Northeast Harbor Golf Club Lawsuit: Maine’s Disclosure Rule

Northeast Harbor Golf Club, Inc. v. Harris is a pair of Maine Supreme Judicial Court decisions, from 1995 and 1999, in which the club sued its longtime president Nancy Harris for buying and developing land around its golf course on Mount Desert Island without ever offering the club a chance to buy it first. The 1995 ruling made the case a landmark in corporate law: Maine used it to throw out the old “line of business” test for corporate opportunities and adopt a stricter, disclosure-first rule drawn from the American Law Institute’s Principles of Corporate Governance. Harris herself, however, ultimately won the case in 1999 on timing grounds.

What Happened: Harris’s Land Purchases

Nancy Harris served as president of the Northeast Harbor Golf Club from 1971 until she was asked to resign in 1990. The club was chronically short of money, running annual deficits and leaning on board contributions to keep going, and its only significant asset was the course itself.¹ The board floated the idea of developing real estate to raise money from time to time but never followed through.

During her presidency, Harris bought two properties that sat in and around the course:

In 1979, she paid $45,000 for the Gilpin property, three noncontiguous parcels scattered among the fairways. The club’s clubhouse and parking lot sat on an unused right-of-way within it, and the club held an easement so golfers could walk between holes.²
In 1985, she paid $60,000 for the Smallidge property, a landlocked parcel surrounded on three sides by the course, assembled from ten heirs. She disclosed this purchase to the board.¹

Harris did not offer either property to the club before buying it. In 1987 or 1988, she subdivided her holdings into 41 lots and began transferring some to her sons John and Shepard Harris and her daughter-in-law Melissa Harris.¹ Her son applied in 1988 to subdivide part of the Gilpin property into five residential lots under the name “Bushwood,” and the Mount Desert Planning Board approved the plan in June 1991.² In 1990, Harris paid another $275,000 for an adjoining lot and building that would give the landlocked Smallidge parcel road access for development.

The Club’s Lawsuit

In May 1991, the club sued Nancy Harris along with John, Shepard, and Melissa Harris for breach of fiduciary duty, arguing that Nancy had taken corporate opportunities that belonged to the club. It asked for an injunction against development and a constructive trust that would effectively hand the properties over to the club.¹ Melissa was named because deed exchanges with Nancy in 1991 had left her holding some of the subdivided lots.³

After a nonjury trial in Hancock County Superior Court, Judge Atwood ruled for the Harrises. Applying the traditional “line of business” test, the trial court found that residential real estate development was not in the golf club’s line of business, that the club could not have afforded the purchases anyway, and that Harris had acted in good faith.¹ The club appealed.

The 1995 Ruling: Maine Adopts the Disclosure Rule

The Maine Supreme Judicial Court vacated the trial court’s judgment and used the case to rewrite Maine’s corporate opportunity doctrine. It rejected both the “line of business” test and the alternative “fairness” test used in other jurisdictions, finding both too vague to give reliable guidance. In their place, the court adopted Section 5.05 of the ALI’s Principles of Corporate Governance, a disclosure-centered framework that only a handful of states had embraced.³

Under this standard, the first question is no longer whether an opportunity fits the corporation’s line of business. It is whether the officer disclosed it. An officer or director who learns of a business opportunity — through their role, through corporate information, or in a context where the corporation could reasonably be expected to have an interest — must fully disclose it to the corporation before taking it personally. The corporation must then formally reject it, and that rejection has to be fair, made by disinterested directors or shareholders, or otherwise satisfy the business judgment rule.¹

The court was pointed on one issue: a fiduciary cannot decide unilaterally that the corporation is too poor or too uninterested to pursue an opportunity and use that as a reason to take it for herself.³ And if the officer never discloses the opportunity at all, she cannot later defend the deal by arguing it was fair. Disclosure comes first; everything else follows. The court sent the case back for reevaluation under the new standard.¹

The 1999 Ruling: Why Harris Won Anyway

When the case came back to the Maine Supreme Judicial Court in 1999, Harris won — but on timing, not on the merits.²

Maine has a six-year statute of limitations. Harris bought the Gilpin property in 1979 and most of the Smallidge property in early 1985, and the club did not sue until May 1991. Those claims were time-barred.²

A sliver of the Smallidge parcel had been bought in June 1985, just inside the six-year window. The court barred that claim under laches, the doctrine that penalizes unreasonable delay when the delay harms the other side. The club had known about the purchases and Harris’s development plans for years without acting, and in the meantime Harris had spent $275,000 in 1990 on road-access property in reliance on the club’s silence. Letting the claim go forward at that point, the court held, would be substantially unfair to her.²

The court vacated the lower court’s judgment for the club and ordered judgment entered for Nancy Harris. Records from the Mount Desert Island Historical Society indicate the litigation ended in 1999 with a settlement following the Supreme Court’s decision.⁴ The development around the course went ahead.

Why the Case Still Matters

Maine had never defined its corporate opportunity doctrine before this litigation. The 1995 opinion made the ALI’s disclosure-first approach the state’s governing rule for fiduciary duty disputes over business opportunities, and it has held up. In 2022, a federal district court in Maine confirmed in Klinges v. Pomerleau that the state still follows the ALI test and that full disclosure remains its central requirement.³

Courts outside Maine have engaged with the decision as well. In Ostrowski v. Avery (1997), the Connecticut Supreme Court acknowledged the appeal of Maine’s “bright line” disclosure rule, though it chose a slightly different path that lets fiduciaries defend their conduct without prior disclosure if they can prove fairness by clear and convincing evidence.⁵ The Rhode Island Supreme Court cited the case the same year in A. Teixeira & Co., Inc. v. Texeira for the principle that a corporate fiduciary cannot serve personal and corporate interests at the same time.³ A dispute over house lots next to a struggling Maine golf club ended up shaping how corporate officers across the state have to handle any deal that might belong to their company.

1
Justia Law. Northeast Harbor Golf Club, Inc. v. Harris, 661 A.2d 1146
2
FindLaw. Northeast Harbor Golf Club, Inc. v. Harris
3
vLex. Northeast Harbor Golf Club, Inc. v. Harris
4
MDI Historical Society. NEHGC v. Harris Litigation Records
5
FindLaw. Ostrowski v. Avery, 243 Conn. 355