MMA Lincoln Gardens, LLC, et al. v. Lancaster (Lawyers Weekly No. 12-179-16)
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
No. 1684CV0594 BLS 1
Lead Case
MMA LINCOLN GARDENS, LLC et al
vs.
DALE LANCASTER
Consolidated With:
SUPERIOR COURT
CIVIL ACTION
No. 1684CV1830 BLS 1
HENDERSON MANAGEMENT, LLC, et al
vs.
BOSTON FINANCIAL INVESTMENT MANAGEMENT LIMITED PARTNERSHIP, et
al
MEMORANDUM AND ORDER ON MOTION TO DISMISS THE FIRST AMENDED
COMPLAINT [in No. 1684CV1830] These cases present disputes between a general partner and investor limited partners. The
disputes arise with respect to four separate limited partnership agreements for the development of
real property. The general partner entity for each of the projects was owned and managed by Dale
Lancaster. Thus, the general partners will be called, collectively, the “Lancaster General
Partners.” The investor limited partners for each project were organized by Boston Financial
Investment Management Limited Partnership (“BFIM”). Thus, the investor limited partners will
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be called, collectively, the “BFIM Limited Partners.”
The litigation began with the commencement of an action by the BFIM Limited Partners
against Dale Lancaster for nonpayment of amounts owed as a result of his personal guarantees of
debts owed by the Lancaster General Partners. That action is the Lead Case, described above.
The BFIM Limited Partners describe the Lead Case as a collection action.
In response, Dale Lancaster and the Lancaster General Partners commenced a separate
action against the BFIM Limited Partners and BFIM. Among other things, the Lancaster General
Partners allege that they were wrongfully removed as general partners of the projects by the
BFIM Limited Partners. The separate action is Docket Number 1684CV1830 which, as described
above, is now consolidated (the “Consolidated Case”) with the Lead Case.
The BFIM Limited Partners now seek to dismiss the First Amended Complaint filed in
the Consolidated Case. The BFIM Limited Partners base their motion on two arguments, one
procedural and one substantive.
Procedural Ground for Motion to Dismiss
The BFIM Limited Partners contend that the claims in the First Amended Complaint
should have been asserted as counterclaims in the Lead Case rather than in a new action (that
later became consolidated with the Lead Case). Because the claims were not asserted as
counterclaims in the Lead Case, the BFIM Limited Partners say that the claims are barred.
The critical dates are as follows. On February 19, 2016, the BFIM Limited Partners
commenced the Lead Case. On March 31, 2016, Dale Lancaster answered the complaint. He did
not assert any counterclaims with his answer. On June 10, 2016, the Lancaster General Partners
and Dale Lancaster commenced the Consolidated Case. On June 27, 2016, Dale Lancaster moved
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to consolidate the Consolidated Case with the Lead Case, and on June 29, 2016, the
consolidation was allowed.
The claims asserted in the Consolidated Case arise out of the transaction or occurrence
that was the subject matter of the Lead Case complaint. Accordingly, the claims in the
Consolidated Case were compulsory counterclaims, at least as to Dale Lancaster (the only
defendant in the Lead Case), that should have been asserted in the Lead Case. The BFIM Limited
Partners therefore rely on the maxim that failure to plead a compulsory counterclaim bars a party
from bringing a later independent action on that claim. Keystone Freight Corp. v. Bartlett
Consolidated, Inc., 77 Mass. App. Ct. 304, 309-310 (2010).
In the temporal context presented here, BFIM Limited Partners’ argument exalts form
over substance. Mass. R. Civ. P. 13 (f) allows a party to assert an untimely counterclaim when
“through oversight, inadvertence, or excusable neglect, or when justice requires” the party failed
to plead a counterclaim at the time of the answer. While Dale Lancaster failed to plead a
counterclaim in the Lead Case, he asserted the counterclaim in the Consolidated Case within
approximately 70 days, and then immediately moved to consolidate the two cases. In substance,
the motion to consolidate acted as a motion to be allowed to file a counterclaim late. The BFIM
Limited Partners joined the motion to consolidate. Stated another way, had Dale Lancaster
moved to file a late counterclaim in the Lead Case, it would have been allowed because (a) the
motion would have been timely made, (b) it was excusable for Lancaster not to file the
counterclaim given that the other Lancaster General Partners and BFIM were not parties in the
Lead Case, (c) there was no unfair prejudice to the BFIM Limited Partners, and (d) justice
requires the case to be decided on the merits rather than on a procedural technicality. Diversified
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Mortgage Investors v. Viking General Corp., 16 Mass. App. Ct. 142, 151 (1983)(“in the
administration of rules like rule 13 (a), there must be reasonable flexibility in order to accomplish
the fundamental purpose of combining related claims in one action in the interest of judicial
economy while at the same time accomplishing a just result”). Dale Lancaster’s prompt motion
to consolidate the two cases put the parties in the same position as if he had moved to file a
counterclaim late in the Lead Case. Consequently, the BFIM Limited Partners’ motion to dismiss
the First Amended Complaint in the Consolidated Case on procedural grounds fails.1
Substantive Grounds for Motion to Dismiss
The BFIM Limited Partners move to dismiss the First Amended Complaint in the
Consolidated Case on the ground that it fails to state a claim upon which relief may be granted.
