Posts tagged "Inc."

MacDonald v. Jenzabar, Inc., et al. (Lawyers Weekly No. 11-005-18)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.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

17-P-45                                         Appeals Court

ALAN MACDONALD  vs.  JENZABAR, INC., & others.[1]

No. 17-P-45.

Suffolk.     October 10, 2017. – January 11, 2018.

Present:  Vuono, Meade, & Kinder, JJ.

Employment, Termination, Severance agreement.  Contract, Employment, Severance agreement, Release from liability, Performance and breach, Construction of contract.  ReleaseCorporation, Stock.

Civil action commenced in the Superior Court Department on August 17, 2012. read more

Posted by Stephen Sandberg - January 11, 2018 at 6:43 pm

Categories: News   Tags: , , , , ,

Boston Segway Tours, Inc., et al. v. Danley, et al. (Lawyers Weekly No. 09-066-17)

COMMONWEALTH OF MASSACHUSETTS

 

SUFFOLK, ss.                                                                             SUPERIOR COURT

                                                                                                            CIV. NO. 15-1498 BLS 2

 

 

BOSTON SEGWAY TOURS, INC. and IAN MEYER,

Plaintiffs,

 

vs.

 

                        ALLAN DANLEY and EASTERA PHOU

Defendants

 

MEMORANDUM OF DECISION AND ORDER

ON CROSS MOTIONS FOR PARTIAL SUMMARY JUDGMENT

 

This case began as a dispute over ownership interests in a company, Boston Segway Tours, Inc. (BST) that offers Boston tours by the use of Segways.  Plaintiff Ian Meyer claimed that he was the full owner, whereas the defendant Allan Danley claimed that he was the owner.  Beyond the question of ownership, each party asserted multiple common law counts against the other, as well as violations of Chapter 93A. Following a jury -waived trial on the limited question of ownership, this Court issued a written opinion determining that Meyer was the full owner.  See Findings of Fact and Rulings of Law dated January 12, 2016 (the January 2016 Decision).  Shortly thereafter, Danley filed for bankruptcy and a Trustee was appointed by the Bankruptcy Court.  The Trustee, on behalf of Danley, filed an Amended Counterclaim in this action.  The case is now before the Court on Cross Motions for Partial Summary Judgment as to the Amended Counterclaim. read more

Posted by Stephen Sandberg - January 11, 2018 at 4:24 am

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

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 read more

Posted by Stephen Sandberg - January 11, 2018 at 12:49 am

Categories: News   Tags: , , , , , ,

Fratea v. Unitrends, Inc., et al. (Lawyers Weekly No. 09-062-17)

COMMONWEALTH OF MASSACHUSETTS

SUFFOLK, ss.                                                                                         SUPERIOR COURT

                                                                                                                  SUCV2016-3182 BLS 2

 

 

 MICHAEL FRATEA, on behalf of himself

And all others similarly situated,

Plaintiff

 

vs.

 

  UNITRENDS, INC., BRADLEY MILLER, and PAUL BRADY

Defendants

 

 

MEMORANDUM OF DECISION AND ORDER

 ON DEFENDANTS’ MOTION TO DISMISS

 

 

This is an action alleging both statutory and common law claims for failure to pay overtime compensation.  In particular, the plaintiff alleges violations of the Massachusetts Wage Act, G.L.c. 149 § 148, and the Massachusetts Fair Wages Act, G.L.c. 151 § 1A and § 1B.  Plaintiff Michael Fratea was a salesman for the defendant Unitrends from December 2015 until March 2016, when he left the company.  On his last day of employment, Fratea received a separation agreement (the Agreement) containing a Release of all claims in exchange for a lump sum payment of $ 1,875.  He signed and returned the Agreement to the company one week later.  See Declaration of Lisa Crawford and Exhibit A attached thereto.[1]  The defendants now move to dismiss the Complaint on the basis of this Release.  This Court concludes that the Motion must be ALLOWED. read more

