Robert and Ardis James Foundation v. Meyers

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13-P-1169 Appeals Court

ROBERT AND ARDIS JAMES FOUNDATION & another1 vs. DANIEL MAXWELL
MEYERS.

No. 13-P-1169.

Suffolk. March 14, 2014. - February 12, 2015.

Present: Cohen, Graham, & Grainger, JJ.

Contract, Implied covenant of good faith and fair dealing.
Damages, Breach of contract, Sale of stock. Corporation,
Stock.

Civil action commenced in the Superior Court Department on
November 16, 2006.

After transfer to the business litigation session, the case
was heard by Christine M. Roach, J.

Kevin P. Martin (Katherine Sadeck with him) for the
defendant.
Joseph L. Bierwirth (Thomas J. Carey, Jr. with him) for the
plaintiffs.

GRAHAM, J. This action arose out of two one-page letter

agreements (letter agreements or agreements) between plaintiff

1
Robert James.
2

Robert James and the defendant, Daniel Maxwell Meyers,2 in which

James agreed to provide Meyers with $653,340 for the purchase by

Meyers of 31,107 shares of stock in the First Marblehead

Corporation, a company cofounded by Meyers. In exchange for

supplying Meyers with the funds, James would receive the right

to participate in the proceeds of the sale of the 31,107 shares.

However, notably absent from each letter agreement was any

provision governing its termination or establishing conditions

upon which Meyers would be required to sell their stock.3

In the fall of 2004, James's daughter, Catherine James

Paglia (Catherine4), seemingly on behalf of the James family,

inquired of Meyers, seeking termination of the agreements.

Meyers declined and, on November 16, 2006, the plaintiffs filed

a multicount complaint in Superior Court, later amended,

asserting claims for division and distribution of the shares

(count I), dissolution of a partnership or joint venture (count

2
Another signatory to the letter agreements was Stephen
Anbinder, discussed infra.
3
The funds were drawn not from James's personal accounts,
but from plaintiff the Robert and Ardis James Foundation
(foundation), a charitable entity for purposes of the Internal
Revenue Code, organized under the laws of New York, whose
purpose is to make qualifying charitable donations of the
accumulated funds. During the relevant time periods of this
lawsuit, the trustees of the foundation were plaintiff James,
his wife (Ardis James), and his two children, Ralph James and
Catherine James Paglia.
4
For clarity, we employ first names when referring to
James's children.
3

II), declaration of an agency relationship (count III), breach

of an implied term of the contract (count IV), breach of the

implied covenant of good faith and fair dealing (count V),

payment of a share of the dividends (count VI), and declaratory

judgment (count VII).

After a six-day bench trial in April, 2011, the trial judge

found in favor of Meyers on counts I through IV and VI. She

did, however, determine that on July 31, 2006, Meyers breached

the implied covenant of good faith and fair dealing (count V).

The judge awarded the plaintiffs damages based on the fair

market value of the shares of the stock as of the time of the

breach. With interest, the damages awarded were $44,052,678.5

The trial judge subsequently denied Meyers's motion for

reconsideration as well as the plaintiffs' motion to amend the

judgment in their favor on counts II, IV, and VI. The central

issue on appeal is whether Meyers breached the implied covenant

of good faith and fair dealing. We conclude that he did not

and, accordingly, reverse.

Facts. We summarize the facts from those agreed-upon, and

the judge's extensive findings. Additional undisputed facts are

supplied for context.

5
The amended judgment included a declaration (count VII)
that Meyers must reimburse the foundation for the fair market
value of the foundation's "share of the subject stock" on July
31, 2006, with interest to April 15, 2011, the date of the close
of evidence at trial.
4

Meyers is a 1984 graduate of Brandeis University, with an

undergraduate degree in economics. He worked in the financial

services industry for the next seven years. In 1991, he and

Stephen Anbinder founded First Marblehead LP, a provider of

higher education private student loan origination and services.

