Opinion
CIVIL ACTION 15-2433-BLS1
04-05-2019
Stephen PUNZAK, M.D. Plaintiff v. Robert MCIVOR; James English, M.D.; Anesthesia Associates of Massachusetts, P.C.; and PR Holdings Company, Inc. f/k/a Plexus Management Group, Inc. Defendants.
MEMORANDUM OF DECISION AND ORDER ON DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT
Mitchell H. Kaplan, Justice of the Superior Court
Plaintiff, Dr. Stephen Punzak, is an anesthesiologist and a former member and shareholder of defendant Anesthesia Associates of Massachusetts, P.C. (AAM). He was also formerly a shareholder of PR Holdings Company, Inc. F/K/A Plexus Management Group, Inc. (Plexus), a corporation formed to provide billing services for AAM. Defendants Dr. James English and Robert McIvor were, respectively, at all times relevant to this action, the president of AAM and the president and CEO of Plexus. Punzak brings this action because his employment with AAM was involuntarily terminated and he was forced to sell his shares in both companies back to each. He asserts claims against the defendants for: Breach of Fiduciary Duty (Count I); Civil Conspiracy (Count II); Intentional Interference with Contractual Relations (Count III); Wrongful Termination (Count IV); Breach of Contract (Count V); and Breach of the Covenant of Good Faith and Fair Dealing (Count VI). The case is before the court on the defendants’ motion for summary judgment dismissing all of the claims. For the reasons that follow the motion is ALLOWED, in part, and DENIED, in part.
BACKGROUND
The following facts are taken from the summary judgment record. All inferences have been drawn in favor of Punzak, the non-moving party.
Punzak was employed as a physician by AAM beginning on August 3, 1992. The offer letter given to Punzak at the time of his employment states:
[w]e know that you understand that we do not consider physicians for corporate participation until they have completed three years of service and it is clear that a good working relationship has been established with our group and the hospital communities we serve .... In years past, we have found that our interview process rarely fails to identify a physician who is not suitable for our group. However, should it appear at any time during that period that the relationship will not be a success, we would expect to terminate our association after suitable notice on our part.
On September 21, 1993, a memorandum was entered into Punzak’s personnel file based on "numerous complains about Dr. Punzak regarding his relationship with both patients and [nurses]." This memorandum stated that AAM’s vice-chairman had spoken to Punzak at least two times about his behavior. It described Punzak’s approach as "overconfident and cavalier," and his attitude as condescending. Punzak does not recall any meeting with AAM’s vice-chairman and disputes the allegations made in the memorandum.
Notwithstanding this 1993 memorandum, in January 1995, Punzak became a shareholder of AAM. All AAM shareholders are practicing anesthesiologists, and many of the physician-shareholders refer to each other as "partners." As each physician earns the same annual base pay and shares equally in AAM’s profits, the physicians carefully schedule their time so that the work is spread equally among the "partners," including on-call burdens.
An examination of the summary judgment record reveals that English, as President of AAM, had significant influence over the composition of AAM’s Board of Directors. The AAM By-Laws specify that the Nominating Committee "shall consist of the President, two stockholders proposed by the President and approved by the Board of Directors, and two stockholders elected by the stockholders...." In consequence, English and the two stockholders that he selects control the Nominating Committee, which in turn selects a slate of directors to be submitted to the stockholders for their vote.
Punzak, allegedly under the direction of AAM’s then-President Lewis, wrote a letter to the board to raise concerns about another AAM physician. On October 1, 1998, an ad-hoc committee appointed by the AAM board found that Punzak expressed his concerns with an "insensitive disregard ... and lack of respect" and in an "inappropriate" manner. The committee decided against termination of Punzak’s employment, but noted "numerous prior complaints about Dr. Punzak’s interpersonal behavior" that "exceeded complaints against all AA[M] physicians in their frequency, severity, and consistency of problem alleged." The committee recommended Punzak write letters of apology and engage in continuing education.
