Opinion
CV-21-159
02-16-2024
ERIC DUBE, Plaintiff, v. CAROLYN BIRD, Defendant, And CASCO BAY ENGINEERING, INC., Party In Interest.
JUDGMENT
John O'Neil, Jr. Justice, Maine Superior Court
This matter was tried to the Court on September 6-8, 2023. At trial, the Court heard the testimony of Eric Dube, Dianne Nay, Christopher Dornbach, Carolyn Bird, Anthony "Tony" Dumais, and expert witnesses Eric Purvis and Daniel Pelletier. Plaintiff Eric Dube ("Dube") was represented by Clifford Ruprecht, Esq. Defendant Carolyn Bird ("Bird") was represented by Timothy Norton, Esq. Casco Bay Engineering, Inc. ("CBE") was represented by David Goldman, Esq. Dube brought a two-count complaint against Bird and CBE demanding to be paid the value of his 49% interest in CBE or alternatively for corporate dissolution under 13-C M.R.S. § 1430, filed with the Court on April 30, 2021. Bird brought a two-count counterclaim against Dube for breach of common law fiduciary duties and breach of statutory duties on September 9, 2021. CBE brought a three-count counterclaim against Dube for unjust enrichment, tortious interference, and violation of the Uniform Trade Secrets Act ("UTSA"), 10 M.R.S. §§ 1541-48 on September 10, 2021. Having considered the evidence and arguments presented, the Court finds and orders as follows.
L Findings of Fact
Dube and Bird founded CBE as a Maine corporation in 2003 to provide engineering services. Dube and Bird were equal shareholders until 2009, with each owning fifty percent of the outstanding shares. In 2009, Dube and Bird agreed that Dube would transfer one percent of his shares to Bird in an effort to qualify CBE as a woman-owned business for purposes of acquiring set aside work. From that point forward and to this day, Dube owns 49% of the outstanding shares and Bird owns 51% of the outstanding shares. Until his resignation on April 29, 2021, Dube was the Vice President, Treasurer, and a member of the Board of Directors of CBE. Bird is currently the President and sole Director of CBE.
Dube and Bird met when they both worked as engineers at Shelley Engineering in Westbrook, Maine in 2000. They both later worked as colleagues for a Vermont company called Engineering Ventures at the company's Maine office after Dube recruited Bird to join him there. Dube graduated from engineering school in 1992 and worked various engineering jobs before forming CBE. Bird graduated from engineering school in 1990 then moved to Seattle where she worked for a large, international engineering firm called Magnusson Klemencic Associates ("MKA"). While employed at MKA, Bird worked on large-scale and prominent projects and held leadership roles on some of those projects. Bird became a licensed Professional Engineer while she worked in Washington in 1997. Dube testified that he was impressed by Bird and her resume when they met. Dube disagreed with the management at Engineering Ventures, so he pitched to Bird the idea of going into business together. Bird testified that she thought it was a good idea, so the two formed CBE.
Both Bird and Dube made important and distinct contributions to CBE's success as an engineering firm. In the early years, Bird was able to work part-time while Dube put in significant hours. Dube worked many smaller-scale, New England and Maine-based projects and Bird admits that he was often the "closer" on those projects. Before Dube became a licensed Professional Engineer in 2011, Bird, as the license holder, reviewed and stamped Dube's drawings and designs before they could become final. Bird began to work more of a full-time schedule some time around 2009 or 2010. At that time, Bird began to focus on bringing in large, out-of-state projects that she acquired through her contacts from her time working at MKA. The woman-owned business set-aside strategy began to pay off in 2016 or 2017, when Bird's marketing efforts and network contacts won CBE a two-million-dollar contract to do engineering work on the Javits Convention Center in New York City. After the Javits Center project, Bird brought in more large-scale projects for CBE in New York. The combination of small and large projects was necessary for CBE's business model. The small projects allowed CBE to sustain staffing levels needed to reach deadlines during crunch times for the larger projects while being able to retain staff during slower times.
At some point after CBE won the Javits Center contract, the relationship between Dube and Bird began to deteriorate. Dube did not like that Bird referred to Javits and other large projects as "her" projects because he thought it was detrimental to the team environment he wanted to cultivate at CBE, and although Bird's contacts led to the project, many of CBE's engineers contributed to the work product for Javits. Bird testified that their working relationship had been "decent" in the early years but that she always felt there were things that were problematic. For example, Bird testified that she could not get Dube to follow through on contracts, had to pressure him to get licensed as a professional engineer, and she was concerned that he moonlighted under the name "Tri-Star." When CBE invested in land in Falmouth in 2017, Bird thought that Dube was beginning to see more value in her and felt the relationship was improving. Dube testified that the reason CBE bought the land was to comply with the woman-owned business program requirements, which put a limit on the amount of cash the company could have on hand.
