P.F. v. Department of Revenue (Lawyers Weekly No. 11-170-16)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

15-P-771                                        Appeals Court

P.F.  vs.  DEPARTMENT OF REVENUE.

No. 15-P-771.

Norfolk.     May 12, 2016. – December 6, 2016.

Present:  Cohen, Rubin, & Hanlon, JJ.

Divorce and Separation, Child support, Modification of judgment. Parent and Child, Child support.

Complaint for divorce filed in the Norfolk Division of the Probate and Family Court Department on February 22, 2004.

A complaint for modification, filed on January 9, 2012, was heard by John D. Casey, J.

read more

Posted by Stephen Sandberg - December 7, 2016 at 3:59 pm

Categories: News   Tags: , , , , ,

Creedon v. Haynes (Lawyers Weekly No. 11-169-16)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

16-P-184                                        Appeals Court

LAURA MARIE CREEDON  vs.  JOSEPH E. HAYNES, SR.

No. 16-P-184.

Suffolk.     October 13, 2016. – December 6, 2016.

Present:  Wolohojian, Carhart, & Shin, JJ.

Rules of Domestic Relations ProcedureContemptDivorce and Separation, Agreement respecting life insurance, Judgment.  Probate Court, Judgment.  Judgment.

Complaint for divorce filed in the Suffolk Division of the Probate and Family Court Department on June 14, 1990.

read more

Posted by Stephen Sandberg - December 7, 2016 at 12:23 pm

Categories: News   Tags: , , , ,

Commonwealth v. Hardin (Lawyers Weekly No. 10-185-16)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

SJC-12067

COMMONWEALTH  vs.  JAMES C. HARDIN.

December 6, 2016.

Breaking and Entering.  Larceny.  Practice, Criminal, Complaint, Dismissal, Appeal by Commonwealth.  Jurisdiction, Felony.

In a four-count complaint, James C. Hardin was charged with (1) malicious destruction of property having a value over $ 250, (2) breaking and entering a motor vehicle in the daytime with intent to commit a felony, (3) larceny of property having a value of $ 250 or less, and (4) possession of a class B controlled substance.  A judge in the Boston Municipal Court accepted Hardin’s guilty plea as to counts 1 and 4, charging malicious destruction and drug possession, and dismissed counts 2 and 3, charging breaking and entering and larceny, for lack of probable cause.  The Commonwealth appealed.  In a divided opinion, the Appeals Court reversed the dismissal of these counts.  Commonwealth v. Hardin, 88 Mass. App. Ct. 681 (2015).  We allowed Hardin’s application for further appellate review.  We agree that these counts of the complaint should be reinstated, but on grounds different from those relied on by the Appeals Court.

read more

Posted by Stephen Sandberg - December 7, 2016 at 8:48 am

Categories: News   Tags: , , , ,

Noble, et al. v. Collias, et al. (Lawyers Weekly No. 12-160-16)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
No. 14-3547-BLS 2
GEORGE NOBLE and CHARLES MINASIAN,
Plaintiffs
vs.
CHRISTIAN COLLIAS, JULIE COLLIAS, RICHARD FOSTER,
and PROGRESSIVE GOURMET, INC.,
Defendants
MEMORANDUM OF DECISION AND ORDER
ON DEFENDANTS’ MOTIONS FOR PARTIAL SUMMARY JUDGMENT
The motions before this Court are yet another example of misguided attempts by some members of the business bar to use summary judgment as the vehicle to decide issues which by their nature almost always require resolution at trial. Faced with claims that include elements regarding the defendant’s knowledge and the reasonableness of plaintiff’s reliance – all questions of fact — each of the three individual defendants ask this Court to rule that they are nevertheless entitled to judgment in their favor as a matter of law as to certain counts asserted against them. They do so under the mistaken impression that, if the summary judgment record contains testimony supporting their position, the facts that such testimony concerns are therefore undisputed even though there is circumstantial evidence which would support the contrary position. “The question of whose interpretation of the evidence is more believable…’is not for the court to decide on the basis of [briefs and transcripts] but is for the fact finder after weighing the circumstantial evidence and assessing the credibility of the witnesses.’” Bulwer v. Mt. Auburn Hospital, 473 Mass. 672, 689 (2016), quoting Lipchitz v. Raytheon Co., 434 Mass. 493, 499 (2001). With this in minds, this Court concludes that the summary judgment motions must
2
be DENIED as to all counts to which they pertain, except for two counts which add nothing to plaintiff’s case and are without any legal basis. 1
This case arises from plaintiffs’ purchase of common stock in the defendant Progressive Gourmet Inc. (Progressive), a close corporation, and plaintiff George Noble’s loan to Progressive of $ 300,000. Progressive is not moving for summary judgment. The moving parties are Progressive CEO Richard Foster and two individuals, Christopher Collias (Chris) and his wife Julie Collias (Julie), who hold the majority of shares in the company and together owned one block of stock that was sold to the plaintiffs. Julie is also Progressive’s treasurer and Chris a former CEO in the company.
The motions before the Court do not concern the promissory note (Count VI) and are only partially dispositive as to both Chris and Foster. 2 Although the three motions are not identical as to the counts that each of them targets, together they concern the following claims: violation of the Blue Sky Statute, G.L.c. 110A §410 (Section 410) (Count I); fraud (Count II); negligent misrepresentation (Count III), violations of Chapter 93A (Counts IV and V); and unjust enrichment (Count VII).
Section 410 prohibits the sale of securities by means of any untrue statement of material fact or material omission. The statute offers strong protections to buyers at the same time that it creates a strong incentive for sellers of securities to make full disclosure. To achieve those purposes, described as both “redressive” and “preventive,” the statute imposes a burden of proof
1 The penchant of some members of the plaintiff’s bar to add as many counts as possible to a Complaint tends to exacerbate the problem highlighted by this opinion, since this practice tends to invite summary judgment from the other side where those counts are particularly weak.
2 The Business Litigation Session has by a procedural rule attempted to discourage the use of partially dispositive motions by requiring counsel to consult with the court first before serving them. Unaware of this procedural order, defense counsel had already served their motions on plaintiff’s counsel before that consultation took place. Because counsel had already expended substantial time in preparing the motions, this Court felt compelled to permit them without inquiring into their substantive merit. In hindsight, this was a mistake.
3
on the plaintiff which is considerably lighter than that which applies to common law misrepresentation cases. Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43, 52 (2004). Although it does not impose strict liability, it does shift the burden of proof with regard to what the defendant knew or should have known at the time that the sale was made, placing that burden on the defendant.
Section 410(a) (2) assigns primary liability to the “seller” of the security as that term has been construed by the case law. See e.g. Hays v. Ellrich, 471 Mass. 592, 598-601 (2015) (investment adviser who solicited sale is “seller” under 410(a)(2)). Section 410(b) assigns secondary liability to: 1) every officer or director of the seller; 2) every person who “directly or indirectly controls a seller,” and every “agent who materially aided in the sale…” Each of the defendants, for reasons specific to him or her, argues that Section 410 does not apply to them. The defendants’ arguments notwithstanding, there is evidence in the summary judgment record to support the conclusion that all three defendants are covered by the statute. As to Foster in particular (whose summary judgment motion as to this Count focuses solely on this issue) this Court concludes that there are sufficient facts from which a jury could conclude that he acted as an “agent” for the Colliases as to that block of stock that the Colliases sold to the plaintiffs.
Section 410 does permit an affirmative defense to liability: if the defendant can prove by a preponderance of the evidence that she did not know and “in the exercise of reasonable care,” could not have known that the statement was false when made, then the defendant is not liable. Julie Collias ask this Court to rule that, as a matter of law, she has sustained that burden of proof. The plaintiffs’ memorandum submitted in opposition to her motion sets forth in detail all the evidence in the summary judgment record from which a rational trier of fact could reach a different conclusion. Defendant’s argument is all the more surprising, given that the Supreme
4
Judicial Court has described this burden as a “heavy” one which is “difficult to sustain.” Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. at 52. Certainly, it is a fact intensive inquiry almost always left to the fact finder. Massachusetts Mutual Life Ins. Co. v DB Structured Products, Inc., 110 F.Supp.288, 297 (D.Mass. 2015) and cases cited therein. Admittedly, the plaintiffs’ case against Julie appears to be weak, given her limited involvement in Progressive and the stock sales at issue. That a plaintiff is not likely to succeed at trial, is not the relevant standard for summary judgment, however.
The common law claims of fraud and negligent misrepresentation rest on the same set of allegations, the only difference being the allocation of the burden of proof. That is, it is incumbent on the plaintiff to prove that the defendant had the requisite state of mind necessary for liability to attach. The plaintiff must also prove reasonable reliance on the misrepresentation. Defendants contend that the evidence is insufficient as to both of these issues. The question is not whether plaintiffs will prevail at trial, however, but whether there is a material disputes of fact as to these elements, which are by their nature quite fact intensive. As a consequence, the case law is clear that summary judgment is a disfavored remedy where it relates to a party’s knowledge or state of mind. Flesner v. Technical Communications Corp., 410 Mass. 805, 809 (1991); Quincy Mut. Fire Ins. Co. v. Abernathy, 393 Mass. 81, 86 (1984); White v. Seekonk, 23 Mass.App.Ct. 139, 141 (1986). That is equally true with respect to whether a party exercises reasonable care, since that necessarily depends on the circumstances. See Fox v. F&J Gattozzi Corp., 41 Mass.App.581, 588 (1996); see also Restatement (Second) Torts 552 (1977), comment e (noting that what is reasonable is a “question for the jury, unless the facts are so clear as to permit only one conclusion”). Here, there are clearly material fact disputes on these issues.
5
Count IV, alleging a violation of 93A in connection with the securities sales, survives in light of this Court’s ruling regarding the fraud claim. Count V, however, alleges a different 93A violation – namely, that the defendants fails to make a reasonable settlement offer after receiving a 93A demand letter. A demand letter is a condition precedent to suit; although its purpose may be to encourage negotiation and settlement, this Court is unaware of any case law outside of the insurance context to suggest that the failure to make a settlement offer in and of itself is an unfair and deceptive practice. Indeed, there is some authority to the contrary. See e.g. Da Silva v. U.S. Bank, N.A., 885 F.Supp.2d 500, 506 (D Mass. 2012) and cases cited therein. Although the defendant’s response to the 93A demand letter (or lack thereof) may be relevant to the surviving 93A count, there is no reason for this additional count to remain in the case.
This Court also sees no legal basis for a claim of unjust enrichment (Count VII). That is an equitable remedy which is available only if a party does not have an adequate remedy at law. Here, plaintiffs clearly have common law and statutory claims. That the plaintiffs may fall short of proving the facts necessary to sustain recovery on those claims does not mean that they can then rely on a theory of unjust enrichment. So long as the legal remedies are viable, that is enough. Ruggers, Inc. v. U.S. Rugby Football Union, Ltd., 843 F.Supp.139, 148 (D.Mass. 2012).
For all the foregoing reasons, it is ORDERED that, as to Counts V and VII of the Complaint, the defendants’ motions are ALLOWED, so that those counts are DISMISSED. As to the remaining counts, each defendant’s Motion is DENIED.
________________________________________
Janet L. Sanders
Justice of the Superior Court
Dated: November 10, 2016
6