Meyers served as the managing partner of First Marblehead

LP. In 1995, upon incorporation, First Marblehead Corporation

(First Marblehead) was a privately held Delaware corporation

with its headquarters in Massachusetts, and Meyers became its

chief executive officer (CEO) and chair of the board of

directors, positions he held through 2005. On October 31, 2003,

First Marblehead offered its common stock to the investing

public in an initial public offering (IPO), and its shares have

been traded on the New York Stock Exchange since that date.

James, eighty-six years old at the time of trial, is a

professional investor with more than forty years of experience

investing in various business ventures. He graduated from

Harvard Business School, and later earned a Ph.D. in economics

from Harvard. James taught economics and business organization

at the Massachusetts Institute of Technology (MIT) and was

involved in the creation of MIT's Sloan School of Management.

In 1969, he and a friend formed Enterprise Asset Management,

Inc. (EAM), a highly successful investment firm with offices on
5

Fifth Avenue in New York City. EAM has interests in diverse

businesses and industries throughout the world.6

James became familiar with Meyers through his children's

involvement with First Marblehead. Catherine, a former vice

president at Morgan Stanley & Company, had been a principal in

Interlaken Capital (Interlaken), a private equity firm.

Interlaken made an investment in First Marblehead in the mid-

1990s, as did Catherine and other Interlaken partners.

Catherine introduced her brother Ralph James to Meyers in

the mid-1990s. In 1995, Meyers hired Ralph as executive vice

president of First Marblehead. Subsequently, Ralph held the

position of president and chief operating officer. In 2004, he

was elected vice chair of First Marblehead's board of directors.

In approximately 1997, Meyers developed a personal

relationship with James and the two met several times a year in

James's New York office and at the New York Yacht Club. They

also took several leisure trips together. James considered the

First Marblehead business plan "quite a brilliant thing." He

also contacted one of the larger investors in First Marblehead

who assured James that "this guy [Meyers] knows what he is

doing."

6
EAM invested in a wide range of businesses and industries
including shopping centers, oil and gas, the sale of French wine
in China, and villa construction in India. At his pretrial
deposition, James estimated his net worth in the hundreds of
millions of dollars.
6

In November, 1997, James made his initial investment in

First Marblehead. Meyers wanted to purchase a leisure boat and,

to fund the purchase, he sold 10,000 shares of his privately

held common stock in First Marblehead to James at thirty-six

dollars per share.7 The $360,000 investment was "relatively

modest" by James's standards.

The following year, James and Meyers entered into the first

of the two letter agreements that are at the heart of this

litigation. On January 22, 1998, First Marblehead issued a

letter offering its shareholders the opportunity to purchase

additional shares of First Marblehead stock in a rights offering

(the 1998 rights offering) at a price of twenty dollars per

share up to a maximum number of shares commensurate with the

shareholder's existing percentage ownership of First Marblehead.

Meyers was given the right to purchase up to 18,627 shares,

Anbinder up to 13,161 shares, and James up to 941 shares.

Meyers and Anbinder were not in a financial position to

participate in the 1998 rights offering and were concerned that

it would dilute their percentage ownership of First Marblehead.

James personally participated in the 1998 rights offering,

purchasing the maximum number of shares allowed.

7
James later sold the shares and those accumulated from
stock splits of the original 10,000 shares, and earned a profit
in excess of $24 million.
7

Meyers sought and obtained agreement from James that James,

through the foundation, would provide the money required for

Meyers and Anbinder to purchase the shares in their own names in

exchange for James's right to share in the proceeds of the sales

in the future. Meyers sent James a draft agreement regarding

the proposed purchase of First Marblehead stock and, after some

discussion, the parties reached agreement. The entire content

of the letter agreement (the 1998 agreement) signed by James on

February 20, 1998, was as follows:

"Dear Bob:

"This letter will confirm our agreement regarding the
purchase of common stock of The First Marblehead
Corporation in the current rights offering by Steve
Anbinder and me.

