O’Malley v. Burr, et al. (Lawyers Weekly No. 09-031-18)
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1784CV03497-BLS2
____________________
EUGENE O’MALLEY
v.
STEPHEN BURR, LAWRENCE KULIG, and ECKERT SEAMANS CHERIN & MELLOT, LLC
____________________
MEMORANDUM AND ORDER ALLOWING DEFENDANTS’ MOTION TO DISMISS
This case arises from a dispute between plaintiff Eugene O’Malley and Adel A. Hamadi Al Tamimi concerning the financing of an arbitration claim. They entered into a contract providing that if O’Malley could arrange for someone to fund the arbitration then Tamimi would pay him a four percent finder’s fee. Tamimi breached the contract. O’Malley successfully sued Tamimi for breach of contract and violation of G.L. c. 93A. He was awarded treble damages of $ 580,200, plus interest, plus roughly $ 825,000 in attorneys’ fees and costs. O’Malley asserts that he has been unable to collect the full amount owed by Tamimi under this judgment.
O’Malley has now sued the two lawyers who represented Tamimi in this transaction, Stephen Burr and Lawrence Kulig, as well as their law firm, Eckert Seamans Cherin & Mellot, LLC. He alleges that the funds O’Malley procured were paid into Eckert’s IOLTA account, Burr and Kulig knew that four percent of that amount should have been paid to O’Malley, Burr falsely asserted that Tamimi had a good faith basis for not paying O’Malley, the Defendants then let Tamimi transfer his funders, and as a result O’Malley has been unable to collect what he is owed. O’Malley asserts claims for fraud, fraudulent concealment, violation of c. 93A, and intentional infliction of emotional distress.
Defendants have moved to dismiss all claims. The Court will ALLOW the motion to dismiss because all four claims are barred by the statutes of limitations.
1. Factual Allegations. For the purpose of deciding the motion to dismiss, the Court assumes that Mr. O’Malley’s factual allegations and any reasonable inferences that may be drawn from the facts alleged in his complaint are true. See Golchin v. Liberty Mut. Ins. Co., 460 Mass. 222, 223 (2011). O’Malley alleges the following facts.
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O’Malley and Tamimi entered into a written consulting agreement in July 2011. It provided that if O’Malley could find an investor to provide Tamimi with the funds he needed to finance an arbitration claim against the Sultanate of Oman, then O’Malley would be paid a finder’s fee equal to four percent of the total amount of capital advanced to Tamimi.
O’Malley was successful. He procured a $ 5.96 million investment in the Oman arbitration. He was therefore owed a $ 238,400 finder’s fee.
The investor wired his $ 5.96 million payment to Eckert Seamans’ client account for the benefit of Tamimi. The proceeds were wired on September 6, 2011.
The next day O’Malley emailed Burr. He asked that Eckert pay his finder’s fee. Burr responded in emails stating that he had to speak with his client, Tamimi, but expected that he would be able to wire the full payment to O’Malley by September 8.
On September 8 Burr wired a partial payment of $ 50,000 to O’Malley. He also sent an email assuring O’Malley that “I talked to him [Tamimi] an hour ago and told him that he needed to pay you,” and that “I will not get paid until you get paid and the money will not leave here until this is dealt with.”
On September 15 Burr emailed Tamimi and urged him to “approve payment in full immediately.” Burr also advised his client that “[i]f I thought there was an opening to negotiate under the terms of his contract I would tell you, but there is not.”
But Tamimi did not want to pay the rest of what he owed to O’Malley. So on September 28 Burr sent an email to O’Malley in which Burr falsely asserted that Tamimi had raised “some substantive issues as to whether you have fully earned what your contract provided for,” and that “his concerns are good faith concerns and not just a negotiating or delaying tactic.” O’Malley alleges that that is was false and that Burr knew it was false.
Two days later, on September 30, Burr released approximately $ 220,000 from the client account to Eckert’s own account as payment by Tamimi of previously incurred legal fees. Burr did not disclose this fact to O’Malley, despite his prior assurance that O’Malley would get paid in full before Eckert received any further payment from Tamimi.
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O’Malley retained counsel and filed suit against Tamimi to recover the balance of his finder’s fee. The Court takes judicial notice that O’Malley filed his lawsuit against Tamimi on November 4, 2011.1
Three days later Tamimi asked Burr to move Tamimi’s funds out of the Eckert Seamans client account and into the account of a trust controlled by Tamimi. Burr complied by transferring the remaining $ 4.79 million to the account of Hiland Realty Trust. He did so in order to help Tamimi avoid his obligation to O’Malley. And Burr never disclosed this transfer to O’Malley.
O’Malley alleges that he incurred more than a million dollars in attorneys’ fees in suing Tamimi, “only a small portion of which have been recovered,” as a direct result of “Defendants’ failure to timely pay the fee owed to O’Malley” and of the fact that Defendant “lied on multiple agents to O’Malley.”
