Posts tagged "Inc."

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

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

16-P-874                                         Appeals Court

ZELBY HOLDINGS, INC.  vs.  VIDEOGENIX, INC.

No. 16-P-874.

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

Present:  Green, Milkey, & Neyman, JJ.

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

Posted by Stephen Sandberg - August 19, 2017 at 6:48 am

Categories: News   Tags: , , , , , ,

Tam, et al. v. Federal Management Co., Inc., et al. (Lawyers Weekly No. 12-093-17)

Posted by Stephen Sandberg - August 4, 2017 at 12:36 pm

Categories: News   Tags: , , , , ,

Tam, et al. v. Federal Management Co., Inc., et al. (Lawyers Weekly No. 12-093-17)

COMMONWEALTH OF MASSACHUSETTS

SUFFOLK, ss. SUPERIOR COURT

CIVIL ACTION

  1. 13-02347-BLS1

SIEW-MEY TAM & another1

1 Mary Jane Raymond

2 d/b/a The Schochet Companies

3 Richard Henken, Peter Lewis, and David Flad

4 The individual defendants are alleged to be statutorily liable for FMC’sWage Act violations.

5 The defendants have also filed a separate motion for summary judgment on the claims asserted by Tam.  That motion remains pendingand is not addressed in this Memorandum of Decision.

vs.

FEDERAL MANAGEMENT CO., INC.2 & others3

MEMORANDUM OF DECISION AND ORDER ON

DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

AGAINST PLAINTIFF MARY JANE RAYMOND

Plaintiffs Siew-Mey Tam and Mary Jane Raymond were formerly employed by Federal Management Co., Inc. (FMC) as property managers.  Following the termination oftheiremployment, they brought this action against FMC, Richard Henken, David Flad, and Peter Lewis4alleging that they were misclassified as exempt employees under G.L. c. 151, § 1A and FMC failed to pay them for overtime hours worked.  The case is presently before the Court on the defendants’ motion for summary judgment dismissingthe claims assertedagainst themby Raymond.5 For the following reasons, the motion is ALLOWED. read more

Posted by Stephen Sandberg - August 3, 2017 at 3:08 pm

Categories: News   Tags: , , , , ,

Niles v. Huntington Controls, Inc., et al. (Lawyers Weekly No. 11-100-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

16-P-229                                        Appeals Court

ADRIAN NILES  vs.  HUNTINGTON CONTROLS, INC., & another.[1]

No. 16-P-229.

Norfolk.     January 12, 2017. – July 31, 2017.

Present:  Kafker, C.J., Hanlon, & Agnes, JJ.

Practice, Civil, Summary judgment. Labor, Public works, Wages. Public Works, Wage determination. Administrative Law, Wage administration.

Civil action commenced in the Superior Court Department on November 22, 2013. read more

Posted by Stephen Sandberg - July 31, 2017 at 3:34 pm

Categories: News   Tags: , , , , , ,

NTV Management, Inc. v. Lightship Global Ventures, LLC, et al. (Lawyers Weekly No. 12-080-17)

