Posts tagged "Holdings"

North American Catholic Educational Programming Foundation, Inc., et al. v. Clearwire Spectrum Holdings II LLC, et al. (Lawyers Weekly No. 09-023-18)

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COMMONWEALTH OF MASSACHUSETTS

 

SUFFOLK, ss.                                                                                   SUPERIOR COURT

                                                                                                            CIVIL ACTION

                                                                                                            No. 15-3118 BLS 2

 

 

NORTH AMERICAN CATHOLIC EDUCATIONAL

 PROGRAMMING FOUNDATION, INC. et al.[1]
Plaintiffs

 

vs.

 

CLEARWIRE SPECTRUM HOLDINGS II LLC,

CLEARWIRE LEGACY LLC and SPRINT SPECTRUM, L.P.,
Defendants

 

MEMORANDUM OF DECISION AND ORDER
ON
DEFENDANTS’ MOTION TO STAY ACTION

 

Plaintiffs are non-profit entities that hold licenses from the Federal Communications Commission (FCC) to operate Educational Broadband Services (EBS) channels in certain geographic markets.  In 2006, plaintiffs granted access to a portion of their wireless communication spectrum to defendants Clearwire Spectrum Holdings LLC and Clearwire, Legacy, LLC (Clearwire) pursuant to various written Agreements, including Master Royalty and Use Agreements (MRUAs).  The defendant Sprint Spectrum L.P. (Sprint) subsequently acquired all the stock in Clearwire’s parent, and a dispute arose between Sprint and the plaintiffs as to what services Sprint was obligated to provide plaintiffs’ customers.  Plaintiffs took the position that Clearwire had effectively sublicensed its use of the broadband spectrum to Sprint, and that, pursuant to the Agreements, this required plaintiffs’ consent – consent which they were entitled to withhold unless Sprint agreed to provide broadband access to plaintiff’s customers that was equivalent to what Clearwire itself would have provided had there been no sublicense. read more

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Posted by Massachusetts Legal Resources - March 10, 2018 at 12:35 am

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

ABCD Holdings, LLC v. Hannon, et al. (Lawyers Weekly No. 09-035-17)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
SUCV2016-1840-BLS2
ABCD HOLDINGS, LLC,
Plaintiff
vs.
PATRICK HANNON and SOFIA GAGUA
Defendants
And
J.DERENZO CO., SOFIA GAGUA,
SIMILAR SOILS, INC., IMMANUEL CORP., AGRITECH INC., and L-5 INC.,
Reach and Apply Defendants
MEMORANDUM OF DECISION AND ORDER
ON PLAINTIFF’S MOTION FOR A REAL ESTATE ATTACHMENT
This is an action seeking to collect on a personal guaranty and to recover for other allegedly wrongful conduct following the execution of that document. The guaranty was executed by defendant Patrick Hannon who, pursuant to the terms of the guaranty, was required to pay $ 109,879 plus attorney’s fees and collection costs in the event the borrower defaulted. The borrower did indeed default and plaintiff, the assignee of the original lender’s rights under the guaranty, now seeks to collect on the guaranty and asserts other claims, including a claim under Chapter 93A. This Court (Salinger, J.) has already determined that there is a reasonable likelihood that plaintiff will recover against Hannon on the guaranty. There is also ample
2
evidence that plaintiff will recover an additional $ 45,000 that Hannon had paid on another loan but that had to be disgorged to Hannon’s bankruptcy trustee as a preference. 1
The case is now before the Court on plaintiff’s Motion to Attach property located at 34 Highview Drive in Uxbridge, Massachusetts (the Uxbridge House). Hannon lives there with his girlfriend, Sofia Gagua, named in this case both as a defendant and a reach and apply defendant. Title to the property is in Gagua’s name. According to the Amended Verified Complaint, the Uxbridge House was purchased with funds from Hannon, giving rise to a claim against Gagua under the Uniform Fraudulent Transfer Act, G.L.c.109A §2. After careful review of the documentation and affidavits submitted by the parties — both in connection with this motion and earlier in this litigation — this Court concludes that plaintiff is entitled to an attachment in the amount of $ 258,226.22.2 The Motion is therefore ALLOWED.
This is the third time that plaintiff has requested such an attachment. The first time was shortly after this lawsuit began. This Court (Salinger, J.) denied the request because the allegations that Gagua had used funds fraudulently conveyed to her by Hannon were all made on information and belief. See Memorandum of Decision dated June 24, 2016. The second time was in a related lawsuit, King Root Capital, LLC v. Hannon et al., Civ. No. 2017-02307-BLS 2, which is a suit on a judgment against Hannon.3 This Court denied plaintiff’s request in that case,
1 Hannon and his wife Elizabeth Hannon filed for Chapter 11 bankruptcy in 2012, after the loans that are the subject of the instant litigation became due. In June 2014, the bankruptcy court denied his request for discharge in bankruptcy because Hannon had made material misstatements in his bankruptcy filings.
2 This was the amount requested in plaintiff’s motion filed on October 11, 2017. On the afternoon of October 16, one day before hearing on the motion, plaintiff filed a supplemental memorandum that asked for an attachment in the amount of $ 471,789.72. Because defendants did not have a fair chance to respond to that higher amount and because Hannon’s liability for that higher amount is less certain, this Court allowed the attachment in the amount originally requested.
3 Although King Root was the entity that obtained the judgment against Hannon, that judgment was ultimately assigned to the plaintiff in this case.
3
in part because Gagua was the owner of the house and because the funds used to purchase the property appeared to have come not from Hannon but from two other corporate entities, RHR, LLC (RHR) and Agritech, Inc. (Agritech). See Memorandum of Decision dated August 25, 2017 (the August 2017 Decision). RHR is owned by Hannon’s son. Plaintiff alleged that RHR and Agritech were the alter egos of Hannon and offered supporting documentation which did indeed raise a serious question as to whether these entities had adhered to corporate formalities. Still, plaintiff’s request seemed to be based on the novel theory of “reverse veil piercing.” Moreover, there was evidence that Gagua was making arrangements to repay RHR the $ 423,124.77 it had contributed to the purchase price. This Court denied this second request for an attachment without prejudice.
This third attempt is not exclusively premised on a theory of reverse veil piercing and is supported by additional information. That information shows that Hannon himself did indeed make a substantial payment toward the purchase price and that funds used to renovate the Uxbridge House following the purchase were drawn from an entity wholly owned by Hannon. Moreover, the circumstances leading up to and surrounding the purchase of the Uxbridge House support the conclusion that plaintiff will indeed be able to prevail on its claim against Gagua. Of particular relevance to this Court’s ruling is the following evidence, all of which concern events that occurred when Hannon had incurred the debt to plaintiff and was effectively insolvent.
The Uxbridge House was originally owned by an individual by the name of Amanda Fresh, who has submitted an affidavit in this matter. In that affidavit, Fresh states that Hannon approached her in 2014 about renting the Uxbridge House for six months, after which time he would purchase it. Hannon executed both a Lease Agreement and an Offer to Purchase. See
4
Exhibit A and B to Fresh Affidavit. He made an initial deposit of $ 5,000 toward the $ 458,950 purchase price. See Exhibit C to Fresh Affidavit. He also made rent payments.
Hannon moved into the house with Gagua, whom he falsely identified as his wife. See fn. 1. Hannon made three additional payments toward the purchase price of $ 10,000 each. These payments were made in cash in November and December 2014: Hannon met Fresh at a local Dunkin Donuts and delivered the cash in a bag. In July 2015, Hannon signed a Purchase and Sale Agreement with Fresh, who agreed to credit $ 41,500 Hannon had already paid her toward the purchase price. One day before the scheduled closing, Fresh received an email from an attorney who she understood represented Hannon. That email stated: “I have spoken to the Buyer, and his wife Sofia Gagua will be taking title to the property.” See Exhibit G to Fresh Affidavit.
The closing went through as scheduled and Gagua took title, recording a Declaration of Homestead on the Uxbridge House. In the Declaration, signed under the pains and penalties of perjury, she identifies herself (falsely) as Hannon’s wife. In an earlier deposition, Gagua testified that she made $ 600 per week and had virtually no assets. In her affidavit submitted in the instant case, Gagua admits that she could not qualify for a “traditional” loan and that she obtained the money to buy the house from RHR, which gave her what she described as a “bridge loan.” There is no documentation related to that loan and RHR obtained no security for it. As described in this Court’s August 2017 Decision, RHR has no payroll or other operating expenses, has transferred most of the funds it receives to Agritech, and has never filed an annual report with the Secretary of State. Agritech has also failed to file annual reports. Agritech is wholly owned by Hannon, who is its president and sole shareholder.
5
Since the purchase of the Uxbridge House, substantial payments have been made to contractors performing renovations at the property. Bank records obtained in the King Root litigation show that $ 217,226.22 in payments were made to Thomas LaFlamme Construction, Inc. between July and December 2015. Deposition testimony shows that this was in connection with the construction of a deck and a pool cabana at the Uxbridge House and for work on the kitchen. Copies of the checks written to LaFlamme show that all payments were made by Agritech. Since the filing of the Motion, plaintiff has come up with additional evidence showing that Agritech paid a landscaping business, Perreault Nursery, an additional $ 227,274.56 in 2016 to do work in and around the Uxbridge House. Documents produced by Perrreault show that this was for fencing, a fire pit, stairs to a “backyard,” installation of a garden and patio, and drainage work at the Uxbridge address.
To obtain an attachment, a plaintiff must demonstrate: “that there is a reasonable likelihood that [it] will recover judgment, including interest and costs, in an amount equal to or greater than the amount of the attachment over and above any liability insurance shown by the defendant to be available to satisfy the judgment.” Mass. R. Civ. P. 4.1(c). This Court concludes that plaintiff has satisfied its burden. Plaintiff is reasonably likely to obtain a judgment against Hannon in an amount that exceeds $ 200,000. As to its claim against Gagua based on the Uxbridge House, there is a reasonable likelihood that plaintiff will be able to show that investments in that house came from Hannon’s funds and that the purpose was to place those funds out of reach of his creditors, among them the plaintiff. Plaintiff also has a reasonable likelihood of prevailing on its direct claim against Gagua, who appears to have aided and abetted Hannon in an attempt to defraud his creditors, including plaintiff.
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A “transfer” is defined by the Uniform Fraudulent Transfer Act “disposing of or parting with an asset or an interest in an asset, and includes payment of money…” G.L.c. 109A §2. The evidence before this Court supports a finding that Hannon transferred money to Gagua when he contributed $ 41,500 toward the purchase price and that the purpose of this transfer was to place it out of reach of creditors, including the plaintiff. As to the money coming from Agritech, this Court does not have to conclude that Agritech is Hannon’s alterego. Rather (as plaintiff argued), an attachment can be supported by viewing Agritech as an asset of Hannon. Hannon as its sole shareholder has the exclusive right to monies in Agritech’s bank account, which essentially represents Hannon’s equity interest in the company. Hannon used that bank account as his own personal piggy bank, drawing down funds to improve on the Uxbridge House. Title to the house was placed in the name of Gagua in an effort to keep this asset out of the hands of creditors.
This Court is also more inclined than it had been previously to conclude that there is no real distinction between Agritech and Hannon. Although it had previously dismissed Agritech from the case, it is becoming more and more apparent to this Court that Hannon is using the corporate structure as a way to place his assets out of reach. In essence, the company appears to serve as a repository for monies that, if they went to Hannon directly, would be subject to a trustee process attachment. Hannon then uses these monies to pay personal expenses and to enhance the value of an asset ( Uxbridge House) which he effectively controls, at the same time that he arranges to have title to this asset placed in the name of his girlfriend Gagua. Gagua appears only too willing to assist Hannon in this apparent fraud, exposing herself to direct liability in this case as a defendant. At this point, this Court has reason to question the
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credibility of both Hannon and Gagua. Their denials of any wrongdoing are thus becoming increasingly hard to swallow.
__________________________________
Janet L. Sanders
Justice of the Superior Court
Dated: October 20, 2017 read more

