AM Properties, LLC v. J&W Summit Ave, LLC (Lawyers Weekly No. 11-024-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.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-1343                                       Appeals Court

AM PROPERTIES, LLC  vs.  J&W SUMMIT AVE, LLC.

 

 

No. 15-P-1343.

Suffolk.     May 17, 2016. – March 8, 2017.

Present:  Cypher, Blake, & Henry, JJ.

Adverse Possession and Prescription.  Real Property, Adverse possession.

Civil action commenced in the Land Court Department on September 27, 2013.

The case was heard by Alexander H. Sands, III, J., on motions for summary judgment.

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Posted by Stephen Sandberg - March 8, 2017 at 5:58 pm

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Ramirez v. Commerce Insurance Company (Lawyers Weekly No. 11-022-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.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-59                                         Appeals Court

WRBASY RAMIREZ[1]  vs.  COMMERCE INSURANCE COMPANY.

No. 16-P-59.

Suffolk.     November 7, 2016. – March 7, 2017.

Present:  Cypher, Massing, & Sacks, JJ.

Motor Vehicle, Insurance.  Insurance, Motor vehicle insurance, Replacement, Construction of policy.  Contract, Insurance, Construction of contract.  Evidence, Replacement cost.

Civil action commenced in the Superior Court Department on February 21, 2014.

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Posted by Stephen Sandberg - March 8, 2017 at 12:07 am

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Ramirez v. Commerce Insurance Company (Lawyers Weekly No. 11-022-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.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-59                                         Appeals Court

WRBASY RAMIREZ[1]  vs.  COMMERCE INSURANCE COMPANY.

No. 16-P-59.

Suffolk.     November 7, 2016. – March 7, 2017.

Present:  Cypher, Massing, & Sacks, JJ.

Motor Vehicle, Insurance.  Insurance, Motor vehicle insurance, Replacement, Construction of policy.  Contract, Insurance, Construction of contract.  Evidence, Replacement cost.

Civil action commenced in the Superior Court Department on February 21, 2014.

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Posted by Stephen Sandberg - March 7, 2017 at 8:31 pm

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The Gillette Company v. Provost, et al. (Lawyers Weekly No. 11-023-17)

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-42                                         Appeals Court

THE GILLETTE COMPANY  vs.  CRAIG PROVOST & others.[1]

No. 16-P-42.

Suffolk.     October 13, 2016. – March 7, 2017.

Present:  Wolohojian, Carhart, & Shin, JJ.

“Anti-SLAPP” Statute.  Privileged Communication.  Practice, Civil, Motion to dismiss, Interlocutory appeal.

Civil action commenced in the Superior Court Department on January 16, 2015.

A special motion to dismiss was heard by Janet L. Sanders, J.

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Posted by Stephen Sandberg - March 7, 2017 at 4:56 pm

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Burns v. Taylor, et al. (Lawyers Weekly No. 12-018-17)

COMMONWEALTH OF MASSACHUSETTS

SUFFOLK, ss.SUPERIOR COURT

CIVILACTION

  1. 2015-00719-BLS1

CHRISTOPHER E. BURNS

HUGH R. TAYLOR and LISA FRANKS

MEMORANDUM OF DECISION AND ORDER ON

DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

In early 2014, plaintiff Christopher Burns and defendants Hugh Taylorand Lisa Franks formed an investment advisory firm which they called Taylor Wealth Management Partners.  Although they planned on entering into a formal written agreement that would define the terms of their business arrangement, they began their joint enterprise before they had agreed upon all of the terms and memorialized their agreement in a written contract.  By December 2014, terms of their agreement were still being debated, theparties’ relationship hadsoured,and Taylor, with Franks’ consent and assistance, told Burns that he must leave the firm.   Aggrieved by the termination, Burns filedthis action against Taylor and Franks, alleging that their actions constituted a breach of contract and a breach of fiduciary duty.  The matter is now before the court on the defendants’ motion for summary judgment.  For the reasons that follow, the motion is ALLOWED,in part,and DENIED,in part.

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Posted by Stephen Sandberg - March 7, 2017 at 9:47 am

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Balles v. Babcock Power Inc. (Lawyers Weekly No. 10-039-17)

Posted by Stephen Sandberg - March 7, 2017 at 6:12 am

Categories: News   Tags: , , , , , ,

C.E.R. v. P.C., et al. (Lawyers Weekly No. 11-021-17)

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-525                                        Appeals Court

C.E.R.  vs.  P.C. & another.[1]

No. 16-P-525.

Essex.     December 1, 2016. – March 6, 2017.

Present:  Milkey, Massing, & Sacks, JJ.

Civil Harassment.  Harassment Prevention.  Protective Order. Words, “Intimidation.”

Complaint for protection from harassment filed in the Ipswich Division of the District Court Department on December 28, 2015.

A hearing to extend harassment prevention orders was had before Peter F. Doyle, J.