By the late 2010s, however, Bird felt sidelined by Dube and the other male engineers at CBE. She testified about asking Dube to talk on multiple occasions, to which he would tell her that he did not have time until the next week but would then go play nerf basketball with "the boys upstairs" for the next thirty minutes. Bird travelled to New York with Keith Brenner, Tony Dumais, and another employee engineer, Zach Valente-Pacheco, to meet with a client to make plans for a project. The client left the room and asked the team to come up with a plan to meet a . tight deadline for the project, at which point Bird excused herself to go to the bathroom. Outside of Bird's presence, the three CBE engineers decided amongst themselves that Keith Brenner and Tony Dumais would do all the engineering work on the project because they needed to use a special program to complete the work and Brenner and Dumais were the "most efficient" at using the program. When Bird returned and learned that the team had left her out of the plan to complete the engineering work on the project, Bird was upset. Dumais used the gendered term "hysterical" to describe Bird's reaction when he testified about this incident. Dumais testified that they changed the plans to give Bird some of the engineering work on the project to placate her before the client returned. Bird testified that this incident reflected a trend at CBE where she would secure projects and then the actual engineering work would be taken from her. Bird got the impression that the men at CBE wanted her to focus on marketing and administrative work, but she loves engineering and took offense to being relegated to non-engineering work.
In January of 2020, project designer Chris Dornbach resigned his position at CBE. After he resigned but before he left employment, Dornbach sent an email to both Bird and Dube expressing his concerns for the future of the company because he and other employees could sense that Bird and Dube were not communicating well and felt a lack of cohesion in the company. (Pl.'s Ex. 23.) The loss of Dornbach constituted a blow to employee morale and led to a discussion between Dube and Bird in early 2020 during which Bird told Dube she was "done," which both parties understood as meaning she wanted to separate from the business partnership. In February 2020, both Dube and Bird created a list of goals or non-negotiables that they would require in order to stay in business together at CBE. Bird's goals included analyzing profitability of projects and owner compensation over the past years, bonuses to owners based on profitability, to use separate bank accounts for each owner's projects, and a raise for herself. (Pl.'s Ex. 24.) Dube's goals focused on employee development. (Id.) In 2020, Bird suspected that the projects she secured for CBE were bringing in more profits to the company than Dube's projects. She asked the office manager, Dianne Nay, to help her with a preliminary profitability analysis and Bird determined that she was making "huge" profits for CBE and felt that she should be compensated accordingly. At some point, Bird also asked Nay to set up a separate bank account for the New York projects so the accounts could be tracked. Nay testified that eventually, every project Bird worked on was assigned to the separate bank account.
Dube and Bird, as owners of CBE, compensated themselves with a combination of their salaries and distributions. On a few occasions, one or both of them also received a bonus. Specifically, one or both owners received a bonus in 2012-2015. (Pl.'s Ex. 7-B, page 10.) Dube received $10,000 in 2012, $6,000 in 2013, $12,000 in 2014, and $3,000 in 2015 in bonuses. (Id.) Bird received $8,000 in 2014 as a bonus. (Id.) Distributions were required to be and were paid in proportion to share ownership, and the owners agreed on their salaries and bonuses. The parties did not have any employment agreements, shareholder agreements, non-competition agreements, or non-solicitation agreements between themselves or with the company at any point in time, nor did the company have any non-competition agreements or non-solicitation agreements with any of its employees. In the early years of CBE, Bird wished to work part time and the parties agreed that Dube and Bird would be paid on an hourly basis, which resulted in Bird having a lower salary than Dube. Dube testified, and Bird did not refute, that the initial agreement between the business partners was to share in their successes and losses equally. CBE had never tracked information relating to project origination or project profitability that would be used for compensating the owners based on the profitability of their projects. Dube and Bird met annually to discuss their compensation and bonuses and would come to agreement on compensation during these annual meetings. Bird testified that in some years, Dube would tell her that he was outperforming her, and he should get a bonus and she acquiesced. When she felt she was "crushing it" and should get a bonus herself, she testified that she was afraid to ask Dube. Each year, Dube and Bird would execute a unanimous consent in lieu of the annual shareholders' meeting required under CBE's bylaws to "close the books." The last such unanimous consent was executed in January 2020.
The February 2020 business goals discussions did not resolve the differences between Dube and Bird and they proceeded to negotiate the terms of their separation. Conversations were stalled due to the onset of the COVID-19 pandemic in March of 2020, but continued throughout 2020. In July 2020, CBE's accountants advised Dube and Bird that there were significant profits projected for the year and recommended they take a significant distribution, but Bird did not agree to make the distribution at that time. Dube testified that the plan throughout 2020 was to split the company equally or 51/49 in accordance with their relative ownership, and although progress had stalled at various points, they were close to an agreement at the end of 2020. In December of 2020, CBE's accountant recommended to Dube and Bird that they should take a distribution before the end of the year of all the cash in the company except $200,000, with the remaining $200,000 to be used for expenses associated with the split. (Pl.'s Ex. 11.) Dube, as treasurer, recommended to Bird that they follow the accountant's advice, but initially she did not agree. On December 31, 2020, Bird did agree to distribute $400,000 to the owners for the purpose of paying taxes. (Pl.'s Ex. 10-F.)