read more

Posted by Stephen Sandberg - December 7, 2016 at 5:13 am

Categories: News   Tags: , , , ,

Cumberland Farms, Inc. v. Tenacity Construction, Inc. (Lawyers Weekly No. 12-161-16)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, SS. SUPERIOR COURT
CIV. NO. 15-1589 BLS 2
CUMBERLAND FARMS, INC.,
Plaintiff
vs.
TENACITY CONSTRUCTION, INC.
Defendant
MEMORANDUM OF DECISION AND ORDER
ON CROSS MOTIONS FOR PARTIAL SUMMARY JUDGMENT
This case arises from a project for the construction of facilities located in Rhode Island and Massachusetts. The plaintiff Cumberland Farms, Inc. (CFI) is the owner of the properties on which the facilities were built. The defendant Tenacity Construction, Inc. (Tenacity) was the general contractor. CFI instituted this action to recover the difference between what it believes that it was obligated to pay Tenacity for its work and what it ended up paying, taking into account those amounts that CFI paid to Tenacity’s subcontractors on Tenacity’s behalf. Tenacity counterclaimed, maintaining that CFI wrongfully failed to pay Tenacity for costs attributable to winter conditions and that, to the extent it could not pay its subcontractors, this was due to CFI’s breach of contract. CFI now moves for summary judgment as to Tenacity’s counterclaims against it. Tenacity has cross moved as to the same claims, asking this Court to enter judgment in its favor. This Court concludes that CFI’s Motion must be Allowed and that Tenacity’s Motion must be Denied.
BACKGROUND
The following facts in the summary judgment record are undisputed.1 CFI owns properties
1 As CFI points out in its Reply Memorandum, Tenacity’s response to several of CFI’s fact allegations contain improper argument or unsupported denials. This does not comply with Rule 9(A)(b)(5). This approach is also not effective advocacy, since it obscures rather than illuminates the summary judgment record without advancing Tenacity’s position on the issues in any respect.
2
located at 15 Main Street in Northborough, Massachusetts (the Northborough Property) and at 2643 Hartford Avenue in Johnston, Rhode Island (the Johnston Property). CFI retained Tenacity as general contractor for the construction of a gas station/convenience store on the Northborough Property (the Northborough Project) and construction of a similar facility together with office space on the Johnston Property (the Johnston Project). On September 23, 2013, the parties entered into two construction contracts (the Master Contract) that governed Tenacity’s work. Ex. 8 of Joint Appendix. Under the Master Contract, Tenacity was responsible for paying the subcontractors on both Projects.
The Master Contract expressly incorporated two Work Orders, one for each Project. The Northborough Project Work Order provided that work was to start at the Northborough Property on October 7, 2013 and be completed within 112 days (January 27, 2014). The Johnston Project Work Order stated that work was to begin November 4, 2013, and was to be completed within 140 days (March 24, 2013). Both projects were substantially delayed: the Johnston Project was completed May 6, 2014 and the Northborough Project completed on April 28, 2014.
Tenacity’s counterclaim concerns the additional costs it alleges that it was forced to incur as a result of harsh winter conditions. and is based on its assertion that CFI is responsible for those additional expenses. According to the summary judgment record, the parties met in January 30, 2014 to discuss the impact that these winter conditions were having on completion of the projects. CFI agreed at that meeting that Tenacity would be paid for additional work due to winter conditions on a “time and materials” basis, as provided by the Master Contract. In the winter and spring of 2014, Tenacity submitted change order requests for time and materials due to winter conditions and CFI approved and paid all of them. Those requests included a markup for Tenacity’s overhead and profit. Every request was paid in full.
In a May 30, 2014 letter to CFI, Tenacity stated that it was entitled to an “equitable adjustment” to the Master Contract price for certain indirect costs attributable to winter conditions —
3
namely, those associated with diminished productivity and decreased efficiency in performing the work. Tenacity had expressed concern at the earlier meeting on January 30 that these indirect costs would not be covered by compensating it on strictly a time and materials basis. Other than CFI’s indicating that it would “wait and see how it goes,” there is nothing in the summary judgment record to show that CFI at any time agreed to compensate Tenacity for these indirect costs.
On June 6, 2014, Tenacity submitted a breakdown of costs that it sought in connection with this request to adjust the contract price. CFI asked for backup information on June 17, 2014 and on June 25, 2014. On July 8, 2014, CFI sent an email to Tenacity denying any responsibility for lost productivity costs but offered some amount in an effort to settle the dispute. Shortly thereafter, however, Tenacity informed CFI that it had been unable to make final payments to subcontractors and suppliers due to cash flow issues.
At CFI’s request, Tenacity provided CFI with a list of those subcontractors and suppliers who had not been paid, together with an amount believed to be due to each. Pursuant to 8(i) of the Master Contract, CFI had the right to pay off these obligations directly, upon notice to Tenacity. This notice was given by an August 1, 2014, letter to Tenacity. On August 8, 2014, CFI sent an email to Tenacity’s subcontractors and suppliers directing them to submit claims for outstanding payments to CFI. Over the next six months, CFI personnel reviewed and processed requests for payment from dozens of subcontractors and suppliers, confirming that there was backup documentation for them and that Tenacity had approved the work performed before any payment was made.
CFI made payments directly to subcontractors and suppliers in the total amount of $ 790,650.64. CFI made payments to Tenacity pursuant to the Master Contract (together with change orders) in the total amount of $ 2,983,261.92.2 Because the sum of these two figures exceeded that amount CFI believed that it was obligated to pay Tenacity, it refused to release retainage funds. It also brought this
2 Tenacity does not appear to dispute these figures except to insist that it is entitled to an adjustment of the contract price and that if that adjustment were made, it would have been able to pay its subcontractors.
4
lawsuit seeking to recover the difference between that amount it alleges that it was obligated to pay pursuant to the Master Contract and that amount it actually paid, taking into account the subcontractor payments. In counterclaiming, Tenacity asserts that CFI’s wrongful refusal to adjust the contract price for winter conditions and its retention of retainage amounts has caused Tenacity to suffer damages.
DISCUSSION
Tenacity’s counterclaim alleges the following: breach of contract (Count I), unjust enrichment/quantum meruit (Count II), detrimental reliance/promissory estoppel (Count III), declaratory judgment (Count IV) and a violation of G.L.c. 93A (Count V). Each of these counts depends upon Tenacity’s theory that it is entitled to an equitable adjustment to the Master Contract price for the loss of productivity due to winter conditions. In moving for summary judgment in its favor on all counts, CFI contends that the damages that Tenacity seeks to recover are expressly precluded by the Master Contract, and that the undisputed facts show that there was no modification of this provision. This Court is convinced that CFI’s position is the correct one.
Tenacity acknowledges that a claim for an equitable adjustment does not lie where the contract itself limits the remedies or prevents the recovery sought. That is precisely the case here. The Master Contract contains a broad “no damages for delay” clause that applies not only where the work force is idle and cannot perform any work but also where there is interference with or obstructions to the work so as to delay its completion. Specifically, Section 6(e) of the Master Contract states:
Except as otherwise provided by law, should contractor’s performance in whole or in part be interfered with, delayed, resequenced or disrupted, or be suspended in the commencement, prosecution or completion for reasons beyond Contractor’s control…Contractor’s sole remedy shall be an extension of time in which to complete the Work order…”
Section 6(e ) goes on to state that even if this provision is determined to be legally unenforceable so that Tenacity is not limited in its remedy to an extension of time, Tenacity may not recover from CFI any damages due to work inefficiency or loss of productivity, among other things. This limitation on
5
remedies is underscored by other provisions of the Master Contract. For example, Section 7(c ) states: “Any overruns or underruns in the amount of Work actually performed will not cause any price adjustments, unless mutually agreed upon, and will not relieve Contractor of its responsibility to perform the Scope of Work.” The undisputed facts show that Tenacity was allowed an extension of time to complete both the Northborough and the Johnston Projects. It is also clear that the basis for its theory calling for an equitable adjustment of the contract price rests on its contention that it must be compensated for loss of productivity and work inefficiencies – damages that are expressly ruled out by Section 6(e).
Tenacity cites Superior Court decisions in support of its position that its claim is not barred by Section 6(e). None of these decisions has any precedential value. As explained in CFI’s reply at pages 7 through 9, they are also factually distinguishable. For example, some of those decisions involved contractual provisions which prohibited damages for delay but did not directly address — as Section 6(e) does– damages occurring as a result of hindrances or disruptions. Still others involve situations where there was active interference by the contractor. The Appeals Court has suggested in dictum that these additional factors could permit a plaintiff contractor to recover even in the face of a “no damages for delay” provision. See B.J. Harland Elec. Co., Inc. v. Granger Bros, Inc. 24 Mass.App.Ct. 506, 509 (1987), citing John E. Green Plumbing & Heating Co., v. Turner Constr. Co., 742 F.2d 965, 966-967 (6th Cir. 1984) (where it was held that subcontractor was entitled to recover on a theory that the general contractor interfered with the work even though the contract barred delay damages, the court reasoning that the bar there applied only to the cost of an idle workforce). Those additional factors are simply not present in the instant case. The Court also attaches some significance to the fact that the Master Contract expressly addresses the problem of winter conditions—and provides that “any work requiring winter conditions and/or costs shall be completed on a time and material basis.” Section G.5 of Master Contract. Having compensated Tenacity for time and materials attributable to
6
winter conditions, CFI was not required to pay anything more.
Tenacity argues in the alternative that the Master Contract was modified as a result of the May 2014 letter that Tenacity sent to CFI asking to be compensated for the loss of productivity due to winter conditions. See Exhibit 11 of Joint Appendix. Tenacity assets that this letter was the equivalent of a change order and that, pursuant to the Master Contract, any change order that is not rejected within 30 days of receipt will be deemed approved. Section 5(j) of Master Contract. This Court disagrees. The letter is entitled “Request for Equitable Adjustment to Contract Price – Constructive Acceleration.” It was not submitted in accordance with the procedures established by the parties on forms (entitled Change Orders) intended for that purpose. Because Tenacity had not followed established protocols, CFI had no reason to view the letter as a change order. Nor did it at any time suggest that it intended to approve the request. In short, Tenacity has no reasonable expectation of providing that the Master contract was modified either orally or in writing. Because the Master Contract by its express terms bars Tenacity’s recovery for the indirect costs attributable to winter conditions, Tenacity’s counterclaim fails as a matter of law.
CONCLUSION AND ORDER
For all the foregoing reason, CFI’s Motion for Partial Summary Judgment as to Tenacity’s Counterclaim is ALLOWED, and the Counterclaim is DISMISSED with prejudice.
________________________________________
Janet L. Sanders
Justice of the Superior Court
Dated: November 16, 2016