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COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss SUPERIOR COURT
CIVIL ACTION
NO. 2016-0327-BLS1
NTV MANAGEMENT, INC.
vs.
LIGHTSHIP GLOBAL VENTURES, LLC and KENT PLUNKETT
MEMORANDUM OF DECISION AND ORDER ON
DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT DISMISSING THE COMPLAINT AND PLAINTIFF’S CROSS-MOTION FOR SUMMARY JUDGMENT ON COUNT I OF ITS COMPLAINT
This case arises out of a Consulting and Advisory Services Agreement (the Agreement) between the plaintiff, NTV Management, Inc. (NTV) and the defendant Lightship Global Ventures, LLC (Lightship). The defendant, Kent Plunkett, founded a company, Salary.Com, Inc., which, following a series of acquisitions, became a division of IBM. Plunkett and a colleague formed Lightship for the purpose of reacquiring Salary.Com from IBM. The Agreement, while containing some one-off terms, was in effect a non-exclusive brokerage agreement pursuant to which NTV would be due a commission if it found financing for the acquisition and a lesser fixed sum for introducing “at least ten qualified sources of capital.” Lightship did acquire Salary.com, but not with equity or debt partners introduced to the deal by NTV. NTV, nonetheless, alleges that it is due fees under the Agreement and damages for a variety of other wrongful conduct on the part of the defendants. It has pled its complaint in seven counts: breach of contract, breach of the covenant of good faith and fair dealing, promissory estoppel, unjust enrichment, deceit, a violation of Chapter 93A, violations of the Uniform Fraudulent Transfer Act, and a count to reach and apply stock or assets of Salary.com (although curiously it has not
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named Salary.com, or the entity that presently owns it, as a defendant).
Apparently, concerned about matching NTV’s imaginative pleading measure for measure, the defendants have asserted five counterclaims against NTV: breach of a duty of confidentiality, breach of contract, defamation, misrepresentation, and tortious interference with contractual or business relations. These counterclaims are not the subject of a motion now before the court.
The case is before the court on the defendants’ motion for summary judgment dismissing all the claims asserted against them, and NTV’s cross-motion for summary judgment on part of its breach of contract claim. For the reasons that follow, the defendants’ motion is Allowed, in part, and Denied, in part, and NTV’s motion is Denied.
FACTS
Based on the summary judgment record, the following facts are undisputed or viewed in the light most favorable to the non-moving party.
Salary.com was founded by Plunkett in 1999. It became a public company in 2007, and then was acquired by a firm called Kenexa, Inc. in 2010. In 2012, Kenexa was acquired by IBM, after which Salary.com was operated as a division of that company or an IBM affiliate. In 2014, IBM informed Plunkett that it was interested in selling Salary.com. Also, in 2014, Plunkett and another former colleague at Salary.com formed Lightship for the purpose of attempting to acquire Salary.com from IBM. Lightship signed a Non-Disclosure Agreement with IBM which limited Lightship’s ability to disclose confidential information concerning Salary.com to others, including that IBM was actively seeking to dispose of this asset. As is typical in these kinds of potential transactions, IBM set up a data room where confidential information concerning
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Salary.com could be reviewed by Lightship and potential investors who would finance the acquisition. The information available to potential investors did not include financial statements specific to Salary.com because it was operated by IBM as division of a larger enterprise. In February, 2015, Lightship and IBM entered into an agreement that gave Lightship the exclusive right, for a period of time, to negotiate a purchase agreement for Salary.com. Lightship had previously entered into an investment banking relationship with the firm Stifel Nicolaus & Co. (Stifel) to assist it in the proposed acquisition.
Through Stifel, a number of potential investors were identified who signed NDAs with Lightship, were informed of the acquisition target, and given access to the data room. A number of potential investors presented Lightship with term sheets for an acquisition of Salary.com. In early 2015, a private equity firm called Genstar Capital signed an agreement with Lightship that gave it an exclusive right to try and negotiate a transaction with IBM. Genstar retained a firm, Alvarez and Marsal, to analyze Salary.com’s earnings and prepare a report. This report was Genstar’s property. Genstar, however, failed to reach terms acceptable to IBM. Thereafter, a firm called Symphony Technology Group (Symphony) entered a similar agreement with Lightship, but it also failed to reach agreement with IBM. In July, 2015, Stifel informed Lightship that it would no longer represent it in connection with a Salary.com transaction.
In July, 2015, a mutual acquaintance, Steven Sandler, introduced Plunkett to a principal of NTV. NTV was then a newly formed organization which was planning to raise a venture capital fund, although it did not yet have any investors. After discussions, Lightship and NTV agreed to enter into an investment banking relationship in which NTV would seek to find investors willing to finance the acquisition of Salary.com. After some negotiations, their relationship was memorialized in the Agreement which was executed on August 5, 2015. As
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relevant to this case, the Agreement contained the following provisions.
The term of the Agreement was six months, but it could be terminated by either party on 14 days notice. Section 4 of the agreement had standard confidentiality terms. It also provided that: “NTV further agrees to abide by all terms and conditions of the NDA entered into between IBM and Lightship.” This meant that NTV should not disclose the name of the target, Salary.com, or any of its data, to a potential investor identified by NTV until the investor had signed an NDA.
Most of provisions of the Agreement relevant to this case are found in a document entitled Scope of Work (SOW) that was an exhibit to the Agreement and made a part of it. The SOW described the services that NTV was going to provide Lightship as follows:
NTV will endeavor to source capital and structure financing transactions from agreed-upon target investors and/or lenders. NTV will facilitate and participate in meetings and due diligence with capital sources, structuring and negotiating terms, and closing financing for the Acquisitions as [Lightship’s] advisor.
With respect to fees potentially due NTV, the SOW provided:
[Lightship] will pay to NTV as transaction fees (collectively, “Fees”) at closing in cash the a [sic] success fee (the Success Fee”) equal to the greater of 3% of the value of the capital that NTV introduces to the project that is invested or $ 330,000. In the event a deal is consummated by management with investment or financial sponsorship other than parties introduced by NTV, but not including sources contacted and/or introduced by NTV, (ie: not a strategic buyer acquiring substantially all of the business other than incentive interests for and direct investment by management where such strategic partner and not management controls) and no success fee is earned, then NTV shall be entitled to a $ 330,000 advisory fee in consideration of its team’s effort, services, time, and opportunity costs associated with working with management, preparing materials, communication with potential sources of capital, and other services, provided NTV shall have introduced at least 10 qualified sources of capital and remained engaged with [Lightship] and available to provide advice and support. It is understood and agreed by the parties that: . . . (ii) NTV expects to introduce and facilitate investment from third party sources collectively able to finance all levels of the transactions (i.e., both equity and debt) and [Lightship] has agreed as to each level of the capital structure for which NTV has one or more sources of capital willing and able to provide financing that [Lightship] has agreed that the Company will close with such investor(s) introduced and facilitated by NTV and not with other investors who might offer such financing on
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substantially the same terms; provided that if [Lightship] determines reasonably and in good faith that accepting financing from one or more of such investors would not be in the best interests of the Company and its management and shareholders (but specifically excluding as an interest of the Company avoidance of fees otherwise payable), [Lightship] shall not be required to close with such investor(s). If third parties not introduced by NTV shall offer better terms than parties introduced by NTV, then NTV will have the opportunity, within five days after notification to match such terms.
As is evident from the terms quoted above, NTV’s agreement with Lightship was not exclusive. If Lightship purchased Salary.com with investors that NTV had not introduced to the deal, it would not be due a Success Fee. NTV might still, however, be due an advisory fee of $ 330,000, if it met the preconditions to the award of that fee described in the SOW.
NTV sent a brief email to 28 potential sources of capital describing the transaction in very general terms. While the parties dispute whether Plunkett approved all of these possible investors as qualified sources of capital before the email was sent, for the purposes of this motion, the court assumes that he did. Of these 28 email recipients, 12 expressed interest in looking more closely at the deal. NTV sent these potential investors a 12 page power point presentation that provided additional information about the proposed transaction, but did not identify the target, although a recipient might have been able to deduce its identity. Lightship admits that NTV scheduled meetings or calls between 7 of these responders and Plunkett. NTV asserts that it had three others ready to speak with Plunkett: Vector Capital, Princeton Capital and Silicon Valley Bank, but the meetings did not take place. These three investors will be addressed further in the “Discussion” section of this memorandum.
Of the potential investors contacted by NTV, only 4 executed NDAs. None of the potential investors contacted by NTV presented Lightship with a proposed term sheet for a Salary.com transaction. NTV’s representatives testified at deposition that all of the investors it approached wanted audited or detailed financial statements for Salary.com, which did not exist
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because it was operated as a division of a larger group.
In August, 2015, Plunkett also began discussions with other investment banking firms, including Moorgate Capital Partners (Moorgate), with a view to finding investors to finance a Salary.com acquisition. Several potential investors signed NDAs, performed due diligence in the IBM data room, and submitted term sheets. In October, Lightship began to focus on two potential investors, one of which—H.I.G. Capital (HIG)—was introduced by Moorgate. On November 3, 2015, Lighthouse and HIG entered into an Agreement providing HIG with a period of exclusivity in which to try and negotiate a purchase with IBM, as had been the case with Genstar and Symphony. HIG was offering to provide only the equity layer of financing, so the debt component would still be necessary even if HIG were more successful than Genstar or Symphony in reaching an agreement with IBM for the purchase of Salary.com. The terms of the debt financing would, of course, have to be acceptable to HIG, which would be contributing the equity at risk in the independent Salary.com enterprise.
Lightship did not provide a copy of the November 3rd letter to NTV; nor was it required to do so. It is, however, undisputed that not long thereafter NTV was aware that HIG was negotiating with IBM for the purchase of Salary.com. In a November 22-23, 2015 email exchange between representatives of a potential debt investor, Ares Management (Ares), introduced to the deal by NTV, and NTV, Ares wrote to NTV: “We were potentially interested at 2-3X EBITDA leverage, but that was so far below HIG’s ask that we didn’t do much work. If that’s interesting, let us know.” In fact, by November 17, 2015, NTV was threatening to sue Lightship for having entered into the agreement with HIG. On December 14, 2015, Lightship sent NTV a letter stating that it was terminating the Agreement on 14 days notice.
HIG was still negotiating with IBM on December 29, 2015. It closed the transaction on
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December 31, 2015, the last day that IBM was willing to move forward at HIG’s offering price. The debt was provided by Prudential. The financing included $ 17 million of equity from HIG and $ 55 million of debt from Prudential, which included $ 10 million of operating capital. The actual terms of the acquisition are not provided in the summary judgment record, but it appears that the acquirer was a new company (the proverbial Newco) owned in undisclosed percentages by HIG, Plunkett, and other members of Salary.com management. At one time, spread sheets showing the sources and uses of funds to be provided HIG and a still unidentified debt financier included a $ 330,000 fee going to NTV, although that fee was not included in the final closing documents and no fee was paid to NTV.
DISCUSSION
Standard for Review
Summary judgment will be granted when there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. Mass. R. Civ. P. 56(c); Cassesso v. Commissioner of Corr., 390 Mass. 419, 422 (1983). To prevail on its summary judgment motion, the moving party must affirmatively demonstrate the absence of a triable issue, and that the summary judgment record entitles it to a judgment as a matter of law. Pederson v. Time, Inc., 404 Mass. 14, 16-17 (1989). “[A]ll evidentiary inferences must be resolved in favor of the [nonmoving party].” Boyd v. National R.R. Passenger Corp., 446 Mass. 540, 544 (2006).