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Posted by Stephen Sandberg - March 7, 2017 at 2:39 am

Categories: News   Tags: , , , ,

Mullins v. Corcoran, et al. (Lawyers Weekly No. 12-019-17)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
NO. 2014-02302 BLS1
JOSEPH R. MULLINS
vs.
JOSEPH E. CORCORAN and GARY A. JENNISON
MEMORANDUM OF DECISION AND ORDER ON
THE PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
The court borrows the following introduction from one of the many other summary judgment decisions that it has written in connection with the numerous litigations that these parties have filed against one another. “Beginning in the early 1970s, the plaintiff Joseph R. Mullins and the defendants Joseph E. Corcoran and Gary A. Jennison, through many different manner of business entities, operated a very successful real estate business. In 1987, they entered into an agreement to separate, to the extent possible, Mullins interests from those of Corcoran and Jennison (the 1987 Agreement). However, many of their ventures were apparently not susceptible to separation and continued in joint ownership. This case involves entities of that nature. Since 2001, from this court’s perspective, it appears that the principal business of these individuals and their related businesses has been to sue one another. This is, at least, the fifth such case.” The instant case is now before the court on Mullins’ motion for summary judgment.
In another summary judgment decision the court provided the following description of the parties’ prior business arrangements and their 1987 Agreement, which is also equally applicable to this dispute:
“From the early 1970s until 1987, Corcoran, Mullins, and Jennison operated a successful
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real estate business that involved the development and management of multi-unit affordable or mixed-income housing, as well as other real estate projects. For the most part, each project was owned by a limited partnership of which Corcoran, Mullins, Jennison, Inc. (CMJ) was the general partner. Other related entities (collectively with CMJ, the Companies) contracted to provide services to the projects, including construction, management and other related services. 1 Corcoran, Mullins, and Jennison were the sole shareholders of the Companies, owning, respectiviely, 60%, 20% and 20% of the shares of each.
“In 1987, after Mullins expressed his desire to leave the business, the three of them, with the assistance of counsel, negotiated the separation and going-forward Agreement.2 Pursuant to its terms, ownership of some of the projects was transferred to Corcoran and Jennison (or entities jointly owned by them) and others to Mullins (or entities owned by him), but ownership of many projects remained as it had been, i.e., jointly owned by all three through limited partnerships of which CMJ was the general partner. These projects would continue to be serviced by the related Companies, also jointly owned by Corcoran, Jennison and Mullins, in the manner described above.
“The 1987 Agreement begins with three whereas clauses, the last two of which provide:
WHEREAS the parties wish to preserve and continue the business of Corcoran, Mullins, Jennison, Inc. (“CMJ”) with respect to those endeavors listed on the schedule attached hereto . . . and to preserve and continue the businesses of CMJ Management Company, Inc. (“CMJ Management”), CMJ Builders, Inc. (“CMJ Builders”), CMJ Construction Corp. (“CMJ Construction”), CMJ Equipment Corp. (“CMJ Equipment”), CMJ Peninsula Construction, Inc. (“Peninsula”) and Bay Pines Development Company, Inc. (“Bay Pines”) (together with CMJ, the “Companies”) with respect to those endeavors listed on the schedules attached hereto . . . and
1 The related entities included: CMJ Management Company, Inc., CMJ Builders, Inc., CMJ Construction Corp., CMJ Equipment Corp., CMJ Peninsula Construction, Inc., and Bay Pines Development Company, Inc.
2 The agreement was simply titled “Agreement.”
3
WHEREAS the parties wish to conduct other aspects of their business separately hereafter, and accordingly wish to withdraw from joint sponsorship, management and/or ownership [of] the projects listed on the attached schedules respectively entitled “Cor-Jen Projects,” “C&J Entities” and “JRM Projects.”
“Consistent with the latter Whereas clause, Sections 1(a)-(f) of the Agreement describe the mechanism by which ownership interests in the projects that will no longer be jointly owned will be transferred, service contracts for those projects that will be assigned to Corcoran and Jennison owned entities (the C&J Entities and Cor-Jen ) or Mullins owned entities (JRM), as the case may be, and the liabilities associated with each project born by the parties (or the corresponding entities) that now own the projects. . . .
“Consistent with the first Whereas clause quoted above, Section 1(g) provides that: “The individuals will retain their present stock ownership interests in the Companies. The business operations and conduct of the Companies will henceforth be governed by the provisions of this Agreement.” Section 3 and 4 then proceed to describe how, going forward, the CMJ Projects, i.e., the projects as to which ownership will be preserved among the three parties as it existed at the time of the 1987 Agreement, will operate and the Companies will be managed.
“More specifically, Section 3 states that CMJ Management will continue to manage the CMJ Projects and CMJ Construction, CMJ Builders, and Peninsula will continue to be the contractors to them. Furthermore, the “terms and conditions” of these “arrangements shall be those presently in effect, and no change in such terms shall be effected without consent of all the parties hereto.” This section goes on to state that “[a]ll business dealings of and among any one or more of” the parties to the agreement, the Companies (other than CMJ Equipment), Cor-Jen, the C&J Entities, and JRM “shall be conducted in scrupulous good faith according to good
4