"We have agreed that Steve and I will exercise our rights
to purchase 18,627 and 13,161 shares, respectively, of
stock @ $20.00 per share and that you will advance the
funds to each of us in return for the right to participate
in the proceeds of sales. The total of the advances will
be $635,760. The advances will be without recourse and
will be repaid solely out of proceeds when the stock is
sold.

"Steve and I will take title to the stock in our own names.
Each of us will deliver the newly-issued share
certificate[s] to you, and you will retain the certificates
in your possession until the stock is sold. You may also
vote the stock as you see fit.

"Upon the sale of the stock, you will be entitled to the
sale proceeds up to a sale price of $30 per share. The
balance of the sale proceeds, if any, will be divided 50%
to you and 50% to either Steve or me. Either Steve or I
may assign all or part of our interest to a third party.
8

"If this letter accurately reflects the terms of our
agreement, I ask that you sign the duplicate copy of the
letter and return it to me."

First Marblehead's outside counsel, Attorney Rodney G.

Hoffman, had drafted the agreement and represented Meyers.

Anbinder had been added as a signatory to the final 1998

agreement.8 James wired $635,760 of foundation funds for the

purchase of stock pursuant to the 1998 agreement, which included

$372,540 for the purchase of 18,627 shares by Meyers and

$263,220 for the purchase of 13,161 shares by Anbinder.9

In a letter dated January 25, 1999, the parties executed an

almost identical letter agreement (the 1999 agreement) in

connection with another rights offering (the 1999 rights

offering). James directed the foundation to provide Meyers and

8
There were three material differences between the draft
and the final 1998 agreement: (1) the economics of the final
1998 agreement moved in James's favor, providing him with ten
dollars per share higher appreciation in value of the stock
price from the date of the 1998 agreement before James needed to
divide proceeds from the sale of the stock to Meyers and
Anbinder, (2) James acquired the right to vote the shares, and
(3) the language in the draft permitting James to hold the
certificates "until such time as [they] agree that the stock
should be sold" was deleted.
9
Sometime after the 1998 agreement, Meyers and Anbinder
sent an undated letter to Ralph confirming the purchase of the
additional shares. In that letter, Meyers and Anbinder each
assigned to Ralph a one-half interest in the proceeds of the
sale of the stock purchased under the 1998 rights offering, in
recognition of Ralph's hard work and good contributions to First
Marblehead. The assignment by Meyers and Anbinder to Ralph
subsequently was converted into an option agreement and
exercised by Ralph, resulting in substantial personal gain.
9

Anbinder $479,205; Meyers purchased 12,480 shares of First

Marblehead stock and Anbinder purchased 8,818 shares. Between

the two rights offerings, James advanced $1,114,965 of

foundation funds to First Marblehead, $653,340 on behalf of

Meyers.

First Marblehead was highly successful and the value of its

stock increased dramatically. On August 25, 2003, the

corporation effected a ten-for-one stock split of its shares.

In October of 2003, First Marblehead effected a four-for-one

stock split, and in December of 2006, it executed a three-for-

two stock split. As a result of the stock splits, the 31,107

shares subject to the agreements had become 1,866,420 shares by

the time of the trial in 2011.

Meyers left First Marblehead as CEO and chair of the board

of directors on September 27, 2005.10 On October 5, 2005, the

board of directors declared a dividend to shareholders of twelve

cents per share of common stock, paid quarterly. Because Meyers

owned the shares subject to the letter agreements, he received

and retained all of the dividends paid on those shares.

