BMK Successful Before The Massachusetts Supreme Judicial Court on Issue Regarding Arbitration of Valuation of Shares of a Closely-Held Corporation

May 22, 2015

BMK attorneys Robert R. Berluti, Ted Whitesell and Michael Bednarz successfully argued to the Massachusetts Supreme Judicial Court (the “SJC”) that it should affirm a decision they had previously secured in the Massachusetts Superior Court denying a motion to compel the firm’s client to arbitrate the value of his shares of a closely-held corporation. During the pendency of the underlying litigation, which involved claims of a corporate freeze-out and excessive executive compensation, the client/shareholder offered to sell his shares back to the company, invoking a share redemption and valuation provision contained in the company’s Articles of Incorporation. The client later changed his mind and elected not to sell his shares. Seeking to force a sale of the shares, the corporation and the remaining shareholder sought to compel the client to go through with the sale, arguing that the provision was an arbitration provision that was irrevocable once invoked. The Superior Court agreed with BMK and denied the motion to compel arbitration.

The company immediately appealed the decision and sought direct appellate review by the SJC. BMK was again successful on appeal. The SJC held that although the redemption provisions was an arbitration provision, the client/shareholder had successfully revoked his intent to sell prior to selection of the arbitrators and thus could not be forced to go forward with the process. The underlying litigation remains pending in the Superior Court.

The case is reported as Vale v. Valchuis, 471 Mass. 495 (2015).