established business practices . . . . It is the intent of this Agreement that each of the parties hereto be entitled to enjoy all the economic benefits of the Companies pro rata, in accordance with their present stock ownership, and in accordance with the provisions of Section 4(3) [sic] and 4(4) [sic].” 3 (Emphasis in original). Lastly, Section 3 prohibits CMJ, CMJ Builders, CMJ Construction, or Bay Pines from entering into any new ventures “without the unanimous consent of the parties hereto.”
“Section 4(a), echoing Section 1(g), provides that: “Stock ownership of the individuals in the Companies shall be maintained in the current proportions and no issue or redemption of stock or other capital event shall be effected in any of the Companies without the unanimous consent of all of the parties hereto.” Subsection (b) further provides that: “None of the Companies will . . . guaranty the obligations of any one or more of the parties hereto, JRM, Cor-Jen or any other entity.”
This litigation involves one of the CMJ Projects—the Cobble Hill Apartments.
FACTUAL BACKGROUND OF THIS LITIGATION
The following summary of relevant facts, which are material to the pending motion for summary judgment, are taken from the parties’ 142 page, 350 paragraph Statement of Undisputed Material Facts, the vast majority of which are actually disputed by one side or the other. The court has attempted to distill from this dense pleading the facts necessary to consider the motion, viewed in the light most favorable to Corcoran and Jennison, the non-moving parties.
3 The Agreement does not contain a Section 4(3) or 4(4) but it is evident that the reference should be read as Sections 4(c) and 4(d), which deal with the calculation and distribution of profits from the Companies among Corcoran, Jennison, and Mullins.
5
The Cobble Hill Apartments are located in Sommerville. This property was owned by a Massachusetts limited partnership, Cobble Hill Apartments Company, LLP (CHAC), and CMJ was the general partner of CHAC. When the 1987 Agreement was executed, this property had a 224 unit apartment building on its east side and a convenience store and a few other small retail businesses on its west side. In 2003, Corcoran, Jennison and Mullins agreed to form Cobble Hill Center LLC (CH Center), a limited liability company the sole member of which is Cobble Hill Trust; the beneficiaries of that trust, through another intermediary entity, are Corcoran, Jennison, and Mullins, in their traditional 60/20/20 percent arrangement. CH Center is managed by CMJ. Simultaneous with the formation of CH Center, CHAC created a separate parcel encompassing the west side of the property and leased it to CH Center for 99 years with an option to purchase for a nominal payment. The purpose of this transaction was to facilitate the development of this west side parcel with a new building.
Starting some time thereafter steps were undertaken to develop the leased parcel and modest costs were incurred to that end. Beginning in 2009, Corcoran’s son, Joseph J. Corcoran (Joseph) undertook the task of leading this project and development activities accelerated. Mullins was generally aware of the development work and the direction that the project was taking. While Joseph was apparently reporting to his father and Jennison on his development efforts, Mullins was kept generally informed of this work and the costs being incurred on a periodic basis. Mullins did not receive nor did he ask to receive all of the detailed reports that Joseph or others involved in the development prepared, nor was he denied any information that he requested. By the first half of 2012, Mullins was aware of the project plan, which was to be a new apartment building with 160 units and ground floor retail; the development budget was $ 36
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to $ 38 million. Mullins was generally supportive of the approach to developing the west side parcel.
On July 17, 2012, Mullins and his son attended a CMJ quarterly meeting at which the Sommerville project was discussed in some detail. Although there is some evidence that Mullins had some internal concerns about the project which he shared with his son, he did not express them at the meeting. To the contrary, he suggested to Joseph that a local attorney be hired to facilitate the permitting process and move the project along.
By February, 2013, Mullins was aware that the project was going to require a $ 1 million to $ 1.5 million capital call, and expressed no opposition to the project moving forward. In the summer of 2013, Mullins was told that it was anticipated that construction would begin in 2014, and again he expressed no objection.
In a letter dated September 20, 2013, Mullins first stated that he had not consented to the Coble Hill Center development project and that certain development expenses should not be incurred without his consent. He did, however, consent shortly thereafter to a refinancing of the Cobble Hill Apartments, a necessary part of the project because a substantial part of the proceeds of the refinancing were to be applied to development expenses. As part of that refinancing, Cobble Hill Center exercised its option to purchase the west side parcel.
In December 2013, Joseph sent Corcoran, Jennison, and Mullins a comprehensive package of materials, approximately 250 pages in length, which included, among other things, a project timeline, financial analysis, cost analysis and project drawings (the December package). These materials disclosed, apparently for the first time, that Joseph was to receive a 10% ownership interest in Cobble Hill Center, deducted ratably from Corcoran’s, Jennison’s, and Mullins’ equity, with the result that Mullins’ interest would be reduced to 18%. On January 10,