Unable to reach a separation agreement by the end of 2020, negotiations continued into 2021. In February or March of 2021, Bird for the first time communicated to Dube that she wished to be given a sizeable bonus for her contributions to CBE's profitability over the years as part of a separation agreement. Dube did not agree to this condition because, he testified, they had never done compensation based on project-based profitability in the past and the agreement had always been to share in profits and losses equally. Bird insisted on the bonus as a condition of separation, and Dube continued to refuse to agree to this condition. In early March of 2021, Bird refused to approve Dube's expense reimbursement for February 2021 and ordered that all reimbursements to Dube be withheld until the separation agreement was finalized. Dube grew frustrated with the stalled efforts to separate and continued to push Bird to at least separate operationally while they worked out the financial details. Bird did not want to separate operationally or notify employees or clients of the impending separation until all of the details were agreed upon.
In late March of 2021, Tony Dumais emailed Dube and Bird to inquire about company reviews and raises. (Pl.'s Ex. 17.) Typically reviews and raises were given at the beginning of the year, but Dube and Bird were focused on separation negotiations and had not yet done employee reviews and raises for 2021. At this point, Dube felt it was important to inform the employees about the future of the company and pressed Bird to agree to communicate with the employees promptly, but Bird still did not want to tell the employees until the final agreement had been reached. After discussing which employees they expected to stay with Bird at CBE and to follow Dube to a new company, Bird acquiesced to notifying the employees in two emails sent on April 18, 2021. Bird sent the email to Keith Brenner and Zach Valente-Pacheco, the employees they expected would stay with her. Dube sent the exact same email to Tony Dumais, Dianne Nay, David Latham, and Gordon Murray, the employees the parties expected to come with him. (Pl.'s Ex. 18-B.) The notification emails stated that there was no set timeline for the separation while negotiations continued. (Id.) After notifying the employees, Dube felt it important to begin notifying clients of the separation in an effort to control the message now that employees were aware, but Bird continued to insist on full agreement before moving forward with client notification.
Unbeknownst to Bird at the time, Dube ramped up his efforts to establish his new company in March of 2021. On March 31, 2021, Dube executed articles of incorporation for Trillium Engineering Group, P.C. ("Trillium"), and filed the articles with the Maine Secretary of State's Office on April 2, 2021. Also on March 31, 2021, Dube signed a lease for Trillium's Yarmouth office space. The term of this lease began on April 15, 2021. Some time in March, Dube took Dianne Nay to the Yarmouth office space. Although he refrained from explicitly stating to Nay why he was showing her the office space, he knew she would, and in fact did, understand that he intended to use the office space for a company separate from CBE. By mid-April, Dube had commissioned and received a final logo design for Trillium. Dube did not advise Bird of his plans and efforts to establish Trillium at the time he insisted they notify employees of the separation, although Bird did admit on cross-examination that Dube had told her in an April 8, 2021 email to "plan on being two separate companies May 1." (See also Pl.'s Ex. 10-H.) Bird also stated in an email to CBE's accountant on March 26, 2021, that Dube's lawyer was imminently threatening litigation "within the next couple days." (Pl.'s Ex. 13-D.) Additionally, Bird participated in a meeting with Flyte New Media in January 2021 to discuss what Dube's new company's website would look like. (Pl.'s Ex. 5-T, final page.)
The day after the email notification went out to employees, Dube testified that Tony Dumais asked him about next steps and mentioned to Dube that he would be interested in being business partners with him. Dube testified that he did not go into specifics with Dumais or any of the other employees during the time period between the notification emails and his resignation because there was no formalized separation agreement. Dube talked to all of the employees in the office the day after the employee email notification and testified that he told them there was no set timeline, but change was coming. Bird, Keith Brenner, and Zach Valente-Pacheco were not in the office that day as they frequently worked remotely during this period of time.
Dube mentioned multiple times at trial that Bird's absence from the office starting in March 2020 was a source of frustration for him and gave him the impression that she was not working very much or very hard. The Court notes that during the period of time from March 2020 through and beyond April of 2021, many professionals with the ability to work remotely were encouraged to do so to mitigate the COVID-19 pandemic, therefore the Court does not draw the same inference from Bird's remote work as does Dube.