read more

Posted by Stephen Sandberg - December 7, 2016 at 1:39 am

Categories: News   Tags: , , , , , , ,

Kiribati Seafood Company, LLC v. Crovo (Lawyers Weekly No. 12-162-16)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
SUCV2014-02851-BLS2
KIRIBATI SEAFOOD COMPANY, LLC,
Plaintiff
vs.
M. DELACY CROVO,
Defendant
MEMORANDUM OF DECISION AND ORDER
ON DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
Plaintiff Kiribati Seafood Company, LLC (Kiribati) filed this legal malpractice action against defendant M. Delacy Crovo (Delacy) seeking to recover damages flowing from Delacy’s alleged role in violating a Washington state court order against Kiribati. Kiribati’s Amended Complaint asserts both contract-based and negligence-based claims as well a violation of 93A. The case is now before this Court on the defendant’s motion for summary judgment. Specifically, the defendant contends that Kiribati’s claims are barred by the applicable statutes of limitations. This Court agrees, and therefore concludes that the Motion must be ALLOWED.
BACKGROUND
The relevant facts in the summary judgment record, viewed in the light most favorable to Kiribati, are as follows.
Kiribati is a Washington state limited liability company formed in 2000 to own and operate a commercial fishing vessel. Currently, Kiribati is owned by Nicholas Coscia, who holds the majority interest, and a second individual with a minority interest named Steven Ross.
2
In 2000 and 2001, Kiribati refurbished a boat, the MADEE, with the expectation that it would be used in South Pacific commercial fishing operations. In 2001, the MADEE sustained damage due to a rudder failure. It was repaired in Tahiti, but suffered additional damage after a dry dock collapsed. Lawsuits ensued. Moran Windes & Wong, PLLC (MWW), a Seattle based law firm, represented Kiribati in an action brought in Hawaii related to the rudder failure. A French law firm, later acquired by the Paris office of Dechert, LLC (Dechert), represented Kiribati on its claim for damages to the MADEE sustained in the dry dock collapse. Sometime in May 2010, Dechert on behalf of Kiribati, settled the dry dock collapse case, and the proceeds of the settlement (the Settlement Funds) were sent to Dechert. At the time of the settlement, Delacy’s brother Charles Crovo (Charles) was the majority owner of Kiribati, with Coscia holding a minority interest.
Delacy is a Massachusetts attorney who has acted as (or held herself out to be) counsel for Kiribati at various times commencing in 2000. At the heart of this lawsuit is the role she played in the transfer of the Settlement Funds from Dechert to other entities. In a letter dated April 29, 2010 to Dechert’s Paris office (the April 2010 Letter), Delacy stated that she was Kiribati’s corporate attorney and that Charles Crovo was authorized to make all monetary decisions on Kiribati’s behalf. This letter was sent under Delacy’s married name, Marie D. Carlson, with a letterhead that read, “Law Offices of Marie Carlson.” Delacy sent a second letter, again under the name “Marie Carlson,” to Dechert in May 17, 2010 (the May 2010 Letter), again stating that she was Kiribati’s corporate counsel and that, in her legal opinion, Charles Crovo was authorized to receive the Settlement Funds on Kiribati’s behalf. Delacy provided Dechert with the information necessary to deposit the funds in her IOLTA account.
3
On May 19, 2010, Dechert transferred the Settlement Funds to Delacy, who subsequently disbursed the funds to Charles and others.
While these events were taking place, MWW, the Seattle law firm, was looking to get paid its attorney’s fees for representing Kiribati in the separate litigation for damages caused by the rudder failure. On May 25, 2010, MWW filed an action in Washington state court asserting an attorney’s fee lien against the Settlement Funds and, to secure that lien, asked the court to order Kiribati to deposit the funds into the court registry. MMW, PLLC v. Kiribati Seafood Co., et al. Civ. No. 10-2-18839 SEA (King County Superior Court). The Seattle court allowed that motion on June 22, 2010 and ordered that the Settlement Funds be deposited with the court by June 25, 2010 (the June 2010 Order). Kiribati did not comply with that Order.
As a consequence of that noncompliance, MWW filed a motion to strip Charles and Coscia of any authority to act on behalf of Kiribati and to appoint a receiver. The motion alleged that Coscia and Charles, together with others, had engaged in acts of misconduct intended to circumvent the court’s June 2010 Order. In support, MWW alleged that Crovo had “invented a fictitious lawyer named ‘Marie Carlson’ who claimed to be Kiribati’s corporate counsel and wrote up a fictitious certification that Mr. Crovo presented to the Paris Bar Association and the Paris Bank, which caused them to both remove their financial controls on the account and facilitated the payout of the $ 860,000 to Mr. Crovo.” Attached to the motion was the April 2010 Letter from Delacy to the Dechert attorney in Paris. The motion concluded: “The rats are fleeing the ship and the court needs to act before it sinks and irreparably harms the creditors.”
Kiribati filed an opposition to the motion, supported by Delacy’s affidavit dated July 1, 2010. Coscia participated in Kiribati’s opposition to MWW’s motion, which he admitted reading. In her affidavit, Delacy explained that she regularly uses her married name, “Marie D.
4
Carlson,” for her legal work. She stated that that she had disbursed the Settlement Funds to various trusts at the direction of Charles on June 8 and on June 10, 2010. Delacy denied knowing of MMW’s May 25 2010 request that the Settlement Funds be deposited with the court at the time that she disbursed the funds to these other entities.
On July 2, 2010, the Seattle court allowed MWW’s motion to appoint a receiver, finding that Kiribati’s noncompliance with its June 2010 Order placed it in contempt. The court appointed James F. Rigby as receiver of Kiribati and granted him “all the powers necessary to act on behalf of Kiribato” and specifically gave him the authority to obtain custody over the Settlement Funds. Rigby undertook an investigation as to what had happened with the money. On June 29, 2011, he filed a written report with the court stating that the funds had been transferred from Delacy’s IOTA account to Charles personally as well as to companies he controlled. This report was sent to Coscia, among others. On September 2011, Charles paid the Settlement Funds into the Seattle court registry.
The receivership was terminated on June 26, 2013. Coscia took over control of Kiribati together with Ross. Less than a week later, Kiribati sued Dechert here in Massachusetts. See Kiribati et al. v. Dechert, LLP, Civ. No. 13-2393-BLS 2 (Suffolk Superior court). Kiribati alleged that Dechert had committed legal malpractice in releasing the Settlement Funds to Delacy. The case was ultimately dismissed on summary judgment.
Kiribati filed the instant lawsuit against Delacy on September 8, 2014. It alleged that Delacy had committed legal malpractice by failing to comply with the Seattle court’s June 2010 Order. As a consequence of her misconduct, Kiribati alleged that it had been forced to incur attorney’s fees and other costs in connection with the appointment of a receiver and the receiver’s efforts to recover the Settlement Funds.
5
DISCUSSION
Delacy argues that all of the claims asserted against her are time-barred because the statute of limitations began to run on July 2, 2010 when the Seattle court allowed the motion to appoint a receiver for Kiribati. She contends that, as of that date, Kiribati was aware that it sustained some appreciable harm – namely, the attorney’s fees associated with the appointment of the receiver and the fees that would likely be incurred in connection with the receiver’s recovery efforts. The parties agree that a three year statute of limitations applies to Counts I through VIII, which are those claims based on legal malpractice. G.L.c. 260 §4. A four year statute of limitations applies to Count IX alleging a violation of Chapter 93A. . See G.L.c. 260 §5A. This action was filed more than four years after July 2, 2010.
The statute of limitations in a legal malpractice claim begins to run when the client “knows or reasonably should know that he or she has sustained appreciable harm as a result of the lawyer’s conduct.” Lyons v. Nutt, 436 Mass. 244, 247 (2002), quoting Williams v. Ely, 423 Mass. 467, 473 (1996). “Reasonable notice that …a particular act of another person may have been a cause of harm to a plaintiff creates a duty of inquiry and starts the running of the statute of limitations.” Bowen v. Eli Lilly & Co., 408 Mass. 204, 210 (1990). “[I]t is not necessary that the plaintiff client know the full extent of harm or loss or know precisely in what manner and what harmful after-effects flow from the alleged malpractice . . . .” Frankston v. Denniston, 74 Mass. App. Ct. 366, 374, rev. den., 455 Mass. 1102 (2009). “Appreciable harm encompasses the incurring of legal expenses, such as litigation-related expenses in defending against, or advancing, an issue that is central to the alleged legal malpractice.” Id.
Applying those principles to the case before me, this Court concludes that the statute of limitations began to run no later than July 2, 2010, the date when the Seattle court appointed the
6
receiver at MMW’s request. That appointment occurred because Kiribati had failed to comply with the Court order to deposit the settlement money with the court registry. As to the reasons for noncompliance, that was set forth in detail in materials submitted both in support and in opposition to the motion. Based on these materials (and Coscia’s own admission that he was familiar with them), Kiribati clearly knew that Delacy convinced Dechert to wire the Settlement Funds to her IOLTA account and that she then disbursed those funds so as to put Kiribati in violation of the June 2010 Order. No later than July 2, 2010, Kiribati knew that Delacy had caused some appreciable harm to it – harm that would ultimately consist of the attorney’s fees it incurred in connection with that appointment and the recovery of the disbursed monies.
Kiribati maintains that it did not have knowledge or sufficient notice that it was harmed by Delacy’s conduct until Coscia was deposed in 2012. It was only on that later date that Coscia says that he became aware, for the first time, that Delacy conspired with her brother to disburse the Settlement Funds to family members or entities in which Charles Crovo had an interest. Before that (according to Coscia) , he relied on the assurance of his business partners – and on Delacy’s insistence of her innocence in the matter — that the funds had been applied to pay Kiribati’s creditors and that Delacy had done nothing wrong. But Coscia unquestionably knew in July 2010 that MWW was accusing Delacy of misconduct and that her actions led to the violation of the court order and the appointment of a receiver – events which triggered the damages that Kiribati now seeks in this lawsuit. That Coscia did not know precisely where those funds went is irrelevant to the issue of when the statute of limitations began to run.
It is true that once the receiver was appointed, then only the receiver could bring suit on behalf of Kiribati. That did not toll the statute of limitations, however. See Comer of Insurance v. Bristol Mut. Liability Ins. Co., 279 Mass. 325, 325 (1932) (statute of limitations continues to
7
run even after a receiver is appointed). That the receiver did not file suit against Delacy is a decision that is binding on Kiribati, whether Coscia as the current majority owner agrees with that decision or not. The receivership was terminated on June 26, 2013 and Kiribati (with Coscia in control) could have instituted suit then. Indeed, it did file suit against Dechert just one week later. It did not name Delacy as a defendant. Now that it has done so, it is too late.
The appointment of the receiver also undercuts two other arguments that Kiribati makes in opposition to the instant motion. Its first argument relies on the continuing representation doctrine and is based on Kiribati’s contention that Delacy was its lawyer, thus tolling the statute of limitations during that period in which she was corporate counsel. But Delacy ceased to have any authority to act on behalf of Kiribati once the receiver was appointed, and there is no evidence that she later served as Kiribati’s counsel once the receivership was dissolved. The second argument relies on the doctrine of adverse domination: because Coscia was a minority owner until 2012, he contends that he was not in a position to take any action on behalf of Kiribati since Charles held the majority interest. Like Delacy, however, Charles ceased to have any authority to act on behalf of Kiribati once the receiver was appointed. Once the receivership was terminated, Kiribati was controlled by Coscia as majority owner, not Charles. In short, neither doctrine is of assistance to the plaintiff.
CONCLUSION AND ORDER
For all of the foregoing reasons and for other reasons articulated in the defendant’s Memoranda, defendant’s Motion for Summary Judgment is ALLOWED and the Amended Complaint is hereby DISMISSED with prejudice.
______________________________
Janet L. Sanders
Dated: November 18, 2016 Justice of the Superior Court
8