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2014, Mullins responded to his receipt of the December package, by asking for additional information. On February 28, 2014, Mullins sent Corcoran and Jennison a seven page letter explaining why he would not consent to the project moving forward. In March, Mullins wrote another letter in which he suggested alternative transactions for the west side parcel. This was the first time that he expressed to Corcoran or Joseph his preference for a different development approach. In March and May, 2014, it was reported (although it may already have been understood) that CMJ would have to guarantee the proposed construction loan needed to finance development. Mullins wrote to Corcoran and Jennings reminding them that the 1987 Agreement prohibited CMJ from guaranteeing loans of other entitiies (without the consent of all three parties).
Mullins filed this law suit in July, 2014. This appears to have had the effect of stopping all development activity. Subsequent efforts to resolve the impasse by selling the property, agreeing to an alternative transaction, or buying one another’s interest in CH Center have all failed.
THE CLAIMS
In his complaint, Mullins asserts two claims. Count I alleges a breach of contract, i.e., the 1987 Agreement. He asserts that the 1987 Agreement was breached by (i) development efforts that were undertaken on Cobble Hill Center without his consent; (ii) spending CMJ funds on this effort without his consent; (iii) refusing to stop the Project (presumably before this action was filed); and (iv) refusing to meet with Mullins. Count II alleges a breach of fiduciary duty. It is based on essentially the same contentions as the breach of contract claim.
Corcoran and Jennings each separately answered Mullin’s complaint and asserted counterclaims against him. Both of their counterclaims are also pleaded in two counts and also
8
allege claims of breach of contract and breach of fiduciary duty. These counterclaims, in effect, assert that Mullins’ conduct breached the 1987 Agreement because his business dealings with Corcoran and Jennings, as described above, have not been “conducted in scrupulous good faith according to good established business practices . . . . [and as a result inconsistent with] the intent of this Agreement that each of the parties hereto be entitled to enjoy all the economic benefits of the Companies pro rata.” The claims of breach of fiduciary duty are based on essentially the same alleged conduct.
In his motion for summary judgment, Mullins requests that judgment enter in his favor on his claims and dismissing the counterclaims.
DISCUSSION
The standards to be applied in determining whether summary judgement may enter in favor of a party asserting a claim are well known to the litigants and need not be set out here. The court will address each of acts alleged to establish, as a matter of law, a breach of contract or a breach of fiduciary duty.
The Guaranty of the Construction Loan
Mullins asserts that the guarantee of the construction loan necessary to build the Cobble Hill Center project would violate the provisions of the 1987 Agreement which prohibit one of the CMJ companies from guaranteeing the obligations of another company. The problem with this assertion, which cuts across many of Mullins’ claims of breach of contract, is that no such guaranty was executed. A guaranty of the construction loan was proposed, but the project stopped, no construction financing was finalized, and therefore there was nothing to guaranty. It
9
certainly was not a breach of contract to propose such a guarantee, which clearly could have been provided by CMJ if Corcoran, Jennings, and Mullins had agreed.
Indeed, the summary judgment record contains evidence that many, if not all, of the earlier CMJ development projects required guaranties of some manner during construction. In many instances these were personal guarantees of each of the parties, which would appear to be riskier for the individuals than a guaranty provided by a business entity. In fact, the court will take judicial notice of the fact that most major construction projects of the kind contemplated here cannot be undertaken with non-recourse debt during the construction phase of the project. It is clear that, under the 1987 Agreement, CMJ could not guaranty a CH Center loan without the unanimous agreement of the three parties to the 1987 Agreement. Nonetheless, it is possible that, under certain circumstances, if one party led the other two to believe that a development project was approved so that substantial time and effort was expended to bring it to the point of financing, and then refused to execute any kind of loan guarantee without justification, causing the project to founder, he might have breached that contract provision that requires all three parties to conduct the business of the companies that they own jointly “in scrupulous good faith according to good established business practices.”
For present purposes it is enough to note, that no guaranty was provided and therefore this provision of the 1987 Agreement was not breached.
The Ownership Interest of the Parties in CH Center
The court has no difficulty finding that although Cobble Hill Center was not a CMJ project identified in the schedule to the 1987 Agreement, it was carved out of CHAC, which was such a project, with an express understanding by all of Corcoran, Jennings, and Mullins that the opportunity to develop the west side of the property was another CMJ project, subject to the
10
applicable provisions of the 1987 Agreement. Accordingly, Mullins 20% interest in that project could not be reduced to 18% without his express agreement. There is nothing in the summary judgment record that establishes a business practice that the person who leads a development project will always receive a 10% equity interest in that project such that Mullins could be deemed to have agreed to give 2% of his interest to Corcorcan’s son.
However, suggesting that Mullins give Joseph his alloquat share of a 10% interest in the project is not a breach of contract, and, once again, Joseph was never granted that interest. There is no indication in the summary judgment record that this project could not have moved forward if that part of the project development plan was eliminated, because Mullins would have agreed to the rest of the proposal. A request that Mullins transfer some of his equity to Joseph is not a breach of contract. Mullins was entitled to reject that part of the development proposal, as he did.