The nonmoving party, however, cannot defeat a motion for summary judgment by merely asserting that facts are disputed. Mass. R. Civ. P. 56(e); LaLonde v. Eissner, 405 Mass. 207, 209 (1989). Rather, to defeat summary judgment, the nonmoving party must “go beyond the pleadings and by [its] own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial.”
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Kourouvacilis v. General Motors Corp., 410 Mass. 706, 714 (1991). “Conclusory statements, general denials, and factual allegations not based on personal knowledge [are] insufficient.” Cullen Enters., Inc. v. Massachusetts Prop. Ins. Underwriting Ass’n, 399 Mass. 886, 890 (1987), quoting Madsen v. Erwin, 395 Mass. 715, 721 (1985).
Breach of Contract and Breach of the Covenant of Good Faith and Fair Dealing
NTV asserts that Salary.com breached the Agreement by failing to pay the 3% commission, or alternatively failing to pay the $ 330,000 advisory fee. The court will first address the claims asserting a breach for failure to pay the commission.
NTV argues that Lightship breached the Agreement by failing to tell NTV that it was talking to other investment banking firms. However, the Agreement was clearly not exclusive. Indeed, it contemplated what might happen if the transaction closed with investors not introduced by NTV. Lightship was under no obligation to inform NTV concerning other firms it was using to raise capital. NTV also complains that Lightship began focusing on HIG in October and signed an exclusivity arrangement with HIG on November 3, 2015. Never having introduced a potential investor that even submitted a term sheet to Lightship, NTV could not have been surprised that Lightship focused on a potential equity investor that did its due diligence, met with management, and submitted terms on which it would attempt to close a transaction with IBM. NTV also complains that HIG received a copy of the Alvarez and Marsal report; however, it paid Genstar for it. There is no evidence in the summary judgment record that Lighthouse would not have entered into negotiations with an investor generated by NTV, if any such investor presented a term sheet for a proposed transaction.
More specifically, NTV contends that there exists a triable issue of fact concerning whether MTV is due the 3% fee “under the lost opportunity doctrine.” This doctrine, however,
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addresses the question of how lost profits may be proven when they are the consequence of a breach of contract or business tort. It is not a separate means of establishing a breach of contract or a tort. This doctrine simply has no application to this case. See, e.g., Herbert A. Sullivan, Inc. v. Utica Mutual Ins. Co., 439 Mass. 387, 413 (2003) (“An element of uncertainty is permitted in calculating damages . . . This is particularly the case in business torts, where the critical focus is on the defendant’s conduct.”) (emphasis supplied).
NTV argues that an investor that it introduced to the deal, Ares, “might” have “matched the terms that Prudential eventually offered on December 18, 2015.” There are two problems with this argument: one legal and one factual.
First, the Agreement provides: “If third parties not introduced by NTV shall offer better terms than parties introduced by NTV, then NTV will have the opportunity, within five days after notification to match such terms.” NTV never introduced a party to Lightship that offered to enter into a transaction, debt or equity, on any terms, and that includes Ares. Clearly, the contract envisions that a qualified investor introduced by NTV who had made an offer would be given a brief period to attempt to match or exceed a better offer made by another investor. It does not mean that NTV had the right to find a third-party that had never presented an offer sheet who might, on five days-notice, decide to invest more than $ 50 million on terms better than those offered by an investor prepared to close. There is no way to determine if an investor’s terms are better than those produced by an NTV introduced party, where the NTV party never submitted anything to compare.
Additionally, there is no evidence that Ares could possibly close on financing by December 31, 2015, the date by which IBM required the transaction be complete. The December 17, 2015 email from Ares to which NTV points expresses only a vague willingness to
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talk to NTV about the deal. A previous November 23, 2015 email exchange between Ares and NTV shows that Ares had direct contact with HIG about this transaction, but HIG was looking for debt on terms that were of no interest to Ares. There is no evidence that HIG’s position ever changed. Indeed, Lightship submitted an affidavit from a managing director at Ares who attested that he had a good working relationship with HIG from other deals, he looked at material sent to him by HIG and spoke to HIG about it, and then told HIG that Ares would pass. NTV offers no evidence to contradict this affidavit. The summary judgment record contains no evidence creating a triable issue on the question of whether Ares would have presented matching or better terms than Prudential, if offered the opportunity to do so in late December, 2015. NTV’s speculation that this might have happened is insufficient.
NTV’s claims for breach of the implied covenant of good faith and fair dealing as it relates to the claim for the commission fails for similar reasons. There is simply no evidence that NTV brought the Salary.com transaction to the attention of any potential investor who might have provided financing for this transaction on better terms than HIG and Prudential. Even assuming that there is evidence in the summary judgment record that Plunkett was not responsive to requests to meet with an NTV sourced investor, a debatable proposition, there is no evidence that any such investor was actually prepared to invest.1
Turning to the advisory fee, the Agreement states: “In the event a deal is consummated by management with investment or financial sponsorship other than parties introduced by NTV, . . .
1 A brief reference to Silicon Valley Bank is made in the opposition in this regard; however, again defendants have submitted an affidavit from a Managing Director of this firm in which he points out that Silicon Valley was Salarly.com’s banker when it was an independent company, and he knew about the proposed transaction, but never met with Plunkett or anyone else associated with the Salary.com deal and never proposed any terms on which Silicon Valley would invest. NTV has not offered any deposition testimony or other evidence from Silicon Valley suggesting that it was ready to close on a Salary.com transaction by December 31, 2015. For these reasons, there can be no 93A claim premised on a refusal to pay the 3% commission because there is no evidence that NTV generated a potential investor actually interested in financing the acquisition.
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then NTV shall be entitled to a $ 330,000 advisory fee in consideration of its team’s effort, services, time, and opportunity costs associated with working with management, preparing materials, communication with potential sources of capital, and other services, provided NTV shall have introduced at least 10 qualified sources of capital and remained engaged with [Lightship] and available to provide advice and support.” With respect to this fee, Lightship maintains that NTV failed to “introduce[] at least 10 qualified sources of capital and remained engaged with [Lightship] and available to provide advice and support.” It concedes, for purposes of its motion for summary judgment, an introduction to 7 potential investors, but contends that there is no evidence in the record supporting the last 3, viz: Vector Capital, Princeton Capital and Silicon Valley Bank (SVB).
In response, NTV first argues that the Agreement could be read to mean that all NTV had to do was “introduce” potential investors to the deal, i.e., let them know it was out there; it did not have to actually introduce them to Lightship. On this proposed interpretation, sending a brief email very broadly describing the deal to 28 firms fulfilled its obligation. The court does not find that this is a reasonable interpretation of the Agreement. The Agreement contemplated that NTV would find at least 10 qualified sources of capital sufficiently interested in the opportunity that they would want to meet with the principals of Lightship, i.e., be introduced to Lightship. Clearly, sending a cold email to investors, most of whom did not even respond, was not what the parties understood would be sufficient to earn $ 330,000. Moreover, sending a follow-up email that attached a power point providing some additional information, but still without identifying Salary.com as the target, was also inadequate.
As to the three investors, in dispute: Vector, Princeton, and SVB, Lightship argues that: (i) Stifel had already contacted Vector when it was still acting as Lightship’s investment banker;
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(ii) Princeton was not an acceptable source of capital because one if its managers had sought to oust Plunkett as CEO of Salary.com a decade earlier; and (iii) SVB could not be introduced to this transaction because SVB was Salary.com’s banker when it was an independent company and Plunkett had already discussed the deal with SVB. The court finds these arguments insufficient to support dismissal of this claim by summary judgment. If Vector and SVB had previously passed on the Salary.com/Lightship transaction, but were willing to re-engage because of NTV’s efforts, a jury could find that they were introduced, or at least ready and willing to be introduced, to Lighthouse regarding their possible participation in the acquisition within the meaning of the Agreement. As to Princeton, there is evidence in the summary judgment record that Plunkett approved either directly or by inference this firm as an acceptable source of capital when it reviewed the original list of 28 firms to which NTV sent its initial email describing the transaction. The jury could also choose not to believe Plunkett regarding his reason for not meeting with Princeton or find that reason insufficient under the Agreement. While it may be that the literal terms of the Agreement have not been fulfilled if Plunkett or other members of Salary.com team never met with these three firms; however, a breach of the covenant of good faith and fair dealing might be might be demonstrated with evidence that Plunkett avoided meeting with potential investors who NTV had contacted and developed to the point that they wanted to engage with the Salary.com team to discuss the acquisition.
Additionally, there is evidence that at one point the $ 330,000 advisory fee was included in a spread sheet generated by Lighthouse as a transaction expense to be paid at closing. This is certainly not conclusive evidence that the fee was due, as there are other explanations as to why it might be included in an early draft of a closing document. It is, nonetheless, some evidence that Lighthouse believed that NTV had earned this fee.
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Accordingly, summary judgment is denied with respect to so much of Counts I, II and VI as are based on a failure to pay the advisory fee.2 NTV’s motion for summary judgment on this claim is also denied, as NTV has only shown that there are disputed issues of fact material to the claim, not that it is entitled to judgment as a matter of law.
Deceit
NTV alleges a claim for Deceit/Negligent Misrepresentation in Count V. The only allegedly false statement identified in the complaint with any specificity is that Lighthouse represented to NTV that it had an agreement with IBM that gave it an exclusive right to negotiate a purchase of Salary.com, but failed to tell NTV that the agreement had expired. Even if this allegation were true, the summary judgment record establishes that IBM continued to negotiate the terms of the Salary.com purchase with Lighthouse and its equity partner HIG through the end of 2015, closing the transaction on December 31, 2015. This is not a case in which NTV was misled into expending substantial resources in assisting Lighthouse only to have IBM sell to another buyer. A necessary element of a claim of deceit is damages, and NTV has not alleged that it suffered any damage in reliance on this allegedly material misrepresentation. See Kilroy v. Barron, 326 Mass. 464, 465 (1950) (plaintiff must have relied upon the representation as true and “acted upon it to its damage.”)
Remaining Claims
In its opposition to the defendant’s motion for summary judgment, NTV raises no argument in support of its claims for promissory estoppel, unjust enrichment, fraudulent transfer, or its claims to reach and apply debt or other interests due either defendant from some other
2 Count VI alleges the violation of Chapter 93A. The court finds this claim to be quite weak. Nonetheless, there exist circumstances in which a breach of the covenant of good faith and fair dealing will support a Chapter 93A claim and it therefore declines to dismiss this Count to the extent it is related to the advisory fee. See, e.g., Massachusetts Employers Ins. Exchange v. Propac-Mass., Inc., 420 Mass. 39 (1995).
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third-party, not named as a defendant in this action, nor could it. Those claims are dismissed.
ORDER
For the foregoing reasons, the defendants’ motion for summary judgment is ALLOWED, in part, and DENIED, in part, as follows: all Counts of the complaint are dismissed except so much of Counts I, II and VI as allege claims based upon Lighthouse’s refusal to pay the advisory fee. Plaintiff’s motion for summary judgment is DENIED.
____________________
Mitchell H. Kaplan
Justice of the Superior Court
Dated: May 31, 2017 read more