In 1990, before Punzak became a shareholder of AAM, a separate corporation was formed to perform billing services for AAM. This corporation, Anesthesia Associates Management Corporation, was renamed Plexus Management Group, Inc. in 2003. Today, this corporation is named PR Holdings Company, Inc.. (for purposes of this decision, this corporation will be referred to as "Plexus"). Although initially formed as a professional corporation entirely owned by AAM’s shareholders, Plexus was converted to a C corporation in October 2012. By December 2013, Plexus had 85 shareholders. At that point, not all of the shareholders of Plexus were also physician-shareholders of AAM.
On January 1, 2006, Plexus entered into an agreement with AAM which apparently changed the manner in which Plexus would be compensated for the services that it performed for AAM. According to this 2006 Agreement, Plexus received ten percent of AAM’s revenue each year for providing services; the Agreement also set its term thirty years (the 2006 Agreement) AS a consequence of the 2006 Agreement, Plexus was able to generate a profit. Punzak alleges that the 2006 Agreement was executed without a vote of either the AAM board of directors or its shareholders. Moreover, Punzak served on the Plexus board, and he maintains that the board members were not provided with financial statements disclosing the sums being paid by AAM to Plexus.
In August 2012, HIG, a private equity firm, offered to acquire Plexus for $ 28 million. Punzak contends that is when he first became aware of the 2006 Agreement. He alerted other AAM physician-shareholders by email, raising concerns about both the offer price as well as the management and governance of AAM and Plexus.
On September 8, 2012, Punzak emailed McIvor a request for AAM and Plexus financial information; McIvor forwarded the email to English. On the same day, English responded to McIvor by email (the "open warfare email"). English wrote that his "opinion is that [Punzak] has finally declared open warfare and we should go on the offensive .... I don’t want to overstate it, but this is not going to end well. It’s him or us ...."
In response to the critical emails Punzak sent to AAM shareholders, Punzak was allegedly placed on a Performance Improvement Plan ("PIP") on March 5, 2013 by the AAM board. There is evidence in the Summary Judgment record that at least some members of the board were unaware of the PIP.
On December 13, 2013, an intra-office e-mail announced that AAM was implementing new software that allowed AAM and other on-site personnel to track, within one hundred yards of a medical facility, the location of AAM physicians through the use of the physicians’ cell phones. Punzak sent three reply-all e-mails in response to this announcement. In these emails, Punzak suggested that "[w]hat we are all really waiting for is an app to track management," "[w]e could use the tracking to see who is the long ball hitter, nearest the pin, stays in the fairway most often" and "let’s turn on the front camera to make sure nobody is getting too much sun on the fairways or the Cayman beaches." In the third e-mail, Punzak apologized for the prior two, stating that "[a]pparently a few people who don’t know me well mistook my obvious attempt at a little bit of satirical humor as genuine concern on my part about an invasion of privacy. Just to clarify, I am joking ...."
On December 20, 2013, Punzak’s employment with AAM was terminated. Defendants allege that the board decided that Punzak violated the PIP when he sent the sarcastic reply-all emails. Punzak maintains that his employment was terminated because he questioned the financial arrangements that English and McIvor had instituted without notice to the AAM doctors. There is evidence that contrary to the defendants’ contentions, the board did not unanimously terminate Punzak’s employment. It is undisputed that neither the implementation of the PIP plan nor Punzak’s termination had anything to do with his clinical abilities as an anesthesiologist.
There is evidence that after the termination, English contacted physicians at AAM, including Triffin Psyhojos and James O’Ruorke, asking them not to recommend Punzak for future employment. Punzak asserts that some AAM physicians followed these instructions and suggested to local hospitals that they not hire him.