The Obligation to Act in Scrupulous Good Faith
With respect to this somewhat amorphous provision of the 1987 Agreement, it is sufficient to say that many disputed questions of fact exist regarding whether one or all of the parties acted in scrupulous good faith toward the others. For example, there are questions of fact as to whether Corcoran and Jennings plowed ahead with the project knowing that Mullins harbored reservations about the proposed plan, incurring expenses that Mullins had not agreed to fund; and also questions of fact concerning whether Mullins consciously led Corcoran and Jennings to believe that he was on board with the development plan while harboring an undisclosed intent to refuse to provide his consent at the last moment in order to achieve some advantage to which he would not otherwise be entitled, or simply to inflict loss or frustration as
11
part of the parties’ decade long feud. These disputed questions of fact cannot be resolved by summary judgment.
Unconsented to New Ventures
The 1987 Agreement does prohibit CMJ from “enter[ing] into any new ventures without the unanimous consent of the parties.” Here, there is at the very least a factual dispute regarding Mullins’ consent to move forward with the development of the west side of the Cobble Hill Apartment property. Clearly, Mullins participated in the formation of a new entity in 2003 for the purpose of developing this land with a new building and the creation of a separate west side parcel to enable it. He also participated in a number of meetings in which the status of the project and the capital call necessary to move it forward was discussed. He made suggestions concerning how to accomplish the development. Unquestionably, disputed issues of fact exist concerning his consent to the development project—when it began and when it ended.
Whether expenses were incurred after February, 2014, when Mullins expressly stated that he did not consent to the project, that might constitute damages to CH Center4, also involves disputed questions of fact. It may be that such expenses that were incurred were necessary to preserve the economic benefit of the several years of development activity that had gone on up to that date. Moreover, it is possible that a finder of fact could conclude that Mullins’ express reasons for withholding his consent to the development in February, 2014 were prevarication and not genuine, thereby constituting a breach of the contractual obligation requiring that Mullins conduct himself in scrupulous good faith according to good established business practices. It may well be that Mullins reasons for withholding consent were held in good faith and first expressed in February, 2014 because that is when he first had sufficient information to perform a
4 It might be that such damages would be damages to CH Center and therefore have to be asserted in a derivative claim.
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thorough review of the proposal. However, on the record before it, the court cannot make that factual finding as a matter of law.
Providing Management Reports
While Mullins may not have received all of the memoranda and documents generated as part of the project, as noted above, he (or his staff) appears to have been periodically informed of all material issues in the development path. Undoubtedly, Mullins and his staff were aware the a project of this scope would generate a great deal more paper than Mullins was receiving; however, the summary judgment record does not contain any evidence that Mullins requested additional information until January, 2014, after he received the comprehensive project report. The court cannot say as a matter of law that, as it relates to the Cobble Hill Center project, Corcoran and Jennings breached an obligation under the 1987 Agreement to provide him with reports.5
Damages
As questions of fact exist with respect to whether there has been a breach of contract, there are clearly questions of fact concerning whether any breach has caused Mullins (or CH Center) damages.
Breach of Fiduciary Duty
Unquestionably, Corcoran, Jennison, and Mullins, as owners of closely held businesses owed one another fiduciary duties of utmost good faith and fair dealing. In this case, as well as in the other litigations in which these parties have sued one another, the obvious enmity between
5 The 1987 Agreement states that “Mullins shall be furnished forthwith with copies of all reporst prepared for management of the Companies, . . .” “Reports” is further defined to include financial statements, projections, feasibility reports and clearly includes important reports necessary to follow significant developments. It is not clear that in this context “reports” means every informational memorandum generated with respect to a particular development project.
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them makes this fiduciary obligation difficult to fulfill. The court’s review of the record suggests that both sides have been obstinate in refusing any consensual resolution of this dispute, other than the one he proposes. Under the circumstances, the court cannot say as a matter of law that any party, or all of the parties, have breached this obligation. Summary judgment cannot enter on either party’s breach of fiduciary duty claim.
Corcoran’s and Jennison’s Breach of Contract Claim
For the reasons explained above, the court also cannot rule as a matter of law, that Corcoran’s and Jennison’s breach of contract claim fails.
ORDER
For the foregoing reasons, Mullins’ motion for summary judgment is DENIED. The clerk shall schedule this case for a final pre-trial conference. A trial date will be scheduled at that conference.
____________________
Mitchell H. Kaplan
Justice of the Superior Court
Dated: January 31, 2017.