Posted by Stephen Sandberg - July 4, 2017 at 8:51 am

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

Spinazola v. Mass. Environmental Associates, Inc., et al. (Lawyers Weekly No. 12-078-17)

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COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION
NO. 0684CV00949BLS1
ROSEMARY SPINAZOLA, as Executrix of the Estate of Clarence Spinazola and as Co-Trustee of the Clarence Spinazola 1994 Revocable Trust
vs.
MASS. ENVIRONMENTAL ASSOCIATES, INC. and PATRICK J. HANNON
MEMORANDUM OF DECISION AND ORDER ON MOTION TO SUBSTITUTE ASSIGNEE, KING ROOT CAPITAL, LLC, AS PLAINTIFF AND REQUEST FOR EXECUTION
This case was filed on March 6, 2006. On March 8, 2007, a Final Judgment by Default Upon Assessment of Damages by the Court entered in favor of the plaintiff, Rosemary Spinazola, as Executrix of the Estate of Clarence Spinazola and as Co-Trustee of the Clarence Spinazola 1994 Revocable Trust (the Judgment)1, in the amount of $ 982,316, with interest from the date of filing. On August 20, 2007, the defendants filed a “Motion to Vacate Judgment by Default for Failure to Produce Discovery and for Failure to Comply with Court Orders.” On September 18, 2007, that motion was denied. Then, nearly ten years later, the motion now before the court was filed. It is styled: “Motion to Substitute Assignee, King Root Capital, LLC, as Plaintiff and Request for Execution” (the Motion). In that motion, King Root Capital, LLC (King Root) alleges that: (1) Spinazola assigned her interest in the Judgment to ABCD Holdings, LLC (ABCD Holdings or, simply, ABCD); (2) ABCD, thereafter, assigned its interest to King Root; (3) after accounting for payments by the defendants and the further accrual of post-
1 It is not clear to the court whether the judgment is in favor of Rosemary Spinazola, individually, or the Estate or a Trust. The court will simply use the term “plaintiff.”
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judgment interest, as of October 18, 2016 the Judgment balance is $ 2,055,540.59, with interest accruing from that date; and (4) the court should “substitute it as the plaintiff in this case and issue an execution in its name [in that amount].”
The defendants appeared by counsel and opposed the motion. The principal grounds for their opposition was that the sole member of ABCD is attorney George A. McLaughlin, III, whose brother is the sole member of King Root. McLaughlin represented defendant Hannon for a number of years, and, in particular, in connection with the negotiation and execution of a Settlement Agreement between the plaintiff and Hannon pursuant to which the Judgment would be satisfied in full by payment to plaintiff of $ 400,000 according to a payment schedule (the Agreement).2 The defendants also alleged that McLaughlin diverted funds available to pay the balance of the $ 400,000 due under the Settlement Agreement to other entities.3 Based on these allegations, the defendants assert that the assignments “are void against public policy, fatally infected by McLaughlin’s misuse of confidential client information and self-dealing.”4
At an initial hearing on the Motion, the court ruled that an evidentiary hearing was necessary to consider the defendants’ public policy arguments and scheduled an evidentiary hearing for May 1, 2017. A hearing was convened on that day. Three witnesses testified: the plaintiff’s lawyer, McLaughlin, and his brother; 23 exhibits were entered in evidence.
2 It appears undisputed that Hannon did not fulfill his obligations under the Agreement.
3 The defendants also generally assert questions concerning the validity of the terms of the assignment.
4 McLaughlin’s numerous disputes with Hannon over the last five years are recounted in at least three written decisions: Hannon v ABCD Holdings, LLC, First Circuit Court of Appeals, No. 15-2269 (Oct. 7, 2016) (the “Bankruptcy Case,” in which the First Circuit affirmed the dismissal of Hannon’s bankruptcy petition and denial of discharge based on his making false statements in financial reports filed in the bankruptcy court); ABCD Holdings, LLC v. ABC&D Recycling, Inc., Hampshire Sup. Ct. No. 12-0171 (Jan. 9, 2013) (“the Loan and Warrants Case,” in which the Superior Court (Carey, J.) found that loans to Hannon controlled entities from McLaughlin controlled entities were enforceable because Hannon was represented by competent, independent counsel when the loans were made and warrants which were issued in connection with the loans properly exercised); and ABCD Holdings, LLC v. Patrick J. Hannon, Suffolk Sup.Ct. No. 16-1840 (June 24, 2016) (the “Collection Case,” in which the Superior Court (Salinger, J.) found that ABCD was likely to succeed in obtaining a judgment on Hannon’s guarantees of loans to entities he controlled, but denying preliminary injunctive relief freezing Hannon’s assets because the relief requested could only be granted to a judgment creditor).
3
FINDINGS OF FACT
Based on the testimony of the witnesses, the exhibits, decisions entered in other cases, and reasonable inferences drawn therefrom, the court makes the following findings of fact, by a preponderance of the evidence.
McLaughlin has been a member of the bar of the Massachusetts Supreme Judicial Court since 1985. He is a principal in the firm, McLaughlin Brothers P.C. He represented Hannon and various businesses that Hannon controlled on a variety of matters from 2006 until 2012, but did not represent the defendants in this case (Hannon and Mass. Environmental Associates, Inc. (MEA)) prior to the time judgment entered against them. However, he did represent them in the negotiation of the Settlement Agreement with the plaintiff’s counsel, Peter Sutton, a partner in the Boston firm, Reimer & Braunstein. The Agreement was executed on November 16, 2007. As relevant to this case, it provided that if Hannon made periodic payments (in the aggregate $ 400,000) according to a schedule set out in the Agreement (the last of which was due on November 1, 2008), he and MEA would be released from any claims under the Judgment. If he breached the Agreement, the plaintiff would be entitled to enforce the Judgment, and the defendants would be credited with any payments made pursuant the Agreement.
McLaughlin also represented Hannon in connection with another substantial judgment that had been entered against him. He was similarly able to negotiate with that judgment creditor an arrangement in which the total amount of the judgment would be reduced if periodic payments were made on an agreed schedule. Apparently, for reasons not explained at the hearing, Hannon was due payments from an entity called: Casella Waste Systems (Casella). This judgment creditor required that these Casella payments be made to McLaughlin, who would then
4
be responsible for paying the creditor. McLaughlin described the arrangement, pursuant to which he received all payments due Hannon from Casella and then made distributions to creditors, Hannon and McLaughlin’s own law firm for legal fees, as an escrow agreement. There is, however, no evidence that a written escrow agreement was ever prepared. A schedule showing receipts from Casella and payments made to various payees, over the period January 21, 2010 to March 20, 2012, was offered in evidence. It reflects approximately $ 572,000 in receipts from Casella and 570,500 of payments made to various payees (of which $ 146,502 went to Hannon) over that period. Hannon did not challenge the accuracy of the schedule at the hearing. The court credits McLaughlin’s testimony that he only made payments out of the Casella account after clearing them with Hannon, at least to the point that McLaughlin received notice of Hannon’s bankruptcy petition.
Hannon defaulted on his payments under the Agreement. At some point, McLaughlin negotiated a reinstatement of the Agreement in return for a $ 25,000 payment, not to be counted toward the $ 400,000 settlement amount. In an email from Sutton to McLaughlin dated June 14, 2011, Sutton confirmed that Agreement was “reinstated,” but if Hannon failed to make monthly payments of $ 5,000 “the full amount of the judgment will become due.” According to the email, $ 140,500 then remained outstanding. The Casella account suggests that Hannon stopped making payments to Reimer & Braunstein, for the benefit of the plaintiff, in January, 2012. The court credits McLaughlin’s testimony that he never redirected payments from this account to other creditors that Hannon had instructed him to pay to Reimer & Braunstein.
In July, 2011, through an entity controlled by him (Bright Horizon Finance, LLC), McLaughlin loaned Hannon $ 219,759 to purchase an interest in a company called ABC&D Recycling. The details surrounding the loan and Hannon’s default on it are described in the Loan
5
and Warrants Case. See n. 4, supra.
In May, 2012, Hannon and his wife filed a bankruptcy petition under Chapter 11 of the Bankruptcy Code (later converted to a Chapter 7 petition). McLaughlin and ABCD Holdings filed proofs of claim in the bankruptcy proceeding, as did the plaintiff. Sutton, as attorney for the plaintiff, examined Hannon concerning the Judgment, Agreement and his assets in the course of those proceeding. McLaughlin caused ABCD Holdings and other companies he then controlled to file an adversary complaint challenging Hannon’s right to a discharge in the bankruptcy proceeding based upon allegedly false income statements filed with the Bankruptcy Court. The Bankruptcy Court found for ABCD Holdings and dismissed the petition, denying Hannon a discharge. This ruling was affirmed by the District Court and by the First Circuit Court of Appeals in the Bankruptcy Case.
On June 10, 2016, McLaughlin caused ABCD Holdings, Inc. and another entity he controlled to file the Collection Case in the Suffolk Superior Court against Hannon and a number of other individuals and entities (some of which were reach and apply defendants); it was assigned to BLS 2. ABCD Holdings moved for a preliminary injunction against Hannon enjoining him from encumbering or disposing of any of his assets or income, except to satisfy ordinary living or business expenses. In a written opinion dated June 24, 2016, the court (Salinger, J.) denied ABCD Holdings’ motion finding that: “Since Plaintiffs are not yet judgment creditors of Hannon, the Court may not exercise its general equity jurisdiction to temporarily grant injunctive relief in the nature of a creditors’ bill attachment.”
Sutton read an article describing the June 24th decision in the July 8, 2016 edition of Lawyers Weekly. He telephoned McLaughlin offering to sell him the Judgment entered in this case. On July 11, 2016, McLaughlin emailed Sutton: “Hi Peter-Please send me the Assignment
6
of the Spinazola matter for collection or whatever you were going to send, as I want to spend some time this summer trying to get some money out of Mr. Hannon.” Thereafter, Sutton and McLaughlin negotiated over the terms of the assignment of the Judgment. Sutton demanded $ 10,000 plus 50% of whatever McLaughlin recovered, after McLaughlin was reimbursed the $ 10,000 and costs of collection, and McLaughlin agreed. McLaughlin sent Sutton drafts of the documents to memorialize their agreement. Dissatisfied with his draft, Sutton had a member of his firm prepare the transactional documents. They consisted of an “Agreement Pursuant to a Non-Recourse Assignment of Judgment and Indemnification Dated as of the 14th Day of September, 2016” and a “Non-Recourse Assignment of Judgment and Indemnification Agreement” also dated as of September 14, 2016. Under these documents, the plaintiff assigned to ABCD Holdings her rights under the Judgment. On September 15, 2015, another entity controlled by McLaughlin (Rising Tides LLC) provided Reimer & Braunstein with a check for $ 10,000.
On December 8, 2016, ABCD Holdings sold the Assignment of Judgment to King Root under exactly the same terms as ABCH Holdings purchased it from the plaintiff. In fact, McLaughlin appears to have used the same two transactional documents drafted by Reimer & Braunstein that Sutton used to sell him the Assignment, just changing the names of the parties and the dates. King Root attempted to pay ABCH Holdings for the Judgment on December 8, 2016, but that check was returned for insufficient funds as King Root then had only $ 751.14 in its checking account. Thereafter, $ 10,000 was deposited in the King Root account, and another check issued to ABCD Holdings on December 15, 2016. Also on December 15, 2016, King Root’s attorney served Hannon with the motion now before the court.
7
RULINGS OF LAW
