]eriod, [Segal] shall not be

entitled to receive his [b]ase [s]alary or any fringe benefits

for periods after the termination of the [e]mployment [p]eriod."

The agreement also specified Segal's salary for the first two

years of his employment.    Afterward, his salary was to be

determined by a vote of seventy-five per cent of the board, and

was "payable in regular installments in accordance with

[Genitrix]'s general payroll practices."4   The employment

agreement identified Johnson as a third-party beneficiary, and

authorized him to "enforce the [c]ompany's rights under the

terms of this [a]greement."   Any amendment or waiver of a

provision in the employment agreement required written consent

from Genitrix, Segal, and Johnson.    At no point did Johnson

exercise his rights, including termination rights, pursuant to

this agreement.

     4 Andrew Segal's base salary was $75,000 per year until
July, 2003. At that time, the board members of Genitrix
approved a resolution to increase his salary to $150,000 per
year.
                                                                     6

     In 2003, Johnson began funding Genitrix through Fisk

Ventures, LLC (Fisk), an entity owned entirely by Johnson and

Rose.5   Fisk became the largest shareholder of Genitrix, and

gained the authority to appoint a fifth member to the board.

Thereafter, Johnson and Fisk's combined equity in Genitrix

exceeded fifty per cent.     Fisk and Johnson's board

representatives, taken together, constituted sixty per cent of

the board.   Although their representatives comprised a majority

on Genitrix's board, they were still short of the seventy-five

per cent threshold required to pass most board resolutions.

     Genitrix never employed more than five full-time employees.

As the president and sole officer, Segal was responsible for all

day-to-day operations.   He supervised the laboratory and

directly managed human resources.    He was in charge of

fundraising and generating new capital.     Segal also handled the

company's payroll.   As the only individual with authority to

"physically sign checks on the Genitrix bank accounts," he wrote

checks for employee wages.    When Genitrix began using a company

called Paychex to handle its payroll, Segal still had to order

each payroll individually, including for himself.       However,

Segal did need board approval for numerous actions, including

"material personnel practices or policies," hiring and firing of

     5 Johnson owned over ninety per cent of Fisk, and Rose owned
the remainder.
                                                                      7

employees earning $45,000 or more, setting compensation for

officers and employees other than Segal, and acquiring debt or

equity in the company.

     On March 23, 2006, Segal informed the board that the

company was running out of funds to pay its employees.      He told

the board they would need to lay off at-will employees the

company could not afford to pay, so as to avoid liability under

the Wage Act.    A few days later, Rose told Segal that Fisk would

not invest more money in Genitrix if Segal continued to control

the management of the company.6    Fisk did subsequently invest

additional money in Genitrix on April 6, 2006, but unlike prior

investments, Rose earmarked that investment for specific

purposes:   payroll, expenses necessary to comply with covenants

in the LLC agreement, and the repair or replacement of a

centrifuge.     All subsequent Fisk investments were also earmarked

for specific purposes, such as patent fees and other employees'

salaries.   Segal voted in favor of each board resolution

authorizing Genitrix to accept these investments.

     At the start of 2007, Genitrix was still short on money and

struggling to make payroll.     Segal stopped taking his salary in

January, 2007.    He testified that he did so to help the company

     6 Segal was no longer CEO of the company after 2006.
Segal's testimony does not provide an explanation for this
change. Rose testified that Segal resigned to prevent the board
from reducing his board seats.
                                                                      8

afford to pay Elihu Young, its last remaining employee other

than Segal.   Segal explained he "was put in a position where

[he] felt [he] had to not pay [him]self."   When pressed about

who made that decision, Segal testified, "Given the box I was

in, I did."   Segal later suggested to the board that he was no

longer paying himself.   On February 23, 2007, he stated, "Even

without disbursing my salary, it is unlikely that we will be

able to pay . . . Young for more than [two] more pay periods,"

and proposed that the company sell its laboratory equipment and

lay off Young to cut costs.   Rose believed Young was

"extraordinarily valuable to the company," as the only one who

knew "how to make the [company's cancer-fighting] molecule."

Rose responded that "given [Young's] importance to the company,

he should not be let go without giving the board a full

opportunity to meet and discuss this issue in detail.

Liquidating assets is an important issue as well."      The Johnson

board members did not agree to either proposal.   Instead, Rose

directed Fisk to invest enough money in Genitrix to pay Young's

salary for another month.

    Despite Segal opting to not pay himself, by mid-2007

Genitrix was again unable to afford to pay even Young.      On May

17, 2017, Johnson's board members finally agreed to lay off

Young, voting in favor of a board resolution to terminate

Young's employment.   A week later Fisk invested additional money
                                                                     9

in Genitrix for the purpose of paying Young's remaining salary.

When Young left, Young closed the company's laboratory.

