ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Saturday, October 16, 2010

A good time was had by all

A I'm on the way back to Fort Worth -- enjoying the free WiFi at Philadelphia International Airport -- after a great one-day conference at Western New England’s Blake Law Center. The conference marked the 35th anniversary of one of the casebook staples on fiduciary law, Wilkes v. Springside Nursing Home, Inc., 370 Mass. 842 (1976).


Wilkes involved four men who had gone into business together to run a nursing home. They began as a partnership in 1951, then (on the advice of an attorney) formed a corporation to protect themselves from liability. Each of the four owned an equal share of the venture, each too a salary, and each served as a director. Some time later, the four had a falling-out. Wilkes’s fellow shareholders—Quinn, Riche, and Conner—excluded him from the board and fired him, leaving him with no way to get any economic value from his investment.

Under partnership law, Wilkes’s expulsion would have triggered a dissolution, and he would have been able to get the fair market value of his shares or even (if he chose to outbid the other three) take over the nursing home. Under corporate law, however, Wilkes had no claim. Shareholders ordinarily do not owe each other fiduciary duties; a shareholder has no right to sit on the board, nor does he have the right to employment. The case looked like a sure loser.

But the Massachusetts Supreme Judicial court held that a closely held corporation was essentially just a partnership which incorporated to get limited liability. The court ruled that the other shareholders in the nursing home owed Wilkes fiduciary duties, and that he was entitled to show that his "reasonable expectation" was that he would be entitled by his ownership interest to continued employment and a role in management.  Since the decision more than half of U.S. states have adopted some version of the Wilkes approach.

Eric Gouvin of WNE did a terrific job of putting the panels together. All of the papers presented at the conference will be published in a symposium in the Western New England Law Review, which will be a must-read for those of us who teach Business Organizations.  When I get a few minutes I’ll give you my take on the most interesting aspects of the conference.


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It was a great day with top notch presentations. And it was great to see you, Frank.


Posted by: Meredith R Miller | Oct 16, 2010 7:38:44 AM