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Posted by Stephen Sandberg - March 6, 2017 at 11:05 pm

Categories: News   Tags: , , , ,

Roger v. Centerline Holding Company, et al. (Lawyers Weekly No. 12-020-17)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
NO. 2015-01120 BLS1
STEPHEN D. ROGER
vs.
CENTERLINE HOLDING COMPANY
and
CENTERLINE GP HOLDINGS LLC, CENTERLINE GP DISPOSTIONS LLC, CCL ACQUISTIONS II LLC, and CCL DISPOSITIONS II LLC, Nominal Defendants
MEMORANDUM OF DECISION AND ORDER ON
THE PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
In this action, the plaintiff, Stephen D. Roger, seeks a declaratory judgment concerning his rights under two limited liability company agreements (the Agreement[s]) governing two Delaware limited liability companies: nominal defendants Centerline GP Holdings LLC and Centerline GP Dispositions LLC ( respectively, GP Holdings and GP Dispositions, or, collectively, the GP companies). The GP companies each have two members: Roger and defendant Centerline Holding Company (CHC); Roger and CHC each hold a 50% interest in each of the companies.1 As relevant to this litigation, the Agreements are identical. Roger seeks a declaration that, under the Agreements, (i) management decisions require the vote of both members and (ii) he has a right to access to all of the GP companies’ records necessary to exercise his management rights.
1It is not apparent why CCL Acquisitions II LLC and CCL Dispositions II LLC are parties to this action and no relief is ordered with respect to them.
2
PROCEDURAL ISSUES AND RELATED LITIGATION
This case is before the court on Roger’s motion for summary judgment. CHC has filed an opposition to that motion and also a motion under Mass.R.Civ.P. 56(f) in which it asserts that: “this case remains in its early stages, and much work remains to be done before summary adjudication is remotely appropriate . . . the parties have not yet deposed any of the more than 12 witnesses that they have collectively identified as having knowledge material to the dispute. . . .”
The court disagrees.
First, it may be noted that this case was filed on April 16, 2015; on August 15, 2016, the court entered a scheduling order (jointly proposed by the parties) which called for fact discovery to be completed by March 31, 2017; to date, neither party has taken any depositions; and, notably, CHC elected not to take any discovery in the three months and one half months that passed between the date the summary judgment motion was served on it and the date of the hearing on that motion. The Rule 56(f) motion might have been more convincing if it had been supported by discovery demonstrating that material, disputed facts existed.
The court finds that, as the case has developed, the issues presented by the Amended Complaint (the Complaint) can be resolved based upon a few clearly undisputed facts and a review of the Agreements. The controlling question raised by the Complaint is whether each of the two members of the GP companies can independently manage the business of the companies or whether management decisions require a majority vote of the members, which, under the present membership, requires the vote of both remaining members. While factual issues may exist regarding whether, in the past, CHC caused the GP companies to act without Roger’s
3
consent, Roger has explicitly stated that he does not seek damages as a result of any prior unilateral actions, nor is he asking that any prior act be rescinded or undone. The relief that Roger requests is entirely prospective. A resolution of any factual dispute concerning historic conduct is not material to any remaining material issues in this litigation.
The existence of a present dispute, i.e., an actual controversy, concerning the meaning of the Agreements is clearly established by the parties’ pleadings. See Entergy Nuclear Generation Co. v. Dep’t of Envtl, Protection, 459 Mass. 319, 325 (2011). Roger asserts “that all actions taken by the Members require the consent of a majority of the Members.” CHC contends that: “Actions that may be taken by ‘each of the Members’ may still be taken by a member individually. Thus, to the extent that CHC has caused [the GP companies] to take actions in the ordinary course of their business, it has not violated any right of Roger.” (emphasis in CHC’s pleading).
The court notes that a related case between the same parties is pending in the Delaware Court of Chancery: Centerline Holding Co. v. Roger, No. 12015-CB (the Delaware action). CHC filed the Delaware action on February 18, 2016. In it, CHC alleges that it (or certain employees of an affiliate of CHC) properly exercised rights granted them under the Agreements to purchase Roger’s membership interests in the GP companies by notices delivered to him on December 9, 2015. Although Roger disputed the valuation of his interests set out in the notice, the Agreements require the parties to arbitrate valuation, if they disagree on the number. Among other relief, CHC asked the Court of Chancery to declare that Roger no longer owns membership interests in the GP companies and to compel Roger to arbitrate the value (i.e., purchase price) of these interests. In his answer to CHC’s complaint Roger asserted that CHC did not have right to call his interests and, in any event, the notice was defective. Roger moved, in Delaware, to
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dismiss or stay the Delaware action, which was filed more than a year after the Massachusetts case. The Court of Chancery denied the motion, explaining that the issue presented in the Delaware action—whether CHC had acquired Roger’s membership interests—was not raised by the Complaint in the Massachusetts case and did not have to be raised as a compulsory counterclaim in that case. It is this court’s understanding that although the Delaware action has been pending for some time, CHC has apparently only recently filed a motion for judgment on the pleadings, and CHC’s counsel informed the court at the hearing on Roger’s motion for summary judgment that the motion for judgment on the pleadings is scheduled to be heard in the Court of Chancery on February 14, 2017.
While this court could decide the question of whether CHC has properly exercised a right to purchase Roger’s membership interests, as the parties have addressed this issue in their summary judgment pleadings and it is certainly implicated by the pending motion, this court notes, as did the Chancellor in the Delaware action, that the Massachusetts complaint was not amended to address the purchase notice delivered to Roger after his action was commenced. This court will, therefore, defer to the Court of Chancery, which is scheduled to decide this issue in only two weeks.
At oral argument on the summary judgment motion, this court asked whether any ruling it might enter regarding Roger’s rights as a member of the GP companies would be academic, if the Court of Chancery held that his interests had been acquired by CHC. His counsel responded that the issue of who controlled the GP companies might affect the value of Roger’s interests. The court then asked CHC’s counsel whether CHC planned to argue in an arbitration that Roger’s alleged limited ability to participate in the management of the GP companies reduced