     At this point the company was out of money and apparently

deadlocked on even how to conduct board business.     Rose and the

Johnson board members wanted to hold board meetings, but Segal

wanted to conduct board business using electronic mail (e-mail)

messages so that everything would be in writing.    As a result of

the deadlock and the financial condition of the company, Rose

filed a petition for the judicial dissolution of Genitrix on

behalf of Fisk in June, 2007.    The petition was filed in

Delaware, where Genitrix was incorporated.    Segal was a named

party to the Delaware dissolution proceeding because he was

still the president of the company.

     For the next two years Segal actively opposed the

dissolution.   In July, 2007, he brought counterclaims in that

proceeding against the defendants for breach of the LLC

agreement, breach of the implied covenant of good faith and fair

dealing, breach of fiduciary duties, and tortious interference

with his employment agreement.   Segal did not bring a

Massachusetts Wage Act claim in those proceedings.7

     As the dissolution proceedings continued, Segal did some

other work as president, including paying patent annuity fees

     7 Given the result we reach here, we need not address the
issue of claim preclusion.
                                                                    10

and protecting the work associated with those patents, securing

directors' and officers' insurance, and making necessary tax

filings.   Segal testified that he continued to work for the

company during this time, despite no longer taking a salary,

because he thought he "would eventually get paid."    He believed

that when the company sold its patents, "that money would go, at

least in part, to pay [him]."

    Both Young and Segal raised the issue of unpaid wages with

the board.   A few months after Segal stopped paying himself, he

informed the board that he was no longer taking a salary.      In

late 2007, months after he left Genitrix, Young threatened to

bring a Wage Act claim against the company for outstanding

unpaid wages.   In March, 2008, Rose directed Fisk to invest

enough money in Genitrix to compensate Young for his unpaid

wages, and in return Young signed an agreement releasing

Genitrix, its board members, and its agents from liability.

Rose did not, however, direct Fisk to invest money in Genitrix

toward Segal's salary.

    Segal and Rose continued to argue over whether Segal was

owed wages, and whether those wages should take priority over

other company expenses, such as patent fees.    On February 19,

2009, Segal sent an e-mail message to Rose stating, "The

[c]ompany owes me wages and benefit expenses.    I cannot agree to

any arrangement that does not respect that claim."    Rose
                                                                    11

responded, "It is not appropriate to subordinate new funds to

whatever claims that you may believe you have. . . .   So, if you

can't have first priority, you think that the company's

intellectual property rights should simply expire?"

    In early 2009, Segal filed suit against Rose and Johnson in

Massachusetts under the Wage Act for unpaid wages from 2007 to

2009.   Around the same time, the Delaware Court of Chancery

ordered Genitrix's dissolution and appointed a liquidator to

conduct the dissolution and winding up of the company's affairs.

As part of the dissolution, the liquidator auctioned off

Genitrix's intellectual property.   Fisk submitted the winning

bid of $300,000 even though Johnson's board representatives had

said Genitrix was worth over $15 million three years earlier.

    Segal submitted a proof of claim to the liquidator for back

pay in June, 2009, but that claim was denied.   Segal appealed

from the denial to the chancellor, who dismissed the claim as

moot in October, 2010, because the company did not have enough

money to satisfy Segal's claims.

    The defendants moved for summary judgment in the

Massachusetts Wage Act suit, and a Superior Court judge granted

the motion in 2013, finding that the defendants did not "have

the management" of the company under the Wage Act.    The Appeals

Court, in a memorandum and order pursuant to its rule 1:28,

reversed and remanded the grant of summary judgment on the Wage
                                                                      12

Act claim, holding that our decision in Cook v. Patient Edu,

LLC, 465 Mass. 548, 556 (2013), which found the manager of an

LLC liable under the Wage Act, raised a genuine issue of

material fact as to whether the defendants could be held liable

under the Wage Act.       See Segal v. Genitrix, LLC, 86 Mass. App.

Ct. 1103 (2014).

    At trial the jury were instructed that the "duty to pay

wages extends to the president and treasurer of a corporation

and any officers or agents having the management of such

corporation, which includes an LLC, such as Genitrix."       More

specifically, the jury were instructed that a "person qualifies

as an agent having the management of such corporation if he

. . . 'controls, directs, and participates to a substantial

degree in formulating and determining policy of the corporation

or LLC.'"    The jury went on to find both defendants individually

liable under the Wage Act.      Segal filed a timely notice of

appeal, and we granted Johnson and Rose's application for direct

appellate review.     On appeal, the defendants argue, inter alia,

that there was insufficient evidence to find Wage Act liability

and, alternatively, that the judge erred in his instructions to

the jury about the Wage Act.