Posted by Stephen Sandberg - January 9, 2018 at 5:53 am

Categories: News   Tags: , , , , ,

JRM Hauling & Recycling Services, Inc. v. The Newark Group, Inc. (Lawyers Weekly No. 09-056-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
No. 2015-3790 BLS 1
JRM HAULING & RECYCLING SERVICES, INC.
vs.
THE NEWARK GROUP, INC.
FINDINGS OF FACT AND RULINGS OF LAW AFTER TRIAL
This contract dispute was tried before me, jury waived, from October 23 to 27, 2017. The
dispute arises out of a contract between plaintiff, JRM Hauling & Recycling Services, Inc.
(“JRM”), and defendant, The Newark Group, Inc. (“Newark”), wherein Newark agreed to
purchase and JRM agreed to sell “all secondary fiber produced by [JRM] at” JRM’s location in
Malden, Massachusetts (the “Agreement”). JRM claims that Newark wrongfully terminated the
Agreement in January 2015. By its terms, the Agreement was to run for ten years from its
execution on November 1, 2006 to October 31, 2016.
JRM asserts its claim in two counts: breach of contract and breach of the implied
covenant of good faith and fair dealing. Newark counterclaims, pursuant to a provision of the
Agreement, seeking indemnification from JRM for Newark’s costs, including legal fees and
disbursements, incurred defending any unsuccessful claims made by JRM.
I. FINDINGS OF FACT
The Agreement
JRM, a company with headquarters in Peabody, Massachusetts, is a hauler of trash and
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recycled material. JRM is under contract with municipalities and businesses to pick up at
curbside the trash generated by the occupants. JRM picks up trash that has been separated by the
occupants to put newspaper and other paper into one bin and all other trash in another bin. The
contract in this case concerns what JRM was to do with the “loose paper” picked up at curbside.
Under its contracts with the municipalities, JRM was required to guarantee that the materials it
collected from the residents would be recycled..
Newark is a New Jersey corporation with corporate offices in Cranford, New Jersey. In
February 2015, as discussed below, Newark was acquired by Caraustar Industries, Inc.
In 2005, JRM learned that a facility located at 1130 Eastern Avenue in Malden,
Massachusetts (“the Malden facility”) might be available as a location for JRM’s operations. The
facility had been operated previously as a recycling center. JRM began negotiations with the
owner of the facility, Robert Heffernan, who was, at that time, a Newark employee. At around
the same time in 2005, Newark was looking for sources of supply of Secondary Fiber/RMP for
use by its mill in Fitchburg, Massachusetts. Secondary Fiber/RMP is a description of the loose
news and other paper collected by JRM. The mill in Fitchburg manufactured recycled paper
board products from the secondary fiber. In particular, the mill was producing “graphic board” to
be used as game boards and covers for books.
Jonathan Gold was a long time executive of Newark. He started employment with Newark
in 1978. In 2006, Gold was Senior Vice-President of the Recycled Fibers Division of Newark.
Gold lived in Swampscott, Massachusetts. His family had a long history of working in the
recycle industry. Gold knew the president and sole shareholder of JRM, James R. Motzkin, and
Motzkin’s son, James (“Jimmy”) S. Motzkin. In 2006, Gold became involved, on behalf of
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Newark, in the discussions with JRM regarding a lease of the Malden facility and a supply
contract for secondary fiber for Newark.
According to Gold, Newark wanted to secure all of the output of secondary fiber from
JRM. Newark’s demand for secondary fiber for its Fitchburg mill was so large that it also
contracted with other suppliers of secondary fiber to provide the material. Gold was told by his
superiors to get sufficient supply under contract because it was very important to the success of
the Fitchburg mill. The Fitchburg mill was looking for as much as 10,000 tons monthly of
secondary fiber. Gold testified that at the time of the supply contract with JRM it did not matter
to Newark where JRM collected secondary fiber to deliver to Newark. He did not even consider
the possibility that JRM could deliver more secondary fiber than the Fitchburg mill could use. I
find this testimony to be credible.
JRM simultaneously negotiated (1) an agreement with Heffernan to lease the Malden
facility, (2) an agreement with Newark to provide approximately $ 250,000 in financing for the
purchase of equipment for the Malden facility; and (3) the supply Agreement with Newark that is
the subject of this case. A deal was struck. JRM entered into a lease for the Malden facility with a
term of 10 years, starting on July 1, 2005. JRM would not have entered into the lease for the
Malden facility if it were not also entering into the Agreement with Newark to supply the
Fitchburg mill. JRM needed a guaranteed market for secondary fiber to sustain its operations at
the new Malden facility.
The Agreement was entered into on November 1, 2006. The term of the Agreement was
for ten years, from November 1, 2006 to October 31, 2016. The form of the Agreement was a
standard form developed and presented by Newark. Both parties, however, were represented by
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counsel with respect to the negotiation of the Agreement. Paragraph 1 of the Agreement is as
follows:
1. AGREEMENT TO PURCHASE AND SELL
Buyer agrees to buy, and Seller agrees to sell, all secondary fiber
produced by Seller at the following location(s): 1130 Eastern
Avenue, Malden, MA on the following terms and conditions:
(Emphasis in the original). Paragraph 1 goes on to describe the price, grade and quality of the
secondary fiber. Paragraph 1 also includes a promise by Newark as the buyer to purchase a
minimum of 500 tons per month. The Agreement contains no specified limit in tons that
constitutes a maximum amount of secondary fiber that Newark was obligated to purchase.
The Agreement includes an integration clause stating that the Agreement constitutes the
entire agreement between the parties. The parties agreed that the Agreement may not be
amended, nor may compliance with its terms be waived, except pursuant to a writing signed by
the party to be charged. The Agreement precludes JRM from assigning any interest in the
Agreement without first obtaining the written consent of Newark. The Agreement provides that
“the duties, rights and remedies of the parties hereunder shall be governed by the substantive
laws of the State of New Jersey, without regard to its conflicts of law principles.” The Agreement
provides for the waiver of trial by jury with respect to any litigation arising out of the Agreement.
Finally, the Agreement provides that Newark, but not JRM, shall be indemnified for its legal fees
and disbursements and other costs incurred in enforcing or defending against any unsuccessful
claims made by JRM with respect to the Agreement.
At the time JRM entered into the Agreement with Newark, the Malden facility was the
only location that JRM used to receive recycled materials from its trucks picking up trash from
4
customers pursuant to JRM’s contract with municipalities and businesses. The JRM trucks
picked up trash at curbside, drove to Malden, and then simply dumped the trash on the floor of
the Malden facility. Recycled paper was dumped in a separate area from other recyclables. A
JRM employee then pushed with a loader vehicle the loose paper onto a conveyer belt leading to
a compactor. Another employee watched the loose paper on the belt and pulled out anything that
was not paper. The belt dropped the paper into the compactor. From the compactor, the paper
was pushed into the trailer of a truck. The paper was not baled or otherwise processed. The paper
was delivered to Newark loose.
Under the Agreement, Newark could select a mutually agreeable location for Newark to
pick up the secondary fiber from JRM. The parties subsequently agreed, however, that JRM
would deliver the loose paper/secondary fiber to Newark for an additional price per ton.
As referenced, Gold, the lead negotiator for Newark of the Agreement, testified that
Newark did not care at the time of entering into the Agreement whether the secondary fiber
delivered from JRM would come from the Malden facility or elsewhere. Notwithstanding the
language in the Agreement stating that Newark was obligated to purchase “ all secondary fiber
produced by Seller at the following location(s): 1130 Eastern Avenue, Malden, MA”, Gold
testified that the specification of the collection location was insignificant. I find this testimony to
be credible, given the heavy demand for secondary fiber anticipated by Newark for its Fitchburg
mill.1
1 Newark called as a witness Ms. Lynn Herro. Herro currently works for Caraustar, and
was previously employed by Newark as corporate controller. She works at the corporate office in
New Jersey. She testified that she had no role in negotiating the Agreement with JRM.
Nevertheless, she offered the opinion that the reason for specifying the location from which
Newark was obligated to purchase was to impose some limit on the quantity Newark was to buy.
5
Performance of the Contract Until 2014
For eight years, from 2006 to mid 2014, the parties operated under the Agreement with no
difficulties, disagreements or disputes. JRM typically delivered secondary fiber to Newark each
work day (on average, twenty days per month), taking two, and sometimes three, truck loads per
day to Newark. Each delivery was approximately 20 to 25 tons of secondary fiber. Thus, using
the estimate of 25 tons per load, JRM could deliver secondary fiber to Newark in the amount of
approximately 1,000 to 1,500 tons per month. For the calendar year 2014, however, JRM’s
delivery of secondary fiber to Newark averaged 933 tons per month.
Market Changes Affecting Newark
In or about 2010, market demand for the products manufactured by Newark at its
Fitchburg mill decreased significantly. In 2011, Newark began the process of changing the
products produced at its Fitchburg mill to paperboard that required much less loose paper/
secondary fiber. As a result, Newark began selling the loose paper received from JRM to
customers in the domestic and export market. Newark suffered losses, at an increasing rate, on
those transactions. By January 2014, Newark’s Fitchburg mill was using only ten per cent of the
secondary fiber being furnished by its suppliers. Newark was experiencing substantial losses as a
result of the Agreement with JRM.
Newark Considers Getting Out of the Contract
In February 2014, Mr. Frank Papa, Newark’s CEO, stated to Gold that “the mill needs
I find that although Herro’s testimony might be correct in another context, in this case Gold was
adamant that there was no limit to what Newark wanted to buy. The location designation was
merely to reference the one and only place JRM operated a facility to collect material for recycle.
The actual location of the JRM collection facility was insignificant to Newark.
6
your help to try to minimize this expense. We can’t be absorbing a $ 1.5 million loss for next
year. I’m confident you can get creative and find a home for the news.”
A few months later, Newark, for the first time in the eight year history of the Agreement,
claimed that the paper delivered by JRM was excessively contaminated with prohibited food
materials. The claim was raised by officials at the Newark mill in Fitchburg. Gold investigated
the claim. He concluded that the claim of contamination was baseless. The rejection of JRM’s
load was, according to Gold in an email at the time, “laughable.” Gold recommended in writing
to his superiors that Newark divert the tonnage from JRM to Newark’s plant in Salem,
Massachusetts instead of Fitchburg. Gold would then cause the Salem plant to sell the secondary
fiber to overseas markets. The other option, Gold wrote to his superiors, was to terminate the
Agreement for default on quality. Gold recommended against this option because the claim of
contamination would not hold up. Newark elected not to terminate the Agreement on the ground
of poor quality of the delivered secondary fiber.
JRM Fails to Deliver Loose Paper to Newark on January 13, 2015
In the several years prior to 2015, JRM planned to construct a state-of-the-art recycling
facility on property owned by the Moskins. The facility would have the capability to handle,
refine and process various types of recycled material (e.g., paper, cardboard, glass, plastic,
aluminum and steel) into raw materials for use in manufacturing. JRM’s owners created a
separate company called GreenWorks, Inc. in 2013 to own and operate this new facility. A major
investment with respect to GreenWorks was to purchase and install a large, technologically
sophisticated, sorting machine. The GreenWorks facility cost at least $ 18 million to develop.
JRM’s owners expected that GreenWorks could do more complete processing of recycled
7
material, enabling it to sell the material in finer and higher grades at higher prices. On January
12, 2015, JRM’s owners opened GreenWorks for business.
In January 2015, JRM was aware that Newark was losing money under the Agreement to
purchase JRM’s secondary fiber. Likewise, Newark was aware of the development, construction
and opening of GreenWorks by the owners of JRM. JRM’s owners intended, ultimately, to move
all of its operations from the Malden facility to GreenWorks. The lease for the Malden facility
expired at the end of June 2015. JRM’s owners testified that there was space at GreenWorks
where the JRM trucks could dump the loose paper for delivery to Newark exactly as had been
done for years under the Agreement. In fact, there was capacity at GreenWorks for GreenWorks
or JRM to increase the amount of secondary fiber collected for delivery.
As the GreenWorks facility was in the process of becoming operational in mid-January
2015, GreenWorks needed to test its new sorting machine. JRM directed its drivers to deliver
loose paper to GreenWorks, instead of the Malden facility, to be used to test the machine. JRM
failed to notify Newark that JRM would not be delivering its daily tons to Newark. Immediately
upon the lack of a delivery to Newark, on January 13, 2015, Newark emailed JRM inquiring