Mass.R.Civ.P. 25(c) provides: “In case of any transfer of interest, the action may be continued by or against the original party, unless the court upon motion directs the person to whom the interest is transferred to be substituted in the action or joined with the original party.” The court has found no Massachusetts case, nor any reference in the Massachusetts Practice Series, addressing the right of an assignee of a judgment to bring a motion, long after the entry of final judgment, seeking to be substituted as the party plaintiff and then to have an execution issued in its name. There are, however, federal cases in which a court has done this under the federal version of Rule 25(c), although it appears that this generally occurs when a corporate judgment creditor becomes the successor to another corporate entity by merger or other acquisition. See Vision Bank v. Algernon Land Co., L.L.C., 2012 WL 827011 (S.D. Al., March 12, 2012) and cases collected there. Whether Massachusetts would follow the federal approach, especially when a judgment is sold ten years after its entry, is not clear. However, as neither party has addressed this issue, the court will assume that it has this authority.
Hannon’s first argument in opposition to the Motion is factual. Hannon notes that in February and March of 2012, $ 131,667.02 was paid from the Casella account to McLaughlin’s company, Bright Horizon, in partial repayment of its loan to Hannon’s companies. According to Hannon, this money should have been used to pay the Judgment. However, as noted above, the court credited McLaughlin’s testimony that he did not make any payments from the Casella account that Hannon had not cleared. Additionally, on January 26, 2012, $ 55,000 was paid from the Casella account to Hannon, who apparently chose not to pay any of that sum to the plaintiff.5
5 The court notes that Hannon did not testify at the hearing and did not offer any evidence to rebut McLaughlin’s assertion that he pre-cleared payments from the account or to explain why Hannon did not make monthly payments to Reimer & Braunstein when he received such a substantial payment himself.
8
Hannon next argues that the assignment is void because it violates public policy. In support of this proposition he cites New Hampshire Ins. Co., Inc. v. McCann, 429 Mass. 202 (1999) in which the Supreme Judicial Court stated: “We think the [legal malpractice] claim should be assignable unless some clear rule of law of professional responsibility, or some matter of public policy, necessitates that the assignment should not be enforced.” Id. at 210. In seeking to establish that a clear rule of professional responsibility is violated by the assignment in this case, Hannon directs the court to Otis v. Arbella Mut. Ins. Co., No. CA 99-2907-F, 2003 WL 21385792 (Mass. Super. Apr. 18, 2003), aff’d 443 Mass. 634. Otis, however, is another case involving the assignment of a legal malpractice claim (not a judgment), and the assignment there at issue bears no resemblance to the assignment in this case.
In Otis, the plaintiff/assignee of a legal malpractice claim was also the plaintiff in a personal injury case in which the defendant sought to avoid liability by asserting that Otis was comparatively negligent. When a judgment far in excess of the limits of the defendant’s policy entered after trial, Otis obtained an assignment of the defendant’s putative legal malpractice claim against his defense counsel, premised on the theory that defense counsel had done an inadequate job of proving that Otis’ own negligence caused the accident. Otis, using the same trial counsel that prevailed in the personal injury action, now as the assignee of the legal malpractice claim, intended to prove that he was the principal cause of his own injuries and the assignor’s defense lawyers were negligent. The Superior Court properly concluded that under these circumstances, Otis and his lawyer were both engaging in “disreputable public role reversal” that should not be permitted.
In this case, McLaughlin did not represent Hannon until after a judgment of default
9
entered against him. Moreover, and more importantly, McLaughlin (as de facto assignee)6 does not have to prove anything. He is not the assignee of a claim against Hannon, he is the assignee of a final judgment. In particular, McLaughlin does not have to prove facts contrary to those proved to obtain the judgment, and, therefore, there is no “public role reversal.”
Next Hannon argues that under the Massachusetts Rules of Professional Conduct, the assignment is void as a matter of public policy. Hannon first directs the court to Rule 19(c) which states, as relevant to this case:
A lawyer who has formerly represented a client in a matter or whose present or former firm has formerly represented a client in a matter shall not thereafter:
(1) Use confidential information relating to the representation to the disadvantage of the former client or for the lawyer’s advantage or the advantage of a third person . . . .
“Confidential information” is not specifically defined in the Rules, but Comment 3A to the Editor’s Notes to Rule 16 explains, as relevant to this case:
“Confidential information” consists of information gained during or relating to the representation of a client, whatever its source, that is . . . (b) likely to be embarrassing or detrimental to the client if disclosed, or (c) information that the lawyer has agreed to keep confidential. “Confidential information” does not ordinarily include . . . (ii) information that is generally known in the local community or in the trade, field or profession to which the information relates. . . . Information that is “generally known in the local community or in the trade, field or profession to which the information relates” includes information that is widely known. Information about a client contained in a public record that has received widespread publicity would fall within this category. On the other hand, a client’s disclosure of conviction of a crime in a different state a long time ago or disclosure of a secret marriage would be protected even if a matter of public record because such information was not “generally known in the local community.”
In this case, the court finds that McLaughlin did not use confidential information gained through his representation of Hannon to obtain an assignment of the Judgment. One can imagine
6 The court recognizes that the actual assignee was ABCD Holdings, which then transferred the assignment to McLaughlin’s brother’s firm, King Root. For reasons that are discussed, infra, the court disregards these corporate entities in addressing the validity of the assignment.
10
a set of circumstances in which a lawyer who previously represented a client in negotiating an agreement with a judgement creditor, like the one at issue here, would violate Rule 9(c) by purchasing the judgment. For example, if, as a result of a prior representation, the lawyer knew that the full amount of the judgment was still outstanding because the former client/debtor had breached the payment agreement and then sought out the judgment creditor some time later for purpose of purchasing it, this might well constitute a misuse of confidential client information. That is not what happened in this case.
Here, Hannon first accepted the possibility that his lawyer could become his creditor in 2011, when he borrowed money from McLaughlin7. In 2012, he unavoidably and permanently altered his relationship with McLaughlin when he filed for bankruptcy, defaulted on the loans, and thereby caused McLaughlin to be adverse to him in the bankruptcy proceedings. Indeed, McLaughlin was forced to pay Hannon’s bankruptcy estate some of the loan repayments because they were held to be preferences. The Judgment, the Agreement, and the McLaughlin loans all became a matter of public record in this community when they became the subject of the bankruptcy proceedings. Sutton even examined Hannon with respect to the Judgment and the Agreement during those proceedings. Finally, McLaughlin did not use confidential information to seek out the holder of the Judgment. It was Sutton who believed that he might be able to recover something for his client when he read the decision in the Collection Case which specifically explained that McLaughlin could not obtain a freeze order against Hannon’s assets because he was not yet a judgment creditor.
Hannon also argues that McLaughlin would have learned confidential information concerning Hannon’s assets when he represented him in negotiating deals with Hannon’s
7 Again, the court recognizes that the loans went from McLaughlin controlled entities to Hannon controlled entities, but, for purposes of this professional responsibility analysis the court disregards the LLCs.
11
creditors. The court finds no evidence that McLaughlin presently has any confidential information concerning Hannon’s assets. In denying, McLaughlin preliminary relief in the Collection Case, Judge Salinger specifically pointed-out that McLaughlin’s allegations concerning Hannon’s assets were based on “information and belief.” Moreover, McLaughlin has already engaged in litigation adverse to Hannon concerning Hannon’s assets—not only in the Collection Case, but also in the adversary proceeding which McLaughlin filed against Hannon in the Bankruptcy Case.
Hannon also bases his public policy arguments on Rule of Professional Conduct 19(a) which states:
A lawyer who has formerly represented a client in a matter shall not thereafter represent another person in the same or a substantially related matter in which that person’s interests are materially adverse to the interests of the former client unless the former client gives informed consent, confirmed in writing.
Hannon argues that the enforcement of the Judgment is a matter substantially related to the negotiation of the Agreement ten years ago. Perhaps, although Hannon stopped making payments under the Agreement many years ago, and it is obviously no longer in force. In any event, McLaughlin is not representing any party adverse to Hannon. Rather, in purchasing the Judgment, he was acting as a principal not an attorney or agent. The Rule does not address this circumstance. Rather, under many situations, McLaughlin’s actions would run afoul of Rule 19(c). In this case, for the reasons discussed above, they do not. McLaughlin was already a creditor of Hannon and adverse to him in many actions when he purchased the Judgment.
In the end, the court finds that there is something unseemly about McLaughlin purchasing a judgment against Hannon where he previously represented Hannon in negotiating an arrangement for its payment with the original judgment creditor. Furthermore, the court finds
12
that the transfer of the assignment from ABCD Holdings to King Root did not ameliorate the optics of the situation, it made them worse. ABCD Holdings is a limited liability company with one member and manager—McLaughlin. King Root is a limited liability company with one member and manager—McLaughlin’s brother. The transaction between ABCD Holdings and King Root was not an arm’s length commercial sale. ABCD Holdings simply transferred the Judgment to King Root on exactly the same terms as ABCD Holdings purchased it from the plaintiff. In fact, McLaughlin used the transactional documents prepared by Reimer & Braunstein; he just changed the names and date. If the assignment was void as against public policy when held by McLaughlin’s LLC, it was also void when owned by his brother’s LLC.
While too much should not be read into the SJC’s decision in New Hampshire Ins. Co., Inc. v. McCann, which was case in which the SJC was addressing the broad question of whether legal malpractice claims should be assignable, there the Court stated: “We think the claim should be assignable unless some clear rule of law of professional responsibility, or some matter of public policy, necessitates that the assignment should not be enforced.” As discussed above this is not a case in which a clear rule of law or professional responsibility prevents assignment. With respect to the public policy concern raised by this assignment, McLaughlin and Hannon have been adverse to one another in a number of cases over the last five years. McLaughlin’s testimony at the evidentiary hearing suggested that their animosity has spilled-over into personal matters that have been addressed in District Courts. Under these unique circumstances, the court finds that there are no prevailing public policy reasons that prevent McLaughlin from purchasing the right to enforce an unsatisfied judgment entered ten years ago in a case in which he did not represent Hannon.
13
ORDER
For the foregoing reasons, King Root’s motion to substitute it as the plaintiff in this action and for the issuance of an execution pursuant to G.L. c. 235, § 19 is ALLOWED. King Root shall however submit a sworn statement calculating the amount of the execution that the clerk shall issue. This statement shall credit Hannon with all payments made to plaintiff, including the $ 25,000 paid to reinstate the Agreement.
___________________
Mitchell H. Kaplan
Justice of the Superior Court
Dated: May 9, 2017 read more