read more

Posted by Stephen Sandberg - December 6, 2016 at 10:04 pm

Categories: News   Tags: , , , , , ,

United Salvage Corp. of America v. Kradin (Lawyers Weekly No. 12-159-16)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
NO. 16-03131 BLS 2
UNITED SALVAGE CORP. OF AMERICA d/b/a
FRAMINGHAM SALVAGE CO.,
Plaintiff
vs.
RICHARD KRADIN,
Defendant
MEMORANDUM OF DECISION
ON PLAINTIFF’S MOTION FOR A PRELIMINARY INJUNCTION
Plaintiffs United Salvage Corporation, doing business as Framingham Salvage Company (Framingham Salvage), instituted this action against the defendant Richard Kradin seeking enforcement of noncompetition and nonsolicitation agreements negotiated when Kradin sold his salvage business to plaintiff. A hearing on plaintiff’s request for a preliminary injunction was held on November 3, 2016. Ruling from the bench, this Court allowed that Motion and entered the Order proposed by plaintiff. Although this Court did articulate the reasons for its ruling in open court, this memorandum is issued by way of further explanation.
Framingham Salvage is in the scrap metal and metal recycling business. In January 2015, it purchased all the assets of a competitor, Industrial Metal Recycling Inc. (IMR), owned by the defendant Kradin. In connection with that transaction, the parties executed a series of agreements, all of which are attached to the Verified Complaint. Kradin was represented by
2
counsel in negotiating these agreements, which reference each other and therefore are construed as a whole.
Pursuant to an Asset Purchase Agreement, Framingham Salvage obtained all the assets of IMR, including its goodwill, in return for assuming liabilities totaling over $ 500,000 and forgiving IMR’s own $ 152,607 debt to plaintiff. Pursuant to an Employment Agreement, Framingham Salvage agreed to employ Kradin for a term of 60 months at a $ 250,000 annual salary. The parties executed a third agreement, entitled Proprietary Information and Inventions Agreement (the PII Agreement), which contains the restrictive covenants at issue in this case. Those covenants prohibit Kradin from competing with Framingham Salvage or soliciting the business of any customer with whom he has had personal contact or learned about during the course of his employment with the plaintiff. The covenants applied not only during the period of Kradin’s employment but continue for a period of five years from the date of the termination of his employment, regardless of the reason for the termination. Section 4(i ) if the PII Agreement further stated:
Each of my obligations to be performed under this Agreement shall be interpreted independent of any other provisions of this Agreement, the Asset Purchase Agreement or my Employment Agreement and any other obligation the Company [Framingham Salvage] may have toward me. The existence of any claims by me against the Company, whether based on this Agreement or otherwise, shall not be a defense to the enforcement by the Company of any of my obligations under this Agreement.”
On July 25, 2016, Framingham Salvage terminated Kradin, alleging that he had played golf on numerous work days without the company’s knowledge or approval, submitted false sales contact reports and generally misrepresented to the company orally and in writing that he was working when in fact he was not. Taking the position that this constituted “cause” under the Employment Agreement, Framingham Salvage ceased paying Kradin’s salary and, at the same
3
time, reminded him of his obligations under the PII Agreement. It is undisputed that Kradin almost immediately began to contact Framingham Salvage customers and solicited them to do business with him instead.
In opposing the plaintiff’s motion, the defendant argues that Framingham Salvage has materially breached its own obligations by failing to pay some of the debts it had assumed, then drove him out of the company on “trumped up charges.” Although the evidence is conflicting as to whether Framingham Salvage breached any of its obligations or terminated Kradin without cause, the weight of that evidence at this point favors the plaintiff, not the defendant. More important, the defendant’s argument as to the significance of this evidence ignores Section 4(i ) of the PII Agreement, which makes it clear that the noncompete and nonsolicitation covenants are independent obligations and that any claim that Kradin may have against Framingham Salvage is not a defense to their enforcement. Even assuming that Kradin was terminated without cause, the restrictive covenants themselves expressly state that they apply regardless of the reason for any termination. By the terms of the Agreements that he signed, this defense does not excuse him from complying with the restrictive covenants.
Kradin next argues that issuance of the injunction would deprive him of the ability to earn a livelihood and that the restrictive covenants are unreasonable and in violation of public policy. This Court disagrees. The covenants are tailored to protect Framingham Salvage’s legitimate business interests – namely, the protection of its good will. Their geographic reach is limited to areas within Framingham Salvage’s territory. The five year length is also not unreasonable, particularly in light of the fact that it was negotiated as part of a sale of a business. See Alexander & Aexander Inc. v. Danahy, 21 Mass.App.Ct. 488, 496 (1986) (upholding five year restrictive covenant arising out of the sale of a business, court explained why a covenant in
4
that context must be enforced more liberally). Clearly, the covenants here at issue were supported by ample consideration, since Kradin was able to get out from under $ 650, 00 in debt and also get a high level position in Framingham Salvage at a generous salary. As to the harm Kradin may suffer if it turns out the charges to terminate him were indeed “trumped up,” then he can sue Framingham Salvage for his unpaid salary. In other words, he has an adequate remedy at law.
For these and other reasons articulated by plaintiff’s counsel and by this Court at the motion hearing, the Motion for Preliminary Injunction was ALLOWED.
_________________________________
Janet L. Sanders
Justice of the Superior Court
Dated: November 8, 2016