2. Analysis. The Court concludes that O’Malley’s claims against these Defendants are all time-barred under the applicable statutes of limitations and therefore must be dismissed under Mass. R. Civ. P. 12(b)(6). Cf. Epstein v. Seigel, 396 Mass. 278, 279 (1985) (motion to dismiss under Rule 12(b)(6) is proper vehicle for asserting that claims are barred by statute of limitations).
2.1. Running of the Limitations Period. O’Malley filed the current action against Burr, Kulig, and Eckert Seamans on October 30, 2017. The three tort claims (for fraud, fraudulent concealment, and intentional infliction of emotional distress) are all governed by a three-year statute of limitations. See G.L. c. 260, § 2A. The claim under c. 93A is governed by a four-year limitations period. See G.L. c. 260, § 5A.
O’Malley’s claims for fraud accrued, and thus the limitations period began to run as to those claims, as soon as he “learn[ed] or reasonably should have learned of the misrepresentation[s]” by Defendants. See McEneaney v. Chestnut Hill Realty Corp., 38 Mass. App. Ct. 573, 577 (1995); accord Friedman v. Jablonski, 371 Mass.
1 That lawsuit was captioned and docketed as O’Malley v. Tamimi, Suffolk Superior Court civil action 11-4040. Defendants’ in this case have asked the Court to take judicial notice of the pleadings and docket from this prior lawsuit. O’Malley has not opposed this request. The Court may and does take judicial notice of the pleadings, docket, and other records of this related case. Cf. Reliance Ins. Co. v. City of Boston, 71 Mass. App. Ct. 550, 555 (2008) (records of related court proceedings are subject to judicial notice and may be considered in deciding motion to dismiss).
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482, 484-486 (1976). Since O’Malley’s claim under c. 93A is also based at least in part on allegations of fraud, the Court concludes that this claim similarly did not accrue until O’Malley learned that Defendants had made misrepresentations to him. Cf. Int’l Mobiles Corp. v. Corroon & Black/Fairfield & Ellis, Inc., 29 Mass. App. Ct. 215, 221 (1990) (“The accrual date for a c. 93A cause of action is determined by the same principles dispositive of the accrual dates of general tort actions.”). In contrast, O’Malley’s claim for intentional infliction of emotional distress accrued as soon as he began to experience emotional distress and had reason to believe it was caused at least in part by the Defendants. Cf. Crocker v. Townsend Oil Co., 464 Mass. 1, 8 (2012) (“limitations periods in Massachusetts run from the time a plaintiff discovers, or reasonably should have discovered, the underlying harm … for which relief is sought,” and has reason to believe that the harm was caused by the defendant).
It is apparent from the allegations in the complaint, and O’Malley conceded at oral argument, that O’Malley was aware of all facts giving rise to his claims against Defendants by the end of the trial in his lawsuit against Tamimi. The Court takes judicial notice, from the docket and verdict slip in that case, that the jury rendered its verdict in that case on September 23, 2014.
It follows that O’Malley’s common law tort claims against Defendants are all time barred. These three claims—for fraud, fraudulent concealment, and intentional infliction of emotional distress—are governed by a three-year statute of limitations. See G.L. c. 260, § 2A. O’Malley waited until October 30, 2017, which was more than three years after the jury verdict in the underlying case, to file this suit.
Now, the c.93A claim is governed by a longer four-year limitations period, and this action was filed less than four years after the trial against Tamimi finished. Cf. Passatempo v. McMenimen, 461 Mass. 279, 296-297 (2012) (mere fact that allegations supporting 93A claim would also support common-law tort claim, such as for fraud, does not make 93A claim subject to shorter, three-year limitations period).
But the Court concludes that the c. 93A claim is also time-barred because it accrued by the time that O’Malley sued Tamimi on November 4, 2011. By that time Tamimi knew that Eckert Seamans had received the $ 5.96 million in funding arranged by O’Malley, that the firm had transferred $ 50,000 of those funds to O’Malley, and that it had failed and had begun to refuse to pay O’Malley the rest of
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his finder’s fee. In addition, O’Malley specifically alleged in paragraph 19 of the complaint that he filed against Tamimi that on November 3, 2011, Burr met with O’Malley and “conceded that Al Tamimi had no basis on which to withhold the balance of the consulting fee owed to O’Malley.” Thus, by his own pleading O’Malley concedes he learned that Burr’s prior assertions that Tamimi had a good faith basis for refusing to pay O’Malley were false back in 2011, well over four years before O’Malley sued these Defendants.
The limitations period began to run on the claims asserted in this action as soon as O’Malley knew that Burr had been lying to him about the reasons for non-payment and that O’Malley had been injured by the non-payment, all of which had occurred by November 2011. It does not matter whether O’Malley realized he had claims against these Defendants or had discovered facts supporting every element of each possible claim. See Doe v. Harbor Schools, Inc., 446 Mass. 245, 256-257 (2006); Malapanis v. Shirazi, 21 Mass. App. Ct. 378, 382-383 (1986). Nor does it matter whether O’Malley realized he would not be able to recover in full from Tamimi. See Taygeta Corp. v. Varian Associates, Inc., 436 Mass. 217, 229 (2002) (“The plaintiff need not know the full extent of its injury for a cause of action to accrue and for the statute of limitations to begin running.”). Once a person knows or should have known that she has been harmed by some act or omission of someone else, that knowledge “creates a duty of inquiry and starts the running of the statute of limitations,” even if the injured person has not yet realized that she may have a legal claim against the other party. Passatempo, 461 Mass. at 294, quoting Bowen v. Eli Lilly & Co., 408 Mass. 204, 210 (1990).