Following his termination, Punzak’s 100 shares of AAM and 100 shares of Plexus were involuntarily purchased by the corporations. The Defendants contend that under the terms of the AAM and Plexus Stockholder Agreements, he was required to sell his shares to each within 90 days after his employment was terminated. Specifically, the AAM Stockholder agreement states that:
Within ninety (90) days after a Stockholder ceases to be an employee of the Company and within such period after the death of a Stockholder, such Stockholder or his personal representative, as applicable, shall offer in writing to sell and shall sell and the Company shall purchase all the shares of the stock of the Company then owned by such Stockholder, or the estate of a deceased Stockholder, at the Offering Price determined pursuant to Section 9 hereof.
Section 9(a) of the AAM Stockholder Agreement provides that:
The Adjusted Net book Value [per] Share for purposes of this Agreement shall be equal to the Net book Value [per] share as determined on a cash basis by the independent accountants ordinarily engaged by the Company, as of the last day of the fiscal quarter immediately preceding the date of the event causing the purchase of the shares, except that all salaries and bonuses earned prior to the Valuation Date shall be deducted as liabilities.
It then sets out the manner by which the Offering Price for the shares will be set:
The starting point for computing this amount is the tax basis net worth as of the end of the year preceding the date of termination. The tax basis net worth is shown on the cash basis combined statement of assets, liabilities and stockholders’ equity. The tax basis net worth should be divided by the total shares outstanding and multi[plied] [by] the number of shares held by the terminee.
The Plexus Stockholder Agreement also has a share redemption provision:
Within ninety (90) days after a Stockholder ceases to be an employee of Anesthesia Associates of Massachusetts, Inc. or the Company and within such period after the death of a Stockholder, such Stockholder or his or her personal representative, as applicable, shall offer in writing to sell and shall sell and the Company shall purchase all the shares of the stock of the Company then owned by such Stockholder, or the estate of a deceased Stockholder, at the Offering Price determined pursuant to Section 9 hereof.
Section 9 provides in relevant part:
Beginning in 2007, the Board of Directors of the Company shall not less than annually cause the stock of the Company to be valued at its fair market value as of the preceding December 31st by an independent appraiser or by the independent accountant ordinarily engaged by the Company using such valuation methods as are determined in good faith to be reasonable and appropriate, such fair market value to be approved by the Board of Directors of the Company and to be the Offering Price per share.
Punzak maintains that the shareholder agreements are not enforceable. Both are unsigned, contain redline edits, additions, and strikeouts. Further, Punzak denies that either agreement was ever presented to shareholders. Questions of fact exist regarding the provenance and enforceability of these documents, which are the basis for the Defendant’s "repurchase" of Punzak’s AAM and Plexus shares.
Turning to the actual valuation of the shares, because AAM had a negative tax basis net worth at year’s end of 2012, Defendants determined that Punzak was entitled to zero dollars for his shares of AAM, and accordingly redeemed the shares for the price that he had originally paid for them, $ 100. This valuation is hardly surprising as it appears that AAM distributed all available cash each year to the doctor/shareholders whose professional services generated the revenue. The valuation of the Plexus shares is more problematic.
Defendants hired an independent accountant, Gordon Associates, Inc. ("Gordon"), to value the company and Punzak’s shares. Gordon valued the company at $ 21, 235, 000 but found a "per" share value of $ 1, 240 after applying very substantial discounts for lack of control and lack of marketability. Defendants paid Punzak $ 124, 000 for his 100 shares. At least the following questions of fact are associated with the Gordon valuation. First, there is substantial evidence that Gordon was not provided with the third party offer of $ 28 million for the purchase of Plexus, a relevant piece of information for any appraiser as he selects multiples and discount rates. And, while an event subsequent to the valuation date may not be admissible, it is worth noting that in 2015, Plexus was sold for $ 42 million. Secondly, the Plexus shareholder agreement, which is replete with crossed-out provisions and underlined additions, is at best ambiguous with respect to whether a departing shareholder was to receive his pro-rata percentage of all of the shares or the heavily discounted fair market value of a single share of Plexus multiplied by the number of shares he owned.