    2.      Discussion.   a.   The statutory language and legislative

history of the Wage Act.       The Wage Act requires employers to

compensate their employees for earned wages as set out in G. L.
                                                                    13

c. 149, § 148.     An employer who violates § 148 may be sued by

the aggrieved employees.     G. L. c. 149, § 150.   Section 148

defines "employer" as a "person having employees in his [or her]

service."   G. L. c. 149, § 148.   For corporations, such persons

are the "president and treasurer of [the] corporation and any

officers or agents having the management of such corporation,"

in addition to the corporation itself.     Id.   The statute does

not include board directors or investors in its definition of

"employer."   See id.    As explained below, we consider the

omission of directors and investors to be significant.      If

personal liability is to be imposed on these defendants, who

served as directors and investors, it must be because they meet

one of the express categories of corporate actors identified by

the Legislature:     the president, treasurer, or officers or

agents having the management of the company.     Such officers or

agents have assumed and accepted individual responsibility for

the management of the corporation, justifying the imposition of

personal liability for Wage Act violations.

    Both parties agree that neither defendant was ever

president or treasurer of Genitrix.     Indeed, the plaintiff in

this case was president of Genitrix.     The defendants were also

not officers of Genitrix.     Accordingly, they could only be found

liable if they were "agents having the management" of Genitrix

under the statute.
                                                                    14

    In determining the meaning of "agents having the

management" of the company, we examine the statutory language

and legislative history, as well as our case law.    DiFiore v.

American Airlines, Inc., 454 Mass. 486, 490-491 (2009), quoting

Industrial Fin. Corp. v. State Tax Comm'n, 367 Mass. 360, 364

(1975) ("We look to the intent of the Legislature 'ascertained

from all its words construed by the ordinary and approved usage

of the language, considered in connection with the cause of its

enactment, the mischief or imperfection to be remedied and the

main object to be accomplished, to the end that the purpose of

its framers may be effectuated.' . . .   In addition, our respect

for the Legislature's considered judgment dictates that we

interpret the statute to be sensible, rejecting unreasonable

interpretations unless the clear meaning of the language

requires such an interpretation").   The plain language of the

provision indicates two important requirements:     the defendant

must both be an agent and have the management of the company.

See G. L. c. 149, § 148; Milford v. Boyd, 434 Mass. 754, 757

(2001) ("In interpreting a statute, . . . none of its words is

to be regarded as superfluous").

    The language, "agents having the management of such

corporation," should also be read in the context of the language

it follows.   DiFiore, 454 Mass. at 491 ("Where possible, we

construe the various provisions of a statute in harmony with one
                                                                  15

another, recognizing that the Legislature did not intend

internal contradiction").   The statute begins with express

reference to the president and treasurer, two high level

officers in the corporation with individual responsibility for

its over-all management, particularly its financial affairs.

See Lydia E. Pinkham Med. Co. v. Gove, 303 Mass. 1, 9 (1939) (as

treasurer and assistant treasurer of company, defendants had

duty to protect company's finances and disburse them as directed

by president or directors).   After expressly including these two

positions, it refers to officers or agents having the management

of the corporation.   Not all officers or agents are included,

just those, like the president or treasurer, having the

management of the corporation.   Some management responsibility

is not the same as "the" management of the corporation.

Wiedmann v. The Bradford Group, Inc., 444 Mass. 698, 712 (2005)

("Merely holding a managerial position over some branch,

division, or office of a corporation does not, by itself, mean

that that manager has the 'management' of the 'corporation' as a

whole").   We therefore understand the Legislature to impose

personal liability for Wage Act violations on the president and

treasurer of the corporation and on other officers or agents who

may not hold these titles, but who have assumed and accepted as

individuals significant management responsibilities over the

corporation similar to those performed by a corporate president
                                                                    16

or treasurer, particularly in regard to the control of finances

or payment of wages.

    This interpretation is also supported by the legislative

history.   As we discussed in Cook, 465 Mass. at 552, the Wage

Act was passed in 1879, and originally applied only to

municipalities employing "laborers."    See St. 1879, c. 128.

Over time, the Wage Act expanded to include specific industries,

until it was eventually amended to cover all private employers.

See id.; St. 1935, c. 350.

    In 1932, a provision was added to the Wage Act to address

corporate violations of the statute, imposing personal liability

on "any officer thereof responsible for such violation."      St.

1932, c. 101.   At this point the statute was confined to a

select group of company officers responsible for the Wage Act

violation.   Neither board members, investors, nor other

corporate actors were referenced.   In 1935, the statutory

language was replaced with the modern wording, which imposes

liability on the "president and treasurer of a corporation and

any officers or agents having the management of such

corporation."   See St. 1935, c. 350.