Posted by Stephen Sandberg - June 30, 2017 at 10:33 pm

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Mount Vernon Fire Insurance Company v. Visionaid, Inc. (Lawyers Weekly No. 10-108-17)

NOTICE:  All slip opinions and orders are subject to formal revision and are superseded by the advance sheets and bound volumes of the Official Reports.  If you find a typographical error or other formal error, please notify the Reporter of Decisions, Supreme Judicial Court, John Adams Courthouse, 1 Pemberton Square, Suite 2500, Boston, MA, 02108-1750; (617) 557-1030; SJCReporter@sjc.state.ma.us

SJC-12142

MOUNT VERNON FIRE INSURANCE COMPANY  vs.  VISIONAID, INC.[1]

Suffolk.     December 5, 2016. – June 22, 2017.

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

Insurance, Insurer’s obligation to defend.

Certification of questions of law to the Supreme Judicial Court by the United States Court of Appeals for the First Circuit.

Kenneth R. Berman (Heather B. Repicky also present) for the defendant.

James J. Duane, III (Scarlett M. Rajbanshi also present) for the plaintiff. read more

Posted by Stephen Sandberg - June 22, 2017 at 5:46 pm

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Geanacopoulos v. Philip Morris USA Inc. (Lawyers Weekly No. 12-070-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
9884CV06002-BLS1
____________________
THOMAS GEANACOPOULOS, on behalf of himself and a class
v.
PHILIP MORRIS USA INC.
____________________
MEMORANDUM AND ORDER ON PLAINTIFF’S MOTION FOR DISPOSITION OF RESIDUAL FUNDS
Judge Leibensperger found after a lengthy bench trial that, “for more than twenty-eight years until 1999,” Philip Morris USA, Inc., “knowingly and willfully marketed Marlboro Lights as a cigarette less harmful or safer than Marlboro Reds without sufficient evidence to substantiate that claim.” Judge Leibensperger concluded that in so doing Philip Morris deliberately deceived Massachusetts consumers in violation of G.L. c. 93A. He awarded statutory damages of $ 25 per class member, or an estimated total of $ 4,942,500, plus prejudgment interest. The parties then entered into a settlement agreement to govern the distribution of this award to eligible class members. Philip Morris paid $ 15,273,815 to fund the settlement.
Given the number of class members who have been identified, the parties expect that residual funds totaling roughly $ 6.8 million will be left in the settlement fund after the distribution of the statutory damages plus interest to each class member and the payment of all authorized expenses.
Plaintiffs have asked the Court to approve distribution of the residual funds. The distribution of such residual funds in a class action is governed by Mass. R. Civ. P. 23(e). It provides that any such residual funds “shall be disbursed [a] to one or more nonprofit organizations or foundations (which may include nonprofit organizations that provide legal services to low income persons) which support projects that will benefit the class or similarly situated persons consistent with the objectives and purposes of the underlying causes of action on which relief was based, or [b] to the Massachusetts IOLTA Committee to support activities and programs that promote access to the civil justice system for low income residents of the Commonwealth of Massachusetts.” Rule 23(e)(2). This rule is similar in aim to common law cy pres doctrine, which governs the disposition of property dedicated for
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charitable purposes where the original purposes had become impossible or impracticable.1
In their original motion, Plaintiffs asked that $ 1.6 million be distributed to each of four non-profit organizations or sets of programs—the Campaign for Tobacco-Free Kids, the Massachusetts General Hospital Tobacco 21 and CEASE Programs, the University of Massachusetts Medical School Center for Tobacco Treatment and Research and Training, and Northeastern University’s Public Health Advocacy Institute—and that any remaining residual funds (which Plaintiffs estimated would amount to roughly $ 383,500) be distributed to the Massachusetts IOLTA Committee.
After the Massachusetts IOLTA Committee objected to this proposal, the Plaintiffs and the Committee agreed upon an alternative recommendation.
Plaintiffs and the Committee now jointly request that forty percent of the residual funds be paid to the Massachusetts IOLTA Committee. Plaintiffs recommend that the remainder be distributed in equal shares of fifteen percent each to the four public health organizations listed above. The Committee no longer takes any position as to whether distributing money to any or all of those organizations would be proper.
Distribution of a portion of the residual funds to the Massachusetts IOLTA Committee is permissible and appropriate because it is specifically authorized by Rule 23(e)(2).
The Court finds that it would also be proper and appropriate to distribute a portion of the residual funds to the Campaign for Tobacco-Free Kids, the Massachusetts General Hospital Tobacco 21 and CEASE Programs, the University of Massachusetts Medical School Center for Tobacco Treatment and Research and Training, subject to the condition that each organization used any such funds for their charitable activities in Massachusetts. For the reasons stated in Plaintiffs’ written submissions, the Court finds that such use of residual funds by these three organizations or programs will benefit Massachusetts residents who are members or
1 See generally Board of Selectmen of Provincetown, 15 Mass. App. Ct. 639, 646 (1983) (summarizing cy pres doctrine).
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the plaintiff class or are similarly situated, and will do so in a manner consistent with the objectives and purposes of this class action.
The Court declines to authorize the distribution of any portion of the residual funds to Northeastern University’s Public Health Advocacy Institute in order to avoid any appearance that the selection of funding recipients was not made on the merits. One of the lead attorneys representing the plaintiff class in this lawsuit serves as PHAI’s litigation director and as director of PHAI’s Center for Public Health Litigation. The Court fully credits PHAI’s showing that this individual will not benefit personally from any residual funds that may be distributed to PHAI. Nonetheless, the Court is convinced that it should not authorize any distribution to PHAI in order to avoid any appearance of impropriety.2
In the exercise of its discretion, the Court will order that the Massachusetts IOLTA Committee receive 55 percent of the residual funds and that other three organizations or programs discussed above, other than the PHAI, each receive 15 percent of the residual funds.
ORDER
Plaintiffs’ motion for disposition of residual funds is ALLOWED IN PART. The Court hereby orders that any residual funds available in the Settlement Fund after paying or accounting for all permissible distributions to class members and all allowable expenses shall be distributed as follows: (1) 55 percent of the total residual funds shall be paid to the Massachusetts IOLTA Committee to support activities and programs that promote access to the civil justice system for low income residents of the Commonwealth of Massachusetts; (2) 15 percent shall be paid to the Campaign
2 Cf. Weeks v. Kellogg Co., No. CV 09-08102(MMM)(RZx), 2013 WL 6531177, *19 (C.D. Cal. 2013) (Morrow, J.) (declining to approve cy pres distribution to local food bank that had a “preexisting relationship with certain of plaintiffs’ counsel”); In re Linerboard Antitrust Litigation, MDL No. 1261, 2008 WL 4542669, *5 (E.D. Pa. 2008) (DuBois, J.) (declining to approve cy pres distribution to Public Interest Law Center of Philadelphia because attorney that appeared in case “currently serves in a lead role at PILCOP”); see generally American Law Institute, draft Principles of the Law of Aggregate Litigation, § 3.07, comment b (2009) (“a cy pres remedy should not be ordered if the court or any party has any significant prior affiliation with the intended recipient that would raise substantial questions about whether the selection of the recipient was made on the merits”).
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for Tobacco-Free Kids, to be used only for programs or activities in Massachusetts; (3) 15 percent shall be paid to the Massachusetts General Hospital’s Tobacco 21 and CEASE Programs, to be used only for programs or activities in Massachusetts; and (4) 15 percent shall be paid to the University of Massachusetts Medical School’s Center for Tobacco Treatment and Research and Training, to be used only for programs or activities in Massachusetts.
June 9, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court read more

Posted by Stephen Sandberg - June 16, 2017 at 7:56 am

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Bassett, et al. v. Triton Technologies, Inc., et al. (Lawyers Weekly No. 12-074-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1684CV03475-BLS2
____________________
LAURA BASSETT, JAMIE ZALINSKAS, ALYSSA WRIGHT, and ALEXIS CRAMER, on behalf of themselves and all others similarly situated
v.
TRITON TECHNLOGIES, INC., S. JAY NALLI, and ANDREW S. BANK
____________________
MEMORANDUM AND ORDER ALLOWING PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION
The four named plaintiffs used to work for Triton Technologies, Inc., as “inside sales” employees. They assert two distinct claims for unpaid wages. The first claim alleges that Defendants violated the overtime statute, G.L. c. 151A, § 1A, by not paying Plaintiffs time-and-a-half for working more than forty hours per week. The second claim alleges that Defendants violated the Sunday pay law, G.L. c. 136, § 6(50), by not paying Plaintiffs time-and-a-half for working on Sundays.
Plaintiffs have now moved to certify a class consisting of two distinct subclasses—one comprised of sales employees at Triton who have not received time-and-a-half for working more than forty hours in any given week, and another comprised of all sales employees who have not received time-and-a-half for hours worked on a Sunday.
The Court finds that class certification is appropriate because both sub-classes are so numerous that it is not practical to join all class members, there are questions of law or fact that are common to all members of each subclass and that predominate over questions of fact that affect only individual members, the claims of the named Plaintiffs are representative of the claims of each subclass, the named Plaintiffs and their counsel will fairly and adequately protect the interests of the class, and a class action would permit the most fair and efficient adjudication of this dispute. See Mass. R. Civ. P. 23.
Although Defendants do not oppose certification of the overtime subclass, they argue that the class should be limited to salespeople who claim to be owed overtime by Triton for work performed after November 13, 2013. Defendants point out that the
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overtime claim is subject to a three-year statute of limitations, see G.L. c. 151, § 20A,1 and this action was filed on November 14, 2016. Plaintiffs agree that it is appropriate to limit the overtime class to this three-year period. The Court will do so.
Defendants do oppose certification of the Sunday subclass. They argue that this claim is subject to a six-month statute of limitations under G.L. c. 136, § 9, and that none of the named Plaintiffs worked for Triton within six months before this lawsuit was filed (i.e. after May 13, 2015). The Court disagrees.
The Sunday claim is not governed by the six-month limitations period invoked by Defendants. That statute provides that “Prosecution for violations of sections two, three, or five [of chapter 136] shall be commenced within six months after the offense was committed.” G.L. c. 136, § 9. This limitations period only governs criminal prosecutions brought against persons who commit one of the crimes set forth in G.L. c. 136, §§ 2, 3, or 5. But this case is not a criminal prosecution, and Plaintiffs do not seek to enforce any part of sections 2, 3, or 5 of chapter 136.
The Sunday claim is actually governed by a three-year limitations period. As the Court explained in a prior decision in this case dated March 6, 2017, Plaintiffs may enforce the Sunday pay law by asserting a cause of action for non-payment of wages under G.L. c. 149, § 150. Cf. Drive-O-Rama, Inc. v. Attorney General, 63 Mass. App. Ct. 769, 769-770 (2005) (failure to pay time and a half for work on legal holidays, as required by G.L. c. 136, § 13, violated the Wage Act). All Wage Act claims, including claims to enforce the Sunday pay law, are governed by the three-year limitations period established in G.L. c. 149, § 150. It appears to be undisputed that each of the named Plaintiffs worked for Triton within three years before this action was filed.
The Court will certify the Sunday pay class but limit it to the applicable three-year statutory limitations period.
1 The limitations period for overtime claims used to be two years, but § 20A was amended effective November 18, 2014, to extent that period to three years. See St. 2014, c, 292, §§ 3, 4.
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ORDER
Plaintiffs’ motion for class certification is ALLOWED IN PART. The Court hereby certifies a class of plaintiffs that shall consist of the following two subclasses: (1) all sales employees of Triton Technologies, Inc., who did not receive compensation equal to one and one-half times their regular hourly rate for all of the hours that they worked in excess of forty house during any week at any time after November 13, 2013; (2) all sales employees of Triton Technologies, Inc., who did not receive compensation equal to one and one-half times their regular hourly rate for all of the hours that the worked on a Sunday at any time after November 13, 2013.
June 13, 2017
___________________________
Kenneth W. Salinger
Justice of the Superior Court read more

Posted by Stephen Sandberg - June 16, 2017 at 12:47 am

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Meunier, et al. v. Market Strategies, Inc. (Lawyers Weekly No. 12-072-17)

COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT.
1684CV01546-BLS2
1684CV03592-BLS2
____________________
JOHN J. MEUNIER, CHRISTY M. WHITE, and the JOHN J. MEUNIER 2012 IRREVOCABLE TRUST
v.
MARKET STRATEGIES, INC.
____and____
MARKET STRATEGIES, INC.
v.
COGENT RESEARCH HOLDINGS LLC
____________________
MEMORANDUM AND ORDER ON MARKET STRATEGIES, INC.’S MOTION FOR SUMMARY JUDGMENT
John Meunier, Christy White, and the John J. Meunier 2012 Irrevocable Trust (the “Trust”) claim that Market Strategies, Inc. (“MSI”) breached its contractual obligations to make certain payments to Cogent Research Holdings LLC (which the parties refer to as “Holdco”). They also claim that after signing the contract at issue MSI misrepresented its willingness and ability to pay what it owes and thereby committed deceptive acts in violation of G.L. c. 93A. Finally, Meunier and White seek declaratory judgment regarding the enforceability of certain non-competition, non-solicitation, and confidentiality agreements. MSI has moved for summary judgment.
The Court will grant summary judgment in MSI’s favor on the contract claim because Plaintiffs are not intended beneficiaries of MSI’s payment obligations to Holdco as a matter of law. It will also allow MSI’s motion with respect to the declaratory judgment claim because any dispute regarding enforceability of the non-competition or non-solicitation agreements is moot and Plaintiffs lack standing to challenge the confidentiality agreement on the ground that MSI committed a material breach of contract by not paying Holdco. However, the Court will deny the summary judgment motion with respect to the misrepresentation and c. 93A claims because they are independent from the contract claim.
1. Undisputed Factual Background. These actions arise from the May 2013 sale of Cogent Research LLC to MSI. At the time of the transaction, Meunier, White,
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and the Trust were the sole owners of Cogent Research. They agreed to sell Cogent Research to MSI in exchange for an “Initial Payment” of $ 8.0 million, a “Delayed Payment” of $ 2.0 million, and a “Contingent Payment” of roughly $ 3.15 million that was due after MSI received additional audited financial statements of Cogent Research. Meunier and White also agreed to work for MSI for three years and entered into a non-competition, non-solicitation, and confidentiality agreement.
Meunier, White, and the Trust created Holdco in connection with this transaction. They are the sole owners of Holdco. They transferred ownership of Cogent Research to Holdco, which in turn sold Cogent Research to MSI. The parties’ purchase agreement provides that MSI was required to pay an Initial Payment, Delayed Payment, and Contingent Payment to Holdco. MSI does not have any contractual obligation to make any of these payments to Meunier, White, or the Trust.
Although the parties’ purchase agreement provides that MSI was to make the Deferred and Contingent Payments to Holdco no later than April 30, 2016, a separate subordination agreement executed at the same time modifies those terms. The parties to the subordination agreement were Holdco, MSI, and an administrative agent representing Senior Lenders of MSI. Meunier and White signed this contract on behalf of Holdco. The subordination agreement provides in § 2.1 that the obligations of MSI to make the Delayed and Contingent Payments “shall be subordinate and subject in right and time of payment … to the prior Payment in Full of all Senior Debt” held by the Senior Lenders. It provides in § 2.3 that, so long as Senior Debt is outstanding, MSI shall not make and Holdco shall not accept payment of any part of the Deferred and Contingent Payments if doing so would cause MSI to default under the Senior Credit Agreement.1 And it provides in § 2.4(a) that Holdco shall not sue
1 In its prior decision dated February 23, 2017, the Court construed § 2.3 as providing that MSI shall not make and Holdco shall not accept payment of any part of the Deferred and Contingent Payments until the Senior Lenders are paid in full. The Court understood the clause barring payments that would cause a default as limiting payments to Holdco that would otherwise be permitted under § 2.2 if MSI were involved in a bankruptcy or similar proceeding. In their summary judgment memoranda, however, both sides say that § 2.3 permits MSI to make Deferred or Contingent Payments at any time—even if Senior Debt is still unpaid—so long as doing so does not breach any obligation owed to the Senior Lenders. The Court accepts the parties’ shared construction of their own contract.
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MSI or take any other action to enforce MSI’s payment obligations under the purchase agreement until the Senior Debt is paid in full.
2. Contract Claim. To date, MSI has not paid any part of the $ 5.15 million in Deferred and Contingent payments that it owes to Holdco. Plaintiffs claim that this constitutes a breach of the purchase agreement. Meunier, White, and the Trust all sued MSI in their own names, purporting to assert their own rights as intended third-party beneficiaries of MSI’s contractual promise to pay Holdco these amounts.
MSI contends that it is entitled to summary judgment on this claim because Plaintiffs have no standing to raise it. (On the merits, MSI contends that it is required or at least permitted to withhold these payments under the subordination agreement. It does not seek summary judgment on that ground.)
2.1. Legal Background — Intended Beneficiaries and Contract Interpretation. The purchase agreement provides (in § 9.09) that it “will be governed by and construed and enforced in accordance with” Massachusetts law.
“Under Massachusetts law, only intended beneficiaries, not incidental beneficiaries, can enforce a contract.” See Harvard Law School Coalition for Civil Rights v. President and Fellows of Harvard College, 413 Mass. 66, 71 (1992). “One need not be a beneficiary of every provision of the contract in order to be an intended beneficiary with enforceable rights; it is enough to be the intended beneficiary of the promise one is seeking to enforce.” The James Family Charitable Foundation v. State Street Bank and Trust Co., 80 Mass. App. Ct. 720, 725 (2011). An intended third-party beneficiary “stands in the shoes” of, and thus has no greater rights than, the contracting party whose rights the beneficiary seeks to enforce. Rae v. Air-Speed, Inc., 386 Mass. 187, 196 (1982), quoting Restatement (Second) of Contracts § 309 (1981); accord Campione v. Wilson, 422 Mass. 185, 194 (1996).
Plaintiffs would have standing to enforce MSI’s promises to pay Holdco only if the purchase agreement expressly or implicitly conveyed a “clear and definite” intent that Plaintiffs have the right to enforce those promises. See James Family Charitable Foundation, supra, at 724-725, quoting Lakew v. Massachusetts Bay Transp. Auth., 65 Mass. App. Ct. 794, 798 (2006), and Anderson v. Fox Hill Village Homeowners Corp., 424 Mass. 365, 366-367 (1997). “[T]he language and circumstances of the
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contract” determine whether the contracting parties intended that Plaintiffs would have the right to sue MSI for not paying amounts it owes to Holdco. Anderson, supra, at 367.
If written contracts are unambiguous, as they are here, a court “may determine whether” someone who was not a direct party to a particular promise “was an intended beneficiary as a matter of law.” James Family Charitable Foundation, 80 Mass. App. Ct. at 725. This follows from the general rule that “[i]f a contract … is unambiguous, its interpretation is a question of law that is appropriate for a judge to decide on summary judgment.” Seaco Ins. Co. v. Barbosa, 435 Mass. 772, 779 (2002). “Whether a contract is ambiguous is also a question of law.” Eigerman v. Putnam Investments, Inc., 450 Mass. 281, 287 (2007).
Although the parties disagree sharply as to whether the purchase agreement expressly or implicitly indicates that Plaintiffs are intended beneficiaries with the right to enforce MSI’s payment obligations, that does not mean that the contract is unclear. “[A]mbiguity is not created simply because a controversy exists between parties, each favoring an interpretation contrary to the other’s.” Indus Partners, LLC v. Intelligroup, Inc., 77 Mass. App. Ct. 793, 795 (2010) (affirming summary judgment based on contract interpretation), quoting Jefferson Ins. Co. v. Holyoke, 23 Mass. App. Ct. 472, 475 (1987).
Plaintiffs are mistaken in asserting that the parties’ dispute regarding their contractual intent is a factual question, and that the issue can only be decided at trial and after considering Plaintiffs’ subjective understanding that they would be able to enforce MSI’s payment obligations. Since the parties’ contracts are unambiguous, parol or extrinsic evidence regarding the parties’ intent is inadmissible. See, e.g., General Convention of New Jerusalem in the United States of America, Inc. v. MacKenzie, 449 Mass. 832, 835 (2007); Herson v. New Boston Garden Corp., 40 Mass. App. Ct. 779, 792 (1996). But even if parol evidence could be considered, Plaintiffs’ uncommunicated subjective intent would still be irrelevant. The meaning and effect of a contract “is not to be determined by the secret thought or unexpressed intent of any of the parties, but is to be determined by the intent as expressed by words and acts of all the parties in the light of the circumstances.” Tudor Press v. Univ. Distrib.
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Co., 292 Mass. 339, 341 (1935). In other words, “contracts rest on objectively expressed manifestations of intent,” and cannot be altered by “subjective and unexpressed expectations” of one party or side. Beatty v. NP Corp., 31 Mass. App. Ct. 606, 612 (1991). Thus, the terms of a written contract—and not a party’s subjective motives, desires, or intent—“determine whether performance under the contract would necessarily and directly benefit” a third-party and thus make them an intended beneficiary with the right to enforce the contract. Lonsdale v. Chesterfield, 662 P.2d 385, 390 (Wash. 1983) (en banc); accord James Family Charitable Foundation, 80 Mass. App. Ct. at 725.
2.2. Construing the Contracts. The Court concludes that the contract documents are unambiguous and that they do not contain any clear or definite expression that Plaintiffs have any right to enforce MSI’s payment obligations.
The purchase agreement provides (in § 2.05) that MSI is required to pay the Delayed and Contingent Payments to Holdco, the seller of Cogent Research. No provision requires MSI to make those payments to any of the Plaintiffs, or gives Plaintiffs any right to compel MSI to make the payments to Holdco.
Plaintiffs’ assertion that the purchase agreement expressly makes them intended third-party beneficiaries with the right to enforce MSI’s obligations to pay Holdco is without merit. Plaintiffs point to § 9.07 of the purchase agreement, which provides in relevant part that “[t]his Agreement will not confer any rights or remedies upon any Person … other than the Parties and their respective successors and permitted assigns[.]”This provision means what it says and nothing more: no person or entity that is not a party to the purchase agreement has any right to enforce and may not seek any remedies for a breach of this contract. Although each of the Plaintiffs is a party to the purchase agreement, § 9.07 does not state that all of the contracting parties are intended beneficiaries of all of the contract provisions. Nor does § 9.07 resolve the matter against Plaintiffs, as MSI contends. This provision does not say that the contracting parties have no right to enforce obligations that are not owed to them directly. The heading to this section (“No Third Party Beneficiaries”) does not matter, because § 9.03 provides that “[t]he headings contained in this Agreement are included for purposes of convenience only, and will not affect the
