Meunier, et al. v. Market Strategies, Inc. (Lawyers Weekly No. 09-067-17)
COMMONWEALTH OF MASSACHUSETTS SUFFOLK, ss. SUPERIOR COURT Civ. No. 2016-1546-BLS2 JOHN J. MEUNIER, CHRISTY M. WHITE, and JOHN J. MEUNIER 2012 IRREVOCABLE TRUST Plaintiffs vs. MARKET STRATEGIES, INC., Defendant Consolidated with: Civ. No. 2016-3592-BLS2 MARKET STRATEGIES INC., Plaintiff, COGENT RESEARCH HOLDINGS, LLC Defendant MEMORANDUM OF DECISION AND ORDER ON MARKET STRATEGIES, INC.’S MOTION TO DISMISS These consolidated cases arise from the sale of Cogent Research, LLC (Cogent) to Market Strategies, Inc., (MSI). To facilitate the sale, the individual owners of Cogent – John Meunier, Christy White and the John Meunier 2012 Irrevocable Trust – transferred their equity interest in Cogent to a holding company, Cogent Research Holdings, LLC (CRH) which then transferred its equity interest in Cogent to MSI. In return, MSI agreed to make an initial payment of $ 8 million, and additional payments (described as Delayed and Contingent Payments) three years later totaling $ 5.1 million. The terms of the sale were memorialized in an Equity Unit Purchase Agreement (EUPA), a Subordination Agreement, and a Senior Credit Agreement, all dated May 2, 2013. MSI made the initial payment but has failed to pay any portion of the Delayed or Contingent Payments (together, the Remaining Payments), which became due on April 30, 2016. The case is now before the Court on MSI’s Motion to Dismiss the Counterclaim asserted against it by CRH in one of the two consolidated actions, Civ. No. 16-03592. This Court concludes that the Motion must be DENIED. In support of the Motion, MSI relies on certain terms of the Subordination Agreement which subordinate the Remaining Payments to a more senior debt that MSI has with a separate lender, the Private Bank (the Bank). Section 2.3 of that Agreement states that MSI will not make and CRH will not accept any of the Remaining Payments if doing so would cause MSI to default on its debt to the Bank. Section 2.4 prevents CRH from taking any “Enforcement Action” (a defined term in the Agreement) in an effort to collect payment from MSI until MSI’s debt to the Bank is paid in full. MSI argues that because the Bank has not been paid in full and because any payment to CRH would place it in default with the Bank, the unambiguous terms of the Subordination Agreement prevent CRH from seeking to collect the Remaining Payments, thus requiring dismissal of its Counterclaim. A fair reading of the Counterclaim, however, reveals that more is involved here than the straightforward application of certain contractual provisions. The Counterclaim alleges among other things that MSI has conspired with the Bank to commit accounting fraud so as […]