    The primary change to the wording of the corporate

liability provision in 1935 was the addition of per se

individual liability for a company's president and treasurer,

two of the corporation's highest-level officers who had assumed
                                                                    17

and accepted individual responsibility for the company's over-

all financial management.   In addition to expressly including

these two positions, the 1935 amended language refers to

officers or agents of the corporation, but, as explained above,

not all officers or agents were included, only those, like the

president or treasurer, having "the management" of the

corporation.   The reference to "officers or agents having the

management" harkens back to the original wording from 1932,

which imposed personal liability on the officers who were

"responsible for such violation" of the Wage Act.   The

particular statutory focus on the payment of wages is also

evident from the purpose of the Wage Act.8   The Wage Act was

enacted to "protect wage earners from the long-term detention of

wages by unscrupulous employers."   Cook, 465 Mass. at 552,

quoting Melia v. Zenhire, Inc., 462 Mass. 164, 170 (2012).

     b.   The novel questions presented here.   We begin with the

recognition that this case is quite unusual and removed from the

     8 The focus on the payment of wages is particularly clear in
the language governing G. L. c. 149, § 148, violations in the
public sector:

          "Every public officer whose duty it is to pay money,
     approve, audit or verify pay rolls, or perform any other
     official act relative to payment of any public employees,
     shall be deemed to be an employer of such employees, and
     shall be responsible under this section for any failure to
     perform his official duty relative to the payment of their
     wages or salaries, unless he is prevented from performing
     the same through no fault on his part."
                                                                    18

core concerns of the Wage Act.    An employee may always sue the

president and treasurer of a company for unpaid wages.    The Wage

Act imposes categorical liability on a company's president and

treasurer, and under Massachusetts law, corporations are

required to elect a president and treasurer.    G. L. c. 149,

§ 148.   G. L. c. 156D, § 2.05.   The plaintiff here, however, is

the president and sole officer of the corporation and thus the

only person expressly identified by virtue of his title as

responsible for Wage Act violations.    He was also specifically

and exclusively charged with the management of the finances and

the payroll function in his employment agreement.    He also made

the decision not to pay himself.   As we consider whether the

defendants were agents having the management of the company for

the purposes of imposing personal liability under the Wage Act,

we must carefully separate Segal's officer and agency powers,

and his actions, from those of the defendants.

    We must also for the first time apply the definition of

"agents having the management of the corporation" to board

members or investors.   None of our previous cases involved

attempts to impose liability on board members or investors.     Nor

did any of those cases require us to define the term "agent."

In Wiedmann, 444 Mass. at 711, liability was imposed on the

president of the company and another individual who the

defendants "admit[ted] ran the company."    However, with regard
                                                                     19

to a third individual who was a manager in the company, we held

that he lacked "the" management of the corporation as a whole,

as he was not a higher-level executive, that is "someone who

controls, directs, and participates to a substantial degree in

formulating and determining policy of a corporation."       Id. at

711-712.   Thus, in Wiedmann we only had to focus on the

management part of the test of "agents having the management of

such company."   In Cook, 465 Mass. at 554, we had an even

narrower question to answer, which was whether LLCs should be

treated the same as other corporations for Wage Act purposes.

We concluded they should, and reversed the allowance of a motion

to dismiss based on the corporate structure of the LLC.       Id. at

556.

       How the statutory definition of "agents having the

management of such corporation" would apply to board members and

investors is by no means obvious.    A board generally acts

collectively, not individually.     Estate of Moulton v. Puopolo,

467 Mass. 478, 487-488 (2014).    Also a board ordinarily sets

policy and oversees management but does not perform the

management function itself.    See Boston Athletic Ass'n v.

International Marathons, Inc., 392 Mass. 356, 365 (1984).      See

also Harhen v. Brown, 431 Mass. 838, 844 (2000).    Investors may

exercise significant financial control over a company through

their power over their investments, but they are generally
                                                                       20

acting as outsiders, not managers or agents of the corporation.

With these overarching considerations in mind, we turn to the

application of the phrase "agents having the management" of the

company to board members and investors in general and, more

specifically, Johnson and Rose.

    c.   Requirement that the defendants be agents.    Section 148

does not define "agent," but we assume the Legislature intended

to give the term its ordinary common and corporate law meaning.

See Goodrow v. Lane Bryant, Inc., 432 Mass. 165, 170 (2000).       At

common law, an agency relationship exists where "there is mutual

consent, express or implied, that the agent is to act on behalf

and for the benefit of the principal, and subject to the

principal's control."   Theos & Sons, Inc. v. Mack Trucks, Inc.,

431 Mass. 736, 742 (2000).   See Fergus v. Ross, 477 Mass. 563,

566 (2017); Restatement (Second) of Agency § 15 (1958).       In the

context of corporate law, an executive officer is generally

considered an agent of the company, because he or she acts on

the corporation's behalf, subject to the corporation's control,

as exercised through the board of directors.   See Restatement

(Second) of Agency § 14C comments a, b (1958).     By contrast,

"[n]either the board of directors nor an individual director

. . . is, as such, an agent of the corporation."    Id. at § 14C.

This is because the board of directors, acting as a whole, is

generally not subject to another's control.    Id. at § 14C
                                                                  21

comment a.   "An individual director, as such, has still less

resemblance to an agent than has the board as a body.    He [or

she] has no power of his [or her] own to act on the

corporation's behalf, but only as one of the body of directors

acting as a board.    Even when he [or she] acts as a member of

the board, he [or she] does not act as an agent, but as one of

the group which supervises the activities of the corporation."