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Posted by Massachusetts Legal Resources - November 3, 2017 at 6:12 pm

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Zelby Holdings, Inc. v. Videogenix, Inc. (Lawyers Weekly No. 11-106-17)

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-874                                         Appeals Court

ZELBY HOLDINGS, INC.  vs.  VIDEOGENIX, INC.

No. 16-P-874.

Norfolk.     February 10, 2017. – August 18, 2017.

Present:  Green, Milkey, & Neyman, JJ.

Negotiable Instruments, Note, Payment.  Uniform Commercial Code, Payment on negotiable instrument.  Payment.  Limitations, Statute of.  Practice, Civil, Motion to dismiss, Statute of limitations.  Common Law.  Contract, Unjust enrichment.  Unjust Enrichment. read more

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Posted by Massachusetts Legal Resources - August 19, 2017 at 6:48 am

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ABCD Holdings, LLC v. Hannon, et al. (Lawyers Weekly No. 12-068-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1684CV01840-BLS2
____________________
ABCD HOLDINGS, LLC
v.
PATRICK J. HANNON, SOFIA GAGUA, and PATRICK J. (“P.J.”) HANNON and Others1
________________________________________
PATRICK J. HANNON
v.
ABCD HOLDINGS, LLC; ABC&D RECYCLING, INC.; WARE REAL ESTATE, LLC; TRI COUNTY RECYCLING, INC.; and GEORGE McLAUGHLIN, III
____________________
MEMORANDUM AND ORDER DENYING MOTION TO DISMISS COUNTERCLAIMS AND THIRD-PARTY CLAIMS
Plaintiff ABCD Holdings, LLC, (“Holdings”) has sued Patrick J. Hannon in part to enforce Hannon’s personal guaranty of one-half of the amount that Holdings loaned to Ware Real Estate, LLC (“Ware”) and ABC&D Recycling, Inc (“Recycling”). Holdings claims that Hannon is liable under his limited guaranty to repay $ 109,879.50 (half the original loan amount) plus reasonable collection costs.
In response, Hannon has asserted various counterclaims and third-party claims alleging, in essence, that George McLaughlin deliberately prevented Ware and Recycling from repaying what they owed under their note by using Holdings to take control of Ware and Recycling and then transferring their assets and business operatings to a new entity called Tri County Recycling, Inc. (“Tri County”).
The parties sued by Hannon—i.e., McLaughlin, Holdings, Ware, Recycling, and Tri County—have moved to dismiss Hannon’s claims. They claim that Hannon’s claims are all barred by a release executed by the Chapter 7 trustee of Hannon’s bankruptcy estate. In addition, Tri County asserts that the allegations against it do not state viable claims even if the claims were not barred by the release.
The Court concludes that these arguments are without merit. It will therefore DENY the motion to dismiss Hannon’s counterclaims and third-party claims.
1 Reach and Apply Defendants J. Derenzo Co.; J. Derenzo Construction Company, Inc.; Sofia Gagua; RHR, LLC; Patrick J. (“P.J.”) Hannon; Similar Soils, Inc.; Immanuel Corp.; Agritech, Inc.; and L-5, Inc.
– 2 –
1. Settlement Agreement and Release. Hannon filed a petition under Chapter 11 of the United States Bankruptcy Code on May 3, 2012. That bankruptcy case was converted to a Chapter 7 or liquidation proceeding on January 2, 2013. The bankruptcy trustee sued Bright Horizon, LLC (“Bright Horizon”) and The McLaughlin Brothers, P.C. (“McLaughlin Bros.”) to recover various payments Hannon had made to them.
In May 2015 the bankruptcy trustee entered into a settlement agreement in which George McLaughlin, Bright Horizon, and McLaughlin Bros. agreed to pay the bankruptcy estate $ 45,000. In exchange, the trustee released all claims “whether known or unknown” that the estate or Hannon may have against George McLaughlin, Bright Horizon, McLaughlin Bros., or “any entity owned by any of” them. The settlement agreement states that it is releasing such claims “to the Trustee’s full authority to waive such claims.”
McLaughlin asserts that he owns Holdings, Recycling, Ware, and Tri County, and that the release executed by the bankruptcy trustee therefore bars all of Hannon’s counterclaims and third-party claims in this action. The Court disagrees.
Hannon’s claims in this action all arise at least in part from alleged acts by McLaughlin and his companies that occurred after Hannon’s bankruptcy petition was converted to a Chapter 7 proceeding in January 2013. Hannon alleges in his pleading that McLaughlin has been in full control of Recycling and Ware “since February 6, 2013,” and that since that time McLaughlin has taken steps to ensure that neither Recycling nor Ware has repaid any part of the loan to Holdings. He further alleges that Tri County was incorporated in May 2014, and that around that time McLaughlin terminated the business operations of Recycling and Ware and shifted those operations to Tri County.
Hannon correctly argues that the bankruptcy trustee had no power to release claims that were never part of the bankruptcy estate. See In re Ontos, 478 F.3d 427, 431 (1st Cir. 2007). “It is axiomatic that a Chapter 7 trustee may only release claims that he has the power to assert.” In re Pierport Dev. & Realty, Inc., 502 B.R. 819, 825 (Bankr. N.D.Ill. 2013), quoting In re Cent. Ill. Energy, LLC, 406 B.R. 371, 373–74 (Bankr. C.D.Ill. 2008).
– 3 –
McLaughlin and the other moving parties respond by pointing out that Hannon’s bankruptcy estate included not only all claims belonging to Hannon as of May 3, 2012, when he first filed for bankruptcy, but also all other claims arising up until the time when the bankruptcy case was converted to a Chapter 7 proceeding, which occurred on January 3, 2012. See 11 U.S.C. § 1115(a)(1) (property of bankruptcy estate includes “all property of the kind specified in section 541 that the debtor acquires after the commencement of the case but before the case is closed, dismissed, or converted to a chase under chapter 7, 12, or 13, whichever occurs first”); 11 U.S.C. § 541(a)(1) (bankruptcy estate includes “all legal or equitable interests of the debtor in property as of the commencement of the [bankruptcy] case”); Cole v. Pulley, 18 Mass. App. Ct. 950, 951 (1984) (rescript) (for purposes of § 541(a)(1), “property” includes “all interests of the debtor in rights of action” (quoting 4 Collier, Bankruptcy par. 541.10[1] (1983)).
As noted above, however, Hannon’s counterclaims and third-party claims are based in large part upon alleged acts or omissions by McLaughlin and his companies that occurred after Hannon’s bankruptcy case was converted to a Chapter 7 proceeding.
As a result, Hannon’s claims in this action were never part of his bankruptcy estate, and therefore could not be and were not released by the bankruptcy trustee.
2. Claims against Tri County. Hannon asserts two claims against Tri County. He alleges that Tri County would be unjustly enriched if Hannon is forced to pay any amount under the limited guaranty. In addition, Hannon claims that Tri County is liable under the note as a successor in interest to Recycling and Ware, and that Hannon has been harmed by Tri County’s alleged “plundering” of the assets of Recycling and Ware. The Court understands this to be a common law claim for indemnification on the theory that Tri County is legally obligated to repay the note to Holdings, and that if it does not do so and as a result Hannon is liable under his personal guaranty then he is entitled to full indemnification from Tri County.2 It does
2 “A person who, in whole or in part, has discharged a duty which is owed by him but which as between himself and another should have been discharged by the other, is entitled to indemnity from the other, unless the payor is barred by the wrongful nature of his conduct.” Suffolk Const. Co. v. Benchmark Mech. Sys., Inc., 475 Mass.
– 4 –
not matter that Hannon labels this claim as one for “successor liability” rather than a claim for indemnification.3
When one corporation acquires the assets of another, “the liabilities of a selling predecessor corporation are not imposed upon the successor corporation which purchases its assets, unless (1) the successor expressly or impliedly assumes liability of the predecessor, (2) the transaction is a de facto merger or consolidation, (3) the successor is a mere continuation of the predecessor, or (4) the transaction is a fraudulent effort to avoid liabilities of the predecessor.” Guzman v. MRM/Elgin, 409 Mass. 563, 566 (1991).
The facts alleged by Hannon plausibly suggest that Tri County is liable to pay the amounts owed by Ware and Recycling to Holdings under a “de facto merger” or a “mere continuation” theory of successor liability. See generally Milliken & Co. v. Duro Textiles, LLC, 451 Mass. 547, 557-558 (2008) (summarizing factors characterizing de facto mergers and mere continuations).
As a result, Hannon has stated viable claims that if Tri County fails to pay those amounts, and as a result Hannon is compelled to pay Holdings under his personal guaranty, then Tri County would be unjustly enriched and Hannon would be entitled to restitution and indemnification from Tri County.
ORDER
The motion to dismiss Patrick J. Hannon’s counterclaims and third-party claims is DENIED.
6 June 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court
150, 154 (2016), quoting Santagate v. Tower, 64 Mass. App. Ct. 324, 330 (2005), quoting in turn Restatement of Restitution § 76 (1937).
3 See Gallant v. City of Worcester, 383 Mass. 707, 709 (1981) (complaint may allege facts plausibly suggesting that plaintiff has legally viable claim even if complaint does not name correct legal theory); Republic Floors of New England, Inc. v. Weston Racquet Club, Inc., 25 Mass. App. Ct. 479, 487 (1988) (plaintiff may press at trial any legal theory fairly raised by allegations in complaint, even if that theory is not expressly invoked in the complaint). read more