There are two AAM employment manuals, a 1995 Physician Employment and Benefits manual (the "1995 manual") and a 2011 Shareholder Policies & Procedures manual (the "2011 manual). It is the Defendants’ position that Punzak was terminated, in accordance with the 1995 manual, for cause. According to the 1995 manual, "[i]t is the Corporation’s policy to terminate any Physician who cannot perform satisfactorily, whose attendance is poor, who is found unsuited for the job, or who otherwise fails to comply with the policies of the Corporation as herein set forth."
While there is a dispute over whether the 2011 manual was actually distributed to the AAM shareholders, the parties’ arguments turn on the termination provisions found in the 1995 manual.
DISCUSSION
Count I: Breach of Fiduciary Duty
In Count I, Punzak asserts a claim for breach of fiduciary duty against McIvor and English. For the reasons that follow, the breach of fiduciary duty claims relating to English’s position as president and director of AAM will proceed, but those relating to Plexus are dismissed. More specifically, the claims asserted in this count against McIvor, who is not a shareholder, director, or officer of AAM, are dismissed. As to English, who is a shareholder, President, and director of AAM, summary judgment is denied.
Under Massachusetts law, the general rule is that a director "owes a fiduciary duty to the corporation itself, and not its shareholders." Int’l Bhd. of Elec. Workers Local No. 129 Benefit Fund v. Tucci, 476 Mass. 553, 561 (2017) (Tucci). In Tucci, the Supreme Judicial Court explained that there are "at least two exceptions" (emphasis supplied) to this general rule: cases involving close corporations and instances where "a controlling shareholder who also is a director proposes and implements a self-interested transaction that is to the detriment of minority shareholders." Id. In cases where a court finds that an exception to the general rule applies, a direct action may be brought by a harmed shareholder. Id. The question presented in this case is, whether under the somewhat unique circumstances presented here in which AAM exhibits many of the characteristics of a close corporation and a partnership and English has acquired authority similar to that of a controlling shareholder, another exception to the general rule that a president of a company owes direct fiduciary duties only to the corporation should apply.
In Donahue v. Rodd Electrotype Co., the SJC held that shareholders in a closely-held corporation "owe one another substantially the same fiduciary duties in the operation of the enterprise that partners owe to one another." 367 Mass. 578, 593 (1975). The court found that three elements must be satisfied to make the finding that a corporation is a closely-held corporation. There must be: "(1) a small number of stockholders; (2) no ready market for the corporate stock; and (3) substantial majority shareholder participation in the management, direction and operation of the corporation." Id. at 585. In short, the corporation must bear a "striking resemblance to a partnership." Id. at 586. Once this standard is met, the "stockholders participating in management are held to a standard of fiduciary duty more exacting than the traditional good faith and inherent fairness standard because of the trust and confidence reposed in them by the other stockholders." Id. at 595.
In Wilkes v. Springside Nursing Home, Inc., the plaintiff and three other men formed a corporation, and each invested $ 1000 for equal ownership. 370 Mass. 842 (1976). Each assumed an "active and ongoing responsibility for carrying a portion of the burdens necessary to operate the business." Id. at 845. The work was apportioned so that each employee-shareholder had an approximately equal role. Id. When his relationship with the other employee-shareholders turned sour, Wilkes was "informed that neither his services nor his presence at the nursing home was wanted by his associates." Id. at 847. The court found that Wiles had always competently completed his assigned duties and had never suggested that he was disinclined to continue doing so. Id. at 852. The court concluded that by cutting off Wilkes salary, it was assured that he would never receive a return from the corporation. Id. at 853. When such a result occurs, "courts must weigh the legitimate business purpose, if any, against the practicability of a less harmful alternative" to their chosen action. Id. at 851.