whether JRM intended to make deliveries to Newark. JRM responded the same day stating that it
was testing the machine at GreenWorks and “if you want material we have it.” Gold, on behalf of
Newark, responded within 45 minutes: “Let’s meet to go over the future. Name the time, place
etc. I have no problem with ending the loads that were going to Fitchburg and now Salem (your
call but no problem at all). Just want to make sure I finish all orders that I have taken before we
stop.” JRM responded in an email: “We are working out a lot of kinks this week. Testing speeds,
angles, etc to make sure we have a good product. We definitely want to work together and would
8
like to sit down to go over some details. Give me a week or two to get things worked out and we
can meet up then or at a break in the action.” Jimmy Motzkin testified, credibly, that JRM did not
intend to stop delivering material to Newark as called for under the Agreement.2 Gold responded
to Jimmy Motzkin’s email: “Perfecto and a big congratulations with the start up.” As indicated
by the emails, and as testified to by Gold, Newark had no objection to JRM suspending deliveries
on January 13, 2015.3 Gold testified: “We didn’t want the material.”
Gold testified that he had been aware of the plan to build GreenWorks by the owners of
JRM for years. Further, Gold was aware that JRM intended ultimately to move its operations
from the Malden facility to a location at GreenWorks. He understood that JRM would continue
to supply loose paper/secondary fiber to Newark under the Agreement from the GreenWorks
location starting in January 2015. Gold testified that JRM’s plan was of “no concern” to him. I
credit the testimony of Gold.
Newark Decides to Terminate the Agreement
Within three days of the missed delivery, by January 16, 2015, Newark decided to
terminate the Agreement. Gold testified that the CEO of Newark, Mr. Papa, instructed Gold to
“end the deal.” In an exchange of emails on that date among executives at Newark, reference is
made to a meeting that was scheduled with JRM on January 20, 2015. Gold invites Chuck Stone,
2 The parties stipulated that “[a]fter January 13, 2015, JRM continued delivering at least
some of the secondary fiber it collected to the Malden Facility.”
3 The record contains an exchange of emails from Newark (Marc Galardi) and Jimmy
Moskin on January 14, 2015. Newark had some existing orders for loose paper to fulfill. Galardi
mentions that Newark may be “facing roll over charges” if it does not receive material from
JRM. No evidence was presented at trial that Newark actually experienced the charges. JRM
responded by offering loose paper for pick up and referencing the agreement with Gold to sit
down for a meeting.
9
the Vice President/General Manager of the Northeast Region of Newark’s Recycled Fibers
Division, from the corporate office in New Jersey to attend the meeting. Stone asks that two
additional Newark employees attend. In the email, Gold states “come to JRM as I am putting an
end to the deal.”
A meeting between Newark and JRM occurred, over lunch at a restaurant, on January 20,
2015. Five people testified at trial regarding what was said at the meeting: James Motzkin,
Jimmy Motzkin, Gold, Stone, and Marc Galardi, another Newark employee. According to the
Motzkins, Gold stated at the meeting that effective immediately Newark would no longer accept
any material from JRM. The Motzkins testified that they were shocked at the termination. They
did not say that JRM agreed to the termination.4 Gold testified that he told the Motzkins at the
meeting that he had been given marching orders: Newark could no longer take delivery of
materials. Gold could not recall any response from the Motzkins. Stone testified that there was
discussion about Newark not wanting the material but he denied that Gold said Newark would
not accept deliveries. Stone also testified that James Motzkin said that “they will do whatever
[Gold] wanted to do.” Galardi testified that he could not recall the discussions at the meeting.
After the lunch meeting, the participants adjourned to a pre-arranged tour of the new
GreenWorks facility and there were discussions about future business opportunities.
I find the testimony of the Motzkins and Gold to be credible. At the meeting on January
20, 2015, Newark refused further deliveries under the Agreement. JRM did not assent to the
4 At trial, Jimmy Motzkin was confronted with his deposition where he testified that he
said “Okay” in response to Gold’s rejection of future deliveries. The context of the
“Okay” response at deposition was not provided. The use of the word “Okay” is ambiguous. It
does not necessarily mean that Jimmy Motzkin agreed to the termination of the Agreement.
10
termination of the Agreement.
In February 2015, the corporate office of Newark prepared a document to terminate the
Agreement in writing. Newark was about to be sold to Caraustar Industries, Inc. Gold was urged
to obtain a written confirmation from JRM that the Agreement was terminated. By email dated
February 7, 2015, Gold states to JRM that “with the sale of the company eminent [sic] Feb 17,
I’ve been asked to get all contracts closed or ended. Please see the attachment on the loose new
deal. Let me know when you have a chance.” The attachment is a document entitled Termination
Agreement. The Termination Agreement, dated February 1, 2015, purports to terminate the
November 1, 2006 Secondary Fiber Purchase Agreement and states that “neither party shall have
any further liability to the other” after the termination date. The document is signed by Gold.
Gold testified, credibly, that when he sent this email on February 7, 2015, he knew there had
been no agreement by JRM to terminate the Agreement. JRM responded by requesting a meeting
to discuss the proposed Termination Agreement. In fact, JRM never accepted the proposed
Termination Agreement and did not sign it.
On February 17, 2015, the date of the acquisition of Newark by Caraustar, Gold resigned
from his officer position at Newark. Starting in April 2015, Gold began to perform some
consulting work for JRM. Stone continued to be employed by Caraustar until his retirement in
2017. At the end of March 2015, Caraustar inquired of Marc Galardi (still employed by Newark)
about the status of the Agreement. Galardi responded in an email that “JRM has stopped bringing
material in, but the contract is still in place.”
JRM’s Response to Termination of the Agreement
JRM’s owners intended to move JRM’s collection of loose paper from the Malden
11
facility to GreenWorks once GreenWorks was up and operating. According to James Motzkin,
JRM had no reason to anticipate that Newark would object to the transfer of JRM’s collection
activity to the GreenWorks location. In fact, Motzkin had discussed JRM’s plan to move JRM’s
operation to GreenWorks with Gold, and Gold was supportive of the move. Gold never
expressed any concern over the proposed move. It was JRM’s intention to collect loose paper,
and deliver it to Newark, exactly as JRM had been doing from the Malden facility. JRM wanted
the Agreement with Newark to continue for the life of the contract.
After the January 20, 2015 meeting, JRM began to look for other purchasers of the loose
paper that had previously been delivered to Newark under the Agreement. According to James
Motzkin’s testimony there was essentially no market for loose paper. JRM could not obtain the
purchase price under the Agreement for the loose paper that Newark was obligated to pay. To
mitigate its losses, JRM decided to have GreenWorks process the loose paper to a higher, finer
grade and baled, for which there was a market. JRM was then able to sell the fully processed and
baled secondary fiber at a price higher per ton than what would have been paid by Newark for
loose paper. The cost, however, of processing the loose paper to a baled, refined degree was a
cost that JRM would not have incurred if Newark had continued the Agreement to buy
unprocessed, unbaled loose paper.
Damages
JRM claims that it has suffered damages as a result of Newark’s unjustified termination
of the Agreement. JRM calculates its damages to be $ 2,169,948 (Exhibit 43). Findings regarding
the damages calculation are in Part III, below.
12
II. ANALYSIS AND CONCLUSIONS OF LAW
The Agreement provides that the “duties, rights, and remedies of the parties” shall be
governed by New Jersey law. Because the sale of secondary fiber under the Agreement is a sale
of “goods” as defined by the Uniform Commercial Code (“UCC”), N.J. Rev. Stat. § 12A: 2-101,
105 et seq, the New Jersey UCC will be applied. It will be cited as UCC §2-xxx. New Jersey also
recognizes the implied covenant of good faith and fair dealing that applies to all contracts. To
prove a breach of the implied covenant, JRM must prove (i) the existence of a contract, (ii) that
Newark engaged in conduct, without good faith, with bad motive or intention, for the purpose of
depriving JRM of the rights and benefits of the parties’ contract, (iii) that JRM suffered damages
as a result of that conduct, and (iv) that JRM performed its own contractual duties, unless
excused. Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Ctr. Assocs., 182 N.J. 210,
224-225 (2005).
A. Repudiation of the Agreement
As referenced above, I find that Newark unilaterally terminated the Agreement on
January 20, 2015. Newark informed JRM that it would no longer accept deliveries of secondary
fiber from JRM under the Agreement. JRM did not consent to the termination.
Under UCC § 2-610, “[w]hen either party repudiates the contract with respect to a
performance not yet due the loss of which will substantially impair the value of the contract to
the other” the aggrieved party has certain options. I find that Newark’s repudiation of the
Agreement substantially impaired the value of the contract to JRM. The Agreement, providing a
guaranteed price to JRM for loose paper, had approximately 21 months left before the agreedupon
term ended. Under UCC § 2-610 (b) and (c), JRM was entitled, upon repudiation, to
13
suspend its own performance and to seek any remedy for breach.
Newark makes three legal arguments to justify the termination of the Agreement on
January 20, 2015. First, Newark contends that the failure of JRM to deliver loose paper on
January 13 – 20, 2015, was a breach of the Agreement, relieving it from performance. Second,
Newark avers that JRM abandoned the Agreement by failing to provide adequate assurance of
performance. Third, Newark says that JRM was planning to deliver loose paper from
GreenWorks, not the Malden facility. Thus, Newark had no obligation to continue purchases. I
will address each argument in turn.
The parties agree that the contract at issue is an installment contract as described in UCC
§ 2-612. JRM was obligated to deliver “all” of its secondary fiber/loose paper in separate lots.
The Agreement does not specify when the deliveries should occur. The Agreement provides that
the goods will be picked up by Newark pursuant to “a pickup schedule, which [Newark] may
revise from time to time in its reasonable discretion.” According to the parties’ stipulated facts, at
some date after the execution of the Agreement, the parties entered into another agreement for
JRM to deliver the goods to Newark for an additional price per ton. A copy of this delivery
agreement is not in the record. Accordingly, the record reflects no obligation for JRM to deliver
every business day, every week or every month. JRM was, however, obligated to sell “all” of its
output of secondary fiber to Newark. The evidence shows that the practice of the parties was for
JRM to deliver loose paper to Newark every business day.
Newark contends that the failure of JRM to deliver loose paper on January 13 – 20, 2015,
was a breach, or default, under the Agreement. If the failure to deliver was a “breach [that] goes
to the whole contract (12A: 2-612)”, Newark may cancel the Agreement. UCC § 2-711(1). The
14
reference to § 2-612 invokes the applicable provisions of law governing an installment contract
like the Agreement here.
Under UCC § 2-612(3), when a “default with respect to one or more installments
substantially impairs the value of the whole contract there is a breach of the whole.” I find that
the failure of JRM to deliver loose paper on January 13 – 20, 2015, did not impair the value of the
Agreement to Newark. Newark was losing money on its re-sale of loose paper. As stated by
Gold: “We didn’t want the material.” I find that the suspension of delivery by JRM on January
13, 2015, was viewed by Newark as an opportunity, not an impairment. The opportunity was to
use the suspension of delivery to “end the deal” as Gold did on January 20, 2015.
Next, Newark says that JRM failed to provide adequate assurance that it intended to
continue to perform following the suspension of deliveries on January 13, 2015. Newark argues
that failure to provide reasonable assurance from JRM to Newark constitutes repudiation by
JRM. UCC § 2-609(1) provides that “[w]hen reasonable grounds for insecurity arise with respect
to the performance of either party the other may in writing demand adequate assurance of due
performance and until he receives such assurance may if commercially reasonable suspend any
performance for which he has not already received the agreed return.”
Newark’s argument under UCC § 2-609 fails at more than one level. First, Newark’s
“insecurity” must arise from a threat to its “expectation of receiving due performance” that will
not impair the value of the contract. Id. As described above, Newark was not insecure about
JRM’s performance. On the contrary, it wanted to end the contract. Second, I find that the emails
from Marc Galardi to Jimmy Motzkin on January 13 and 14, 2015, are not, when viewed in
context, demands for assurance of performance of the whole contract. Galardi was inquiring
15
regarding the short term interest of Newark to obtain material to fulfill a handful of existing
orders. Gilardi did not express “insecurity” as to the contract as a whole and did not demand
performance of the contract as a whole. At precisely the same time as Galardi’s emails, Galardi’s
superior, Gold, stated to JRM that he had “no problem with ending the loads that were going to
Fitchburg and now Salem (your call but no problem at all).” Third, JRM did, in fact, provide