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Posted by Massachusetts Legal Resources - June 16, 2017 at 10:15 pm

Categories: News   Tags: , , , , ,

WHDT Congress Holdings LP v. Farnsworth Congress LLC (Lawyers Weekly No. 12-059-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1784CV00295-BLS2
____________________
WHDT CONGRESS HOLDINGS LP
v.
FARNSWORTH CONGRESS LLC
____________________
MEMORANDUM AND ORDER DENYING PLAINTIFF’S MOTION FOR A PRELIMINARY INJUNCTION AND SCHEDULING A RULE 16 CONFERENCE TO PICK A TRIAL DATE
WHDT Congress Holdings LP has contracted to buy a ground-floor commercial condominium unit in a building that Farnsworth Congress LLC is having constructed at 338 Congress Street in the Fort Point Channel neighborhood of Boston. The parties’ purchase and sale agreement gives Farnsworth a “limited right of approval” of any proposed tenant to ensure that it “is of similar quality and class” as the “first class appearance and nature” of the building as a whole. Although WHDT is not required to lease the unit to a restaurant, if its wishes to do so Farnsworth has the contractual right to withhold approval if the proposed tenant is not “of similar or greater quality and appearance” to Row34, Bastille Kitchen, Sportello, and Blue Dragon, which are all located within a few blocks of the new building.
WHDT filed a complaint in January 2017 claiming that Farnsworth has unreasonably withheld approval of a franchise of the “&pizza” chain as a tenant, allegedly in violation of the parties’ P&S. Almost three months later WHDH served, and has now filed, a motion for a preliminary injunction that would enjoin Farnsworth from withholding its approval of &pizza’s tenancy and also order Farnsworth to provide plans and other documentation regarding the disputed condominium. WHDT proposes that resolution of its preliminary injunction motion be consolidated with a bench trial on the merits to be held no later than forty-five days of the date it served its motion, i.e. by June 5, 2017.1
The Court declines to consolidate the motion hearing with the trial and hold both in early June, because new issues raised by WHDT for the first time in its motion
1 Neither party has requested a jury trial. WHDT represents that is because the parties waived any right to a jury trial in their P&S.
– 2 –
papers will require a reasonable time for discovery plus expert testimony. The Court will deny the preliminary injunction motion because WHDT has not shown that it is likely to prevail on the merits of its claims or that it will suffer any irreparable harm in the meantime. If WHDT had sought a prompt trial when it filed its complaint, it may have made sense to schedule the trial for early June. It is now too late for that. But the Court believes that the parties should be able to get this case ready for trial within the next two or three months. It will hold a scheduling conference next week to set a trial date and all intermediate deadlines.
1. Request to Consolidate P.I. Hearing and Trial. WHDT argues in its reply brief that there is no real need for discovery in this case, and thus trial can be scheduled almost immediately.
That might be true if trial of this case were limited to the breach of contract claims in the complaint. The parties have already presented most of the relevant evidence on those claims in their preliminary injunction papers.
But WHDT raises a new issue for the first time in its preliminary injunction memorandum, arguing that if Farnsworth was entitled under the terms of the P&S to withhold approval of &pizza then the P&S should be reformed to eliminate any requirement that a restaurant tenant be of a higher quality and class than &pizza. WHDT asserts that there are no better tenants in the market than &pizza. WHDT also reiterates an allegation in its complaint that the condo unit, which has only about 1,500 square feet of space, is just too small to fit “a successful sit-down restaurant” that is similar in quality to the restaurant benchmarks specified in the P&S.
Farnsworth is entitled to a reasonable amount of time to conduct discovery and procure expert testimony regarding this new contract reformation claim. It is entitled to understand exactly what WHDT has done to try to identify prospective restaurant or other commercial tenants, and pull together rebuttal evidence on this topic. It is also entitled to a reasonable period to rebut WHDT’s assertion that no quality restaurant can survive such a small space.2
2 This assertion may come as a surprise to anyone who has eaten at the very successful Spoke Wine Bar in Davis Square, Somerville, which arguably is of the same quality and class as the restaurant comparables listed in the P&S, and which was and soon will again be located in a very tiny space. The architectural firm that
– 3 –
The Court concludes that it would therefore be unfair to force Farnsworth to go to trial in early June, especially since WHDT chose to wait for several months after filing its complaint before asking for such an early trial date. Nonetheless, the Court believes it may be appropriate to schedule the trial in July or August. It will discuss the timing of the trial with the parties at next week’s scheduling conference.
2. Merits of Motion for Preliminary Injunction. In the meantime, the Court will deny WHDT’s request for preliminary injunctive relief.
2.1. Legal Standards. “A preliminary injunction is an extraordinary remedy never awarded as of right.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). To the contrary, “the significant remedy of a preliminary injunction should not be granted unless the plaintiffs had made a clear showing of entitlement thereto.” Student No. 9 v. Board of Educ., 440 Mass. 752, 762 (2004). “Trial judges have broad discretion to grant or deny injunctive relief.” Lightlab Imaging, Inc. v. Axsun Technologies, Inc., 469 Mass. 181, 194 (2014).
A plaintiff is not entitled to preliminary injunctive relief if it cannot prove that it is likely to succeed on the merits of its claim. See, e.g., Fordyce v. Town of Hanover, 457 Mass. 248, 265 (2010) (vacating preliminary injunction on this ground); Wilson v. Commissioner of Transitional Assistance, 441 Mass. 846, 858-859 (2004) (same).
Nor may a plaintiff obtain a preliminary injunction without proving that it will suffer irreparable harm in the absence of such an order, and that such harm to the plaintiff from not granting the preliminary injunction would outweigh any irreparable harm that defendants are likely to suffer if the injunction issues. See, e.g., American Grain Products Processing Institute v. Department of Pub. Health, 392 Mass. 309, 326-329 (1984) (vacating preliminary injunction on this ground); Nolan v. Police Comm’r of Boston, 383 Mass. 625, 630 (1981) (same).
2.2. Analysis. WHDT has not met its burden of proving that it is likely to succeed on the merits or that it will suffer any irreparable harm in the absence of preliminary injunctive relief.
designed the Spoke space states that the restaurant seating, bar, kitchen, and restrooms all fit in 908 sq. ft. of retail space, and that the operation uses an additional 662 sq. ft. of support spaces in the basement. See http://incitearchitecture.com/spoke-winebar-and-restaurant (last visited May 16, 2017).
– 4 –
WHDT has not shown that Farnsworth unreasonably withhold approval of &pizza as a tenant. Although WHDT has filed an affidavit asserting that &pizza would be of the same or better quality of some restaurants in the Fort Point Channel neighborhood, it has made no showing that &pizza is comparable in quality to the four benchmark restaurants listed in the P&S.3 The Court credits Farnsworth’s evidence that &pizza serves pizza in cardboard boxes, soda in plastic cups, and asks its customers to eat off of cardboard plates with their hands or plastic utensils. It also credits the evidence that &pizza is therefore of a lower quality or class than the benchmark restaurants.
If WHDT could prove its claim that Farnsworth has threatened not to approve any restaurant that serves pizza, that may establish a breach of the P&S. Anyone who has dined at Short & Main in Gloucester, Massachusetts knows that a high-quality restaurant of quality comparable to the P&S benchmarks can have a pizza-focused menu. But such a showing would not entitle WHDT to an order compelling Farnsworth to accept &pizza as a tenant.
Although WHDT also argues that Farnsworth breached the P&S by refusing to provide access to and documentation concerning the condominium unit, it has not supported that claim with convincing evidence. The Court does not credit Farnsworth’s conclusory hearsay evidence on this point, and instead credits the contrary evidence based on personal knowledge in the affidavits submitted by Farnsworth.
WHDT has also not shown that it will suffer irreparable harm without a preliminary injunction. It claims that it will suffer lost profits and may have to forfeit a $ 210,000 deposit if it cannot sign &pizza as a tenant. But money can compensate for such economic damages. Since WHDT could be made whole by money damages, it is not entitled to preliminary injunctive relief. See Packaging Industries Group, Inc. v. Cheney, 380 Mass. 609, 621 (1980) (preliminary injunction “must be denied” where money damages would adequately compensate for any harm that plaintiff might suffer before final judgment is entered, “no matter how likely it may be that
3 Instead, WHDT compares &pizza to the restaurants By Chloe, Tikkaway, Aceituna Grill, and Yoki Express.
– 5 –
the moving party will prevail on the merits”). Finally, since WHDT has not shown that Farnsworth breached the P&S by withholding approval of &pizza as a tenant, it has also not shown that it is being denied an opportunity to occupy and use the unit in a manner consistent with the P&S.
ORDER
Plaintiff’s motion for a preliminary injunction and for a trial on the merits within the next forty-five days is DENIED. The Court shall conduct a scheduling conference pursuant to Mass. R. Civ. P. 16 on May 23, 2017, at 2:00 p.m. The Court intends to set an appropriately short time for completing fact discovery and exchanging expert disclosures, and to schedule a trial on the merits in the very near future.
May 16, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court read more

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Posted by Massachusetts Legal Resources - June 1, 2017 at 6:35 am

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Erecruit Holdings, LLC v. Willis Group Holdings, LLC (Lawyers Weekly No. 12-003-17)

COMMONWEALTH OF MASSACHUSETTS

SUFFOLK, ss.                                                                                   SUPERIOR COURT

                                                                                                             SUCV2016-0557-BLS2

ERECRUIT HOLDINGS, LLC

Plaintiff

 

and

 

SIXCEL, LLC

Plaintiff/Intervenor

vs.

 

WILLIS GROUP HOLDINGS, LLC

Defendant

 

 

 

MEMORANDUM OF DECISION AND ORDER

ON PLAINTIFF ERECRUIT HOLDINGS, LLC’S MOTION

 FOR JUDGMENT ON THE PLEADINGS

This action arising from a business deal gone sour between the plaintiff Erecruit Holdings, LLC (Erecruit) and the defendant Willis Group Holdings, LLC.  Erecruit alleges that Willis breached a written contract called the Non-Perpetual Software License Agreement (the Agreement) by fabricating a pretext for terminating the Agreement, then refusing to pay Erecruit for amounts owed.  In response, Willis asserted a  Counterclaim alleging that Erecruit misled it as to Erecruit’s capabilities and then after Willis had already paid Erecruit $ 93,500, failed to deliver on the promises it made to provide Willis with  a fully functional software product – promises that Erecruit  knew at the time that it made them that it could not keep.    Erecruit now moves for a judgment on the pleadings as to Willis’s Counterclaim. This Court concludes that the Motion must be DENIED for the reasons set forth in Willis’s Opposition, and offers the following by way of brief explanation. read more

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Posted by Massachusetts Legal Resources - February 2, 2017 at 2:40 pm