Here, AAM had no non-employee shareholders, but rather the individual shareholders were all the physicians working in common purpose to generate revenue for the corporation. All are anesthesiologists and refer to each other as "partner." The individual doctors hold equal shares in the corporation and adjust their schedules so that each doctor is working a similar number of hours. The shareholders rely on the corporation for their livelihood, as the income to the corporation comes exclusively from the fees the doctors earn from their practice of medicine, and the corporation then distributes the revenue to the doctors in compensation for their service. The total number of physician-shareholders in AAM was 83 on the date Punzak’s employment was terminated.
English exerts a significant amount of influence over the affairs of the corporation. In addition to himself, English selects two other shareholders to the Nominating Committee, which in turn selects the slate of candidates presented to the shareholders for election to the board. Punzak as well as other shareholders have testified to the manner in which AAM is managed, and in particular the amount of power English exercises over the corporate decision-making.
The court acknowledges that there has been no case in this state where a corporation with more than twenty-one shareholders has been found to be closely-held. See Elmaleh v. Barlow, 19 Mass.L.Rep. 684 (finding that, although Massachusetts law does not provide a maximum number of shareholders allowed in a close corporation, "this court has not found a case in which a close corporation had more than twenty-one shareholders"). Accordingly, the court does not find that AAM, with 83 shareholders, is a closely-held corporation. Also English is not a majority shareholder, rather he holds the same interest in AAM as all of the other physician/shareholders. In consequence, the neither of the two exceptions to the general rule that officers owe fiduciary duties only to the corporation identified in Tucci applies to AAM.
Nevertheless, the attributes of a closely held corporation described in Donahue and Springside Nursing Home are strikingly similar to those that pertain to professional corporations like AAM. All the shareholders all perform similar services for the corporation that then pays them salaries for their work. They are dependent on the corporation for their livelihood and can expect no return for their ownership interests in AAM other than through their salaries. The shareholder/physicians refer to one another as partners. Given the resemblance of this kind of professional corporation to a partnership, the principles announced in Donahue and Springfield certainly suggest that a president of AAM ought to have fiduciary obligations to each of his fellow physicians to treat them fairly, as well as obligations to AAM. Additionally, although English was not a majority shareholder of AAM, he had acquired significant power and authority over the other shareholder/physicians. Finally, the method of valuation used in setting the price at which Punzak’s shares in Plexus would be acquired, which included discounts of more than 50% for lack of marketability and lack of control, had the effect of transferring much of the value of Punzak’s interests in Plexus to the other shareholders. English apparently adopted this valuation approach even though the Plexus shareholder agreement is at best ambiguous concerning whether these discounts should be applied to a terminated physician.
The court notes that in Tucci, the SJC explained that there were "at least" two exceptions to the rule that officers of a corporation do not owe fiduciary duties directly to shareholders. The court finds that in this case where AAM and English have attributes similar in nature to a closely held corporation and a controlling majority shareholder, respectively, another exception to the general rule applies.
Count II: Civil Conspiracy
Count II asserts that McIvor and English conspired to breach their fiduciary duties to Punzak. Because Count I is not be dismissed as to English, this claim for civil conspiracy also survives.
Count III: Intentional Interference with Contractual Relations
Count III assets a claim for intentional interference with a contractual relationship against directors McIvor and English. To establish this claim, a plaintiff must prove that: (1) he had a contract with a third party; (2) the defendant knowingly induced the third party to break that contract; (3) the defendant’s interference, in addition to being intentional, was improper in motive or means; and (4) the plaintiff was harmed by the defendant’s actions. See Draghetti v. Chmielewski, 416 Mass. 808, 816 (1994); Harrison v. NetCentric Corp., 433 Mass. 465, 476 (2001).
Punzak alleges that McIvor and English intentionally and improperly interfered with the relationship between him and his employer, AAM. It is clear that "[a] party to a contract cannot be held liable for intentional interference." Harrison, supra at 476. While acting within the scope of their employment, corporate officials are generally immune from intentional interference claims as well. See Blackstone v. Cashman, 448 Mass. 255, 260 (2007). However, this immunity does not extend to officials acting "out of malevolence, that is, with actual malice." Id. "Actual malice is defined as a spiteful, malignant purpose, unrelated to the legitimate corporate interest." Id. See also King v. Driscoll, 428 Mass. 576, 587 (1994). A showing of "sloppy and unfair business practices" is not sufficient, but rather "the behavior must rise to the level of personal hostility or ill-will to satisfy the malice standard." Weber v. Cmty. Teamwork, Inc., 434 Mass. 761, 783 (2001).