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the value of his interests, i.e., that some manner of discount for lack of control should be applied. Counsel asked for time to consult with his client on this question and report back to the court.
CHC did, thereafter, file a report with the court, but the report did not answer the question raised at oral argument. Rather, it went on for multiple pages explaining that the GP companies were holding companies. And, even though the GP companies held majority interests, directly or indirectly, in the downstream operating companies, the operating agreements of these subsidiary companies deprived the GP companies of the ability to control management of the operating companies. The degree of management and control that the GP companies can exert over any downstream affiliates is manifestly not an issue before this court. Rather, the question is whether, as a member of the GP companies, Roger has or had a right to participate in management of the GP companies equivalent to that of CHC and whether his consent is necessary for any management decision. As CHC did not answer the question of whether it would assert its interpretation of the Agreements in an arbitration concerning the value of Roger’s membership interests, this court finds that the resolution of the dispute concerning each members right to participate in the management of the GP companies is necessary, even if the Court of Chancery finds that CHC has properly exercised its rights to acquire Roger’s interests.
FACTUAL BACKGROUND
The following undisputed facts are drawn from the summary judgment record.
Roger was an executive officer of Centerline Capital Group, Inc. (CCG), which was an indirect subsidiary of CHC, from 2003 until December 11, 2013. CHC, through its subsidiaries, developed affordable housing projects that provided tax benefits to institutional investors. The
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affordable housing projects were owned by lower tier local partnerships. CHC and its affiliated companies were referred to as the Centerline Group.
GP Holdings was formed in 2003 and GP Dispositions in 2005, in each case to hold, directly or indirectly, general partner interests in local affordable housing projects that CHC or its affiliates had acquired when the underlying project’s general partner had defaulted on its obligations. The original members of the GP companies were employees of the Centerline Group. The Agreement governing GP Holdings and GP Dispositions was amended and restated several times, and, by the end of 2008, each company had five members, none of which was Roger. By May 1, 2011, several members had withdrawn, Roger had become a member, and Roger and an individual named Robert Levy, were the sole remaining members, each owning 50% of the membership interests.
In November, 2013, a private investor, who the parties refer to as the “Hunt Companies,” acquired the Centerline Group (which included CHC) and, as part of that acquisition, Robert Levy assigned his membership interests in the GP companies to CHC. At that point, the two 50% members of the GP Companies were Roger and CHC. As noted above, Roger’s employment with a Centerline Group company terminated on December 11, 2013. On December 9, 2015, Roger received notice that his membership interests were being called. Also as explained above, the question of whether that notice caused Roger no longer to be a member of the GP companies will soon be addressed in the Delaware action.
The current versions of the Agreements were last amended and restated as of December 31, 2008. The provisions necessary to address the issues raised in this litigation are found in Article III: Rights, Duties and Liabilities of the Members. The relevant sections are as follows:
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3.1 (a) Each of the Members shall have the right to and are hereby vested with the full, exclusive and complete right, power and discretion to operate, manage and control the affairs of the Company and to make all decisions affecting the Company affairs.
3.1 (b) The Members shall have full, exclusive and complete discretion to manage and control the business and affairs of the Company, to make all decisions affecting the business and affairs of the Company and to take all such actions as they deem necessary or appropriate to accomplish the purpose of the Company as set forth herein. The Members shall be the sole persons with the power to bind the Company, except and to the extent that such power is expressly delegated to any other person by the Members. No such delegation shall cause and Member to cease to be a Member of the Company. There shall not be a “manager” (within the meaning of the Delaware Act) of the Company.
3.1 (c) The Members shall have the right to designate one or more persons as officers of the Company to carry out any powers of the Members to the fullest extent permitted by law. Until removed from office by he action of the Members, each of the Members shall be officers of the Company holding the office of Executive Vice President. Any action of the foregoing officers, acting singly, shall bind the Company.
3.1 (f) Except as provided in Section 5.2 and Section 6.62, all actions to be taken by, or which require the approval or consent of, the Members hereunder shall be taken only with the consent of the Members holding a majority of the Membership Interests held by the members obtained at a meeting held in person or by telephone upon two days written notice to all of the members. The Members may act without a meeting if the action taken is approved in advance in writing by a majority of the Members; provided however, that if any Member shall deliver to the Company in writing a request for written notice of any actions to be taken by the Members without a meeting, then any such action shall not constitute an approved action of the Company unless each member has obtained two days prior written notice of the purpose request for consent to such action. Notice of the foregoing may be provided by U.S. mail, overnight delivery, hand delivery, email or facsimile.
The Agreements have traditional merger clauses establishing that the Agreements are integrated and supersede any prior understandings of the parties.
2Section 5.2 provides that all members must consent to dissolution. Section 6.6 is a savings clause if any provision of the Agreement is found invalid. Neither addresses any issue relevant to this case.
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DISCUSSION