assurance that it could deliver the short-term loads requested by Galardi.
Finally, UCC § 2-609 requires “reasonable” grounds and “adequate” assurance.
According to Official Comment 3 to this UCC section, those terms should be understood by
applying commercial standards in accordance with commercial practices. JRM and Newark had
been performing under the Agreement for more than eight years prior to January 13, 2015. The
emails between the parties at that time propose reasonable steps to determine both parties’ intent
as to performance under the Agreement. A meeting was set for seven days5 after January 13,
2015, on January 20, 2015. Rather than engage in a commercially reasonable discussion at that
meeting regarding the continuation of performance under the Agreement, however, Newark
repudiated the Agreement. At no point did JRM repudiate the Agreement.
Newark’s last line of defense to the finding that it repudiated the Agreement on January
20, 2015, is to point to the fact that JRM intended, ultimately, to move its operation of collecting
the truck loads of curbside pick up of loose paper to GreenWorks rather than the Malden facility.
Newark argues that it was only obligated under the Agreement to purchase loose paper collected
5 Even if Newark’s emails from Galardi could be viewed as a justified demand for
assurance of performance, under UCC § 2-609(4), JRM had a “reasonable time not exceeding
thirty days” to provide assurance. I find that JRM acted reasonably by proposing, then attending,
a meeting within seven days.
16
at the Malden facility.
On January 20, 2015, JRM was still operating the Malden facility. Newark repudiated the
Agreement on that date because it was losing money on the deal, not because JRM might in the
near future begin to collect material at GreenWorks rather than Malden. The collection location
was immaterial to Newark at the time the Agreement was entered into, and the location remained
immaterial to Newark after it chose to repudiate.
Newark unjustifiably repudiated the installment Agreement on January 20, 2015. JRM
did not assent in writing or otherwise to the termination. JRM is entitled to proceed to the
remedies provided to a seller upon default by the buyer as described in UCC §§ 2-703, 2-706,
and 2-708.
III. DAMAGES
UCC § 2-703 lists the remedies available to a seller when the buyer has repudiated the
contract. Among the remedies are to resell the goods and recover damages (§ 2-706), or to
recover the difference between the contract price and the market price for the goods (§ 2-708(1)).
Here, JRM is proceeding under UCC § 2-708(1). See JRM’s Proposed Conclusions of Law, ¶ 15.
JRM’s theory of damages is that the market price for the loose paper that, absent repudiation,
would have been sold to Newark, can be determined by the evidence of what GreenWorks did
with the loose paper. JRM delivered the loose paper to GreenWorks for no consideration.6
GreenWorks then processed the loose paper to a higher, refined degree than mere loose paper,
and baled the finished product (‘finished paper”). GreenWorks sold the finished paper to third
6 Because JRM delivered the loose paper to GreenWorks for no consideration there was
no “resale” that would allow a calculation of damages pursuant to UCC § 2- 706.
17
parties, thereby determining a market price for the finished paper.
To calculate damages, JRM then applies a cost factor to refining the loose paper to
become finished paper. JRM subtracts that cost from the market value (total revenue received) of
the finished paper. The calculation produces a “net return.” The “net return” is a loss in 2015 and
a profit in 2016. The last step in JRM’s damages theory is to take the total revenue that would
have been received by JRM from Newark if the contract had been performed, and adjust that
number by the “net return.”
UCC § 2-708(1) provides as follows:
Subject to subsection (2) and to the provisions of this Chapter with respect to
proof of market price (12A: 2-723), the measure of damages for non-acceptance
or repudiation by the buyer is the difference between the market price at the time
and place for tender and the unpaid contract price together with any incidental
damages provided in this Chapter (12A: 2-710), but less expenses saved in
consequence of the buyer’s breach.
JRM does not seek the remedy of profit it would have earned under the Agreement, pursuant to
subsection (2) of § 2-708.7 It proceeds under § 2 – 708(1), as guided by UCC § 2-723.
Under JRM’s theory of damages, it bears the burden of proving three measurement points
necessary for JRM’s calculation of damages: (1) the contract price for loose paper that Newark
was obligated to pay, (2) the market price of the loose paper at the time and place of tender, and
(3) the reasonable quantity of loose paper that Newark was obligated to buy. JRM’s damages
calculation is contained in Exhibit 43. The calculation was prepared by JRM’s long-time
7 As referenced above, JRM is explicitly proceeding under UCC § 2-708(1), not § 2-
708(2). JRM’s Proposed Conclusions of Law, ¶ 15. Moreover, JRM offered no evidence to show
the profit margin that it, as opposed to GreenWorks, experienced prior to the breach. JRM’s
damages witness (John Hoffman) testified that he did not prepare any analysis of JRM’s profits
in 2014.
18
accountant, John Hoffman. Hoffman is a certified public accountant who has acted as JRM’s
outside accountant for more than twenty years. He has also served as the outside accountant for
GreenWorks since its inception. At trial, Hoffman explained the calculations.
As to the first measurement point, Hoffman used the minimum price per ton of loose
paper that Newark agreed to pay. That price is $ 57.50 per ton of loose paper. The price of $ 57.50
per ton is referenced in the “Minimum Price Rider” attached to the Agreement. While Newark
argued that the minimum price rider “provides for suspension of the minimum price in certain
circumstances” (JRM Proposed Findings of Fact ¶ 17), there was insufficient proof that any such
circumstances applied to JRM’s calculation of damages. I find that $ 57.50 per ton is the correct
price to use in calculating JRM’s damages.
The second measuring point under JRM’s theory of damages is “the market price at the
time and place for tender” of the goods not purchased by Newark. See UCC § 2-708(1). JRM
elected to offer no evidence of what the market price for loose paper was in the 2015 – 2016
period. Instead, it proceeded on a theory of showing what a reasonable estimate of market price
for loose paper could be based on a comparable market.
UCC § 2-708(1) directs the court to UCC § 2-723 for a description of acceptable proof of
market price. As stated in the Official Comment to that section, “[w]here the appropriate market
price is not readily available the court is here granted reasonable leeway in receiving evidence of
prices current in other comparable markets or at other times comparable to the one in question.”
JRM introduced evidence showing that there was no market for loose paper, or at least there was
no “readily available” market. Consequently, in its effort to mitigate damages, JRM decided to
use the market for finished paper as a comparable market. While it may be that the market for
19
finished paper could be used as a “comparable market” under the circumstances of this case,
JRM failed to offer acceptable evidence to adjust the finished paper price to a reasonable
estimate of the price of loose paper.8 In fact, nowhere in its damages analysis (Exhibit 43) or in
Hoffman’s testimony is there evidence that would allow a reasonable estimate of the market price
of loose paper in the 2015 – 2016 period. This is the fundamental flaw in JRM’s claim for
damages.
Hoffman detailed in Exhibit 43 the per ton price actually obtained by GreenWorks from
third parties for finished paper. That evidence was unrebutted. As shown on Exhibit 43, the
comparable market price for finished paper varied significantly over the remaining 21 months of
the Agreement. By the use of actual prices obtained for finished paper, JRM satisfied the
requirement of UCC § 2- 708(1) to show market price in a comparable market “at the time and
place for tender.”
The market price for finished paper must be adjusted, however, to come to a reasonable
estimate of the market price for loose paper. Finished paper sells at a higher price because the
product is refined and baled. It costs more to refine and bale finished paper than to sell loose
paper. Guided by that fact, JRM embarked on an analysis of the cost of producing finished paper.
Hoffman calculated the cost of refining and baling the loose paper to make the product finished
paper. Hoffman calculated the cost for processing the paper to be $ 75.16 per ton and $ 73.50 per
ton for 2015 and 2016, respectively.
JRM’s proof of damages goes awry at this point. Instead of proving the market price of
8 For example, it is possible that there could be evidence that the price of loose paper
fluctuates at a certain percentage below the price of finished paper. There was no such evidence
offered.
20
loose paper, even by way of deduction or inference, JRM limits its proof to the cost of processing
loose paper to a finished product. Then, JRM performs a “net return” calculation measuring
GreenWorks’ profit and loss. For example, the calculation for 2016 in Exhibit 43 simply
calculates that GreenWorks made a profit on the sale of finished paper. Then, inexplicably, the
damages to JRM for that year are calculated to be the revenue JRM would have received had
Newark performed, less the profit GreenWorks made. This damages formula is inconsistent with
UCC § 2-708(1). JRM’s proof does not prove anything about the market price of loose paper
during the 2015 – 2016 period. On that basis alone, JRM fails to prove damages.
Even if JRM’s damages model is considered further, it is erroneous in its methodology.
First, the calculation of cost per ton is faulty. The premise of the calculation was to determine a
cost per ton of all of GreenWorks’ output, including product from glass, metals and paper. The
calculation uses 100% of GreenWorks’ costs, but fails to divide by 100% of GreenWorks’
output, when calculating cost per ton.9 If all output is considered, including cardboard, the cost
per ton of product from GreenWorks would be $ 59.15 and 53.80 for 2015 and 2016, respectively.
Use of those revised cost per ton numbers shows that GreenWorks made a substantial profit on
the sale of finished paper derived from loose paper delivered by JRM. Second, JRM fails to
explain the rationale of calculating damages by taking expected revenue from the Agreement in
9 Hoffman offered Exhibit 40 as his calculation of cost. As described by Hoffman, he
compiled the total cost of operating the GreenWorks facility for each of 2015 and 2016, and the
monthly average for each year. From the records of GreenWorks, Hoffman took the number of
total tons processed at the facility for the year. The number of total tons processed included all
materials processed at the facility, not just paper. Hoffman divided the cost number by the total
tons of product, except that he reduced by 75% the tons of cardboard product, to come to the
price per ton for processing. The reduction for cardboard is inconsistent with the purpose of the
calculation.
21
2015 – 2016, and adjusting that number by GreenWorks’ net profit or loss. That calculation is
comparing apples to oranges. It says nothing about JRM’s loss or profit, nor does it provide a
basis for estimating the market price for loose paper in 2015 – 2016.
The third, and last, measuring point for JRM’s theory of damages is to prove the
reasonable quantity of loose paper that Newark was obligated to buy. Because JRM failed to
prove a reasonable estimate of price for loose paper in the 2015 – 2016 period, this measuring
point does not need to be addressed. Nevertheless, I make the following finding for the record.
JRM’s damages model, Exhibit 43, is built on the assumption that JRM could have delivered to
Newark a much larger amount of loose paper than it ever did during the time the Agreement was
operating. The damages model assumes 20,816 tons delivered in 2015 and 20,217 tons delivered
in 2016. In contrast, the tonnage delivered to Newark in 2014 was approximately 1,000 tons per
month, or 12,000 tons for the year. Testimony at trial showed that the Moskins intended in 2015 –
2016 to increase the amount of loose paper picked up because JRM had more capacity at
GreenWorks. UCC § 2-306 provides guidance for evaluating the reasonable expectations of the
parties to an output contract like this one. “A term which measures the quantity by the output of
the seller . . . means such actual output . . . as may occur in good faith, except that no quantity
unreasonably disproportionate to . . . any normal or otherwise comparable prior output . . . may
be tendered or demanded.” I find that Newark was not obligated to purchase the disproportionate
amounts of approximately 20,000 tons in the years 2015 – 2016.
In sum, JRM elected to transfer the loose paper it collected after January 20, 2015 to
GreenWorks for no consideration, thereby eliminating the typical measure of damages based on
resale of the goods. UCC § 2-706. It chose to seek damages under UCC § 2-708(1). There was,
22
however, no proof of the market price of loose paper after Newark’s repudiation. The evidence
offered at trial by JRM was insufficient to prove that JRM suffered damages.
ORDER
JRM’s claims for breach of contract and breach of the implied covenant of good faith and
fair dealing must be DISMISSED for failure to prove damages. Under the Agreement, “Seller
shall also indemnify Buyer for its costs (including legal fees and disbursements) in enforcing, or
defending against any unsuccessful claims made by Seller with respect to, this Agreement.”
Newark counterclaims under that provision of the Agreement. Newark is hereby ORDERED to
serve, pursuant to Superior Court Rule 9A, its motion for legal fees and disbursements,
accompanied by supporting material and affidavits. The deadline for service of the motion is
January 8, 2018. Both parties should indicate in their respective motion and opposition papers
whether they wish to have an evidentiary hearing on the motion.
By the Court,
Edward P. Leibensperger
Justice of the Superior Court
Date: December 7, 2017
23 read more