Here, it is undisputed that Punzak’s employment was not terminated by Defendants for any reason related to his clinical abilities as an anesthesiologist. Rather, Defendants allege that Punzak was terminated as the result of the emails he sent and because his interactions with other AAM employees were inappropriate in tone. In response, Punzak points to the open warfare email: "this is not going to end well. It’s him or us ...." Clearly, a jury could draw an inference from that language that the Defendants were motivated by personal animosity against Punzak in causing his termination and relied upon the emails only as an excuse for firing him. There is also the timing of his termination which did not follow unfortunately-phrased criticism of other physicians but rather complaints concerning how English and McIvor were dealing with Plexus. Punzak also points to evidence that the defendants urged AAM physicians not to recommend him for future employment with other area hospitals. Punzak has attested that English also told him that if he did not sign a general release agreement at the time of his termination, he would "make life difficult for Dr. Punzak and make it impossible for him to get a job." Taking all reasonable inferences in favor of the non-moving party, the evidence is sufficient to establish questions of fact concerning whether McIvor and English acted with actual malice rather than out of a legitimate corporate interest.
Although Punzak was an at-will employee of AAM, a personnel manual can constitute an employment contract between an employee and his employer. See O’Brien v. New England Tel. & Tel. Co., 422 Mass. 686, 691 (1996). If the parties agree, orally or in writing, either prior to employment or during at-will employment that a personnel manual will "set forth relative rights and obligations of employer and employee," then the manual will become a part of the employment contract. Id. Similarly, continuing to work after being provided an employment manual "provides the consideration necessary to support the contract." Id. Here, there is a question of fact as to whether Punzak received either of the employment manuals and if his employment relationship with AAM was based on a specific contract. However, even if the employment relationship was not embodied in a written contract, malicious interference with an at-will employment relationship will support a cause of action. As the SJC explained in Blackstone, courts have "often considered intentional interference with advantageous relations in the context of employment." 448 Mass. at 260.
To assert a claim for intentional breach of an advantageous relationship, a plaintiff must prove that "(1) he had an advantageous relationship with a third party (e.g., a present or prospective contract or employment relationship); (2) the defendant knowingly induced a breaking of the relationship; (3) the defendant’s interference with the relationship, in addition to being intentional, was improper in motive or means; and (4) the plaintiff was harmed by the defendant’s actions." Blackstone, supra at 260. This type of a claim may be proven in the context of an employee/employer relationship even in the absence of a written employment agreement. Id.
Count IV & V: Wrongful Termination & Breach of Contract
Count IV asserts a claim for wrongful termination. As the court understands it, this is a claim that AAM did not follow the contractual requirements for termination of a shareholder/physician rather than some manner of claim that the termination violates a public policy. In consequence, Count IV will be addressed along with the other breach of contract claims asserted under Count V.
Assuming, arguendo, that the 1995 AAM "Physician Employment and Benefits" manual defines the terms of Punzak’s employment, it provides that "[i]t is the Corporation’s policy to terminate any Physician who cannot perform satisfactorily, whose attendance is poor, who is found unsuited for the job, or who otherwise fails to comply with the policies of the Corporation as herein set forth. A Physician’s employment may be terminated by the Corporation by the affirmative vote of a majority of the entire Board of Directors."
