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Donahue v. Rodd Electrotype Co.

Supreme Judicial Court of Massachusetts
328 N.E.2d 505 (1975)


Facts

Harry Rodd (defendant) served for many years as the president and general manager of Rodd Electrotype Co.  In 1955, Harry Rodd held 200 of Rodd Electrotype Co.’s 250 shares, representing an 80 percent stake in the company. Joseph Donahue owned the remaining 50 shares, which passed on his death to his wife Euphemia Donahue (plaintiff) and his son. By the end of the 1960s, Harry Rodd had ceded the management of the corporation to his sons Charles and Frederick Rodd (defendants), and Harry wished to dispose of his shares. He gave most of them to his children as gifts.  Additionally, Charles and Frederick – who controlled the board – caused the corporation to purchase 45 of Harry’s shares for $800 per share. When the Donahues learned of the purchase, they offered to sell their shares to the corporation on the same terms given to Harry. The board rejected the offer. Euphemia Donahue sued Harry, Charles, and Frederick Rodd, as well as the third member of the board, for breaching fiduciary duties owed to her as a minority shareholder. She asked the court to rescind the corporation’s purchase of Harry Rodd’s stock. The trial court found in favor of the defendants, holding that the transaction was inherently fair. The appellate court affirmed. Euphemia Donahue appealed to this court.

Rule of Law

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Issue

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Holding and Reasoning (Tauro, C.J.)

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Concurrence (Wilkins, J.)

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