read more

Posted by Stephen Sandberg - December 6, 2016 at 6:29 pm

Categories: News   Tags: , , , , , , ,

Hillside FXF, LLC, et al. v. Premier Design + Build Group, LLC, et al. (Lawyers Weekly No. 12-158-16)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
SUCV2013-03831-BLS2
HILLSIDE FXF, LLC & JONES DEVELOPMENT COMPANY, LLC,
Plaintiffs
vs.
PREMIER DESIGN + BUILD GROUP, LLC,
HALEY & ALDRICH, INC., & G. LOPES CONSTRUCTION, INC.,
Defendants
MEMORANDUM OF DECISION AND ORDER
ON DEFENDANT PREMIER DESIGN + BUILD GROUP, LLC’S
MOTION FOR SUMMARY JUDGMENT AGAINST HILLSIDE FXF, LLC &
JONES DEVELOPMENT COMPANY, LLC
This case arises out of the construction of a FedEx facility in Northborough, Massachusetts. Plaintiffs Hillside FXF, LLC (Hillside) and Jones Development Company, LLC (Jones) filed this action against defendants G. Lopes Construction, Inc. (Lopes), Premier Design + Build Group, LLC (Premier), and Haley & Aldrich, Inc. (Haley) seeking to recover damages relating to remedial work performed after the construction. This Court has already denied Haley’s summary judgment motion. This memorandum concerns the defendant Premier’s Motion for Summary Judgment as to plaintiffs’ claims against it. 1 Premier argues that release language in a change order bars all of the plaintiffs’ claims against it and that plaintiffs have in any event waived any claim because they failed to follow certain contractual provisions. After careful review of the summary judgment record, this Court concludes that there are questions of fact such that the Motion must be Denied.
1 Plaintiffs also filed a motion to strike three of Premier’s fact statements contained in Premier’s Superior Court Rule 9A (b) (5) statement of material facts. That motion is denied for the reasons stated in Premier’s opposition.
2
BACKGROUND
The relevant facts in the summary judgment record, viewed in the light most favorable to the plaintiffs, are as follows. Hillside and Jones engage in commercial development and construction projects. On August 23, 2011, Hillside as the owner/developer and Premier as the general contractor entered into an agreement to construct a FedEx freight facility at 300 Bartlett Street, Northborough, Massachusetts (the “Project”). Because the site was on a relatively steep slope, a significant amount of cut and fill and excavation work was required to prepare it for construction. The earthwork began in September 2011, with foundations and walls of the building installed in early 2012. Shortly thereafter, it was noticed that the walls appeared to have shifted laterally. Ultimately, it was determined that the foundations had settled and that this was caused by improper fill work. By the time the building was stabilized and the site repaired, Hillside had spent more than $ 3 million in remedial work.
Premier’s Motion is based in part on language contained in its construction contract with Hillside (the Agreement). See Exhibit C of Joint Appendix. Article 7 of the Agreement states that “[i]f, during the period of construction, the Work [as defined by the Agreement] is found to be defective or not in accordance with the Agreement Documents, contractor shall correct it with reasonable promptness after receipt of written notice from Owner to do so …. Owner shall give such notice within ten (10) business days after discovery of the condition.” Article 9 ¶ Q states that: “[s]hould either party to this Agreement suffer injury or damage…because of any act or omission of the other party…claim shall be made in writing to such other party within a reasonable time after the first observance of such injury or damage.” On March 26, 2012,
3
Premier sent the plaintiffs a written notice of soil stability issues. Four days later, on March 30, 2012, plaintiffs sent Premier a notice that these issues arose from Premier’s defective work.
The Motion also relies on a certain change order — Change Order 13 — entered into between the parties following the execution of the Agreement. The Agreement defines a change order to be “a written order to a Contractor signed by Owner issued after execution of the Agreement authorizing a change in the Work or an adjustment in the Agreement Sum or Agreement Time.” Article 6 of Agreement. Change Order 13 was one of fourteen change orders issued. It was executed on June 19, 2013, many months after Hillside had discovered the problems with the foundation. Change Order 13 stated that:
“The following changes shall be added to and become part of Item I of the Standard Contract Agreement dated August 23, 2011:
. . . Credit to contractors [sic] fee. This credit shall serve as final compensation to the Owner [Hillside] and constitutes a complete release from any and all claims against the Contractor [Premier] relating to this project. DEDUCT $ 30,000.”
See Exhibit J. Kevin Jones signed Change Order 13 on behalf of the plaintiffs.
The summary judgment record contains various e-mails and portions of deposition testimony relating to the meaning of this language. As described in one email, its purpose was to give Premier a $ 30,000 credit to help offset the costs “associated with the soils, building and undercut issues.” Alec Zocher, a Premier representative, testified that he had several conversations with Jones about Change Order 13 but couldn’t recall what was said beyond the fact that there was some negotiation as to the amount of the credit. As Jones recalls it, the discussion pertained only to the specific work that was to be performed pursuant to Change Order 13, and that, although he did not notice the release language, he would have assumed that it related only to a minor dispute between the parties regarding Premier’s ten percent fee as general contractor. Jones denies that there was any discussion about resolving the parties’ larger dispute
4
over the failure of the Project site, nor did he understand the language to constitute a release by plaintiffs of that much larger claim.
DISCUSSION
Premier makes two arguments in support of its motion for summary judgment. First, it contends that Change Order 13 is an enforceable release that bars all of the plaintiffs’ claims against Premier in this action. Second, it argues in the alternative that the plaintiffs’ contract claims against Premier are waived because plaintiffs failed to provide timely written notice of the damage to the property and of their claim that Premier’s work was defective. The Court will discuss each of these arguments in turn.
A. Change Order 13
As an initial matter, this Court concludes that Illinois law applies. See Article 12 of the Agreement (providing that Agreement to be construed in accordance with Illinois law). Under Illinois law, a release, like any contract, must be enforced as written if its terms are clear and explicit. However, in determining the meaning of those terms, Illinois courts strictly construe them against the benefitting party; to be enforceable so as to bar a claim, the release must spell out the intention of the parties with great particularity. Construction Systems, Inc. v. FagelHaber, LLC, 35 N.E.3d 1244, 1251 (Ill. App. Ct. 2015). Indeed, Illinois cases seem to suggest that the court must always take into account the circumstances surrounding the execution of a release, regardless of what the release says. Ainsworth Corp. v. Cenco, Inc., 437 N.E.2d 817, 821 (Ill. App. Ct. 1982) (“[N]o form of words, no matter how all encompassing, will foreclose scrutiny of a release . . . or prevent a reviewing court from inquiring into surrounding circumstances to ascertain whether it was fairly made and accurately reflected the intention of the parties’). Moreover, the court should avoid interpretations that lead to absurd results where a
5
contract is susceptible to more than one construction. Where one construction is “fair, customary and such as prudent men would naturally execute,” and the other is “inequitable, unusual or such as reasonable men would not be likely to enter into,” the court must prefer the former. Chicago Title & Trust Co., v. Telco Capital Corp., 685 N.E.2d 952, 955-956 (Ill.App.1997), quoted in Bank of Commerce v. Fyre Lake Ventures, LLC., 84 F.Supp. 3d 807, 823 (C.D. Ill.2015) (denying summary judgment because of factual disputes as to meaning of release).
In opposing the motion, plaintiffs contend that reading Change Order 13 to release Premier from a $ 3 million damages claim in exchange for a $ 30,000 credit would be an absurd interpretation. This Court finds this argument to be persuasive. At the very least, this Court concludes that there is are genuine disputes of fact regarding the intent of the parties such that summary judgment on this basis would be improper. As noted by the plaintiffs, there is evidence in the summary judgment record suggesting that the only dispute that was intended to be resolved by the release language in Change Order 13 concerned the dispute between the parties regarding the general contractor’s fee on certain of the remedial work. This is a plausible interpretation of the release language, since it is immediately preceded by the words “credit to contractors [sic] fee.” That the language was not intended to foreclose the much larger claims asserted in this action is further supported by the fact that it was placed in a change order. As defined by the Agreement, a change order is an order authorizing a change in the work or an adjustment to the time in which the work is to be completed or the price to be paid. Thus, plaintiffs have some justification for their position that Jones, signing on behalf of plaintiffs, could not be reasonably expected to find a release of the magnitude argued by Premier in a change order that covered a relatively insignificant amount of additional work.
6
B. Timely Notice
Premier’s second argument merits less discussion. Premier notes that the undisputed facts show that the problems in the building foundation were first observed on or around February 23, 2012, but that the plaintiffs did not issue any written notice of this defect until March 30, 2012. Premier contends that Article 9 of the Agreement required that this notice had to be given within ten days of discovery of the defect and that this delay amounted to a waiver of plaintiffs’ contractual claims. Article 9, however, says only that a claim against the liable party for injury to property must be made “within a reasonable time after the first observance of such injury or damage.” Clearly, a month is not an unreasonable time. Premier asserts that the notice had to be given within ten days, but this ten day requirement is contained in Article 7, not Article 9. Moreover, a reasonable interpretation of Article 7 is that it was to give a contractor a chance to correct its defective work before the owner corrects it and sends the contractor the bill. In any event, neither Article 7 nor Article 9 contains any waiver language.
CONCLUSION AND ORDER
For all of the foregoing reasons, Defendant Premier Design + Build Group, LLC’s Motion for Summary Judgment is DENIED.
______________________________
Janet L. Sanders
Justice of the Superior Court
Dated: November 3, 2016