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ABCD Holdings, LLC v. Hannon, et al. (Lawyers Weekly No. 12-172-16)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
SUCV2015-1367-BLS2
ABCD HOLDINGS, LLC,
Plaintiff
vs.
PATRICK HANNON, SOFIA GAGUA, PATRICK (“P.J.”) HANNON,
RHR, LLC, SIMILAR SOILS, INC. and AGRITECH, INC.,
Defendants
And
J.DERENZO CO., SOFIA GAGUA, RHR, LLC, PATRICK (“P.J.”) HANNON,
SIMILAR SOILS, INC., IMMANUEL CORP., AGRITECH INC., and L-5 INC.,
Reach and Apply Defendants
MEMORANDUM OF DECISION AND ORDER
ON MOTIONS TO DISMISS
This is an action seeking to collect on a personal guaranty and to recover for other allegedly wrongful conduct following the execution of that document. The guaranty was executed by defendant Patrick Hannon on a loan for $ 219,759. The lender, Bright Horizons Finance, LLC, subsequently assigned its rights under the promissory note and under the guaranty to the plaintiff ABCD Holdings, Inc. Plaintiff has sued not only Hannon but various other individuals and entities on a variety of legal theories. Now before the Court are motions to dismiss by: 1) Hannon, as to some (but not all) counts against him; 2) defendants P.J. Hannon and RHR, LLC; and 3) defendant Agritech, Inc. This Court concludes that Hannon’s Motion must be Denied but that the other two Motions must be Allowed.
2
BACKGROUND
This action was instituted on June 6, 2016. Plaintiff tried and failed to obtain a preliminary injunction against Hannon. See Memorandum of Decision dated June 24, 1016 (Salinger, J.) The case was once again before the Court in connection with various motions to dismiss, which were allowed in part and as to other counts reserved, since plaintiff’s counsel indicated that he would amend the complaint. The Amended Complaint was filed on October 7, 2016. The allegations as set forth in the Amended Complaint, together with attachments thereto, are as follows.
The loan which is at the heart of this case was made on July 21, 2011. It was made by Bright Horizons, an entity owned by Boston attorney George McLaughlin. The loan was made to two companies, Ware Real Estate (Ware) and ABC&D Recycling (Recycling). Ware owns real property in Ware, Massachusetts improved with a waste transfer station; at the time, it was wholly owned by defendant Hannon. Recycling was in the business of recycling debris from construction sites and operated the waste transfer station in Ware. Hannon was its president and sole officer. Hannon was also a long time client of McLaughlin.
The loan to Ware and Recycling was payable in full on demand, pursuant to terms set forth in a promissory note (the “W&R Note”) with payments of interest to be made on a monthly basis. The W&R Note is attached to the Amended Complaint as Exhibit A. In addition to requiring payment on demand, the W&R Note gave Bright Horizon the right to receive half of the profits of the two businesses; it also conferred warrants which gave Bright Horizon the right to purchase a majority share of the two companies at an agreed upon purchase price which could be paid by forgiving $ 100,000 of the debt owed as a result of the loan. The W&R Note was signed by Hannon as manager of Ware and as president of Recycling.
3
Hannon also executed a “Limited Guaranty,” attached to the Amended Complaint as Exhibit B. The Limited Guaranty provided that, in the “Event of Default” (a defined term under the Note), Hannon was prohibited from accepting or receiving any payment or reimbursement from Ware or Recycling, and if he did receive such payment, was required to hold it in trust. The Amended Complaint alleges that Hannon breached this provision by accepting and receiving payments from the two companies totaling at least $ 580,000 while he was in control of them; he also received $ 40,000 from the sale of certain property owned by one of the companies, raising the total to $ 620,000. The Guaranty further provided:
“Anything to the contrary in this Guaranty notwithstanding, the liability of Guarantor under this Guaranty is limited to the repayment of (i) no more than $ 109,879 of the Guaranteed Obligations (the Liability Limit”) plus (ii) 100% of any and all collection costs or expenses incurred by Lender against Guarantor, including reasonable attorneys’ fees and expenses….”
(Emphasis added).
To date, Ware and Recycling have failed to pay amounts owed under the W&R Note apart from a few interest payments. Similarly, Hannon has made no payments pursuant to the Limited Guaranty. The Amended Complaint alleges that plaintiff has incurred $ 247,000 in collection costs so far. All told, it is alleged that Hannon owes $ 976,879 pursuant to the Limited Guaranty (the sum of the $ 109,879 amount that Hannon guaranteed, collection costs of $ 247,000, and $ 620,000 of “additional interest”).
The lawsuit also concerns a second loan which was made directly to Hannon in the amount of $ 125,000 (the Hannon Note). Hannon made some payments on that obligation. However, on May 3, 2012, Hannon and his wife filed a petition for bankruptcy pursuant to Chapter 11. As a consequence of that petition, Bright Horizon was required to disgorge $ 45,000 of those payments as a preference. Plaintiff seeks to recover that amount in this action.
4
On July 21, 2012, Bright Horizon assigned all of its rights under both the W&R Note and the Hannon Note as well as under the Limited Guaranty to plaintiff ABCD Holding, an entity which (like Bright Horizon) was wholly owned by McLaughlin. On July 17, 2012, ABCD Holdings exercised the warrants it obtained under the W&R Note to purchase a majority interest in Ware and in Recycling. Hannon refused to honor them and litigation ensued as to whether ABCD Holdings had lawfully acquired a majority interest in Recycling. ABCD Holding, LLC v. ABC&D Recycling, Inc., Civ. No. 2012-00171 (Hampshire County Superior Court). A Superior Court judge (Carey, J.) concluded that it did, specifically finding that the loan agreement that conferred the warrants was a “fair and reasonable business contract.” See Findings of Fact, Rulings of Law and Order, attached to Amended Complaint as Exhibit N. Neither Ware nor Recycling is a named party in the instant action.
On June 20, 2014, the Bankruptcy Court entered judgment denying Hannon’s request to discharge his debts, freeing creditors (like the plaintiff) to pursue their claims against him. According to the Amended Complaint, Hannon had already embarked on a course of conduct to make his assets unavailable for creditors. Specifically, Hannon funneled money to a girlfriend with whom he cohabited, defendant Sofia Gagua, while the bankruptcy was pending. In 2015, she purchased a house in Uxbridge for $ 458,000 in cash – money that the Amended Complaint alleges she obtained from Hannon.
In the meantime, the Amended Complaint alleges that Hannon continued to engage in the same business of receiving soils and other materials for recycling or deposit at landfills. Specifically, it states that he is operating two landfills in Uxbridge known as “Rolling Hills” and “Green Acres.” Neither landfill is actually owned by Hannon, however: the Rolling Hills landfill is owned by reach-and-apply defendants Immanuel and L-5, and the Green Acres landfill is
5
owned by reach and apply defendants Elias Richardson and Richardson-North Corporation. The Amended Complaint alleges that these entities have contracted with Hannon so that the money that they receive is actually funneled to Hannon directly or to entities that Hannon controls. Those entities include defendant Agritech (of which Hannon is president and sole officer), defendant RHR which is “nominally managed” by Hannon’s son, P.J. Hannon, and Similar Soils, Inc. Patrick J. Hannon is identified in Secretary of State filings as the president and director of Similar Soils. Reach and apply defendants J. Derenzo Company and J. Derenzo Construction Company, Inc. (Derenzo) have paid money to one or both of the Uxbridge landfills – payments which are then routed through the above named entities controlled by Hannon.
The Amended Complaint asserts the following counts against Hannon only: enforcement of Limited Guaranty (Count I); breach of contract (Count II); enforcement of Hannon Note (Count III); money lent (Count IV); unjust enrichment (Count V) and violation of Chapter 93A (Count VI). The motion by Hannon seeks to put a cap on liability as to Counts I and II (relating to the W&R Note) and seeks to dismiss Counts V and VI for failure to state a claim upon which relief may be granted. Count VII, labeled “alter ego/piercing the corporate veil,” is asserted against RHR, Similar Soils and Agritech and alleges that all three entities are “sham corporations” controlled by Hannon for the fraudulent purpose of hiding his assets. Count VIII for “fraudulent transfer” alleges that Hannon has, “on information and belief,” transferred all or some of his contract rights to income earned in connection with the two Uxbridge landfills; that count is asserted against RHR, Agritech, Gagua, and P.J. Hannon. Count IX, asserted against “all defendants,” seeks to reach and apply the house purchased by Gagua. It also seeks to reach and apply “contract benefits” and “business opportunities” belonging to RHR, Similar Soils,
6
Agritech, Immanuel Corp. and L-5. The motions by defendants RHR, Agritech and P.J. Hannon pertain to Counts VII, VIII, and IX.
DISCUSSION
A. Hannon’s Motion to Dismiss