Dube determined that separation negotiations had reached an impasse and testified that he felt he was being "held hostage" at CBE until he would agree to give Bird the bonus, for which she had never proposed a specific amount. During the workday on April 29, 2021, Dube informed CBE's employees that were in the office (who also happened to be the employees he determined would be coming to the new company with him) that he intended to resign as an employee and director at the end of the day. He further told the employees that they could also leave CBE and come work for him at Trillium. He did not instruct the employees that they should provide advance notice to Bird of their resignations, nor did he instruct them to leave instructions or notes regarding open projects or tasks they were responsible for that needed attention. At the end of the workday, at 4;45 PM on Thursday, April 29, 2021, Dube emailed to Bird his resignation letter in which he resigned as an officer, director, and employee of CBE effective immediately. (Defs.' Ex. 5.) In the hours following Dube's email, the other employees that were expected to follow him also emailed Bird to resign. (Defs.' Exs. 13, 18.)
Dube brought in a number of boxes of paper CBE client files he had been storing in his garage that he left at the office when he resigned. Several hours before his resignation, he emailed himself information about a project he testified he had been working on for fifteen years. (Defs.' Ex. 6.) He also copied client files and took a disk drive with him of both personal and work information stored on his work computer. He testified that he took the client files in case the clients decided to bring the work to Trillium and Bird and CBE refused to send client files over. In his last week with CBE, Dube wrote off over $20,000 in client accounts. (Pl.'s Ex. 2-A, Attachment B.)
Dube, Dianne Nay, and Tony Dumais all testified that the mass departure of April 29, 2021 was not coordinated and happened organically when Dube announced his resignation, although Nay acknowledged that it was "possible" she had conversations with Dube about following him to a new company between April 18 and April 29, 2021. The Court does not find the testimony that the April 29, 2021 resignations were not pre-planned to be credible. On April 14, 2021, before even the notification to employees about the impending split had been sent, Nay sent an email to Dube with a link for office chairs. (Defs.' Ex. 20.) On April 28th, 2021, Nay sent an email to Dumais with the subject line "As requested" with an attachment outlining the standard hours and vacation hours of the four employees determined to be following Dube (Dumais. Latham, Murray, and Nay). (Defs.' Ex. 4.) Dumais admitted on cross that he knew he was leaving CBE when the email from Nay was sent. Further, Dumais's loan documents from the loan he used as start-up funding to enter Trillium as a partner are dated May 3, 2021, a mere two business days after his last day at CBE. Dube commenced this suit on the day following his departure, April 30th, 2021. All of this evidence tends to show a level of coordination and planning of the departure that occurred before the day they resigned without notice.
Dube testified that he did not know that, following the employees' departure, CBE would be unable to service the existing New England client contracts and that Bird and CBE had "options" to provide service to the clients. The employees who left, however, left CBE with limited transition materials to pick up where the departing employees left off. Dube himself did not leave CBE with a transition memo. Dianne Nay testified that she prepared payroll before leaving, but she only prepared payroll for herself and the other departing employees. (Defs.' Ex. 18.) Tony Dumais had intended to resign effective at noon on Friday, April 30th, leaving him time to wrap up a project in the morning, but Bird, upon learning of the mass departure, directed Zach Valente-Pacheco to lock the departing employees out of the network and email and informed Keith Brenner that security would be present at the CBE office the following morning. Brenner contacted Dumais on the 29th and informed Dumais that security would be present the next morning. Thereafter, Dumais attempted to check his work email but found that he had been locked out. Dumais took this to mean that he was terminated effective immediately and therefore he did not come into CBE on Friday morning to wrap up. The employees who left CBE were primarily responsible for CBE's Maine and New England projects and they did not leave any instructions on what was needed on the projects. Bird did not know anything about these projects and CBE did not have sufficient staff to complete the projects. Many clients followed Dube to Trillium. Indeed, Dube and Dumais began calling CBE clients on the morning of April 30th to inform them that they had left CBE and were now at Trillium and to "let [Trillium] know if they needed anything." The Court notes that the CBE clients that later became clients of Trillium were earlier identified as clients that would likely follow Dube and Dumais if and when they left CBE. (Compare Pl.'s Ex. 10-1 (proposed client contact list identifying which engineer was primarily responsible for each client), with Defs.' Ex. 31, final page (listing CBE clients that Trillium actively billed from May of 2021 through February of 2022).)
In the months following Dube's departure, business suffered at CBE. The remaining employees had their own projects to work on in addition to the few clients who finished out their contracts with CBE after Dube's departure. Bird was left to deal with the fallout of the departure, including the boxes of client files left by Dube in the office. Bird opted to hire a service to have all of the files scanned and uploaded into a cloud server. Dube argues that this was unnecessary because most of the documents were already saved in digital form in the network, but Bird testified credibly that the files contained handwritten notes and other information that does not appear in the digital files. Because Bird was left to deal with the fallout of the departure, she did not have any time or ability to focus on bringing in new projects in the following months.