Mass. R. Civ. P. 12 (b) (6). To survive a motion to dismiss, a complaint must set forth the basis
for the plaintiff’s entitlement to relief with “more than labels and conclusions.” Iannacchino v.
Ford Motor Co., 451 Mass. 623, 636, quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007). At the pleading stage, Mass. R. Civ. P. 12(b)(6) requires that the complaint set forth
“factual ‘allegations plausibly suggesting (not merely consistent with)’ an entitlement to relief . .
. .” Id., quoting Bell Atl. Corp., 550 U.S. at 557. The court must, however, accept as true the
allegations of the complaint and draw every reasonable inference in favor of the plaintiff. Curtis
v. Herb Chambers I-95, Inc., 458 Mass. 674, 676 (2011).
1 Because I find that Dale Lancaster is not barred from proceeding with the First
Amended Complaint for failure to assert a counterclaim, it necessarily follows that the other
Lancaster affiliated plaintiffs in the Consolidated Case may proceed. The BFIM Limited Partners
argue that the Lancaster affiliates are “functional equivalents” of Dale Lancaster and that they too
should be barred because Dale Lancaster did not file a timely counterclaim. I do not need to
decide whether the “functional equivalent” argument is valid.
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Each count of the First Amended Complaint (Counts I through XII) is based on the claim
that the BFIM Limited Partners breached the respective Limited Partnership Agreement
applicable to one of the four real estate projects and that BFIM tortiously interfered with the
contracts. The Lancaster General Partners allege that, in breach of the Limited Partnership
Agreements, the BFIM Limited Partners exercised, without justification, authority in the
contracts to remove and replace the general partners. The BFIM Limited Partners then installed
BFIM affiliates as general partners for each of the four projects. The Lancaster General Partners
and affiliates allege that they are owed money as a result of the wrongful removal.
The First Amended Complaint follows a similar pattern for each of the projects. The
Limited Partnership Agreements are attached. It is alleged that the general partner had the
exclusive right to manage the business of the partnership and that the limited partners had the
authority to remove the general partner only if there had been a “Material Default” (a term
defined in the agreements) by the general partner that had not been cured within an applicable
time period. Then, the First Amended Complaint alleges that (a) the general partner fully
performed its obligations, (b) there was no default, (c) the grounds stated in the notice of default
were not valid, and (d) the removal of the general partner was improper and in breach of the
Limited Partnership Agreement. The First Amended Complaint provides factual details for each
of those propositions that, if taken as true, plainly state a claim for breach of contract. Likewise,
the First Amended Complaint provides facts to support a claim that BFIM induced the limited
partners to take the action improperly to remove the general partner in order to replace the
general partner with a BFIM affiliate.
In their motion to dismiss, the BFIM Limited Partners engage in argument over the facts
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concerning whether the general partners were in default. In large part, the disputed facts relate to
whether the general partners had the obligation to fund expenses of the limited partnerships at the
time when the limited partners claim they did but failed to do so. This issue is also fact sensitive.
It turns on whether certain milestone events occurred that arguably relieved the general partners
of a funding obligation. Resolution of these disputes cannot be obtained on a motion to dismiss,
especially when all of the general partners’ statements of fact in the First Amended Complaint
must be taken as true.
CONCLUSION
For the reasons stated above, Defendants’ Motion to Dismiss the First Amended
Complaint (in No. 1684CV1830, the Consolidated Case) is DENIED.
By the Court,
Edward P. Leibensperger
Justice of the Superior Court
Date: December 7, 2016
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