Id. at § 14C comment b.9   See Estate of Moulton, 467 Mass. at

487.

       Likewise, investors in a company are ordinarily not

considered agents of the company.    Much like board members,

investors invariably exercise some control over the businesses

they invest in.   See United States v. Bestfoods, 524 U.S. 51, 72

(1998).    However, exercising one's rights as an outside investor

is separate and distinct from being an agent of the corporation.

1 W.M. Fletcher, Fletcher Cyclopedia of the Law of Corporations

§ 30, at 100 (rev. ed. 2015) ("The mere fact that one is a

shareholder or a majority or principal shareholder gives the

individual no authority to represent the corporation as its

agent in dealing with third persons" [footnote omitted]).

       The Restatement (Second) of Agency § 14C (1958) is more on
       9

point in these circumstances than Restatement (Third) of Agency
§ 1.01 comment f(2) (2006). This court has also recently relied
on the Restatement (Second) of Agency in Estate of Moulton v.
Puopolo, 467 Mass. 478, 487 (2014).
                                                                   22

Investors are acting on their own behalf, not that of the

company.   Neither the common understanding of the word "agent,"

nor its use in the Wage Act, encompasses ordinary investors or

investment activity.   This court accordingly will not attribute

to the Legislature an intent to "alter the normal rules of

corporate law . . . in the absence of plain or necessarily

implied intent to change the pre-existing law."    Leonard v.

McMorris, 63 P.3d 323, 327 (Colo. 2003).    See Scott v. NG US 1,

Inc., 450 Mass. 760, 769 n.16 (2008) (reading legislative intent

in G. L. c. 21E to avoid "doing violence to bedrock principles

of corporate law").    If the Legislature intended for the Wage

Act to reach investors and investment activity, it would have

done so explicitly.    See Seagram Distillers Co. v. Alcoholic

Beverages Control Comm'n, 401 Mass. 713, 720 & n.11 (1988)

(declining to disregard corporate form where statute did not

clearly mandate it).

    This is not to say that an individual director or investor

can never be personally liable as an agent of the company.

Rather, individual directors or investors may still be

considered agents of the corporation if they are empowered to

act as such, but any agency relationship stems from their

appointment as an agent, not from their position as a director

or investor.   Restatement (Second) of Agency at § 14C comment b.

For example, an individual director or investor could be
                                                                   23

appointed as an agent if the board exercised "its express or

implied power to confer authority upon [the individual] to act

for the corporation," or if the individual was appointed as an

executive officer.   Id.   This does not mean that an individual

director is immune from any Wage Act liability unless the board

has passed an official board resolution appointing that director

as an agent of the company.   An agency relationship can arise

from either express or implied consent.    Theos & Sons, Inc., 431
Mass. at 742.   If, for example, a particular board member had

been empowered to act individually as the functional equivalent

of the president or treasurer of the corporation, that board

member would be liable for Wage Act violations.    Cf. Estate of

Moulton, 467 Mass. at 489 ("There is no allegation that the

directors undertook any action without a formal board meeting or

vote, nor is there any allegation that any individual director

attempted to usurp the power of the board . . .").

    In the instant case, neither defendant was appointed as an

executive officer.   The LLC agreement provided that "[u]nless

delegated by the [b]oard, all management powers over the

business and affairs of the [c]ompany shall be exclusively

vested in the [b]oard."    Those management powers, particularly

over the payment of wages, were in turn expressly delegated to

Segal, not individual board members.    The agreement also

expressly stated that investors did not have agency authority.
                                                                  24

The agreement specified that "[n]o [m]ember in his or her

capacity as a [m]ember shall have any power to represent, act

for, sign for or bind the [c]ompany or make any expenditures on

behalf of the [c]ompany."10

     There was, however, one express delegation of power to the

defendants.   The employment agreement between Segal and Genitrix

named Johnson, as the investor, as a third-party beneficiary.

It expressly stated that Johnson "may enforce the [c]ompany's

rights under the terms of this [a]greement."    Thus, Johnson was

empowered to act as Genitrix's agent to enforce Segal's

employment agreement, including the termination provision which

allowed the "[b]oard with the approval of at least [fifty per

cent] of the [r]epresentatives" to terminate Segal's employment

for cause.    Additionally, Johnson's e-mail message to Segal

stating that Rose "speaks for" Johnson, and Segal's testimony

that Johnson was referring to financial matters, allows for a

reasonable inference that Rose was Johnson's agent.    Whatever

agency powers Johnson had, Rose essentially shared.