O’Malley’s assertion that the statute of limitations was tolled because Defendants fraudulently concealed the existence of claims against them is unavailing. By November 2011 O’Malley already knew, as explained above, that Burr had lied when he asserted that Tamimi had a good faith basis for withholding full payment. Although O’Malley alleges that Burr failed to disclose that Eckert Seamans had paid itself out of Tamimi’s funds and then transferred the balance from its client account to the account of a trust controlled by Tamimi, that would not toll the running of the limitations period. “Absent a fiduciary or other special duty … active fraud is ordinarily required to prove fraudulent concealment;” mere failure to disclose
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information will not toll the running of a statute of limitations. Salvas v. Wal–Mart Stores, Inc., 452 Mass. 337, 375–376 (2008) (employer’s withholding of information about payroll discrepancies did not toll statute of limitations on claim for unpaid wages). Since Defendants did not represent O’Malley, they had no duty to disclose to him facts that their client chose not to share. Here, O’Malley knew that he had not been paid in full and that Burr had lied about the reasons why. That O’Malley did not learn exactly what happened to all the money he had procured until later on did not toll the statute of limitations.
Though O’Malley alleges that Eckert Seamans could and should have paid O’Malley before paying itself, and that he did not learn until December 2014 that Eckert Seamans had paid itself roughly $ 220,000 from Tamimi’s funds rather than paying that money over to O’Malley, that has little relevance to the pending claims. O’Malley alleges no facts plausibly suggesting that Defendants owed him a fiduciary duty or had any other obligation to ensure that Tamimi paid O’Malley in full. Defendants did not represent O’Malley. The mere facts that Defendants were holding Tamimi’s funds and that they knew Tamimi owed money to O’Malley did not make them an escrow agent. O’Malley does not allege that the funds were governed by any escrow agreement. And during oral argument O’Malley conceded that Defendants were not his lawyers and that there was never any escrow agreement governing disposition of the funds obtained through O’Malley’s efforts and held in Eckert Seamans’ client account for Tamimi.
2.2. Equitable Tolling to Avoid Expense. At oral argument, Mr. O’Malley asked that his delay in filing this suit be excused on the ground that it made little sense for O’Malley to incur great expense to sue Defendants so long as he expected to be able to recover in full from Tamimi. Under Massachusetts law, however, the Court may not disregard the statutes of limitations on this ground.
O’Malley is arguing in substance that the running of the statutory limitations period should be deemed to have been equitable tolled, or stopped, during the time that O’Malley was suing Tamimi, defending his judgment on appeal, and trying to collect on that judgment. The Court is not convinced.
Under Massachusetts law, the doctrine of equitable tolling is used “sparingly” and applies only in limited circumstances. Shafnacker v. Raymond James Assocs.,
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Inc., 425 Mass. 724, 728 (1997). O’Malley has the burden of establishing that the limitations period was equitably tolled under the circumstances of this case. See Albrecht v. Clifford, 436 Mass. 706, 715-716 (2002). “[A]llegations relied on to toll the statute of limitations … need not be pleaded in a complaint.” Cannonball Fund, Ltd. v. Dutchess Capital Management, LLC, 84 Mass. App. Ct. 75, 90 (2013). But since O’Malley’s complaints in this case and the prior action show “that the statute of limitations has run prior to the date the action was commenced,” this action must be dismissed under Rule 12(b)(6) in the absence of some showing that the limitations period was equitably tolled for some reason. See generally Babco Industries, Inc. v. New England Merchants Nat. Bank, 6 Mass. App. Ct. 929, 929-930 (1978).
The fact that O’Malley filed a timely claim against Tamimi, and by doing so was “seeking to gain relief in a more efficient manner” than by adding claims against the Eckert Seamans defendants, “is not sufficient to toll the statute of limitations.” See Shafnacker, 425 Mass. at 728 (submission of claims to arbitration does not equitably toll statutes of limitations on those claims during period of arbitration). What Mr. O’Malley should have done “is to file a complaint” against Defendants “within the time allowed by the statute of limitations and have that action stayed pending the result” of the separate claims against Mr. Tamimi. Id. at 729. Having failed to file a timely claim against Defendants, however, this action must dismissed because it is barred by the statutes of limitations. Id.
ORDER
Defendants’ motion to dismiss is ALLOWED because all claims are barred by the applicable statute of limitations. Final judgment shall enter dismissing all claims with prejudice.
March 22, 2018
___________________________
Kenneth W. Salinger
Justice of the Superior Court