February 28, 2011
Wilkes v. Springside Nursing Home-The Backstory
Many people are familiar with Donahue v. Rodd Electrotype, 328 N.E.2d 505, the 1975 Massachusetts Supreme Court opinion that held shareholders in closely-held corporations owe each other fiduciary duties akin to those owed by general partners in partnerships. Wilkes v. Springside Nursing Home, Inc., 353 N.E.2d 657 (Mass. 1976) is slightly less familiar but just as important. In Wilkes, the Massachusetts Supreme Court had to operationalize Donahue, determining what the respective parties’ burdens were in a corporate freezeout case. It was Wilkes that really had to wrestle with the conflict between protecting minority shareholders and allowing the majority to run the business.
Eric Gouvin (Western New England) has written an interesting account of the backstory of Wilkes. His article includes biographies of the principals and a detailed description of the setting of the case. The parties, apparently, had a history, and that history helps animate the case. If you like to see the story behind famous cases, and in particular if you want to understand how problems arise in closely-held businesses, I strongly recommend Eric’s article.