     In sum, Segal, the president and the only officer of the

     10The limited liability company (LLC) agreement defined
"[m]embers" as "Segal, [i]nvestor [Johnson], the [o]ther
[i]nvestors and any [p]erson who becomes a substituted or
additional [m]ember as herein provided and who is listed as a
member of the [c]ompany in the books and records of the
[c]ompany, in such [p]erson's capacity as a member of the
[c]ompany."
                                                                     25

company, had significant officer and agency authority.       In

contrast, the defendants had limited express agency authority,

all of which related to the power to terminate Segal.

    d.      Requirement that the defendants have the management of

the company.    The question then becomes whether the defendants'

limited agency powers, analyzed in the context of the over-all

corporate structure, made either or both defendants agents

having the management of the company.     We conclude that the

agency authority here was insufficient to make the defendants

individually or collectively "agents having the management of

such corporation."

    i.      Johnson's authority to enforce the employment

agreement.     As the sole officer of Genitrix, specifically

charged with "management of the [c]ompany's . . . finances and

other administrative matters," including the human resources and

payroll functions, Segal, not the defendants, had all of the

express officer and agent authority over the management of

Genitrix.

    During most of this time period, Segal was not only the

sole executive but also the only employee; he was also the only

individual with authority to sign checks on behalf of the

company, and he was exclusively in charge of payroll.        The

defendants had no agency authority in this area.     Segal

testified that he affirmatively decided to stop paying himself
                                                                   26

due to lack of funds.   When asked at trial who instructed the

payroll company, Paychex, to stop paying him, Segal testified,

"Well, I didn't tell them not to pay me.   I just didn't tell

them to pay me."   The decision was not made by Johnson or Rose,

as they were not empowered to do so.

    In contrast to Segal's wide-ranging powers over management

as the sole officer of the company and its designated authority

for payroll, Johnson's management powers as an agent derived

only from his authority to "enforce the [c]ompany's rights under

the terms" of Segal's employment agreement.    The right to fire

Segal for cause, and select his successor if no suitable person

satisfactory to seventy-five per cent of the board could be

identified in fifteen months, does not, by itself, render

Johnson an agent having the management of the corporation.      This

right gave Johnson some leverage over Segal, but not the over-

all management of the financial and payroll function of the

company as required by the Wage Act.

    The other significant powers the defendants had as board

members and investors were distinct from the agency powers

provided in the agreement.   As explained above, the board's

powers are neither agency powers nor powers entrusted to

individual board members.    Collective board oversight and

control over management, finances, and policy is not oversight

and control by individual board members.    See Estate of Moulton,
                                                                    27
467 Mass. at 487 ("Adoption of corporate policies is achieved by

a vote of the board of directors as whole, acting as the

corporation . . . and cannot be accomplished in the ordinary

course by any individual director").    The individual board

members are not acting as the board's agents in the exercise of

this board function.   The statute specifically imposes personal

liability on those who have assumed individual responsibility as

officers or agents.    It does not impose individual liability on

board members, acting as board members, or outside investors

overseeing their investments.   This distinction reflects the

Legislature's intention to exclude the ordinary performance of

board or investor responsibilities, including board or investor

oversight of management and the policymaking and financial

controls associated therewith, from personal liability under the

Wage Act.   Personal liability, particularly for board members,

in corporate law is the exception, not the rule.    See G. L.

c. 156D, § 8.30 (c) ("A director is not liable for any action

taken as a director, or any failure to take any action, if [the

director] performed the duties of his [or her] office in

compliance with this section").   See also Sagalyn v. Meekins,

Packard & Wheat Inc., 290 Mass. 434, 438 (1935) ("The management

of the corporation is vested commonly in the board of directors.

Their action taken in good faith, even though wanting in sound

judgment, does not involve them in personal liability").     The
                                                                   28

individuals targeted by the Wage Act reflect this careful

consideration by the Legislature, particularly given that

violations of its provisions may give rise to criminal as well

as civil liability.   G. L. c. 149, § 150 (authorizing

"indictment against any person for a violation of [§] 148").

    Finally, our corporate statutes as a matter of course

impose management oversight responsibility on boards.     See,

e.g., G. L. c. 156D, § 8.01 (b):   "All corporate power shall be

exercised by or under the authority of, and the business and

affairs of the corporation shall be managed under the direction

of, its board of directors, subject to any limitation set forth

in the articles of organization . . . ."   Therefore, if board

members, acting as board members, were to be considered agents

of the company and their normal oversight responsibility were

deemed to be "the management of the company," then they would

always be agents having the management of the company.    If that

were the case, the Legislature would not have omitted board

members and directors from the definition of corporate

employers, as they would essentially have per se liability for

every Wage Act violation.

    ii.   Rose and Johnson's particular board activities.     At

trial, Segal pointed to the behavior of Rose and Johnson's other

board representatives, as well as Rose's communications on

behalf of Johnson's representatives, as evidence of the
                                                                   29

defendants acting as agents having the management of the

company.   In particular, he emphasized that Rose and the other

Johnson board representatives refused to authorize Segal's cost-

cutting proposal to terminate the last employee other than Segal

and to sell the company's laboratory equipment.   This decision,

according to Segal, limited Genitrix's ability to pay Segal.