Nature of the dispute. In 2001, Catherine joined EAM as a

director and began assisting her father with his financial

10
In August, 2008, the board of directors asked Meyers to
return, and he did so. We also note that James attempted,
unsuccessfully, to contact Meyers during the period of 2005 to
2006.
10

affairs at EAM and the foundation. She spent several years

making sure his investments were properly reflected on EAM and

foundation records. Many documents were missing from the files

of the foundation, including the 1999 agreement. On October 19,

2004, Catherine sent an electronic mail message (e-mail) to

Meyers and Anbinder, seeking the voting proxy cards belonging to

the foundation and asking them "to consider whether we can

negotiate an equitable distribution of these shares between you

and the Foundation so that this agreement can be terminated."11

Although Anbinder did not believe he had a duty to do so,

he agreed to unwind his portion of the agreements.12 On December

13, 2005, following months of negotiation, Anbinder and James

reached agreement regarding the disposition of the First

Marblehead shares of stock (Anbinder agreement). The Anbinder

agreement gave Anbinder the right to receive fifty percent of

the proceeds of the sale of his shares of First Marblehead stock

pursuant to the agreements.13 At the time of the Anbinder

11
Meyers and Anbinder sent the proxies to Catherine and, on
November 4, 2004, she thanked them for their prompt attention to
her request.
12
As a result of a succession of stock splits, the 21,979
shares of stock that originally were subject to the agreements
had become 879,160 shares by April of 2005.
13
The Anbinder agreement provided, in relevant part, that
Anbinder and James "have now agreed to modify our agreement by
distributing the 879,160 shares of stock in [First Marblehead]
currently held by [James] . . . on a 50-50 basis as follows:
11

agreement, the stock price had increased to around twenty

dollars per share (from about fourteen dollars per share in

October of 2005). Thus, James's investment of $461,625 resulted

in his receipt of $8,791,600, which was fifty percent of the

proceeds from the sale of Anbinder's shares pursuant to the

agreements.

Catherine expressed her satisfaction with the Anbinder

agreement and felt that the deal was a very small economic

concession on the part of the foundation.14 Anbinder informed

Meyers about the favorable terms of the deal, asking several

times whether "he wanted to sit down and talk to the James

family." Meyers answered, "Not particularly."15

439,580 shares would be distributed to the Foundation, and the
remaining 439,580 shares would be retained by . . . Anbinder."
14
Addressing the concession, James testified, "It should
cost the Foundation to do this. I didn't know how long
[Anbinder] would take and what he'd do. I was delighted, I
would have paid more to get this thing done." Further
explaining his motivation for wanting to sell the stock, James
noted that First Marblehead was a "large value" stock, and the
foundation lacked cash at that time to satisfy its legal
obligation to pay out five percent of its investment assets.
Catherine testified that in order to achieve her goal of getting
rid of the letter agreements with Anbinder and Meyers, she
understood that she might be required to sweeten the original
terms.
15
As stated supra, dividends on First Marblehead stock were
paid quarterly beginning on October 5, 2005. At no time prior
to this litigation did the plaintiffs assert any claim to the
dividends paid on the stock shares at issue and, on appeal, the
plaintiffs have not challenged the trial judge's finding that
they were not entitled to these dividends.
12

In 2006, an inquiry by the Attorney General of New York

prompted the foundation to hire a lawyer to advise it on matters

relating to its tax-exempt status.16 That lawyer advised the

foundation to "promptly take any and all actions required to

secure the Foundation's fair share of the proceeds from the

investment [in First Marblehead] so that such proceeds can be

devoted to the charitable purposes of the James Foundation."

The lawyer advised the foundation to take legal action against

Meyers if he remained unwilling or unable to cooperate.

In a letter dated July 10, 2006, James asked Meyers to meet

to discuss a resolution of the agreements. The letter provided

as follows:

"Dear Dan:

"It has been a long time since you and I have spoken. I
have tried to call you a few times but I am not sure that I
have the correct number. I would really enjoy getting
together to see what you are up to in your new situation.

"Also, as you can see from the attached letter, I am
getting some pressure from the attorney for the Foundation
to address our mutual interests in the 1.24 million shares
of First Marblehead stock. As you probably know, in
December 2005 I was able to negotiate a resolution with
Steve Anbinder relating to the other portion of the First
Marblehead stock, and I would very much like to reach a
comparable agreement with you. I think it is in both of
our interests to do that. . . .