Posted by Stephen Sandberg - January 6, 2018 at 9:54 am

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City of Beverly v. Bass River Golf Management, Inc., et al. (Lawyers Weekly No. 11-002-18)

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-171                                        Appeals Court

CITY OF BEVERLY  vs.  BASS RIVER GOLF MANAGEMENT, INC., & another.[1]

No. 15-P-171.

Essex.     November 14, 2016. – January 5, 2018.

Present:  Sullivan, Maldonado, & Neyman, JJ.

Contract, Municipality, Performance and breach.  Municipal Corporations, Contracts.  Consumer Protection Act, Trade or commerce, Unfair or deceptive act.  Bankruptcy, Stay of other proceedings.  Practice, Civil, Directed verdict, Amendment, New trial, Instructions to jury.  Judgment, Amendment. read more

Posted by Stephen Sandberg - January 5, 2018 at 4:01 pm

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CALM Golf, Inc. v. Read, et al. (Lawyers Weekly No. 09-055-17)

COMMONWEALTH OF MASSACHUSETTS
PLYMOUTH, ss. SUPERIOR COURT
CIVIL ACTION
NO. 13-01214
CALM GOLF, INC.
vs.
RENE J. READ, IN HIS CAPACITY AS TOWN MANAGER OF THE TOWN OF
DUXBURY, AND ROBERT TROY, ESQ.
MEMORANDUM OF DECISION AND ORDER ON
DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
This action arises out of an award to plaintiff, CALM Golf, Inc.(“Calm”), from the Town
of Duxbury (represented by its Town Manager, Rene Read) (“Duxbury”), to operate the North
Hill Country Club and Golf Course (“North Hill”).1 Calm alleges that Duxbury is liable to it for
breach of contract (Count I), violation of Chapter 93A (Count IV), and violation of the
Massachusetts Public Bidding Statute, G. L. 30(b) (Count VI).
Before the Court is Duxbury’s motion for summary judgment. A proper review of the
record shows that the core facts are largely undisputed. It also shows that this case boils down to
two simple, controlling propositions. First, did Duxbury’s award to Calm equate to a contract,
either express or implied? Second, was Duxbury required to conclude a formal contract with
Calm despite the fact that, as the result of litigation brought by a disappointed bidder – the thenextant
manager of North Hill, Johnson Golf Management, Inc. (“Johnson) – this Court ordered
Duxbury not to contract with Calm but rather to continue its contract with Johnson? read more