     As evidenced by Rose's response to Segal, the termination

of the only employee who knew how to make the company's molecule

and the sale of the company's laboratory equipment were not the

type of ordinary personnel or financial decisions left to

individual managers.   They obviously rose to the level of board

consideration.   That being said, corporate boards are regularly

required to make difficult decisions that have an impact on the

company's finances; indeed, that is an important part of their

responsibility as a board.   Such decisions, however, are not the

acts of individual board members as agents and do not impose

personal Wage Act liability.11   We discern nothing exceptional in

these board activities that would render Rose or Johnson

individually liable under the Wage Act as agents having the

     11We note that even within the regular confines of board
activity, Rose could not control the board. To the contrary,
the board was deadlocked. The Johnson board representatives
constituted sixty per cent of the board, short of the seventy-
five per cent majority required to pass most board resolutions.
Segal and his other representative constituted the remaining
forty per cent.
                                                                       30

management of the corporation.   See Estate of Moulton, 467 Mass.

at 489.

    iii.     Rose's investment activities.   To prove that Rose

acted as an agent having the management of Genitrix, Segal

relied heavily on the conditions Rose imposed on new infusions

of capital by Fisk.    In 2006, as Genitrix was running out of

funds, Segal sought more money from Fisk.    Rose informed Segal

that Fisk would not invest more money in Genitrix if Segal

remained in control.    Thereafter, Rose restricted Fisk's new

investments to fund specific expenses, as decided by Rose.        By

2007, Genitrix was so financially strapped that it needed more

outside investment to fund its existing operations, including

payroll.   It was during this time period that Segal worked

without pay.

    As explained above, investors invariably exercise some

control over the businesses in which they invest, particularly

when that business is failing and seeking new funds from these

investors.   See Bestfoods, 524 U.S. at 72 (activities consistent

with investor status include monitoring corporation's

performance and supervising corporation's finance and capital

budget decisions).    But exercising one's rights and leverage as

an investor over infusions of new money are separate and

distinct from being an agent having the management of the

corporation that is seeking the additional financing.
                                                                    31

Investment restrictions limited to the use of new monies are not

management direction and control over existing resources.     See

generally Scott, 450 Mass. at 766.

     Fisk was a separate company from Genitrix.     Fisk was not

responsible for Genitrix's payroll; Genitrix was.    Fisk had no

contractual or other obligations to make these payments.     As

Fisk's representative, Rose undoubtedly had significant power

over new investments in Genitrix, and how that money was spent,

but his exercise of that power was not as an agent having the

management of Genitrix.   In fact, the LLC Agreement expressly

prohibited the defendants from exercising agency authority on

behalf of the company in their role as investors.    It was Segal,

not Rose, acting as the agent of Genitrix in these negotiations

for infusions of new money from Fisk.   Segal, as a board member,

also voted in favor of each board resolution to accept capital

from Fisk, including the conditions imposed on those monies.

Finally, Rose imposing terms and conditions on new outside

investment is not the same as Rose managing the company.     We

therefore conclude that Rose's actions conditioning Fisk's

infusions of new capital into Genitrix do not prove he was an

agent having the management of Genitrix.12

     12No arguments have been made on appeal raising questions
whether Rose's twin roles as a Fisk investor and Genitrix board
member presented issues regarding his exercise of his fiduciary
duty of loyalty or care to Genitrix. Furthermore, at least
                                                                 32

    In sum, neither board members nor investors are officers or

agents having the management of the company for Wage Act

purposes unless they are so empowered by the corporation.   Here,

the person expressly designated as an officer or agent of

Genitrix, particularly in regard to the payment of wages, was

the plaintiff, Segal, not the defendants Rose or Johnson.   In

this context, neither Rose's ordinary board activities on behalf

of Genitrix, his investment activities on behalf of Fisk, nor

his actions as Johnson's agent, alone or in combination,

rendered either him or Johnson personally liable for any Wage

Act violations as agents having the management of Genitrix.

Accordingly, we conclude that the evidence at trial was

insufficient to establish the defendants as liable under the

Wage Act, and the trial judge erroneously denied the defendants'

under Delaware law, LLCs may limit fiduciary duties. Del. Code
Ann. tit. 6, § 18–1101(c) ("To the extent that . . . a member or
manager or other person has duties [including fiduciary duties]
to a limited liability company or to another member or manager
or to another person that is a party to or is otherwise bound by
a limited liability company agreement, the member's or manager's
or other person's duties may be expanded or restricted or
eliminated by provisions in the limited liability company
agreement . . ."). As the Delaware Court of Chancery judge
explained, "the Genitrix LLC [a]greement eliminates fiduciary
duties to the maximum extent permitted by law by flatly stating
that members have no duties other than those expressly
articulated in the [a]greement. Because the [a]greement does
not expressly articulate fiduciary obligations, they are
eliminated." We also note that it is not at all uncommon for
investors to have seats on the boards of the companies in which
they invest. Indeed, they often insist on it.
                                                                   33

motion for judgment notwithstanding the verdict.

     e.   Jury instructions.   The defendants also advance a

number of other arguments relating to the trial judge's denial

of their motion for a new trial.   We need not address these

arguments in light of our conclusion that the judge erred in

denying the defendants' motion for judgment notwithstanding the

verdict.13   However, given our analysis above, and the need for

clarity in future cases, we address whether the jury

instructions were appropriate as to the meaning of "agents

having the management of such corporation" under the Wage Act.