Under Delaware law, “[l]imited liability company agreements are contracts and must be interpreted as such.” RED Capital Inv. L.P. v. RED Parent LLC, 2016 Del. Ch. Lexis 25, at *5 (Del. Ch. Feb. 11, 2016). In consequence, the “[Agreements are] interpreted using standard rules of contract interpretation which require a court to determine from the language of the contract the intent of the parties. Waggoner, 581 A.2d at 1134. In discerning the intent of the parties, the [Agreements] should be read as a whole and, if possible, interpreted to reconcile all of the provisions of the document. Warner Communications Inc. v. Chris-Craft Indus., Inc., Del.Ch., 583 A.2d 962, 967, aff’d, Del.Supr., 567 A.2d 419 (1989).” Kaiser Aluminum Corp. v. Matheson, 681 A.2d 392, 395 (Del. Supr. 1996). Further, “[i]f no ambiguity is present, the Court must give effect to the clear language of the [Agreements]. Johnston v. Tally Ho, Inc., Del.Super., 303 A.2d 677, 679 (1973). A contract is not rendered ambiguous simply because the parties do not agree upon its proper construction. Rather, a contract is ambiguous only when the provisions in controversy are reasonably or fairly susceptible of different interpretations or may have two or more different meanings.” Rhone-Poulenc Basic Chems. Co. v. American Motorists Ins. Co., Del.Supr., 616 A.2d 1192, 1196 (1992).” Id.
In the present case, as it relates to the rights of the Members to manage the GP companies, the Agreements have only one reasonable interpretation.
CHC argues that because Section 3.1 (a) provides that “[e]ach of the Members shall have the right to and are hereby vested with the full, exclusive and complete right, power and discretion to operate, manage and control the affairs of the Company and make all decisions affecting the Company affairs” it is apparent that “each member individually has the right to manage [the GP companies]. Consent of a majority is not required.” (emphasis in CHC brief).
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CHC goes on to assert that “any possible doubt” that the Agreements must be interpreted in this manner “is dispelled by Section 3.1 (c).” It then quotes the following sentences from that Section: “Until removed from office by the action of the Members, each of the Members shall be officers of the Company holding the office of Executive Vice President. Any action of the foregoing officers, acting singly, shall bind the Company.”
CHC’s interpretation is untenable. First, each Member cannot possibly have an exclusive right individually to manage and bind the GP companies. When the Agreements were last restated, the GP companies each had five members, each with a 20% interest in the companies. In Section 3.1 (b), the Agreements expressly state that there will be no “manager.” Five Members cannot possess exclusive rights individually to bind the Companies. Such a provision would be internally inconsistent. And, notably, the very next section of the Agreements provides that: “The Members shall have full, exclusive and complete discretion to manage and control the business and affairs of the Company, to make all decisions affecting the business and affairs of the Company and to take all such actions as they deem necessary or appropriate to accomplish the purpose of the Company as set forth herein.” (Emphasis added.) In other words, these management rights reside exclusively and collectively in the Members. Section 3.1 (f) then explains how the Members will make their management decisions: “all actions to be taken by . . . the Members hereunder shall be taken only with the consent of the Members holding a majority of the Membership Interests held by the members obtained at a meeting held in person or by telephone upon two days written notice to all of the members.” The Section goes on to provide a mechanism for the Members to act without a meeting, as long as there is advance notice of the proposed action and no Member objects.
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CHC’s reliance on Section 3.1 (c) to support its contention that each Member individually can make any management decision by himself is misguided. Section 3.1 (c) is the type of language commonly used to address the right of third parties to rely on the act of a Member to bind the Company, i.e., a third party need not ask for a certificate establishing the Members’ vote before it can rely upon the act of a Member to bind the Company.
While Section 3.1 (a) may be inartfully drafted when it refers to “each” member having an “exclusive” right, in context it is clear that each Member has the right to manage the affairs of the GP companies, subject to the equivalent rights of the other Members to participate in management and the clearly stated directive that: the Members exercise their rights by voting and a vote of the majority of the interests is required for the Members to act. The interpretation proffered by CHC would allow each Member, regardless of the percentage interests in the GP companies that he owned, to independently bind the Company. Two or more Members could take mutually inconsistent actions at the same time. CHC’s proposed interpretation of the Agreements is not a “reasonable” one and not consistent with the other clearly stated sections of Article III.
Roger also seeks a declaration concerning his right to review the GP companies’ records. The court need not address the question of whether CHC permitted him appropriate access to records in the past. On a prospective basis, he is entitled to review all records pertaining to any proposed action that the Members may wish to take so that he can make an informed judgment in voting his interests.
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ORDER
For the foregoing reasons the plaintiff’s motion for summary judgment is ALLOWED as follows: the Court declares that: (i) all decisions affecting the business and affairs of GP Holdings and GP Distributions and all actions necessary or appropriate to accomplish the purpose of these companies requires the consent of the Members holding a majority of the Membership Interests in each company, such consent to be obtained in the manner set out in Section 3.1 (f) of the Agreements; and (ii) Roger shall be provided with access to all records of GP Holdings and GP Decisions, on reasonable notice, necessary for him to exercise his management rights, so long as he is a Member of the companies. Final judgment to enter declaring these rights.
________________________
Mitchell H. Kaplan
Justice of the Superior Court
Dated: February 3, 2017

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Posted by Stephen Sandberg - March 6, 2017 at 7:28 pm

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International Brotherhood of Electrical Workers Local No. 129 Benefit Fund v. Tucci, et al. (and eight companion cases) (Lawyers Weekly No. 10-038-17)

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-12137

International Brotherhood of Electrical Workers LOCAL NO. 129 BENEFIT FUND[1]  vs.  JOSEPH M. TUCCI & others[2] (and eight consolidated cases[3]).

Suffolk.     November 7, 2016. – March 6, 2017.

Present:  Gants, C.J., Botsford, Lenk, Hines, Gaziano, Lowy, & Budd, JJ.

Corporation, Stockholder’s derivative suit, Merger, Sale of assets, Valuation of stock, Board of directors.  Practice, Civil, Class action, Dismissal.

Civil actions commenced in the Superior Court Department on October 15, October 16, October 19, October 20, October 23, October 28, and October 29, 2015.

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Posted by Stephen Sandberg - March 6, 2017 at 3:54 pm

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