Selmark Associates, Inc. v. Ehrlich, 467 Mass. 525

Selmark and Marathon are closely held MA corporations operating as manufacturers’ representatives; Ehrlich joined Marathon in 1997 with potential ownership if deal succeeds.
In 2001-2002, four agreements governed Marathon’s sale to Selmark and Ehrlich: purchase, employment, conversion, and stock agreements, outlining payments, ownership split, and future convertibility.
Post-signing, Marathon and Selmark acted as a single entity publicly, with Ehrlich as Marathon VP; employment ended in 2007 but Ehrlich remained a minority shareholder and producer.
In 2007 Ehrlich was terminated by Elofson; Selmark offered to buy Ehrlich’s Marathon stock instead of conversion; Ehrlich remained a minority shareholder but out of management.
Ehrlich later joined Tiger Electronics; he solicited Marathon principals for Tiger, leading to breach-of-fiduciary-duty claims; the jury awarded damages on multiple claims.
On appeal, the court vacated the contract damages award and remanded for a new trial on damages; c. 93A claim was dismissed; fiduciary-duty breach verdict affirmed against Ehrlich’s opponents.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Blank v. Chelmsford applies to bar fiduciary claims	Selmark contends Blank precludes fiduciary claims where contracts govern	Ehrlich argues fiduciary duty remains when contract does not fully govern	Blank does not apply; fiduciary duty survives where contract does not entirely govern
Breach of fiduciary duty among close shareholders	Selmark/Elofson claim dismissal due to contracts governing relations	Ehrlich asserts breach of trust in termination and actions as minority shareholder	Jury could infer breach of duty; judgment on fiduciary breach affirmed against Selmark/Elofson
Breach of contract: conversion and related damages	Selmark/Elofson contend no breach due to Ehrlich not meeting conversion prerequisites	Ehrlich asserts improper denial of conversion rights breached the agreement	Evidence supports breach of conversion agreement; damages reversed and remanded due to potential double recovery
Chapter 93A claim viability	Ehrlich seeks 93A damages as part of intra-enterprise dispute	93A inapplicable to intra-enterprise shareholder disputes	93A claim reversed; c. 93A inapplicable
Ehrlich’s cross-appeal on competition and injunction	Ehrlich contends he could compete after being frozen out without breaching duties	Selmark/Marathon contend continued fiduciary duties barred competition	Right to compete not a breach; cross-appeal affirmed in favor of Selmark/Marathon

Blank v. Chelmsford Ob/Gyn, P.C., 420 Mass. 404 (Mass. 1995) (contracts may displace fiduciary duties where terms are explicit)
Chokel v. Genzyme Corp., 449 Mass. 272 (Mass. 2007) (when actions fall entirely within contract, fiduciary claims limited)
Merriam v. Demoulas Super Mkts., Inc., 464 Mass. 721 (Mass. 2013) (contract does not entirely govern; fiduciary duty may still apply)
King v. Driscoll, 418 Mass. 576 (Mass. 1994) (contract existence does not entirely relieve fiduciary duties)
Pointer v. Castellani, 455 Mass. 537 (Mass. 2009) (freeze-outs and minority protections in close corporations)
Donahue v. Rodd Electrotype Co. of New England, Inc., 367 Mass. 578 (Mass. 1975) (trust, loyalty, and near-absolute fidelity among close corporation stockholders)
Milliken & Co. v. Duro Textiles, LLC, 451 Mass. 547 (Mass. 2008) (inter-enterprise disputes; 93A applicability limits)
Szalla v. Locke, 421 Mass. 448 (Mass. 1995) (private intra-enterprise disputes generally outside 93A scope)
Conway v. Electro Switch Corp., 402 Mass. 385 (Mass. 1988) (consequential damages and front pay considerations in employment contexts)
Zimmerman v. Bogoff, 402 Mass. 650 (Mass. 1988) (93A inapplicable to disputes among shareholders in close corporation)