Hannon concedes that the Amended Complaint states a claim for relief as to those counts arising from the W&R Note and the Hannon Note (Counts I, II and III). As to Count I and II concerning the W&R Note, however, he argues that the Limited Guaranty by its terms limits his liability to $ 109,879.50 together with collection costs and asks that recovery be capped by that amount. As to Count V for unjust enrichment, Hannon contends that it is superfluous, given the availability of a contract remedy. As to the Chapter 93A claim, Hannon argues that it does not apply to disputes among parties involved in the same business venture and does not lie in any event where the conduct alleged is a “mere breach of contract.” This Court concludes that, at this early stage in the case, the motion must be denied.
Hannon’s argument as to the cap on his liability has some superficial appeal. Certainly, the language of the Limited Guaranty could not be clearer. It states that “[a]nything to the contrary in this Guaranty notwithstanding,” Hannon’s liability under that that contract is limited to “repayment of (i) no more than $ 109,879 of the Guaranteed Obligations (the Liability Limit”) plus (ii) 100% of any and all collection costs or expenses incurred by Lender against Guarantor, including reasonable attorneys’ fees and expenses.” Although Hannon also promised not to accept payments from either Ware or Recycling and, if he did, to hold those amounts in trust, the above quoted language limits plaintiff’s recovery for that breach to the amount expressly set forth in the Limited Guaranty.
7
If plaintiff had alleged only a breach of the Limited Guaranty, then this would be the end of the story. The Amended Complaint alleges more than a breach of that contractual obligation, however, asserting that, at the time that Ware and Recycling were in default on the W&R Note, Hannon essentially drained them of all of their assets. In doing so, he essentially rendered worthless the stock warrants that the companies had given to Bright Horizon so that, when ABCD Holdings exercised those warrants, both Ware and Recycling were empty shells saddled only with debt. This is enough in this Court’s view to state a claim that Hannon has engaged in unfair and deceptive practices in violation of G.L.c. 93A §2.
As the Supreme Judicial Court has recognized, the reach of Chapter 93A is quite broad and may even apply to conduct which is otherwise legal. Kattar v. Demoulas, 422 Mass. 1, 14 (2000) (upholding lower court’s denial of a motion to dismiss a 93A claim as to conduct involving the exercise of a right to foreclose). Because the statute does not attempt to define what constitutes an unfair or deceptive act or practice, the definition necessarily depends on the circumstances of each case. Commonwealth v. DeCotis, 366 Mass. 234, 242 (1974); see also Anthony’s Pier Four Inc., v. HBC Assocs. 411 Mass. 451, 473, 476 (1991) (use of discretionary contract right to force financial concessions violated c. 93A). Where the case involves a contract with a limitation of liability provision, that cap will not necessarily bar a broader recovery under chapter 93A: if the chapter 93A claim depends entirely on the breach of contract claim, it will, but if the conduct at issue is more tortious in nature, it will not. Standard Register Co., v. Bolton-Emerson Inc., 38 Mass.App.Ct. 545, 550 (1995) Thus, for example, a limitation of liability provision in a software agreement was not effective to preclude recovery under Chapter 93A where the conduct alleged was intentional misrepresentation, a tort- based theory. V. Mark Software Inc., v. EMC Corp., 37 Mass.App.Ct. 610, 619-621 (1994). In the instant case,
8
Hannon is accused of draining the assets of Ware and Recycling, which not only made it impossible not only for them to pay off the loan but also rendered the stock warrants that plaintiff had received as part of that loan transaction essentially valueless. This is conduct that sounds more in tort.
As to the defendant’s argument that 93A does not apply, this Court concludes that (at least based on the allegations of the Amended Complaint) this is not a dispute between two parties to the same venture: it arises from an arm’s length transaction negotiated between Bright Horizons on one hand and the two companies controlled by Hannon, Ware and Recycling. Although ABCD Holdings (as assignee of Bright Horizon’s rights) ultimately did become a majority shareholder in Ware and Recycling, that was only after the alleged wrongdoing had occurred. 1
B. Agritech’s Motion to Dismiss
Agritech, which was not a party to the two notes at issue in this case, is included as both a defendant and as a reach and apply defendant. The Counts asserted against it are Counts VII, VIII and IX of the Amended Complaint. This Court concludes that the Amended Complaint fails to state a claim upon which relief may be granted.
In naming Agritech as a defendant in Counts VII, plaintiff asserts that Agritech and Hannon are essentially one and the same. As Agritech points out, this is a novel use of the corporate veil piercing doctrine, which is ordinarily used to pierce the corporate form and hold individuals liable for the corporate debt. Here, the reverse is true: plaintiff is seeking to hold
1 Although the unjust enrichment claim may indeed prove to be duplicative or otherwise have no legal basis apart from the claims that survive, this Court declines at this point to dismiss it from the case. It is conceivable, for example, that facts may be developed that will call into question the enforceability of the Limited Guaranty, which was apparently negotiated between McLaughlin and Hannon when Hannon was his client. If plaintiff is deprived an adequate remedy at law, then this equitable remedy of unjust enrichment may be in order.
9
Agritech liable for the debt of an individual officer to another corporate entity. Moreover, there is no allegation that Agritech itself has done anything to injury the plaintiff. In any event, the Amended Complaint does not set forth facts which would allow this Court to disregard the corporate form. See My Bread Baking Co. v. Cumberland Farms, Inc. 353 Mass. 614, 620 (1968) (listing relevant factors). To survive dismissal, a complaint must plead more than “labels and conclusions” but allege facts with “enough heft to show that the pleader is entitled to relief.” Iannachino v. Ford Motor Co., 451 Mass. 623, 636 (2008), quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). The Amended Complaint certainly contains conclusions: for example, it alleges that, on “information and belief,” Agritech is the “alter ego” of Hannon. It also goes on at some length to describe Hannon’s history of misconduct in other transactions. But as to specific facts supporting Count VII, it alleges only that Hannon is Agritech’s president, sole officer and director and derives revenue from it. This is not enough to survive a motion under Rule 12(b)(6).
Count VIII alleges that Hannon fraudulently transferred certain assets to Agritech in violation of the Uniform Fraudulent Transfer Act (UFTA). See G.L.c. 109A §§5-6. That requires a showing that Hannon as the debtor has made some “transfer” to Agritech after the debt to the plaintiff arose. Under the UFTA, a transfer is defined to mean the “disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, and lease, creation of a lien or other encumbrance.” G.L.c 109A §2. The Amended Complaint, however, does not explain what Hannon transferred to Agritech. Plaintiff appears to argue that Hannon enjoyed certain business opportunities in connection with the Uxbridge landfills and that he set up Agritech to realize these opportunities. But that is not conduct that falls within the purview of the UFTA.
10
Count IX is asserted against Agritech as a reach and apply defendant. According to the Amended Complaint, Agritech has received certain payments in connection with the operation of the two Uxbridge landfills beginning in December 2014, In naming Agritech as a reach and apply defendant, plaintiffs is apparently attempting to claim an entitlement to these payments. A valid action for reach and apply, however, required that the property being “reached” is a debt owed by the reach and apply defendant (here Agritech) to the principal defendant (here Hannon). Mass.Elec. Co. v. Athol One, Inc. 391 Mass. 685, 687 (1984). That necessarily requires a showing that the reach and apply defendant has some specific obligation, incurred through consideration, that is owed to the debtor. The Amended Complaint does not identify the debt that Agritech owes to Hannon.
C. Motion to Dismiss by P.J. Hannon and RHR, LLC
Like Agritech, neither P.J. Hannon nor RHR are parties to the Notes that give rise to this case, but each is named both as a defendant and a reach and apply defendant in the same counts that are lodged against Agritech. Just as those counts are deficient as to Agritech, they also fail to state a claim against P.J. Hannon and RHR, for the same reasons. That is, plaintiff has failed to allege specific facts to pierce the corporate veil or to otherwise hold RHR and P.J. Hannon responsible for Hannon’s misdeeds (Count VII). It does not identify what property Hannon has fraudulently transferred to either RHR or P.J. Hannon so as to support a claim under the UFTA (Count VIII). Finally, there is nothing in the Amended Complaint to suggest that either RHR or P.J. Hannon owe a debt to Hannon that can be reached by plaintiff and applied to satisfy Hannon’s debt (Count IX).
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CONCLUSION AND ORDER
For all the foregoing reasons, the Motion to Dismiss by Patrick Hannon is DENIED. The Motions to Dismiss by Agritech, Patrick J. Hannon and RHR, LLC are ALLOWED and it is hereby ORDERED that Counts VII, VIII and IX be DISMISSED as to defendants P.J. Hannon, RHR, LLC and Agritech, Inc. only.
________________________________
Janet L. Sanders
Justice of the Superior Court
Dated: December 7, 2016 read more