16
The letter from the Attorney General of New York
indicated that the foundation did not appear to be a party to
the letter agreements, and sought support for the foundation's
claim that it was a party.
13

"Please give me a call so that we can get together for
breakfast or lunch."

By letter dated August 21, 2006 (Carmichael letter),

Meyers, through his personal attorney, Martin Carmichael,

reiterated his position that he was acting within his rights

under the agreements. In closing, however, Carmichael stated:

"Meyers would like to make clear that he bears Mr. James no
ill will whatsoever and is only seeking [to] have the
benefit of their original agreement. Moreover, while he
will not negotiate in the face of any continued threats of
litigation, Mr. Meyers would welcome any specific proposal
by the Foundation that would make him reasonably whole in
exchange for surrendering control of a portion of his stock
and foregoing future dividends on it, taking into account
[First Marblehead's] apparently healthy prospects for
continued growth."

At the time of the Carmichael letter, First Marblehead was

a highly successful corporation with growing revenue and income,

and its stock was paying a dividend. From the date of the

Anbinder agreement to the date of the Carmichael letter, the

share price of First Marblehead common stock had risen from

approximately twenty dollars per share to about thirty-five

dollars per share. By early January of 2007, the stock hit a

peak of more than fifty-six dollars per share.17

On November 16, 2006, the foundation filed a complaint

alleging that Meyers had violated the terms of the agreements by

17
On July 31, 2006, the stock closed at $29.62 and
continued to climb until its peak in January, 2007. By the time
of trial, in April of 2011, shares of First Marblehead were
trading in the range of $2.25 to $2.50 per share. During the
posttrial proceedings, the price dropped even further.
14

not unwinding them upon the plaintiffs' request and by not

distributing to the plaintiffs dividends First Marblehead paid

on the stock purchased through those agreements. The plaintiffs

simultaneously sought a preliminary injunction seeking payment

of all dividends into an escrow account. That request was

denied by a motion judge (not the trial judge).

Rulings of law. As herein relevant, the trial judge

rejected the plaintiffs' claims in count IV (breach of an

implied term of the contract), determining that the terms of the

agreements were silent with respect to the mutual understanding

about the time to sell the stock, and that Meyers had not

breached any duty to sell "on demand."18 However, she concluded

that Meyers and James had "essentially an old-fashioned,

trusting, gentlemen's agreement" and that Meyers had "a duty of

good faith and fair dealing implied in the Agreements with James

to, upon reasonable request, engage in reasonable efforts to

arrive at a reasonable time for sale and thus resolve the

contracts," and that Meyers had failed to do so when he

"unfairly rewarded his own interests at the expense of the

18
In count IV of the amended complaint, the plaintiffs
acknowledged that the agreements lacked an express termination
date and "any provision regarding a procedure for determining
when the shares of First Marblehead should be sold." Given the
absence of any express provision in the agreements, the
plaintiffs asked the judge to supply a reasonable term --
"namely, that upon demand by the Foundation, or in the
alternative James, the stock must be sold and the profits
distributed."
15

reasonable expectations of the [plaintiffs] (emphasis

supplied)."

Discussion. The standard of review is well established.

The judge's findings of fact are accepted unless they are

clearly erroneous. Anastos v. Sable, 443 Mass. 146, 149 (2004).

We review the judge's legal conclusions de novo. Ibid.

"Every contract implies good faith and fair dealing between

the parties to it." Anthony's Pier Four, Inc. v. HBC Assocs.,

411 Mass. 451, 471 (1991), quoting from Warner Ins. Co. v.

Commissioner of Ins., 406 Mass. 354, 362 n.9 (1990). The

covenant of good faith and fair dealing requires that "neither

party . . . do anything that will have the effect of destroying

or injuring the right of the other party to receive the fruits

of the contract." Id. 471-472, quoting from Drucker v. Roland

Wm. Jutras Assocs., 370 Mass. 383, 385 (1976).

