Sheehan Phinney Attorneys Prevail at SJC, Establish Law in Massachusetts on Corporate “Deadlock Statute”

(September 18, 2017, Boston, MA) – Sheehan Phinney attorneys Charles Waters and David Hansen won a precedent-setting case in the Massachusetts Supreme Judicial Court involving corporate deadlock. On September 14, 2017, the SJC (Lenk, J.) issued a decision (Koshy v. Sachdev, SJC-12222 (September 14, 2017)) in favor of Sheehan Phinney’s client, an equal owner/director of a Massachusetts software company. Interpreting for the first time the Massachusetts Corporate Dissolution Statute (G.L. c. 156D § 14.30) (a/k/a the “Deadlock Statute”), the SJC reversed the lower court and found that a “true deadlock” existed in the company’s operation and management that required court intervention. The SJC ruled that Sheehan Phinney’s client had proven at trial that a deadlock existed and that there was a threat of irreparable harm as a result of the deadlock. The SJC adopted Sheehan Phinney’s interpretation of the Deadlock Statute and introduced a new four-factor test in Massachusetts to evaluate whether a corporate deadlock exists. Importantly, the SJC also ruled that “dissolution” is not the only remedy upon a finding of deadlock, but that all “lesser remedies” are available including a court-ordered sale of the company to one of the owners or a third party. The Koshy decision will guide future trial courts and arbitrators applying Massachusetts law concerning corporate deadlock and governance disputes.

Waters is Co-Chair of the firm’s Commercial Litigation Group. He has a significant commercial litigation practice with a specialty in corporate governance issues, as well as disputes involving private investment funds, securities fraud cases, shareholder disputes, and breach of fiduciary duty, and other commercial disputes. Waters has been listed as a top commercial litigator by Chambers USA and is regularly recognized by Law and Politics Magazine as a New England Super Lawyer in the area of business litigation. Waters has won multiple million dollar trial awards, including two of the largest trial awards in Massachusetts in 2006 and 2013. His trial successes have garnered attention by both local and national media. Waters serves as a panelist for the Massachusetts Bar Association and MCLE pertaining to litigation and trial issues, and has published articles on various litigation topics.

Dave Hansen is a litigator in the Boston office. He focuses on both employment and business disputes including shareholder disputes between owners of small businesses, contract disputes, construction litigation, commercial landlord-tenant claims, commercial real estate litigation, and numerous other kinds of business disputes. Hansen was named a New England Super Lawyer Rising Star in the area of business litigation.

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Sheehan Phinney is a full service business law firm representing local, national and international clients with innovative approaches and practical solutions. Founded in 1937, Sheehan Phinney has grown to more than 60 attorneys with four offices throughout Massachusetts and New Hampshire and is known for professional excellence, practical counsel and commitment to both its clients and the communities it serves.