Bird was also left with the task of selling the Falmouth parcel of land. Prior to his departure, Dube had been handling the sale of the property and did not provide information about the sale to Bird. When Bird took over managing the sale, she learned that the actual property boundaries differed from what Dube said they were. The property did not actually abut Route One and the building they had once proposed to build on the property would have been situated on the abutter's property. Bird hired Sebago Technics to survey the property for a second opinion and the Sebago Technics survey confirmed the boundaries as Bird had later learned of them. After the undertaking the Sebago Technics survey and other due diligence toward valuing the land, Bird put the land on the market for $525,000 and it sold for the asking price.
II. Conclusions of Law
a. Bird's Counterclaims
Bird's two-count counterclaim against Dube alleges that he breached both common law and statutory fiduciary duties. The elements of a common law breach of fiduciary duty claim are "(1) a fiduciary relationship between the plaintiff and another person, (2) a breach of the other person's fiduciary duty toward the plaintiff, and (3) damages incurred by the plaintiff proximately caused by the breach." Meridiem Med. Sys., LLC v. Epix Therapeutics, Inc., 2021 ME 24, ¶ 12, 250 A.3d 122. The Maine Business Corporation Act establishes the statutory fiduciary duties of directors and officers. Directors, when acting in their official capacity, must act in good faith, in a manner the director reasonably believes to be in the best interests of the corporation, and with the care that a person in a like position would reasonably believe appropriate under similar circumstances. 13-C M.R.S. § 831 (1)-(2). Officers are held to the same standards. Id. § 843(1).
Under both the common law and the statute, Dube, in his capacity as a director and officer of CBE, owed fiduciary duties to the corporation and its shareholders. Bird is a shareholder, therefore Dube owed her a fiduciary duties as a shareholder of CBE. See Rosenthal v. Rosenthal, 543 A.2d 348, 352 (describing the fiduciary duties owed under Maine law "to the corporation and its shareholders"); 13-C M.R.S. §§ 831(1), 843(1) (establishing that officers and directors must act in a manner they reasonably believe to be in the best interests of the corporation).
Bird argues that the manner in which Dube left CBE and established Trillium constituted a breach of his fiduciary duties because his actions furthered his own self-interest and the interests of Trillium at the expense of CBE. Specifically, Bird argues that Dube withheld critical information from Bird about the steps he had taken to establish Trillium, that Dube solicited clients to come with him to Trillium while he was still a director and officer of CBE, that Dube solicited employees to leave with him without notice to CBE, and that Dube used CBE resources such as client lists and files to benefit Trillium. Dube argues that in the absence of non-compete or non-solicitation agreements, he had no duty to refrain from preparing to compete with CBE while still serving as a director, employee, and officer of CBE.
Dube is correct that, in general, an agent or fiduciary is permitted to prepare to compete with the principal while still acting as an agent or fiduciary. Dick v. Koski Prof. Grp., 950 N.W.2d 321, 365 (Neb. 2020); Restatement (Third) of Agency § 8.04 (Am. L. Inst. 2006). Such preparations include incorporating a new business entity and arranging for space and equipment. Restatement (Third) of Agency § 8.04, cmt. c (Am. L. Inst. 2006). "[N]egotiating to leave one's fiduciary position with a closely held corporation and to enter into competing employment elsewhere ... is not, standing alone, a violation of fiduciary duty." Dick, 950 N.W.2d at 365 (emphasis added). An examination of the surrounding facts and circumstances is necessary to properly evaluate whether purported preparations to compete breach fiduciary duties. See Restatement (Third) of Agency § 8.04, cmt. c (Am. L. Inst. 2006). Dube's own cited authority establishes that an agent that is preparing to compete with the principal may not "(1) appropriate the employer's trade secrets, (2) solicit the employer's customers while still working for the employer, (3) solicit the departure of other employees while still working for the employer, or (4) carry away confidential information, such as customer lists." Dick, 950 N.W.2d at 366-67, "The actions of individual and soon-to-be-former agents may become wrongful when they constitute concerted action designed with the purpose of leaving the principal in the lurch." Restatement (Third) of Agency § 8.04, cmt. b (Am. L. Inst. 2006).
Employees may be able to time their departures so that maximum competitive injury is inflicted on the employer because their knowledge of the employer's vulnerabilities at particular times is especially acute, enabling employees who make a concerted plan to depart to time their departure en masse so as to enhance the injury inflicted on the principal.Id. An agent has no duty to disclose their intentions to the principal, but the agent may not mislead the principal. Id.