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Posted by Massachusetts Legal Resources - January 17, 2017 at 3:51 pm

Categories: News   Tags: , , , , ,

ABCD Holdings, LLC v. Hannon, et al. (Lawyers Weekly No. 12-172-16)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
SUCV2015-1367-BLS2
ABCD HOLDINGS, LLC,
Plaintiff
vs.
PATRICK HANNON, SOFIA GAGUA, PATRICK (“P.J.”) HANNON,
RHR, LLC, SIMILAR SOILS, INC. and AGRITECH, INC.,
Defendants
And
J.DERENZO CO., SOFIA GAGUA, RHR, LLC, PATRICK (“P.J.”) HANNON,
SIMILAR SOILS, INC., IMMANUEL CORP., AGRITECH INC., and L-5 INC.,
Reach and Apply Defendants
MEMORANDUM OF DECISION AND ORDER
ON MOTIONS TO DISMISS
This is an action seeking to collect on a personal guaranty and to recover for other allegedly wrongful conduct following the execution of that document. The guaranty was executed by defendant Patrick Hannon on a loan for $ 219,759. The lender, Bright Horizons Finance, LLC, subsequently assigned its rights under the promissory note and under the guaranty to the plaintiff ABCD Holdings, Inc. Plaintiff has sued not only Hannon but various other individuals and entities on a variety of legal theories. Now before the Court are motions to dismiss by: 1) Hannon, as to some (but not all) counts against him; 2) defendants P.J. Hannon and RHR, LLC; and 3) defendant Agritech, Inc. This Court concludes that Hannon’s Motion must be Denied but that the other two Motions must be Allowed.
2
BACKGROUND
This action was instituted on June 6, 2016. Plaintiff tried and failed to obtain a preliminary injunction against Hannon. See Memorandum of Decision dated June 24, 1016 (Salinger, J.) The case was once again before the Court in connection with various motions to dismiss, which were allowed in part and as to other counts reserved, since plaintiff’s counsel indicated that he would amend the complaint. The Amended Complaint was filed on October 7, 2016. The allegations as set forth in the Amended Complaint, together with attachments thereto, are as follows.
The loan which is at the heart of this case was made on July 21, 2011. It was made by Bright Horizons, an entity owned by Boston attorney George McLaughlin. The loan was made to two companies, Ware Real Estate (Ware) and ABC&D Recycling (Recycling). Ware owns real property in Ware, Massachusetts improved with a waste transfer station; at the time, it was wholly owned by defendant Hannon. Recycling was in the business of recycling debris from construction sites and operated the waste transfer station in Ware. Hannon was its president and sole officer. Hannon was also a long time client of McLaughlin.
The loan to Ware and Recycling was payable in full on demand, pursuant to terms set forth in a promissory note (the “W&R Note”) with payments of interest to be made on a monthly basis. The W&R Note is attached to the Amended Complaint as Exhibit A. In addition to requiring payment on demand, the W&R Note gave Bright Horizon the right to receive half of the profits of the two businesses; it also conferred warrants which gave Bright Horizon the right to purchase a majority share of the two companies at an agreed upon purchase price which could be paid by forgiving $ 100,000 of the debt owed as a result of the loan. The W&R Note was signed by Hannon as manager of Ware and as president of Recycling.
3
Hannon also executed a “Limited Guaranty,” attached to the Amended Complaint as Exhibit B. The Limited Guaranty provided that, in the “Event of Default” (a defined term under the Note), Hannon was prohibited from accepting or receiving any payment or reimbursement from Ware or Recycling, and if he did receive such payment, was required to hold it in trust. The Amended Complaint alleges that Hannon breached this provision by accepting and receiving payments from the two companies totaling at least $ 580,000 while he was in control of them; he also received $ 40,000 from the sale of certain property owned by one of the companies, raising the total to $ 620,000. The Guaranty further provided:
“Anything to the contrary in this Guaranty notwithstanding, the liability of Guarantor under this Guaranty is limited to the repayment of (i) no more than $ 109,879 of the Guaranteed Obligations (the Liability Limit”) plus (ii) 100% of any and all collection costs or expenses incurred by Lender against Guarantor, including reasonable attorneys’ fees and expenses….”
(Emphasis added).
To date, Ware and Recycling have failed to pay amounts owed under the W&R Note apart from a few interest payments. Similarly, Hannon has made no payments pursuant to the Limited Guaranty. The Amended Complaint alleges that plaintiff has incurred $ 247,000 in collection costs so far. All told, it is alleged that Hannon owes $ 976,879 pursuant to the Limited Guaranty (the sum of the $ 109,879 amount that Hannon guaranteed, collection costs of $ 247,000, and $ 620,000 of “additional interest”).
The lawsuit also concerns a second loan which was made directly to Hannon in the amount of $ 125,000 (the Hannon Note). Hannon made some payments on that obligation. However, on May 3, 2012, Hannon and his wife filed a petition for bankruptcy pursuant to Chapter 11. As a consequence of that petition, Bright Horizon was required to disgorge $ 45,000 of those payments as a preference. Plaintiff seeks to recover that amount in this action.
4
On July 21, 2012, Bright Horizon assigned all of its rights under both the W&R Note and the Hannon Note as well as under the Limited Guaranty to plaintiff ABCD Holding, an entity which (like Bright Horizon) was wholly owned by McLaughlin. On July 17, 2012, ABCD Holdings exercised the warrants it obtained under the W&R Note to purchase a majority interest in Ware and in Recycling. Hannon refused to honor them and litigation ensued as to whether ABCD Holdings had lawfully acquired a majority interest in Recycling. ABCD Holding, LLC v. ABC&D Recycling, Inc., Civ. No. 2012-00171 (Hampshire County Superior Court). A Superior Court judge (Carey, J.) concluded that it did, specifically finding that the loan agreement that conferred the warrants was a “fair and reasonable business contract.” See Findings of Fact, Rulings of Law and Order, attached to Amended Complaint as Exhibit N. Neither Ware nor Recycling is a named party in the instant action.
On June 20, 2014, the Bankruptcy Court entered judgment denying Hannon’s request to discharge his debts, freeing creditors (like the plaintiff) to pursue their claims against him. According to the Amended Complaint, Hannon had already embarked on a course of conduct to make his assets unavailable for creditors. Specifically, Hannon funneled money to a girlfriend with whom he cohabited, defendant Sofia Gagua, while the bankruptcy was pending. In 2015, she purchased a house in Uxbridge for $ 458,000 in cash – money that the Amended Complaint alleges she obtained from Hannon.
In the meantime, the Amended Complaint alleges that Hannon continued to engage in the same business of receiving soils and other materials for recycling or deposit at landfills. Specifically, it states that he is operating two landfills in Uxbridge known as “Rolling Hills” and “Green Acres.” Neither landfill is actually owned by Hannon, however: the Rolling Hills landfill is owned by reach-and-apply defendants Immanuel and L-5, and the Green Acres landfill is
5
owned by reach and apply defendants Elias Richardson and Richardson-North Corporation. The Amended Complaint alleges that these entities have contracted with Hannon so that the money that they receive is actually funneled to Hannon directly or to entities that Hannon controls. Those entities include defendant Agritech (of which Hannon is president and sole officer), defendant RHR which is “nominally managed” by Hannon’s son, P.J. Hannon, and Similar Soils, Inc. Patrick J. Hannon is identified in Secretary of State filings as the president and director of Similar Soils. Reach and apply defendants J. Derenzo Company and J. Derenzo Construction Company, Inc. (Derenzo) have paid money to one or both of the Uxbridge landfills – payments which are then routed through the above named entities controlled by Hannon.
The Amended Complaint asserts the following counts against Hannon only: enforcement of Limited Guaranty (Count I); breach of contract (Count II); enforcement of Hannon Note (Count III); money lent (Count IV); unjust enrichment (Count V) and violation of Chapter 93A (Count VI). The motion by Hannon seeks to put a cap on liability as to Counts I and II (relating to the W&R Note) and seeks to dismiss Counts V and VI for failure to state a claim upon which relief may be granted. Count VII, labeled “alter ego/piercing the corporate veil,” is asserted against RHR, Similar Soils and Agritech and alleges that all three entities are “sham corporations” controlled by Hannon for the fraudulent purpose of hiding his assets. Count VIII for “fraudulent transfer” alleges that Hannon has, “on information and belief,” transferred all or some of his contract rights to income earned in connection with the two Uxbridge landfills; that count is asserted against RHR, Agritech, Gagua, and P.J. Hannon. Count IX, asserted against “all defendants,” seeks to reach and apply the house purchased by Gagua. It also seeks to reach and apply “contract benefits” and “business opportunities” belonging to RHR, Similar Soils,
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Agritech, Immanuel Corp. and L-5. The motions by defendants RHR, Agritech and P.J. Hannon pertain to Counts VII, VIII, and IX.
DISCUSSION
A. Hannon’s Motion to Dismiss