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meaning or interpretation of this agreement.” In sum, § 9.07 does not expressly resolve the issue one way or the other.
The fact that Meunier, White, and the Trust are the sole owners of Holdco, and therefore will directly benefit if and when MSI pays Holdco the Deferred and Contingent Payment amounts, is not enough to show that Plaintiffs are intended beneficiaries of the promise to make those payments to Holdco. See The James Family Charitable Foundation, 80 Mass. App. Ct. at 724 (intent to give third-party benefit of performance is not enough to make them intended beneficiary with right to enforce performance). Whenever someone contracts to pay money to a closely held company they know that the owners of the company will benefit from that payment. Typically, however, members or shareholders who wish to enforce a contractual obligation owed to a close corporation must bring a derivative action on behalf of the business; they do not automatically have any right to sue in their own names merely because they will benefit if the duty to the corporation is carried out. See, e.g., Pagounis v. Pendleton, 52 Mass. App. Ct. 270, 275 (2001).
The structure of MSI’s purchase and Holdco’s sale of Cogent Holdings indicates that the parties did not intend for Plaintiffs to be able to compel MSI to pay any part of the Deferred or Contingent Payments or seek damages if it failed to do so. If MSI had promised Holdco that it would make payments directly to Meunier, White, and the Trust, then Plaintiffs would have been intended beneficiaries of that promise. See Choate, Hall & Stewart v. SCA Services, Inc., 378 Mass. 535, 546 (1979). But since MSI instead promised to make payments to Holdco, with the understanding and expectation that the economic benefit of those payments would indirectly flow through to its members, Plaintiffs are merely incidental beneficiaries with no right to enforce those contract provisions. Id. at 547 & n.21;2 accord, e.g., Spring Valley IV Joint Venture v. Nebraska State Bank of Omaha, 690 N.W.2d 778, 782-783 (Neb.
2 The SJC quotes with approval the following example from the Restatement of Contracts: “B promises A to pay whatever debts A may incur in a certain undertaking. A incurs in the undertaking debts to C, D and E. If the promise is interpreted as a promise that B will pay C, D and E, they are intended beneficiaries . . . ; if the money is to be paid to A in order that he may be provided with money to pay C, D and E, they are at most incidental beneficiaries.” Id., quoting draft version of what became Restatement (Second) of Contracts § 302, Illustration 3 (1981).
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2005) (where bank had contractual obligation to disburse loan funds to individual borrower, who had disclosed that purpose was to invest in specific partnerships, the partnerships “were at most incidental beneficiaries of the loan agreements and … lack[ed] any enforceable property rights to the loan proceeds”).
As the United States Court of Appeals for the First Circuit has explained, “Massachusetts courts steadfastly have refused to accord intended beneficiary status under a contract whose terms, interpreted in the particular transactional setting, do not provide for the benefits of performance to flow directly to the third party.” Public Service Co. of New Hampshire v. Hudson Light and Power Dept., 938 F.3d 338, 343 (1st Cir. 1991) (holding that, where PSNH agree to repurchase electricity from Massachusetts Municipal Wholesale Electric Company, with understanding that local municipal power companies would benefit from PSNH’s payments to MMWEC, power companies were not intended beneficiaries and had no right to enforce contract) (applying Massachusetts law). Massachusetts is consistent with other jurisdictions in confining intended beneficiary status to people and entities that have a right directly to receive benefits from performance of a contractual promise. See, e.g., Choate, Hall, 378 Mass. at 547 n.21 (citing cases); Public Service, 938 F.2d at 343 n.12 (citing cases); Lonsdale, 662 P.2d at 390 (under Washington law, third-party is intended beneficiary only where “the contract necessarily and directly benefits the third person”) (quoting Vikingstad v. Baggott, 282 P.2d 824, 826 (1955).
Not only is there nothing in the purchase agreement to suggest that Plaintiffs are third-party beneficiaries of MSI’s obligations to pay Holdco, but in addition the subordination agreement confirms that the parties had no clear intent to give Plaintiffs any right to enforce those obligations.
Since the purchase agreement and subordination agreement were closely related and part of a single transaction, the Court must read them together and consider that circumstance in construing any part of either document. See Chelsea Indus., Inc. v. Florence, 358 Mass. 50, 55-56 (1970); Chase Commercial Corp. v. Owen, 32 Mass. App. Ct. 248, 250 (1992). The Court must construe the parties’ contracts in a manner that will give them “effect as … rational business instrument[s] and in a manner which will carry out the intent of the parties.” Robert and Ardis James
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Foundation v. Meyers, 474 Mass. 181, 188 (2016), quoting Starr v. Fordham, 420 Mass. 178, 192 (1995). And “the parties’ intent ‘must be gathered from a fair construction of the contract[s] as a whole and not by special emphasis upon any one part.’ ” Kingstown Corp. v. Black Cat Cranberry Corp., 65 Mass. App. Ct. 154, 158 (2005), quoting Ucello v. Cosentino, 354 Mass. 48, 51 (1968), and Crimmins & Peirce Co. v. Kidder Peabody Acceptance Corp., 282 Mass. 367, 375 (1933).
Plaintiffs’ claim that they are intended beneficiaries of MSI’s payment obligations cannot be squared with the terms of the subordination agreement. That contract, as explained above, provides that MSI’s obligations to pay Holdco under the purchase agreement are subordinate to MSI’s pre-existing obligations to repay its Senior Lenders. The subordination agreement also contained a covenant not to sue. It provides that Holdco “shall not … take any Enforcement Action with respect to” the Deferred and Contingent Payment obligations of MSI “without the prior written consent” of the administrative agent representing the Senior Lenders. The phrase “Enforcement Action” is defined to include bringing a lawsuit, or initiating or participating with others in a lawsuit, to collect all or any part of the Deferred or Contingent Payment amounts. The covenant that Holdco will not sue to enforce MSI’s payment obligations would have little meaning if Plaintiffs could circumvent it at any time by suing MSI in their own names rather than on behalf of Holdco.
For all of these reasons, MSI is entitled to summary judgment in its favor on the contract claim.3
3. Claims for Misrepresentation and Violation of G.L. c. 93A. In Counts II and III of their amended complaint, Plaintiffs claim that they relied to their detriment on false representations by MSI that it was willing and able to pay all amounts it owes
3 Plaintiffs made a request under Mass. R. Civ. P. 56(f) for more time to conduct discovery. But they have not shown that the additional discovery they seek would be relevant to the issue of whether Plaintiffs have standing to enforce MSI’s payment obligation under the purchase agreement. It would therefore be inappropriate to delay resolution of this part of the summary judgment motion to await further discovery. See Commonwealth v. Fall River Motor Sales, Inc., 409 Mass. 302, 308 (1991) (“One common reason for the denial of a continuance [under Rule 56(f)] is the irrelevance of further discovery to the issue being adjudicated in summary judgment.”).
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to Holdco by the due date specified in the purchase agreement. These are not fraud in the inducement claims, as the alleged misrepresentations occurred after the contracts were signed.
MSI argues that if Plaintiffs lack standing to assert their claim for breach of contract, as the Court ruled above, then they also lack standing to bring suit under G.L. c. 93A or for intentional or negligent misrepresentation.
This argument is without merit. The c. 93A and misrepresentation claims do not depend upon and are not derivative of Plaintiffs’ failed claim for breach of contract. Plaintiffs have mustered evidence sufficient to support their claims for misrepresentation. If they can prove that MSI committed a fraud or a deceptive act in violation of c. 93A by misrepresenting its willingness and ability to pay Holdco what it is owed, MSI cannot avoid liability under these theories on the ground that the subordination agreement still absolves it of any current obligation to pay Holdco. The Court will deny the summary judgment motion with respect to these two claims.
4. Declaratory Judgment Claim. Finally, Count IV of the complaint seeks a declaratory judgment regarding the enforceability of the non-compete, non-solicitation, and confidentiality provisions that Meunier and White agreed to as part of the purchase agreement. Plaintiffs did not directly oppose the summary judgment motion with respect to the declaratory judgment claim.
This claim is moot with respect to the non-competition and non-solicitation provisions because they expired by their terms on May 23, 2017, which was four years after the parties executed the purchase agreement. With respect to their duty not to disclose confidential information, Plaintiffs claimed that this provision was unenforceable because MSI had breached its obligation to pay all amounts owed to Holdco. Since Plaintiffs have no standing to enforce those contractual obligations, they also lack standing to seek declaratory judgment as a remedy for such a brief.
In sum, given that there is no longer any actual controversy about the part of this claim that is moot and Plaintiffs lack standing to press the rest of the claim, it would not be appropriate to declare the rights of the parties and MSI is instead entitled to summary judgment dismissing this claim. See Alliance, AFSME/SEUI, AFL-CIO, v. Commonwealth, 425 Mass. 534, 537-539 (1997) (in absence of actual
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controversy between the parties, claim for declaratory relief under G.L. c. 231A must be dismissed); City of Revere v. Massachusetts Gaming Comm’n, 476 Mass. 591, 607-608 (2017) (affirming dismissal of declaratory judgment claim for lack of standing); Manufacturing Imp. Corp. v. Georgia Pacific Corp., 362 Mass 398, 400-401 (1972) (affirming dismissal of declaratory judgment claim regarding rights under contract, because plaintiff alleged no facts under which it would be entitled to recover from defendant for breach of contract).
ORDER
Market Strategies, Inc.’s motion for summary judgment is ALLOWED IN PART with respect to the claims against it for breach of contract and declaratory judgment, which shall be dismissed with prejudice when final judgment enters in these consolidated actions, and DENIED IN PART with respect to the claims against it for violating G.L. c. 93A and for intentional or negligent misrepresentation.
June 12, 2017
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Kenneth W. Salinger
Justice of the Superior Court read more

Posted by Stephen Sandberg - June 15, 2017 at 5:37 pm

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