Posted by Stephen Sandberg - December 22, 2017 at 10:52 pm

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Wildlands Trust of Southeastern Massachusetts, Inc., et al. v. Cedar Hill Retreat Center, Inc., et al. (Lawyers Weekly No. 09-046-17)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
SUCV2016-01432-BLS2
WILDLANDS TRUST OF SOUTHEASTERN MASSACHUSETTS, INC. &
JOHN AND CYNTHIA REED FOUNDATION,
Plaintiffs
vs.
CEDAR HILL RETREAT CENTER, INC. &
BALLOU CHANNING DISTRICT UNITARIAN UNIVERSALIST ASSOCIATION, INC.,
Defendants
MEMORANDUM OF DECISION AND ORDER
ON DEFENDANTS’ MOTIONS TO DISMISS
PLAINTIFFS’ AMENDED COMPLAINT
This is an action seeking to enforce a Conservation Restriction imposed on real property located in Duxbury, Massachusetts (the Property). Plaintiffs are the Wildlands Trust of Southeastern Massachusetts, Inc. (Wildlands Trust) and the John and Cynthia Reed Foundation (the Foundation). Plaintiffs allege that the current owner of the Property, the defendant Cedar Hill Retreat Center, Inc. (Cedar Hill), is engaging in commercial activities in violation of the Conservation Restriction. Also named as a defendant is the Ballou Channing District Unitarian Universalist Association, Inc. (Ballou Channing), the original owner of the Property and the Grantor of the Conservation Restriction. Plaintiffs allege that the Ballou Channing induced the Foundation into making a $ 3 million gift in return for Ballou Channing’s promise to create the Conservation Restriction and to use the Foundation’s donation to preserve the Premises in conformity with that restriction (the “Gift Agreement”).
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This lawsuit was instituted on May 4, 2016. In their original Complaint, plaintiffs asserted the following counts against both defendants: breach of the Gift Agreement (Count I); breach of the Conservation Restriction (Count II); promissory estoppel (Count III); unjust enrichment (Count IV); and violation of Chapter 93A (Count V). The defendants filed motions to dismiss. On December 30, 2016, this Court allowed those motions in part. See Memorandum of Decision and Order dated December 30, 2016 (the 2016 Decision). As to Ballou Channing, this Court dismissed Count II because it no longer owned the Property that was subject to the Conservation Restriction. As to Cedar Hill, this Court dismissed Counts I, III and IV – those counts based on the Gift Agreement –because Cedar Hill was not a party to the Gift Agreement. Count V alleging a violation of Chapter 93A was dismissed as to both defendants.
Six months later, plaintiffs amended their complaint to assert new claims against both defendants and to add back some claims that this Court had previously dismissed. Specifically, the Amended Complaint contains a new claim against both defendants based on the same allegations that were the basis of Counts I, III and IV of the original Complaint, but with a wrinkle: this new claim asserts a breach of what is described as a “Letter Agreement” between the defendants Ballou Channing and Cedar Hill. Plaintiffs say that they only learned of this Letter Agreement as a result of discovery in the case but now claim they are third party beneficiaries entitled to enforce it. As a consequence of this new count for breach of contract (the Letter Agreement), the Amended Complaint added Cedar Hill back to the previously dismissed claims against it of unjust enrichment and promissory estoppel. The Amended Complaint also added Ballou Channing back as a defendant on the claim alleging a breach of the Conservation Restriction, even though this Court in its 2016 Decision had dismissed Ballou Channing as a defendant on that claim. Finally, the Amended Complaint accuses Ballou
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Channing of intentional misrepresentation, an entirely new claim. See Count VI of Amended Complaint.
Defendants now bring a second set of motions to dismiss, targeting these new counts and claims, but also asking this Court to dismiss those counts that I had previously concluded would remain in this case. This Court admits to some frustration in dealing with this latest round of motions which, like the earlier ones, are brought pursuant to Rule 12(b) (6), Mass.R.Civ.P. On one hand, plaintiffs seem intent on circumventing this Court’s earlier decision with new (and ultimately unsupported) theories which needlessly complicate what would seem to be a fairly straightforward case. On the other hand, in moving to dismiss all counts (including those that this Court already declined to dismiss earlier), the defendants make essentially the same arguments they made in connection with their first set of motions. To the extent that they rely on materials beyond the four corners of the Complaint, this Court does not understand why it is important (much less appropriate) to litigate these issues under the standard applicable to Rule 12(b) (6) motions.
Ultimately, this Court concludes that the new claims must be dismissed and the old claims must remain – at least until discovery is complete. The Motions are therefore Allowed in part and Denied in part. Thus, after much expenditure of time and resources, this case is back to where it stood in December 2016: the case survives but only as to those claims that remained in the case after this Court’s 2016 Decision.
BACKGROUND
Because many of the allegations made in the Amended Complaint are the same as those alleged in the original one and are fairly summarized in the 2016 Decision, this Court will not
4
rehash all of them here, except to summarize those allegations (including any new ones) that are necessary to place the issues in context.
The Reeds are abutters to the Property, which consists of about twelve acres of land. When Ballou Channing acquired the Property, it had certain restrictions on its use. In 2007 when the Reeds learned that these restrictions were soon to expire, they entered into discussions with Ballou Channing about extending and strengthening the restrictions. Ballou Channing represented that it would take about $ 150,000 a year to preserve and maintain the Property without the need to engage in commercial revenue-generating activity. The Reeds, through the Foundation, agreed to make a $ 3 million gift to Ballou Channing to cover these expenses. On October 17, 2008, a Conservation Restriction was recorded with the Plymouth Registry of Deeds that named Ballou Channing as Grantor and plaintiff Wildands Trust as Grantee.
The following year, Ballou Channing created Cedar Hill, a 501(c)(3) organization, to own and operate the Property. Ballou Channing also filed a Petition with the Supreme Judicial Court seeking approval of a transfer of the Property to Cedar Hill, as required by G.L.c. 214 § 1. Exhibit C to Amended Complaint.1 The Petition alluded to the $ 3 million gift from the Foundation and stated that it was to compensate Ballou Channing “for (i) its loss of development rights; (ii) the expense associated with creating the Conservation Restrictions and operating and maintaining the Property in accordance with such restrictions over the years; (iii) the beneficial impact the Conservation Restrictions have upon the surrounding community; and (iv) the fact that the Conservation Restrictions will encumber the Property in perpetuity.” ¶ 15 of Exhibit C to Amended Complaint. The Petition added, however, that neither Ballou Channing nor the
1 The Amended Complaint states that the Petition was filed “without notice” to the plaintiffs. It does not state that the plaintiffs were unaware of its contents, however.
5
Foundation had restricted Ballou Channing’s use of the $ 3 million gift “nor envisioned the fund would be used exclusively for the management of the Property.” Id. The Petition further stated that Ballou Channing and Cedar Hill had entered into a Letter Agreement (attached to the Petition) to ensure that Cedar Hill continued to use the Property in accordance with the terms of the Conservation Restriction. To accomplish those ends, Cedar Hill would receive $ 1.4 million from Ballou Channing. That Petition was subsequently approved and the Property was transferred to Cedar Hill by Quitclaim Deed in October 2009. See Exhibit D to Amended Complaint.
The Letter Agreement referenced in the Petition forms the basis of one of the new claims at issue and is attached to the Amended Complaint as Exhibit A. The parties to it are Ballou Channing and Cedar Hill. The Letter Agreement contains certain “Recitals” which acknowledge, among other things, the Conservation Restriction with Wildlands Trust. The Letter Agreement states that $ 1.4 million is being transferred to Cedar Hill to be used “for the purpose of maintaining, operating and improving the Property in accordance with the Conservation Restriction and this Agreement.” It gives member congregations of Ballou Channing permission to use the Property so long as they comply with the Conservation Restriction. Under a section entitled “Dispute Resolution,” the Letter Agreement sets forth a procedure that Ballou Channing must follow in the event that it “becomes aware of or reasonably suspects” that Cedar Hill is not operating the Property in compliance with the Conservation Restriction. If mediation fails, the parties to the Letter Agreement may bring their dispute to Land Court.
The Amended Complaint alleges that since this transfer, Cedar Hill has engaged in commercial revenue-generating activities on the Property which are in violation of the
6
Conservation Restriction. It alleges that Cedar Hill has not used the funds to preserve the Property but that it has rather used some portion of them to promote this commercial activity. Ballou Channing is aware of Cedar Hill’s violations and has refused to take steps to end them. Finally, the Amended Complaint accuses Ballou Channing of intentional misrepresentation, relying on essentially the same allegations that form the basis for plaintiffs’ claim that Ballou Channing breached the Gift Agreement.
DISCUSSION
As a result of the 2016 Decision, this case consisted of essentially two claims. One claim (that involved three separate counts) named Ballou Channing as the sole defendant and was based on allegations relating to its receipt of the $ 3 million gift. The second claim was against Cedar Hill as the sole defendant and alleged breach of the Conservation Restriction, with Wildlands Trust as the sole plaintiff. The Amended Complaint now seeks to reinsert Cedar Hill as a defendant on the first set of claims on the theory that both plaintiffs are third party beneficiaries to the Letter Agreement, and are entitled to enforce its terms against both defendants. The Amended Complaint also seeks to add Ballou Channing back as a defendant on the claim based on a violation of Conservation Restriction and to include the Foundation once again as a plaintiff. This Court concludes that these amendments fail to state a claim on which relief may be granted, for some of the same reasons set forth in its earlier opinion.
A. The Letter Agreement
Count III of the Amended Complaint alleges a breach of the Letter Agreement. Count IV and Count V alleging unjust enrichment and promissory estoppel are based in part on the
7
same allegations. 2 This Court concludes neither plaintiff has a legal basis for asserting any rights under the Letter Agreement so that Count III must be dismissed, and Counts IV and Count V surviving only as to Ballou Channing as the recipient of the $ 3 million gift. See fn. 3, supra.
The parties to the Letter Agreement are the defendants Cedar Hill and Ballou Channing. Plaintiffs are not parties to the Letter Agreement nor are they identified as having any rights under it. Plaintiffs claim that they nevertheless have standing to enforce its terms because they are third party beneficiaries to it. This Court disagrees.
The Restatement (Second) Contracts § 304 defines the circumstances under which a nonparty to a contract can claim a right to enforce it as a third party beneficiary: “[a] promise in a contract creates a duty in the promisor to any intended beneficiary to perform the promise, and the intended beneficiary may enforce the duty.” (Emphasis added). Intended beneficiaries are different from “incidental beneficiaries,” who have no right under the contract, even though they may benefit from it. Restatement (Second) Contracts § 315. Section 302 of the Restatement defines the difference between them: one is an intended beneficiary if “(a) the performance of the promise will satisfy an obligation of the promisee to pay money to the beneficiary; or (b) the circumstances indicate that the promisee intends to give the beneficiary the benefit of the promised performance.” As explained in comment (e) of Section 304 of the Restatement, one qualifies as an intended beneficiary “where the promisee clearly manifests an intention to confer on the beneficiary a legal right to enforce the contract.”
In accordance with these principles, this Court must look to the language of the Letter Agreement and the circumstances surrounding it to determine whether either plaintiff here is an
2 They are also based on allegations relating to the Gift Agreement, a claim that remains in this case even after today’s decision. Because of that, Count IV and V will not be dismissed but may be asserted against Ballou Channing only.
8
intended third party beneficiary. Anderson v. Fox Hill Village Homeowners Corp, 424 Mass. 365, 366 (1997). If the terms of the contract are clear and unambiguous, then its interpretation – including whether it confers rights on a third party – is a question of law. Although there is no requirement that the intended beneficiary be identified by name in the contract, the intent of the contracting parties to create in that third person a right to enforce the contract must be “clear and definite.” James Family Charitable foundation v. State Street Bank and Trust Co., 80 Mass.App.Ct. 720, 724 (2011), quoting Lakew v. MBTA, 65 Mass.App.Ct. 794, 798 (2006). Thus, even if the contract is ambiguous, there must be some circumstances surrounding the making of the contract that demonstrate in a clear and definitive manner that the parties to the contract intended to create rights in a nonparty to enforce its terms.
In the instant case, there is nothing in the language of the Letter Agreement or in the circumstances surrounding it (as described in the Amended Complaint) which suggest that either Wildlands Trust or the Foundation has the right to enforce its terms. As described in the Petition to the SJC, its purpose was to ensure that, in exchange for Ballou Channing’s transfer of the Property together with certain funds, Cedar Hill would maintain and operate the Property in compliance with the Conservation Restriction. If it did not, then the Letter Agreement spelled out exactly what rights Ballou Channing (not the plaintiffs) had against Cedar Hill. Although the plaintiffs may stand to benefit from the Letter Agreement, they are at best incidental beneficiaries, with no legal basis to pursue either Ballou Channing or Cedar Hill for a breach, assuming that one occurred. Indeed, plaintiffs conceded at a hearing on this Motion that neither plaintiff even knew of the Letter Agreement until discovery in this case.
9
B. The Conservation Restriction
Count II alleges a breach of the Conservation Restriction. In its 2016 decision, this Court dismissed this claim to the extent that it was asserted against defendant Ballou Channing, since it no longer owned the Property. It also concluded that only plaintiff Wildlands Trust, not the Foundation, could enforce it. In an apparent effort to circumvent that ruling, plaintiffs have added back both of these parties, ostensibly on the grounds that Cedar Hill is merely an “instrumentality” of Ballou Channing, which still “controls” the Property. The allegations in the Amended Complaint, even construed in the light most favorable to plaintiffs, do not support that.
Cedar Hill is a separate entity which, according the Petition approved by the SJC, is a nonprofit corporation duly registered with the Attorney General. The Amended Complaint alleges no facts to dispute that. According to the Petition and to the Letter Agreement, Cedar Hill was created to take over from Ballou Channing the responsibilities of maintaining the Property, which was conveyed to Cedar Hill after the SJC approved the Petition. The Amended Complaint does not dispute that either. That Cedar Hill had certain contractual obligations to Ballou Channing under the Letter Agreement– or that the Letter Agreement gave Ballou Channing certain rights in the event Cedar Hill did not comply — does not change the fact that these are separate corporate entities. The Amended Complaint does not allege any facts to support the notion that Ballou Channing and Cedar Hill are alter egos, such that these corporate formalities should be ignored. In short, Ballou Channing is not a proper defendant on this claim, for the same reasons that this Court articulated in its 2016 Decision. Nor is the Foundation a proper plaintiff for the reasons set forth in that same decision.
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C. Intentional Misrepresentation
To state a claim for fraudulent misrepresentation, the complaint must allege facts showing that: “(1) the defendant made a misrepresentation of fact; (2) it was made with the intention to induce another to act upon it; (3) it was made with the knowledge of its untruth; (4) it was intended that it be acted upon, and that it was in fact acted upon; and (5) damage directly resulted therefrom.” Equipment & Systems For Industry, Inc. v. Northmeadows Construction Co., Inc. 59 Mass.App.Ct. 931 (2003), quoting Graphic Arts Finishers, Inc. v. Boston Redev. Authority, 357 Mass. 40, 44 (1970). Rule 9(b), Mass.R.Civ.P. requires that a claim of fraud must be alleged with particularity. The Amended Complaint fails to satisfy this heightened pleading standard or allege facts sufficient to support each of the requisite elements. Specifically, it fails to identify a misstatement of existing fact, or to allege that it was made by the defendant with knowledge as to its falsity at the time that it was made.
The misrepresentation claim (Count VI) makes only two allegations that could be at all construed as relating to these two elements. First, it states that Ballou Channing “failed to disclose its plans for the Foundation’s $ 3 million Gift, which plans were wholly inconsistent with the Foundation’s expressed donative intent and the basis on which Wildlands Trust entered into the Conservation Restriction.” ¶ 89 of Amended Complaint. This is vague at best. Moreover, a failure to disclose can form the basis for liability only if one has a duty to disclose, and the Amended Complaint shows no such duty to disclose anything. Whatever obligation the Foundation had to use the money in a certain way is embodied in the Gift Agreement, but breach of a contractual obligation does not amount to fraud. Second, this count states that Ballou Channing affirmatively misrepresented to the Foundation how much it would cost to maintain and preserve the Premises. This is apparently based the following allegation:
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In 2007 and into 2008, in meetings between the Reeds on behalf of the Foundation, and members of the Cedar Hill Committee of Ballou Channing, including several meetings that occurred in the living room of the Retreat Center, Ballou Channing represented to the Foundation that approximately $ 150,000 per year would be required to preserve and maintain the Premises.
Amended Complaint, ¶ 20. It is questionable whether this yearly estimate as to future expenses is a fact at all as opposed to a nonactionable statement of opinion or prediction as to future events. Moreover, the Amended Complaint fails to allege who made this prediction (except in the most general way) or that the speaker knew that it was false when made. These are allegations critical to support a claim as serious as fraud. In sum, this count fails to meet the standard of either Rule 9(b) or of Iannachino v. Ford Motor Co., 451 Mass. 623, 636 (2008).
D. Remaining Claims
In addition to asking this Court to dismiss those claims which are new to the case, the defendants seek dismissal of those claims that the 2016 Decision left in the case. Specifically, Ballou Channing seeks to dismiss that count alleging a breach of the Gift Agreement on the grounds that there is no writing that satisfies the Statute of Frauds. It makes additional arguments as to the claims for unjust enrichment and promissory estoppel, but these arguments are all fact-based and thus not properly decided on a Rule 12(b) (6) motion. As to the Statute of Frauds, this Court already addressed this issue in its 2016 Decision: although it concluded that the plaintiffs could not rely on the Conservation Restriction to satisfy the Statue of Frauds,3 it was persuaded by plaintiffs that, because discovery might very well turn up writings sufficient to comply with the Statute of Frauds, this issue was best resolved by way of a motion for summary judgment. This Court continues to be of that view.
3 Inexplicably, the plaintiffs continue to argue that the Conservation Restriction is sufficient. Reasserting arguments that have already been rejected by this Court, however, is not only improper but does nothing to advance the case and is a waste of judicial and litigation resources.
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Cedar Hill — the sole defendant on the claim alleging a breach of the Conservation Restriction — separately argues that this Court should narrow that claim to the single violation alleged to have occurred on September 8, 2012. This same issue came up on July 13, 2017 in connection with plaintiffs’ Motion to Compel Discovery and defendants’ Motion for a Protective Order. This Court initially agreed with the defendants, but then reconsidered following oral arguments on the instant motions. As explained in a Memorandum of Decision dated October 17, 2017, this Court is now of the view that Count II is not limited to the September 8, 2012 event but also encompasses activities on the Property following that date.
CONCLUSION AND ORDER
For the foregoing reasons, Ballou Channing’s Motion to Dismiss is ALLOWED as to Count II (breach of Conservation Restriction), Count III (breach of Letter Agreement) and Count VI (intentional misrepresentation). It is DENIED as to Count I (breach of the Gift Agreement) and as to Counts III and IV to the extent that these counts are based on the Gift Agreement. As to Cedar Hill’s Motion to Dismiss, it is ALLOWED as to Counts III through V, so that
Only Count II remains as to Cedar Hill and then only to the extent that Count II is asserted by Wildlands Trust.
_________________________________
Janet L. Sanders
Justice of the Superior Court
Dated: November 10, 2017
13 read more