Hannon concedes that the Amended Complaint states a claim for relief as to those counts arising from the W&R Note and the Hannon Note (Counts I, II and III). As to Count I and II concerning the W&R Note, however, he argues that the Limited Guaranty by its terms limits his liability to $ 109,879.50 together with collection costs and asks that recovery be capped by that amount. As to Count V for unjust enrichment, Hannon contends that it is superfluous, given the availability of a contract remedy. As to the Chapter 93A claim, Hannon argues that it does not apply to disputes among parties involved in the same business venture and does not lie in any event where the conduct alleged is a “mere breach of contract.” This Court concludes that, at this early stage in the case, the motion must be denied.
Hannon’s argument as to the cap on his liability has some superficial appeal. Certainly, the language of the Limited Guaranty could not be clearer. It states that “[a]nything to the contrary in this Guaranty notwithstanding,” Hannon’s liability under that that contract is limited to “repayment of (i) no more than $ 109,879 of the Guaranteed Obligations (the Liability Limit”) plus (ii) 100% of any and all collection costs or expenses incurred by Lender against Guarantor, including reasonable attorneys’ fees and expenses.” Although Hannon also promised not to accept payments from either Ware or Recycling and, if he did, to hold those amounts in trust, the above quoted language limits plaintiff’s recovery for that breach to the amount expressly set forth in the Limited Guaranty.
7
If plaintiff had alleged only a breach of the Limited Guaranty, then this would be the end of the story. The Amended Complaint alleges more than a breach of that contractual obligation, however, asserting that, at the time that Ware and Recycling were in default on the W&R Note, Hannon essentially drained them of all of their assets. In doing so, he essentially rendered worthless the stock warrants that the companies had given to Bright Horizon so that, when ABCD Holdings exercised those warrants, both Ware and Recycling were empty shells saddled only with debt. This is enough in this Court’s view to state a claim that Hannon has engaged in unfair and deceptive practices in violation of G.L.c. 93A §2.
As the Supreme Judicial Court has recognized, the reach of Chapter 93A is quite broad and may even apply to conduct which is otherwise legal. Kattar v. Demoulas, 422 Mass. 1, 14 (2000) (upholding lower court’s denial of a motion to dismiss a 93A claim as to conduct involving the exercise of a right to foreclose). Because the statute does not attempt to define what constitutes an unfair or deceptive act or practice, the definition necessarily depends on the circumstances of each case. Commonwealth v. DeCotis, 366 Mass. 234, 242 (1974); see also Anthony’s Pier Four Inc., v. HBC Assocs. 411 Mass. 451, 473, 476 (1991) (use of discretionary contract right to force financial concessions violated c. 93A). Where the case involves a contract with a limitation of liability provision, that cap will not necessarily bar a broader recovery under chapter 93A: if the chapter 93A claim depends entirely on the breach of contract claim, it will, but if the conduct at issue is more tortious in nature, it will not. Standard Register Co., v. Bolton-Emerson Inc., 38 Mass.App.Ct. 545, 550 (1995) Thus, for example, a limitation of liability provision in a software agreement was not effective to preclude recovery under Chapter 93A where the conduct alleged was intentional misrepresentation, a tort- based theory. V. Mark Software Inc., v. EMC Corp., 37 Mass.App.Ct. 610, 619-621 (1994). In the instant case,
8
Hannon is accused of draining the assets of Ware and Recycling, which not only made it impossible not only for them to pay off the loan but also rendered the stock warrants that plaintiff had received as part of that loan transaction essentially valueless. This is conduct that sounds more in tort.
As to the defendant’s argument that 93A does not apply, this Court concludes that (at least based on the allegations of the Amended Complaint) this is not a dispute between two parties to the same venture: it arises from an arm’s length transaction negotiated between Bright Horizons on one hand and the two companies controlled by Hannon, Ware and Recycling. Although ABCD Holdings (as assignee of Bright Horizon’s rights) ultimately did become a majority shareholder in Ware and Recycling, that was only after the alleged wrongdoing had occurred. 1
B. Agritech’s Motion to Dismiss
Agritech, which was not a party to the two notes at issue in this case, is included as both a defendant and as a reach and apply defendant. The Counts asserted against it are Counts VII, VIII and IX of the Amended Complaint. This Court concludes that the Amended Complaint fails to state a claim upon which relief may be granted.
In naming Agritech as a defendant in Counts VII, plaintiff asserts that Agritech and Hannon are essentially one and the same. As Agritech points out, this is a novel use of the corporate veil piercing doctrine, which is ordinarily used to pierce the corporate form and hold individuals liable for the corporate debt. Here, the reverse is true: plaintiff is seeking to hold
1 Although the unjust enrichment claim may indeed prove to be duplicative or otherwise have no legal basis apart from the claims that survive, this Court declines at this point to dismiss it from the case. It is conceivable, for example, that facts may be developed that will call into question the enforceability of the Limited Guaranty, which was apparently negotiated between McLaughlin and Hannon when Hannon was his client. If plaintiff is deprived an adequate remedy at law, then this equitable remedy of unjust enrichment may be in order.
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Agritech liable for the debt of an individual officer to another corporate entity. Moreover, there is no allegation that Agritech itself has done anything to injury the plaintiff. In any event, the Amended Complaint does not set forth facts which would allow this Court to disregard the corporate form. See My Bread Baking Co. v. Cumberland Farms, Inc. 353 Mass. 614, 620 (1968) (listing relevant factors). To survive dismissal, a complaint must plead more than “labels and conclusions” but allege facts with “enough heft to show that the pleader is entitled to relief.” Iannachino v. Ford Motor Co., 451 Mass. 623, 636 (2008), quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). The Amended Complaint certainly contains conclusions: for example, it alleges that, on “information and belief,” Agritech is the “alter ego” of Hannon. It also goes on at some length to describe Hannon’s history of misconduct in other transactions. But as to specific facts supporting Count VII, it alleges only that Hannon is Agritech’s president, sole officer and director and derives revenue from it. This is not enough to survive a motion under Rule 12(b)(6).
Count VIII alleges that Hannon fraudulently transferred certain assets to Agritech in violation of the Uniform Fraudulent Transfer Act (UFTA). See G.L.c. 109A §§5-6. That requires a showing that Hannon as the debtor has made some “transfer” to Agritech after the debt to the plaintiff arose. Under the UFTA, a transfer is defined to mean the “disposing of or parting with an asset or an interest in an asset, and includes payment of money, release, and lease, creation of a lien or other encumbrance.” G.L.c 109A §2. The Amended Complaint, however, does not explain what Hannon transferred to Agritech. Plaintiff appears to argue that Hannon enjoyed certain business opportunities in connection with the Uxbridge landfills and that he set up Agritech to realize these opportunities. But that is not conduct that falls within the purview of the UFTA.
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Count IX is asserted against Agritech as a reach and apply defendant. According to the Amended Complaint, Agritech has received certain payments in connection with the operation of the two Uxbridge landfills beginning in December 2014, In naming Agritech as a reach and apply defendant, plaintiffs is apparently attempting to claim an entitlement to these payments. A valid action for reach and apply, however, required that the property being “reached” is a debt owed by the reach and apply defendant (here Agritech) to the principal defendant (here Hannon). Mass.Elec. Co. v. Athol One, Inc. 391 Mass. 685, 687 (1984). That necessarily requires a showing that the reach and apply defendant has some specific obligation, incurred through consideration, that is owed to the debtor. The Amended Complaint does not identify the debt that Agritech owes to Hannon.
C. Motion to Dismiss by P.J. Hannon and RHR, LLC
Like Agritech, neither P.J. Hannon nor RHR are parties to the Notes that give rise to this case, but each is named both as a defendant and a reach and apply defendant in the same counts that are lodged against Agritech. Just as those counts are deficient as to Agritech, they also fail to state a claim against P.J. Hannon and RHR, for the same reasons. That is, plaintiff has failed to allege specific facts to pierce the corporate veil or to otherwise hold RHR and P.J. Hannon responsible for Hannon’s misdeeds (Count VII). It does not identify what property Hannon has fraudulently transferred to either RHR or P.J. Hannon so as to support a claim under the UFTA (Count VIII). Finally, there is nothing in the Amended Complaint to suggest that either RHR or P.J. Hannon owe a debt to Hannon that can be reached by plaintiff and applied to satisfy Hannon’s debt (Count IX).
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CONCLUSION AND ORDER
For all the foregoing reasons, the Motion to Dismiss by Patrick Hannon is DENIED. The Motions to Dismiss by Agritech, Patrick J. Hannon and RHR, LLC are ALLOWED and it is hereby ORDERED that Counts VII, VIII and IX be DISMISSED as to defendants P.J. Hannon, RHR, LLC and Agritech, Inc. only.
________________________________
Janet L. Sanders
Justice of the Superior Court
Dated: December 7, 2016 read more