We conclude that they were not.

     At trial, the jury were not instructed on agency, except

insofar as it related to the question whether Rose acted as

Johnson's agent.   Instead, jurors were instructed that "a person

qualifies as an agent having the management of such corporation

if he . . . 'controls, directs, and participates to a

substantial degree in formulating and determining policy of the

corporation or LLC.'"   The trial judge erred in giving this

instruction, as the language was taken out of context from our

prior cases and causes confusion, particularly when the

defendants are board members and investors.   See Cook, 465 Mass.

at 556; Wiedmann, 444 Mass. at 711.

     13We note in particular that the briefing and record are
incomplete on the complicated issue of claim preclusion.
                                                                    34

    In Wiedmann, supra, as explained above, the defendants were

a company's president and treasurer, another individual who

admitted to running the company, and the general manager of an

office.   The language quoted from the Wage Act was used to

determine whether an office manager satisfied the requirement of

"having the management" of the company.     Id.   We were not tasked

with differentiating the authority of board members or

investors, or defining the contours of agency.     Indeed the

agency status of the manager in Wiedmann was not at issue, just

the extent of his management powers.     The issue of agency was

also not raised in Cook, supra; the only pertinent question

there was whether the Wage Act could impose personal liability

in the context of an LLC.   The agency issues and the potential

liability of board members and investors were, however,

presented in the instant case and required more complete jury

instructions.

    The defendants made a motion in limine requesting three

instructions on agency, all of which were denied.     First, they

sought an instruction that "agents having the management of such

corporation" referred to agents who do not hold the formal title

of president or treasurer, but whose actual responsibilities are

functionally equivalent to those of a corporate president or

treasurer.   Second, they requested an instruction defining how

an agency relationship is created.     Third, they asked for an
                                                                   35

instruction that outside board directors who are not officers or

employees of the company are not agents unless specifically

appointed as such.

    We believe instructions clarifying these distinctions were

required in the instant case to avoid confusion about the

difference between the powers and responsibilities of board

members, investors, and "agents having the management of such

corporation."   The jury should have been instructed that there

are two important requirements to being an officer or agent

having the management of the company.   The defendant must be an

agent or officer, and must have the management of the company.

To further define the meaning of "officers or agents having the

management" of the company, the jury should have been instructed

that the Wage Act imposes liability on the president and

treasurer of the corporation and on other officers or agents who

may not hold these titles but whose significant management

responsibilities over the corporation are similar to those

performed by a corporate president or treasurer, particularly in

regard to the control of finances or the payment of wages.    This

instruction, and not the language from Wiedmann, 444 Mass. at

711, should be given, as it properly defines the meaning of

"officers or agents having the management" of the company and

avoids confusing a manager's responsibilities with management

oversight by a board or financial control over investments by an
                                                                    36

outside investor.

    In cases involving Wage Act claims against board members,

the jury should also be instructed that "[n]either the board of

directors nor an individual director . . . is, as such, an agent

of the corporation."    Restatement (Second) of Agency § 14C.      An

individual director may become an agent if he or she is also

appointed as an agent, but no agency relationship arises from

his or her position as a director, in and of itself.     Id. at

§ 14C comment b.    For example, an individual director could be

appointed as an agent if the board exercised "its express or

implied power to confer authority upon [the individual] to act

for the corporation," or if the individual was appointed as an

executive officer.     Id.   Additionally, the jury should be

instructed that the collective powers of the board to control

management or set policy are separate and distinct from the

powers of individual board members.     See Estate of Moulton, 467
Mass. at 487.

    In cases involving Wage Act claims against investors, the

jury should be instructed that an outside investor, acting in

his or her capacity as an investor, is not an agent of the

company.   See 1 W.M. Fletcher, Fletcher Cyclopedia of the Law of

Corporations § 30, at 100.     An outside investor may become an

agent, if the board, exercising its express or implied powers,

confers authority upon the investor to act for the corporation,
                                                                   37

or if the investor is appointed as an executive officer.     Cf.

Restatement (Second) of Agency at § 14C comment b.    The jury

should be further instructed that the exercise of ordinary

financial control over an investment does not give an investor

the management of the company in which he or she invests.     An

investor may, for example, impose conditions on the use of the

money invested, such as targeting it for particular

expenditures, without having the management of the company.      See

generally Scott, 450 Mass. at 766.

    3.   Conclusion.   For the foregoing reasons, we reverse the

denial of the defendants' motion for judgment notwithstanding

the verdict, and remand to the Superior Court for entry of

judgment for the defendants.

                                     So ordered.