Posted by Stephen Sandberg - December 7, 2017 at 9:30 pm

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In re OvaScience Inc. Stockholder Litigation (Lawyers Weekly No. 09-050-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss SUPERIOR COURT
CIVIL ACTION
NO. 2015-3087-BLS2
(Consol. with 16-0645)
IN RE OVASCIENCE INC.
STOCKHOLDER LITIGATION
MEMORANDUM OF DECISION AND ORDER ON
PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION
This is a putative class action arising under Sections 11, 12, and 15 of the Securities Act of 1933. Plaintiffs Westmoreland County Employee Retirement System, Phillip Hofmann, Carlos Rivas, and Cesar Castellanos are investors who purchased stock in the defendant OvaScience, Inc. (OvaScience). They allege that a Registration Statement and Prospectus issued in connection with a secondary offering of OvaScience stock on January 8, 2015 contained false statements and material omissions of fact concerning an experimental fertility treatment that OvaScience was in the process of developing. The case is now before the Court on the plaintiffs’ Motion for Class Certification pursuant to Mass R. Civ. P. 23. The plaintiffs seek to certify a nationwide class that consists of all persons who purchased OvaScience stock “pursuant and/or traceable to” the January 8 2015 secondary offering.1 Alternatively, they seek statewide class certification consisting of the Massachusetts-based purchasers. This Court concludes that the plaintiffs’ Motion must be DENIED.
1 Excluded from the proposed class are each of the defendants, past and current officers and directors of OvaScience, J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, and Leerink Partners LLC, their affiliates or sponsors, the members of their families, and any entity which any defendant has or had a controlling interest, and the legal representatives, heirs, successors, or assigns of any such excluded party.
2
Certification of this class requires this Court to exercise personal jurisdiction over absent class members who are not residents of Massachusetts. Whether that can be done consistent with due process was first addressed by the Supreme Court in Phillips Petroleum Co v. Stutts, 472 U.S. 797 (1985) (Stutts). The Court reasoned that, “[b]ecause a state places fewer burdens upon an absent class plaintiff than it does upon an absent defendant in a nonclass suit, the Due Process Clause need not and does not afford the former as much protection from state-court jurisdiction as it does the latter.” 472 U.S. at 811. The Court went on to hold that the forum state may exercise jurisdiction over the absent class member even in the absence of minimum contacts so long as it provides certain basic due process protections. Id. At a minimum, that means that the absent plaintiff must have the opportunity to remove himself from the class. Because the case before it was brought in a state (Kansas) that permitted absent class members to opt out, the Supreme Court held that the state court could properly assert personal jurisdiction over nonresident class members.
Massachusetts, of course, does not permit individual parties to remove themselves or opt out of a class action. See Mass.R.Civ. P. 23. Interpreting and applying Stutts, the Supreme Judicial Court in Moelis v. Berkshire Life Ins. Co., 451 Mass. 483 (2008) held that a Massachusetts state court judge may therefore certify a national class only if absent class members satisfy the “traditional minimum contacts test” first articulated in International Shoe Co.v. Washington, 326 U.S. 310, 319-320 (1945). That test requires that the nonresident plaintiff must have engaged in “some act by which the nonresident purposefully availed himself of the privilege of conducting activities in Massachusetts, thus invoking the benefits and protections of its laws.” Moelis, 451 Mass. at 488, citing Good Hope Industries, Inc. Ryder Scott, Co., 378 Mass. 1, 7 (1979). In Moelis, the SJC upheld the lower court’s refusal to certify
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a nationwide class because the absent class members did not have sufficient contacts with Massachusetts to satisfy constitutional requirements.
The absent class members in Moelis had all purchased life insurance policies from the defendant Berkshire Life Insurance Company (Berkshire) based on a “disappearing premium” concept. Plaintiffs alleged that Berkshire had marketed the policies based on false representations that dividends paid on the policies would eventually cover the policyholder’s obligation to pay premiums after a set number of years, when in fact the premium obligation continued for much longer. In concluding that these contacts were insufficient to permit the assertion of personal jurisdiction, the SJC noted that the only contact that the nonresident class members had with this state was the purchase, through agents in their own states, of an insurance policy from Berkshire, a Massachusetts company, and their mailing of annual premium payments to Berkshire. 451 Mass. at 488. This was simply not enough to warrant the assetion of personal jurisdiction over them. Given the similarities between Moelis and the instant case, this Court is compelled to reach the same conclusion here.
In arguing that this Court may assert personal jurisdiction over the nonresident class members, plaintiffs rely on Kramersmeier v. R.G. Dickinson & Co., 440 N.W.2d 873, 877 (Iowa 1989). That class was a putative class action brought by individuals who had purchased tax-free bonds in a municipal bond offering from Iowa agents of the defendants. The bondholders received periodic payments of principal and interest from funds generated in Iowa, and relied on a prospectus that was prepared by an Iowa underwriter and an Iowa limited partnership for the sole purpose of selling bonds to develop Iowa real estate for the benefit of an Iowa city. The Iowa Supreme Court concluded that these contacts with the state were sufficient to meet the minimum contacts test as articulated in Stutts. The instant case is quite different.
4
Indeed, the nonresidents in this action have even less connection to Massachusetts than those in Moelis. Their only contact with this state is that they own stock in a Massachusetts company, but “stock ownership in or affiliation with a corporation, without more is not a sufficient minimum contact.” Cent. States Se. and Sw. Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 943 (7th Cir. 2000); see also cases cited in Defendants’ Memorandum in Opposition to Plaintiffs Motion for Class Certification, page 4, fn. 3. Unlike Moelis, there is no evidence that they mailed any payment to Ovascience in Massachusetts. The vast majority of these stockholders purchased their shares from defendants J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC, both of which are based in New York.2 The current situs of the shares is Delaware, where OvaScience is incorporated. Neither the nature of the stock itself nor any benefits accruing from stock ownership are so uniquely tied to or affected by a policy of the Commonwealth that a nonresident class member would expect this dispute to be adjudicated in Massachusetts. In short, to include nonresidents in the class would run afoul of the Due Process clause.
Plaintiffs point to several Massachusetts cases in which trial courts approved settlements between defendants and “nationwide” classes of plaintiffs. There is nothing to indicate those courts adjudicated the issue (much less considered it) before approving the settlements, however. In any event, the settlement context is not analogous. Before a settlement is approved, all class members are notified and have an opportunity to object to it – itself a due process protection. Here, absent class members are not notified before the court determines whether to certify the class and (absent a settlement), they will be bound by the result, without any chance to be heard, much less to opt out.
2 The third underwriter defendant, Leerink Partners LLC, is a Boston based company but it only sold 10 shares during the secondary offering.
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If nonresidents are not included in any class, then there are simply not enough Massachusetts members of the putative class to permit this case to proceed as a class action. The defendants have submitted undisputed evidence that a statewide class would consist of only 13 known members – eleven individual purchasers, plus Wellington Management Company (Wellington) and Fidelity Management Trust Company (Fidelity), both of which made multiple purchases during the January 2015 secondary offering.3 Courts have routinely denied class certification in cases involving twenty or fewer plaintiffs. The plaintiffs argue that the class is far larger because Wellington and Fidelity hold their stock “in street name” on behalf of tens of thousands of beneficial owners (the actual investors who would form the class). But this Court has no evidence of that. “’The party instituting the action need not show the exact number of potential members in order to satisfy’ the numerosity prerequisite, but she ‘does bear the burden of showing impracticability and mere speculation as to the number of parties involved is not sufficient to satisfy Rule 23(a)(1).’” Swack v. Credit Suisse First Bos., 230 F.R.D. 250, 258 (D. Mass. 2005), quoting 7A Wright, Miller & Kane, Federal Practice and Procedure § 1762 (2004). Plaintiffs here has failed to satisfy that burden.
________________________
Janet L. Sanders
Justice of the Superior Court
3 This number could further be reduced if this Court allows the defendants’ motion for summary judgment as to four of the named plaintiffs. That motion is currently under advisement. read more