read more

Posted by Stephen Sandberg - December 6, 2016 at 2:55 pm

Categories: News   Tags: , , , , , , ,

Everest National Insurance Company v. Berkeley Place Restaurant Limited Partnership (Lawyers Weekly No. 12-155-16)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
No. 2011-1470
EVEREST NATIONAL INSURANCE COMPANY
vs.
BERKELEY PLACE RESTAURANT LIMITED PARTNERSHIP
ORDER ON POST-VERDICT ISSUES AND FOR JUDGMENT
This action was commenced by Everest National Insurance Company as subrogee of three
persons: Timothy J. Barletta (“Timothy”), Barletta Engineering Corporation (“Barletta Corp.”)
and Osprey Equipment Corporation (“Osprey”). The action is one for contribution under G.L. c.
231B, § 1(d ). Everest, as insurer for all three persons, paid a settlement amount to a state trooper
who was seriously injured in a car accident when he was struck from behind by a car driven by
Timothy. Everest asserted in this case that defendant, Berkeley Place Restaurant Limited
Partnership, d/b/a Grill 23 (“Grill 23″), is jointly liable to the state trooper as a result of
negligently serving Timothy alcohol in the hours before the accident. Following a jury verdict in
favor of Everest that determined that Grill 23 is liable as a joint tortfeasor and that the settlement
reached by Everest with the state trooper and his wife was reasonable, the parties address two
issues: (1) how many tortfeasors bear responsibility for a pro rata share of the settlement, and (2)
what amount is Everest entitled to receive as contribution from Grill 23? Both questions involve
application of the contribution statute. For the first question, the court must determine whether
“if equity requires, the collective liability of some as a group shall constitute a single share.” G.L.
1
c. 231B, § 2(b). The second question is whether, under G.L. c. 231B, §1, Everest may obtain
contribution for more than a pro rata share of what it paid in settlement?
FACTS
On Saturday night, September 27, 2008, Timothy attended a private birthday party at the
Grill 23 restaurant in Boston. The person being celebrated was Timothy’s sister-in-law, Laura
Barletta, and the person throwing the party was her husband, Timothy’s brother, Vincent
Barletta. Approximately 40 people attended the party and the guests were, generally, friends and
family of Laura Barletta. The party was held in a function room, separate from the rest of the
restaurant.
There was evidence before the jury sufficient to show that at the party Timothy was
served alcohol after it had been recognized by the Grill 23 manager on duty that Timothy was
visibly intoxicated. Timothy left the party with his girlfriend, got into a motor vehicle, and drove
west on the Mass Pike. Several minutes later, Timothy, while operating under the influence of
alcohol, smashed into the rear of a state police vehicle parked on the edge of the Pike to assist a
stopped car. State Trooper Christopher Martin was inside the state police vehicle. As a result of
the collision, Trooper Martin suffered serious personal injuries. Subsequently, Timothy pleaded
guilty to the criminal charge of operating under the influence of alcohol.
On September 18, 2009, Trooper Martin and his wife commenced a lawsuit against
Timothy, Barletta Corp. and Osprey. The lawsuit alleged the negligence of Timothy as the driver.
The lawsuit also alleged that the vehicle Timothy was driving at the time of the accident was
“owned, controlled and maintained by” Barletta Corp. “and/or” Osprey. Therefore, “as owner(s)
of the vehicle, [the companies] were responsible for the negligent operation, ownership, control
2
and maintenance of the motor vehicle.” Complaint, ¶s 12 and 15.1
On May 3, 2010, the lawsuit commenced by Trooper Martin and his wife was settled. In
connection with the settlement, a Settlement Agreement and Release (the “Release”) was
executed. Exhibit 3. Pursuant to the Release, Everest and Travelers Insurance Company, as
liability insurers of all three of Timothy, Barletta Corp. and Osprey, agreed to pay a total of
$ 3,750,000, present value, to the Martins as part of a structured settlement to be paid over twenty
years. In return, the Martins released Timothy, Barletta Corp. and Osprey from any and all claims
arising out of the accident.2
The evidence at the trial of this case established that at the time of the accident, Timothy
was employed by Barletta Corp. Barletta Corp. was a family business. The president of Barletta
Corp. was Vincent Barletta.
Osprey was a wholly-owned subsidiary of Barletta Corp. Osprey owned the vehicles and
equipment used by Barletta Corp. Certain employees of Barletta Corp., including Timothy, were
provided with cars owned by Osprey. Pursuant to company policy, employees provided with
company cars were allowed to utilize the cars for personal use as well as for company business.
There was no restriction on the use of a company car. Vincent Barletta had no direct involvement
1 The Complaint also alleged that “[u]pon information and belief, at all relevant times
hereto, Timothy Barletta was acting in furtherance of his companies’ business.” Complaint ¶ 7.
Neither party in this lawsuit asserts that Timothy was acting in furtherance of the companies’
business on the night of the accident. The Complaint was not marked as an exhibit to be
submitted to the jury. Instead, the Complaint has been provided to the court by Grill 23, without
objection, for the purpose of its argument regarding how the court should exercise its equitable
discretion under G.L. c. 231B, § 2(b).
2 The Release also released any and all claims against Grill 23 arising from the accident,
and all claims against the insurers under G.L. c. 93A.
3
in supervising the use of company cars. On the night of the accident, Timothy was driving a car
owned by Osprey and provided to him by his employer.
Vincent Barletta testified that, at the birthday party, he had very little contact with
Timothy. He did not see Timothy show any signs of intoxication. To the extent he did observe
Timothy, nothing in his behavior stood out. The testimony from several witnesses confirmed that
Timothy was seated at a table for six to eight people, away from the head table where Vincent
Barletta was seated with his wife. Vincent Barletta had no memory of observing Timothy
consume alcohol. I find Vincent Barletta’s testimony to be credible.
Before the settlement, counsel for Trooper Martin wrote two demand letters to the
insurers. In the first letter (Exhibit 28), counsel stated that “I understand from our conversations
that liability in this matter is admitted (at least for purposes of mediation).” The letter focused
upon the damages suffered by Trooper Martin and requested $ 7,500,000 to settle. The second
letter (Exhibit 29), stated more specifically that “[t]he evidence of clear liability against
[Timothy] Barletta is undisputed.” The rest of the letter focused on damages and the additional
claim that the insurers were acting in violation of G.L. c. 93A and c. 176D by not yet agreeing to
settle. A demand for settlement of $ 11,000,000 was asserted. Neither letter asserted a theory of
liability against Barletta Corp. or Osprey, other than that Timothy was allegedly a “principal” of
those companies.
At trial, Everest called as a witness Robert A. DeLello. Mr. DeLello was counsel on the
Complaint filed for the Martins to commence the lawsuit against Timothy, Barletta Corp. and
Osprey. He continued as counsel to the Martins in connection with the negotiation of the
settlement. As a result of the determination that the question of pro rata shares of tortfeasors is an
4
issue to be decided based upon principles of equity (see G.L. c. 231B, § 2(b)), Mr. DeLello gave
the following testimony to the court, outside of the hearing of the jury.
Mr. DeLello testified that the theory of the Martins’ case against Barletta Corp. and
Osprey was to hold the companies liable under G.L. c. 231, § 85A; that is, as the owner of the
vehicle Timothy was driving on the night of the accident. Mr. DeLello testified that the police
report listed both companies as the owner of the vehicle. While he acknowledged that if the
litigation had not settled he would have taken discovery regarding possible other theories of
liability of the companies such as negligent entrustment or negligent maintenance, his intent was
to hold the companies vicariously liable as the owner(s) of the vehicle. In fact, the Martins’ case
settled before any discovery was taken.
ANALYSIS
Pro Rata Shares
General Laws c. 231B, § 2 provides as follows:
In determining the pro rata shares of tortfeasors in the entire liability (a)
their relative degrees of fault shall not be considered; (b) if equity
requires, the collective liability of some as a group shall constitute a
single share; and ( c) principles of equity applicable to contribution
generally shall apply.
Accordingly, I must decide, using principles of equity, whether Timothy, Barletta Corp. and
Osprey constitute three tortfeasors and, if they do, whether they should be grouped into a single
share. The consequences of that determination are significant to the parties. If Timothy, Barletta