Here, although Bird was not aware of the extent of Dube's preparations to establish Trillium, she was certainly aware that Dube planned to separate from CBE and start a new business because that was the result they had been negotiating toward for over a year. The Court finds that Dube did not mislead Bird about the timing of his departure. Bird participated in a website design meeting with Flyte New Media in January 2021 for Dube's prospective new business, she knew in March 2021 that Dube's lawyer was threatening litigation within the next few days if they did not come to agreement, Dube informed her on multiple occasions of the imminent need to separate, and he told her in an April 8, 2021 email to plan to be separate companies by May 1. On the other hand, the Court finds that Dube did solicit the departure of Tony Dumais, Dianne Nay, David Latham, and Gordon Murry to Trillium while he was still a director and officer of CBE. The testimony to the contrary is not credible given the evidence of coordination discussed above in the Court's findings of fact. However, Bird and Dube agreed that these employees were likely to leave CBE to follow Dube to his new company upon his separation from CBE. Dube admitted in his testimony that he informed two longstanding clients that he would be leaving CBE, but Bird did not produce any evidence showing that Dube actively solicited CBE customers to Trillium prior to his resignation. Dube also admittedly took a disk drive of information with him that was copied from CBE's servers. Both the Restatement and the Dick v. Koski Prof. Grp. authority relied on by Dube state that departing fiduciaries cannot solicit the departure of employees or carry away confidential information including customer lists while still serving as a fiduciary. In the context of a business association that is negotiating the separation of the fiduciary, however, the wrongful character of taking these actions is less clear. As discussed above, the parties had already agreed that the employees Dube solicited would probably be leaving with him and he was allowed to communicate his separation with them, and the parties had planned to make a similar communication to their respective expected clients. The most problematic aspect, then, of Dube's departure is not that he took the actions the parties were negotiating toward but rather when and how he took them. Whether the maimer of his departure constitutes a breach of his fiduciary duties is a close call.
Even assuming, however, that Dube did breach his fiduciary duties by unilaterally declaring the timeline for the separation and resigning without notice and taking employees with him, the Court finds that Bird has not carried her burden to prove damages proximately caused by the breach. Because the parties were planning on a separation that included at least some CBE clients following Dube to his next place of business, the only possible breach is the manner in which Dube left CBE. Bird is correct, of course, that foreseeability is the touchstone of the proximate causation analysis as a general matter. E.g., Peckham v. Continental Cas. Ins. Co., 895 F.2d 830, 836 (1st Cir. 1990). But it is not enough to argue that the foreseeable result of Dube's departure was CBE's loss of clients because that was indisputably the foreseeable result even under Bird's best-case scenario in which the financial details of the separation were finalized before Dube left to pursue his new company. This is why precisely why Bird's claim fails on proximate cause. The loss analysis prepared by her expert witness Daniel Pelletier assumes that all former CBE clients that Trillium served in its first ten months of operation would have stayed at CBE but for Dube's actions when he left. But even if he left on her terms, she does not dispute that at least some of those clients would have followed him anyway. Bird has not identified any specific clients that CBE would have retained had Dube given her a more definitive statement of advance notice of his intention to resign, leaving the Court to speculate on the true magnitude of loss attributable to Dube's actions, if any. "The mere possibility of [proximate] causation is not enough, and when the matter remains one of pure speculation or conjecture, or even if the probabilities are evenly balanced, a defendant is entitled to judgment." Niehoff v. Shankman & Assocs. Legal Ctr., P.A., 2000 ME 214, ¶ 8, 763 A.2d 121 (quoting Merriam v. Wanger, 2000 ME 159, ¶ 8, 757 A.2d 778). The Court issues judgment for Dube on both counts of Bird's counterclaim.
b. Bird's Request for a Bonus
Detached from any of the claims actually pleaded in this case, Bird asks for the Court to declare that she may, as the sole director and officer of CBE, cause CBE to issue her a $500,000 bonus in recognition of her contributions to CBE's profitability in past years. Bird has not identified any basis in contract, law, or equity for the Court to so authorize.
Bird argues that the Court has authority to declare the bonus pursuant to the business judgment rule and cites to Maine cases discussing and applying the rule generally to support her argument. Under the business judgment rule, courts will not second-guess the business decisions of corporate directors in the absence of bad faith or fraud. Meridian Med. Sys., 2021 ME 24, ¶ 37, 250 A.2d 122. The business judgment rule does not apply to directors setting their own compensation. Kaplan v. Hartford First Corp., 484 F.Supp.2d 131, 150-51 (D. Me. 2007); see also Zimpritch, Maine Corporation Law and Practice § 8.7[b] at 319, § 8.8 [a] at 359 (3d ed. 2015). More fundamentally, the business judgment rule is a presumption of regularity of the business decisions by corporate directors that places the burden on the challenger of an action to rebut the presumption by showing bad faith or fraud. Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984), overruled in part on other grounds by Brehm v. Eisner, 746 A,2d 244 (Del. 2000); see Kaplan, 484 F.Supp.2d at 150-51 (applying the burden-shifting framework of the business judgment rule). The policy rationale behind the business judgment rule is to prevent courts from interfering with corporate governance in the absence of bad faith or fraud. See America v. Sunspray Condo. Ass'n, 2013 ME 19, ¶ 14, 61 A.3d 1249 (quoting Rosenthal, 543 A.2d at 353). The Court is unaware of any authority, and Bird identifies none, applying the business judgment rule as a forward-looking means of affirmative relief.