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Posted by Massachusetts Legal Resources - December 31, 2016 at 12:24 pm

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National Grid Holdings, Inc., et al. v. Commissioner of Revenue (Lawyers Weekly No. 11-064-16)

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

14-P-1662                                       Appeals Court

NATIONAL GRID HOLDINGS, INC., & others[1]  vs.  COMMISSIONER OF REVENUE.

No. 14-P-1662.

Suffolk.     December 11, 2015. – June 8, 2016.

Present:  Cypher, Carhart, & Blake, JJ.

Taxation, Abatement, Corporate excise, Accounting principle.  Public Utilities.  Debt.  Corporation, Stock.  Evidence, Settlement offer.

Appeal from a decision of the Appellate Tax Board.

John S. Brown (Donald-Bruce Abrams with him) for the taxpayers. read more

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Posted by Massachusetts Legal Resources - June 8, 2016 at 3:31 pm

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Realty Finance Holdings, LLC v. KS Shiraz Manager, LLC, et al. (Lawyers Weekly No. 11-110-14)

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

13-P-252                                        Appeals Court

REALTY FINANCE HOLDINGS, LLC[1]  vs.  KS SHIRAZ MANAGER, LLC, & others.[2]

No. 13-P-252.

Suffolk.     January 9, 2014.  –  September 5, 2014.

Present:  Katzmann, Fecteau, & Milkey, JJ.

Contract, What constitutes, Condition precedent, Choice of law clause, Damages.  Evidence, Parol evidence.  Practice, Civil, Summary judgment.  Damages, Breach of contract.

Civil action commenced in the Superior Court Department on August 21, 2008. read more

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Posted by Massachusetts Legal Resources - September 5, 2014 at 9:09 pm

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