Corp. and Osprey constitute a single share then the pro rata apportionment is 50% for Everest’s
insureds and 50% for Grill 23. Grill 23 argues that Everest’s share is on behalf of three
tortfeasors so that Grill 23’s liability for contribution is 25% (as one tortfeasor among four).
5
The parties take disparate positions with respect to which party bears the burden of proof
on this issue. While it is clear that Everest bears the burden to prove that Grill 23 was a
tortfeasor, and that the settlement Everest reached with the Martins was reasonable, the parties
cite no authority with respect to which party has the burden to prove how the court should
exercise its equitable authority under § 2(b). Grill 23 says that Everest must prove a negative; i.e.,
that Barletta Corp. and Osprey were not directly liable for their own active negligence. Logic
suggests, on the other hand, that if Grill 23 wishes the court to find that the corporations are
liable as direct tortfeasors (and not merely liable vicariously as the owner(s) of the vehicle), then
Grill 23 should prove their liability. For purposes of my conclusion based on the evidence in this
case, I assume that Everest bears the burden of proof..
The first question is whether there was sufficient evidence to conclude that Barletta Corp.
and Osprey were tortfeasors. As described above, Mr. DeLello testified that the theory of the
action he commenced on behalf of the Martins against the two corporations was that the
corporations were vicariously liable under G.L. c. 231, § 85A. Under that statute, an evidentiary
presumption is imposed to make the owner of a vehicle liable. “[E]vidence of a [owner’s] ownership of a motor vehicle shifts the burden of persuasion to the [owner] to show that the
driver was not a person for whose conduct the [owner] was legally responsible.” Thompson v.
Auto Credit Rehabilitation Corp., 56 Mass. App. Ct. 1, 5 (2002). The statute “is a rule of
evidence that makes no change in the substantive law of negligence.” Id. The substantive law is
that the driver’s actions may be imputed to the owner if, at the time of the accident, the owner
had the authority and means to control the driver’s conduct. Id. “Like the responsibility of a
principal for the negligence of his agent, or a master for that of his servant, the liability of the
6
registered owner is not joint and several, but derivative.” Gangl v. Ford Motor Credit Co., 37
Mass. App. Ct. 561, 563 (1994). In sum, absent evidence in rebuttal, § 85A makes an owner
vicariously liable for the conduct of the driver. As a practical matter, the statute provides a good
faith basis for a plaintiff to sue the owner of a vehicle involved in an accident caused by the
driver of the vehicle.
Consequently, Grill 23’s argument that the existence of the Martin’s Complaint against
Barletta Corp. and Osprey demonstrates that the corporations were tortfeasors is rejected. The
fact that the corporations were sued was, according to Mr. DeLello, based on vicarious liability.
A party held vicariously liable is not a party who is “jointly liable in tort” as required by G.L. c.
231B, § 1 to be classified as a tortfeasor. Lastly, Mr. DeLello’s testimony that he would have,
absent settlement, pursued discovery to determine if there was a basis to hold the corporations
directly liable as tortfeasors proves nothing.3 He did not conduct discovery and he offered no
evidence to support a claim that the corporations were directly liable.
At the trial of this action there was no evidence, offered by either side, to support a
conclusion that Barletta Corp. or Osprey were directly negligent for their own conduct. Grill 23
argues that Vincent Barletta, as president of Barletta Corp., the parent company of Osprey,
should have stopped Timothy from operating a company vehicle that evening. I am not
persuaded. As described above, there was insufficient evidence to suggest negligence by Vincent
Barletta, and therefore insufficient evidence to find that Barletta Corp. and/or Osprey were
3 Similarly, the fact that the corporations were included as released parties in the
settlement Release does not help Grill 23. Having been named as defendants in the Martin
lawsuit, a lawyer would be guilty of malpractice if he or she did not name the defendants as
parties to be released.
7
tortfeasors.
Under § 2(b), the court may apply equitable principles to “group” tortfeasors into a single
share. I could find little authoritative guidance regarding the exercise of that equitable authority.
The authority apparently applies to the situation where an alleged tortfeasor is only vicariously
liable. See Comment to § 2, Uniform Contribution Among Tortfeasors Act (1955 Revised
Act)(“[I]t invokes the rule of equity which requires class liability, including the common liability
arising from vicarious relationships, to be treated as a single share”). Of course, if a company is
held liable based solely on vicarious liability, the company is not a tortfeasor at all and cannot be
held liable for contribution. Elias v. Unisys Corporation, 410 Mass. 479, 481 (1991)(vicarious
liability arises only by operation of law; it is derivative of the wrongful act of the agent; employer
is not, therefore, a joint tortfeasor under c. 231B). Nevertheless, the Comment makes clear that
vicariously liable parties should be grouped with the actual tortfeasor as a single share.4
In this case, I find that the evidence compels the conclusion that Barletta Corp. and
Osprey were not negligent actors. As a result, as a matter of equity, I group Timothy Barletta,
Barletta Corp. and Osprey as representing a single share of the entire liability for the accident
based upon the negligence of Timothy.
Everest’s Right to Contribution
In order to obtain contribution, the settling tortfeasor must have “agreed while action is
pending against him to discharge the common liability and has within one year after the
4 The Comment also suggests that it is appropriate to “group” tortfeasors into a single
share where, for example, there is allocation of liability between several actors (such as owners
of a building), on the one hand, and a tortfeasor having no connection with the actors, on the
other hand.
8
agreement paid the liability and commenced his action for contribution.” G.L. c. 231B, § 3(d)(2).
The Release (Exhibit 3) indicates that the “Insurers” agreed to pay the Martins in a
structured settlement over twenty years amounts having a present value of $ 3,750,000. “Insurers”
is defined as both Everest and Travelers Insurance Company.
Grill 23 does not challenge the calculation of the present value of what the Insurers
agreed to pay. The agreement to pay the amounts with a present value of $ 3,750,000 triggers the
Insurers right to contribution. LeBlanc v. Logan Hilton Joint Venture, 78 Mass. App. Ct. 699,
711 (2011)(“To preserve a right to contribution against codefendants, that provision [§ 3(d)] requires a settling party either to make payment discharging the common liability of all
defendants, or to agree to make such a payment, and then to pursue the claim for contribution
within a year after the payment”). It was the agreement to pay amounts with a present value of
$ 3,750,000 to the Martins that was put in evidence before the jury, by agreement, for the jury to
determine whether the settlement was “reasonable” under G.L. c. 231B, § 1(c).
Grill 23 does challenge, however, whether Everest may obtain contribution for the
portion of the $ 3,750,000 that was paid by Travelers, not Everest. According to Everest, its
portion of the present value payment, as the excess carrier for the liability of Timothy, Barletta
Corp. and Osprey, was $ 2,787,000. Travelers’ portion was $ 963,000. Grill 23 agrees with that
description of the Insurers respective shares. Bench Memorandum Regarding Legal Framework,
submitted by Grill 23, p.2 (September 13, 2016).
It is readily apparent that Travelers is not a party to this action. Everest presented no
evidence to support an argument that it is an assignee or otherwise the holder of Travelers’ right
of contribution. Indeed, at this late date, Travelers has waived any claim for contribution.
9
The statute, G.L. c. 231B, §1(d), could not be more clear that the right of contribution
runs “to the extent of the amount it has paid in excess of the tortfeasor’s pro rata share of the
common liability.” (Emphasis added). The “it” in that phrase refers to the insurer seeking
contribution. Here, Everest is the only insurer with a claim. Everest paid $ 2,787,000, 50% of
which is in excess because it proved that Grill 23 was jointly liable and that the amount paid in
settlement was reasonable. As a result, Grill 23 is liable to Everest for 50% of $ 2,787,000, or
$ 1,393,500.
CONCLUSION
Based on the verdict returned by the jury, and my findings described herein regarding pro
rata share and the amount recoverable by Everest, judgment shall enter in favor of Everest
against Grill 23 in the amount of $ 1,393,500, plus prejudgment interest.
By the Court,
Edward P. Leibensperger
Justice of the Superior Court
Date: November 7, 2016
10