Beyond Bird's creative invocation of the business judgment rule, the Court finds that there was no agreement between Bird and Dube to award compensation and bonuses based on profitability of their respective projects. Bird did not dispute that the initial agreement between the parties was to share in profits and losses equally, with compensation determined based on hours worked. Bird admitted that CBE had never tracked profitability of individual projects, saying "we should have been doing this all along." If the parties had agreed to award bonuses on the basis of project profitability, CBE would have had to have been fracking those metrics, but it did not. The Court does not doubt the evidence presented that gender biases and gendered office dynamics were at play in the relationship between Dube and Bird and perhaps in the way they were compensated, but Bird did not present any evidence or basis for the Court to provide her a remedy when she admittedly agreed to the businesses finances and testified that she was afraid to ask Dube for a bonus so she did not ever ask. The Court denies Bird's request to declare that she may cause CBE to issue her a $500,000 bonus in recognition of her past contributions to profitability. Going forward, Bird and any future business partners may structure bonuses based on profitability or any way she wants and the relevant parties agree to. There is now no basis to retroactively disturb the compensation packages Bird admitted she agreed to.
c. CBE's Counterclaims
CBE's three-count counterclaim against Dube alleges unjust enrichment, tortious interference, and violation of the UTSA. Neither CBE nor Bird presented any argument on these claims in any of their pre- and post-trial briefing. CBE has failed to present these claims to the Court for decision. See Gravison v. Fisher, 2016 ME 35, ¶ 51, 134 A.3d 857. The Court renders judgment for Dube on CBE's counterclaims.
d. Dissolution
Under 13-C M.R.S. § 1430(2), a corporation may be dissolved in a judicial proceeding brought by a shareholder if it is established that:
A. The directors are deadlocked in the management of the corporate affairs, the shareholders are unable to break the deadlock and, because of the deadlock, irreparable injury to the corporation is threatened or being suffered or the business and affairs of the corporation can no longer be conducted to the advantage of the shareholders generally;
B. The directors or those in control of the corporation have acted, are acting or will act in a manner that is illegal, oppressive or fraudulent;
C. The shareholders are so divided regarding the management of the business and affairs of the corporation that the corporation is suffering or will suffer irreparable injury or the business and affairs of the corporation can no longer be conducted to the advantage of the shareholders generally;
D. The shareholders are deadlocked in voting power and have failed, for a period that includes at least 2 consecutive annual meeting dates, to elect successors to directors whose terms have expired;
E. The corporate assets are being misapplied or wasted; or
F. A shareholder of the corporation has abandoned its business and has failed within a reasonable time to liquidate and distribute its assets and dissolve.13-C M.R.S. § 1430(2). In a dissolution action brought by a shareholder under Section 1430(2), the court may order alternative relief it deems appropriate, including "[p]roviding for the purchase at their fair value of shares of any shareholder either by the corporation or by other shareholders." Id. § 1434(2)(A).
Bird and CBE argue that Dube has not established any of the grounds for dissolution in Section 1430(2), therefore the Court cannot order alternative reliefunder Section 1434. Dube argues that by virtue of bringing suit under Section 1430(2), the Court has authority to order alternative reliefunder Section 1434 even if the Court does not find that any grounds for dissolution have been established. The Court need not reach this issue, however, because the Court finds that the condition described in Section 1430(2)(C) has been established here.
The overwhelming conclusion to be drawn from the evidence presented is that Bird and Dube, the shareholders of CBE, are sharply divided about the most basic aspects of operating the business. Dube is team-focused, seeks to further employee development, believes profits and losses should be shared equally between owners, and focuses on smaller, New England and Maine-based projects. Bird wants to pursue large projects in New York, Seattle, and anywhere in between and wishes to award compensation based on project origination. Dube wanted CBE to declare distributions to be made from the excess cash in the company's accounts, while Bird wanted to reinvest the profits into growing the business into the New York market. On these facts, the Court finds that CBE is no longer being conducted to the advantage of the shareholders generally, but rather to Bird's advantage. This is not necessarily wrongful on Bird's part-for almost the entirety of the separation negotiations the plan was always for the parties to split and have separate businesses. The Court is convinced that this is the best way forward for all involved. In lieu of dissolution, however, the Court will order the alternative relief of requiring CBE to purchase Dube's forty-nine percent of the outstanding shares at fair value. 13-C M.R.S. § 1434(2)(A).
e. Valuation
The only remaining issue to be resolved is the correct valuation of Dube's shares. Dube argues that "fair value" within the meaning of the statute is the total of CBE's assets reduced by its liabilities in proportion to his forty-nine percent ownership interest with no discounts taken for minority status and lack of marketability. Bird and CBE oppose a buyout remedy, but argue that should the Court order a buyout, it should apply the discounts for minority status and lack of marketability.