However, the "scope of the covenant is only as broad as the

contract that governs the particular relationship." Ayash v.

Dana-Farber Cancer Inst., 443 Mass. 367, 385, cert. denied sub

nom. Globe Newspaper Co. v. Ayash, 546 U.S. 927 (2005). "It

cannot 'create rights and duties not otherwise provided for in

the existing contractual relationship, as the purpose of the

covenant is to guarantee that the parties remain faithful to the

intended and agreed expectations of the parties in their

performance.'" T.W. Nickerson, Inc. v. Fleet Natl. Bank, 456
16

Mass. 562, 570 (2010), quoting from Uno Restaurants, Inc. v.

Boston Kenmore Realty Corp., 441 Mass. 376, 385 (2004).

A plaintiff has the burden of proving a lack of good faith

on the part of the defendant. See Nile v. Nile, 432 Mass. 390,

398-399 (2000). A lack of good faith can be inferred from the

totality of the circumstances, id. at 399, however, there is a

presumption that all parties act in good faith, T.W. Nickerson,

Inc. v. Fleet Natl. Bank, 456 Mass. at 574. A contract is to be

construed "with reference to the situation of the parties when

they made it and to the objects sought to be accomplished,"

Starr v. Fordham, 420 Mass. 178, 190 (1995) (citation omitted),

and should also be accorded a construction that effectuates

"[j]ustice, common sense and the probable intention of the

parties," Haverhill v. George Brox, Inc., 47 Mass. App. Ct. 717,

720 (1999) (citation omitted), and gives the agreement "effect

as a rational business instrument," Starr v. Fordham, supra at

192 (citation omitted).

Here, the trial judge, in essence, concluded that Meyers

did not comply with the plaintiffs' request "to consider whether

we can negotiate an equitable distribution of these shares"

during the period from October 19, 2004, through July 31, 2006,

in order to continue to hold the disputed stock and to unfairly

collect dividends. According to the judge, Meyers's failure to

comply deprived the plaintiffs of the benefit of the bargain and
17

demonstrated lack of good faith, given that Meyers no longer

needed the agreements to prevent dilution of his stake after

First Marblehead went public in October, 2003. We are not

persuaded that the evidence at trial supports the judge's

finding of an improper motive by Meyers or that of an absence of

good faith on his part.

First and foremost, the record before us does not support

the judge's conclusion that Meyers was required to reach an

agreement with the plaintiffs within twenty-one months of their

initial request. Even in James's July, 2006, letter, there is

no suggestion that Meyers's failure to reach agreement by that

time constituted a lack of good faith or that Meyers was under

any deadline to respond to the letter. Indeed, James expressed

his willingness to enter into a new deal on comparable terms to

the Anbinder agreement, which took more than one year to

negotiate and to finalize. In sum, there is no evidence in the

record to support a conclusion that Meyers was required to reach

an agreement to unwind the agreements no later than July 31,

2006.

There is also no basis in the record to support the

contention that Meyers did not immediately comply with the

request "to resolve the relationship" in order to extract

financial concessions on something for which he had not

bargained. Meyers was content with the existing deal. It was
18

the plaintiffs who sought to unwind the agreements and who

indicated a willingness to make concessions in order to

accomplish that goal.

Nor was there anything improper in Meyers continuing to

hold the stock and to collect dividends after October, 2003.

Meyers's intent in entering into the agreements was not limited

to protecting his percentage interest in First Marblehead, but

also included holding the stock and sharing in its appreciation

with James, as evidenced by the formula in the agreements for

distributing the sale proceeds. Hence, although stock payouts

were not necessarily contemplated by either party at inception,

Meyers's decision to hold the shares beyond the date of the IPO

and to collect the dividends was his contractual right.

Moreover, Meyers and James were knowledgeable parties to a

commercial transaction who freely negotiated the terms of their

agreements, and could act in their own self-interest so long as

they honored their contractual obligations. Compare Clark v.