Posted by Stephen Sandberg - December 7, 2017 at 2:22 pm

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In re OvaScience Inc. Stockholder Litigation (Lawyers Weekly No. 09-051-17)

1
COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss SUPERIOR COURT
CIVIL ACTION
NO. 2015-3087-BLS2
(Consol. with 16-0645)
IN RE OVASCIENCE INC.
STOCKHOLDER LITIGATION
MEMORANDUM OF DECISION AND ORDER ON
DEFENDANTS’ MOTION FOR SUMMARY JUDGEMENT
This is a putative class action alleging violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 ( the Securities Act). Plaintiffs Westmoreland County Employee Retirement System (Westmoreland), Phillip Hofmann, Carlos Rivas, and Cesar Castellanos are investors who purchased stock in the defendant OvaScience, Inc. (OvaScience).1 They allege that a Prospectus and Prospectus Supplement issued in connection with a secondary offering of OvaScience stock contained false statements and material omissions of fact concerning an experimental fertility treatment that OvaScience was in the process of developing. In addition to suing OvaScience, plaintiffs have also named as defendants certain of the company’s officers and directors as well as the three investment banks who served as the underwriters. The defendants now move for summary judgment against Castellanos, Hofmann, and Rivas (the Individual Plaintiffs). This Court concludes that the Motion must be ALLOWED.
1 Heather Carlson was also a plaintiff in the action. However, on August 1, 2017, the parties filed a joint stipulation voluntarily dismissing her from the action without prejudice. Judgment was entered on the docket pursuant to Mass. R. Civ. P. 58(a) on August 3, 2017.
2
BACKGROUND
On January 8, 2015, OvaScience conducted a secondary public stock offering in which it sold 2,645,000 shares at $ 50 per share (the January 8 Offering). J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, and Leerink Partners LLC served as the Underwriters. The offering closed on January 13, 2015, at which point there were over 27 million OvaScience shares outstanding.
At various points in 2015, the Individual Plaintiffs made purchases of OvaScience stock through online brokers E*Trade and Capital One Investing. On January 8, 2015, Castellano purchased 350 shares at $ 50.488. He made four more purchases between January 12 and February 3, 2015 for a price per share that ranged from $ 40.0899 up to $ 48.1799. Rivas made seven purchases between March 2015 and August 2015 for a price per share ranging from $ 24.32 to $ 41.49. Hoffman made three purchases between February and April 2015 for a price per share that ranged from $ 31.83 to $ 42.107485.
In October 2015, plaintiffs Hofmann and Rivas filed a lawsuit against the defendants; Castellanos filed a separate complaint based on the same allegations five months later, and the two actions were consolidated. In August 2016, Westmoreland intervened as plaintiff in the consolidated actions. After this Court denied a motion to dismiss, discovery proceeded on a bifurcated basis. Phase I of the discovery was limited to “class certification and standing issues” and was to be complete by May 19, 2017. See Scheduling Order dated January 20, 2017. That deadline was extended to June 19, 2017. This motion followed.
DISCUSSION
Sections 11 and 12(a) (2) of the Securities Act impose liability for untrue statements of material fact or omissions of material fact in a registration statement or prospectus. Section 15
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of the Securities Act imposes secondary liability upon persons who control those liable under Sections 11 and 12. See Pyramid Holdings, Inc. v. Inverness Med. Innovations, Inc., 638 F. Supp. 2d 120, 124 (D. Mass. 2009); Cooperman v. Individual, Inc., 171 F.3d 43, 52 (1st Cir. 1999). In order to have standing to bring a claim under Section 11, plaintiffs must have purchased shares in the offering in question or, if the shares were purchased in an aftermarket, be able to trace their shares to the offering at issue. In re Century Aluminum Co. Sec. Litig, 729 F. 3d 1104, 1106 (9th Cir. 2013). For claims asserted under Section 12(a) (2), plaintiffs have standing only if they purchased the stock directly from a “seller”— a person that owned the security and passed title or successfully solicited the purchase of the security, motivated at least in part by a desire to serve its own financial interests or those of the securities owner. See Pinter v. Dahl, 486 U.S. 622 (1988); Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 48-50 (2d Cir. 1991). It is plaintiffs’ burden to show that the circumstances of their purchases provide them with the requisite standing. See In re Puda Coal Sec. Inc. Litig. (Puda Coal), 2013 WL 5493007, at *6, *9 (S.D.N.Y. Oct. 1, 2013).
Defendants first raised the issue of standing in a motion to dismiss pursuant to Rule 12(b) (6), Mass.R.Civ.P. Concluding that, at the very least, the plaintiff Westmoreland had standing, this Court denied the motion and allowed the case to proceed through discovery. Phase I of discovery was to allow plaintiffs the opportunity to compile evidence relating to the standing issue. The deadline for that discovery has now passed. Based on the summary judgment record, this Court concludes that the Individual Plaintiffs have no reasonable expectation of proving that they have standing to sue under either Section 11 or Section 12 of the Securities Act. Because their Section 15 claim is derivative of the Section 11 and Section 12 claims, that too must be dismissed.
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As to their Section 12 claim, it is undisputed that the Individual Plaintiffs purchased their shares from two online brokers and thus did not purchase any shares either directly from any of the defendants or as a result of their solicitations. As to their Section 11 claim, the Individual Plaintiffs have failed to demonstrate either that they purchased their stocks directly in the January 8 Offering or that their stocks are traceable to someone who bought shares in the Offering. Purchases by three of the four Individual Plaintiffs were made after the January 8 Offering for a price per share that is considerably less than the offering price. As to plaintiff Castellanos, he purchased a block of shares on the date of the offering at $ 50.4888 per share, which was just over the offering price of $ 50. However, given that several million shares were already outstanding at the time of the Offering, such evidence merely indicates that the stock might be connected to the Offering. That is simply too speculative to support a Section 11 claim. See Puda Coal, 2013 WL 5493007, at *7 (observing that plaintiff cannot rely solely on the similarity of date and share price to demonstrate traceability); In re Quarterdeck Office Sys., Inc. Sec. Litig., 1993 U.S. Dist. LEXIS 19806, at *8 (C.D. Cal. Sept. 30, 1993), quoting Abbey v. Computer Memories, Inc., 634 F. Supp. 870, 874 (N.D. Cal. 1986) (“Courts have uniformly interpreted § 11 as requiring more than a showing that a plaintiff’s stock ‘might’ have come from the relevant offering.”). In arguing that this similarity in price and date is sufficient, plaintiffs rely on In re Everyware Global, Inc. Sec. Litig., 175 F.Supp.3d 837 (S.D. Ohio 2016), but that was a decision on a motion to dismiss, not summary judgment. Indeed, in concluding that the complaint stated a claim, the court in Everyware specifically noted that, with a chance to proceed past the pleading stage, plaintiffs would seek to prove traceability through third party subpoenas as well as discovery from the underwriter defendants. Plaintiffs in the instant case have made no such effort.
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The Individual Plaintiffs contend that the motion is premature because traceability is a “merits issue” not properly the subject of Phase I discovery. This Court disagrees. Defendants clearly flagged the issue of standing in their motion to dismiss and then successfully obtained a scheduling order that bifurcated discovery so as to focus first on that question of standing. With the deadline for that discovery now passed, the issue is ripe for decision. Moreover, the Individual Plaintiffs have not invoked Mass.R.Civ.P. 56(f), nor have they met its requirements. That rule requires the party seeking to obtain its benefits to explain why he or she is currently unable to adduce the facts essential to an opposition and to provide a plausible basis for believing that the sought-after facts can be assembled within a reasonable time. Plaintiffs have done neither here.
For these reasons and for other reasons articulated in the defendants’ memoranda, the claims asserted by the Individual Plaintiffs in these two consolidated actions are hereby DISMISSED. The sole remaining plaintiff is Westmoreland. This matter is scheduled for a Rule 16 Conference on January ___ 2018 at 2:00 p.m.
________________________
Janet L. Sanders
Justice of the Superior Court
Dated: November 21, 2017 read more

Posted by Stephen Sandberg - December 7, 2017 at 10:47 am

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