read more

Posted by Stephen Sandberg - December 6, 2016 at 12:36 am

Categories: News   Tags: , , , , , , , , , , ,

OBP Corporation v. Welch Allyn, Inc. (Lawyers Weekly No. 12-156-16)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
NO. 2016-01496-BLS1
OBP CORPORATION d/b/a OBP MEDICAL
vs.
WELCH ALLYN, INC.
MEMORANDUM OF DECISION AND ORDER ON
WELCH ALLYN, INC.’S MOTION TO DISMISS
PLAINTIFF’S FIRST AMENDED COMPLAINT
Defendant, Welch Allyn, Inc., allegedly misappropriated confidential business
information belonging to plaintiff OBP Corporation. The confidential business information was
a list of OBP’s customer names, along with confidential sales information. Welch Allyn obtained
the confidential information from Owens & Minor, Inc., OBP’s primary distributor. Welch
Allyn allegedly used the confidential business information to craft a marketing plan intended to
steal OBP’s customers and to eliminate OBP as a competitor in the market for a selfilluminating,
disposable vaginal speculum. Welch Allyn now moves to dismiss OBP’s First
Amended Complaint (Amended Complaint) pursuant to Mass. Civ. P. 12(b)(6). For the reasons
that follow, the motion is DENIED.
BACKGROUND
The following comes from the allegations, taken as true, in OBP’s Amended Complaint.
OBP sells a variety of medical examination instruments to hospitals and physician
offices, including a self-illuminating disposable vaginal speculum. It generates its customers
through direct marketing and sales efforts, and sells its products by entering into pricing
agreements directly with individual customers and with group purchasing organizations (GPOs)
acting on behalf of hospital systems and/or physician’s offices. The individual customer
agreements identify OBP’s customers and the prices OBP negotiated directly with them.
Similarly, the GPO agreements identify the prices OBP negotiated with the GPOs and include
provisions indicating that the terms of the agreement are confidential.
Since June 2011, OBP has used Owens & Minor to fulfill orders from OBP’s customers.
In connection with this service, Owens & Minor stocks its distribution centers with OBP
products. Owens & Minor orders products directly from OBP at an agreed upon unit price based
on demand from OBP’s customers. When Owens & Minor fulfills customer orders, it charges
customers according to the terms set forth in OBP’s pricing agreements with the customers.
OBP reimburses Owens & Minor through “rebates” for any difference between that price and the
fixed price Owens & Minor pays to OBP. As part of this process, OBP provides copies of the
relevant pricing agreements to Owens & Minor. In return for its fulfillment services, OBP pays
Owens & Minor an administrative fee.
Owens & Minor operates pursuant to a Code of Honor, made publicly available on its
website, in which it states that the customer and sales information of suppliers like OBP will not
be disclosed to third parties and will only be used for purposes of effectuating the parties’
business relationship. The Code of Honor specifically provides that:
[a]ll Company records and information related to the Company, its customers,
suppliers and teammates is confidential … [and] no teammate or director of the
2
Company may provide or disclose confidential or proprietary information to anyone
outside the Company (or even within the Company except to teammates who need
to know such information to perform their work) or use such information other than
in conducting the Company’s business.
Code of Honor at 9. The Code defines “confidential information” as “any information that has
not been disclosed to the public” including “customer lists, contracts, pricing and purchase
information,” “supplier lists, contracts, pricing and product information,” and “all written or
verbal agreements between the Company and its teammates, customers, suppliers, strategic
partners, agents and other third parties.” Id. at 9-10.
In November 2014, Welch Allyn, a global manufacturer of medical diagnostic equipment,
introduced a self-illuminating disposable vaginal speculum that competes with OPB’s product.
About a month before it did so, Welch Allyn obtained from Owens & Minor a spreadsheet
referred to as an “opportunity report.” The opportunity report lists OBP’s customer and sales
information associated with OBP’s vaginal speculum. The report specifically identified the
names and addresses of 582 customers who had ordered OBP’s vaginal speculum through Owens
& Minor and the annualized sales totals for each of these customers. OBP alleges that this
information came from the pricing agreements it shared with Owens & Minor on a confidential
basis.
After receiving the opportunity report, Welch Allyn employees exchanged several emails
concerning the information. In one email dated November 7, 2014, Welch Allyn’s Director of
Channel Management and Marketing wrote: “When we use this, let’s not be blatant about where
we got the info. I don’t want Owens to have problems with OBP, they may get their feathers
ruffled if they find out that Owens provided the list to us. Let’s just tread carefully here.” In a
second email dated November 18, 2014, Welch Allyn’s Product Manager for Vaginal Speculums
3
explained: “It’s rare that we are given a list of customers that are buying a known competitor … I
just wan[t] to make sure we try to take advantages in 2014.” In yet another email sent two days
later, Welch Allyn’s Vice President of Acute Care wrote to Sales Managers: “I wanted to reach
out to you on some targeted efforts surrounding the launch of our new LED vag spec. I’ve
attached a list of accounts using the OBP spec and their respective volumes. (This list was
supplied by Owens & Minor and should be treated as highly confidential. This shouldn’t be
emailed out or sent to anyone else.).” (Emphasis in original).
Welch Allyn ultimately used the information from the opportunity report to craft a
marketing plan allegedly intended to steal OBP customers and eliminate OBP as a competitor in
the market for the single-use medical examination instrument. The marketing campaign was
coordinated with a patent infringement lawsuit Welch Allyn filed against OBP in September
2014. In the lawsuit, Welch Allyn claimed that OBP’s vaginal speculum infringed on a Welch
Allyn patent and that OBP unlawfully copied Welch Allyn’s color coded trade dress. In an email
dated December 3, 2014, Welch Allyn’s Product Manager for Vaginal Speculums explained that:
The faster we can move customers over from OBP, the more impact we also have on
the litigation effort with regard to potential settlement. We want to disrupt OBP
business and growth as quickly as possible. I suggested a back pocket offer for initial
discount with larger purchase (end user). While I know we don’t typically want to
discount a new product, in this case business disruption may save us litigation costs.
Two months after this email was sent, in February 2015, Welch Allyn began offering what it
called the “OBP Back Pocket Offer” – an offer to provide OBP customers with a free reusable
light (having a retail value of $ 300) for use with the Welch Allyn vaginal speculum. The offer
significantly reduced the cost of Welch Allyn’s speculum. Around this time, Welch Allyn also
began sending sales representatives to hospital departments where OBP had long sold its
4
products.
In May 2016, OBP brought this action against Welch Allyn. OBP alleges that the
customer and sales data that Owens & Minor provided in the opportunity report was confidential
and that Welch Allyn wrongfully obtained and used this information in connection with the
launch of its self-illuminating vaginal speculum. OBP’s Amended Complaint asserts claims for
common law misappropriation of confidential business information (Count I), statutory
misappropriation of confidential business information (Count II), conversion (Count III), unjust
enrichment (Count IV), violations of c. 93A (Count V), and interference with business relations
(Count VI). Each claim is based on Welch Allyn’s alleged receipt and use of OBP’s confidential
customer information.
ANALYSIS
Welch Allyn moves to dismiss the Amended Complaint its in entirety pursuant to Mass.
R. Civ. P. 12(b)(6). To withstand a motion to dismiss under Rule 12(b)(6), a complaint must
contain “allegations plausibly suggesting (not merely consistent with) an entitlement to relief….”
Iannacchino v. Ford Motor Co., 451 Mass. 623, 636 (2008), quoting Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555-557 (2007). Although the complaint need not set forth detailed factual
allegations, a plaintiff is required to present more than labels and conclusions and must raise a
right to relief “above the speculative level.” Id.
To prevail on a claim of misappropriation of trade secret or confidential business
information, a plaintiff must show that it: (1) possessed a trade secret or confidential business
information; (2) took reasonable steps to preserve the secrecy of that trade secret or confidential
business information; and (3) the defendant breached a duty not to disclose or use the trade secret
5
or confidential business information. See Peggy Lawton Kitchens, Inc. v. Hogan, 18 Mass. App.
Ct. 937, 939 (1984). Welch Allyn argues that OBP’s misappropriation claims must be dismissed
because OBP’s Amended Complaint fails to assert facts satisfying any of these elements.
Specifically, it contends that the Amended Complaint does not allege sufficient facts to show
that: (1) the customer and sales information in the opportunity report belonged to OBP rather
than to Owens & Minor; (2) OBP took appropriate steps to ensure the confidentiality of the
customer and sales information; and (3) Welch Allyn had a duty to refrain from using the
customer and sales information. Welch Allyn further argues that these reasons also justify
dismissal of OBP’s other claims for conversion, unjust enrichment, violation of c. 93A, and
interference with business relations.1
A. Ownership of the Customer and Sales Information
Welch Allyn’s first contention fails because the Amended Complaint affirmatively
alleges that OBP owned the information in the opportunity report. Specifically, the Amended
Complaint alleges that the content of the opportunity report came from the customer names and
pricing information in OBP’s pricing agreements and that OBP provided those agreements to
Owens & Minor on a confidential basis for the sole purpose of facilitating Owen & Minor’s
fulfilment services. Taking these allegations as true, OBP adequately pleads ownership of the
confidential customer and sales information found in the opportunity report.
B. Efforts to Preserve Confidentiality
Welch Allyn’s second contention fails because Amended Complaint adequately pleads
1 Because Welch Allyn’s motion to dismiss the misappropriation count is denied, the court
declines to consider at this time the separate grounds for Welch Allyn’s motion to dismiss other
counts.
6
that OBP took reasonable steps to keep its customer and sales information confidential, such as
by not making the information publicly known outside its business and by employing password
protected computers and employee agreements to protect against disclosure. See Optos, Inc. v.
Topcon Med. Sys., 777 F. Supp. 2d 217, 240 (2011). In making its argument, Welch Allyn
stresses that OBP has not alleged that it entered into a nondisclosure or confidentiality agreement
with Owens & Minor restricting the use of the information contained in the opportunity report.
The lack of such an agreement, however, is not fatal to OBP’s misappropriation claims.
In the absence of a confidentiality agreement, a confidential relationship will be implied
where the facts demonstrate that the disclosures were made to facilitate a specific relationship
such as that between employer and employee, purchaser and supplier, or prospective licensee and
licensor. See Burten v. Milton Bradley Co., 763 F.2d 461, 463 (1st Cir. 1985). The Amended
Complaint alleges that Owens & Minor’s role was to fulfill orders from customers that OBP
generated through its direct marketing and sales efforts. It further alleges that in order to
facilitate Owens & Minor’s fulfillment services, OBP was required to provide Owens & Minor
with the identity of its customers and the terms of its customer pricing agreements. These
allegations suggest that the disclosures of OBP’s customer and sales information were made in
order to promote the supplier/distributor relationship between Owens & Minor and OBP, and that
therefore a confidential relationship should be implied.
That such implication is appropriate is bolstered by the fact that Owens & Minor’s Code
of Honor, promoted on its website, specifically provides that it will not disclose customer and
sales information of suppliers like OBP to third parties and will only use such information for
purposes of effectuating the parties’ business relationship. The presence of the Honor Code on
7
Owen & Minor’s website plausibly suggests that OBP took reasonable steps to preserve the
confidentiality of its customer information.
C. Duty Not to Use the Customer and Sales Information
Welch Allyn’s third argument, that the Amended Complaint fails to demonstrate a breach
of a duty to not use OBP’s customer and sales information, is also without merit. “Under
Massachusetts trade secret law, a third party who knowingly benefits from a trade secret which a
person in a confidential relationship obtained from the plaintiff is liable to the plaintiff for the
misappropriation of that trade secret.” Data Gen. Corp. v. Grumman Sys. Support Corp., 795 F.
Supp. 501, 507 (D. Mass. 1992); see also Optos, Inc., 777 F. Supp. 2d at 240 (“A party who
knowingly benefits from the breacher’s trade secret bounty is also liable.”); Curtiss-Wright Corp.
v. Edel-Brown Tool & Die Co., 381 Mass. 1, 3 n. 2 (1980) (observing that when a purchaser
provides a competitor with a supplier’s confidential plans and specifications, “[r]elief may be had
against [the] competitor despite the lack of any legal relationship between the competitor and the
supplier whose plans were appropriated.”). To recover, a plaintiff need show that the third party
had actual or constructive notice that the information it obtained and used was a trade secret. See
Curtiss-Wright Corp., 381 Mass. at 5-6 & n.4.
In the present case, the Amended Complaint states a claim for misappropriation against
Welch Allyn despite the absence of allegations that Welch Allyn and OBP themselves had a
confidential relationship. The Amended Complaint alleges that it is well known in the medical
instrument industry that customer and sales information is not public information. It also quotes
internal Welch Allyn emails from November 7, 18 and 20, 2014, suggesting that Welch Allyn
knew (1) the information it received from Owens & Minor was highly confidential, (2) receipt of
8
such information was extremely rare, and (3) Owens & Minor could get in trouble if OBP
discovered the disclosure. Taken together, these allegations plausibly suggest that Welch Allyn
had either constructive or actual notice that it was in possession of OBP’s confidential business
information and therefore had an obligation to refrain from using the information to compete
with OBP. See Curtiss-Wright Corp., 381 Mass. at 5-7 (holding that a defendant supplier who
received plaintiff’s confidential drawings from the Navy and used them to win a Navy bid was
properly held liable because the supplier knew, or should have known, that it had received the
plaintiff’s trade secrets).
CONCLUSION
For the reason stated above, Welch Allyn, Inc.’s Motion to Dismiss Plaintiff’s First
Amended Complaint is DENIED.
By the Court,
________________________
Edward P. Leibensperger
Justice of the Superior Court
November 14, 2016
9
10

read more

Posted by Stephen Sandberg - December 5, 2016 at 9:01 pm

Categories: News   Tags: , , , , , ,

Next Page »