The statute uses the term "fair value" as the measure of valuation. 13-C M.R.S. § 1434(2)(A). The Law Court, interpreting the same term in the appraisal rights chapter of the previous title for the Maine Business Corporation Act, held that discounts for minority status and non-marketability should not be applied when determining "fair value" within the meaning of the appraisal statute. In re Valuation of Common Stock of McLoon Oil Co., 565 A.2d 997, 1003-04 (Me. 1989). Interpreting "fair value" as used in 13-C M.R.S. § 1434(2)(A), the very same statute at issue here, the United States District Court for the District of Maine came to the same conclusion that minority and marketability discounts should not apply. Kaplan v. First Hartford Corp., 603 F.Supp.2d 195, 203 (D. Me. 2009). In light of this case law, the Court will not apply minority or marketability discounts to the valuation of Dube's shares.
Bird and CBE argue in their reply brief that Judge Hornby in Kaplan ended up applying a marketability discount of 30% in Kaplan. That reading of Kaplan is mistaken. Judge Hornby adjusted for the marketability discount that was already reflected in the share price the Judge started from. Kaplan, 603 F.Supp.2d at 208. Rather than apply a downward marketability discount, Judge Hornby corrected for the marketability discount for a higher adjusted share price without the marketability discount. Id. ("The adjusted share price to correct for the discounts .. . .") (emphasis added).
The final issue for the Court is the date to use for valuation. Dube argues that the date of valuation should be the day of his resignation, April 29, 2021, because that is the day he demonstrated his desire to separate himself from CBE. Bird and CBE argue that the date should be August 31, 2023, a few days before trial, because that date more properly represents the value of CBE after Dube's conduct upon resignation. "The statute is silent except to leave it clearly within the judge's discretion." Kaplan v. Hartford First Corp., 522 F.Supp.2d 275, 278 (D. Me. 2007). The Kaplan court stressed that the premise for any relief was the court's finding of minority shareholder oppression. Kaplan, 522 F.Supp.2d at 278. In Kaplan, the court ordered the date of valuation to be the date the plaintiff filed his complaint for dissolution based on a number of reasons, including the pattern of oppressive conduct, fairness, and practicality. Id. at 278-79. The court was presented with three different proposed dates for valuation: the date of the oppression, the date of the complaint, or the date of the decree, only one of which was a date certain, the day the complaint was filed. Id. at 278.
This case differs from Kaplan in several important ways. First, the buyout in Kaplan was ordered based on one dominant shareholder's oppression of a minority shareholder. Id. at 275-76, 278. The Court does not find that Bird engaged in oppression of Dube, rather the Court orders the buyout on the basis of serious division between the shareholders preventing the corporation from being conducted to the advantage of the shareholders generally. The Court has been presented with valuation figures for two dates certain: April 29, 2021, the date of Dube's resignation, and August 31, 2023, about a week before trial. The Court exercises its discretion under the statute to fix the valuation date of August 31, 2023. Both Bird and Dube have contributed to the state of CBE as it was at trial, including the loss of value that happened after Dube's departure. Both Bird's unwillingness to come to an agreement on the price to pay for Dube's shares and Dube's unilateral departure on his own terms have led to the devaluation of CBE's assets. The Court has found that the parties agreed to share in the profits and losses of CBE equally and has held Bird to that agreement in refusing her request for a bonus. Out of fairness, the Court holds Dube to that agreement, as well, by ordering the date of valuation to be August 31, 2023.
The Court heard the credible testimony of expert witness Daniel Pelletier that the value of CBE as of August 31, 2023 was $990,337.09, and Dube's credible expert witness Eric Purvis did not dispute the accuracy of that figure when presented with it. (See Defs.'s Ex. 34.) Forty-nine percent of that value is $485,265.17.
III. Judgment
For the reasons discussed above, the entry is:
1. Judgment for Plaintiff on Counts I and II of the Complaint. Casco Bay Engineering, Inc. shall pay $485,265.17 to Eric Dube in exchange for all of his shares in Casco Bay Engineering within 270 days of this Judgment.
2. Judgment for Plaintiff on Counts I and II of Carolyn Bird's Counterclaim. 3. Judgment for Plaintiff on Counts I, II, and III of Casco Bay Engineering, Inc.'s Counterclaim.
The Clerk is requested to enter this Order on the docket for this case by incorporating it by reference. M.R. Civ. P. 79(a).