The court finds that this language in the 1995 manual is ambiguous as it relates to Punzak’s termination. If the four instances enumerated are exclusive, there is a significant question of fact as to whether Punzak’s alleged conduct satisfies any of those four categories. Additionally, the manual sets out a specific process for a termination without cause: an employee who is terminated without cause must be given ninety days’ notice. Punzak was given no notice. Further, there is a question of fact as to whether an "affirmative vote of a majority of the entire Board of Directors," as required by the manual, was obtained in accordance with the corporate charter. In short, questions of fact exist concerning whether the termination complied with the provisions of the 1995 manual, which the Defendants allege constitute an employment contract.
Count V also asserts a breach of contract for failure to pay proper value for Punzak’s AAM and Plexus shares. The contracts at issue here are the AAM and Plexus Shareholder Agreements. As noted above, the enforceability of both documents is disputed by Punzak. Defendants rely upon Haufler v. Zotos, 446 Mass. 489 (2006) to support their argument that these shareholder agreements need not be signed to be legally enforceable. However, in that case the SJC was careful to qualify its holding: a "written contract, signed by only one party, may be binding and enforceable even without the other party’s signature if the other party manifests acceptance." Id. at 498. While a signature is not the only way to establish acceptance, here Punzak denies being provided with a copy of either agreement and also, as noted above, the Plexus agreement, in particular, appears to be in draft form. In consequence, questions of fact exist concerning whether Punzak, by his conduct, manifested acceptance of the agreement. Without the existence of a valid shareholder agreement, the right to involuntarily purchase Punzak’s Plexus shares appears to be lacking.
For the reasons explained previously, the right to repurchase Punzak’s AAM shares seems largely academic. The value of the shares is the opportunity to provide physician services through AAM and receive a salary. The Plexus share are, however, quite different. We now know that Plexus was sold for $ 42 million. The Plexus Shareholder Agreement specifies that if a "Stockholder ceases to be an employee" of AAM, he must sell his shares back to Plexus within 90 days. The agreement goes on to require the "stock of the Company to be valued at its fair market value as of the preceding December 31st by an independent appraiser... using such valuation methods as are determined in good faith to be reasonable and appropriate." There is no evidence here that the appraiser chosen was not qualified, nor is there any evidence that Gordon did not conduct a suitable valuation based of the materials it was given, if the contract provision called for the determination of the fair market value of a single share of Plexus, rather than all of the shares of Plexus. As noted above, the Plexus shareholder agreement is at best ambiguous on that point. Punzak’s claim that Gordon was not given all relevant information to perform its valuation is addressed in the next section of this Memorandum.
Count VI: Breach of the Implied Covenant of Good Faith and Fair Dealing
Count VI asserts a breach by AAM and Plexus of the covenant of good faith and fair dealing that is implied in every contract. "The covenant is preserved so long as neither party injures the rights of another to reap the benefits prescribed by the terms of the contract .... The covenant may not, however, be invoked to create rights and duties not otherwise provided for in the existing contractual relationship, as the purpose of the covenant is to guarantee that the parties remain faithful to the intended and agreed expectations of the parties in their performance." Uno Restaurants v. Boston Kenmore Realty Corp., 441 Mass. 376 (2004). In this case, assuming that the Plexus Shareholder Agreement is a binding contract requiring Punzak to sell his shares at a price determined by Gordon for a single share, there is nonetheless a question of fact concerning whether the Defendants performed their obligations in good faith.
Although the board hired an independent appraiser to value the shares of the company, there is a question as to whether the Defendants provided that appraiser with all of the information necessary to determine the fair market value either of all the shares or a single share of Plexus. There is evidence that Plexus received a third-party offer to purchase it for $ 28 million, $ 7 million more than Gordon valued the company. The Gordon report makes no mention of that offer. This is sufficient evidence to create a question of fact concerning whether Defendants performed their contractual obligations with respect to the valuation in good faith.
ORDER
For the foregoing reasons the Defendants’ motion for summary judgment is ALLOWED, in part, and DENIED, in part. So much of Count I as alleges a breach of fiduciary duty against McIvor is dismissed. The motion is denied with respect to so much of Count I as asserts a claim against English. The motion is DENIED as to all the other Counts.