Segal v. Genitrix, LLC
SJC-12291
| Mass. | Dec 28, 2017Background
- Andrew Segal was president and sole officer/CEO of Genitrix, an LLC; he managed day-to-day operations, payroll, and was the only signatory on company checks.
- H. Fisk Johnson III (investor) and Stephen Rose (Johnson’s representative and board member) were majority investors through Fisk Ventures and controlled a majority of board seats but not the 75% needed for most actions. Neither held officer titles.
- Segal stopped paying himself in early 2007 due to lack of funds; other employees’ unpaid wages led to disputes and eventual Delaware dissolution of Genitrix.
- Segal sued Johnson and Rose in Massachusetts under the Wage Act (G. L. c. 149, § 148) claiming they were personally liable as “officers or agents having the management” of the company.
- A jury found Johnson and Rose liable; the Superior Court denied judgment notwithstanding the verdict; the Supreme Judicial Court granted direct review.
- The SJC analyzed whether board members or investors—acting as such—can be Wage Act “agents having the management,” and whether jury instructions correctly explained agency and management.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether board members/investors can be personally liable under the Wage Act as “officers or agents having the management” of the company | Segal argued Johnson and Rose exercised control (through board actions and conditioned investments) sufficient to make them agents having the company’s management | Johnson and Rose contended they were investors/board members without officer status or agency authority over payroll/finances and thus outside the statute’s scope | Court held Wage Act liability requires that the person be an officer or an agent who has assumed the company’s management; ordinary board or investor roles do not suffice; insufficient evidence against Johnson and Rose |
| Whether the jury was properly instructed on agency and what constitutes “having the management” | Segal relied on prior language about controlling/participating in policy to argue instructions were adequate | Defendants argued the jury needed instructions on agency, board vs. individual authority, and investor limits | Court held trial instructions were inadequate; jurors should have been instructed that (1) the defendant must be an agent or officer and (2) must have management comparable to a president/treasurer; also clarified that directors/investors are not agents solely by virtue of those roles |
Key Cases Cited
- Cook v. Patient Edu, LLC, 465 Mass. 548 (2013) (confirmed Wage Act can impose individual liability in LLC context)
- Wiedmann v. The Bradford Group, Inc., 444 Mass. 698 (2005) (holding that management of a branch does not necessarily equal management of the corporation as a whole)
- DiFiore v. American Airlines, Inc., 454 Mass. 486 (2009) (statutory interpretation principles; read statutory words in context)
- Estate of Moulton v. Puopolo, 467 Mass. 478 (2014) (directors act collectively; individual directors not agents by virtue of board membership)
- Scott v. NG US 1, Inc., 450 Mass. 760 (2008) (refusing to disregard corporate form absent clear legislative intent)
Conclusion: Judgment notwithstanding the verdict for defendants should have been entered because the Wage Act requires officer status or an agency relationship entailing actual management of the company; ordinary board or investor activity—even conditioning investments or voting on board matters—did not meet that standard in this case. Remanded for entry of judgment for defendants.