Rowe, 428 Mass. 339, 342 (1998).

Meyers's refusal to unwind the agreements by July 31, 2006

did not deprive the plaintiffs of the benefit of the bargain.

Here, James entered into the agreements in order to grow his

foundation. By July 31, 2006, the growth of First Marblehead

stock had exceeded all reasonable expectations of the parties.

While the use of a discretionary contract right as a pretext may
19

justify a finding of a breach of the implied covenant, see

Anthony's Pier Four, Inc. v. HBC Assocs., 411 Mass. at 473,

here, at the time Meyers refused to sell, First Marblehead was

setting record income levels, the value of the stock was rising,

and the prospects for continued growth and profitability were

very strong. Although Meyers had sold some of his stock between

2003 and 2006, he retained the majority of his personal shares.

As the trial judge found, Meyers continued to maintain a very

substantial position in the stock of First Marblehead. In

addition, James himself continued to hold shares of First

Marblehead stock for investment purposes well into this

litigation.

Additionally, we are persuaded that the judge erred when

she reached her conclusion that the implied covenant of good

faith was violated after conducting a unilateral inquiry into

James's actions and expectations while discounting the

reasonableness of Meyers's own expectations that he could

continue to hold the stock. Instead, the trial judge emphasized

the long-term implications of Meyers's understanding of the

agreements as granting him sole discretion to decide when to

sell. However, establishing a breach of the implied covenant of

good faith required that the plaintiffs meet their burden of

proving Meyers's lack of good faith. See Nile v. Nile, 432

Mass. at 398-399. Simply put, a demonstration of James's own
20

good faith in asking for the agreements' resolution does not

make Meyers's refusal to unwind an act lacking in good faith.

Equally, the possibility of Meyers breaching the implied

covenant in the future does not prove retroactively Meyers's

lack of good faith on July 31, 2006. Thus, neither argument can

carry the plaintiffs' burden.

Finally, the damages must be vacated because the date of

the breach was arbitrarily determined. The trial judge

concluded that Meyers demonstrated a lack of good faith "and

thus [that there was] a breach . . . of the covenant of good

faith and fair dealing . . . as of the time of Meyers's receipt

of James's letter in July, 2006." As a result, the judge chose

July 31, 2006, as the "fairest" date for calculating damages.

On this record, there are no findings to support the conclusion

that damages for a breach of the implied covenant of good faith

and fair dealing could be fairly awarded using the July 31,

2006, stock price.19

19
The value of the stock fluctuated significantly from
James's initial inquiry regarding a potential unwinding deal in
October of 2004, through the date the plaintiffs filed their
complaint. The value of First Marblehead stock was
approximately thirty dollars per share on July 31, 2006;
however, several months earlier it had traded as low as fourteen
dollars per share. When the Anbinder agreement was struck in
December of 2005, the stock had been trading at around twenty
dollars per share; less than three years later, as a result of
the financial crisis, the stock was trading at less than three
dollars per share.
21

Nevertheless, we agree with the trial judge's declaration

that the agreements contemplate that a sale of the shares will

be effectuated, and thus, Meyers cannot refuse to sell the stock

or otherwise to resolve his relationship with the plaintiffs

indefinitely without violating the implied covenant of good

faith and fair dealing.

Conclusion. So much of the amended judgment as found for

the plaintiffs on their claim for violation of the implied

covenant of good faith and fair dealing is reversed. In

addition, so much of the amended judgment as declared that

Meyers must reimburse the foundation for the fair market value

of the subject stock on July 31, 2006, with interest through

April 15, 2011, for a total damages award of $44,052,678, is

reversed. The matter is remanded so that the amended judgment

may be augmented with a declaration clarifying the parties'

obligations as they arise from the implied covenant of good

faith and fair dealing. In all other respects, the amended

judgment is affirmed.

So ordered.